IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY	
CIV-2017-404-2753
[2018] NZHC 2459	

BETWEEN	RED STAG TIMBER LIMITED
Plaintiff	
AND	JUKEN NEW ZEALAND LIMITED
Defendant	

Hearing:	19 June 2018	
Appearances:	S A Armstrong, J Edwards and M S Bowie for Plaintiff
A R Galbraith QC, C L Bryant and G J Luen for Defendant	
Judgment:	19 September 2018	

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 19 September 2018 at 3:00pm
pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

Solicitors:
Russell McVeagh, Auckland, for the Plaintiff Hesketh Henry, Auckland, for the Defendant

RED STAG TIMBER LIMITED v JUKEN NEW ZEALAND LIMITED [2018] NZHC 2459 [14 September 2018]

Introduction

[1]	In this Fair Trading Act proceeding about standards for timber treatment, Juken New Zealand Ltd applies to strike out parts of the statement of claim and to have a separate hearing on its limitation defence. Red Stag Ltd, the plaintiff, applies for orders fixing terms for tailored discovery, but in the hearing the parties agreed that could be dealt with later.

[2]	Red Stag Timber Ltd and Juken New Zealand Ltd are both in the business of producing and supplying framing timber for residential and commercial building. Red Stag produces solid timber from 100 per cent sawn wood. Juken produces LVL, laminated veneer lumber, an engineered wood product made from thin peeled veneers of wood, glued together with a structural adhesive. To be used as framing timber, both solid timber and LVL need to be treated to prevent degradation from fungi moisture and insect attack. There are standards for timber treatment. Red Stag says that Juken has misrepresented that its framing timber, called J-Frame, complies with the building code and treatment standards, and it has not labelled its product correctly with a warning. Juken denies that it has not complied with the standards and says that it is not required to give any added warnings on its J-Frame. The market for framing timber includes builders’ merchants, frame and truss manufacturers, tradesmen and consumers.

[3]	Red Stag sues Juken for breaches of ss 9, 10 and 13(a) and (e) of the Fair Trading Act 1986 for its conduct over five periods:

(a)	2008 to 2012;

(b)	5 December 2012 to 18 June 2015;

(c)	18 June 2015 to 9 June 2017;

(d)	9 June 2017 to late August 2017; and

(e)	late August 2017 to 31 August 2017.

There is a different cause of action for each period, but all causes of action are based on the same provisions of the Fair Trading Act.

The standards for framing timber

[4]	The building code prescribes functional requirements for buildings and performance criteria with which buildings must comply in their intended use.1 The standards in issue are concerned with making framing timber meet the durability requirements of the building code in clause B2. Building elements2 must, with only normal maintenance, satisfy the performance criteria of the code for 5, 15 or 50 years, according to whether they are structural or non-structural and the ease with which they can be inspected, accessed and replaced. All building work must comply with the building code to the extent required by the Building Act, whether or not a building consent is required for that work.3 There may be various ways by which the functional requirements for buildings and the performance criteria may be met. Section 19 of the Building Act states solutions that a building consent authority must accept as establishing compliance with the building code, two of which are relevant here:

19	How compliance with building code is established

(1)	A building consent authority must accept any or all of the following as establishing compliance with the building code:

…

(b)	compliance with an acceptable solution:

…

(d)	a current product certificate issued under section 269, if every relevant condition in that product certificate is met:

…

[5]	The Ministry of Building, Innovation and Employment publishes acceptable solutions.4 For durability the acceptable solution is in B2/AS1, “Acceptable Solutions and Verification Methods for New Zealand Building Code Clause B2 Durability.”

1	Building Act 2004, s 16.
2	Building Regulations 1992 [the building code], sch 1 cl A2.
3	Building Act 2004, s 17.
4	Building Act 2004, s 22.

Clause 3.2 deals with timber and wood-based building products and sets standards, which incorporate with modifications standards under the Standards and Accreditation Act 2015, especially NZS 3640: 2003 Chemical Preservation of Round and Sawn Timber and AS/NZS 1604.4:2012 Specification for Preservative Treatment – Part 4: Laminated Veneer Lumber (LVL).

[6]	A product certificate under s 19(1)(d), called a CodeMark, is issued by a product certification body under ss 261–272 of the Building Act and the Building (Product Certification) Regulations 2008. One of the requirements for product certification is that the product must comply with any relevant acceptable solution or verification method under s 22 of the Building Act.5 Juken New Zealand Ltd obtained a CodeMark for its J-Frame in June 2015.

[7]	It is also open to a building practitioner to establish compliance with the building code by other methods. These are “alternative solutions”. Whereas a building consent authority must accept compliance with any of the pathways under   s 19, it is not required to accept an alternative solution. One way to persuade a consent authority to accept an alternative solution is to have it appraised by a body such as BRANZ.

