Technopak Limited v Monzeal Limited
[2020] NZHC 1940
•5 August 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-2346
[2020] NZHC 1940
BETWEEN TECHNOPAK LIMITED
Plaintiff
AND
MONZEAL LIMITED
First Defendant
J P GARRICK
Second DefendantS E LEANING
Third Defendant
Hearing: 3 August 2020 Appearances:
G C Williams and J K Nield for Plaintiff E St John and A South for Defendants
Judgment:
5 August 2020
JUDGMENT OF LANG J
[on application for orders setting aside or modifying claims to confidentiality]
This judgment was delivered by me on 5 August 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
Solicitors:
Rae Nield Marketing Law, Auckland
Counsel:
G Williams, Auckland E St John, Auckland
TECHNOPAK LTD v MONZEAL LTD [2020] NZHC 1940 [5 August 2020]
[1] Technopak Limited (Technopak) and Monzeal Limited (Monzeal) are trade competitors. Both manufacture machines that fill bags with powdered products.
[2] Technopak contends that Monzeal, assisted by its directors Mr James Garrick and Mr Scott Leaning, has manufactured machinery that breaches the copyright it holds in the design of its machines. It has therefore issued this proceeding in which it seeks injunctive relief against the defendants prohibiting them from continuing to manufacture and sell the offending machines. Technopak also seeks damages for the losses it has suffered as a result of the defendants’ actions.
[3] The proceeding is at a comparatively early stage and the pleadings are far from complete. The parties have, however, attended to discovery. The defendants filed and served an affidavit of documents dated 3 October 2019 in which they claimed confidentiality for approximately 2,950 documents. They say these are commercially sensitive because, for the most part, they comprise three-dimensional CAD model files relating to the design of Monzeal’s machinery. The files can only be viewed using proprietary software.
[4] Technopak now seeks an order under r 8.25 of the High Court Rules 2016 setting aside or modifying Monzeal’s claim to confidentiality in relation to these documents.
Issues
[5] The issue at trial will be whether the defendants have infringed Technopak’s copyright in designs, models and prototypes of its bulk bag filling machinery.
[6] Monzeal has agreed to permit Technopak’s counsel, instructing solicitors and experts to view the CAD model files in their original format provided they do so at the offices of Monzeal’s solicitors and in the presence of Monzeal’s representatives. It also contends Technopak’s representatives should not be entitled to make copies of the documents or to show them to Technopak’s officers or employees.
[7] Technopak does not accept its representatives should be required to view the documents at the offices of Monzeal’s solicitors or in the presence of Monzeal’s
representatives. It wants Monzeal to provide the documents electronically and in their original format to Technopak’s eDiscovery provider. That entity will then provide electronic copies of the documents to those persons permitted by the Court to inspect them.
[8] Technopak also wants its director, Mr Shane Reckin, to view the documents because he is familiar with the design of Technopak’s machines and is best placed to assess the relevance of the documents to Technopak’s claim.
[9]The issues I am therefore required to determine are:
(a)Where should inspection take place?
(b)Should inspection only take place in the presence of Monzeal’s representatives?
(c)Should Mr Reckin be permitted to inspect the documents and, if so, on what conditions?
(d)Should any person be permitted to copy the documents?
Where should inspection take place?
[10] The defendants initially contended that inspection should only occur at the offices of Monzeal’s solicitors. As I understood Mr St John’s submissions during the hearing, however, the defendants are not firm on this issue.
[11] I do not consider it would be appropriate to restrict inspection in the manner Monzral proposes. Technopak’s representatives should not be required to spend large amounts of time at the offices of Monzeal’s solicitors. Furthermore, this would restrict their ability to view the documents to business hours when the offices are open. That would prevent Technopak’s representatives from viewing the documents outside normal office hours.
[12] I consider Monzeal should provide the documents to Technopak’s eDiscovery provider in electronic form and in their original format. The provider will be required to sign an undertaking as to confidentiality in the form set out in Schedule 1 to Technopak’s amended application dated 17 June 2020.
