QUANTUM LABORATORY LIMITED AND ORS V THE DUNEDIN DISTRICT COURT HC DUN CIV 2007-412-000357

QUANTUM LABORATORY LIMITED AND ORS V THE DUNEDIN DISTRICT COURT HC DUN CIV 2007-412-000357 22 May 2008IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY CIV 2007-412-000357IN THE MATTER OF the Judicature Amendment Act 1972 BETWEEN QUANTUM LABORATORY LIMITED First Plaintiff AND PETER JAMES LESTER Second Plaintiff AND DAPHNE JOY LESTER Third Plaintiff AND THE DUNEDIN DISTRICT COURT Respondent Hearing: 1 April 2008 Counsel: R A Moodie for Applicants P Gunn for Respondent Judgment: 22 May 2008JUDGMENT OF PANCKHURST J Judicial review of District Court findings[1] This proceeding, an application for judicial review, concerns findings made in the context of a civil case heard in the District Court at Dunedin. The applicants were strangers to that proceeding. They were neither parties, nor even witnesses. Yet, they allege that the judgment contains findings about them which are harmful to their reputation and, in the case of Quantum Laboratory Limited, harmful to the business of the company. [2] The basis of the claim is that the challenged findings were not only adverse to the applicants' interests, but were also reached in breach of the principles of naturaljustice. Unaware of the civil proceeding the applicants enjoyed no opportunity to be heard. [3] In broad terms two major issues require determination. The first is whether the District Court judgment contains findings adverse to the applicants reached in breach of natural justice. The applicants assert the existence of various findings of this nature, but the respondent contends that the Judge's findings were limited, not necessarily adverse and appropriately tailored to the circumstances of the case. [4] The second broad aspect concerns relief. At this stage the relief sought is declaratory, being declarations that the impugned findings be quashed on the basis that they are unlawful for want of natural justice. Although it is common ground that as complete strangers to the civil claim the applicants were surprised by the findings, and had no opportunity to meet them, the respondent maintains that declaratory relief, as sought, is unavailable. The principles of natural justice, it is said, do not avail strangers to an adversarial process. Otherwise, adversarial hearings would be beset with all manner of problems in attaining natural justice for persons who are non-participants. [5] Initially Mr Gunn sought to avoid the need for the District Court's involvement in this proceeding. Initiatives were pursued to ascertain if any of the parties to the civil case wished to be joined. They did not. In these circumstances counsel accepted my invitation to assume a role, rather than to abide the decision and deny me the assistance of argument on both sides.Background: the civil proceeding[6] The civil claim in the District Court was Superior Minerals Limited v Lindsay Watt (DC DUN CIV 2003-012-000667 25 October 2005). Superior Minerals is a fertiliser company. It gave advice about, and supplied, fertiliser for application on a dairy farm at Inchclutha. Mr Lindsay Watt initially farmed the property. However, at the time relevant to the claim the farm was owned by L B and D M Watt Limited, being a company formed by Mr Lindsay Watt and his wife. The company initially employed their son Mark Watt as a 50/50 sharemilker. In the District Court JudgeM J Green found that the proper defendants were the company and Mark Watt. They were substituted as the defendants. [7] The original claim was for a sum of about $23,000 being the cost of fertiliser sold to the defendant company by Superior Minerals. This rather modest claim precipitated a counterclaim for a sum of about $137,000 for farming losses (lost production, additional fertiliser costs, extra feed costs and consultancy costs) allegedly incurred as a result of Superior Minerals' supply of defective fertiliser. [8] Quantum Laboratory Limited is described in this proceeding as "an analytical laboratory specialising in coordinated soil, plant and animal nutrition". It operates from premises situated at Waipawa, Hawkes Bay. Soil from the Watt farm was analysed at the laboratory and Superior Minerals supplied fertiliser from a prescription based on the soil analysis. Peter Lester is the managing director and principal shareholder of the company. Daphne Lester is a qualified laboratory technician and is responsible for the management of Quantum Laboratory's analytical work. [9] The District Court hearing was in early September 2005. Judge Green delivered a reserved judgment on 25 October 2005. He found that Superior Minerals was owed a balance of about $23,000 on account of fertiliser it had supplied for the Watt farm. However, the Judge considered that the fertiliser supplied was deficient, with the result that it was "totally inadequate for healthy plant growth" (para [65]). He was also satisfied that losses, of the nature claimed, had accrued in the years to 30 June 2003 and 2004. In the result, and after allowance was made for a set-off on account of the unpaid fertiliser cost, judgment was entered on the counterclaim in sums of about $33,000 for the company and $24,000 for Mark Watt.An appeal to this Court[10] Superior Minerals successfully appealed against the District Court decision. Fogarty J, in a judgment dated 30 June 2006, (HC DUN CIV 2005-412-000814) overturned the findings made in relation to the counterclaim. Hence, instead of a judgment in favour of the company and Mark Watt, judgment was entered forSuperior Minerals. It was held to be entitled to the unpaid cost of the fertiliser, about $23,000, together with interest and costs. [11] The Judge noted that the counterclaim was based on representations which had induced Lindsay Watt to enter into the fertiliser contract and upon a claim that the fertiliser supplied was not fit for its intended purpose in breach of the Sale of Goods Act 1908. After an analysis of the evidence