Cartel damages thinned out

Tuesday 21 April 2015

Author: Andy Glenie

​​This article first appeared in Law News Issue 9 (2 April 2015), published by Auckland District Law Society Inc.

The High Court recently concluded that a victim of price-fixing could not recover from one wrong-doer damages compensating for losses it suffered at the hands of others. The decision offers a rare and important insight into the right to damages under section 82 of the Commerce Act 1986 (Act).​

Background

New Zealand Bloom Limited v Cargolux Airlines International SA [2014] NZHC 109 is yet another chapter in the air cargo price-fixing saga. NZ Bloom is a flower exporter. It alleged that Cargolux breached sections 27 and 30 of the Act by reaching agreements with other airlines to add fuel and security surcharges to their prices for exporting products from New Zealand, which freight forwarders then passed on to NZ Bloom.

NZ Bloom claimed that it had suffered nearly $340,000 worth of losses as a result of the airlines’ agreements forcing it to pay inflated prices. Crucially, only $40,000 of those overcharges were paid to Cargolux. The parties agreed that the Court should determine a preliminary question before trial: could Cargloux be liable to NZ Bloom in respect of the remaining $300,000?

Decision

The Court began by focusing on section 82 itself. Relevantly, the section states that “every person is liable in damages for any loss or damage caused by that person engaging in conduct” that amounts to a contravention or being involved in a contravention of sections 27 or 30 of the Act. Justice Peters took the view that section 82 required NZ Bloom to plead and prove that the $300,000 loss was caused by Cargolux itself entering into or giving effect to the alleged price-fixing agreements.

The Court then went on to consider NZ Bloom’s statement of claim. It simply alleged that the price-fixing agreements between the airlines had caused loss to NZ Bloom in that it was forced to pay $300,000 worth of overcharges. The Court held that pleading to be defective. It did not allege that Cargolux’s conduct had caused NZ Bloom to suffer $300,000 worth of losses, nor did it plead the facts necessary to prove causation between Cargolux’s conduct and NZ Bloom’s losses. Consequently, the Court answered the preliminary question in favour of Cargolux.

In reaching that conclusion, the Court made several important comments in passing. First, it accepted that a plaintiff may be able to plead that a single cartelist caused it loss simply because its significant market presence meant that other players “followed it into the agreements”. Second, the Court pointed out that it had not been asked to determine what kind of causal connection would suffice under section 82 (e.g. it might be enough that the defendant’s conduct was merely a “material cause” of the loss).

Comment

Brief though it is, the decision is significant. To begin with, it may cap NZ Bloom’s recovery from Cargolux at $40,000 (a modest sum by comparison with the costs of High Court litigation).

More widely, it will present a plaintiff in a cartel case with an important choice. It must either proceed against all the cartelists with whom it did business (with the attendant difficulties in terms of cost and complexity), or carefully frame its claims against a single party so as to make it clear exactly how that party caused the plaintiff’s wider losses. Until the law is clarified, a plaintiff taking the latter option may need to assume that it must prove a strong causal connection between the single cartelist and its wider losses.

It is also worth reflecting on the possible implications of the decision with respect to the liability of multiple defendants. Some would assume that cartelists should, like tortfeasors, be jointly and severally liable for the harm done by their conduct. However, this decision leaves open to a cartelist the argument that it has not caused the entire loss suffered by the plaintiff and so should only be liable for a proportion of it. If accepted, that argument could disadvantage even a plaintiff which carefully pleads its case against multiple defendants should one of them become insolvent or otherwise evade the jurisdiction of the New Zealand courts.


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.