Leaders Hawkes Bay Limited v Pienaar
[2021] NZHC 1925
•28 July 2021
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV 2020-441-92
[2021] NZHC 1925
IN THE MATTER OF A breach of contract BETWEEN
LEADERS HAWKES BAY LIMITED
Plaintiff
AND
ROXANNE PIENAAR
Defendant
Hearing: 13 May 2021 Appearances:
C Matsis for the Plaintiff J Bates for the Defendant
Judgment:
28 July 2021
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 28 July 2021 at 4:00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
LEADERS HAWKES BAY LIMITED v ROXANNE PIENAAR [2021] NZHC 1925 [28 July 2021]
[1] On 18 December 2020, the plaintiff, Leaders Hawkes Bay Ltd (Leaders), filed this proceeding and applied, without notice, for two interim injunctions against the defendant, Ms Pienaar. Doogue J granted those interim injunctions later the same day.
[2] Ms Pienaar applies to rescind, vary or clarify the injunctions upon the grounds they were improperly obtained or wrongly granted. She says Leaders failed to discharge the duty upon it, when applying without notice, to make full disclosure to the Court of all material facts. She says that, now there is full disclosure, the injunctions should be rescinded.
The substantive proceeding
[3] Leaders operates a real estate agency in the Hawke’s Bay under the Ray White brand. From some time in 2019 through to late September 2020, Leaders engaged Ms Pienaar (either directly, or through her company) to provide Leaders’ real estate agents with marketing and branding services. Soon after that engagement ended, Ms Pienaar commenced working with a competing real estate agency, Tremains Real Estate Ltd (Tremains).
[4] Leaders says it provided to Ms Pienaar a number of documents that contained information that was confidential to Leaders. Leaders also says that, during the course of her engagement with Leaders, Ms Pienaar used that confidential information and created intellectual property that became Leaders’ intellectual property.
[5] Leaders claims that Ms Pienaar has, since commencing her work with Tremains, failed to return Leaders’ confidential information and intellectual property, and has misused that confidential information and intellectual property in providing services to Tremains. In its statement of claim Leaders seeks:
(a)An order that Ms Pienaar surrender and/or return Leaders’ confidential information and intellectual property.
(b)A permanent injunction prohibiting Ms Pienaar from using Leaders’ confidential information and intellectual property.
Leaders’ application for interim injunctions
[6] Leaders applied without notice for two interim injunctions, mirroring the substantive remedies that Leaders sought in its statement of claim:
(a)An order that Ms Pienaar surrender and/or return Leaders’ confidential information and intellectual property.
(b)An injunction prohibiting Ms Pienaar from using Leaders’ confidential information and intellectual property.
[7] Leaders’ application was supported by an affidavit by Elanor MacDonald. Ms MacDonald is the sole director and (through a trust) the majority shareholder of Leaders.
[8] Ms Pienaar says that Ms MacDonald’s affidavit provided the Court with an incomplete picture. I therefore need to set out, in some detail, what Ms MacDonald said.
Ms MacDonald’s affidavit in support
[9] Ms MacDonald deposed that in 2019 she entered into negotiations with Ms Pienaar and Ms Pienaar’s husband to sell them some shares in Leaders (and in a related company). She then said (referring to Leaders as “the applicant” and Ms Pienaar as “Roxanne”):
6.Around August 2019, whilst those negotiations were taking place, the applicant engaged Roxanne to provide it with marketing and branding services until the negotiations were completed, at which time I envisaged that the applicant would formally engage Roxanne in the role of Real Estate Marketing Director.
7.Roxanne provided the marketing and branding services herself, but she invoiced the applicant through another one of her companies, The Brand Guardian Ltd. I attach to this affidavit marked “A” a copy of the marketing proposal that Roxanne provided to me in April 2019 for those services.
8.In November 2019, Roxanne and the applicant entered into a Confidentiality and Non-Disclosure Agreement (the “Confidentiality
Agreement”). I attach to this affidavit marked “B” a copy of the Confidentiality Agreement.
9.We reached agreement on the share transactions in or around late May 2020 and, on or about 27 May 2020, we formally signed the necessary share transaction documents.
10.At about the same time as the share transaction documents were entered into, the applicant also engaged Roxanne in the role of Real Estate Marketing Director and Darren as a real estate salesperson. I attach to this affidavit marked “C” a copy of Roxanne’s contract for service with the applicant.
11.Although Roxanne had marketing and branding experience, she did not have any real estate agency experience. Therefore, I provided her with a range of documents belonging to the applicant to allow her to provide the agreed services to the applicant and its agents.
[10] Ms MacDonald deposed that the documents she gave to Ms Pienaar included various “Manuals” that contained confidential information about real estate recruitment and marketing techniques.
[11]Ms MacDonald described the services Ms Pienaar provided as follows:
15.Between August 2019 and September 2020 Roxanne provided various marketing and brand services to the applicant’s real estate agents.
16.In doing so, she used the applicant’s confidential information, including the Manuals, when she created intellectual property which in my view became the applicant’s property.
