Sky Network Television Limited v Television New Zealand Limited

[2017] NZHC 2750

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-002693 [2017] NZHC 2750

BETWEEN

SKY NETWORK TELEVISION LIMITED

Plaintiff

AND

TELEVISION NEW ZEALAND LIMITED First Defendant

NZME PUBLISHING LIMITED Second Defendant

MEDIAWORKS TV LIMITED Third Defendant

MEDIAWORKS HOLDINGS LIMITED Fourth Defendant

continued over

Hearing:	1 November 2017
Appearances:	J Miles QC, E Gray and J C Dickson for SKY Network Television Ltd S J Mills QC and M Gavin for Television New Zealand Ltd A H Brown QC and A Ringwood for NZME M D OʼBrien QC and C D Herbert for Fairfax New Zealand Ltd L Bercovitch for Mediaworks
Judgment:	9 November 2017

JUDGMENT OF VENNING J DISCOVERY AND CONFIDENTIALITY

This judgment was delivered by me on 9 November 2017 at 4.00 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

SKY NETWORK TELEVISION LTD v TELEVISION NZ LTD & ORS & SKY NETWORK TELEVISION LTD v FAIRFAX NZ LTD [2017] NZHC 2750 [9 November 2017]

CIV-2016-404-001847

BETWEEN  SKY NETWORK TELEVISION LIMITED

Plaintiff

ANDFAIRFAX NEW ZEALAND LIMITED Defendant

Solicitors:           Simpson Grierson, Auckland Hudson Gavin Martin, Auckland Bell Gully, Auckland

Counsel:            J G Miles QC, Auckland

S Mills QC, Auckland

A Brown QC, Auckland
M D O’Brien QC, Auckland

[1]      The Court convened a case management conference on 1 November 2017 on these files. There were four main issues before the Court:

(a)       Defendants’ applications for tailored discovery.

(b)Defendants’ applications to be released from an agreement to keep the particulars of damage confidential.

(c)      A request by the plaintiff (SKY) for the Fellet affidavit filed in the 1847 proceeding to be sealed and only used for the purposes of these two proceedings.

(d)      Timetabling issues.

[2]      In addition SKY sought leave, by way of memorandum, to discontinue against the third and fourth defendants in 2693.

[3]      The request for leave to discontinue and timetable issues have been addressed in a separate minute issued on 2 November.

[4]      This judgment deals with the remaining issues of discovery and confidentiality.

Discovery

[5]      At the outset I acknowledge that senior counsel and instructing solicitors for all parties have been working towards resolving the issue of discovery. There are now only a limited number of issues remaining regarding discovery.

[6]      The remaining categories still at issue are 14, 16, 20-22, and 28-30.

Category 14

[7]      A principal difference between the parties’ in relation to category 14 is the extent of discovery initially sought from SKY.  SKY also seeks reciprocity in relation to certain categories of documents.  It also proposes to exclude anti-piracy efforts to the extent the documents do not concern the Set One Games. Mr Gray also submitted

anti-siphoning could be excluded because to the extent it is relevant it is included in other categories.

[8]      I understood Mr Ringwood to confirm that the anti-siphoning point was no longer an issue for his client and that what generally might fall into SKY’s proposal in relation to the anti-piracy provision will likely be covered by other categories of discovery:  5, 8, 16 and 24.

[9]      Having heard from counsel I am in general agreement that the redraft advanced by Mr Gray is an appropriate one, including the requirement for reciprocity.

[10]     The discovery under category 14 is to include:

14.Any internal documents held by SKY and/or any of the defendants and any correspondence between SKY or any of the defendants in this proceeding or the defendant in the related proceeding and the Rugby Unions and/or any other national and international sporting bodies relating to:

(a)      The  grant  and  scope  of  SKY’s  rights  under  the  Rugby

Agreement;

(b)       Use by the Rugby Unions and teams of clips of rugby games covered by the Rugby Agreement;

(c)      The scope of fair dealing and enforcement of alleged infringements in footage of or relating to sporting events, excluding where such documents are related to anti-piracy efforts to the extent these efforts do not concern the Set One Games;

(d)       The access rules and agreements particularised in the second amended statement of claim;

(e)       The importance of media coverage of, and access by the public to, rugby games;  and

(f)       The importance of sports news to New Zealanders.

[11]     To clarify, in relation to category (c) I adopt Mr Mills QC’s submission that discovery in relation to that clause should be on the basis of the provision of the general policy documents that sit behind more specific documents

[12]     I understand that subject to the issue of reciprocity which has been dealt with, Category 16 is agreed.

Categories 20 to 22 inclusive

[13]     The defendants seek:

20.Documents relevant to the allegation in paragraph [12 (2693) and 21 (1847)] of the second amended statement of claim concerning relating to SKY’s subscribers … sponsors and advertisers.

