Layaway Depot Limited v Oakmont Limited
[2020] NZHC 185
•17 February 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-002753
[2020] NZHC 185
UNDER The Copyright Act 1994 and the Fair Trading Act 1986 BETWEEN
LAYAWAY DEPOT LIMITED
Plaintiff
AND
OAKMONT LIMITED
First Defendant
SIMRAT KAUR
Second Defendant
Hearing: 11 February 2020 Appearances:
K T Glover for the Plaintiff
G A Keene for the Defendants
Judgment:
17 February 2020
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Monday, 17 February 2020 at 2:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Bowie Yorke, Auckland for the Plaintiff Counsel: K T Glover, Auckland for the Plaintiff
LAYAWAY DEPOT LTD v OAKMONT LTD & ANOR [2020] NZHC 185 [17 February 2020]
[1] On 17 December 2019, Layaway Depot Ltd (Layaway) filed proceedings against Oakmont Ltd, trading as Buzz Value, and its sole director, Simrat Kaur. Four causes of action are specified: breach of confidence, copyright infringement, breach of the Fair Trading Act 1986 and passing off. Layaway seeks an injunction preventing Buzz Value and Ms Kaur from representing that they are associated with Layaway’s business. Layaway also claims damages and costs.
[2] The matter first came before Katz J on 19 December 2019. She set the application for interim injunction down for hearing at 10.00 am on 11 February 2020 with an estimated hearing time of half a day (which I heard). In the meantime, she made certain limited temporary orders to protect Layaway’s position.
Factual background
[3] Layaway is a retail company that sells home goods (such as speakers, televisions, smartphones and furniture) on instalment plans. It has traded since 2011. Layaway started as a door-to-door sales company with retail stores located in Whangarei, Auckland, Hastings and Wellington. In mid-2017, it closed its retail stores and ended its door-to-door sales. Layaway now remarkets to its existing customers and attracts new sales via its website ( Customers purchase goods from Layaway by making weekly or fortnightly instalment payments. Goods are delivered to the customer after the nominated number of payments have been made (but before the goods have been paid for in full), and the customer continues to make payments until the instalment payments have been made. The customer has a “cooling off period” of 10 working days within which he or she can cancel the agreement without cost. The customer can also cancel after the cooling off period, but prior to delivery, for a fee of $90. Layaway is vulnerable to customers who stop payments once they get delivery of the product, so its on-going profitability depends very much on its existing customers who have completed their agreements successfully.
[5] Layaway has over 50 staff in three offices — a main hub in Auckland and two call centres in the Philippines and India.
[6] Buzz Value is a mobile trading company which primarily markets consumer goods through door-to-door sales. It commenced trading in March 2017. It carries out “cold calls” in Auckland, Hamilton, Rotorua, Hastings and Palmerston North. It has a website, but goods cannot be purchased through it. Buzz Value does, however, run a TradeMe account through which significant sales are made. TradeMe sales are cash sales and most door-to-door sales are credit sales.
[7] Since September 2019, Buzz Value has contracted out telephone sales to an Indian company, Oakmont Buzz Value India Pte Ltd (Buzz Value India), which was incorporated on 20 August 2019. Ms Kaur says that Buzz Value India is completely separate from Buzz Value in New Zealand and that it has contracts with a number of New Zealand companies, not just Buzz Value. Ms Kaur says that Buzz Value India does not have access to Buzz Value’s database and that Buzz Value only gives it leads to call.
[8] Layaway alleges that Buzz Value and Ms Kaur have obtained a copy of its confidential customer base known as the Dispatch Report and are using it to target Layaway’s customers by telephone and door-to-door sales. In addition, Layaway alleges that Buzz Value’s agents are contacting its customers and telling them that it has been succeeded by Buzz Value or its name has changed to Buzz Value. Those customers are allegedly being told that they should update their payments to direct them to Buzz Value’s bank account and, further, that any future transactions should be with Buzz Value. As a result, Layaway believes it is not receiving payments for goods that it has supplied, and future sales are being lost.
[9] Layaway seeks a range of interim orders directed at preventing conduct of the nature outlined and disclosing details of any such conduct that has already occurred.
Affidavit evidence
[10] Layaway has filed affidavits from three employees — Courtney Hotchin (affidavit in chief dated 17 December 2019 and reply dated 29 January 2020), Xiaohan (Shawn) Liu (affidavit in chief dated 16 December 2019 and reply dated 29 January 2020), and Kevin Green (affidavit in chief dated 5 February 2020).
