Kennedy v Contact Energy Limited

[2013] NZHC 2576

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2013-485-0576 [2013] NZHC 2576

UNDER

section 3 of the Declaratory Judgments

Act 1908

IN THE MATTER OF

section 52 of the Securities Act 1978

BETWEEN

ANDREW KENNEDY Plaintiff

AND

CONTACT ENERGY LIMITED Defendant

Hearing:	29 August 2013
Counsel:	C Luke for Plaintiff S M Bisley and H Hedley for Defendant
Judgment:	3 October 2013

JUDGMENT OF SIMON FRANCE J

[1]      The Securities Act 1978 requires issuers of securities to keep a register of securities, to have the register available for inspection and to provide a copy of the register to anyone who asks for it as long as the prescribed fee is paid.1   Failure, without  reasonable  excuse,  to  provide  a  copy  when  requested  is  an  offence

punishable by a fine of up to $5,000.2

1      Securities Act 1978, s 52.

2      Section 60(1).

KENNEDY v CONTACT [2013] NZHC 2576 [3 October 2013]

[2]      Mr Kennedy requested a copy of Contact Energy’s register.  With a company the size of Contact Energy, where shares are traded daily, the register is not a static document.   It is in fact an electronic database, consisting of the name of the shareholder, the contact mailing address, and the shareholding.  The evidence shows that on average 155 alterations a day are required to keep it up to date.

[3]      Contact  Energy  responded  to  Mr Kennedy’s  request.    It  produced,  and provided to Mr Kennedy, a printout of the register, with the shareholders arranged by size of the shareholding. As I understand it, Mr Kennedy accepts that what was provided to him contains the required information. However, he nevertheless submits that the defendants have not complied with the Act’s requirement to provide him with a “copy” of the register.

[4]      The issue is that when printing it, Contact Energy superimposed diagonally across each page in large block letters the notation:3

THIS   REGISTER   IS   THE   PROPERTY   OF   CONTACT   ENERGY LIMITED.

[5]      The actual document that was sent to Mr Kennedy has been provided to the Court. This notation makes the document much harder to read but it is legible.  The plaintiff does not concede this, but I find it as a fact that it is.   The watermark is irritating but it does not prevent reader from ascertaining any of the information the register contains.

[6]      Regardless  of  my  conclusion  on  legibility,  the  plaintiff  submits  that  the document provided is not a copy of the register as required by s 52 of the Securities Act 1978 because it has been deliberately altered or modified.  It is submitted that to

be a copy, the document must be a clean unmodified duplication of the register.

3      Those familiar with the output of Official Information Act requests will recognise the practice.

[7]      Underlying  this  complaint  is  not  some  purist  objection.     Rather,  the watermark,  as  it  is  intended  to  do,  makes  the  document  less  user  friendly. Specifically it means that an Optical Character Recognition (OCR) process will fail. That means the recipient cannot scan the document and create his or her own database, but would need to do this by other means – for example, copy typing it into

a database.4

[8]      The obligation in s 52 of the Securities Act 1957 is three-fold:  to maintain a register, to have it open for inspection, and to provide a copy of it on request.  It is an obligation that has been around for a long time.  Counsel have dated it back to the Joint Stock Companies Act 1860.   There is, however, very little commentary or jurisprudence on its purpose.

[9]      Two cases  to  which  I have been  referred  merit  brief mention.    In  S&O Nominees Pty Ltd v Taipan Resources NL,5 a Judge of the Supreme Court of Western Australia sitting in chambers, observed of the Australian equivalent that a purpose of making the information publicly available was to enable persons to contact shareholders.  In In re Wellington Trust Loan and Investment Company Ltd,6 Cleary J made an order requiring the company to provide a copy of the register.  His Honour held that it was not open to the Court, or inferentially the company, to inquire into the motives of the person requesting the copy.

[10]     Although  the  latter  case  may  seem  of  relevance,  it  somewhat  begs  the particular question in this case.  The suspected motive behind the request has led Contact Energy to make what it provided more difficult to use, but that does not

mean that what was provided is not a copy.

4      Mr Kennedy is a solicitor whose clients include, as Contact Energy knew, a company called Stock and Share Trading Pty Limited.  This company is known to make what some describe as “low ball” offers to shareholders of companies.

5      S&O Nominees Pty Ltd v Taipan Resources NL (2000) 35 ACSR 725.

6      In re Wellington Trust Loan and Investment Company Ltd [1959] NZLR 1189 (SC).

[11]     In my view, standing back from the underlying dispute and jousting, there is no serious issue.  Mr Kennedy has received a complete copy of the share register.  It is legible and ordered in a reasonable, intelligible manner.  There is no obligation to provide a different type of copy that is more suitable to his purposes.  Presumably Contact  Energy,  if  it  wanted,  could  put  the  information  on  a  disk  to  save Mr Kennedy the OCR process, but it does not have to.

