FEDERATED FARMERS OF NEW ZEALAND INCORPORATED V FEDERATED FARMERS OF NEW ZEALAND (NORTHLAND PROVINCE) INCORPORATED AND ANOR CA CA162/05

FEDERATED FARMERS OF NEW ZEALAND INCORPORATED V FEDERATED FARMERS OF NEW ZEALAND (NORTHLAND PROVINCE) INCORPORATED AND ANOR CA CA162/05 19 September 2006IN THE COURT OF APPEAL OF NEW ZEALAND CA162/05BETWEEN FEDERATED FARMERS OF NEW ZEALAND INCORPORATED Appellant AND FEDERATED FARMERS OF NEW ZEALAND (NORTHLAND PROVINCE) INCORPORATED First Respondent AND THE REGISTRAR OF INCORPORATED SOCIETIES Second Respondent Hearing: 15 June 2006 Court: William Young P, O'Regan and Arnold JJ Counsel: D J White QC for Appellant C R Pidgeon QC for First Respondent G S Caro for Second Respondent Judgment: 19 September 2006 at 11 amJUDGMENT OF THE COURT A The appeal is allowed. The decision of the High Court is quashed and the decision of the Assistant Registrar of Incorporated Societies is restored. The First Respondent is directed to change its name by 30 November 2006. B Costs to the appellant of $3,000 plus usual disbursements. C Costs in the High Court should be determined in that Court in the light of this judgment.REASONS OF THE COURT(Given by O'Regan J)Introduction[1] This is an appeal against a judgment of Fogarty J (CIV-2004-485-002220 26 July 2005). In that judgment the Judge reversed a decision of the Assistant Registrar of Incorporated Societies (the Registrar) directing the first respondent to change its name.BackgroundThe dispute between the parties[2] This appeal results from the latest episode in a long-running dispute between the appellant, Federated Farmers of New Zealand Inc ("the Federation"), and the first respondent, Federated Farmers of New Zealand (Northland Province) Inc ("Northland"). The background is outlined in the decision under appeal and in this Court's decision in an earlier appeal involving the same parties: Federated Farmers of New Zealand Incorporated v Federated Farmers of New Zealand (Northland Province) Incorporated CA144/04 23 June 2005. A brief summary follows. [3] The Federation is incorporated under the Incorporated Societies Act 1908 ("the Act"). It is parent society to 25 branches, all of which are incorporated as branch societies under the Incorporated Societies Amendment Act 1920 ("the amendment Act"). Northland is one such branch. With the exception of Northland,the position of which is discussed below, each of the branches represents a province within the Federation's structure. [4] The dispute arose when, owing to legislative change, the Federation was forced to restructure its funding. The consequence of the restructuring was that many activities which had been administered locally by the provincial branches would be assumed by the Federation and administered at a national level. Additionally, proposed amendments to the Federation's constitution in 1997 purported to introduce a national subscription, payable to the Federation. In 2000, there were further amendments to the effect that if a branch's subscription fell into arrears of more than 24 months, the branch's name could be removed from the Federation's roll of membership. Northland opposed all changes. It refused to pay the increased capitation rates that followed from the restructuring. [5] Relations between the Federation and Northland became difficult. There were legal proceedings issued by both sides against each other. Some were discontinued, and there was an attempt at mediation to resolve differences. Eventually, the parties were involved in an arbitration conducted by Mr P D McKenzie QC. In his award of 14 August 2003 he found as follows:The Federation is required by Rule 13(b) of its constitution to allocate members which have been solicited in Northland to a province. Northland is not and has not been since at least 9 April 1999 a province to which members can be allocated. The Federation is required under Rule 13 to allocate members to a province on a geographical basis but in the absence of a province in the Northland geographical area, any allocation under Rule 13(b) is in abeyance until such time as either Northland is re-integrated into the Federation as a province, or the Federation has made changes to its provincial structure so as to provide for a province in the Northland geographical area [Emphasis added.][6] In May 2004, in response to the arbitrator's award, the Federation established a new province to represent the interests of the Federation's members in the Northland region. The new province was called Federated Farmers of New Zealand (Far North, Whangarei and Kaipara Districts Province) Inc (the "Far North Branch").The name change application and the arbitration appeal[7] The Federation applied to the Registrar to direct Northland to change its name. On 18 March 2004 the Federation filed submissions with the Registrar. Submissions from Northland were received on 13 September 2004. The Federation also requested that the Registrar apply to the High Court to put Northland into liquidation. Pursuant to s 26 of the Act, only Northland's members, Northland itself, Northland's creditors or the Registrar (ie not the Federation) can apply to the High Court seeking the appointment of a liquidator. [8] The Registrar issued her decision in a letter to the President of Northland