HealthAlliance NZ Limited v Hewlett-Packard New Zealand
[2023] NZHC 1201
•22 May 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 1201
BETWEEN HEALTHALLIANCE NZ LIMITED
Plaintiff
AND
HEWLETT-PACKARD NEW ZEALAND
First Defendant
AND
CAPAX DISCOVERY INC
Second Defendant
AND
ZOVY LLC
Third Defendant
Hearing: 26 April 2023 Appearances:
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:
22 May 2023
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 22 May 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
HEALTHALLIANCE NZ LTD v HEWLETT-PACKARD NZ[2023] NZHC 1201 [22 May 2023]
Introduction
[1] When parties A and B are engaged in litigation, and party B and party C enter deeds either assigning or confirming the prior assignment to party B of rights it relies upon in the litigation, and indemnifying party C in respect of the assignment, is the correspondence between parties B and C surrounding their entry into the deeds covered by the litigation privilege described in s 56 of the Evidence Act 2006?
[2]In my view, it is not.
[3] The privilege attaches to a communication between parties to proceedings such as party B, and other persons such as party C, if the communication is “made, received, compiled or prepared for the dominant purpose of preparing for” the proceeding.1 But the correspondence surrounding the parties’ entry into the deeds will not have been undertaken for the purpose of “preparing for” the proceeding.
[4] The correspondence may have the purpose of facilitating the proceeding, in the sense of assisting party B to acquire rights upon which it can sue or be sued. It may have the purpose of clarifying the proceeding, in the sense of enabling confirmation of party B’s entitlement to sue or be sued. However, “preparing for” the proceeding is a phrase directed to the marshalling of evidence and arguments to be deployed in the proceeding. The phrase does not extend to the acquisition of legal entitlements at stake in the litigation. Correspondence directed to that end is not covered by s 56.
Background
[5] In this proceeding, a health technology services provider, healthAlliance NZ Limited (healthAlliance), sues software companies Hewlett-Packard New Zealand (HP), Capax Discovery Inc (Capax) and Zovy LLC (Zovy). In 2015, healthAlliance arranged with HP for HP to provide an upgraded mailbox archiving and retrieval solution. healthAlliance and HP entered a contract providing for the purchase by healthAlliance of 5,000 perpetual licenses to the solution (the License Contract), and for the provision by HP of support and maintenance. Capax and/or Zovy later assumed
1 Section 56(1).
HP’s support and maintenance obligations, either by assignment from HP in 2016 or by agreement directly with healthAlliance in 2017.
[6] A live issue emerging only in the course of this proceeding is whether the 2016 assignment of support and maintenance obligations (2016 Agreement) operated so as to assign HP’s entitlements under the License Contract to Capax/Zovy.
[7] In 2018, healthAlliance commenced to engage with Capax/Zovy over the prospect of healthAlliance migrating its mailbox data to a competitor’s archiving and retrieval solution. A substantial dispute arose as to whether healthAlliance had used many more than 5,000 licenses and should pay for additional use, and whether the defendants were required to facilitate the migration.
[8] healthAlliance brought these proceedings, in essence seeking injunctive relief requiring Capax/Zovy to facilitate the migration. Upon exchange of an initial tranche of discovery, healthAlliance came to the view that there had been no valid assignment to Capax/Zovy of its obligations under the License Contract. heathAlliance re-pleaded its case accordingly.
[9] Capax/Zovy counterclaimed, alleging breach of the 5,000-license cap and damages for unlicensed use. Its counterclaim implies it has taken an assignment of the License Contract.
[10] In response to directions for standard discovery, Copax/Zovy provided an 82-page discovery affidavit dated 14 December 2021.
[11] By interlocutory application dated 3 August 2022, healthAlliance sought summary judgment on the basis that Capax/Zovy’s counterclaim could not succeed in the absence of a valid assignment of the License Contract.
[12] On 26 November 2022, just over two weeks prior to the scheduled hearing of healthAlliance’s summary judgment application on 12 December 2022, Capax/Zovy filed an affidavit disclosing a Deed of Assignment dated 25 November 2022. The Deed of Assignment 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. The Deed records that:
2.1Confirmation of assignment: Micro Focus confirms that all Rights under the License Contract were assigned by HP to the Assignee for good and valuable consideration, the receipt and sufficiency of which was acknowledged, in or about May 2016 (May 2016 Assignment).
2.2Further assignment: To the extent any Rights under the License Contract were not assigned by HP to the Assignee pursuant to the May 2016 Assignment, then for NZD$1.00 (one NZ dollar) paid by the Assignee to each of the Assignors, and other good and valuable consideration, the receipt and sufficiency of which the Assignors acknowledge, Micro Focus hereby assigns to the Assignee absolutely, with effect form the date of this deed, all of that Assignor’s Rights in, to, under or in connection with the License Contract.
