Craig v Social Media Consultants Limited

[2017] NZHC 1315

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-000102

CIV-2017-404-000795 [2017] NZHC 1315

UNDER

Copyright Act 1994

BETWEEN

COLIN GRAEME CRAIG Appellant

AND

SOCIAL MEDIA CONSULTANTS LIMITED

First Respondent

JORDAN HENRY WILLIAMS Second Respondent

Hearing:	14 June 2017
Appearances:	K Glover and L Bercovitch for the Appellant B Henry and C Foster for First Respondent P McKnight for Second Respondent
Judgment:	14 June 2017

JUDGMENT OF WOOLFORD J

Solicitors/Counsel:

K Glover, Shortland Chambers, Auckland

B Henry, Auckland
P McKnight, Wellington

Chapman Tripp, Auckland

Shanahans, Family and Property Law, Auckland

CRAIG v SOCIAL MEDIA CONSULTANTS LTD & ANOR [2017] NZHC 1315 [14 June 2017]

Introduction

[1]      In a statement of claim dated 16 March 2016 filed in the Auckland District Court, Colin Graeme Craig, former leader of the Conservative Party, sued two defendants for breach of copyright in a two verse poem entitled “Two of Me”, which he  had  incorporated  in  a  letter  he  had  sent  to  his  former  press  secretary, Rachael MacGregor, in December 2013.   The two defendants were Social Media Consultants Limited (SMCL), which publishes the Whale Oil blog on the website  and  Jordan  Henry  Williams,  the  executive  director  of  the New Zealand Taxpayers’ Union Incorporated.   Ms MacGregor had given the letter incorporating  the  poem  to  Mr Williams  for  safekeeping  and  asked  him  not  to disclose  it.    However,  Mr Williams  took  a  photograph  of  the  poem,  which  he incorporated in an article entitled “Exclusive: The poem Colin Craig Doesn’t Want You to See” which he then gave to SMCL’s director, Cameron John Slater, who posted it under his own name on the Whale Oil website.

[2]      The two defendants made applications before trial for summary judgment and/or for Mr Craig’s claim to be struck out on the basis that the claim could not succeed as there was no reasonably arguable cause of action and that the claim was vexatious and an abuse of process.

[3]      In  an  oral  judgment  dated  6  December  2016,  Judge  M-E  Sharp  granted Mr Williams’ application for summary judgment on the basis that Mr Craig had not replied within the required 10 days to the affirmative defences raised in Mr Williams’ statement of defence.1   Judge Sharp did not, however, grant SMCL’s application for summary  judgment  as  SMCL had  not  filed  a  statement  of  defence  raising  any affirmative defences.

[4]      As to the defendants’ applications for the claim to be struck out as vexatious and an abuse of process, Judge Sharp was of the view that the claim was indeed vexatious, having been brought for a collateral purpose, namely, to establish a breach

of confidence and to protect Mr Craig’s reputation.   She did not consider that the

1      Craig v Social Media Consultants Ltd [2016] NZDC 24911.

claim  had  been  brought  in  good  faith  and  struck  out  the  claim  against  both defendants on that basis.

[5]      In a subsequent decision on costs dated 5 April 2017, Judge Sharp awarded indemnity costs against Mr Craig and ordered him to pay $32,593.75 to SMCL and

$27,938.75 to Mr Williams.

[6]      Mr   Craig   now   appeals   against   both   the   substantive   decision   dated

6 December 2016 and the costs decision dated 5 April 2017.

Summary judgment

[7]      As noted, Judge Sharp declined SMCL’s application for summary judgment because SMCL had not filed a statement of defence raising any affirmative defences. Mr Williams had, however, filed a statement of defence in which he pleaded that the disclosure and any copying of the poem was protected by s 42(2) of the Copyright Act  1994,  which  provides  that  “fair  dealing”  with  a  work  for  the  purposes  of reporting current events by means of a sound recording, film, or communication work does not infringe copyright in the work.

[8]      Mr Craig did not, however, file a reply to the affirmative defences raised by Mr Williams.   This was in breach of r 5.64 of the District Court Rules, which provides:

5.64     Duty to file and serve reply

If a statement of defence asserts an affirmative defence or contains any positive allegation affecting any other party, the plaintiff or that other party must, within 10 working days after the day on which that  statement of defence is served, file a reply and serve it on every party who has given an address for service.

[9]      Rule 5.65 then provides:

5.65     Contents of reply

(1)       A reply must be limited to answering the affirmative defence or positive allegation and otherwise must comply with the rules governing statements of defence so far as they are applicable.

