Bremworth Limited (Formerly Cavalier Corporation Limited) v Pebblemill Limited
[2022] NZHC 2352
•14 September 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-604
[2022] NZHC 2352
BETWEEN BREMWORTH LIMITED (FORMERLY CAVALIER CORPORATION LIMITED)
Plaintiff
AND
PEBBLEMILL LIMITED
Defendant
AND
EDWARD CHARLTON RADFORD
Second Defendant
Hearing: 13 September 2022 Appearances:
J Edwards and Y Dong for Plaintiff
G C Williams and T D Mahood for Defendants
Judgment:
14 September 2022
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 14 September 2022 at 10 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BREMWORTH LIMITED (FORMERLY CAVALIER CORPORATION LIMITED) v PEBBLEMILL LIMITED [2022] NZHC 2352 [14 September 2022]
Introduction
[1] The plaintiff, Cavalier Corporation Ltd (Bremworth), sues the defendants, alleging that:
(a)Mr Radford and his company, Pebblemill Ltd (Pebblemill), willingly used, and continue to use, confidential information which belongs to Bremworth relating to the manufacture of felted yarn; and
(b)Mr Radford has breached a contractual restraint of trade clause that he entered into when he sold shares to Bremworth on 7 December 2012.
[2]The defendants’ position, as pleaded in their statement of defence, is:
(a)they have only used information that is in the public domain and which is free for anyone to use to produce felted yarns such as are produced by Pebblemill;
(b)if they have used any confidential information belonging to Bremworth, that use was authorised in such a manner that Bremworth cannot now revoke that authorisation or, if it was not expressly authorised, Bremworth acquiesced to its use; and
(c)Mr Radford has not breached the relevant restraint of trade clause upon which Bremworth relies.
Those positions are, of course, articulated in more detail in the fifth amended statement of claim, dated 11 July 2022, and the statement of defence to that statement of claim, dated 15 July 2022.
[3] However, in the defendants’ opening address, following the completion of the plaintiff’s evidence, the defendants expressly raised the argument that the duty of confidence was not owed to Bremworth (should a duty of confidence be established), it was owed to the entity which purchased the information, being Curlicue Ltd (and
subsequently renamed Radford Yarn Technologies Ltd (RYT)), a subsidiary company of Bremworth rather than Bremworth itself.
[4] The claim took Bremworth by surprise given, in the pleadings, the defendants had admitted Bremworth had acquired RYT’s intellectual property (albeit differing on the scope of that property) and, rather than denying that Bremworth acquired any confidential information, pleaded that it was “restricted to Bremworth’s unique yarn specifications”.
[5] As a consequence, Bremworth has applied, pursuant to r 4.56 High Court Rules 2016 and, in the alternative, under the High Court’s general power to amend pleadings as set out in r 1.9 of the High Court Rules, to join RYT to these proceedings as a second plaintiff.
[6] Bremworth acknowledges the application is made very late, but says that is because the defendants have only just raised the issue of the plaintiff’s standing, and in any event, the addition of RYT will not cause the defendants prejudice and is necessary to resolve the issues between the parties.
[7] The defendants oppose the application. They say their pleaded denials that they owed a duty of confidence to Bremworth were sufficient to signal this issue and they will suffer prejudice if RYT is added as a plaintiff at this late stage in the proceedings, where all the evidence has been heard and only closing submissions remain to be delivered.
The legal principles applying
[8]Rule 4.56 provides as follows:
(1) A Judge may, at any stage of a proceeding, order that—
…
(b)the name of a person be added as a plaintiff or defendant because—
(i)the person ought to have been joined; or
(ii)the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
…
[9] As the commentary to the High Court Rules notes,1 the object of the rule is to provide for the inclusion of necessary parties, and the current approach in New Zealand to joinder is liberal.
[10] When determining whether to add a person as a plaintiff, there is, first, a jurisdictional threshold to be met under r 4.56(1)(b). Rule 4.56(1)(b)(i) allows a person to be added as a plaintiff when that person “ought to have been joined”. Alternatively, r 4.56(1)(b)(ii) allows a person to be added as a plaintiff where that “person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding”.
[11] Where jurisdiction exists under one or other limb of the rule, the Court then has a discretion as to whether to add the party or not. While an order adding a party may be made at any stage of a proceeding, issues of delay and prejudice are clearly relevant to the exercise of the discretion. That said, the Court’s approach in New Zealand has tendered to favour joinder where jurisdiction exists.2
[12]I turn now to consider the factors which are relevant in the current application.
