healthAlliance NZ Limited v Hewlett-Packard New Zealand
[2023] NZHC 2828
•9 October 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1215
[2023] NZHC 2828
BETWEEN HEALTHALLIANCE NZ LIMITED
Plaintiff
AND
HEWLETT-PACKARD NEW ZEALAND
First Defendant
AND
CAPAX DISCOVERY INC
Second Defendant
AND
ZOVY LLC
Third Defendant
Hearing: On the papers Counsel:
R J Hollyman KC and G S A Morrison for Plaintiff No appearance by or on behalf of First Defendant
G C Williams, T A Huthwaite and B E Carey for Second and Third Defendants
Judgment:
9 October 2023
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 9 October 2023 at 4pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Maberly & Co., Auckland Tompkins Wake, Hamilton A J Park, Wellington
Solicitors:
HEALTHALLIANCE NZ LTD v HEWLETT-PACKARD [2023] NZHC 2828 [9 October 2023]
Introduction
[1] By judgment dated 22 May 2023,1 I held that correspondence between the defendants surrounding their entry into certain deeds of assignment and indemnity are not the subject of litigation privilege. Accordingly, I set aside the claim to privilege made by the second and third defendants (Capax/Zovy) in respect of documents referred to in the fourth row of a table appearing beneath the heading “Part 2” in Capax/Zovy’s supplementary verified list of documents dated 13 April 2023.
[2] The plaintiff (healthAlliance) later questioned the basis on which material discovered in consequence of my judgment had been redacted. Capax/Zovy advised that the redactions had been applied to protect “pre-existing solicitor/client privilege”.2
[3] healthAlliance proposed that an unredacted set of the discovered material be provided for review by this Court under r 8.25 of the High Court Rules 2016. Capax/Zovy advised that in principle they do not object to such review, albeit they consider it unnecessary. Upon being advised that my roster prevents assignment of this proceeding to me as trial Judge, Capax/Zovy were content to file for my attention a sealed set of the contentious documents, marked up so as to indicate (but not obscure) the redactions made to date.3
[4] I was content to review a marked up set of contentious documents under r 8.25, and gave directions accordingly. I therefore proceed to determine whether privilege is held in the set I received on 7 September 2023.
Background
[5] The nature of the parties’ dispute, and the basis on which the correspondence surrounding the deeds of assignment and indemnity is said potentially to be relevant, is set out in my 22 May 2023 judgment.
1 healthAlliance NZ Ltd v Hewlett-Packard New Zealand [2023] NZHC 1201.
2 AJ Park letter to Maberly & Co, dated 18 July 2023.
3 healthAlliance NZ Ltd v Hewlett-Packard New Zealand HC Auckland CIV-2021-404-1215, 31 August 2023.
[6] In essence, healthAlliance (a health technology services provider) arranged with Hewlett-Packard New Zealand (HP) for the latter to provide a mailbox archiving and retrieval solution. Capax/Zovy later assumed HP’s contractual support and maintenance rights and obligations (the 2016 Agreement).
[7] healthAlliance brought these proceedings, seeking injunctive relief requiring Capax/Zovy to facilitate the migration of its mailbox data to a competitor’s archiving and retrieval solution. Capax/Zovy counterclaimed, alleging breach of the 5,000-license cap arising under the software licensing aspect of the initial arrangement with healthAlliance (the License Contract) and damages for unlicensed use.
[8] The issue emerged whether, in addition to assuming HP’s support and maintenance rights and obligations, Capax/Zovy also assumed HP’s entitlements under the License Contract. Capax/Zovy proceeded to disclose a Deed of Assignment dated 25 November 2022. The Deed states that entities together described as “Micro Focus” succeeded to the rights under the License Contract of a group of companies of which HP is a member, pursuant to a merger completed in 2017.
