COMMERCE COMMISSION v LODGE REAL ESTATE LTD [2020] NZHC 1909

COMMERCE COMMISSION v LODGE REAL ESTATE LTD [2020] NZHC 1909 [31 July 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2015-404-3045[2020] NZHC 1909BETWEEN COMMERCE COMMISSIONPlaintiffAND LODGE REAL ESTATE LIMITEDFirst defendantLUGTON'S LIMITEDSecond defendantMONARCH REAL ESTATE LIMITEDThird defendantContinued overleafHearing: 29 July 2020Appearances: LCA Farmer and VMA Fowler for the plaintiffL J Taylor QC and M A Cavanaugh for the first and seventhdefendantsM S Anderson for the third and sixth defendantsDate of judgment: 31 July 2020JUDGMENT OF JAGOSE JThis judgment was delivered by me on 31 July 2020 at 4.30pm.Pursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarCounsel/Solicitors:L J Taylor QC, WellingtonWotton + Kearney, AucklandMeredith Connell, AucklandONLINE REALTY LIMITEDFourth defendantSUCCESS REALTY LIMITEDFifth defendantBRIAN KINGSixth defendantJEREMY O'ROURKESeventh defendant[1] For the purposes of the penalty hearing to be heard before me in September2020, the Commission seeks particular discovery of Lodge's and Monarch's financialyear-end statements for each of the financial years 2013, 2014, and 2015, as well asthe most recent financial year-end statement (if not 2020, then 2019).Context[2] So far as the orthodox test is concerned,1 the parties essentially only dispute ifthe Commission can make out its first ground: are the documents sought relevant, andif so how important will they be? Taking the subsequent two grounds to be met here,it then is an issue for my discretion if an order is appropriate.[3] The Commission seeks penalties under s 80 of the Commerce Act 1986, as itrelevantly applied at the time of the defendants' contravention:80 Pecuniary penalties(1) If the court is satisfied on the application of the Commission that aperson—(a) has contravened any of the provisions of Part 2; or(b) has attempted to contravene such a provision; or(c) has aided, abetted, counselled, or procured any other person tocontravene such a provision; or(d) has induced, or attempted to induce, any other person, whether bythreats or promises or otherwise, to contravene such a provision; or(e) has been in any way, directly or indirectly, knowingly concernedin, or party to, the contravention by any other person of such aprovision; or(f) has conspired with any other person to contravene such aprovision,—the court may order the person to pay to the Crown such pecuniarypenalty as the court determines to be appropriate.(2) The court must order an individual who has engaged in any conductreferred to in subsection (1) to pay a pecuniary penalty, unless the courtconsiders that there is good reason for not making that order.(2A) In determining an appropriate penalty under this section, the court musthave regard to all relevant matters, in particular,—1 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14].(a) any exemplary damages awarded under section 82A; and(b) in the case of a body corporate, the nature and extent of anycommercial gain.(2B) The amount of any pecuniary penalty must not, in respect of each act oromission, exceed,—(a) in the case of an individual, $500,000; or(b) in the case of a body corporate, the greater of—(i) $10,000,000; or(ii) either—(A) if it can be readily ascertained and if the court is satisfiedthat the contravention occurred in the course ofproducing a commercial gain, 3 times the value of anycommercial gain resulting from the contravention; or(B) if the commercial gain cannot be readily ascertained,10% of the turnover of the body corporate and all of itsinterconnected bodies corporate (if any).Submissions[4] For the Commission, Leo Farmer argues the financial statements are relevantto the agencies' penalty, as reflecting their size and resources, and establishing generaland specific deterrent by exceeding any comprehended 'licence fee', and to ensuredisgorgement of any consequential commercial gain. He contends those assessmentscannot reliably be made from the limited financial information adduced in the liabilityphase of this proceeding, and would confirm the Commission's apprehension themaximum penalties here would be $10 million. The statements also would allow someinsight into the individual defendants' financial circumstances, as proprietors of thecorporate defendants. The Commission had comparable financial statements of otherdefendants whose settlements with the Commission were approved by this Court.[5] For Lodge, Les Taylor QC argued relevance was prescribed by s 80. Thestatements were not relevant because the defendants' solicitors assured theCommission in writing nothing in the financial statements would enable a calculationof commercial gain or turnover exceeding $10 million for the purposes of s 80(2B),and the maximum commercial gain for the purposes of s 80(2A) was easily assessableas the cost saving secured by avoiding the Trade Me fee as given in evidence at trial.He specifically disavowed any claim the defendants may not be able to pay any penaltyordered by this Court, meaning the financial statements could not be relevant for thatreason either. The availability of the settling defendants' financial statements was onlybecause that was a term of the settlements, rather than any necessity for sentencing.For Monarch, Mark Anderson adopted Mr Taylor's submissions.Discussion[6] 'Relevance' for the purposes of s 80 is more confined than relevance for thepurposes of HCR 8.19, which is to be regarded in terms of HCR 8.7.[7] HCR 8.19 enables an order for particular discovery:[ i]f at any stage of the proceeding it appears to a Judge, from evidence orfrom the nature or circumstances of the case or from any document filed in theproceeding, that there are grounds for believing that a party has not discovered1 or more documents or a group of documents that should have beendiscovered .By "should have been discovered", HCR 8.19 refers to parties' continuing obligationto give discovery of relevant documents after a discovery order is made against them.2The 'generous' approach to the words nonetheless is within that ambit.3 HCR 8.7'sobligation is to: disclose the documents that are or have been in that party's control and thatare—(a) documents on which the party relies; or(b) documents that adversely affect that party's own case; or(c) documents that adversely affect another party's case; or(d) documents that support another party's case.[8] Plainly the statements fall within HCR 8.7. I do not know enough about thecomparator penalty decisions to understand if those entities' financial statements werematerial in their assessments of penalty. I understood Mr Taylor to say they were not;if so, they may not assist if those coordinate decisions are the more influential.2 HCR 8.18. By "discovery order" is meant "an order that requires each party to a proceeding todiscover the existence of documents to every other party": HCR 8.1 (definition of 'discoveryorder').3 For example, see Southland Building Society v Barlow Justice Ltd [2013] NZHC 1125 at [18]–[30]; Hoyle v Hoyle [2015] NZHC 3001 at [24].[9] The Commission does not say it has any foundation to doubt the solicitors'assurances as to s 80(2B)'s criteria, and neither do I. But I am markedly lesscomfortable about accepting the principals' back-of-envelope (if that) assessments oftheir prospective costs for the purposes of s 80(2A), as may be given in anger (andtherefore exaggerated).4 The corporates' commercial gain is a mandatoryconsideration. I need at least some insight into their financial affairs, and somefoundation for the derivative position of the individual defendants. I am conscious alsos 80 directs me to "have regard to all relevant matters", which even with the solicitors'assurances is not effective to make the financial statements irrelevant. The statementsthus are "important", and making the orders sought is appropriate in light of thedefendants' resistance to their disclosure.[10] I therefore exercise my discretion to grant the Commission's applications dated26 June 2020 for further discovery from the first and third defendants.—Jagose J4 Commerce Commission v Lodge Real Estate Ltd [2017] NZHC 1497 at [53] and [70].