Green Way Limited v Mutual Construction Limited
[2021] NZHC 3029
•10 November 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2021-404-1053
[2021] NZHC 3029
UNDER Copyright Act 1994 Fair Trading Act 186 IN THE MATTER OF
Breach of Confidence Inducing Breach of Contract Conspiracy
Copyright Infringement Conversion
Misleading and deceptive conduct
BETWEEN
GREEN WAY LIMITED
Plaintiff
AND
MUTUAL CONSTRUCTION LIMITED
First Defendant
Continued…
Hearing: 21 October 2021 (by VMR) Appearances:
J Billington QC and B Molloy for the plaintiff J McBride and R L White for the defendants
Judgment:
10 November 2021
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 10 November 2021 at 12:00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
GREEN WAY LIMITED v MUTUAL CONSTRUCTION LIMITED [2021] NZHC 3029 [10 November 2021]
PHILLIP ANTHONY AINSWORTH
Second Defendant
ZHEHUA (WILLIAM) XIANG
Third Defendant
STEFAN MASUTTI
Fourth Defendant
[1] The plaintiff, Green Way Ltd, applies for leave to appeal my decision, in a judgment of 8 July 2021, rescinding a search order that Green Way had obtained.1 My decision was made on an interlocutory application, so Green Way requires leave to appeal under s 56(3) of the Senior Courts Act 2016.
Background
[2] Green Way’s substantive claim against the defendants is summarised in my judgment of 8 July 2021. I do not repeat that summary here.
[3]On 17 June 2021, Green Way obtained, without notice, three orders:
(a)A search order against the first defendant, Mutual Construction Ltd
(MCL).
(b)An interim injunction against MCL.
(c)An order that the second, third and fourth defendants (the former employees) file an affidavit disclosing any documents or information in their possession belonging or relating to Green Way.
[4]On 18 June 2021, the search order was executed.
[5] The defendants promptly applied for all three orders to be rescinded. I granted that application in my judgment dated 8 July 2021. I found that:
(a)Green Way’s without notice application did not comply with r 7.23(1) of the High Court Rules 2016. The application did not identify the grounds on which the application was made without notice. The application lacked the requisite certificate.2
1 Green Way Ltd v Mutual Construction Ltd [2021] NZHC 1704.
2 At [47]–[49].
(b)Green Way failed to fully and frankly disclose correspondence with the former employees or that the former employees had engaged solicitors and the possible grounds of opposition that arose from those matters.3
(c)Had Green Way’s non-compliance merely been as to the form of the application, and the lack of a certificate, I would not have rescinded the search order.4
(d)Green Way’s non-compliance was also substantive. Further, it was not suggested Green Way failed to perceive the relevance of the non- disclosed facts. It was likely that, had the full facts been disclosed, the orders would not have been made.5
[6] I therefore concluded all three orders should be rescinded on the terms proposed by the defendants – namely, on the basis that the independent solicitor and the IT expert would retain copies of the documents and data but have no further dealings with them until further order of the Court.
[7] Green Way has since discontinued its claims against the former employees. It has done so because a recent Supreme Court decision has clarified that those claims are within the jurisdiction of the Employment Court rather than the High Court. I understand Green Way will be pursuing the former employees in the Employment Court.
[8] A trial of this proceeding has been scheduled for ten days commencing 20 March 2023.
Green Way’s application for leave to appeal
[9] Green Way applies only for leave to appeal my decision to rescind the search order. Green Way does not challenge my decision to rescind the other two orders.
3 At [72].
4 At [78].
5 At [80].
[10] Green Way says I erred in fact and law in rescinding the search order. It says the proposed appeal would have significant implications for its claim against MCL.
[11] MCL opposes the grant of leave. It says there is no arguable error of fact or law in my judgment, and that in any case the appeal would be pointless, so that leave to appeal is not warranted.
Principles governing leave to appeal interlocutory decisions
[12] In Ngai Te Hapu Inc v Bay of Plenty Regional Council, the Court of Appeal, though refraining from laying down definitive principles, said leave to appeal should be granted under s 56(3) only where:6
(a)There is an arguable error of law or fact; and
(b)The significance or implications of that arguable error, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay the appeal process will involve.
[13] The Court also said the principles that governed applications for leave to appeal under s 24G of the Judicature Act 1908 (appeals from an interlocutory decision of the High Court in respect of any proceeding entered on a commercial list) would apply to applications for leave under s 56(3).7 The Court quoted a passage from the Court of Appeal’s judgment in Meates v Taylor [Leave] summarising those principles.8 That passage included:
A party seeking this Court’s leave to appeal under s 24G, leave having been refused by the High Court, has a high threshold to cross. The Commercial List is designed to secure the expeditious completion of the interlocutory stages of a case, and so minimise delays in its ultimate disposition. The ready availability of a right of appeal can frustrate that objective, hence appeal is not of right but by leave. And leave will not be granted as a matter of course, but only where the particular circumstances clearly warrant incurring the further delay that will be involved.
6 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291 at [17]; see also Tomar v Tomar [2021] NZCA 419 at [7].
7 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291 at [17].
8 Meates v Taylor [Leave] (1992) 5 PRNZ 524 (CA) at 526.
[14] In Tomar v Tomar, the Court of Appeal referred with approval to the considerations that Fitzgerald J, in Finewood Upholstery Ltd v Vaughan, had recognised as relevant on an application for leave to appeal under s 56(3). The Court said those considerations were:9
(a)A high threshold exists.
(b)The applicant must identify an arguable error of law or fact.
(c)The alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value.
(d)The circumstances must warrant incurring further delay.
(e)The ultimate question is whether the interests of justice are served by granting leave.
