The Judicial Committee of the Privy Council Decisions

 


Progressive Enterprises Ltd v Foodstuffs (Auckland) Ltd & Anor (New Zealand) [2002] UKPC 25 (23 May 2002)

Privy Council Appeal No. 6 of 2002

Progressive Enterprises Limited Appellant

v.

(1) Foodstuffs (Auckland) Limited and

(2) The Commerce Commission Respondents

FROM

THE COURT OF APPEAL OF NEW ZEALAND

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REASONS FOR REPORT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL, OF THE

29th April 2002, Delivered the 23rd May 2002

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Present at the hearing:-

Lord Bingham of Cornhill

Lord Steyn

Lord Hoffmann

Lord Millett

The Rt. Hon. Justice Tipping

[Delivered by The Rt. Hon. Justice Tipping]

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Introduction
1. At the conclusion of oral argument on the first issue in this appeal, their Lordships announced their opinion that the appellant ought to succeed on that issue and they would humbly advise Her Majesty that the appeal should accordingly be allowed for reasons to be given later. These are their Lordships’ reasons for that advice.
2. In short, the issue concerned a transitional provision in legislation which amended the Commerce Act 1986. The amending Act stated that it did not affect “any proceedings commenced” before its own commencement. The question before the Board was whether an application by the appellant for clearance of a proposed business acquisition, made to the Commerce Commission prior to the commencement of the amending Act, was a “proceeding” within the transitional phrase. If so, it was commenced before the law changed and fell to be determined accordingly.
Factual background
3. The appellant, Progressive Enterprises Limited (“Progressive”) is the operator of a chain of retail stores in New Zealand. On 25th May 2001 Progressive gave notice to the second respondent, the Commerce Commission (“the Commission”) seeking a clearance to acquire Woolworths (New Zealand) Limited which is the operator of a similar retail chain. In mid June 2001, while the Commission still had Progressive’s clearance application under consideration, the first respondent Foodstuffs (Auckland) Limited, a competing chain store group, applied to the High Court for a declaration that the Commission, in determining Progressive’s application, should apply the new statutory test applying to clearance applications enacted by the Commerce Amendment Act 2001 (“the 2001 Act”) which came into force on 26th May 2001.
4. On 27th June 2001 the High Court rejected Foodstuffs’ contention that the new test applied, holding that as Progressive’s application had been made before the new test came into force, it should be dealt with under the test in force at the time the application was made (“the old test”). The commercial significance of the point is that the old (dominance) test was easier to satisfy than the new (lessening of competition) test. In ruling as it did the High Court (Williams and Paterson JJ) agreed with Progressive’s submission, and the Commission’s own view, that the old test continued to apply to clearance applications made, as Progressive’s was, prior to 26th May 2001 when the new test came into force. Brief reference will be made below to the basis upon which the High Court came to its conclusion. While their Lordships consider this conclusion to have been correct, their reasons are different from those given by the High Court.
5. In accordance with the High Court’s decision the Commission applied the old test to Progressive’s application and on 13th July 2001 issued a clearance for its proposed acquisition of Woolworths. In the meantime Foodstuffs had appealed to the Court of Appeal against the High Court’s decision. On 19th September 2001 the Court of Appeal (Gault, Thomas, Keith and Blanchard JJ; McGrath J dissenting) allowed the appeal, holding that the new test should have been applied by the Commission. As a result the clearance given on 13th July 2001 was found to be invalid and Progressive made a fresh application under the new test. Its application on that basis was declined on 13th December 2001.
6. Albeit of no relevance to the issue of statutory construction which the case raises, it should be mentioned here that the Court of Appeal’s decision was abrogated by the Commerce (Clearance Validation) Amendment Act 2001 which validated all clearances given on and after 26th May 2001 under the old test, except that given to Progressive. This exception was made on the basis that the Progressive case had been the subject of judicial decision. The effect was, however, that of all those who had been given clearances for their respective acquisitions under what the Court of Appeal found to be the wrong test, Progressive’s was the only clearance which was not the subject of statutory validation.
7. In these circumstances Progressive appealed to Her Majesty in Council contending that in reality no statutory validation was necessary in its case because the Court of Appeal was wrong in deciding that its clearance application should have been decided under the new test. In support of its appeal Progressive sought leave to raise a point which it had effectively abandoned in the High Court and did not pursue at all in the Court of Appeal. The point, the substance of which their Lordships will examine in more detail below, was, as outlined above, that section 26 of the 2001 Act, when properly construed, applied the old test to applications for clearance pending but not determined as at 26th May 2001. There was no need therefore, so Mr Sumption QC submitted, for any reference to be made to the relevant provisions of the Interpretation Act 1999 which had been the focus of the arguments and judgments in both the High Court and the Court of Appeal.
New point - leave granted
8. The Commission did not oppose leave being granted to Progressive to raise the point, but Foodstuffs did. Mr Farmer QC, on its behalf, submitted that Progressive was now seeking to resile from a stance which it had adopted below, ostensibly to its advantage there. He pointed out, quite rightly, that if the point was now entertained the Board would not have the advantage of the views of the Court of Appeal on it. Mr Farmer nevertheless accepted that the point was solely one of statutory interpretation and Foodstuffs could not advance any material prejudice if leave was given to argue it.
9. Their Lordships gave leave to do so on the basis of this lack of material prejudice and also because they considered it important, albeit the issue is now essentially spent, to determine the case on the correct legal footing. Not only does that accord with justice between the parties, but it also seemed appropriate from the point of view of ascertaining the true intention of Parliament when the amending legislation was enacted.
Construction issues - textual
10. Against that background their Lordships now state their reasons for accepting Progressive’s contentions concerning the true meaning of section 26 of the 2001 Act which provides:

