Appeal allowed.  Question of damages remitted to High Court for consideration.
 
Contract – Misrepresentation – Breach – Entire agreement clause – Remedies.
 
The appellants (Bill and Sharon Coomey, through their trusts, Bushline) are Taranaki dairy farmers.  They were for many years customers of the first respondent, ANZ and, before it, the National Bank.  The first respondent funded both working capital and development (fixed) capital as the appellants grew their farming business.  That business was cashflow negative at times, reflecting the long-term investments being made.

From 2005 onwards, the parties entered into a series of financial arrangements, including fixed and floating rate loans and interest rate swaps, designed to fix the appellants’ interest obligations.  The swaps were marketed to the appellants as an attractive means of fixing interest rate obligations while providing greater flexibility than fixed-term loans, as well as providing the ability to profit by exiting the swaps early if market conditions were favourable.

In April 2008, by which time the appellants’ funding from the first respondent totalled $11.97 million, the first respondent agreed to fund the $7.25 million purchase price of a new property.  The appellants’ existing and new debt was refinanced as a single floating rate loan of some $19.47 million.  These fixed rate swaps between the appellants and the first respondent hedged that debt.

After April 2008 the appellants’ financial position deteriorated.  Their farming business encountered difficulties while the global financial crisis caused the floating rate to drop, meaning the swaps were less advantageous.  In addition, the first respondent increased the margin applicable to the floating rate loans underlying the swaps several times, further increasing the appellants’ borrowing costs.  In the face of considerable financial pressure, the appellants sold assets and progressively refinanced their debt on less favourable terms as the swaps expired.  They eventually stopped banking with the first respondent and refinanced elsewhere.
 
The appellants contended in the High Court that the first respondent had mischaracterised the benefits of the swaps and breached promises made during negotiations that it would fix the margin on the floating rate loans underlying the swaps for five years and monitor the swaps to ensure they were working to the appellants’ advantage.  The appellants claimed damages ranging up to $6.29 million based on a variety of legal theories and calculations, including negligence; breach of contract; misrepresentation under s 6 of the Contractual Remedies Act 1979; oppressive conduct under s 120 of the Credit Contracts and Consumer Finance Act 2003; and misleading and deceptive conduct under s 43 of the Fair Trading Act 1986.  

In its defence, the first respondent denied any misrepresentation, suggested the claims were barred by statutory limitation periods and relied upon a series of acknowledgment and disclaimer clauses in the parties’ written agreements to exclude liability.  

The High Court found that some misleading representations were made as to the benefit of the swaps, but the first respondent was entitled to rely upon the disclaimer clauses and statutory limitation period to exclude liability for misrepresentations.  The first respondent did not undertake to fix the margin on the floating rate loans for five years, and to the extent that there was a promise to monitor the swaps, the first respondent had lived up to that promise.  The remaining causes of action were time-barred or not made out and the entire claim was dismissed accordingly.  

The appellants appealed.
 
Had the first respondent breached an undertaking or made a misrepresentation?  Held: Yes.  Some of what the appellants termed “misrepresentations” were in fact undertakings, that is, contractual terms not reduced to writing in the refinancing agreements.  That being said, two breaches of undertakings and one misrepresentation were evident.  First, the first respondent had misled the appellants by overstating the benefits of the swaps.  Second, the evidence showed that, judged objectively, the parties had agreed to fix the margin applicable to the floating rate loans for five years.  The first respondent had, therefore, breached that agreement.  Third, the first respondent had agreed to monitor the appellants’ borrowing strategy but had failed to respond to the appellants’ enquiries about the possibility of breaking the swaps early and failed to communicate its view as to the likelihood of reductions in the prevailing floating rate and the commensurate impact on the appellants.
 
Could the first respondent rely upon the disclaimer clauses to preclude liability despite s 4 of the Contractual Remedies Act?  Held: No.  Considering the policy underlying the Contractual Remedies Act and the particular circumstances of and relationship between the parties, it would not be fair and reasonable to allow the first respondent to rely upon those disclaimers.  Although the appellants had received legal advice it was of a formal, mechanical nature and did not resolve the point that the swap product had been incorrectly explained to the appellants by the first respondent.
 
The first respondent was therefore liable for enforceable breaches of two undertakings and one misrepresentation.  It was not necessary in those circumstances for the Court to consider the remaining collateral contract, negligence and Fair Trading Act submissions.  Furthermore, there was insufficient evidence of oppression to establish that Credit Contracts and Consumer Finance Act claim.  

