Adam Young

Summary

The Restructuring Insolvency and Turnaround Association of New Zealand (“RITANZ”) declined Mr Kamal’s application for membership on character grounds. The High Court dismissed his application to quash that decision, but issued a declaratory judgement in his favour. The Court of Appeal upheld RITANZ’s decision to decline his membership application and allowed a cross-appeal by RITANZ against the declaratory judgement, which relaxed the procedural standards the High Court set for RITANZ when determining applications.

Background

Mr Kamal was a former accountant who was subject to disciplinary sanctions by the New Zealand Institute of Chartered Accountants (“NZICA”) in 2009, 2010, and 2011. He was also convicted of six criminal tax offences in 2013, and sentenced to three months’ home detention and 150 hours of community service.

He resigned his membership with the NZICA before he could be removed, and began practicing as a liquidator. In 2015 he was found personally liable for a mishandled liquidation, and in 2018 was falsely holding himself out as a chartered accountant to prospective clients.

The Insolvency Practitioners Regulation Act 2019 (“Act”) required liquidators to become members of either NZICA or RITANZ. In 2020, the NZICA declined Mr Kamal’s application for readmission. In 2021, RITANZ also declined his application for membership, on the basis that he was not of good character.

Mr Kamal sought a judicial review of RITANZ’s decision to decline his membership. The High Court found that RITANZ had erred in its decision-making but only granted declaratory relief, giving a statement that RITANZ had been mistaken in the process it took to determine Mr Kamal’s application, but declining to overturn the decision itself. Mr Kamal appealed the High Court’s decision to uphold RITANZ’s refusal of membership, while RITANZ cross-appealed the High Court’s declaratory relief.

The case

Fit and proper person test

The Act requires NZICA and RITANZ to issue insolvency practicing licences only if they are satisfied that the applicant is a “fit and proper” person. The Court of Appeal held that the standard was not perfection, but that RITANZ had ample evidence to show they were entitled to decline Mr Kamal’s application on the grounds that he was not “fit and proper”.

Mr Kamal submitted that the “fit and proper” test is forward looking, and that the Act contemplated that applicants who would not meet the test unconditionally may do so if they were given extra requirements, such as mentoring and supervision. The Court of Appeal agreed that the test was forward looking, but disagreed that he might be eligible for a conditional licence. The Court considered that conditional approvals would erode the “fit and proper” test so much that it would undermine the purpose of the licensing regime. It declined to quash RITANZ’s decision.

Cross-Appeal: the High Court declarations

The High Court identified four errors in how RITANZ’s declined Mr Kamal’s application for members and gave declaratory relief, without quashing the decision. These included not referring to and assessing three separate mitigating matters in a forward-looking way, and breaching the principles of natural justice by not putting an adverse finding against Mr Kamal to him.

On the mitigating factors, the Court of Appeal found that RITANZ was not required to dwell significantly on them, nor refer to them explicitly in its decision. RITANZ’s characterisation of Mr Kamal’s previous offending was accurate and relevant nonetheless, and the mitigating factors did not impact the overall outcome. This fact was acknowledged by the High Court’s refusal to quash the decision. The Court of Appeal found that omitting reference to those mitigating factors was not an error of law.

On the alleged breach of natural justice, the High Court found that RITANZ had put four adverse inferences to Mr Kamal, but not the adverse conclusion they had drawn from it, which was a breach of natural justice. The Court of Appeal held that despite not putting the conclusion to Mr Kamal, it had given him several opportunities to speak to the issues at hand before RITANZ drew its conclusions, and they were not required to adopt a more rigorous approach. Again, RITANZ had not made an error in law and the Court of Appeal quashed the High Court’s declaratory judgement.

Result

The Court of Appeal dismissed Mr Kamal’s appeal and upheld RITANZ’s decision to decline his application for membership. The Court also upheld RITANZ’s cross-appeal and quashed the High Court’s declaratory judgement. Mr Kamal would not be allowed to practice as a liquidator.

