Hunter Grain Limited v Price HC Tauranga CIV 2008-470-192 - [2010] NZHC 524

IN THE HIGH COURT OF NEW ZEALAND

TAURANGA REGISTRY

CIV-2008-470-192

BETWEEN HUNTER GRAIN LIMITED
Plaintiff

AND RICHARD WILLIAM PRICE
First Defendant

AND PRICE COMMODITIES LIMITED
Second Defendant

Hearing: 1 March 2010

(Heard at Auckland)

Appearances: Mr I Thorpe for Plaintiff Mr H Fulton for Defendants

Judgment: 23 April 2010 at 4 p.m.

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on 23.04.10 at 4 pm, pursuant to Rule 11. 5 of the High Court Rules.
Registrar/Deputy Registrar Date...............

Counsel:

Mr Iain Thorpe, Wellington – [email protected]

Mr Hugh Fulton, Barrister, Auckland – [email protected] Copy:

Mr S Judd, Barrister, Auckland – [email protected]

HUNTER GRAIN LIMITED V PRICE AND ANOR HC TAU CIV-2008-470-192 23 April 2010

Background

[ 1 ] The applications before the Court are:

a)The plaintiff’s application dated 17 July 2009 for leave to use
documents, obtained on discovery in these proceedings, in the proceedings Hunter Grain Ltd v J Swap Contractors Ltd HC Tauranga CIV-2008-470-837, 2 October 2009 (“the J Swap proceedings”). That application is opposed by the defendants.
b)The defendants’ application for a strike out order under r 7.48 dated
11 September 2009, which is opposed by the plaintiff.

The brief background to the applications is that the plaintiff obtained an Anton Piller order against the defendants and obtained a number of documents when the order was executed. The question is whether the plaintiff can use those
documents in the J Swap proceedings against J Swap Contractors Ltd (“J Swap”). The plaintiff has already made use in the J Swap proceedings of the documents obtained under the search and seizure order without obtaining authority to do so. That is essentially the basis for the strike out application.

The proceedings against J Swap

The following statement of background is an extract from the judgment of Asher J in the J Swap proceedings (at [4][ 18]). I respectfully adopt that summary, which I have repeated in paragraphs [4] to [ 14] below.
The second plaintiff, Hunter Grain (NZ) Limited (“HGNZ”) is a supplier of palm kernel meal. Palm kernels are a by-product of the extraction of palm oil and the meal is a useful stock feed for dairy cattle. From 1988 HGNZ imported palm kernel meal and sold it to Intelact Nutrition Limited as the New Zealand retailer. Intelact Nutrition Limited used the defendant, J Swap Contractors Limited (“J Swap”) as a storage and cartage contractor. In mid-2004 Intelact Nutrition Limited decided to source its palm kernel meal from a different importer. At that stage J

Swap decided to establish a retail business providing palm kernel meal, sourcing its product from HGNZ.

In 2004 the Chief Executive of HGNZ was a Richard William Price. He had formed a close relationship with J Swap, and in particular was a personal friend of one of the directors of J Swap, Stephen Swap. Mr Stephen Swap is a trustee of Mr Price’s family trust. Almost all the dealings between HGNZ and J J Swap have been conducted between Mr Price and Mr Stephen Swap.
On 18 February 2006 the first plaintiff, Hunter Grain Limited (“HG”), was incorporated. The purpose was to set up a New Zealand vehicle in which Mr Price could have a shareholding. His shareholding in HG was 20 percent and he was the managing director. The other shareholders were, David and Michael Dossor, based in Australia. HG took over the business formerly conducted by HGNZ. The shareholders of HGNZ are solely the Dossors. Mr Price had the day-to-day control of all aspects of HG’s operations in New Zealand.
By 2007 the trade in the business of HGNZ and J Swap was very substantial and continuing to expand. In dollar terms over the period of their engagement, HG’s palm kernel meal sales to J Swap amounted to over $100 million. However, some difficulties started to arise between Mr Price and the Australian shareholders of HG, David and Michael Dossor. From December 2007 J Swap started sourcing palm kernel meal from other suppliers.
From September 2007 Mr Price began carrying out certain activities which the plaintiffs considered to be in breach of his duties to them. HG commenced proceedings against Mr Price on 14 March 2008. It obtained an Anton Piller order (now called a search order under Part 33 of the High Court Rules), which was executed on 18 March 2008. The execution was supervised by an independent solicitor assisted by another lawyer and two private investigators. Certain hard copy documents were identified and uplifted and a copy was taken of the contents of the hard drive of Mr Price’s laptop computer.
Mr Price challenged the issue of the search order. In a judgment, Hunter

Grain Limited v Price HC Tauranga CIV-2008-470-192 25 July 2008, Allan J concluded that in September 2007 Mr Price had gone to Singapore and dealt with HGNZ’s supplier of palm kernel meal (Wilmar International Limited) directly. On 26 September 2007 Mr Price advised that he intended to resign from HGNZ. Ultimately, in mid-January 2008, it was agreed that his shares would be purchased by Mr David Dossor from HGNZ and that he would resign as a director. Allan J held that there was a serious question to be tried that Mr Price was liable for conversion and misuse of confidential information, and for breach of his duty as a director to act in good faith and in the interests of HG. He refused to discharge the Anton Piller order.

[ 10] Mr Price resigned as a director on 23 January 2008. Allan J inferred that prior to this Mr Price had been negotiating with a different supplier of palm kernel meal for the supply of meal to New Zealand, that company being Toepfer International Asia-Pte Limited (“Toepfer”), and that this was not disclosed to HG. Allan J found that Mr Price had obtained a significant timing advantage by his actions to secure a supply of palm kernel meal while still employed by HG: at [65]. The Judge also found that there was a serious question to be tried in that after 10 January 2008 Mr Price, although no longer employed by HG, went into HG and took his laptop from the premises. He then took the hard drive out and replaced it with a hard drive that was blank, save for the basic program. It was accepted before Allan J by Mr Price’s counsel that Mr Price obtained confidential information by taking this step.

