High Court Confirms Reach Of New Zealand Commerce Act

In the recent case Commerce Commission v Koppers Arch Wood Protection (NZ) Limited and others the New Zealand High Court set aside protests to jurisdiction by three individual overseas defendants in the long running Commerce Commission investigation into cartel behaviour by suppliers of wood preservative chemicals.

Although the decision only considers matters of jurisdiction, the case is of interest because the Commerce Commission was successful despite conceding that the relevant foreign defendants were neither resident nor personally carrying on business in New Zealand.

In summary, the Court held that foreign defendants are proper parties to New Zealand litigation under the Commerce Act, provided the service and other High Court Rules are observed. This is in spite of the fact that the foreign defendants may not be resident in or carrying on business in New Zealand. Though any penalties imposed on the parties may ultimately be proved to be unenforceable, the Court felt that, as a matter of policy, it may actually be in the interest of the defendants to participate in that litigation to lessen or avoid the risk of findings being made which affect their personal or commercial reputations.

The relevant defendants, executive officers of the companies' overseas offices, were foreign citizens resident now in Australia, USA and France. The issue concerned the ambit and operation of the New Zealand High Court Rules. Under Rule 219(h), the High Court has jurisdiction over defendants overseas where any person outside of New Zealand is a necessary or proper party to a proceeding properly brought against some other person duly served or to be served within New Zealand.

In reaching its decision the High Court confirmed the approach to be used in assessing whether individuals are 'necessary or proper' parties to a claim. It must be established that:

There is a substantial or serious legal issue for trial.

There is a credible or plausible factual basis for arguing the legal issue.

Accordingly, the issue for the Court in this case was whether each foreign defendant was either a party to the cartel, was an accessory to it, or was part of a conspiracy to contravene the Commerce Act.

Were the foreign defendants party to the alleged conduct?

Importantly for executives based overseas, the Court said that the Commerce Act applies to overseas defendants where only part of the anti-competitive conduct takes place within New Zealand, or where communications to...