JAG Media Limited v Magna Systems Engineering (NZ) Limited

[2012] NZHC 733

ORDER PROHIBITING PUBLICATION OF NAMES OR IDENTIFYING PARTICULARS OF THE PARTIES UNTIL 5PM, MONDAY 23 APRIL 2012.

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-001965 [2012] NZHC 733

BETWEEN  JAG MEDIA LIMITED First Plaintiff

ANDBROADCAST INC LIMITED Second Plaintiff

ANDMAGNA SYSTEMS ENGINEERING (NZ) LIMITED

First Defendant

ANDCOUNTRY 99 TV LIMITED Second Defendant

Hearing:         17 April 2012

Counsel:         DB Hickson for Plaintiffs

Judgment:      17 April 2012

JUDGMENT OF ASHER J

Solicitors/Counsel:

Castle Brown, PO Box 9670, Newmarket, Auckland. Email:  [email protected] and [email protected]

JAG MEDIA LIMITED V MAGNA SYSTEMS ENGINEERING (NZ) LIMITED HC AK CIV-2012-404-

001965 [17 April 2012]

[1]      Jag Media Ltd and Broadcast Inc Ltd have issued proceedings in this Court seeking damages from Magna Systems Engineering (NZ) Ltd and Country 99 TV Ltd for unlawful use of a database provided to those companies by Broadcast Inc. The proceedings have not yet been served.   However, the two plaintiffs seek a without notice order permitting inspection of computer systems held at the premises of Magna Systems Engineering (NZ) in Newmarket, Auckland.  The purpose of the inspection is to identify information relevant to the proceeding.  The plaintiffs seek to take samples by way of forensic images of databases, computer registry files and a computer operating system.  An order is sought that the samples are delivered up to the Registrar.   It is proposed that the plaintiffs’ forensic expert Mr Spence be the person who carries out this task.

[2]      This application was first considered by Heath J on 16 April 2012.   He considered the orders sought were closely comparable to search orders under Part 33 of the High Court Rules, but lacked the protection required to address the invasive nature of the search.  He indicated that he would be prepared to hear counsel on that issue or on any amended application it might wish to make. An amended application has been filed, but the applicant still relies on r 9.34 and not on Part 33.

[3]      Rule 9.34 provides:

9.34  Order for inspection, etc

(1)   The court may, for the purpose of enabling the proper determination of any matter in question in a proceeding, make orders, on terms, for—

(a)   the inspection of any property:

(b)   the taking of samples of any property: (c)   the observation of any property:

(d)   the measuring, weighing, or photographing of any property: (e)   the conduct of an experiment on or with any property:

(f)   the observation of a process.

(2)   An order may authorise a person to enter any land or do anything else for the purpose of getting access to the property.

(3)   In this rule, property includes any land and any document or other chattel, whether in the control of a party or not.

[4]      There must be a question as to whether there is jurisdiction under r 9.34 to grant the order.   This is because the orders are for the purpose of “enabling the proper determination of any matter in question in a proceeding”.  At the present time there is only a detailed pleading on the part of the plaintiffs and it is not clear what, if any, are the matters in question, or what is required for their proper determination.

[5]      The absence of any identified matters in question may be a fatal barrier in itself to the issues of the application.  But it could be said that the issue of whether there has been a deliberate taking and storing of the plaintiffs’ confidential material is an obvious issue and therefore a question in the proceeding.   I do not need to determine this jurisdictional point, as a broader issue arises.

[6]      Orders under r 9.34 are usually sought in the context of served proceedings where there is a statement of defence, and the issues are apparent.  Only then can the relevance and importance of an inspection or testing process be evaluated and a decision made as to whether the invasive step of inspection is warranted.

[7]      Orders  of  inspection  can  have  significant  commercial  consequences,  but these cannot be evaluated with just one side of the story.  Clearly the information on the computers to be inspected will be at least in part confidential.  It may be highly confidential.     There  may  be  records  belonging  to  innocent  parties  who  are competitors of the plaintiffs.

[8]      The inspection process proposed involves a servant of the plaintiffs entering onto another person’s premises and inspecting that person’s property by opening and copying from their computer.  This is an invasive process and if carried out at the wrong  time  or  in  the  wrong  way  is  likely  to  cause  distress,  and  may  damage goodwill.

[9]      It was observed in Overseas Containers Ltd v Geo H Scales Ltd[1] that prior to service where an order if this type is sought the appropriate tests are those that apply

to search orders.  McGechan J stated:[2]

… but at this early stage in consideration of R 331 I do not propose to be so adventurous as to rule that where rights of entry, search and removal are conferred, the court should adopt any lower standard than that required for an Anton Piller order.

[1] Overseas Containers Ltd v Geo H Scales Ltd HC Wellington CP395/86, 22 September 1986.

[2] At 7.

[10]     The requirements that relate to a search order contain particular safeguards that are appropriate when a without notice order that involves what would otherwise be a trespass to property and inspection by a third party of a person’s confidential material is sought.  The requirements of r 33.3 relating to a search order are a strong prima facie case, serious potential or actual loss or damage if an order is not made, and sufficient evidence that the respondent possesses relevant evidentiary material and that there is a real possibility that the respondent might destroy such material or cause it to be unavailable for use in evidence.  These are safeguards that are required to protect a defendant who has not been served.

[11]     It may be the case that the threshold requirement can be met by the plaintiffs. However,  for  the  plaintiffs  to  do  so  they  would  need  to  file  an  application  or amended application under r 33.2 and file a detailed memorandum addressing the Part 33 requirements.

[12]     Thus,  because  this  is  a  without  notice  application,  and  the  Part  33 considerations have not been addressed, and that procedure not utilised, I am not prepared to grant an order under r 9.34.   However, I am prepared to adjourn this application for a short period to give the plaintiffs an opportunity to file an amended application and a memorandum and any further affidavit evidence that they consider necessary.  On the face of the papers, there may well be a strong prima facie case, and a basis for a Part 33 order.

[13]     If no such amended application is made before 5pm Friday, 20 April 2012 the present application will stand dismissed.  If such an application is made then it will be dealt with on the papers or, if the Judge considers it appropriate, by way of a further telephone conference. Any application can be referred to me.

……………………………..

Asher J