Greymouth Petroleum Limited v Ruwhiu
[2015] NZHC 220
•19 February 2015
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
CIV-2012-443-241 [2015] NZHC 220
BETWEEN GREYMOUTH PETROLEUM LIMITED
First Plaintiff
BONUS DRILLING (NZ) LIMITED AGENCIA EN CHILE
Second Plaintiff
AND
EPERE TAI RUWHIU First Defendant
ET3 LIMITED Second Defendant
Hearing: 9 and 10 February 2015 Appearances:
R J Gordon and D P MacKenzie for Plaintiffs
S W Hughes QC for DefendantsJudgment:
19 February 2015
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 18 February 2015 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Minter Ellison Rudd Watts, Wellington
QuinLaw, New Plymouth
Counsel: S W Hughes QC, New Plymouth
GREYMOUTH PETROLEUM LTD v RUWHIU [2015] NZHC 220 [19 February 2015]
[1] The Plaintiffs (“Greymouth” and “Bonus”) respectively seek judgment on liability in their proceedings against the Defendants (“Mr Ruwhiu” and “ET3” respectively).
[2] The proceedings arise out of two agreements, the first being a “Settlement Agreement” between Greymouth and Mr Ruwhiu dated 23 March 2010 (“Settlement Agreement”) and the second a “Services Agreement” between Bonus, ET3 and Mr Ruwhiu dated 3 August 2010 (“Services Agreement”). Bonus is a wholly owned subsidiary of Greymouth. ET3, which was incorporated by Mr Ruwhiu, is the Contractor and Mr Ruwhiu the Named Individual under the Services Agreement.
[3] In the first cause of action Greymouth alleges that Mr Ruwhiu breached clauses 4 and 5 of the Settlement Agreement. In the second and third causes of action Bonus alleges that Mr Ruwhiu and ET3 breached clause 11.7(a) and clause
11.6 of the Services Agreement respectively.
[4] The contractual provisions in issue concern the return of documents to Greymouth and Bonus and associated matters. There is no suggestion that Mr Ruwhiu or ET3 has passed on confidential information to a third party.
[5] I heard evidence from Mr Peter Missingham, general counsel for the Greymouth Group; Mr Richard Huffam, an IT Manager for Greymouth; Mr Michael Spence, a computer forensic analyst; and from Mr Ruwhiu.
[6] For reasons set out below, I am satisfied that Bonus should succeed on its second cause of action, but that the Plaintiffs fail on the first and third causes of action.
First Cause of Action – clauses 4 and 5 Settlement Agreement
[7] Mr Ruwhiu was employed by Greymouth between 1 June 2004 and 2 April
2010. The terms on which Mr Ruwhiu ceased employment are contained in the
Settlement Agreement.
[8] In the first cause of action Greymouth alleges that Mr Ruwhiu breached clauses 4 and 5 of the Settlement Agreement. I address the matters pertaining to clause 5 of the Settlement Agreement later in the judgment because they came last in time.
[9] Clause 4 of the Settlement Agreement provides:1
4. Return Of Greymouth’s Property
On or before the Termination Date, the Employee must return to
Greymouth:
(a) (other than the Employee’s cellphone and laptop) all property, materials, cards, keys, passwords and documents (originals and copies) that the Employee has or has power over that belong to Greymouth or contain its information; and
(b) all documents that contain information that is not in the public domain and that relate to Greymouth, its business, or its affairs. This includes (without limitation) all information recorded on computer disks and in computer records, that are on the Employee’s laptop or otherwise.
[10] Greymouth bases its case on clause 4(b). The relevant facts may be summarised as follows.
[11] In the course of employment, Mr Ruwhiu had the use of two laptops. The first, referred to as “the G4”, was superceded by a MacBook Pro (“MacBook”) in or about 2007/2008.