17.For example, Roxanne presented a number of workshops on marketing from August 2019 onwards. I attach to this affidavit marked “D1”, “D2” and “D3” copies of the workshop materials that she prepared. I always considered those materials to be the applicant’s property, as she was being paid by the applicant to create and develop it for us.
[12] Ms MacDonald described what happened after Ms Pienaar’s engagement with Leaders was terminated. She annexed copies of correspondence that was sent by the parties’ respective solicitors (Gault Mitchell for Leaders, Brown & Bates for Ms Pienaar). The correspondence began with a letter from Gault Mitchell to Ms Pienaar dated 28 September 2020. Brown & Bates responded by letter dated 2 October 2020. As Ms MacDonald recorded in her affidavit, that letter said Ms Pienaar had complied with her obligation to return “property and/or confidential information”.
[13] The correspondence then turned to Ms MacDonald’s concerns about the whereabouts of the Manuals. Ms MacDonald said:
24.It then occurred to me to look for the Manuals. I could not find them anywhere. In fact, I couldn’t find many of the hard-copy or electronic documents or materials that Roxanne had been provided with or prepared over the previous 14 months. On 16 October 2020, therefore, the applicant’s lawyers wrote to Brown & Bates again, this time to ask that either Roxanne return the Manuals immediately or, if she did in fact leave them in one of the applicant’s offices, that she advise where she left them. I attach to this affidavit marked “H” a copy of that letter.
25.The applicant’s solicitors also wrote to Tremains to put them on notice of my concerns. I attach a true copy of that letter to this affidavit marked “I”.
26.Roxanne denied any wrongdoing. A true copy of the letter from Brown & Bates to that effect is attached to this affidavit marked “J”.
27.I wasn’t happy with the response and discussed litigation options with the applicant’s solicitors. I also rang Simon Tremain directly and encouraged him to ensure that Roxanne returned any information that she should not have retained.
28.I decided to wait and see what happened next. I still wanted Roxanne to return the Manuals but, at the very least, I thought my discussion with Simon would be enough to ensure that she didn’t disclose any confidential information.
[14] The letter from Brown & Bates in which Ms Pienaar “denied any wrongdoing” was dated 16 October 2020. Ms MacDonald did not say so in the body of her affidavit, but in that letter Brown & Bates asserted that Ms Pienaar did not hold any of Leaders’ property, that only two of the Manuals had been given to Ms Pienaar, and that she had not taken them.
[15] I interpolate that it was readily apparent from [28] of her affidavit that Ms MacDonald (and Leaders) did not perceive any urgent need to seek the Court’s assistance in obtaining the return of the Manuals from Ms Pienaar (assuming she held any). This is reflected in the more than two months that passed from Brown & Bates’ letter of 16 October 2020 and Leaders’ application for interim injunctions, during which time it appears Leaders and its solicitors did not write further to Brown & Bates about the Manuals.
[16] That provides context for the next section of Ms MacDonald’s affidavit, which appeared under the heading “Proof of breach”:
30.On Thursday 10 December 2020 Michaela Vodanovich, the applicant’s Hawkes Bay Advisor, had a training session booked at the Hawkes Bay Business Hub, a shared working space for hire in Ahuriri, Napier.
31.When Michelle was unpacking for her training, she noticed a workbook left by the previous booking. It is an almost exact copy of material developed and used by Roxanne for marketing training at Ray White.
32.Roxanne had just used the room to present to one of the Tremains group sales teams.
33.On reviewing the workbook (attached to this affidavit marked “K”), it was immediately obvious to me that it was based on the applicant’s intellectual property and confidential information. On further examination, it was clear that the documents were almost word-for-word identical. The only differences that I could discern were:
•She added bullet points on the front cover (although the wording of those bullet-points sound like the wording used by the main Ray White trainer).
•She updated the Facebook statistics on page 14.
•She updated the Instagram statistics on page 20.
•She changed the office example on page 21 from a Ray White one to a Tremains one.
•She changed the 9 images on the right of page 22 from Ray White Tiles (although the bike image on page 22 is a Ray White Corporate Image and the Instagram Highlights icons on page 24 are all Ray White corporate images).
34.In my view, Roxanne is deliberately using the applicant’s materials in the course of her work for Tremains.
[17] Ms MacDonald then gave reasons for Leaders making the application without notice. Her first reason was:
38.1 Roxanne has already lied once about having returned documents and information. I believe that if she is given notice of this application, she will take steps to hide those documents and information.
[18] Ms MacDonald did not identify the basis of Ms Pienaar’s alleged lie. But, in context, she must have been asserting that the matters outlined in her “Proof of
breach” section showed that Ms Pienaar had lied when saying she did not hold any of Leaders’ property.
The memorandum in support
[19] Leaders’ without notice application was also supported by a memorandum of counsel. This said that Leaders’ position was that the parties had entered into a confidentiality agreement and then a contract for service, and that under those contracts the work produced by Ms Pienaar was Leaders’ property and was to be returned on termination. The memorandum referred to specific terms of the two contracts.
