CAYMAN SPECTRUM (NZ) CO v SPARK NEW ZEALAND TRADING LTD [2023] NZCA 428 [7 September 2023]

CAYMAN SPECTRUM (NZ) CO v SPARK NEW ZEALAND TRADING LTD [2023] NZCA 428 [7 September2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA275/2023[2023] NZCA 428BETWEEN CAYMAN SPECTRUM (NZ) COFirst AppellantEVEREST WIRELESS PARTNERS LLPSecond AppellantAND SPARK NEW ZEALAND TRADINGLIMITEDRespondentHearing: 21 August 2023Court: Goddard, Whata and Downs JJCounsel: A F Pilditch KC and M B Wigley for AppellantsZ G Kennedy and M D Toulmin for RespondentJudgment: 7 September 2023 at 11.00 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellants must pay costs to the respondent for a standard appeal ona band A basis, with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Goddard J)Introduction[1] Cayman Spectrum (NZ) Co (Cayman), the first appellant, formerly carriedon business as a holder of management rights in New Zealand radio spectrum. At allrelevant times, the shareholders in Cayman were the second appellant, EverestWireless Partners LLP (Everest) and Craig Wireless Systems Limited(Craig Wireless). Each held 50 per cent of the issued shares in Cayman.[2] In 2015 Cayman owned a block of 2.5 GHz spectrum. Craig Wireless ownedand controlled (through subsidiaries) two blocks of 2.3 GHz spectrum.1 Spark NewZealand Trading Limited (Spark) owned various spectrum blocks, including a blockadjacent to Cayman's 2.5 GHz block.[3] Mr Boyd Craig was at the relevant time a director of Craig Wireless. Caymanhad two directors at this time: one appointed by Everest and one appointed byCraig Wireless. Mr Craig was the director of Cayman appointed by Craig Wireless.[4] In 2015 and 2016 various dealings took place between Cayman and Spark inrelation to the Cayman 2.5 GHz spectrum, and between Craig Wireless and Spark inrelation to the Craig Wireless 2.3 GHz spectrum. Cayman and Everest have broughtproceedings against Spark in relation to those transactions. They allege that Mr Craigprocured Cayman's entry into the transactions without authority to do so on behalf ofCayman, and in breach of his fiduciary duties to Cayman. They claim compensationand other relief from Spark on the basis that:(a) Spark received benefits from those transactions, with knowledge ofMr Craig's breaches of fiduciary duty (the knowing receipt causes ofaction); and(b) Spark dishonestly assisted Mr Craig's breaches of fiduciary duty(the dishonest assistance causes of action).1 We refer to Craig Wireless and its subsidiaries collectively as "Craig Wireless".[5] The appellants' claims against Spark are set down for a four-week trial in theHigh Court beginning on 1 November 2023.[6] Spark applied to strike out certain paragraphs of the appellants' secondamended statement of claim (2ASC) under r 15.1 of the High Court Rules 2016.Justice Lang struck out the challenged paragraphs on the basis that they wereirrelevant, so had the potential to cause prejudice or delay: Spark should not berequired to respond to those aspects of the pleading.2[7] The appellants appeal against the decision of the High Court striking out thoseparts of their pleading. The High Court granted leave to bring the appeal under s 56(3)of the Senior Courts Act 2016. The appeal was entered on the fast track to ensure itcould be determined prior to trial.Background[8] In order to understand the issues on appeal, it is necessary to describe thetransactions that are the focus of the proceedings in a little more detail.[9] In November 2015 Mr Craig negotiated a number of agreements with Spark.On behalf of Craig Wireless (and its subsidiaries) he negotiated a sale of the CraigWireless subsidiaries' rights in the 2.3 GHz spectrum to Spark under two sale andpurchase agreements (SPAs). On behalf of Cayman, Mr Craig negotiated twoagreements with Spark:(a) A guard band agreement (GBA) that enabled Spark to make moreextensive use of the spectrum it held adjacent to the 2.5 GHz spectrumowned by Cayman. Spark paid $1 for Cayman's consent to use the"guard band" component of Spark's spectrum.(b) A network services agreement (NSA) under which Spark agreed tomake use of the Cayman spectrum in order to enable Cayman to meetimplementation requirements (also referred to as "use it or lose it"2 Cayman Spectrum (NZ) Co v Spark New Zealand Trading Ltd [2023] NZHC 1063 [High Courtjudgment].obligations) imposed by the Crown on spectrum purchasers. The NSAalso granted Spark a right of last refusal in relation to purchase ofCayman's 2.5 GHz spectrum, and the right to receive 20 per cent of thegross proceeds of any future sale by Cayman of that spectrum.