Monnery v Parsons

[2021] NZHC 2854

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-482

[2021] NZHC 2854

BETWEEN

PAUL MARK MONNERY

First Plaintiff

PAUL MARK MONNERY and JULIE ANN MONNERY

Second Plaintiffs

AND

ANDREW GRAHAM PARSONS

First Defendant

JOHN MURRAY CREIGHTON
Second Defendant

BRUCE GORDON COPELAND

Third Defendant

KURT BREDENBECH
Fourth Defendant

MURRAY CHARLES PARSONS
Fifth Defendant

PUSH DEVELOPMENTS LIMITED
Sixth Defendant

SANDFIELD ASSOCIATES LIMITED

Seventh Defendant

SANDFIELD VENTURES LIMITED
Eighth Defendant

PKB INVESTMENTS LIMITED

Ninth Defendant

Hearing:

17 August 2021

Appearances:

C R Carruthers QC and R L Fletcher for plaintiffs

P R W Chisnall and J D Haig for the first and sixth defendants J P Nolen for second defendant

MONNERY v PARSONS [2021] NZHC 2854 [26 October 2021]

D J Chishom QC and J D Ryan for third, seventh and eighth

defendants
G Bogiatto for fourth, fifth and ninth defendants

Judgment:

26 October 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction

[1]                 This proceeding was commenced on 4 July 2018. Three years on, interlocutories are not complete. The plaintiffs say that, once they are, they intend to replead their claim. Before the Court for determination are the remnants of applications by the plaintiffs for orders relating to interrogatories and discovery, and by two of the defendant groups for orders relating to discovery, the determination of a preliminary question or referral of that question to an expert for determination, and further security for costs. I say “remnants” because the lion’s share of these applications fell away prior to or during the hearing. Furthermore, in my assessment, other aspects cannot sensibly be dealt with at this stage.

[2]                 The background was described in my judgment dated 19 December 2018,1 and more recently by Associate Judge Sussock in a judgment dated 6 May 2021 in separate but closely related proceedings.2

[3]A brief summary will suffice for present purposes.

[4]                 At the centre of the case is a company by the name of Convendium Ltd. The company was incorporated in June 2005 as a vehicle for developing and bringing to market a cashless payment system for vending machines.   The second plaintiffs,   Mr and Mrs Monnery, in their capacities as the trustees of a family trust, were the promoters and the original shareholders. The first plaintiff, Mr Monnery, was

1      Monnery v Parsons [2018] NZHC 3414 at [1]–[3].

2      Sandfield Associates Ltd v Monnery [2021] NZHC 1003 at [7]–[19].

formerly the sole director and manager. In a variety of different circumstances the defendant groups became shareholders or creditors of the company.

[5]                 In or about March 2015 there was a major falling out between Mr Monnery and the defendants (and, as I understand the position, between certain of the defendants too). In any event, from that date, Mr Monnery had no further involvement with the management of the company. Eventually Covendium failed altogether. It was struck off the register in November 2017, presumably for failure to comply with its statutory obligations. In November 2018 it was reinstated and liquidators appointed to wind it up. It would seem that there is no prospect of any return for creditors, let alone members.

[6]                 As currently pleaded, the plaintiffs’ claim alleges two causes of action, both economic torts. These are pleaded at paragraphs 82–86 and 87–90 of their statement of claim. Their first cause of action is “causing loss by unlawful means” and the second is “conspiracy to injure economic interests”.

[7]The plaintiffs’ prayer for relief seeks the following remedies:

The Plaintiff’s claim and pray judgment for:

A.Judgment for the sum of $1,120,000 for the first plaintiff and

$5,388,000 for the second plaintiffs;

B.Alternatively, an enquiry as to damages and judgment for such sum as found on enquiry;

C.An account of the profits made by the Defendant from their use of the software and associated intellectual property of Convendium and the name “Carnival Payments” together with the brochures, promotional material and the website copied from that used by Convendium and any other assets of Convendium or Eftpos;

D.An injunction restraining the Defendants or any of them from using the software and associated intellectual property of Convendium and the name “Carnival Payments” together with the brochures, promotional material and the website copied from that used by Convendium and any other use of the assets of Convendium or Eftpos;

E.The costs of and incidental to this proceeding.

[8]                 Thus, they seek either common law damages (A and B) or equitable restitutionary relief (C), ancillary relief and costs (D and E).

