Maori: Paki v. Attorney-General

Recognising that its ruling might open future political claims by Maori for resource rents on water used to generate hydroelectric power, the Supreme Court has tip-toed around questions of riverbed ownership.  Judges are signalling that there is no general rule that Maori land ownership extends to rights over an adjoining river. To claim ownership, iwi and individual hapu need to prove rights over a river arising by custom and usage which have not been lost either by sale of adjoining land or by passage of time.

Mighty River Power has been a nervous bystander to claims for government compensation by Pouakanui hapu at Mangakino in the central North Island for alleged Treaty of Waitangi breaches in nineteenth century purchases of land.  Mighty River generates power from neighbouring dams at Maraetai and Whakamaru.

Pouakanui alleges a loss of mana in sales of hapu land to the Crown in 1887 and 1899 because the Crown did not tell them that the land sale included rights to the adjoining Waikato River.  It claims compensation for this loss of mana.  While Pouakanui has presumed all along that rights to the riverbed were sold in the nineteenth century, this might not be the case.  Following a landmark preliminary hearing in 2012 on the general principles applying to riverbed ownership (which depend upon whether or not a particular stretch of river is “navigable”) the Supreme Court left open the question of who owned the bed of the Waikato river at Mangakino in the 1880s.  The river at Mangakino was then a series of rapids passing through a steep gorge.

Revisiting the general question of river ownership in the Supreme Court, Chief Justice Elias  said there is no universal custom within Maoridom linking riverside ownership with riverbed ownership.  Any general rule is subject to proof of custom and usage drawn from the local history of a particular Maori community.   Land conveyancing rules applied by colonial settlers adopting English law do not apply to questions about Maori customary ownership of riverbeds.

Pouakanui did not provide evidence in court of any customary rights over the Waikato river at Mangakino; it simply claimed damages on the presumption that riverbed rights had been lost on sale.

The Supreme Court dismissed the Pouakanui claim for damages, regardless of whether the hapu had retained ownership of the Waikato river at Mangakino or not.  If Pouakanui enjoyed customary rights of ownership over the riverbed, then ancestors of the hapu would have been aware that selling the land would include a sale of riverbed rights, the court ruled.  Conversely, if the hapu did not enjoy customary rights it did nor suffer any loss in a sale of the riverbed and there is no basis for any claim.

Evidence was given that in 2002 and 2003 certificates of title were issued in the name of the Crown for the riverbed beneath both the Maraetai and Whakamaru dams.

Paki v. Attorney-General – Supreme Court (29.08.14)

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Insurance: Ridgecrest v. IAG

Policy wording enabled a Christchurch building owner with an underinsured property recover more than the amount nominally insured because a reset clause in the policy meant the amount insured was reset after each of a successive series of earthquakes.  While multiple payouts resulted, the owner was not entitled to more than the replacement cost of the building.

IAG Insurance disputed the amount payable to Ridgecrest NZ Ltd following damage to Ridgecrest’s Gloucester Street building during a series of four earthquakes in 2010 and 2011.  IAG’s liability under the policy was stated as a maximum of $1.984 million in respect of each single “happening”.   This figure was less than the replacement cost of the building.

During the period of insurance, the Gloucester Street building was partially damaged in a series of earthquakes before being written off as a total loss following severe quakes in February and June 2011.  Taking a lead from marine insurance, IAG argued the earlier damage had “merged” into the total loss claim and it was liable to pay only the maximum sum fixed under the policy at $1.984 million.  The Supreme Court disagreed.  IAG’s policy wording entitled Ridgecrest to recover separately for losses arising from each separate earthquake.  A marine insurance “merger” argument could not apply when the policy reset after each of the separate events.  Ridgecrest could recover damage caused by each of the three initial earthquakes (up to the policy limit of $1.984 million for each quake) as well as $1.984 million for the total loss following the June 2011 quake.

But, as a general principle of insurance law, any insured cannot be placed in a better position than existed before the loss.  This meant Ridgecrest could recover more than the nominal sum insured of $1.984 million but could not receive compensation in excess of the replacement value of the building.   The court was not asked to rule on the amount actually payable.

Ridgecrest v. IAG – Supreme Court (27.08.14)

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Fair Trading: Godfrey Hirst (NZ) v. Cavalier Bremworth

The dominant headline message in any advertisement must not be misleading the Court of Appeal ruled.  It is a breach of the Fair Trading Act to bait advertising with misleading headlines to attract custom and then heavily qualify in the fine print what is on offer.

