Whitehead, Whitehead and Whitehead v Honey New Zealand (International) Ltd HC Auckland CIV 2008-404-2149

[2010] NZHC 901

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-002149

BETWEEN  JOHN EDWARD WHITEHEAD, ROSALENE MARIE WHITEHEAD AND EDWARD IVAN WHITEHEAD AS TRUSTEES OF THE J AND R WHITEHEAD TRUST

Plaintiffs

ANDHONEY NEW ZEALAND (INTERNATIONAL) LTD Defendant

Hearing:         3 May 2010

Appearances: R M Dillon for Plaintiffs

M Pascariu for Defendant

Judgment:      3 May 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL

Solicitors:

Gaze Burt, PO Box 301 251, Albany, North Shore City

Minter Ellison Rudd Watts, PO Box 3798, Auckland

J E WHITEHEAD, R M WHITEHEAD AND E I WHITEHEAD AS TRUSTEES OF THE J AND R WHITEHEAD TRUST V HONEY NEW ZEALAND (INTERNATIONAL) LTD HC AK CIV-2008-404-

002149  3 May 2010

[1]      This matter has come to the Court as an application for further discovery but in reality what has emerged in argument is the inspection of documents for which the defendant claims confidentiality.  The matter that has been argued is whether these documents require greater protection than is provided under the High Court Rules.

[2]      The plaintiffs applied for further discovery and in their application listed a range of documents that they require.  The defendant replied with a further affidavit of documents and in that affidavit of documents it disclosed the documents but also identified classes of documents for which it claims confidentiality.  It has indicated that it will allow inspection of the documents only on specific terms.  Those specific terms were that it required an extensive undertaking to be given.

[3]      The basis for the claim for confidentiality is set out in the affidavit of the defendant’s witness, Mr Pringle.  In the second affidavit of documents, Mr Pringle gives reasons for his belief that the matters are highly commercially sensitive and should be subject to restrictions on inspection, as follows:

a)       The export of honey is a highly competitive business and details of pricing are sensitive commercial issues.  The documents listed in the affidavit for which confidentiality is required are said to relate to the defendant’s operational costs and include pricing of honey purchased and exported and production costs which are said to be highly commercially sensitive, confidential and of significant value to any competitor that might obtain access to it.

b)He also says that pricing and associated financial information in issue are the product of market knowledge and industry experience that the defendant’s business has acquired over many years.   It represents a major investment and is the basis for the defendant’s competitive strategy and business model.

c)       Mr  Pringle  also  says  that  the  defendant  is  likely  to  be  severely prejudiced in the event that such information found its way into the hands of a competitor.  In his words, it would not be over-stating the

position to say this information could completely undermine the defendant’s investment in marketing and strategic development by enabling its competitors to take the benefit of that investment without expending their own funds.

d)He also says that the disclosure of the defendant’s commercial information would also enable its competitors to pre-empt the defendant’s business growth strategy and provide them with an unfair advantage   that   would   seriously   threaten   the   viability   of   the defendant’s business.     If rival exporters were to discover that the defendant had been purchasing and exporting honey at a certain price, in Mr Pringle’s view they may elect to benchmark their prices against the  defendant’s  prices  in  an  attempt  to  acquire  the  defendant’s supplies and customers.

[4]      The documents concerned consist to a large extent of tax invoices and credit notes with customers and also buyer-created tax invoices to suppliers.  In argument, Mr Dillon also identified two pricing lists which he said would be in the public domain.  He also identified a calculation spreadsheet.  As the hearing developed, it emerged that he accepted entirely that the calculation spreadsheet should be subject to special protection and the subject of an undertaking.  Mr Pascariu submitted that confidentiality protections should remain in place for all remaining documents.

[5]      The thrust of the plaintiff’s case was that the High Court Rules give adequate protection for confidentiality already and it is not necessary to provide further protection by way of the confidentiality undertaking sought by the defendant.  It was also argued that, as the undertaking required documents to be returned after the litigation was completed, that obligation falling on solicitors would impose an unnecessary burden on solicitors who would potentially face competing duties to their own client.

[6]      As    both  parties  agreed,  the  starting point  is s 69  of  the  Evidence  Act. Section 69(1) allows the Court to give directions that confidential information not be disclosed under s 69(1)(b).   Directions can be given in terms of s 69(2)(a) if the

Judge considers that the public interest in the disclosure in the proceeding of the communication information is outweighed by the public interest in preventing harm to a person by whom, about whom or on whose behalf the confidential information was  obtained,  recorded  or  prepared  or  to  whom  it  was  communicated.    The defendant in this case says that the public interest in the disclosure is outweighed by the need to prevent harm to it.  It refers to the provisions under the rules under which under  an  affidavit  of  documents  the  party  making  the  disclosure  can  present proposals for the protection of confidentiality and points to the Court’s powers under r 8.31(3).