Turning to the first respondent’s substantive defences, the exclusion clauses did not reach far enough to exclude liability for the breaches found and the claim was not time-barred as the misrepresentations and breaches had recurred several times after the statutory cut off.  Accordingly, the claims were made out.
 
As requested by the parties, the matter was remitted to the High Court for the assessment of damages.

Result

Minister of Justice's decision to surrender the appellant under s 30 of the Extradition Act is quashed.  The Minister must reconsider whether Mr Kim, as murder accused, is to be surrendered in accordance with the matters identified at [278] of the judgment.

Criminal practice and procedure — Extradition

In 2011, New Zealand received a request from the People’s Republic of China (the PRC) seeking the extradition of Mr Kim on one count of intentional homicide.  In response, the Minister of Justice sought and received various assurances from the PRC to meet concerns identified by Mr Kim and Ministry officials in connection to the risk of torture, extra-judicial killing and Mr Kim’s right to a fair trial under international law.  The Minister was satisfied that these assurances addressed the risks identified and determined that Mr Kim be surrendered under s 30 of the Extradition Act 1999.

Mr Kim successfully applied to judicially review that decision.  The Minister obtained further assurances in light of the High Court’s findings and reconsidered her decision, determining again that Mr Kim be surrendered to face trial in the PRC.  The Judge refused Mr Kim’s second application for judicial review.  Mr Kim appealed that decision to this Court.    

Issue One: Is reliance upon diplomatic assurances consistent with New Zealand’s international obligations?

Held: Yes.  New Zealand is not prohibited by international law from accepting or relying on diplomatic assurances when assessing whether there is a substantial risk a person will be tortured or otherwise subjected to breaches of human rights.  The Judge correctly held that before relying on assurances, the Minister must address the preliminary question of whether the general human rights situations in the requesting state was such that assurances could be relied upon, however erred in finding the Minister explicitly addressed this question.

Issue Two: Did the Minister take into account a consideration irrelevant to the surrender decision, namely helping the PRC establish credibility in the international community?

Held: No.  There was no evidence before the Court that the Minister intended to secure outcomes for the PRC through the extradition of Mr Kim; the evidence that the PRC would likely be motivated to honour assurances was relevant to the Minister’s assessment of whether the PRC would likely comply with undertakings.

Issue Three: Did the Minister err in accepting assurances in relation to torture as adequate to protect Mr Kim on return to the PRC?

Held: Yes.  While it was relevant for the Minister to ascertain whether Mr Kim was in a class of defendants at “high risk” of torture in the PRC, it was not reasonably open to the Minister to conclude on the evidence before her that Mr Kim, as a murder accused, was not at high risk.  In upholding this the Judge erred.  The Judge also erred in finding no error in the Minister’s conclusion that certain factors, such as location of trial, reduced Mr Kim’s risk of torture because there was a lack of evidence on this point.  Finally the Judge erred in failing to identify deficiencies in the Minister’s consideration of the adequacy of assurances given the information that torture remains widespread in the PRC and that torture is difficult to detect.

Issue Four: Did the Minister err in relying upon diplomatic assurances as an adequate protection against the imposition of the death penalty?

Held: No.  The Minister was entitled to take into account evidence of prior compliance of the PRC in this regard.  The Judge was correct to find no error in this regard.

Issue Five: Did the Minister fail to address the risk of extra-judicial killing?

Held: No.  Although the Court agreed with Mr Kim that the risk of extra-judicial killing must be addressed separately to the risk of torture, there was no evidence before the Court that Mr Kim was at risk of extra‑judicial killing beyond that considered under torture.

Issue Six: Did the Minister apply an incorrect legal standard when determining whether Mr Kim’s right to a fair trial would be upheld?

Held: Yes.  This Court has reservations as to the Othman (Abu Qatada) v United Kingdom test of “flagrant denial of justice”, as it involves such a departure from standards so as to amount to a nullification or destruction of fair trial rights guaranteed by international law.  Rather, a more appropriate threshold is whether there is a “real risk of a departure from the standard such as to deprive the defendant of a key benefit of the right in question”.  One a person establishes a “real risk”, it is for the requesting state to dispel any doubts.

Issue Seven:  Did the Minister err in concluding that there was no risk of departure from fair trial standards justifying refusal of surrender?

Yes.  The assurance that Mr Kim would be tried in accordance with domestic law did not meet the concern that he would not be tried before an independent tribunal, a right guaranteed under international law.  The evidence before the Judge, and Minister, was that PRC’s criminal justice system prioritises stability and crime control over procedural rights, and is subject to political influence.  There was insufficient evidence before the Minister in relation to disclosure, the status of the defence bar and the right to examine prosecution witnesses for the Minister to reasonably conclude there was no real risk to a departure from fair trial standards in Mr Kim’s case.

