LOW VOLUME VEHICLE TECHNICAL ASSOCIATION INCORPORATED v DRIVE NZ CLASSIC LIMITED [2022] NZCA 405

LOW VOLUME VEHICLE TECHNICAL ASSOCIATION INCORPORATED v DRIVE NZ CLASSICLIMITED [2022] NZCA 405 [26 August 2022]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA144/2021CA163/2021[2022] NZCA 405BETWEEN LOW VOLUME VEHICLE TECHNICALASSOCIATION INCORPORATEDFirst AppellantNEW ZEALAND TRANSPORT AGENCYSecond AppellantAND DRIVE NZ CLASSIC LIMITEDRespondentHearing: 26 April 2022Court: French, Clifford and Courtney JJCounsel: R J Gordon and A S Kirk for First AppellantN F Flanagan and N E Copeland for Second AppellantK I Bond for RespondentJudgment: 26 August 2022 at 11.30 amJUDGMENT OF THE COURTA The appeal is allowed.B The respondent's cause of action in negligence is struck out.C The High Court's costs order is set aside. The appellants are entitled tocosts in that Court on a 2B basis together with reasonable disbursements.D The respondent must pay the appellants costs for a complex appeal on aband A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Clifford J)Introduction[1] This appeal involves the regime established under the Land Transport Act 1998(the LTA) and the Land Transport Management Act 2003 (the LTMA) to ensurevehicles produced or modified in low volumes (LVVs) — here 10 Skoda Yeti vehiclesmodified for drivers in wheelchairs — are safe to operate on New Zealand roads.That regime, of inspection and certification, is found in the Land Transport Rule:Vehicle Standards Compliance 2002 (the Rule) made by the Minister of Transportpursuant to s 152 of the LTA.[2] The Rule itself does not specify the standards for inspection and certification.Rather cl 6.4(1) the Rule establishes generic requirements, namely that a vehicle:(a) is safe to be operated; and(b) has been designed and constructed using components and materialsthat are fit for their purpose, and is within safe tolerance of its statewhen manufactured or modified; and(c) complies with the applicable requirements; and(d) has not suffered water damage as specified by the Director under 11.1;and(e) has undergone specialist inspection and certification if required by6.5, and that the specific aspects of the vehicle have been certified.[3] It is the requirement in cl 6.4(1)(c) to comply with "applicable requirements"that does the Rule's heavy lifting. In the great majority of cases inspection andcertification for use in New Zealand are based on manufacturers' warranties andcertificates of compliance with applicable recognised standards and on regulatoryapproval of vehicles in, typically, their place of manufacture or in other largerjurisdictions where they are marketed. By definition that approach is not suitable forthe inspection and certification of LVVs. The applicable requirements for safetyinspection and certification of LVVs are found in the Low Volume Vehicle Code(the Code).[4] The appellants, the Low Volume Vehicle Technical Association Inc(the Association) and the New Zealand Transport Agency (the Agency) havecentral roles under that regime: the Agency, to appoint and supervise certifiers;the Association, to establish, maintain and develop the Code.[5] The respondent, Drive NZ Classic Ltd (Drive NZ), modified the 10 Skoda Yetisand subsequently become involved in a dispute with the Agency and the Associationabout their safety and certification. Drive NZ sued the Agency and the Association innegligence for damages. Drive NZ did so, alleging the Agency and the Associationowed the following "non-delegable" duty of care:to set up, conduct and administer the low volume vehicle inspection andcertification process in a reasonably competent manner and to a prudentstandard.[6] The Association and the Agency applied to strike out Drive NZ's claim.In the High Court at Auckland, Peters J declined that application.1 This is an appealagainst that judgment: the Judge having granted leave to appeal her decision.2BackgroundRegulatory context[7] The phrase "applicable requirement" is defined in the Rule as follows:3Applicable requirement means any requirement specified or incorporated inan Act, regulation, code or rule listed in Schedule 1 that applies to the design,construction, condition, equipment, modification, repair or maintenance of aspecific vehicle.[8] Schedule 1 of the Rule lists certain Acts, regulations, rules and, specifically,the "Low Volume Vehicle Code". It is by inclusion in sch 1 that provisions areincorporated "by reference" into the Rule.1 Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc [2020] NZHC 3015[Judgment under appeal].2 Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc [2021] NZHC 377; andSenior Courts Act 2016, s 56(3).3 Land Transport Rule: Vehicle Standards Compliance 2002, pt 2.