“Nothing in this Act –

(a) enables any proceedings to be brought that were barred before the commencement of this Act; or

(b) affects any proceedings commenced before the commencement of this Act.”

11. It was Mr Sumption’s submission that the word “proceedings” in paragraph (b) should not be limited to court proceedings as Progressive had accepted below. In its statutory context, so he argued, the word must have been intended to cover proceedings of the various kinds (including applications for clearance) contemplated by the Commerce Act 1986 (“the principal Act”) which the 2001 Act was amending. Mr Farmer, for reasons their Lordships will address below, contended that this was not the intended meaning of the word “proceedings” which should be construed as referring only to proceedings in a court and hence not to applications for clearance.
12. It is convenient, as did counsel, to examine the issue first from a purely textual point of view and then and more importantly from the point of view of the statutory context in which the word “proceedings” finds its place.
13. Textually their Lordships can find no reason why the word “proceedings” should not relate both to proceedings in court and to applications for clearance which, they consider, can reasonably be described as proceedings before the Commission. Section 26(b) speaks of “any” proceedings and from a purely textual point of view the word is apt to include an application seeking clearance for an acquisition. Accordingly, in their Lordships’ view, there can be no a priori textual presumption that the word “proceedings” was not intended to cover clearance applications. That is as far as purely textual considerations can fairly take the matter.
Statutory regime - clearances
14. Their Lordships therefore turn to the statutory context. Part V of the principal Act, which comprises sections 58-74, deals with authorisations and clearances, the former in relation to restrictive trade practices and the latter in relation to business acquisitions. Essentially an authorisation permits a restrictive trade practice which would not otherwise be allowed and a clearance determines that a proposed business acquisition will not have a proscribed effect.
15. Prior to 26th May 2001 section 47 prohibited business acquisitions if they resulted in any person acquiring or strengthening a dominant position in a market. On and after 26th May 2001 the prohibition applies if the acquisition has or is likely to have the effect of substantially lessening competition in a market. These are the old and the new tests earlier mentioned.
16. Section 66(1) allows a person who proposes to acquire assets of a business or shares to give the Commission a notice seeking clearance for the acquisition. Within 10 days after the Commission has registered the notice, or such longer period as may be agreed, the Commission must, if appropriately satisfied, give a clearance. If not so satisfied it must decline to do so: subsection (3). If within the statutory period or an agreed extension the Commission has neither given nor declined a clearance, it is deemed to have declined: subsection (4). A clearance expires 12 months from the date it was given by the Commission or 12 months from its confirmation by the court: subsection (5).
17. A clearance is not necessary to implement a business acquisition. The parties may proceed without a clearance but their transaction is then subject to challenge as a breach of section 47. The value of a clearance is that if the transaction is implemented within its 12 month life span and in accordance with its terms it cannot be challenged under section 47.
18. Section 68(1) obliges all applicants for clearances to supply the Commission with such documents and information in relation to the acquisition as the Commission requires. Section 68(4) entitles applicants for clearance to withdraw their application and section 68(5) empowers the Commission to consult with any person who the Commission believes is able to assist it in making a determination. Section 69B empowers the Commission to hold conferences. Their Lordships were informed by Mr Farmer that the Commission does not now usually hold conferences; but the capacity to hold them is still part of the statutory framework.
19. It is here convenient to refer to section 109 which empowers the Commission to prescribe forms of application. As those produced in evidence demonstrate, the forms which the Commission has prescribed are obviously designed to elicit from applicants the kind of information the Commission is likely to need to discharge its statutory functions. As was to be expected the prescribed form of application for clearance under the old test was directed to considerations of dominance and was not designed to cover all the matters which need to be considered under the new lessening of competition test. The forms prescribed for that purpose were published on 26th May 2001, the day the new test came into force, but of necessity Progressive had used the previous form in respect of its application made the day before.
20. It is also convenient to refer at this point to section 108(a), the significance of which is that it refers to “proceedings” of the Commission in these terms:

