Medtech Limited v Valentia Technologies (NZ) Limited
[2025] NZHC 913
•15 April 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-003051
[2025] NZHC 913
BETWEEN MEDTECH LIMITED
Plaintiff
AND
VALENTIA TECHNOLOGIES (NZ) LIMITED
Defendant
Hearing: 6 March 2025 Appearances:
A Ross KC and O Sutton for Plaintiff
K T Glover and D T D Horton for Defendant
Judgment:
15 April 2025
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 15 April 2025 at 11.00 am pursuant to r 11.5 of the High Court Rules 2016.
………………………………
Registrar/Deputy Registrar
Solicitors:Minter Ellison Rudd Watts, Auckland Create IP, Auckland
MEDTECH LTD v VALENTIA TECHNOLOGIES (NZ) LTD [2025] NZHC 913 [15 April 2025]
[1] The plaintiff, Medtech, seeks leave to appeal two of my interlocutory judgments:1
(a)a judgment rescinding preservation orders dated 20 June 2024 (the Preservation Orders Judgment);2
(b)a costs order relating to the Preservation Orders Judgment dated 8 November 2024 (the Costs Judgment).3
[2] Medtech also seeks an extension of time in which to apply for leave to appeal the Preservation Orders Judgment. I grant an extension so that the leave issue can be dealt with directly.
[3] The applications are unusual. The gist of Medtech’s application is that in the Cost Judgment I concluded that Valentia was the successful party on the Preservation Orders Judgment when I should not have done. Medtech says this finding was in “error” because I had been misled by Valentia’s affidavit evidence to conclude in the Preservation Orders Judgment that without-notice preservation orders I made on 21 December 2024 (Preservation Orders) should not have been made.
[4]For the reasons outlined below, I dismiss the applications for leave to appeal.
Relevant procedural background
[5] The parties are competitors in the provision of patient/practice management software to medical practices (PMS). PMS is used for patient record-keeping and practice management at GP office practices and other health care providers. Medtech’s products are Medtech32 and a more recent product, Medtech Evolution. Valentia’s product is called indici. Medtech currently has 70 per cent of the market. Valentia has 17 per cent.
1 Pursuant to s 56(3) of the Senior Courts Act 2016, leave is required to pursue the interlocutory appeals.
2 Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 1618 (Preservation Orders Judgment).
3 Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 3315.
[6] On 19 December 2023, Medtech issued proceedings against Valentia alleging breaches of intellectual property rights, interference with contractual relations, breach of confidence, breach of a settlement of earlier litigation, and misleading conduct under the Fair Trading Act 1986. Medtech sought a range of interim orders without notice, including the Preservation Orders I made on 21 December 2024.4 The Preservation Orders were aimed at preserving a snapshot of the present version of Valentia’s software, associated intellectual property and operating environment so that Medtech could assess whether there had been a breach of its rights.
[7] In June 2024, I rescinded the Preservation Orders in the Preservation Orders Judgment. I also made orders for discovery of certain material that Valentia had provided voluntary undertakings to preserve in the context of an application for “interim interim” relief that I had considered in February 2024.5
[8] I ordered costs in favour of Valentia as the successful party on the Preservation Orders Judgment. I awarded Valentia $61,422 in costs, plus disbursements of
$54,625.90. However, a large part of this award related to Medtech’s application for an interim injunction that was heard at the same time, an application which I declined.6 A number of the line items awarded are not specific to one application or the other. The parties acknowledge it would be possible for the Court to come to a costs figure solely for the Preservation Orders Judgment. This could not exceed half of the total costs and disbursements awarded, which would amount to approximately $30,000 in costs and $25,000 in disbursements. It is likely to be less than this, given the greater emphasis at the hearing and in the supporting material on the interim injunction application.
[9] It is evident that if leave is granted the amount of money disputed on appeal will be dwarfed by the costs of this application and/or the costs of the appeal.
4 Medtech Ltd v Valentia Technologies (NZ) Ltd CIV-2023-404-003051, 21 December 2023, minute making preservation orders (Preservation Order Minute). The contents of this minute is detailed in Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 191 (Interim-Interim Orders Judgment).