21.Documents relevant to the allegation in paragraph [13 (2693) and 22 (1847) of the second amended statement of claim concerning relating to SKY’s expenditure promoting and producing SKY’s [rugby (and Olympic coverage)].

22.Documents relevant to the allegation in paragraph [(14 (2693) and 23 (1847) of the second amended statement of claim concerning relating to SKY’s return on its investment through subscription fees, sponsorship and advertising revenue.

[14]     SKY says the detail sought is only relevant, if at all, to the damages claim rather than the liability hearing. Mr Gray submitted that SKY’s annual reports for the period of 2014 to 2017 would provide sufficient information about its model of operation and that its briefs of evidence would also explain its operation. He acknowledges that SKY cannot rely on documents at trial that it has not discovered.

[15]     Mr Ringwood submitted that these claims are also relevant to the issue of fair dealing which is to be dealt with at the liability hearing so that the documents are discoverable.  Mr Mills made the same point and submitted it was unsatisfactory to await the exchange of evidence. Further discovery might then be required which could jeopardise the hearing.

[16]     There is force in Mr Gray’s submission that to require discovery in the very general way sought would effectively require discovery of all documents relating to SKY’s business model.   Relevant documents could in theory encompass every document in SKY’s control that relates to sport.

[17]     However, even without seeing them, I have reservations whether the annual reports will provide sufficiently focused information on the particular categories of discovery sought.

[18]     Against that, discovery must be proportionate.

[19]     SKY will have, at a general level, reports relating to these categories of documents. There must be reports or summary papers prepared by SKY for the Board from time to time which deal with these particular heads of the business model during the relevant time period, i.e. 2014–2017. SKY should be able to provide those general level reports and summary papers.

[20]     SKY is to discover:

Category 20

[21]     Documents at a general level or in summary form relevant to the allegation in [paragraph 12 (2693), paragraph 21 (1847)] relating to SKY’s subscribers, sponsors and advertisers for the period 2014–2017.

Category 21

[22]     Documents at a general level or in a summary form relevant to the allegation in paragraph [13 (2693), paragraph 22 (1847)] relating to expenditure promoting and producing SKY rugby and Rio Olympic Games coverage (as appropriate).

Category 22

[23]     Documents at a general level or in a summary form relating to the allegation in paragraph [(14 (2693), paragraph 23 (1847)] relating to SKY’s return on investment through subscription fees, sponsorship and advertising revenue for SKY rugby coverage and the Rio Olympics.

[24]     The defendants seek documents relating to any infringements alleged by SKY of its copyright rights under the rugby agreement and the IOC agreement by parties other than the defendants.  SKY seeks the addition of the following qualifier:

Excluding where those documents are related to anti-piracy efforts to the extent those efforts do not concern the Set One games.

[25]     Mr Ringwood submitted that the anti-piracy documents even outside rugby and the Rio Olympics may still be relevant in that the breach by others may have caused the loss in subscribers that SKY pursue in these proceedings.  That is a possibility. Again proportionality is a relevant consideration.  At least initially there should be discovery of the documents, including the anti-piracy documents at a general level.

Category 29

[26]     I understand that the parties can agree on cl 29.  Mr Gray made the point that

SKY considers it irrelevant but will provide discovery.

Category 30

[27]     Again, save for one issue, the parties are largely in agreement.  The one issue not agreed was NZME’s objection in relation to the radio.   While I note Mr Ringwood’s objection to it as being potentially irrelevant, I understand it will not be particularly difficult to provide discovery. I also accept Mr Gray’s submission that the radio publication can be taken from the SKY commentary.  I direct that discovery of the category 30 documents is to include NZME radio reports.

Timetable

[28]     The timetable for completion of discovery has been fixed in the minute that issued on 2 November 2017.

Confidentiality of particulars

[29]     Following a direction from Heath J that on or before 17 August 2017 the plaintiff was:

to file and serve an amended statement of claim that … provides full particulars of any special damages claimed including the manner of their calculation.

SKY has filed an amended claim and pleaded “'Particulars of loss and damage’ (a) Refer separate confidential particulars of damage”.  SKY has provided a document containing confidential particulars of damage but on terms.

[30]   SKY seeks to keep the damages calculation annexed to the document confidential to a limited number of parties.   The damages calculation in the confidential particulars document is made up of the following categories:

•Estimated lost subscriber revenue due to a reduction in the number of subscribers as a result of the defendants’ actions.

•      Estimated value of additional incentives to gain new subscribers.

•      Make good commitments incurred in 2016.

•Estimated increased expenditure on sport content programming content rights.

•Estimated expenditure on developing, launching and maintaining the sports highlights application.