“108. Regulations – The Governor-General may from time to time, by Order in Council, make regulations for all or any of the following purposes:

(a) Prescribing the procedure to be followed under this Act in respect of applications and notices to, and proceedings of, the Commission:”

While too much should not be made of the point, this use of the word “proceedings” in the principal Act in no way suggests that when the same word was used in section 26(b) of the 2001 Act it was intended to refer only to court proceedings. The more is this so when account is taken of the fact that section 15 of the principal Act uses the terminology of “meetings” when referring to the internal workings of the Commission, the required quorum and matters of that kind. Hence the phrase ‘proceedings of the Commission’ is entirely apt to refer to the whole adjudicative process whereby the Commission considers an application for a clearance.
Appeals
21. Their Lordships move next to the subject of appeals. Section 91 provides for a right of appeal to the High Court against any determination of the Commission. Section 92(c) specifically entitles both the applicant for a clearance and the party who is the subject of the proposed acquisition to appeal. Appeal rights are also given to those who participated at any conference. In its determination of an appeal the High Court may confirm, modify or reverse the determination of the Commission or any part of it and may also exercise all the powers of the Commission in relation to the subject matter: section 93. The High Court may also refer the matter in issue back to the Commission for reconsideration with its reasons for doing so and any directions as it thinks just: section 94. Subject to stated criteria the High Court may give to any party to an appeal leave to appeal to the Court of Appeal: section 97. Such further appeals are not necessarily limited to issues of law. Their Lordships were informed that in considering appeals both the High Court and the Court of Appeal not infrequently hear further evidence, particularly in relation to changes in the relevant market which have occurred since the determination of the previous decision maker: see for example New Zealand Co-operative Dairy Co Ltd v Commerce Commission [1992] 1 NZLR 601 at 611. The High Court generally sits with a specialist lay member/assessor in clearance cases (section 78) and the Court of Appeal may do so.
22. From this structure it is evident that whether a clearance should be given can be the subject of adjudication at three levels, all of which are or may be concerned with both legal and factual matters. The first instance decision-maker is the Commission, a specialist body whose expertise fully equips it, rather than a Court, to be the primary fact finding and adjudicative body. There is then the capacity for two appeals both on fact and law, during the course of which significant changes in the relevant market may take place and fall to be considered.
23. That is the statutory context against which Parliament, in section 26(b) of the 2001 Act, stated that nothing in that Act was to affect proceedings commenced before it came into force.
Approach of High Court
24. In the High Court the question whether applications for clearance were proceedings within the meaning of section 26(b) was dealt with in the following way. The court noted in its judgment that counsel then leading for Progressive had submitted that a clearance application did not come within the term “proceedings” in section 26(b). Mr Farmer for Foodstuffs made a similar submission and relied upon the point in support of a contention that clearance applications had deliberately been excluded from section 26(b). Not surprisingly, in these circumstances, the High Court was minded to agree with the stance adopted by both sides.
Discussion
25. In determining the scope of the word “proceedings” which Parliament used in section 26(b) their Lordships observe at the outset that no good reason was advanced why Parliament might have thought it appropriate to confine the concept of proceedings to court proceedings. Mr Farmer accepted that an appeal at either level in a clearance context was a proceeding within the meaning of section 26(b). Thus any such appeal which was pending as at 26th May 2001 would continue to be determined under the old test. That being so, it is difficult to see any logic in ascribing to Parliament the intention to treat applications at the first level of adjudication any differently. Mr Farmer suggested that a transitional provision such as section 26(b) should be restrictively interpreted so that the new law could come into effect as soon as possible. Their Lordships do not accept that it is appropriate to approach a transitional provision on any such presumptively restrictive basis. The meaning of such a provision should be derived from the language Parliament has chosen, using the statutory context as an aid to interpretation if necessary.