By declining Mr Kamal the ability to meet the “fit and proper” test with a conditional licence, the Court showed how the test is a minimum standard that all insolvency practitioners must meet. This case also shows how professional bodies retain some leeway on how they decide membership applications. This is particularly so in circumstances where, despite minor procedural irregularities, the outcome would have remained the same.

For further information on this case or similar issues contact Director, Brigitte Morten.

Summary

Muaūpoko Tribal Authority (Muaūpoko) and Te Rūnanga o Raukawa (Raukawa) succeeded at the Court of Appeal in an application to quash an exemption for specified vegetable-growing regions from national bottom-lines (the “Vegetable Exemption”) in the 2020 National Policy Statement for Freshwater Management (“NPS-FM”).

Background

Muaūpoko and Raukawa represent iwi and hapū who both claim mana whenua over Lake Horowhenua and the Lake’s outlet, the Hōkio stream. These bodies of water are heavily polluted owing to decades of discharge into the lake, including fertiliser run off from regional vegetable growing.

The 2020 NPS-FM implemented the Government’s policy of Te Mana o Te Wai (“TMOTW”), which prioritised the health of freshwater bodies over the health and economic needs of communities. The NPS-FM provided objectives and bottom lines for water quality that Regional Councils would implement.

Vegetable growers expressed concern to the Minister that they would not be able to meet the bottom lines without significantly cutting back on fertilisers, threatening production viability. In response, the Vegetable Exemption was added to the NPS-FM, which permitted Regional Councils to set water quality targets below national bottom lines for 10 years for select vegetable growing regions, so long as the targets continued to improve the state of local water bodies without compromising food security and the domestic supply of fresh vegetables. Lake Horowhenua and the Hōkio Stream fell within this exemption.

The Minister for the Environment undertook limited consultation with Muaūpoko and Raukawa regarding the Vegetable Exemption, but this was only after an ‘in-principle’ decision had already been made to include it in the NPS-FM.

Muaūpoko and Raukawa unsuccessfully challenged the Vegetable Exemption in the High Court. The judgement stated that it did not contravene the Resource Management Act 1991 (“RMA”) and that a balance could be struck between the Vegetable Exemption and the TMOTW principles. The High Court also held that the Minister had not failed to consider mandatory relevant considerations, there had been adequate consultation on the policy, and there was no breach of the principles of the Treaty of Waitangi.

The case

The Court of Appeal accepted that the Minister had acted in good faith throughout the process, and had made some efforts to undertake consultation on the Vegetable Exemption with Muaūpoko and Raukawa. The Court however held that this consultation was not appropriate or sufficient.

The Court noted that consultation had to give meaningful opportunity for input by submitters. This included properly informing the groups being consulted about what is being proposed and giving them adequate time to prepare and make their views known. The Court noted various contextual factors with regards to Lake Horowhenua and the Hōkio Stream that required extra diligence on the part of the Crown when it undertook consultation on the proposed Vegetable Exemption. These included:

• The long and complicated history of Lake Horowhenua with local iwi and hapū, and their relationship with the Crown;

• Muaūpoko and Raukawa’s claims to mana whenua over the Lake;

• The fishing and property rights iwi and hapū had in the lake;

• The Lake’s status as a taonga, the pollution of the Lake, the Crown’s responsibility for the pollution, and the Crown’s obligations under the Treaty to actively protect taonga; and

• The NPS-FM’s emphasis on TeMana o Te Wai and recognition of the role of Māori in freshwater management.

Muaūpoko and Raukawa were given little information when the Minister consulted with them, far less information than what was available to the Minister. They were also given very little time to consider that limited information, investigate alternatives to the Vegetable Exemption, and respond to the Minister. This did not meet the Minister’s obligation to undertake consultation.

