MYSTIC FERRETS LTD AND ORS V MINISTRY OF AGRICULTURE & FORESTRY HC HAM CIV 2007-419-1614

MYSTIC FERRETS LTD AND ORS V MINISTRY OF AGRICULTURE & FORESTRY HC HAM CIV 2007- 419-1614 20 March 2008IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV 2007-419-1614IN THE MATTER OF the Arbitration Act 1996 AND IN THE MATTER OF the Biosecurity Act 1993 BETWEEN MYSTIC FERRETS LTD First Appellant AND B HOLLAMBY FAMILY TRUST Second Appellant AND BRUCE HOLLAMBY Third Appellant AND THE MINISTRY OF AGRICULTURE AND FORESTRY Respondent Hearing: 28 February 2008 Appearances: David Hayes for Appellants Geraldine Gardner for Respondent Judgment: 20 March 2008JUDGMENT OF HARRISON JIn accordance with R540(4) I direct that the Registrar endorse this judgment with the delivery time of 1:00 pm on 20 March 2008_________________________________________________________________________________ SOLICITORS Brook Law (Hamilton) for Appellants Crown Law (Wellington) for Respondent COUNSEL David HayesIntroduction[1] Mr Bruce Hollamby operated a ferret farming business either personally or through the medium of his family trust or company, Mystic Ferrets Ltd. In 2002 the Chief Technical Officer of the Department of Conservation (DOC) advised the Director-General of the Ministry of Agriculture and Forestry (MAF) of his belief that the ferret was 'an unwanted organism'. That advice set in train a series of events which Mr Hollamby says caused his business to close. He claims compensation from MAF in an amount yet to be quantified. [2] Mr Hollamby was bound to submit his claim for determination by arbitration: s 162A Biosecurity Act 1993 (all future statutory references will be to that enactment). The parties referred two principal legal questions to Hon Peter Salmon QC. The arbitrator decided both issues unfavourably to Mr Hollamby who now appeals.Background[3] The relevant factual background is not in dispute. [4] Mr Hollamby carried on his ferret farming business at Awanui in the Waikato pursuant to annual licences granted under the Wildlife (Farming of Unprotected Wildlife) Regulations 1985. The Regulations provided for licences to be issued to farm ferrets, polecats, stoats and weasels and were introduced to control the fitch industry during the 1980 boom (by 1986 over 100 registered fitch farms exported in total about 80,000 skins). The licences were transferable and renewable annually on the payment of a fee. [5] In 1999 DOC started a review of the regulatory controls for keeping ferrets. The public were invited to make submissions on options for tighter controls. Following that review, Dr Geoffrey Hicks, the DOC Chief Technical Officer, wrote to the Director-General of MAF on 18 February 2002 in these terms:As required in Section 164C of the Biosecurity Act 1993, and Section 8 of the Department of Conservation's Unwanted Organism Policy, this document is to formally advise you that the CTO-Conservation (Dr Geoff Hicks) has determined Mustela furo (the Ferret) to be an Unwanted Organism. The Department of Conservation's Unwanted Organism policy describes ten criteria, a minimum of two of which are needed to be met in order for an organism to be declared unwanted. The CTO-Conservation considers Mustela furo meets five of these criteria (see Appendix I). Ferrets are established in most parts of New Zealand, and are currently managed under the Wildlife Act 1953 and Wildlife (Farming of Unprotected Wildlife) Regulations 1985. These regulations allow the farming, breeding, and selling of ferrets under permit from the Department of Conservation. Any person keeping three or more ferrets is defined as farming them and is required to have a permit. The Department has no discretion to refuse permits. The recent increase in the trade of ferrets as pets is aiding in their spread and social acceptance. The Department believes that not taking action to prevent this trade is counter to the millions of dollars spent annually on mustelid control and research into eradication techniques. A recent discussion document reviewing the management of ferrets under the Wildlife Act regulations resulted in a decision by the Minister of Conservation to use Biosecurity Act 1993 powers to prevent the commercial sale, breeding and distribution of ferrets in New Zealand. The intention is not to prohibit the existing commercial farming of ferrets for export, but to prevent the keeping of ferrets as pets. As an Unwanted Organism, it will no longer be legal to knowingly release, sell or offer for sale, breed, or encourage the breeding, or to exhibit ferrets without an exemption from the Chief Technical Officer- Conservation.