5 Interim-Interim Orders Judgment.
6 Medtech Ltd v Valentia Technologies (NZ) Ltd [2024] NZHC 2107.
[10] On 29 October 2024, Valentia served its affidavit of documents sworn by one of its directors for the discovery ordered in the Preservation Orders Judgment (Discovery Affidavit). In a number of instances, the affidavit conveyed that many documents were not retained by Valentia prior to receiving notice of the proceedings because of its standard businesses practices. Medtech regarded these statements as wholly contrary to statements in an affidavit by the same Valentia deponent in January 2024. It was on the basis of the January 2024 affidavit that I had rescinded the Preservation Orders in the Preservation Orders Judgment.
[11] Medtech then applied for leave to appeal the Costs Judgment on the basis that I had been misled in the Preservation Orders Judgment and hence was wrong to conclude that Valentia was the successful party. On receipt of the application, I expressed the preliminary view7 that the issue raised involved a collateral attack on the conclusions in the Preservation Orders Judgment. In other words, that judgment stood unless appealed or recalled.
[12] In response, Medtech applied for leave to appeal the Preservation Orders Judgment and for leave to appeal that judgment out of time.
Preservation Orders Judgment
[13] My rationale for making the Preservation Orders is set out in my relevant minute dated 21 December 2023:8
[16] The orders ensure, for the plaintiff’s benefit, that there is no opportunity for the defendant to “cover its tracks” (as Medtech put it) if Valentia has indeed been contravening Medtech’s intellectual property rights. The without notice basis of the orders is required given that purpose.
[17] That avoids the prospect of harm to Medtech in being unable to investigate breaches. It preserves the software and associated material in its present form in a manner that a search order9 would but without the intrusion and invasiveness of such an order.10 It goes little further than the obligation of a party to preserve documents for discovery, albeit it requires Valentia to take the action of retaining a copy of the present version of the software/schema etc and operating environment for that purpose. This
7 Medtech Ltd v Valentia Technologies (NZ) Ltd CIV-2023-404-003051, 13 December 2024, minute.
8 Preservation Order Minute, above n 4, at [16]–[18].
9 High Court Rules 2016, pt 33.
10 Fieldforce (NZ) Ltd v Auchterlonie (1994) 7 PRNZ 563.
requires Valentia to take the action of making such a copy. Medtech has provided an undertaking as to damages.
[18] The preservation orders seek no more than to preserve information by requiring a copy of the present software and environment to be made. I am advised that the orders can be implemented without affecting in a material way the operation of the software or end users.
[19] On this last point, making such an order at this time of year and without hearing from the applicant I quizzed the plaintiff’s counsel on how readily the orders can be complied with. While there was strictly no evidence on this, I am advised that the plaintiff’s solicitors have worked closely with PWC to make the orders as targetable and achievable as practicable, while ensuring they serve the purposes of enabling the plaintiff to test its claims. I am also told that PWC believe that the orders can be complied with readily, however Mr Lloyd for the plaintiff acknowledged that cannot be assured given the plaintiff does not know how the defendant operates. To address this, the orders enable the defendant to return to the Court, as would be usual in this context.
[14] Turning to the Preservation Orders Judgment, two factors underpinned the decision to rescind the preservation orders. The first was my conclusion that on the basis of evidence from Valentia, the two assumptions on which I had made the orders were incorrect in light of evidence Valentia had filed:
[38][T]he two assumptions behind the orders were:
(a)That the orders were necessary and appropriate because of the potential for inadvertent or deliberate untraceable changes to the software.
(b)That the orders could be implemented without affecting in a material way the operation of the software or end users and could be complied with readily.
[39] From the evidence that has been filed by Valentia I am satisfied that Valentia’s change processes are such that there is no realistic risk of deliberate or accidental alteration of Valentia’s software in a manner that would justify a preservation order. That is, there is no sensible risk of “destruction” or “dissipation”, applying those concepts by analogy to software/documents. In retrospect, it was unnecessary to make a preservation order at the time, without notice, given this was to avoid that risk.
[40] I have also now had evidence from Valentia’s principal and from independent experts engaged on Valentia’s behalf in the proceeding. This evidence outlines the complexity and significant practical difficulties with Valentia taking a copy of its “virtual environment” (being the aspect of the preservation orders that is not subject to the undertakings Valentia has given).
[15] Medtech says that Valentia’s Discovery Affidavit contradicts the affidavit evidence given by the same deponent in January 2024, referred to at [39] of the passage above. It says that this inconsistency undermines my conclusion that I would not have made the orders had I had information contained in the Discovery Affidavit back in December 2023 on Valentia’s change processes. Medtech does not say that the allegedly contradictory information impacts on my other conclusion as to the ease of compliance with the orders.