[9] The "Low Volume Vehicle Code" is defined in the Rule as "the Code ofthe Low Volume Vehicle Technical Association Incorporated";4 in other words, theCode of the Association. Neither the Rule, the LTA under which the Rule is made,5nor the LTMA, which gives the Agency responsibility for the Rule,6 contain anyexplanation of the identity or role of the Association as author of the Code.[10] The LTMA does, however, provide for the delegation or contracting out ofthe Agency's functions and powers. Section 97 of that Act provides:97 Agency must consider delegating or contracting out functions andpowersIn the course of performing its functions and exercising its powers,the Agency must consider whether it could most efficiently andeffectively perform those functions and exercise those powers bymeans of its own operations, or by delegating or contracting out thoseoperations to appropriate persons.[11] As we understand it, the Agency has for some time now contracted theAssociation to carry out a significant role in the regulation of LLVs. The most recentform of that contract from July 2012 is the Low Volume Vehicle Certification SystemOperating Agreement (the Operating Agreement). The introduction to the OperatingAgreement records:This agreement recognises the very special and unique relationship that existsbetween [the Association] and [the Agency], as a result of the twoorganisations having worked successfully together since 1990 to bringthe Low Volume Vehicle Code (the Code) into New Zealand's land transportcompliance frame-work.[12] The Operating Agreement provides for LVV regulation by the Association inconjunction with the Agency in the following way.[13] The Association is responsible for establishing standards and operationalrequirements against which vehicle safety is assessed, and communicating thosestandards and requirements to LVV certifiers, the motoring public and participatingorganisations. It also provides specialised technical and operational advice and4 Part 2.5 Land Transport Act 1998, s 152.6 Land Transport Management Act 2003, s 95.support to assist the Agency to fulfil "its responsibilities relating to the application ofthe Code". In particular the Association is responsible for issuing what are known as"certification plates" for LVVs following inspection and confirmation of complianceby authorised certifiers.[14] The Agency is responsible for appointing those certifiers, for the ongoingoversight of certifiers and for the provision of certifier support to the Association toenable it to fulfil its obligations under the Operating Agreement. Reflecting, perhaps,that the Code had by 2012 been in existence for some time the Operating Agreementdid not expressly provide for the promulgation of the Code. It does expressly provide,however, that the Agency and the Association are to work together for the applicationand continuous improvement of the Code and to ensure that, wherever possible, allaspects of the Code continue to be incorporated by reference within theappropriate legislation.[15] Possibly reflecting the Association's historical role in the formulation ofthe Code, the Operating Agreement provides that the Association is the exclusiveowner of all copyright and intellectual property rights in relation to the Code.[16] The final underpinning of the regulatory status of the Code as authored bythe Association is found in s 165 of the LTA. Section 165 provides for incorporationby reference in the Rule of material sourced not from the public agencies of the Statebut, as it were, externally. Section 165(1) provides:(1) The following, whether in written or electronic form, may beincorporated by reference in a rule made by the Minister, theGovernor-General, or the Agency:(a) standards, requirements, or recommended practices ofanother State or an international organisation:(b) standards, requirements, or rules of the NZ StandardsOrganisation, or a body or organisation outside New Zealandthat has functions corresponding to the functions of theNZ Standards Organisation:(c) material formulated by a specialist public sector organisationor a specialist private sector organisation:(d) any other material or document that, in the opinion ofthe Minister or the Agency (as the case may be), is too largeor impractical to be printed as part of the rule.[17] At the hearing of this appeal counsel for the Agency confirmedthe Association's status as a "specialist private sector organisation" (s 165(1)(c)),qualifying it to author documents appropriate for incorporation by reference intothe Rule.