Polls, principles and not letting the facts get in the way of a good story

The latest election year polling offered no surprises. The serial hiccups plaguing Labour's early campaigning and the Greens' publicised backroom dealings with internet heavy, Kim Dotcom, could only cost them. 

In the end Labour was lucky to achieve and net 'no change' at 34%.  But with National making a 6% gain over the past month, it's clear that Labour's result was largely achieved at the expense of its putative partner in Government, the Greens.

Although a nice fillip for National, its 51% result is not necessarily a cause for celebration for them.  The fact is that the party's now commanding lead over Labour comes too soon in the campaign, fostering complacency in some and anxiety in others about the prospect of a right-of-centre Government unbridled by the interests of a support party.

Even so, there was little good news in the poll results for David Cunliffe, who has enough to contend with without the restiveness of the 'Anyone But Cunliffe' cabal in his rear.  Nor is the likelihood of a warming in Labour's cold war with the Greens a good look for punters alive to the need for a stable government.

But that's the risk Labour seems inclined to run. Apparently targeting its no-shows in the 2011 election, as well as the disaffected who drifted off to the Greens, Cunliffe continues to burnish Labour's Old Left credentials. 

This may only result in a cannibalisation of the left wing vote, but it's still a valid strategy.  After all, and polls aside, success or failure at the general election will turn on only a few percent each way.

Which is why Cunliffe's appointment of Unite union leader, former Alliance Party member and Mana Party chair, Matt McCarten, as his chief of staff, is not necessarily the misstep some pundits suggest.  McCarten can be relied upon to shake things up, take names and make sure the Party organisation gives a credible appearance of unity.  He will also galvanise the union machine – not least his own – to get Labour voters out on election day.

The issue with his appointment though is the wider signal it sends.  On the far left of New Zealand politics and independent enough to make his own choices about who he will and will not support, McCarten clearly sees something in Cunliffe's policy direction to make it worth his while.

This wouldn't mean much if he were drawn from the normal recruiting ground of political chiefs of staff - the anonymous and the grey.  But he wasn't.  A political figure and story in his own right, McCarten could be easily seen as someone who commands service rather than serves.  At the very least the public will view him as someone with his own agenda.

To avoid this appearance he will need to keep his head down and lips zipped, but the odds on that are not good, particularly when Cunliffe looks back to the political centre to claw in votes that he is otherwise only winning from the Greens.  Nor is National likely to overlook the opportunity to give a timely reminder to voters about who may or may not be pulling Cunliffe's strings.

Cunliffe's problems don't end there.  Confronting the need to appease his internal audience, as well as gain a visible momentum, he runs the risk of opportunistic and, in the end, hollow grabs at popularity.

His hastily announced intention to consider buying back former State assets definitely falls into this category.  An attempt to capitalise on public disgruntlement at the Government's partial privatisation programme, it was so heavily couched in 'ifs', 'buts' and 'maybes' as not to sustain even casual scrutiny.  It was also a clear gimmie for Key, who was quick to challenge Cunliffe to say definitively what he means – a challenge that Cunliffe refused to take up.

There are no wins in this sort of stuff for Labour.  Lacking credibility and arguably without principle as well, it's precisely the sort of knee-jerk that Labour must avoid if it is to rebut Key's dismissive description of them as policy "nutters".

Of course the right is not without its own credibility gap.  The ACT leader's incest comments gaffe, closely followed by its evidently unformed law and order policy, could well make them long odds with the voters of Epsom, whose appetite for swallowing dead rats should not be regarded as infinite.

And on the cross benches, Winston's race card looks as worn as the Great Man himself.  But despite the absence of fact to support his latest allegations of a John Key-Sino conspiracy - this time to buy Huka Lodge - he still scored big with his Grey Power audience, gleefully agog at the horror of it all.

It was hardly a convincing appeal to the rest of us. But then again that was never intended.

Independent Forestry Safety Review

The Independent Forestry Safety Review had its first meeting last week after being announced at the end of January.  The Review, conducted by a Panel consisting of George Adams, Hazel Armstrong and Mike Cosman, is working independently to:

  • identify the factors that lead to injury and fatalities in the forestry sector; and
  • recommend a package of practical measures that could reduce injuries and fatalities.

