Detection Services Limited v Pickering [2018] NZHC 1617 (3 July 2018)

Last Updated: 28 August 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
	CIV 2015-404-003135 [2018] NZHC 1617
BETWEEN	DETECTION SERVICES LIMITED First Plaintiff
AND	DETECTION SOLUTIONS LIMITED Second Plaintiff
AND	DETECTION SERVICES PTY LIMITED Third Plaintiff
AND	DETECTION SOLUTIONS PTY LIMITED Fourth Plaintiff
AND	STEPHEN CARL JOHN SIMMONS Fifth Plaintiff
AND	CHRISTOPHER LORRAINE PICKERING First Defendant continued over/...

Hearing:	2 July 2018
Counsel:	M Corlett QC for the Plaintiffs A Barker QC for the First and Second Defendants
Judgment:	3 July 2018

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by me on

03.07.18 at 3:30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Dukesons Business Law Langton Hudson Butcher Counsel:

M Corlett QC A Barker QC

DETECTION SERVICES LIMITED & ORS v C L PICKERING & ORS [2018] NZHC 1617 [3 July 2018]

AND	AQATAR LIMITED Second Defendant
AND	JAKE VAN DER PEYL Third Defendant

Introduction

[1] The parties have made applications for further and better discovery, including orders setting aside claims to confidentiality. However, at the hearing on Monday, 2 July 2018 draft consent orders were filed establishing that virtually all issues between the parties pertaining to discovery have been resolved. The only outstanding issues are those related to confidentiality. They are addressed in this judgment.

[2] By consent and in accordance with my conclusions on confidentiality, I make the orders set out at paragraph [30] below.

The claims to confidentiality

[3] The plaintiffs claim confidentiality in relation to four categories of documents:

(a) Financial reports for the plaintiffs from 2012 to 2016;

(b) Plans and other information relating to the new alternative system developed by the plaintiffs;

(c) More general correspondence (including emails) relating to the development of the new DPX system; and

(d) Contracts, correspondence and tender documents relating to Sydney water, Melbourne Water, City West Water, Yarra Valley Water, Central Highland Water and Tyco.

[4] The defendants claim confidentiality in relation to one category of documents, namely the wiring diagrams which Mr Pickering, the first defendant, addresses at paragraphs 60 to 64 of his affidavit of 6 June 2018.

Factual background

[5] The relevant facts are set out in the judgment of Associate Judge Doogue dated 12 April 2017. That judgment¹ dealt with the application for a separate trial.

Relevant legal principles on the issue of confidentiality

[6] Challenges to claims of confidentiality are dealt with in Rule 8.25. A proper evidential foundation should be laid for a claim of confidentiality in respect of each document alleged to be confidential.² This is inherent in terms of Rule 8.15(2)(f).

[7] As Mr Barker QC submitted, the starting point is that a party is entitled to know the case against him. It is not usual for a party to be denied access to documents that form the case against them. It is an exception that should be justified.³

There is nothing I can discern in either the Immigration Act 1964 or the Judicature Amendment Act 1972 which suggests a duty on the part of the High Court in this case to protect the interests of other persons so as to override the right of a party to know the case he has to meet and to deny him the opportunity of challenging it by calling evidence and by cross-examination. And the opportunity which the order gives to counsel to inspect the document

– without disclosure to their clients – is not an acceptable alternative. That course would be appropriate only if jurisdiction distinctly existed to withhold the document from the party himself. It would be appropriate then in order to ameliorate the encroachment by reason of necessity on the application of natural justice in those proceedings. It is a second best and inadequate at that. For how can counsel be expected to conduct a case where he is dealing with his client across an information barrier and where he is deprived of the opportunity to test the secret information by the standard forensic methods of cross-examination and the adducing of further evidence.

[8] In Port Nelson Ltd v Commerce Commission⁴ the Court of Appeal described the approach to claims of confidentiality in the following terms:

We agree in broad terms with the Judge’s approach in the above passages. 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

¹ [2017] NZHC 709.

² Port Nelson Ltd v Commerce Commission [1994] 3 NZLR 435.

3. Ministry of Foreign Affairs v Beneipal [1994] 1 NZLR 758 at 767 per Richardson J; see also Mobil Oil NZ v Ellison 2013 [19].

⁴ n2 above.

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 prejudice may be sufficient, but that will depend on the seriousness of the possible prejudice and on the significance of 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.

