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You are here: BAILII >> Databases >> The Judicial Committee of the Privy Council Decisions >> Rowling v Takaro Properties Ltd [1987] UKPC 2 (30 November 1987) URL: http://www.bailii.org/uk/cases/UKPC/1987/2.html Cite as: [1987] UKPC 2, [1987] 1 WLR 413, (1987) 84 LSG 900, (1987) 3 BCC 132, [1988] AC 473, [1987] WLR 413, [1987] BCLC 472 |
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Privy Council Appeal No. 61 of 1986
JUDGMENT OF THE LORDS OF THE JUDICIAL COMMITTEE OF THE PRIVY COUNCIL, delivered the 30TH November 1987
Present at the Hearing:
THE LORD CHANCELLOR (LORD MACKAY OF CLASHFERN).
LORD KEITH OF KINKEL.
LORD BRANDON OF OAKBROOK.
LORD TEMPLEMAN.
LORD GOFF OF CHIEVELEY
[Delivered by Lord Keith of Kinkel]
In 1968 Richard Stockton Rush Junior ("Mr. Rush"), a citizen of the United States of America, came to New Zealand. He had the idea of establishing in a remote part of that country a high class tourist lodge which would attract wealthy visitors interested in fishing and other sporting activities. In February 1969 Mr. Rush entered into an agreement with the Crown, ac ting through the Lands and Survey Department, for the purchase of about 2,591 acres of land in the Upukerora Valley, which is situated near Lake Te Anau about 22 miles from the township of Te Anau in the south of the South Island. On 13th February 1969 he incorporated a company called Takaro Properties Limited ("Takaro") with a share capital of $250,000 divided into 250,000 ordinary shares of $1 each, all fully paid. Of these Mr. Rush, who was governing director of the company, owned 194,000, his wife and trustees for their children owned 30,000, and the other directors, who were New Zealanders, owned 26,000. Takaro set about building the proposed tourist lodge on the land acquired from the Crown. This was an expensive business, involving inter alia the construction of a 17.7 km. access road. Takaro used for the purpose part of the subscribed capital and the proceeds of a loan of $lm by the Bank of California. The loan was guaranteed by Mr. R.K. Davies, a resident of California who was Mr. Rush' s father-in-law. The lodge opened for business on 16th October 1970. The facilities of the lodge were of a very high standard and the tariffs were very expensive. Few Hew Zealanders were interested, and most of the visitors were wealthy Americans. The lodge stayed open for the season November to April inclusive till May 1973 when it closed and did not re-open. The occupancy rate never exceeded 19.3 per cent. Heavy losses were incurred. Mr. R.K. Davies died in September 1971. His executors repaid the loan by the Bank of California and took it over, They obtained the security of a mortgage over the land and lodge and a charge upon Takaro' s under taking. Their fiduciary status required that something should be done about the money owing to them.
If the project was to be revivified some new sources of finance had to be found. Mr. Rush, having had no success in Hew Zealand or the United States, looked to Japan. He was acquainted with some businessmen there. He negotiated with Mitsubishi Rayon Company ("Mitsubishi") and on 22nd February 1973 reached agreement with Mitsubishi that it would purchase a 90 per cent holding in Takaro from him and his children's trustees for the price of $1.6m. There was to be a lease by Mitsubishi of the facilities of the lodge, and the purchase price was to be applied partly to discharge the liability to the Davies estate and partly in carrying out improvements at the lodge.
This proposed transaction required the consent of the Minister of Finance under the Overseas Takeover Regulations 1964, and Takaro applied for such consent by letter to the Reserve Bank dated 30th January 1973. The Minister of Finance was Mr. Rowling, the present appellant, being a member of the Labour Government which had taken office in December 1972. While in opposition he had expressed disapproval of the sale by the Crown in 1969 of the land at Upukerora Valley to Takaro. Mr. Rush and his solicitor had a meeting with Mr. Rowling who indicated a desire that the land should revert to Hew Zealand interests. The transaction was in any event well outside the normal guidelines for the sale of shares in a New Zealand company to foreigners. Refusal of consent to it was signified by the Reserve Bank on 14th March 1973. A renewed application pleading extreme hardship was made on 3rd July 1973. This was considered by Mr. Rowling and he referred it to the Cabinet Economic Committee, a body of seven senior Ministers with a quorum of three. It was decided that the previous refusal of the application should be adhered to. In August 1973 attorneys and solicitors acting for the Davies estate had a meeting with Mr. Rowling, explained the difficulties confronting the estate and pressed for approval of the application. Mr, Rowling asked the Foreign Investment Committee to consider the matter and make recommendations for the Cabinet Economic Committee. In the result, however, the Registrar of Overseas Takeovers wrote to Takaro's solicitors on 31st August 1973 a letter which amounted to a final refusal of the application, while indicating that any revised proposal would receive consideration.