[8]	Juken New Zealand Ltd uses boron to treat its J-Frame. That is said to be a form of “envelope” protection. There are other chemical treatments. One is them is called “glueline”. Red Stag contends that Juken’s boron treatment does not reach the penetration required under the standards. Part of its case is that Juken can only comply if it uses glueline.

[9]	NZS 3640: 2003 Chemical Preservation of Round and Sawn Timber introduced a hazard class system to set requirements for preservative chemicals, retention and penetration requirements and identification of timber. Hazard class 1.2 applies to timber that is protected from the weather, above ground but with the possibility of exposure to weather. If that timber has been treated to the standards required under NZS 3640, it may be labelled “H 1.2” to show that it complies with the standard. Red Stag says that in 2012 the standard was amended by inserting cl 1.1.2

5	Building (Product Certification) Regulations 2008, reg 10(a)(ii).

to show that in the H 1.2 class treatment requirements in the standard applied to LVL. It says that under cl 6.1.2 LVL should be glueline treated.

[10]	AS/NZ 1604.4:2012 Specification for Preservative Treatment – Part 4: Laminated Veneer Lumber (LVL) includes preservative retention requirements for LVL, but not preservative penetration requirements for H1.2 class LVL (to which NZS 3640 applies instead). It has labelling requirements. These include a number to identify the treatment plant, a number to identify the preservative code, the hazard class, a penetration code pattern and a warning if envelope treatment has been used. J-Frame was branded 912 11 H1.2 – 912 for the treatment plant, 11 for boron and H1.2 for the hazard class. Red Stag says that the standard also requires Juken to mark an “E” on the J-Frame to show envelope treatment and to show a warning along these lines:

WARNING

This product has been treated to an envelope penetration pattern. If this protective envelope is broken by such actions as cutting, drilling or machining, suitable remedial action to repair the envelope shall be applied to cut surfaces.

The pleadings

First cause of action

[11]	Red Stag alleges that between 2008 and 2012 Juken’s J-Frame did not comply with the building code. There was no acceptable solution under s 19 of the Building Act and there was no alternative solution. Juken made representations in trade as to its compliance with laws and standards and how its J-Frame was treated, but Red Stag gives no particulars of these representations.

Second cause of action

[12]	The period of this cause of action is from when clause 6.1.2 was inserted into NZ 3640 to require glueline treatment for LVL until Juken obtained its CodeMark. Again Red Stag says that Juken did not meet the requirements of cl B2 of the code as its J-Frame did not comply with an acceptable solution and there was no alternative solution. It alleges that Juken made representations in trade that J-Frame met or

exceeded the H1.2 standards in NZS 3640 and AS/NZ 1604.4, but did not mark its J- Frame with “E” and the warning, as required. It had J-Frame independently tested and found that the boron treatment did not give complete penetration.

Third cause of action

[13]	The period of this cause of action is from when Juken obtained its CodeMark in 2015 until 9 June 2017 when the Commerce Commission wrote to Juken about compliance with the Fair Trading Act. Red Stag alleges similar representations in trade, says that further testing of J-Frame showed that the boron treatment did not give complete penetration and that the CodeMark certification did not result in compliance with the code.

Fourth cause of action

[14]	Red Stag says that after Juken received a letter from the Commerce Commission in June 2017 until late August 2017 it represented to customers that boron is distributed throughout the sapwood in the interior and exterior veneers, that it supports the supplementary protection of cut surface as best practice, but the standards do not require this for hazard classes below H2, and did not mark the J-Frame as required by AS/NZ 1604.4.

Fifth cause of action

[15]	Red Stag says that at about the end of August 2017 Juken changed its labelling on J-Frame and advised its customers that it had addressed the Commerce Commission’s concerns, but the labelling still does not comply with the requirements of AS/NZ 1604.4.

[16]	For all causes of action Red Stag alleges that Juken made misleading or deceptive representations in trade; as a result it obtained a larger share of the framing timber market than if J-Frame had been correctly labelled; and Red Stag’s revenue and profit were reduced. For relief it seeks declarations as to breaches of the Fair Trading Act, an inquiry as to damages or an account of profits.

[17]	Juken says that it complied with the standards in NZS3604 and AS/NZS1604.4. It denies that it was required to attach the “E” label or the warning, because it says that those requirements do not apply to hazard class H1.2. It says that it amended its marketing after it obtained the CodeMark in June 2015. It also notes that the standards are somewhat confusing. It says that the proceeding is out of time under s 43A of the Fair Trading Act.