The Review follows a series of accidents in the forestry sector, and will examine why the New Zealand sector has not achieved as good a safety record as it would like.  The Review has been initiated by the sector itself (forest owners, forest industry contractors and farm forestry associations) but will liaise with WorkSafe NZ and is supported by other agencies including ACC.

The Review will include consultation with those affected by serious injuries and fatalities in the forestry sector.  An initial stakeholder forum is scheduled for March.  The Review is expected to take six months.

The Review sits alongside WorkSafe NZ's other work in the forestry sector, including the review of the Forest Operations Approved Code of Practice (which proposes changes to the expectations and responsibilities of operators) and face-to-face meetings with owners and managers in the forestry sector.  Further information on WorkSafe NZ's actions in the forestry sector can be found here.

FMCA implementation - Phase 1 Regulations approved

The initial stages of implementing the Financial Markets Conduct Act 2013 (FMCA) are well underway, with the first round of regulations approved by Cabinet. The regulations cover:

  • Fair dealing: providing credit under a credit contract is not a financial service for this part of the FMCA.  Instead, credit contracts are regulated by the Commerce Commission under the Fair Trading Act 1986 and the Credit Contracts and Consumer Finance Act 2003.
  • Licensing and other regulation of market services: the Financial Markets Authority is able to commence licensing various market participants (though this is not yet mandatory).  This part includes regulations relating to crowd funding and peer-to-peer lending, which will no longer require a prospectus or investment statement before raising funds from the public. 
  • Enforcement: infringement fees and forms for infringement notices and reminder notices.
  • Transitional matters:The FMCA provides for an additional Securities Act 1978 exemption and regulations prescribe exclusions relating to this.

The full regulations are available here and commence on 1 April.  The Financial Markets Legislation (Phase 1) Commencement Order 2014 provides that the first phase of the FMCA also commences on that date.  The provisions that come into force include preliminary provisions (Part 1), fair dealing provisions, other than unsubstantiated representation provisions (Part 2), most of the licensing and market service regulation provisions (Part 6), financial reporting provisions (Part 7), most of the enforcement, liability and appeal provisions (Part 8) and various amendments to other Acts.  Further information can be found here.  The remaining provisions are intended to come into effect on 1 December 2014.

The remaining timeline for implementation is:

  • MBIE is currently consulting on the governance, DIMS provider conduct obligations and financial product markets regime (which form part of the Phase 2 regulations).  Submissions close 14 March, and further information can be found here.
  • 1 April - Phase 1 regulations come into force.
  • April - MBIE consults on regulations relating to disclosure documents and process.
  • 1 December - Phase 2 regulations come into force. 

It is anticipated that the current Phase 1 regulations will be replaced with a full set of FMCA regulations.  Further information on the FMCA's implementation timetable can be found here.

Government to update antiquated law governing incorporated societies

The Government has accepted most of the Law Commission's recommendations to update the outdated Incorporated Societies Act 1908.  The Act governs around 23,000 incorporated societies covering a range of purposes including sports clubs, community groups and religious groups.   The key recommendations of the Law Commission's report are explained in this previous edition of Watching Brief.  Some of the Report's key recommendations include:

  • changing the required purpose of incorporated societies of "no pecuniary gain", to "no monetary gain", for increased clarity;
  • requiring incorporated societies to have a decision-making committee of officers, with statutory duties analogous to those of directors in the Companies Act 1993, and enabling civil enforcement of the constitution and officers' duties to the society; and
  • outlining the rules governing disclosure and management of conflicts of interest and requiring societies to establish a complaints and dispute resolution processes.

The Government's response accepts the need for a new Act.  An exposure draft and a model constitution for incorporated societies will be released for consultation in 2015.  There is likely to be a long reform and transitional period with any new Act, given the need for educating the not-for-profit sector about its new obligations and regulatory framework. 

For further information, and to read the Government's full response, please see here.

