McGougan and Dingle v Depuy International Ltd

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeAsher J
Judgment Date13 April 2018
Neutral Citation[2018] NZCA 91
Docket NumberCA582/2016
Date13 April 2018

[2018] NZCA 91

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Court:

French, Asher and Gilbert JJ

CA582/2016

CA45/2017

Between
Michael John McGougan and Brian Frederick Dingle
First Appellants
Bevan Malcolm Sanson
Second Appellant
and
Depuy International Limited
First Respondent
Accident Compensation Corporation
Second Respondent
Between
Michael John McGougan and Brian Frederick Dingle
First Appellants
Bevan Malcolm Sanson
Second Appellant
and
Depuy International Limited
Respondent
Counsel:

D J Goddard QC for Appellants

C A McLachlan QC and J L W Wass for DePuy International Ltd V E Casey QC and E M Gattey for Accident Compensation Corporation

Accident Compensation, Tort — appeal against a High Court (“HC”) decision which stopped the appellants from pursuing claims for compensatory damages in New Zealand — class action against the first respondent concerning defective hip implants — proceedings barred by s317 Accident Compensation Act 2001 (“ACC Act”) (proceedings for personal injury) — some claimants estopped from seeking compensatory damages by a judgment of the English and Welsh High Court

The Court held that s317(1) ACC Act prohibited claims for damages arising directly or indirectly out of personal injury covered by the ACC Act. The application of the bar was not qualified by any requirement that the conduct giving rise to the proceedings occurred within NZ. Section 317 ACC Act did not contain any prerequisite that the person claiming the benefit of the statutory bar had made direct or indirect contributions to the ACC scheme. if Parliament had intended that s317 ACC Act would not apply to overseas persons whose conduct overseas had caused damage, it would have said so. Section 321 ACC Act (powers of Corporation when person had right to bring proceedings) prevented double recovery of the amount of entitlements under the ACC Act in circumstances where one of the exceptions in s317 ACC Act applied. Section 317 ACC Act only applied to proceedings brought in NZ and did not not offend the presumption against the extraterritorial reach of legislation.

The NZ claimants, although not named in the intituling in Allen (No 2), were parties to the actions. The NZ Sample Claimants were chosen as a “sample” of those in the group to proceed to a preliminary issue hearing. The NZ Claimants had a clear and obvious interest in the subject matter of the Allen (No 2) proceeding, were directly affected by the outcome, and the NZ Sample Claimants had acted on their behalf. The appellants were privies of the NZ Sample Claimants in Allen (No 2). The proceedings by the 25 NZ Claimants in the HC were an attempt to circumvent the effect of Allen (No 2).

The claims for compensatory damages were prohibited by s317 ACC Act. The 25 NZ Claimants, including the appellants, were prevented from proceeding by issue estoppel. For them to proceed would be an abuse of process.

The appeal was dismissed.

  • A The appeals are dismissed.

  • B The appellants must pay DePuy International Ltd costs for a standard appeal on a band A basis with usual disbursements. We certify for two counsel.

JUDGMENT OF THE COURT
REASONS OF THE COURT

(Given by Asher J)

Table of Contents

Para No

Introduction

[1]

Relevant background

[2]

The English proceedings

[7]

The issues

[13]

Appeal against the first judgment — the statutory bar in s 317

[15]

The issue

[15]

Section 317

[21]

The purpose of the ACC Act

[25]

Section 321

[41]

The Sentencing Act 2002

[49]

The presumption against denial of access to the courts

[50]

The territorial scope of the ACC Act

[56]

Deterrence

[62]

Conclusion

[63]

Appeal against the second judgment — estoppel

[64]

Issue estoppel

[64]

Privies

[74]

Relevant history

[78]

Conclusion on issue estoppel

[91]

Special circumstances

[93]

Abuse of process

[99]

Conclusion

[105]

Result

[106]

Introduction
1

Two hip implant systems designed and manufactured by DePuy International Ltd (DePuy), have failed. Forty-one New Zealanders who received DePuy hip implants between 2006 and 2009 claim the products were defective and caused them personal injury. Their claims are represented by the three appellants. In the two decisions of Collins J that are the subject of this appeal, the appellants have been stopped from pursuing claims for compensatory damages in New Zealand. The first judgment concludes the claims to compensatory damages in New Zealand are barred by s 317 of the Accident Compensation Act 2001 (the ACC Act). 1 The second, that 25 of the claimants are estopped from seeking compensatory damages in any event by a judgment of the English and Welsh High Court, and the continuation of the proceedings in New Zealand would be an abuse of process. 2 The appeals against each of these decisions were heard together, and we determine them both.