[18] Those arrangements led Drive NZ to describe the LVV inspection andcertification regime as "self-regulation by hobby car enthusiasts". Whilst the affidavitof Mr Johnson, the chief executive of the Association, described the Association's roleby reference to the wording of the Rule and the Code, some support for Drive NZ'scharacterisation may be found in another document incorporated into the Code at thattime, namely the "New Zealand Hobby Car Technical Manual". The introductorysection of that manual describes aspects of the development of the regulatoryframework. It is sufficient to note the following remarks of Mr Johnson in that manual:The reason for the level of success in the LVV system in New Zealand is downto one simple factor — the rules are written for enthusiasts, by enthusiasts.In most other countries, regulations for hobby vehicles are written by theirgovernment, rather than by representatives of the enthusiasts, and the outcomeof that is always, as far as we are aware, unsatisfactory for both parties.The pleadings[19] A statement of claim generally pleads, that is asserts, facts rather than mattersof law. On a strike out application the pleaded facts are treated as being true,the question being whether if true they disclose a reasonably arguable cause of action.7[20] Drive NZ's statement of claim included a detailed pleading, in effecta summary, of the regulatory framework followed by its pleading of facts. Its pleadedduty of care would appear to be based on its assessment of the regulatory framework.Its factual pleading provides the narrative of the ways in which it assertsthe Association and the Agency breached that duty of care.7 Robert Osborne (ed) McGechan on Procedure (looseleaf ed, Thomson Reuters) at [HR15.1.02],citing Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; and High Court Rules 2016,r 15.1(1)(a).[21] The following summary is sufficient for our purposes:(a) In 2011 Drive NZ, then owned by Roger Philips and his wife Carol asto 50 shares each, was in business as a producer of LVVs by modifyingregular vehicles. In 2011 Drive NZ began modifying Skoda Yetivehicles to render them suitable and safe to be driven by a person ina wheelchair. In all, 10 such vehicles are involved in these proceedings— referred to as Cars 1 to 10 in the pleadings.(b) Car 1 was modified conventionally using welded steel. An LVVcertifier, Mr Munro, inspected and certified Car 1 and submitted acompliance certificate to the Association. The Association duly issuedan LVV certification plate. In June 2012 Drive NZ modified Car 2 in asimilar way to Car 1, but using bonded composites instead of steel anda bespoke rear suspension. As with Car 1, after those modifications Car2 was also certified as compliant by another LVV certifier, Mr Stokes,and the Association issued an LVV certification plate.(c) In September 2012 Mr and Mrs Philips incorporated U Drive Mobility(NZ) Ltd (UDM), also owned by them in equal shares. UDM acquiredthe Drive NZ business between October 2012 and June 2013.UDM modified Cars 3 to 10 in the same way as Drive NZ had modifiedCar 2. As with Car 2, it did so under the direction and withthe assistance of Mr Stokes. Mr Stokes certified those cars tothe Association. The Association issued LVV certification plates forCars 3 and 5 to 8 but not for Cars 4, 9 and 10. UDM sold all eight carsto members of the public.(d) In November 2012 a Mr Simpson became a half shareholder withMr and Mrs Philips in UDM.(e) In May 2013, following a complaint, the Association reviewedthe compliance certificate submitted for Car 10. As a resultthe Association identified modifications to Car 10 which, it said,required design approval. It notified Mr Stokes, the responsiblecertifier. Mr Stokes applied for design approval. That was declined.At the Association's request UDM was advised by Mr Stokes that it wasrequired to close its production facilities whilst further testing ofthe vehicles was carried out by Mr Stokes in conjunction withthe Association.(f) Over the rest of 2013 there was an ongoing engagement between UDMon the one hand and Mr Stokes, the Association and the Agency onthe other. By late 2013 the Agency had written to UDM confirmingpreviously identified non-compliance with certification requirementsand advising of revocation of certifications. That month the Agencynotified UDM customers of those matters.(g) Throughout 2014 UDM, the Agency and the Association co-operatedto attempt to resolve issues. Independent experts were involved.By late 2014 the Agency had satisfied itself that, although the vehicleshad been modified to standards outside the applicable requirements setby the Code, it was possible certificates of exemption could be issuedfor the vehicles confirming — on an alternative basis — their safetyand conformity with necessary operational requirements. Ultimatelycertificates of exemption were issued for all eight of Cars 3 to 10 basedon a range of further inspections, testing and modifications.