Giggle HQ Limited v Giggle Developments Limited
[2023] NZHC 3564
•8 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2418
[2023] NZHC 3564
35664
UNDER
Rule 7.48 and Part 19 of the High Court Rules 2016 and s 16 of the Contempt of Court Act 2019
BETWEEN
GIGGLE HQ LIMITED
Applicant
AND
GIGGLE DEVELOPMENTS LIMITED
First Respondent
DARREN GARY SHAW
Second Respondent
Hearing: 7 December 2023 Appearances:
J V R James for Applicant S Elliott for Respondents
Judgment:
8 December 2023
JUDGMENT OF LANG J
[on application seeking findings of contempt]
This judgment was delivered by Justice Lang On 8 December 2023 at 4.00 pm
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Anthony Harper, Auckland
Insight Legal Ltd, Warkworth/S Elliott, Auckland
GIGGLE HQ LTD v GIGGLE DEVELOPMENTS LTD [2023] NZHC 3564 [8 December 2023]
[1] The parties to this proceeding are embroiled in a dispute relating to intellectual property. The first respondent, Giggle Developments Ltd (Giggle), operates as a licensee of the applicant, Giggle HQ Ltd (GHQ) in the Bay of Plenty region. The second respondent, Mr Shaw, is a shareholder and director of Giggle. The dispute has prompted GHQ and an associated company, Giggle Operations Ltd (in liq), to initiate proceedings in this Court against Mr Shaw and Giggle as well as several other associated entities (the substantive proceeding).1
[2] One of the complicating features of the case is the fact that the parties are still required to maintain a business relationship with each other and with other franchisees and licensees. Given the heat the dispute has generated to date it is no surprise that it has had a significant and detrimental impact on those relationships.
[3] GHQ applied for interim injunctive relief in the substantive proceeding. After hearing from counsel Brewer J issued a Minute on 21 August 2023 in which he made several interim orders by consent. These included an order prohibiting Mr Shaw, Giggle and several other named entities from contacting, directly or indirectly, any of the other franchisees or licensees of GHQ in relation to those parties’ dealings with GHQ.2
[4] GHQ has filed the present proceeding because it considers Mr Shaw and Giggle breached the terms of the orders made by Brewer J on 21 August 2023 in remarks that Mr Shaw made in an email that he sent to other franchisees and licensees on 5 October 2023. It seeks orders finding the respondents in contempt under s 16 of the Contempt of Court Act 2019 (the Act). GHQ seeks an order that Mr Shaw be sentenced to a term of imprisonment or required to pay a fine. It also seeks an order that Giggle pay a fine of $20,000 or such other amount as the Court may determine as being appropriate.
1 Giggle HQ Ltd v Shaw HC Auckland CIV-2023-463-11. GHQ originally filed the proceeding in the Rotorua Registry but Brewer J made an order transferring it to the Auckland Registry in a Minute issued on 21 August 2023.
2 As well as another company called Connekta Works Ltd.
The alleged breach
[5] The background to the substantive proceeding is extremely complicated. It is not necessary for present purposes to describe it in greater detail than I have already done. I proceed directly to the issue to be determined in the present proceeding.
[6]The orders that Brewer J made on 21 August 2023 were relevantly as follows:
…
(b)Mr Shaw, Giggle Developments Ltd, Giggle International Services Ltd and Ms Badiuk are prohibited from taking any action, directly or indirectly, to deny Giggle HQ Ltd use of the Giggle Systems and Solutions (as defined in the Services and Licence Agreement) or to impede Giggle Operations’ performance of its obligations under the Services and Licence Agreement.
(c)Mr Shaw, Giggle TV Holdings Ltd, Giggle Developments Ltd, Giggle International Services Ltd and Ms Badiuk are prohibited from contacting, directly or indirectly, any of the franchisees or licensees of Giggle HQ Ltd, or Connekta Worx Ltd, in relation to those parties’ dealings with Giggle HQ Ltd.
(d)Nothing in the above orders shall preclude Giggle Developments Ltd or Giggle Ltd from engaging with the franchisees or licensees of Giggle HQ Ltd to the extent reasonably required and for the sole purpose of:
(i)Giggle Developments Ltd performing its obligations under its Licence Agreement with Giggle HQ Ltd for the Bay of Plenty area;
(ii)Giggle Ltd performing its obligations in relation to the Labtests network.
[7] GHQ contends that Mr Shaw breached order (c) by sending the following email to several other franchisees and licensees of GHQ on 5 October 2023:
Hi all. I hope you are all well I am doing very well thank you. BOP is still doing very well Albeit the pre-election jitters!