Fogarty J was satisfied that the misrepresentation cause of action must fail. The allegations relied upon were not representations of existing fact. They amounted to promises, or boasts, as to the future, namely that increased productivity would result from use of the supplied fertiliser. Representations of this nature were not terms of the contract. This cause of action necessarily failed. [12] As to the alternative claim that the fertiliser was unfit for its intended purpose the Judge held that the District Court findings did not establish the fertiliser was defective, rather that the milk fat production achieved following its usage did not match the assurances made by Superior Minerals. It followed that there was no breach of s16 of the Sale of Goods Act, rather, at most, the supply of a product which did not measure up to the boasts which preceded its sale. [13] The appeal decision satisfied the concerns of the appellant, Superior Minerals. However, it left intact the findings relevant to the present applicants.The challenged findings[14] Before I refer to the passages from Judge Green's decision which are presently challenged, it may be helpful to refer to the structure of his decision. Although, as I have just noted, the counterclaim was framed on the basis of contractual misrepresentations and the contention that the fertiliser was unfit for purpose, the Judge began his decision by referring to what he termed "quantity" and "ratio" theories concerning the appropriate constituents of good pasture fertiliser. For present purposes I need not refer to the differences between these theories. The Judge's reasoning continued on the footing that he must evaluate the merits of the competing theories. With respect, I think it was at this point that the decisionmiscarried. The case did not depend upon an evaluation of the competing theories at all. [15] Rather, it was a conventional claim (by way of counterclaim) alleging contractual misrepresentation and, in the alternative, the supply of goods which were unfit for their intended purpose. The required focus was upon the representations relied upon by the Watts and whether the fertiliser supplied was defective in terms of the Sale of Goods Act. The productive capacity of the fertiliser, particularly by comparison to that supplied by a competitor who operated from a different theoretical viewpoint, was not the central issue. [16] This confusion arose from the circumstance that the Watts called Dr Douglas Edmeades as an expert witness in support of their case. His evidence referred to the properties of the fertiliser supplied by Superior Minerals. He explained that the fertiliser reflected an application of the ratio theory which was devised in the United States. He doubted the efficacy of this theory, as compared to a quantitative approach to fertiliser preparation. [17] Against this background I turn to the passages in the District Court judgment which are challenged. In order to render some of the passages intelligible it is necessary to include reference to matters which do not directly affect the applicants, but which supply necessary context. [18] At para [16] the Judge said:The plaintiff, [Superior Minerals] initially, and at all times relevant to this case, had engaged the services of a Dr Lester who operated as an analyst under the name of Quantum Laboratories Limited. I was told that the doctorate that this gentleman uses is an honorary doctorate from what is thought to be the Anglo American Institute of Drugless Therapy. I was also told that he is believed to have done correspondence courses out of the United States of America and has attended some training courses in the Albrecht/ratio theory. I was not told he had any analytical or laboratory qualifications. No claim to any qualifications appears on any of the analysis reports provided by his company produced as exhibits.[19] Also in para [16] the Judge said this:None of the directors or employees of the plaintiff had, at the time relevant to entering into and completing negotiations between the parties, undertaken any of the three or four day courses in the United States. Mr Lester must, therefore, at the times relevant to this case, have been the sole effective source of information for them about the proper ratio of elements for pasture growth and analysis according to the tenets of the ratio theory.[20] Then at para [19] he said:Essentially I am called upon to evaluate the competing claims of the two theories. On the one hand I have the views of Dr Edmeades a well-qualified expert and on the other the opinions of laymen on the effectiveness of the ratio theory. I have not heard from Mr Lester.[21] The shareholders and directors of Superior Minerals were Lawrence Alloo and Fenton Hore. With reference to them the Judge said at para [59]:No evidence was forthcoming from either as to the research spoken of in their pamphlet produced at the seminar that the Watts attended. Nor did they produce any evidence as to trials of pasture growth on soil with the necessary balance of elements dictated by the ratio theory. It seems in this regard that they relied upon Mr Lester and Quantum Laboratories Limited to advise them as to quantities and thus the plaintiff was merely a mixer of elements recommended by Mr Lester.[22] Finally at para [63]:One of the problems that the directors and representatives of the plaintiff suffer is that they had no expertise at all in their product and pasture growth at the time of the seminar or during the following presentations and negotiations with the Watts. It seems abundantly plain that they were reliant on Mr Lester who has not been shown to have any particular expertise. Certainly no evidence was given of his background, skills or analytical abilities.Are the findings adverse to the plaintiffs?