[22] Reflecting that pleaded narrative, in summary Drive NZ particularised theAssociation and the Agency's breaches of the duty of care said to be owed to itas follows:(a) by the Association, for what had transpired to be its erroneous assertionof compliance failures and associated safety issues and for the flawedprocess adopted by it in dealing with UDM; and(b) by the Agency, for failing to properly supervise both the Associationand the Agency's certifiers, as evidenced by the erroneous assessmentsmade by the Association and the flawed process it had followedresulting in erroneous revocation of certifications.[23] Drive NZ filed its proceeding in June 2019. It did so in its own name,notwithstanding that (i) it had sold its business to UDM in September 2012,(ii) had arranged for Mr Simpson to become a half shareholder and director in UDMin November 2012, (iii) that Mr Simpson had become UDM's sole director inFebruary 2016 and its sole shareholder in March 2016, so that (iv) thereafter neitherof Drive NZ nor the Phillips had any interest in UDM. It did not plead a factual basisupon which it was entitled to assert what were, if they existed, rights clearly belongingto UDM. At the same time, throughout its statement of claim it referred to duties owedto UDM and losses UDM had incurred, which it estimated as being in excess of$5 million.[24] It subsequently transpired in doing so Drive NZ had relied on an assignmentby UDM to it dated 24 June 2019, that is the same day as it filed its proceedings, ofUDM's asserted rights against the Association and the Agency arising fromthese events.8The strike out application[25] The Association and the Agency applied for strike out on the groundsDrive NZ's statement of claim disclosed no reasonably arguable cause of action.The principal ground for that assertion was that UDM's purported assignment of itscauses of action to Drive NZ was void as being an assignment of a bare right of actionto an assignee with no "genuine commercial interest" in the enforcement of the claim.They argued further it was not reasonably arguable that either the Association orthe Agency owed a relevant duty of care. Drive NZ had no prospects of successfullyestablishing foreseeability and proximity. Even if it could, policy considerationswould inevitably result in its claim failing.8 The Deed of Assignment recorded that Beachlands Investment Group Ltd (formerly known asUDM) agreed to assign to Drive NZ its "right, title, and interest" in the claim againstthe Association and the Agency for damage caused to UDM's business of modifying theSkoda Yeti vehicles to allow them to be driven by a person in a wheelchair. While in formBeachlands was the assignor, for simplicity we shall continue to refer to the assignor as UDM.The High Court decision[26] The Judge first considered the Agency and the Association's contention theassignment from UDM to Drive NZ was, being — as all parties accepted9 —the assignment of a bare cause of action, void because Drive NZ could not establish ithad a "general commercial interest" in the enforcement of UDM's rights. The Judgenoted the law in this area was not straight forward, particularly given that recent caseshave focused on assignments in the context of litigation funding agreements.10That said, she noted the following observations of the majority of the Supreme Courtin one of those cases:11[77] The essential issue is whether the SPF Documents amount tothe assignment of a bare cause of action. If they do, the question that mustthen be addressed is whether such assignment is "impermissible" inWaterhouse terms, which it would be unless it fell within one of the recognisedexceptions, identified by the respondents as either an assignment to a partythat had an antecedent commercial relationship with the assignor or anassignment by a liquidator.[27] More specifically, the Judge focused on Drive NZ's proposition that the factsDrive NZ and UDM had a transactional relationship as vendor and purchaser, and atrelevant times were associated companies because of common shareholdings,evidenced the existence of Drive NZ's claimed genuine commercial interest.Having referred to the competing authority she had been referred to, she concluded:12[73] Coming back to this case, the least that can presently be said for[Drive NZ] (that is, absent any additional evidence) is that it was the vendorof intellectual property and goodwill to UDM; [Drive NZ]'s shareholdersowned 50 per cent of UDM at the time the cause of action arose; and the stepsthe defendants took regarding Cars 3 onwards — whatever the rights andwrongs of them — will have caused loss to UDM, and therefore all itsshareholders, Mr and Mrs Phillips included. Having regard to theSupreme Court's statements in Waterhouse and PricewaterhouseCoopers, andthe outcome in Massai, I think it is insufficiently clear the matters I have justlisted will be insufficient to support the assignment. I decline to strike out theclaim on this ground accordingly.9 Judgment under appeal, above n 1, at [60].10 At [61] and [64], referring to Waterhouse v Contractors Bonding Ltd [2013] NZSC 89, [2014] 1NZLR 91 and PricewaterhouseCoopers v Walker [2017] NZSC 151, [2018] 1 NZLR 735.11 PricewaterhouseCoopers v Walker, above n 10.12 Judgment under appeal, above n 1 (footnote omitted).