Submissions for the plaintiff
[13] Counsel for the plaintiff, Mr Edwards, points out that the defendants had not expressly pleaded or raised Bremworth’s standing to bring its causes of action until after Bremworth had finished giving evidence at trial. Indeed, at the first case management conference on 4 June 2020, counsel for both parties agreed there were no additional parties that needed to be joined.
1 Robert Osborne McGechan on Procedure (online ed, Thomson Reuters) at [HR4.56].
2 Newhaven Waldorf Management Ltd v Allen [2015] NZCA 204, [2015] NZAR 1173 at [44]–[45].
[14] Bremworth submits it is appropriate, in light of this issue now being raised, that RYT is joined as a plaintiff to the first and second causes of action. Bremworth’s Chief Executive Officer, and the sole director of RYT, Mr Gregory Smith, are the same person, and he has provided an affidavit which explains that RYT consents to being joined as a plaintiff and, more importantly, says RYT has a “clear and common interest in the existing claims brought by Bremworth”. Mr Edwards says, further, that joining RYT will enable the resolution of all matters of controversy between the parties and avoid duplication, delay and cost.
[15] Mr Edwards submits the defendants will suffer no prejudice if RYT is joined as no new issues will be raised and no further evidence will be required. The new claims are all based on the facts which have emerged at trial and replicate those made by Bremworth. There is also no need for further discovery. Mr Edwards says that in undertaking discovery, Bremworth reviewed all of RYT’s records and it is clear that all relevant RYT documents have been disclosed. There is no practical risk, therefore, that further discovery is required to resolve the issues between the parties.
[16] Mr Edwards notes that the amendment to the pleadings will be minimal, simply adding RYT as an alternative plaintiff in the first two causes of action. Mr Edwards confirmed that the plaintiff could produce amended pleadings today, and the evidence supporting the case remains the same, whether the plaintiff is RYT or Bremworth.
[17] For those reasons, Mr Edwards argues it is in the interests of justice that the application is granted.
Submissions for the defendants
[18] Mr Williams, for the defendants, says that RYT does not meet the threshold of being a party which “ought” to have been joined. This is because Bremworth claims that the defendants have breached a duty of confidence owed to Bremworth, and the answer to that question can be determined without RYT’s joinder to the proceeding. In respect of the second limb, which is essentially whether RYT’s presence is necessary to do justice, Mr Williams argues similarly that RYT’s alleged rights against the defendants will not be directly affected by any order that may be made by the Court.
[19] In any event, the defendants submit that even if there is jurisdiction to join RYT, the Court has a discretion to refuse joinder, and in that regard delay is a relevant consideration. Mr Williams cites Hallam v Ryan, where an application for joinder failed on jurisdictional grounds.3 However, it was also indicated that the Court would, in any event, have exercised its discretion against joinder. In that case, the proceeding had commenced on 21 March 1988 and, when the application for joinder was made in August 1989, the case was awaiting a standby fixture for late August 1989. Because the delay in applying was not fully explained and late joinder would have jeopardised the trial date, the application would have been refused in any event.
[20] Mr Williams argues similar considerations apply here. He says the delay is not fully explained, noting there was no obligation on the defendants to raise the possibility that RYT was the correct plaintiff, and, in any event, the defendants had denied that Bremworth was owed any obligation of confidence by them and so sufficiently signalled the issues they now raise.
[21] More importantly, the defendants argue that the late joinder of RYT will be prejudicial because:
(a)RYT has not provided disclosure;
(b)the defendants have not seen a statement of claim setting out RYT’s claims precisely, nor had the opportunity to respond to those claims in a fully considered statement of defence;
(c)limitation defences arise in respect of RYT’s claim that did not arise in respect of the plaintiff, Bremworth;
(d)there has been no opportunity to call RYT personnel to test RYT’s claims; and
(e)the defendants have not had the opportunity to prepare their closing address having regard to the allegations that RYT is yet to make.
3 Hallam v Ryan (1989) 3 PRNZ 132 (HC).
All these factors, Mr Williams contends, point against the addition of RYT as an additional plaintiff.
Discussion
[22] I accept that it is surprising RYT was not named as a plaintiff given the contractual arrangements, which are relied on to say confidential information was transferred to Bremworth, were with a subsidiary and separate entity, Curlicue Ltd, later RYT.