The plaintiffs’ application

[9]The plaintiff’s application dated 28 April 2021 seeks orders in these terms:

1.The applicants, the above named first and second plaintiffs, Paul Mark Monnery and Julie Ann Monnery, will on 7 May 2021 apply to the Court for the following orders:

1.1For discovery as follows—

Second defendant (Creighton entities)

·     Creighton IT from 2015 to the present

·     Creighton IT Limited from October 2019

·     Aotea Cliffs Estate Trust

·     Any other entities associated with the second defendant in New Zealand or Australia conducting similar business to that conducted by the entities identified

First, Fifth and Sixth Defendants (Parsons entities)

·     Push Developments Limited, Eftpos Vending Limited, Carnival Payments

·     Eftpos Pay Limited

·     Eftpos Laundry Technologies Limited

·     Any other entities associated with the First or Fifth Defendants in New Zealand or Australia conducting similar business to that conducted by the entities identified.

Third, Seventh and Eighth Defendants (and any relevant associated interests)

Fourth and Fifth Defendants (and any relevant associated interests)

Relevant documents

·     Contracts, agreements or arrangements concerning operation of the technology used by these entities, particularly    with    the    Third,    Seventh    and  Eighth Defendants and associated interests, and ILR Limited.

·     Financial records showing the income from these operations.

·     Communications concerning the operation of the businesses identified, both in relation to use and operation of technology and financial returns.

·     Documents showing the changes made to the systems operated by the Parsons and Creighton interests respectively to enable the Verifone Pin Pad to be installed so as to be integrated with the Sandfield and ILR software respectively.

·     All financial information from the time alterations were made to the systems to the present, including invoices, statements and bank accounts.

·     If the allegation is that the defendants have developed new systems, documents showing the development of the systems and the features which make them different from the system operated previously by Convendium Limited.

1.2Requiring the Second and Fifth Defendants to comply with the plaintiffs’ notice to answer interrogatories dated 7 July 2020.

1.3Requiring the First, Fifth and Sixth Defendants, the Second Defendant, and the Third, Seventh and Eighth Defendants to comply with the plaintiffs’ notice to answer interrogatories dated 29 August 2020.

[10]              By the time the matter was heard the only aspects of the plaintiffs’ application that were pursued were the application for further discovery against the first and sixth; second; and fifth defendants.

[11]              As I read their application, insofar as it concerns discovery, the plaintiffs first identify (in their headings) the defendant groups from which they are seeking discovery, then the persons or other entities who or which they believe the defendants may have had dealings concerning Convendium’s property and finally the categories of documents sought.

[12]              That approach has done little to assist clarity, though Mr Carruthers’ oral submissions clarified what was being sought.

Rule 8.19

[13]              The plaintiffs’ application indicates that the basis upon which they are seeking further discovery is r 8.19 of the High Court Rules 2016 which materially provides:

If at any stage in the proceeding it appears to a judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered one or more documents or a group of documents that should have been discovered, the judge may order that that party [provide further discovery].

[14]              The orthodox approach to such applications was reconfirmed in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd.3

[15]There are four stages:

(a)Are the documents sought relevant and, if so, how important will they be?

(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?

(c)Is discovery proportionate, assessing proportionality in accordance with pt 1 of the discovery checklist in the High Court Rules 2016?

(d)Weighing and balancing these matters, in the Court’s discretion and applying r 8.19, is an order appropriate?

[16]Two further principles are important.

[17]              First, the relevance of any documents must be assessed against the pleadings. This requirement imposes a discipline on applications, and ensures that they do not descend into fishing expeditions. As Professor Zuckerman notes:4

… there is a tension between seeking information concerning a cause of action and searching for a cause of action to pursue. The traditional purpose of disclosure is to assist parties to establish a case which they have reasonable grounds to bring or defend, not to enable a party to ferret out a case for which it has otherwise no grounds whatever…

3      Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760.

4      Adrian Zuckerman Zuckerman on Civil Procedure Principles of Practice (4th ed, Sweet & Maxwell, London, 2021) at [15.162].

[18]              Second, there is a presumption that affidavits of documents, properly sworn, filed and served, are conclusive,5 with the result that it is up to a party seeking further discovery to establish that an existing affidavit is incomplete.6

The plaintiffs’ case

[19]              In my judgment of December 2018 I expressed some views about the plaintiffs’ statement of claim.7 I will not repeat these.  In his submissions Mr Carruthers made  it clear that the plaintiffs’ essential claim is that the defendants — individually or in one combination or another — took Convendium’s intellectual property in connection with the cashless payment systems and used it to their own advantage.