[13] The eDiscovery provider will then make electronic copies of the documents available to Technopak’s solicitors, counsel and experts once those persons have signed the same or similar undertakings as to confidentiality.
Should inspection take place in the presence of the defendants’ representatives?
[14] It follows that the plaintiff’s authorised representatives are not required to inspect the documents in the presence of the defendants’ representatives. This would have been inappropriate in any event because the discussions that will be held as the documents are viewed would inevitably be subject to litigation privilege.
Should Mr Reckin be permitted to inspect the documents and, if so, on what conditions?
[15] This is the most contentious aspect of the present application. In an affidavit filed in support of the application Mr Reckin contends he should be permitted to view the documents for the following reasons:
1.These proceedings were commenced on what was seen by us in the public domain.
2.All of the Defendants’ machines are in the public domain somewhere in the world.
3.We are seeking documents on what was done by the Defendants while developing their machines. We do not require any pricing information of the Defendants machines.
4.We hold copyright works which the Defendants are familiar with. The only people who are able to identify all works that have been infringed by the Defendants are Henry Hermans or myself. It is agreed that it is appropriate for me to be able to assess the Defendants’ documents.
[16] The defendants oppose Mr Reckin being permitted to view Monzeal’s documents. Mr Leaning explains the basis for their stance in the following paragraphs of an affidavit filed in opposition to the application:
11.The plaintiff goes further in its supporting affidavit and says that only Henri Hermans or Shane Reckin could understand the documents. Again, that might be true, but there is no explanation as to why that applies to the plaintiff and not the defendants. In fact, it must apply more the other way because the plaintiff will not identify the documents in which the copyright exists.
12.Our three-dimensional CAD model files are confidential as they contain all the detail that would allow the individual parts to be copied exactly without the need to reverse engineer from a machine.
13.We have provided two dimensional drawings (in PDF format) of the detail contained within the three-dimensional CAD model. This is all that is required to evaluate any potential copyright infringement. Certainly, the plaintiff does not explain why seeing the CAD models are necessary.
14.Other than CAD models, the confidential documents contain documents such as machine sales proposals, which are commercially sensitive and not in the public domain. They have no bearing on evaluating a potential copyright breach.
15.We have provided over 2000 open documents including very detailed drawings of our equipment. The plaintiff has provided only 177 open documents with very few drawings of the machinery in which it claims copyright.
[17]The leading authority in this context is the decision of the Court of Appeal in
Port Nelson Ltd v Commerce Commission, in which the Court observed:1
The ability of each party to a proceeding to inspect the documents of the other, except for documents which are privileged, is important in enabling the proceeding to be brought to a just conclusion. It avoids parties being taken by surprise. It enables legal advisers to better assess the likely outcome of trial, and to concentrate on what will ultimately prove to be the real issues. In this way it can save cost. Sometimes, however, relevant documents which are not privileged may be commercially sensitive. Examples would be documents showing the detailed costings of products or services which are provided in a competitive market, the marketing plans for a proposed new product, or a patent specification during the period before the application has been accepted and made available for inspection. In some cases it may be sufficient protection that “a party who seeks discovery of documents gets it on condition that he will make use of them only for the purposes of that action and for no other purpose”: …
In other cases, the Courts have directed that particular documents are to be shown only to nominated persons, typically solicitors, counsel, and expert witnesses. Power to limit access in this way arises from the inherent jurisdiction of the Court to prevent the abuse of its process. Orders limiting the persons to be allowed access to discovered documents have been made in
1 Port Nelson Ltd v Commerce Commission (1994) 7 PRNZ 344 (CA) at 347-348.
many cases in the High Court, and a recent example in this Court is NZ Railways Corp v Auckland Regional Council.
