West Coast Forests Discussed On Breakfast TV
Media release - West Coast forests MH Now
there have been protests as only the West Coast of the South
Island can produce in the past week, as formed by the
government's decision to stop beech logging and the High
Court's decision last week to agree with it. So how does
this decision stack up, what does it mean for the
government, for West Coasters and the state owned enterprise
Timberlands? Mai Chen is with us.... Now I'm no legal
expert, but as I understand it in this country the
government makes the law and if the government wnats to make
a new law it can, and taking it to court's not going to
achieve anything. Is that correct? MC The difficulty Mike
is that when you contract with the government this is not
like contracting with any private party. And I think the
lesson to be learnt from this case is that when you are
contracting with the government you have to understand that
a state owned enterprise like Timberlands is subject to
direction via the ministers, who are the shareholders in
this case. And if those mnisters change because there is a
change of government, and as a consequence of that their
policy changes, then it doesnt matter that you have a
contract. That contract can be over-ridden by statutory
obligation, and that is what makes dealing with the
government so dangerous. MH As is pointed out in the SOE
Act, section 13, 'ministers from time to time direct the
board to omit from a statement of corporate intent a
provision relating to the nature and scope of the activities
to be undertaken'. In other words they can do what they
like.
MC Well that's right Mike. And in this case the
court said, 'well did they follow the procedures, did they
consult the board?' Yes, I know the board's saying 'well
we're not very happy about this direction', but the reality
was that on that fateful day Mike, on the 10th of December
the very day the Labour-Alliance government was sworn in,
those shareholding ministers met with the board, and despite
the fact that the board came out of that meeting fighting,
during the meeting it appears that they said 'ministers, we
want to be accomodating of the government's new policy, and
if the new policy is that you want beech logging stopped, we
don't think there are going to be any problems with
that'. MH And that is the consultation is it, as opposed
to the consultation with the West Coasters, who will assume
then I guess that they didn't talk to them before they
changed their mind, they simply talked to Timberlands? MC
Mmm, and I think that's the difficulty, because when private
people say 'well hang, on we enter into contracts all the
time, and the whole point of entering into a contract is
that you and I have an agreement, and because of this
agreement I had with you to do beech logging I went out
there and I bought $60,000 worth of plant. Now that may not
be a lot to you, but it's a lot for a small company like
me'. And what they're saying is 'where will I end up on
this contract government? And as a consequence we're out of
pocket. Now what about compensation?' And the difficulty
Mike is that when you're dealing with the government in this
way, when you're dealing with an SOE, and that SOE can be
subject to changed directions by a change of government and
a change of policy, then the difficulty is that you may well
end up out of pocket and there is no requirement for
consultation under section 14. When a ministerial direction
comes on that may result in hurting private individuals,
there is no requirement to give compensation. MH
Furthermore though, the SOE did have a force majeure clause
in there, which as I understand it basically means 'we're a
government run organisation, rules can change and here's the
clause that gets us out of it'. MC That's it. Well mike,
you see the thing is that whenever you are dealing with an
SOE or a Crown entity you should be looking at that
contract. And if for example I am advising a private
company that is dealing with the government I always say 'be
careful'. You have to consider the risks of going and
spending a lot of money and then the government changes. In
this case the court said there were unusually broad force
majeure clauses, and specifically with respect to
Timberlands it said that force majeure change of
circumstance can include a change of government policy in a
direction that changes the scope of the s.c.i.. MH I was
going to ask about pre-election policy. That actually
doesn't matter though, in fact I suppose you could say that
'we forewarned you', so it wasn't a total surprise, but even
though, you don't even have to tell them that do you? MC
Well, you don't have to tell them that except that you have
to look at the timing when that force majeure clause was put
in. If you look at the scope of events you will see that
those force majeure clauses were put into the contracts just
before the elections. Essentially what happened was, in mid
August, now remember the elections took pace in November, in
mid August of last year, the then minister of SOEs, the
Honourable Tony Ryall, said 'oh, I think we will in
principle say yes to these beech logging contracts'. Now,
you know it was controversial, one could argue that that was
within the three month period prior to the election when
really they should have said 'well, maybe we shouldn't take
any decisions'. But two weeks after Ryall made that
announcement Labour released its policy and it said 'no
beech logging', and we will use legislation if necessary to
repeal the West Coast Accord and there will be no
compensation. But Mike, you and I were discussing during
the ad break whether or not this litigation was worthwhile
at all. And I guess from the perspective of the lawyers
trying to perhaps put a good spin on what is otherwise a
complete loss, one would have to say that the hundred
million dollars compensation package, which has been offered
by the Crown is pretty phenomonal. That has to be the
biggest package of regional development assistance offered
to the fewest number of people in New Zealand's
history. MH Is it guilt money though? MC Well, it's an
important precedent Mike. Remember, the ACC reforms have
just rolled back the ability of private insurance companies
to sign out insurance contracts. No compensation. I mean
we've had some companies say 'hey, we've spent a hundred
million getting into this, it's going to cost us another
hundred million to get out of this'. The government said
'tough - you knew the policy was going to change, live with
it'. Now the difficulty here is that if you offer a hundred
million to the West Coast Mike, what sort of a precedent
does that create? The govt changes policy all over the
place. MH Yeah, but it depends on how many businesses it
affects. I mean it's a very rare day to close down a major
source of income for an entire region based on philosophy
isn't it? MC WelI I guess Mike that's precisely what this
government will argue. They will say 'ah, this is not a
precedent for the run of the mill change of policy. This is
a very unusual circumstance because this was one of the
major resources and a major source of employment on the West
Coast'. MH Yeah, but... [unclear] that interested me most
was that there comes a point, this is in the decision by the
way, there comes a point where public policies are so
significant and appropriate... [unclear] by those elected by
the community, that the court should defer to their decision
except in clear and extreme circumstances. So what they're
saying is it's too big for the court. MC ... That is a
very, very interesting statement and the reason is because
there is a distinction between what the courts can look at,
and what they can't look at. At the end of the day it is
the executive branch of 0government that is there to
determine policy and to look at political considerations.
The court is not there to make policy, and they're not there
to judge policy either. They're there to judge the law, and
what they're saying is 'look, at the end of the day this was
a matter of high public policy. It was a matter of high
politics. It's about a new government's policy. It's too
big for us. We're not here to judge that. That's up to
them. If we want to get elected we'll run for parliament,
but we're judges and we're just here to see, did they obey
the law?' And in this case they said they clearly did. MH
And the reason I raise that is that my understanding is that
they're still talking on the West Coast about more court
action. They cannot take the government to court if they
want to change the law! MC It is true, and I guess for
that reason, had I been asked to advise these people I would
have said 'look, you're chances in this particular case I
would have thought would have been no higher than about five
to ten percent'. Mike, when lawyers advise their clients
they only give them four statements. They say it's either
poor, 25% or less; fair, sort of 50:50; reasonable, about
60, 65; or very reasonable, and that's 75% or above. And in
this case I would have said 'poor'. And that's the
difficulty. You know, at the end of the day Mike, the
saying is true, 'you can't fight City Hall', and at the end
of the day it is the government who can change the law on
you and they can change the policy. Now you don't want to
go into a war with an opponent like that. End of
interview.
- From "Peter K.
Russell"
Breakfast Show, TV1
8.43am 4 April 2000
Mike Hosking & Mei Chen