Class action developments: High Court finds in favour of kiwifruit class action

Thursday 5 July 2018

Authors: Jenny Stevens and Duncan McLachlan

​​​​​​​​​​​​​​​​​The High Court's decision on stage one of the Kiwifruit case was released on Friday: Strathboss Kiwifruit Ltd v Attorney-General [2018] NZHC 1558. The Court's key findings were that the Ministry of Primary Industries owed a duty of care to the kiwifruit growers in relation to the avoidable Psa incursion, breached that duty and is not immune from liability. Consequently, the case will now move on to a stage two hearing to assess the Crown's damages exposure.  By all accounts those damages could be very significant indeed.

There remains a lot to digest from the Court's 500 page decision, particularly the crucial analysis of what this might mean for the potential exposure of public sector entities exercising an operational function. The case is also a significant development for class action litigation in this country. It is the first decision in New Zealand in which a true "class action" has been successfully pursued through to trial. 

Observations from a class action perspective

The Kiwifruit case was brought as a representative action under High Court Rule 4.24. A representative action is the current mechanism by which class actions (in all but name) can be advanced in New Zealand. The first plaintiff, Strathboss, represents a class of about 200 orchard owner operators as well as orchard lessors and lessees who alleged they had suffered losses from the bacteria, Psa, outbreak in this country. Strathboss has succeeded in its argument that it was owed a duty of care and it thereby opens the door for others in the class to benefit from the finding. The second plaintiff, Seeka, is a post harvest operator. Originally Seeka's claim was also intended to be a representative action, but no other post harvest operators opted into the proceeding by the opt in date of 9 October 2015. Accordingly, Seeka's claim continued on its own behalf only. The Court found no duty of care was owed to Seeka. 

At stage two the Court will determine whether all of those in the Strathboss class were owed the duty of care, what losses each of those parties have suffered and, thus, who within the class will actually be awarded damages. Importantly, in respect of the next stage, the Judge found: 

... Those within the Strathboss class will have to show they had property rights in the vines and crops or that their interest in the vines and crops is sufficiently direct or closely associated with those rights that they should be treated as though they have suffered loss to their property.  The duty of care applies to the consequential financial losses from that property for damage for those that are in the class but will be subject to the limits of causation, remoteness, mitigation and betterment.  [at para 28]

The litigation is funded by the New Zealand based litigation funder, LPF Litigation Funding Ltd. Any damages awarded at stage two will therefore be apportioned between the members of the Strathboss class who prove loss and the litigation funder. With estimates indicating that the total damages could be in the order of hundreds of millions of dollars, it could be a significant payday for a funder who has publicly signalled an intention to continue to pursue actions in New Zealand.  

The funding and pursuit of class actions against the Crown raises broader policy issues which are neatly illustrated by the outcome in this case. Without the funder taking on this case, the growers may never have been able to bring the claim in circumstances where the Court has confirmed a legal wrong occurred. But, in the context of the liability of a public entity, any damages awarded will now be funded by the taxpayer including the share of the damages that goes to the funder. What is the correct policy balance? These are hard issues but ones that can be canvassed in the signalled upcoming review of class actions and litigation funding being undertaken by the Law Commission. 

The outcome in the Kiwifruit case will undoubtedly have a significant impact on the market and appetite for class actions and litigation funding in New Zealand over the coming years particularly against the Crown.

The issues at stage one

In early November 2010 the bacteria known as Psa was identified as present in two neighbouring kiwifruit orchards in Te Puke. The bacteria spread and caused significant damage to participants in the kiwifruit industry. A claim for negligence was brought against the Crown arising from loss caused to both kiwifruit growers and post harvest operators. The plaintiffs claimed that Psa was introduced from a shipment of kiwifruit anthers (the part of the stamen that contains the pollen), which were to be used to artificially​ pollinate orchards using milled pollen. The plaintiffs said that the Ministry of Agriculture and Forestry (now MPI) was negligent in granting a permit to the importer, Kiwi Pollen, to import the pollen (the pre-border stage) and when giving border clearance to the particular consignment of anthers (the border stage).

In the Court's judgment delivered last Friday, Mallon J determined four stage one questions:

  1. Did MAF owe a duty of care to the plaintiffs?

  2. Did it breach that duty?

  3. Did the anthers consignment cause the Psa outbreak?

  4. Was the Crown immune from liability?

Over 498 pages, the Court found in favour of the first plaintiff but not the second plaintiff, Seeka. Crucially, Mallon J held that it was just, fair and reasonable that MAF owe a duty of care to those within the class represented by Strathboss who have suffered loss to their property. As her Honour put it, "The wrong to them should be remedied".  However, Mallon J found that MAF did not owe a duty of care to Seeka. Seeka's relationship with MAF was "less close", and the effects on Seeka were less direct than those suffered by Strathboss. 

In respect of whether or not MAF breached that duty, the Court found in favour of the first plaintiff on the first cause of action i.e. the pre-border stage, but not on the border stage. Her Honour then also found in favour of the first plaintiff on each of the other two questions.

If you would like to discuss the Kiwifruit case's potential relevance to you or your business, please contact the lawyers featured or your usual Bell Gully adviser.​


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.

For more information
  • Jenny Stevens

    Partner Wellington
  • Sophie East

    Partner Auckland
  • David Friar

    Partner Auckland
Related areas of expertise
  • Class actions
  • Litigation and dispute resolution