[18]	Other bodies in the industry have also considered whether Juken has complied with the standards in the Building Act. The Commerce Commission has also enquired into the matter.

Juken’s strike-out application

[19]	Juken applies to strike out parts of the statement of claim:

(a)	The claims for an account of profits in each cause of action;

(b)	Red Stag’s first cause of action;

(c)	allegations of breach of the building code; and

(d)	pleadings to the effect that without discovery Red Stag Timber is unable to particularise all breaches of the Fair Trading Act by Juken New Zealand Ltd for each cause of action.

The strike out application under r 15.1(a) of the High Court Rules says that the pleading does not disclose a reasonably arguable cause of action. That can cover two aspects. One is where the cause of action is substantively defective, for example, where no cause of action known to the law is disclosed or on facts assumed to be true the plaintiff will fail at law. The other is where the pleading is procedurally defective, for example, for not meeting the pleading requirements of the High Court Rules, such as not giving adequate particulars.6 The difference goes to how the court exercises its discretion. If a pleading is substantively defective, it is more likely to be struck out

6	See for example High Court Rules 2016, rr 5.17, 5.21, 5.25–5.27.

because it cannot be saved or amended. Starting a fresh proceeding would be pointless. If it is procedurally defective, the pleading may be amended. If so, there should be opportunity to amend and strike-out may be inappropriate. See Tipping J’s dictum in Marshall Futures Ltd v Marshall distinguishing between a pleading “which is a total write-off and one which is capable of effective repair.”7 In this application
(a) is substantive, but the others are procedural.

The claims for accounts of profits

[20]	Red Stag accepts that it cannot claim an account of profits as relief.8 The only monetary relief under the Fair Trading Act 1986 is in s 43(3) and that does not include an account of profits. The claims for accounts of profits are struck out in these parts of the statement of claim: paragraphs 12.4(b), 13.4(b), 14.4(b), 15.4(b) and 16.4(c).

The first cause of action

[21]	Juken applies to strike out Red Stag Timber’s first cause of action, paragraphs
7.1 to 7.3 and 12.1 to 12.4 of the statement of claim. The first cause of action alleges breaches of the building code, non-compliance with cl B2 and misrepresentations in trade between 2008 and 2012, but gives no particulars. That can be seen in Red Stag’s pleading:

7.3 During this period, Juken New Zealand Ltd engaged in conduct, and made representations in trade, in relation to J-Frame’s compliance with applicable laws and standards and how its J-Frame product was treated.

Particulars

To be provided following discovery.

And

12.2 Without discovery, Red Stag is unable to particularise all breaches of the Act by Juken during this period, and claims relief in respect of all such acts.

Juken acknowledges that Red Stag gives some particulars in the other causes of action.

7	Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC).
8	Oxygen Air Ltd v LG Electronics Pty Ltd [2017] NZHC 1857 at [43].

[22]	A timing point can be noted. This cause of action relates to the period before NZ 3604 was amended to apply to LVL and before AS/NZS 1604.4 began. Red Stag has not pleaded any treatment standards or labelling requirements that applied to LVL before December 2012.

[23]	Juken’s case is that the pleading is deficient for non-compliance with r 5.26(b) of the High Court Rules:

5.26	Statement of claim to show nature of claim

The statement of claim—

(a)	must show the general nature of the plaintiff’s claim to the relief sought; and

(b)	must give sufficient particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances to inform the court and the party or parties against whom relief is sought of the plaintiff’s cause of action; …

While Juken is known to have manufactured and sold J-Frame between 2008 and 2012, nothing is known or pleaded as to treatment standards for J-Frame, building code requirements for LVL, how Juken marketed J-Frame and whether it involved any form of misrepresentation or deception.

[24]	Red Stag acknowledges that as it now stands the pleading is defective, but it says that it will be able to give particulars once it has had discovery. It invokes a line of cases that have held that where relevant information is within the knowledge of the party requesting particulars, they may be given after discovery.9 It cites Houghton v Saunders where an application to strike out a claim under the Fair Trading Act for absence of particulars as to misleading conduct was dismissed.10 French J held that the issue was more of a pleadings issue than a substantive legal impediment and accepted that particulars could be given after discovery.11 Red Stag submitted that while there were different causes of action for different periods because of changes of standards, Juken’s conduct and representations had been similar throughout. Because

9	Sachs v Speilman (1887) 37 Ch D 295; Hickson v Scales (1900) 19 NZLR 202 (SC); and Truck Master Ltd v Mastagard Waste Ltd [2014] NZHC 1676.
10	Houghton v Saunders (2008) 19 PRNZ 173 (HC) at [44].
11	At [213]–[216].