I am still here and (not going away anywhere in a hurry). Just a quick note to tell you of my new email address (below).
My emails (and probably yours) were being constantly viewed by GHQ. (along with my OneDrive files) This goes against Microsoft policy as GHQ must have signed authorization to do this, however that doesn’t appear to stop them.
And I quite like my privacy!
I refuse to allow this to continue and have taken it upon myself to setup another email address (as I am entitled to) as there is nothing mine or (in anyone’s contract) that says you must use the Goggigle one
I did have a forward set up, so any mails sent to me got sent on however in the efforts to try and force me to use the go giggle one GHQ have removed this! So hence I am advising you of my new one.
So any correspondence please sent it to me here on the email below and always available on the same phone number to chew the fat!
See you all at conference! And have a fantastic day (Emphasis added)
The law
[8] Section 16 of the Act provides for the enforcement of court orders in a variety of ways, including a finding of contempt. It relevantly provides as follows:
16 Certain court orders and undertakings may be enforced
(1)This section applies to—
(a)any interim or final order, decision, decree, direction, or judgment of a court (a court order) to do or abstain from doing something, except as provided in section 17:
…
(2)A court may enforce the court order or undertaking against the party, non-party, or other person bound by the order or undertaking by taking action provided for in subsections (3) and (4) on application by—
(a)the party who sought the order or undertaking being enforced; or
(b)a person who benefits from, or has an interest under, the order or undertaking; or
(c)the Solicitor-General, if the Solicitor-General is satisfied that there is a high degree of public interest in enforcing the order or undertaking.
(3)The court—
(a)must not proceed further under this section unless it is satisfied that other methods of enforcing the court order or undertaking have been considered and are inappropriate or have been tried unsuccessfully; and
(b)if so satisfied, must make a finding as to whether it is proved beyond reasonable doubt that—
(i)the court order or undertaking being enforced has been made in clear and unambiguous terms and is clearly binding on the person; and
(ii)the person had knowledge or proper notice of the terms of the court order or undertaking being enforced; and
(iii)the person has, without reasonable excuse, knowingly failed to comply with the court order or undertaking being enforced.
(4)On finding beyond reasonable doubt that the requirements of subsection (3)(b)(i) to (iii) are met, the court may—
(a)do any of the following:
(i)issue a warrant committing the person or a director or an officer of the body corporate, as the case may be, to a term of imprisonment not exceeding 6 months:
impose a fine,—
(A)in the case of an individual, not exceeding
$25,000; or
(B)in the case of a body corporate, not exceeding
$100,000:
(iii)order the individual or a director or an officer of the body corporate, as the case may be, to do community work, not exceeding 200 hours, as the court thinks fit:
(b)if the court is the High Court, make a sequestration order in accordance with the rules of court.
[9] The fact that the Court has the power to impose significant punitive measures, including imprisonment, means that a finding of contempt will not be made lightly. As Gordon J noted in Han v Zhu, s 16(3)(a) is unambiguous in stating that an
application under s 16 is an enforcement method of last resort.3 The Court must not make a finding of contempt unless all other methods of enforcing an order have either been exhausted or are inappropriate.
[10] As will be clear from the wording used s 16(3)(b), the Court may only find a person in contempt if it is satisfied beyond reasonable doubt regarding three matters:
(a)the Court order being enforced has been made in clear and unambiguous terms and is clearly binding on the person sought to be held in contempt;
(b)that person had knowledge or proper notice of the terms of the order; and
(c)that person has, without reasonable excuse, knowingly failed to comply with the order.
[11] The requirement that these matters be proved beyond reasonable doubt reflects the fact that the sanctions available under s 16 are those that usually apply to transgressions of the criminal law. Under the criminal law the onus is on the prosecution to prove beyond reasonable doubt that the defendant committed the offence with which he or she is charged.
Analysis
[12] There is no dispute in the present case that the respondents had knowledge of the terms of the orders because they were represented by counsel when Brewer J made them. They were also subsequently served with a sealed copy of the orders. Further, there is no dispute that the orders were binding on the respondents because they were named as respondents in the application for interim relief and they were also expressly named in the orders that the Judge made. However, issues arise in relation to the remaining requirements under s 16(3)(b)(i) and (iii).
3 Han v Zhu [2021] NZHC 3007, [2021] NZFLR 596 at [30], referencing Johnson v Johnson [2021] NZHC 840 at [64].
Is order (c) cast in clear and unambiguous terms?
[13] Section 16(3)(b)(i) requires any order to be made in clear and unambiguous terms. The need for clarity is obvious in the present context given the fact that punitive sanctions apply for breach of court orders. Those who are subject to such orders need to have a clear understanding of what they can and cannot do.
