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[Footnotes omitted. They can be found in the original via the link above, which contains the full version of Chapter 3.]
Chapter 3: A Barrister’s Perspective
The New Zealand Supreme Court has been operating now for a decade, time for the initial settling down period to have passed and for some judgements, albeit tentative, to be made about its performance. The question that many will naturally ask is whether the Supreme Court has improved the situation that previously existed in which the Privy Council was the final appellate body in the New Zealand Court hierarchy. The word “final” in this context needs to be viewed against the fact that, for whatever reason, the number of appeals that went to the Privy Council was relatively small (said to be about 11 a year). For that reason, the Court of Appeal on a reasonably regular basis would sit as a Court of five, and occasionally even as a Court of seven, judges in order to give that Court’s judgments on important points of legal principle greater authority. That practice has been largely discontinued since the establishment of the Supreme Court.
When introducing the Supreme Court Bill in December 2002, the Attorney-General, the Hon Margaret Wilson, said that the new Supreme Court was expected to hear about five times the annual number of cases heard by the Privy Council. Leaving aside leave applications, the actual number of substantive appeals heard and disposed of currently is much smaller than that: 22 in 2012 and 16 in 2013. The main work of the Court currently appears to be in dealing with leave applications. In 2013, it disposed of 141 such applications (almost always, if not entirely, on the papers), of which over two thirds were declined. Hearing around 20 substantive appeals a year the Court’s work can be compared with the corresponding number of 60 in both the House of Lords (now Supreme Court) and the High Court of Australia. However, the number of appellate judges in those Courts is much larger. In New Zealand, the Supreme Court Act 2003 restricts the number of judges in that Court to six, but in fact the decision was taken administratively to have only five permanent judges, apparently on the theory that every permanent judge should have the “right” to sit on every case. Leaving aside any financial issues, this is a wrong-headed policy that will necessarily limit the impact that the Supreme Court can have on the New Zealand way of life.
The debate about whether the Judicial Committee of the Privy Council should continue to be the final appellate court for New Zealand rose from time to time over nearly a century and with greater vigour following the lead of Canada and Australia in abolishing rights of appeal to it. Dissatisfaction with the Privy Council was debated in the House of Lords following reported criticisms of delays in the disposal of appeals by Sir Robert Stout, then the Chief Justice of New Zealand, in July 1905. The Lord Chancellor was reported to have said that the criticism by Sir Robert, if correctly attributed, was “manifestly a ridiculous exaggeration”. This provoked a reported response from the Chief Justice in the following terms:
My statement as to delays was not exaggerated, as the following figures will prove. During the last 15 years 29 appeal cases from New Zealand have been decided by the Privy Council. Of these two took between nine months and one year from the date of the New Zealand Appeal Court decision; thirteen between one year and two years; thirteen over two years. Of the latter thirteen nine took between two and three years, two took between three and four years, one took over five years, and one took seven years. I did not say who was to blame for the delays but that the delays have occurred. A judicial system in which there are such delays requires reformation.
The question of delays in the Supreme Court will be discussed below where it will be seen that the problem has not gone away, though the delays appear to be more in the time taken between the time of hearing and the date of delivery of judgment rather than in the time taken to have an appeal heard. That distinction will be of no comfort to litigants who are entitled to have expectations that there will be no unwarranted delays in obtaining an outcome to their litigation, expectations that it will be submitted have not been met by the Supreme Court in a number of cases.
Further discussion of the desirability (or otherwise) of abolishing appeals to the Privy Council arose: in 1978 in the Report of the Royal Commission on the Courts; in 1989 in a Law Commission Paper on the Structure of the Courts; in 1995 in a report by the Solicitor General to the Cabinet Strategy Committee on court structures; in a Discussion Paper called “Reshaping New Zealand’s Appeal Structure” issued in 2000 by the Attorney General; and in an Advisory Group report in April 2002 issued by the Attorney General’s Office which recommended replacing appeals to the Privy Council with the establishment of a Supreme Court.
The Supreme Court Act 2003, which established the new Supreme Court, was enacted soon after. Existing appeals to the Privy Council however continued for some time and some still continue, though rarely, particularly in the case of a number of highly publicised criminal convictions for murder that preceded the passing of the 2003 Act.
One of the justifications for a local final appellate court was that it would enhance access to justice as litigants would not have to bear the costs of travel to the United Kingdom. As a theoretical argument, that was hard to sustain as the costs of air travel and even of London hotels are but a small fraction of the costs of conducting an appeal (wherever it is heard). Furthermore, in terms of access to justice, the fairly stringent leave conditions under the Supreme Court Act 2003, are a greater barrier to bringing forward an appeal (at least in a civil case) than was the case with the Privy Council where disputes that involved a monetary amount of $5,000 or more could be brought as of right.
