Croser v Focus Genetics Limited Partnership (2548500)

[2019] NZHC 3087

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-625

[2019] NZHC 3087

BETWEEN

DAMIEN LEIGH CROSER and KIRSTEN LOUISE CROSER

Plaintiffs

AND

FOCUS GENETICS LIMITED PARTNERSHIP (2548500)

Defendant

On the papers:

Counsel:

C M Stevens and T Mijatov for Plaintiffs

D McLellan QC, S M Bisley and P J Niven for Defendant

Judgment:

26 November 2019

JUDGMENT (NO. 2) OF CHURCHMAN J

Introduction

[1]                  This is a further interlocutory application in these proceedings. By email received at 4:29 pm on 19 November 2019, the defendant filed an interlocutory application for:

(a)leave to appeal an interlocutory order; and

(b)a stay of the interlocutory order.

[2]                  The interlocutory order referred to was an interim injunction issued by the Court on 18 November 2019.

[3]The interim injunction essentially had two components to it:

CROSER & ANOR v FOCUS GENETICS LIMITED PARTNERSHIP (2548500) NO. 2 [2019] NZHC 3087

[26 November 2019]

(a)the first imposed an obligation on the defendant to cause Sheep Genetics Australia (SGA) to make publicly available certain genetic data in relation to the parentage of some stud rams that the plaintiffs wished to sell; and

(b)the defendant was to provide, to an expert nominated by the plaintiffs, genetic data about the plaintiffs’ stud sheep that would permit the expert to prepare a mating plan for the plaintiffs’ sheep.

[4]                  The background to these proceedings is that the plaintiffs are sheep farmers in South Australia and the defendant is a sheep genetics business that operates in both New Zealand and Australia.

[5]                  In December 2013, the parties entered into a written agreement that saw the defendant provide certain genetic material and relevant data to the plaintiffs with the intention that the plaintiffs would utilise that material and data to create a flock of superior quality sheep. Both parties were to share in the proceeds from the sale of the sheep.

[6]                  The relationship between the parties became dysfunctional which led to the plaintiffs issuing proceedings against the defendant.1

[7]                  As a result of the breakdown in the relationship between the parties, the defendant removed the plaintiffs’ ability to access genetic information about the plaintiffs’ sheep that had, prior to that point, been publicly available on the Lambplan database operated by SGA.

[8]                  The removal of access to this data caused the plaintiffs to apply for an interim injunction on two bases. The first was that they urgently needed that data in order to be able to prepare a mating plan for their sheep that avoided the possibility of inbreeding. The second was that, if prospective purchasers of their rams did not have access to the parentage data and the Australian Sheep Breeding Values (ASBVs), then

1      Croser v Focus Genetics Limited Partnership (2548500) CIV-2019-485-164.

the sheep could not be sold for the premium price that superior sheep with full data can command. The Court issued an interim injunction.2

[9]                  The original proceedings were set down for a two-week hearing to commence on 14 October 2019. The parties negotiated a settlement of that proceeding and, by email of 2 October 2019, the Court was advised by counsel for the plaintiffs that the proceedings had been settled, and that the hearing could be vacated.

[10]               The defendant was aware of and acquiesced in the communication to the Court and the vacation of the fixture.

[11]               After the fixture had been vacated, an issue arose between the parties, with the defendant claiming that the information that they had agreed to provide the plaintiffs as part of the settlement was different to that which the plaintiffs had described in the settlement agreement tendered to the defendant for signature. The defendant also claimed that no final settlement had been reached, that the agreement had always been “subject to contract” and that, until the written agreement was signed, there was no settlement.

[12]               On 25 October 2019, the plaintiffs issued these proceedings in order to enforce the settlement agreement. They also applied for an urgent substantive fixture on, or from, 2 December 2019. By way of separate application, they applied to be able to rely on the evidence in discovery documents exchanged in the original proceedings (CIV-2019-485-164).

[13]               The defendant vigorously opposed the application for urgency on a wide number of grounds.3

[14]               A principal ground of opposition was that the hearing of this matter would take much longer than the two days the plaintiffs had estimated as a result of the number of witnesses that the defendant indicated it wished to call.

