PAE (NEW ZEALAND) LIMITED V BROSNAHAN, CARTER, PATTINSON HC WN CIV 2005 485 843

PAE (NEW ZEALAND) LIMITED V BROSNAHAN, CARTER, PATTINSON HC WN CIV 2005 485 843 26 July 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2005 485 843BETWEEN PAE (NEW ZEALAND) LIMITED Plaintiff AND MARK DAVID BROSNAHAN, MICHAEL RALPH CARTER, WAYNE ALBANY PATTINSON DefendantsCIV 2005 485 1439AND BETWEEN PAE (NEW ZEALAND) LIMITED Plaintiff AND WAYNE ALBANY PATTINSON Defendant Hearing: 7 June 2006 Counsel: D G Dewar and D Vincent for Plaintiff A S Olney and P Dorrans for Defendants in CIV-843 R Fowler and S Kirby for Defendant in CIV-1439 Judgment: 26 July 2006 at 10.45am In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 10.45am on the 26 th day of July 2006.JUDGMENT OF ASSOCIATE JUDGE GENDALLIntroduction[1] The common plaintiff in these two proceedings CIV 2005-485-843 (the "misrepresentation proceeding") and CIV 2005-485-1439 (the "confidential information proceeding") seeks an order pursuant to r 382 that the two proceedings be consolidated. [2] The application is opposed by the defendants in the misrepresentation proceeding and the defendant in the confidential information proceeding.Background facts[3] In the misrepresentation proceeding the plaintiff alleges misrepresentation of profitability, assets and liabilities by the defendants in that proceeding ("the defendant shareholders") leading up to the plaintiff's purchase of shares in the company Central Property Services Limited ("CPS") from the defendant shareholders in May 2004. [4] The confidential information proceeding concerns the obtaining of a computer-based document from the former CPS office by the defendant in that proceeding ("Mr Pattinson") in May 2005 and the provision of that document to a competitor of the plaintiff. [5] In the misrepresentation proceeding the plaintiff is seeking to recover from the defendant shareholders a sum close to $1 million. These proceedings were filed in this Court on 29 April 2005 and served upon Mr Pattinson as one of the defendant shareholders on 9 May 2005. [6] Some two days later on 11 May 2005 the parties accept that Mr Pattinson obtained a document from the former CPS offices and provided this to a competitor of the plaintiff. [7] Subsequently on 1 July 2005 the confidential information proceeding was issued by the plaintiff. On 12 August 2005 Fogarty J granted an interim injunctionrestraining the defendant in that proceeding from any reproduction, publication or dealing with the document in question. [8] In the meantime, so far as the misrepresentation proceeding was concerned, according to the plaintiff, on 7 July 2005 it is alleged by the defendant shareholders that numerous files which may have some relevance were deleted from one of the plaintiff's computers. [9] Subsequently, on 31 July 2005 one of the defendant shareholders Mr Michael Carter ceased his employment at the plaintiff's Palmerston North office. [10] According to the plaintiff, allegations were then made that the plaintiff or its officers had tampered with electronic data stored on the computer used by Mr Michael Carter. As I understand it, these computer issues appear to loom large in this litigation from the plaintiff's point of view.Counsel's Arguments and My Decision[11] The plaintiff seeks the present consolidation order, it contends, on the basis that: (a) There are common parties in both proceedings. (b) There are common witnesses in both proceedings. (c) Both actions arose because of or subsequent to the purchase of CPS by the plaintiff. (d) There are common issues relating to: (i) Evidence as to the treatment of documents on computer equipment held at the plaintiff's Palmerston North premises formerly under the control of the defendantshareholders' company CPS and the treatment of those documents. (ii) Forensic assessment of the computer records arising from (i) above. (iii) Credibility of witnesses. [12] Specifically, in the grounds put forward by the plaintiff in support of this application, it contends that it is in the interests of justice overall that consolidation take place and there is no perceived inconvenience to any other party because: (a) The plaintiff in the two proceedings is the same. Although two of the defendant shareholders are not named in the confidential information proceeding the plaintiff seems to suggest that they are so intricately connected with that proceeding that they will be substantively involved in any trial should it be heard separately. (b) Consolidation will save the time of the Court and the parties by ensuring that issues and evidence are not repeated in separate proceedings. (c) Consolidation will avoid the prospect of competing credibility and potentially inconsistent factual findings by separate courts. [13] The jurisdiction to order consolidation is contained in r 382 High Court Rules which provides:382 When order may be madeWhere 2 or more proceedings are pending and it appears to the Court— (a) That some common question of law or fact arises in both or all of them; or (b) That the rights to relief claimed therein are in respect of or arise out of—(i) The same event (ii) The same transaction; or (iii) The same event and the same transaction; or (iv) The same series of events; or (v) The same series of transactions; or (vi) The same series of events and the same series of transactions; or (c) That for some other reason it is desirable to make an order under this rule,— the Court may order those proceedings to be consolidated on such terms as it thinks just, or may order them to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them.