City Sales Limited v Campbell [2015] NZHC 3058 (4 December 2015)

Last Updated: 27 January 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-002331 [2015] NZHC 3058

BETWEEN	CITY SALES LIMITED Plaintiff
AND	MICHAEL JOHN CAMPBELL Respondent

Hearing:	30 November 2015
Appearances:	A J Gilchrist for Plaintiff L Ponniah for Respondent
Judgment:	4 December 2015

_{JUDGMENT OF COURTENY J}

This judgment was delivered by Justice Courtney on 4 December 2015 at 3.00 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

_{Date..........................}

CITY SALES LTD v CAMPBELL [2015] NZHC 3058 [4 December 2015]

Introduction

[1] City Sales Ltd (CSL), is a licensed real estate agent that specialises in the sale of apartments in central Auckland. The defendant, Michael John Campbell, is a licensed real estate salesperson. He was an independent contractor to CSL between August 2011 and August 2015. He now contracts to another real estate agency. CSL asserts that he has used confidential information from its internal database to contact prospective clients. It has applied for interim relief seeking a mandatory injunction requiring Mr Campbell to disclose the names of the people to whom he sent an email flyer shortly after leaving CSL and an order restraining him from further contact with any of those whom CSL considers to be its clients.

[2] The principles that apply to applications of this kind are well established. The plaintiff must show that there is a serious question to be tried and that the balance of convenience favours granting the relief sought.¹ In considering the balance of convenience relevant considerations include the adequacy of damages if relief is not granted, the relative strength of the respective cases and the potential effect of the decision on third parties.² Finally, the Court must step back and look at the overall justice of the case.

Background to the application

[3] It is common ground that CSL owns an extensive database which it has built up over many years. CSL’s managing director, Martin Dunn, explained that in assembling the database his staff used three software systems as well as Land Transfer Office data, cross-referencing publicly available information from White Pages and Google to match up addresses and owners. Mr Dunn estimates that there are currently about 26,000 apartments in the central and fringe Auckland areas. He considers that his database includes a substantial proportion of those apartments and their owners. As an indication of the size of the database CSL emails approximately

_{20,000 letters every fortnight to potential clients.}

¹ _{Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA).}

² Wellington International Airport v Air New Zealand Ltd HC Wellington CIV-2007-485-1756,

30 July 2008 at [6] and [13].

[4] It is, however, evident from Mr Campbell’s unchallenged evidence on the point that the database also includes the contact details of people who are not the owners of city apartments. Mr Campbell has described the “farming” of email addresses by which any person emailing a CSL agent, even on a personal matter, has his or her contact details automatically added to the CSL database. Mr Dunn implicitly acknowledges this to be the case because he has accepted that there may well be personal contacts of Mr Campbell on the database in respect of whom no duty of confidentiality would apply.

[5] CSL is alert to the risk of confidential information being taken from its database and has systems in place to prevent this. One is the restriction on staff access so that agents can only access one owner at a time and must record a “response” before being able to move on to another owner and agents are not permitted to contact an owner within three months of another CSL agent having contacted that person. Further, the system has a function that automatically flags “unusual” activity by any agent.

[6] Mr Campbell went to Europe for six weeks between 3 July and 10 August

2015. While he was away the CSL system produced database alerts showing “unusual” access. CSL terminated Mr Campbell’s access to the system. On his return Mr Campbell discovered that this had happened. He took the view that this was a repudiation of his contract and gave notice of termination. The next day,

13 August 2015, CSL wrote to Mr Campbell reminding him of his obligations under his contract, particularly in relation to confidential information.

[7] On 11 September 2015 Mr Campbell emailed a flyer to 317 people advising of his move from CSL to another agency. Some of these people contacted CSL, which led to this proceeding.

A serious question?

[8] Mr Campbell had a written contract with CSL. Clause 16 was a confidentiality provision which included:

16.1 Except in the proper performance of the contractor’s duties during the continuation of his contract the contractor will not at any time either directly or indirectly utilise or divulge to any person confidential information concerning the business of the company. The contractor will endeavour to prevent the publication or disclosure of any knowledge of information which has been acquired or may have already been acquired during the course of this contract concerning the business, affairs, property, customers, clients or principals of the company. This restriction will continue to apply after the termination of this contract without limit in point of time but will cease to apply to knowledge or information which comes into the public domain without breach by the contractor of this restriction.

...

16.4 “Confidential information” means and includes all or any one or more of the following but is not limited thereby; client names and details, listing details, sales, information, know-how, trade secrets, tactical or technical information of any kind, sales, marketing and financial information both historic and projected or strategic about the company.