(citations omitted)
[18] These observations were echoed in an English context in Roussel Uclaf v Imperial Chemical Industries Plc, in which Aldous LJ explained:2
Each case has to be decided on its own facts and the broad principle must be that the Court has the task of deciding how justice can be achieved taking into account the rights and needs of the parties. The object to be achieved is that the applicant should have as full a degree of disclosure as will be consistent with adequate protection of the secret. In doing so, the Court will be careful not to expose a party to any unnecessary risk of its trade secrets leaking to or being used by competitors. What is necessary or unnecessary will depend upon the nature of the secret, the position of the parties and the extent of the disclosure ordered. However, it would be exceptional to prevent a party from access to information which would play a substantial part in the case as such would mean that the party would be unable to hear a substantial part of the case, and would be unable to understand the reasons for the advice given to him and, in some cases, the reasons for the judgment. Thus what disclosure is necessary entails not only practical matters arising in the conduct of the case but also the general position that a party should know the case he has to meet, should hear matters given in evidence and understand the reasons for judgment.
[19] In Warner-Lambert Co v Glaxo Laboratories Ltd, a patent infringement case, Buckley LJ observed:3
If in a particular case it is right that disclosure of any facts should be made by one party to his opponent’s advisers before trial, it must normally follow as a matter of course that the opponent should be entitled to know the facts so disclosed. His advisers are his agents in the matter, and strong grounds must be required for excluding the principal from knowledge which his agents properly acquire on his behalf. But this principle must be subject to some modification if trade secrets are to be protected from disclosure to possible competitors. …Where a matter in question in an action, being that matter upon which inspection or disclosure will throw light, is of a technical nature, the party seeking discovery may well require inspection by, or disclosure to, technical and professional advisers. If the matter be of a kind on which the party will be likely to be able with the aid of those advisers to form some kind of view of his own, it seems to me that he should normally be allowed to know as much about the facts as his advisers. If, however, the case were one of so esoterically technical a character that even with the help of his expert advisers the party himself could really form no view of his own upon the matter in question but would be bound to act merely upon advice on the technical aspects, disclosure to him of the facts underlying the advice might serve little or no useful purposes. In such a case a court might well be justified in directing disclosure of allegedly secret material only to expert or professional
2 Roussel Uclaf v Imperial Chemical Industries Plc [1990] FSR 25 at 29-30.
3 Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 (CA) at 360.
agents of the party seeking discovery on terms that they should not, without further order, pass on any information so obtained to the party himself or anyone else, but should merely advise him in the light of the information so obtained. Even so, if the action were to go to trial, it would seem that sooner or later the party would be bound to learn the facts, unintelligible though they might be to him, unless the very exceptional course were taken of excluding him from part of the hearing. Even where the information is of a kind that significance of which the party would himself be able to understand, it may nevertheless be just to exclude him, at any rate during the interlocutory stages of the action, from knowing it if he is a trade competitor of his opponent.
(Emphasis added)
[20] I accept that the nature of the material means it should be regarded as confidential. I did not take Mr Williams on Technopak’s behalf to argue to the contrary. It is therefore necessary for the Court to balance the likely commercial prejudice to Monzeal if Mr Reckin is permitted to view the documents against the prejudice Technopak is likely to suffer in preparing its case if Mr Reckin is not able to view them.
[21] Monzeal’s concern appears to be that Mr Reckin could use the information contained in the CAD models to give Technopak a competitive advantage over Monzeal. The most obvious way in which this might occur would be through Technopak using Monzeal’s designs and models in the future production of its own machinery. That would obviously be to Monzeal’s detriment. Mr Leaning has not expressed his concerns in any detail, however, so it is difficult to determine the level of risk to which the defendants consider Monzeal may be exposed if Mr Reckin is permitted to view the documents. I would therefore categorise it as a general concern that Monzeal may be prejudiced if that occurs.
