COMETA UNITED CORPORATION AND TRADEWOOD SHIPPING COMPANY V CANTERBURY REGIONAL COUNCIL CA CA168/07

COMETA UNITED CORPORATION AND TRADEWOOD SHIPPING COMPANY V CANTERBURY REGIONAL COUNCIL CA CA168/07 5 December 2007IN THE COURT OF APPEAL OF NEW ZEALAND CA168/07 [2007] NZCA 560BETWEEN COMETA UNITED CORPORATION AND TRADEWOOD SHIPPING COMPANY Appellants AND CANTERBURY REGIONAL COUNCIL Respondent Hearing: 21 August 2007 Court: Arnold, Gendall and Priestley JJ Counsel: C A McVeigh QC for Appellant A C Hughes-Johnson QC, P J Shamy and H van der Wal for Respondent Judgment: 5 December 2007 at 10 amJUDGMENT OF THE COURT The appeal is dismissed. REASONS OF THE COURT(Given by Arnold J)Introduction[1] This case raises a short but interesting point. It is whether an unincorporated group of persons can properly be convicted of an offence against the Resource Management Act 1991 (RMA). We, like the Courts below, have concluded that it can.Background[2] The MV Antares, a vessel owned by the appellant Cometa United Corporation and managed by the appellant Tradewood Shipping Company, discharged light fuel oil into Lyttelton Harbour on two occasions. The appellants were charged with offences against ss 15B(1) and 338(1B) of the RMA as "owners" of the vessel. They entered not guilty pleas. [3] Section 15B(1) provides that: "No person may, in the coastal marine area, discharge a contaminant, from a ship into water " except in certain circumstances, none of which is relevant here. Section 338(1B) provides that where any contaminant is discharged from a ship in the coastal marine area in breach of s 15B, the master and the owner of the ship each commit an offence. Section 2 of the RMA includes two relevant definitions: (a) "Owner" includes a manager of a vessel; and (b) "Person" includes "the Crown, a corporation sole, and also a body of persons, whether corporate or unincorporate". [4] Following a hearing in the District Court before Judge J A Smith, the appellants were convicted and fined: DC CHCH CRN-05009502103-7 9 March 2006. The Judge concluded that the evidence was "overwhelming" that the appellants were "separate legal entities". Accordingly, he said, they could be convicted of the RMA offences "whether or not they are registered as corporate bodies".[5] The appellants appealed to the High Court against both conviction and sentence. Fogarty J dismissed their appeals: HC CHCH CRI 2006-409-000128 6 October 2006. He held that the evidence did not establish that either appellant was a "corporation" or a "separate legal entity" (at [15] – [17]). He held that each had been proved to be a "body of persons", however, and so could be guilty of an offence under the RMA (at [70]). [6] By minute dated 4 April 2007, Fogarty J granted leave to appeal to this Court.The issue[7] The only substantive point argued by the appellants at the hearing before Judge Smith, and on the appeal before Fogarty J, was that the prosecution was required to prove beyond a reasonable doubt that the appellants were bodies corporate and had failed to do so. For the purposes of the argument before us, Mr McVeigh QC for the appellants summarised the issue as follows:In a prosecution brought under the provisions of the Resource Management Act 1991, can an information be laid and a conviction entered against an unincorporated body of persons?Offences against the RMA[8] Section 338 of the RMA creates various offences against the RMA. We reproduce the section in full:Offences against this Act(1) Every person commits an offence against this Act who contravenes, or permits a contravention of, any of the following: (a) Sections 9, 11, 12, 13, 14, and 15 (which impose duties and restrictions in relation to land, subdivision, the coastal marine area, the beds of certain rivers and lakes, water, and discharges of contaminants): (b) Any enforcement order;(c) Any abatement notice, other than a notice under section 322(1)(c): (d) Any water shortage direction under section 329. (1A) Every person commits an offence against this Act who contravenes or permits a contravention of section 15A or section 15C (which impose restrictions in relation to waste or other matter). (1B) Where any harmful substance or contaminant or water is discharged in the coastal marine area in breach of section 15B, the following persons each commit an offence: (a) If the discharge is from a ship, the master and the owner of the ship: (b) If the discharge is from an offshore installation, the owner of the installation. (2) Every person commits an offence against this Act who contravenes, or permits a contravention of, any of the following: (a) Section 22, which relates to failure to provide certain information to an enforcement officer: (b) Section 42, which relates to the protection of sensitive information: (c) Any excessive noise direction under section 327: (d) Any abatement notice for unreasonable noise under section 322(1)(c): (e) Any order (other than an enforcement order) made by the Environment Court. (3) Every person commits an offence against this Act who— (a) Wilfully obstructs, hinders, resists or deceives any person in the execution of any powers conferred on that person by or under this Act: (b) Contravenes, or permits a contravention of, any of the following: (i) Section 283, which relates to non-attendance or refusal to co-operate with the Employment Court: (ii) Any summons or order to give evidence issued or made pursuant to section 41: (c) Contravenes, or permits a contravention of, any provision (as provided in Schedule 10) specified in an instrument for the creation of an esplanade strip or in an easement for an access strip, or enters a strip which is closed under section 237C.