As referred to above, the number of appeals that have surmounted the leave requirement and been heard and disposed on their merits is not as great as had been anticipated. However, judged by the standard of the number of attempts that have been made to obtain leave, the claim of greater access has undoubtedly been made out numerically. Judged by the far greater proportion of applications that are rejected however, this claim may to some extent be illusory. On the other hand, in 2012, 11 substantive appeals in which leave to appeal had been given were allowed and 13 dismissed. That might be said to justify the establishment of the Court given an apparently large degree of error in the Court of Appeal in those cases where leave was granted. I would myself hesitate to draw that conclusion based on statistics alone. The judicial process is inherently uncertain and judges at different levels, and even at the same level, frequently disagree. It cannot be assumed the judges in the Supreme Court have some intrinsically greater wisdom or knowledge of the law than those in the Court of Appeal or even the High Court despite the fact that they will almost certainly have greater judicial experience.
A primary justification for a local Supreme Court, as reflected by the statutory leave criteria, is that it will provide guidance in important areas of the law through its judgments. The rest of this chapter will test that hypothesis by reference to some of its rulings in major cases that have attracted public or professional attention. Necessarily the cases considered are but a selection but one that, in my view, is sufficiently broad to enable some general conclusions about the performance of the Court to date. The cases selected cover commercial law, tax law, the law of tort and various social and human rights issues, all areas that impact on the daily lives of New Zealanders.
Tax avoidance has long been a controversial area of the law. There has been a constant battle between wealthy taxpayers who have endeavoured to avoid or minimise the taxes that they pay, on the one hand, and revenue authorities who are charged with ensuring that everybody meets their legal obligations in relation to tax, on the other. The scales have swung back and forwards starting with the laissez faire approach of the House of Lords in the famous Duke of Westminster case in which it was said that it was open to a taxpayer to arrange his affairs in whatever way he chose in order to minimise the tax payable. Lord Tomlin firmly and unequivocally rejected the very approach that, it will be seen, has won favour with the Supreme Court. He said:
Apart … from the question of contract …, it is said that in revenue cases there is a doctrine that the Court may ignore the legal position and regard what is called “the substance of the matter”, and that here the substance of the matter is that the annuitant was serving the Duke for something equal to his former salary or wages, and that therefore, while he is so serving, the annuity must be treated as salary or wages. This supposed doctrine … seems to rest for its support upon a misunderstanding of language used in some earlier cases. The sooner the misunderstanding is dispelled, and the supposed doctrine given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting “the incertain and crooked cord of discretion” for “the golden and straight metwand of the law”…. The so-called doctrine of “the substance” seems to me to be nothing more than an attempt to make a man pay notwithstanding that he has so ordered his affairs that the amount of tax sought from him is not legally claimable.
Without traversing here the swings that have occurred in the United Kingdom, Australia and New Zealand, it is enough to say that the pendulum in New Zealand has certainly swung strongly in favour of the Commissioner of Inland Revenue. The courts generally in recent times have reacted against tax arrangements, particularly those that have been designed by tax professionals and in many cases marketed as such.
It has to be said at the outset that the statutory provisions that define and establish tax avoidance are not conducive to easy judicial interpretation and application. The courts have struggled for over half a century to determine the boundaries between legitimate commercial transactions that may give rise to tax advantages and those that are illegitimate and that run foul of the statutory prohibition on entering into tax avoidance arrangements. That is understandable when the statutory provisions are read. Section BG1 of the Income Tax Act 1994 provides simply that a tax avoidance arrangement is void against the Commissioner for income tax purposes. The term “arrangement” is defined broadly and a “tax avoidance arrangement” is defined as meaning an arrangement that “directly or indirectly – (a) has tax avoidance as its purpose or effect; or (b) has tax avoidance as one of its purposes or effects, whether or not any other purpose or effect is referable to ordinary business or family dealings, if the purpose or effect is not merely incidental …” The term “tax avoidance” is then defined as including “(a) directly or indirectly altering the incidence of any income tax: (b) directly or indirectly relieving any person from liability to pay income tax: (c) directly or indirectly avoiding, reducing, or postponing any liability to income tax”.
This provision or its predecessors had been considered a number of times in the Privy Council in appeals from New Zealand, going back at least to the two Europa cases in 1971 and 1976, Mangin v Commissioner of Inland Revenue in 1971, Challenge Corp Ltd v Commissioner of Inland Revenue in 1986, Commissioner of Inland Revenue v Mitsubishi Motors New Zealand Ltd, Commissioner of Inland Revenue v Auckland Harbour Board and Miller v Commissioner of Inland Revenue in 2001 and Peterson v Commissioner of Inland Revenue in 2006. The best known of these is Challenge in which the High Court and the Court of Appeal (both by majority) upheld inter-company transactions which culminated in the corporate group being able to include tax losses that had originated in a company that had been brought into the group with losses that were pre-existing. The Privy Council (by a four to one majority) ruled that the predecessor to s BG1 overrode the provisions of the specific section that allowed profits and losses in a corporate group to be set off against each other. In delivering the judgment of the majority, Lord Templeman thought that the key indicator of tax avoidance was an arrangement in which the financial position of the taxpayer was unaffected (save for the costs of devising and implementing it) and through this arrangement the taxpayer sought to obtain a tax advantage without the reduction in income, loss or expenditure which Parliament intended to be suffered by any taxpayer qualifying for a reduction in his liability to tax. Lord Oliver, dissenting, thought that the tax avoidance section (then s 99) and the specific provision under which a deduction was claimed had to be read together if the former were not to deprive the latter of any utility or content.