[15] Other authorities have, correctly in my respectful view, said that the proposed appeal must be of sufficient significance to warrant the delay and cost of the appeal.10
[16]In summary, Green Way must satisfy me that:
(a)There is an arguable error of law or fact; and
(b)The alleged error is of sufficient importance (either generally or to Green Way) to warrant the cost and delay of the appeal.
Is there an arguable error of fact or law?
[17] Mr Billington QC, counsel for Green Way, submitted there were two arguable errors in my judgment. The first was my finding that Green Way failed to fully and
9 Tomar v Tomar [2021] NZCA 419 at [6], referring to Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9] and [14].
10 Li v Chief Executive, Ministry of Business, Innovation and Employment (No 2) [2018] NZHC 1171 at [21]–[22]; Yu v Bradley [2018] NZHC 2312 at [11].
frankly disclose correspondence with the former employees. Mr Billington’s written submissions carefully addressed the extent to which Green Way had referred to this correspondence in the affidavits and memorandum that accompanied its without notice application. He submitted that there was sufficient disclosure.
[18] The second alleged error was my finding that it was likely that, had the full facts been disclosed, the without notice orders would not have been made. Mr Billington referred to the second of these as a finding that the non-disclosure was material. He said the legal test for materiality was high and had not been passed in this case.
[19] Mr McBride, counsel for the defendants, submitted that neither error was arguable. He said I had carefully analysed the extent of disclosure in the affidavits and memorandum and had applied the correct legal test for materiality. He also submitted that any appeal on the materiality point would be an appeal against the exercise of a discretion, and therefore limited in scope by May v May.11 This created a higher hurdle for Green Way to cross on this application.
[20] I am satisfied Green Way has raised arguable errors. The proposed appeal would be far from frivolous. It is neither necessary nor appropriate to elaborate further, other than to observe it is unlikely any appeal would be a limited one constrained by May v May principles.
Is the alleged error of sufficient importance (either generally or to Green Way) to warrant the cost and delay of the appeal?
[21] In his written submissions Mr Billington said the issues that would be raised on the appeal would have wider public and general importance, as most case law on without notice applications for search orders was decided before the High Court Rules 2016 came into force. Mr Billington did not pursue this at the hearing. I do not consider any point of general importance would be raised by the appeal. The legal principles, some of which are codified by the High Court Rules 2016, are tolerably clear. It is the application of those principles that would be in issue on any appeal.
11 May v May (1982) 1 NZFLR 165 (CA).
[22] At the hearing Mr Billington submitted that the appeal would be of importance to Green Way. He said that Green Way alleges that MCL instigated and pursued a scheme to misappropriate Green Way’s confidential information and to breach Green Way’s copyright in various works. These were serious allegations. They bred mistrust. Without access to the yield from the search order, Green Way could not be satisfied it would receive proper disclosure from MCL.
[23] Mr McBride submitted the proposed appeal would be pointless. Documents had already been preserved in the yield. The yield had been returned to MCL, but the independent solicitor (and IT expert) retained a control copy. MCL was undertaking the discovery process. It was doing so by searching the yield. MCL’s discovery was being overseen by solicitors. This was how discovery always worked, and there was no responsible basis on which Green Way could complain about it. If, after seeing MCL’s list of documents, Green Way applied for further and better discovery, the control copy of the yield retained by the independent solicitor could be used to assess whether MCL had complied with its discovery obligations.
[24] I accept Mr McBride’s submission. The point of the search order was to secure and preserve documents. That happened with the creation of the yield. Copies of the yield remain with the independent solicitor. A condition on which I rescinded the search order was that the independent solicitor would retain copies of the yield but have no further dealings with them until further order of the Court. That was the basis on which MCL applied to rescind the without notice orders.12
[25] The Court therefore retains control over the secured and preserved documents. MCL is now undertaking discovery from the yield. That discovery is being overseen by its solicitors. The solicitors have their own discovery obligations.13 When MCL provides an affidavit of documents, it will have to explain the process that it used to search the yield.14 If Green Way applies for further and better discovery, the Court
12 Green Way Ltd v Mutual Construction Ltd [2021] NZHC 1704 at [74].
13 For example, High Court Rules 2016, r 8.13.
14 High Court Rules 2016, r 8.15(2).
might utilise the yield to determine whether MCL has complied with its discovery obligations.15
[26] If Green Way were to successfully appeal my decision to rescind the search order, this Court would then have to decide what to do with the yield. The Court would probably ask the independent solicitor to prepare a report, with the assistance of the IT expert, categorising the yield into relevant, irrelevant and privileged documents, with that report being provided to the parties’ respective solicitors.16
[27] In that event, the yield would be no better secured or preserved than it is at present. Security and preservation of evidence are the point of a search order. Green Way (or at least its solicitors) might, in the event of a successful appeal, be more likely to obtain a report on the yield than they would if they had to apply for further and better discovery. I do not regard that difference as important, given the discovery obligations to which MCL’s solicitors (officers of this Court who are overseeing discovery from the yield) are subject.
[28] For these reasons, I conclude the proposed appeal would be of marginal significance to Green Way. I would not characterise it as important.
[29] Counsel did not address me on the question of any delay that might result from an appeal. I acknowledge that an appeal is unlikely to delay final resolution of the proceeding, given the trial scheduled for March 2023. But it is not out of the question. There would, of course, be a substantial cost to any appeal.
[30] Taking all these matters into account, I am not satisfied that an appeal of marginal significance to Green Way warrants the substantial cost and slight risk of delay of the appeal.
Result
[31]Green Way’s application for leave to appeal is declined.
15 I emphasise “might”. Whether a Court would do so would depend, of course, on the material put forward in support of any application.
16 This was Green Way’s proposal for the yield, prior to the search order being rescinded.
[32]MCL is entitled to costs on the application.
Campbell J
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