Premier Events Group Limited v Beattie HC Auckland CIV 2010-404-3178

[2010] NZHC 1162

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-003178

BETWEEN  PREMIER EVENTS GROUP LIMITED Plaintiff

ANDMALCOLM JAMES BEATTIE First Defendant

ANDANTHONY JOSEPH REGAN Second Defendant

ANDCARTAN GLOBAL LIMITED Third Defendant

ANDPARNELL PARTNERS GROUP LIMITED

Fourth Defendant

Hearing:         21 June 2010

Counsel:         Z Kennedy and M Pascariu for the Plaintiff

J Eichelbaum for the Defendants

Judgment:      21 June 2010

(ORAL) JUDGMENT OF STEVENS J

Solicitors/Counsel:

Minter Ellison Rudd Watts, PO Box 3798, Shortland Street, Auckland 1140

J Eichelbaum, PO Box 147 180, Ponsonby, Auckland 1144

PREMIER EVENTS GROUP LIMITED V MALCOLM JAMES BEATTIE AND ORS HC AK CIV-2010-404-

003178  21 June 2010

Introduction

[1]      On  27  May 2010,  the  plaintiff  Premier  Events  Group  Ltd  (PEG)  issued proceedings  against  the  defendants  claiming  breaches  of  fiduciary  obligations against the first and second defendants, misuse of PEG’s confidential information against the third and fourth defendants and conspiracy to injure PEG’s business by unlawful means against all four defendants.

[2]      PEG also made a without notice application for an Anton Piller order or search orders as they are now known.  Following consideration of such application, the Court granted search orders on 27 May 2010.  The search orders were executed the following day.

[3]      In accordance with the terms of the search orders, the documents seized were copied and the originals returned to the defendants.   PEG’s solicitors now hold approximately 15,000 pages of documentation taken from the various premises specified in the search orders.   A computer forensic expert instructed by PEG’s solicitors  also  holds  material  in  electronic  form  on  cloned  hard  drives  obtained during the course of the search.  In accordance with the terms of the search orders, the material seized has not been disclosed by PEG’s solicitors to any of the officers of PEG.

[4]      The defendants have applied for orders to set aside the search orders, for costs and damages on various grounds set out in an interlocutory application dated

11 June 2010.  On 10 June 2010, Asher J directed that the matters before the Court be heard in two parts:

a)        Whether  the  material  seized  under  the  search  orders  should  be disclosed to PEG; and

b)        Whether the search orders should be varied or discharged.

[5]      The only matter for determination today concerns the first issue.  Any issues concerning the application for variation or discharge of the search orders must await

hearing and determination on a later occasion.  So too must any application by PEG for interim relief.   In summary, therefore, the parties are agreed that the question now to be decided involves whether or not certain of the documents seized, namely, those that the defendants claim belong to them or other parties, but were in their possession, may be referred to officers of PEG.   A consequential point is whether such documents may be referred to in any evidence filed in Court either in support of an application for interim relief and/or in opposition to the application for variation or discharge of the search orders.

Factual background

[6]      In June 2003, a Mr Robert Gill, together with the first defendant Mr Beattie and the second defendant Mr Regan, formed PEG to be a specialist provider of event management and promotional services for major sporting events worldwide.  Both Mr  Gill  and  Mr  Beattie  had  previous  businesses  in  the  advertising  and  media industry.   Mr Regan had a banking and finance background.   Mr Beattie was the managing director of PEG from June 2003 until 24 December 2009.   After his resignation as a director, he remained in the employment of PEG until 5 March 2010. Mr Regan was the financial director of PEG from 2003 until 1 April 2010.

[7]      By 2009 PEG had become a major New Zealand-based provider in the Australasian travel and hospitality services market.   It had an impressive list of substantial corporate clients.  Despite the difficult trading year in 2009, the financial outlook for PEG from 2010 to 2012 was very positive.   This is because PEG had been able to capitalise on opportunities presented to it by the 2010 FIFA World Cup, the 2011 Rugby World Cup and the 2012 Olympic Games.  In respect of these major events, PEG had secured a number of significant contracts from corporate clients.

