A report on a decision based on the Act involving CHH
This High Court decision followed on from a successful claim the Commerce Commission brought against Carter Holt Harvey in the Auckland District Court.
In the District Court, Carter Holt Harvey pleaded guilty to 20 charges laid under section 10 of the Fair Trading Act 1986 by the Commerce Commission for misleading the public by marketing timber under the quality specification of “MGP-10” when the timber was not, in fact, of MGP-10 quality. Carter Holt Harvey was fined $900,000.
The Commerce Commission then filed a class action in the High Court under section 43 of the Fair Trading Act. This section essentially provides remedies for persons who have suffered loss as a consequence of misleading and deceptive conduct under the Fair Trading Act.
If successful, the court might order Carter Holt Harvey, in addition to the fine from the District Court, to refund end users the difference in price between what each end user paid for the timber marketed as MGP-10 and the fair market value of such timber, and order that Carter Holt Harvey pay to its competitors the amount of the lost profit suffered by each.
In response, Carter Holt Harvey applied to strike out the claim brought by the Commerce Commission. It argued that the proceedings were both prejudicial and an abuse of process because they involved an indeterminate class of people; the Commerce Commission’s claim covered all end users who had purchased the misrepresented MGP-10 timber, and all competitors who lost profits because of Carter Holt Harvey’s misrepresentations without individually naming each claimant within the class.
Carter Holt Harvey argued that because not all individual claimants within the class were named by the Commerce Commission at the outset, and because they were not advised whether each claimant consented to the proceedings, they were not provided with the opportunity to fully know the case brought against them.
They believed that as a defendant in Fair Trading Act proceedings, principles of natural justice would be breached unless individual claimants were fairly identified, and their claims quantified so Carter Holt Harvey would have an appropriate chance to explore the extent of each claim.
Upon making its decision, the court declined to make an order striking out the proceedings. It determined that the Commerce Commission had not abused procedure or acted in a way likely to cause prejudice by commencing proceedings against Carter Holt Harvey in the High Court without yet naming the persons on whose behalf the claim was made or specifying the amounts claimed.
The court was satisfied, upon examination of the words and meaning of section 43 of the Fair Trading Act, that the section contemplates a proceeding being brought by “any person” even where that person has not suffered, or is not likely to suffer loss or damage from the breach.
This certainly entitles the Commerce Commission, or any private party, to bring an action on behalf of others under the Act.
The language of the section was deemed inconsistent with true class actions, where the members of the class are unidentified and potentially indeterminate. The court determined that the legislative intention was that section 43 should only be used to provide remedies to persons who are actually named. This would preclude true class actions, where the persons are not named but are rather identified by category of class name.
The court further suggested that if true class actions were to be permitted under section 43, such intention would have been specifically drafted into the wording of the section, as is common in other class action provisions such as section 50 (3) of the Health and Disability Commissioner Act 1994.
However, nothing in the section suggested that persons had to be named at the commencement of proceedings. In fact, the court, in ruling against Carter Holt Harvey’s application for a strike out, believed that such a requirement would not be in accord with the remedial nature of section 43.
It would be an onerous task to name all claimants at the outset, and it may further be an expensive and pointless task if the substantive proceedings were to fail.
Case law lends some support to this proposition. Class actions for unidentified persons can be initiated by the Commerce Commission, but there is a need for individual claimants to be identified, at least before the conclusion of the proceedings.
In essence, there is no point in bringing a claim for a person who cannot be identified after reasonable enquiry, as there could be no basis for a court, under s43, to order a payment to a notional unidentified person.
It should be noted that Carter Holt Harvey also brought a strike out application on the basis that the proceedings had been brought outside the limitation period of three years under the Act. The strike out application was unsuccessful on this basis as well.