[ 11 ] HGNZ and HG issued proceedings against J Swap on 1 October 2008. The proceedings contain allegations that overlap with the allegations in the Price proceedings. In the first cause of action it is alleged that there was a joint venture between HGNZ, HG and J Swap, that between August 2007 and January 2008 J Swap conducted the ventures affairs for its personal benefit and for the benefit of Price and Toepfer. This is alleged to constitute a breach of the fiduciary duties of loyalty and to act in good faith. The second cause of action is for damages for repudiation of the joint venture. The third cause of action is for a general breach of fiduciary duty on the part of J Swap. The fourth cause of action is knowing assistance (to Mr Price) in breach of fiduciary duty. These causes of action are all causes of actions of the first plaintiff, HG.

The judgment of Allan J made certain directions relating to the cataloguing of the material obtained when the search orders were exercised, in particular in relation to the material that was on Mr Price’s personal hard drive, which contained the contents of his work hard drive while he was employed by HG. An independent accountant employed by PricewaterhouseCoopers, Mr Campbell McKenzie, was to make a search of two optical discs containing the material, known as PC RP-02 and PC RP-03. He was, following a search, to produce a catalogue of the folder and file contents of each disc, and provide a description of each document sufficient to identify it. The catalogue was to describe all emails on each of the discs, providing a description of the sender, recipient, the date of the email and the subject heading. Mr Price’s counsel were to inspect Mr McKenzie’s catalogues and advise HG’s solicitors in writing which of the documents the defendants claimed did not comprise HG’s business records. Copies of all HG’s business records, as identified by the defendant, were to be immediately released by the executing solicitors to HG. Mr McKenzie was to review and categorise each document identified by Mr Price as not being an HG business record, as either being business or personal or as “unsure”. HG was to advise Mr Price of any documents where HG disputed the claim that they were not business records. The parties had leave to apply to the Court in the event of any dispute.
Mr McKenzie prepared a catalogue. That catalogue listed, inter alia, an email from Mr Price to Mr Simon Murphy of Toepfer, dated 5 December 2007 with the subject heading “NZ agreement”. It also listed a document dated 7 January 2008 as document 13157. It was an email from Mr Price to Stephen Swap and it was entitled “establishment of our JV”.

[ 14] Mr McKenzie forwarded to HG the documents in respect of which no objection was taken, by way of a DVD. Included on the DVD was a document entitled “Price Commodities Limited”. This document appeared to have been attached to the email sent on 7 January 2008 from Mr Price to Stephen Swap under the heading “establishment of our JV”. The document appears to be an action plan for the joint action of Mr Price and J Swap through January and February 2008, which involved them working with Toepfer, (“the action plan”).

[15] In the J Swap proceedings, the defandants alleged that Hunter had wrongly used certain documents which had been obtained in the present proceedings. The documents that it is said were improperly used included “the catalogue” to the extent that it discloses references to and descriptions of the two emails, and the attachment to the email of 7 January 2008.

[ 16] To resume my review of the background, I note that in this application the defendant raises the same point – viz the alleged wrongful use of the catalogue and also the two emails and the attachment to the email of 7 January 2008.

[ 17] An application was brought to strike out the J Swap proceedings based upon the wrongful use of documents in that proceeding which were documents that had been obtained from Mr Price as a result of the Anton Piller order. Asher J who heard that application, said in the judgment at [19]:

As I understand Mr Fisher’s argument, he submits that neither the subject headings of the 5 December 2007 or 7 January 2008 emails, or the action plan should have been used by HG for any purpose other than the Price litigation. To so use those documents was a breach of the implied undertaking that they would only be used in that limited way.

It will be seen that the defendant’s position in this proceeding, then, mirrors the position it took in the J Swap proceedings.
Hunter brought an application for injunction, which was dealt with by Allan J in a judgment dated 25 July 2008. In that judgment, Allan J described the subject matter of the proceedings in the following way:
[3]  Hunter Grain believes that certain steps taken by Mr Price during
the latter stages of his directorship, and at the time of his departure, constitute breaches of duty owed by him to Hunter Grain. There are two particular complaints:
a)        that Mr Price engaged in negotiations while still a director
of Hunter Grain with Toepfer International-Asia Pte Ltd (Toepfer), a major international trader in grain and stock food commodities, in order to secure for himself the New Zealand agency for that company; the plaintiffs say that in
doing so Mr Price appropriated to himself a corporate opportunity which he ought to have disclosed to Hunter Grain.
b)       that at the time of his departure from Hunter Grain, he took
with him two computers upon which were stored a significant number of confidential documents belonging to Hunter Grain. Some of those documents are not otherwise available to Hunter Grain. To date the confidential information has not been returned to the company; indeed, Mr Price accepts that he caused a hard drive containing much of the material in dispute to be destroyed.

[20] In its present application the plaintiff seeks leave to use in the J Swap proceedings a very wide range of documents which it obtained as a result of the search and seizure order made in this proceeding. In his submissions Mr Thorpe said:

7.2 The documents sought to be discovered in the J Swap Proceedings
are all documents discovered in these proceedings by or on behalf of the defendant, including the documents obtained on the execution of Anton Piller orders in March 2008, but not including the 10 Eastlight folders of documents provided by the defendant recently pursuant to the 14 May 2009 orders for discovery in respect of damages. Had the first defendant not stolen and destroyed the plaintiff’s hard drive, all of these documents on the hard drive would have been available to the plaintiff, without apparent restriction, and would have been discoverable.

[21 ] Apart from the above description, the documents are not further indentified. Whether all the documents are admissable in the J Swap proceedings is not clear. It was not, for example, accepted by the defendants that documents were admissible, with the only issue being that leave to use them in the other proceeding should be declined because of the plaintiff’s alleged misconduct in having already used the documents in the J Swap proceeding without consent. Issues of privilege arise and I shall consider that matter below.

[22] The defendants’ opposition was based on the following propositions:

a) The documents were obtained on execution of the Anton Pillar order or by discovery and are thus subject to limitations on use other than in this proceeding;
b)The J Swap proceedings are “a different action” and the defendants are not parties to it;
c)The plaintiff has, in breach of its undertaking to the Court and in breach of the rules and obligations, already used the documents in the J Swap proceeding without leave;
d)As a result of the last mentioned ground the plaintiff is in contempt of the Court and its conduct amounts to an abuse of the proceedings;
e)Generally, the present proceeding ought to be dismissed or stayed due to the contempt or abuse of proceedings ground.