[20]              On that basis, Mr Carruthers submitted that any documentation demonstrating that one or more of the defendants — or associated parties — derived financial benefits from the use of Convendium’s intellectual property was relevant and discoverable. From that starting point he developed the applications for further discovery against the three defendant groups identified earlier by focussing on material that he contended demonstrated that there may exist undiscovered documentation showing their involvement (or the involvement of entities with which they are associated) in dealings by which they derived some financial benefit from Convendium’s intellectual property. The thrust of this argument may be illustrated by reference to the argument relating to the first and sixth defendants.

[21]              Mr Carruthers went through a careful analysis of the available material including the affidavit evidence and the documents discovered to this point directed at establishing that Mr Andrew Parsons and his company, Push Developments, had taken advantage of their access to Convendium’s software in order to pursue opportunities with other entities from which they may or may not have derived income.

[22]              The argument focussed on three groups of entities that he referred to as “Gooder”, “Washouse” and “Verifone”.

5      McCullagh v Robt Jones Holdings Ltd [2015] NZHC 1462, (2015) 22 PRNZ 615 at [7] citing

Jones v The Monte Video Gas Co (1880) 5 QBD 556 (CA).

6 At [7].

7      Monnery v Parsons, above n 1.

[23]              Objection was raised by Mr Chisnall that this went beyond the terms of the plaintiffs’ notice of application. There is something in that. However, the objection was not pressed strongly, and, in any event, it did not appear to me that the defendants were embarrassed in any sense by the scope of the application.

[24]              I am satisfied that there is some — far from conclusive — material that may support an allegation that Andrew Parsons and Push Developments Ltd pursued opportunities that Convendium might have laid claim to.

[25]              The defendants all contend that the plaintiffs will not be able to succeed in any such claim, not least because in their former capacities as shareholders in Convendium and the company’s director, the plaintiffs have no basis for asserting any proprietary interest in the company’s intellectual property and thus no standing to sue in respect of the alleged usurpation of the same.

[26]              In the context of an interlocutory application such as this, the Court must strike a balance between allowing itself to be drawn too deeply into the merits of the case and ignoring obvious barriers for an applicant. As a rule, that balance is struck by extending to the applicant a reasonable but not unbridled degree of latitude in the sense that the Court accepts that a plaintiff must be allowed to develop its case.

[27]              However, the difficulty in this case is fundamental. As currently pleaded, the plaintiffs do not assert that they are the owners, or part-owners, or otherwise have any proprietary interest, in the intellectual property concerned, and nor, as far as I can see, is there anything in the affidavit evidence that would support such an assertion. Indeed, it is hard to see how these could be given the company structure.

[28]              That being so, I am unable to see how any party other than Convendium (or its liquidators), can have standing to pursue remedies in relation to the usurpation of its intellectual property.

[29]              In those circumstances, the conclusion that, on the current pleadings, the additional documentation being sought from the first and sixth defendants is irrelevant appears to me to be unavoidable.

[30]              That really brings me full circle to the plaintiffs’ position. I do not doubt that it is their intention to replead their case. But, in my view, before the Court could be justified in putting the first and sixth defendants to the difficulty and cost of providing further discovery — which may possibly include seeking documentation from persons or entities with which they have previously been associated — there must at least be a pleading on the basis of which the plaintiffs can say that the documentation is relevant. Otherwise, the discovery process is being used in an attempt to unearth a cause of action.

[31]              Mr Chisnall and Mr Haig produced a helpful table setting out the categories of documentation originally sought by the plaintiffs and their client’s responses to those requests and I reproduce this below:

No.	Document(s) sought	Response
1	Contracts/agreements or arrangements concerning the development of the first and sixth defendants new vending system.	These have been discovered in Part 3 of the first and sixth defendants’ affidavit of documents.
2	Financial records showing income from the businesses operated by Push and the other entities.	Not relevant – refer submissions below.
3	Relevant communications regarding the establishment of the new system.	Already discovered.
4	Documents showing changes to the systems operated by ‘the Parsons’ interests to enable the Verifone Pin Pad to be installed so as to be integrated with the Sandfield and ILR software.	No such documents exist.
5	Documents showing financial information arising from the operation of any business after any alleged alterations were made to Convendium’s system.	No such documents exist.
6.	Documents relating to the development of the new system.	Already discovered.