dated 27 September 2004. The letter was copied to the Federation and its counsel. The decision recorded as follows:I have only considered the issue of Northland's name. Currently there is an outstanding request by Federated Farmers for me to apply to the Court to wind up Northland. Both Northland and Federated Farmers have been advised that I will not be considering that issue until the current litigation involving Northland and Federated Farmers is at an end. I am not required to determine the status of Northland when considering the name issue as the relevant provisions of the Incorporated Societies Act 1908 apply to both societies and branch societies. I have considered the name issue in terms of section 11A(1)(b) of the Act, namely whether Northland's name is undesirable. I have not considered the name issue in terms of section 11A(1)(a) of the Act as that would require me to consider the status of Northland. In my view it is clear that the relationship between Northland and Federated Farmers has broken down. That is clear from the award of the arbitrator. The arbitrator found that Northland has not been a province of Federated Farmers since at least April 1999 and relinquished its affiliate status with Federated Farmers in January 2001. Since that time Northland has had no recognised status under the rules of Federated Farmers. I consider that Northland's current name represents itself to have a status and relationship with Federated Farmers. With Northland having lost its status and relationship, I consider that it is undesirable for Northland to continue with its current name. In reaching that decision I have noted that Federated Farmers have taken steps to set up a separate organisation based in that region which will compete with Northland. I consider that there is potential for confusion amongst people dealing with Northland and Federated Farmers whileNorthland has its current name. That would include people intending to become members of either Northland or Federated Farmers I have noted that Northland considers it has commercial value in its "brand" name and that it would suffer financial hardship if it was ordered to change its name. In exercising my statutory function, I cannot consider Northland's "brand" name. All I can consider is its registered name. It is up to Northland to decide upon a new name which must comply with the Act. If Northland changed its name to either "Northland Federated Farmers Incorporated" or "Northland Farmers Federation Incorporated" I would consider that it complied with the Act. Pursuant to section 11A(1)(b) of the Act, I direct Northland to change its name[9] Around the same time it lodged the name change application with the Registrar, the Federation appealed to the High Court against the arbitrator's award. The dispute was as to the application of s 7 of the amendment Act, which provides:7 Evidence of membership of branchFor the purposes of this Act membership of a branch of a society shall be determined in accordance with the general rules of the society and the special rules (if any) of the branch in that behalf, and not otherwise, and every member of a local branch shall be deemed to be a member of the society and liable to all the obligations of membership.[10] The Federation's appeal was dismissed on 27 May 2004 and a further appeal was lodged with this Court, leading to the decision referred to at [2] above. That appeal was the subject of the reference to "current litigation" in the Registrar's letter. The appeal to this Court was heard on 12 April 2005. The question on appeal was whether, under s 7 of the amendment Act, membership of a parent incorporated society was a condition precedent for membership of a branch of that parent. On 23 June 2005 this Court allowed the Federation's appeal. So far as is relevant to the present case, this Court said (at [95]):[W]e reject the argument that for all legal purposes the parent or originating society is "primary" or "superior" to the branch. There are two incorporations – each separate in law – and the relationship between them must necessarily be regulated by private ordering, or by statute. In most areas, the branch is completely autonomous. But in the area of "membership" there is an interlocking relationship. Hence, in our view, the 1920 Act created what we have described as a "hybrid" situation – for some, but not all purposes, the branch society is truly independent.[11] The Court concluded:[101] In this case, the Northland members must first comply with the membership rules of the parent society. A number have not done so, insofar as they have not paid their (required) national subscriptions. The Northland members must comply with any local membership rules. If these things are complied with, they are "deemed" to be members of the Federation (even though, ironically in this case, they are "actual" members of the Federation by virtue of having paid their subscriptions). [102] We make no comments on the merits of this dispute, particularly since it was intimated that other proceedings might follow on this proceeding. However, we do say that it is plainly in the interests of these long standing antagonists to come to terms, and devote their undoubted industry to something other than litigation.