Poynter v Commerce Commission

JurisdictionNew Zealand
CourtSupreme Court
JudgeBlanchard,Tipping,Mcgrath,Wilson JJ,Tipping J
Judgment Date16 April 2010
Neutral Citation[2010] NZSC 38
Date16 April 2010
Docket NumberSC 32/2009

[2010] NZSC 38

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, Blanchard, Tipping, McGrath and Wilson JJ

SC 32/2009

BETWEEN
Andrew Robert Poynter
Appellant
and
Commerce Commission
Respondent
Counsel:

J G Miles QC, S C Keene and A J Fincham for Appellant

D J Goddard QC and M-A M Borrowdale for Respondent

Appeal against a decision that Poynter, acting in Australia, came within the jurisdictional bounds of the Commerce Act 1986 in respect to his actions which were allegedly anti competitive — whether there was jurisdiction to bring proceedings against Poynter — whether the acts of agents could be attributed to Poynter in order to bring him under the Act.

Held: It was undisputed that the facts of the case did not fall within the ambit of s4, which governed conduct outside New Zealand. However, CC argued that s4 was not exhaustive, but acts by agents attributed to a principal, and parties to a conspiracy formed in New Zealand could be covered by the Act.

Section 90 the Act (Conduct by servants or agents) dealt with the attribution of the state of mind of an agent to the principal. It did not deal with attribution of the state of mind to an individual who is not the corporation or employer. The people acting in New Zealand were not doing so on behalf of Mr P personally, but the company. Mr P was not an employer or corporation, therefore this section was inapplicable to the facts. If s90 had applied, Mr P would have been in the same position as if he had personally engaged in the contravening conduct in New Zealand, as all attributable conduct had occurred in New Zealand.

The view of the Court of Appeal that the concept of conspiracy in s80(1)(f) extended the scope of extraterritoriality beyond s4 was rejected. For the conduct of one person to be attributed to another, there must have been either a relationship of principal and agent that gave rise to that consequence, or one person must become liable for another person's conduct as a result of the first person's conduct, by directing or encouraging the other person to engage in the conduct in question.

The Act was a code and the court must limit itself to the express terms of the Act or necessary implication for extraterritoriality purposes. Appeal allowed.

JUDGMENT OF THE COURT
  • A The appeal is allowed.

  • B The orders made by the Courts below are set aside.

  • C The Commission's application to set aside Mr Poynter's protest to the jurisdiction is dismissed and Mr Poynter is dismissed from the proceeding.

  • D The Commission must pay Mr Poynter for his costs in this Court the sum of $15,000.00 plus disbursements to be fixed if necessary by the Registrar. Mr Poynter should also have costs in the Court of Appeal and the High Court either as agreed or as fixed by those Courts.

REASONS

Para No

Elias CJ

[1]

Blanchard, Tipping, McGrath and Wilson JJ

[18]

ELIAS
1

The Commerce Commission alleges that the appellant, Mr Poynter, is liable to penalty under's 80 of the Commerce Act 1986 in respect of price manipulation contrary to ss 27 and 30 of the Act. It is accepted that Mr Poynter does not reside or carry on business in New Zealand. His direct participation in the alleged breaches of the Act is accepted to have taken place outside New Zealand. Nor did it involve communications into New Zealand. It is claimed however that Mr Poynter had managerial responsibility within the Fernz group of companies named as defendants in the proceedings issued by the Commerce Commission. 1 The Fernz defendants have admitted liability by reason of arrangements or understandings to substantially lessen competition in New Zealand in relation to the market in timber treatment products. 2 The Commerce Commission claims that Mr Poynter became personally liable by his “involvement in one or more of the breaches by the Fernz Group defendants”, by being “directly or indirectly, knowingly concerned in one or more of the breaches by the Fernz Group defendants”, and by reason of his having “conspired with another defendant or defendants to breach [the provisions of the Act]”. These claims against him are based on s 80(1) of the Act, which is set out below at [11]. Mr Poynter has not yet pleaded to the claim. He entered an appearance under protest to jurisdiction and takes the preliminary point that the Commerce Act does not extend to his conduct because it is not covered by s 4.