[13] The Assignors described in the Deed are not defined, but by implication are Micro Focus. The Assignee is Capax.
[14] By interlocutory application dated 24 February 2023, healthAlliance applied for further discovery of all documents relating to the purported, actual or potential assignment by any party to Capax/Zovy or any other party of the License Contract or any associated rights or obligations.2 This is the application I must determine.
[15] By notice of opposition dated 20 March 2023, Capax/Zovy opposed healthAlliance’s discovery application orders, amongst other things asserting that, with one exception, the documents sought have already been discovered, are privileged, are not relevant and are not within Capax/Zovy’s control, or do not exist. The exceptional document is a Deed of Indemnity dated November 2022, which on 24 March 2023 was provided to healthAlliance on a counsel-only basis and later attached by healthAlliance’s counsel to its submissions.
[16] 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
2 The formal application is more broadly expressed. The essence is as outlined above.
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).
[17] Capax/Zovy then filed and served a supplementary verified list of documents, affirmed by Michael McGrath, Chief Operating Officer of Zovy, and dated 13 April 2023. As a supplementary list, it naturally excluded from mention all documents referred to in Capax/Zovy’s discovery affidavit dated 14 December 2021. Substantially following the standard form for discovery affidavits set out in the High Court Rules, Form G37 in Schedule 1, the list asserts that there are no documents of the following types:
Part 1
Documents that are in [Capax/Zovy’s] control and for which neither privilege nor confidentiality can be claimed
…
Part 4
Documents that relate to matters in question in this proceeding, but which are no longer in the possession or control of [Capax/Zovy]
…
Part 5
Other documents known to [Capax/Zovy] to relate to a matter in question in the proceeding, but which have never been in [Capax/Zovy’s] control
[18] In respect of Part 3 of the standard form, “documents that are in [Capax/Zovy’s] control and for which [Capax/Zovy] claims confidentiality”, the list referred to the Deed of Assignment and the Deed of Indemnity.
[19] And in respect of Part 2 of the standard form for discovery affidavits, the list contained the following table under the heading “Documents that are in [Capax/Zovy’s] control and for which privilege is claimed”:
| Document dated | Document type | Author | Recipient | Nature of privilege | Reference |
| Various | Letters, emails, attachments, file note, documents and draft documents in relation to legal advice and professional legal services | Second and third defendants and their legal advisors | Second and third defendants and their legal advisors | Solicitor/client | Evidence Act, section 54 |
| Various | Letters, emails, attachments, file note, documents and draft documents in relation to these proceedings | Second and third defendants and their legal advisors / experts / agents | Second and third defendants and their legal advisors / experts / agents | Litigation | Evidence Act, section 56 |
| Various | Letters, emails, attachments, file note, documents and draft documents in relation to an attempt to settle these proceedings | Plaintiffs and/or its legal advisors, and the second and third defendants and their legal advisors | Plaintiffs and/or its legal advisors, and the second and third defendants and their legal advisors | Without prejudice | Evidence Act, section 57 |
| Various | Letters, emails, attachments, file note, documents and draft documents in relation to professional legal services or in relation to these proceedings | Second and third defendants and their legal advisors, first defendant and its legal advisors of other parties with a common interest including Mirco Focus | Second and third defendants and their legal advisors, first defendant and its legal advisors of other parties with a common interest including Mirco Focus | Common interest / Litigation | Evidence Act, section 56 |
[20] Uncertainty as to the nature of documents the subject of claims to privilege is undesirable. Rule 8.16(2) of the High Court Rules 2016 permits the description of documents “of the same nature” for which privilege is claimed “as a group or groups”. However, under r 8.16(3):
The description of documents for which privilege is claimed … must be sufficient to inform the other parties of the basis on which each document is included in a group ….
[21] As can be seen, the phrase “in relation to” is deployed for the purpose of describing each of the four document types set out in the table. And documents
described in the fourth row are described as documents “in relation to professional legal services or in relation to these proceedings”. I consider these phrases to be unhelpful.
[22] Nevertheless, the focus of Mr Williams’ submissions for Capax/Zovy in opposition to the proposition that privilege does not attach to documents in the fourth row was upon “material relating to the negotiation of” the above deeds.
[23] It is therefore tolerably clear that the above table indicates two categories of documents the subject of a claim to litigation privilege:
(a)in the second row, documents created for the purpose of communications between Capax/Zovy and their own legal advisers, experts and agents; and
(b)in the fourth row, documents created for the purpose of negotiations and other communications between Capax/Zovy, HP and other parties said to have a ‘common interest’ (including Micro Focus), including between these parties’ respective legal advisers, surrounding the parties’ entry into the Deed of Assignment and the Deed of Indemnity.