[22] I consider it significant, however, that the documents in the present case contain technical information. As the highlighted passage from Warner-Lambert set out above4 demonstrates, the courts are likely to permit technical material to be viewed by a person in Mr Reckin’s position where he can form his own view through inspecting technical documents. Mr Reckin’s affidavit is certainly sparse in the information it provides but Mr Leaning has not contradicted Mr Reckin’s assertion that he is the person best placed to view the material on Technopak’s behalf. If
4 At [19].
anything, Mr Leaning appears to accept it in the passage from his affidavit set out above.5
[23] Furthermore, as a director of Technopak Mr Reckin is in a position to assist in making major decisions on Technopak’s behalf. By way of example, having viewed the documents he would be in a position to recommend to his fellow directors that Technopak should abandon its claim if the documents do not support the allegation that there has been a breach of copyright. This was seen as a relevant factor in both Warner-Lambert6 and the more recent decision of this Court in Payment Express Ltd v Paymark Ltd.7
[24] In some cases the courts have held it would be impossible or unrealistic for a party who views confidential material to “ring fence” the knowledge gained from viewing it so as to prevent future harm being inflicted on a competitor.8 I do not see that as a particular danger in the present case provided appropriate conditions are imposed to minimise the risk that Mr Reckin may use the knowledge he gains from viewing the documents to improve Technopak’s machines in the future at Monzeal’s commercial expense.
[25] I do not place any weight on the fact that Technopak has not explained why it cannot use the documents it has already received from Monzeal to advance its claim. Monzeal acknowledges the documents for which confidentiality is sought are relevant to Technopak’s claim. It would not have included them in its affidavit of documents if that was not the case. Technopak is therefore entitled to seek access to the documents notwithstanding the fact that it has already received other documents through the discovery process.
[26] I am therefore satisfied Mr Reckin should be permitted to view the documents provided he signs an appropriate undertaking not to use the knowledge he gains from viewing them for any purpose other than the present litigation. He will also be subject
5 At [8].
6 Warner-Lambert Co v Glaxo Laboratories Ltd, above n 3, at 360.
7 Payment Express Ltd v Paymark Ltd [2019] NZHC 2027 at [35].
8 See eg Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV 2006-485-1600, 12 August 2009 at [20].
to conditions that require him to view the documents at the offices of Technopak’s solicitors or counsel and prohibit him from copying any documents.
[27] I propose to leave it to counsel and the parties in the first instance to reach agreement regarding any further conditions that may be appropriate. Leave is reserved to return to the Court if they are unable to reach agreement regarding these.
Should the defendants’ representatives be permitted to copy the documents?
[28] For the reasons given above it is important that Mr Reckin not be permitted to copy any of the documents that he views. I see no reason, however, why the defendants’ counsel, solicitors and experts should not be permitted to copy the documents provided they do not disseminate them to persons other than those authorised to view the documents. Copying should only occur for purposes directly associated with this proceeding. By way of example, I accept Mr Williams’ submission that it may be necessary for Technopak’s experts and legal advisers to include extracts of relevant documents in briefs of evidence prepared for trial. Its legal advisers may also need to include extracts from documents when giving written advice to Mr Reckin.
[29] I will again leave it to counsel and the parties in the first instance to endeavour to reach agreement regarding any conditions that need to be imposed in relation to the copying of documents. Leave is reserved to seek further directions if they are unable to reach agreement.
Reciprocity of inspection arrangements
[30] Much of the defendants’ opposition to the present application stems from the fact that Technopak has made the same or similar claims for confidentiality of its documents as those advanced by the defendants. I record that Mr Williams confirmed on Technopak’s behalf during the hearing that it would permit inspection of its confidential documents by Monzeal’s representatives on the same terms as it is permitted to inspect Monzeal’s confidential documents.
Costs
[31] I consider Technopak was the successful party in relation to the application and is therefore entitled to an award of costs in its favour. If counsel cannot reach agreement they should file concise memoranda and I will determine costs on the papers.
Lang J