[11] Buzz Value and Ms Kaur have filed a notice of opposition (dated 17 January 2020), together with two affidavits from Ms Kaur (dated 19 December 2019 and 17 January 2020) and an affidavit from Buzz Value’s sales manager, Gurpreet Singh (dated 17 January 2020).
[12] Buzz Value and Ms Kaur have also filed two affidavits (dated 7 and 10 February 2020) from Ms Kaur’s husband, Ajaypal Singh, who refers to meetings he had in India on 12 and 18 January 2020 with Gurbaljit Singh, a director of Buzz Value India, and to a more recent telephone call with Mr Gurbaljit Singh on 9 February 2020. He also refers to a decision made by Buzz Value to terminate its contract with Buzz Value India. Layaway initially objected to the affidavits being read as they were well outside the time for affidavits in opposition and after it had filed reply evidence and submissions. In the end, however, counsel for Layaway did not object to their admissibility because of the acknowledgement in the affidavits that Buzz Value India had purchased databases locally.
[13] Layaway has put forward as evidence of possible unlawful conduct an approach by telephone to Mr Liu, Layaway’s digital marketing manager, on 26 November 2019, from a sales person who said that they were from Buzz Value. That person knew of Mr Liu’s name and mobile telephone number and told Mr Liu that he had signed up for a lounge suite with Buzz Value on 18 July 2019. Mr Liu says that the only time he had signed up for anything was when he had completed a dummy sale through Layaway as part of his role as digital marketing manager on 18 July 2019. The particular product he ordered was a lounge suite. The dummy sale was entered in the system and became part of the Dispatch Report, which is the customer and transaction database used by Layaway as one of the core tools for managing the business. Mr Liu is of the view that Buzz Value could not have known all the details about him and his dummy sale without obtaining the information illegally.
[14] In addition, Layaway has put forward telephone discussions with seven customers as evidence of possible unlawful conduct. Included in affidavit evidence are transcripts of telephone calls with three of the customers. The transcripts are particularly instructive. One customer contacted Layaway and told it that she had been approached at home by a sales person who said that Layaway had changed its name
to “Buzz Bee”. The sales person told the customer that she was a Gold customer and enquired whether she wanted to replace the speaker she was still paying off in instalments. The sales person seems to have had a copy of Layaway’s loan contract with the customer’s signature. He sold her a Samsung mobile phone.
[15] A second customer contacted Layaway to say he had a visit from one of Layaway’s agents and was not quite sure what he had signed for. He was told that Layaway did not undertake door-to-door transactions. The customer said that the sales person (a woman) had all his details, including what he had purchased previously from Layaway.
[16] A third customer told Layaway that a former employee of Layaway (Sandeep) visited her husband and got him to sign a form and enter a contract with something called “Buz Depot”. She said the sales person told her husband that he needed him to sign his bank account details to update their files.
[17] Mr Gurpreet Singh, the sales manager for Buzz Value, acknowledges approaching two of the three customers in respect of whom Layaway has transcripts of their telephone conversations. He also acknowledges that he previously worked for Layaway, but was made redundant in February 2018, when Layaway ceased making any door-to-door sales. He says that it was a coincidence that he approached Layaway’s customers. He said he did not represent himself as being from Layaway, nor did he have in his possession any information or documents that involved the customer’s purchases from Layaway.
[18] Ms Kaur, Buzz Value’s sole director and the second defendant, explicitly denies that Buzz Value has ever come into possession of Layaway’s Dispatch Report and/or customer database. She is also adamant that Buzz Value has not at any time knowingly encouraged its employees to approach existing customers of Layaway for the purpose of obtaining their business. Buzz Value has its own very large customer database, which provides the source of numerous approaches by its employees on a door-to-door basis. She says that because Buzz Value approaches a large number of the public via door-to-door sales persons, there will inevitably be occasions when Buzz Value’s sales persons will knock on the doors of existing customers of Layaway.
[19] As to the evidence of Mr Liu, Ms Kaur does not believe that he received a telephone call from any officer, employee or agent of Buzz Value in New Zealand. She says she cannot, however, speak for Buzz Value India, who are contracted by Buzz Value to call members of the public in New Zealand.