[12] Mr Ruwhiu’s evidence is that, when he received the MacBook, he transferred all the work files and emails that were on the G4 to a folder on the MacBook (“G4 folder”), and that he then created a “.pst” file in Outlook or similar (“.pst file”) on the MacBook for emails that he sent and received thereafter. Greymouth permitted Mr Ruwhiu to retain the G4 for personal use. Mr Ruwhiu’s evidence is that he deleted all work files from the G4 and thereafter the family used it for personal matters.
[13] Mr Ruwhiu’s cessation of employment with Greymouth was amicable and, amongst other things, he was also permitted to retain the MacBook when he left. It is common ground that the MacBook was Mr Ruwhiu’s property thereafter.
[14] Mr Ruwhiu’s evidence is that he was told when he left Greymouth, and that he knew in any event, that Greymouth should have all work related files on the MacBook. Given that, Mr Ruwhiu created a folder on the MacBook which he believed contained those files, and which included the G4 folder (“the MacBook folder”). The MacBook folder did not, however, include the .pst file.
[15] Mr Ruwhiu then delivered the MacBook to Greymouth’s IT Manager, Mr Huffam, as he had been instructed to do by Greymouth’s Human Resources personnel.
[16] Mr Ruwhiu’s delivery of the MacBook to Mr Huffam was accompanied by a discussion between the two, the import of which is controversial. Mr Ruwhiu’s account of it is that he told Mr Huffam that he had put the work files in the MacBook folder. Mr Huffam’s account is that Mr Ruwhiu told him he should copy the MacBook folder.
[17] Mr Huffam copied the MacBook folder and then returned the MacBook to Mr Ruwhiu. Mr Huffam did not copy the .pst file i.e. the many emails in that file were not copied. Those emails have now been deleted and many cannot be retrieved.
[18] In [34] of its statement of claim, Greymouth alleges:2
34.Mr Ruwhiu has knowingly and deliberately breached clause 4 of the Settlement Agreement, by failing to return all documents, data and information that he was required to return (including Greymouth’s Data).
[19] Counsel for Greymouth contends that Mr Ruwhiu’s breach of clause 4(b) is evidenced by the fact that Greymouth does not have a copy of the .pst file or emails it contained. Greymouth also relies on a later examination of the MacBook by Mr Michael Spence, an expert computer analyst. Mr Spence’s examination revealed
other files containing Greymouth information that Mr Ruwhiu had not placed in the MacBook folder. Accordingly, Greymouth alleges that Mr Ruwhiu has failed to “return” documents as required by clause 4(b) of the Settlement Agreement.
[20] Counsel for Mr Ruwhiu submits that there has been no breach as Mr Ruwhiu’s delivery of the MacBook to Mr Huffam, as Mr Ruwhiu was instructed, constituted a “return of all documents” as required by clause 4(b).
[21] Counsel for Greymouth submitted that Mr Ruwhiu “instructed” or “ordered” Mr Huffam to copy the MacBook folder and, by implication, nothing else. Mr Huffam, however, was Greymouth’s IT Manager. Mr Ruwhiu was leaving and not able to order Mr Huffam to do anything or to instruct him to limit that which he copied.
[22] Mr Huffam acknowledged in evidence that there was no impediment to his copying the entire contents of the MacBook if he wished.3 It would also have been open to Mr Huffam to check the MacBook folder and, had he done so, the omission of the emails would have been apparent. Moreover, a document held in Greymouth’s Human Resources files (“HR form”) records that Mr Ruwhiu had returned the MacBook as required, although noted that it was to be given back to him.
[23] Mr Ruwhiu was instructed to deliver the MacBook to Mr Huffam. I accept the submission for Mr Ruwhiu that his doing so constituted a “return” to Greymouth for the purposes of clause 4(b).