[9] healthAlliance applied for further discovery of all documents relating to the assignment of the License Contract. The basis for healthAlliance’s further disclosure application was its concern that assignment of the License Contract to Capax/Zovy for the purposes of this litigation may amount to maintenance and champerty. As noted in my earlier judgment, Capax/Zovy can be taken by its counterclaim relying on the License Contract to disavow any such suggestion. I am not required to comment further upon that topic.
[10] Capax/Zovy provided a further document, a Deed of Indemnity dated November 2022. The Deed of Indemnity appears to be a companion to the Deed of Assignment. It refers to this proceeding, and asserts that Micro Focus “has the direction of all healthAlliance proceedings under [the merger of Micro Focus with the group of companies of which HP is a member] and has required Capax to indemnify it for costs and liabilities in relation to [this proceeding].” It records that Capax “confirms and restates its indemnity to Micro Focus under the [2016 Agreement] in respect of [this proceeding] and agrees to indemnify Micro Focus in respect of the
assignment” (the “assignment” apparently being intended as a catch-all for whichever is the operative assignment, the 2016 Agreement or the 2022 Deed of Assignment).
[11] However, Capax/Zovy declined to disclose correspondence between the defendants and their legal advisors surrounding the defendants’ entry into the Deeds of Assignment and Indemnity. These are the circumstances in which I issued my 22 May 2023 judgment.
Legal principles
[12] Legal professional privilege arises from the general duty a lawyer has to hold in confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship.4 The privilege is the client’s, not the lawyer’s, so only the client may waive the privilege or restrain disclosure. Legal professional privilege commonly arises in situations of:
(a)solicitor-client privilege;5 and
(b)litigation privilege.6
Solicitor-client privilege
[13] Section 54 of the Evidence Act provides for solicitor-client privilege as follows:
54 Privilege for communications with legal advisers
(1)A person who requests or obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was—
(a)intended to be confidential; and
(b)made in the course of and for the purpose of—
(i)the person requesting or obtaining professional legal services from the legal adviser; or
4 Lawyers and Conveyancers Act 2006, s 271.
5 Evidence Act 2006, s 54.
6 Section 56.
(ii)the legal adviser giving such services to the person.
(1A) The privilege applies to a person who requests professional legal services from a legal adviser whether or not the person actually obtains such services.
(2)In this section, professional legal services means, in the case of a registered patent attorney or an overseas practitioner whose functions wholly or partly correspond to those of a registered patent attorney, requesting or obtaining or giving information or advice concerning intellectual property.
…
[14] Solicitor-client privilege is the privilege which attaches to communications between clients and their lawyers. The effect of the privilege is that neither the client nor the lawyer (without the client’s consent) can be compelled to disclose any communication between them if the communication was intended to be confidential and made in the course of and for the purpose of requesting, obtaining, or receiving professional legal services.7 If these requirements are not satisfied, then privilege will not attach to the communication. Relevantly, a statement must be intended as a confidential communication.8 Material that is initially protected by legal professional privilege may then be disseminated beyond the lawyer/client relationship. In this context, failing to preserve confidentiality will discharge the privilege.9
Litigation privilege
[15]Section 56 of the Evidence Act provides for litigation privilege as follows:
(1)Subsection (2) applies to a communication or information only if the communication or information is made, received, compiled, or prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding (the proceeding).
(2)A person (the party) who is, or on reasonable grounds contemplates becoming, a party to the proceeding has a privilege in respect of—
(a)a communication between the party and any other person:
7 See Matua Finance Ltd v Equiticorp Industries Group Ltd [1993] 3 NZLR 650 (CA); Smith v Smith [1991] NZFLR 397 (HC); Stack v Corbett [1997] 3 NZLR 233 (HC); B v Auckland District Law Society [2004] 1 NZLR 326 (PC); and Shannon v Shannon [2005] 3 NZLR 757 (CA).
8 Matthew Downs (ed) Cross on Evidence (online ed, LexisNexis) at [EVA54.6], citing s 65(2), Beckham v R [2015] NZSC 98 at [88]–[99] and Hawkins (as trustees of the Heads Trust) v Hawkins [2021] NZHC 1248 at [27].