[8]      In September 2009, PEG was in advanced negotiations with a US company named Cartan Tours Inc (Cartan) to form a strategic joint venture for the purpose of collaborating in the procurement and marketing of hospitality programmes for the

2012 Olympic Games.   Because of the contacts which Cartan holds, the proposed joint venture would have given PEG strategic access to tickets and other benefits associated with the 2012 Olympic Games.

[9]      On 24 December 2009, Mr Beattie resigned as a director of PEG and on

20 January 2010 he also resigned from his employment with PEG with effect from

5 March 2010.  Despite his resignation, Mr Beattie continued to support PEG on a contract basis to see through the delivery of services provided by PEG, including the

2012 Olympic Games project.   Clients of PEG were advised accordingly in early

February 2010.

[10]     On 17 March 2010, Mr Regan also resigned as a director of PEG and his involvement in the business ceased entirely from 31 March 2010.

[11]     In  February  2010,  just  before  Messrs  Beattie  and  Regan  ended  their respective involvement with PEG, major clients of the business started to terminate their contracts one after the other.   For the purposes of this judgment, there is no need to refer to the various contracts save to note that terminations occurred in February 2010.  But, because of the changed situation between PEG and Mr Beattie, in May 2010 PEG needed to negotiate alterations to several of its contractual arrangements.

[12]     In early 2010, Cartan withdrew from the joint venture negotiations already referred to.   In March 2010, Messrs Beattie and Regan incorporated the third defendant, Cartan Global Ltd (Cartan NZ) and Parnell Partners Group Ltd (Parnell Partners).  PEG alleges from documentation already examined that some of PEG’s major clients have switched their business from PEG to Cartan NZ and Parnell Partners.  Finally, at the beginning of April 2010, one of PEG’s operation managers also resigned and left PEG to join Messrs Beattie and Regan.

Scope of the issue

[13]     During the course of his submissions, Mr Eichelbaum, for the defendants, acknowledged that the Court in connection with any application for interim relief and/or in an application for variation or discharge of search orders would be entitled to consider the documents seized as a result of the execution of the search orders. Further, Mr Eichelbaum acknowledged that to the extent that any of the documents obtained as fruits of the search are relevant (in the Peruvian Guano sense) and are the

documents belonging to PEG, then they may be referred to by PEG or by a deponent on behalf of PEG for the purposes of any application for interim relief and/or the application for variation and discharge.

[14]     So the issue for determination narrowed even further.   Is it permissible for officers of PEG to be shown, and to refer to and discuss in any affidavit filed in the subsequent proceedings, documents that are characterised as the defendants’ documents, or documents of other parties that were in the possession of the defendants at the time of the execution of the search order?

[15]     Mr Kennedy, for PEG, submitted that officers of PEG ought to be entitled to see and to refer to such documents.   Otherwise, both the officers of PEG and the solicitors or counsel advising them would be placed in an impossible position.  On the other hand, Mr Eichelbaum submitted that it was not appropriate for this to occur at this stage.

Applicable authorities

[16]     The  legal  principles  applicable  to  an  application  for  discharge  are  well settled.   Because that issue is to be determined later, a brief reference to these principles will suffice.   An executed search order will not normally be discharged prior to trial, unless the order has been obtained mala fide, or on material non- disclosure, or if there are other special circumstances which clearly demonstrate that the order should not have been made: see DB Baverstock Ltd v Haycock1 cited with

approval in Fujitsu General New Zealand Ltd v Melcol New Zealand Ltd.2

[17]     On the disclosure of documents point, Mr Kennedy cited authority for the proposition that evidence obtained upon the execution of a search order may be considered by the Court at the time of the hearing of an application for variation or

1           DB Baverstock Ltd v Haycock [1986] 1 NZLR 342.

2           Fujitsu General New Zealand Ltd v Melcol New Zealand Ltd (2002) 16 PRNZ 395 (CA).

discharge  of  that  order:  see  Lock  International  PLC  v  Beswick3   and  Twentieth

Century Fox Film Corporation v Colonial Arms Tavern.4

[18]     Mr Kennedy also cited the English Court of Appeal decision in WEA Records

Ltd v Visions Channel 4 Ltd,5 per Donaldson MR:

In the instant case the Anton Piller order is spent in the sense that it has been executed. However, the defendants seek to go back to the beginning of the action saying that, regardless of whether the fruits of the order are such as to show that it was abundantly justified, the judge had insufficient material to justify his action at the ex parte stage. They therefore invite us to set the ex parte order aside and to order the return of the affidavits to the two personal defendants and the seized material to the defendants' solicitors.