[20] In his affidavit (dated 7 February 2020), Ms Kaur’s husband, Ajaypal Singh, does however speak for Buzz Value India. He says he was in India during January 2020 and spoke to the director of Buzz Value India, Mr Gurbaljit Singh, on 12 and 18 January 2020. Mr Ajaypal Singh says he was told by Mr Gurbaljit Singh that Buzz Value India does not have access to Layaway’s Dispatch Report or any document belonging to Layaway. Buzz Value India has not heard of Layaway and does not deal with Layaway in any way or form. Mr Gurbaljit Singh confirmed that Buzz Value India does, however, buy databases locally, but had not come across any information regarding Layaway or its database.
[21] In his second affidavit (dated 10 February 2020), Mr Ajaypal Singh confirms that the telephone number referred to by Mr Liu in his reply affidavit dated 29 January 2020 is, in fact, the New Zealand phone number for Buzz Value India. Mr Ajaypal Singh says that there are now questions in his mind as to whether or not Buzz Value India has, in fact, in the course of purchasing databases locally in India, come into possession of information concerning Layaway’s customers. He says that he will be giving immediate notice to Buzz Value India to terminate their contract. He says that while he does not know whether Buzz Value India has in fact done anything more than access a database with Layaway’s customers’ names, street addresses and email addresses, he can no longer be sure as to exactly what has happened and, in those circumstances, the only way his wife and he can be sure that they will not be embarrassed by the activities of Buzz Value India is to severe their links with that company. Mr Ajaypal Singh says that as a result of these proceedings he will be forwarding a copy of Mr Liu’s and Ms Hotchin’s affidavits to Mr Gurbaljit Singh at Buzz Value India to seek a full and detailed explanation from him as to whether Mr Liu’s account of what happened is accepted by Buzz Value India or not.
[22] Layaway does not allege that the defendants or anyone employed by Buzz Value has accessed their computer system and stolen the Dispatch Report. Rather, Ms Hotchin states that they were not able to find the source of any leak and says:
As Layaway also operates an office in India we are highly suspicious that someone within that office is the source of leaking our database to Buzz Value, possibly via Oakmont Buzz Value India Limited.
Further:
Having discussed the matter with others on the Layaway executive group, we have little doubt that one of our current or former staff members in Layaway India has stolen the Dispatch Report and sent it to Buzz Value.
Ms Hotchin does not specify who at Buzz Value, whether they be in India or New Zealand, was the recipient of the information.
[23] Ms Hotchin goes on to state that Layaway considers it likely that its Dispatch Report was initially taken in April or May 2019 and that it has been taken multiple times as it continues to be updated with new customer information, such as the dummy sale entered by Mr Liu on 18 July 2019.
Discussion
[24] The test for an interim injunction is well known. Three questions are to be answered:
(a)Is there a serious question to be tried?
(b)Does the balance of convenience favour granting the interim injunction, including the adequacy of damages? and
(c)Where is the overall justice of the case?
[25] Counsel for the defendants does not concede that there is a serious question to be tried. He submits that there is simply no evidence of any breach of confidence on the part of Buzz Value and Ms Kaur and no evidence of breaches of the provisions of the Fair Trading Act. He submits that Layaway faces major difficulties with regard to
the two affidavits of Ms Hotchin. He says they are full of inadmissible hearsay statements. In addition, Ms Hotchin attempts to give evidence which she is quite clearly not entitled to do, having no direct knowledge of the matters in question. Ms Hotchin also expresses her opinion about the evidence on numerous occasions. Counsel submits that Layaway could have obtained affidavits from its customers and, in situations where that may have been difficult, the employee receiving the call from a customer should have provided affidavit evidence as to what was said.
[26] Counsel submits that there is virtually no evidence of any wrongdoing on the part of Buzz Value, Ms Kaur and/or the employees of Buzz Value. He submits that the affidavit evidence of Mr Gurpreet Singh should be preferred to the unreliable evidence of Ms Hotchin.
[27] As to the evidence of Mr Liu, counsel for the defendants acknowledges that the transcript of the phone call does provide some evidence to suggest that the caller had confidential information relating to Layaway’s customer database. However, there was no evidence before the Court of any close association between Buzz Value and Buzz Value India, apart from the coincidence of name. Counsel submits that Buzz Value India should be regarded as an entirely separate legal entity for which Buzz Value can have no liability.