(4) Notwithstanding anything in the Summary Proceedings Act 1957, any information in respect of any offence against subsection (1) of this section may be laid by any person at any time within 6 months after the time when the contravention giving rise to the information first became known, or should have become known, to the local authority or consent authority.[9] As can be seen, s 338(1B) creates an offence in relation to a breach of s 15B. Section 15B(1) provides, as noted above, that no person may, in the coastal marine area, discharge a harmful substance or contaminant from a ship into water other than in certain circumstances. These are that the discharge is permitted under one of several specified instruments or the harmful substance or contaminant will not, after reasonable mixing, give rise to certain specified effects. An offence against s 338(1B) does not require proof of an intention to commit the offence (s 341B). [10] Section 339 deals with penalties. Subsection (1) applies to the offences at issue. It provides:Every person who commits an offence against section 338(1) or (1A) or (1B) is liable on conviction to imprisonment for a term not exceeding 2 years or a fine not exceeding $200,000, and, if the offence is a continuing one, to a further fine not exceeding $10,000 for every day or part of a day during which the offence continues.Section 339A limits the imposition of imprisonment for breach of s 15B and s 339B provides for an additional penalty where there has been commercial gain. Section 339C enables the amount of any unpaid fine to be recovered by sale of the ship and its equipment if a court so orders, or from the ship's agent, who may in turn recover that amount from the master or owner as the case may be. [11] Finally, we set out s 340:Liability of principal for acts of agents(1) Where an offence is committed against this Act— (a) By any person acting as the agent (including any contractor) or employee of another person, that other person shall, without prejudice to the liability of the first-mentioned person, be liable under this Act in the same manner and to the same extent as if he, she, or it had personally committed the offence; or(b) By any person while in charge of a ship, the owner of the ship shall, without prejudice to the liability of the first- mentioned person, be liable under this Act in the same manner and to the same extent as if he, she, or it had personally committed the offence. (2) Notwithstanding anything in subsection (1), where any proceedings are brought by virtue of that subsection, it shall be a good defence if the defendant proves— (a) In the case of a natural person (including a partner in a firm) that— (i) He or she did not know nor could reasonably be expected to have known that the offence was to be or was being committed; or (ii) He or she took all reasonable steps to prevent the commission of the offence: (b) In the case of a body corporate that— (i) Neither the directors nor any person concerned in the management of the body corporate knew or could reasonably be expected to have known that the offence was to be or was being committed; or (ii) The body corporate took all reasonable steps to prevent the commission of the offence; and (c) In all cases, that the defendant took all reasonable steps to remedy any effects of the act or omission giving rise to the offence. (3) Where any body corporate is convicted of an offence against this Act, every director and every person concerned in the management of the body corporate shall be guilty of the like offence if it is proved— (a) That the act that constituted the offence took place with his or her authority, permission, or consent; and (b) That he or she knew or could reasonably be expected to have known that the offence was to be or was being committed and failed to take all reasonable steps to prevent or stop it.Appellants' submissions[12] Mr McVeigh emphasised the common law rule that an unincorporated body of persons could not, as a body, be guilty of a crime, although its individual members could. He accepted that the rule could be displaced by statute, butsubmitted that the Courts below were wrong to find that the RMA had displaced it. (These principles are discussed in Ormerod (ed) Smith & Hogan Criminal Law (11ed 2005) at 243. See also the discussion in Campbell v Scott [1995] 2 NZLR 345 at 348 and 354 – 355 (HC).) [13] Mr McVeigh said that Fogarty J had fallen into error in his analysis of the position under the RMA by focussing on the particular offences at issue in this case, rather than on the position more broadly. The Judge had noted that the RMA provided several mechanisms for overcoming procedural difficulties in