Treasury publishes findings of sectoral-level capital investments in New Zealand

Last week, Treasury published a paper analysing growth in sectoral-level capital investments in New Zealand.  The paper was one of a series of six Working Papers published by Treasury, covering topics as wide-ranging as unemployment in New Zealand to analysis of trade barriers.  These Working Papers were published to inform and stimulate debate, rather than to be a concise exposition of Treasury policy or opinion.

The paper, written by Weshah Razzak, explores the view that is generally agreed on by economists, that the low levels of capital investment in New Zealand might be due to relatively low levels of productivity.  The data set was comprised of 21 years of data from 1988 to 2009. 

Razzak uses an empirical mode, developed by Glick and Rogoff in 1995, to estimate the responsiveness of growth in sectoral-level investment to a number of productivity shocks, in order to further substantiate the view on the positive association between capital investment growth and productivity shocks.

The paper confirms the existence of this positive association, and more importantly, confirms that various random productivity shocks have significant effects on investment growth at the sectoral level in New Zealand. The papers other findings include that:

  • sectoral-level investment growth responds significantly and contemporaneously to sector-specific and country-specific productivity shocks, but responds with a two year time lag to global productivity shocks;
  • government spending shocks are positively associated with sectoral-level investment growth; and
  • shocks in terms of trade are positively associated with sectoral-investment growth, although the reaction (and the time lag between a shock and its effect) vary from sector to sector.

Razzak uses these results to draw the implication that policy does not have a direct influence on sectoral-level investment growth - rather, that random productivity shocks are directly responsible.  While this implication might be alarming, and suggests a futility to the role of policy, he posits that policy can play a significant role in indirectly influencing sectoral-level investment growth, noting that policy may be able to influence labour and capital productivity, which may in turn increase productive investments.

The five other Working Papers published by Treasury cover the following topics:

  • the recent history of unemployment in New Zealand;
  • the expansion of New Zealand superannuation;
  • New Zealand labour market dynamics either side of the global financial crisis;
  • the role and effect of trade barriers in New Zealand trade; and
  • a comparison of KiwiSaver information from different sources.

The Working Papers can be accessed here.

Reserve Bank focuses on governance of insurance firms

The Reserve Bank's Insurance Oversight Policy Manager has stated that the Bank will be increasing its focus on the directors and senior management of insurance firms. 

It has stated that, in its effort to deliver a soundly functioning insurance industry, as is its function under the Insurance (Prudential Supervision) Act 2010, it will be concentrating on the actions of company boards and company governance structures.  Responsibility and accountability for prudently running an insurance business will rest with the insurer's board and senior management.  Strong governance is understood as being a linchpin in the success of the industry. 

To that extent, the Reserve Bank has indicated insurers can expect it to take a similar philosophical approach to regulating insurers as it has adopted for regulating banks, but that its practical approach will be modified to fit the insurance sector.  Further, the Bank will be focussing more on insurers that have the most impact on the economy, and on the risks that pose the greatest threat to the soundness of efficiency of the insurance sector.

Insurance companies, and particularly the larger companies, therefore should be aware that strong governance and top-down control are expectations that are implicit in the law that governs the insurance industry, and are being treated by the Reserve Bank as critical to compliance.


New Bills
Environmental Reporting Bill 

Type of Bill:  Government BillMember in charge:  Hon Amy Adams

This Bill proposes to create a national-level environmental reporting system, with the aim of ensuring that reporting on the environment occurs on a regular basis, and that it can be trusted.  Currently New Zealand was one of only a few OECD countries that did not require independent reporting on the state of the environment.  The scope of the proposed mandatory reports is comprehensive, going beyond the current (non-statutory) programme of environmental indicator updates.

Local Government (Auckland Council) Amendment Bill (No 3)

Type of Bill:  Member's BillMember in charge:  Maggie BarryThis Bill's purpose is to remedy a perceived loophole in the current legislation, which permits candidates for local boards of the Auckland Council to serve as members on two or more local boards at the same time.  The Bill would prohibit candidates from serving on more than one local board at the same time.

