Nuwave Software Ltd v Objective Corporation Solutions NZ Ltd - [2022] NZHC 2511

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2022-485-398

[2022] NZHC 2511

BETWEEN
NUWAVE SOFTWARE LIMITED

Plaintiff

AND

OBJECTIVE CORPORATION SOLUTIONS NZ LIMITED

Defendant

Hearing: 28 September 2022

Appearances:

A S Olney and A C Singleton for the Plaintiff

J H Stevens and L J Hardcastle for the Defendant

Judgment:

30 September 2022

JUDGMENT OF PALMER J

Solicitors/Counsel
A S Olney, Barrister, Wellington Bell Gully, Wellington

NUWAVE SOFTWARE LIMITED v OBJECTIVE CORPORATION SOLUTIONS NZ LIMITED [2022] NZHC
2511 [30 September 2022]

What happened?

[1] In 2016, Nuwave Software Ltd (Nuwave), the plaintiff, entered a joint venture with Master Business Systems Ltd (MBS) through a jointly and equally owned company, GoCouncil Ltd (GoCouncil). MBS offered a product, GoGet, which Councils used to process applications for building consents. Nuwave had expertise in the development of online portals. The joint venture company, GoCouncil, provides bundled software to building consent authorities that enables building consent applications to be both lodged and processed digitally (an end-to-end solution). The primary competing end-to-end package was AlphaOne.

[2] In March 2017, GoCouncil succeeded in tendering to develop and provide a portal, the Simpli portal, for applicants and councils on behalf of around 20 building consent authorities. The Simpli portal integrates with MBS’s GoGet processing product. So a number of GoCouncil’s clients are also, separately, clients of MBS.

[3] Around June 2016, the directors of GoCouncil, from Nuwave and MBS, signed a shareholders’ agreement (the Agreement) and, in October 2016, approved a constitution. It provides that the primary objects are maximise the value of GoCouncil and grow the business of providing online web-portal services consistent with the relevant business plan. Business plans were developed over the course of strategy meetings and generally recorded in the minutes of those meetings and in emails. A formal document was never attached to the Agreement. Relevantly, cl 15 of the Agreement provides:

15NON-SOLICITATION

15.1Non-solicitation: Each Shareholder undertakes not to directly or indirectly without the previous consent in writing of the Company approach any existing clients or employees of the Company to leave the mploy or custom of the Company at any time during which the Shareholder (or any party over which they have a Controlling Interest) is a Shareholder, and for a further period of 24 months after ceasing to be a Shareholder.

15.2Approved exclusion: The restrictions in this clause 15 shall not apply if the Key Person obtains the prior written consent of the Board (which must have the support on the same basis as set out in clause 6.1) to the activity or solicitation.

15.3Restrictions Reasonable: The parties acknowledge that the restrictions set out in this clause 15 are reasonable and necessary in order to protect the goodwill in and know-how of the Company.

15.4Survival: This clause 15 will survive termination of this Agreement.

[4] From December 2017 to August 2018, the directors of Nuwave and MBS as well as the CEO of…

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.

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Details

Case: [2022] NZHC 2511
Decision Date: 30 September 2022

CaseChat Overview and Summary

In the High Court of New Zealand, Nuwave Software Limited brought an action against Objective Corporation Solutions NZ Limited for breach of a shareholders’ agreement and oppressive conduct under the Companies Act 1993. Nuwave sought an interim injunction to prevent Objective NZ from soliciting GoCouncil clients to switch to Objective NZ’s product, Objective Build, and for damages. The central issue was whether an interim injunction should be granted to preserve the status quo pending the outcome of the substantive proceedings. The court considered whether there was a serious question to be tried, the balance of convenience, the adequacy of damages, and the overall justice of the position.

After examining the evidence, the court concluded that there was a serious question to be tried regarding the enforceability of the shareholders’ agreement, the parties’ intentions, and the effect of subsequent conduct. The balance of convenience favoured Nuwave, as the loss of clients could impact GoCouncil’s viability and the competitiveness of the market. The court also found that damages would not be an adequate remedy, as calculating the loss would be difficult, and the proposed injunction was relatively narrow and discrete. The court ordered an interim injunction prohibiting Objective NZ from directly or indirectly approaching 24 specified GoCouncil clients, directed Nuwave to file an affidavit regarding the sufficiency of its undertaking as to costs, and reserved leave for either party to apply to discharge or vary the order. Costs for the application were awarded on a 2B basis to Nuwave.

Orders