Dotcom v Attorney-General

[2018] NZHC 653

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-003103

[2018] NZHC 653

BETWEEN

KIM DOTCOM

First Plaintiff

MEGAUPLOAD LIMITED

Second Plaintiff

AND

THE ATTORNEY-GENERAL (on behalf of the Crown in right of New Zealand)

First Defendant

THE ATTORNEY-GENERAL

Second Defendant

THE ATTORNEY-GENERAL (on behalf of Crown Law Office)

third Defendant

THE UNITED STATES OF AMERICA

Fourth Defendant

THE ATTORNEY-GENERAL (on behalf of New Zealand Police)

Fifth Defendant

Hearing:

(On the papers)

Counsel:

R M Mansfield and S L Cogan for Plaintiffs

M J Lillico, F R J Sinclair and Z Fuhr for Defendants

Judgment:

11 April 2018

JUDGMENT OF VENNING J

(Application to defer the filing of a statement of defence)

This judgment was delivered by me on 11 April 2018 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Anderson Creagh Lai, Auckland

Crown Law, Wellington

Counsel:            R M Mansfield/S L Cogan, Auckland

DOTCOM v THE ATTORNEY-GENERAL [2018] NZHC 653 [11 April 2018]

Introduction

[1]    Mr Dotcom and Megaupload Limited sue the Attorney-General (in various capacities) and the United States of America (USA). They seek damages for amounts to be particularised prior to trial.

[2]    The defendants’ statements of defence were due to be filed by 26 February 2018. On 15 February the defendants filed a memorandum seeking an adjournment of the proceedings pending the outcome of the decisions of the Court of Appeal in two appeals pursued by Mr Dotcom.

[3]    In a minute issued on 1 March 2018 the Court indicated it was not prepared to deal with the matter by way of memorandum and required a formal application to be filed. The defendants then filed a formal application seeking the deferral of filing of the statement of defence. The plaintiffs filed a notice of opposition. Counsel for the plaintiffs and the defendants agree that the application for deferral can be dealt with on the papers. The parties have exchanged memoranda.1

Factual background

[4]    It is unnecessary to summarise the background to the various interactions between Mr Dotcom and the New Zealand and USA authorities in detail to determine the application. For present purposes I paraphrase the summary set out by Brewer J in Dotcom v The District Court at North Shore (the 1679 proceedings).2

[5]    On 5 January 2012, the United States District Court for the Eastern District of Virginia issued an arrest warrant for Mr Dotcom based on five charges contained in an original indictment. On 20 January 2012, Mr Dotcom was at home when the Police arrived with search warrants and an arrest warrant. They searched Mr Dotcom’s home and seized, among other things, electronic devices such as computer hard drives and memory sticks. Mr Dotcom was arrested.

1      Plaintiffs’ memoranda of: 15 February, 28 February and 9 March 2018; Defendants’ memoranda of: 26 February and 5 April 2018.

2      Dotcom v The District Court at North Shore [2017] NZHC 3158.

[6]    The search warrants and the arrest warrant were issued by the District Court following a legal process that began on 11 January 2012 with a formal request by the USA to the New Zealand Government for assistance for the purpose of extraditing Mr Dotcom to the USA to face the criminal charges in the original indictment.3

[7]    On 16 February 2012, the United States District Court for the Eastern District of Virginia issued a superseding arrest warrant based on a superseding indictment which amended the five counts in the original indictment and added a further eight counts.

Procedural background

[8]    Mr Dotcom has opposed his extradition. He challenged the validity of the search warrants. In 2014, the Supreme Court dismissed his appeal against the Court of Appeal findings that the search warrants were valid.4 Subsequently the District Court held Mr Dotcom was eligible for extradition. Mr Dotcom then appealed that decision to this Court.

[9]    Gilbert J upheld the decision of the District Court that Mr Dotcom was eligible for extradition, albeit concluding that the conduct alleged in the counts of the original indictment   based   on    copyright   infringement    was   not   an   offence   against  s 131(1)(c),(d)(ii) or (d)(iii) of the Copyright Act 1994.5 The Judge held that s 131 of the Copyright Act did not provide an available extradition pathway. However, Gilbert J concluded that the general criminal law fraud provisions in the Crimes Act 1961 could apply to the alleged actions of Mr Dotcom and others so that the Crimes Act in combination with s 101B of the Extradition Act provided other extradition pathways, as did the Treaty on Extradition between USA and New Zealand itself.

[10]   Mr Dotcom appealed the High Court decision. The appeal was heard by the Court of Appeal on 7 February 2018. The decision is reserved.

3      The search warrants were issued under s 44(1) of the Mutual Assistance in Criminal Matters Act 1992 (MACMA), while the arrest warrant was issued under s 20(1) of the Extradition Act 1999 (EA).

