E-BLENDED LEARNING SOLUTIONS LTD V DEVANEY HC NWP CIV-2012-443-000461

E-BLENDED LEARNING SOLUTIONS LTD V DEVANEY HC NWP CIV-2012-443-000461 [14 September 2012]IN THE HIGH COURT OF NEW ZEALANDNEW PLYMOUTH REGISTRYCIV-2012-443-000461[2012] NZHC 2382BETWEEN E-BLENDED LEARNING SOLUTIONSLIMITEDApplicantAND ALEXANDER PETER ST JOHNDEVANEYFirst RespondentAND AGATA MALGORZATA OLEKSIAKSecond RespondentAND CREATIVE LEAP LIMITEDThird RespondentHearing: 13 September 2012(Heard at Auckland (by telephone))Counsel: A Dennett and A McGowan for ApplicantT Wano, L Wallace and H Froude for RespondentJudgment: 14 September 2012JUDGMENT OF VENNING JThis judgment was delivered by me on 14 September 2012 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors: Dennis King Law, New PlymouthGovett Quilliam, New PlymouthIntroduction[1] There are two applications before the Court:(a) an application by the first, second and third respondents to vary the injunction orders made on 6 September 2012; and(b) an application by E-Blended Learning Solutions Ltd (E-Blended) for particular discovery.Background[2] For present purposes the background to these proceedings is sufficiently set out in the judgment of Heath J dated 6 September 2012.[3] Following that judgment and the orders/directions therein I convened atelephone conference with counsel on 11 September 2012. At that conference Imade further directions in relation to the respondents' application to vary theinjunction orders granted by Heath J on 6 September 2012. The respondents havenow filed their application to vary. The application is supported by affidavits of MrDevaney and Ms Oleksiak. The respondents also oppose E-Blended's application forparticular discovery.[4] E-Blended has filed a notice of opposition to the application to discharge or vary the injunction.Application for adjournment[5] At the outset of the hearing on 13 September 2012 Ms McGowan sought an adjournment of the hearing. She submitted that E-Blended would need until 18 September 2012 to file affidavits in response. After hearing from counsel I declined the application for adjournment. The injunction was obtained on an ex-parte basis. The respondents have responded promptly to a tight timeframe to bring the application to vary the injunction orders. While the respondents' affidavits wereserved at 5.30 p.m. rather than by 5.00 p.m. I do not consider that material, particularly when the issues underlying the application for discharge to vary were largely discussed during the course of the telephone conference of 11 September. Innoting that I accept that the application to vary is more extensive than discussedduring that call. However, I am satisfied that the matter should be dealt with ratherthan adjourned further, particularly given the nature of the injunctive orders.The application to vary[6] The respondents seek to vary the existing injunction order by deleting the following paragraphs:(a) 4.1.1;(b) 4.1.4;(c) 4.1.5;(d) 4.1.6;(e) 4.1.7;(f) 4.1.9;(g) 4.2 – apart from the first sentence.[7] The application is opposed by E-Blended. Ms McGowan submits that by varying the introductory words of clause 4.1 in the following way any proper concerns the respondents may have will be addressed:The respondents (or an agent acting on behalf of any one or more of them) are restrained from using any documents or confidential information of the applicant which they hold or to which they have access, including relating to the following: [which replaces "being of the following type"].The nature of the substantive claim[8] E-Blended's claim against the respondents is based on a breach of a duty ofconfidentiality and an abuse of confidential information obtained by the respondents during the time they were seconded to work for E-Blended.[9] The first and second respondents were employed by Practical Services Limited (PSL), a company associated with E-Blended. Their employment contracts with PSL included the following clause:19.0 Confidential Information19.1 During the period of employment the Employee will from time to time be exposed to Information relating to the business of the Employer (PSL) and its clients.Any such information confidential to the business of PSL and/or its clients, including financial or any other Information relating to PSLor its client's business, technical Information, client or suppliers'lists or any confidential personal Information as defined in the Privacy Act 1993 as may be acquired by the Employee in the course of his/her employment, may not be divulged to any individual, person or company during or after the cessation of employment. This Information could include Information pertaining to proceduresused in PSL or its client's business. Any of PSL or its client'sprocedures and information with which the Employee comes into contact during his/her employment, including, but not limited to, all methodologies, systems, designs, product/services ideas, resource manuals, teacher assessments, evaluation resources, processes and/or procedures developed by the Employee during the course of employment, shall remain the property of the Employer. During the employment and for twenty-four months thereafter, the Employee shall not use any of this Information for his/her own gain or anyother person's gain without the prior permission of the Employer.Any breach of the foregoing may constitute grounds for summary dismissal, or could give rise to post-employment litigation. ...