[20] The memorandum addressed the alleged breaches by Ms Pienaar. The only breach for which any details were given was Ms Pienaar’s alleged use of the workbook for the Tremains training. The memorandum said:
8. The applicant says that the respondent has then used the works, documents and materials belonging to the applicant when her contract for service was terminated. It says that the fact that the document used for the Tremains training (exhibit “K”) is so close to being identical to the applicant’s documents reinforces this, and the fact that there is still the applicant’s imagery in the document (see paragraph 33 of Ms Macdonald’s affidavit) counts against it being a newly created document just for Tremains. Rather it is clear that she is working off the applicant’s documents. It is submitted that is a third clear contractual breach.
[21] Leaders needed to establish, in order to obtain interim injunctions, that there was a serious issue to be tried. In that respect, the memorandum again highlighted the alleged misuse of the workbook for the Tremains training:
10.4There is a serious issue to be tried, given the clear contractual basis for the issues, the failure to return any specific documents created during her time with the applicant, and the all-but-identical nature of the Tremains document created.
[22] The memorandum had to set out any known grounds of opposition or defence.1 On that topic, the memorandum said:
1 High Court Rules 2016, r 7.23(3)(d).
11. If looked at from the defendant’s point of view, she may claim that work was produced before the confidentiality agreement and contract for service were entered into, but even her terms and conditions envisage that the applicant will keep at least copies of work produced (see clauses 13 and 19 of terms attached at the end of exhibit “A” of Ms Macdonald’s affidavit). Also, the confidentiality agreement extended to information that came into the respondent’s possession before, during or after the commencement of the agreement.
The Judge’s reasons
[23] Doogue J began her judgment by summarising Leaders’ case. Her Honour noted that Leaders alleged that the Manuals, containing confidential information, had been provided to Ms Pienaar, and that Ms Pienaar used the confidential information to create intellectual property which Leaders’ alleged became its property:2
For example, the respondent [Ms Pienaar] presented a number of workshops on marketing from August 2019 onwards. The applicant [Leaders] says they consider those materials to be the applicant’s property, as at all material times the respondent was being paid by the applicant to create and develop the intellectual property for the applicant.
[24] Doogue J said that the workbook found by Ms Vodanovich after the Tremains training session was “an almost exact copy of the material developed and used by [Ms Pienaar] for marketing training at [Leaders]” and that it was “clear that the documents were almost word for word identical”.3 Her Honour recorded that Leaders said this was “proof of [Ms Pienaar] deliberately using the applicant’s materials in the course of her work for Tremains”.
[25] Her Honour then set out the law governing interim injunctions. Having done so, she expressed her reasons for granting the interim injunctions succinctly:
[39]I find there is clearly a serious question to be tried.
[40] Turning to the balance of convenience, I find this favours the applicant. Although I acknowledge there may be some more complexities to the case than are apparent on the pleadings before me, I consider the case against the respondent is strong enough to warrant interim relief. The confidentiality agreement and the contract for service are plain on their face. Equally, the alleged breach points squarely at the respondent’s conduct. That conduct counts against the balance of convenience being weighed in her favour.
2 Leaders Hawkes Bay Ltd v Pienaar [2020] NZHC 3460 at [13].
3 At [19] and [20].
[41] I am also satisfied that damages would not be an adequate remedy for the applicant. The applicant has provided an undertaking to comply with any order for payment of damages to compensate the respondent for any damage sustained through an interim injunction.
[42] Counsel did not refer me to any arguments relating to the effect of this decision on any third parties, and I could see none that would obviously sway the balance of convenience either way.
[43] Given I am satisfied that the applicant has a strong case and the respondent’s conduct appears to count against her, it is not necessary for me to consider the preservation of the status quo.
[44] Finally, I find that the overall justice in this case favours the granting of interim relief. In particular, I note the respondent will still be able to work and operate her business, she simply cannot use the applicant’s property when doing so.
[26] In summary, her Honour found that Leaders had a “strong case”, that the alleged breach “points squarely at [Ms Pienaar’s] conduct” and that Ms Pienaar’s conduct “counts against the balance of convenience being weighed in her favour” and “appears to count against her”. The reasons for these findings were plain from what was set out earlier in the judgment. Leaders’ strong case, and Ms Pienaar’s conduct that counted against her, arose from Ms Pienaar having conducted a training session for Tremains using a workbook that was an almost identical copy of material that her Honour understood, based on Ms MacDonald’s affidavit, had been “developed and used” by Ms Pienaar when working for Leaders.4
[27] Her Honour granted injunctions on the following terms, pending further order of the Court:5
(a)the respondent is required to return the applicant’s property, including all documents created, conceived, or developed during the course of her contract for service with the applicant; and
(b)the respondent is prohibited from using the applicant’s property, including all documents created, conceived, or developed during the course of her contract for service with the applicant.