In December 2008, the Supreme Court delivered its judgments in Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [Ben Nevis]. It was heralded at the time as that Court’s attempt to give definitive guidance as to what constituted tax avoidance so that taxpayers and their advisers could know where the line was drawn between tax minimisation and tax avoidance. The case concerned investment in a forestry scheme with attempted deductions for payment of obligations relating to promissory notes, licence fees and insurance premiums covering the performance of the forest scheduled to be harvested in 50 years’ time. The Court ruled that the scheme was a tax avoidance arrangement and commented in particular on the risk that the scheme would never be a profitable one, the gratuitous use of the promissory note mechanism and the timing mismatch between when expenditure was legally incurred and the point when it was required to be paid “in an economic sense”.
There were two separate concurring judgments delivered by the Court. The first by Elias CJ and Anderson J and the second, more substantive one, by Tipping, McGrath and Gault JJ. While all the judges were agreed on the result, Elias CJ and Anderson J thought that the specific statutory allowances under the Income Tax Act 2007 were not in potential conflict with the general anti-avoidance provision. The judges however then went on to say that it was not necessary in the present case to determine whether the claims were properly made under the specific provisions of the Act because they “were part of a wider tax avoidance arrangement” and that was sufficient to decide the appeal. By contrast, the other three Judges had found compliance with the specific provisions allowing deductions but struck them down because the scheme ran foul of s BG1. The subtlety of the different approaches and the need for the separate judgment of Elias CJ and Anderson J may escape even experienced tax practitioners.
Tipping, McGrath and Gault JJ (“the majority judgment”) undertook a fairly lengthy review of the judgments in Challenge. This review covered the decisions of Woodhouse P, who thought that any tax avoidance purpose or effect, even if linked to a legitimate business purpose, was enough to trigger s 99, and of Richardson J who (for the majority) took a “scheme and purpose of the Act” approach and said that it was not the function of the anti-avoidance provision “to defeat other provisions of the Act or to achieve a result which is inconsistent with them”. Thus, if the specific provisions contemplated that there would be a deduction or other tax advantage then there was no room for overriding that statutory purpose by the application of s 99 or s BG1. The majority judgment noted that the Privy Council did not differ from that statement of principle but only on the facts, taking the view that the economic reality was that it was a “pretence” for a profitable company to buy the shareholding of a loss company outside the group in order to offset the losses against the profits made within the group and that this was tax avoidance.
The majority judgment clarified the relationship between specific provisions allowing a tax deduction or other benefit and the general anti-avoidance section by reference to the Court of Appeal’s judgment in Commissioner of Inland Revenue v BNZ Investments Ltd by concluding “it is only if a specific provision on its true construction and application was intended to give the particular transaction the tax benefit claimed that it will fall outside the areas of application of s 99”. The judgment went on to say that uncertainty on this issue had been created by the Privy Council in the Auckland Harbour Board case and that Parliament’s “overall purpose is best served by construing specific tax provisions and the general anti-avoidance provision so as to give appropriate effect to each”. They are, the judges said, “meant to work in tandem”.
This led to an attempt to lay down some principles by which the question of whether the tax benefit arising in the particular transaction was within the scope intended by Parliament. The majority judgment thought that there could be a combination of factors including the economic and commercial effect of the transaction and the financial consequences for the taxpayer. As to this, they said:
… A classic indicator of a use that is outside parliamentary contemplation is the structuring of an arrangement so that the taxpayer gains the benefit of the specific provision in an artificial or contrived way. It is not within Parliament’s purpose for specific provisions to be used in that manner.
 In considering these matters, the courts are not limited to purely legal considerations. They should also consider the use made of the specific provision in the light of the commercial reality and the economic effect of that use. The ultimate question is whether the impugned arrangement, viewed in a commercially and economically realistic way, makes use of a specific provision in a manner that is consistent with Parliament’s purpose. If that is so, the arrangement will not, by reason of that use, be a tax avoidance arrangement. If the use of the specific provision is beyond parliamentary contemplation, its use in that way will result in the arrangement being a tax avoidance arrangement.
With respect, that is a statement of principle and a test which is succinctly stated and consistent with the preponderance of recent Privy Council authority.