[31]     The defendants’ legal advisers initially agreed to disclosure of the particulars being limited to them, reserving their rights.  They now seek to be released from that agreement.  The defendants say there is no jurisdiction for SKY to restrict disclosure of the particulars of loss and that to do so is in breach of the New Zealand Bill of Rights Act 1990.

[32]     SKY has now offered to disclose the confidential particulars of damage on a confidential basis to the defendants’ external legal advisers, in-house counsel, CEO and CFO and any independent financial expert witness engaged by any defendant. SKY has also accepted further limited disclosure may be justified and has invited the

defendants to specify any particular additional individuals who may require access to the confidential particulars of damage.

[33]    Mr Gray suggested that the Court has inherent jurisdiction to make the confidentiality orders sought.  He submitted that they were appropriate in the present case.

[34]     Mr  Errington,  SKY’s  acquisitions  executive,  has  sworn  an  affidavit  in opposition to the defendants’ application and in support of the confidentiality SKY seeks.   Mr Errington says the information is not publicly available and cannot be calculated from publicly available information.  It would be harmful to SKY for this information to be made available to the defendants without restriction. The defendants are all competitors of SKY.

[35]     Mr Brown QC suggested that the high point of Mr Errington’s affidavit was his evidence:

The confidential information could be used to broadly estimate the value SKY attributes to rights for sports events, or would need to recoup when commercialising its products.  This knowledge in a competitor’s hands, … would weaken SKY’s negotiating position with rights holders and suppliers.

and submitted that the concerns were expressed in very general terms and did not support the restriction sought.

[36]     I consider that aspects of Mr Errington’s concern are overstated.  In the first category SKY attributes an annual value to a SKY sports subscriber which is then totalled to calculate damages for a three year period.  I understand that the number of SKY subscribers and the monthly fee appears in the SKY annual report published each year.  It is difficult to see that information relating to the number of subscribers and the monthly income from them can be said to be sensitive and confidential when it is published in that form.

[37]     Next, the estimated value of additional incentives to gain new subscribers is based on a percentage of a global figure over a three year period, the percentage being based on the number of subscribers SKY calculates it has lost as a result of the

defendants’ actions.   The significance of the incentives figure to a competitor is somewhat diminished by the fact the calculations are spread over a three year period and relate directly to the defendants’ actions in this case.

[38]     The next category are the payments SKY was required to pay for “make good” commitments incurred in 2016.  The make good commitments are historical.  They will be fact dependent on the issues raised in those years.

[39]     The fourth category is an estimate of the increased expenditure SKY spent on sport content programme content rights.  That is calculated on the basis of five per cent of the total increase over a three year period.   I accept there is commercial sensitivity in those figures.  From the figures it would be possible to calculate SKY’s overall expenditure on such rights, at least for that period.

[40]     Finally  there   is   estimated   expenditure   on   developing,   launching   and maintaining a sports highlights application broken down into CapEX; team development costs and anticipated further costs.   The anticipated further costs are general and account for approximately 65 per cent of the costs.   Because of the generality of the information it would be of limited assistance to a competitor.

[41]     So while I accept that the information does contain financial data, aspects of which can be properly said to be sensitive and confidential, I consider SKY overstates the confidentiality of the particulars, especially in the way they are provided in the summary document.   Any further  breakdown  of  the  figures  and  the  documents underlying the figures  in the various  categories  might  well  support  a claim  for confidentiality, but the generalised and summarised form of the particulars does not support the very limited disclosure sought by SKY.

[42]     However, I also consider the defendants overstate the position when they submit SKY’s proposal to limit the provision of particulars to identified persons is a breach of natural justice and a breach of the New Zealand Bill of Rights Act.  SKY has not suggested it will not provide the particulars.  It has simply sought to limit the distribution of the particulars to certain of the defendants’ employees and witnesses.

[43]     The starting point is that particulars are required to be provided in accordance with the rules. Particulars may be provided in a separate document as in this case. As Kós J noted in Ayers v LexisNexis NZ Ltd “particulars are of pleadings. But they are not themselves pleadings”.1

[44]     In addition to the parties SKY has now agreed may see the particulars, the particulars should be made available at the least to other employees of the defendants who need to see them for the purposes of this litigation, expert witnesses, and the Boards of the defendants to enable the Boards to consider their position as to the conduct of the litigation.   As the Court has said on more than one occasion it is generally desirable that the quantum of damages is specified with sufficient particularity. The absence of a particularised quantum hampers meaningful discussions as to settlement and will not assist the expeditious hearing of the matters in issue.2

[45]     I am satisfied an appropriate balance can be struck between SKY’s desire for confidentiality of the particulars and the defendants’ wish to make the particulars more broadly available.