4 At [19].
5 At [46].
Ms Pienaar’s application to rescind the injunctions
[28] Ms Pienaar applied on 23 December 2020 to rescind, vary or clarify the interim injunctions. She made a comprehensive affidavit in support the same day. Ms Pienaar said that Ms MacDonald had not fully disclosed the contractual relations between the parties or the origins of the workbook that Ms Pienaar used in her training sessions. Ms Pienaar also denied retaining any of Leaders’ property.
[29] After Ms Pienaar applied to rescind the injunctions, the parties attempted, through their solicitors, to resolve the dispute over the appropriateness of the injunctions. Counsel did not seek an urgent hearing.
[30] By the time the application came before me, Ms Pienaar had filed further affidavits in support, Ms MacDonald had filed an affidavit in opposition, and Ms Pienaar had filed two affidavits in reply. The common bundle was a remarkable 1,040 pages.
[31] I acknowledge there were substantial exhibits that were appropriately annexed to the affidavits. But the affidavits also contained a considerable amount of material that had no bearing on the issues that arose on Ms Pienaar’s application. At the hearing counsel made almost no reference to that material. Having considered that material, I see no need to refer to it further. It is sufficient for me to summarise the following (relevant) matters in the further affidavits filed by both parties.
The contractual relations between the parties
[32] In her original affidavit, Ms MacDonald deposed that in around August 2019 Leaders had engaged Ms Pienaar to provide it with marketing and branding services. She said that Ms Pienaar provided these services herself, but “invoiced” Leaders through one of her companies, The Brand Guardian Ltd. Ms MacDonald annexed to her affidavit a marketing proposal that she said Ms Pienaar provided to her in April 2019 for those services. Although Ms MacDonald did not say so in her affidavit, that marketing proposal was signed by Ms Pienaar on behalf of The Brand Guardian Ltd.
[33] Ms Pienaar’s affidavit clarified that Ms MacDonald had, on behalf of Leaders, accepted the proposal by The Brand Guardian Ltd in about June 2019. The Brand Guardian Ltd’s proposal included the provision of workshops to Leaders’ real estate agents. The proposal said that workbooks would be provided to agents at the workshops.
[34] Ms Pienaar deposed that The Brand Guardian Ltd, through Ms Pienaar, provided workshops to Leaders’ agents in June and July 2019. At those workshops The Brand Guardian Ltd provided workbooks to the agents. Ms Pienaar deposed that this occurred before Leaders engaged Ms Pienaar personally on about 1 August 2019.
[35] Ms MacDonald did not, in her affidavit in opposition, dispute what Ms Pienaar said on these matters. It therefore appears that, rather than The Brand Guardian Ltd merely “invoicing” Leaders for Ms Pienaar’s services, until 1 August 2019 The Brand Guardian Ltd was the party that contracted with Leaders. The effect of cls 13 and 19 of The Brand Guardian Ltd’s terms and conditions appears to be that the intellectual property in any native or working files (for example, in the workbooks) was retained by The Brand Guardian Ltd.
[36] It is common ground that Leaders engaged Ms Pienaar personally from 1 August 2019. It is also common ground that her engagement was not initially the subject of any written agreement. The first written agreement that Leaders and Ms Pienaar entered into was a confidentiality and non-disclosure agreement dated 1 November 2019. Much later, in May 2020, Leaders and Ms Pienaar signed a contract for service under which Ms Pienaar was engaged as a marketing director. Ms MacDonald referred to and annexed both agreements to her initial affidavit.
The origins of the workbooks
[37] In her original affidavit, Ms MacDonald deposed that between August 2019 and September 2020 Ms Pienaar was paid by Leaders to “create and develop” workbooks for the workshops that Ms Pienaar presented. She annexed copies of three such workbooks. She said that the workbook that Ms Pienaar had subsequently used in the Tremains presentation was almost identical.
[38] Ms Pienaar’s first affidavit explained that she had first developed the workbook for a presentation given by The Brand Guardian Ltd to another client before any engagement by Leaders. She then explained that the workbook was developed for use in the presentations given to Leaders by The Brand Guardian Ltd (before Ms Pienaar personally was engaged by Leaders). She deposed that none of the content of the workbook was based on Leaders’ intellectual property or confidential information. In her second affidavit, Ms Pienaar identified, in considerable detail, publicly available sources for much of the workbook that was used in the Tremains presentation. She observed that Ms MacDonald had not identified what parts of the workbook allegedly contained Leaders’ intellectual property or confidential information.
[39] In her affidavit in opposition, Ms MacDonald conceded that Ms Pienaar “may be right” that the workbooks were first produced before Ms Pienaar was engaged by Leaders. She also accepted that Ms Pienaar probably did provide a lot of the information in the workbook herself, “most probably from the sources she notes”. Ms MacDonald said, however, that Ms Pienaar continued to conduct the workshops after her engagement by Leaders, and that Ms Pienaar needed to change the publicly- sourced information to make it specific to Leaders. Ms MacDonald deposed that Ms Pienaar could only do that from discussions with Leaders, as Ms Pienaar did not have sufficient real estate experience to do it on her own.
[40] However, Ms MacDonald did not identify any particular part of the workbook that Ms Pienaar used in the Tremains presentation that she alleged contained Leaders’ confidential information or intellectual property.