[9] Claims for confidentiality need to be carefully reviewed and scrutinised by the Court⁵:

Notwithstanding the observation in McGechan, care must be taken not to introduce a low threshold test to imposing confidentiality restrictions merely because an examination of past cases indicates that restrictions may have been “relatively common”: The Court of Appeal’s thorough examination of the issue in Port Nelson reflects the measured approach, focussed on the likely extent of any prejudice, which is called for.

Analysis and decision

[10] I find that all of the claims of confidentiality should be rejected. In each case the claim for confidentiality is based essentially on mutual distrust and largely unsubstantiated allegations of potential misuse of the documents for improper personal gain.

[11] It has not been demonstrated that the parties will be prejudiced in a significant way, should confidentiality not be ordered. In each case, I conclude that there is sufficient protection arising from the obligations that all of the parties have pursuant to Rule 8.30(4) – i.e. the parties can only use the documents for the purposes of the proceedings and not for any collateral or ulterior purpose. I address that matter further below.

[12] I now turn to address each of the categories of documents in turn.

Financial reports for the plaintiffs from 2012 to 2016

[13] There is no obvious reason why this material should be confidential. The disclosure of company and personal financial information is a standard part of almost

⁵ Business Distributors Ltd v SIA Abrasives Australia Pty Ltd [2014] NZHC 3365.

all commercial litigation. Mr Pickering is not a competitor; he owns a leather works factory. It is a feature of many of the cases that the strongest confidentiality concerns arise between commercial competitors.⁶

[14] Importantly, the financial information Mr Pickering seeks is critical to understanding the substantial claim against him. The quantum of the claim is essentially made up of a claim for employee costs, development costs and lost business opportunity. That claim depends on the financial performance of the relevant plaintiffs over that period. It provides a baseline against which the plaintiff companies potential performance must be judged.

[15] The financial information will likely form a key basis of the evidence at trial, particularly in terms of cross-examination. Mr Pickering cannot credibly be excluded from hearing that evidence and nor should he be. His position is similar to the defendants in Mobil Oil NZ Ltd v Ellison7.

[16] There is no basis for any confidentiality order.

Plans and other information relating to the new alternative system developed by the plaintiffs

[17] Mr Pickering accepts that he spent almost four years developing the DPX system and components in his own time. He says he is the person with the most knowledge of its design, structure and capability.

[18] The plaintiffs claim against him is that it took them four years from 2011 to 2015 to develop a replacement system, with many employees of the plaintiffs working fulltime on the project. It is clear in these circumstances, that the comparability or otherwise of the two systems is one of the primary factual issues in the case.

[19] It seems that the person who is in the best position to assess the similarity or otherwise of the two systems is Mr Pickering. It would be artificial to have a situation

⁶ Intercity Group (NZ) Ltd v NakedBus NZ Ltd [2013] NHC 2261.

⁷ n3 above.

where he describes the system that he developed, but would be unable to discuss with counsel or any expert engaged on his behalf, the similarity of that system with the system developed for the plaintiffs.

[20] Again, there is no basis for any claim of confidentiality.

More general correspondence (including emails) relating to development of the new DPX system

[21] A bundle of these documents was produced to the Court at the hearing. By consent, and in accordance with Rule 8.25(2), I have inspected these documents for the purposes of determining the issue of confidentiality:

[22] These documents include further plans, notes of meetings and the like concerning the development of the plaintiffs’ alternative system.

[23] I find that the disclosure should be determined in the same manner as the categories above. Again, no claim for confidentiality has been made out.

Contracts, correspondence and tender documents relating to Sydney water, Melbourne Water, Citywest Water, Yarra Valley Water, Central Highland Water and Tyco:

[24] I accept the submissions of Mr Barker QC that the documents in this category form an important part of the issue of quantum, namely the claim for lost opportunities arising from the alleged misappropriation by the defendants.

[25] Mr Pickering knew the various water companies having previously been the general manager of the first plaintiff. I accept that he may well have a unique insight into the issues arising from the documents. There is no basis for the confidentiality claimed.

The claim for confidentiality by the first and second defendants in relation to the wiring diagrams

[26] As Mr Corlett QC submitted, the claim for confidentiality by the first defendant arises in circumstances where on Mr Pickering’s own case, he has no intention of further developing either the Inscan system or any other similar system in the leak detection industry. Mr Pickering says that he no longer works in this industry at all.