Second and third causes of action – clause 11.7(a) and 11.6 Services Agreement
[24] The Services Agreement, dated 3 August 2010, was entered into after Mr Ruwhiu left Greymouth. The parties to the Services Agreement are Bonus as the “Company”, ET3 as the “Contractor” and Mr Ruwhiu as the “Named Individual”. In short, the agreement provided for ET3 to employ Mr Ruwhiu and to make him available to Bonus to provide services requested by Bonus. By clause 2.1 of the
Services Agreement, Mr Ruwhiu agreed to abide by ET3’s obligations as if he were
ET3.
[25] Mr Ruwhiu went to Chile in about August 2010 and returned to New Zealand in November 2010. During that time, Mr Ruwhiu used (his) MacBook for work related matters, including emails. On his return to New Zealand, Greymouth engaged Mr Ruwhiu to perform some contract work, pending what he expected to be a return to Chile in early 2011.
[26] Throughout his employment with Greymouth, and whilst in Chile, Mr Ruwhiu reported to Mr John Sturgess, Greymouth’s Chief Operating Officer. A dispute arose between Mr Sturgess and Mr Dunphy, Greymouth’s Managing Director, in about February 2011. Mr Ruwhiu’s evidence is that it became apparent to him at that time that his services would no longer be required by either Greymouth or Bonus. In fact, Mr Ruwhiu’s evidence is that he was locked out of his office and essentially banned from all Greymouth sites. Mr Ruwhiu attributes these proceedings, and the actions leading up to them, to his having sworn an affidavit in support of Mr Sturgess in November 2011. Greymouth denies that suggestion.
[27] It having become apparent that his relationship with Greymouth and Bonus was at an end, Mr Ruwhiu began deleting Greymouth and Bonus files from the MacBook, including emails in the .pst file, as he came across them. Mr Ruwhiu said he considered it inappropriate that he should retain the files, and that in any event he would have no further need of the information they contained. Mr Ruwhiu’s evidence is that at no time did he believe he was deleting the only copies of such emails as he understood Greymouth and Bonus operated a backup system.
[28] As it turns out, Greymouth’s backup system worked only for Windows users. Greymouth did not back up the Apple Mac computers that were in use and so any email deleted from the .pst file has been lost forever, unless (presumably) sent to or by an employee whose emails were backed up. Bonus did not operate any backup system.
[29] The Plaintiffs are sceptical of Mr Ruwhiu’s evidence that he thought the MacBook was backed up. Mr Huffam’s evidence was that it was well known within Greymouth that Apple Mac devices were not backed up, although Mr Huffam could not refer to any advice from the company to that effect. To the extent it is material, I accept Mr Ruwhiu’s evidence that he believed the contents of the MacBook, and of the G4 for that matter, were backed up.
[30] In [39] of its statement of claim, Greymouth alleges:4
39. The defendants have knowingly and deliberately breached clause
11.7 of the Service Contract, by failing to return confidential information and other documents belonging to the plaintiffs.
[31] Clause 11.7 of the Services Agreement provides:5
11.7 The Contractor must, on termination of this Agreement, immediately:
a.return to the Company all Confidential Information and service deliverables (whether in documents, reports, exhibits, data or other papers, and whether on paper or in any electronic information storage and retrieval system or in any other storage medium) in the Contractor’s possession or control; and
b.destroy or erase, or procure the destruction or erasure of, all copies (whether on paper or in any electronic information storage and retrieval system or in any other storage medium) of any analysis, studies, notes, memoranda, data or other documents prepared by or for the Contractor which contain or reflect any Confidential Information.
[32] Although there is no agreement as to when the Services Agreement terminated, for the reasons given above I propose to proceed on the basis that it had terminated by the end of February 2011.