Statutes Amendment Bill (No 4)

Type of Bill: Government BillMember in charge: Hon Chester Burrows This Bill is an omnibus Bill that makes small, technical amendments to a range of Acts, namely:

  • Animal Welfare Act 1999
  • Antarctica (Environmental Protection) Act 1994
  • Biosecurity Act 1993
  • Births, Deaths, Marriages, and Relationships Registration Act 1995
  • Commodity Levies Act 1990
  • Copyright Act 1994
  • Forests Act 1949
  • Friendly Societies and Credit Unions Act 1982
  • Governor-General Act 2010
  • Heavy Engineering Research Levy Act 1978
  • Judicial Conduct Commissioner and Judicial Conduct Panel Act 2004
  • Land Transport Act 1998
  • Land Transport Management Amendment Act 2008
  • Local Government Act 1974
  • Local Government Act 2002
  • Local Government (Auckland Council) Act 2009
  • Local Government Official Information and Meetings Act 1987
  • Marine Mammals Protection Act 1978
  • Misuse of Drugs Amendment Act 1978
  • National Animal Identification and Tracing Act 2012
  • National Parks Act 1980
  • Ngati Manuhiri Claims Settlement Act 2012
  • Official Information Act 1982
  • Ombudsmen Act 1975
  • Pork Industry Board Act 1997
  • Reserves Act 1977
  • Sale and Supply of Alcohol Act 2012
  • Sentencing Act 2002
  • Summary Proceedings Act 1957
  • Tariff Act 1988
  • Tokelau (Territorial Sea and Exclusive Economic Zone) Act 1977
  • Trade in Endangered Species Act 1989
  • Wildlife Act 1953

Bills Awaiting First Reading

Building (Earthquake-prone Buildings) Amendment BillEducation (Breakfast and Lunch Programmes in Schools) Amendment Bill Education (Food in Schools) Amendment BillElectoral (Adjustment of Thresholds) Amendment Bill Electronic Data Safety Bill Energy (Fuels, Levies, and References) Amendment Bill Environmental Reporting BillHealthy Homes Guarantee BillLand Transport (Safer Alcohol Limits for Driving) Amendment BillLocal Government (Auckland Council) Amendment Bill (No 3)New Zealand Superannuation and Retirement Income Amendment BillNga Rohe Moana o Nga Hapu o Ngati Porou Bill Statutes Amendment Bill (No 4)SuperGold Health Check BillOverseas Investment (Owning our Own Rural Land) Amendment BillUnderground Coal Mining Safety BillWaitangi National Trust Board Amendment Bill

Bills before Select Committee

Submissions open

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Submissions closed

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Bills Awaiting Second reading

Bills that have recently been reported back to the House from a Select Committee are in bold and the Select Committee reports on these Bills are linked.
Commerce (Cartels and Other Matters) Amendment Bill
Construction Contracts Amendment Bill 
Defence Amendment Bill 
Employment Relations Amendment Bill
Fisheries (Foreign Charter Vessels and Other Matters) Amendment Bill
Housing Corporation Amendment Bill
Land Transport and Road User Charges Legislation Amendment Bill (as reported by the Transport and Industrial Relations Committee)
Nga Mana Whenua o Tamaki Makaurau Collective Redress Bill 
Nga Punawai o Te Tokotoru Claims Settlement Bill
Parental Leave and Employment Protection (Six Months Paid Leave) Amendment Bill (as reported by the Government Administration Committee)
Public Health Bill
Radio New Zealand Amendment Bill
Register of Pecuniary Interests of Judges Bill (as reported by the Justice and ElectoralCommittee)
Reserves and Other Lands Disposal Bill
Resource Management (Restricted Duration of Certain Discharge and Coastal Permits) Amendment Bill 
Social Security Amendment Bill (No 3) 
Social Security (Fraud Measures and Debt Recovery) Amendment Bill 
Spending Cap (People's Veto) Bill
Summary Offences (Possession of Hand-held Lasers) Amendment Bill (as reported by the Transport and Industrial Relations Committee
Taxation (Income-sharing Tax Credit) Bill
Therapeutic Products and Medicines Bill
Victims of Crime Reform Bill
Victims' Orders Against Violent Offenders Bill (as reported by the Law and Order Committee)