Matters in dispute
[24] In its supplementary written submissions in response to Capax/Zovy’s supplementary list of 13 April 2023, healthAlliance expressed concern that further documents relevant to assignment of the License Contract and the 2016 Agreement might exist notwithstanding Mr McGrath’s assertion by means of the list to the contrary.
[25] In commencing his submissions, Mr Williams observed that, it having become clear healthAlliance was seeking documents relating to negotiation of the 2016 Agreement, Capax/Zovy would undertake to revisit the scope of its disclosure of that material and confirm its position to Capax/Zovy. At that time, Mr Williams understood the exercise to be likely to reveal little more than red-lined drafts of the 2016 Agreement.
[26] A further point made by Mr Williams was that consistent denial (such as in this case) of possession of any relevant document other than those the subject of verified lists should be sufficient, in the absence of independent evidence, to dismiss an application for discovery.3
[27] In those circumstances, Mr Hollyman KC, for healthAlliance, was content in the course of the hearing to confine its application to the documents described in the fourth row of the above table, and his submission that privilege could not attach. In this manner, I was in effect invited to treat healthAlliance’s application for further disclosure under r 8.19 as an application to set aside a claim to privilege under r 8.25.4
[28]Mr Williams took no issue with this change of focus, and I proceed accordingly.
[29] It can be added at this point that the obvious basis for healthAlliance’s further disclosure application is its concern that assignment of the License Contract to Capax/Zovy for the purposes of this litigation may amount to maintenance and champerty. Capax/Zovy can be taken by its counterclaim relying on the License Contract to disavow any such suggestion. I am not required to comment on this topic. Capax/Zovy has listed documents surrounding entry into the two deeds because they carry potential relevance. That is a sufficient foundation upon which to consider the sole outstanding issue, whether the claimed privilege in the listed documents exists.
healthAlliance submissions
[30] Mr Hollyman took issue with the submission for Capax/Zovy that it holds privilege in materials relating to the 2022 Deed of Assignment and Deed of Indemnity, except to the extent this claim involved solicitor/client privilege over communications between Capax/Zovy and their own legal advisors. He submitted litigation privilege could not apply, because:
(a)the Micro Focus entities are non-parties to the litigation;
3 Baker-Marriot v Kurkziener HC Auckland M1397/93, 5 November 1993.
4 High Court Rules.
(b)it would be highly unusual for privilege (of any form) to attach to communications or documents as between counterparties to a transaction;5 and
(c)litigation privilege does not attach to transactions for the acquisition of rights to sue.6
[31] And Mr Hollyman submitted common interest privilege could not apply, because:
(a)Common interest privilege does not simply attach to communications between parties to the same transaction.7
(b)There can be no common interest privilege without a pre-existing privilege in a document that is then shared, absent waiver, with a third party holding a common interest.8
[32] Mr Hollyman further submitted, relying on s 65 of the Evidence Act, that Capax/Zovy had put the 2022 Deed of Assignment “squarely in issue”, and by doing so had waived privilege over all related documents.
Capax/Zovy’s submissions
[33] Mr Williams submitted that all documents relating to the negotiation of the 2022 Deed of Assignment and Deed of Indemnity are privileged:
5 Citing Pacific Pearl Accommodation Ltd v Zhou [2021] NZHC 2187 at [33]. In my view, this judgment is not authority for Mr Hollyman’s proposition, which falls for consideration on its merits. In Pacific Pearl, the documents in issue were file notes of a party’s solicitor. Associate Judge Bell observed simply that: “Records of conversations with a lawyer acting for the other side of a transaction or dispute are not normally subject to privilege unless they are exploring settlement.”
6 Citing Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc [2020] NZHC 396 at [46].
7 Citing Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV-2006-485-1600, 12 August 2009 at [79]–[81].
8 Citing Fresh Direct Ltd v J M Batten & Associates (2009) 20 PRNZ 126 (HC) at [66]–[69]; Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV-2006-485-1600, 13 July 2010; and Mitre 10 (NZ) Ltd v Thistle Dome Holdings Ltd [2015] NZHC 2719, [2015] NZAR 1909 at [18]– [20].
Those documents are all either subject to solicitor/client privilege (as they contain certain legal advice or relate to professional legal services), litigation privilege (in that the relevant communications were made for the dominant purpose of the existing litigation), and/or subject to common interest privilege.
[34] Mr Williams further submitted that disclosure of the two deeds had not amounted to disclosure of any document within the categories of privileged material set out in the above table, and that therefore there had been no waiver in terms of s 65.
Legal principles
Litigation privilege
[35]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:
(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.
[36] This provision was intended to codify the pre-existing common law on the subject,9 formulated for New Zealand by the Court of Appeal in Guardian Royal
9 Carter Holt Harvey Ltd v Genesis Power Ltd (No 7) HC Auckland CIV-2001-404-19741, 6 May 2008.
Exchange Co v Stuart.10 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:11
[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.
