James Farmer

Legal Commentary

Terence Arnold Retires From the Supreme Court Bench

Monday, April 10, 2017
Retirement from the Bench at the age of 70 is compulsory.  It has become customary for a retiring Judge – at least in the High Court, Court of Appeal and Supreme Court – to have a final sitting which is addressed by the Attorney General (or the Solicitor General in his stead) and by the Presidents of the New Zealand Law Society and the New Zealand Bar Association or their representatives.  The retiring Judge then replies.

The occasion last Friday (7 April) was the final sitting of Terence Arnold on the Supreme Court.  As one would expect, the Courtroom was packed with lawyers, friends and family.  The Chief Justice presided and made an opening tribute followed by Una Jagose QC (the Solicitor General), Kathryn Beck (President of the New Zealand Law Society), Clive Elliott QC (President of the New Zealand Bar Association) and then me, speaking for myself as a long-standing colleague and friend of Terence’s, with some personal reminiscences.

The Chief Justice spoke of Terence’s time on the Supreme Court and his contribution to it (which of course was considerable).  She spoke of how as a team player he held the Judges of that Court together (no doubt a reflection of his having been a partner in a large law firm and therefore used to working co-operatively with those around him).   

The Chief Justice also drew a contrast between his service to the Court and those who choose not to serve.   What, however, other speakers brought out and emphasised were the other forms of service that Terence had provided.  What those speakers noted was that he had already been through 4 careers before he first became a Judge when appointed directly to the Court of Appeal.  He first lectured in a number of Law Schools after graduating with Masters’ degrees from Victoria University and from New York University.  It was during that period that he began his immense contribution to legal education and training which made him an outstanding mentor for and teacher of young lawyers during each of his next 3 careers – as a partner at Chapman Tripp, as a barrister and Queen’s Counsel at the independent Bar and then as Solicitor General and head of the Crown Law Office.  

I would venture to suggest that, notwithstanding his outstanding achievements as an appellate Judge on the Court of Appeal and then on the Supreme Court, his service to the good of the public and to the development of higher standards of professional practice and advocacy was at least as noteworthy.  And, oh, serving and helping clients who are often in dire straits and whether being paid to help them or not, is just as essential part of the legal system – in fact a bigger part of it – as the (important) task of deciding whether they should get a remedy or not.  Terence understood that and did his utmost for his clients in the work that he did before he became a Judge.

During his reply remarks, Terence referred to the work being done by both the New Zealand Law Society and the New Zealand Bar Association in training young lawyers and in the improvement in standards.  He specifically mentioned the valuable part that oral advocacy plays in assisting Judges to reach the most appropriate outcome to the cases before them.  Speaking for myself, I was heartened to hear that acknowledgement, though, given his history as a University lecturer in law, as a litigation partner at Chapman Tripp, as a leading barrister and Queen’s Counsel and as Solicitor General responsible for the welfare and training of a large number of Crown Counsel, I was not surprised that he should make it.

Given that those who went before me had outlined in detail Terence’s record, CV and achievements, I chose to focus mainly on what he and I had done together with other lawyers and with whom collectively we had striven to achieve good outcomes for our clients while not (I hope) taking ourselves too seriously.  Below are the notes of my presentation to a great lawyer, Judge and friend. 

Notes for address to Supreme Court at Final Sitting of Justice Arnold

This address is a personal one which is being made with special leave from this Court at my request.  (By arrangement between the Executive Director of the NZ Bar Association and the Associate to the Chief Justice) The request was made because of my long association with Your Honour both before and after you were appointed to the Bench which you have served with such distinction.

I think our association began with the judicial review case of Petrocorp v. Minister of Energy in 1990 when I was briefed for the appeal to the Court of Appeal after Ted Thomas, who had done the High Court hearing with you and Sarah Dempsey (now Justice Sarah Katz) was appointed to the High Court.  You were then a senior litigation partner at Chapman Tripp.  Together we won the appeal but then when the Crown took the case to the Privy Council, although we were led by the famous Sir Patrick Neill (later Lord Neill), we ultimately lost.  You will recall though what a great experience that was working with Sir Patrick – spending long evenings in his Chambers while he poured over the detail of the Record and while we became increasingly hungry - hunger exacerbated by Neill’s promise from time to time of “we must get a curry in” – which however never eventuated.  You no doubt remember as clearly as I do leaving his Chambers near midnight and stumbling through the heavy February snow looking in vain for a restaurant or eating house that was open.

We then embarked on several years of Commerce Act litigation for Telecom against Clear Communications, represented by John Fogarty and Tom Weston, and the Commerce Commission, represented by Douglas White.   Though there were several different cases involving one or other of these parties over at least 5 years, the most famous undoubtedly was the section 36 abuse of a dominant position case heard initially in the High Court by the late Justice Tony Ellis assisted by the distinguished Australian economist Professor Maureen Brunt.  That was the case that led to the establishment of the Baumol-Willig rule after the 2 leading American economists William Baumol and Bobby Willig of Princeton University.  They expressed the view that a telecommunications firm in a dominant position which was charging a competitor to carry calls from the competitor’s network to customers on the Telecom network could not be said to be acting anti-competitively if the charges were equivalent to the costs that Telecom incurred itself in providing connecting calls between its own customers.   

