Spark New Zealand Trading Limited v Spud Consulting Limited

[2020] NZHC 515

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2875

[2020] NZHC 515

BETWEEN

SPARK NEW ZEALAND TRADING LIMITED
Applicant

AND

SPUD CONSULTING LIMITED

First Respondent

AND

MARK LESTER

Second Respondent

CIV-2018-404-2876

BETWEEN

SPARK NEW ZEALAND TRADING LIMITED
Applicant

AND

VICTORY I.T LIMITED (IN LIQUIDATION)

First Respondent

AND

SEAN DAVID BRYAN

Second Respondent

Hearing:

4 March 2020

Appearances:

Z G Kennedy and Y J Lee for the applicant S M Kilian for the 2875 parties

B M Stainton and L M Tawse for the 2876 parties

Date of judgment:

13 March 2020

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 13 March 2020 at 5.00pm.

Pursuant to Rule 11.5 of the High Court Rules

………………………… Registrar/Deputy Registrar

SPARK NEW ZEALAND TRADING LIMITED v SPUD CONSULTING LIMITED [2020] NZHC 515 [13

March 2020]

[1]                 These proceedings are brought to obtain this Court’s assistance in the taking of evidence in arbitrations between the applicant (“Spark”) and the respondents (“Spud” and “Victory”) respectively.1 Spark alleges the respondents conspired with each other to Spark’s detriment. This Court previously made discovery orders against the respondents.2

[2]                 Spark now alleges the respondents have not complied with the discovery orders, the Spud respondents’ affidavit of documents improperly stating “restrictions proposed to protect the claimed confidentiality of any document” as limited only to Spark’s named external counsel having given undertakings;3 and the Victory respondents not having served a compliant affidavit of documents at all (the draft of which is said to have material shortcomings, including proposing this Court first determine if documents are relevant and admissible.).

[3]                 On application before me, Spark seeks I impose a fine against each respondent for their various non-compliances, set aside their claims to confidence, and direct their prompt discovery in terms of this Court’s earlier orders. Spark additionally seeks leave to use documents disclosed by Victory to illustrate shortfalls in Spud’s discovery. But Spark proposes to adjourn the claim for a fine against the Victory respondents until inspection can occur, to determine the adequacy of that disclosure. If there also are shortfalls in Spud’s discovery, as is alleged, the claim for that fine also is premature.

[4]                 The claims to confidentiality are at the heart of the respondents’ defences in the arbitrations, and occupied the majority of argument before me. With no disrespect to counsel for their interesting submissions, any decision I made on claims to confidence likely would have impact in the substantive arbitrations and therefore should be avoided if possible. As discussed with counsel, the issue really is if the restrictions proposed to protect that claimed confidentiality are warranted.4

1      Arbitration Act 1996, Sch 1, art 27.

2      Spark New Zealand Trading Ltd v Victory I.T, CIV-2018-404-2786, and Spark New Zealand Trading Ltd v Spud Consulting Ltd, CIV-2018-404-2785, minute, 6 June 2019.

3      High Court Rules 2016, r 8.15(2)(f).

4      Vector Gas Contracts Ltd v Contact Energy Ltd [2014] NZHC 3171, [2015] 2 NZLR 670 at [32].

[5]                 I have no hesitation in saying the respondents’ novel approaches to their discovery obligations are unwarranted. First, documents obtained by way of inspection, or copies of them, may be used “only for the purposes of the proceeding”, and “except for the purposes of the proceeding, must not [be made] available to any other person”.5  Use or provision other than for the purposes of the proceeding  is     a contempt of Court, enforceable in its own right with significant penalties,6 as well as providing a foundation for strict liability for any consequent loss or damage.7 Second, the prejudice and harm claimed by Victory for any breach of confidence is entirely speculative: it turns on Spark’s knowledge of its financial detail from inspection affecting competitive negotiations in the sale of Victory, presently in liquidation. Third, assessments of relevance are initially for the discovering party to make,8 and questions of admissibility are not material. In any event, any claim of irrelevance is overtaken by this Court’s earlier discovery orders.

[6]                 In discussion with counsel, I understood finalisation of Victory’s affidavit of documents was now only a formal step to be taken. I invited counsel to confer on achieving a satisfactory inspection regime. That has not been possible. I would have held no proposed restrictions on inspection were warranted, but Spark proposes the discovered documents:

(a)be released to Spark’s in-house legal counsel on the basis of their undertaking to ensure compliance with HCR 8.30(4) and the confidentiality obligations set out in the Arbitration Act 1996 (including ss 14A and 14C);

(b)may be disclosed to independent third-party experts retained by Spark solely for the purpose of the respective arbitration; and

(c)subject to any further orders of this Court or the arbitrator, may not be disclosed to any other party, including within Spark.

5      High Court Rules 2016, r 8.30(4).

6      Contempt of Court Act 2019, s 16.

7      Todd Petroleum Mining Company Ltd v Vector Gas Trading Ltd [2017] NZHC 1129 at [65].

8      High Court Rules 2016, rr 8.7, 8.10 and 8.18

On that basis, I apprehend it is unnecessary to determine the application to use Victory’s documents against Spud.

[7]I order:

(a)the respondents to comply with this Court’s discovery orders set out in its minute of 6 June 2019 within five working days of the date of this judgment, or such further time as may be agreed between the parties or extended by this Court;

(b)the applicant to deal with the discovered documents on the terms set out at [6](a)–[6](c);

(c)the applicant’s counsel, Zane Kennedy and Yoonjung Lee, are relieved of their undertakings to the respondents relating to discovered documents; and

adjourn the applicant’s claims for fines and increased costs against the respondents to be called before me after April 2020.

—Jagose J

Counsel/Solicitors:

Z G Kennedy Barrister, Auckland MinterEllisonRuddWatts, Auckland Kilian & Associates, Auckland

Stainton Chellew, Auckland