NEW ZEALAND BLOOM LIMITED v CARGOLUX AIRLINES INTERNATIONAL S.A. [2015] NZHC 109

NEW ZEALAND BLOOM LIMITED v CARGOLUX AIRLINES INTERNATIONAL S.A. [2015] NZHC 109 [10 February 2015]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2011-404-7008[2015] NZHC 109BETWEEN NEW ZEALAND BLOOM LIMITEDPlaintiffAND CARGOLUX AIRLINESINTERNATIONAL S.A.DefendantHearing: 2 October 2014Appearances: B D Gustafson for PlaintiffP R Jagose and J W Upson for DefendantJudgment: 10 February 2015JUDGMENT OF PETERS JThis judgment was delivered by Justice Peters on 10 February 2015 at 9.30 ampursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate: ...................................Solicitors: Claymore Partners Limited, AucklandChapman Tripp, WellingtonCounsel: B D Gustafson, Auckland[1] The Plaintiff ("NZ Bloom") seeks to recover damages of $338,426.06, plusinterest, from the Defendant ("Cargolux"). This judgment determines the followingpreliminary question in the proceeding:1Is it arguable as a matter of law and in terms of the further Amended Statement of Claim to be filed by the plaintiff, that the defendant is liable for damages under s 82 of the Commerce Act 1986, in respect of loss or damage alleged to have been suffered by the plaintiff from its payment of Fuel and Security Surcharges levied in alleged pursuance of the Fuel and Security Agreements by airlines other than the defendant?[2] Associate Judge Abbott ordered the determination of this question by consent, and when making the order, the Judge also ordered the filing and service ofan amended statement of claim. That pleading ("statement of claim") was filed in September 2014.2[3] Determination of the preliminary question requires the construction of s 82(1)Commerce Act 1986 ("Act"). In short, s 82(1) renders a defendant liable for loss or damage caused by particular conduct. The construction of s 82(1) is important in the present case because NZ Bloom seeks an order that Cargolux should pay NZ Bloom $338,426.06, whereas Cargolux submits that, having regard to s 82(1) and the case pleaded against in the statement of claim, its liability cannot exceed $40,774.70.Background[4] NZ Bloom is a grower and exporter of flowers and engages freight forwarders to carry its exports.[5] NZ Bloom's case against Cargolux, as pleaded, is as follows. Cargoluxdenies most of the important allegations but I shall proceed on the basis that NZ Bloom will be able to prove the facts which it has pleaded:[6] in about September 2001 and thereafter, Cargolux and other carriers, referred to by NZ Bloom as "the cartel", arrived at two1 High Court Rules, r 10.15; and New Zealand Bloom Ltd v Cargolux Airlines International S.A.[2014] NZHC 536 at [55](a).2 Third Amended Statement of Claim dated 22 September 2014.understandings, one including a provision that each member of thecartel would impose a "fuel" surcharge on exports from New Zealand and the other a provision that each would impose a "security" surcharge on such exports (together "the provisions");3[7] that the provisions, or agreements as NZ Bloom refers to them later inits pleading, had the "effect or purpose" of substantially lesseningcompetition in various markets, whether as a matter of fact or by virtue of a deeming provision in s 30 of the Act;4[8] that between 2001 and 2006 members of the cartel, including Cargolux, gave effect to the provisions by charging the surcharges to freight forwarders, including NZ Bloom's freight forwarder;5[9] the agreements (not Cargolux or the cartel but the agreements) caused NZ Bloom loss of $338,426.06, being the sum of the surcharges that NZ Bloom paid (as passed on by its freight forwarder) between 2004 and 2006. Of this sum, only $40,774.70 was paid in respect of surcharges rendered by Cargolux6 – hence the preliminary question;[10] NZ Bloom seeks an order pursuant to s 82(1) of the Act that Cargolux is liable in the sum of $338,426.06, or alternatively is liable for the $40,774.70 to which I have referred.7 As I have said, Cargolux's caseis that, given the case pleaded against it, it could not be liable to NZ Bloom under s 82 for more than $40,774.70.Relevant provisions of the Act[11] It is common ground that, if the matters in [5](a) to (c) are proved, NZ Bloom will have established that Cargolux contravened each of s 27(1) and (2) of the Act. These provisions prohibit, respectively, a person entering into an agreement of the3 At [15] and [17].4 At [22] to [24].5 At [16] and [19].6 At [26].7 See relief sought at 17.nature described above and a person giving effect to the same. Section 27(1) and (2) provide:27 Contracts, arrangements, or understandings substantially lessening competition prohibited(1) No person shall enter into a contract or arrangement, or arrive at an understanding, containing a provision that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market.(2) No person shall give effect to a provision of a contract, arrangement, or understanding that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market.[12] Section 27 is in Part 2 of the Act. Remedies for breach of prohibitions in Part 2 are in Part 6 of the Act and include s 82. A breach of s 27, or acting as an accessory to the same, might lead to:[13] an application by the Commerce Commission ("Commission") for theimposition of a pecuniary penalty pursuant to s 80;[14] the grant of an injunction on the application of the Commission or third party pursuant to s 81; and[15] an action by a third party such as NZ Bloom for damages and/or exemplary damages and/or other relief – see ss 82, 82A, 89 and 90.