Finally, under the heading of tax law, reference should be made to two cases decided by the Supreme Court that go to issues of process in the administration of the revenue statutes. The first of these was BNZ Investments Ltd v Commissioner of Inland Revenue, in which the Commissioner had issued amended tax assessments for a number of banks, in relation to what were known as structured finance deals which the Commissioner said constituted tax avoidance. The Bank of New Zealand took action challenging the amended tax assessments. In response to orders for discovery, the Commissioner provided a list of documents which included material relating to other banks which had been obtained by the Commissioner using his statutory powers of investigation to show that they had engaged in similar transactions. The propriety of this was challenged by all the banks. Both the High Court and the Court of Appeal found in favour of the Commissioner. The Supreme Court ruled similarly that, although tax secrecy and confidentiality were important values that should be protected (and were expressly protected under s 81 of the Tax Administration Act 1994), the disclosure of information regarding the affairs of other taxpayers was reasonably necessary for the fulfilment of the Commissioners statutory obligation in this instance.
The contrary position had been the subject of decisions of the highest authority, beginning with the House of Lords in Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses Ltd, as applied by the New Zealand Court of Appeal, by two of the greatest New Zealand Judges, Cooke P and Richardson J (as they both were at the time) in Knight v Commissioner of Inland Revenue and Commissioner of Inland Revenue v E R Squibb & Sons (NZ) Ltd [Squibb]. The Supreme Court in BNZ Investments Ltd v Commissioner of Inland Revenue, in a judgment delivered by McGrath J, however, held that the judgments in Squibb had to be read as confined to the subject-matter to say that the “issues raised by tax secrecy and the public interests at stake will differ in different situations and this must affect how the legislative provisions are applied in any particular context”.
The second substantive case relating to tax administration to come to the Supreme Court was Tannadyce Investments Ltd v Commissioner of Inland Revenue [Tannadyce]. In that case, the Commissioner had made default assessments which rejected the great part of a claim by the taxpayer that it had substantial losses globally. The taxpayer did not initiate the statutory disputes procedure and the Commissioner then took enforcement action to recover the debt by way of a statutory demand. The taxpayer then sought to set the demand aside and challenged the assessments by judicial review on the grounds of conscious maladministration, abuse of power and breach of natural justice. The taxpayer claimed that it had not been able to file a return because it needed access to financial records in order to do so which were in the possession of the Department, a claim that the Department initially denied. It later appeared that it did have documents of the plaintiff. The statement of claim was wholly struck out in the Court of Appeal. The appeal to the Supreme Court, after giving leave, was dismissed.
An important statutory provision that required consideration by the Court was s 109 of the Tax Administration Act 1994 which provided that, except by way of statutory objection or challenge proceedings, “(a) no disputable decision may be disputed in a court or in any proceedings on any ground whatsoever; and (b) every disputable decision and, where relevant, all of its particulars are deemed to be, and are taken as being, correct in all respects”. Such privative or ouster clauses have often been treated with a degree of contempt by the courts particularly if they are seen as an attempt to exclude the supervisory powers by way of judicial review of the superior courts over administrative action. The classic case is that of Anisminic v Foreign Compensation Commission in which the House of Lords made it plain that errors of process and substantive errors that failed to match administrative law standards were reviewable notwithstanding a privative clause in the statute that conferred the decision-making power under challenge. In Tannadyce, the Supreme Court in the majority judgment of Blanchard, Tipping and Gault JJ (delivered by Tipping J) confined judicial review to cases where the taxpayer was unable to bring its grievance within the statutory process. The minority judgment of Elias CJ and McGrath J (delivered by the latter) dissented from this approach but all the judges were of the view that on the facts the appellant had not made out its case.
Tipping J acknowledged that judicial review should not be excluded lightly by a statutory ouster clause but said that the statutory challenge proceeding “has a built-in right for the taxpayer to take the matter to the High Court, if that is thought necessary or desirable”. It cannot matter, he said, whether the taxpayer seeks relief by judicial review or pursuant to a statutory challenge. Somewhat oddly, he then went on to say that it was “necessary to recognise the possibility that there may be rare cases in which it is not practically possible for a taxpayer to challenge an assessment under [the statute]”. Further, he said, judicial review will also be available when what is in issue is not “the legality, correctness or validity of an assessment but some suggested flaw in the statutory process that needs to be addressed outside the statutory regime, because it is not provided for within it”.
Later in the judgment, Tipping J explained his insistence on the statutory process being paramount in removing “the opportunity which the availability of judicial review would present, and has presented, for gaming the system”. One assumes that this is a reference to the case of Westpac Banking Corp v Commissioner of Inland Revenue. In that case, by way of a separate cause of action in the nature of judicial review, the taxpayer bank had sought to challenge the validity of the assessment. This challenge relied on the fact that before entering into a series of structured finance transactions the taxpayer bank had obtained a binding ruling from the Commissioner pre-approving the first transaction and the fact that there were authoritative officers within the Department who were of the view that, generically, these transactions did not constitute tax avoidance. The Court of Appeal said that judicial review was restricted to cases where the purported assessment was “not an assessment” or where there was “conscious maladministration”. The taxpayer bank sought leave to appeal that decision to the Supreme Court but leave was refused. Ironically, the Court of Appeal’s judgment was expressly overruled by the Supreme Court in Tannadyce. In a joint judgment, Elias CJ and McGrath J explained, rather weakly, that in declining leave, the Court did not intend to be confirming the correctness of the Court of Appeal’s decision. That assertion needs to be measured against the actual words used by the Court in the Westpac leave decision: “… we are satisfied that it is not reasonably arguable that the Court of Appeal’s approach to the law, including its view of the effect of the policy of the legislation, was wrong”. The Court went on to say:
Furthermore, in applying these principles to the pleaded facts, the applicant’s proposed appeal is not one that has any reasonable prospect of success. There is no basis in those circumstances for the argument that different views within the Inland Revenue Department on tax liability of transactions of the kind in issue can preclude an assessment by an officer who honestly takes one of those views. Nor is there any other basis in the pleading for the argument that there is no true assessment at all.