[12]     Within the context of the Securities Act 1978, and having regard to the way in which registers are kept, the obligation to provide a copy must be seen as the obligation to provide the information contained in the register in a readable and I suggest intelligible format.  I do not consider, for example, that Contact could jumble the name of shareholders so they were provided in a random order.  That could not be called a copy because it is not realistically a way in which the register is maintained.   But I would see no difficulty with it being produced alphabetically rather than by shareholding size, although if the latter is the normal order of storage that is what should be produced as a “copy”.

[13]     The New Shorter Oxford Dictionary gives as its first definition of copy:7

A piece of written or printed matter that reproduces the contents of another.

[14]    I consider that concept captures what is meant by “copy” here.  It is the reproduction of the information that matters.  This is not a situation where one is wanting a copy for the purposes of “sighting” the original.  Indeed with these large entities there is no original. Accordingly, I see the focus as being on the information that is provided rather than the format.

[15]     Other examples can be imagined.  For example, a type of paper that is unable to be photocopied, or a disk that cannot be further copied.  I do not consider that it could be seriously argued that either of these were not a copy.

[16]     The   plaintiff   placed   reliance   of   a   decision   of   Fisher J   in   Clear Communications Ltd v Telecom Corporation of New Zealand Ltd.8   The context was copies of documents provided as part of disclosure.   Telecom had stamped a confidentiality statement on the copies. These, like here, make reading less easy, and prevented OCR.    Fisher J  required Telecom  to  alter its  technique, ruling that  it inhibited the purpose of discovery.

[17]     I accept the same can be argued here, namely that the technique being used by Contact Energy impedes one of the purposes of the provision, which is contacting shareholders.  It impedes it to the extent that it makes contacting them more onerous. But  there  is  nothing  to  suggest  Fisher J  was  holding  that  what  was  originally provided was not a copy.  Rather, exercising a general discretion available under the High Court Rules, he directed that copies were to be provided in a different format to aid discovery.

[18]     There is no suggestion here that the Court has any power to order a different form of copy.  Further, the policy issues which Fisher J was dealing with are much more familiar to a Court than assessing whether it is correct to require a company to facilitate use of its register in this way.   I note, for example, that the Financial Markets Control Bill in its current form introduces an ability for the company to object to providing a copy of its register and to ask the Authority for exemption.  The Bill would also require the requester of a copy of the register to identify at the time why it is being sought.

[19]     I make these observations only to respond to Mr Luke’s submission that the Court should, in defining copy, have regard to the policy imperatives of this provision.  Those imperatives are not easy to discern, and current material suggests they may not favour the plaintiff.  In my view, the task for a court here is not even to define  “copy”,  but  rather  to  decide  if  the  document  Contact  Energy  provided Mr Kennedy is a copy of the register.  I consider the answer to that is “yes”.

Conclusion

[20]     These proceedings are an application by the plaintiff for declaratory orders that:

(a)      Section 52(3)  of  the  Securities  Act 1958  requires  a  company  to provide a clean unmodified duplication of the required register;

(b)the copies of the registers provided by the defendant to the plaintiff in January 2013  did  not  meet  the  requirements  of  s 52(3)  of  the Securities Act 1958.

[21]     The proceedings came before me by way of two interlocutory applications – one by the plaintiff for summary judgment, and one by the defendant for a strike out, each saying that the other’s case is untenable.  The parties agree that my conclusion on these applications will determine the substantive proceedings, and that in the circumstances nothing turns on the difference between applications for summary judgment and for strike out.9

[22]     The plaintiff’s application is declined.  The defendant’s application is granted and the proceedings are struck out.  Declarations are not appropriate at this stage but the answers to the orders sought are:

(a)      no; the Act requires what it says, which is that a copy of the register be provided;

(b)the  documents  provided  by  the  defendant  were  copies  within  the meaning of s 52(3) of the Securities Act 1978.

9      The agreement was conditional on the tenor of my conclusions.   The way in which I have resolved the issues means that these conditions do not apply, and it is therefore correct to record the parties as otherwise agreeing.

[23]     The defendant is entitled to costs.    Memoranda to be filed if agreement

cannot be reached.

Solicitors:

C Luke, Barrister & Solicitor, Auckland

Buddle Findlay, Barristers & Solicitors, Wellington

Simon France J