Gelder v Innate Immunotherapeutics Limited [2015] NZHC 1144 (27 May 2015)

High Court of New Zealand

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Gelder v Innate Immunotherapeutics Limited [2015] NZHC 1144 (27 May 2015)

Last Updated: 26 June 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-004338 [2015] NZHC 1144

BETWEEN	FRANK BAILEY GELDER First Plaintiff PROBE INTERNATIONAL INC Second Plaintiff
AND	INNATE IMMUNOTHERAPEUTICS LIMITED Defendant/Applicant
AND	CHRISTOPHER JOHN O'LOUGHLIN Non-Party

Hearing:	26 May 2015
Appearances:	B Henry for Plaintiffs E Grove for Defendant/Applicant Non-Party in Person
Judgment:	26 May 2015
Reasons:	27 May 2015

_{REASONS JUDGMENT OF VENNING J}

This judgment was delivered by me on 27 May 2015 at 11.45 am, pursuant to Rule 11.5 of the High

_{Court Rules.}

Registrar/Deputy Registrar

Date...............

Solicitors: Shanahans, Family and Property Law, Auckland

Jones Young, Auckland

Copy to: B Henry, Auckland

E J Grove, Auckland

C J O’Loughlin

GELDER v INNATE IMMUNOTHERAPEUTICS LIMITED [2015] NZHC 1144 [26 May 2015]

[1] The defendant seeks an order for particular discovery against Mr O’Loughlin

(the non-party). The application is opposed by the non-party.

[2] The non-party is not opposed in principle to the disclosure and inspection of documents in his control but seeks a number of conditions to the disclosure, particularly that the defendant will not use the material to take any action against him.

Background

[3] The first plaintiff, Dr Gelder is a scientist. He is the sole director of the second plaintiff, Probe International Inc (Probe). Probe is incorporated in the United States and manufactures biotechnology products. The plaintiffs and the defendant entered a royalty and option agreement in August 2000. The non-party was an employee of the defendant from 2000 until about December 2011.

[4] The plaintiffs allege the defendant transferred approximately 300,000 ml of “research antibody inventory” to the non-party under an employment settlement. The defendant denies the transfer of the research material to the non-party but says:

(a) it offered its surplus research material to both the non-party and Mr Gelder in November 2009 as the material was going to be destroyed; and

(b) in November or December 2009 the non-party and Mr Gelder jointly uplifted an unknown quantity of research material which had minimal commercial value.

The application

[5] The application seeks an order requiring the non-party to provide particular discovery of documentation concerning his uplift, storage, sale and/or attempted sale and/or disposal of research materials from the defendant. The non-party opposes the discovery application on the basis that:

(a) he received the material as part of a confidential commercial settlement between himself and the defendant in December 2011;

(b) the material contains information of a valuable commercial opportunity transferred to him;

(c) the defendant has transferred material to him on three occasions and has had the opportunity to undertake an inventory of all material and documentation transferred to him but has negligently failed to do so;

(d) he is concerned to ensure the defendant does not use the material, equipment and documentation in his possession to negate the commercial employment settlement concluded with the defendant either through competition or by commencing litigation.

[6] For those reasons the non-party, while prepared to agree to discovery, is only prepared to do so on condition that the defendant agree not to commence litigation against him in the future or, alternatively, on condition that any order the Court makes confirms the Court will not exercise its inherent jurisdiction to permit the defendant to take any steps against the non-party in the future.

[7] The plaintiff has already reached an accommodation with the non-party. Mr Henry confirmed that he has inspected the documents available to the non-party. They fall into four categories:

(a) records of sales by the non-party when employed by the defendant;

(b) records of sales by the non-party after the termination of his employment;

(c) an inventory of all material held by the non-party; and

(d) agreements between the defendant and the non-party.

[8] The documents sought by the defendant are relevant to a number of issues in the proceeding, namely;

(a) whether the materials transferred to the non-party have had or are likely to have had any commercial value and if so what that value may be;

(b) they may indicate the nature and quantities of material transferred by the defendant to the non-party and his subsequent dealing with them; and

(c) they may record the costs of storage and processing and sale or attempted sale of the materials.

[9] They are documents that, if in the control of the plaintiff, (or for that matter the defendant), would have been discoverable.

[10] The only issue raised on the application is whether they should be discovered on the terms sought by the non-party. While I understand the practical force of the non-party’s concern and his reliance on the settlement agreement concluded with the defendant that does not, in law, support the terms sought by him as a condition of his complying with an order for discovery.

[11] The issue of use of documents discovery during the litigation process is provided for by the High Court Rules. Rule 8.30 restricts the use of documents discovered to “only for the purposes of the proceeding”. If the defendant wished to use the documents for any other purpose, including a claim against the non-party, leave of the Court would be required. On any such application for leave the Court would take into account the terms of the settlement agreement between the non-party and the defendant that the non-party relies on. The settlement agreement is, however, no answer to the application for discovery itself.

Orders

[12] After I indicated that I proposed to make an order for discovery in terms of the application I took an adjournment and the parties reached an agreement as to the terms of the order. The terms are as follows:

(a) The non-party will discover all materials relating to:

(i) sales, attempted sales and marketing of the materials received from Innate both pre and post 2011;

(ii) any test documentation relating to the materials;

(iii) any documentation relating to the storage, processing or disposal of the materials;

(iv) any correspondence with the first plaintiff at any time regarding the materials;

(v) the inventory already prepared on the materials.

(b) The non-party shall not be required to discover individual labels/indicators on the materials but agrees he will give the applicant’s counsel (and one employee from the applicants not being Mr Wilkinson) reasonable opportunity to inspect materials to check against the inventory.

(c) The applicant shall pay the non-party’s reasonable legal costs incurred in relation to discovery and the applicant’s reasonable costs of assisting his lawyer with the discovery and the applicant’s reasonable costs of providing access to the materials to check against the inventory.

(d) Discovery can be made by class or category basis.

(e) Discovery and inspection is to be completed within three weeks by 16

June 2015.

(f) The inventory is to be provided by 2 June 2015.

[13] In addition, the disclosure of the documents is to be on the basis:

(a) the defendant is not to use any documentation discovered by the non- party in competition with the non-party; and

(b) I record that the defendant acknowledges that the information of the non-party is his confidential information, and is commercially sensitive.

[14] Leave reserved to all parties to apply on 48 hours notice.

Costs

[15] The application was reasonably brought but the concerns expressed by Mr

O’Loughlin were not unreasonable either. Costs are to lie where they fall on this application and hearing.

Venning J