DOTCOM V TWENTIETH CENTURY FOX FILM CORPORATION, DISNEY ENTERPRISES INC, PARAMOUNT PICTURES CORPORATION, UNIVERSAL CITY STUDIOS PRODUCTIONS LLP, WARNER BROS. ENTERTAINMENT INC CA451/2014 [2014] NZCA 426

DOTCOM V TWENTIETH CENTURY FOX FILM CORPORATION, DISNEY ENTERPRISES INC, PARAMOUNT PICTURES CORPORATION, UNIVERSAL CITY STUDIOS PRODUCTIONS LLP, WARNER BROS. ENTERTAINMENT INC CA451/2014 [2014] NZCA 426 [29 August 2014]IN THE COURT OF APPEAL OF NEW ZEALANDCA451/2014[2014] NZCA 426BETWEEN KIM DOTCOMAppellantAND TWENTIETH CENTURY FOX FILMCORPORATION, DISNEYENTERPRISES INC, PARAMOUNTPICTURES CORPORATION,UNIVERSAL CITY STUDIOSPRODUCTIONS LLP, WARNER BROS.ENTERTAINMENT INCRespondentsHearing: 27 August 2014Court: Stevens, White and Miller JJCounsel: T J Walker and L F Stringer for AppellantJ E Hodder QC and L L Fraser for RespondentsJudgment: 29 August 2014 at 10.30 amJUDGMENT OF THE COURTA The application for a stay is dismissed.B There will be orders that:(a) Mr Dotcom must, by 5.00 pm on 5 September 2014, file underseal and serve on the respondents' solicitors the affidavitrequired by the disclosure order.(b) The respondents' solicitors are not to disclose the contents of the affidavit to any person without the leave of the High Court. Leave is reserved to apply to the High Court for directions as to the taking of instructions from any of the respondents on information contained in the affidavit.(c) If further directions are required generally any application should be made to the High Court.C The appellant must pay the respondents one set of costs on a standard application on a band A basis and usual disbursements. We certify for second counsel.____________________________________________________________________REASONS OF THE COURT(Given by Stevens and White JJ)Introduction[1] The appellant has applied for a stay of a judgment given in the High Court by Courtney J, in which she granted an ancillary application by the respondents requiring Mr Dotcom to make full disclosure of his assets.1 Mr Dotcom was ordered by 20 August 2014 to file and serve an affidavit setting out the nature, extent and value of his assets wherever they are located and identifying the nature of his interest in them.2 Mr Dotcom has filed a notice of appeal in this Court and it will be heard on 9 October 2014.[2] Under r 12 of the Court of Appeal (Civil) Rules 2005 (the Rules) an appeal does not operate as a stay of a proceeding in which a decision was given.3 Under r 12(3) a party may apply for a stay from the Court appealed from – which Mr Dotcom did unsuccessfully. Having received comprehensive submissions from the parties, Courtney J dismissed the application for a stay.4 In so doing the Judge varied her previous orders by directing that:5(a) Mr Dotcom must, by 5pm [on] 22 August 2014 file under seal andserve on the respondents' solicitors the affidavit required by thedisclosure order;(b) The respondents' solicitors are not to disclose the contents of the affidavit to any person without the leave of the Court. Leave is1 Twentieth Century Fox Film Corporation v Dotcom [2014] NZHC 1789 [High Court judgment].2 At [75].3 Court of Appeal (Civil) Rules 2005, r 12(1) and (2).4 Dotcom v Twentieth Century Fox Film Corporation [2014] NZHC 1980 [Stay judgment].5 At [27].reserved to apply for directions as to the taking of instructions from any of the respondents on information contained in the affidavit.[3] The parties agreed on the terms of an interim stay to enable Mr Dotcom to apply to this Court for a stay under r 12(5) of the Rules.6 Counsel for the respondents opposes the grant of a stay. The application came before us in circumstances of urgency. We are grateful to counsel for their written and oral submissions.Background[4] The background to the respondents' application for an ancillary order underr 32.5 of the High Court Rules (HCR) is not in dispute.7 The respondents are plaintiffs in civil proceedings brought against Mr Dotcom and others in the United States of America claiming over US$100 million for copyright infringement. Further, Mr Dotcom and other parties are charged under criminal proceedings in the United States in respect of which the US Government has sought and obtained from a United States Court orders based on similar allegations of copyright infringement, restraining the disposition of assets in New Zealand. The orders are registered in New Zealand by an order of the High Court dated 18 April 2012 (the criminal restraining orders).8[5] As a result of public statements made by Mr Dotcom in New Zealand, the respondents believe that he has access to, and is disposing of, substantial assets in New Zealand that are outside the scope of the criminal restraining orders. For example, Ms Walker, for Mr Dotcom, confirmed at the hearing that any property acquired after January 2012 would not be covered by the criminal restraining orders.