relation to shipowners which were unincorporated bodies. Examples are: (a) Section 352A(1), which provides that, where the owner of a ship is alleged to have contravened s 15B, service may be effected for the purposes of the Summary Proceedings Act 1957 (SPA) by serving the summons or other document personally, or by registered post, on the ship's agent. (b) Section 339C, dealing with the recovery of fines from ships' agents. [14] But, Mr McVeigh said, similar mechanisms were not available more generally, and that was the basis on which the case should be approached. Section 338 created numerous offences other than those relating to ships. Assuming that the difficulties of prosecuting unincorporated bodies could be overcome in relation to foreign shipowners by means of mechanisms such as those referred to in [13] above, there were no equivalent provisions dealing with unincorporated bodies in other contexts. Penalties for offences under the RMA range from imprisonment to substantial fines and include, for example, community service. Mr McVeigh argued that it was impossible for such penalties to be enforced against an unincorporated body of persons. [15] "Person" in s 338, Mr McVeigh said, could not have different meanings depending on the particular offence at issue. The absence of any procedural mechanisms to deal with unincorporated bodies generally, either in the RMA itselfor in the SPA (which applies to prosecutions under the RMA), indicated that the common law rule was not intended to be displaced. [16] Mr McVeigh submitted that the fact that s 340 referred only to natural persons (including partners in firms) and to corporations was a further indication that an unincorporated body could not be guilty of an offence against the RMA. [17] In addition, Mr McVeigh made several points on the basis of the SPA. [18] First, he said that, given the potential penalty of two years imprisonment, a "person" charged with breaching s 15B of the RMA would have a right to elect trial by jury (s 66(1) of the SPA). This is so even if the relevant "person" is a corporation, which cannot, of course, be imprisoned (s 66(3) of the SPA). There is no equivalent provision for an unincorporated body to elect trial by jury. [19] Second, he noted that s 2 of the SPA deals with "representatives". It defines the word "representative" as follows:representative, in relation to a corporation, means a person duly appointed by the corporation to represent it for the purpose of doing any act or thing which the representative of a corporation is by the Act authorised to do, but a person so appointed shall not, by virtue only of being so appointed, be qualified to act on behalf of the corporation before the Court for any other purpose.Section 2(2) goes on to deal with the mode of appointment of "representatives" by corporations. [20] Mr McVeigh said that "representative" is referred to in three sections in the SPA: (a) Section 66(3), which allows a representative of a corporate defendant to exercise the corporation's right to elect trial by jury. (b) Section 153A, which entitles the representative of a corporate defendant to enter a guilty plea on behalf of the corporation before or during a preliminary hearing (see s 153A(4) and (5)).(c) The proviso to s 172, which provides that the representative may answer the question required under s 163(2) to be put to defendants without legal representation at a preliminary hearing. [21] Mr McVeigh also referred to s 361 of the Crimes Act 1961, which deals with a plea being entered by a corporation charged on indictment. It allows a "representative" to enter a plea in writing on behalf of the corporation. Section 361(3) defines "representative" in similar terms to s 2 of the SPA, and s 361(4) is in similar terms to s 2(2) of the SPA. He said that there was no equivalent provision in relation to unincorporated bodies.Discussion[22] Ormerod observes (at 243) that "[t]he potential [criminal] liability of unincorporate bodies seems to have been little noticed." Certainly there is little relevant case law on the issue. [23] Unincorporated bodies range from loosely to highly organised groupings. At one end of the spectrum are groups of people who have come together in an ad hoc way for a particular short-term purpose. Examples are residents who are opposing a development in their neighbourhood or parents of school children who want to take up a particular concern with the school. At the other end of the spectrum are bodies which are long-lived, have officers, governance arrangements and employees just as corporate entities do, and operate and present themselves to the public as established, independent organisations. Bodies of this latter type are distinct from (and more than) the individuals who make up their membership – as a practical matter, they have independent existence and act as independent entities: see the discussion in, for example, Willis v Association of Universities of the British Commonwealth [1965] 1 QB 140 at 147 – 148 (CA) and Edwards v Legal Services Agency [2003] 1 NZLR 145 at [26] – [28] (CA). This is presumably why s 29 of the Interpretation Act 1999 defines "person" to include an unincorporated