[14] In considering applications under r 382 the Court has a wide discretion which must be exercised judicially. The purpose of consolidation is discussed in McGechan on Procedure at HR 382.03 as follows:HR382.03 ObjectThe object of consolidation is to prevent unnecessary multiplicity of trials where a number of actions exhibit common features, and can be consolidated without injustice. Where, for example, the result in a number of different actions will turn upon the interpretation of a standard form document, consolidation would be desirable. Likewise, where a single occurrence results in damage to a number of plaintiffs, and the facts surrounding that single occurrence will be relevant in claims by all, consolidation is expedient. The addition of r 382(c) now confers jurisdiction in the widest terms. In exercising discretion, the practical realities of running a trial, and questions of prejudice to parties must be given proper weight. The same applies to choice of the form of order made. For example, in separate actions involving the same parties where an estoppel is likely to arise from the first hearing, concurrent hearing will be preferred. On an interpretation question, where in reality the decision in one case will determine all, an order for stay of all but one action creating in effect a "test case" is the more likely order to save time and the expense of multiple representation.[15] The grounds put forward in opposition to this application by counsel for Mr Pattinson in the confidential information proceeding are broadly: (1) There are no common features between the proceedings significant enough to warrant consolidation. The rights to relief claimed in bothproceedings do not arise out of the same series of events or transactions. (2) The only commonality between the proceedings is a common defendant (Mr Pattinson) and a common plaintiff. (3) The separate factual circumstances out of which both proceedings arise mean it is likely that there will be more witnesses exclusive to each proceeding than witnesses common to both. (4) The confidential information proceeding does not require an analysis of the defendants' or plaintiff's use of any computer equipment – it relates only to release of a hard-copy document. (5) The discovery process in the confidential information proceeding is well advanced, all parties having supplied affidavits of documents, with the only matter outstanding being a specific request from the defendants to the plaintiff for further discovery concerning tender documents at Royal New Zealand Air Force, Ohakea. This differs significantly from the situation regarding discovery in the misrepresentation proceeding. (6) The defendant in the confidential information proceeding has claimed in his Statement of Defence that there is an overriding public interest in the document at issue, and it is therefore in the interests of justice that this proceeding is not delayed unnecessarily. [16] And in turn, counsel for the defendant shareholders in the misrepresentation proceeding puts forward the following grounds in opposing consolidation: (1) There are insufficient grounds to justify consolidation – some common parties is not enough. (2) There are significant differences between the two proceedings that make consolidation undesirable in the following sense:(a) There is no common originating event. (b) There are different parties. (c) There are different causes of action and relief sought. (d) There are no common allegations of fact or law. (e) There is no common evidence or material documents. (3) Consolidation will not result in any material efficiency benefits and will, on the other hand, cause prejudice. [17] I turn now to consider first, whether common issues of fact or law arise here.Common issues of fact?[18] In support of the plaintiff's contention that common issues of fact arise in the two proceedings, Mr Peter Derek Leslie in his second affidavit dated 24 March 2006 filed in support of the consolidation application deposes:2. The plaintiff says as a result of recent developments it can now confirm that there are factual issues as to credibility common to both proceedings and that Mr Carter has a direct interest in both proceedings. It is now clear that all three defendants in CIV-843 [the misrepresentation proceeding] were present and involved in the critical transaction concerning CIV-1439 [the confidential information proceeding]. Issues of credibility in each proceeding will turn on treatment by the parties of computer based data and information. Plaintiffs and defendants in both cases are making allegations against the other which will call for critical examination of the means by which information was stored, access, modified and distributed from computer equipment held at Palmerston North.[19] These contentions provide the only real basis to underpin the plaintiff's fundamental argument that there are common questions of fact involved in the two proceedings. But, for the reasons I will now outline, in my view this argument is flawed.