9 At [EVA54.6], citing Lavrentiadis v Wintrust New Zealand Ltd [2022] NZHC 326 at [67].
(b)a communication between the party’s legal adviser and any other person:
(c)information compiled or prepared by the party or the party’s legal adviser:
(d)information compiled or prepared at the request of the party, or the party’s legal adviser, by any other person.
(3)If the proceeding is under, or to be under, Part 2 of the Oranga Tamariki Act 1989 or the Care of Children Act 2004 (other than a criminal proceeding under that Part or that Act), a Judge may, if satisfied that it is in the best interests of the child to do so, determine that subsection (2) does not apply in respect of any communication or information that the Judge specifies.
[16] This provision was intended to codify the pre-existing common law on the subject,10 formulated for New Zealand by the Court of Appeal in Guardian Royal Exchange Co v Stuart.11 There, Cooke J (as he then was) outlined the so-called ‘dominant purpose’ test that was adopted by each member of the Court as follows:12
[W]hen litigation is in progress or reasonable apprehended, a report or other document obtained by a party or his legal adviser should be privileged from inspection or production in evidence if the dominant purpose of its preparation is to enable the legal adviser to conduct or advise regarding the litigation.
[17] It can be seen that the ‘dominant purpose’ required of the relevant document under the common law was that of “conduct[ing] or advis[ing] regarding the litigation”. It is this activity which is described more succinctly in s 56 as “preparing for a proceeding or an apprehended proceeding”.
[18]Consistently with this view, the authors of Cross on Evidence assert that:13
The rationale of [this] head of privilege has been succinctly stated by the English Law Reform Committee to be to facilitate the obtaining and preparation of evidence by a party to an action in support of his case. The privilege is essential to the adversarial system. This would be unworkable if parties were obliged to disclose communications with prospective witnesses.
10 Carter Holt Harvey Ltd v Genesis Power Ltd (No 7) HC Auckland CIV-2001-404-19741, 6 May 2008.
11 Guardian Royal Exchange Co v Stuart Assurance of New Zealand Ltd [1985] 1 NZLR 596 (CA).
12 At 602.
13 Mathew Downs, above n 8, at [EVA56.1].
[19] As I previously dealt with,14 it appears, again, litigation privilege is intended to attach to materials generated for the dominant purpose of marshalling of evidence (and potentially arguments) to be deployed in the proceeding. This is the sense in which the phrase “preparing for” is used in s 56.
[20] Again, I concur with the observations of Associate Judge Smith in Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc on assignment and litigation privilege. 15 His Honour observed:16
On the face of it, the dominant purpose of the assignment document in this case was not to “prepare” for apprehended litigation, but to acquire a cause or causes of action owned by another party. The simple acquisition of a “thing in action” (the right to sue for alleged breach of duties allegedly owed by a prospective defendant) does not in my view come within the s 56 concept of “preparing” for the court proceeding in which the prospective defendant will be sued. Rather, the acquisition is a component part of the assignee’s cause of action, which it will need to prove if it is to have a chance of succeeding at trial.
Common interest privilege
[21] Justice Wylie was required to address common interest privilege in Fresh Direct Ltd v J M Batten & Associates.17 In that case, a firm of accountants (Batten & Associates) notified its insurer of circumstances which were said to have given rise to loss on the part of Fresh Direct, one of the firm’s clients. Justice Wylie found that neither solicitor-client privilege nor litigation privilege attached to the notification document. His Honour addressed the prospect of common interest privilege attaching as follows:18
[66] It is not always clear on the authorities or in the texts whether common interest privilege is a separate stand-alone privilege, or whether it is an extension to either legal professional privilege or litigation privilege or both. In my view it can not be a stand-alone privilege. Rather it is an extension of either or both legal professional privilege or litigation privilege. Having a common interest in a document not otherwise privileged can not create an independent privilege. To suggest otherwise would be to negate in large part the rules applicable to legal professional privilege and to litigation privilege.