body. [24] In New Zealand, the Crimes Act contains a definition of "person" which includes incorporated and unincorporated bodies, although the definition is qualifiedby the words "in relation to such acts and things as it or they are capable of doing or owning". As noted above, the Crimes Act specifically contemplates that corporations can be charged with crimes (see s 361), but there is no provision showing a similar contemplation in relation to unincorporated bodies. [25] While the SPA does not contain a definition of "person", it does, as outlined at [17] – [20] above, contain provisions that make it clear that the Act applies to corporations as well as to natural persons. But, as Mr McVeigh pointed out, there are no similar provisions in the SPA dealing with unincorporated bodies. [26] Turning to the RMA, as we have said, "person" is defined in s 2 to include an unincorporated body of persons. As Fogarty J noted, the RMA does provide various procedural mechanisms relating to service and the recovery of fines which are sufficient to enable the prosecution of unincorporated ship-owning bodies whose vessels discharge contaminants in breach of the Act. But Mr McVeigh's point concerning the absence of similar provisions that might apply to unincorporated bodies charged with other offending under the RMA must be addressed. He says that s 338 has general application. Consequently, there must be mechanisms for dealing with such difficulties in all contexts, not simply in relation to offences involving ships, in order to justify the conclusion that Parliament intended that unincorporated bodies fall within the offence provisions of the RMA. [27] However, even if we accept that Mr McVeigh is correct in identifying what may be described as a procedural lacuna in the RMA in relation to the prosecution of unincorporated bodies, we do not consider that the appeal should succeed. [28] We agree with Fogarty J that in this particular context the RMA does provide mechanisms to deal with the practical problems that might otherwise arise in relation to unincorporated bodies which own or manage vessels entering New Zealand waters. We also agree with the Judge that the effect of accepting the appellant's arguments would be to leave a significant lacuna in the RMA, given that New Zealand is a trading nation whose ports are frequently visited by foreign owned and managed vessels. As Mr Hughes-Johnson QC submitted, this point finds support in the comments of the then Minister of Transport, the Hon MauriceWilliamson, when introducing the Resource Management Amendment Bill in November 1994. That Bill was introduced in order to expand and consolidate in one enactment statutory provisions relating to discharges from vessels and such like into the coastal marine area. The Minister said ((8 November 1994) 544 NZPD 4597):At present the enforcement provisions of the [RMA] cannot be applied to foreign ships. This came about because controls over foreign ships were left to the Marine Pollution Act [1974] but in practice that Act restricts only the discharge of oil. This left foreign ships free to discharge with impunity untreated sewerage, garbage, and chemical effluent anywhere in our waters. This Bill expressly removes the exemption for foreign ships and will provide for a single regime of discharge controls for all ships within our territorial sea. This step should be welcomed by all parties.[29] Further, looking at the matter more generally, we consider that procedural problems of the type identified by Mr McVeigh can be overcome without great difficulty for two inter-related reasons. [30] First, an unincorporated group must be capable of being described as a "body" of persons to fall within the definition in s 2 of the RMA. Individuals whose common interests have brought them together for a temporary purpose without any formal organisation may not fit that description. This seems to follow from Discount Brands Ltd v Westfield (New Zealand) Ltd [2005] 2 NZLR 597. In that case this Court had said that an incorporated society whose registration had lapsed did not exist as a legal entity at the relevant time for the purposes of the RMA. Blanchard J said:[127] That finding cannot be sustained. It overlooks the definition of "person" in s 2 of the Act:person includes the Crown, a corporation sole, and also a body of persons, whether corporate or unincorporate: . Northcote Mainstreet was undoubtedly an unincorporated body of persons, during the interregnum between the lapsing of its incorporation and its restoration to the register under the Incorporated Societies Act 1908. The Court of Appeal said in Edwards v Legal Services Agency [at [28]] that a number of group of persons: " must be regarded as a body if there is such regulation of their internal affairs that there can be said to be a structure by which they can be recognised as a collective entity – the unincorporated equivalent of a body corporate."[128] Northcote Mainstreet continued to operate in accordance with its rules during the interregnum, for part of that time not appreciating that it had ceased to be registered. It acted throughout as a collective entity. There was not, and on the facts there could not be, any suggestion on the part of Discount Brands that through inactivity, the unincorporated body has "spontaneously" dissolved. (Footnote omitted.)