First published in NZ Lawyer, 29 June 2012.
In late May, the Court of Appeal held in Kuehne + Nagel International AG
v Commerce Commission  NZCA 221 that the New Zealand Courts should
accept jurisdiction in proceedings against Kuehne + Nagel International AG
(KNI), a Swiss company, alleging breaches of the Commerce Act
1986 (the Act). KNI had not engaged in any conduct in New
Zealand itself (indeed, it submitted that it was a mere holding company).
The judgment is notable for the Court's approach to attribution of the
conduct of the local subsidiary Kuehne + Nagel Ltd (KNNZ) to
KNI, and the Court's reliance on a plea agreement that KNI had entered into with
the US Department of Justice (DoJ) for evidential purposes.
KNI is incorporated in Switzerland. The Court noted that it provides freight
forwarding services worldwide through a network of local subsidiaries (together
comprising the KN Group). KNNZ was one such subsidiary.
In 2010, the Commerce Commission (Commission) filed
proceedings against KNI and others. There were no proceedings against the local
company, KNNZ. The Commission alleged that KNI and others had breached sections
27(1) and 27(2) of the Act by engaging in price fixing in the New Zealand
freight forwarding industry. The Commission served the proceeding on KNI in
Switzerland without leave of the High Court, under HCR 6.29. KNI protested the
jurisdiction of the New Zealand Courts.
The High Court upheld KNI's protest in respect of the alleged breaches of
section 27(1), because there had been no "entry into" an anti-competitive
agreement in New Zealand and KNI did not "carry on business" in New Zealand.
However, Venning J dismissed KNI's protest in respect of the section 27(2)
claims for "giving effect" to anti-competitive agreements reached overseas. Two
key questions arose under HCR 6.29. On the first, the Court found that the
Commission had established a good arguable case that the conduct of KNNZ in
giving effect to the relevant agreements could be attributed to KNI. On the
second, more factual question the Court considered the evidence that the
Commission had built up in relation to the allegations and concluded that there
were serious issues to be tried. It therefore found that it had jurisdiction in
relation to the section 27(2) claims. KNI appealed the finding of jurisdiction
for the section 27(2) claims.
The decision of the Court of Appeal
The Court of Appeal dismissed KNI's appeal. The most interesting aspect of
its decision is its consideration of attribution under section 90(2) of the Act.
The Commission argued that the relevant acts were those of KNNZ in giving effect
to the price fixing agreements; KNNZ had engaged in that conduct on behalf of
KNI so the conduct could be attributed to KNI under section 90(2). That section
90 Conduct by servants or agents
conduct engaged in on behalf of a body corporate—
(a) by a director,
servant, or agent of the body corporate, acting within the scope of his actual
or apparent authority; or
(b) by any other person at the direction or
with the consent or agreement (whether express or implied) of a director,
servant, or agent of the body corporate, given within the scope of the actual or
apparent authority of the director, servant or agent—
shall be deemed, for
the purposes of this Act, to have been engaged in also by the body corporate.
The Court accepted that section 90(2) was an "enlarging provision" which
could make a corporation liable for the conduct of others where it would not be
otherwise (including at common law). The scope of section 90(2) was not limited
to agency concepts, and it was not necessary to show that the relevant conduct
had been for the benefit of the parent company (although that could be a
relevant factor). Ultimately however, the Court considered that the outcome of
the case turned not on the proper interpretation of section 90(2) but on an
evaluation of the facts. It concluded that the evidence showed, at least to the
standard necessary in a challenge to jurisdiction, that KNNZ had clearly acted
as the representative of KNI in the New Zealand freight forwarding market, at
the direction of KNI, and for its benefit.
Although the Court accepted that formal admissions could only be fully
binding in the case in which they were made, it regarded as "highly instructive
in an evidentiary sense" a plea agreement which KNI had entered into with the
DoJ, the full detail of which had only emerged after the High Court hearing. In
that agreement, KNI pleaded guilty to counts of conspiracy to suppress
competition in the United States. It made various admissions, relevantly
including that it had "through its subsidiaries, provided international air
freight forwarding services". Those admissions conflicted with KNI's submission
that it was a holding company and had not itself engaged in freight forwarding
markets. The Court of Appeal expressed considerable surprise that KNI was now
seeking to disavow the clear admissions it had made in the plea agreement as to
the operation of the KN Group. It found that KNI had failed by "a wide margin"
to demonstrate that the High Court had been wrong on the point.
Consistency with Poynter
At first glance, the outcome in this case might be thought inconsistent with
Poynter v Commerce Commission  3 NZLR 300 (SC). There, Mr Poynter
– who, like KNI, was not resident or carrying on business in New Zealand and had
engaged in no conduct in New Zealand – successfully protested the jurisdiction
of the New Zealand Courts in connection with a timber preservatives cartel.
However, in that case, section 90 could not be used to attribute to Mr Poynter
as an employee the conduct of his New Zealand colleagues; whatever conduct of
others had occurred in New Zealand was not on his behalf, but on behalf of his
employer. As the Court of Appeal noted, that was not the position in Kuehne
+ Nagel. Here, section 90(2) was clearly capable of attaching liability to
KNI. The relevant acts had been committed in New Zealand by KNNZ and were simply
being attributed to KNI. There was no risk of the Act being given
The decision is significant, offering the Commission and antitrust plaintiffs
a means of pursuing overseas parents for the conduct of local subsidiaries in
giving effect through New Zealand subsidiaries to anti-competitive agreements
entered into offshore.
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.