[7]      I am guided by the decision of the Court of Appeal in Port Nelson Ltd v The

Commerce Commission (1994) PRNZ 344, in particular at pp 348-349:

Relevant documents should generally be made available for inspection.  The fact that they are regarded as being confidential, and would not be made available were it not for the requirements of the litigation is immaterial.  An order for non-disclosure can only be made when the Court is satisfied in terms of r 312 that such an order is necessary.   It must be either apparent from the document in question or shown by other evidence that disclosure would be likely to prejudice the party in some significant way.   Even the possibility of a prejudice may be sufficient, but that will depend on the seriousness of the possible prejudice and on the significance to the document to the issues in the proceeding, and the extent to which limited disclosure may enable the concerns of both parties to be accommodated.

It follows that the documents must be approached on a one by one basis. This is the responsibility of counsel.  In the vast majority of cases counsel should be able to agree whether or not a document is such as to require special protection bearing in mind the restrictions by the use of discovered documents which may apply in any event.

[8]      I note in particular that at p 350 the Court noted the relevance of documents for costings.  The Court said:

On the other hand, costing details may be in a different category as enabling a competitor to structure its own charges to the best competitive effect. These are questions which can only be decided on a document by document basis.

[9]      I accept that apart from the price lists which are obviously in the public domain, the remainder of the documents the defendant is seeking protection for are entitled to the added protection it seeks.  I say this because I accept the defendant’s claims that the documents relate to costings and would be valuable information if

passed to a competitor.  I note the objection of the plaintiffs that there is no risk of that happening.  The plaintiffs say that they are not a trade competitor.  However, costings are matters of great importance to any commercial business.  I accept the defendant’s claims that they have worked out their costings over a significant period of time and that if others were to work out how they did their costings, that would be a commercial advantage now enjoyed by the defendant which would potentially be lost.  In these circumstances it is prudent to give protection by requiring the plaintiffs to give the undertakings which are sought.

[10]     I have discussed the undertaking with Mr Pascariu.   He has proposed  a modification of it to remove any claim to absolute property in information.   This arose out of my discussion with him under which it seems inappropriate to say that there can be property in information.  Confidentiality is protected by obligations, not by property law.

[11]     The need for the extra care in this case is not because the plaintiffs will themselves deliberately seek to break any undertaking.   The extra undertaking is required to bring home to all those who receive the defendant’s confidential documents that these are in fact confidential documents and their confidentiality must be respected.  Once people take the extra step of signing an undertaking, they are far more likely to comply with their obligations and mishaps are less likely to occur.  It is the risk of mishaps and loose lips that is being addressed by this decision today.

[12]     The final point raised by Mr Dillon was that solicitors could be placed in difficulty if they were required to return to the defendant documents containing the confidential information.  I do not regard this as an inappropriate requirement. These documents will need to be held separate from other documents to comply with the undertaking.  The plaintiffs themselves will be under a similar obligation to return documents.   I see no inconsistency in requiring the solicitors to comply with the same obligation as their clients.

[13]     Accordingly,  apart  from  documents  251  and  252,  being  the  pricing  lists which are not to be subject to any special provisions for protection, I direct that

inspection of the documents in Part 3 of the defendant’s affidavits of documents is to take place in terms of the undertaking set out below.

[14]     The  results  of  the  application  are  divided.    The  plaintiffs  applied  for discovery and have now obtained the discovery they sought.   The defendant has succeeded in obtaining protection of the confidentiality it sought.  Both have shared

success.   Costs will lie where they fall.

R M Bell

Associate Judge

1.The  information  contained  in  Honey  New Zealand  (International)  Ltd’s confidential documents listed in Part 3 of the affidavits of documents of Matthew James Pringle sworn 3 September 2009 and 2 February 2010 (Confidential Information) shall at all material times be used in accordance with this undertaking.

2.The Confidential Information contains information of a confidential nature which is of commercial value to HNZ and that loss or damage would be sustained by HNZ if the Confidential Information should be divulged to or should come into the possession of a third party, including any party in competition with HNZ.

3.I shall receive the Confidential Information in the strictest confidence and in good faith and shall be responsible for maintaining its confidentiality and shall not:

(a)      at any time directly or indirectly disclose, distribute or permit to be disclosed or distributed the Confidential Information in whole or in part to any third party;

(b)use the Confidential Information in any way which is in furtherance of competition with HNZ or any of its related companies or for any purpose whatsoever other than in connection with the Proceeding; and

(c)assert rights of any nature in respect of, or contest HNZ’s ownership of the Confidential Information.

4.        The  Confidential  Information  shall  be  used  for  the  sole  purpose  of  the

Proceeding.

5.The Confidential Information will be stored in such a way as to protect it from disclosure to any third party.

6.For the avoidance of any doubt, the parties and their legal advisers and expert witnesses are not prevented in any way from relying on the Confidential Information for the purpose of the Proceeding, and reference in open Court to the Confidential Information (in whole and in part) is not prohibited.  (HNZ reserves its rights to seek appropriate confidentiality orders at the hearing protecting the Confidential Information from disclosure to third parties).

7.I will return to HNZ’s solicitors and/or destroy every copy (in whole or in part) of the documents containing the Confidential Information in my possession  or  under  my control,  including any electronic  copy,  after  the determination of the Proceeding and will confirm in writing to HNZ’s solicitors that I have done so.

Defendant/solicitor/counsel/expert witness for the defendants