I regard this as wholly absurd. The courts are concerned with the administration of justice, not with playing a game of snakes and ladders. If it were now clear that the defendants had suffered any injustice by the making of the order, taking account of all relevant evidence including the affidavits of the personal defendants and the fruits of the search, the defendants would have their remedy in the counter-undertaking as to damages.

(emphasis added)

[19]     Whilst referring to the WEA Records case, I also mention in passing the statement by Purchas LJ at 595:

…I doubt that on an application to set aside an ex parte order which has become entirely spent, even if made to the court which made that order, let alone by way of appeal, the party against whom the order had been made can succeed save only in those very exceptional circumstances to which Sir John Donaldson MR and Dunn LJ have referred.

[20]     The passage cited from the judgment of Donaldson MR in WEA Records was referred to by Gault J in the Fujitsu case.   At [10], His Honour noted that the circumstances in which it would be appropriate to discharge an executed search order prior to trial would be rare.

3Lock International PLC v Beswick [1989] 1 WLR 1268 at 1284. (“I agree that in deciding whether the defendants have suffered injustice as a result of the order, I should not ignore evidence which the order itself has brought to light”).

4           Twentieth Century Fox Film Corporation v Colonial Arms Tavern (1985) 1 NZIPR 602 at

607.  (“If I add the evidence of the actual removal by the third and fourth defendants of all the illicit tapes, as disclosed in the affidavits of the plaintiffs’ representatives, then the conclusion becomes overwhelming”).

5           WEA Records Ltd v Visions Channel 4 Ltd [1983] 2 All ER 589 at 594.

[21]     In terms of the use to which the documentation in question may be put, the parties agreed that a key element in this case is relevance.  Although the purpose of the search order is primarily for the preservation of evidence, it also operates as an order for discovery in advance of pleadings: see Crest Homes PLC v Marks.6

PEG’s submissions

[22]     Mr Kennedy submitted first that the actual documentation obtained under search from the defendants, comprising the defendants’ documents and documents of other parties in the defendants’ position, was relevant to the issues in the proceeding. In support, Mr Kennedy referred to the reports of independent solicitors who were on hand  at  the  time  of  the  execution  of  the  search  orders.    In  their  reports  the independent solicitors confirmed that the documents seized are relevant to the issues between the parties and within the scope of search orders.  Hence, counsel submitted that PEG would be entitled to inspect those documents by way of discovery in any event.   But further, such documentation would be relevant to an application for interim relief and in opposing any application for variation or discharge.  Counsel for the defendants did not challenge this proposition.  Such relevance is implicit from the concession that documents in these categories may be referred to, and considered by, the Court.

[23]     Mr Kennedy also referred to the fact that, at this stage, the defendants have not provided any evidential basis for any claim to confidentiality in respect of the documents seized under the search orders.   He submitted that any confidentiality issue is appropriately addressed by the undertaking given by PEG in respect of the search orders.  This includes of course an express undertaking that PEG would not, without leave of the Court, use the documents seized except for the purpose of this proceeding.

[24]     It  is  possible  that  some  of  the  documents  may  be  of  a  commercially confidential nature.  If so, no doubt counsel for the defendants will compile a list and provide it to the solicitors for PEG, and counsel can together seek to work out

6           Crest Homes Plc v Marks [1987] AC 829 at 853.

appropriate confidentiality undertakings.  I expressly reserve the position regarding any specific claims for confidentiality in relation to the categories of documents to which this judgment refers.