[10] For present purposes I accept that E-Blended is a client of PSL so that the relevant provisions of the clause apply to it.[11] There are three essential elements required to establish an action for breachof confidence as claimed in the statement of claim:(a) the information must have the necessary quality of confidence about it;(b) the information must have been imparted in circumstances importing an obligation of confidence; and(c) there must be an unauthorised use or threat of unauthorised use or disclosure of that information to the detriment of the party communicating.[12] The focus of this application to vary is on the first of those elements, and particularly the identification of just what confidential information E-Blended seeks to protect.[13] Confidential information generally includes both "knowhow" andcommercially sensitive information. To establish that such information is secret orconfidential E-Blended must have expended some skill and effort to produce theinformation in question. E-Blended should also be able to identify the confidentialinformation with sufficient clarity to support its claim. In the case of concepts andideas it is necessary for it to establish that they are the result of some effort and skillby E-Blended and are accordingly of value to E-Blended.[14] Fundamental to a claim based on breach of confidential information is the concept that the information must have the necessary quality of confidence about it so as to categorise it as secret or confidential so that disclosure to the public at large can be and has been regulated.[15] Against those general principles I consider the particular clauses.Clause 4.1.1 – the clients of [E-Blended][16] This clause cannot survive the challenge. It lacks the necessary degree of confidentiality. There is no suggestion that the respondents have taken client lists. The principal clients of E-Blended are well known, for example Vodafone and Southern Cross Healthcare. As Mr Wano pointed out, on E-Blended's facebook page there is a reference to its client Vodafone and members of the Vodafone management.Ms McGowan's suggested alteration of the introductory wording does not resolvethe issue. The proposed redraft begs the question as to what confidential information it is said relates to the clients. I accept that the value of the projects carried out by E- Blended for its clients and the costings of such projects is in the nature of confidential information. But those matters are covered by clauses 4.1.2 and 4.1.3. Clause 4.1.1 is to be deleted from the order.Clauses 4.1.4 and 4.1.54.1.4 – The methods, processes, and knowhow developed by the applicant for its business of multimedia development and provider of educational resources and online educational development throughout New Zealand.4.1.5 – The methods, processes, and knowhow developed by the applicant in relation to gamification software, which is designed to teach persons desired knowledge via games in an electronic and usually online format.[17] Mr Wano submitted that these clauses are too broad and that they could cover information that is either part of general industry knowledge or is otherwise based on publicly available information.[18] Counsel advised that gamification is essentially "making learning fun" by turning an event into a game. Each presentation is specific to a particular client and/or particular function. A variety of medium are used. E-Blended says it has developed its own software programs in relation to its presentations.[19] I accept that to the extent the underlying information applied to produce the gamification software or the underlying information required for E-Blended'smultimedia development is common knowledge then that information itself cannot be confidential information. However, what would properly be confidential information is the way that E-Blended has processed or developed that underlying information or software for the purposes of providing its educational resources. In other words the enhancements that E-Blended has made to the base information and how it has done that could be confidential information.