Budget airlines and car hire companies have been notorious for advertising cheap deals which on closer examination prove to be anything but cheap.  The Court of Appeal set out rules governing headline messages when considering a legal challenge to Cavalier Bremworth’s 2013 launch of its new Habitat range of synthetic carpets.  Its advertising highlighted the resistance of this new carpet to wear and to stains, emphasising what it called “superb warranties” offered in support of the new product.  The fine print qualified these warranties out of existence.

The Court of Appeal said media campaigns must be judged from the perspective of all those targeted by an advertisement, excepting those consumers who are unusually stupid or whose reactions to the advertisement are extreme or fanciful.  In reading an advertisement, consumers are expected to take some reasonable care in interpreting the message.  But advertisers are still required to pitch an advertisement at the level expected of their target market bearing in mind the knowledge and acumen of customers they seek to attract.

The Court of Appeal was heavily critical of Cavalier’s 2013 advertising campaign.  The dominant message promised stains would wipe off easily, the carpet would not soil in its lifetime, the carpet would hold its colour for 25 years, the carpet would not crush under heavy foot traffic but would spring back and through its lifetime the carpet would be anti-static.  This dominant message was heavily qualified in a separate 23 page warranties booklet: the warranty was provided by a third party, not Cavalier; the warranties did not apply to carpet supplied for time-share properties or rental properties; the warranty did not extend for 25 years but reduced after 15 years; the warranty lapsed if the purchaser did not regularly vacuum the carpet and have it professionally steam cleaned every two years.  Excluded from the warranty against staining was virtually everything that conceivably could cause a stain, with that stain exclusion itself incorrectly cross-referenced to the wrong page of the warranty booklet.

In deciding whether a particular advertisement is misleading, it is the “dominant message” or “general thrust” which is critical, the Court of Appeal said.  It is not a case of separately analysing each individual statement; it is the overall impression which counts.  Any significant qualification from the headline message must be sufficiently prominent to come to the attention of targeted customers.  The greater the disparity between the headline message and the qualifying information, the greater is the requirement to draw customers’ attention to the true position in the clearest way possible.

Given that advertisements are designed to attract custom, it is no defence to a complaint about a misleading advertisement to say any customer would be made aware of all qualifications and exclusions by the point of sale; it is a breach of the Fair Trading Act to use a misleading headline message to draw a customer into a website or physical store and then later disclose the true position.

Godfrey Hirst (NZ) Ltd v. Cavalier Bremworth – Court of Appeal (27.08.14)

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Joint Venture: Worldwide v. NZ Venue & Event Management

After gaining total management control in 2006 of the 12,000 seat Vector Arena in Auckland, the Australian-based Jacobsen family has cheerfully neglected to pay in full the $2.69 million compensation due to its former joint venture partner, Florida-based Worldwide Entertainment Group.  The Supreme Court imposed court-ordered interest to run from 2006 to such time as final payment is made.

Worldwide, together with the Jacobsen family, were parties to a joint venture for the construction and operation of the Vector Arena.  Worldwide held a 25% stake.  This joint venture came to an end in January 2006 when a US Federal Court in Florida put Worldwide Entertainment into receivership.  Appointment of receiver amounted to a “change of control” which triggered pre-emption rights in the joint venture agreement.  Jacobsen interests immediately assumed full management control of Vector Arena’s operations.  Convoluted litigation followed over what compensation was payable to Worldwide for its former 25% stake.  It was not until a court ruling in November 2011 that Jacobsen interests were ordered to pay Worldwide $2.69 million within 28 days, with interest running on any delayed payment.  Rather than making payment, Jacobsen argued court-ordered interest can be awarded only on the “recovery of debt or damages” and this was neither. It was a declaration as to the value of an interest in a business.

The Supreme Court ruled that the phrase “debt or damages” is not to be read too narrowly. It covers all cases where a claim is made for money.  In this case the appointment of a receiver triggered an immediate transfer of Worldwide’s stake in the joint venture to Jacobsen.  The joint venture agreement was silent on when payment was to be made, so the assumption is that payment and transfer were simultaneous, the Supreme Court said.  Worldwide was entitled to payment from early 2006, even though the amount to be paid was not finalised until late 2011.  Interest was payable from when notice of pre-emption was given in 2006.

The rates for court-ordered interest are set by government regulation.  They vary depending on inflation.  In this case, Jacobsen interests were ordered to pay 7.5% on the amount outstanding for the period 2006 to mid-2011, and 5.0% from mid-2011 to full payment.

Worldwide NZ LLC v. NZ Venue & Event Management – High Court (24.11.11) & Supreme Court (11.08.14)

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