Juken had made misrepresentations as to treatment of if J-Frame from 2013 on, it could be inferred that it also misrepresented its product before.

[25]	In response Juken says that that is not good enough. It says that Red Stag must have some basis before it can issue a proceeding, even if at the outset the evidence may be insufficient to establish a cause of action. It developed its argument by arguing from the principles on which pre-commencement discovery is ordered under r 8.20 of the High Court Rules. If the court will not order pre-commencement discovery to allow an intending plaintiff to formulate their claim, the proposed proceeding will not be launched. Pre-commencement discovery is not ordered when its purpose is purely exploratory: to enable the intending plaintiff to see if it has a claim. A plaintiff should not be able to circumvent those restrictions by starting a proceeding, then obtaining discovery to see if it has a case.

[26]	Rule 8.20(1) states the requirements for pre-commencement discovery:

(1)	This rule applies if it appears to a Judge that—

(a)	a person (the intending plaintiff) is or may be entitled to claim in the court relief against another person (the intended defendant) but that it is impossible or impracticable for the intending plaintiff to formulate the intending plaintiff’s claim without reference to 1 or more documents or a group of documents; and

(b)	there are grounds to believe that the documents may be or may have been in the control of a person (the person) who may or may not be the intended defendant.

[27]	In Exchange Commerce Corporation Ltd v New Zealand News Ltd, the Court of Appeal held that “may be entitled” contemplated evidence of circumstances showing at least the real probability of the existence of a claim against someone.12 The rule is not a mechanism to encourage fishing expeditions. There must be some foundation established that will make it just that the respondents should be put to the trouble and suffer the intrusion on their affairs which an order will involve.13 If there is insufficient basis to justify issuing a proceeding, there should be no prior discovery.

12	Exchange Commerce Corporation Ltd v New Zealand News Ltd [1987] 2 NZLR 160 (CA) at 164.
13	Hetherington Ltd v Carpenter [1997] 1 NZLR 699 (CA) at 704. See also Welgas Holdings Ltd v Petroleum Corporation of New Zealand Ltd (1991) 3 PRNZ 33 (HC), especially at 44.

[28]	I accept the argument. In those cases where the courts have allowed a general pleading to stand with particulars to be given after discovery, they have accepted that there is at least enough substance to the claim that it should be allowed to run. For example, in Houghton v Saunders French J accepted that the Fair Trading Act claim seemed plausible, given the defendants’ involvement in the issue of a prospectus. But that is missing here. Red Stag has given no evidence to suggest any ground to believe that between 2008 and 2012 there were treatment standards for Juken’s products, that there were any labelling requirements, that Juken did not adhere to those standards and did not label its J-Frame correctly, and that Juken in any way misrepresented its J-Frame in trade. New standards were introduced in 2012. Red Stag says that one consequence is that Juken misrepresented its compliance with those standards. But that is not a reason to believe that it engaged in misleading or deceptive conduct before. Red Stag’s first cause of action is entirely speculative. It could not give a basis for ordering pre-commencement discovery. Nor should it be allowed to stand on the off-chance that discovery might throw up something useful. Paragraphs 8.1–8.15 and 12.1–12.4 are struck out.

[29]	That is a procedural strike out. The pleading of the first cause of action fails for lack of particulars under r 5.26(b) of the High Court Rules. It does not bar Red Stag from starting a fresh proceeding alleging Fair Trading Act breaches between 2008 and 2012, so long as it is procedurally compliant and also meets substantive requirements (including any limitation rules).

Allegations of breach of the building code

[30]	For the second cause of action, paragraph 8 of the statement of claim pleads:

8.2	During the period 5 December 2012 to 18 June 2015, in supplying J- Frame in the market, Juken was in breach of the Building Code.

8.3	During this period, Juken did not comply with the requirements of clause B2 either by:

(a)	complying with an Acceptable Solution; or

(b)	relying on an Alternative Solution.

Juken says that this general pleading is defective because it is not supported by particulars. Red Stag should not be allowed to maintain this pleading by saying that it will give particulars after discovery.

[31]	In response, Red Stag Timber Ltd does not resile from its allegation that Juken’s J-Frame does not comply with the building code, but says that it is not essential to maintain the allegation for its case. In its notice of opposition it says that it will delete the pleading. In the hearing it accepted that paragraph 8.2 should be struck out but that it would substitute paragraph 8.3 with this:

During this period, Juken did not:

(a)	Comply with an Acceptable Solution in order to comply with the requirements of clause B2 of the building code; and

(b)	treat J-Frame as if it were an Alternative Solution, including in relation to its branding and marketing of J-Frame.