(2)       An  affirmative  defence  or  positive  allegation  in  a  statement  of defence that is not denied is treated as being admitted.

[10]     Judge  Sharp  held  that  by  failing  to  file  a  reply,  Mr  Craig  in  effect acknowledged that he had no arguable reply to the affirmative defences pleaded by Mr Williams.  Her Honour stated:

The lack of reply, in my view, is determinative of the summary judgment application in this case.

[11]     Judge Sharp therefore exercised her discretion to grant summary judgment to Mr Williams because of the lack of a reply within the required time period by Mr Craig.

[12]     However, Judge Sharp refused summary judgment to SMCL because she was left with doubt on the issue of fairness or otherwise of the dealing, notwithstanding that  SMCL  had  not  pleaded  the  affirmative  defence  of  fair  dealing,  which Mr Williams had done in the statement of defence he had filed.

[13]     The key issue in the appeal against the District Court’s decision to grant Mr Williams’ application for summary judgment is therefore whether the Judge fell into error by treating Mr Craig’s failure to file a reply within the required time period as determinative when she was unable to say specifically that Mr Williams had proved on the balance of probabilities that Mr Craig had no arguable reply to the affirmative defences pleaded “given the issue about whether the defendants dealt fairly with the work”.

[14]     The inconsistency in the result whereby SMCL’s application for summary judgment was declined, but Mr Williams’ application for summary judgment was granted on the same set of facts and with the same legislative background indicates to me that the Judge fell into error by adopting a formulaic approach when she held that  the  lack  of  reply  by  Mr  Craig  to  the  affirmative  defences  pleaded  in Mr Williams’ statement of defence was “determinative” of his summary judgment application.

[15]     The Judge cites one authority in support of her finding – Van de Klundert v

Clapperton.2      On  close  examination,  however,  the case is  not  authority for the

2      Van de Klundert v Clapperton [2015] NZHC 425.

proposition that the failure to file a reply within the required time period is determinative of  a summary judgment  application.    It  was  relevant  only to  the exercise of the discretion to be exercised on any summary judgment application. Van de Klundert v Clapperton was a defamation case in which the plaintiff alleged that  the  defence  of  qualified  privilege  pleaded  by  the  defendant  did  not  apply because the defendant was predominantly motivated by ill-will or otherwise took improper advantage of the occasion of publication.   In that case, the plaintiff was required by s 41 of the Defamation Act 1992 to serve particulars of the ill-will within

10 working days  after service of the statement  of defence.   He did not do so. Associate Judge Osborne stated:3

While [counsel] did not urge me to treat the absence of a s 41 notice as determinative of the summary judgment application, its absence is a matter which in my judgment is relevant to the exercise of the discretion which I must exercise on any summary judgment application.

[16]     More importantly, it appears that the Judge’s attention was not drawn to a number of other High Court cases in which the failure to file a reply was also not regarded as determinative.  These include Sargison v VinPro Ltd,4 Frankton Gateway

Apartments (2003) Ltd v Sullivan,5 Gillespie v Guest (No 2)6 and Bright v Town.7

[17]     For instance, in Frankton Gateway Apartments (2003) Limited v Sullivan, Associate Judge Matthews stated:8

[30]     …[A] slip in the process of refining the pleadings would have the effect of denying [the plaintiff] the right to argue the validity of the positive defence claimed - in other words, it would bring all or part of [the plaintiff's] claim to a peremptory halt, even though the claimed positive defence might, in some cases at least, lack merit. I do not think that the rule was intended to have that effect. It may be compared with the situation that applies when a statement of defence is not filed within time. The Rules allow a plaintiff to obtain judgment by various steps depending on the nature of the proceeding. In contrast there are no equivalent rules which specifically allow a defendant to seek a permanent stay or strike-out of a plaintiff’s claim on the ground that  a  reply  has  not  been  served.  In  my  opinion  this  supports  an interpretation of rr 5.62 and 5.639  as a mechanism to bring about prompt

3 At [11].

4      Sargison v VinPro Ltd HC Dunedin CIV-2011-412-000453, 28 October 2011.

5      Frankton Gateway Apartments (2003) Ltd (in liq) v Sullivan [2012] NZHC 2399.

6      Gillespie v Guest (No 2) [2013] NZHC 669.

7      Bright v Town [2016] NZHC 411.

8 At [30].

9      Rules 5.62 and 5.63 of the High Court Rules are the equivalent of rr 5.64 and 5.65 of the District

definition of the issues in a case. I do not think these rules are to be interpreted  so  as  to  deprive  a  plaintiff  of  access  to  justice.  The  phrase "treated as being admitted" should be interpreted as having procedural effect only, not substantive.