[33] Bonus relies on clause 11.7(a). It is common ground that ET3 and Mr Ruwhiu would have had confidential information (as defined in the Services Agreement) within in their possession or control as at February 2011. It is also common ground that Bonus made no request for the return of the information until
December 2011. Counsel for the Defendants submitted that the obligation imposed
4 First Amended Statement of Claim, above n 2, at [39].
5 Contract for the Provision of Services dated 3 August 2010, at [11.7].
in clause 11.7(a) would arise only on a request by Bonus for the return of confidential information, and did not arise here as there was no such request. Counsel for Bonus rejects this submission on the basis that the obligation to return arises even in the absence of a request by Bonus for compliance. I accept that submission. I do not consider the obligation imposed by clause 11.7(a) to be dependent on a request by Bonus. I am satisfied that the Defendants breached clause
11.7(a) of the Services Agreement.
[34] Turning to the third cause of action, in [43] of the statement of claim Bonus alleges:6
43. The defendants have knowingly and deliberately breached clause
11.6 of the Service Contract, by failing to safeguard all documents (including electronic information containing confidential information, especially emails) which were supplied to or held by them.
[35] Clause 11.6 provides:7
11.6 The Contractor agrees to safeguard all documents including electronic information containing Confidential Information, which the Company may supply to the Contractor hereunder, and all other documents containing Confidential Information whether prepared by the Contractor or another. The Contractor shall prevent access to all such Confidential Information by third parties.
[36] Both counsel were agreed that “safeguard” should be given its dictionary meaning for the purpose of construing clause 11.6. The Shorter Oxford English Dictionary defines to “safeguard” as:8
To keep secure from danger or attack; to guard, protect, defend; to make safe.
[37] It is common ground that ET3 and Mr Ruwhiu would have been supplied documents within the categories stipulated under clause 11.6 and that Mr Ruwhiu deleted many of them. Counsel for Bonus submits that the Defendants were in
breach of clause 11.6 when Mr Ruwhiu began that process.
6 First Amended Statement of Claim, above n 2, at [43].
7 Contract for the Provision of Services, above n 5, at [11.6].
8 Shorter Oxford English Dictionary (5th ed, Oxford University Press, Oxford, 2002) Vol 2, at
2684.
[38] The issue on this clause is whether comprehensive deletion of material in the circumstances which arose after February 2011 constituted a breach of the obligation to safeguard.
[39] Counsel for Bonus submits that it did and that it was the Defendants’ obligation to ensure all documents within clause 11.6 were retained pending return pursuant to clause 11.7(a). Counsel for the Defendants submits that the obligation to “safeguard” is akin to one to protect or to keep safe from a third party, as the final sentence in clause 11.6 makes clear. Counsel submits that deletion was in accordance with the obligation imposed by clause 11.7(b) (see above) and did not constitute a breach of clause 11.6.
[40] On balance I prefer the submission of counsel for the Defendants. First, I am not satisfied that the obligation to safeguard is tantamount to an obligation to retain. Secondly, clause 11.7(b) requires immediate deletion and I do not consider compliance with that obligation, despite a failure to comply with clause 11.7(a), constitutes a breach of 11.6. It follows that I am not satisfied that Bonus has proved a breach of clause 11.6.
First cause of action - clause 5 Settlement Agreement
[41] In December 2011 Greymouth began to review the information it had copied from the MacBook in 2010. On doing so Greymouth realised that it had only a handful of Mr Ruwhiu’s emails from 2007 onwards. That realisation was followed by correspondence and meetings between the parties and it is those communications which form the basis of Greymouth’s allegation of a breach of clause 5 of the Settlement Agreement.
[42] Greymouth alleges:9
35.Mr Ruwhiu has knowingly and deliberately breached clause 5 of the Settlement Agreement, to co-operate with reasonable requests from Greymouth for the provision of information, advice and knowledge gained by him during his employment by Greymouth.
[43] Clause 5 of the Settlement Agreement provides:10
5. Agreement to Co-operate
The Employee shall whenever requested to do so following the Termination Date, co-operate with all reasonable requests from Greymouth for the provision of information, advice and knowledge gained by the Employee during his employment in relation to Greymouth’s ongoing operations.