In furtherance of proposition “(e)”, the first and second defendants have sought an order under r 7.48 or the inherent jurisdiction of the Court in relation to the plaintiff’s breach of undertaking not to use documents discovered or seized for any purpose other than these proceedings.
a) The grounds on which the strike out is said to be justified are that the
plaintiff has obtained documents on discovery or from the execution of an Anton Pillar order subject to undertakings that the documents not be used for a collateral or other purpose than in these proceeding.
In the affidavit evidence he filed Mr Price said that there is a further reason why there has been improper use of documents obtained on discovery or subject to the Anton Pillar order. The particular documents related to the additional grounds that the plaintiff was not entitled to possession of copies of documents which are listed in the following paragraph. That is because they were the defendants’ personal documents and were not the plaintiff’s business documents. I shall explain the significance of these terms at the appropriate point in my judgment. The defendant submitted that there had been misconduct on the part of the plaintiff’s legal advisors and that this was relevant to whether the Court should grant leave to use the documents. Further, the defendant filed its own application to strike out the plaintiff’s claim which was similarily based on that misconduct.

[25] The documents which, according to the defendant, had been obtained as a result of the Anton Piller order and had already been used in the J Swap proceedings without consent were:

a)      Action plan;
b)      Email 3.12.07 Price to S Murphy;
c)      Email 7.1.08 Price to S J Swap;
d)      Catalogue identifying documents compiled by CB McKenzie;
e)      Email 9.10.07 Price to S Murphy;
f)      Email 14.11.07 Price to S J Swap;
g)      Email 14.11.07 Rabobank to Price.

Issues

[26] Mr Thorpe for the plaintiff described the issues in the following terms:

3.The point that arises to be considered is how a plaintiff is to behave when it receives in one proceeding documents that are relevant and discoverable in another set of proceedings to which it is also a party.
4.In the first set of proceedings of the plaintiff has its well-known obligation not to use documents obtained on discovery for a collateral purpose, see for example Wilson v White [2005] 3 NZLR 619 (CA) and the commentary in McGechan at HRPt8Subpt 3.07.
5.However, in the second set of proceedings the plaintiff is subject to the equally well-known obligation to give discovery of all relevant documents coming in its possession, custody or power (HCR r 1.3 and r 8.18 and McGechan HR8.18.01)), including an obligation to give ongoing discovery after completion of its list of documents (HCR r 8.28 and Shipbuilders Ltd v Benson [ 1992] 3 NZLR 549 (CA)).
6.As the defendants have refused to give the plaintiff leave to discover in the J Swap Proceedings documents from these proceedings that are relevant to the J Swap Proceedings, the plaintiff requires direction from the Court to determine how it is to reconcile its two conflicting duties.

[27] The plaintiff said that it should be able to use the documents in the J Swap litigation on the following grounds, which are set out in counsel for the plaintiff’s submissions:

7.1 the director of J Swap Contractors Ltd, Mr. Stephen Swap, was
founding shareholder of the second defendant, Price Commodities Limited, and remains a trustee of the first defendant Richard Price’s family trust. He has given affidavit evidence on behalf of J Swap Contractors Ltd in these proceedings and deposed that he had read
all of the plaintiff’s affidavits. It follows that any claim of confidentiality as between the defendants and J Swap Contractors Ltd must be tenuous, at best;

7.4 if the defendant in the Swap Proceedings had been joined to these
proceedings, then there would have been no particular issue about the plaintiff’s discovery being made available to J Swap Contractors Ltd. The only reason they were not joined to these proceedings was to maintain momentum in these proceedings after the Anton Piller orders had been initially obtained. It is noteworthy that the plaintiff has still not managed to obtain a hearing date against the defendant in the Swap Proceedings, despite having commenced those proceedings in 2008.

[28] Mr Fulton’s overview of the issues was in the following terms:

53 The plaintiff’s grounds in its application amount only to:
a)There is a tenuous factual link between this proceeding and the Swaps’ separate action.
b)Unidentified or unclassified documents in this action will be relevant in the separate Swaps’ action.
c)The defendants have not identified prejudice.

54 Grounds appearing in the plaintiff’s submission appear to be:
a)How does the plaintiff comply with its discovery obligations to Swaps in respect of documents that it holds from Price following execution or discovery.
b)(By reference to Izard Weston’s correspondence made into “evidence”) all information sourced originally from the plaintiff’s hard-drive is owned by the plaintiff and outside any restriction on use.
c)Unrestricted discovery would follow if Swaps were a party to this action.

55 These grounds are insufficient for release of the undertaking and for
permission to use the documents. Again the order that is sought is quite indiscriminate so as to include all documents of the defendants, which would include personal, privileged and confidential or sensitive information. The plaintiff was asked to identify both its grounds and the documents for discovery and those to be exempted. It has inadequately responded.

Issues summarised

[29] As well as the above matters, there were other issues raised by the parties in their affidavits and pleadings. I consider the issues can be distilled down to those in the following list:

a)What is the scope of the principle that places constraints on the use by a party of documents which he/she has obtained through the process of discovery?
b)Does the fact that the first defendant had stored the documents on a computer belonging to his employer, the plaintiff, mean that the plaintiff owned the documents and does not require the consent of the Court when deciding how to use its own documents?
c)Is use of the documents in question for the purposes proposed here, prevented by the principle that documents obtained under the compulsion of an Anton Pillar order or discovery cannot be used for a collateral purpose, namely, proceedings against another party?
d)Whether leave should be declined in any event because there has been dishonesty on the part of the plaintiff’s advisors in any or all of the following respects:
i)Knowingly using the documents without the consent of the Court when they knew such consent was required;
ii)Providing deliberately false information to the party whose documents had been disclosed by attempting to conceal such disclosure or by representing that such disclosure had been inadvertent when it was not;

e) Whether the plaintiff’s proceeding should be struck out in any event
because:
i)There has been dishonesty on the part of the plaintiff’s advisors in the respects set out under “(d)”;
ii)The plaintiff used discovered documents in the J Swap proceedings without first obtaining leave or consent.