As I understand this, Red Stag is saying that before Juken obtained its CodeMark certification in 2015, it did not come within the pathway under s 19(1)(b) of the Building Act and did not have an alternative solution.

[32]	The more important aspect is Red Stag’s position that the core of its case is that Juken breached the Fair Trading Act by representing in trade that it met the treatment requirements of the standards and failed to label its J-Frame correctly. The allegation of non-compliance with the building code is secondary to that. There may be a question whether Red Stag should give particulars of its new paragraph 8.3, but I was not asked to deal with that. Juken did not give any strong opposition to Red Stag’s proposal. It is appropriate. Accordingly paragraph 8.2 and 8.3 are struck out without prejudice to Red Stag replacing paragraph 8.3 in the terms it proposes and with leave to deal with any residual questions of particulars.

Lack of particulars of all breaches of the Fair Trading Act in other causes of action

[33]	The second, third, fourth and fifth causes of action, paragraphs 13.2, 14.2, 15.2 and 16.2, plead:

Without discovery, Red Stag is unable to particularise all breaches of the Act by Juken during this period, but claims relief in respect of all such acts.

Just as with the first cause of action, Juken complains of lack of particulars. It acknowledges that Red Stag has given particulars of alleged infringing conduct, but says it should not be able to make a general allegation as to other breaches without particulars and later refine its pleadings after discovery.

[34]	Here its argument on pre-commencement discovery principles does not work. Red Stag has given enough particulars to show a reasonably arguable case for breaches of the Fair Trading Act for the other causes of action, but it acknowledges that it is not aware of all of Juken’s marketing of J-Frame. On the other hand, Juken does know. Juken cannot complain of injustice in being required to disclose documents going to marketing of its J-Frame, even if they deal with representations that are not particularised in the current statement of claim. The case is similar to Sachs v Speilman, where North J said:14
Of course I can see well enough why they press for these particulars. If the plaintiff were obliged to condescend upon particulars, and to specify the instances in which the defendants have done what he charges them with, the result might be that from his imperfect knowledge he would not be able to point out in the particulars some cases in which they had actually done what he says they have done; and inasmuch as, after particulars were given, their defence would be addressed only to those points, the ignorance of the plaintiff might relieve the defendants from being held responsible as to certain matters with respect to which they are open to the charge contained in the statement of claim.

[35]	Red Stag should have the opportunity to give particulars of other breaches of the Fair Trading Act in the second to fifth causes of action after Juken has made discovery. The paragraphs are allowed to stand in the meantime.

Application to decide the limitation defence separately

[36]	Juken applies for a hearing under r 10.15 of the High Court Rules to decide this question:

Are the claims by Red Stag Timber Ltd time-barred under s 43A of the Fair Trading Act 1986?

14	Sachs v Speilman (1887) 37 Ch D 295 at 303.

Juken has pleaded s 43A as an affirmative defence. The section says:

A person may apply to a Court or a Disputes Tribunal for an order under s 43 at any time within three years after the date on which the loss or damage, or the likelihood of loss or damage was discovered or ought reasonably to have been discovered.

[37]	It recognises that there are disputed issues of fact on the limitation question, but says that on a finding that Red Stag’s claim is time-barred, the case will fail without the need to make more extensive discovery and to have a lengthy hearing with more complex issues of liability and quantum. Confident that the limitation question will go its way, it urges a hearing on that question alone, as it will dispose of the case.

[38]	Red Stag began the proceeding on 17 November 2017. Juken says that before 17 November 2014, Red Stag discovered or ought reasonably to have discovered the loss or damage for which it sues. The loss pleaded by Red Stag is that J-Frame obtained a greater share of the framing timber market than it would otherwise have obtained had J-Frame been correctly labelled; Red Stag's share of the framing timber market was reduced from what it would otherwise have been and Red Stag's revenue and profits from sales of its framing timber was reduced from what it would otherwise have been. So far Red Stag has not given further particulars of the loss or damage and has not quantified the monetary relief it seeks.

[39]	Juken says that time started running under s 43A when Red Stag became aware that it was more probable than not that Juken's conduct had caused or would in future cause more than minimal loss or damage to its competitors in the structural framing market. Its case is that J-Frame was branded H1.2 from December 2012. The product label on the framing stated that it was treated with boron but there was no warning label or "E" symbol. Marketing materials from December 2012 to June 2015 stated that J-Frame complied with H1.2 treatment standards under NZS3640 and AS/NZS1604.4. That information was publicly available. In 2013, the Ministry of Business Innovation and Employment reviewed the acceptable solution for durability, the B2/AS1. That led to a debate in the industry as to the status of boron-treated LVL such as J-Frame and whether compliance with AS/NZS1604.4 was an acceptable solution. In mid-2014, another competitor in the framing timber market, Carter Holt Harvey, ran laboratory tests on J-Frame and wrote to Juken on these issues in

August 2014. At a timber treatment conference in Rotorua in September 2014 attended by representatives of Carter Holt Harvey, Red Stag and Juken, there were discussions whether and how NZS3640 and AS/NZS1604.4 applied to boron-treated LVL. In November 2014, Carter Holt Harvey raised with Juken concerns similar to those of Red Stag in this proceeding.

