Silich v Ngati Tama Custodian Trustee Limited

[2019] NZHC 103

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV2017-443-17

[2019] NZHC 103

BETWEEN

PAUL SILICH, LARRY CROW, CONRAD O’CARROLL and PATRICIA O’CARROLL
as four of the current trustees of the Te Runanga o Ngati Tama Trust

First Plaintiffs

AND

NGATI TAMA CUSTODIAN TRUSTEE LIMITED

Second Plaintiff

HOMESOFT GROUP PTY LIMITED
Third Plaintiff

SITU SYSTEMS PTY LIMITED
Fourth Plaintiff

LISA WHITE
First Defendant

TAHUATA WHITE
Second Defendant

ADRIAN WHITE
Third Defendant

ALLEN WHITE
Fourth Defendant

DENISE TINNEY

Fifth Defendant

Hearing:	21 August 2018
Appearances:	W C Pyke for Plaintiffs
Judgment:	21 August 2018
Reasons:	7 February 2019

SILICH & ORS v WHITE & ORS [2019] NZHC 103 [7 February 2019]

REASONS JUDGMENT OF DUFFY J

This reasons judgment was delivered by me on 7 February 2019 at 4.00 pm pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors/Counsel: Simpson Legal, Auckland

W C Pyke, Barrister, Auckland

[1]    The first plaintiffs (the Ngati Tama trustees) are four out of seven of the trustees of the Te Runganga o Ngati Tama Trust (TRONT). The second plaintiff, Ngati Tama Custodian Trustee Limited (Ngati Tama), is an incorporated company and is the custodian trustee of TRONT. The third plaintiff, Homesoft Group Pty Limited (Homesoft), is a company incorporated in Australia which owns the rights in relation to the My Virtual Homes software (MVH software), which enables the design of a “3D virtual home” and markets that software to consumers. Ngati Tama is the custodian trustee of TRONT and an 82 per cent shareholder in Homesoft. The fourth plaintiff, Situ Systems Pty Limited (Situ), is a company incorporated in Australia which licenses the MVH software for business use.

[2]    The proceeding is for claims of breach of confidence and causing loss by unlawful means.

[3]    The plaintiffs have resolved their dispute with the first, second and third defendants. The fourth and fifth defendants are beneficiaries of TRONT along with other members of the Ngati Tama iwi. These defendants were served with this proceeding. They have taken no steps in the proceeding. Accordingly, the plaintiffs seek judgment by way of formal proof against them.

[4]    I am satisfied that the fourth defendant was properly served with the proceedings.

[5]    The fifth defendant lives overseas. She was served by substituted service following a direction from Hinton J on 6 October 2017.

[6]    No-one expressly addressed the issue regarding service of an overseas defendant. Rule 6.27 of the High Court Rules provides that proceedings may be served on a defendant outside New Zealand without leave when: (a) a claim is made in tort; and (b) any act or omission responsible for damage was done or occurred in New Zealand; or (c) the damage was sustained in New Zealand.

[7]    The claim for causing loss by unlawful means is a claim in tort. The claim for breach of confidence is based in equity. However, it is now well settled that for r 6.27

to apply it is enough if one of the causes of action qualifies under that rule.1 Accordingly, in terms of r 6.27 it was not necessary for the plaintiffs to obtain leave of the Court to serve the fifth plaintiff overseas. I am satisfied that the fifth defendant has been properly served in accordance with the directions given by Hinton J.

[8]    Despite the failure of the defendants to oppose the claims against them, this Court must assess the merits of the claim before it can be satisfied that judgment can be entered against the defendants; this is made clear by the Court of Appeal in Khan v Shariff:2

We do not however agree with a further submission that because the claim proceeded by way of formal proof, a simple assertion by Dr Sahu Khan as to the correctness of the contents of the statement of claim was sufficient to prove his claims. The Court must still satisfy itself regarding the plaintiff’s evidence in much the same way as if the proceeding had gone to trial. It is not the case that allegations of fact made in a statement of claim are deemed to be admitted.

Facts

[9]    Gregory Lane is one of the directors of Homesoft and the chief executive of Homesoft and Situ. He has provided an affidavit in support of the plaintiffs’ case. The affidavit evidence establishes that a confidential report of the plaintiffs (the Lane report), which was prepared by Mr Lane, on or about 10 February 2016 has unlawfully come into the hands of the defendants. The Lane report outlines the performance of the third plaintiff; this report includes sales projections and refers to contracts with customers or potential customers. Included here are: (a) CSR Limited (CSR) which is a commercial entity based in Australia and New Zealand that is already a valuable customer of Situ; and (b) Caroma, which is a wholesaler of bathroom products in Australia and New Zealand, that is a potential valuable customer of Situ.