2      Croser v Focus Genetics Ltd Partnership [2019] NZHC 627.

3      These are set out at Croser v Focus Genetics Ltd Partnership [2019] NZHC 2995 at [17].

[15]               The Court promptly allocated a hearing date for the application for urgency and heard the matter on 6 November 2019. During the course of the hearing, it became apparent that, given the breadth of the matters the defendant indicated it wished to raise by way of opposition and the various applications that it indicated it intended to make, a two-day hearing was going to be insufficient. This meant there was no realistic prospect of the Court being able to hear this matter prior to Christmas. This, in turn, meant that the relief which the plaintiffs sought by way of its application for urgency (namely the ability to sell the rams in the October-December selling season with appropriate pedigree/genetic information, and the preparation of a breeding plan to permit mating in February/March) was simply not going to be capable of being achieved.

[16]               The plaintiffs therefore, during the hearing, orally applied for an interim injunction.

[17]               The  oral  application  was  followed  up  with  a  written  memorandum  of   7 November 2019 setting out the terms of the injunction sought. An undertaking as to damages was also subsequently filed.

[18]               The defendant filed a memorandum on 12 November 2019 with detailed submissions in relation to both the urgency application and the interim injunction application. The defendant also filed extensive affidavit evidence.

[19]               On 14 November 2019, the plaintiffs filed a memorandum of submissions in reply, with the defendant filing a further memorandum of submissions in response the following day.

[20]               After considering all of the submissions and evidence, the Court issued an interim injunction on 18 November 2019. That interim injunction required the defendant to take certain steps within 24 hours of release of the decision. The decision was received by the defendant at 12:34 pm on 18 November 2019.4

4      Above n 3.

[21]               On 19 November 2019, the defendant filed a memorandum at Court seeking “clarification” of the terms of the interim injunction. Under the heading “Impossibility of compliance with the order”, the defendant’s counsel also raised a number of issues which they suggested meant that the defendant could not comply with the interim injunction.

[22]               By a further memorandum also dated 19 November 2019, the defendant sought leave to appeal a part of the interim injunction decision. The particular part was [70(a)] which required the defendant, within 24 hours of the order, to cause SGA to make publicly available on Lambplan certain ASBVs relating to rams that the plaintiffs had proposed selling at various times up until these proceedings were resolved.

[23]               The second part of the application was for a stay of its obligations to comply with [70(a)] of the injunction until final determination of the intended appeal.

[24]               As an alternative to a stay, the defendant requested staying that part of the injunction set out in [70(a)] of the judgment until such time as the Court of Appeal could determine or dismiss any application for leave to appeal from any decision declining to grant a leave to appeal.

[25]               Following a teleconference on 20 November 2019, the Court issued a minute dated 21 November 2019 confirming that there was no ambiguity in the interim injunction which required clarification and that the words used meant exactly what they said. In relation to the claimed “impossibility of compliance”, the minute also explained that SGA was not a party to the proceedings and the injunction was not issued against them. The obligation was on the defendant to take appropriate steps to cause SGA to make the information publicly available. The minute noted that, based on the material before the Court, the Court had a reasonable expectation that if the defendant requested SGA to make the genetic information publicly available, it would do so.5

5      Croser  &  Anor  c  Focus   Genetics   Limited   Partnership   (2548500)   CIV-2019-485-625, 21 November 2019 at [8].

[26]               To the extent that the Court has been provided with email correspondence between the defendant and SGA, it appears that there is no technical difficulty that would stop SGA complying with the defendant’s requests.

[27]               The minute of 21 November noted that the defendant’s application for leave to appeal and a stay were conditional upon the outcome of the defendant’s application for “clarification”.

[28]               The minute also indicated that, after issuing a minute on the “clarification” issue, the Court would then address the questions of leave to appeal and stay on the papers.

Leave to appeal an interlocutory application

[29]               Under s 56(3) of the Senior Courts Act 2016, leave to appeal an interlocutory decision is required from the High Court. If this Court refuses leave, then the Court of Appeal may still itself grant leave under s 56(5).