[25]     Mr Kennedy also referred to the fact that the majority of the documents obtained were the property of PEG.   In this regard, one of the defendants had acknowledged that to the extent that documents seized did belong to PEG these ought to be returned to PEG.   Furthermore, in light of the concession made by Mr Eichelbaum there is now no difficulty in these documents being referred to by officers of PEG in affidavits to be filed in later interlocutory applications.

[26]     By way of conclusion, Mr Kennedy submitted that officers of PEG, and not just its solicitors and counsel, ought to be entitled to both inspect the material seized including documents of the defendants and documents of other parties in their possession.   Furthermore, such material ought to be able to be referred to by a deponent on behalf of PEG in the context of any future interlocutory proceeding.

Defendants’ submissions

[27]     Mr Eichelbaum accepted that on an application for interim relief, or on an application to vary or discharge, the Court is fully entitled to consider all of the documents seized as a result of the search orders.  But he drew a line and submitted that officers of PEG should not have the advantage of viewing that challenged category of the fruits of the search because of the fact that, at this stage, the search orders were allegedly obtained on an improper basis.

[28]     Mr Eichelbaum submitted that the defendants themselves have not had the advantage of discovery at this stage of the proceeding.  For example, he referred to documentation in the possession of the plaintiff relating to an alleged attempt by PEG to divert business in a manner which was prejudicial to the defendants.   He submitted that, if a deponent on behalf of PEG were able to refer to the documents in any affidavit, then there was a mismatch because his client would not be able to do so in respect of any documents in the possession of PEG that were as  yet not discovered.   But, Mr Eichelbaum accepted that he had not yet initiated with the

solicitors for PEG any request for such documents.  He also accepted it was open to him  to  make  such  an  application  and  apply  to  the  Court  to  obtain  relevant information.

[29]     So the critical thrust of Mr Eichelbaum’s submission was that the ability to refer to the challenged documentation of the defendants gave PEG an advantage over the defendants in any future interlocutory proceedings, particularly any application for interim relief and any application to vary or discharge the search orders.   In support of this proposition, Mr Eichelbaum cited from a judgment of Donaldson J (as he then was) in Bank Mellat v Nikpour.7   In that case, Donaldson J referred to the principle that no injunction obtained ex parte should stand if it has been obtained in circumstances in which there was a breach of the duty to make the fullest and

frankest disclosure.  He noted that principle was of great antiquity and he cited from a judgment of Warrington LJ in R v Kensington Income Tax Commissioners, ex parte Princess Edmond de Polignac8 where he said:

It is perfectly well settled that a person who makes an ex parte application to the court-that is to say, in the absence of the person who will be affected by that which the court is asked to do-is under an obligation to the court to make  the  fullest  possible  disclosure  of  all  material  facts  within  his knowledge, and if he does not make that fullest possible disclosure, then he cannot obtain any advantage from the proceedings, and he will be deprived of any advantage he may have already obtained by means of the order which has thus wrongly been obtained by him.  That is perfectly plain and requires no authority to justify it.

[30]     From this quotation, Mr Eichelbaum relied in particular on the proposition that a party “cannot obtain any advantage from the proceedings”.

[31]     As an alternative submission, Mr Eichelbaum submitted that the Court, rather than decide the issue today, might adjourn the application to allow PEG to refer to the defendants’ documents so that such application might be heard with the application for discharge.   I should say at once that I see no need to adjourn the application and propose to deal with the matter today.

7           Bank Mellat v Nikpour [1985] FSR 87.

8           R v Kensington Income Tax Commissioners, ex parte Princess Edmond de Polignac [1917]

1 KB 486 at 509.

[32]     Finally, Mr Eichelbaum sought to draw the Court into a discussion as to the nature and scope of the principles dealing with applications for variation or discharge of search orders.   He referred to an Australian decision in Lego Australia Pty v Parragio9 per Wilcox J.  However, as I indicated to Mr Eichelbaum in argument, any discussion about the nature and scope of the principles applicable to this issue must remain for the hearing of the application to vary or discharge.

Discussion

[33]     There is no dispute that the key issue is whether or not officers of PEG can see, that is inspect, and refer in any affidavit evidence to the narrow category of documents comprising the defendants’ documents and documents of other parties that were in the possession of the defendants at the time of the execution of the search order.  The sole argument against officers of PEG being able to so refer is that it would give PEG some kind of perceived advantage over the defendants.  I am not persuaded that this submission should prevail for the following reasons.

