A majority of the Supreme Court in Ririnui v Landcorp has expanded the scope of judicial review of commercial and policy decisions affected by a material error.
Landcorp a state-owned enterprise (SOE), entered into an agreement to sell a farm to the highest bidder in a tender process. Before it did so, it was advised by the Office of Treaty Settlements (OTS) under a non-binding protocol arrangement that the farm was not of potential interest for future Treaty settlements. OTS' advice was based on the erroneous belief that the claims of all iwi in the region had been settled, when, in fact, Ngāti Whakahemo's claim had not been. Ngāti Whakahemo applied for a judicial review of Landcorp's decision to enter into the agreement, as well as OTS' decision to disclaim interest in the farm and the decision of Landcorp's shareholding Ministers to not intervene to stop the sale. Ngāti Whakahemo also claimed that Landcorp's decision was tainted by bad faith, and the shareholding Ministers were entitled to prevent the sale under the Duomatic principle (a common law doctrine of company law that, at its highest, unanimous shareholder consent could bind the company).
Ultimately, the Court issued two declarations by shifting majority:
- The Ministers' decision not to intervene was a wrongful exercise of public power because it was made under a material mistake (Elias CJ, Glazebrook and Arnold JJ)
- Landcorp's decision to sell was a wrongful exercise of a public power because it was made under a material mistake (Elias CJ, Glazebrook, Arnold and O'Regan JJ).
Elias CJ and Arnold J would have referred the matter back to the Ministers to consider whether they should request that Landcorp negotiate with Ngāti Whakahemo, with a possibility of the sale agreement being set aside if they did. O'Regan J and Glazebrook J, however, declined to set aside the agreement as it would unfairly prejudice the third party purchaser. William Young J held that section 21 of the State-Owned Enterprises Act 1986 prevented interference with commercial contracts entered into by SOEs.
The plurality of the judgment allowed all parties to enjoy some success, while creating uncertainty as to the scope of judicial review. It is likely to be significant in relation to:
- The extent to which a material error can render subsequent decisions, made without knowledge of that error, wrongful
- The reviewability of policy decisions and decisions made by SOEs
- The ability of the Court to set aside contracts entered into by SOEs
- The demise of the Duomatic principle.
Buddle Findlay acted for Landcorp in the High Court proceeding and successive appeals.
See the Court's decision here.