Issue Eight: Did the Minister err in making the decision to surrender Mr Kim notwithstanding the absence of assurance addressing the risk of disproportionate punishment?

Held: Yes.  As a matter of sentencing methodology and considering international legal obligations, it would be a disproportionately severe, or cruel and degrading, punishment should time served in custody in the arresting state not be deducted from the finite sentence of imprisonment in the PRC.  There was evidence before the Minister of PRC officials previously providing assurances to this effect.  Against this background, the Court considered the Judge erred in finding no reviewable error.

Issue Nine:  Did the Minister err in relying on advice from PRC officials as to Mr Kim’s access to mental health care in custody in the PRC?

Held: Not appropriate to consider on the basis of material before the Court.

Appeal dismissed. Question of law. No order as to costs.

Statutes – interpretation.

Mrs Broadbent applied to the Chief Executive of the Ministry of Social Development (the Chief Executive) for an additional subsidy to reduce her contribution to the cost of her residential care. The Chief Executive conducted a means assessment and found that Mrs Broadbent did not qualify for this additional subsidy because, by transferring most of her and her late husband’s properties to trusts, she had deprived herself of income from those assets that would have been available to meet the costs of care. The Chief Executive considered he was entitled to disregard these transfers when calculating Mrs Broadbent’s income.

On appeal, the Social Security Appeal Authority (the Authority) upheld the Chief Executive’s assessment. On further appeal to the High Court on a question of law, Katz J reversed the Authority. The Chief Executive appealed to this Court.

Can the Chief Executive include any income capable of being derived from gifted assets valued below the permitted threshold in a person’s means assessment under ss 147 and 147A of the Social Security Act 1964 (the Act)? Held; no. The natural inference from the employment of “gift” in the Social Security (Long-term Care) Regulations 2005 is that if it relates to property capable of earning income, the gift will include its income earning potential. There is no particular reason to set that natural inference aside when applying s 147. Where, as in Mrs Broadbent’s case, the property is sold at fair value, there cannot have been a deprivation of its potential income because the income stream has also been sold for fair value as part of the price of the property.

Observation: The Authority proceeded on the premise that it was the assets formerly owned by Mrs Broadbent and her late husband that were gifted to the relevant trusts. In the High Court, Katz J was not called upon to answer that proposition. On the facts before this Court, the position is that the actual property Mrs Broadbent deprived herself of was in fact the principal of the forgiven loans used by the relevant trust to purchase those assets i.e. the right to repayment of that principal and not the trust’s assets themselves. This Court considered how to approach this issue and held that the best practical approach was to answer the question of law as posed. Issues of the status of the residual principal will need to be reconsidered.

Appeal against the refusal to grant judicial review is allowed.  Application for judicial review is granted.  The application for leave to appeal is declined as it did not need to be determined given the judicial review decision.  The Auckland Unitary Plan Independent Hearings Panel is ordered to give reasons for its recommendations to the Auckland Council relating to the zoning and height requirements for the Promenade and Lake Road Blocks in Takapuna.  Costs order. 

Judicial review – natural justice.  Resource management – District plan. 

The appellant, Mr Belgiorno-Nettis, challenges the recommendations of the first respondent, the Auckland Unitary Plan Independent Hearings Panel (the Panel) made to the second respondent, the Auckland Council, and the Council’s decision based on those recommendations.  The appellant’s challenge was against specific recommendations of zoning and height levels for the Promenade and Lake Road Blocks in Takapuna, on which he had made submissions. 

Issue: was the Panel obliged to give reasons for its recommendations?

Held: Yes.  The legislation in fact required the Panel to give reasons for accepting or rejecting submissions.  This could be done by grouping submissions as the Panel was not required to give reasons for the determination of individual submissions.  Beyond specific legislation, there is no absolute rule that courts must give reasons for their decisions.  However, providing reasons is part of the principle of open justice.  The ability to see and understand the court process is critical to the maintenance of public confidence in our court system.  The Panel was a quasi-judicial nature.  A reader should have been able to understand why this decision on zoning and height levels for a significant block of land has been made.  

Issue: did the Panel give reasons for its recommendations?

Held: No.  The high level policy statements of the Panel’s approach to allowing greater intensification in existing urban areas were not sufficient to explain why decisions for zoning and height levels for the Promenade and Lake Road Blocks were made.  There were no reasons given, or any attempt to give an explanation for group submissions or explain decisions on particular issues, for the acceptance or rejection of Mr Belgiorno-Nettis submission on the Promenade and Lake Road Blocks.  The Panel had an immense task in responding to the large number of submissions but by grouping submissions and responding on general issues, it was not impossible for brief reasons to be given.  To not give reasons was a reviewable error of law. 