Return of the Manuals and other Leaders’ property
[41] Ms Pienaar deposed that she returned, to particular individuals, the Manuals that were provided to her in the course of her engagement by Leaders. In her affidavit in opposition, Ms MacDonald disputed this, relying on hearsay statements from those individuals.
[42] In her first affidavit, Ms Pienaar said that she had reviewed the content of her laptop computer, and there was nothing belonging to Leaders to return. She annexed hard copies of documents stored on her laptop relating to workshop presentations to
Leaders. She said she understood these were native files that she was entitled to retain under The Brand Guardian Ltd’s terms and conditions, but that she would return or destroy them if that was what the injunctions required. She asked for directions.
[43] Ms Pienaar’s first affidavit was prepared within a few days of being served with the injunctions, and just prior to the summer break. In the New Year she engaged an IT expert to conduct a search of her laptop, including deleted items. As a result of that search, Ms Pienaar provided copies of various documents to Leaders’ solicitors. These included a database of contact details.
[44] In her second affidavit, Ms Pienaar explained the origin of that database. She deposed that she had not used the database or supplied it to any person. She deposed that her laptop has been with her solicitor since 20 January 2021. She undertook not to use the material on her laptop.
The issues
[45] Two issues arise. The first is whether there was material non-disclosure by Leaders when applying without notice for the interim injunctions. The second issue is whether, given what is now before the Court, the interim injunctions should remain.
Was there material non-disclosure by Leaders?
Principles governing applications without notice
[46] An application without notice can be made only in exceptional circumstances, such as where proceeding on notice would cause undue delay or irreparable injury to the applicant. The applicant must make full and frank disclosure of all material facts, whether those facts assist the applicant’s case or not.6 Material facts are those that are material for the court to know “in dealing with the application as made”.7 They therefore include not only facts material to possible defences to the substantive claim, but also facts material to possible grounds of opposition to the application.
6 McPherson v Bergers Securities Ltd HC Auckland CIV-2003-404-2752, 12 June 2003 at [2] and [3].
7 Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 (CA) at 1356.
[47] These matters are codified in r 7.23(2). Rule 7.23(2)(a) provides that an application without notice can be made only on specified grounds, the first being “that requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant”. Rule 7.23(2)(b) provides that such an application can be made only if the applicant has made all reasonable enquiries and taken all reasonable steps to ensure the application, and supporting documents, contain all material “that is relevant to the application”, including any defence that the other party might rely on, and “any facts that would support the position” of the other party.
[48] The obligation in r 7.32(2)(b) is not merely to take all reasonable steps to disclose material facts. The applicant must also (and, logically, first) make “reasonable enquiries” to ensure that all relevant material is disclosed. In Brink’s Mat Ltd v Elcombe, Ralph Gibson LJ explained that:8
The applicant must make proper inquiries before making the application: see Bank Mellat v Nikpour [1985] FSR 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.
[49] The limited grounds on which an application without notice can be made, and the applicant’s duty of full and frank disclosure, are reinforced by other subclauses of r 7.23. Relevant to the current application, r 7.23(3) requires the applicant to file a memorandum whenever the application is of a kind that would likely be contested if made on notice (which Leaders’ application was). The memorandum must (among other things) explain the grounds on which each order is sought without notice and set out all information known to the applicant that is relevant to the application. It is not sufficient for the memorandum to disclose possible defences: the information must include “any known grounds of opposition or defence” on which the other party may rely, or any facts that would support the other party’s “opposition to the application or defence of the proceeding”.
[50] Lastly, r 7.23 reinforces the obligation of full and frank disclosure by setting out, in subclause (4), the consequences of the applicant failing to disclose all relevant
8 Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 (CA) at 1356.
matters to the court. Such a failure may result in the court dismissing the application or (if orders have been made) rescinding the orders. I will return to that topic below.
Submissions
[51] Mr Bates, for Ms Pienaar, submitted that Leaders had failed to provide full and frank disclosure of the following matters:
(a)The workbook had first been created for workshops provided by The Brand Guardian Ltd in June and July 2019 (before Ms Pienaar personally was engaged).
(b)Those workshops were provided under The Brand Guardian Ltd’s terms and conditions, which Leaders had accepted.
(c)To the extent that the workbook was developed by Ms Pienaar after she was engaged by Leaders, Ms Pienaar did not base the content of the workbook on Leaders’ intellectual property and confidential information.
(d)The workbook used by Ms Pienaar in the Tremains presentation was not based on Leaders’ intellectual property and confidential information.
[52]Mr Matsis, for Leaders, submitted there had been no material non-disclosure:
(a)Ms MacDonald had merely deposed that Ms Pienaar had presented a number of workshops from August 2019 onwards. Even if the workbook had been created for workshops in June and July 2019 (which Ms MacDonald could not reasonably have been expected to recall), the point was that Ms Pienaar continued to use and develop the workbook after 1 August 2019 (once she was personally engaged by Leaders).