[40]	In December 2014, Red Stag wrote to the Timber Quality Scheme with its concerns and sent a copy to Juken. It referred to J-Frame's compliance with the requirements of NZS3640 as discussed at the treatment preservation conference in September 2014. Juken will say that Carter Holt Harvey drew Red Stag’s attention to the J-Frame issue sometime after 6 November 2014.

[41]	Red Stag arranged for its own laboratory testing of J-Frame on 17 November 2014. Red Stag's case is that it realised that J-Frame did not comply with Juken’s claims until after a further round of testing on 18 December 2014. Red Stag says that it does not usually test its competitors' products. Its case will be that until Carter Holt Harvey raised concerns, J-Frame was not on Red Stag's radar.

[42]	Juken will attack this part of Red Stag’s case. It will refer to Red Stag's attempts to produce a competing jointed framing product similar to J-Frame and tests for that purpose. It was aware of those matters during the September timber treatment conference. Juken says that even on the evidence given by Red Stag’s chief executive, Red Stag had all the facts needed to make this claim before November 2014.

[43]	Juken says that a hearing of the limitation question will be relatively straightforward. Red Stag holds most of the documents relating to limitation and there are not likely to be many. The hearing should accordingly be short and an early fixture should be available. Because Juken anticipates success, it will avoid having to make extensive discovery which may involve difficulties in protecting confidential information. It says that that is a more efficient outcome than the cost of going to a single hearing.

[44]	For applications for a separate question hearing under r 10.15, the default position is that all matters in issue are to be determined in one hearing because that

will normally be the most expeditious and efficient way of dealing with the proceeding.15 The party proposing a preliminary hearing of a question has the burden of persuading the court to depart from the normal course. That is often a difficult test.

[45]	In Turners and Growers Limited v Zespri Group Limited White J noted the following factors which the courts have taken into account:16

(a)	the likelihood of delay in finally resolving the proceeding;

(b)	the probable length of hearings if there is a split trial;

(c)	whether a decision one way or the other on the separate questions would end the litigation;

(d)	the impact on the length of any subsequent hearing;

(e)	a balancing of the advantages to the parties and the public interest in shortening litigation as against any disadvantages asserted by parties opposing a split trial;

(f)	demarcation difficulties in defining issues to be addressed at the first trial;

(g)	resulting difficulties of issue estoppel;

(h)	inadvertent disqualification of a judge who has expressed views at the first trial on matters for decision at the second trial;

(i)	inadvertent findings at the first trial upon matters that are for full evidence and argument at the second hearing;

(j)	the need to recall some witnesses at the second hearing;

(k)	the duplication of time involved in the Court and counsel "coming up to speed" again for the second hearing;

(l)	the prospect of multiple appeals;

(m)	a second round of discovery or other interlocutories and amended pleadings following the first trial; and

(n)	rostering difficulties in ensuring that the same Judge is available for the second hearing.

15	Clear Communications v Telecom Corporation of NZ Limited (1998) 12 PRNZ 333 (HC) at 334.
16	Turners and Growers Limited v Zespri Group Limited HC Auckland CIV-2009-441-4392, 5 May 2010.

He also referred to authorities where judicial warnings have been given as to the risks involved in ordering split trials.

[46]	In Haden v Attorney-General Kós J suggested that the most important questions on applications under r 10.15 are:17

(a)	Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?

(b)	Will the separate question bring the proceedings to an end?

(c)	What potential time-saving does the separate question offer?

(d)	How will appeals be dealt with? and

(e)	Are there any practical considerations tending one way or the other?

[47]	Red Stag cited Australian authorities that have held that it is generally undesirable to decide limitation questions in interlocutory proceedings in advance of a hearing of a proceeding except in the clearest of cases.18 It appears, however, that Australian practice is different. The Australian cases dealt with strike-out applications, applications for summary judgment and preliminary hearings where the courts decided questions of law on agreed statements of fact.19 Under r. 10.14 “question” includes any question or issue in a proceeding, whether of fact or of law or partly of fact and partly of law. The court can accordingly decide in a preliminary hearing contested factual matters for a limitation defence. That is not a ground for refusing a hearing under r 10.15. There are however other reasons for not ordering a separate question hearing.