[20] With regard to the misrepresentation proceeding, the factual background appears to relate to the period from 28 October 2003 when the plaintiff began negotiations with the defendant shareholders to purchase their interest in CPS until 14 May 2004 when settlement of the purchase of the shares took place. It is clear, too, that this proceeding only concerns various representations alleged to be made about the CPS business by or on behalf of the defendant shareholders, during that period. [21] So far as the confidential information proceeding is concerned, the factual background there appears to involve the much later period from 11 May 2005 until 17 May 2005. And this proceeding relates to an entirely different situation - the discovery and use of a document that records a meeting between the plaintiff's executive director and a representative of the Royal New Zealand Air Force. [22] Clearly, the periods of concern in each proceeding are different. [23] The only common factual issue relied upon by the plaintiff appears to relate to issues of credibility arising from allegations of misuse of computer-based information contained in the plaintiff's computer system, noted at paragraphs [18] and [19] above. [24] As to this, the disclosure at issue in the confidential information proceeding concerns a hard copy document delivered both by hand and by fax. Admittedly the information in this document does relate to data that was stored on and accessed from computers, but this seems to me to be ancillary to the real issue, which is simply the disclosure itself. I question whether the fact that the information in question was originally computer-based data has any real role in the confidential information proceeding. It seems to me that it is simply ancillary that the confidential document may have come off a computer. [25] And, the misrepresentation proceeding appears to involve no directly pleaded allegations of misuse of computer-based information. The claims in that proceeding relate to alleged misrepresentations as to the financial and net asset position of CPS prior to its purchase by the plaintiff in May 2004.[26] There does seem to be some complaint from the plaintiff in the misrepresentation proceeding relating to discovery issues concerning electronic documents. These discovery issues appear to have a sharp edge with allegations being made that undisclosed documents exist. On this, a computer analysis has apparently been undertaken by a Mr Jorgensen for the plaintiff. But, as I see it, these are purely discovery issues and notwithstanding the complaint, the factual issues to be considered in the misrepresentation proceeding seem to me to be quite different from those under consideration in the confidential information proceeding. [27] Before me, counsel for the plaintiff went on to contend that in this litigation, credibility issues will be critical. The plaintiff's position is that the three defendants in the misrepresentation proceeding were present and involved at the critical time when the document was disclosed by Mr Pattinson in the confidential information proceeding. As I understand it, this is disputed by the defendants. But, in any event, these are evidentiary matters and ancillary to the principal issues in each case, which even the plaintiff has acknowledged plainly arose out of entirely different events. [28] I conclude that any common issues of fact are very limited here. At best, any common factual issues which may be said to exist between the misrepresentation proceeding and the confidential information proceeding can only relate to some commonality of parties and to limited credibility issues. These are clearly insufficient to justify taking the relatively rare step of ordering consolidation here – see Equiticorp Industries Group Limited (in statutory management) v Hawkins (No. 2) (1993) MCLR 454 at 464-465 and Shattock v Devlin (1989) 1 PRNZ 271 at 272.Common Issues of Law[29] Notwithstanding my findings at paragraph [28] above, I turn now to consider whether there are questions of law common to both proceedings sufficient to justify the proceedings being heard together – as outlined in Callplus Limited v Telecom New Zealand Limited (2000) 15 PRNZ 14 (although in that case, unlike the present, both proceedings clearly arose out of the same transaction).[30] The amended Statement of Claim in the misrepresentation proceeding pleads causes of action against the defendants in misrepresentation, breach of warranty and breach of the Fair Trading Act 1986. [31] The Statement of Defence and counterclaim in that proceeding sets out additional legal matters for consideration in relation to a counterclaim based on breach of contract, rectification and/or common mistake. [32] In contrast, however, the Statement of Claim in the confidential information proceeding specifies three causes of action against Mr Pattinson as sole defendant in that proceeding, in conversion, deliberate interference in trade by unlawful means, and breach of an obligation of confidence. [33] The Statement of Defence in the confidential information proceeding raises an affirmative defence that there can be no