[12] On 20 July, Fogarty J heard an appeal by Northland under s 34B of the Act against the Registrar's decision directing it to change its name. Accordingly Fogarty J, unlike the Registrar, had the advantage of seeing this Court's 23 June judgment.Provisions[13] Before summarising Fogarty J's judgment, it is necessary to set out the provisions governing the Registrar's power to direct a change in name. [14] Sections 11 and 11A(1) of the Act provide:11 Name of society not to be the same as the name of another society or body corporate(1) No society shall be registered under a name which is identical with that of any other society registered under this Act, or of a company carrying on business in New Zealand (whether registered in New Zealand or not), or of any other body corporate established or registered in New Zealand under any Act, or so nearly resembles that name as to be calculated to deceive, except where that other society or company or body corporate, as the case may be, signifies its consent in such manner as the Registrar requires, and the Registrar is satisfied that registration of the society by the proposed name will not be contrary to the public interest. (2) Except with the consent of the High Court, no society shall be registered by a name which, in the opinion of the Registrar, is undesirable.11A Change of name(1) If— (a) Through inadvertence or otherwise, a society at its first registration, or on its registration by a new name, is registered by a name which is in contravention of section 11 of this Act, or of any enactment, other than this Act, relating to restrictions on the use of any name; or (b) A society is for the time being registered by a name which, in the opinion of the Registrar, is undesirable,—the society shall, within a period of 6 weeks from the date of its being required by the Registrar to do so, or such longer period as he may allow, change its name in accordance with section 21 of this Act to a name that is not in contravention as aforesaid and is not, in the opinion of the Registrar, undesirable. [Emphasis added][15] Section 11A(1) is in mandatory terms: once the Registrar forms the opinion that a society's name is undesirable, the requirement for a change of name necessarily results.Judgment of Fogarty J[16] Fogarty J said the Registrar had gone too far in saying that Northland had lost its relationship with the Federation. The Judge noted that in its 23 June 2005 judgment this Court accepted that Northland still had a statutory status as a branch under the amendment Act. He considered that the Registrar had overlooked this status (at [22]): "The Federation does not want [Northland]. It is a problem child. But it is still a branch of the Federation". [17] The Judge acknowledged that the Act conferred a "broad discretion" on the Registrar. But the Judge said that discretion needed to be exercised in the light of the Act's purposes. Therefore, he said the Registrar was misusing her powers under s 11A in requiring Northland to change its name in a fashion that denied its continued status as a branch of the Federation. [18] Fogarty J said the Registrar should not have considered the name change application during the currency of the litigation between the Federation andNorthland. He noted that the Federation only applied for the name change because it was frustrated that Parliament had not conferred a direct right on the Federation to apply to the High Court to have Northland put into liquidation. [19] The Judge said he thought the present name was "undesirable". However he thought the Federation and Northland were coming to the end of their dispute – either they would settle or the Registrar would eventually apply to the High Court under s 26. Until such time, the Judge said the Federation's name change application was an attempt by the Federation to "have the fruits of a victory that it has not yet won": at [27]. [20] Fogarty J said that the continuation of Northland's name was not misleading. He said it would be clear to interested farmers that Northland was not a province of the Federation, even though the words "Northland Province" remained in its name. Accordingly, Fogarty J allowed Northland's appeal and reversed the Registrar's decision.The present appeal[21] On 2 August 2005 the Federation filed a notice of appeal with this Court. On 9 June 2006, six days before we heard argument in the appeal, the Federation applied for leave to adduce new evidence by affidavit pursuant to r 45(1)(b) of the Court of Appeal (Civil) Rules 2005. The proposed evidence was an affidavit of Annabel Young, the Chief Executive Officer of the Federation. It referred to confusion that had ensued in the farming community as to whether Northland was a province of the Federation. The Federation pointed out that the affidavit post-dated the judgment under appeal and was credible and relevant to the Judge's finding that the continued use of Northland's name would not be misleading or cause confusion. The Federation's application was opposed. [22] We are not prepared to grant leave. The events deposed of in the affidavit took place before the hearing before Fogarty J. Thus the affidavit could have been adduced for the purposes of the appeal to the High Court so the evidence is not "fresh" in the sense described in Rae v