[16] Section 82, and the corresponding provision in respect of a remedy for a breach of s 47 in Part 3, provides:82 Actions for damages for contravention of Part 2(1) Every person is liable in damages for any loss or damage caused by that person engaging in conduct that constitutes any of the following—(a) A contravention of any of the provisions of Part 2 of this Act:(b) Aiding, abetting, counselling, or procuring the contravention of such a provision:(c) Inducing by threats, promises, or otherwise the contravention of such a provision:(d) Being in any way directly or indirectly, knowingly concerned in, or party to, the contravention of such a provision:(e) Conspiring with any other person in the contravention of such a provision.(2) An action under subsection (1) may be commenced within 3 years after the matter giving rise to the contravention was discovered or ought reasonably to have been discovered. However, no action under subsection (1) may be commenced 10 years or more after the matter giving rise to the contravention.[17] "Engaging in conduct" is defined in s 2(2) of the Act:(2) In this Act,—(a) a reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, including—(i) the entering into, or the giving effect to a provision of, a contract or arrangement; or(ii) the arriving at, or the giving effect to a provision of, an understanding; or(iii) the requiring of the giving of, or the giving of, a covenant:...[18] I did not receive submissions on the legislative history of s 82 or, more generally, on how the various provisions in Part 6, at least as they concern contraventions of Part 2 provisions, combine. For instance, Part 6 provides for an award of exemplary damages for a contravention of a prohibition in Part 2,8 and for relief by way of "Other orders".9[19] Few cases addressing s 82 have come before the Court. Counsel referred me to Bomac Laboratories Ltd v F Hoffman-La Roche Ltd in which the Court discussed s 82 in the course of determining interlocutory applications,10 and to several cases concerning applications by the Commission for the imposition of pecuniary penalties.8 Commerce Act 1986, s 82A.9 Section 89.10 Bomac Laboratories Ltd v F Hoffman-La Roche Ltd (2002) 7 NZBLC 103,627.[20] Counsel also referred me to Australian authorities discussing a broadly equivalent provision in their legislation, now s 82 Competition and Consumer Act2010 (Cth) ("CCA") but formerly s 82 Trade Practices Act 1974 (Cth) ("TPA").11Section 82 TPA applied to relief sought for breach of both the trade practice and fair trading/consumer protection provisions of the Australian legislation, and in many of the cases to which I was referred the Court was determining relief for misleading or deceptive conduct – which in New Zealand would be sought pursuant to s 43 Fair Trading Act 1986.[21] As to s 43 Fair Trading Act 1986, its different language and the fact that the Court has discretion as to the remedy it orders, if any, mean that its construction is of no real relevance to the determination of the preliminary question.[22] I record also that counsel for NZ Bloom referred me to authorities emanating from the European Court of Justice.12 Again, I have not found those authorities helpful in determining the preliminary question in this case.Submissions[23] Counsel for NZ Bloom submits that it is arguable under s 82(1) that one member of the cartel (Cargolux) is liable for all losses ($338,426.06) caused to NZ Bloom by the cartel's activities in breach of Part 2 of the Act.13[24] Counsel for Cargolux submits that under s 82(1) a defendant is liable for loss or damage caused by the defendant's engagement in proscribed conduct and so it is for a plaintiff to prove that the loss or damage sought to be recovered was so caused.1411 Henville v Walker (2001) 206 CLR 459 (HCA); I & L Securities v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 (HCA); Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 (HCA); Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 (HCA);State of Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691 (FCA); and Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd (2010) 188 FCR 351 (FCA).12 Case C-557/12 Kone AG v ÖBB-Infrastruktur AG (CJEU 5 June 2014); and Case C-557/12 Kone AG v ÖBB-Infrastruktur AG (opinion of Advocate General 30 January 2014).13 Plaintiff's Synopsis dated 22 September 2014, at [16] – [22].14 Outline of Submissions of Counsel for the Defendant on Preliminary Question dated 30 September 2014, at [3] and [17].[25] In my view, the language of s 82(1) is quite clear. Section 82(1) renders a defendant liable for any loss or damage caused by the defendant having engaged in conduct constituting any of s 82(1)(a) to (e), that is Cargolux is liable in damages for any loss or damage caused by Cargolux engaging .[26] In this case, the conduct on which NZ Bloom relies is that described in s 82(1)(a), being a contravention of s 27(1) and/or (2), that is a provision of Part 2 of the Act. Accordingly, to recover, NZ Bloom is required to plead and prove that the loss or damage claimed of $338,426.06 was caused by Cargolux entering into and/or giving effect to the agreements.[27] However, the relevant part of the statement of claim reads:1526. The Fuel Agreement and the Security Agreement have caused NZ Bloom loss:26.1 NZ Bloom was charged and paid Fuel Surcharge and the Security Surcharge on the Cargolux Export Shipments of $40,774.70 as set out in Schedule 3; and26.2 NZ Bloom was charged and paid Fuel Surcharge and the Security Surcharge on the Cartel Export Shipments of $338,426.06 as set out in Schedule 3.