JAG Media Limited v Magna Systems Engineering (NZ) Limited [2012] NZHC 3083 (20 November 2012)

Last Updated: 23 November 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-001965 [2012] NZHC 3083

BETWEEN JAG MEDIA LIMITED First Plaintiff

AND BROADCAST INC LIMITED Second Plaintiff

AND MAGNA SYSTEMS ENGINEERING (NZ) LIMITED

First Defendant

AND COUNTRY 99 TV Second Defendant

On the papers

Date: 20 November 2012

_{COSTS JUDGMENT OF GILBERT J}

This judgment was delivered by me on 20 November 2012 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:

Counsel: D B Hickson, Auckland: [e-mail]

C A Murphy, Auckland: [e-mail]

J P Nolen, Auckland: [e-mail]

G Moodley, Auckland: [e-mail]

JAG MEDIA V MAGNA SYSTEMS ENGINEERING (NZ) HC AK CIV 2012-404-001965 [20 November 2012]

[1] The plaintiffs obtained a without notice search order in respect of the first

defendant’s computer systems on 2 May 2012. This order was executed on

9 May 2012 by Mr Spence, an independent digital forensic expert, with assistance from Mr Moodley, who was appointed as the independent solicitor.

[2] In a judgment dated 9 July 2012, Woodhouse J made orders by consent as to how the data obtained in the search was to be dealt with. For technical reasons, Mr Spence was unable to comply with some aspects of this order. In particular, it was not technically possible to delete selected data from the forensic image in the manner contemplated in the consent order. Mr Spence therefore proposed an alternative solution on 18 July 2012, namely that he would agree not to provide, disclose or otherwise report on the material to any party without permission of the Court.

[3] The plaintiffs immediately agreed with this proposal and circulated a draft joint memorandum on 23 July 2012 seeking revised orders.

[4] On 2 August 2012, the first defendant rejected Mr Spence’s proposal and advocated a process for the creation of sub-files containing relevant and discoverable material with the original data being returned to the first defendant. The plaintiffs considered that the first defendant’s alternative approach was impractical and maintained that Mr Spence’s suggestion ought to be adopted.

[5] On 9 August 2012, Mr Spence prepared a report explaining why he did not consider that the first defendant’s sub-file approach was feasible. Mr Moodley filed a memorandum on 13 August 2012 attaching a copy of this report and copies of the correspondence between the parties. He sought a variation to the order as proposed by Mr Spence.

[6] The first defendant filed a memorandum on 17 August 2012 seeking a variation to the order in accordance with its proposal. Alternatively, it suggested that Mr Spence confer with its expert, Mr McKenzie of PwC, to discuss a common approach. The first defendant advised in this memorandum that its approach had been “regularly used by PwC”.

[7] Mr Moodley filed a memorandum on 20 August 2012 maintaining that the revised approach suggested by the first defendant was not appropriate and did not address the issues set out in Mr Spence’s previous report. However, he agreed that the experts should confer.

[8] At a telephone conference on 22 August 2012, I directed that the experts confer and prepare a joint report. Mr Moodley filed a memorandum on

21 September 2012 attaching an agreed statement from the experts advising that the first defendant’s proposal was not practical. They recommended that the forensic images acquired during the search should continue to be held by Mr Spence with appropriate orders or undertakings from Mr Spence to protect the security and confidentiality of the information held. This was effectively what Mr Spence had originally proposed on 18 July 2012.

[9] The first defendant was still not satisfied with these proposed arrangements. In a memorandum dated 3 October 2012 it proposed a detailed procedure to apply to any further searches of the electronic data by Mr Spence to ensure that irrelevant, privileged and confidential material was protected from disclosure.

[10] I convened a telephone conference on 10 October 2012 to deal with the issue. Tentative agreement was reached during the course of that conference but no orders were made to enable counsel for the first defendant to obtain instructions. I subsequently made consent orders following receipt of a joint memorandum of the parties filed on 29 October 2012. These orders required Mr Spence to provide the first defendant with an electronic copy of all data obtained during the original search. It also provided a procedure for protecting irrelevant, commercially sensitive, confidential and privileged information from disclosure in any further reports provided by Mr Spence.

[11] The plaintiffs have met Mr Spence’s and Mr Moodley’s costs for dealing with these issues. They seek an order requiring the first defendant to pay the costs which they say were incurred as a result of the first defendant’s opposition to the variations proposed by Mr Moodley and Mr Spence on 18 July 2012. In particular, the

plaintiffs seek an order requiring the first defendant to pay the sum of $16,383.62, calculated as follows:

(a) Mr Moodley’s costs of $5,034.87. These costs cover the period from

9 July 2012 to 21 September 2012.

(b) Mr Spence’s costs of $9,159.75. These costs cover the period from

17 July 2012 to 20 September 2012.

(c) The plaintiffs’ costs on a 2B basis of $2,189. This includes preparation for the case management conference on 22 August 2012, attendance at that conference and preparation of the memorandum seeking costs.

[12] The first defendant opposes any order for costs. It submits that the usual practice is for the costs of search orders to be reserved pending determination of the substantive proceeding so that the merits of the application and any subsequent steps can be assessed in the context of the overall claim. However, it acknowledges that the Court has a discretion to award costs on an interim basis applying usual costs principles.

[13] The first defendant submits that no costs should be awarded against it because the approach suggested by the experts, the independent solicitor and the plaintiffs failed to address adequately how the first defendant’s private information would be protected from disclosure. It argues that it acted reasonably in exploring various avenues for protection of this private information. It points out that the agreed protocol in the consent variation orders goes beyond the proposal advanced by Mr Spence on 18 July 2012 in that it stipulates a methodology for protection of the first defendant’s private and confidential material in the event of further searches of the data and reports by Mr Spence.

[14] The first defendant also takes issue with some of the costs claimed. It argues that some of these costs do not relate to the first defendant’s proposal. It also argues that one of Mr Spence’s invoices appears excessive when compared with

Mr McKenzie’s costs. I am satisfied, based on Mr Moodley’s memorandum filed on

7 November 2012, that Mr Spence’s costs are reasonable.

[15] The parties must share responsibility for the fact that the original consent orders could not be complied with because they were, in part, not technically feasible. The solution proposed by Mr Spence was practical and provided sufficient protection in relation to the first defendant’s private and confidential documents. The protocol now in place and embodied in the consent variation orders, may or may not be required, depending on whether it becomes necessary for Mr Spence to undertake further searches of the electronic data or provide further reports in relation to it. The costs involved in establishing that protocol may or may not have been necessary. These costs should be reserved and dealt with after final disposition of the case.

[16] However, most of the costs claimed by the plaintiffs were incurred in responding to the “sub-file” approach proposed by the first defendant. Mr Spence, Mr Moodley and the plaintiffs maintained from the outset that this approach was technically impractical. Their position was subsequently vindicated as confirmed in the joint report from the experts. I consider that the first defendant should pay the costs incurred in relation to this unworkable proposal. I propose to fix a global sum and direct that it be paid by the first defendant. Taking all matters into account, I consider that the first defendant should pay to the plaintiffs the sum of $12,000

_{towards these costs. I make an order accordingly.}

M A Gilbert J