Relevant background
2

The basic facts are not in contention for the purposes of this appeal. The hip implants in question are known as DePuy ASR XL Acetabular System or ASR Hip Resurfacing System products (the ASR Implants). Their manufacturer, DePuy, is an English company, a subsidiary of Johnson & Johnson, an American company. The parties are agreed DePuy does not carry on business in New Zealand. It is not registered as an overseas company under pt 18 of the Companies Act 1993, which requires overseas companies carrying on business in New Zealand to register with the Companies Office. DePuy does not design, manufacture or supply the ASR Implants in New Zealand. The design and manufacture occurred outside New Zealand, primarily in Leeds. DePuy supplied the ASR Implants to DePuy Ireland, which in turn supplied them either to DePuy New Zealand Ltd or Johnson & Johnson (New Zealand) Ltd. These companies supplied the ASR Implants in New Zealand from 2003 until they were recalled globally in August 2010. In the relevant period DePuy did not pay income tax or GST in New Zealand.

3

The appellants have all received ASR Implants and have had to undergo, or will have to undergo, revision surgery to replace them. The costs of the appellants' revision surgery have been met by companies associated with DePuy as part of the management of the recall of the ASR Implants.

4

The appellants allege the ASR Implants were defective in both design and manufacture, and this gave rise to an unacceptably high risk that there would be erosion of a component which would release cobalt or chromium debris into the patient's body. The consequences for the patient included metal poisoning and tissue damage, and the need for revision surgery with all the risk, inconvenience, pain and suffering that major surgery entails. In particular, the appellants pleaded DePuy failed to:

  • (a) do an appropriate risk assessment of, and appropriately test, the ASR Implants before distributing them to be implanted into patients; and

  • (b) appropriately test and monitor the ASR Implants after they were distributed to be implanted in patients.

5

The appellants plead two causes of action. First, there has been a breach of the guarantee of acceptable quality provided for in s 6 of the Consumer Guarantees Act 1993 for which DePuy, as manufacturer, is liable. The appellants seek a declaration to that effect and compensatory damages. Second, the appellants plead DePuy negligently breached its duty of care to the recipients of the ASR Implants. They seek a declaration to that effect, compensatory damages and exemplary damages. Exemplary damages are sought on the basis that DePuy knew of the defects from 2007 at the latest, and failed to issue a safety alert or recall the products until August 2010. The appellants allege DePuy deliberately and outrageously ran a “consciously appreciated risk” of causing personal injury, loss and damage to them. In respect of both causes of action the appellants seek a declaration that s 317 of the ACC Act does not bar the claims.

6

Each of the appellants has previously lodged claims with the Accident Compensation Corporation (ACC) in respect of the personal injuries they suffered as a result of the ASR Implants. They have each received entitlements under the ACC Act, including compensation for loss of earnings. However, the appellants contend they have suffered loss over and above that which has been compensated under the ACC Act. Their concern is that, while ACC provides compensation for loss of earnings, the scheme only provides for payment of a percentage of weekly earnings from the second week of incapacity up to a maximum weekly payment of $1,341.31 (subject to annual adjustments) until determination of vocational independence or the age of entitlement to New Zealand superannuation. Through their proceedings against DePuy in New Zealand, the appellants seek additional compensation for pain, suffering and loss of enjoyment of life.

The English proceedings
7

Actions were commenced against DePuy in England between 2012 and 2014. These included claims by the appellants, along with 60 other New Zealanders, referred to throughout as the “New Zealand Claimants”. All of the New Zealand Claimants were represented by Hugh Preston QC of PLI Legal Services.

8

In proceedings we will call the “ Allen Action”, each of the 10 claimants had been implanted with ASR Implants outside the United Kingdom. Four of the claimants in the Allen Action were from New Zealand: Lawrence Allen, Michael Monks, Nicholas Fletcher and Peter Myson. These parties were referred to for the purposes of the English proceedings as the “New Zealand Sample Claimants”. It was directed that there would be a preliminary issue trial to determine the law applicable to the claims in the Allen Action. The claims of all other claimants in the English proceedings (including the other New Zealand...

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