[34]     There is no dispute that the Court is entitled to consider the documents.  They are accepted as being relevant to the issues the Court will have to determine.  The only issue is whether officers of PEG will be permitted to assist the Court with any relevant affidavit evidence relating to those documents in the course of any future application.   It is possible to envisage that some of the documents within the challenged category may require to be placed in context.  I consider that can only be done by way of an explanation in an affidavit form from a duly authorised officer of PEG.  Similarly, there may be material in the correspondence that is plainly wrong in the light of facts known to officers of PEG.   If so, then the Court should be told about that.

[35]     I am satisfied that in reality there is no disadvantage to the defendants (or as Mr Eichelbaum put it, advantage to the plaintiff) if an affidavit of that type were to be filed referring to the documentation concerned.  If such an affidavit were filed, it would be open to the defendants to file any affidavit evidence in reply commenting

9           Lego Australia Pty v Parragio (1993) 44 FCR 151 at 161.

upon or correcting the position or otherwise explaining the context in a different way.

[36]     The advantage claimed by Mr Eichelbaum was also put in a different way. He submitted that in respect of other matters potentially relevant to the proceeding by way of counterclaim, or matters that the defendants might want to raise in the context of the application to vary or set aside, the defendants would not have had access to documents held by PEG.  However, this issue can be dealt with in several ways.  First, the defendants’ solicitors could write and ask for particular documents. Further, if there are matters that are relevant and known to the defendants then they can refer to the matters generally without the use of documents and in this way the Court can be informed of the evidence concerned.

[37]     The authorities such as Lock International PLC and Twentieth Century Fox are clear that, in the context of any application to vary or discharge a search order it is permissible for the Court to refer to the fruits of the search.   In the Twentieth Century Fox case, the dictum of Quilliam J cited in footnote 4 above assumes that the evidence of the plaintiffs would be contained within an affidavit filed on behalf of the plaintiffs.  It seems that there is, however, no direct authority on the narrow point arising here, namely, whether the party who refers to such documents should be able to deal explicitly with, by way of comment or elaboration on, the documents in the course of an affidavit to be placed before the Court.

[38]     I am satisfied that it is appropriate that an officer of PEG should be able to refer to such documents.  For them not to be able to do so risks the Court having to decide, for example, an application for interim relief or an application to vary or discharge without being in possession of all the relevant factual information.  If that were the case, there is a real risk that the Court would be misled by an absence of helpful and relevant factual information which might only be able to come from a deponent who has seen and considered the documents.

[39]     There is another reason to support this approach arising from the concession made by Mr Eichelbaum.   He accepted that the Court is entitled to consider the challenged class of documents.  But, if the Court is to be deprived of any relevant

additional factual information from a deponent of PEG, then the Court is being forced into a position where it has to rely on the views of counsel for PEG alone.  If counsel  are  unable  to  obtain  instructions  from  and  evidence  relating  to  the documents concerned, counsel would be operating in an information vacuum.  This runs the risk of counsel being placed in an intolerable position.  The same is the case for the Court.

Conclusion

[40]     I am satisfied that PEG ought to be able to both inspect, consider and give relevant evidence in affidavit form about the documents concerned.   I direct accordingly.

Costs

[41]     Counsel for PEG made an application for costs.  This is an appropriate case for costs.   But bearing in mind that the matter is likely to proceed promptly to a further interlocutory hearing, I propose to reserve costs.  I indicate that, if costs are to be fixed later, then it should be on a 2B basis.

Directions

[42]     I direct that the proceeding next be called in the Duty Judge list at 10am on Wednesday, 14 July 2010.  I note that by that time it is likely that an application for interim relief would have been filed.  I direct that, once such an application is filed, counsel should confer to discuss an appropriate timetable.  A joint memorandum of counsel is to be filed by no later than 4pm on Monday, 12 July 2010 addressing timetabling issues and questions such as whether or not any application for interim

relief should be heard together with the application to vary or discharge.

Stevens J