Issue: what was the appropriate remedy?

Held: In the circumstances the appropriate remedy was not to order a rehearing of the issues relating to Mr Belgiorno-Nettis’ submission.  The appropriate remedy was to require the Panel to give reasons for its recommendations in relation to the two blocks of land.

Application to adduce fresh evidence granted. Appeal allowed. Sentences quashed and concurrent sentences of 10 years and six months' imprisonment substituted.

Criminal Law - Sentence appeal - Starting point - Mitigation

Sentence - Fresh evidence on appeal - Cultural report

Appeal against 12-year sentences for wounding with intent to cause grievous bodily harm and aggravated burglary. The appellant argued the sentencing Judge had erred by sentencing based on facts not proved at trial, by adopting a starting point that was too high, and by giving no discount for the period on electronically monitored bail. The appellant also sought to adduce a cultural report (Sentencing Act 2002, s 27) as fresh evidence on appeal, meriting a discount to sentence.

Was the s 27 cultural report fresh and credible evidence on appeal?

Held: Yes. Cultural reports should not usually be produced for the first time on appeal. Where the opportunity to produce a report has not been taken at first instance and it appears to the appellate court that the report may make a difference, the proper course may be to remit the matter to the trial judge for re-sentencing. In this case, the Crown did not oppose admission of the cultural report on appeal. The information in the report was material to sentence and sufficiently established a causal connection between cultural circumstances and offending, identified mitigating circumstances, and pointed to genuine prospects of rehabilitation.

Did the sentencing judge err in the sentence imposed?

Held: Yes. The sentencing Judge concluded a particular weapon was used at least in the course of a joint combined attack, which was a  finding of fact open to him. The starting point correctly fell within the band 3 of R v Taueki and was within the available range. However, the sentencing Judge stated the appellant's history was replete with violent offending. She had very few convictions for violence and the Court considered this error had a bearing on the Judge's view of reoffending risk. EM bail is a mitigating factor and the Judge erred in declining credit for time on EM bail on the basis that the appellant was lucky to get bail. Finally, the picture painted by the cultural report detracted somewhat from the appellant's culpability and pointed to prospects of rehabilitation. EM bail and factors mentioned in the cultural report warranted a global allowance of 18 months.

Summary: PROPERTY LAW—Restrictive covenants—Property Law Act 2007—Section 317—Extinguishment of covenant
CIVIL PRACTICE AND PROCEDURE—Indemnity costs—Costs of enforcement

The appellants’ land had the benefit of restrictive covenants registered over part of the respondent’s land.  These restricted the use of this part of the respondent’s land to grazing, lifestyle farming or forestry.  The covenants were originally intended to facilitate consent for quarrying on the dominant land, part of which is now owned by the appellants.  The respondent sold its land to a third party which is now building a dairy factory on the land subject to the covenant.   

The respondent applied to the High Court for orders extinguishing or modifying the covenants under s 317 of the Property Law Act 2007 (PLA).  The High Court granted this application finding:

a) there had been a change in the nature or extent of the use being made of the benefited land, much of which had been sold and will never be developed as a quarry;
b) the use of the burdened land had also changed and was now zoned Industrial 2;
c) the character of the neighbourhood had changed beyond recognition;
d) the covenants had no continuing practical value;
e) the continuation of the covenants would impede the reasonable use of the burdened land in a manner or to an extent that could not reasonably have been foreseen by the original parties to the covenants; and
f) extinguishment would not substantially injure the appellants.

In a later judgment, the High Court declined to order the respondent to pay any compensation to the appellants.  The Court awarded indemnity costs to the appellants being costs of enforcement payable in terms of the covenants.

The appellants appealed to this Court against the extinguishment of the covenants and the refusal to order compensation.  The respondent cross-appealed against the indemnity costs order.
HELD: APPEAL AGAINST EXTINGUISHMENT ALLOWED

Was there a sufficient change in the nature or extent of the use of the benefited and burdened lands?
Held: No. The changes were not sufficient to justify extinguishing the covenants. The aggregate resource is located on the appellants’ land and this land is still zoned for aggregate extraction and processing.  The only change in the use of the burdened land is the construction of the dairy factory in breach of the covenants.  

Was there a sufficient change in the character of the neighbourhood?
Held: No.  While the neighbourhood had changed, this did not justify extinguishing the covenants.  The changes did not increase the burden imposed by the covenants on the burdened land in a different way or to a different extent from that which could have reasonably been contemplated when they were entered into 20 years ago for a term of 200 years.  

