McLean v Marshall - [2016] NZHC 1276

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2013-412-000188 [2016] NZHC 1276

BETWEEN
DOUGLAS WAYNE FRASER MCLEAN

First Plaintiff

AND

D W F MCLEAN AND G H THORPE AS TRUSTEES OF THE MCLEAN FAMILY TRUST

Second Plaintiffs

AND

ROBERT RITCHIE MARSHALL Defendant

Hearing: 31 May 2016

Appearances:

L A Andersen for the Plaintiffs
Defendant in person

Judgment:

14 June 2016

JUDGMENT OF NATION J

Background

[1] As summarised by the Court of Appeal:1

[1] 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.

[2] 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. 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.

1 McLean v Marshall [2015] NZCA 370 (footnotes omitted).

MCLEAN v MARSHALL [2016] NZHC 1276 [14 June 2016]

[3] The Judge rejected a separate claim for $103,033.08. 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 appeal[ed] against that aspect of the decision.

[4] 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.

[2] In its judgment of 13 August 2015, the Court of Appeal allowed the first plaintiff’s appeal. They set aside the High Court’s dismissal of Mr McLean’s claim for damages in the sum of $103,033.08. They remitted back to the High Court for rehearing “the question of the quantum of damages for the breach of the obligation to provide the source code at termination”.

The plaintiff ’s claim as pursued on the rehearing of the quantum of damages
issue

[3] At the rehearing, Mr McLean sought to pursue damages on two claims which

Mr Andersen said were relevant, namely:

(a) costs associated with the identifying and remedying of the malicious code - $7,961.54 (the Bridge Programme); and

(b) costs associated with identifying the issues with the undocumented source code supplied and restoring it to the position the programme was at termination of $103,033.08 (the source code).

The Bridge Programme

[4] In relation to (a), the evidence I heard established that in February 2012 Mr Marshall had developed the system to the point where the parties had “an executable copy” of the programme they were developing. That was, as I understood it, a programme which could be marketed to potential customers but…

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 [2016] NZHC 1276
Case: [2016] NZHC 1276
Decision Date: 14 June 2016

CaseChat Overview and Summary

This case involves a dispute between Douglas Wayne Fraser McLean and Robert Ritchie Marshall, arising from a joint venture agreement to develop software for automated trading in foreign exchange. Mr McLean sued Mr Marshall for damages following his breach of the joint venture agreement. The initial hearing was conducted in the High Court at Dunedin, presided over by Gendall J, who found that Mr Marshall had breached the contractual obligations owed to Mr McLean. He awarded damages in favour of Mr McLean for trading losses and costs involved in reviewing and discovering malicious software code, totalling $17,958.79. The Court of Appeal allowed Mr McLean's appeal regarding the damages for the breach of the obligation to provide the source code at termination, setting aside the High Court's dismissal of the claim for $103,033.08 and remitting the case back to the High Court for rehearing.

The primary legal issue in this case was the quantum of damages for the breach of the obligation to provide the source code at termination. Mr McLean sought to recover costs associated with identifying and remedying the malicious code and the costs associated with identifying the issues with the undocumented source code supplied and restoring it to the position the programme was at termination. The Court of Appeal had previously held that the claim for $103,033.08 was remitted back to the High Court for rehearing.

In its judgment, the Court examined the evidence presented by Mr McLean regarding the costs incurred to overcome the problems caused by Mr Marshall's failure to provide the source code. The Court accepted that Mr McLean had incurred costs of $103,033.08 and was entitled to judgment for damages in that sum for Mr Marshall's breach of the obligation to provide the source code at termination. The Court rejected Mr Marshall's contention that the work done in documenting the source code was unnecessary to remedy his breach of contract, as it was necessary to understand how the programme worked in order to identify the changes.

The Court concluded that there was judgment for the first plaintiff against the defendant in the sum of $103,033.08, together with interest on that sum under the Judicature Act 1908 calculated from the time proceedings were filed. The Court also tentatively decided that Mr McLean was entitled to costs in respect of this hearing but not steps earlier in the proceedings, and that costs should be fixed for the hearing on a 2B basis. If there was no agreement over costs, counsel for Mr McLean was to file a memorandum within 21 days, with Mr Marshall to file his response within 14 days.

Orders