[16] The second factor underpinning the Preservation Orders Judgment was that at the hearing, Valentia agreed to discovery orders for the same material that it had undertaken to preserve at the time of the February application for “interim interim” orders. Valentia’s concession that discovery orders could be made was given after a degree of “judicial persuasion”, and on the basis that there would be reciprocal orders for discovery of an initial tranche of material by Medtech. The context is that it was important to Valentia to resist being cast by Medtech as having orders made against it, and the reciprocity mitigated against such a perception.11
[17] At the present hearing, Medtech drew a distinction between rescinding the Preservation Orders (which is what I ordered) as opposed to discharging the orders. I agree there is a valid distinction to be made between these two concepts. Rescission will mean that the orders were never made. Discharge is focused on whether the orders that have been made should continue to remain in force.
[18] My finding that the Preservation Orders should not have been made in the first place due in part to the matters referred to at [14] above naturally leads to an order that the Preservation Orders should be rescinded. My replacement of those orders with discovery orders is more forward-facing and, if it stood alone as a rationale for the judgment, would only justify the Preservation Orders being discharged. As I understand, Medtech submits that if the matters referred to at [14] as a basis for rescinding the order fall away, the costs outcome should differ.
11 Preservation Orders Judgment at [45]; see also Interim-Interim Orders Judgment at [8].
Legal test on the leave application
[19] Section 56(3) of the Senior Courts Act 2016 requires leave to appeal an interlocutory judgment. The principles that guide the Court’s assessment of when to grant leave has been developed by case law.12 In Greendrake v District Court of New Zealand, the Court of Appeal summarised the following approach to whether leave should be granted:13
(a)a high threshold exists;
(b)the applicant must identify an arguable error of law or fact;
(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;
(d)the circumstances must warrant incurring further delay; and
(e)the ultimate question is whether the interests of justice are served by granting leave.
[20] In this particular case the ultimate question of the “interests of justice” is central to Medtech’s applications.
Decision
[21] The present application is one out of the box. Commonly, a key issue on whether leave to appeal an interlocutory judgment is to be granted is the impact on the substantive hearing. That aspect has no relevance here. Moreover, while emphasising that the sum involved is not trivial, Medtech does not strongly suggest that the substantive outcome is significant for the parties. Nor can it be said there is any serious issue justifying an appeal about the approach to the Court’s discretion to award costs.
12 See, for example, Auto Net v Tyler [2021] NZHC 542; Coffey v Walker [2020] NZHC 605; Yu v Bradley [2018] NHC 2312; and Westpac New Zealand Ltd v New Dawn Holdings Ltd [2022] NZHC 3476.
13 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6].
[22] The principal justification for leave to appeal lies, rather, in the contention that it is important for the administration of justice that a costs award on a judgment effectively procured by misleading evidence is not allowed to stand. The application is justified not by an alleged error in the outcome, but rather by how that error came about. The error in question is the alleged misleading of the Court in respect of the Preservation Orders Judgment. Correction of the error would require amendments to the Court’s finding in the Costs Judgment that Valentia succeeded in the Preservation Orders Judgment.
[23] However, the Court of Appeal only has jurisdiction to hear and determine an appeal from a “judgment, decree or order” of the High Court, or a “decision” of the High Court.14 Medtech has confirmed that it does not seek to challenge the outcome of the Preservation Orders Judgment. The aspect of the judgment Medtech seeks to overturn is a specific finding that the Preservation Orders were not required at the time they were made because of Valentia’s change processes. Valentia is correct that the application seeks to challenge the reasons for the Preservation Orders Judgment rather than the judgment, order or decision itself.15
[24] In my view, in these circumstances, the grounds advanced engage the procedure for recall,16 not appeal. I am not inclined to recall either of the judgments of my own motion, because the application was not argued in that way. This is sufficient to dismiss the applications.
[25] As to the substance of the applications for leave, Mr Ross KC for Medtech contends that I need only conclude that there is a reasonably arguable basis for the initial evidence being incorrect to provide the platform for leave to appeal, applying the test of “a reasonably arguable error of fact or law”. I do not see it that way because of the unusual basis for the application here.