International Insurance Brokers (NelsonMarlborough) Ltd [1998] 3 NZLR 190 (CA) and does not meet the test for admission of new evidence enunciated in that case. The essence of that test continues to apply notwithstanding changes to the wording of the relevant rule:Aotearoa International Limited v Paper Reclaim Limited [2006] NZSC 59 at [6]. In any event, for reasons that will become clear, the proposed evidence does not affect our decision either way.Submissions in this CourtThe Federation[23] Counsel for the Federation, Mr White QC, submitted that it was undisputed that Northland had lost its status as either an affiliate or province of the Federation and that Northland had no recognised status under the Federation's constitution. He said the decision of the Registrar that Northland's name was "undesirable" was based on the fact that the name indicated that Northland had a status within, and a relationship with, the Federation. He noted that even Fogarty J had said in the judgment under appeal that Northland's name was "undesirable". [24] In this regard, Mr White stressed that Northland was a shell. Any members in the Northland area willing to pay subscriptions as required by the Federation would simply be allocated to the Far North branch. [25] Mr White contested the Judge's finding that the Registrar had overlooked Northland's status as a branch. He pointed out that in her decision, the Registrar said that she was deciding the name change application under s 11A(1)(b), which deals with the question of whether a society's name is undesirable, and not s 11A(1)(a), which would require a determination of Northland's status. Mr White submitted that the words "for the time being" in s 11A(1)(b) meant the assessment of undesirability needed to be made in light of the facts at the time of assessment. The Registrar has to take into account changes in circumstances since the initial registration of the society or branch. Thus the Registrar was entitled to take cognisance of the fact that,since its registration as a branch, Northland had lost both its provincial status and a relationship with the Federation that its name connoted. [26] Mr White also disputed Fogarty J's finding that Northland's continued use of its name would not be misleading, and that it would be clear to all interested farmers in the Northland region that Northland is not a province of the Federation. Mr White said there was no evidence before Fogarty J that would support such a finding. Mr White said the Registrar was entitled to conclude that Northland's name suggested a provincial relationship. The name had the potential to lead people to think, erroneously, that Northland was still a province of the Federation, or to confuse Northland with the Far North branch. [27] Mr White said that the next step in resolving the impasse between the Federation and Northland was for the Registrar to apply to the High Court to wind up Northland pursuant to s 26. However Fogarty J was wrong to say the Registrar should not have considered the name issue before the impasse was resolved.Northland[28] Counsel for Northland, Mr Pidgeon QC, said the Registrar was wrong to make her decision on the basis that Northland had no status within, or relationship with, the Federation. In particular Mr Pidgeon pointed to the fact that under Northland's constitution, approval is required from the National Council of the Federation to change Northland's name (the combined effect of rr 1 and 31), effectively giving the Federation a veto power over any new name which Northland wanted to adopt. Accordingly Mr Pidgeon submitted the Registrar overlooked the terms of Northland's constitution when making her decision. [29] Mr Pidgeon supported Fogarty J's finding that the Registrar ought not to have considered the name change application during the currency of litigation between Northland and the Federation concerning Northland's survival. He reiterated Fogarty J's finding that there was no evidence that Northland's name would cause confusion. Like Fogarty J, he said that the application for a name change was made out of frustration on the part of the Federation of its inability to apply to liquidateNorthland directly. Mr Pidgeon pointed out that the Registrar has not, since the delivery of Fogarty J's judgment, taken steps to apply to the High Court to liquidate Northland. [30] Mr Pidgeon said there were no authorities under the Act in which a name change application, by a party who originally consented to the name it now found objectionable, had been successful. He said the Federation did not have proprietary rights in the phrases "Federated Farmers" and "province". He cited New Zealand Trophy Hunting Ltd v Registrar of Companies (1990) 5 NZCLC 66,346 at 66,350 (HC) as authority for the proposition that a similarity between two names cannot of itself render one of the names undesirable.DiscussionThe nature of the Registrar's decision[31] Given s 34B confers a general, unrestricted right of appeal against the Registrar's decision, the High Court heard the appeal de novo and was not confined to deciding whether the Registrar's decision could simply be challenged in judicial review proceedings (ie whether she took into account an irrelevant consideration or discounted a relevant one). Nevertheless, her