[44] Counsel were at odds over whether Greymouth had made a request within the terms of clause 5. For that reason it is necessary to say something about each such request.
[45] I accept the submission of counsel for Mr Ruwhiu that Greymouth’s first letter, dated 23 December 2011, was inaccurate in important respects and that these inaccuracies put the letter outside clause 5. For instance, Greymouth asserted that it was entitled to the return of information pursuant to section 11 of the Services Agreement, when in fact only Bonus was so entitled. Greymouth also asserted non- compliance with clause 4(b) of the Settlement Agreement, which no doubt was Greymouth’s view of it, but which was incorrect on my view of it. Greymouth then said it required delivery of, amongst other things, specified data including data due only to Bonus, and the “company laptop” for copying and data retrieval. In short Greymouth’s request sought more than that to which it was entitled and I am not satisfied that Mr Ruwhiu breached clause 5 in failing to co-operate with it.
[46] Likewise in respect of Greymouth’s letter of 18 January 2012 which essentially repeated the requests in the first letter.
[47] Mr Ruwhiu replied to Greymouth’s letter of 18 January 2012 by letter dated
20 January 2012. Mr Ruwhiu asked for a copy of the Settlement Agreement and the HR form. Mr Ruwhiu also said that he had written to Bonus asking the company to confirm that he could talk to Greymouth and that he would be compensated for his time.
[48] Greymouth wrote again on 26 January 2012. This letter was also inaccurate. It asserted that Mr Ruwhiu had not provided any data beyond 2006, when he had. It was the emails that were missing. The letter also repeated the request for delivery to which I have already referred. Greymouth sent a letter in similar terms on
31 January 2012.
[49] Mr Ruwhiu wrote on 3 February 2012 and said he would be available to meet on 8 February 2012. That meeting was attended by one of Greymouth’s in house counsel, Mr Laird; by a local lawyer, Ms Clarke (for Greymouth as I understand it); Mr Ruwhiu and Mr Sturgess. Again, there were numerous (incorrect) references by the Greymouth representatives to Mr Ruwhiu having failed to supply any information in respect of his work post 2006. Also, Mr Ruwhiu’s complaints that he had given the laptop to Mr Huffam for copying in April 2010 and that, despite requests, he had still not been supplied with the HR form, were largely dismissed, even though accurate.
[50] This meeting was followed by exchanges of letters between the parties’ legal advisers and, after that, the provision of information copied to a hard drive. That was also followed by delivery of the G4 and MacBook to Mr Spence, to whom I have referred above, for copying. I add that the provision of the computers followed the commencement of this proceeding and the making, by consent, of preservation orders.
[51] Even allowing Greymouth some leeway, I have concluded that the various requests to which I have referred were outside clause 5, because of the inaccuracies and errors they contained. Given that, it is unnecessary for me to determine the other submission by counsel for Mr Ruwhiu which was that the letters did not seek information pertaining to “Greymouth’s ongoing operations” as the term is used is clause 5. Counsel submitted that clause 5 contemplated co-operation with a request for information such as, say, a well or resource consent with which Mr Ruwhiu had been involved but did not contemplate the extensive requests made in the correspondence. In my view that submission has merit but, as I say, it is unnecessary for me to determine the matter.
Result
[52] I find for Bonus on its second cause of action and make the declaration sought:11
(a) A declaration that the defendants have breached clause 11.7 of the
Service Contract.
[53] Given this was a trial as to liability only, the parties may submit a memorandum as to a trial regarding quantum on the second cause of action.
[54] I dismiss the other causes of action.
[55] The Plaintiffs having been largely unsuccessful, it will be for them to pay a substantial proportion of the Defendants’ costs on a 2B basis, together with disbursements. The parties may submit memoranda if they are unable to agree on those costs/disbursements within 10 working days of receipt of this judgment.
..................................................................
M Peters J
11 First Amended Statement of Claim, above n 2, at 11.
0
0
0