[28] This pleading does not meet the requirements of s 82(1) because it does not allege that Cargolux's conduct caused loss or damage nor plead the facts to be reliedon to prove causation.[29] Counsel for NZ Bloom submitted that Cargolux's conduct in breach ofs 27(1) and (2) could be said to have "caused" the loss, because the carrier's sheermarket presence in the air freight industry was such that other carriers followed it into the agreements and gave effect to them.16[30] For my part, I would not rule out a plaintiff succeeding on such a case under s 82(1). That, however, is not the case that NZ Bloom has pleaded in the statement of claim. I add that in answering the preliminary question, I am not required todetermine the point at which conduct by a defendant has "caused" loss or damage15 Third Amended Statement of Claim, above n 2, at [26].16 Plaintiff's Synopsis, above n 14, at [18].suffered by the plaintiff for the purpose of s 82(1). I say that, given counsel for NZBloom's submission that it is sufficient if a defendant's conduct is a "material cause"of the loss or damage. As I say, that is not a matter I am required to determine.[31] I accept the submission by counsel for Cargolux that statements in other authorities plainly anticipate that under s 82(1) a defendant will be liable for such loss or damage as their conduct has caused and that it will be for a plaintiff to prove that causal link if it seeks to recover. For instance, in Commerce Commission v Koppers Arch Wood Protection (NZ) Ltd (a case concerned with an application by the Commission for the imposition of a pecuniary penalty), the Court said:17[92] ... s 82 creates an action for damages against persons engaging in contravening conduct whereas s 80 exposes a person to liability for pecuniary penalties if that person has contravened the Act or conspired with others to contravene. ... Finally, and perhaps of most importance, s 82 creates liability for loss or damage caused by engaging in conduct that contravenes the Act or conspiring with another in contravention, that is to say it focuses on the damage flowing from such engagement or conspiracy whereas s 80 is retrospective, looking back to whether contravention has occurred or there has been a conspiracy to contravene. ...[32] In Bomac, the plaintiffs alleged breaches by the defendants of s 27(1) and (2). At [95] onwards of the judgment, the Court said:18[95] Assuming for the purposes of this argument that a New Zealand Court would have jurisdiction, I doubt that a breach of s 27(1) would without more give rise to a claim in damages. Entry into a contract including an anti-competitive provision would not of itself have a causal effect on Bomac. It could only suffer loss as a result of the separate and subsequent act of giving effect to or implementing the offensive provision within s 27(2). [Section] 27(1) appears designed to prohibit conduct of a kind that may support the remedies of injunction or declaration; by contrast, s 27(2) appears to have the purpose of allowing the separate or additional remedy of damages where a plaintiff can prove a causal nexus between the breach and its loss.[96] If this analysis is correct, Bomac would appear to have little prospect of success on its s 27(1) claims. [Section] 81 governs the Court's jurisdictionto grant an injunction for breach of s 27(1). ...17 Commerce Commission v Koppers Arch Wood Protection (NZ) Ltd [2007] 2 NZLR 805, at [92].18 Bomac Laboratories Ltd v F Hoffman-La Roche Ltd, above n 11, at [95] and [96].[33] The statements in these authorities are helpful but obiter. In this instance the answer to the preliminary question turns on NZ Bloom's pleading and whether it satisfies the requirements of the statute.Section 82 Competition and Consumer Act 2010[34] For the same reason, it is unnecessary for me to address the careful submissions made by both counsel on s 82 CCA and the various decisions of the High Court of Australia to which I have referred above.[35] Section 82 CCA provides:A person who suffers loss or damage by conduct of another person that wasdone in contravention of a provision of , may recover the amount of theloss or damage by action against that other person or against any person involved in the contravention.[36] Section 75B CCA provides:A reference in this Part to a person involved in a contravention of a provision shall be read as a reference to a person who:(a) has aided, abetted, counselled or procured the contravention;(b) has induced, whether by threats or promises or otherwise, the contravention;(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or(d) has conspired with others to effect the contravention.[37] As counsel for Cargolux submitted, and as counsel for NZ Bloom acknowledged, the clear differences between s 82 CCA and s 82 of (our) Act would of course need to be taken into account in drawing on the Australian authorities in the New Zealand context. I have not found those authorities assisted the determination of the preliminary question because, as I have said, the answer to that question turns more on the manner in which NZ Bloom has pleaded its case rather than the reach of s 82(1) of the Act.Result[38] The answer to the preliminary question is No. Having succeeded, Cargolux is entitled to its costs (on a 2B basis) together with disbursements...................................................................M Peters J