What conclusions can be drawn as to the Supreme Court’s judgments to date in tax avoidance cases? It is submitted, first, that the test laid down in Ben Nevis, which builds on earlier decisions of the Court of Appeal and Privy Council in Challenge, is a workable exposition of principle but one that will always be problematic in application because of the conceptual difficulties inherent in tax avoidance and its distinction from tax minimisation. Secondly, the existence of a statutory process for challenging the correctness of tax assessments should never be a reason for excluding judicial review on process grounds, including not only allegations of breach of natural justice but also cases where a taxpayer alleges that its legitimate expectations based on dealings with the Department have been frustrated. The courts have always been zealous in preserving their supervisory jurisdiction by way of judicial review of administrative decision-making. It cannot be assumed that a statutory process designed for testing substantive correctness will provide an adequate venue for dealing with process issues that may go to the validity of the assessment.
There is a view that a Supreme Court should focus on the great social issues of the day. One only needs to consider the United States Supreme Court and the landmark decisions which come to mind and which are not in the area of commercial law but rather concern matters that affect all citizens. The great education segregation case of Brown v Board of Education is an example. In Australia the High Court’s judgments in Mabo v Queensland (No.2) constituted a radical breakthrough in thinking about native rights. New Zealand has yet to sort out where the Treaty of Waitangi fits within the structure of the New Zealand legal system, notwithstanding important dicta in the Privy Council in New Zealand Maori Council v Attorney-General, a case in which the present Chief Justice appeared as counsel for the Maori Council. In the sequence to that case, in which the Maori Council challenged the sale of the commercial assets of Radio New Zealand, the Court of Appeal, exceptionally, sat with seven judges, presumably in recognition of the importance of Treaty issues in New Zealand law. After deciding the case six to one against the New Zealand Maori Council, the court of three judges then refused leave to appeal to the Privy Council on the grounds that the issue was not of sufficient public importance to warrant leave!
The Supreme Court has, unsurprisingly, had to deal with key issues relating to the law of abortion and, perhaps unsurprisingly, on an issue where personal values affect judgment, divided three to two. Interesting as this case is, there are other two Supreme Court cases in this area which I wish to focus on. I will be expressing disappointment in their outcomes, which on one view might be thought to be liberal in the sense of upholding civil rights and the Bill of Rights but in another sense may be said to be totally out of empathy for the views of New Zealand citizens.
The first case is that of Brooker v Police. This case is remarkable for at least one fact, namely that 18 months elapsed between the time of hearing and the delivery of the judgments. This will be commented on further below.
The appellant was convicted of disorderly behaviour in the District Court. He had been the subject of a search at his home late at night pursuant to a search warrant. A few days later, at 9.20 am, he knocked on the door of a female police constable, who had been involved in the search knowing that she had been on duty the night before and would be asleep. The constable asked him to leave, whereupon he retired a short distance to the verge just outside the house and began singing songs and displayed a sign that was derogatory of the constable. There was no evidence of public disruption or of complaints from members of the public. The appellant was first charged with acts intended to intimidate a person but, after hearing the evidence, the District Court Judge exercised his power to amend the charge to one of disorderly behaviour under s 4(1)(a) of the Summary Offences Act 1981. He then convicted the appellant. That conviction was upheld by the High Court and by the Court of Appeal. By a majority of three to two, the Supreme Court allowed his appeal. A somewhat similar course occurred in the Morse case, discussed below, save that the Supreme Court was unanimous. The fact remains that in Brooker, seven out of ten judges found themselves in the minority and in Morse ten judges were evenly split but the Supreme Court prevailed.
Elias CJ founded her judgment in Brooker on s 14 of the New Zealand Bill of Rights Act 1990 which affirms the right to “freedom of expression, including the freedom to seek, receive, and impart information and opinions of any kind in any form”. She said that that provision was enacted to affirm New Zealand’s commitment to the International Covenant on Civil and Political Rights. It is to be noted immediately however that art 19 of the Covenant provides that the exercise of the rights “to hold opinions without interference” are subject to the duties and responsibilities that are provided by law and that are necessary for “respect of the rights and reputations of others”. Elias CJ however thought that it was not enough that the appellant’s actions may have caused annoyance to the constable, citing in this respect the judgment of Douglas J in the United States Supreme Court affirming the right of free speech under the First Amendment to the United States Constitution. That approach was consistent with the concurring judgments of Blanchard and Tipping JJ.