Was there a sufficient change in other circumstances to justify extinguishing the covenants?
Held: No.  The utility of the covenants was not sufficiently impaired by rezoning, nor was the fact that the dairy factory could have been built on other parts of the burdened land relevant to the assessment.

Would continuation of the covenants impede the reasonable use of the burdened land in a different way or to a different extent from that which could reasonably have been foreseen by the original parties to the covenants?
Held: No.  The impediment upon the burdened land had not changed sufficiently to justify extinguishment.

Would extinguishment substantially injure the appellants?
Held: Yes.  The appellants lost valuable rights as a result of the covenants being extinguished.  Their ability to develop a quarry would likely be impeded if a dairy factory is constructed on the burdened land.

HELD: APPEAL AGAINST REFUSAL TO ORDER COMPENSATION DISMISSED; CROSS-APPEAL AGAINST INDEMNITY COSTS AWARD DISMISSED

Should compensation have been awarded to the appellants?
Held: No.  As the covenants should not have been extinguished the question of compensation does not arise.

Should the appellant have been awarded indemnity costs?
Held: Yes.  The appellants’ costs in defending the respondent’s application to extinguish its covenants is a form of enforcement of the covenants falling within the indemnity costs provision in the covenants.  

127 Hobson and Mr Parbhu appeal against a decision of Whata J in the High Court finding an indemnity clause in a collateral deed to a deed of lease between 127 Hobson and Honey Bees to be lawful and enforceable.

Contract – Penalties – Whether Whata J erred in his construction of the indemnity clause?
Held: no.  The proper construction of the indemnity clause, having regard to what the parties intended the obligation to be, was (1) that the indemnity (if triggered by default) ran until the end of the initial term of the lease and no further; and (2) the indemnity included only payment of rent and outgoings, and did not extend to non-economic obligations.

Contract – Penalties – Whether Whata J erred in concluding that the indemnity clause was not a penalty and therefore lawful and enforceable?
Held: no.  The principles stated in Wilaci Pty Ltd v Torchlight Fund No 1 LP (in rec) [2017] NZCA 152, [2017] 3 NZLR 293 (applying NSW law) apply also to New Zealand.  The indemnity was not a penalty.  Honey Bees had a legitimate interest in performance given the importance of the primary obligation to install a second lift to their business and distrust that had developed after execution of the agreement to lease.  The indemnity was not out of all proportion to this legitimate interest, given the potential disadvantage to Honey Bees of containing the clause in a collateral deed rather than the lease deed itself and the risk settings agreed to by the parties.

Appeal allowed. Certificate of compliance issued under s 139 Resource Management Act set aside. Costs orders.
Judicial Review – appeals.
The appellant sought judicial review of a decision by Auckland Council to issue a certificate of compliance under s 139 of the Resource Management Act. The certificate was issued in respect of a proposed outdoor shooting range.
Whether the Judge erred in not quashing the certificate? Held: the certificate should be set aside, the Council had insufficient information to properly assess the extent of earthworks involved in the proposed activity, setting aside the certificate would be of practical value to the appellant and there has been no disentitling conduct on the part of the appellant.

Appeal dismissed.
Mr Everett appeals against a decision of Jagose J in the High Court sentencing him to a term of seven years and six months’ imprisonment, with a minimum period of imprisonment of three years and nine months’ for the manslaughter of his partner.  Mr Everett appeals against sentence only.

Criminal law – Sentence – starting point.  Whether Jagose J erred in adopting a starting point of seven years, six months’ imprisonment.
Held:  No.  Discussion of sentencing for domestic violence causing death.  Query whether sentencing in domestic violence cases for wounding or injuring with intent to cause GBH and manslaughter following the infliction of GBH are readily reconcilable.  Death following the deliberate infliction of GBH a seriously aggravating factor in sentencing.  In manslaughter cases founded upon GBH offending — where really serious injury is an intended consequence — it is desirable to consider both comparable manslaughter sentencing and R v Taueki [2005] 3 NZLR 709 (CA) principles to ensure manslaughter is not under-sentenced, and GBH not over-sentenced.  Here, applying dual analysis, sentence lenient, not manifestly excessive.

Criminal law – Sentence – minimum period of imprisonment.  Whether Jagose J erred in imposing an MPI of three years and nine months’ imprisonment.
Held:  No.  Particular callousness, denial of responsibility and lack of remorse by appellant such that imposition of an MPI justified in terms of accountability, denunciation and deterrence.