[20] To take a simple example, if in the course of presenting its programs, E- Blended used Microsoft word documents or slideshows then of course the respondents cannot be prevented from using Microsoft word or slideshows. It is thecontent of the documents and slideshows, and in the case of the software, the program and how it is put together for presentations that is the confidential information. For E-Blended's present purposes I consider that the clauses 4.1.4 and 4.1.5 can remain if they make it clear that what is injuncted is the use of information as to the methods, processes and knowhow (enhancements) developed by E-Blended for its presentation of online educational development and electronic games. The respondents should be prevented from using the knowledge of such presentations to the extent they include confidential information of that nature in the future. I consider the matter can be clarified sufficiently as follows:4.1.4 The methods, processes, and knowhow developed by E-Blended for its business of multimedia development and provider of educational1 resources and online educational development throughout New Zealand in relation to E-Blended's presentations and proposed presentations known to the first and second respondents.And similarly:4.1.5 The methods, processes, and knowhow developed by the applicant in relation to gamification software, which is designed to teach persons desired knowledge via games in an electronic and usually online format in relation to E-Blended's presentations and proposed presentations known to the first and second respondents.The injunction is varied accordingly.Clauses 4.1.6 and 4.1.74.1.6 – That the Southern Cross Healthcare Group (Southern Cross) was an important and valuable client of the applicant and was likely to be an important source of ongoing revenue for the applicant.[21] Clause 4.1.7 is in similar terms but by reference to Vodafone. Again, with respect, these clauses do not sufficiently identify what confidential information is sought to be protected. They are just too general. It would be apparent to anyone in the service industry that Southern Cross Healthcare Group and Vodafone could be important and valuable clients. The level of business and expected fees to be incurred from such clients is properly confidential information but the general knowledge that they are important clients cannot be confidential information. Those clauses are deleted.Clause 4.1.94.1.9 – E-Blended's [contacts] in its clients including [E-Blended's] contactsin Southern Cross and Vodafone.[22] Again I am unable to accept that the knowledge that the respondents would have gained of the contact people within Southern Cross and Vodafone (and other clients) is confidential information as such. The contacts for such managers in such organisations is information that could be obtained by any third party ringing Southern Cross or Vodafone, outlining the proposal and asking who they should speak to. Further, as noted, in relation to Vodafone at least E-Blended has referred to the contacts on their facebook page. Clause 4.1.9 is deleted.Clause 4.2[23] The respondents accept they are bound by the first sentence of cl 4.2 and will comply with the injunction preventing them contacting (directly or indirectly) any known clients of the applicant including Southern Cross Healthcare and Vodafone. However, they object to being required to send a copy of the order to such clients and a copy to E-Blended.[24] Again, I accept there is force in the respondents' application to vary the second part of this clause. Mr Devaney and Ms Oleksiak have both deposed as to their level of contact with E-Blended's clients after their resignation from PSL. Thecontact was relatively innocuous at least in relation to Vodafone and Southern Cross. I accept that in relation to "Training for You" the contact arose out of work that had been originated by E-Blended. However Ms Oleksiak has set out the detail of her contact in her affidavit.[25] I am satisfied that E-Blended's position is appropriately covered for thefuture by the respondents' agreement to abide by the order in the first sentence of4.2, particularly that they would not contact directly or indirectly known clients of the applicant. On the basis of the evidence before the Court E-Blended has the information that would have been required under the second part of clause 4.2 in anyevent. I set the second part of clause 4.2 aside. (To avoid doubt, only the first sentence remains).Application for particular discovery[26] Mr Wano submitted there was no need for the urgent orders sought by E- Blended. I accept that some, at least, of the need for urgency has gone with the issue of the injunction but, as was disclosed by the affidavits of Mr Devaney and Ms Oleksiak, there has been some limited contact with clients which could have raised issues of the use of confidential information. Further, the information sought by way of discovery in relation to clauses 1.1.4 and 1.1.5 in particular (without excluding the information in relation to the other matters that remain) may assist the parties to further clarify what, if any, further variations ought to be made to the orders. I therefore grant the application for particular discovery, relating as it does to all documents and confidential information belonging to E-Blended and relating to the orders (as amended above).[27] I accept the time for compliance can be extended. The time for compliance is to be 10 working days from delivery of this decision.Costs[28] I reserve the issue of costs generally on both the application to vary and the application for discovery.Further review[29] The Registrar should list this matter for review and further direction at a telephone conference towards the end of September before an Associate Judge or in October when a Judge is next in New Plymouth.__________________________ Venning J