Bills Awaiting Third Reading

Appropriation (2012/13 Financial Review) Bill 
Border Processing (Trade Single Window and Duties) Bill
Companies and Limited Partnerships Amendment Bill
Families Commission Amendment Bill 
Electoral Amendment Bill 
Electronic Transactions (Contract Formation) Amendment Bill
Gambling Amendment Bill (No 2)
Heritage New Zealand Pouhere Taonga Bill 
Insolvency Practitioners Bill 
Kaipara District Council (Validation of Rates and Other Matters) Bill
Maungaharuru-Tangitu Hapu Claims Settlement Bill 
Natural Health and Supplementary Products Bill (formerly the Natural Health Products Bill) 
Raukawa Claims Settlement Bill
Sullivan Birth Certificate Bill
Student Loan Scheme Amendment Bill (No 3) 
Tasman District Council (Validation and Recovery of Certain Rates) Bill 
Te Tau Ihu Claims Settlement Bill
Trade (Safeguard Measures) Bill

Acts Assented

Airports (Cost Recovery for Processing of International Travellers) Act 2014

This Act provides for cost recovery arising from processing of travellers in the aviation security, biosecurity, and customs areas.  To that extent, it provides for cost recovery at new and re-established international airports, a grace period for re-establishing international airports, and cost recovery for non-routine processing of international travellers.

Subantarctic Islands Marine Reserves Act 2014

This Act creates three new marine reserves: the Moutere Mahue/Antipodes Island Marine Reserve, the Moutere Hauriri/Bounty Islands Marine Reserve, and the Moutere Ihupuku/Campbell Island Marine Reserve.  It also provides that rangers for those reserves are to be deemed to be appointed from the New Zealand Defence Force.

Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014

This Act stipulates the annual rates of income tax for the 2013-14 tax year, contains new rules for New Zealand residents with interests in foreign superannuation schemes, and makes other changes to tax law, including minor changes to the provisions in Part M of the Income Tax Act 2007 relating to Working for Families tax credits.

Legislative Instruments

Accident Compensation (Ancillary Services) Amendment Regulations 2014  
Accident Compensation (Earners' Levy) Regulations 2014 
Accident Compensation (Liability to Pay or Contribute to Cost of Treatment) Amendment Regulations 2014 
Accident Compensation (Work Account Levies) Regulations 2014
Airport Authorities (Airport Companies Information Disclosure) Amendment Regulations 2014 
Anti-Money Laundering and Countering Financing of Terrorism (Publication of Class Exemption) Notice 2013 
Auctioneers Regulations 2014 
Children, Young Persons, and Their Families (Minimum Rates of Payment for Board and Lodgings) Order 2014 
Civil Aviation Charges Regulations (No 2) 1991 Amendment Regulations 2014 
Commodity Levies (Citrus Fruit) Order 2014 
Companies Act 1993 Amendment Regulations 2014
Corporations (Investigation and Management) Order 2014
Crown Minerals (Royalties for Minerals Other than Petroleum) Amendment Regulations 2014 
Education (2014 School Staffing) Amendment Order 2014
Deposit Takers (Charities) Exemption Notice 2014
Electronic Identity Verification Amendment Regulations 2014 
Exclusive Economic Zone and Continental Shelf (Environmental Effects—Non-notified Activities) Regulations 2014
Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014
Financial Markets Authority (Levies) Amendment Regulations 2014
Financial Markets Conduct (Phase 1) Regulations 2014
Financial Markets Legislation (Phase 1) Commencement Order 2014
Financial Reporting Legislation Commencement Order 2014
Financial Reporting (Levies) Regulations 2014
Fisheries (Southland and Sub-Antarctic Areas Commercial Fishing) Amendment Regulations 2014
Health and Safety in Employment (Rates of Funding Levy) Amendment Regulations 2014
Health Entitlement Cards Amendment Regulations 2014
Insurance (Prudential Supervision) Amendment Regulations 2014
Kiwifruit Export Amendment Regulations 2014
Medicines (Approved Laboratories and Analysts in Charge) Amendment Notice 2014
Mines Rescue (Levy) Regulations 2014 Minimum Wage Order 2014
Misuse of Drugs (Approved Laboratories and Analysts in Charge) Amendment Notice 2014
Non-bank Deposit Takers Act Commencement Order 2014
Real Estate Agents (Audit) Amendment Regulations 2014
Retirement Villages (General) Amendment Regulations 2014
Securities Amendment Regulations 2014   Shipping (Charges) Regulations 2014
Social Security (Childcare Assistance) Amendment Regulations (No 2) 2014
Social Security (Income and Cash Assets Exemptions) Amendment Regulations
2014 Social Security (Long-term Residential Care) Amendment Regulations 2014
Social Security (Rates of Benefits and Allowances) Order 2014
Social Security (Temporary Additional Support) Amendment Regulations 2014 
State Sector (Application of Certain Provisions to Transfer of Functions from Department of Internal Affairs to Department of the Prime Minister and Cabinet) Order 2014 
Student Allowances Amendment Regulations 2014 
War Pensions (Rates of Pensions, Lump Sum Payments, and Allowances) Order 2014
War Pensions Amendment Regulations 2014