[6] An unwanted organism is described as: s 2: any organism that a chief technical officer believes is capable or potentially capable of causing unwanted harm to any natural and physical resources or human health [7] Having formed his belief, the Chief Technical Officer was bound to notify MAF's Director-General accordingly, who was bound in turn to keep a register 'available for public information and inspection at the office of the Director-General during normal office hours': s 164C. [8] The Minister of Conservation advised Mr Hollamby on 24 June 2002 that he would be able to continue with his business as an exporter of ferrets but would beunable to sell ferrets on the domestic market to members of the public. However, the Act did not then extend the statutory controls imposed on unwanted organisms consequential upon registration with the Director-General applying to licensees under the Wildlife Regulations: s 7(2). This void was remedied by the passage of the Biosecurity Amendment Act on 7 July 2003. [9] The Minister exercised his statutory powers subsequently to exempt Mr Hollamby from the statutory prohibitions, and has since granted him annual licences to farm ferrets for export under the appropriate regulations. Mr Hollamby's last exemption was granted on 24 March 2006 and was 'extendable at his request' should he still be operating the business at 1 November 2015. However, Mr Hollamby ceased farming the property for ferret breeding some time before 19 July 2006. [10] In a very brief statement of claim, Mr Hollamby alleged that on or about 18 February 2002 'the Chief Technical Officer exercised his statutory powers by forming a belief that ferrets were an unwanted organism'. The purpose of forming the belief was alleged to be the management or eradication of the ferret population. Mr Hollamby claimed that the exercise of this power caused him verifiable loss estimated at $300,000, being: (1) loss of value of the business, being either loss of goodwill or of share value; (2) loss of revenue due to inability to sell ferrets in New Zealand; and (3) loss of revenue from leased land and ferrets.Issues(1) Statutory Power[11] The first or threshold question submitted for the arbitrator's determination was whether or not the Chief Technical Officer exercised his statutory powers when forming a belief that ferrets were an unwanted organism. That is because the statute materially provides: s 162A:(1) Where –(a) Powers under this Act are exercised for the purpose of the management or eradication of any organism; and (b) The exercise of those powers causes verifiable loss as a result of – (i) The damage to or destruction of a person's property; or (ii) Restrictions, imposed in accordance with Part 6 or Part 7, on the movement or disposal of a person's goods, - that person is entitled to compensation for that loss. (2) The compensation payable under this section must be of such an amount that the person to whom it is paid will be in no better or worse position than any person whose property or goods are not directly affected by the exercise of the powers.[12] The arbitrator concluded: at para 13: I have not been persuaded, however, that the Act can be read in such a way as to provide a relevant power [in terms of the relevant statutory provisions] to the chief technical officer. In fact it can be said that no power is needed to form a belief. No doubt if he is directed to do so, the chief technical officer would have a duty to determine whether a particular organism was unwanted. That is rather different to there being a need or an intention to give him a power to do so. It is also important to note that the consequences that flow from the formation of the belief are not direct. The consequences are in fact as a result of specific statutory provisions I conclude, therefore, that the formation of a belief pursuant to s 164C is not the exercise of a power for the purposes of s 162A.[13] Mr David Hayes, Mr Hollamby's counsel, submits that the arbitrator erred in law. In support of the appeal he essentially repeats the same argument which he advanced before the arbitrator. Mr Hayes says the Chief Technical Officer exercised his statutory powers when 'he used his discretion and formed the belief that ferrets were unwanted organisms'. He acknowledges that the statute does not expressly provide such a power. However, given the clear and unambiguous results of the officer exercising his discretion, particularly the requirement to register unwanted organisms (s 164C) and the automatic application of restrictions (ss 52 and 53), Mr Hayes says the only logical inference is that the officer must have a power to make a determination. Any other conclusion means that the officer is not accountable for his actions.