The dissenting Judges, McGrath J and Thomas J, took a different approach and gave value to the right to privacy. It is fair to acknowledge that the Chief Justice was well aware that the law provides protection to the privacy of individuals and she instanced the Trespass Act 1980, the Harassment Act 1997 and provisions in the Summary Offences Act 1981, including the one with which the appellant had first been charged. Her view was that, in that broader legal context, the existence of those provisions suggested that “an expansive meaning of s 4(1)(a), unconnected to public order, is unnecessary”.
McGrath J, by contrast, while recognising the importance of freedom of expression, said that the earlier Court of Appeal decision in Melser had incorporated “freedom of expression as a balancing factor in deciding if conduct reaches the level of being disorderly”. The Judge considered that the right to privacy, although not among the fundamental rights that are affirmed in the Bill of Rights, was one recognised in international human rights instruments and had also received increasing recognition in New Zealand law. He said that, although the complainant was a police constable and therefore a public official, she was entitled to enjoy the rights of an ordinary citizen which included the right “to be free from unwarranted physical intrusion into the privacy of her home”. With reference to the right to freedom of expression under the New Zealand Bill of Rights Act 1990, McGrath J pointed to s 5 which renders all fundamental rights and freedoms subject to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society. He went on to say that the offence of disorderly behaviour could provide such a limit if the conduct amounted “to a sufficiently serious and reprehensible interference with the rights of others to warrant the intervention of the criminal law”. He then undertook what he called a balancing exercise of the conflicting rights of freedom of expression and protest and the right to privacy. In doing so, he placed particular emphasis on the fact that the protest took place outside the complainant’s house and on her doorstep. “Home is the place of rest at the end of a day’s work”, he said, “especially during the time when a citizen wishes to sleep”. That has to strike a chord in most of us.
Thomas J gave an especially long judgment of 186 paragraphs. He apologised for the length of it, particularly given that he was in dissent (along with McGrath J) and, acknowledging that a future court, differently composed, might take a different view of the balancing exercise between competing rights that was required, said that he had written in length “in the hope that what I have to say may be of assistance to a future court”. From the judgment of Thomas J, I would extract one paragraph that goes to the heart of judicial decision making and that highlights the necessary connection between judicial thinking and community values. He said:
I wish to stress the importance of a test which imports the standards of the community for good reason. First, as I have suggested, what is or is not disorderly conduct should, as far as possible, be determined by reference to the values of the community and not the predilections of judges. Reference to the Bill of Rights automatically tends to enlarge the scope for judicial evaluation of the behaviour in issue. Rights and freedoms, and the protection of rights and freedoms, it is thought, are more naturally the province of judges. But the application of the Bill of Rights does not mean that what is essentially a question of fact and degree is to be converted into a question of law or that contemporary attitudes, practices and values of the community are to be set aside. The reaction of the reasonable person can be informed by due recognition of the rights and values affirmed in the Bill of Rights.
Thomas J also pointed to judgments of the United States Supreme Court that affirmed the right to privacy in the face of what he described as that Court’s “commitment to an almost absolute concept of freedom of speech” and said that he did not think the absence of its inclusion in the Bill of Rights meant that it should not be “recognised as a fundamental value and given the weight of a fundamental value”.
The fact that the values of the community are not the province of judges of the Supreme Court was also demonstrated by that Court’s judgments in Morse v Police, decided a few years later. In that case, the appellant had been convicted of offensive behaviour under s 4(1)(a) of the Summary Offences Act 1981, the same section under which Brooker had also been charged. She had participated in the burning of the New Zealand flag at an Anzac Dawn Parade in Wellington which had been attended by 5000 people in a protest against New Zealand military participation in Afghanistan. Her appeals to the High Court and the Court of Appeal were dismissed but the Supreme Court unanimously upheld her appeal and quashed the conviction.
Elias CJ stated the legal test of offensive behaviour, which she equated with disorderly behaviour, as follows:
… “offensive” behaviour is behaviour productive of disorder. It is not sufficient that others present are offended if public order is not disrupted. On the other hand, it is not necessary that the conduct be violent or likely to lead to violence since behaviour with that effect constitutes the more serious offence described by s 3 of the Summary Offences Act. The behaviour must however be such as to interfere with use of public space by any member of the public, as through intimidation, bullying, or the creation of alarm or unease at a level that inhibits recourse to the place.
The Chief Justice thought that, as both sides of the same coin, disorderly behaviour and offensive behaviour both required the element of disruption of public order. She said that, in her view, the courts below were “wrong to take the view that behaviour is offensive within the meaning of s 4(1)(a) simply on the basis that it is capable of wounding feelings or arousing outrage in a reasonable person, irrespective of objectively assessed disruption of public order”. She went on to say that, in her view, those who ventured into a public space must be tolerant of the “expressive behaviour of others” because of the value our society places on freedom of expression. In her view also, a lack of “proportionality in outcome (more restriction than is necessary to achieve the legitimate outcome of preservation of public order under s 4(1)(a)) is a result that is substantively unreasonable and amounts to error of law”.