The House's second sitting week for the year ended Thursday 13 February.  It will sit again on Tuesday 18 February, when the Government will aim to progress the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill, the Student Loan Scheme Amendment Bill (No 3) and a number of other Bills on the Order Paper.  Wednesday will be a Members' Day, and on Thursday morning the House will sit under extended hours to progress Treaty of Waitangi Settlement legislation.  Following that week, the House will next sit on 4 March.


Prime Ministers Key and Abbott meet in Sydney

On 20 February, Hon Bill English spoke to an audience of over 100 at the annual address of the New Zealand Institute for Public Administration (IPANZ). 

The Deputy Prime Minister commented on the rate at which public services were improving in New Zealand, referring to the six-monthly progress report on the Government's Better Public Services initiative, published on the day of the address.  He highlighted there had been significant gains, but acknowledged there were still challenges ahead.  These challenges were not so great as to merit a formal, high-level inquiry, as had been publicly suggested earlier that day. 

The Minister described what he saw as four likely future developments and desirable improvements in the New Zealand public service:

  • Increasing focus on the "customer" - the public service should increase efforts to understand the needs of the people affected by its actions and policies, as well as central governmental actions and policies, including accounting for the impact of regulation on New Zealand companies.  The Minister referred specifically to the Commerce Commission's interventions in the policy and regulation-making process.
  • Understanding the "value-drivers" - the public service should seek to understand what combination of financial and human resources lead to success and value in the wider community.  This involves understanding the relationship between the operating model and the financial plan.  The Minister made specific reference to improvements already made in the New Zealand Defence Force and the Ministry of Social Development.
  • Using "feedback loops" - the public service should get involved in feedback loops to learn more about vital factors that will enable improvement.  Feedback would lead to the accumulation of front-line knowledge over time, and provide answers on how to make dysfunctional systems work.  Feedback also ensures the community sees that the public service is working to improve itself, and that it is open and transparent.
  • Acting more like a "network" - the public service should adapt its inevitable hierarchical structure to the aim of working horizontally, across different sub-departments and different departments, to ensure organisational forms are not inhibiting the public service's functionality and limiting the value added by it. 

Hon Bill English ended his address by stating that the public service has been and will likely continue to be subject to an adaptive rather than restructural model for change.  The basis for change was evolution flowing on from the purposes, aims and actions of the public service.


The Local Government and Environment Subcommittee heard public submissions on and further considered the Local Government 2002 Amendment Bill (No 3).

The Justice and Electoral Committee took public submissions on and considered the Human Rights Amendment Bill.  It also considered the Register of Pecuniary Interests of Judges Bill.

The Primary Productions Committee considered the Food Bill.  It also considered briefings on new import health standards for pork, "swaps" loans and their effect of primary industries, and the future of Maori agribusiness.

