Myvirtualhome International Ltd (in rec and in liq) v Ngati Tama Custodian Trustee Limited HC Auckland CIV 2009-443-548

[2011] NZHC 711

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-443-548 (incorporating CIV 2010-404-2197)

BETWEEN  MYVIRTUALHOME INTERNATION LTD (IN RECEIVERSHIP AND IN LIQUIDATION)

First Plaintiff

ANDOPEN GROUP LTD Second Plaintiff

ANDDAVID WILLIAM PHILLIPS Third Plaintiff

ANDMVH GROUP LIMITED Fourth Plaintiff

ANDNGATI TAMA CUSTODIAN TRUSTEE LIMITED

First Defendant

ANDRODNEY IVAN MARTIN Second Defendant

ANDGREGORY LLOYD WHITE Third Defendant

ANDTHE TE RUNANGA O NGATI TAMA Fourth Defendant

ANDTHE CUSTODIANS AND ELDERS AND TRUSTEES OF THE NGATI TAMA IWI Fifth Defendant

ANDHOMESOFT GROUP PTY LTD (PREVIOUSLY CALLED BRISBANE SOFTWARE GROUP PTY LTD)

Sixth Defendant

ANDHOMESOFT PTY LTD (PREVIOUSLY CALLED BRISBANE SOFTWARE NO1

PTY LTD)

Seventh Defendant

Hearing:         9 February 2011

MYVIRTUALHOME INTERNATIONAL LTD (IN RECEIVERSHIP AND IN LIQUIDATION) V NGATI TAMA CUSTODIAN TRUSTEE LIMITED HC AK CIV 2009-443-548 (incorporating CIV 2010-404-2197) 9

February 2011

Counsel:         E Orlov for First, Third and Fourth Plaintiffs

D W Phillips, in person, Third Plaintiff
D M Hughes and K A van Houtte for First, Third, Fourth, Fifth and
Sixth Defendants
J P Nolen for Second Defendant
N J Scampion for URS NZ Ltd

Judgment:      9 February 2011

(ORAL) JUDGMENT (NO. 2) OF HEATH J

[1]      This  proceeding  relates  to  a  dispute  over  the  ownership  of  intellectual property.

[2]      In order to provide an early solution to complex ownership issues, I made an order, on 27 October 2010, requiring three questions to be determined separately from other issues arising in the proceeding:

(a)       What  entity  owned  the  Auran  jet  engine  source  code,  as  at  24

December 2008?

(b)Were the two debentures, deed of subordination of debt and guarantee entered into lawfully on 24 December 2008?  In other words, are they valid documents?

(c)      If  receivers  of  Computer  Design  Software  Pty  Ltd  were  validly appointed by Ngati Tama Custodian Trustee Ltd, pursuant to the debenture in favour of the latter company, was CDS entitled to terminate the licence (on the basis of notice given on 7 July 2009) to use  (non  Aurun)  software  of  My  Virtual  Home  International  Ltd and/or Open Group Ltd on 28 October 2009?

[3]      Procedural directions have been made to truncate preparation and to enable those questions to be determined on a priority basis over a period of not more than five days, commencing on 28 March 2011.  The proceeding came before me today to

monitor whether that time will be sufficient to resolve the issues and to ascertain whether the case will be ripe for hearing.

[4]      I deal separately with one specific issue involving a non-party, so that its counsel may be released promptly.

[5]      Mr  Phillips,  as  third  plaintiff,  has  made  an  application  for  non-party discovery against URS NZ Ltd (URS).  The application was stated in the following terms:

2.    That the applicant can obtain by a discovery order by the NZ High Court certain books and documents from the NZ offices of the company titled URS New Zealand Limited whose premises are located at URS Centre, 6th Floor, 13-15 College Hill, Auckland and whose email server might be located at that address, or at whatever address the URS email server is located, those documents and records (including electronic or otherwise stored records) which include or otherwise refer to emails sent,  received,  stored  or  otherwise  forming  part  of  in  the  email addressed titled: [email protected] and/or other such documents stored on any URS computer or records which in any way refer to or are related to matters involving Rodney Martin and/or My VirtualHome International Ltd, and which involve My VirtualHome International Limited’s relationship or communications with any of the following persons/entities: Creative Designer Software Pty Limited and/or Open Group Limited and/or David W Phillips and/or Ngati Tama Custodian Trustee Ltd and/or Greg White and/or Grant Cleary and/or Rogers & Rutherford, and/or John Moody, and/or Greg Lane and/or Paul Condon and/or Hermione Olsen and/or NZiF Advisory Ltd and/or Robert Rogers (CEO of NZiF Advisory Ltd)

This discovery order to include but not be limited to the emails Rodney Martin  (while  director  of  My  VirtualHome  International  Ltd  and Creative Designer Software Pty Limited) sent and received on the email address [email protected] in the period April 2008 to February 2009.

[6]      URS raised issues about the costs to be incurred in providing discovery, particularly in light of the short time which will pass before the proceeding is due to be heard; at least, insofar as the separate questions are concerned.