2

Section 4 describes the circumstances in which the Commerce Act applies to conduct outside New Zealand. It provides:

4 Application of Act to conduct outside New Zealand

  • (1) This Act extends to the engaging in conduct outside New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand.

  • (2) Without limiting subsection (1) of this section, section 36A extends to the engaging in conduct outside New Zealand by any person resident or carrying on business in Australia to the extent that such conduct affects a market, not being a market exclusively for services, in New Zealand.

  • (3) Without limiting subsection (1) of this section, section 47 extends to the acquisition outside New Zealand by a person (whether or not the person is resident or carries on business in New Zealand) of the assets of a business or shares to the extent that the acquisition affects a market in New Zealand.

3

It is accepted that subs ( 2) and (3) have no application. Mr Poynter maintains that the only basis upon which the Act could attach to his conduct is if s 4(1) applies. It is common ground that it does not because he is not resident in New Zealand and it has been conceded by the Commerce Commission that he does not carry on business in New Zealand.

4

The Commerce Commission does not rely on s 4(1). It maintains instead that the conduct of Mr Poynter's subordinates within New Zealand is attributed to him by operation of law. On this basis it is said that no question arises of extraterritorial application of the Act, against which there is a common law presumption of statutory interpretation. 3 Since the conduct for which Mr Poynter is responsible is the conduct of his subordinates within New Zealand, the restricted extraterritorial scope of the Act under's 4 is irrelevant.

5

The protest to jurisdiction was not upheld in the High Court. 4 Mr Poynter's appeal to the Court of Appeal was dismissed. 5 The Court of Appeal concluded that it was “sufficient that the communications or directions [by Mr Poynter] in furtherance

of the anti-competitive arrangement were given to New Zealand actors while they were overseas”: 6
  • [43] If the New Zealand actors then acted in New Zealand to give effect to the anti-competitive arrangement, they can properly be regarded as having acted at the direction of, or on behalf of, the overseas residents in that respect. The overseas residents will be regarded as having committed conduct in New Zealand, and s 4(1) will be irrelevant.

  • [44] We consider that this approach is consistent with basic principle and reflects the realities of globalisation. Increasingly, large international entities are responsible for the manufacture and distribution of goods. If such entities enter into anti-competitive arrangements overseas directed at a New Zealand market, we do not accept that they can insulate themselves from liability in New Zealand by operating through local entities (whether or not they are subsidiaries) and taking care not to hold meetings in, or to send communications to, New Zealand in relation to the arrangements. The Commission may face practical problems in seeking to hold such entities to account, but there is, in our view, jurisdiction under the Act. As we discuss further below, we consider that this is consistent with the language and policy of the Act.

6

The Court of Appeal rejected the submission on behalf of Mr Poynter that its approach cut across the provisions of s 90 (the statutory provision dealing with attribution of the conduct of agents). In addition to reliance upon a form of agency, the Court accepted the argument of the Commission that there is a “useful analogy to be drawn with the treatment of conspiracy at common law” 7 in interpreting the statute. The Court concluded, in summary: 8

  • [52] … (b) Section 4 does not address the situation where overseas residents (who have not personally acted in New Zealand) have entered into an anti-competitive arrangement overseas in relation to a New Zealand market and that anti-competitive arrangement has been implemented in New Zealand by local persons who were themselves parties to the arrangement or acting at the direction or with the authority of the overseas persons. That situation must be addressed as a matter of interpretation (which includes reference to the policy and purposes of the Act), and by reference to the relevant principles set out in the authorities.

  • (c) Adopting that approach, we consider that Hugh Williams J was right to accept that the Commission's claims against the appellants fell within the scope of the Act.

7

I have come to the conclusion that the appeal should be allowed and the protest to jurisdiction upheld. The argument addressed to this Court on behalf of the Commerce Commission shifted from that apparently addressed to the lower Courts. To the extent that the Court of Appeal relied upon its view that s 4 is not an exhaustive statement of the circumstances in which the Act has extraterritorial application (a view with which I respectfully disagree given the role and stated purpose of s 4 within the legislation) and found jurisdiction in order to plug a “loophole” (an approach which in my view is inconsistent with the explicit extraterritorial scheme contained in s 4 read as a whole and which exceeds permissible interpretation), it is not supported by the argument ultimately advanced to this Court by the Commerce Commission....

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