The Court also held that the Vegetable Exemption “effectively introduced a new matter of national significance” to the NPS-FM, being the importance of the vegetable growing areas’ supply of fresh vegetables and national food security. Given that the exemption would require Regional Councils to contend with possible conflicts between the principles of TMOTW and the Vegetable Exemption, the Minister should have considered withdrawing all or part of the proposed NPS-FM. This would have enabled the Minister to undertake wider rather than targeted consultation on the Vegetable Exemption.

In coming to its judgement, the Court noted the Government’s desire for quick action on water quality reform, but considered that the situation still required considerable caution on the part of the Minister.

The Court also briefly commented on the other issues raised by the parties, citing the reasoning of the High Court judgement. The Court held that:

• Section 5 and part 2 of the RMA did not contain environmental bottom lines that were breached by the Vegetable Exemption;

• The Vegetable Exemption was arguably inconsistent with other parts of the NPS-FM, but conflicts were likely to be rare if policies were properly construed;

• The Minister was not required to consider the relative strengths of Muaūpoko’s and Raukawa’s claims to Lake Horowhenua; and

• The Court considered it unnecessary to address the other Treaty considerations raised on appeal, given they were likely to be raised in the further consultation now required of the Minister.

‍Result

The Court of Appeal allowed the appeal, quashing (one could say squash-ing) the Vegetable Exemption as contained in clause 3.33 and Appendix 5 of the 2020NPS-FM. The Minister was directed to reconsider the exemption.

For further information relating to this or similar cases please contact Director Brigitte Morten

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SUMMARY

The Supreme Court  overturned the Minister for Oceans and Fisheries’ decision on Total Allowable Catch (“TAC”) for the East Coast tarakihi fishery (“East Coast Fishery”), despite Seafood New Zealand succeeding on one ground of appeal. The key issues were whether the Minister’s decision could consider social, cultural, and economic factors (“SCE factors”), and what probability of rebuild success the Minister could choose.

BACKGROUND

Under the Fisheries Act 1996, the Minister for Oceans and Fisheries has a duty to review the TAC of New Zealand’s various fisheries to enable sustainable utilization. In 2019, the then-Minister Stuart Nash, reviewed the TAC of the East Coast Fishery. The stock had fallen below a level that could produce the maximum sustainable yield (“MSY”) and so the Minister was obliged to set a TAC that would allow the stock to recover.

The Minister had already reduced the TAC for the East Coast Fishery a few times and indicated he would revisit it in another year’s time, with further reductions if the fishing industry did not meet their own plan to rebuild fishing stocks within a 20 year timeframe. In his decision on the TAC he recorded that it reflected the economic impact on fishers, their families, and regional communities.

Under section 13(2)(b), the Minister must set a TAC that enables recovery in a “way and rate” that “will” result in the stock being restored, and within a “period appropriate to the stock”, having regard to the biological characteristics of the stock and environmental conditions (“scientific factors”). A mandatory part of this decision is the probability of success of rebuilding the stock. Section13(3) also requires the Minister to have regard to SCE factors when determining the way and rate of the TAC.

The Royal Forest & Bird Protection Society of New Zealand (“Forest & Bird”) challenged the Minister’s decision on the TAC on the grounds that he should only have regard to the scientific considerations based on the best available information, and should not have considered SCE factors. The best available information (the Harvest Strategy Guidelines (“HSS”) and Operating Guidelines (“OG”)) recommended a probability of success of 70%, which Forest & Bird claimed was a mandatory relevant consideration. The Minister adopted an implicit probability of 50%, and had not considered a 70% probability of success.

The High Court determined that SCE factors can only influence the Minister’s decision-making after an “appropriate” period is fixed according to scientific considerations only. It held that the Minister therefore erred by considering SCE factors while determining an “appropriate” period. The High Court agreed with Forest & Bird that the HSS and OG was the best available information and a 70% probability was a mandatory relevant consideration.

The Court of Appeal, by majority, dismissed an appeal by Seafood NZ against the High Court’s decision. It found that the “period appropriate to the stock” set a maximum period that must be fixed by reference to scientific considerations, and only insofar as the HSS included SCE factors in its scientific consideration, could the Minister consider them. It also held by majority that the HSS did specify a default 70% probability of success, and that the Minister was required to consider it.