[23] Both counsel made detailed submissions directed to this aspect. Mr and Mrs Lester also filed affidavits which detailed their personal backgrounds and described the adverse impact which publicity arising from the Superior Minerals' case has had on their business. This evidence provided the background against which Mr Moodie argued that the business implications had been disastrous and that Mr Lester's reputation, in particular, was significantly tarnished.[24] By way of example Mr Lester's affidavit of 10 September 2007 includes the following:14. Many of the big fertiliser companies don't like Quantum Laboratory Ltd. There are two reasons, one is that we are independent analysts and are not beholden to any one fertiliser company. The second reason is that sustainable agriculture provides the benchmark for our work. We believe that only the essential limiting elements from the soil should be applied to the soil. Fertiliser companies on the other hand prefer the NPK theory that is sometimes referred to as the 'quantity theory'. That theory subscribes to the view that farmers should apply a maintenance level of phosphate and nitrogen each year regardless of what the soil tests show. That theory says that plants will take what they want and the rest will leach out. What leaching out means is that excess fertiliser and chemicals are transported into waterways, lakes and the like and damage these ecosystems. So Quantum Laboratory's approach is not good news to fertiliser companies focussed on increased annual sales.No doubt Mr Lester genuinely considers this to be an accurate description of his company's situation in the market-place. He also considers that the court case provided a platform for his approach to fertiliser application to be discredited, without his having any opportunity to defend himself. [25] Mr Gunn submitted that the plaintiffs' claim is misconceived, in that it misunderstood "the context of the fertiliser case". He drew attention to paragraph [94] of the judgment in which the Judge referred to the different soil analysis results reached by Quantum Laboratories and the analyst subsequently engaged by the Watts: I have considered the strikingly different results obtained of the analysis of identical soil samples by Quantum Laboratories Limited, the analyst used by [Superior Minerals] and the analyst [retained by the Watts]. That they are so different establishes that one of them is inaccurate. It does not, however establish which of them is inaccurate. I heard no evidence as to the qualifications of either analyst and whilst I have already expressed reservations about Quantum Laboratories Limited I cannot determine which was responsible for an inaccurate analysis.Hence, said Mr Gunn, the Judge expressly refrained from making an adverse finding as to analytical competence. [26] Counsel also argued that such findings as the Judge did make were limited in nature, and based on adequate supporting evidence. Mr Gunn stressed that there wasno finding to the effect that Mr Lester was personally responsible for the relevant soil analysis. Rather, the analysis was attributed to Quantum Laboratories itself. The evidence did clearly establish that Mr Lester was closely linked to the company. It was therefore open to refer to Mr Lester in the judgment as an analyst who operated under the name of Quantum Laboratories Limited (see para [18]). With reference to Daphne Lester, she was neither identified nor mentioned in the course of the decision.How is the impact of the findings to be approached?[27] Is it appropriate to examine both the evidence which was before Judge Green, and the affidavit evidence in this proceeding, in order to assess whether the findings were indeed adverse to the plaintiffs? Or, is the proper approach that findings are necessarily adverse, if they have that effect and it is shown they were reached in breach of natural justice? [28] Mr Moodie drew attention to observations contained in Re Erebus (No. 2)[1981] 1 NZLR 614 (CA). At 629 Woodhouse P and McMullin J said with reference to the impugned finding:[The applicants] plead in their statement of claim that the Commissioner's findings to that effect are not based on evidence of probative value. Elsewhere in the present judgment we deal with aspects of these arguments. Here, dealing with principles, we add that fairness is not necessarily confined to procedural matters. It can have wider range. Remedies in this field are discretionary and the law not inflexible. If a party seeks to show not only that he did not have an adequate hearing but also that the evidence on which he was condemned was insubstantial, the Court is not compelled to shut its eyes to the state of the evidence in deciding whether, looking at the whole case in perspective, he has been treated fairly.[29] And at 651 they added this:The concept of natural justice does not rest upon carefully defined rules or standards that must always be applied in the same fixed way. Nor is it possible to find answers to issues which really depend on fairness and commonsense by legalistic or theoretical approaches. What is needed is a broad and balanced assessment of what has happened and been done in the general environment of the case under consideration. In the present case the expressed complaints turn upon the absence of warning that the affected officers were at risk and that the critical decisions taken against them were unsupported by any evidence of probative value.