confidentiality in a document where an overriding public interest exists. As I have noted at paragraph [7] above, Fogarty J in his Judgment of 12 August 2005 granted an interim injunction restraining the defendants in that proceeding from any reproduction, publication or dealing in any manner whatsoever with the document in question. His Honour Justice Fogarty went further and in this Judgment made an order first, that the Court file was not to be searched except by solicitors and counsel for the parties in the proceeding, and secondly, that all references to the personalities of the parties, the identity of the relevant Government agency, the name and occupation of the employee of that Government agency and the factual circumstances of the case were suppressed. [34] Given that Fogarty J judgment restraining the use of the document in question and the "ring-fencing" nature of the interim order, in my view, difficulties might well arise here over access to the confidential information proceeding file and the use of the document in question if an order for consolidation was made. [35] Weighing up all these matters, it is hard to see any questions of law common to both proceedings here. Commonality of legal issues is not a factor which would assist the plaintiff in the present consolidation application.Common Rights to Relief[36] Further, I am satisfied in terms of R.382(b) that the rights to relief sought by the plaintiff in these two proceedings do not arise out of the same transaction or series of events. As I see it, there is nothing before the Court at present to evidence a link between the purchase of CPS in the period October 2003 to May 2004 on the one hand, and the events the subject of the confidential information proceeding which occurred in May 2005, on the other. [37] And finally, in the second affidavit of Mr Leslie sworn 24 March 2006 and filed in support of the present consolidation application, he acknowledges at paragraph 12:12. It is contended that the rights of relief do not arise out of the same events and PAE accepts that.Is it desirable for some other reason to make an order for consolidation?[38] As to this, the plaintiff contends that there would be a saving of time and expense if a consolidation order is made here. [39] At paragraph 12 of his first affidavit dated 23 February 2006, Mr Leslie in support of the present application states:it would be expeditious to consolidate both proceedings, given the same factual matters will be traversed in both proceedings, and a significant number of the documents disclosed are common to both proceedings.[40] Notwithstanding this contention, before me the plaintiff appeared to have some difficulty identifying what documents filed by the plaintiff in the confidential information proceeding might have any relevance to matters to be considered in the misrepresentation proceeding. And, as I have noted above, there is little common factual overlap between the proceedings here. I dismiss these claims by the plaintiff. [41] As to the plaintiff's contention that there is likely to be more common witnesses called in both proceedings than witnesses exclusive to each proceeding,again I am satisfied that there is little material before the Court to substantiate this claim. It seems that Mr Pattinson would presumably be a witness in both proceedings and according to the plaintiff, perhaps also a Mr Carter and a Mr Lance Palmer. But, in any event, given my findings above that there is little in the way of common questions of fact between the two proceedings, even some commonality of witnesses would not, in my view, be a factor which would point strongly in favour of consolidation here. [42] And, as to the suggestion that refusing consolidation might risk inconsistent findings, in my view, because there are no significant issues of fact or law common to both proceedings, there can be little concern in this case of inconsistent findings.Conclusion[43] Given my conclusions above that first, at best there is only a minor overlap of factual material between the misrepresentation proceeding and the confidential information proceeding, secondly that there are no common issues of law, and thirdly, the rights to relief claimed in both proceedings clearly do not arise out of the same series of events or transactions, the plaintiff's present application for consolidation must fail. [44] In my view, this conclusion is somewhat reinforced by the discrete and special nature of the confidential information proceeding alluded to at paragraph [33] above. As I see it, this goes some way to supporting the conclusion that it would be inappropriate for it to be consolidated with the misrepresentation proceeding, which shares none of the same aspects of confidentiality.Result[45] The plaintiff's application for consolidation fails.Costs[46] As I see it, there is no reason why costs should not follow the event in the normal fashion. The defendants are entitled to costs on this application, which are awarded on a category 2B basis together with disbursements, if any, as approved by the Registrar.Associate Judge D.I. GendallSolicitors:Thomas Dewar Sziranyi Letts, Lower Hutt for Plaintiff Russell McVeagh, Wellington for Defendants in –843 Phillips Fox, Wellington for Defendant in -1439