[30]               In Finewood Upholstery Ltd v Vaughan, Fitzgerald J recognised the following considerations as relevant on an application for leave:6

(a)A high threshold exists for the granting of leave. An allegation of error of law or fact is generally insufficient. An applicant should raise an arguable error.

(b)Leave should only be granted where the circumstances warrant incurring further delay.

(c)The alleged error should be of general or public importance that requires determination, or otherwise be of sufficient importance to the applicant to outweigh the lack of any general or precedential importance.

[31]               She described the leave requirement as a “filtering mechanism”,7 a characterisation with which Palmer J expressed agreement in Li v Chief Executive, Ministry of Business, Innovation and Employment: “the requirement for leave to appeal interlocutory decisions should filter out appeals on unmeritorious grounds and

6      Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9], citing A v Minister of Internal Affairs [2017] NZHC 887.

7 At [13].

insignificant points”.8 Palmer J also stated that he considered “the wider purpose behind s 56(3) is to lessen tactical delays and enhance the efficiency of the administration of justice”.9 In short:10

… an application to appeal an interlocutory decision under s 56(3) is likely to be granted where: (a) there is good reason to consider it before, or separately to, the substantive appeal; and (b) it is sufficiently meritorious in substance and relates to a sufficiently important issue as to outweigh the cost and delay of appeal.

[32]               Where an applicant is seeking a stay of an interlocutory order such as an interim injunction, the Court is engaged in a balancing exercise.

[33]               In Mad Butcher Holdings Limited v Standard 739 Limited, Gault J dealt with an application for a stay in the context of an application for leave to appeal an interlocutory order.11 He summarised the approach to a stay as follows:12

[10]   The starting point is that a successful party is entitled to the fruits of  its judgment. An appellant who seeks to stop this must show why the usual consequences should not follow. The Court balances the competing rights of the party who has obtained judgment against the need to preserve the appellant’s position in the event the appeal succeeds. Factors include whether appeal rights would be rendered nugatory, the apparent strength of the appeal, whether the successful party will be injuriously affected by the stay, and the overall balance of convenience. The Court exercises its discretion in a manner which, balancing all the factors, best meets the overall justice of the case.

Analysis

[34]               The defendant advanced a number of grounds in support of the applications for leave to appeal and stay. I will address each of these separately.

[35]               The first ground is: “The Orders are a mandatory injunction made on an interim basis, made without full oral argument.”

[36]               As set out above, the oral application for an interim injunction was advanced when it became obvious that, as a result of the approach which the defendant wished

8      Li v Chief Executive, Ministry of Business, Innovation and Employment [2018] NZHC 117, [2018] NZAR 1134 at [19].

9 At [20].

10 At [22].

11     Mad Butcher Holdings Limited v Standard 739 Limited [2019] NZHC 699.

12     Citations omitted.

to take to defend the application, there was no possibility of the plaintiffs’ application being dealt with in time to provide the remedy sought by the plaintiffs.

[37]               Although the application was made orally, and there was brief oral argument about it, the application was then progressed by way of filing a formal written application setting out the terms of what was proposed. The defendant then had the opportunity of filing detailed legal submissions and extensive affidavit evidence. Any submission that the defendant was denied an opportunity to fully state its position is unfounded.

[38]               The second ground is that the defendant had, on 12 November 2019 (after the oral hearing but before the detailed written submissions were filed), offered terms to the plaintiffs for an injunction which it asserted were consistent with what the parties had previously agreed and largely performed. It was suggested that this balanced the plaintiffs’ need for access to the data against the prejudice to the defendant.

[39]               In the decision on the interim injunction application on 18 November 2019, the Court had specifically addressed the question of whether the plaintiffs should be bound to the terms of what was referred to as the Sales Agreement.13

[40]               It was entirely appropriate for the defendant to make a further settlement proposal to the plaintiffs. However, in the absence of an agreement as to the terms upon which the defendant, in the interim, would provide genetic information to the plaintiffs, both parties remained at risk of the Court coming to a decision on the interim injunction application that they were unhappy with.

[41]               There is nothing in the defendant’s argument that, because it made a further settlement proposal, somehow the Court should not have issued an interim injunction.