[30] These observations indicate that the evidence before the decision-maker is relevant and also serve to confirm the elastic nature of the natural justice requirement. It is not some abstract concept. The extent of the requirement depends upon the circumstances of the particular case. A range of considerations may require consideration. These include the nature and circumstances of a hearing, its subject- matter and the seriousness and likely impact of the relevant findings. [31] I turn to the findings and circumstances of this case. In my view Mrs Daphne Lester cannot assert that the judgment contains findings adverse to her. She is not mentioned in the decision. At most, she may be affected by association with her husband and with the company, of which she is also a director. [32] Mr Peter Lester I am satisfied is adversely affected by findings contained in the judgment. To my mind the real sting is contained in para [16] where, having identified Mr Lester as an analyst trading "under the name of Quantum Laboratories Limited", the Judge said:I was told that the doctorate that this gentleman uses is an honorary doctorate from what is thought to be the Anglo-American Institute of Drugless Therapy. I was also told that he is believed to have done correspondence courses out of the United States of America and has attended some training courses in the Albrecht/ratio theory. I was not told that he had any analytical or laboratory qualifications .It is the case that Mr Lester holds an honorary doctorate. But his affidavit evidence also indicates that he has other qualifications. He is a qualified agronomist and agricultural consultant, with about 30 years practical experience in the field of soil analysis. But, I am in no position to make a final assessment concerning Mr Lester's competence and abilities. [33] Neither was Judge Green. Yet para [16] is understandably harmful on account of what it implies. The use of the phrase "this gentleman", for example, carries a pejorative ring. Through innuendo the paragraph conveys that Mr Lester was unqualified in relation to soil analysis. Subsequent observations and contrasts in paras [19], [59] and [63] add to the sting contained in para [16].[34] Given that Mr Lester was not even a witness in the case, and had no opportunity to defend himself, the terms of the judgment are most unfortunate. Nor did the context require the Judge to make findings personal to Mr Lester. The real issues were the alleged misrepresentations made on behalf of Superior Minerals and whether the fertiliser supplied by the company was unfit. However, the case miscarried the moment the Judge found that his essential function was to evaluate the merits of competing theories. I sympathise with Mr Lester's position in the aftermath of this judgment. [35] With reference to Quantum Laboratory the damage is essentially collateral. There are no express findings which are adverse to the company. But Mr Lester is equated with the company and the aspersions against him have the obvious potential to adversely affect the company as well.Is declaratory relief available?The arguments[36] Mr Moodie characterised the findings as invalid and unlawful and, by reference to New Zealand authorities, contended that such findings be brought up to this Court and quashed. Mr Gunn, however, argued that non-parties are not entitled to relief of this nature, at least in relation to adverse findings made in the context of an adversarial court proceeding. Counsel drew a distinction between inquisitorial and administrative hearings on the one hand, and adversarial court proceedings on the other. Mr Gunn also doubted whether relief was appropriate in a judicial review context, both as a matter of discretion and because alternative remedies were not pursued. [37] Mr Moodie relied upon O'Regan v Lousich [1995] 2 NZLR 620 (HC). The case concerned a finding of the Mäori Land Court that Sir Stephen O'Regan had acted in an "overbearing manner" as the former chairman of a corporation when dealing with dissenting shareholders. The case was not brought under the Judicature Amendment Act 1972, but at common law, an order for certiorari being sought by the applicant. This reflected a concern that the Judge in the Mäori Land Court maynot have been exercising a statutory power of decision (which concern Tipping J seemed to doubt). The present case is by way of judicial review. Mr Gunn did not question this approach. [38] Unlike this case Sir Stephen was a witness in the Mäori Land Court hearing. He made an affidavit, but was not required for cross-examination, although he filed a memorandum explaining his absence from the court hearing. Tipping J found that the impugned passage from the judgment had a serious affect on the applicant's reputation, that reputation was a right worthy of protection and that a serious breach of elementary fairness had occurred. At 631-2 he said this:The public are entitled to take the view, and do take the view, that if a Judge criticises someone in a judgment the Judge has carefully weighed the evidence after giving the person criticised an opportunity to be heard. Thus comments such as that which the Judge made in the present case carry considerable weight. The greater the apparent authority of the person making the finding the greater is the harm likely to ensue to the person criticised; the greater therefore is the responsibility of the person making the comment or finding not to do so without observing the rules of procedural fairness. In my judgment those rules were not followed in the present case and Sir Stephen has reason to feel aggrieved. The present point is not whether the Judge's comments are correct. Sir Stephen, of course, says they are not. The point is that he has never had the opportunity which should have been afforded to him to put his position. In my judgment the Judge's finding was made in breach of the rules of natural justice.