[28] Turning to the second ground on which strike out was claimed the Judge notedthat at trial Drive NZ would need to establish foreseeability of loss and a sufficientlyproximate relationship to base a duty of care. If those matters could be established,the Court would then need to consider the argument, here essentially a policy one,whether it was fair, just and reasonable to impose the claimed duty.[29] In argument, the Association and the Agency relied on Attorney-Generalv Carter to argue the principles expressed in existing authority precluded recognitionof the alleged duty.13 That case involved a successful strike out application bythe Ministry of Transport where it had been sued in respect of certificates of survey ithad issued for a vessel following assessment of the vessel's safety and seaworthiness.That vessel was purchased by the plaintiffs, but it later proved to be worthless and wassold for scrap. This Court found that because the legislative purpose of the certificatewas to certify the safety of the vessel, and was not intended for economic purposes,there was insufficient proximity. Moreover, the class of persons entitled to rely onthe certificate were the passengers or crew who were on the vessel, rather thanthe plaintiffs. The safety focus of the regime also counted against recognising thatduty of care.14[30] For its part, Drive NZ distinguished the outcome of Carter by reference to thecase of Oceania Aviation Ltd v Director of Civil Aviation, where the Director ofCivil Aviation was sued in negligence for revocation of a certifier's licence to actas such.15 The point was that in Oceania Aviation this Court had found sufficientproximity, and had only refused to acknowledge the duty of care on policy grounds.[31] The Judge accepted Drive NZ's argument that, on the basis of Oceania, it wasnot possible to conclude it had a hopeless case as regards foreseeability andproximity.16 As to policy considerations, whilst they might prove determinative at trialthey were not "so obvious" that Drive NZ's claim should be struck out.1713 Attorney-General v Carter [2003] 2 NZLR 160 (CA).14 At [33]–[36].15 Oceania Aviation Ltd v Director of Civil Aviation CA163/00, 13 March 2001.16 At [85].17 At [87].This appeal[32] As noted, the Agency and the Association bring this appeal againstthe High Court ruling on their strike out application with the leave of the High Court.The Association only appeals on the duty of care questions of foreseeability andproximity, and the wider policy issues. The Agency, in addition to appealing on thosegrounds, also appeals on the "no genuine commercial interest" ground.[33] Reflecting the emphasis placed on those arguments, we first addressthe appellants' contention Drive NZ's pleadings in negligence do not disclose areasonably arguable cause of action.AnalysisOverview[34] We start by referring to the Supreme Court's decision in Couch v Attorney-General.18 In that decision the Court considered an appeal in which the High Courthad struck out a claim — a decision upheld by this Court — that allegedthe Department of Corrections failed to exercise reasonable care in the supervision ofa parolee who had seriously injured the plaintiff and murdered three others.The Supreme Court unanimously allowed the claim to proceed to trial.[35] Elias CJ, with whom Anderson J agreed, set out the well settled principles tobe applied on an application for strike out. In summary, the jurisdiction is exercisedsparingly, in circumstances where an action is so clearly untenable that it cannotsucceed. In the context of a claimed novel duty of care, the Chief Justice explained:[32] It is often not easy to decide whether a duty of care not previouslyrecognised by authority is owed to the plaintiff It may be unrealistic toexpect that the pleadings and arguments to support a claim will always beadequate at an early stage of the proceedings. Caution in disposing of suchcases on a summary basis is necessary both to prevent injustice to claimantsand to avoid skewing the law with confident propositions of legal principle orassumptions about policy considerations, undisciplined by facts.