You will recall our trip together to Princeton as well as to other American locations to brief other economists including the late Alfred Kahn at Cornell and the enjoyment that we got from sitting at the feet of these great economists, and being paid to do so.  You will recall also, I’m sure, our initial doubts about the Baumol-Willig rule based on our insight that the application of the rule was likely to lead to the embedding of Telecom’s monopoly profits except perhaps in the very long term.   When we raised that with Baumol, his response was simply if you’re worried about monopoly profits regulate prices.  And indeed that was what eventually happened, many years later when the Telecommunications Act of 2001 was passed.  Schedule 1, Part 1, section 2 says: “the Baumol-Willig rule does not apply in respect of applicable pricing principles that provide for a forward-looking cost-based pricing method”.

The other feature of that case, also involving Professor Baumol, that I am sure you will remember is the situation that arose when a medical certificate was produced by him that said that long-distance air travel was likely to be detrimental to his health.  Long-distance for this purpose was defined as not including New York to Paris which he often travelled or New York to Los Angeles.  But New Zealand certainly was regarded as long distance.  Telecom viewed Baumol’s evidence as being so critical – which it was – that they instructed us to advise the court that they were prepared to pay for the hire of a suitable premises in LA and for the travelling and accommodation expenses of counsel on both sides and the Judge and Registrar to have Baumol’s evidence heard there.  You and I found what was called a Private Court in Beverley Hills and the Beverley Wilshire Hotel at the foot of Rodeo Drive was deemed by us to be appropriate accommodation for the Judge and Registrar (and for us as well).  John Fogarty QC, for Clear Communications, made the submission that a video link from TV One’s studio at Avalon was an adequate means for taking Baumol’s evidence but Tony Ellis saw the virtue in our proposal.  And so we all went to Beverley Hills for what was surely a unique legal experience for New Zealand lawyers and Judges.  Baumol did perform magnificently and the Baumol-Willig rule found its way into New Zealand law.  However, I like to think that it was our superb advocacy as to the appropriate forum conveniens that achieved this result. 

Having discussed the highlights of your career as a practising lawyer – and mine – I should say something very briefly about your Judgments given as a Judge.  Given the time constraints, I will only mention one but I cheered when I read it.    It is the Judgment that you gave for the majority of this Court in Firm PI v. Zurich Australian Insurance Ltd concerning principles of interpretation of commercial contracts.  
In that Judgment you picked up on the dangers of Judges resorting to notions of “commercial common sense” and “commercial absurdity” to determine the meanings of contracts.   You made the point that there was reason to be cautious in this area “because commercial absurdity tends to lie in the eye of the beholder”.   You showed admirable judicial restraint at that point by not adding what I myself have said similarly in hearings by drawing a comparison with beauty and the eye of the beholder.  

You then drew attention to similar warnings given by Lord Hoffmann and Lord Neuberger and quoted from the latter’s stricture that “Judges are not always the most commercially-minded, let alone the most commercially experienced, of people, and should … avoid arrogating to themselves overconfidently the role of arbiter of commercial reasonableness or likelihood”.  You then added the insight that the bargain that is struck in a commercial contract may represent various compromises of position and varying interests that each party assesses in coming to an agreement.  That, you pointed out, is not “easily perceived or understood by a court”.

Finally, I want to say something about your great passion for yachting.  You sailed your own boat with success for many years in local races in Wellington though I was a little dismayed when you told me once that the rule that you must give way to a boat on starboard tack only applies to boats larger than yours.
However, what is not widely known is that, having joined the crew of my yacht when I brought it down to Wellington twice for the Port Nick Regatta, you became a New Zealand champion when on both occasions the boat won the New Zealand IRC and PHRF Championships.

One story however that went down in the history of Chapman Tripp involving your boating skills and judgment concerned the time very early in our respective yachting careers when you brought to Auckland your Chapman Tripp team (which included Forrie Miller, Francis Cook, Michael Crosby and John Beaglehole) and we sailed to Waiheke for the weekend in a Beneteau cruising yacht that I had just bought.   You will recall that my experience of keel boats at that time was very limited and my experience of driving a tender with an outboard motor even less.   The events that occurred had, I understand, repeated tellings at Chapman Tripp gatherings, I suspect with increasing degrees of exaggeration.  So I would like to take this occasion to set the record straight by telling it exactly as it did happen.  What occurred was that, with the yacht safely anchored in the middle of the bay at Oneroa, you and I hopped into the dinghy.  You made the mistake – near fatal as it turned out – of allowing me to take the helm of the outboard motor, the helm being a sort of a tiller which you turned for direction and which you rotated as a throttle for greater or lesser speed.   After cruising around the bay you will recall that I had some difficulty in lining up the landing platform at the stern of what from our position looked like a tiny 45 foot yacht and we made several passing movements without getting close enough to berth.  Francis Cook who had been sitting down below in the yacht commented afterwards that he had been puzzled by the noise of the repeated approaches and departures of a motor boat.  However, in due course I did get my bearings right and as we drifted close to and alongside the landing platform you leaned out over the front of the dinghy and got a hand on the platform of the yacht.  Unfortunately at that very moment, in an attempt to put the outboard into idling speed, I rotated the throttle the wrong way which caused the boat to accelerate with increasing speed away from the yacht.  You however were still holding on to the yacht with your legs still in the dinghy. At this point, you gave a very good imitation of an Indian rubber man.    In a state of panic I thought that I was about to be responsible for the drowning of a distinguished Judge before he actually became one.  However, you showed your quickness of mind by managing to let go of the yacht and falling back into the dinghy in time.  

And so, here we are today.

7 April 2017

Jim Farmer

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