4      Dotcom v Attorney-General [2014] NZSC 199, [2015] 1 NZLR 745.

5      Ortmann v United States of America [2017] NZHC 189.

[11]   On 21 July 2017, Mr Dotcom commenced the 1679 proceedings in the High Court by filing a statement of claim for judicial review. He raised eight causes of action in which he:

(a)challenged the validity of the arrest warrant and all steps taken in reliance on it, including the extradition proceeding;

(b)asserted the request for surrender received by the Minister did not comply with s 18 of EA;

(c)argued that if the arrest warrant is invalid, then so too must be the search warrants.

(d)argued that  there  being  no  extraditable  offence  known  to  the  New Zealand authorities, there was no basis for the search warrants. The Attorney-General should not have authorised the Police to apply for the search warrants;

(e)asserted the USA’s request to the Attorney-General was invalid absent an extraditable offence;

(f)challenged the decision by the Minister of Justice to decline to exercise discretion in Mr Dotcom’s favour;

(g)asserted that the Minister should have exercised her discretion in Mr Dotcom’s favour;

(h)challenged the decision by the Deputy Solicitor-General to direct the clones be made of the electronic devices seized from Mr Dotcom’s homes and they be sent to the USA.

[12]   Brewer J struck out the first seven causes of action. He found them to disclose no reasonably arguable cause of action and/or to be an abuse of process. The defendant had not sought to strike out the eighth cause of action.

[13]   Mr Dotcom has appealed that decision. The appeal is due to be heard on 23 and 24 April 2018 by the Court of Appeal.

The present proceedings

[14]In the present proceedings the plaintiffs plead:

(a)The Attorney-General, Crown Law and the Police owed Mr Dotcom a duty of care in seeking and maintaining the arrest warrant. They breached that duty by seeking the arrest warrant; failing to disclose to the District Court there was no basis on which the Judge could reasonably be satisfied the offence for which he was sought was an extradition offence; failing to advise the District Court Judge of the superseding indictment and its effect; and failing to ensure the USA understood and discharged its duty of candour.

(b)The Attorney-General and Crown Law owed Mr Dotcom a duty of care in the exercise of their role as Central Authority under the Extradition Act 1999 and the Treaty on Extradition between New Zealand and the United States. They breached this duty by failing to identify the request for Mr Dotcom’s surrender was made in reliance on the superseding US arrest warrant rather than the US arrest warrant on which the 18 January 2012 arrest warrant was based;

(c)The Attorney-General, Crown Law and the Police acting as public officers in exercising or purporting to exercise public powers knew or were recklessly indifferent to the fact that the arrest warrant was unlawful, failed to disclose to the District Court that a superseding indictment had been issued and did so for an improper motive;

(d)The United States, the Attorney-General, Crown Law and the Police maliciously procured the arrest warrant because they either did not have or ceased to have reasonable and probable cause to apply for the warrant but nevertheless pursued and maintained the arrest warrant. In doing so they were motivated by an improper purpose.

[15]   The causes of action substantially rely on the proposition the defendants pursued the arrest warrant notwithstanding they knew or ought to have known there was no basis upon which a District Court Judge could reasonably be satisfied that the offences were extradition offences and/or that they breached their duty of disclosure in relation to the superseding arrest warrant. They are based in large part on Gilbert J’s finding that s 131 of the Copyright Act did not provide an available extradition pathway.

[16]   That issue was the subject of argument before the Court of Appeal at the hearing on 7 February 2018. It will also feature in the appeal from Brewer J’s decision in the 1679 proceedings, which is to be heard later this month. Largely for those reasons and for reasons of efficiency of process, the defendants submit they should not have to file defences to the claims until the Court of Appeal decisions are available and their strike out application is determined. The strike out application is based on abuse of process arguments similar to those raised in the 1679 proceedings.

The opposition to the application for deferral

[17]In response to the application for deferral the plaintiffs submit that:

(a)this Court (Brewer J) found that Mr Dotcom had two reasonably arguable causes of action, namely that the arrest warrant pursuant to which he was brought before the New Zealand extradition process or Court was invalid, as was the request for surrender received by the Minister;

(b)the defendants overstate the degree of overlap between the various proceedings. The first and second causes of action in the 1679 proceeding will not be determined by the findings of the Court of Appeal on the availability of s 131 of the Copyright Act as an extradition pathway in the extradition appeal;

(c)to the extent there is an overlap, such overlap does not preclude the defendants pleading to the allegations of fact in the statement of claim.

The allegations should not go unanswered pending the outcome of the extradition appeal and the 1679 appeal;

(d)this proceeding is different in nature (tort) to the extradition and 1679 proceeding;

(e)given the United States’ position on the absence of any further rights of appeal in the extradition proceeding it is in the interests of justice this proceeding be case managed in the usual way now rather than adjourned until decisions have been issued in the extradition appeal and the 1679 appeal, otherwise there is a risk Mr Dotcom’s claims will be rendered nugatory;

(f)the defendants’ strike out application does not provide a basis on which to adjourn or stay this proceeding. The proceeding should not be stayed pending the hearing of the strike out application;

(g)the defendants’ application is a strategy to tactically delay disclosing the role of the New Zealand authorities.