(b)By continuing to use and develop the workbook, the workbook became Leaders’ property. This was because of provisions in the contract for service. Moreover, Ms MacDonald maintained that the workbook included information that came from her.
(c)Ms Pienaar’s position, relying on The Brand Guardian Ltd’s terms and conditions, was foreshadowed for the Court by Leaders. Ms MacDonald annexed those terms and conditions to her affidavit, and the memorandum of counsel in support referred to relevant clauses.
Decision
[53] In her original affidavit Ms MacDonald deposed that Ms Pienaar provided the marketing and branding services herself but had “invoiced” Leaders through The Brand Guardian Ltd. This may have been accurate from 1 August 2019 onwards,9 but it was misleading in respect of Leaders’ initial engagement of The Brand Guardian Ltd. The Brand Guardian Ltd was engaged by, and was not merely invoicing, Leaders.
[54] Ms MacDonald did not disclose that initial engagement. She did refer to and annex the marketing proposal that was provided by The Brand Guardian Ltd in April 2019 (though she said it was provided by Ms Pienaar). But she did not disclose that Leaders had engaged The Brand Guardian Ltd, and that The Brand Guardian Ltd had provided workshops, before Leaders engaged Ms Pienaar personally on 1 August 2019.
[55] As a result of that non-disclosure, the impression Ms MacDonald’s affidavit created was that the only engagement by Leaders had been of Ms Pienaar personally on 1 August 2019. That was an incorrect impression.
[56] Ms MacDonald said that Ms Pienaar had provided marketing workshops from August 2019, for which Ms Pienaar had prepared workbooks. Ms MacDonald deposed that she always considered those materials to be Leaders’ property, as Ms Pienaar was being paid by Leaders “to create and develop it for us”. Later in her
9 This would depend on whether Ms Pienaar’s services were invoiced through The Brand Guardian Ltd.
affidavit she deposed that the workbook was “developed” by Ms Pienaar for marketing training at Leaders, and that it was “produced at our cost”.
[57] Ms MacDonald did not disclose that a version of the workbook had earlier been provided by The Brand Guardian Ltd for workshops that it ran in June and July 2019. As a result of that non-disclosure, the clear impression created by Ms MacDonald’s affidavit was that the workbook was entirely created, developed and produced by Ms Pienaar while she was engaged by Leaders. That was incorrect.
[58] Ms MacDonald also deposed that Ms Pienaar, in providing marketing services, used Leaders’ confidential information and “created intellectual property” which in Ms MacDonald’s view became Leaders’ property. She gave the workbook as an example. She said that the workbook found at the Tremains training was “based on [Leaders’] intellectual property and confidential information”. These statements, read in the context of the impression that the workbook was entirely created by Ms Pienaar while she was engaged by Leaders, conveyed the clear impression that all, or substantially all, of the workbook was based on Leaders’ intellectual property and confidential information. As is now clear, that was an incorrect impression.
[59] I do not accept Mr Matsis’ submission that Ms MacDonald could not reasonably have been expected to recall that the workbook had first been created before August 2019. First, Ms MacDonald does not, in her affidavit in opposition, depose that she failed to recall that matter. Secondly, even if she had overlooked that matter, an applicant’s duty of disclosure requires it to make proper enquiries. It would have been a simple matter for Ms MacDonald to see from a review of Leaders’ records that the workbook had been presented (and therefore created) before August 2019.
[60] Ms Pienaar has, in her affidavits, provided a detailed explanation of her development of the workbook, including her use of publicly-available sources. I acknowledge that Ms MacDonald would not have been aware of all of this when she made her original affidavit. But this is no excuse for her having conveyed an inaccurate impression that the workbook was substantially based on Leaders’ intellectual property and confidential information. A cursory comparison of the workbook created by The Brand Guardian Ltd in June 2019 with the workbook used
for the Tremains training would have revealed that, at best for Leaders, only parts of the workbook could have been based on Leaders’ intellectual property and confidential information.
[61] The incorrect impressions that I have identified were only partly cured by the memorandum of counsel in support of Leaders’ without notice application. (To be clear, this is not a criticism of counsel who signed the memorandum. There is no suggestion counsel was made aware of the correct position.) The memorandum began by saying that Leaders engaged Ms Pienaar “initially through her company, Brand Guardian Ltd”. The memorandum also referred to relevant clauses in the terms and conditions of The Brand Guardian Ltd. The memorandum thereby raised the possibility that those terms and conditions might apply. But the memorandum did not explain that the workbook had first been created by The Brand Guardian Ltd. The impression therefore remained that the workbook was entirely created by Ms Pienaar while working for Leaders, and that all or substantially all of the workbook was based on Leaders’ intellectual property and confidential information. The memorandum said that the Tremains workbook was “all-but-identical” to Leaders’ documents.
[62] In summary, in my judgment Leaders did not provide full and frank disclosure of all material facts when it applied without notice for the interim injunctions.
Should the interim injunctions remain?