[18]     I am of the opinion that, in the present case, Mr Craig cannot be characterised as having accepted the affirmative defence of fair dealing raised by Mr Williams in his statement of defence.  In his notice of opposition to the summary judgment/strike out application made by Mr Williams, dated 14 June 2016, Mr Craig stated that he was opposed to the making of any such order because Mr Williams did not deal fairly with his poem.   He then listed a number of particulars which he asserted demonstrated Mr Williams’ lack of fair dealing.

[19]     The Judge also acknowledged in her oral judgment, dated 6 December 2016, that Mr Craig made legal arguments opposing Mr Williams’ affirmative defence of fair dealing at the hearing of Mr Williams’ application when she stated:

By his lack of reply to the affirmative defences raised, the plaintiff in effect is saying (notwithstanding his legal argument to the contrary today) that he accepts that those affirmative defences pertain.

[20]     Mr Craig has, however, never accepted the affirmative defences raised by Mr Williams and made that quite plain six months earlier in his formal notice of opposition.  In those circumstances, I am of the view that the Judge fell into error in allowing Mr Williams’ application for summary judgment on the basis of Mr Craig’s lack of a formal reply to the affirmative defences raised in his statement of defence.

Application to strike out

[21]     Judge Sharp also granted the application by both SMCL and Mr Williams to strike out Mr Craig’s claim as vexatious and an abuse of process of the Court.  The Judge considered that Mr Craig’s real motive in bringing the claim was to establish a breach of confidence and to protect his reputation.  The Judge thought Mr Craig was therefore deceiving the Court because he was using the claim for ulterior and improper purposes.  The Judge was also of the view that the claim was manifestly

groundless  and  without  foundation.    Furthermore,  although  the  claim  “perhaps

Court Rules.

contains the germ of a legitimate grievance”, Judge Sharp was of the view that Mr Craig would not be able to access relief from the Court apart for a declaration “which would be a pyrrhic victory only for him and a complete waste of Court time and public money”.

[22]     The key issue in the appeal against the District Court’s decision to grant both SMCL’s and Mr Williams’ applications to strike out Mr Craig’s claim is therefore whether the Judge fell into error in characterising Mr Craig’s claim as vexatious and an abuse of process of the Court.

[23]     The threshold before a claim can be determined vexatious and an abuse of process is a high one. A claimant should not lightly be denied the right to have his or her claim substantively determined.  Access to the Courts is a very important right and of real significance in settling disputes in the community.

[24]     After careful consideration in the circumstances of this case, I am of the view that the Judge again fell into error in characterising Mr Craig’s claim as vexatious and an abuse of process.

[25]     The Judge found that Mr Craig was motivated by a collateral purpose.  With respect, the Judge did not cite any evidence to support that finding.  Mr McKnight submitted that Judge Sharp took judicial notice of earlier proceedings involving Mr Craig in which the evidence of Mr Williams was preferred to that of Mr Craig. The Judge did make a passing reference to defamation proceedings in the High Court,  but  did  not  explain  how  she  concluded  from  those  proceedings  that Mr Craig’s motive in filing the copyright claim earlier in time was to protect his reputation.

[26]     Mr Henry submitted that evidence of Mr Craig’s motives could be gleaned from the pleadings and affidavits sworn by Mr Craig himself.   I accept that upon perusal of the pleadings and affidavits an inference may be drawn as to Mr Craig’s motives, but at best they are mixed motives.  Mr Craig does view himself as a poet of some literary merit.   Even if Mr Craig’s primary motivation was to protect his reputation, I am of the view that his copyright claim should still be determined on its

merits.  He is entitled to have his day in Court, although Mr McKnight notes that he has had seven and half weeks in Court already in various proceedings.

[27]     In Solicitor-General v Siemer, Mr Siemer applied to strike out a contempt application brought by the Solicitor-General on the basis that he acted in bad faith or with ulterior motives when he brought the application.10   Mallon J stated:11

To the extent that the respondent seeks to establish that the contempt application was brought in bad faith or with ulterior motives, that is not relevant to a determination of the contempt application which would be considered on its merits.

[28]     Similarly,  in  Goldsmith  v  Sperrings  Ltd,  the  English  Court  of  Appeal considered an application for a stay of proceedings in the context of a defamation proceeding alleged to have been brought with a collateral purpose outside the legitimate scope of the legal process.12   Bridge LJ stated:13

What if a litigant with a genuine cause of action, which he would wish to pursue in any event, can be shown also to have an ulterior motive in view as a desired byproduct of the litigation?   Can he on that ground be debarred from proceeding?  I very much doubt it.

