McLean v Marshall

[2014] NZHC 1624

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2013-412-000188 [2014] NZHC 1624

BETWEEN

DWF MCLEAN

First Plaintiff

DWF MCLEAN AND G H THORP AS TRUSTEES OF THE MCLEAN FAMILY TRUST

Second Plaintiffs

AND

R R MARSHALL Defendant

Hearing:	3 and 4 June 2014
Appearances:	L A Andersen for Plaintiff Defendant Appears in Person
Judgment:	11 July 2014

JUDGMENT OF GENDALL J

MCLEAN v MARSHALL [2014] NZHC 1624 [11 July 2014]

Table of Contents

Para No

Introduction	[1]
The claim	[7]
The evidence for Mr McLean	[11]
Mr McLean	[11]
Mark Hook	[21]
The evidence for Mr Marshall	[22]
Mr Marshall	[22]
Pauline Steedman	[24]
Annette Marshall	[25]
The joint venture element	[26]
Analysis of the claimed breaches	[30]
Preliminary	[30]
Trading losses	[32]
Failing to provide source code	[36]
The so-called malicious “bug”/code	[39]
Analysis of quantum	[40]
Preliminary	[40]
Trading losses	[41]
Malicious code	[42]
Restoration of code	[45]
Loss of chance	[47]
Result	[51]
Costs	[54]

Introduction

[1]      On  or  around  12  March  2007  the  first  plaintiff  (Mr  McLean)  and  the defendant (Mr Marshall) entered into a joint venture agreement (the Agreement) which concerned the development of a software system which would enable automated trading of foreign exchange (the System).

[2]      On  12  March  2012  Mr  Marshall  gave  three  months  notice  under  the Agreement to terminate the Agreement as from 12 June 2012 (the Termination Date). Mr Marshall and in the pleadings the second plaintiff (the Trust) say that at the Termination Date there was “significant international interest in the purchase of the system and/or the right to use the system under license.”

[3]      Mr  McLean  alleges  that  Mr  Marshall  has  breached  the  terms  of  the

Agreement by:

(a)      Failing to pay his one-half share of trading losses incurred in testing the software.

(b)Failing to provide Mr McLean with the source code for the System at regular intervals during and on termination in contravention of the Agreement.

(c)       Taking  steps  to  prevent  Mr  Marshall  from  using  the  software  by

‘locking’ the System via the insertion of what Mr Marshall terms a

‘malicious bug’.

[4]      As a result of this, Mr McLean alleges that he has suffered loss:

(a)       from an inability to personally trade any version of the System.

(b)through  an  inability to  demonstrate any version  of the System  to various interested parties.

(c)      from being unable to commercially exploit the System following the termination by Mr Marshall because of the refusal to provide the source codes.

(d)as a result of being unable to amend the source code to “take into account the changing connectivity requirements of the parties that power the System, rendering it useless.”

[5]      As a result, Mr McLean claims to have suffered loss totalling $635,991.87. This comprises $4,997.25 in unpaid trading losses, $12,961.54 being the cost of reviewing and discovering the malicious software, $103,033.08 being the cost of identifying issues with the undocumented source code and restoring it to its position as at termination, and loss of chance claims involving potential lost opportunity…