Before I move on to giving my assessment of the issues, I should comment on the point that Mr Fulton advanced, that the plaintiff’s application seeks to sanction the use of documents in the J Swap proceedings regardless of whether they are privileged, or confidential. I do not consider that the fact that leave might be granted on an application of this type overrides the right to object to production of documents in other proceedings on the grounds that they might be, for example, privileged as between Mr Price and his legal advisors.
Before considering the individual issues, I shall consider the relevant principle.

What is the scope of the principle that places constraints on the use by a party of documents which he/she has obtained through the process of discovery?

In Crest Homes plc v Marks [ 1987] AC 829 at 860, Lord Oliver of Aylmerton stated:
[T]he court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery. As Nourse L.J. observed in the course of his judgment in the instant case (ante, p.840G), each case must turn on its own individual facts.
At 853 Lord Oliver also said:
It is clearly established and has recently been affirmed in this House that a solicitor who, in the course of discovery in an action, obtains possession of copies of documents belonging to his client's adversary gives an implied undertaking to the court not to use that material nor to allow it to be used for any purpose other than the proper conduct of that action on behalf of his client: see Home Office v. Harman [1983] 1 A.C. 280. It must not be used for any "collateral or ulterior" purpose, to use the words of Jenkins J. in Alterskye v. Scott [ 1948] 1 All E.R. 469, approved and adopted by Lord Diplock in Harman's case, at p. 302. Thus, for instance, to use a document
obtained on discovery in one action as the foundation for a claim in a different and wholly unrelated proceeding would be a clear breach of the implied undertaking: see Riddick v. Thames Board Mills Ltd. [1977] Q.B. 881.
In Riddick the plaintiff sued his employer for damages for wrongful arrest and false imprisonment arising from the circumstances of his dismissal from their employment. In the course of discovery in that proceeding the defendant employer disclosed an inter-office memorandum which said that the plaintiff was highly strung, lacked confidence and was unable to do his job. The proceeding for false imprisonment was settled. The plaintiff then commenced a further proceeding against the same defendant, his employer, this time for defamation allegedly committed by publishing the contents of the memorandum. In Riddick, therefore, the parties to the second action were identical to the first. The two incidents from which the causes of action derive had substantial linkages from a factual point of view, both stemming from the event that led to Mr Riddick’s dismissal and removal from the company’s premises.
In his judgment in Riddick Lord Denning referred to the balance that was required to be struck between two competing public interests. The first was the public interest that full disclosure of documents should be made so that the Court could get at the truth of a dispute. Against that needed to be balanced a public interest in preserving privacy and protecting confidential information. Lord Denning said at 895-896:
The reason for compelling discovery of documents in this way lies in the public interest in discovering the truth so that justice may be done between the parties ...
Compulsion is an invasion of a private right to keep one’s documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party – or anyone else – to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice ... In order to encourage openness and fairness, the public interest requires that documents disclosed on discovery are not to be made use of except for the purpose of the action in which they are disclosed.

[36] The above statement of principle was adopted by Rodney Hansen J in Telstra New Zealand Ltd v Telecom New Zealand Ltd (2000) 14 PRNZ 541 at [47].

In the Riddick case, Waller LJ said in his judgment at 912:
The interests of the proper administration of justice require that there should be no disincentive to full and frank discovery.
Although this court indicated that a claim might arise based on this document dated April 16, 1969, the court was not called upon to consider whether or not such action would be an abuse of the process of the court. Indeed the fact that it was disclosed on discovery is not mentioned in the judgments. In my opinion it is highly desirable that there should be no discouragement to full and frank disclosure on discovery. If there be a risk that disclosures may produce new causes of action parties may be deterred from disclosing the document.
I am of the opinion that to use this document, which had been compulsorily disclosed in other proceedings, is an abuse of the process of the court and it would be contrary to public policy to allow it to be used in these proceedings.
One of the factors that Waller LJ referred to as supporting the restriction on use of discovered documents was the need to protect individuals giving discovery from the contingency that if they give discovery that may lead to further causes of action against them. So, in Riddick the documents that the defendant was required to disclose in the wrongful imprisonment cause of action should not be permitted to be used as a basis upon which to prove liability in a later defamation action. Before I consider the application of these statements of principle to the present case, I shall deal with a point that the plaintiff raised which would, if accepted, circumvent the need for comment.

Is use of the documents in question for the purposes proposed here, prevented by the principle that documents obtained under the compulsion of an Anton Pillar order or discovery cannot be used for a collateral purpose, namely proceedings against another party?

The principle stated in Alterskye v Scott [1948] 1 All ER 469 was said to be intended to prevent the use of documents obtained on discovery for any “collateral or ulterior purpose” which includes use of documents as evidence in another proceeding (Riddick at 911). Where the applicant’s wish is to use the documents in other proceedings, it would seem that some assessment is to be made of the closeness of connection between the two sets of proceedings. Such an approach would constitute a relevant mechanism for testing whether or not the controlling

principle which governs the use of discoverable documents should be applied in its full rigour or whether a departure is justified. While it might not be permissible in transactions resulting in cases that have a remote connection between each other to decline leave, it seems fair and reasonable that a different approach be taken where there is a close factual connection between the two matters. There is such a connection here. In fact, it would have been possible for the subject matter of the two proceedings against the two different defendants to have been included in one proceeding. I did not understand Mr Fulton for the defendant to contend otherwise. In this case, there are close links between the alleged conduct of Mr Price in the proceeding in which the discovery was given and the other proceeding in which the documents were used. I have noted the submissions of Mr Thorpe at paragraph [26] above which correctly summarise the links . What is in effect alleged is that the plaintiff lost its business to J Swap as a result of, inter alia, unauthorised disclosure of information by Mr Price. It is also alleged in the J Swap proceedings that J Swap sanctioned breaches of duties which Mr Price owed to his employer, the plaintiff. There is, in other words, a substantial interweaving of the facts of the two sets of proceedings.