[32]              With respect to items 1, 3 and 6, Andrew Parsons and Push Developments say that this material has already been discovered and there is no obvious basis for looking beyond the discovery. I accept that. There is no evidence suggesting otherwise.

[33]              It is of course the application in respect of the category of documentation contained in item 2 that Mr Carruthers pressed most strongly.

[34]              Mr Chisnall and Mr Haig submit that on the pleadings any income derived by Andrew Parsons and Push Developments and other entities are “not relevant and constitute an overboard fishing request”. For the reasons already outlined, I accept that, as matters stand, such documentation cannot be relevant.

[35]              As to items 4 and 5, in the absence of any evidence to the contrary, I accept that a proper search for any such documentation has already been undertaken by or on behalf of Andrew Parsons and Push Developments and any persons or entities to which they are related and that it has been concluded that no such documentation exists.

[36]              For those reasons, the plaintiffs’ application for an order requiring the first and sixth defendants to provide further discovery is dismissed.

Second and fifth defendants

[37]              Although Mr Carruthers did not go into the same level of detail in addressing the applications against the second and fifth defendants as he had done in connection with the application against the first and sixth defendants, it is clear that the same type of documentation is sought — documentation evidencing dealings by the second and fifth defendants or associated individuals or entities pursuant to which those defendants derived or sought to derive some financial benefit from Convendium’s intellectual property.

[38]              It follows that for the same reasons as I have indicated that the plaintiff’s application against the first and sixth defendants cannot succeed, their application against the second defendant too must fail.

[39]              As Mr Bogiatto submitted there is a further basis upon which the fifth defendant is entitled to resist the application.

[40]              The plaintiff is seeking further discovery against the fifth defendant in relation to a series of entities (or alleged entities) with which he has no connection whatsoever. As Mr Bogiatto submitted, the fifth defendant’s affidavits sworn in opposition to this application confirm that whilst he had a minor shareholding in Convendium, he has never been a shareholder or director of any of the other entities referred to by the plaintiffs in their application, and does not have possession of or control over documentation held by any of those companies. In my view, that is decisive. The plaintiffs are only entitled to discovery from a party in respect of documentation that that party has within its possession or control. As far as I can see there is no sense in which it can be said that fifth defendant has possession of or control over documentation held by any of the entities in question.

Conclusion on plaintiffs’ application for discovery

[41]              The plaintiffs’ applications for further discovery against the first and sixth, second and fifth defendants cannot succeed and are dismissed.

[42]              Those being the only aspects of the plaintiffs’ application ultimately pursued, the remaining aspects do not have to be addressed.

The defendants’ applications

[43]Before the Court are applications:

(a)By the first and sixth defendants dated 21 May 2021 seeking the following orders:

(i)Directing the plaintiffs to file and serve a supplementary affidavit of documents listing all relevant documents in their control relating to their pleaded claim for losses suffered.

(b)That an expert be appointed to review the defendant parties’ software systems to compare to the Sandfield software, ILR Firmware, Push Software and New Firmware and report to the Court.

(c)For further security for costs.

(d)That the plaintiffs pay the costs and disbursements of this application.

(b)By the third, seventh and eighth defendants dated 28 May 2021 for the following orders:

1.1To appoint as a court-appointed expert (the Expert): (i) the person agreed by the parties; or (ii) failing agreement of the parties, a person from persons suggested by the parties;

1.2Formulating the question to be determined by the Expert as follows:

Is there a substantial similarity between: (i) the core protectable expression of the software used by Convendium Limited; and (ii) the core protectable expression of the software used by the sixth defendant, Push Developments Limited?

1.3Instructing the Expert to examine the source codes for each of the software used by Convendium Limited and the software used by the sixth defendant, Push Developments Limited, and to report to the Court and the parties on their findings.

1.4Without prejudice to claims for costs in the proceeding, that the Expert’s costs be paid by the parties in the following proportions in the first instance:

(a)20% by the plaintiffs

(b)20% by the first and sixth defendants

(c)20% by the second defendant

(d)20% by the applicants; and

(e)20% by the fourth, fifth and ninth defendants.

1.5In the alternative to orders 1.1 to 1.4 above:

(a)To decide a question separately from any other question before trial in this proceeding;

(b)Formulation the question for determination before trial as follows:

Is there a substantial similarity between: (i) the core protectable expression of the software used by Convendium Limited and (ii) the core protectable expression of the software used by the sixth defendant, Push Developments Limited?