[33] It is inappropriate to strike out a claim summarily unless the court canbe certain that it cannot succeed. The case must be "so certainly or clearlybad" that it should be precluded from going forward. Particular care is18 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.required in areas where the law is confused or developing. And in both X vBedfordshire County Council and Barrett v Enfield London Borough Councilliability in negligence for the exercise or non-exercise of a statutory duty orpower was identified as just such a confused or developing area of law.Lord Browne-Wilkinson in X thought it of great importance that such cases beconsidered on the basis of actual facts found at trial, not on hypothetical factsassumed (possibly wrongly) to be true for the purpose of the strike-out.Lord Slynn in Barrett was of the same view:the question whether it is just and reasonable to impose liabilityof negligence is not to be decided in the abstract for all acts oromissions of a statutory authority, but is to be decided on thebasis of what is proved.[34] Proper and necessary limits to liability in negligence do not requireblanket immunity through over-restriction of the circumstances in which aduty of care arises. There is particular risk of such over-restriction onsummary consideration on strike-out policy considerations are said topreclude a duty of care. (Footnotes omitted.)[36] The Chief Justice further explained that in her and Anderson J's view, a claimshould not be struck out as disclosing no duty of care "unless there is clear legalimpediment to its succeeding at trial".19 In a similar vein, Tipping J, with whomBlanchard and McGrath JJ agreed, said a claim should only be struck out on the groundthat policy militates against a duty of care only if it can be said that this is"undoubtedly so".20[37] It is to be remembered that the role of the regulatory regime administered bythe Department of Corrections was to protect the safety of the public, and it wasa member of the public who was asserting the existence of the tortious duty of care.That is not the case here. The regime of inspection and certification is for public safety,but it is a regulated person who is asserting a duty to protect from economic loss.That is a crucial consideration.Negligence[38] Given the present context and the policy considerations in play, the generalapproach taken by this Court in Carter, referred to above at [29], provides a good19 At [40].20 At [126].example of the application of the recognised framework for our analysis.21Although Carter was decided five years before Couch, it not only involved anapplication for strike out of a claim for a novel duty of care, but also one where policyconsiderations were of considerable importance in determining the ultimate questionof whether it was fair, just and reasonable to recognise the claimed duty.[39] Following an analysis of the leading cases, including Carter, Professor Toddin Todd on Torts summarises the approach taken in cases involving claimed novelduties as follows:22(3) In novel or borderline cases where the duty question needs to bedecided, the courts have found it helpful to divide the inquiry intotwo stages. First, they ask whether the defendant should reasonablyhave foreseen injury to his or her "neighbour", in the sense of a personwho is closely and proximately affected by the defendant's conduct.Secondly, they weigh up any broader implications for the communityin recognising or denying a duty.(4) The two-stage approach provides us with a structure for determiningdisputed duty issues, but cannot in itself direct us towards anyparticular conclusion. Nor, indeed, can the Caparo inquiry into whatis "fair and reasonable". Ultimately the court must make a valuejudgment based upon its assessment of all the relevant circumstances.[40] The context in Carter was the performance by a regulatory agency the Ministryof Transport, and its delegate Marine and Industrial Safety Inspection Services Ltd, ofa survey required by regulation which had the purpose of ensuring the safety andseaworthiness of a vessel in the public interest. As Tipping J for the Court put it:23[22] Whether it is fair, just and reasonable to hold that a duty of care isowed by defendant to plaintiff in a situation not covered by authority isconventionally addressed in terms of proximity and policy: see for examplePrice Waterhouse v Kwan at p 41, para [6], and of course South PacificManufacturing Co Ltd v New Zealand Security Consultants & InvestigationsLtd [1992] 2 NZLR 282. Generally speaking, proximity is concerned withthe nature of the relationship between the parties whereas policy is concernedwith the wider legal and other issues involved in deciding for or against a dutyof care. 21 Attorney-General v Carter, above n 13.22 Stephen Todd "Negligence: The Duty of Care" in Todd on Torts (8th ed, Thomson Reuters,Wellington, 2019) at 160.23 Attorney-General v Carter, above n 13.