[14] In the present case the Judge’s orders do not prescribe the meaning or scope of the word “dealings” as it is used in order (c). If arguments as to interpretation arise this will obviously suggest that the orders have not met the threshold of being clear and unambiguous.
[15] I consider the only portion of the email that could arguably breach the Judge’s orders is the italicised sentence below:
My emails (and probably yours) were being constantly viewed by GHQ. (along with my OneDrive files) This goes against Microsoft policy as GHQ must have signed authorization to do this, however that doesn’t appear to stop them.
[16] GHQ contends that this sentence breached order (c) because it cast GHW in a negative or pejorative light for its actions in viewing Mr Shaw’s emails and also possibly those of the recipients of the email. It would therefore taint the relationship between GHQ and the recipients of the email in the future.
[17] In advancing this submission Mr James contends on GHQ’s behalf that the Judge’s orders must be construed purposively and in light of the reasons why they were made. These included GHQ’s perception that Mr Shaw had in the past made comments to other franchisees and licensees that denigrated GHQ and its director, Mr Brown. Mr James contends the orders must be construed in light of this purpose, and that a broad meaning should therefore be accorded to the term “dealings” as it is used in order (c).
[18] However, this submission needs to be viewed in the light of s 16(3)(b)(i), which requires any order to be clear and unambiguous before the courts will enforce it. It is noteworthy that there is nothing in the orders that expressly prohibits the named persons from making derogatory or pejorative remarks about either GHQ or
Mr Brown. However, I accept that conduct of that type may not fall within the scope of permitted activity under order (d).
[19] One interpretation of the word “dealings” is that it relates to past conduct. In other words, dealings or interactions that have already taken place between the franchisees and licensees and GHQ. Under this interpretation order (c) would not apply to future interactions and dealings between those parties or to actions taken by GHQ on a unilateral basis.
[20] If this interpretation is applied the respondents would not have breached the terms of order (c). This is because GHQ would have acted unilaterally in viewing the emails sent and received by the franchisees and licensees. That act did not constitute a dealing between those parties and GHQ. Further, any effect on the dealings between those parties would be in the future.
[21] Mr James resists this interpretation. He contends that the word “dealings” necessarily applies also to future dealings or interactions between GHQ and the franchisees and licensees. He says the email that Mr Shaw sent to the franchisees and licensees was likely to affect their future dealings with GHQ because it questioned GHQ’s integrity in viewing Mr Shaw’s emails. It also suggested that GHQ may be viewing emails sent to and by the franchisees and licensees. Mr James submits that this type of suggestion was obviously likely to affect dealings between GHQ and the franchisees and licensees in the future.
[22] I accept that, by implication, this is another available interpretation of the word “dealings”. However, the fact that there is another available interpretation merely underscores the point that the meaning of the order is ambiguous.
[23] Mr James also submits that the wording used in order (d) is instructive. He says this demonstrates that the named persons were only entitled to contact franchisees and licensees for one of the two purposes set out in (d). They were impliedly prohibited from contacting the franchisees and licensees for any other person.
[24] The difficulty with this submission is that order (d) is cast in permissive terms whilst order (c) is cast in prohibitive terms. The exercise of extrapolating prohibited
conduct by implication from a permissive order merely creates further ambiguity and confusion.
[25] These issues lead me to conclude that the term “dealings” in order (c) can be interpreted in either of two ways. One of these leads to the conclusion that the order was breached whilst the other is to opposite effect. It follows that order (c) was not made in clear and unambiguous terms. For this reason it cannot meet the threshold required under s 16(3)(b)(i).
[26] For completeness, I record that the respondents also argued that GHQ could not satisfy the Court that it had either exhausted all other means of enforcing the Judge’s orders or considered these to be inappropriate. The need to exhaust all other means of enforcement is obviously imposed to ensure that a party seeking to enforce an order of the Court does not immediately resort to contempt proceedings under the Act.
[27] It is not strictly necessary to determine this issue having regard to the conclusion I have already reached. I note, however, that the onus is on the party seeking an order under s 16 to demonstrate that this is the only appropriate means of addressing the breach that has occurred. In many cases it will be possible for a party to persuade a party to desist from breaching court orders without resorting to the contempt procedure. By way of example, the party in breach can be asked to cease the conduct in question immediately or face contempt proceedings if that does not occur.
[28] In the present case, however, the act upon which GHQ relies was a single event that had already occurred. It is therefore difficult to see what other steps GHQ could have taken.
Result
[29]The application is declined.
Costs
[30] The respondents are the successful parties and are entitled to a single award of costs on a category 2B basis together with disbursements as fixed by the Registrar.
Lang J
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