[6] For completeness, we note this Court has recently considered the question of the duration of the registration in New Zealand of the criminal restraining orders. This was on appeal from a decision of Thomas J in the High Court, in which she6 Mr Dotcom's application to this Court under r 12(5) was filed on 21 August 2014.7 The order was sought in the context of an application for a freezing order under pt 32 of the High Court Rules [HCR]. The ancillary order required Mr Dotcom to fully disclose his assets position by providing an affidavit detailing the nature, location and value of all of his assets (whether legally or beneficially owned) worldwide.8 Commissioner of Police v Dotcom & Ors [2012] NZHC 634 at [100]; Mutual Assistance in Criminal Matters Act 1992, ss 54 and 56 and Criminal Proceeds (Recovery) Act 2009, s 132.dismissed an application by the Commissioner of Police for an order extending the duration of registration beyond April 2014. This Court allowed the appeal and made an order extending the duration of the registration of orders issued by the United States District Court for the Eastern District of Virginia for one year from 18 April 2014.9[7] The civil proceeding in the United States involves a claim by the respondents who control five major motion picture studios. The allegation is that Mr Dotcom and others infringed their copyright interests through the operation of the online file hosting service Megaupload and related sites. As well as the civil claims the United States Government has filed criminal charges against Mr Dotcom; Mr Dotcom is facing extradition proceedings in relation to those charges.[8] The United States civil proceeding is stayed, pending the outcome of the extradition proceedings and the criminal prosecution. The stay was granted on 10 June 2014 at the request of Mr Dotcom and the other defendants. It is a conditionof the stay that the respondents may "institute and pursue any action in the UnitedStates or a foreign jurisdiction to preserve the defendants' assets in the event that such action becomes necessary". This condition was included at the request of therespondents who were concerned that registration of the criminal restraining orders could lapse in the future, leaving them without any means of enforcing a judgment in the civil claim.[9] The respondents filed an originating application in the High Court on 27 May 2014 seeking a freezing order restraining Mr Dotcom from dealing with or disposing of his assets and ancillary orders. The substantive application sought a freezing order in respect of:Any assets in New Zealand, being assets listed in the Schedule to this application and any other New Zealand assets owned (beneficially orlegally) by the respondents [10] The assets in the schedule referred to were those subject to the criminal restraining orders. One of the ancillary orders sought was for disclosure by9 Commissioner of Police v Dotcom [2014] NZCA 408.Mr Dotcom and others of their assets. This is a common form of ancillary order and would allow clarity and certainty as to the terms of the freezing order to be sought in the originating application.[11] It seems Mr Dotcom initially indicated he would agree to an interim freezingorder to ensure that the respondents' position was not prejudiced in the event that registration of the criminal restraining orders lapsed. Notwithstanding that indication, the respondents pursued the application seeking an ancillary order requiring Mr Dotcom to make immediate and full disclosure of his financial position. The respondents were concerned because, whilst they have never known the exact nature, extent or whereabouts of Mr Dotcom's assets, they believed his New Zealandassets were not entirely restrained by the criminal restraining orders.[12] It was against that broad background that Courtney J granted the ancillary orders set out at [2] above.The stay application in the High Court[13] In her stay judgment Courtney J accepted a submission for Mr Dotcom that ifa stay were not granted his appeal rights would effectively be "rendered nugatory".10However she added that the mere fact that appeal rights are rendered nugatory is not necessarily determinative. She concluded:[9] in the circumstances of this case I consider that this consequencecarries little weight. This is because Mr Dotcom himself does not assert that there will be any adverse effect on him if deprived of an effective appeal.[10] The affidavit that Mr Dotcom filed in support of his application does not touch on the issue of what effect complying with the disclosure order would have on him. He does not say that he will be adversely affected if required to make disclosure of his financial position. Ms Walker did not address the issue in her submissions and dealt with it only in reply. But I found her argument unconvincing.[11] Ms Walker submitted that it is axiomatic that an individual whose appeal rights are rendered nugatory is prejudiced. When pressed about the nature of the prejudice Ms Walker submitted that a person should not be required to disclose private financial matters without justification and that to do so would cut across privacy rights and values that underpinned s 21 of the NZ Bill of Rights Act 1990 (BORA), drawing an analogy with the right10 Stay judgment, above n 4, at [9].against unreasonable search and the right to freedom of expression. Ms Walker did not develop the argument beyond general reliance on theSupreme Court's discussion of the nature of those rights in Hamed v R.11 I am unable to accept, on the strength of the argument presented, that requiring disclosure of financial information in the context of an application for an ancillary order under Part 32 of the High Court Rules could be regarded as a search in the sense of the privacy interests protected by NZBORA.