[14] I respectfully agree with the arbitrator. The starting point is to decide the meaning of the word 'power' where used in s 162A. A power means a 'legal authority to act for another, especially in a particular capacity ': The New Shorter Oxford English Dictionary, 1993 Ed. The source of a power vested in a civil servant to act for the Crown, where it does not otherwise exist by operation of law, is statutory. [15] The Act vests the Chief Technical Officer with many express powers. Among them are the powers to appoint inspectors and authorise persons for the purposes of administering and enforcing all provisions of the Act or for the purposes of a national pest management strategy: s 103(2); and to accredit persons for the purposes of performing particular functions: s 103(7). Inspectors or authorised persons who act under the Chief Technical Officer's authority have a wide range of powers when complying with the officer's lawful directions and powers: s 104-126. By express reference to the management or eradication of any organism, the Chief Technical Officer is empowered to require information: s 48; to permit an owner of an organism to carry out an act otherwise prohibited by the statute: s 53(2); and may by notice in writing direct the destruction of imported organisms: s 127. [16] The Chief Technical Officer was not exercising a power in any sense of the word when forming a belief prior to writing to the Director-General on 18 February 2002. He did not require a statutory power to form a belief that an organism was unwanted. All human beings of sound mind are capable of forming a belief. The only difference here is that the Chief Technical Officer by virtue of his scientific qualifications and experience was capable of forming a belief on the specialist subject of whether or not an organism is unwanted. And the belief itself is a state of mind; it is not an act performed lawfully for and on behalf of the Crown. [17] As the statutory definition illustrates, the question of whether or not an organism is unwanted is intensely subjective. It is founded on the Chief Technical Officer's belief, a state that can be formed at any given time. His belief has special status in that it is sufficient to constitute 'an organism an unwanted organism': s 164C(1).[18] Formation of the belief both, first, discharges a statutory function – that the organism 'is capable or potentially capable of causing unwanted harm ': s 2; and, second, imposes an express duty to notify the Director-General ('must notify'): s 164C(1). He is obliged to communicate his affirmative belief. That, however, is not the performance of a power but of an express duty, which is a very different statutory function. In this context, the concepts of a power, a function and a duty have different purposes, meanings and effects: ss 7(1) and 154(a) and (b). [19] This construction is consistent with the Act taken as a whole. The purpose of Part 5 is 'to provide for the effective management or eradication of pests and unwanted organisms': s 54. It constitutes a detailed regime for formulating and notifying national and regional pest management strategies for that specific purpose. A wide range of powers are conferred on a range of bodies including national and regional councils. In my judgment the compensation provisions of s 162A are directed principally to those Part 5 powers. [20] Mr Hayes seeks to circumvent what is an apparently fatal distinction by reference to this provision: s 164C:(4) Where a chief technical officer fails to notify the Director-General in accordance with this section, that failure does not invalidate the chief technical officer's belief that makes the organism an unwanted organism.[21] I do not consider that this provision assists Mr Hollamby. It simply confirms what may appear to be obvious, that the Chief Technical Officer's failure to comply with his statutory duty does not invalidate the existence of his belief. Its relevance lies, as Ms Geraldine Gardner submits for the Crown, elsewhere. A person can only be liable for the offence of communicating an unwanted organism if he or she knowingly communicates an unwanted organism; he or she must know that the organism is unwanted: s 52. If the Chief Technical Officer has failed to discharge his or her duty to notify the Director-General of an affirmative belief, and it is not publicly registered, then a party cannot be liable for the offence of knowingly communicating an unwanted organism.[22] Accordingly, for these reasons, I agree with the arbitrator that the Chief Technical Officer's formation of a belief that an organism was unwanted did not constitute the exercise of a power for the purpose of s 162A.