[10]   The plaintiffs contend the Lane Report was issued in confidence. It has a confidential watermark and states on the inside cover:

This report is strictly confidential. Please do not distribute. The contents of this report could damage ongoing business dealings if made public and

1      See Bomac Laboratories Ltd v F Hoffman-La Roche Ltd (2002) 7 NZBLC 103 (HC) at 627; and

Baxter v RMC Group plc [2003] 1 NZLR 304 (HC).

2      Khan v Shariff [2018] NZCA 583; see also Ferreira v Stockinger [2015] NZHC 2916 at [35]; Neumayer v Kapiti Coast District Council [2013] NZHC 1106 at [8]; and Chen v Zhong HC Auckland CIV-2010-404-1995, 14 November 2011 at [39].

persons viewing this document are kindly asked to limit distribution to board members only.

This reference to board members means the Ngati Tama Trustees, being Paul Silich, Larry Crow, Conrad O’Carroll and Patricia O’Carroll, Lisa White, Tahuata White and Adrian White.

[11]   On 7 May 2016, Mr Lane e-mailed the Ngati Tama trustees following a phone call which he received in relation to the MVH software. The e-mail outlined a business plan for Homesoft and Situ and included references to the CSR and Caroma opportunities. This information was commercially sensitive and confidential to TRONT.

[12]   The fourth and fifth defendants appear to have obtained a copy of the Lane Report as well as the information contained in Mr Lane’s e-mail of 7 May 2016. The plaintiffs cannot account for how this occurred as the fourth and fifth defendants are not trustees of TRONT. The plaintiffs believe a copy of the Lane Report was provided to the fourth and fifth defendants by one of the other defendants.

[13]   Since the fourth and fifth defendants have been in receipt of TRONT’s confidential information the following has occurred: First, the fourth defendant has contacted Mr Lane and Paul Condon the co-chief executive of Homesoft and Situ and demanded they provide the fourth defendant with certain information in relation to the third and fourth plaintiffs. The fourth defendant has further said that if the requested information is not provided there will be “dire consequences”. Second, the fifth defendant has similarly contacted Mr Lane and made similar threats if her request is not acceded to. Third, on 29 March 2017 the fourth defendant contacted Mr Lane again asserting that if a satisfactory response was not forthcoming by a certain date the fourth defendant would contact CSR and Caroma detailing the “abysmal management” of Homesoft and Situ.

[14]   To date neither the fourth nor fifth defendants have outlined what the alleged “abysmal management” might be.

[15]   Mr Lane expresses concerns that if the fourth defendant proceeds with the threatened communications, either CSR or Caroma will terminate their business relationships with Homesoft and Situ. Of particular concern is the fact that Situ is a start-up company that has no goodwill or existing business reputation that would otherwise allow it to combat the bad publicity that might flow from the fourth defendant’s threatened action. Accordingly, Mr Lane is of the view that unless the fourth defendant is restrained from communicating with the existing and potential clients of Homesoft and Situ those companies will suffer irreparable financial harm.

[16]   Mr Lane also details four other companies that offer Homesoft and Situ sound business opportunities. He is concerned that bad publicity might deter those companies from proceeding to deal with Homesoft and Situ.

[17]   While the fourth defendant is the person who is primarily responsible for the threats, there is evidence to show that he has disclosed this information to the fifth defendant and that she is similarly inclined to carry out the threats.

Causes of action

Breach of confidence

[18]   It is a well-established equitable principle that a person who receives information in confidence must not take unfair advantage of it.3 The Court will intervene where:

(a)Information is of a confidential nature;

(b)Information was communicated in circumstances importing an obligation of confidence; and

(c)The defendant has made or will make an unauthorised disclosure or use of that information.

3      A B Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 (CA).

[19]   The obligation of confidence does not require a contractual relationship. Where a third-party is acting unconscionably in acquiring or using confidential information equity will assist.4 Relevant factors to consider include:

(a)The nature of the information;

(b)The state of knowledge of the acquirer of the confidential information;

(c)The extent of any breach;

(d)What kind of detriment has resulted or might result to the parties; and

(e)The degree of culpability of the third-party acquirer and discloser.

