Strike-out application – High Court – misleading or deceptive conduct – purpose and definition of affirmative defences – found not to be affirmative defences as pleaded – Fair Trading Act 1986 – Commerce Act 1986

Godfrey Hirst NZ Ltd v Bremworth Carpet and Rugs Ltd [2023] NZHC 1365 per Peters J.

The High Court has determined an application by carpet manufacturer Godfrey Hirst to strike out four affirmative defences pleaded by the Bremworth defendants, which also manufacture carpets.

In 2022, Godfrey Hirst brought a claim under s 9 of the Fair Trading Act 1986 (FTA), taking issue with four statements made by Bremworth during its 2020 “Going Good” advertising campaign. The campaign advertised Bremworth’s decision to stop manufacturing synthetic carpets. The statements were alleged to have:

• equated the impact of synthetic carpet installed in the “average” home with that of 22,000 single-use plastic bags;
• effectively said that synthetic carpet sheds microplastics;
• touted the (alleged) environmental superiority of carpet made from wool over carpet made from synthetic fibre; and
• been based on “research, science and innovation”.

Bremworth’s statement of defence pleaded four affirmative defences that Godfrey Hirst sought to strike out. First, Bremworth argued Godfrey Hirst made similar statements between 2019 and 2021, rendering Godfrey Hirst’s conduct inequitable and precluding it from relief. Second, the demands and requirements in Godfrey Hirst’s letter, which began the proceedings, had the purpose, effect or likely effect of inhibiting competition by Bremworth, contravening s 30 of the Commerce Act 1986.

Third, by seeking relief, Godfrey Hirst sought to take advantage of its alleged substantial degree of market power in two distinct markets, so as to restrain Bremworth from communicating the features, characteristics and benefits of its products.

Finally, Bremworth alleged that by seeking relief, Godfrey Hirst had  engaged in conduct that was “unconscionable” in trade and was in breach of s 7 of the FTA.

Godfrey Hirst succeeded in striking out those defences. The High Court clarified the purpose and definition of affirmative defences, using commentary from McGechan on Procedure. An affirmative defence “is one which relies on material outside the admission and denial of the facts alleged by a plaintiff in a statement of claim”, (Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZCA 154, (2012) 21 PRNZ 235).

The High Court adopted Black’s Law Dictionary, 11^th ed definition of affirmative defence – “a defendants assertion of facts and arguments which, if true, will defeat the plaintiff’s or the prosecution’s claims, even if all the allegations in the complaint are true”.

Applicable principles: Misleading or deceptive conduct in trade – purpose and definition of affirmative defences – pleading affirmative defences – inhibiting competition – unconscionable conduct – cannot strike out on grounds of prejudice or delay

Held: The High Court found the defences Bremworth pleaded were not affirmative defences so were not reasonably arguable. Even if they had been made out, they would not have affected Bremworth’s liability under s 9 of the FTA if that were otherwise established.

The High Court acknowledged how the substance of some affirmative defences pleaded might be relevant to the issue of relief if s 9 of the FTA is established. For sake of completeness and in response to Godfrey Hirst’s submissions, the court explained it would not have struck out the defences on grounds of prejudice or delay as the need for additional work or trial time was not a sufficient basis for a strike-out in the context.

Vivian Mitchell is an LLB/BA graduate.

Godfrey Hirst NZ Ltd v Bremworth Carpet and Rugs Ltd [2023] NZHC 1365