It is not necessary for present purposes to traverse the similar judgments of the other members of the Court. The convictions were set aside on the basis that the element of public disorder had not been the correct focus of the trial judge. While a rehearing might normally have then followed, the Court directed that, given the time that had elapsed and the nature of the charge, the matter did not warrant a rehearing.
This decision was the subject of a caustic article by Thomas J, writing extra-judicially after his retirement. The article took the form of a bogus judgment of a fictitious Judge (Athena J) which upholds the refusal of a District Court Judge, Wiseman DCJ, to apply the Supreme Court’s judgment in Morse. The humour at times wears a little thin however the final paragraph is worth repeating here:
The Supreme Court’s decision in Morse reflects the ugly side of human rights or the enforcement of human rights. It presages a law captured by the rhetoric of the right to freedom of expression without due regard to the value underlying the particular exercise of that right; a law in which, under the guise of the right to freedom of expression, the “right” to offend can be exercised without responsibility or restraint providing it does not cause a disruption or disturbance in the nature of public disorder; a law in which an impoverished amoral concept of “public order” is judicially ordained; a law in which the right to freedom of expression trumps – or tramples upon – other rights and values which are the vital rights and properties of a free and democratic society; a law to which any number of vulnerable individuals and minorities may be exposed to uncivil, and even odious, ethnic, sexist, homophobic, anti-Christian, anti-Semitic, and anti-Islamic taunts providing no public disorder results; a law in which good and decent people can be used as fodder to promote a cause or promote an action for which they are not responsible and over which they have no direct control; a law which demeans the dignity of the persons adversely affected by those asserting their right to freedom of expression in a disorderly or offensive manner; a law in which the mores or standards of society are set without regard to the reasonable expectations of citizens in a free and democratic society; and a law marked by a lack of empathy by the sensibilities, feelings and emotional frailties of people who can be deeply and genuinely affronted by language and behaviour that is beyond the pale in a civil and civilised society.
To those who grew up in the aftermath of the Second World War and conscious of the sacrifices made by New Zealanders in both the First and Second World Wars, Anzac Day is part of the fabric of this Nation. That is true even of those who are the descendants of that generation, as witnessed by the increasing attendances at Anzac Day parades. Given that expression of public sentiment, which it is submitted is an obvious one, the Supreme Court’s judgments in Morse must raise real questions of the ability of appellate judges who are far removed from the day-to-day world of ordinary New Zealanders to interpret and apply statutes that are said to embody New Zealand values.
The cases that I have discussed or referred to above are but a small selection but I believe that my observations above and that I will make hereafter reflect a much broader knowledge and experience of the Court and the judgments that it has delivered.
It is interesting for me to return to a comparable chapter that I wrote shortly before the Supreme Court was established and at a time when its form and composition was still a matter of debate. The question that I had been asked to address was whether the quality of decision making in New Zealand would be weakened if the Privy Council were to go as the final court of appeal in the New Zealand judicial system. My view then was that whatever court replaced the Privy Council should be one whose role “needs to accommodate not only analysis of the facts and the law to achieve a result that accords with law and justice in particular cases, but also statements of principle that will provide proper guidance for lower Courts and that will be reflective of proper legal development”. I have raised above, in considering the judgments issued in Wholesale Distributors Ltd v Gibbons Holdings Ltd in particular, whether the Supreme Court should venture to expound the law in grand terms that go far beyond the facts or even the issues in the case that it is considering.
That was a question that was addressed in the Court of Appeal, before the Supreme Court was established, in Attorney-General v E. I referred to that case and in particular to the dissenting judgment of Thomas J who complained of what he called the “judicial minimalism”, namely “resolving the issue before the Court and nothing more”. What I said in relation to that was: “Over time, a minimalist approach to judicial decision making is likely to stultify the growth of the law and leave practitioners with a body of precedent that is very fact-oriented, giving little guidance to how future cases will be decided.” I also expressed the view that “to the extent that the common law in particular requires adaptation to meet social change, it is the [Supreme] Court that provides the authoritative lead”. I believe that the Supreme Court has recognised and sought to grapple with that challenge, sometimes with outstandingly successful results such as in the leaky building Judgments and sometimes with questionable outcomes as in the commercial contracts cases discussed above.
To the latter I would also add the disappointing and much-criticised judgment of the Court in Commerce Commission v Telecom Corp New Zealand Ltd [the 0867 case], in which the Court considered whether it was always necessary to adopt a counterfactual analysis in cases where the issue was whether a firm with substantial market power had used that power for an anti-competitive purpose in a market. This was an important issue in the equally important area of competition law, and one which the Commerce Commission took to the Court for guidance and in which the Government appeared by counsel to make submissions. The Court heard the case over four days. The argument is reported in the New Zealand Law Reports over eleven pages. The judgment occupies 15 pages and, in marked contrast to the Court’s performance in most other cases it hears (as to which see further below), delivered its judgment in just over two months after the hearing. A commendable performance except that, as all the commentators say, the product was less than impressive, was superficial and failed to grapple convincingly with the issues. Competition law constitutes an important driver of the New Zealand economy and the apparent lack of interest by the Court in this area was less than had been expected.