[20]   In determining whether a third-party is liable for use of confidential information, the most critical factor will be the state of the defendant’s knowledge. Either wilful blindness or actual knowledge of a breach of confidence will be sufficient to render a third-party liable in breach of confidence.5

Causing loss by unlawful means

[21]   There is a cause of action for causing loss by unlawful means where there has been deliberate and wrongful interference with the actions of a third-party in which the plaintiff has an economic interest, coupled with the intention thereby to cause loss to the plaintiff.6 This statement of the essential characteristics of this tort was accepted by the Court of Appeal in Dyver v Loktronic Industries Limited.7

[22]   First, it must be shown that the defendant’s conduct/interference was deliberate and performed with the intention to cause loss to the plaintiffs, as opposed to an intention to improve one’s own financial position.8

4      Hunt v A [2008] 1 NZLR 368 (CA) at [92]-[94].

5      See above, n 3.

6      OBG Ltd v Allen [2007] UKHL 21, [2008] 1 AC 1 at [47].

7      Diver v Loktronic Industries Ltd [2012] NZCA 131, [2012] NZLR 388.

8      OGB Limited v Allan [2007] UKHL 21, [2008] 1 AC 1.

[23]   The intention to cause loss does not necessarily have to be the sole or predominate motivation; it is sufficient if such an intention was a contributing cause of the conduct.9

[24]   Second, it must be established that the loss resulted from unlawful conduct. The unlawful conduct cannot be merely incidental. There must be a causative link between the illegal conduct and the loss suffered.10

Perpetual injunctions

[25]   If satisfied that the plaintiffs have actionable claims for breach of confidence or causing loss by unlawful means, the Court must then go on to consider whether it is appropriate to grant perpetual injunctions against the fourth and fifth defendants.

[26]   The Court has a wide discretion to grant injunctive relief where it is just to do so in all the circumstances.

Analysis

[27]   I am satisfied that in relation to the action for breach of confidence the plaintiffs have made out a prima facie case for relief against the fourth defendant. The uncontested evidence is sufficient to establish that: (a) the subject information has the essential characteristics of confidential information; (b) the plaintiffs have not authorised the release of this confidential information to either the fourth or the fifth defendant; (c) the fourth and fifth defendants either will or may in the future release the confidential information to diverse persons which will be to the detriment of the plaintiffs.

[28]   To date, the release or threatened release of the confidential information has been averted by the interim relief granted by Ellis J.11 I am satisfied that the plaintiffs are entitled to maintain the confidentiality of their information and that a perpetual

9      Van Camp Chocolates Ltd v Aulsebrooks Ltd [1984] 1 NZLR 354 (CA).

10     At 360.

11     The available evidence points this way and there is no evidence to suggest anything to the contrary.

injunction, (on the same terms as the interim relief) against the fourth defendant will achieve this result.

[29]   I am satisfied that the same level of risk which applies to the actions of the fourth defendant also applies to the fifth defendant. However, she resides in the United States of America. The plaintiffs have not outlined for me how a perpetual injunction issued in this country might be enforced against a defendant who resides overseas, particularly when the breach might be enacted overseas. This question is affected by private international law, particularly the scope of this Court’s civil jurisdiction to enforce injunctions outside New Zealand. Injunctions are a discretionary remedy. In principle, the Court will not make orders when circumstances render them futile because such orders are incapable of enforcement.

[30]   Regarding the fifth defendant, I propose to grant the plaintiffs leave to file further submissions on the question of whether it is appropriate to grant an injunction against the fifth defendant given that she resides outside New Zealand.

[31]   The plaintiffs have not established their claim for interference by unlawful means. There is insufficient evidence to prove that it is more probable than not that either defendant has acted deliberately and with the intention to cause any of the plaintiffs loss. It is equally open to infer from the available evidence that the fourth and fifth defendants are for their own reasons unhappy with the governance of TRONT, particularly in relation to the commercial activities of Homesoft and Situ as well as other planned commercial ventures in which the plaintiffs may engage. Actions motivated by negative beliefs and understandings about how TRONT is being managed by its trustees and how the other plaintiffs are conducting their commercial activities in relation to TRONT’s interests may be misguided and potentially if not actually detrimental to the plaintiffs. However, such conduct is at best either reckless or negligent. It cannot be equated with an intention to harm the plaintiffs. Indeed, such conduct is more likely to be driven by the belief that it is the plaintiffs who are causing harm to TRONT rather than the other way around.

Result

[32]The plaintiffs have established their first cause of action.

[33]   Accordingly, they are entitled to a perpetual injunction against the fourth defendant on the following terms:

The fourth defendant is restrained from communicating either directly or indirectly by whatever means possible with any customer or potential customer of Homesoft or Situ, including in particular CSR Limited and Caroma.

[34]   The plaintiffs have leave to file further submissions on the question of whether it is appropriate for this Court to grant a perpetual injunction against the fifth defendant given she resides overseas

[35]   The plaintiffs have failed to establish their second cause of action; accordingly, on this cause of action I grant judgment to the fourth and fifth defendants.

[36]   Leave is reserved for the plaintiffs to file a memorandum as to costs in relation to this formal proof.

Duffy J