[27] I accept Mr Corlett’s submissions that there is no basis for any assumption by the first and second defendants that the plaintiffs will use the documents sought for some ulterior or collateral purpose. I also accept that the systems as a whole need to be compared and that it is not necessary to impose restrictions on the plaintiffs’ access to the documents in dispute.

[28] There is no basis to the claim for confidentiality.

Result

[29] All claims to confidentiality as set out in paragraphs [3] and [4] above are set aside in accordance with Rule 8.25(3).

[30] In accordance with the draft consent order and the determinations made in this judgment, I make the following orders:

(a) By 27 July 2018, the plaintiffs are to file and serve an affidavit listing all relevant documents in the following categories, and make those documents available for inspection:

(i) Communications with the company “JD7” from the period 1 January 2009 to 1 January 2016;

(ii) Documents relating to the development of a leak system by the plaintiff similar in function to the DPX system after 1 June 2011 (the alternative system) including:

1. All plans for the alternative system;
2. All correspondence with suppliers or developers of that system;

3. All correspondence to or from or documents authored by the employees referred to in the schedules to the updated witness statement of Stephen Simmons (the employees) that related to the development of the alternative system;

4. The employment contracts including salary reviews for the employees.

(ii) Documents relating to the promotion or use of any leak detection system by the defendants similar in function to the DPX system after 1 June 2011;

(iii) In respect of Sydney Water, Melbourne Water, City West Water, Yarra Valley Water, Central Highland Water and Tyco:

1. All contracts relating to the provision of leak detection services that included any component of leak detection work on trunk main pipelines from 2005 to present;

2. All correspondence with these parties from 2009 to 2015 concerning the provision of leak detection services on trunk main pipelines;

3. All requests from those parties for tenders or for expressions of interest or requests relating to main trunk leak detection services for the period 2009 to 2015.

(iv) Financial statement of Detection Solutions Limited and Detection Solutions Pty Ltd for year end 31 March 2005 to 31 March 2016.
(v) Confirming that no copy of the laptop used by Mr Pickering when employed by the plaintiffs was made before that laptop was disposed of.

(b) By 27 July 2018, the defendant is to file and serve an affidavit listing all relevant documents in the following categories, and make those documents available for inspection:

(i) Any documents additional to those on the memory stick, that the first or second defendant received from the third defendant, including any physical items;

(ii) Any further documents in the period between October 2009 and July 2011 (including but not limited to documents in the categories set out in paragraph 1(a)(iii)(A) – (C) of the plaintiffs’ application for further and better discovery dated 11 May 2018) relating to the development, design, construction or supply of any component of the system referred to by the first and second defendants in the pleading as DPX that are in their control, and to the extent that they are not in their control, stating to the best of their knowledge when the documents ceased to be in their control, who now has control of them or what has happened to them;

(iii) Correspondence prior to 1 September 2011 (if any) relating to the acquisition of the leather business acquired by the first defendant in 2011 following his dismissal including any documents relating to when he first learned the business was available for acquisition and when the first took steps towards the acquisition of the business;

(iv) All communications they had with the freight forwarding company MCL either directly or through representative parties such as lawyers;
(c) Leave is reserved to apply in respect of above matters.

(d) The timetable currently in place is to be varied to provide that the defendants’ briefs of evidence are due by 10 August 2018.

Concluding comment

[31] My decision to reject all the claims to confidentiality in no way authorises any party receiving the discovered documents to use them for any purpose they choose.

[32] The rules of this Court are very clear. A party who seeks discovery of documents gets them on condition that he will make use of them only for the purposes of the proceedings and for no other purpose. In this regard, Rule 8.30(4) provides:

A party who obtains a document by way of inspection or who makes a copy of a document under this rule –

(a) may use that document or copy only for the purposes of the proceeding; and

(b) except for the purposes of the proceeding, must not make it available to any other person (unless it has been read out in open court).

[33] The Court treats any infringement of these obligations very seriously. In accordance with Rule 8.33 it is a contempt of court to use documents provided by way of discovery for some collateral or ulterior purpose. Rule 8.33(1) reads –

(a) every person is guilty of contempt of Court who, being a person against him a discovery order or other order under the subpart has been made, wilfully and without lawful excuse disobeys the order or fails to ensure the order is complied with.

Costs

[34] I assume that the parties are agreed that costs should lie where they fall. In the event that there is no agreement, memoranda are to be filed within seven days.

Associate Judge P J Andrew