E-Blended Learning Solutions Ltd v Devaney

[2012] NZHC 2294

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

CIV 2012-443-461 [2012] NZHC 2294

BETWEEN  E-BLENDED LEARNING SOLUTIONS LTD

Applicant

ANDALEXANDER PETER ST JOHN DEVANEY

First Respondent

ANDAGATA MALGORZATA OLEKSIAK Second Respondent

ANDCREATIVE LEAP LTD Third Respondent

Hearing:         6 September 2012 (by telephone) Counsel:      D King for Applicant

Judgment:      6 September 2012

JUDGMENT OF HEATH J

This judgment was delivered by me on 6 September 2012 at 4.00pm pursuant to Rule

11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Dennis King Law, PO Box 1092, New Plymouth

E-BLENDED LEARNING SOLUTIONS LTD V DEVANEY HC NWP CIV 2012-443-461 [6 September 2012]

[1]      Yesterday, E-Blended Learning Solutions Ltd (E-Blended) sought a search order, under rr 33.2 and 33.3 of the High Court Rules.   Rule 33.3 sets out the prerequisites for an order:

33.3    Requirements for grant of search order

The court may make a search order under rule 33.2 only if the court is satisfied that—

(a)       an applicant seeking the order has a strong prima facie case on an accrued cause of action; and

(b)      the potential or actual loss or damage to the applicant will be serious if the search order is not made; and

(c)       there is sufficient evidence in relation to a respondent that—

(i)       the respondent possesses relevant evidentiary material; and

(ii)      there is a real possibility that the respondent might destroy such  material  or  cause  it  to  be  unavailable  for  use  in evidence in a proceeding or anticipated proceeding before the court.

[2]      Having considered the application and the affidavits in support, I reached a provisional conclusion that the grounds for a search order had not been made out.  In a Minute issued yesterday, I stated:

[7]     On the basis of the evidence of Ms Burney and Ms Hannan, I am prepared to accept that E-Blended has a strong prima facie case based on breach of confidence.[1]     I am satisfied that the potential or actual loss or damage to E-Blended will be serious.[2]   I am also satisfied that Mr Devaney, Ms  Oleksiak  and  Creative  Leap  Ltd  each  possess  evidentiary  material relevant to a claim for breach of confidence.[3]

[8]    My concern is over the last element; namely, whether there is a “real possibility” that any of the three respondents “might destroy such material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the Court”.[4]   To destroy the material is likely to take away the business opportunity that Mr Devaney and Ms Oleksiak may otherwise have  wished  to  pursue.    In  any  event,  if  the  material  were  promptly destroyed that may lessen the risk that E-Blended might suffer serious loss.

[1] High Court Rules, r 33.3(a). This is based on an equitable duty of confidence. Counsel may wish to consider whether because Mr Devaney and Ms Oleksiak were former employees, jurisdiction in a dispute of this nature may rest with the Employment Relations Authority.

[2] Ibid, r 33.3(b).

[3] Ibid, r 33.3(c)(i).

[4] Ibid, r 33.3(c)(ii).

[3]      Notwithstanding those views, I indicated that I would be prepared to hear from counsel for E-Blended today, either for the purpose of persuading me that a search order should be made or to seek some other form of injunctive relief.  I heard from Mr King, for E-Blended, at 2pm today for that purpose.

Background

[4]      Given  the  urgency  with  which  I  am  dealing  with  the  application,  my summary of the issues will necessarily be brief and incomplete.

[5]      Mr Devaney and Ms Oleksiak  were employed by a company called Practical Services Ltd, a member of the Zieland Group of Companies, of which E-Blended is also part.  They were seconded to work for E-Blended.  Both Mr Devaney and Ms Oleksiak commenced their secondment around July 2007.   Mr Devaney and Ms Oleksiak resigned from their employment within days of each other, in July 2012 and finished working for E-Blended on 10 August 2012.

[6]      It  is  alleged  that  Mr  Devaney  and  Ms  Oleksiak  attempted  to  remove intellectual property and confidential documents belonging to E-Blended and then incorporated a new company, Creative Leap Ltd, to trade in direct competition with E-Blended.   It is asserted further that Mr Devaney and Ms Oleksiak have been contacting clients of E-Blended to inform them of the services they are now offering through Creative Leap Ltd.

[7]      On 16 August 2012 Ms Burney, the legal manager for Zieland Group of Companies, wrote to Mr Devaney about concerns that he and Ms Oleksiak had taken intellectual property and confidential documents on a USB stick.  He replied on 24

August 2012 denying any intent to remove the USB stick that had been found in his possession around 4.30pm on Friday 10 August 2012, when he was leaving E- Blended’s premises for the last time.  In his letter, Mr Devaney also wrote:

I can also confirm that I do not hold or have access to any company or client information.

Other evidence casts real doubt on the veracity of that response.

[8]      Ms Burney deposes that she spoke to an organiser of a conference to be held in Auckland on 9 and 10 October 2012.  That conversation took place on 23 August

2012, the day before Mr Devaney’s reply was received.   The organiser told Ms Burney that Mr Devaney and Ms Oleksiak had booked to attend the conference while still employed by Practical Services Ltd and were to present a paper entitled “The Gamification of Learning and Training – Teaching by Stealth”.  Gamification is an area in which E-Blended has developed expertise and know-how for relevant software.

[9]      There are concerns that major customers will be enticed to Creative Leap Ltd, to the detriment of E-Blended.