17	Haden v Attorney-General (2011) 22 PRNZ 1 (HC) at [50].
18 Wardley Australia Limited v Western Australia [1992] HCA 55, (1992) 175 CLR 514 at 533; Magman International Pty Limited v Westpac Banking Corporation (1991) 32 FCR 1 (FCA); Carey-Hazel v Getz Bros & Co (Aust) Pty Ltd [2001] FCA 703, (2001) 112 FCR 336; Mayne Nickless Limited v Multigroup Distribution Services Pty Limited [2001] FCA 1620, (2001) 114 FCR 108; and Joey Constructions Pty Limited v IT Environmental (Australia) Pty Limited [2018] FCA 534.
19 The practice under the old Code of Civil Procedure, rr 154 and 254-248, did not allow for preliminary hearings with disputed facts.

Will the separate question bring the proceeding to an end?

[48]	Juken assumes that if it can establish that Red Stag knew or ought to have known before 17 November 2014 that Juken’s breaches of the Fair Trading Act had caused Red Stag Timber Ltd loss, it will avoid liability altogether. But the statement of claim alleges ongoing conduct by Juken New Zealand Ltd up to the start of the proceeding. The second, third, fourth and fifth causes of action include alleged breaches within three years of the start of the proceeding. Red Stag says that it continued to suffer loss and damage as a result of Juken’s conduct in the three years before 17 November 2017.

[49]	Juken assumes that the likelihood of loss is enough to start time running under s 43A, but Red Stag is claiming monetary relief under s 43(3)(f) of the Fair Trading Act. That is for actual loss or damage, not a potential loss.  In Wardley Australia Ltd v Western Australia the High Court of Australia held that for claims under s 82 of the Trade Practices Act 1974 (Cth) (which imposed a three-year limitation “after the date on which the cause of action accrued”) loss or damage was the gist of the cause of action and there could be recovery only for actual loss or damage, not potential or likely damage:20
To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever- present risk of undercompensation or overcompensation, the risk of the former being the greater.

[50]	The position is the same under the Fair Trading Act. Whereas s 43(1) provides that the section applies if “a person…has suffered, or is likely to suffer, loss or damage by conduct of another person…”, s 43(3)(f) provides that the court may make an order directing the other person to pay “the amount of the loss or damage”. That is a remedy for actual loss, not potential loss. No claim is possible under the subsection until the loss has occurred. Red Stag is entitled to claim for any losses it suffered during the three years before it sued, even if Juken’s actions outside the three years caused those losses, and for Juken’s alleged infringing conduct during those three years.

20	Wardley Australia Ltd v Western Australia [1992] HCA 55, (1992) 175 CLR 514 at 525.

[51]	That is reinforced by the history of the limitation provisions under the Fair Trading Act 1986. The original limitation provision was former s 43(5):

An application under subsection (1) of the section may be made at any time within three years from the time when the matter giving rise to the application occurred.

In Murray v Eliza Jane Holdings Limited the Court of Appeal held that "the matter giving rise to the application" meant the conduct alleged, not the occurrence or discoverability of loss or damage.21 Accordingly, an application could be made only if the defendant had contravened the Fair Trading Act within the three years before the proceeding was filed. Parliament responded by introducing the discoverability test in (now) s 43A. The obvious intention was to extend the time for bringing a claim by allowing an applicant to claim for conduct that occurred more than three years before the proceeding was started, but where the loss or damage caused by the contravention was discoverable only in the three years before the proceeding. In extending the time, Parliament cannot have intended to exclude claims based on conduct that occurred within the three years before the proceeding was started.

[52]	Accordingly, the best that Juken could hope for in a separate hearing to decide the limitation defence is to exclude any claims where damage was discoverable before 17 November 2014. The relevant damage would presumably be loss of sales before that date. A successful finding on limitation might trim a bit off the second cause of action, but the rest of the case would continue.

Overlap

[53]	Red Stag says that the limitation and liability questions are entwined. An inquiry into the limitation defence will include these questions:

(a)	How was J-Frame promoted?

(b)	How was J-Frame branded and labelled?

21	Murray v Eliza Jane Holdings Limited (1993) 6 PRNZ 251 (CA).

(c)	Did the treatment of J-Frame and the preservative penetration and retention results align with the representations that J-Frame was making through its advertising and labelling?

(d)	What regulations and standards relate to timber treatment for J-Frame?

(e)	Did the treatment of J-Frame and the preservative penetration and retention results comply with the relevant regulations and standards?

(f)	Was Red Stag aware how J-Frame was treated, labelled and promoted?