Mr. Rush then sought to negotiate a different arrangement with Mitsubishi, and at this stage he brought in Tse Group Consultants, a development advisory agency headed by Cedric Jack Tse ("Mr. Tse"). An outline agreement was reached involving Takaro, Mitsubishi, the Tse Group and the Davies trustees. This involved (1) that Mitsubishi should subscribe for 80,000 ordinary $1 shares and 120,000 non-cumulative preference $1 shares in the capital of Takaro; (2) that of the resultant $200,000 Takaro, having reopened the lodge, would apply $39,000 in improvements to it, including the construction of tennis courts, and the balance of $161,000 as working capital; (3) that Mr. Tse would form a consortium, which he indicated would include himself and also Sir Clifford Plimmer and Mr. A.D. Myers, well known businessmen in New Zealand, which would provide a capital sum of $850,000; (4) that this sum should be applied partly in constructing a championship standard golf course on Takaro's land and partly in developing the first phase of a planned 136 holiday homes project, each on a section of up to 5 acres; (5) that the Davies trustees would refrain from requiring any payment of capital or interest in respect of the sums due to them for two years or, if the project went well, for five years. A draft deed drawn up by Mr. Tse in May 1974 provided that 10 holiday homes were to be built and sold by 31st December 1975, 20 more by 31st December 1977 and yet others by 31st December 1978. The houses were to be subject to severe restrictive covenants, including covenants that the purchasers were not to have occupation for more than two months in each year. The proceeds of the homes, after payment to the consortium of development costs with interest at 10%, were to be applied initially in paying off capital and interest due to the Davies trustees, and when that had been achieved were to be divided 75 per cent to the consortium and 25 per cent to Takaro.
The issue of shares in Takaro to Mitsubishi required, by virtue of the Capital Issues (Overseas) Regulations 1965, ("the Regulations of 1965") the consent of the Minister of Finance. These Regulations were made under section 28 of the Reserve Bank of New Zealand Act 1964 ("the Act of 1964") which, so far as relevant for present purposes, provides:-
"28. Control of overseas exchange and other transactions -
(1) In addition to any other power to make regulations conferred by this Act, the Governor-General may from time to time, by Order in Council, if he is satisfied that it is necessary to do so for the purpose of safeguarding in the public interest the credit, overseas resources, or development of New Zealand, make regulations providing for the prohibition, restriction, regulation, and control of overseas exchange transactions, and of other transactions affecting or likely to affect at any time the overseas resources of New Zealand.
(2) Without limiting the generality of subsection (1) of this section, regulations may be made for the purposes of that subsection in respect of all or any of the following matters:
(a) The taking, sending, or transfer of money or securities to or from New Zealand:
(b) The registration of securities in the names of, or the is sue, transfer, or delivery of securities to, or the furnishing of information in relation to the ownership or acquisition of or control over securities or rights or interests therein by, persons not ordinarily resident in New Zealand, or companies that are under the effective control of such persons or of bodies corporate incorporated outside New Zealand, or nominees, trustees, or agents of such persons or of such companies or bodies corporate; or the transfer to overseas registers of securities:
(c) The commencement of business in New Zealand by companies incorporated outside New Zealand:
(d) The disposal of foreign currency and foreign securities accruing to, held by, or at the disposal of persons resident, whether permanently or temporarily, in New Zealand:
(e) Any dealing or transaction having the effect of a purchase, borrowing, sale, loan, or exchange of foreign currency or foreign securities:
(f) The consideration for, and methods of settlement for, exports (including re- exports) from and imports into New Zealand, and the disposal of the overseas proceeds of exports and re-exports:
(g) The acquisition, surrender, transfer, disposition, or provision of, or other dealings in, property, goods, money, securities, services, or work, or rights or interests in respect of any such things, or any other benefit, in New Zealand in consideration in whole or in part for the acquisition, surrender, transfer, disposition, or provision of, or other dealings in, property, goods, money, securities, services, or work, or rights or interests in respect of any such things, or any other benefit, outside Hew Zealand; or any arrangement or transaction having the like effect."