Discussion

[18]   Case management is applied to proceedings in order to promote their just, speedy and inexpensive determination.6 Cases are triaged for the appropriate process. The current proceeding has been noted as a complex defended proceeding requiring case management. It will require several case management conferences before a fixture will be allocated.

[19]   The Court has general jurisdiction to extend the time appointed by the rules for taking a step in the proceeding and specific jurisdiction to extend or suspend the time for filing a statement of defence.7 Applications such as the present are to be determined on the basis of the overall interests of justice after considering the competing interests of the parties.

6      HCR 7.1(a).

7      HCR 1.19 and 5.47(2)(b).

[20]   Despite counsel for the plaintiffs’ submissions I am satisfied that the interests of justice and the objectives of the rules will best be met in the present case by deferring the time for the defendants to file a statement of defence to the current proceeding.

[21]   The plaintiffs rely on the findings of Brewer J that the first and second causes of action in 1679 were reasonably arguable to support the submission that the present causes of action will not be affected by the outcome of the appeal in the 1679 proceedings. But I accept Ms Fuhr’s response that those observations were effectively subsumed by the Judge’s finding that it was nevertheless an abuse of process to pursue those arguments in a collateral civil proceeding. The Court of Appeal decision on the 1679 proceedings will inevitably inform the status of the plaintiffs’ claims in these proceedings.

[22]   Further, I accept the defendants’ counsel’s advice that during the course of the Court of Appeal hearing of the eligibility appeal both parties made extensive submissions on the correctness of Gilbert J’s interpretation of the offences in s 131 of the Copyright Act. That finding in Mr Dotcom’s favour was a fundamental plank underpinning both the judicial review proceedings and the current civil claim. It is inevitable that the form of this proceeding will be informed by the outcome of the Court of Appeal’s decision on that issue, quite apart from Gilbert J’s finding on the alternate pathway.

[23]   While it is correct that the factual allegations will be within the defendants’ knowledge, and the defendants are not required to plead to matters of law, the allegations in the current statement of claim are premised on the findings of Gilbert J, which have been subject to the appeal. The causes of action rely on that finding. There would be little point in pleading to the factual narrative if the underlying causes of action are to be amended.

[24]   The plaintiffs argue that unless and until the findings in their favour are overturned on appeal they are entitled to rely on them. Strictly that is correct in that no stay automatically operates. There is a limit however to how far that point can be taken in the present case. Quite apart from the point made above that the issue will

likely be dealt with by the Court of Appeal, other practical considerations are relevant such as the cost of proceedings and resources. The present statement of claim is a substantial document in narrative form running to some 61 pages. It includes allegations arising from decisions made following meetings both in New Zealand and overseas between various different parties on a number of different occasions. The task of responding to the pleading will be an extensive and expensive exercise.

[25]   The timing of the appeals are also relevant. The hearing of the appeal in 1679 is scheduled for later this month. Given the first appeal has been heard, and the imminent hearing of the 1679 appeal, any delay in pleading will be limited in the overall context of the progression of a civil case of this nature, which as noted, is a complex case. I consider it is inevitable that the parties’ approach to the current proceedings, including the form of the strike out application, will be substantially informed by the outcome of both Court of Appeal decisions.

[26]   Nor do I accept there is a risk that Mr Dotcom’s claims will be rendered nugatory. If the claims in these proceedings have independent substantive merit they can be pursued by Mr Dotcom whatever the outcome of the extradition proceedings.

[27]   Next, and importantly, since the plaintiffs’ original submissions were filed the defendant has filed a strike out application. That application should be determined before a defence is required. While the present claims are based on tort, it would still be a waste of the parties’ and the Court’s resources and not in the interests of justice overall to hear that strike out application at this time pending receipt of the decisions of the Court of Appeal. The strike out application will inevitably be significantly influenced by the outcome of the Court of Appeal decisions and any amended pleading that may follow.

[28]   There is a further, albeit minor, point. The plaintiffs have as yet failed to pay costs previously awarded by this Court. The defendants should not be put to the expense of incurring significant further costs in this matter while there is an outstanding costs award unpaid by the plaintiffs.

[29]   Finally, I do not accept the submission the application is a strategy to tactically delay disclosing the role of the New Zealand authorities. There is no evidence of that. The plaintiffs’ reliance on the recent decision of the Human Rights Review Tribunal is misplaced. The passage cited by the plaintiffs’ counsel does not support what is effectively a submission of bad faith on the part of the defendants.

Result

[30]   For the above reasons the application to stay the proceeding is granted. There will be an order that the defendants are not required to file a statement of defence to this proceeding pending further order of the Court.

[31]   The Registrar is to refer this file to me to allocate a telephone conference for the purposes of advancing this proceeding and to allocate a hearing of the strike out application after the delivery of the Court of Appeal decisions on the appeals from the decisions of this Court in Ortmann v United States of America and Dotcom v The District Court at North Shore.8

Costs

[32]   The defendants are to have costs in relation to the application and memoranda. I certify for costs on a category 3 time band B basis.

Venning J

8      Ortmann v United States of America, above n 5; and Dotcom v The District Court at North Shore, above n 2.