(g)	Was Red Stag aware of the relevant regulations and standards for J- Frame, given that Red Stag did not produce any LVL products? That will involve deciding how the timber treatment standards apply.

(h)	Should Red Stag have been aware how other competitors' products were labelled, promoted and treated? That is in the context of an industry with 28 participants all making labelling and promotional representations.

(i)	Is it reasonable to expect competitors to comply with relevant laws and standards?

(j)	How would Red Stag know J-Frame was envelope-treated when Juken claimed that it was not?

(k)	Who at Red Stag would have needed to know these matters? These matters overlap with the inquiry as to liability.

[54]	In Commerce Commission v Carter Holt Harvey the Supreme Court said about an earlier version of s 43A:22

22	Commerce Commission v Carter Holt Harvey [2009] NZSC 120, [2010] 1 NZLR 379 at [31].

As loss is not relevant for present purposes unless it was occasioned by a contravention of the Act, the words "as a result of a contravention of the Act" are necessarily implicit in this question.

That means that an applicant under s 43 had to be aware not only of loss or damage but also that that loss or damage was the result of a contravention of the Fair Trading Act. Knowledge of the law is not required, but knowledge of the facts giving rise to the contravention is. In a limitation hearing, there will therefore be an inquiry whether Juken’s conduct amounted to contraventions of the Fair Trading Act. That will require an inquiry into Red Stag’s questions. Matters to be decided on limitation and liability will overlap. Clear demarcation will not be possible.

[55]	That will go against the just, speedy and inexpensive determination of the proceeding. The limitation hearing will not be as confined as Juken would wish, because of the liability questions to be determined. The parties will inevitably strive for findings in the limitation hearing that will support their case in the liability trial. Witnesses on both sides will give evidence on the same matters in more than one hearing.

What potential time saving does the separate question offer?

[56]	Given the liability questions to be decided, a hearing on limitation is likely to run for a week. A fixture will be unlikely within 12 months, probably longer. After a decision is given, a hearing on liability will be another 12 months away, assuming no appeals and no difficulties with interlocutory steps. A hearing to decide all matters, liability, limitation and relief, will again be at least 12 months away – about the same time until a hearing on limitation only. Accordingly a separate hearing on limitation will prolong the proceeding. There will be no time saving.

Conclusion

[57]	Juken held out that Red Stag was treating the case as major litigation, interlocutory steps would be protracted with extensive discovery, and there would be heavy preparation for a final hearing with difficult issues as to causation and loss.

There was a real risk of the case running on for years. Its proposed hearing on limitation would offer a quick way of disposing of the case.

[58]	I note the risks, but I do not accept that a hearing on the limitation question is the answer. There will be no saving in time, as a successful limitation defence will not get rid of Red Stag’s claim altogether. The case will take longer. It will cost more. There will be duplication of evidence, submissions and issues. This is a clear case for not ordering a separate hearing. The risk of the case running on for years should be addressed by sound case management. The application under r 10.15 is dismissed.

The application of tailored discovery

[59]	Red Stag applied for an order fixing terms for tailored discovery under r 8.8 of the High Court Rules, but did not ask me to hear it. In the hearing counsel indicated that they would file a memorandum as to discovery but none has been referred to me so far. They indicated that they expected to file and serve affidavits of documents by mid-October and that six weeks would be required for inspection. This decision may affect those arrangements. The registrar is to arrange a telephone conference to see whether further directions are required for discovery. If counsel agree that a conference is not required, they should advise the registrar.

Outcome

[60]	Neither side is a clear-cut winner. They have had divided success. In light of that, it may be appropriate not to make a costs order, but the parties should have the opportunity to submit first. Any party seeking costs is to file and serve a memorandum within five working days of this decision. The other side is to respond within a further five working days. If no memoranda are filed, I shall take it costs are not sought.

[61]	I make these orders:

(a)	On Juken’s strike-out application:

(i)	The claims for accounts of profits in paragraphs 12.4(b), 13.4(b), 14.4(b), 15.4(b) and 16.4(c) of the statement of claim are struck out.

(ii)	Red Stag’s first cause of action in paragraphs 8.1–8.15 to 12.1–
12.4 of the statement of claim are struck out.

(iii)	Paragraphs 8.2 and 8.3 of the statement of claim are struck out without prejudice to Red Stag replacing paragraph 8.3 in the terms it proposes and with leave reserved to deal with any residual questions of particulars.

(iv)	The rest of the application is dismissed.

(b)	I dismiss Juken’s application for a separate hearing of its limitation defence.

(c)	I direct the registrar to arrange a telephone conference for any directions as to discovery and for further case management.

(d)	Leave is reserved to apply for further directions.

……………………………….
Associate Judge R M Bell