Relevance of non -party discovery rule

[40] As Mr Thorpe submitted, it is relevant to bear in mind that there have been inroads made into the “privacy” aspect by the High Court Rules. Specifically, it is today common for the courts to make orders for discovery against non-parties: r 8.26. Orders under that rule may be made against persons to provide discovery of documents:

...that the person would have had to discover if the person were a party to the proceeding.

[41 ] The policy underlying r 8.26 would seem to be that individuals can be required to give discovery of their private documents even although they are not parties to the proceeding where such an order is ‘necessary’. To analyse the effect of the adoption of that rule in the terms in which Lord Denning explained the issues in Riddick, the legislature has apparently decided that the public interest in having a document available to enable the Court to get at the truth of a dispute will generally outweigh the competing public interest in preserving privacy.

Other considerations

There is an apparent tension between, on the one hand, restricting the use of documents preventing the document in the present case being used in the J Swap case on the grounds that they are private documents, when it is likely that the same documents could have been obtained by means of a non-party discovery order. However, the principle stated in authorities such as Riddick has not been abandoned in New Zealand and I am bound to apply them. But there are good reasons why it can be said that the policy underlying the requirement of an undertaking not to disclose documents obtained on discovery would not, in principle, be breached in the present case.
In the present case, there is not the “risk that disclosures may produce new
causes of action” such that “parties may be deterred from disclosing the document” (cf Riddick at 912, Waller LJ).
But Mr Price is not a defendant in the J Swap proceedings . Any extant causes of action against Mr Price and his company have already been included as part of the present proceeding. The fact that the documents discovered in the proceedings in which those causes of action were commenced are now proposed to be discovered in another action against a different party should not amount to a disincentive to Mr Price and his company to give discovery in the proceedings that they are involved in at least not on the grounds mentioned in paragraph [37].
The next relevant point is that the subject matter of the J Swap proceedings is closely linked to those brought against the defendant. J Swap is alleged to have, inter alia, assisted the defendant in breaching the same obligations that they allegedly owed to his employer, which is the basis upon which the present claim is brought. The defendant could not reasonably complain that he was compelled to give discovery for one purpose only to find that the documents he produced were later put to another unrelated collateral purpose. In substance, that part of the J Swap proceedings which relates to the dealings between J Swap and the defendant will canvas many matters that are similar to those which will be gone into in the present proceeding. Both claims could have been brought as one set of proceedings.
The plaintiff’s proceedings in the present action, which the defendant seeks to strike out, are based upon serious breaches of obligation on the part of Mr Price. Allan J has already found that there is a serious question to be tried on these issues. The documentary evidence which was obtained as a result of the search and seizure order appears to show that while Mr Price was still an employee of the plaintiff he was acting other than in accordance with his duties of loyalty to the plaintiff. The plaintiff alleges that it has suffered very large financial loss.
I consider that declining to permit use of the documents in the J Swap litigation, would, because of the severity of its effect on the plaintiff, be a disproportionate outcome. That is, it would be a serious step to take to make an order whose effect would be to deprive the plaintiff of the use of strongly probative evidence in the J Swap proceeding on the grounds that the plaintiff made improper use of that material when it obtained it from discovery in the present proceedings.

Does the fact that the first defendant had stored the documents on a computer belonging to his employer, the plaintiff, mean that the plaintiff owned the documents and does not require the consent of the Court when deciding how to use its own documents?

The plaintiff’s submission was that the documents had all been at one time stored on the disk drive of a laptop computer belonging to the plaintiff and that because the plaintiff owned the laptop and its component parts, including the hard disk, it was the owner of documents originally created or stored on that disk. As matters have turned out, instead of getting documents from its own disk drive, it has obtained them by a roundabout process as follows. Mr Price copied all or many of the documents from the plaintiff’s hard drive onto a new computer that he bought and which was his property. That computer was subjected to forensic examination as part of the execution of an Anton Pillar order and copies of the documents were located.
The plaintiff’s submission was that the ownership of the original documents in electronic form on its computer hard drive would also attach to copies made on a further drive owned by some person other than the owner of the original drive. Specifically, it was submitted that had Mr Price not unlawfully taken the disk drive and destroyed it, the plaintiff would have had access to the documents as of right and would not have needed any approval from the Court to use of the documents in the J Swap proceedings. The plaintiff effectively says that it ought to be treated as being in the equivalent position it was in at the stage before the hard drive was destroyed and when the hard drive was in its owner’s possession.
Mr Fulton submitted that that Mr Price had stored documents which were his private property on the computer drive pursuant to an entitlement he had as part of his work arrangements to do just that. The fact that some personal use of the employer’s computer was recognised as part of Mr Price’s employment arrangements meant that documents stored on the hard drive pursuant to that authority were never intended to, and did not, become the plaintiff’s property. Mr Thorpe disputed that there was any such entitlement. He said that at all times the plaintiff must have had the right to have access to all of the contents of files stored on the hard drive for the purposes of maintenance and security of the plaintiff’s computer of which the hard drive was part. Additionally and alternatively, Mr Thorpe said that even if it was a condition of Mr Price’s employment that he should have the right to store private documents on his employer’s computer, that could not extend to those documents which the plaintiff brought into existence in furtherance of actions and designs which were in breach of the obligations that he owed to his employer.

Discussion

A party giving discovery is required to provide information about documents which he has in his possession. Discovery may provide to an opposite party documents which he already knew about the existence of – documents that he already has copies of in his possession. The very fact that a party is required to disclose that he or she had the document in their possession may prove a relevant fact in the case, quite apart from establishing that the document disclosed actually exists. It might be that, in theory, a party rather than seeking discovery could bring a proprietary action against another party to recover possession of the document belonging to the claimant which the other party has converted or detained. In such a case, the question of ownership or right to possession of the document would be

decisive of the outcome of the application and would determine whether or not the defendant was required to yield the document to the claimant. But the process of discovery under which the plaintiff obtained the copies of documents in question in this case is quite a different one. It is based upon the High Court Rules, which are the product of the power of the Court to direct a party compulsorily to disclose documents. The party giving discovery has to disclose all documents that are or were in its possession or control and relate to a matter in question in the proceeding: r 8.18. The policy underlying the law is to avoid any disincentive for a party to make full and candid disclosure – whatever the provenance of documents in the possession of the discovering party. The fact that the documents provided on discovery may be copies of documents that the plaintiff owned is irrelevant to the question of whether the party who has obtained copies under discovery is subject to restraints on what uses he/she can put the documents to.