[9] Although Mr Dunn initially expressed the “real fear that the Defendant has stolen my entire database for his own use or to sell/rent to others” he has now accepted that Mr Campbell’s email flyer was sent to only 317 people. He no longer expresses any fear that his entire database has been compromised. Nor does he assert that the details of every one of the 317 are confidential to CSL. However, he maintains that a proportion of the names are confidential information. He maintains that CSL cannot assess the extent of Mr Campbell’s breach or CSL’s loss until he knows all 317 names.

[10] In asserting that there is a serious question as to whether Mr Campbell has acted in breach of his obligation CSL relies on: (1) Mr Campbell’s “unusual” activity on the database in the weeks preceding his resignation; (2) the fact that Mr Campbell accepted a listing from vendors for whom CSL had previously acted; and (3) Mr Campbell’s contact with three people whose details are held on CSL’s database³.

[11] I start by considering the evidence about Mr Campbell’s “unusual” activity

on the database. Mr Campbell denied downloading or copying the CSL database. He explained that he had deliberately made an effort to continue contacting

3. Mr Dunn has deposed that more than these three people contacted CSL but did not want to become involved in the legal proceedings.

prospective clients while he was away so as to ensure an ongoing work stream when he returned. In response, Mr Dunn produced database alerts for six of the days when Mr Campbell was away, three in July and three in August. These alerts were in form of automated emails. Each showed “a daily average” figure and a figure for a specific 24-hour period. The daily average figures ranged from six to eight. The actual usage figures ranged from 18 to 37. Mr Dunn also produced an email from (presumably) another staff member of CSL, Jesse Dunn, containing a graph that purported to show Mr Campbell’s actual computer access between February and August 2015.

[12] I decline to place significant weight on the database alerts because there was no evidence or explanation as to how the “daily average” figure was identified or why the averages varied. As a result there is insufficient context from which to draw an inference as to the nature of the actual use figures. I place no weight on the graph attached to Jesse Dunn’s email because there was no evidence as to who prepared it or how it was prepared. Indeed, its accuracy seems doubtful because it does not show any usage at all during February and most of March and no usage for most of May, which seems very unlikely.

[13] Moreover, Mr Campbell deposed that CSL expects sales staff to access the database and seek to make approximately 20 calls per day. Allowing for those owners whom staff were not permitted to contact (because of recent contact by other agents) and those who could not be reached, Mr Campbell considered that agents needed to access the database an average of 60 times per day in order to make 20 calls. He also described in detail the process required to log in, which was relatively cumbersome. Mr Dunn did not comment on any of this evidence.

[14] The second aspect CSL relies on is the fact that after Mr Campbell began work for another real estate agent he listed and sold an apartment that had been previously listed with CSL. Mr Campbell denies approaching the vendors and maintains that they contacted him. Mr Campbell deposed to the owners’ willingness to provide an affidavit if necessary. Apparently, however, it was not necessary because in Mr Dunn’s subsequent affidavits he did not challenge Mr Campbell’s explanation as to how he came by the listing.

[15] I turn next to the three identified recipients of Mr Campbell’s email flyer, Mr Manu Bhanabhai, Mr Reginald Watt and Dr Wallace Bain. Mr Bhanabhai is a solicitor who acts for CSL. The email with the attached flyer sent to Mr Bhanabhai is annexed to Mr Dunn’s first affidavit. There is no affidavit from Mr Bhanabhai himself. Mr Campbell’s explanation for contacting Mr Bhanabhai was that Mr Dunn had provided Mr Campbell with Mr Bhanabhai’s details, handwritten on the back of Mr Dunn’s business card, a copy of which he annexed to his affidavit. Mr Dunn acknowledges that the business card is one that he used up to 2012 and that Mr Bhanabhai’s name and phone number on the back of the his understanding, Mr Campbell never had any other contact with Mr Bhanabhai.

[16] Clearly, Mr Campbell obtained Mr Bhanabhai’s name and telephone number during his time with CSL, but not from CSL’s database and, on Mr Dunn’s evidence, not as a client of CSL. Since there is no affidavit from Mr Bhanabhai it is impossible to know the nature and extent of any other contact between him and Mr Campbell.