[42]               The defendant then submits that the terms in [70(a)] of the interim injunction have effectively determined the present proceedings and the underlying proceedings. It is claimed that the effect of the injunction is “to grant the plaintiffs unfettered and permanent access to a substantial amount of Focus’ confidential data”.

13     Croser & Anor v Focus Genetics Limited Partnership, above n 3, at [51].

[43]               This submission is factually incorrect. The order is an interim order only. The public access to the data is only available in connection with the sales of rams that will occur in the period between the issue of the order and the resolution of the underlying proceedings.

[44]               The grant of the interim injunction will not determine proceedings. The access to the data is not “unfettered” but is for the limited purpose as set out in the injunction. The defendant accepted that it was appropriate that, on an interim basis, the plaintiffs should have some data, the only issue was as to the extent of that data.

[45]               The defendant also claims that the Court failed to properly consider the balance of convenience and overall justice, and asserted that this was because “there is minimal prejudice to the plaintiffs under Focus’ Proposal”. It was said that the plaintiffs had not adduced any evidence that their losses would not be compensable in damages, that their losses were speculative and that the plaintiffs were marketing rams without ASBVs immediately prior to the order being made.

[46]               The Court considered all of these issues when it dealt with the original injunction application in the underlying proceedings. Without repeating the reasoning in the original injunction decision, the Court referred to it (specifically in [59]-[66]) and indicated that it applied the same reasoning in relation to this interim injunction.

[47]               The defendant’s claim that the plaintiffs were marketing rams with ASBVs immediately prior to the injunction being issued is a variation of its argument that the plaintiffs should be bound by the terms of the Sales Agreement. As indicated above, in the injunction decision in these proceedings, the Court explained why the fact that the plaintiffs had, on a short-term basis, agreed to an arrangement that was different to that sought in the present injunction application, did not somehow estop it from seeking an injunction on different terms.

[48]               In relation to the defendant’s claim that irreparable harm will be caused to the defendant because the order will determine the key issue in these proceedings and the underlying proceedings, this is also a repetition of the argument dealt with above. The interim injunction did not require the defendant to make the genetic data publicly

available on a permanent basis. It relates to the sale of specific sheep that the plaintiffs are intending to sell imminently. Once those sheep are sold, the data that relates to them ceases to have value to the plaintiffs because it no longer owns the sheep and cannot sell them a second time.

[49]               The defendant also claims that the alleged errors are of general or public importance. Two grounds are given in support of this submission:

(a)mandatory interim injunctions are rarely granted; and

(b)the case concerns a novel intellectual property issue.

[50]               Mandatory interim injunctions are rare, as was acknowledged by the Court in the injunction decision in the original proceedings. However, in appropriate cases they can be granted. The Court’s decision in that case to grant what was effectively a mandatory interim injunction was not challenged by the defendant.

[51]               In the present case, the defendant conceded that it was appropriate for the plaintiffs to have access to some data. That was effectively a concession that the plaintiffs’ application for a mandatory interim injunction had some justification. The only real issue in dispute was the extent of the data to be provided.

[52]               There is little that could be said to be novel about this dispute. It does involve intellectual property but there is nothing about the subject matter that makes the granting of an interim injunction (either in the original proceedings or in this case) novel.

[53]               The reality is that, while the issues in this case are important to the parties, the sums involved overall are relatively modest. The Court has already expressed concern at the mounting litigation costs.

[54]               The plaintiffs have submitted that this is a case where delay favours the defendant and have implied that the defendant’s actions are part of an overall strategy to delay as much as possible. The Court is not required to resolve that issue for the purposes of this application, but there is no doubt that delay would seem to favour the

defendant and, as noted in the decision on the injunction application in the original proceedings, there is a significant disparity in resources as between the parties which impacts on their relative ability to cope with the consequences of delay.

[55]               The balance of convenience clearly favours the plaintiffs. The defendant’s arguments are weak, and the case does not give rise to any matters of public significance.

Conclusion

[56]For these reasons, the applications for leave to appeal and stay are declined.

Churchman J

Solicitors:

Succeed Legal Limited, Wellington for Plaintiffs Buddle Findlay, Wellington for Defendant

cc:C M Stevens and T Mijatov D McLellan QC