(2) Verifiable Loss[23] The second question is whether, if formation of the belief is an exercise of a power, that exercise has caused damage to or destruction of Mystic's property: s 162A(1)(b)(i). This is the second limb of the statutory power. The arbitrator determined this question in case he was wrong on the first. I am in the same position and I shall deal only briefly with this point. [24] The arbitrator concluded as follows: at para 16: In this case it is necessary to consider whether the loss has been caused as a result of damage to or destruction of [Mystic's] property. It is important to note that the entitlement to compensation is limited. It does not apply to any verifiable loss caused by the exercise of powers but just to those types of loss set out in the two subparas. In my view the words used indicate the type of property that was in mind. It is easy to comprehend powers of entry and other powers exercisable under the Act resulting in damage or in extreme cases, destruction of property. The words connote some physical action. Thus, in my view, the type of property referred to in [s 162A(1)(b)(i)] is physical property capable of being damaged or destroyed. It could be damage to land, it could be damage to goods; but I do not consider that the section is intended to extend to the loss of value of a company[25] As on the first question, Mr Hayes repeats the same arguments as those advanced before the arbitrator. He acknowledges that there is no statutory definition of 'property' but submits that it should be given the widest meaning to include all tangible and intangible property. He seeks support from the broad definition of 'property' found in s 2 Property Law Act 1952 including: real and personal property, and any estate or interest in any property real or personal, and any debt, and any thing in action, and any other right or interest.[26] Mr Hayes submits that the deliberate use of the word 'property' is intended to cover more than losses of particular goods. He says there is a clear statutory intent to indemnify a person for damages suffered to property and goods of all kinds, notjust land and physical goods; and that intangible property can be damaged or destroyed. He says that it makes no sense for compensation to be available for goods and land but not anything else affected, especially when the Act differentiates property and goods and elicits a clear intent to compensate for losses. [27] I disagree. The Act expressly provides for compensation payable for those whose domesticated organisms are destroyed as a consequence of implementing a pest management strategy: s 86. In this case, as Ms Gardner submits, s 162A serves a different purpose. It envisages a three-stage process. First, there must be an exercise of a relevant power (I have already found against Mr Hollamby on this threshold question). Second, that event must cause verifiable – that is, provable – loss. Third, the loss must be as a result of damage to or destruction of a person's property. [28] Although expressed in convoluted terms incorporating two discrete causal elements, s 162A provides a regime for compensating a party for what is known as consequential or economic damage. The trigger is the loss or destruction of property; that can only be, as the arbitrator found, physical damage to or destruction of tangible property. It is that event which results in a verifiable loss. The section does not provide for compensation for the damaged or destroyed property but for its consequential effect. Here it is said to be loss of value of the business suffered on resale. [29] In a case like this, Mr Hollamby would have to prove the first step of damage to or destruction of his tangible property; that is, of his ferret stock, caused by the exercise of a statutory power on 18 February 2002. However, the Chief Technical Officer's communication of his belief to the Director-General on that date did not result then or subsequently in damage to or destruction of Mr Hollamby's ferrets. He was still entitled to farm them for export under the statutory licence granted to himself. [30] Some years later, according to Mr Hayes, Mr Hollamby decided to destroy the pets because he would be unlikely to be able to sell the business as a going concern for export purposes only. I only have to summarise these facts to show thatthe proximate cause of any economic loss to Mr Hollamby was his decision to cease operating a ferret farming business, not a power exercised by a statutory body for the purpose of management or eradication of any organism.Conclusion[31] I repeat my satisfaction that the arbitrator did not err in law when delivering his award on 28 September 2007 and I dismiss Mystic's appeal. [32] Costs must follow the event. The Crown is entitled to costs according to category 2B for one counsel together with disbursements including travelling expenses and accommodation. [33] I wish to express my appreciation to Mr Hayes and Ms Gardner for the quality of their argument, both written and oral. ______________________________________ Rhys Harrison J