Seafood NZ further appealed to the Supreme Court.

THECASE

What could the Minister consider when setting a “period appropriate to the stock”?

Seafood NZ submitted that the “appropriate” period for the stock rebuild was to be determined alongside the “way and rate” as a single decision, incorporating scientific and SCE factors. Seafood NZ’s counsel accepted there would be an evaluative step where the Minister assessed the appropriateness of the period with sole regard to the scientific factors, but maintained that this was only a relevant consideration and not a control on the TAC.

The Minister submitted that section13(2)(b)(ii) was a cross-check on the period that results from the “way and rate” analysis. They submitted that the legislation does not compel adoption of the “most appropriate” period to the stock, but that there could be a range of “appropriate” periods with regard to the scientific factors. Where the range of periods are “appropriate to the stock”, the Minister may take the SCE factors into account when choosing among them.

Forest & Bird submitted that the Minister erred by doubling a previous period he had considered “appropriate”, by reference to SCE factors, which they said were legally irrelevant. Rather, they claimed the Minister should have determined the “appropriate” period only by reference to the scientific factors affecting the stock. They accepted that there may be a range of periods that the Minister could then choose from.

The Supreme Court held both subsections (i) and (ii), providing for the “way and rate” and the “period appropriate to the stock”, were intended to constrain the TAC that the Minister could adopt. They acted as a sustainability check. In determining the “appropriate” periods, the Minister’s decision concerns the stock of the East Coast Fishery, not those who have an interest in the stock. Only scientific factors could be considered in determining an “appropriate” period for the East Coast Fishery stock.

The Court held that the Minister does get discretion insofar as the TAC is set within an “appropriate” period as determined by scientific factors. Section 13(2)(b)(ii) uses the indefinite article “a” in  “a period appropriate to the stock”. As long as the TAC is determined with a scientifically “appropriate” period, the Minister could then consider SCE factors in setting the way and rate.

An implied default 70% chance of success?

The Supreme Court found that to satisfy the Act’s requirement for the stock to be restored, the Minister was only required to set a TAC that had at least a 50% chance of success. The 70% probability of success was not a mandatory relevant consideration beyond the required minimum. The HSS and OG, which had the recommended 70% probability of success, also had the assumption that the TAC would not be revisited before the expiry of their build period. The Minister had already adopted a policy in 2018 of reviewing progress and adjusting the TAC as necessary, and so the HSS and OG were outdated at the time of his 2019 decision. They were therefore not the “best available information” and not mandatory relevant considerations for the Minister. On this point Seafood NZ succeeded.

Conclusion

Seafood NZ did not succeed in relegating the “appropriate” recovery period to a “mere mandatory relevant consideration” for the Minister in setting the TAC. Section 13(2)(b)(ii) is a limit on the Minister’s discretion. What periods are “appropriate to the stock” can also only be determined by reference solely to the scientific factors relating to the fish stock; on this Forest & Bird succeeded. However, so long as the Minister sets a TAC within an “appropriate” period, they may take social, cultural, and economic considerations into account when setting the way and rate of the TAC.

Finally, the Minister was not required to consider a default probability of success of 70%, as the information containing this assumption was out of date and therefore not the “best available information”.

‍RESULT

While the Supreme Court partially allowed Seafood NZ’s appeal, the Minister’s decision was still unlawful as he had considered SCE factors when assessing a rebuild period “appropriate to the stock”.  The Minister was required to remake the decision.

The Minister must separate the assessment of the “appropriate” period (and only consider scientific factors) and the “way and rate” analysis (which can include the SCE factors). Owing to the partial success of Seafood NZ’s appeal, the Minister also need only set a TAC with at least a 50% chance for a successful stock rebuild.

For further information on this case or related issues please contact Director Brigitte Morten