26. Mr Farmer also referred to the terms of the transitional provisions which Parliament had adopted when amendments were made to the principal Act in 1990. Section 48 of the Commerce Amendment Act 1990 expressly provided that notices already given under section 66 should be subject to the previous regime. Mr Farmer sought to draw from the absence of any express reference to such notices in section 26(b) of the 2001 Act the conclusion that Parliament had intended that they should be treated differently from proceedings, which necessarily therefore had a limited meaning. Their Lordships agree with Mr Sumption’s response to the point. Nothing can be gained from the so called legislative history because the context of section 48 of the 1990 Act was materially different from that of the 2001 Act. It is in any event unlikely that the words of the transitional provisions in the confined circumstances of the 1990 amendment would have been present to the minds of those responsible for the 2001 legislation.
27. Nor can their Lordships see any force in the point that the use of the word “commenced” in section 26(b) finds some counterpart in Parts VI and VII of the principal Act but not in the terminology which is adopted in the sections dealing with the clearance regime.
28. Mr Farmer contended also, by reference to Stroud’s Judicial Dictionary (6th ed. vol. 2 at page 2060) that the word proceedings has a settled meaning which is restricted to court proceedings. Their Lordships cannot agree: see for example the decision of the Court of Appeal in R v Westminster (City) London Borough Council Rent Officer, Ex P Rendall [1973] 1 QB 959 at 974. That case concerned a rent officer’s power to determine fair rental. Lord Denning MR said of the undefined word “proceedings” in section 1(3) of the Rent Act 1968 that it covered “any proceedings of a legal nature, even though they do not take place in a court of law”. His Lordship had no doubt that applications to rent officers to fix the fair rental of premises were proceedings for the purposes of that Act.
29. It cannot be right to take the view that the word is a term of art to the extent that it must necessarily be confined to court proceedings whatever the context and the force of all the relevant constructional pointers. Nor do their Lordships find any support for Foodstuffs’ argument in the explanatory note to what was then clause 26 of the Bill which became the 2001 Act.
30. Mr Farmer made the allied submission that a limited construction of the word “proceedings” in section 26(b) was appropriate because the need for that transitional provision arose because of the possibility that civil or penal proceedings in a court pursuant to Part VI may have been pending at the time the 2001 Act came in force. That may well be so but the point does not in any way elucidate why Parliament might have wished to exclude clearance applications from its general approach to the transitional regime. Indeed it is fair to say that if Parliament’s intention had been to make such an exclusion it seems likely that it would have made the dichotomy plain on the face of the legislation.
31. In short their Lordships, having carefully considered Foodstuffs’ points, reached the clear view that neither individually nor in combination could they prevail against the force of the points advanced by Mr Sumption for Progressive.
32. His argument in short was twofold: first that an immediate switch to the new test as at 26th May 2001, in respect of clearance applications pending at that date, would have been unworkable and second that such an immediate switch would have been apt to cause injustice. It was therefore unlikely that Parliament had that intention. Before addressing the points advanced by Progressive in more detail it is desirable at this point to note that Mr Wilson QC for the Commission advised the Board that it too, while not taking any adversarial stance, had been of the view that section 26(b) did not apply to clearance applications. It saw the matter as resolved in favour of the continuance of the old test by reason of sections 17 and 18 of the Interpretation Act 1999. One reason for the Commission’s view of section 26(b) appears to have been a perception that the section as a whole was focussed on limitation issues. That, in their Lordships’ view, is not a correct reading of the section, the two lettered paragraphs of which serve different purposes. Paragraph (a) is concerned with limitation issues, whereas paragraph (b) is concerned with the applicability of the amendments made by the 2001 Act to proceedings in train when they came into force. There is no necessary inconsistency between paragraph (a) and paragraph (b). While the reach of the limitation provision does not involve clearance applications, the word “proceedings” is a perfectly sensible one in both contexts.
33. As noted earlier, their Lordships agree with Mr Sumption’s submission that there would have been little logic in Parliament providing that appeals pending at 26th May 2001 should continue under the old test but first instance determinations should change mid-stream to the new test. There would also be the potential for capricious and unfair distinctions if clearance applications pending at 26th May 2001 were then to be dealt with under the more onerous new test. The Commission’s workload and how it allocated its resources could influence which of two applications made on the same day would be determined under the old and new tests. An appeal determined under the old test which led to an order for reconsideration would (arguably) result in such reconsideration having to be dealt with under the new test when everything up to then and all the evidence had been focussed on the old test.