Legal principles
[63] Both counsel referred me to cases that have applied a so-called “liberal” approach to applications to rescind without notice orders. On that approach, even if the Court is satisfied there was a material non-disclosure in the without notice application, rescission of the without notice orders is not automatic. Instead, the Court has a discretion whether to rescind, and should review the merits of the application in light of all the evidence now before the Court.10 Both counsel submitted I should proceed on that basis, and consider Leaders’ application afresh.
10 Love v Wensley Developments The Marina Ltd HC Invercargill CIV 2009-425-100, 4 August 2009 at [29] and the cases there cited.
[64] I accept that a material non-disclosure does not lead automatically to rescission. The Court has a discretion.11 Relevant to that discretion is whether the non-disclosure was innocent (in the sense that the facts were not known to the applicant or their relevance was not perceived) and whether the orders could properly have been granted had the full facts been disclosed.12
[65] Mr Matsis made a related submission. He said that, for a court to rescind an order made without notice, the alleged defects in the application must have led the court to make the order.13 He submitted there was no such causative linkage.
[66] Given counsel agreed I should consider Leaders’ application afresh, I will proceed on that basis. First I will deal with Mr Matsis’ related submission that there was no causative linkage.
Did the non-disclosure have any causative effect on the decision?
[67] I reject Mr Matsis’ submission that there was no linkage between the defects in Leaders’ application and Doogue J’s grant of the interim injunctions. Her Honour found that Leaders had a “strong case”, that the alleged breach “points squarely at [Ms Pienaar’s] conduct” and that Ms Pienaar’s conduct “counts against the balance of convenience being weighed in her favour” and “appears to count against her”. It is clear from the judgment that her Honour made those findings because she understood, based on Ms MacDonald’s affidavit, that Ms Pienaar had conducted a training session for Tremains using a workbook that was an almost exact copy of material that had been “developed and used” by Ms Pienaar when working for Leaders.14
Considering the application afresh: principles governing interim injunctions
[68] The approach to determining an application for an interim injunction is settled. The Court assesses:
11 Lazard Bros & Co v Midlands Bank Ltd [1933] AC 289 (HL) at 307; Brink’s Mat Ltd v Elscombe
[1988] 1 WLR 1350 (CA) at 1357.
12 Brink’s Mat Ltd v Elscombe [1988] 1 WLR 1350 (CA) at 1357.
13 He relied on Harbour City Security Ltd v Allied Security Ltd [2021] NZHC 952.
14 At [19].
(a)Whether there is a serious question to be tried.
(b)The balance of convenience.
(c)Where the overall justice lies.
[69] The balance of convenience requires the Court to balance the injustice that may be caused to the applicant if an interim injunction is not granted and the applicant ultimately succeeds in obtaining a permanent injunction, against the injustice that may be caused to the respondent if an interim injunction is granted and the applicant ultimately fails. This is a broad and flexible inquiry. It usually involves consideration of these factors:
(a)The adequacy of damages to both parties.
(b)The relative strength of each party’s case.
(c)The conduct of the parties.
(d)Preservation of the status quo.
(e)The effect on innocent third parties.
[70] The first injunction sought by Leaders was an interim mandatory injunction. Such injunctions are rarely granted. The same legal test applies to them, but “it will be a rare set of facts indeed that will withstand the scrutiny of that test”.15 This is because, for instance, an interim mandatory injunction does not usually preserve the status quo.
Is there a serious issue to be tried?
[71] Mr Bates submitted that, given the fuller picture now before the Court, there was no serious issue to be tried regarding Leaders’ claim that Ms Pienaar has failed to
15 Pilkington v Fidelity Life Assurance Co Ltd HC Wellington CIV-2007-485-2270, 14 April 2010 at [18]; Fidelity Life Assurance Co Ltd v Pilkington [2010] NZCA 424 at [26]; Clode v Oliphant [2018] NZHC 1442 at [21].
return or is misusing Leaders’ intellectual property or confidential information. Mr Matsis, by contrast, submitted that Leaders’ position was now stronger than it was when the without notice application was made. This was because Ms Pienaar’s laptop contained a database that she acknowledged was Leaders’ property.
[72] I do not accept either submission. It will be apparent from my reasons so far that I regard Leaders’ case as being weaker than as presented to Doogue J. But it is not so weak that I can conclude that there is no serious issue to be tried. To reach that conclusion I would have to reject Ms MacDonald’s evidence that some of the content of the workbook reflects information that was provided to Ms Pienaar in the course of her engagement by Leaders, and her evidence that there are Manuals that were provided to Ms Pienaar that have not been returned.
[73] I would also have to reject Mr Matsis’ argument that the effect of the Confidentiality Agreement and the Contract for Service was that, even if the workbook and other materials were created before August 2019, as Ms Pienaar continued to develop the workbook and other materials after that date, they became Leaders’ property. I am not in a position, on an interlocutory application, to resolve such conflicts of affidavit evidence or to determine difficult questions of contract interpretation. They are matters for trial.
[74]There is still a serious issue to be tried.
Balance of convenience
[75] I first consider the adequacy of damages. In this case I regard it as a neutral factor. This is because the adequacy of damages must be considered both ways.16 It would be just as difficult to calculate damages on Leaders’ undertaking as it would be to calculate damages for breach by Ms Pienaar.