[39] Reliance was placed upon this case because it involved a non-party. Although a deponent in the proceeding, Sir Stephen otherwise played no part. The case is also noteworthy for the fact that the availability of a remedy in favour of a non-party was not considered. Mr Gunn pointed this out and observed that, if Sir Stephen was not strictly a party, he was very closely connected to the parties in the case. Mr Gunn did not contend that O'Regan v Lousich was wrongly decided, but he at least impliedly questioned its authority.The inquisitorial/adversarial distinction[40] A marked divide exists between investigative and adversarial proceedings with reference to the principles of natural justice. Decision-makers in the former context have the power to summons witnesses to give evidence before them. So, forexample, in Re Erebus Royal Commission; Air New Zealand Limited v Mahon[1983] NZLR 662 (PC) Lord Diplock said at 666:An investigative inquiry into facts by a tribunal of inquiry is in marked contrast to ordinary civil litigation the conduct of which constitutes the regular task of High Court Judges in which their experience of the methodology of decision-making on factual matters has been gained. Where facts are in dispute in civil litigation conducted under the common law system of procedure, the Judge has to decide where, on the balance of probabilities, he thinks that the truth lies as between the evidence which the parties to the litigation have thought it to be in their respective interests to adduce before him. He has no right to travel outside that evidence on an independent search on his own part for the truth; and if the parties' evidence is so inconclusive as to leave him uncertain where the balance between the conflicting probabilities lies, he must decide the case by applying the rules as to the onus of proof in civil litigation.[41] Coroners conduct an investigative process. Section 58(3) of the Coroners Act 2006 provides that they "must not comment adversely" on anyone without notice and affording a reasonable opportunity to be heard. In Suckling v Bradley(HC TIM CP 6/87 13 September 1989) Fraser J reviewed and quashed a coroner's finding made in breach of natural justice (albeit the then Coroners Act 1951 did not contain a provision equivalent to the present s58). [42] Similar examples could be provided from overseas. However, that would be repetitive. Superior Minerals v Watt was not, of course, decided in an inquisitorial context. It was an ordinary civil claim governed by the District Court Rules. [43] The rights of a non-party in an adversarial context was considered in Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 (HL). The case concerned poaching of union members. Mr Cheall and other members left their former union and joined A.P.E.X. The former union made a formal complaint against A.P.E.X., which resulted in a hearing before a disputes committee. The respective unions were parties to that hearing. Mr Cheall attended the hearing, but as an advisor. The committee found that poaching had occurred. It required the exclusion of the members from A.P.E.X. and their return to the complainant union. Mr Cheall sought a declaration that his exclusion from A.P.E.X. was unlawful because he had not been heard in relation to a decision which affected his rights.[44] Lord Diplock at p 190 said this:This contention did not find favour with any of the judges in the courts below: the only parties to the dispute that was before the disputes committee were the trade unions concerned. They, and they only, were entitled to make representations written or oral to the committee. Decisions that resolve disputes between the parties to them, whether by litigation or some other adversarial dispute-resolving process, often have consequences which affect persons who are not parties to the dispute; but the legal concept of natural justice has never been extended to give such persons as well as the parties themselves rights to be heard by the decision-making tribunal before the decision is reached. If natural justice required that Cheall should be entitled to be heard, there could be no stopping there; and any other member of either union who thought he would be adversely affected by the decision, if it went one way or the other, would have a similar right to be heard. To claim that this is a requirement of "fair play in action" (to borrow Sach L.J.'s description of natural justice in Edwards v Society of Graphical and Allied Trades [1971] Ch. 354, 382) would be little short of ludicrous.Mr Cheall's concern lay with a consequence of the hearing. He was excluded from membership of the union and required to rejoin another. [45] Two cases, one Canadian and one Australian, concern reputation. The first isHurd v Hewitt (1994) 120 DLR (4th ) 105, a decision of the Court of Appeal for Ontario. Professor Hewitt sought a position at the University of Toronto, with tenure, but failed to obtain it. The decision in favour of another applicant was made by a 15 person search committee. Professor Hewitt filed a grievance which was eventually submitted to a grievance review panel. The panel found that eight of the 15 members of the search committee had met privately and conspired to pool their votes when the final decision was made. The conspiracy finding affected the reputation of the eight persons against whom it was made, one of whom was called upon to resign. Five of the eight "conspirators" applied to review the conspiracy finding on the basis it was reached in breach of natural justice. [46] At first instance Lane J was persuaded that a declaration that the finding was made in breach of a duty of fairness was appropriate. He referred to the Public Inquiries Act 1990 which contained a provision requiring that commissions of inquiry only make findings of misconduct after the affected person had been heard. [47] On appeal the declaration was set aside. Carthy J delivered the main judgment. Two passages from his judgment follow. Unfortunately they are lengthy.After noting Lane J's reliance upon the Public Inquiries Act and the "intuitive attraction" to the notion that fairness should be expected of decision-makers before reaching adverse conclusions against a non-party, the Judge said this at 112:Civil trials and purely administrative hearings, be they public or private, are invariably disputes between parties or institutions. They may involve a broad public interest, such as the impact upon the environment, or a narrow dispute, as here, as to the right to tenure. There is some lis between the participants presented for determination by the decision-maker. The driving force is the adversary system which assumes that each party will present the best possible evidence and argument