McLean v Marshall - [2015] NZCA 370

IN THE COURT OF APPEAL OF NEW ZEALAND

CA442/2014
[2015] NZCA 370

BETWEEN	DOUGLAS WAYNE FRASER MCLEAN Appellant
AND	ROBERT RITCHIE MARSHALL Respondent

Hearing:	29 July 2015
Court:	White, Heath and Collins JJ
Counsel:	L A Andersen for Appellant Respondent in person
Judgment:	13 August 2015 at 11.00 am

JUDGMENT OF THE COURT

A The appeal is allowed. The High Court’s dismissal of the appellant’s claim for damages in the sum of $103,033.08 is set aside.
BThe question of the quantum of damages for the breach of the obligation to provide the source code at termination is remitted to the High Court for rehearing.

C No order as to costs.

____________________________________________________________________

REASONS OF THE COURT

(Given by Heath J)

The appeal

On or about 12 March 2007, Mr McLean and Mr Marshall entered into a joint venture agreement (the Agreement) to develop a software programme to facilitate automated trading in foreign exchange. On 12 March 2012, Mr Marshall gave three months’ notice of an intention to terminate the Agreement.
Mr McLean sued Mr Marshall for $635,991.87 to recover losses that he claimed to have been suffered in consequence of the alleged breaches. In a judgment given on 11 July 2014, following a hearing in the High Court at Dunedin, Gendall J found that Mr Marshall had breached contractual obligations owed to Mr McLean.[1] He awarded damages in favour of Mr McLean, in the sums of $4997.25 (trading losses) and $12,961.54 (costs involved in reviewing and discovering the malicious software code); a total of $17,958.79.[2]
[1]McLean v Marshall [2014] NZHC 1624 at [35] and [38]–[39]. See [10]–[11] below.
[2]At [52].
The Judge rejected a separate claim for $103,033.08.[3] That was the cost to which Mr McLean says he was put as a result of Mr Marshall’s failure to provide the source code on termination of the Agreement. Mr McLean appeals against that aspect of the decision.
[3]At [45] and [46]; set out at [12] below.
Gendall J also rejected Mr McLean’s claim for damages of $515,000 based on loss of a chance. There is no appeal from that decision.

The joint venture

Messrs McLean and Marshall were the “founding members of the Pork Bellies Fun Club”, an organisation established to trade in foreign exchange. The Agreement recorded that the two men had been “hindered” in the administration of foreign exchange contracts into which they had entered, by “the lack of an adequate system, especially an automated one”. The Agreement evidences Mr McLean’s and Mr Marshall’s intention to “join as partners” to create “their own system”. Mr McLean and Mr Marshall were to share ownership of the system equally.[4]
[4]Clause 4.4.
Messrs McLean and Marshall intended to use a combination of software and services to develop a system that would use a “CMS API”.[5] That expression was defined in the Agreement as a “computer software that connects to an internet trading platform made available under license by Commodity Market Systems of the USA”.[6]
[5]Clause 3.1.
[6]Clause 1.1.
The system was to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading McLean v Marshall

Details

AGLC: McLean v Marshall [2015] NZCA 370
Case: [2015] NZCA 370
Decision Date: 13 August 2015 at 11.00 am

CaseChat Overview and Summary

The appeal in McLean v Marshall was heard by the Court of Appeal of New Zealand. The appellant, Douglas Wayne Fraser McLean, sought to appeal the High Court's dismissal of his claim for damages amounting to $103,033.08, which he argued were incurred due to the respondent, Robert Ritchie Marshall, failing to provide the source code at the termination of their joint venture agreement. The joint venture was formed to develop a software program for automated trading in foreign exchange. The central legal issue in this case was whether the High Court correctly dismissed McLean's claim for damages due to Marshall's failure to provide the source code at termination.

The Court of Appeal found that the High Court had erred in its approach to the quantum of damages. The High Court Judge, Gendall J, had rejected McLean's claim for $103,033.08, which McLean argued represented the costs of identifying issues with the undocumented source code and restoring it to the position that the program was at the termination of the Agreement. Gendall J dismissed the claim on the basis that McLean had not provided adequate evidence to support the quantum of the claim, and that the losses claimed were inherent to the provision of incomplete code. However, the Court of Appeal held that Gendall J had misconstrued the nature of McLean's claim, which was not for the completion of the code, but rather for the restoration of the code to its form at the time of termination. Given this error, the Court of Appeal allowed the appeal and set aside the High Court's dismissal of McLean's claim. The matter was remitted to the High Court for rehearing on the question of the quantum of damages for the breach of the obligation to provide the source code at termination.

The final orders of the Court of Appeal were that the appeal was allowed, the High Court’s dismissal of McLean’s claim for damages in the sum of $103,033.08 was set aside, and the question of the quantum of damages for the breach of the obligation to provide the source code at termination was remitted to the High Court for rehearing. No order as to costs was made.

Orders