The Commerce Committee continued to consider the Accounting Infrastructure Reform Bill, as well as the Credit Contracts and Financial Services Law Reform Bill. 

The Finance and Expenditure Committee continued hearing evidence on the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Bill.

The Government Administration Committee completed its consideration on the special report on a matter relating to the 2012/13 financial review of the Department of Internal Affairs.

The Health Committee considered the Smoke-free Environments (Tobacco Plain Packaging) Amendment Bill.


High Court blocks Ministry of Education from signing contract following tender

Telco Technology Services Ltd v Ministry of Education [2014] NZHC 213Wellington High Court, Collins J, 19 February 2014

In this case Telco Technology Services Ltd (Telco) successfully sought an interim injunction preventing the Ministry of Education (Ministry) from awarding the contract to a supplier following a tender process.  Telco bid for the work to implement the final phase of the project to provide schools with ultrafast broadband.  Following the tender, the Ministry awarded that work entirely to one supplier.

Telco applied for judicial review, alleging the Ministry had breached a legitimate procedural expectation (as contrasted with an expectation of a particular substantive outcome).  Telco argued that: the Ministry represented that the work would be awarded to multiple suppliers (and Telco created its bid on that basis); and this created an expectation that the Ministry would inform bidders if all work could be awarded to one supplier and then allow bidders to amend their bids accordingly.

Significantly, the Court first determined that the Ministry's decision could be reviewed on the ground of a legitimate procedural expectation.  Previous judicial review cases - notably Lab Tests Auckland Ltd v Auckland District Health Board [2008] NZCA 385, [2009] 1 NZLR 776 (CA) - had limited grounds of review of public agencies' procurement/commercial decisions to breach of legislation, and fraud, corruption and bad faith.  In Lab Tests, the Court of Appeal found that the procuring agencies (District Health Boards) had followed the statutory requirements concerning conflicts of interests and the use of insider information, and would not impose additional requirements in those areas. 

In distinguishing Lab Tests, the Court in this case found there "was no obvious statutory framework which regulated the way the Ministry was to conduct the tender process" and that "Accordingly, the vacuum created by an absence of specific legislative provisions may be filled by public law principles such as natural justice and procedural fairness" (at [37]).  The Court stated more broadly that "... judicial review is available in a commercial tendering context where the Crown may have breached procedural expectations in a material way to the detriment of a tenderer" (at [34]).

Further, the Court also expressed an unwillingness to limit the grounds of review simply because the decision was "commercial", stating (at [38]):

It is reasonably arguable that the Ministry breached its fundamental procedural obligations when it failed to give Telco the opportunity to be assessed on a fair and equal basis with the successful tenderer.  Further, it is also reasonably arguable Telco believed that the Ministry would assess all tenderers on a fair basis and relied on the Ministry’s representations to its detriment.  This is a public law concept that prevails over the commercial nature of this case.

The Court did not consider whether the Ministry adhered to the Government Rules of Sourcing (which replaced the Mandatory Rules for Procurement by Departments), which are untested as a ground of judicial review.

The Court went on to find a seriously arguable case that the Ministry did create a legitimate expectation, that it was reasonable for Telco to rely on it, and that Telco did rely on that expectation to its detriment.  The Court then went on to determine that the overall justice of the case favoured the granting of the interim injunction.  An important factor seems to have been that the Ministry has not yet entered the contract with the preferred supplier.  There appear good policy reasons for awarding the interim injunction, to preserve the ability to award an adequate remedy (requiring a re-tender) if Telco succeeds at a full hearing, without having to overturn a contract with the preferred supplier.

The outcome for Telco could be different following a full hearing.  At this interim stage, the Court applied the test of whether there was a seriously arguable case.  The Court also would not have had the opportunity to closely analyse the evidence and resolve disputes to make robust findings of fact.  In particular, the Ministry argued it did not make a clear representation that could give rise to the legitimate expectation, and disputed evidence about recollections of a meeting between Telco and Ministry representatives.  If the case proceeds to a full hearing (which it may not need to if the Ministry decides to amend the RFP, re-tender and evaluate the new bids), then the availability of legitimate procedural expectation as a ground of review may also be re-litigated.