[14] Courtney J considered the grounds of appeal, the effect of a stay on the respondents and the overall balance of convenience, concluding:[24] On the one hand Mr Dotcom says he has an arguable appeal and that the respondents will not be worse off if they have to wait until his appeal is determined because there are sufficient assets that are already restrained which exceed any reasonable assessment of damages they could obtain. Although Mr Dotcom himself has not asserted any prejudice as a result of having to comply with the order, his counsel argues that requiring him to disclose financial information is, in itself, prejudicial.[25] Mr Dotcom's counsel has raised points which appear on their face tobe arguable on appeal. But they are not so compelling as to justify staying execution of the judgement. Nor am I satisfied that the additional information about Mr Dotcom's Hong Kong assets alters my conclusion regarding the respondents' concerns. To the extent that disclosure in itself may be shown to be prejudicial, I accept Mr Hodder's suggestion thatMr Dotcom's concerns can be adequately addressed through a "waterfall" oforders ensuring the confidentiality of information that Mr Dotcom puts before the Court.Principles to be applied on stay application[15] As noted above, the stay application is brought by the appellant under r 12(3) of the Rules. The legal principles governing whether the application should be granted are not in dispute and have previously been settled by this Court.12[16] Accordingly, in determining whether to grant a stay, the appellant mustconvince the Court that the balance of factors favours such an outcome. In doing so,the Court must consider the competing considerations of allowing the successfullitigant the right to the fruits of judgment in their favour and the need to preserve theposition of the appellant in case the appeal is successful. There are a range of factors11 Hamed v R [2011] NZSC 101, [2012] 2 NZLR 305.12 Keung v GBR Trustees Ltd [2010] NZCA 396 at [11]; Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87. See also Dymocks Franchise Systems (NSW) Pty Ltd v Bigola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9].relevant to the Court's consideration bearing on the interests of justice in each case. We deal only with those relevant here:(a) whether the appeal may be rendered nugatory by the lack of a stay;(b) whether the appellant will suffer any prejudice; and(c) whether the successful party will be injuriously affected by the stay.Submissions for appellant supporting stay[17] Ms Walker essentially repeats the submissions made in support of the application for a stay in the High Court. At the forefront she contends the appeal by Mr Dotcom will be rendered nugatory by the lack of a stay. As to the prejudice said to arise for Mr Dotcom, Ms Walker submits that a person should not be required to disclose private financial matters without justification. To do so would cut across privacy rights and values that underpin s 21 of the New Zealand Bill of Rights Act 1990. Ms Walker accepts that Mr Dotcom did not refer to any such prejudice in his affidavit filed in the High Court in support of the application for stay. Nor did he identify any particular prejudice arising from disclosure of his worldwide assets. Ms Walker submits, however, that prejudice to Mr Dotcom's privacy is self-evident and there is no need to provide affidavit evidence to justify the submission.[18] Ms Walker also submits that any requirement to disclose financial information prior to the disposition of the appeal on 9 October 2014 is essentially the thin end of the wedge. Once private information is disclosed, it can never be retrieved. An individual should not be required to divulge private financial information without good cause. Here, until the appeal is disposed of, there is an absence of good cause.Discussion[19] In support of their application under r 32 of the HCR generally, and the application for an ancillary order for disclosure in particular, the respondents have provided an undertaking as to damages.[20] Ms Walker addressed us on aspects of the merits of the appeal against the High Court judgment. These are best left to the hearing of the substantive appeal on 9 October 2014. We observe that the merits of the proposed appeal were canvassed by Courtney J in the stay judgment.13 She considered the arguments advanced by Mr Dotcom but concluded that none were decisive in tilting the balance in favour of granting a stay.[21] For our part we observe only that the merits of the substantive appeal, while potentially arguable as Mr Hodder accepted, are not obvious at this stage. Certainly they are not so obvious at this stage as to be a material factor in favour of a stay.[22] As noted, the main contention for Mr Dotcom is that a refusal of a stay would render his appeal rights nugatory. We disagree. The order for disclosure is an ancillary one and does not have any effect on the financial assets of Mr Dotcom. Any such order would require a further hearing in the High Court and Mr Dotcom has made it clear he will oppose the making of any form of freezing order. Mr Dotcom would therefore be free to deal with such assets, particularly since he has given no undertaking not to do so and no undertaking as to damages. No doubt Mr Dotcom would be wise to take legal advice on the wisdom of dealing with such financial assets in the face of an extant, but as yet unresolved, application for a freezing order under r 32 of the HCR.