[76] As to the relative strength of the parties’ cases, at this interlocutory stage Ms Pienaar appears to have the better case. Faced with Ms Pienaar’s evidence as to the origin of and sources for the material in the workbook, Leaders had these responses:
16 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) at 408; Western Work Boats Ltd v Kelly [2016] NZHC 2577 at [28].
(a)Ms MacDonald asserted that some of the material in the workbook was nonetheless based on confidential information that was imparted by Leaders to Ms Pienaar. While I am not in a position to make a determination on the affidavit evidence alone, I have to say that is a bare assertion by Ms MacDonald. On its face, the workbook does not appear to contain anything that could be regarded as confidential to Leaders. Ms MacDonald does not identify the parts of the workbook that she alleges are based on confidential information (despite Ms Pienaar inviting her to).
(b)Mr Matsis submitted that even if the workbook was created before August 2019, Ms Pienaar had continued to develop the workbook after that date, so it became Leaders’ property. Mr Matsis relied on the terms of the Confidentiality Agreement and the Contract for Service. I did not hear full argument on this submission, and refrain from making any determination. It suffices to say that I perceive considerable difficulty with the submission:
(i)The scope of the Confidentiality Agreement is framed by cl 3.1, in which Ms Pienaar acknowledges that in providing services to Leaders she will receive or have access to Leaders’ confidential information. The operative provisions of that Agreement (including cl 3.4, which Leaders says has retrospective effect) refer to confidential information disclosed to Ms Pienaar. The question therefore remains: was such confidential information disclosed, and is Ms Pienaar retaining or using such information? The Agreement does not appear to convert anything Ms Pienaar developed during her engagement by Leaders into Leaders’ property.
(ii)The Contract for Service came into operation only on 22 May 2020. Clauses 10 and 11 protect Leaders’ “intellectual property” and “confidential information”. Clause 15 provides that “intellectual property” includes “ideas … subsisting in any
works, documents or items that [Ms Pienaar] creates, conceives, develops or makes during the course of this Contract”. These clauses raise similar questions to those raised by the Confidentiality Agreement. What confidential information was disclosed? What ideas subsist in the documents that Ms Pienaar developed during the Contract for Service? These clauses do not appear to convert the entirety of any document developed by Ms Pienaar into Leaders’ property.
[77] To the extent Leaders’ case is based on the workbook, I therefore assess it as a weak case.
[78] I acknowledge that Leaders’ case does not turn solely on the workbook (though that was the main focus of its application). Leaders also alleged that Ms Pienaar had failed to return the Manuals. There is conflicting affidavit evidence on that. However, Leaders’ case relies in part on Ms MacDonald reporting hearsay statements. Leaders does not offer any explanation for the makers of those statements being unavailable to give affidavit evidence. At this stage that evidence should, therefore, be given little weight.
[79] Apart from the Manuals, Leaders did not identify any other confidential information, intellectual property or other Leaders’ property that Ms Pienaar was alleged to have retained or misused.
[80] There is one exception. Ms Pienaar acknowledged, having had her laptop examined by an IT expert, that it contained a Leaders’ database. Ms Pienaar has undertaken not to use it, and her laptop has been in her solicitor’s possession since January 2021.
[81] As to the conduct of the parties, in its without notice application, Leaders painted a picture of Ms Pienaar not being open or honest. That appears to have had considerable influence in Doogue J’s decision to grant the injunctions. I have found that Leaders failed to provide full and frank disclosure to the Court. In response to the interim injunctions, Ms Pienaar has acted promptly to identify any information in her
possession that might be confidential to Leaders, has left it in her solicitor’s possession, and undertaken not to use it. All these matters tell against the interim injunctions remaining.
[82] As to the preservation of the status quo, this does not favour the grant of the interim mandatory injunction sought by Leaders. The status quo does favour the grant of the injunction restraining use of Leaders’ property (though Ms Pienaar’s undertaking has much the same effect).
[83] Taking all these factors into account, in my view the balance of convenience is tilted, by a significant degree, against the interim injunctions remaining.
Overall justice
[84] The balance of convenience will usually be determinative of whether an interim injunction should be granted (or continue). However, the Court should nonetheless stand back and consider whether there is anything in the overall justice of the case that leads to a different conclusion. In this case I do not see any reason why I should not determine the application guided by the balance of convenience.
Conclusion
[85] For the above reasons, including Ms Pienaar’s undertaking, I conclude the interim injunctions should not remain. They should instead be rescinded.
Result
[86] The interim injunctions granted by Doogue J on 18 December 2020 are rescinded.
[87] Ms Pienaar, having succeeded on this application, is entitled to costs. If the parties cannot agree the quantum of costs, memoranda may be filed as follows:
(a)Ms Pienaar by 13 August 2021.
(b)Leaders by 20 August 2021.
[88] Each memorandum is not to exceed three pages (excluding relevant costs schedules or annexures).
Campbell J
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