[7]      Having discussed matters, agreement has been reached on the terms of an order to be made under r 8.26 of the High Court Rules.  The draft order is in the following terms:

1.    The applicant has made an application pursuant to rule 8.26(2) of the

High Court Rules.

2.    Pursuant  to  rule  8.26(2)  of  the  High  Court  Rules  and  subject  to paragraphs 3 and 4 below, URS New Zealand Limited (“URS”) is ordered to:

a.File an affidavit (“Affidavit”) stating whether the documents as defined below in paragraph 5 (“Documents”) are or have been in its control; and if they have been but are no longer in its control, URS’s  best  knowledge  and  belief as  to  when  the Documents ceased to be in its control and who now has control of them; and

b.     To serve the Affidavit on the parties to the proceeding; and

c.If the Documents are in URS’s control, to make them available for inspection, in accordance with rule 8.33, to the parties to the proceeding.

3.    Within 7 days URS is ordered to provide the Applicant with an estimate of what will likely be:

a.its actual expenses (including actual solicitor and client costs) of and incidental to the application; and

b.its  actual  expenses  (including  an  allowance  for  management time) in complying with the order in paragraph 2.

(“Estimate of Expenses and Costs”)

4.    URS will begin the exercise of producing the Affidavit after it receives payment of its Estimate of Expenses and Costs.   URS will notify the Applicant if it exhausts the Estimate of Expenses and Costs payment, and, if requested to do so by the Applicant, will provide the Applicant with a new estimate (“Revised Estimate of Expenses and Cost”).  URS will resume the exercise of providing the Affidavit only after it receives payment of its Revised Estimate of Expenses and Costs.   The parties will repeat this exercise until the Affidavit is produced and served on the parties.

5.    The Documents referred to in paragraph 2 above are:

a.Any documents (whether hard copy or electronic) that refer to, or contain matters involving, both Rodney Martin and My VirtualHome International Limited dated between April 2008 and February 2009 (inclusive).

b.Any documents (whether hard copy or electronic) dated between April 2008 and February 2009 (inclusive) that contain communications between My VirtualHome International Limited and the following entities: Creative Designer Software Pty Limited, Open Group Limited; David W Phillips; Ngati Tama Custodian Trustee Ltd; Greg White; Grant Cleary, Rogers & Rutherford; John Moody; Greg Lane; Paul Condon; Hermione

Olsen;  NZiF  Advisory  Ltd;  Robert  Rogers,  (CEO  of  NZiF Advisory Ltd).

6.    Subject to paragraphs 3 and 4, pursuant to rule 8.27 of the High Court Rules, the Applicant is ordered to pay URS New Zealand Limited all its actual expenses (including actual solicitor and client costs) of and incidental to the application and all its actual expenses (including an allowance for management time) in complying with the orders in paragraphs 2, 3 and 4 above.

In additional counsel agree that in the event of their being any issues as to the reasonableness of the costs expenses incurred, those matters can be resolved by the Court in the course of this proceeding.  That will also need to be incorporated into any sealed order.

[8]      Mr Nolen, for Mr Martin, has raised some concerns about the possibility of the list containing documents from Mr Martin that may be privileged as between solicitor and client.   There may be questions of waiver, in the sense that if Mr Martin’s position is that he acted in reliance on legal advice, he may not be able to claim privilege.  Similarly, if correspondence was sent on behalf of MyVirtualHome International Ltd then it is open to the liquidators of that company to waive privilege.

[9]      To  protect  Mr  Martin’s  position,  I further  order  that  the  verified  list  of documents to be prepared on behalf of URS shall contain a separate part which will list those documents which have passed between Mr Martin and any legal firm, identifying the date, sender and recipient of each of those documents.   That will enable Mr Nolen to consider those documents so that any questions of privilege can be resolved promptly.

[10]     The verified list of documents once prepared, shall be served on all parties to this proceeding.  No date has been set for filing of the verified list.  That is because Mr Scampion, for URS, advises it is unclear how great the task of collating the documents will be.

[11]     The proceeding will be adjourned, in any event, for a case management conference before Lang J at 9am on 18 February 2011.   The non-party discovery issues are to be mentioned before Lang J at that time so that he can make any further

orders that may be required in relation to the provision of the verified list , its timing and the subsequent production of documents.

[12]     Mr Orlov has raised the possibility of some cost being thrown upon Mr Martin, if there appears to be any onerous obligation in relation to inspection or production that results from the list of privileged documents.  That can be assessed once the verified list is prepared.  That question is reserved for further argument, if necessary.   I express no view on whether any such allocation of costs should or should not be made.

[13]     Save for the specific orders made in relation to the cost of preparing the verified list and producing the documents, all questions of costs in relation to this

application are reserved as between the parties to this proceeding.

P R Heath J

Solicitors:

Equity Law, PO Box 8333, Symonds Street, Auckland

Kensington Swan, Private Bag 92101, Auckland
Lowndes Associates, OO Box 7311, Wellesley Street, Auckland
Wilson Harle, PO Box 4539, Shortland Street, Auckland
Copy to:

Mr D W Phillips, State Highway 2, Pokeno 2471