1.6Awarding further security for cost in favour of the defendants.

1.7Awarding the costs of this application to the applicants.

[44]              Costs issues aside, the only aspects of those applications that were pursued at the hearing were:

(a)the application by the first and sixth defendants for further discovery relating to the plaintiff’s pleaded losses;

(b)the applications by both the first and sixth defendants and the third, seventh and eighth defendants for further security for costs (informally supported by the other defendants).

Discovery against plaintiffs

[45]              It is elementary that a party claiming damages or any other remedy is obliged to discover relevant documentation relating to the loss in respect of which such a remedy is sought. In the case of a claim for monetary compensation of one sort or another such as this, it is hard to see how a claimant could avoid discovering details of his, her,  their or its financial circumstances over the relevant period of time.     Mr Carruthers did not contend otherwise. To that extent the application is not opposed.

[46]              I will make an order in the terms sought by the first and sixth defendants in their notice of application.

Security for costs

[47]              Having considered the submissions made on behalf of the defendants who or which have applied for a further order for security for costs, the submissions made in support of those applications by the remaining defendants, and the submissions made in opposition to those applications by the plaintiffs, I have reached the view that the appropriate course is to adjourn these applications.

[48]My reasons for adopting this course are as follows:

(a)First, as already said Mr Carruthers has informed the Court that the plaintiffs’ will be filing and serving an amended statement of claim that is likely significantly to reformulate their case. A key consideration in any application for security for costs is the apparent merits of the claim and the defence. Clearly, it would be an exercise in futility to attempt any assessment, or, rather, reassessment, of the merits of the plaintiffs’ claim and the defendants’ respective defences in this case if the claim, and therefore the defences, are to alter materially;

(b)In such circumstances, it strikes me that to reassess security for costs at this stage would simply set up the prospect of a further — third — application or set of applications for security for costs thereby adding significantly to the costs associated with the interlocutory stages of the proceeding;

(c)Finally, when the claim is recast it may be that one or more of the current defendant applicants may wish to reconsider whether to pursue that application and those defendants who have not at this stage made any such application may wish to consider doing so.

[49]              I record that in the course of his submissions on behalf of the third, seventh, and eighth defendants, Mr Chisholm accepted that the best course might be to adjourn these applications. I have concluded that that is the fairest course, not least because the applications before the Court seek orders for security for costs at $100,000 per each defendant group. For reasons that I will cover in the next paragraph, I cannot determine at this stage whether or not an order of that magnitude would prevent the plaintiffs from pursuing their claim but there must be a realistic possibility that it would do so. Accordingly, the determination of the current applications is an important step and it seems to me that it should only take place following the repleading of the claim.

[50]              I mention one further point that is relevant to any application for security for costs. At the time of the previous application the plaintiffs elected not to provide the Court, or the other parties, with any evidence as to their financial position. I

commented on this in my judgment, indicating that it effectively meant that the Court could not go any further than:8

concluding that an order for security for costs against the plaintiffs in this case will make it more difficult for them to pursue their claim.

[51]              It is not of course a requirement that a plaintiff opposing an application for security for costs must disclose his or her or its financial position.

[52]              However, a failure to do so places the plaintiff in a disadvantageous position because it effectively invites the Court to infer that the plaintiff will not be in a position to meet any costs order that may be made so as to foreclose the threshold question under r 5.45, and at the same time makes it difficult for the plaintiff to mount any argument that an order will preclude him or her or it from pursuing the claim.

Summary of conclusions

[53]For those reasons, I make the following orders:

(a)The plaintiffs’ applications for further discovery against the first and sixth; second; and fifth defendants are dismissed;

(b)On the application of the first and sixth defendants, I order that the plaintiffs provide discovery as to their financial positions in the terms sought in paragraph (a)(i) of the application;

(c)The applications by the first and sixth defendants for further security for costs are adjourned but may be renewed following the repleading of the plaintiffs’ case, or in the event of the plaintiffs proceeding without repleading.

[54]Costs are reserved. If counsel cannot resolve these, they may file and serve

8      Monnery v Parsons, above n 1, at [36].

memoranda in the usual way.

Associate Judge Johnston

Solicitors:

Woods Fletcher Associates, Wellington for plaintiffs

Macalister Mazengarb, Wellington for first and sixth defendants K3 Legal Ltd, Auckland for second defendant

Claymore Partners, Auckland for third, seventh and eighth defendants George Bogiatto, Auckland for fourth, fifth and ninth defendants