[26] As I have said, the foundation for seeking leave to appeal is the collateral issue that my finding in the Preservation Orders Judgment is undermined because of what
14 Senior Courts Act, s 56.
15 See Gao v Body Corporate 183930 [2016] NZCA 458, [2016] NZAR 1313 at [17]–[35].
16 High Court Rules, r 11.9.
Valentia is alleged to have wrongly presented to the Court. Medtech founds its appeal on the proposition that the Court should not permit a situation where Valentia has procured a result from providing misleading and incorrect information in support of its application to discharge the preservation order and injunction.
[27] Assuming for the sake of argument that leave to appeal was appropriate rather than recall, I consider a strong factual platform is required. It is not in the interests of justice to allow leave to appeal on this basis (when the other foundations for leave to appeal an interlocutory application are not present)17 unless the applicant has a sufficiently strong argument that the Court has been misled with material effect. Unless this is likely, the appeal is a waste of limited resources of the appellate court.
[28] Certainly, at first glance, there do appear to be inconsistencies between the Discovery Affidavit and Valentia’s earlier affidavit from January 2024. However, looking at the matter in context, I am not sufficiently persuaded.
[29] Valentia’s January 2024 affidavit primarily addressed changes to the production source code (the live software). What was said in this affidavit appears to be correct, that is, that all changes to the live software are meticulously logged. This is referable to “production” source code. The Discovery Affidavit is primarily referring to retention of development material that does not end up in the software/source code.
[30] Having heard Mr Glover for Valentia, I understand why Valentia says that the two affidavits should not be viewed as contradictory. In essence, Valentia’s position from the outset was that the preservation order was otiose and unnecessary.18 That is because:
(a)From the moment Valentia was served with proceedings, it was under an obligation to preserve any existing documentation under r 8.3 of the High Court Rules. That is so whether or not the proceedings were accompanied by a preservation order.
17 Refer [21] above.
18 Interim-Interim Judgment at [8].
(b)For material that did not involve pre-existing documents relating to changes to the live software, Valentia’s evidence is that it cannot change the software in its live environment without a footprint of this being preserved because of the way its business-as-usual systems operate.
[31] The first affidavit filed by Valentia’s principal (which Mr Glover also emphasises was done under conditions of urgency) outlined at some length the facts supporting the issue in (b). He says it was not directed at its business-as-usual processes for documents in (a) given Valentia’s stance that it was required to preserve documentation under r 8.3 with or without the preserving order.
[32] Mr Glover says that the more recent discovery affidavit filed in October 2024 addresses the issue of documents Valentia no longer held as at the date of service of proceedings. He stresses that neither a preservation order nor the obligation under r 8.3 (if a preservation order had never been made) could assist in preserving material that no longer existed prior to the date of service of the proceedings. This was going to be lost to Medtech whether the service of proceedings in December 2023 was accompanied by preservation orders or not. Valentia says that the Discovery Affidavit reflects the reality that documentation prior to service of the proceedings is incomplete due to business-as-usual processes.
[33] Valentia’s explanation may be an incomplete answer to the issues Medtech raises. For example, at the hearing of the leave application, it became clear that the lack of precision in terms used to describe the software and material led to some gaps in my understanding of the facts. Moreover, on the face of it, I read an annexure to Valentia’s first affidavit as conveying that changes to database records are logged through change management processes.19 In contrast, I read the Discovery Affidavit as saying that database code was placed under source control only upon receipt of the Preservation Order.20
[34] However, as matters presently stand, I do not consider there is a sufficiently strong foundation for the proposition that the Court has been materially misled to
19 Exhibit AJ-08 to the January 2024 affidavit.
20 Discovery Affidavit at [18].
justify leave to appeal on that basis. On Valentia’s explanation, it remains the case that the live production code cannot be changed without leaving a trail. Moreover, nothing in the Discovery Affidavit affects the other issues raised in the Preservation Orders Judgment as to ease of compliance with the order (or the replacement of the Preservation Orders with a discovery order). As well, the Discovery Affidavit does not detract from Valentia’s underlying proposition that preservation orders were also unnecessary due to its obligation on discovery to retain documents from the time of service.
Result
[35] The applications for leave to appeal are otherwise dismissed. I have previously categorised this case as a category 3 proceeding. I order costs in favour of Valentia on a 3B basis.
Anderson J
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