Regulation 3 of the Capital Issues (Overseas) Regulations of 1965, so far as material, provides:-
"3. Borrowing or raising money outside New Zealand -
(1) Except with the consent of the Minister, it shall not be lawful -
(a) For any body corporate incorporated in New Zealand, or any unincorporated body of persons (other than a partnership in which none of the partners is a body corporate incorporated in New Zealand) carrying on business in New Zealand, or any person acting as trustee or agent for or on behalf of any such body corporate or unincorporated body as aforesaid, to borrow money outside New Zealand; or
(b) For any body corporate incorporated in New Zealand to raise money outside New Zealand by the issue, whether in New Zealand or elsewhere, of any shares in that body corporate; or
(c) For any body corporate incorporated in New Zealand to make any call in respect of any shares issued by that body corporate to a person not ordinarily resident in New Zealand; or
(d) For any body corporate to issue for any purpose shares in or securities of that body corporate to a person not ordinarily resident in New Zealand, if either the body corporate is incorporated in New Zealand or the shares or securities are, or are to be, registered in New Zealand; or
...
(5) Nothing in this regulation shall apply to any transaction entered into by or in respect of any person if the amount borrowed or raised, or, as the case may be, the amount called up or the amount of the shares or securities issued or offered for subscription, sale, or exchange, in that transaction, together with the total of all other amounts borrowed, raised, called up, or offered by or in respect of the same person in all other transactions to which this regulation applies within one year immediately preceding the first-mentioned transaction, does not exceed £10,000."
"6. Overseas companies commencing business in New Zealand - Except with the consent of the Minister, it shall not be lawful for any company incorporated outside New Zealand and not lawfully carrying on business in New Zealand at the commencement of these regulations to register or commence to carry on business in Sew Zealand."
"The Minister" is defined by Regulation 2 as meaning the Minister of Finance.
By letter dated 28th January 1974 Takaro applied for the Minister's consent under Regulation 3 to the proposed issue of shares to Mitsubishi. At the same time the consent o f the Reserve Bank, under the Exchange Control Regulations 1965, was asked for. No issue now arises as regards the latter consent, and the matter need not be alluded to further, In the ordinary way the application for the Minister's consent would have been dealt with by the Reserve Bank under delegated authority because the proposed issue, since it did not involve more than 25% of the voting capital of Takaro (it actually amounted to 24.2%), fell within guidelines made public in 1972. However, since the earlier application for the sale of 90% of the shares in Takaro to Mitsubishi had been handled by Mr. Rowling personally, this new application was referred to him as a matter of policy. The appellant consulted the Cabinet Economic Committee, a quorum of which met and considered the application on 20th March 1974. They took the view that it should be refused. The appellant then made the formal decision to refuse consent, which was intimated to Takaro's solicitors by letter dated 21st March 1974.
Takaro thereupon applied to the High Court (then known as the Supreme Court) for judicial review of the appellant's decision. By a judgment dated 22nd August 1974 Wild C.J. quashed the decision and directed that the appellant should consider Takaro1s application anew. The appellant appealed against this judgment, but it was affirmed by the Court of Appeal on 25th February 1975 ([1975] 2 NZLR 62). Their Lordships will have occasion at a later stage to consider in some detail the grounds of these two decisions, but for the present it suffices to say that they proceeded on the basis that the appellant's refusal of consent was primarily motivated by a desire that Takaro1s land should revert to indigenous New Zealand ownership, and that this was a consideration which the Court of Appeal held that, on a proper construction of the Regulations of 1965, he was not entitled to take into account.
In the meantime the Tse Group had prepared an outline plan for the development of Takaro' s land by building a golf course and holiday homes and on 21st May 1974 submitted it to the local planning authority, Wallace County Council, for approval. Approval in principle was notified on 7th June 1974. On 3rd October 1974, however, the Tse Group wrote to Mr. Rush withdrawing from the scheme. They cited as their reasons for doing so the delay caused by refusal of Takaro's application for consent to the capital issue to Mitsubishi and also "the steadily worsening local and international liquidity situation". It will be recalled that, following the Yom Kippur War in October 1973, the ensuent show of teeth by OPEC and the dramatic surge in oil prices thus engendered, the economy of the free world was at this time indeed in a parlous condition, the property development scene being particularly seriously affected. Then on 7th April 1975 Mitsubishi also intimated to Mr. Rush its withdrawal, on the grounds of unexpected circumstances on Takaro's side and "the worst recession in our textile trade industry".