…
14 healthAlliance NZ Ltd v Hewlett-Packard New Zealand, above n 1.
15 Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc [2020] NZHC 396 at [46].
16 At [46].
17 Fresh Direct Ltd v J M Batten & Associates (2009) 20 PRNZ 126 (HC).
18 (Citations omitted).
[68] Common interest privilege is concerned with the effect of the confidential communication of a privileged document to a person who has a common interest in its subject matter or in litigation in connection with which the document was brought into being. The importance of common interest privilege lies in a client’s ability to voluntarily share privileged information with those with whom he shares a sufficient identity of interest in the subject matter of the information without there being a resultant waiver or loss of privilege …
[69] Here, for the reasons I have explained, in my view legal professional privilege and litigation privilege are not available in respect of any of the documents at issue in this case. Because none of the documents are privileged in the hands of either Batten & Associates or [its insurer], common interest privilege is not available when they get into the hands of the other.
[22] Justice Dobson commented similarly in Todd Pohokura Ltd v Shell Exploration NZ Ltd.19 Justice Wylie’s above-cited remarks at [68] were referred to with approval by Collins J in Mitre 10 v Thistle Dome Holdings Ltd.20 I respectfully adopt them.
Marked up set of contentious documents
[23] The marked up set of documents I received is comprised of an index covering six compilations of documents. My findings are accordingly set out beneath six headings, largely corresponding to these descriptions.
Tab 1 — letter from AJ Park to Tompkins Wake
[24] This letter, dated 15 August 2022, is the means by which Capax/Zovy made its proposal that HP and Micro Focus complete a formal assignment to Capax. Notwithstanding the present redaction of paragraphs 3 to 6, I do not consider it to contain any privileged material. I have reached this view on the following basis.
[25] Paragraph 3 addresses the effect of the proposed assignment on healthAlliance’s summary judgment application. That Capax/Zovy received legal advice in respect of this issue is implied. However, the substance of any such advice is not stated. Instead, the text simply sets out Capax/Zovy’s assertion, made by its lawyers in correspondence with HP’s lawyers, as to the effect of the proposed assignment. Solicitor-client privilege in any advice Capax/Zovy may have received
19 Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV-2006-485-1600, 12 August 2009.
20 Mitre 10 (NZ) Ltd v Thistle Dome Holdings Ltd [2015] NZHC 2719, [2015] NZAR 1909.
on the issue is unaffected. Any such advice is not disclosed. Further, I have previously found litigation privilege not to be held in this correspondence.
[26] Paragraph 4 addresses a related issue — whether healthAlliance’s consent to assignment is required. It sets out Capax/Zovy’s view on that issue. Again, that view may well have been formed in the light of legal advice, but the substance of the advice (albeit offered) is not stated. Again, solicitor-client privilege is unaffected, and litigation privilege has been found not to be held.
[27] Paragraphs 5 and 6 deal with consequential aspects. Their discoverability flows from the discoverability of paragraphs 3 and 4.
[28]Accordingly, CDZ.02.0004 requires disclosure in full.
Tab 2 — emails between AJ Park and Tompkins Wake (same email chain)
[29] CDZ.02.0005 is an email chain ending on 19 August 2022 at 10:37 am. It includes the email attaching the 15 August 2022 letter (CDZ.02.0004). The Tompkins Wake recipient’s version of that email in the set has had a banner added, apparently automatically, warning that the email originated outside Tompkins Wake. The banner has been redacted. It is not privileged, as neither s 54(1) nor s 56(2) of the Evidence Act apply. However, it is irrelevant and does not require disclosure. An email later in the chain, dated 19 August 2022 at 10:30 am, has been redacted to obscure its reference to the 15 August 2022 approach relating to assignment and its request for particularised terms of the proposed assignment. Just as the 15 August 2022 letter is not privileged, this development in the parties’ communications on the topic of assignment is, for the same reasons, not privileged. It requires disclosure.