in favour of that party's position and that the role of the tribunal or judge is to reach a decision based upon that evidence and argument. One frailty of the adversary system, or concession it must make, is that the search is not in hope of absolute truth but for the closest one can come to truth on the evidence presented. It is, accordingly, not the normal function of the tribunal to search out evidence, and, in fact, judges are criticized if they interfere in the examination of witnesses to the point of becoming advocates in the cause. A public inquiry has a very different foundation. It may be seeking the cause of a disaster. It is investigative. The tribunal itself decides what evidence it wants and searches it out. The participants may be interested in one conclusion or another but they do not gain control of the proceedings. In a sense, the parties are the tribunal on the one hand and the range of those who may be adversely affected by the conclusions on the other; a range that may include a myriad of individuals and institutions and their reputations. Since those persons do not have any direct element of control of the proceedings it is understandable that s.5(2) of the Public Inquiries Act [was] passed to provide statutory protection against abuse of the powers of the commission. In fact, the statute confirms the common law respecting the conduct of commissions of inquiry, as outlined later in these reasons. It can be argued that, despite the functional differences between inquiries and disputes between private individuals, witnesses and others stand in the same position in respect of either. They are outsiders who have no element of control of the proceedings, and thus of their reputations. This is true to an extent, as is exemplified by the present case, but assuaged generally by the fact that the best interest of each party is to see an issue canvassed fairly so that it can be argued credibly. Good advocacy demands that an allegation be put to a witness or, if it is cast against a non-witness and has significance, that the opposite party call that person to respond. The fact that there is no direct common law precedent on this issue suggests that the adversary system, in its normal operation, is not inflicting widespread abuse. In the same vein, the tribunal or judge plays a role in assuring fairness. Through its supervisory control of the conduct of the proceedings, the tribunal will usually insist that witnesses be treated fairly in the manner of questioning. The ultimate control of fairness to all concerned is the power, and natural inclination, to turn aside arguments based upon incomplete evidence where the party making an allegation bypassed the opportunity to close out the gaps.[48] Then after reference to the course of events before the grievance review panel Carthy J continued at 113:That was the adversary system operating from its driving forces and, in this case, inflicting harm upon non-participants in the dispute. The question is whether, as a matter of policy, change can be justified to avoid a recurrence of this result. Stripped of concerns about fairness, the reasons under appeal impose an obligation on a tribunal not to make a particular finding or, alternatively, to initiate the calling of evidence before doing so. Neither is consistent with dispute resolution based upon the adversary system. If the facts established in evidence dictate a conclusion, the duty of the tribunal is to reach that conclusion if those facts are relevant to the decision. If evidence is not adduced the tribunal must assume the parties, or one of them, had good reason not to do so and then simply draw an inference from that failure, rather than interpose itself by insisting that evidence be called against the presumed best interest of that party. It would be a distortion of our system to have the tribunal determining what evidence is to be called and what persons are to be invited to intervene, notwithstanding the desires of the parties, or that intellectually honest reasons must be contorted because the parties failed to assure fairness to an outsider to the dispute. The practical consequence of any other conclusion would be chaotic. The tribunal cannot know at the outset what evidence may be relevant to the ultimate reasons. Every time an aspersion is cast at any person, the tribunal would have to assure itself that the person is warned and given an opportunity to respond. The allegation might arise from the evidence of the last of a series of witnesses and be cast against earlier witnesses and others. This would mandate recalling those witnesses and calling the others, or imposing upon the tribunal the obligation to ignore what may be very cogent evidence. Taking it a step further, judgment might be reserved and, upon reflection, the tribunal might determine that a particular segment of evidence is essential to the reasoning. The hearing would have to be reconstituted if that evidence involved misconduct on someone's part and the allegation had not been put to that person. Alternatively, essential evidence to the reasoning would have to be ignored. The foundation of this proceeding before the GRP was the agreed right to arbitration of a dispute between two parties, and this could only be accomplished by a true verdict on the evidence. The witnesses, and others who may have been impugned, had the protection of the supervisory role of the conduct of the proceedings by the GRP, the self-interest of the parties in presenting a case which could not be attacked for avoiding issues, and ultimately the laws of libel. Those persons stand with all other members of the public, giving away the right to complain of libels issued in the course of exercising a public duty in support of the general policy of encouraging fearless and diligent pursuit of those duties. It is thus my conclusion that if a rule does not exist it should not be invented.