My conclusion, therefore, is that the fact that the original documents were stored on a hard drive which admittedly belonged to the plaintiff does not exempt the plaintiff from the requirement to obtain leave before using the document obtained in the course of discovery or under the Anton Pillar order in another proceeding.

Alleged misconduct on the plaintiff’s part as an element of the defence to the application to use documents in other proceedings and as basis for the strike out application

Mr Fulton summarised the grounds of the application in the following way:
2 The source and use of each will be identified as coming into the
possession of the plaintiff or its solicitors from the defendants as a result of the search and seizure operation on 18 March 2008 and from discovery of those and other documents. The plaintiff has used these documents in the Swaps action.
Before dealing with the submissions of the parties on this point, it is necessary to set out some additional background.

[55] The parties agreed to the following terms in relation to the Anton Piller order.

MEMORANDUM OF COUNSEL FOR PLAINTIFF AND DEFENDANTS IN RELATION TO DRAFT ORDERS FOR THE SEARCH AND INSPECTION OF DOCUMENTS SEIZED DURING EXECUTION OF ANTON PILLER ORDER

May it please the court counsel for the plaintiff and the defendant agree that: In respect to the plaintiff’s business records

The first defendant has confirmed that the optical disks comprise copies of all information taken from the plaintiff’s hard drive by the first defendant.
Mr McKenzie will make a search of the optical disks ‘PC RP-02’ and ‘PC-RP-03’ as defined in his affidavit sworn on 15 July 2008 presently in the possession of the executing solicitors, Keegan Alexander.
Mr McKenzie’s search will produce a catalogue of the folder and file contents of each of those disks providing a description of each document sufficient to identify it.
Mr McKenzie’s search will produce a catalogue of all e-mails on each of the disks providing a description of the sender, recipient, the date of the e-mail and the subject heading.
Mr McKenzie will complete this task by 18 July 2008.
The defendants’ counsel will inspect Mr McKenzie’s catalogues and advise the plaintiff’s solicitors in writing which of the documents that the defendants claim do not comprise the plaintiff’s business records.
The defendant will complete this task by 25 July 2008.
Copies of all of the plaintiff’s business records as identified by the defendant will immediately be released by the executing solicitors to the plaintiff.
Mr McKenzie will review and categorise each document identified by the defendant as not being a plaintiff’s business record as – plaintiff’s business, personal or unsure.
Mr McKenzie will complete this task as quickly as possible but in any case no later than 2 August 2008, with leave to request more time if required.
The plaintiff will advise the defendant of any documents where the plaintiff disputes the claim that they are not business records. The plaintiff’s counsel, Mr I Thorpe, will be entitled to inspect any such documents on his undertaking to keep their contents confidential from his clients pending further order of the Court.
In respect of documents relevant to issues in dispute the parties have leave to apply to the court in these proceedings to determine whether any document can properly be characterised as a business record of the plaintiff and therefore must be released to the plaintiff.
In respect of production of relevant documents for inspection
13.Mr McKenzie will undertake a search of the entire forensic copy of the defendant’s electronic records (including deleted records) using the search terms set out in the plaintiff’s solicitors’ letter to the defendant’s counsel of 22 April 2008 which is pp 499-501 of the plaintiff’s bundle of relevant documents for the hearing in these proceedings commencing on 10 July 2008. Mr McKenzie will produce his results in the form of catalogued lists as described earlier in this order (without attempting to categorise them as relevant or not).
14.Mr McKenzie will complete this task by 2 August 2008.
15.Within 10 working days of Mr McKenzie advising the parties of the results of his search the defendant will advise the plaintiff of which documents it objects to produce for inspection, and why in each case.
16.The parties shall then have leave to apply to the Court for orders as to inspection of any such documents.
The scheme of the arrangement, then, was that Mr McKenzie (a computer expert) would produce a catalogue of the documents, and the defendants would inspect it and advise the plaintiff which documents the defendants claimed were not part of the plaintiff’s business records. Those documents which the defendants classified as the plaintiff’s business records were to be released to the plaintiff. The plaintiff’s counsel would then have the right confidentially to inspect any documents which the defendants claimed were not the plaintiff’s business records. The parties had the right to seek directions of the Court as to which documents were, and which were not, business records.
The plaintiff accepted that certain documents which were categorised by Mr Price as “non-business” documents were provided to the plaintiff. Their
classification under the mechanism I have set out above had not been reviewed by the Court and so there could be no dispute that Mr McKenzie should not have released them to the plaintiff.
Mr Fulton submitted that Mr McKenzie had acted deliberately in releasing non-business records to the plaintiff. He said this followed from the fact that the process in which Mr McKenzie was involved was one of precision so that it was inherently unlikely that a non-business record would be sent to the plaintiff as a result of error. Mr Price, in what were essentially submissions that he made in the course of his affidavit dated 8 April 2008, also made reference to the fact that Mr McKenzie declined to demonstrate to the defendants how this mistake had been made because, he said, he did not have any authority or instructions to do so. He also said that Mr McKenzie had made it clear that he would not co-operate with the defendants in allowing their expert to verify the process that had been followed without first obtaining the authority of the plaintiff’s solicitors. Mr McKenzie’s overall response was characterised as partisan and demonstrating loyalty to the plaintiff. This was said to be the real explanation as to how the release of the non-business documents occurred. I interpolate to comment that from my understanding of the facts of the case, I could very well see why someone in Mr McKenzie’s position having caused the dispute to erupt in the first place, would decline to engage further with the defendant unless both parties agreed that that would be an appropriate course to take.
Mr Fulton analysed in considerable detail why the defendants regarded the use of the documents that had already occurred so seriously. I do not intend to set out the full process of reasoning in detail but will make reference to one of the documents to give an indication of the type of thing that the defendants complain about.
The two documents which particularly concern the defendants are emails which Mr Price sent to a Mr Simon Murphy (who is with Toepfer) on 3 December 2007 and to Mr Swap on 7 January 2008.
The Murphy email of 3 December 2007 and that to Mr Swap on 7 January 2008 were recovered from the laptop which Mr Price purchased after he left the service of the plaintiff and to which documents that had been on the plaintiff’s laptop were copied. These documents indicated that even while Mr Price was still an employee of the defendants he was making arrangements to go into business on his own account as an importer of the commodities which the plaintiff imported and that he and J Swap would agree on a form of joint venture to make this possible. Copies of the “action plan” were sent to J Swap under cover of a letter before action. The way in which this occurred was that when writing to the solicitors for J Swap on 2 September 2008, the plaintiff enclosed copies of the emails including the “action plan”, (category “(a)” in paragraph [24] above).
The defendants say that use of this material was particularly objectionable because it was done deliberately. I understand that to involve an assertion that the solicitors acting for the plaintiff knew that the documents had been obtained as a result of the Anton Piller order and that it was improper for them to disclose it to a non-party in the position of J Swap without the consent of the defendants or leave of the court.
Mr Fulton said that the explanation provided by the solicitors for the plaintiff –that the admitted wrongful disclosure had occurred accidentally – was false. He was also critical of the fact that such explanation was advanced on behalf of the defendants by means of an affidavit sworn not by one of the solicitors involved, but by an officer of the plaintiff. Mr Thorpe for the plaintiff made it clear that the plaintiff did in fact act deliberately in sending the document under cover of the letter before action which the plaintiff’s solicitors wrote to J Swap. Mr Thorpe said that any reference to inadvertence was to do with the fact that when the plaintiff’s legal advisors later wrote to the defendants’ counsel they may not have made it clear that the letter to which were attached documents obtained in the present proceeding had in fact previously been sent to J Swap.
Mr Fulton said it was of particular significance that the solicitors for the plaintiff wrote to him in August 2008 in the course of which they made comments about the action against Mr Rice. The letter requested the defendant to allow production of certain of the documents which had been obtained under the Anton Pillar order and said that the plaintiff “should not be deprived of evidence available to it in the prosecution of claims against the Swap entities”. Without having any agreement of counsel for Mr Rice, the plaintiff’s solicitors went ahead and wrote to J Swap on 2 September 2008 enclosing copies of documents obtained under the Anton Pillar search in any event. Mr Fulton also considered that it was of further significance that a fortnight later, after writing the letter that they did to J Swap, the