[10]     Today, Mr King referred me to other evidence, in making submissions to support the primary application for a search order.  While accepting my reason for concluding that there was no “real possibility” that the three respondents would destroy evidential material because it was not in their interests to do so,[5]  Mr King submitted that the second limb of r 33.3(c)(ii) may apply; namely, that there was “a real  possibility  that  the  [respondents]  might  cause  [evidential  material]  to  be

unavailable for use in evidence in a proceeding or anticipated proceeding before the

Court”.

[5] See para [2] above.

[11]   Notwithstanding Mr King’s submissions that the Court is dealing with information technology professionals who may be able to remove confidential information from the jurisdiction of the Court, their apparent lack of candour with their former emplopyer about their business intentions after resigning their employment and the circumstances in which they registered for the Auckland conference, the ability for a forensic examiner to interrogate a computer to identify information that was previously stored on the hard drive, militates against a conclusion that Mr Devaney and Ms Oleksiak might make the “material unavailable” for evidential purposes.   Further, were they to  do so, they would be at risk of contravening a Court order (the injunction I propose to issue) and being in contempt

of Court.

[12]     In my view, the appropriate course is to restrain use of any confidential information that may be held, to prohibit Mr Devaney, Ms Oleksiak and Creative Leap Ltd (or their agents) from contacting clients of E-Blended and requiring them not to destroy or make unavailable confidential information relating to the breach of confidence claim.

[13]     I  have  given  consideration  to  whether  orders  should  be  made  that  the Creative Leap website ( and its Facebook and Twitter pages, be disestablished.   However, on reflection, I consider it would be useful for those accounts to be maintained so that E-Blended could readily monitor whether anything is recorded on the site or pages that might infringe against the orders I propose to make.  No doubt, Mr Devaney and Ms Oleksiak will understand the seriousness of the situation and the need for them to comply strictly with the orders.

[14]     I refuse to make a search order.  Instead, on the basis of undertakings as to damages given by Practical Services Ltd and E-Blended (both of which are to be re- filed to refer specifically to the injunctions rather than the proposed search order), I make the following orders:

(a)      Mr Devaney, Ms Oleksiak and Creative Leap Ltd (or an agent acting on behalf of any one or more of them) are restrained from using any documents or confidential information of E-Blended which they hold or to which they have access, being of the type described in paras

1.3.1–1.3.9  of  the  draft  order  submitted  today,  which  shall  be incorporated into the order as sealed.

(b)Mr Devaney, Ms Oleksiak and Creative Leap Ltd (or an agent acting on behalf of any one or more of them) shall not contact (directly or indirectly) any known clients of E-Blended, including Southern Cross Healthcare and Vodafone.  If any such clients have been contacted to date, Mr Devaney, Ms Oleksiak and Creative Leap Ltd (or an agent acting on behalf of any one or more of them) shall immediately notify the client (or clients) of this order, by sending a copy to them by

email.  They shall also send a copy of any such email to E-Blended at a nominated email address to be inserted into the sealed order.

(c)      Mr Devaney, Ms Oleksiak and Creative Leap Ltd (or an agent acting on behalf of any one or more of them) shall not destroy or make unavailable  for  evidential  purposes  any documents  or  confidential information relevant to this proceeding.

(d)      The costs of this proceeding are reserved.

[15]     For the purposes of this order, the terms “document” and “information” shall include any writing on any material, any electronically stored writing and data, any information stored by means of tape recorder, computer disk, photography, USB drive, video and includes any book, plan, charge, drawings, design, memorandum, note, graph or ledger or copies thereof.

[16]     I make the following procedural directions:

(a)       E-Blended shall file and serve a Statement of Claim by midday on 10

September 2012.

(b)Any  application  to  discharge  these  orders  and  any  affidavits  in support, shall be filed and served by 3pm on 10 September 2012.

(c)      Any notice of opposition and affidavits in opposition to an application to  discharge the  orders  shall  be filed and  served by 10am  on  12

September 2012.

[17]     The proceeding shall be listed for mention in the Duty Judge List in the High Court at Auckland at 10am on 13 September 2012.  Provided time is available, any application to discharge may be heard at that time.  Should time be necessary on that day to  argue  any  aspect  of  the  proceeding,  counsel  should  request  a  telephone conference with the Judge scheduled to sit as Duty Judge on 13 September 2012, to be held on the afternoon of 12 September 2012.

[18]     Leave is reserved to E-Blended to seek any other order, on notice to Mr Devaney, Ms Oleksiak and Creative Leap Ltd.  Any such application shall be filed and served with supporting affidavits by 5pm on 10 September 2012.  Any notice of opposition and affidavits in opposition shall be filed and served by midday on 12

September 2012.

[19]     Copies of all documents filed in the proceeding to date (including the draft Statement of Claim), the sealed order and a copy of this judgment shall be served on Mr Devaney, Ms Oleksiak and Creative Leap Ltd as soon as practicable.

[20]     For completeness, I have given consideration to whether orders should be made in this Court given the former status of Mr Devaney and Ms Oleksiak as employees.[6]    I consider that jurisdiction does exist and refer to BDM Grange Ltd v

[6] See fn 1 above.

Parker.[7]

[7] BDM Grange Ltd v Parker [2006] 1 NZLR 353 (HC).

P R Heath J

Delivered at 4.00pm on 6 September 2012