[23] However, I do not accept that the fact the defendants took issue with Bremworth’s standing to bring the relevant claims, was signalled in the pleadings. While the defendants denied they owed an obligation of confidence to Bremworth, that cannot, without more, be seen as alerting Bremworth to the fact they denied Bremworth was the appropriate party to bring the claim. Indeed, the defendants effectively confirmed the relationship was between the defendants and Bremworth by, for example, pleading “the intellectual property that Bremworth acquired in the purchase of RYT was the specifications for, and the associated methods of producing the effects embedded in, the unique and exclusive felted yarns developed by Radford Yarn for Bremworth”. Similarly, the defendants admitted that “as part of Bremworth’s acquisition of the RYT business, Bremworth acquired all of RYT’s intellectual property [as] defined in the SPA”. The pleaded defences focus on the scope of the intellectual property Bremworth acquired, by saying it was not confidential information, except perhaps to a limited extent which has not been breached, rather than denying that Bremworth was the party entitled to assert rights in respect of that information. For these reasons, I do not consider the late application to join RYT as a plaintiff is entirely unexplained.
[24] In terms of whether either of the jurisdictional thresholds in r 4.56 are met, the question of whether the party “ought” to have been joined involves consideration of whether the party should be joined in order to do justice. If the defendants are claiming that only RYT has the right to enforce the duties or obligations of confidence in respect of the claimed intellectual property, then I consider that question is answered in the affirmative. RYT “ought to have been joined” as a plaintiff.
[25] More importantly, I consider that RYT should be before the Court to effectually and completely adjudicate upon and settle all issues in the proceedings.4 While, of course, at present, the claim is expressed as whether the defendants have breached a duty of confidence owed to Bremworth, that claim is clearly founded on the agreements reached with RYT, and it would be entirely unsatisfactory to leave that question open, and requiring further litigation, if the claim that a duty of confidence has been breached is substantiated but fails, simply because the duty was found to be owed to RYT, not Bremworth. For these reasons, I am satisfied that both jurisdictional thresholds in r 4.56 are met.
[26] However, the far more important point is whether there is genuine prejudice to the defendants if RYT is joined now, such that I should, in the exercise of my discretion, decline the application. Mr Edwards has explained that he only seeks to join RYT as a plaintiff in the first and second causes of action. RYT would simply be added alongside Bremworth as a plaintiff to enforce rights in relation to the intellectual property allegedly acquired as part of the sale to Curlicue/RYT.
[27] In respect of the restraint of trade, Bremworth says it was a party to the agreement for sale and purchase of shares and so can enforce the restraint of trade in its own right, so no change is sought in respect of that cause of action, and I say no more about that.
[28] In respect of the other concerns the defendants raise, I consider concerns about the need for a new statement of claim and for further disclosure are lacking in substance. The addition of RYT as an additional or alternative plaintiff in the first two causes of action can be done quickly and does not fundamentally change the case, save for the fact that the limitation issues will arise in respect of any breach of an alleged duty of confidence which occurred prior to 2016. However, that is the plaintiff’s difficulty. So long as limitation issues are acknowledged as arising, there can be no prejudice to the defendants.
4 Taylor v McDougall [1963] NZLR 694 (SC) at p 696.
[29] I also consider it is almost inconceivable that there will be documents which are relevant to the dispute which have not been discovered. That said, Bremworth can be required to provide confirmation, in affidavit form, that that is the case. Bremworth clearly pleads its rights are drawn from the arrangements with RYT, and Mr Williams did not identify any specific additional evidence which should be heard if RYT was added as a plaintiff.
[30] Similarly, if there are issues arising which need to be addressed in closing submissions, and which cannot be dealt with in the time available between now and when those submissions are heard, any such prejudice can be addressed by reserving leave to provide additional submissions on those issues at a later date.
[31] Finally, to the extent the grant of the application is an indulgence to the current plaintiff, Bremworth, that can be met by an award of costs in the defendants’ favour.
Conclusions
[32] For all these reasons, I am satisfied it is appropriate to grant the application as I did in my oral judgment issued on the morning of 13 September 2022 on the following conditions:
(a)the plaintiff is to file and serve an amended statement of claim by 5 pm, 13 September 2022;
(b)the defendants are to file and serve a statement of defence by 5 pm, Wednesday 14 September 2022, but can seek leave to defer that should any unexpected issues arise;
(c)the plaintiff is also to, before closing submissions are heard, provide an affidavit confirming that the new plaintiff, Radford Yarn Technologies Ltd, has discovered all relevant documents; and
(d)the plaintiff is to pay the defendants 2B costs in respect of all steps relating to this application.
Solicitors:
Russell McVeagh, Auckland Hudson Gavin Martin, Auckland
1