In these circumstances the whole scheme for the attempted rescue of Takaro fell to the ground. Takaro never asked the appellant to reconsider its application and he did not do so. The Davies trustees appointed a receiver to Takaro in March 1975, and the chattels in the lodge were sold by auction shortly afterwards. On 24th June 1975 Takaro and Mr. Rush instituted against Mr. Rowling the proceedings which give rise to the present appeal. The proceedings originally claimed damages for losses sustained through failure of the rescue scheme upon various grounds, including negligence on the part of the appellant in the exercise of his statutory powers, knowingly acting in excess of those powers and malicious exercise of them. The appellant applied for the statement of claim to be struck out as disclosing no reasonable cause of action. On 21st July 1976 Beattie J. struck out all the alleged causes of action apart from those based upon malicious exercise of power and wilful excess of power ([1976] 2 NZLR 657). On appeal by Takaro and Mr. Rush the Court of Appeal restored the cause of action based upon allegations of negligence ([1978] 2 NZLR 314). The action eventually came to trial before Quilliam J. upon a fourth amended statement of claim, the material allegations in which, as regards the grounds upon which liability was sought to be established, were as follows:-
"By reason of the particulars set out hereunder the Defendant knew that the First Plaintiff was in a serious financial position and knew or ought to have known that if he refused his consent as aforesaid to the First Plaintiff, the First Plaintiff would be unable to raise the sum of $200,000 elsewhere and would either be unable to reopen Takaro Lodge or would be forced to sell Takaro Lodge to the New Zealand Government or to New Zealand interests or would be prevented from subdividing any of the land at Takaro Lodge for resale, and would thereby suffer serious financial loss.
....
(a) He allowed his decisions to be dominated by an irrelevant consideration, namely a desire that the ownership of Takaro Lodge should revert to New Zealand;
(b) He acted for a purpose, namely the desire that the ownership of Takaro Lodge should revert to New Zealand which purpose was alien to that for which his powers were granted.
(c) He failed in the circumstances to exercise his discretion at all in that he allowed his decision to refuse the said application to be dominated by the taking into account of an irrelevant consideration and the pursuit of an improper purpose.
(d) By not following the guidelines set for such applications by the Reserve Bank of New Zealand in accordance with the policy of the Government of New Zealand as administered by him he refused his consent in circumstances in which no Minister of Finance could reasonably have refused his consent to the said application. Particulars of the guide lines referred to:-
The guidelines are contained partly in the Reserve Bank of New Zealand Booklet 'Exchange Control Investment in New Zealand by Overseas Residents' (R.B.E.C. 14); and in the Press Statement o f the Defendant dated 12 January 1973 headed !Overseas Investment in New Zealand'. There are also general guidelines followed by the Reserve Bank which are referred to by Mr. Hardie in evidence given in Takaro Properties Limited v. Rowling and The Reserve Bank (A. No. 186/74).
(e) He failed to consider the application fairly in that he allowed himself to be influenced by a strong personal desire that the land should revert to New Zealand interests;
(f) He failed to take reasonable care to ascertain the extent of his powers at law in considering the application and refusing his consent;
(g) He failed to take reasonable care as aforesaid in considering the said application in the actual or constructive knowledge of the facts set out in Paragraph 9 hereof.
In refusing his consent as aforesaid the Defendant maliciously (in the sense that he exercised his statutory powers in acting for a purpose which he knew was not a lawful purpose namely that the ownership of Takaro Lodge would revert to New Zealand) and/or knowingly acted ultra vires the terms of the said statutory regulations and/or negligently set out to force and/or forced the First Plaintiff into a situation where the First Plaintiff:-
(a) Would be unable to reopen Takaro Lodge and/or
(b) Would be prevented from selling Takaro Lodge other than to the New Zealand Government or New Zealand interests and/or
(c) Would be forced to sell Takaro Lodge to the New Zealand Government or Hew Zealand interests and/or
(d) Was prevented from subdividing any of the land of Takaro Lodge for resale."
Quilliam J. gave judgment on 10th December 1982 ([1986] 1 NZLR 22) in favour of Mr. Rowling. He held (1) that Mr. Rowling was under a prima facie duty of care, (2) that on the facts no breach of that duty had been established, (3) that no malicious exercise of statutory powers had been established, and (4) that, assuming that liability had been established, it had not been shown that negligence or malice, as the case might be, was a cause of any loss to the plaintiffs. The last holding was based upon the judge's finding that the rescue project for Takaro was not viable, and was doomed to failure even if Mr, Rowling had not withheld his consent to the issue of shares to Mitsubishi - as the judge put it, he could see nothing but disaster for the scheme.