opinion must still properly be accorded weight: Vicom New Zealand Ltd v Vicomm Systems Ltd [1987] 2 NZLR 600 at 604 (CA). The decision necessarily involves the Registrar in making a value judgment and the Court's scrutiny ought to be restrained. [32] In the present case, the only question which was before the Registrar was whether Northland's name was "undesirable". She rightly confined herself to that task. She did not consider the dispute between Northland and the Federation. She did not agree to apply to the High Court to liquidate Northland under s 26. [33] Mr Pidgeon argued that the Registrar should have declined to embark on the exercise of considering whether the name of Northland was undesirable while the issue of the initiation of a liquidation of Northland was still unresolved. In effect hesought to convince us that it was an error on the Registrar's part to embark on the exercise. We do not see how that can be so, and to the extent the High Court Judge considered it was, he was, in our view, in error. The Registrar was asked by the Federation to direct Northland to change its name, and provided with information that could reasonably have led her to consider Northland's name was undesirable. She formed the view that she had sufficient information before her to decide the undesirability issue. In those circumstances she had no reason to defer her decision and it certainly cannot be said that she was bound not to form an opinion on the undesirability of the name because of the wider dispute between the parties which remained unresolved.Was the Registrar correct?[34] Turning to the undesirability issue itself, we think the Registrar was entitled to decide that Northland's name misrepresents Northland as holding a status within and a relationship with the Federation. As we have noted the statutory criterion of "undesirable" appeared in the old Companies Act 1955, s 31(1)(a). In Flight Centre (NZ) Ltd v Registrar of Companies (1994) 7 NZCLC 260,612 at 260,614 (HC), one of the last cases to consider the old provision (the test of "undesirable" is not repeated in the Companies Act 1993), Blanchard J said that where a descriptive name has a geographical label attached, the same name with a different geographical label would not be "undesirable" in terms of s 31(1)(a). As is apparent from the Registrar's recommendations of names she considered would be compliant with the Act, she found the objectionable words to be "Northland Province". Thus, by analogy, Flight Centre might support the view that "Northland Province" attached to "Federated Farmers" is not "undesirable". But Flight Centre is clearly distinguishable because it refers to descriptive phrases. As Fogarty J found in the present case, "Federated Farmers" is not descriptive, but rather "distinctive in New Zealand of the Federation": at [20]. So the distinctive phrase "Federated Farmers", coupled with the geographical reference "Northland Province", connotes a Northland provincial branch of the Federation.[35] We accept the Federation's submission that s 11A(1)(b) requires the Registrar to take notice of changes in circumstances since Northland was registered as a branch under the amendment Act. While it is still a branch under the amendment Act, Northland has lost any real relationship with the Federation. It is no longer an affiliate of the Federation and it certainly is not a province. We think the Registrar in her discretion was entitled to infer from the similarity between the two names and the wider factual circumstances that there was a potential for confusion amongst people dealing with the Federation and Northland. Of course, similarity per se will not be sufficient to demonstrate undesirability. It is a matter of fact and degree: Sika (New Zealand) Ltd v Sika Technology Ltd [1994] MCLR 47 at 48 (CA). [36] Northland itself implicitly accepted the possibility of confusion in its submissions to the Registrar, where it said that the establishment of the Far North Branch would "create confusion". [37] We conclude that the Registrar's decision to direct Northland to change its name was not wrong. She was entitled to decide the way she did notwithstanding Northland's status under the amendment Act. That status does not affect the practical relationship between Northland and the Federation, which is other than what Northland's name might imply. Northland's name connotes a relationship with the Federation that it does not have: it makes a statement about Northland that is no longer true. In those circumstances, it is clear the name is undesirable. Fogarty J himself recognised this when he said he thought Northland's name was "undesirable". [38] We conclude that the High Court was wrong to allow the appeal from the Registrar's decision.Result[39] The appeal is allowed. The decision of the Registrar directing Northland to change its name is restored. Northland is directed to change its name by 30 November 2006.Costs[40] We award costs to the Federation of $3,000 plus usual disbursements. We do not know if costs were awarded in the High Court. If they were, we remit that issue to the High Court for reassessment in the light of this judgment.Solicitors: Gillespie Young Watson, Lower Hutt for Appellant Urlich McNab Kilpatrick, Whangarei for First Respondent