Rock Solid Holdings v Simmons
[2021] NZHC 2892
•29 October 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-001043
[2021] NZHC 2892
BETWEEN ROCK SOLID HOLDINGS
First Applicant
PETER JOHN BISHOP
Second ApplicantFIELDCO LIMITED
Third ApplicantAND
BRADEN MATTHEWS SIMMONS
Respondent
Hearing: On the Papers Appearances:
Z G Kennedy and H M Jacques for the applicants A J B Holmes for the respondent
Judgment:
29 October 2021
JUDGMENT No 2 OF PALMER J
(Costs)
This judgment was delivered by me on 29 October 2021 at 11.00 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar Date:
Counsel/Solicitors:
A J B Holmes, Barrister, Auckland Z G Kennedy, Barrister, Auckland Cook Morris Quinn, Auckland MinterEllisonRuddWatts, Auckland
ROCK SOLID HOLDINGS v SIMMONS [2021] NZHC 2892 [29 October 2021]
What happened?
[1] The applicants say that the computer systems of a company called Euroclass hold commercially sensitive, intensely private, and confidential financial and strategic information relating to Euroclass, and to individual members and entities associated with the Plymouth Brethren Christian Church. In these proceedings, the plaintiffs alleged a former employee, Mr Braden Simmons, attempted to and did access their computer systems without authorisation. They sued for three causes of action for breach of confidence and one of intrusion upon seclusion. They applied for an interlocutory order requiring Mr Simmons to answer 18 interrogatories.
[2] Mr Simmons opposed the application on the basis they were unnecessary, irrelevant to any matter at issue and, as a fishing expedition, vexatious and oppressive. He provided an affidavit swearing that he had not “hacked” the computer systems and that hacking into a computer system with malicious intent was the opposite of who he really was. In response to the plaintiffs’ dissatisfaction with that affidavit, he swore a second affidavit saying, among other things:
To avoid confusion, I wish to restate clearly that I have not done what is alleged by any interpretation, using any terminology. I have not accessed, seen, read, downloaded, or shared the Commercially Sensitive Documents, Personal Information, and Financial and Strategic Information. I have not accessed or deleted any of the Applicants’ logs files or records. I have not claimed to any person that I have accessed, seen, read, downloaded, or shared the Commercially Sensitive Documents, Personal Information, Financial and Strategic Information.
[3] He also denied that he knew personal information about another employee, that he knew the second applicant’s passwords or had access to his emails.
[4] On 22 December 2020 I issued an interlocutory judgment ordering Mr Simmons to answer certain of the interrogatories.1 I said:
[8] I consider the interrogatories are relevant and relatively limited and are not vexatious or oppressive. I order that Mr Simmons answer interrogatories one to 10 and 12 to 15 in schedule A of the application within five working days of the date of this judgment, i.e. 5 pm Wednesday 20 January 2021, in compliance with r 8.39 and verify the answers by affidavits. I award costs to the plaintiffs and against Mr Simmons on a 2B basis.
1 Rock Solid Holdings Ltd v Simmons [2020] NZHC 3487.
[5] On 22 January 2021, Mr Simmons provided an affidavit answering the interrogatories. He admitted having obtained unauthorised access to the second applicant’s email account, by guessing a password, and reviewing emails and documents. He also admits parking outside the business, connecting to its Wifi network and attempting but failing to log into the system. In all, he admits accessing the plaintiffs’ computer systems without authorisation on nine separate occasions between May 2017 and February 2020, including accessing personal information about the other employee, and unsuccessfully attempting to do so on two separate occasions.
[6] On 10 May 2021, the applicants applied for an order varying the order for 2B costs and seeking either indemnity costs of $31,491.71 or increased costs, uplifted by 50 per cent to $10,575. Mr Simmons opposes the application.
Law of costs on interlocutory applications
Indemnity and increased costs
[7] Rule 14.6 of the High Court Rules 2016 (the Rules) provides the Court may increase costs above the standard amount, or order payment of actual costs (indemnity costs), at any stage of a proceeding. It states, relevantly:
(3)The court may order a party to pay increased costs if—
…
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
…
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
…
(4)The court may order a party to pay indemnity costs if—
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
…
Varying interlocutory costs awards
[8] Rule 14.8(1) of the Rules provides that costs on an opposed interlocutory application, “must be fixed in accordance with these rules when the application is determined”, “unless there are special reasons to the contrary”. Rule 14.8(2) provides:
Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made
[9] In Palmerston North City Council v Hardiway Enterprises Ltd (Struck Off), Williams J reviewed relevant cases and suggested that r 14.8(2) tends to be used in three circumstances:2
(a)mostly, after successful appeal of an interlocutory decision;
(b)where the position regarding costs had not been mentioned or had been incorrectly stated; and
(c)where the Court lacked information when making the costs award.
Submissions
[10] Mr Kennedy, for the applicants, submits that Mr Simmons’ third affidavit establishes that evidence in the first two affidavits was false and/or misleading, as was Mr Simmons’ reliance upon those two affidavits in opposing the application to answer interrogatories. He submits that relying on the misleading evidence contained in the first two affidavits was improper and unreasonable. Mr Kennedy submits that would
2 Palmerston North City Council v Hardiway Enterprises Ltd (Struck Off) [2018] NZHC 3005.
have entitled the applicants to indemnity or increased costs which should now be awarded. He submits the indemnity costs claimed relate to the preparation of the application and are reasonable.