[29]     The comments of Bridge LJ were cited with approval by the High Court of Australia in Williams v Spautz.14   The High Court did, however, see a distinction if a plaintiff did not wish to pursue his or her cause of action to a conclusion because he or she intended to use the proceeding for a collateral purpose.  In the present case, there is, however, no suggestion that Mr Craig does not intend to pursue his claim to a conclusion.

[30]     While the Judge stated that Mr Craig’s claim was “manifestly groundless and

without foundation”,15  she did acknowledge that “it perhaps contains the germ of a legitimate grievance”16 and had earlier noted17 that:

10     Solicitor-General v Siemer HC Wellington, CIV-2010-404-8559, 13 May 2011.

11 At [58].

12     Goldsmith v Sperrings Ltd [1977] 1 WLR 478 (CA) at 503.

13     At p 586.

14     Williams v Spautz [1992] HCA 34, (1992) 174 CLR 509 at 522.

15 At [49].

16 At [52].

17     At [22] – [23].

(a)      Copyright in the poem did vest in Mr Craig;

(b)      The poem had not previously been published to the public, only to

Ms MacGregor;

(c)      The defendants did publish the poem without Mr Craig’s permission;

and

(d)      SMCL operated the Whale Oil website for profit.

[31]     Of importance, Judge Sharp was also unable to conclude the affirmative defences  raised  by Mr Williams in  his  statement  of defence were proven.    She stated:18

…I am unable to say specifically that [Mr Williams] has proved on the balance of probabilities that [Mr Craig] has no arguable reply to the statutory defences pleaded and argued by [Mr Williams] given the issue about whether the defendants dealt fairly with the work…

[32]     Her Honour also stated:19

I am left with doubt on the issue of the fairness or otherwise of the dealing.

[33]     In those circumstances, Mr Craig’s claim cannot be seen as groundless.

[34]     The lack of a remedy, apart from perhaps a declaration, was also a factor in Judge Sharp’s decision to strike out Mr Craig’s claim.  However, if Mr Craig is able to establish breach of copyright, the Court has  a range of options, even in the absence  of  identifiable  loss  by  him.     Nominal  damages  would  be  available. Mr Craig may also be able to claim additional damages if the defendants have acted fragrantly in breach of his rights.20   Further, Mr Craig has indicated that he will seek discovery of the profits made by the Whale Oil website through the increase in

traffic following publication of his poem.  If there is an identifiable increase in profit,

18 At [32].

19 At [36].

20     JeansWest Corporation (New Zealand) Ltd v G-Star Raw CV [2015] NZCA 14, (2015) 13 TCLR

787; Wellington Newspapers Ltd v Dealers Guide Ltd [1984] 2 NZLR 66 (CA).

this may form the basis of a substantial monetary claim against the defendants, if the defendants are not able to establish the affirmative defence of fair dealing.

[35]     Although awards of compensatory damages in New Zealand for copyright infringement are traditionally fairly low, I am of the view that it is fundamental to the rule of law that a party whose rights have been infringed have access to the Courts to obtain justice.

[36]     As an addendum to her judgment, Judge Sharp expressed a serious doubt that the  poem  could  be  said  to  be  a  substantial  part  of  the  literary  work  in  which copyright vested in Mr Craig, and that is the letter in which the poem was inserted. If it was not a substantial part, then there could not, by law, be an infringement of Mr Craig’s copyright.   Judge Sharp stated that while she did not specify that as a ground either for the grant of summary judgment to Mr Williams or as a basis for striking out Mr Craig’s claim, it was a matter which she did take into account.  Judge Sharp  did  not,  however,  make  any  finding  on  the  issue.     There  are  also countervailing arguments which will need to be determined in any substantive hearing.

Conclusion

[37]     The appeal against Judge Sharp’s decision dated 6 December 2016 to grant summary judgment to Mr Williams and to strike out Mr Craig’s claim as vexatious and an abuse of process is therefore allowed and Judge Sharp’s decision quashed. The appeal against the costs decision dated 5 April 2017 must also be allowed and is accordingly quashed.

[38]     I direct that Mr Craig’s claim be reinstated and called in the District Court for a case management conference to advance it to a substantive hearing.  SMCL should file its statement of defence prior to the conference.   Mr Craig should also file a formal reply to the affirmative defences raised by Mr Williams in his statement of defence prior to the conference.

[39]     Costs are reserved. If the parties cannot agree, I will receive memoranda

which should be filed within 10 working days of the date of this judgment.

Woolford J