[37] 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”.
[38]Consistently with this view, the authors of Cross on Evidence assert that:12
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.
[39] Again, it appears 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.
[40] The judgment of Associate Judge Smith in Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc accords with this view. 13 In that case, Drive NZ was suing for negligence on the basis that another company had assigned it those claims. The pleaded assignment was not included in Drive NZ’s initial disclosure. Associate Judge Smith found the assignment should have been included, and in doing so added that there was no basis on which to conclude that the assignment document might have been protected by litigation privilege under s 56. His Honour observed:14
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
10 Guardian Royal Exchange Co v Stuart Assurance of New Zealand Ltd [1985] 1 NZLR 596 (CA).
11 At 602.
12 Mathew Downs (ed) Cross on Evidence (online ed, LexisNexis) at [EVA56.1].
13 Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc, above 6.
14 At [46].
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.
[41] I respectfully agree with this analysis. Capax/Zovy appears to have disclosed the 2022 deeds themselves consistently with Associate Judge Smith’s reasoning.
Common interest privilege
[42] Justice Wylie was required to address common interest privilege in Fresh Direct Ltd v J M Batten & Associates.15 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:16
[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.
…
[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
15 Fresh Direct Ltd v J M Batten & Associates, above n 8.
16 (Citations omitted).
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.
[43] Justice Dobson commented similarly in Todd Pohokura Ltd v Shell Exploration NZ Ltd.17 Justice Wylie’s above-cited remarks at [68] were referred to with approval by Collins J in Mitre 10 v Thistle Dome Holdings Ltd.18 I respectfully adopt them.
Waiver
[44]Section 65 of the Evidence Act 2006 relevantly provides for waiver as follows:
(1)A person who has a privilege conferred by any of sections 54 to 60 and 64 may waive that privilege either expressly or impliedly.
(2)A person who has a privilege waives the privilege if that person, or anyone with the authority of that person, voluntarily produces or discloses, or consents to the production or disclosure of, any significant part of the privileged communication, information, opinion, or document in circumstances that are inconsistent with a claim of confidentiality.
(3)A person who has a privilege waives the privilege if the person—
(a)acts so as to put the privileged communication, information, opinion, or document in issue in a proceeding; or
(b)institutes a civil proceeding against a person who is in possession of the privileged communication, information, opinion, or document the effect of which is to put the privileged matter in issue in the proceeding.
…
[45] In BIL NZ Treasury Ltd v PriceWaterhouseCoopers New Zealand, Associate Judge Johnston captured the principle behind s 65(2) and (3) as follows:19
[72] Broadly, if a party elects to disclose and rely on (by pleading or discovering the same) a document or documents within a category of privileged material, an opposing party is entitled to insist on all documentation within the same category being disclosed.
17 Todd Pohokura Ltd v Shell Exploration NZ Ltd, above n 7.
18 Mitre 10 (NZ) Ltd v Thistle Dome Holdings Ltd, above n 8.
19 BIL NZ Treasury Ltd v PriceWaterhouseCoopers New Zealand [2022] NZHC 150.
Analysis
[46] Given the above legal principles, it is clear that correspondence between the parties surrounding entry into the 2022 deeds of assignment and indemnity are not the subject of litigation privilege. Litigation privilege attaches to material generated for the purpose of “preparing for” a proceeding only in the sense of marshalling of evidence (and potentially arguments) to be deployed in the proceeding. As with the assignment and indemnity themselves, such correspondence was not for the purpose of “preparing for” this proceeding in that sense, but for the purpose of Capax/Zovy acquiring, or at least confirming its prior acquisition of, its entitlement to sue.
[47] In case I am wrong in this conclusion, I observe that I would not have found any litigation privilege attaching to the documents described in the fourth row of the above table to have been waived by disclosure of the 2022 deeds. There is a sufficient conceptual distinction between the deeds and the documents surrounding their entry such that disclosure of the former does not put the latter in issue. And they have never been described as falling within the same category of material such that disclosure of the former gives rise to an entitlement to insist on disclosure of the latter in accordance with the principle in BIL NZ Treasury Ltd cited above.
Result
[48] Pursuant to r 8.25(3), I set aside the claim to privilege made in respect of the documents referred to in the fourth row of the table beneath the heading “Part 2” in the Capax/Zovy’s supplementary verified list of documents dated 13 April 2023.
[49] In accordance with Mr Williams’ request made at the hearing, I do not proceed immediately to award costs. If costs cannot be agreed between the parties, they are to file and serve memoranda upon which I will determine the issue, healthAlliance no later than 9 June 2023, and Capax/Zovy no later than 23 June 2023.
Johnstone J
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