[17] Mr Watt did provide an affidavit. He confirmed the receipt, unsolicited, of Mr Campbell’s email and said that, although he had previously met Mr Campbell when he had attended CSL auctions with another agent, he had never given Mr Campbell his contact details. In fact, Mr Watt’s recollection was incorrect. Mr Campbell said that he had obtained Mr Watt’s contact details from a sale and purchase agreement in relation to a property that he had listed while at CSL and, further, that he had had lunch with Mr Watt in the presence of other CSL agents. He denied accessing the CSL database to obtain Mr Watt’s details. In a later affidavit Mr Watt acknowledged being the purchaser under the sale and purchase agreement that Mr Campbell referred to but continued to deny that he had ever provided Mr Campbell with his contact details and said that his dealings in relation to the property had been with another agent (Mr Campbell having been the listing agent only). He refers to having been invited to lunch by another CSL agent and finding that other agents, including Mr Campbell, were also at that lunch.

[18] Dr Bain did not provide and affidavit but Mr Dunn produced Dr Bain’s email attaching a copy of Mr Campbell’s email flyer and advising that he had never met

Mr Campbell nor done any business with him. Mr Campbell’s explanation was that he obtained Dr Bain’s details “from declaring a contract unconditional”. There were no other details provided and nor was there any response to that assertion from either Mr Dunn or Dr Bain. In the circumstances, there is no basis on which I could conclude that Dr Bain’s details were obtained from the CSL database. However, Mr Campbell’s explanation suggests that Dr Bain’s name appeared as purchaser on an agreement for sale and purchase in the same way as Mr Watt’s name.

[19] There is an obvious issue regarding Mr Watt and, possibly, Dr Bain; although Mr Campbell denies having obtained their contact details from the CSL database, he clearly did obtain at least their names (their contact details may well have been accessible through other public means) from the sale and purchase agreements they executed. Mr Gilchrist, for CSL, submitted that the sale and purchase agreements were the property of CSL and the retention and use of them to obtain contact details was as much a breach of the confidentiality agreement as accessing the database for that purpose. At this stage, at least, I cannot accept that argument.

[20] The only relevant breach pleaded in CSL’s statement of claim is the taking of “confidential client information”.⁴ But, as purchasers, neither Mr Watt nor Dr Bain were clients of CSL; in each case CSL’s client was the vendor of the properties. It might be arguable that the names of purchasers are within the ambit of the definition of confidential information but that is not obviously the case. Nor is it clear that copies of the sale and purchase agreements belonged exclusively to CSL. Mr Campbell said that he retained them because he was required to by the REAA Code of Conduct r 10.12. Mr Dunn contends that r 10.12 only required CSL, as the

real estate agent, to retain the agreements, not Mr Campbell, who was the salesperson. This argument seems to me to miss the point. CSL’s obligation to retain a copy of the contract says nothing about ownership of the copy held by the salesperson. That is a question to be determined by reference to Mr Campbell’s contract. Clause 16 is silent as regards sale and purchase agreements. It might be

_{arguable that a sale and purchase agreement falls within the definition of confidential}

4. There is a second cause of action for breach of the Fair Trading Act 1986 which does not relate to confidential information.

information but that is a question of interpretation of the clause and I was not addressed on the point.

[21] On the evidence adduced, the only question that arises, it is whether the use of sale and purchase agreements to obtain buyers’ names is a breach of cl 16. But given the ambiguous terms of cl 16 I do not regard that as a serious question for the purposes of considering injunctive relief. No serious question arises as to the central allegation relating to Mr Campbell’s use of the database. I do not have sufficient reliable evidence to conclude that there was unusual activity by Mr Campbell or that his accessing of the database should be regarded with suspicion.

Balance of convenience

[22] Even if a serious question had arisen, the balance of convenience would plainly favour Mr Campbell. He is continuing to work as a real estate agent and, as such, needs to have access to his own contacts. Mr Dunn acknowledges that some of these 317 names are not confidential information protected by cl 16 even though they appear on CSL’s database and there is insufficient evidence from which to conclude that any of the contacts are genuinely confidential to CSL.

[23] If it is ultimately shown that obtaining names from sale and purchase agreements is a breach of cl 16, it would be a straightforward matter to identify and, if necessary, quantify any loss. I acknowledge Mr Gilchrist’s concern that Mr Campbell has not deposed to owning any significant assets, which raises doubt about the extent of his ability to meet an award of damages. On the other hand, any damages are most likely to be quantified by reference to lost commission and there is no basis on which to think that lost commission associated with a finite group between August 2015 and the eventual date of trial will be especially high.

Overall justice of the case

[24] Given my conclusions above, there is no need to consider the overall justice of the case.

Result

[25] The application is refused. Mr Campbell is entitled to costs on a 2B basis. [26] The matter is adjourned to the Duty Judge list on 10 December for

_timetabling.

P Courtney J