[28] While the evidence may suggest a prima facie case implicating Buzz Value India, counsel submits that there is absolutely no evidence of wrongdoing against the first and second defendants and, accordingly, there is no serious question to be tried.
[29] Although counsel for the defendants submits that there is no serious question to be tried, he, on behalf of his clients, consents to a continuation of the limited temporary orders made by Katz J on 19 December 2019 to protect Layaway’s position. This is on the basis that Buzz Value says it has never had in its possession a copy of Layaway’s Dispatch Report and/or customer database and has never represented to members of the public that Layaway has been renamed as or succeeded by Buzz Value.
[30] Because of the consent given by the defendants to a continuation of the temporary orders made by Katz J, it is unnecessary for me to finally determine whether
there is a serious question to be tried. The first and second defendants reserve their position on that issue. There are apparently 55,880 customers on Layaway’s database and evidence (of varying degrees of probativeness) of contact or possible contact with only seven customers has been put forward by Layaway.
[31] There is, however, cogent evidence that Buzz Value India had details of Mr Liu’s dummy sale from Layaway’s Dispatch Report when it contacted him in November last year. A question for trial is whether Buzz Value India was an express agent of Buzz Value or was acting with the ostensible authority of Buzz Value. Layaway will argue that Buzz Value was, in any event, clearly a beneficiary of this breach of confidence.
[32] As to the balance of convenience, Buzz Value and Ms Kaur accept that the orders sought are “no skin off its nose” because they are adamant they did not have, and never have had, access to Layaway’s Dispatch Report and/or customer database. They also maintain they have never passed themselves off as Layaway’s agent or advised customers that Layaway had changed its name or been succeeded by Buzz Value.
[33] I am of the view that the overall justice of the case is in favour of maintaining the status quo to allow both parties to continue trading without unnecessary restriction or interference. The orders will preserve Layaway’s business pending trial. Layaway does not seek to shut down Buzz Value’s business, but to prevent unfair competition through the unlawful use of Layaway’s database, infringement of Layaway’s rights and any conduct which may be misleading or deceiving customers.
Result
[34] Against this background, I make the following orders on an interim basis until further order of the Court:
(a)That the defendants, together with their employees, agents, and contractors, shall, until further order of the Court, be restrained from:
(i)accessing, copying, modifying, transmitting, or deleting any copies of the Dispatch Report database of Layaway, any extracts from it or any details derived from it or any other documents obtained directly or indirectly from Layaway or any associated entity (including Layaway Depot India Pte Ltd);
(ii)contacting any customers whose details they have received (directly or indirectly) from Layaway’s Dispatch Report database;
representing;
1. that they are associated with Layaway;
2. that the Buzz Value business or any other business is the successor to Layaway or is associated with Layaway; or
3. that purchases which customers made through Layaway were, in fact, with Buzz Value or any other business.
(b)That the defendants:
(i)take immediate steps to preserve any or all documents (including any electronic documents) which are potentially relevant to Layaway’s claims in this proceeding;
(ii)not delete or dispose of any documents (including any electronic documents and, in particular, including any part of its customer database in any electronic or other form) which may be relevant to these proceedings; and
(iii)take active steps to preserve all such documents and will not encourage any other person to delete or dispose of potentially relevant documents.
(c)Ms Kaur, on behalf of both the first and second defendants (having made due enquiries of all employees, agents and contractors with potentially relevant knowledge, including Buzz Value India), shall file and serve an affidavit by Friday, 28 February 2020, setting out details of the approach made by Buzz Value India to Mr Liu on 26 and 27 November 2019 and any other customers of Layaway who can be identified, including the date on which such customers were contacted and details of any resulting sales, funds received from such customers and details of bank accounts into which those funds were deposited.
[35] In addition, the following timetable orders are made to progress the proceeding to a substantive hearing:
(a)The time for filing and serving a statement of defence by the defendants is extended to Friday, 21 February 2020.
(b)Not less than 15 working days after the statement of defence is filed, the parties must file a joint memorandum, or each party must file a separate memorandum, addressing the matters set out in r 7.3(2) of the High Court Rules 2016.
(c)The proceeding is thereafter to follow the case management procedures set out in Part 7 of the High Court Rules.
[36]Costs on the application for an interim injunction are reserved.
Woolford J
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