Upon appeal by Takaro and Mr. Rush the Court of Appeal on 1st May 1986 reversed the judgment of Quilliam J, as regards Takaro's claim in negligence but sustained it as regards the claim based on malicious exercise of statutory powers. Mr. Rush's appeal was dismissed on the ground that Mr. Rowling did not owe him any duty of care independent of that owed to Takaro. Damages payable to Takaro were assessed at $300,000, with interest at 11% per annum from 21st March 1974 to the date of judgment. Despite Quilliam J.'s express finding of fact that he could see nothing but disaster for the scheme, damages were calculated by reference to the loss of the chance that Takaro, which was probably Insolvent on 21st March 1974, might have become prosperous if Mr. Rowling had on that date legalised the issue of shares to Mitsubishi. Upon the issue of negligence, Woodhouse P., Richardson and McMullin JJ. held that Mr. Rowling was at fault in taking into account what was described as "the reversion factor", i.e. the desire that the Takaro land should revert to New Zealand interests. Cooke and Somers JJ. held that he was at fault in not taking legal advice upon the question whether he was entitled to take the reversion factor into account. Mr. Rowling now appeals, with leave of the Court of Appeal, to Her Majesty in Council. There is -no cross-appeal by Mr. Rush, nor by Takaro on the malicious exercise of powers issue.
In his consideration of Takaro's application for consent to the proposed share issue Mr. Rowling was acting as guardian of the public interest of New Zealand. The Governor-General, under powers conferred upon him by the legislature, had enacted that such issues to foreigners were illegal unless made with the consent of the Minister of Finance. The Minister could not properly consent to a particular issue unless satisfied that it was in the interests of New Zealand, or at least not contrary to those interests. In this case Mr. Rowling decided, having consulted the Cabinet Economic Committee, that the proposed issue was contrary to the interests of New Zealand. Wild C.J., affirmed by the Court of Appeal, held that on a proper construction of the relevant Act and Regulations Mr. Rowling had made a mistake. The considerations affecting the interests of New Zealand which he was entitled to take into account were not so wide as he had thought. In particular, he was not entitled to take into account the desirability, as he saw it, of the Takaro land reverting to New Zealand controlled ownership. There is no suggestion that from a broad point of view such reversion would not have been a good thing for New Zealand, or that Mr. Rowling was not at any rate entitled to think it would be. It was simply decided that that particular aspect of the interests of New Zealand was an irrelevant one. So Mr. Rowling was required to consider afresh whether or not he should consent to the issue. The legal proceedings resulted in delay and, because of that delay, combined with deteriorating economic circumstances, the main sponsors of the rescue package for Takaro pulled out. Takaro claimed that they had suffered economic loss because of that event, that the event came about because of Mr. Rowling's mistake, and that Mr. Rowling was liable to them in damages for negligence, because he owed them a duty of care not to make a mistake about the matters he was entitled to take into account in considering whether or not to consent to the proposed share issue, and was in breach of that duty.
The character of the claim is novel. So far as their Lordships are aware, it has never previously been held that where a Minister or other governmental agency mistakes the extent of its powers and makes a decision which is later quashed on the ground of excess of statutory powers or of an irrelevant matter having been taken into account, an aggrieved party has a remedy in damages for negligence. The issue was canvassed in Dunlop v. Woollahra Municipal Council [1982] AC 158, where Lord Diplock at p. 171 expressed doubts as to whether a duty of care could exist in such circumstances, but found it unnecessary to decide the issue since, on the assumption that a duty existed, there had clearly, on the facts, been no breach of it.
The argument In the appeal traversed the following Issues:
(1) duty of care;
(2) the proper construction of the relevant legislation;
(3) breach of duty;
(4) causation;
(5) quantum of damages; and
(6) rate of interest on damages.
Their Lordships will consider these In turn.
1. Duty of care
The Court of Appeal found no difficulty In holding that a duty of care rested upon the Minister; indeed, Cooke J. (as he then was) went so far as to observe that the question of liability to Takaro seemed to him to be relatively straightforward.
"The distinction between the policy and the operational areas can be both fine and confusing. Various expressions have been used instead of operational, e.g. 'administrative' or 'business powers' . It may not be easy to attach any of these labels to the decision of the Minister in this case, but what appears to me to emerge clearly enough is that for the reasons I have indicated his decision was the antithesis of policy or discretion. I therefore equate it with having been operational. The result of that conclusion is that consider the prima facie existence of a duty of care has been established."