[23] Mr Dotcom will, even if disclosure were made, be free to pursue his appeal. If he is successful, he would be entitled to claim costs and may also have a case fordamages arising from the respondents' undertaking.[24] Even if we are wrong and the appeal could in some respect be said to be rendered nugatory, that is not the end of the matter. As this Court held in Keung, that fact alone is not determinative.14 We need to assess whether there is any proven prejudice.13 Stay judgment, above n 4, at [16]–[23].14 Keung, above n 12, at [20].[25] We are prepared to accept Ms Walker's submission, set out at [17]–[18]above, that there is an element of general prejudice inherent in a requirement to disclose financial assets in the context of an application for Mareva-type orders, under r 32 of the HCR. However such an eventuality is an integral part of the compromises involved in freezing order cases, pending the determination of civil claims for damages. The obligation of disclosure in this situation reflects the policy behind the powers of the High Court to make orders of this kind to protect the integrity of court processes, preventing an actual or prospective judgment-debtor from dealing with assets where there is a risk that those assets may be dissipated within or removed from the jurisdiction. A freezing order aims to ensure that an applicant who obtains judgment will not be denied recovery.15[26] The power of the Court to make a freezing order under r 32.2 is supported by the power to make an ancillary order under r 32.3, including an order for discovery (as has been made in this case). An ancillary order may be made for the purpose ofeliciting information relating to assets relevant to the freezing order or "prospective freezing order", and for the purpose of determining "whether the freezing order should be made".16 It is clear from these purposes that an ancillary order may precede the making of a freezing order. As a matter of common sense, it may well be necessary to obtain disclosure of assets to ensure that the terms of the freezing orders are appropriately focused. As such, the ancillary order is a prerequisite to the proper and effective operation of the freezing order jurisdiction.[27] In this case we do not accept that Mr Dotcom faces any specific prejudice arising from the requirement to disclose his financial assets on the terms imposed by the High Court. First, there is no evidence before the Court of any such prejudice. Mr Dotcom does not mention any specific prejudice in his High Court affidavit.[28] Second, as Ms Walker confirmed, Mr Dotcom has already made disclosure to the Official Assignee of his assets that are the subject of the criminal restraining orders without seeking or obtaining any confidentiality order in respect of thatinformation. We were also told that a copy of the Official Assignee's report has been15 Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [HRPt32.01(1)]; Steven Gee Commercial Injunctions (5th ed, Sweet & Maxwell, London, 2004) at [1.120].16 HCR, r 32.3(2)(a) and (b).provided by Mr Dotcom's solicitors to the solicitors for the respondents without any confidentiality stipulation.[29] Third, if there is any element of confidentiality involved in the disclosure by Mr Dotcom of the further information required by the High Court order, it will be protected by the accompanying order for disclosure to the respondents' solicitorsonly. This is a standard form of confidentiality order in civil cases of this nature.17[30] Turning to the position of the respondents, we are satisfied that they could well be injuriously affected if a stay were granted and Mr Dotcom were not required to make disclosure of his assets now. In the absence of any undertaking from Mr Dotcom, there is no assurance that he will not take steps to dissipate or remove his assets prior to the hearing on 9 October 2014. There is also the further delay that would inevitably be involved in the completion of disclosure by Mr Dotcom in the event that his appeal is ultimately unsuccessful.[31] For these reasons, Mr Dotcom has not convinced us that balancing the competing factors favours the grant of a stay.Result[32] The application for a stay is dismissed.[33] There will be orders that:(a) Mr Dotcom must, by 5.00 pm on 5 September 2014, file underseal and serve on the respondents' solicitors the affidavitrequired by the disclosure order.(b) The respondents' solicitors are not to disclose the contents ofthe affidavit to any person without the leave of the High Court. Leave is reserved to apply to the High Court for directions as to the taking of instructions from any of the respondents on information contained in the affidavit.17 New Zealand Railways Corp v Auckland Regional Council (1990) 3 PRNZ 332 (CA) at 337;Port Nelson Ltd v Commerce Commission (1994) 7 PRNZ 344 (CA) at 347–348; InterCity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 2261, (2013) 21 PRNZ 520; Evidence Act 2006, ss 52(4)(b) and 69; and Richard Mahoney and others The Evidence Act 2006: Act & Analysis (3rd ed, Thomson Reuters, Wellington, 2014) at 345.(c) If further directions are required generally any application should be made to the High Court.[34] As costs should follow the event, the appellant must pay the respondents one set of costs on a standard application on a band A basis and usual disbursements. We certify for second counsel.Solicitors:Simpson Grierson, Auckland for Appellant Chapman Tripp, Wellington for Respondents