[49] These observations were made with reference to persons some of whom did appear before the decision-maker, albeit as witnesses, not parties. Their complaintwas that they had been labelled as conspirators without that accusation being put to them. Carthy J approached matters on the basis that the protection of the reputation of a witness at an adversarial hearing should be no greater than the protection afforded to a stranger to the proceeding. [50] The Australian case is Szivk v Minister for Immigration and Citizenship[2008] FCA 334, a decision of the Federal Court. The case concerned an appeal against a decision of the Federal Magistrates Court upon an immigration issue. One aspect of the appellant's case was that he had only failed to appear at an earlier hearing on account of the fraudulent misconduct of his migration agent. The Magistrate refused to make a finding concerning this allegation because the agent was not before him and had no opportunity to meet the allegation of fraudulent misconduct. Had there been such misconduct, a natural justice requirement would not have been met and the original tribunal decision could not stand. [51] Finkelstein J found that there was no justification for the Magistrate to refuse to decide the fraudulent misconduct issue. He explained the obligation upon the Magistrate in these terms:[23] The rules of procedural fairness applicable in administrative tribunals apply, usually equally, but sometimes with greater force, in curial proceedings. But the procedures in the two fora are not entirely the same and the rules must be modified to take account of the differences One difference is that curial proceedings are adversarial whereas administrative proceedings usually are not. Being adversarial, in curial proceedings it is the parties, not the decision-maker, that define the issues to be contested, select the witnesses they intend to call, choose the evidence they wish to lead and to which they intend to object, and decide which arguments will be pursued and which will be abandoned: Jones v National Coal Board [1957] 2 QB 55 at 63-64; Ratten v R (1974) 131 CLR 510 at 517; Crampton v R (2000) 206 CLR 161 at 173; Dhanhoa v R (2003) 217 CLR 1 at 9; Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364 at 393. [24] It is common for parties locked in adversarial litigation to make all sorts of allegations to advance their own cause. If the opposite party is criticised he can be called to rebut the criticism. If a third party is criticised, he can be called by one of the parties. In both circumstances the individual who has been criticised will have the opportunity to rebut the criticism. [25] But it is often the case that a third party is criticised and not called as a witness. The reason he is not called, assuming him to be available to give evidence, is that the party who may be adversely affected if the criticism is accepted has made a decision not to call that person. That is the party's right. In some cases the exercise of that right may lead to an adverseinference being drawn against that party. However that may be, there is no rule to the effect that the criticised person must be given notice that he is to be attacked in evidence to be given. There are good reasons why there is no such rule. As I have explained, it follows from the adversarial nature of our trial system. In any event, even if given notice there is usually nothing the third party can do. He cannot demand that he be permitted to give evidence. If that were the position, trials would become unmanageable. In limited circumstances a judge may allow a non-party to be heard: see eg r2.13 of the Federal Court (Corporations) Rules 2000 (Cth). But the circumstances in which leave will be granted are rare.EvaluationThe issue[52] Szivk involved an issue other than that which arises in the present case. Mistakenly, the Magistrate refused to make a finding in relation to the misconduct allegation, on account of misconception as to the obligations owed to a non-party. It represents the other side of the coin. But, Hurd v Hewitt is directly in point. Non- parties at the relevant hearing were branded as conspirators and challenged that finding in a subsequent proceeding of their own. Although they succeeded at first instance, on appeal the declaration by which the impugned finding was quashed was itself set aside. Carthy J at 118 said that the original declaration was "a kindess to the applicants, but as a precedent it introduces a dangerous distortion to the litigation process and must, therefore, be set aside". [53] To my mind the decisions of Hurd v Hewitt and O'Regan v Lousich are irreconcilable. In the latter it seems that Tipping J was not confronted with an argument which challenged the very availability of relief in favour of a non-party. Therefore, he did not consider this question. Is it appropriate to provide relief in such cases? This broad question gives rise to two sub-issues. These are whether an adverse finding against a non-party is necessarily in breach of natural justice. And, if so, what manner of adverse finding is worthy of relief.A breach of natural justice?[54] Carthy J's decision is interesting for the extent to which his reasoning emphasised process implications. Confronted with the existence of a declarationmade in favour of a non-party, he looked at the implications of a natural justice requirement in favour of non-parties in an adversarial context. Carthy J rightly observed that the reputations of non-parties not infrequently are at stake. Yet, a requirement upon the decision-maker to afford the non-party an opportunity to be heard would be incompatible with the dynamics of the adversarial process. Therefore, he reasoned, the declaration made at first instance must be set aside. This, it seems to me, is to place the potential implications for the adversary process above the reputational rights of a non-party afflicted with a finding possibly made in breach of natural justice. [55] Carthy J also recognised a number of safeguards of the adversarial process