[30] The redactions made to CDZ.02.0005 appear also in other email chains forming part of Tab 2, and should be treated as above.
[31] CDZ.02.0083 is an email chain which includes an email dated 4 October 2022 at 1:06 pm that has been redacted immediately following a reference to information being shared confidentially and subject to common interest privilege. The redacted passage sets out what appear to be reasons for Capax/Zovy’s view that formal
assignment is in the defendants’ best interests, including its view that the proposed deed just confirms what occurred in 2016. Again, while the prospect of Capax/Zovy having taken legal advice on the issue is implied, the advice is not stated and any solicitor-client privilege in that advice is unaffected. The passage requires disclosure.
[32] The redaction made to the 4 October 2022 email appears also in other email chains forming part of Tab 2, and should be treated as above.
[33] CDZ.02.0088 is an email chain which includes redactions made to an email dated 14 September 2022 at 8:27 am:
(a)The first redaction sets out the understanding of HP’s solicitors (set out in an earlier email in the chain, of 6 September 2022 at 10:59 am) on the issue whether there were improvements in the archiving solution provided initially by HP. The understanding has likely been formed on the basis of HP’s instructions to its solicitors for the purpose of the litigation, and is shared with Capax/Zovy under the heading “confidential and subject to common interest privilege”, for the apparent purpose of informing HP’s response to litigation. As noted in my 22 May 2023 judgment, the authorities suggest common interest privilege operates as an extension of pre-existing privileges. I found then that litigation privilege did not attach to correspondence surrounding entry into the Deeds. However, my judgment did not deal with the prospect of the claim to common interest privilege being made out as an extension of pre-existing solicitor-client privilege.
In the case of this redacted passage, the correspondence contains solicitor-client privileged material. This passage is privileged and need not be disclosed.
(b)The second redaction to CDZ.02.0088 sets out Capax/Zovy’s response to HP’s request whether Capax would be prepared “to share (on a common interest basis) any legal advice they have on the assignment arguments, including the requirement for consent”. The
response includes what appears to be the legal advice Capax had received on this issue, beneath the observation that “the information is strictly confidential, and is shared on a common interest basis”.
This passage, beneath the introductory comments commencing “Question two:…” and concluding “on a common interest basis”, is solicitor-client privileged and need not be disclosed.
Tab 3 — (further) emails between AJ Park and Tomkins Wake (same email chain)
[34]CDZ.02.0011 is an email chain which contains redactions to:
(a)An email dated 28 October 2022 at 9:31 am, advising that Tompkins Wake had sent certain comments made by AJ Park on behalf of Capax/Zovy on issues in the litigation unrelated to the prospect of assignment or indemnity, and were awaiting feedback. The redacted passage is litigation privileged and need not be disclosed.
(b)The banner as described above, automatically attached to an email received at Tompkins Wake on 27 October 2022 at 8:37 am. The banner is irrelevant and need not be disclosed.
(c)An email dated 26 October 2022 at 10:03 am, setting out AJ Park’s comments on behalf of Capax/Zovy as to the appropriate parties and substance of the Deeds. The passage identifies Capax/Zovy’s reasoning and position in respect of the Deeds. While this reasoning and position are likely to have been informed by legal advice, the purpose for which it was set out appears to be to support entry into the Deeds on the terms proposed by Capax/Zovy. The legal advice itself is not stated. For reasons outlined in my earlier judgment, this passage is not litigation privileged. Nor is it solicitor-client privileged, it not meeting the requirement stated at s 54(1)(b) of the Act. It requires to be disclosed.
(d)An email dated 20 October 2022 at 7:22 pm, redacted in respect of a paragraph setting out HP’s position on becoming a party to the
assignment and indemnity, is for the same reasons not privileged and requires to be disclosed.
[35] The redactions to CDZ.02.0011 appear also in other email chains forming part of Tab 3, and should be treated as above. No other parts of those other email chains are redacted. They do not require further comment.