The reference to the uncharacteristic speed with which the Court delivered judgment in the 0867 case leads to the final point relating to the performance of the Court which is the time which it has taken to deliver some judgments. I have not attempted a statistical analysis to establish the average time that the Court has taken to deliver judgments after the completion of hearings. However, there have been a number of cases in which the Court has taken more than a year to do so. Reference has been made above to Brooker (18 months). There has also been Chamberlains v Lai (11 months), in which the Court followed the lead of the House of Lords in preference to the High Court of Australia in abolishing the common law immunity of barristers in respect of their conduct of litigation. Most egregious is the case brought by Susan Couch. Ms Couch was seriously injured, and three of her colleagues killed, when William Bell robbed the club in which they worked. William Bell, a parolee, came to rob the club after being negligently assigned to employment there by the Department of Corrections, and discovering that alcohol and cash were amply available. Ms Couch brought a claim in tort against the Department of Corrections in which she sought exemplary damages. The Department applied to strike out the claim on the grounds that no duty of care was owed to the plaintiff and was successful in the High Court and in the Court of Appeal. The Supreme Court gave two judgments in her favour. In the first, it was held that there was an arguable duty of care. That decision took 14 months to give. The Court then considered whether her claim for exemplary damages was barred by the Accident Compensation Act 2001, holding that it was not. One year and one day passed between the time of the hearing and the delivery of the judgments of the Court. The total time between the first hearing and the delivery of judgments after the second hearing was just under three years. Ms Couch, who was seriously disabled, waited either patiently or otherwise while the Court sat on its hands.
To say that justice delayed is justice denied is a trite observation. An enormous effort has been put into making the courts at all levels more efficient and in expediting the hearing of cases. Case management in the High Court in particular is characterised by strict and tight timetables for the conduct of litigation and the disposal of interlocutory steps leading up to substantive hearings. These impose onerous obligations on the legal profession which does a very good job in complying with the orders of the Court and in facilitating the speedy disposal of cases. There is a similar good performance from the Supreme Court and its administrators in getting applications for leave and the hearing of appeals established. But the performance of the Court in a number of cases in the ultimate disposal of those cases has not been one that the private sector would tolerate. It is ironic, as noted at the beginning of this piece, that in 1905 the then New Zealand Chief Justice had complained of delays in the Privy Council in disposing of appeals.
This leads finally back to the issue posed at the beginning as to whether the right of appeal to the Privy Council should have been replaced – and, now, can be said to have been beneficially replaced – by the establishment of the Supreme Court. I will attempt to answer that question in a roundabout way before concluding that it is not yet possible to come to a conclusion.
There is, it seems to me, a marked difference between the style of the judgments that issued from the Privy Council and those that have been delivered over the last decade by the Supreme Court. I rather doubt that the Privy Council ever saw its role as being that of deciding cases other than on a relatively “minimalist” approach. This may be a reflection of the decision making process adopted by the Privy Council which was to require counsel to “retire” from the hearing room at the conclusion of the hearing and for their Lordships then to remain, discuss the case and come to a conclusion before allocating the writing of the judgment to one of their number. I am not privy to the internal workings of the Supreme Court but I doubt that its processes resemble those of the Privy Council.
A feature of the judgments of the Supreme Court is that they are lengthy and burdened with references and footnotes that would make them more suitable for submission as academic articles to the Law Quarterly Review. The judgments in Brooker, a case about a protestor singing outside the home of a police constable, occupy nearly 300 paragraphs or 100 pages. (As noted above, the judgments in the 0867 case on a complex economic and commercial issue, occupy a mere 50 paragraphs.) There is also the feature of the majority of Supreme Court judgments that there is seldom a single judgment written for the court. In Vector there were five separate judgments. I have commented above on the confusion created by the separate joint judgment of Elias CJ and Anderson J in Ben Nevis which detracts from the reasonable simplicity of the joint judgment of the other three judges. This leads to inevitable difficulty in ascertaining the ratio decidendi of the case, especially when the judgments are as long as many of them are.
The challenge facing the Supreme Court in the years ahead is to combine simplicity and brevity of exposition with guidance on decision making. The responsibility of the Court is not only to determine the issues in the instant case before it but do so in a way that provides some guidance as to how other courts might determine similar cases that are not necessarily based on the same facts but that at least give rise to the same or similar issues. There must be, of course, a sound factual basis for doing so, assisted by directed argument from counsel. There was always a feeling that the Privy Council never considered that it was required or appropriate to provide such guidance and that that was more appropriate for the Law Lords to consider when they were considering British law in the House of Lords. The Supreme Court of New Zealand was, by contrast, established with a different mandate.