It is at this stage that it is necessary, before concluding that a duty of care should be imposed, to consider all the relevant circumstances. One of the considerations underlying certain recent decisions of the House of Lords (Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [1985] AC 210) and of the Privy Council (Yuen Kun Yen v. The Attorney General [1987] 3 W.L.R. 776) is the fear that a too literal application of the well-known observation of Lord Wilberforce in Anns v. Merton London Borough Council [1978] AC 728 at pp. 751-752 may be productive of a failure to have regard to, and to analyse and weigh, all the relevant considerations in considering whether it is appropriate that a duty of care should be imposed. Their Lordships consider that question to be of an intensely pragmatic character, well suited for gradual development but requiring most careful analysis. It is one upon which all common law jurisdictions can learn much from each other; because, apart from exceptional cases, no sensible distinction can be drawn in this respect between the various countries and the social conditions existing in them. It is incumbent upon the courts in different jurisdictions to be sensitive to each other's reactions; but what they are all searching for in others, and each of them striving to achieve, is a careful analysis and weighing of the relevant competing considerations.
No doubt there may be possible answers to some of these points, taken Individually. But if the matter is looked at as a whole, it cannot be said to be free from difficulty. Indeed their Lordships share the opinion expressed by Richmond P. in Takaro Properties Ltd. v. Rowling (No. 1) [1978] 2 NZLR 314, at p. 318, that the whole subject is of the greatest importance and difficulty, as is well demonstrated by the valuable, though understandably inconclusive, discussions of the problem by Woodhouse J. (as he then was) and Richardson J. in the same case. Doubtless it was considerations such as those to which their Lordships have already referred that led Lord Diplock, in Dunlop v. Woollahra Municipal Council [1982] AC 158, at p. 171, to express doubts whether a duty of care can exist in such circum stances. In particular, it is being suggested that liability in negligence should be imposed in cases such as the present, when the effect of any such imposition of liability will on the one hand lead to recovery only in very rare cases and then only for the consequences of delay which should not be long; and may, on the other hand, lead to consider able delay occurring in a greater number of cases, for which there can be no redress. In all the circumstances , it must be a serious question for consideration whether it would be appropriate to impose liability in negligence in these cases, or whether it would not rather be in the public interest that citizens should be confined to their remedy, as at present, in those cases where the Minister or public authority has acted in bad faith.
2. The relevant legislation
In the judicial review proceedings before Wild C.J. and the Court of Appeal a certain view was taken about the proper construction of the relevant provisions of the Act of 1964 and the Regulations of 1965, leading to the conclusion that Mr. Rowling was not entitled to take the reversion factor into account in his consideration of Takaro's application. That conclusion may be res judicata as between the parties to the present appeal, but the view taken of ^he proper construction of the Act and Regulations is not binding upon this Board, Counsel for the respondent did not maintain the contrary, and the matter was fully argued before their Lordships. Mr. Rowling did not give evidence in the judicial review proceedings. Wild C.J. found that the reversion factor played the dominant part in his decision on the basis of what he had said to Mr. Smith, Takaro's solicitor, in the course of a meeting held to discuss the earlier application for consent to the sale to Mitsubishi of 90% of the shares in Takaro. Mr. Rowling did give evidence in the present proceedings, and in the course of it he said that in addition to the reversion factor he had taken into account, and been influenced by, eight additional considerations which were listed by Quilliam J, ([1986] 1 NZLR 33, 34) as follows:-
"1. The doubtful viability of the project.
2. It involved an unwise deployment of resources and particularly building resources at a time when New Zealand was suffering acute pressures in the building industry.
3. A luxury tourist resort and the construction of a championship golf course could not rate as a high economic priority.
4. The company was badly under-capitalised.
5. The likelihood that the company would in the future show a continued pattern of operating losses.
6. The lodge was not situated in a desirable area.
7. The lack of clear benefit to New Zealand as a whole."
"The object and purposes of Part IV of the Act do not seem to be in doubt. Part IV is concerned with safeguarding the overseas resources of New Zealand. And the specific power to make regulations follows immediately upon s 27 which speaks of the maintenance of an adequate level of overseas exchange reserves. The policy which Parliament intends should underlie the regulation-making power contained in s 28(1) is specifically stated in that subsection to be "for the purpose of safeguarding in the public interest the credit, overseas resources, or development of New Zealand' . Some argument might perhaps be advanced that the reference to development of New Zealand is intended to embrace every type of development whether economic, sociological or otherwise. But in the close context of Part IV of the Act and particularly the references in s 28(1) to credit and overseas resources we believe that the expression 'development of New Zealand" must be read in the sense of economic and financial development and by reference to the essential need of the country to maintain its overseas resources and exchange - a situation that does not arise and has not been relied on in this case. Moreover, s 28( 1) expressly provides that the regulations that may be made for such purposes are intended to provide 1 for the prohibition, restriction, regulation, and control of overseas exchange transactions, and of other transactions affecting or likely to affect at any time the overseas resources of New Zealand1 . It will be noticed that the reference to 'other transactions' is qualified to the extent that they affect or may affect 'the overseas resources of New Zealand'. That is a necessary qualification to the expression 'other transactions' but it was not needed in relation to the earlier reference to 'overseas exchange transactions' which inevitably would have some effect on overseas resources. We think that the Chief Justice was right when he took the view that the ownership of land by overseas persons in the context of the present case is ' an entirely distinct and different matter relating to private ownership of land within New Zealand and not to New Zealand's resources outside this country'."