which tend to minimise the risk of harm to non-parties. He referred to the ability of a party to call the non-party as a witness so that he or she may respond. He noted the role of a Judge in assuring fairness, both through exercising a supervisory control over the conduct of the proceeding and through what he termed the "ultimate control", the ability to couch a judgment in terms which recognise that a non-party may not have had a fair crack of the whip. He also noted that the absence of "direct common law precedent on this issue" suggested that the adversary system in its normal operation was not "inflicting widespread abuse". I agree. [56] Implicit in the Judge's reasoning is that non-parties to an adversarial process are not able to be afforded procedural fairness. Given the nature of the process, a decision-maker cannot require the presence of a non-party. Therefore, there is no ability to provide non-parties with an opportunity to refute allegations. Yet, the decision-maker may have no option but to make a finding adverse to a non-party, where the context and evidence requires as much. Absent a procedural fairness requirement, and therefore a breach of natural justice, Carthy J held that it was wrong in principle to subsequently proffer a remedy to the non-party. [57] Tipping J, by contrast, expressed no such reservations. He simply looked at the circumstances and held that the making of the adverse finding against Sir Stephen, was in breach of natural justice. The problems attendant upon affording procedural fairness to a non-party, did not enter the equation.[58] I note that O'Regan v Lousich is quite extensively referred to by Phillip Joseph in Constitutional and Administrative Law in New Zealand (3rd ed 2007). No criticism is made of the decision. At para 24.4.3 the author cites the case with reference to a "duty to warn" witnesses of the risk of an adverse finding in both adversarial or inquisitorial hearings. The decision of Fisher J in Khalon v Attorney- General [1996] 1 NZLR 458 (HC) at 466 is given as authority for this proposition. However, the case is dissimilar, because the finding sought to be impugned was against a party, rather than a stranger to the proceeding. [59] It may be arguable that procedural fairness is sufficiently adaptable to meet the concern of a genuinely aggrieved non-party, even absent changes to the adversarial process. Where the safeguards available at the hearing fail and, additionally, the decision-maker fails to tailor the terms of the judgment to recognise the non-parties' predicament, then, arguably, a remedy should follow. It, I think, would be for the most part a response to the decision-maker's failure to couch the judgment in appropriate terms. [60] But, as noted above, there will be instances where a decision-maker cannot escape the responsibility of an adverse finding against a non-party. Szivk was one such case. Maybe the decision-makers in Hurd v Hewitt likewise had no option but to make the conspiracy finding. Drawing the line between a necessary finding, and a gratuitous one, may be very difficult. A further legitimate issue must be that decision-makers should not be placed in fear of making necessary findings, on account of concern that an adverse finding may be quashed at the suit of a non-party. Denial of the possibility of relief overcomes this difficulty.What manner of adverse finding is worthy of relief?[61] The decision in Cheall involved a finding which was adverse only in the sense that Mr Cheall's choice of a union was imperilled. To my mind it is unthinkable that this was a situation worthy of discretionary relief. Sir Stephen O'Regan, on the other hand, received relief because the finding gave rise to reputational harm. If relief is to be available in favour of non-parties, where is the dividing line to be drawn? Is a particular level of reputational harm to be a pre-requisite? The conspiracy finding in Hurd v Hewitt, for example, apparently caused significant reputational damage, yet ultimately a remedy was denied. [62] Again, it may be arguable that discretionary relief provided in the judicial review context is able to cope with these difficulties. That is, that Judges can be left to evaluate whether a finding is adverse in a manner, and to an extent, which justifies the quashing of the impugned finding. But assuming relief is granted, issue may arise as to its adequacy, and effectiveness. In the present case, for example, the findings relevant to Mr Lester attracted coverage in farming publications. As a result it is alleged that economic harm has resulted. Quashing the findings after the event is likely to be seen as too little, too late.Conclusion[63] Standing back it seems to me that difficulties abound. I am forced to the view that the approach of Carthy J is to be preferred. Only rarely do the available safeguards inherent in the adversary process fail to deliver a less than satisfactory outcome. This case may be one such example. [64] But, in my view the absence of a rule favouring procedural fairness in favour of non-parties in an adversarial process has arisen for good reason. These are admirably summarised in the judgment of Carthy J to which I have made extensive reference. To reject his conclusion, and assume that the various difficulties are able to be accommodated in a judicial review context, impresses me as unlikely. Accordingly, I find that, despite the concerns which I hold in relation to the treatment Mr Lester received in the District Court judgment, there was no breach of natural justice for which a remedy is available. [65] The application for judicial review is dismissed. Costs are reserved. If sought by the respondent a memorandum may be filed within 15 working days, to which the applicants will have a further 10 working days in which to reply.____________________________________________________________________Solicitors: Moodie & Co, 2B Denbigh Square, Feilding for Plaintiffs Crown Law Office, Wellington for Respondent