If the decision concerning legitimate procedural expectations holds, it represents a further reason why public agencies procuring goods and services should remain cautious and vigilant.  It will reinforce the existing need to be clear about the representations made about a tender process and evaluation criteria, to follow those representations, to record any changes to process or criteria in writing, and, where necessary, to give bidders an opportunity to re-submit bids following such changes.

The case also illustrates that a key period of legal risk for procurers is between selecting a supplier and entering a contract with them.  If a contract is entered into sooner, that would reduce the risk of an interim injunction and the impact of any remedy following a full hearing (at least where there is no fraud, corruption or bad faith).

Search warrants for Kim Dotcom's Coatesville home were lawful
Attorney-General v Dotcom [2014] NZCA 19
Court of Appeal, 19 February 2014

This represents one further step in the long-running saga of Kim Dotcom, following the raid of his Coatesville home in January 2012.

In this particular case, the Court of Appeal was required to consider two issues on appeal from the High Court: the validity of the search warrants, and the validity of the removal to the United States of forensic copies of some electronic items seized during the raids ("the clones").  This decision did not concern the question of the legality of any action taken by the GCSB in its surveillance on Dotcom, or any other issues which have been before the courts. 

The Court of Appeal held that the search warrants contained substantive defects, including references to non-New Zealand crimes, over-broad descriptions of items and failure to follow the prescribed form.  Ultimately, the Court of Appeal held, overturning the High Court's decision, that although the warrants were defective in some respects, any defects were not so radical as to require them to be treated as nullities. 

In relation to the clones, the Court held that that their removal to the US was unlawful, as it was prohibited by statute unless authorised, and was it was not authorised by the Solicitor-General. 

The finding that the raid was lawful may affect Dotcom's extradition hearing (scheduled for April, but likely to be delayed) as he had intended to argue that evidence obtained during the raid was inadmissible because it was taken unlawfully. 

The day after the Court released its decision, Dotcom confirmed that he will seek leave to appeal to the Supreme Court.

In Trade

New Zealand's trade barriers investigated

On 18 February, Treasury published a Working Paper that investigates the nature and effect of a range of barriers to trade in New Zealand. The Paper's main conclusion is that non-trade-policy factors have a greater effect on international trade levels than do trade-policy factors. This means that all policy-makers, and not only those associated with trade-policy, must be wary of the trade impacts of their actions and regulations, and should focus more closely on how they can ensure New Zealand's export (and import) flows are improved and maintained. 

The analysis covers New Zealand's trade with around 220 trade partners between 2001 and 2006.  The analysis uses the gravity model, which takes particular care to avoid any selection bias that may result from a complete lack of trade between the countries used.  The range of trade barriers tested includes tariffs, as well as non-trade-policy barriers, such as property rights, financial market sophistication, corruption and measures related to infrastructure quality. The investigation involved qualifying the different trade barriers used in New Zealand by measuring their trade costs and quantifying their impact on international trade.

The Paper also reviewed several recent empirical studies that have investigated the effects of various trade barriers on trade flows.  These studies highlighted the importance of transaction costs and present empirical evidence on the trade-facilitating effects flowing from improvements in infrastructure and institutional quality.  The conclusion drawn from the studies is that most trade barrier costs are not due to trade-policy induced barriers.  Instead, the impact of non-trade-policy induced tangible barriers on the volume of trade is often found to be higher.

The investigation into New Zealand trade barriers resulted in findings that were consistent with the study's overall conclusion.  Tariffs and burdensome customs procedures within trade partners were found to have a negative effect on most of New Zealand's exports, but non-trade-policy barriers, such as corruption within trade partners, had a stronger negative effect on exports to those places.  Stronger property rights, financial market sophistication and better infrastructure within New Zealand's trade partners were found to be associated with higher exports from New Zealand to those countries. 

The Working Paper can be accessed here.

Tariff Concessions   

The following applications for tariff concessions have been made in the past two weeks:

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