[31] Tipping J said:[170] In considering this issue I revert to the definition of person. It says that the word includes "a body of persons, whether corporate or unincorporate". A corporate body is a legal entity in its own right distinct from its members. An unincorporate body of persons is not. An unincorporate body is rather like a partnership. It is recognised as having a separate existence, but in law it is no more than the aggregation of the individuals who are its members. [171] Whether one views Northcote Maintstreet as a corporate or unincorporate body is not the immediate point. My point is that by making unincorporate bodies persons for [RMA] purposes, Parliament seems to have been looking more to substance than to legal existence or form. The concept of person is clearly designed to go beyond legal persons. It is necessary to be able to identify a body, but not a body which is legally recognised in its own right. The statutory policy evident from this expansive approach to persons suggests that a body of persons, as a body, ought to be able to rely on attributes pertaining to its individual members. That is an easier concept when the body is not a separate legal person than when it is. But in the present context the proposition must apply in both instances. The answer cannot, in this field, depend on issues akin to whether a corporate veil should be lifted.[32] These passages suggest that, in order to meet the definition, the unincorporated group must have some form of internal structure which enables it to take and implement decisions as a collective. If the group exists as a "collective entity" it can properly be viewed as a "body" of persons. [33] Second, and following on from the point just made, a group constituting a "body of persons" is likely to have a similar general structure to a company, in the sense that it will have a decision-making process, people who have governance responsibilities and such like (a pseudo-corporate structure). Consequently, as is said in Ormerod at 243:When an unincorporated association is prosecuted, presumably the court must proceed by analogy to the law relating to corporations. Such associations have officials corresponding to the controlling officers ofcorporations and it is inconceivable that the association is liable for the act of any one of its members who has no part in the general management of its affairs.[34] In other words, given that the unincorporated group must be capable of being described as a "body of persons" in order to be subject to the RMA, the attribution of actions which breach the RMA to the body as opposed simply to particular individuals is feasible. Practical difficulties in relation to matters such as service and enforcement can be addressed by means of the pseudo-corporate structure that an organisation meeting the definition of "body of persons" will have. We consider that this is the appropriate approach in the absence of specific provisions dealing with unincorporated bodies in respect of offences under the RMA. [35] In our view, this meets Mr McVeigh's submissions based on the absence in the SPA of provisions dealing with unincorporated bodies. He was correct to say that the SPA applies to prosecutions under the RMA. But in our view the RMA clearly contemplates the prosecution of unincorporated bodies. We do not consider that this evident parliamentary intention should be frustrated by the absence of relevant provisions in the SPA. Rather, as Ormerod indicates, the proper approach is that, in the case of unincorporated bodies that constitute "bodies of persons", the courts will, where necessary, adopt processes analogous to those that apply in the case of corporations. [36] It is clear from the material before the Court that each of the appellants in this case meets the definition of "body of persons". [37] Finally, as we have noted above, to interpret the provisions relating to the owners of vessels in the way urged on us by the appellants would leave a significant gap in the RMA's capacity to deal with offences committed by foreign owned and managed vessels. The same observation can be made in relation to the application of the RMA generally to unincorporated bodies. As the Supreme Court made clear inDiscount Brands, such bodies have entitlements under the RMA, including the right to be consulted and the right to object. Accordingly, we can see no reason why they should not also be subject to the restrictive aspects of the RMA, including liability for offences.[38] Although we have found that Parliament did contemplate that unincorporated bodies could be liable for breaches of the Act, the absence of specific provisions addressing the types of problem that have been outlined in respect of corporate bodies (for example, the appointment of representatives) is undesirable. We commend this to Parliament for its consideration.Decision[39] The appeals are dismissed.Solicitors: Anthony Harper Lawyers, Christchurch for Appellant Raymond Donnelly & Co, Christchurch for Respondent