Tab 4 — draft deeds of assignment
[36] CDZ.02.0042 is a draft deed of assignment, containing marginal comments added apparently by the lawyers for HP, Micro Focus and Capax/Zovy, in respect of two aspects of the draft deed: first, the effect of the deed on the 2016 Agreement; and second, the extent to which HP is to be identified in the deed as endorsing the assignment. The comments are in pairs, amounting to representations in respect of each aspect, made on behalf of Capax/Zovy, to which there is a response on behalf of HP and Micro Focus, and have been redacted.
[37] Although the comments are set out as the views of the respective defendants’ lawyers on the above aspects, they amount in their context to representations of the defendants’ views on the merits of the deed as drafted. They are in substance the defendants’ own assertions on the significance of the deed in relation to the legal rights the subject of the current litigation. To the extent the representations reflect the legal advice the respective defendants received on each aspect, there is no reservation of solicitor-client privilege. Nor could there be as any such privilege is necessarily waived by the making of the defendants’ representations to each other (albeit the expectation of confidence being upheld is at least implied).
[38] In my view, CDZ.02.0042 is not privileged for the reasons set out in my earlier judgment. And the balance of the justice interests in disclosure of CDZ.02.0042 is such as to require that it be disclosed in its entirety. In reality, the representations seem simply reflective of the parties’ positions in the litigation, and tend to confirm the apparent purpose of the Deed of Assignment. The need for and the effectiveness of the Deed will require to be addressed later in the proceeding.
[39] CDZ.02.0079 is an earlier version of CDZ.02.0042, containing the first comment of each pair on each aspect. It requires to be treated as set out above.
Tab 5 — draft deed of indemnity
[40] CDZ.02.0043 is a draft deed of indemnity, containing marginal comments two of which have been redacted. The comments, similarly to those redacted from CDZ.02.0042, set out the views of Capax/Zovy’s lawyers on the basis Capax/Zovy has adopted those views as their own. They are neither litigation privileged, nor solicitor-client privileged, and require to be disclosed.
[41] The redactions to CDZ.02.0043 appear also in CDZ.02.0080, and should be treated as above.
Tab 6 — emails between AJ Park and Tompkins Wake (same email chain)
[42] CDZ.02.0064 is a file note exchanged by email dated 14 October 2022, recording the essence of a Teams meeting between the defendants’ respective lawyers, by reference to the defendants’ respective positions, captured by way of bullet point.
[43] The first redacted bullet point, appearing under the heading “Position of Micro Focus”, addresses the indemnity, in a manner capable of affecting the strength of the defendants’ position as against the plaintiff. It is not privileged, as it does not purport to record the legal advice Micro Focus is likely to have received on this topic, and my judgment on the question of litigation privilege applies. Its disclosure is required.
[44] Disclosure of the heading “Position of HP” is required so as to make sense of the discoverable bullet points that follow. Of the following bullet points:
(a)The first, setting out HP’s attitude to the litigation is litigation privileged and does not require to be disclosed.
(b)The second, setting out HP’s view in respect of the assignment is not solicitor-client or litigation privileged for the reasons above, and requires to be disclosed.
(c)The third and fourth are addressed to the legal advice HP will receive on the assignment, are solicitor-client privileged and need not be disclosed.
[45] The redactions to CDZ.02.0064 appear also in email chains forming part of Tab 6, and should be treated as above.
[46] The banner described above appears in CDZ.02.0065, and in other email chains forming part of Tab 6, is irrelevant and need not be disclosed.
[47] CDZ.02.0073 is an email chain ending with an email from AJ Park dated 15 October 2022, containing a redacted passage setting out Capax/Zovy’s view (in terms implicitly confirming that view has been formed in accordance with legal advice) on whether HP requires to be a party to the assignment. For the reasons set out in my earlier judgment, it is not litigation privileged. Nor is it solicitor-client privileged, as the view has been expressed for the purpose of influencing entry into the assignment, and not to facilitate the receipt of legal advice for joint benefit. The passage requires disclosure.
Johnstone J
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