[24] If the defendant has, or is deemed to have, assumed responsibility tothe plaintiff to be careful in what is said or written, thereby creating proximity,it will usually, subject to policy considerations, be fair, just and reasonable tohold the defendant liable for want of care. [41] Where, as is generally the case, there is not voluntary assumption ofresponsibility there is a close relationship between the proximity and the policyassessment. Tipping J explained:[26] In most cases, however, there will be no voluntary assumption ofresponsibility. The law will, however, deem the defendant to have assumedresponsibility and find proximity accordingly if, when making the statementin question, the defendant foresees or ought to foresee that the plaintiff willreasonably place reliance on what is said. Whether it is reasonable forthe plaintiff to place reliance on what the defendant says will depend onthe purpose for which the statement is made and the purpose for whichthe plaintiff relies on it. If a statement is made for a particular purpose, it willnot usually be reasonable for the plaintiff to rely on it for another purpose.Similarly, if the statement is made to and for the benefit of a particular personor class of persons, and the plaintiff is not that person or within that class,it will not usually be reasonable for the plaintiff to place reliance on it so as tooblige the defendant to assume responsibility for carelessness in its making.[27] When, as in the present case, the environment which bringsthe parties together is legislative, the terms and purpose of the legislation willplay a major part in deciding the issues which arise. It is the legislation whichcreates and is at the heart of the relationship between the parties. It will oftencontain policy signals bearing on that aspect of the inquiry.[42] As in Carter, consideration of the legislation — the interests and parties itserves to protect — has proved to be decisive in other cases. The Association pointsto other examples in which claims of novel duty have been rejected on the basisthe legislation was not designed to protect the claimants against economic loss.24In the present case, the purpose of the regulatory framework established under the LTAand the LTMA, as contained in the Rule and as administered by the Agency and itsdelegates, including the Association, is road safety: that is, the safety of the driversand users of motor vehicles on the roads and other users of the roads such as cyclistsand pedestrians. That purpose serves to enable the fulfilment of the overarchingpurpose of the LTA, which is to promote safe road user behaviour and vehicle safetyby providing for a system of rules governing road user behaviour, the licencing of24 See Bella Vista Resort Ltd v Western Bay of Plenty District Council [2007] NZCA 33, [2007]3 NZLR 429; Queenstown Lakes District Council v Charterhall Trustees Ltd [2009] NZCA 374,[2009] 3 NZLR 786 (CA); and Marina Holdings Ltd (in rec) v Thames-Coromandel DistrictCouncil (2010) 12 NZCPR 277.drivers, and technical aspects of land transport, and to recognise reciprocal obligationsof persons involved.25[43] Accordingly, in our view it is manifest that Drive NZ does not come withinthe class of persons for whose benefit the regulatory requirements exist and nor,therefore, is it reasonable for them to claim reliance as such for their private, economic,interests. No detailed analysis of the LTA, the LTMA, or the Rule is required in thissituation for us to reach that conclusion.[44] In our view those considerations point clearly to this being a case where, as inCarter, in terms of both proximity and policy it would not be fair, just and reasonableto recognise the duty asserted by Drive NZ.[45] In reaching the opposite conclusion, on the issue of proximity the Judge wasof the view that Oceania Aviation showed it was reasonably arguable that such a dutycould be recognised here.[46] Oceania Aviation was not, we note from the outset, a decision on a strike outapplication. It followed a High Court trial alleging that certain actions ofthe Director of Civil Aviation gave rise to causes of action in the torts of misfeasancein public office and negligence. The High Court had dismissed the claims intheir entirety. Oceania Aviation Ltd appealed.[47] There was, this Court found, nothing to justify the assertion of misfeasance inpublic office — which claim had been the principal focus of the proceedings belowand on appeal.26 The Court dealt with the claimed duty of care in negligencesuccinctly. It noted that the claimed duty of care came close to equating the commonlaw duty of care with a public law right to have powers exercised lawfully, whichtraditionally has not been thought to give rise to a right to damages.27 The Courtobserved that counsel for the appellant had been unable, not surprisingly, to point toany case in which a public official charged with responsibility for public safety had25 Land Transport Act 1998, long title.26 Oceania Aviation Ltd v Director of Civil