[11] Mr Holmes, for Mr Simmons, accepts that knowingly putting forward false or intentionally misleading evidence would be improper and could warrant the order sought. But he submits Mr Simmons’ affidavits are all consistent and his opposition to the interrogatories was neither improper nor did it rely on false or misleading evidence or submissions. He submits that Mr Simmons’ first and second affidavits were made in response to three highly specified allegations of unauthorised access, two more general allegations of “taking excerpts” from commercially sensitive and personal documents, and one specific allegation of logging onto a Wifi network, all of which he denied then and still denies or says is irrelevant. Mr Holmes disputes the definition of “hacked” and Mr Simmons’ motivation to harm the Exclusive Brethren. He suggests Mr Simmons learnt of personal information from other sources and did not learn specific information or know the second applicant’s password or have access to all his emails. He submits there is no basis to allege anything Mr Simmons said about parking outside the company and accessing the Wifi was untrue.
[12] The allegations changed when an amended statement of claim was filed after Mr Simmons made his first two affidavits. Mr Holmes submits the Court was aware of that and was not in any danger of being misled. He submits Mr Simmons could not voluntarily provide certain information without risk of criminal prosecution. Mr Holmes submits the amount of indemnity costs claimed is excessive in several ways and seeks costs on this application if the applicants do not succeed. He submits any grievance on this issue should been resolved by Mr Simmons’ offer to pay an amount equivalent to the increased costs sought rather than incurring further costs in opposing the application.
Should increased or indemnity costs be awarded?
[13] As any lawyer knows, there can be tension between precisely answering a question and the resulting answers not being misleading. Mr Simmons’ third affidavit, compelled by the Court’s orders to answer the interrogatories, puts an entirely different
complexion on the facts than did his position at the hearing of the interlocutory application, based on his first and second affidavits. For example:
(a)In his second affidavit, Mr Simmons said:
My mobile phone contained a saved network named ‘Euroclass’, which was the name of the Wifi when I was at the company… my mobile phone is likely to have automatically connected to the Applicant’s Wifi when I am in range of the signal. I have no way of knowing whether it has ever done so, as the phone would make that connection automatically.
(b)However, in his third affidavit he confirms that he intentionally connected to that Wifi network on at least one occasion:
I then thought that there was a slim chance that, from a location near Euroclass’ office, I might be able to log onto the Wifi using [Redacted]. If so, I would be on the local network where I might conceivably find some way of obtaining Mr Powell’s letter.
Having parked across the street from Euroclass, I found that although the signal was weak, I was indeed able to access the Wifi.
[14] Mr Holmes submits there is no contradiction between those two statements. That is true only in the most technical sense. Mr Holmes’ interpretation requires the reader to view the first statement as an acknowledgment that Mr Simmons’ phone may have connected to the network without his knowledge. It implicitly denied any intentional connection to the Wifi network. Yet it appears from his third affidavit that, at the time Mr Simmons made that statement and at the time of the hearing of the interlocutory application, he knew he had intentionally connected to the Applicant’s Wifi network. For that reason, his first statement was misleading.
[15] There is another example of contradiction between Mr Simmons’ first and third affidavits.
(a)In his first affidavit he said:
Indeed, the suggestion that I am a person who would hack into computer systems with malicious intent, is the very opposite of who I really am.
(b)But Mr Simmons’ third affidavit states:
On the login page. Chrome displayed a list of suggested usernames. On this occasion, I noticed that one of the suggestions was ‘[email protected]’. In the circumstances it piqued my curiosity.
I clicked the suggestion. I did not know the password, I simply typed the memorable and familiar phrase [Redacted] into the password field.
[16] Mr Holmes submits that the first statement is not misleading in light of the latter, in part because no conclusion can be drawn as to his purposes for hacking the account. But again, I consider it is only on a technical reading of the statements that they can be viewed as consistent. Mr Simmons’ first affidavit suggests that he would not hack into a computer system. His third affidavit confirms he gained access to an email account without knowing the password. I consider Mr Simmons’ first statement is misleading.
[17] Mr Holmes’ arguments on behalf of Mr Simmons that seek to explain the contradictions appear technical, artificial and contrived. I certainly did not take from the first and second affidavits, and Mr Holmes’ arguments in opposing the order to answer interrogatories, that the information now revealed in the third affidavit was likely to have been the position. Viewed in light of the third affidavit, reliance at the time of the hearing of the interlocutory application on aspects of his first and second affidavits appears to me to have been misleading.
[18] I consider that in opposing the application to answer interrogatories, Mr Simmons acted improperly and unnecessarily in terms of r 14.6(4)(a). I did not know this at the time of awarding costs. If I had, I would have awarded indemnity costs. The order for costs on a 2B basis should not have been made. Accordingly, under r 14.8(2), I quash the original order and substitute an order that Mr Simmons pay indemnity costs and disbursements in the amount sought, which I consider reasonably reflected actual costs.
Palmer J
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