plaintiff’s counsel advised the defendant that the matters that had been mentioned in the letter to Mr Fulton on 7 August 2008 were not going to be referred to J Swap and, “there is no reason now to bring them to Mr J Swap’s attention”.

This last comment was misleading. That is because by the time it was written the full contents of the letter of 7 August 2008 had already been disclosed to Mr Swap who had received a copy of it.
Mr Fulton considered that this conduct was part of a pattern of deliberate infraction of the principle that documents obtained in discovery are not to be used for other purposes without leave of the Court.
Mr Thorpe went on to say that he disclosed to Mr Fulton at an early stage that the plaintiff had obtained a copy of the Action Plan but Mr Fulton did not respond. It has not been established that when the plaintiff used the document, (and also documents (b) and (c) which the defendant said were also mis-classified by Mr Mckenzie), as admittedly it did, it appreciated that it was a document that the IT consultant had released in error.
I simply note that the plaintiff now appears to be ‘agnostic’ on the issue of whether the attachment was even wrongly provided to the plaintiff. But at one point in the history of the matter, it was prepared to facilitate Mr McKenzie giving an explanation as to how the document came to be disclosed to the plaintiff in the first place. That would seem to be inconsistent with a position that it was not accepted that the document had been wrongly released.
To summarise, the rather complicated factual allegations seem to be as follows:
a) First, the defendant says that Mr McKenzie deliberately gave
documents to the plaintiff which he was not authorised to under the agreed arrangements;
b)Secondly, that the plaintiff’s lawyers knew that the documents so provided were not authorised;
c)Thirdly, the plaintiff misled the defendant by giving the impression that the unauthorised documents were not intended to be used for purposes of the J Swap proceedings when that had already occurred.

Alleged misconduct of Mr McKenzie and plaintiff’s legal advisors

[70] It was implicit in the submissions for the defendants that if the plaintiff was prevented from using a document by its implied undertaking, that circumstance would be exacerbated if it knew that the document had come into its hands in circumstances where there was an additional reason for it not using the documents. Specifically, if the plaintiff knew at the time that it viewed the document by sending a copy of it to J Swap’s solicitors, that it should never have had possesion of it, then that, it is argued, would be an additional feature which the Court should take into account, either in assessing the opposition to the application which would allow further use of the document or as a basis for the type of strike out application which has been brought here.

[71 ] Mr Fulton made a strong attack on the propriety of the conduct of both Mr McKenzie and counsel for the plaintiff and the solicitors engaged. He suggested that they acted in concert to bring about disclosure of the documents contrary to the agreed protocol for managing release of the documents. All of this was denied by counsel for the plaintiff and by Mr McKenzie. There was no cross-examination of the parties concerned. It is not suggested that the propriety or otherwise of Mr McKenzie’s actions can be determined as part of this application. This issue was raised by me at a telephone conference which took place on 29 March 2010 after I became concerned that it would be impossible to assess properly the claims made against Mr McKenzie without seeing and hearing the relevant witnesses on oath. During the conference on 29 March 2010, Mr Fulton said that issues about Mr McKenzie’s conduct were not relevant to the present applications but the defendant will be taking further steps against Mr McKenzie arising from his alleged misconduct. Apart from that the alleged misconduct of Mr McKenzie is not a matter on which findings can be made at this point. But the issue I will now examine is

whether Mr McKenzie’s alleged misconduct impacts on the applications presently before the Court.