Aviation, above n 15, at [64].27 At [65].been found to owe a common law duty of care to those who were being regulated inthat public interest.28 The Court then reasoned:[67] It was entirely foreseeable that the appellant would suffer loss as aresult of the Director's action. There was also the necessary proximity orcloseness of relationship between the Director and the appellant, to whom hisnotices and directives were addressed. But, against these factors, there wasa very strong policy argument that it would not be just and reasonable toimpose any duty of care. The Judge was in our view right to conclude that,even if the postulated duty were to be confined to situations not involving anemergency exercise of power, the imposition of a duty to take care forthe interests of suppliers of aircraft parts – the persons being regulated – wouldbe likely to conflict with the Director's primary duty to those potentiallyaffected by the use of those parts in an aircraft. It might well, as the Judgesaid, promote undue caution or reticence on the part of the Director and soimpede his role as a protector of public safety. This is an area where to err onthe side of caution in the interests of the suppliers of a part might be to placethe lives of pilots and passengers at some risk.[68] Gendall J said that "in the particular circumstances of this case" a dutyof care was not to be imposed. We too are content to leave the matter onthat basis.[48] As can be seen, the analysis of proximity was closely linked to the Court'sassessment of foreseeability. That it went no further than that is clear from the focusedreasoning and conclusion that, given the regulatory context, it would not be fair, justand reasonable to recognise the claimed duty of care. Our assessment is thatOceania Aviation provides little or no support for the propositions advanced byDrive NZ.[49] Nor do we consider this Court's decision in Attorney-General vStrathboss Kiwifruit Ltd provides support for Drive NZ's position on foreseeabilityand proximity.29 In that case, this Court considered there would have been sufficientproximity between the relevant Ministry of Agriculture and Fisheries personnel, whohad decided to grant an import permit for pollen to be used in the commercialpollination of kiwifruit orchards, and some kiwifruit growers with "property rights" inkiwifruit vines or crops.30 Those growers were at risk from the introduction ofkiwifruit pathogens, as subsequently happened and caused loss. Again, that case isdistinguishable because the purpose of the regulatory regime here is not to protect the28 At [66].29 Attorney-General v Strathboss Kiwifruit Ltd [2020] NZCA 98, [2020] 3 NZLR 247.30 At [241].economic interests of LVV manufacturers and producers, but rather the interests ofthe public in road safety.[50] We are satisfied that given the purpose of the regulatory regime and itsexpression in the Rule:(a) there was not a relationship of proximity between the Agency and itsdelegate the Association and Drive NZ; and(b) to the extent of any broader analysis involved at the second stage,the regulatory framework is firmly against the recognition ofthe claimed duty of care.[51] Further support for our conclusion can be found in the fact that, asthe Association submits, UDM was not without remedy. When the Agency revokedthe certifications in late 2013, UDM had a right of appeal to the District Court againstthat decision pursuant to s 106 of the LTA. That right of appeal was not exercised atthe time; and indeed, another six years passed till these proceedings were brought.[52] On the basis of the conclusions we have reached, it is not necessary to considerthe validity of the assignment. Having said that, were that to have been a live issuelike the Judge we would not have granted strike out on that issue alone. Whether therewas a genuine commercial interest was essentially a factual assessment, not one thatcould easily be made before evidence had been heard and assessed.Result[53] The appeal is allowed.[54] The respondent's cause of action in negligence is struck out.[55] The High Court's costs order is set aside. The Agency and the Association areentitled to costs in that Court on a 2B basis together with reasonable disbursements.[56] In this Court, the Agency and the Association sought costs for a complexappeal on a band A basis and usual disbursements but did not press for certificationfor two counsel. Drive NZ submitted this was a standard appeal and that certificationfor two counsel was unnecessary. In the circumstances, we order that the respondentmust pay the appellants costs for a complex appeal on a band A basis and usualdisbursements.Solicitors:MinterEllisonRuddWatts, Wellington for First AppellantMeredith Connell, Auckland for Second AppellantBraun Bond & Lomas Ltd, Hamilton for Respondent