That view is clearly a tenable one. Mr. Rowling could not be regarded as unreasonable or negligent in holding it. If he did hold it, he could reasonably regard the reversion factor, and also the eight additional factors to which he spoke, as being matters bearing on the safeguarding of the development of New Zealand, such as were proper to influence his decision.
3. Breach of duty
"The principal allegation against Mr. Rowling is that he knew he was not entitled to take the reversion factor into account so that there was no question of mistake involved. It was said that with the knowledge he had he was simply careless in his approach to the matter. I am altogether unable to reach that conclusion. The submission starts from a wrong premise. Mr. Rowling at no stage acknowledged that he knew he was not entitled to take the reversion factor into account. His evidence was to the contrary, and I must make it clear that although I believe he acted beyond his powers in certain respects, I have no hesitation in saying that I accept his evidence as having been honestly given. He said he believed then, and still believes, that he acted within his powers in taking it into account, Perhaps some force is lent to that evidence by reflecting that he pursued that belief as far as the Court of Appeal before being obliged to accept that it was wrong. The concession which he made in his evidence was that he knew he had no right to take the reversion factor into account if it stood alone. He believed there were other factors as well and, moreover, that they were factors which alone would have justified a refusal of consent. There can, I think, be little doubt that if those other factors had been properly available to him for consideration they would, indeed, have entitled him to conclude that the project would have failed and this was a matter which he regarded as important. Mr. Rowling has said that these other matters were given full consideration and I have indicated that I accept his evidence upon that. It also finds confirmation from other circumstances. If he had been so obsessed by the reversion factor as to have been negligent in the sense that he was not prepared to consider anything else, then one might expect to find that he had dealt with the application in a peremptory manner. There is no suggestion in the evidence that he did so."
"It must also be observed that, although the consent required under the various regulations was that of the Minister, in practice the Minister acted upon the decision of the Cabinet Economic Committee in respect of any matter which went before that Committee. Moreover, once a matter had been referred to the Committee then it went back to that Committee when it arose on any subsequent occasion. The result was that although the hardship petition involved a 90 per cent transfer of shares, even when the very much modified application in respect of a new issue of less than 25 per cent of the capital was made, that also went before the Committee. The Takaro matter, in one form or another, went to that Committee on three or four occasions and it was that Committee which made the final decision to refuse consent. Accepting that both the Committee and the Minister acted upon a wrong basis, nevertheless, it cannot, in my view, be said that either acted negligently in any of the respects set out in para. 10(a) to (e) of the statement of claim."
On the second allegation, Quilliam J. had this to say Cat p. 38):-
"... even were such a duty to exist I can see no evidence to suggest that there was a breach of that duty. There seems to me to have been no more reason for Mr. Rowling to have felt under an obligation to take legal advice on the implications of Takaro's application for consent than upon any other of the wide range of matters which must have gone to him for decision. . It is true that he had available to him the services of the Crown Law Office, and no doubt also of legal advisers employed within his department. It seems inconceivable that there was a duty to take advice in respect of every matter and application coming before him. I can see nothing to suggest that he ought to have recognised that there was or may have been involved an aspect of the law which was beyond the scope of his normal under standing of the regulations which he was required to administer."
"It is apparent that in reaching that conclusion the judge considered that because an hones t mistake had been made by the Minister himself when he used the reversion factor it could not be regarded as a negligent mistake; or alternatively that when he shared his responsibility and his opinion with his colleagues he had been careful enough. But that assessment fails to recognise that honest though the Minister's assumption was, he arrived at it well knowing that the reversion factor was not legally or practically relevant in the statutory context of the application before him. By itself the honest use of material known to be irrelevant involves an illogicality which hardly meets the standard of care to be expected. And in any event honesty is no answer to the complaint that the Minister assumed too much too easily. The complaint is not that the mistake he made was dishonest or deliberate. It is simply that it was careless. To put the matter in another way, a subjective belief that something could properly be done is no answer to a claim of negligence. The standard of care and whether it was met or not must be assessed objectively - by asking what might reasonably have been expected in the circumstances. Finally, whatever the general conclusion of the Committee it was the Minister who still had to make the formal decision to refuse or grant the consent.