[46]     The confidential particulars are to be made available to the following persons provided that in the case of categories (c) and (d) the defendants’ senior counsel are satisfied it is necessary for the particulars to be made available to those parties:

(a)       Defendants’ counsel and solicitors.

(b)      Defendants’ internal legal staff, CEO, CFO, and Board.

(c)       Any other employee who needs to see the particulars for the purposes of this proceeding.

(d)Any third party to which the defendant has a legal obligation to report such information.

1      Ayers v LexisNexis NZ Ltd [2012] NZHC 3055 at [47].

2      Milne v North Shore City Council HC Auckland M264/99, 9 November 1990;  and Appanna v

Anglesea Hospital Ltd [2017] NZHC 2257 at [14]–[15].

(e)      Any independent expert witness engaged by the defendants, subject to first obtaining an undertaking from the expert witness that they will treat the material confidential with that undertaking to be provided to SKY at the end of the proceedings.

[47]     During  the  course  of  the  hearing  Mr  O’Brien  QC  suggested  that  the information should also be made available to the Board and Chief Executives of the shareholding entity of his client. There is no evidence before the Court as to the extent of any limitation on the authority of the particular Board of the defendant.  It would only be necessary for the particulars to be referred to any ultimate shareholding entity if an ultimate decision is to be made by that Board rather than the defendants’ Board. In the absence of such evidence I am not satisfied it is necessary at this stage for disclosure to be extended that far.

[48]     Leave is also reserved (in the event counsel cannot agree) for the defendants to apply to provide further disclosure in the future.

[49]     For the avoidance of doubt any existing arrangements regarding confidentiality are replaced by the above directions/orders.

[50]     Finally, I record that the above relates to the provision of the confidential particulars. It does not deal with the documents which underlie the particulars. Those documents might properly be the subject of more restrictive orders.

Fellet affidavit

[51]     Mr Fellet swore an affidavit on 5 August 2016 in support of an application for interim injunction.  Exhibit JF1 to Mr Fellet’s affidavit annexed an agreement (the IOC agreement) between the International Olympic Committee (IOC) and SKY. Exhibit JF2 to Mr Fellet’s affidavit contains the terms of SKY’s bid for the rights granted by the IOC.  SKY says the exhibits are confidential and seeks orders that the affidavit be used for the purpose of these proceedings and for no other purpose and be treated as confidential by the parties to both proceedings.

[52]     Redactions were made to JF1, the IOC agreement and to JF2, SKY’s bid to protect the sensitive pricing information in the copies served.

[53]     SKY now seeks effectively, on behalf of the IOC, to enforce the confidentiality of the IOC agreement. The IOC is not a party to this proceeding.

[54]     The IOC agreement provided for confidentiality at cl 25.1. The clause provides for an express limitation on confidentiality. Disclosure is permitted “to the extent that disclosure is necessary for financial, legal or governmental proceedings”.

[55]     The defendants oppose any orders for confidentiality being imposed at this stage. Mr O’Brien made the point that the Fellet affidavit was filed and served a year ago with the redactions, which the defendants accept are appropriate, but apart from that no indication was given that there were any confidentiality concerns. The affidavit has been referred to a number of people who had a proper interest in seeing it for the purpose of these proceedings.

[56]     I note Mr O’Brien’s submission, but there is no evidence before the Court as to the actual extent of dissemination of Mr Fellet’s affidavit.  I accept it is likely the affidavit has been circulated to experts and possibly other witnesses for the purposes of the earlier hearings on this file.

[57]     SKY’s principal concern is as to the confidentiality of the IOC agreement. On its face and in light of the confidentiality clause the IOC agreement could only be disclosed for the purposes of legal proceedings.  If an application for confidentiality had been made at the time of the injunction application the Court would likely have granted it. It would be quite wrong for a party now in possession of that agreement to use the confidential information for any purpose other than related to this proceeding. The difficulty arises because the affidavit has been properly disseminated to a number of parties since August 2016.

[58]     I am not prepared to make the extensive orders sought by SKY at this late stage. I leave the matter on this basis.  The defendants’ legal advisers are to advise those parties to whom they made the affidavit available, that the provisions of the IOC

agreement are confidential, and the agreement is not to be copied or disclosed further or used in any way other than for the purposes of these legal proceedings.

[59]     At a more general level there is the order previously made by Heath J that the Court files in these proceedings are not to be searched, copied or inspected without leave of a Judge on a formal application made on notice to all parties. That order will prevent any broader access to Mr Fellet’s affidavit or publication of the details of the IOC agreement.

Costs

[60]     Given the reasonable approach the parties have taken to the issues and the mixed results, I reserve the issue of costs on the applications to be costs in the

proceedings.

Venning J