The defendant alleges that the wrongful release of the non-business documents came about as a result of concerted misconduct agreed to by Mr McKenzie and the plaintiff’s solicitors. That is, it is alleged that the
solicitors/counsel procured Mr McKenzie to breach, or at least cooperated with him in breaching, the agreement as to the documents.
The plaintiff’s solicitors have not provided sworn evidence on the point of whether there was such concerted action. Nor has any other affidavit evidence been filed that specifically deals with the point. In my view, the only way in which the defendant could succeed in his contention would be if the competing contentions could be resolved by a consideration of surrounding circumstances which made one party’s account of matters more likely to be true than another.
It would seem that the contentions for the defendant are supported by the fact that it was unlikely that an ‘action plan’ prepared by Mr Price could legitimately be viewed as a business record of the plaintiff. At the point when the plaintiff made use of that document by sending a copy to J Swap, it would have known what it contained and been aware that it was a document that Mr Price had prepared for his own personal future business operations. Therefore, it should have concluded that it was not entitled to possession of the document. The plaintiff had no reason to believe that, even though the document was not a Hunter Grain business document, Mr Price was content for the plaintiff to have it anyway. It seems more probable than not that the plaintiff (in which term I include its legal advisors), at the very least knew that Mr McKenzie had made a mistake in releasing the document to it. That leads to questions about whether the plaintiffs were not required to look out for Mr Price’s interests and correct an obvious mistake that might have occurred which led to a non-business document being released.

Conclusion on misconduct point

The arguments that I heard do not enable me to determine that, adversely to the plaintiff and its legal advisors, there was deliberate misconduct on their part as to the circumstances in which they received the document. They probably appreciated that a mistake had been made which resulted in it receiving the business plan, and notwithstanding that appreciation on their part elected to make use of the document.
There was no exploration in argument before me as to what the position is where a party has taken advantage of a mistake which resulted in a party receiving a document that the oppsoing party did not intend it to have. I consider that in the circumstances of this case the plaintiff should have proceeded with caution – particularly because it had received the document not from the opposite party itself but from a third person who, of course, did not have any apparent entitlement to waive such rights as the opposing party might have in respect to the document.
But the plaintiff did take some steps to alert the defendants’ counsel to the fact that it had obtained the document (along with others), in a letter dated 7 August 2008. Express reference was made to the fact that the plaintif had acquired a copy of the business plan. No objection was taken by the defendant: there was no prompt protest that the plaintiff ought not to have the document. Then, within a matter of a few weeks, the plaintiff made reference to the document in a letter that it sent to J Swap, on 2 September 2008.
Given the fact that allegations of serious misconduct require proof to a high standard comesurate with the seriousness of the charges, the allegations by the defendant fall short. I am not prepared to draw the conclusion that the plaintiff deliberatly breached the confidentiality duty that was encumbent on it when it sent the document to J Swap.

The strike out application

[79] The strike out application was advanced on the basis that the conduct of the
plaintiff in using in the J Swap proceedings the documents discovered in this

proceeding amounted to an abuse of process which the Court ought to penalise by making the order sought.

Given that I have ruled that the plaintiff is entitled to use the discovered documents in the J Swap proceedings, I have in effect concluded that the plaintiff’s conduct so far has been unacceptionable. The order that I am making in this proceeding in effect sanctions the use of the documents by the plaintiff. The case is not one where the plaintiff has breached its obligations and the Court is invoking a jurisdiction to relieve a party from the consequencees of its misconduct. Consistent with that approach, there can have been no abuse of process by the plaintiff in using the documents the way that it did. For that reason the strike-out application cannot succeed.
Even if I were wrong in the conclusion just expressed, there is a second reason why the defendant cannot succeed on its strike out applcation and that is that such an order would be disproportionate to any breach by the plaintiff of the duties owed in respect to the documents obtained on discovery. Were the Court to grant the defendants’ application for a strike out order, it would in effect rule out any opportunity for the plaintiff to pursue its remedies against Mr Price and to be compensated for the very large losses that it claims he has caused to it because it breached certain procedural rules of the Court. I accept that a party must observe confidence in respect of documents it obtains under a search and seizure order and that there are good reasons why that should be so. A failure on the part of an applicant for an Anton Pillar Order to observe the privacy and confidence that attaches to the documents is a serious matter. However, the Court has to strike a balance between marking its disapproval of cases where a party has arguably breached its duties to the Court, on the one hand, and the consequences that will ensue if the party’s proceeding is struck out. In my judgment, it would be quite out of proportion for the Court to view the breach of the implied undertaking relating to the documents here as being so grave as to preclude the plaintiff continuing with its substantive proceedings against Mr Price.

[82] I decline to make an order striking out the proceeding.

Orders and consequential matters

The result is that I generally conclude that there is no objection to the plaintiff using documents obtained in this proceeding for the purposes of the J Swap proceedings. The practicalities of the present application mean that I have not been asked to rule on specific documents on a document by document basis. I would hope that the general indications that I have given in this judgment should be sufficient to provide the necessary guidance. It would be useful if the plaintiff prepared a schedule of relevant documents that it wished to use in the J Swap proceedings and supplied that to the defendant. If necessary I can hear the parties again on 5 May 2010 at 10 a.m., which I have allowed for a half-day to hear from the parties about any consequential matters relating to this application.

Mr Fulton has raised the possibility that any order that the Court might make that the disputed documents be available for use in the J Swap proceedings could result in the defendant being compelled to make available in the J Swap proceedings privileged documents and other documents which he is entitled to resist production of.
The application before me has not involved consideration of whether any documents that the plainfiff might wish to use in the J Swap proceedings could be protected from discovery or might be inadmissable in evidence because, for example, it is legally priviledged. These are not matters that I have been required to resolve in this proceeding. No doubt if the plaintiff intends to persist with its intention to use the documents in any of the ways that I have just mentioned, arrangements can be made within the framework of the J Swap proceedings for the present defendant to be heard in opposition to that course.
The parties should confer on the matter of costs. If they cannot agree, I shall hear them further on that issue.

J.P. Doogue Associate Judge