"In the present case the Minister's evidence was to the effect that he knew that he had no right to take the reversion factor into account if it stood alone, but that on his understanding of the regulations he was entitled to take it into account provided that he also took into account other considerations. That is such an unusual supposition that I cannot help thinking that the Minister should reasonably have seen it as crying out for legal advice. Quilliam J, thought that there was no more reason to take advice on this matter than upon any others of the wide range going to the Minister for decision. On that point, with respect, I must differ from the judge.
"Mr. Rowling at no stage acknowledged that he knew he was not entitled to take the reversion factor into account. His evidence was to the contrary, and I must make it clear that although I believe he acted beyond his powers In certain respects, I have no hesitation in saying that I accept his evidence as having been honestly given. He said he believed then, and still believes, that he acted within his powers in taking it into account. Perhaps some force is lent to that evidence by reflecting that he pursued that belief as far as the Court of Appeal before being obliged to accept that it was wrong."
4. Causation and
5. Damages
6. Interest on damages
"87. Power of Courts to award interest on debts and damages -
(1) In any proceedings in [the High Court or Court of Appeal] for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate, not exceeding [the prescribed rate] as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment:
(a) Authorise the giving of interest upon interest; or
(b) Apply in relation to any debt upon which interest is payable as of right, whether by virtue of any agreement, enactment, or rule of law, or otherwise; or
(c) Affect the damages recoverable for the dishonour of a bill of exchange.
(2) In any proceedings in [the High Court or the Court of Appeal] for the recovery of any debt upon which interest is payable as of right, and in respect of which the rate of interest is not agreed upon, prescribed, or ascertained under any agreement, enactment, or rule of law or otherwise, there shall be included in the sum for which judgment is given interest at such rate, not exceeding [the prescribed rate] as the Court thinks fit for the period between the date as from which the interest became payable and the date of the judgment.
(3) In this section the term 'the prescribed rate' means the rate of 7f percent per annum, or such other rate as may from time to time be prescribed for the purposes of this section by the Governor-General by Order in Council."
Articles 2 and 3 of the Order of 1980 provide:-
"2. Rates of interest prescribed -
(1) The maximum rate of interest that a Court may, pursuant to subsection (1) of section 87 of the Judicature Act 1908, include in the sum for which judgment is given in any proceedings for the recovery of any debt or damages shall be 11 percent.
(2) The maximum rate of interest that a Court may, pursuant to subsection (2) of that section, include in the sum for which judgment is given in any proceedings for the recovery of any debt upon which interest (at an undetermined rate) is payable as of right shall be 11 percent.
3. Application - This order applies in respect of every judgment given on or after the 1st day of April 1980, whether the proceedings were instituted before or after that date."
The argument for Mr, Rowling was that the power to award interest conferred upon the court by section 87, upon a proper construction of that enactment, did not allow the award, for any part of the period between the arising of a cause of action and the date of judgment, of interest at a higher rate than had for the time being been prescribed as the maximum during that part of the period. In their Lordships' opinion the argument is correct. The rate of 11% per annum was not the prescribed rate for the whole of the period from 21st March 1974 to the date of judgment. It was so only from 1st April 1980 to the date of judgment. Their Lordships are unable to infer an intention on the part of the legislature that the prescribed rate should be retrospective. The results if it were so would be unfair and even bizarre. Thus a. litigant who recovered judgment on 1st April 1980 upon a cause of action arising five years earlier might be awarded interest at 11% for the whole period, while one whose judgment was delivered on 31st March could be awarded only a lower rate for the whole period. If the prescribed rate were to be reduced by Order in Council, the maximum rate of interest which could be awarded would be only the reduced rate for the whole period since the cause of action arose, notwithstanding that for most of that period the prescribed rate was much higher. The respondent's only answer to the last anomaly was that in such a situation legislation might be expected to be passed to alleviate its consequences. That does not appear to their Lordships to be a sufficient answer. They are clearly of the opinion that the intention of the enactment was that regard should be had to the rate of interest from time to time prescribed during the period between the arising of the cause of action and judgment, and that the maximum rate of interest for each part of the period should be reckoned accordingly.