34. Foodstuffs’ argument would lead to a further anomaly in the appeals arena. Take a clearance application declined prior to the coming into force of the amendment but on a date in respect of which notice of appeal could be given before or after that event. An appeal brought before the crucial date would be a proceeding commenced in time for the appellant to be entitled to have the case dealt with under the old test; whereas if notice of appeal was given after the crucial date, albeit still within time, the appeal as a proceeding would not have been commenced before the cut off date. Hence the new test would apply to proceedings which, ex hypothesi, had been focussed throughout on the old.
35. While, as Mr Farmer pointed out, there will always be “winners and losers” when there is a change in the law, their Lordships do not think it right to ascribe to Parliament an intention to create the potential for such capricious and unreasonable results as those which they have been discussing.
36. There are also the points made by the Commission’s Chief Investigator, Mr Borthwick, in his affidavit concerning the workability of Foodstuffs’ interpretation. While these points may not have been decisive in themselves they certainly add force to the overall proposition that Parliament is most unlikely to have intended to create the situation which giving a limited meaning to the word “proceedings” would involve. Although it would have been possible for applicants for clearance whose applications were pending at 26th May 2001 to supply the significant further information which the new test involved, the prima facie time limit of 10 days also militates against this being the intended consequence of a clearance application being current at the changeover date. Furthermore for those whose applications were undetermined as the change approached there would be the curious incentive not to agree to any extension of time, thereby forcing a deemed refusal of clearance from which an appeal could then be brought prior to the cut off date thereby locking in the old test by that means. Such would hardly be a rational basis upon which Parliament might have intended the transitional provisions to work. There is then the section 108 point already mentioned and the difficulty in identifying why Parliament would have intended its use of the word proceedings to have the restricted meaning for which Foodstuffs contends. The capacity for a long lead time before the new test came fully into effect is unlikely to have been a reason in view of the very short time frame envisaged for clearance applications, absent consent to extension. It is also unlikely that Parliament intended to give incentives for attitudes to extension on either side to be motivated by considerations of transitional advantage or disadvantage.
37. In the light of all these points their Lordships consider that Mr Sumption was right when he argued that the correct view is that Parliament saw the clearance process as a single statutory proceeding involving the Commission and potentially the High Court and the Court of Appeal. Parliament can hardly have intended that there could be an application on one basis and a decision on another. An orderly, logical and fair transition to the new test is achieved by reading the word “proceedings” in section 26(b) as including applications for clearance. Not to do so is apt to produce the opposite result, namely a disorderly, illogical and unfair transition. The word “proceedings” is, in its context, perfectly capable of including clearance applications and in their Lordships’ opinion, for the reasons given, it must have been used by Parliament in that sense rather than in a more limited sense. Hence the old test applied to Progressive’s application for clearance as a proceeding commenced before the commencement of the 2001 Act. The clearance issued by the Commission on 13th July 2001 was accordingly valid.
38. The relevant sections of the Interpretation Act 1999 apply only if the head enactment does not otherwise provide the answer (section 4(1)(a)). In this case it does. It is therefore neither necessary nor appropriate for their Lordships to express any view on the arguments advanced by the parties in their printed cases on that aspect of the appeal and upon which counsel were not required to address oral argument.
Costs
39. Their Lordships have considered the memoranda filed at their request after the hearing and in the light of the result of the appeal. In the rather unusual circumstances their Lordships will humbly advise Her Majesty that the order for costs made in the High Court should be restored; that the order for costs made by the Court of Appeal should be set aside, and that in both the Court of Appeal and before their Lordships’ Board all parties should bear their own costs.