[10] The GBA was executed in late November 2015. The NSA was executed inearly December 2015.[11] The appellants claim that Mr Craig did not have authority to commit Caymanto the GBA and the NSA. They also claim that the GBA provided for valuable rightsto be surrendered in favour of Spark for $1: that is, this was in effect a sale of thoserights at an under value, contrary to the best interests of Cayman. Broadly speaking,the appellants' case is that Mr Craig purported to act on behalf of Cayman withoutauthority, and in doing so he sacrificed the interests of Cayman in order to maximisethe benefit to Craig Wireless from the SPAs.[12] The appellants go on to plead that Spark terminated the NSA and stopped usingthe Cayman spectrum in July 2016, when the contract was due to run to December2016. They allege that Spark did this so that Cayman would fail to meet its continuingimplementation requirements in relation to the Cayman spectrum, and would be at riskof forfeiting that spectrum, thus preventing its sale to new entrants into the relevanttelecommunications markets including companies controlled by Mr Malcolm Dick,who is currently the sole director of Cayman (appointed by Everest).[13] The appellants also plead that Spark entered into various ancillaryarrangements with Craig Wireless and/or Cayman, including making an advance of$1 million to a Craig Wireless subsidiary secured over the Cayman spectrum.The claims pleaded in the 2ASC[14] The appellants plead five causes of action in the 2ASC:(a) In the first cause of action, Cayman alleges that Spark received rightsunder the NSA, GBA and SPAs in the knowledge that Mr Craig wasbreaching the fiduciary duties he owed to Cayman by causing it to enterinto the GBA and NSA. Cayman claims an account of profits and/or aconstructive trust over the Craig Wireless spectrum and/orcompensation based on the value of the rights Spark obtained under theGBA.(b) In the second cause of action, Cayman alleges that Spark dishonestlyassisted Mr Craig to breach his fiduciary duties to Cayman by engagingin the pleaded conduct in the period November 2015 to December 2016,including by entering into the NSA and GBA and performing thoseagreements, by entering into the ancillary arrangements, and byterminating the NSA. Cayman claims an account of profit and/orcompensation based on the value of the rights Spark obtained under theGBA.(c) In the third cause of action, Cayman seeks a declaration that the NSA,GBA and SPAs constitute in substance either a single agreement or aseries of collateral contracts, and related relief. The relief soughtincludes a declaration that the GBA, NSA and SPAs are not valid andbinding because Cayman, as one of the parties, has not entered intothose agreements.3(d) The fourth cause of action is the same as the first, but substitutesEverest for Cayman as the claimant.(e) The fifth cause of action is the same as the second, but substitutesEverest for Cayman as the claimant.[15] Mr Pilditch KC, who appeared for the appellants, emphasised that the 2ASCalleges that Spark acquired additional information about the conduct of Mr Craig overtime. Even if Spark did not have the requisite knowledge for knowing receipt or3 Although relief is sought in relation to the SPAs, we note that the Craig Wireless subsidiaries thatwere parties to the SPAs are not parties to the proceeding brought by the appellants.dishonest accessory liability at the time the original agreements were entered into inlate 2015, the appellants have pleaded that:(a) Mr Craig's breaches of duties were not confined to entry into the SPAs,the GBA and the NSA. They continued over the period November 2015to December 2016, as the agreements were performed and as ancillaryarrangements were entered into.(b) Spark assisted these breaches of duty by the conduct it engaged in overtime, including by performing the agreements and by entering into theancillary arrangements.(c) In relation to some or all of these breaches, Spark's assistance wasprovided with the requisite knowledge to found liability.The elements of dishonest assistance liability[16] The focus of the argument before us was on the causes of action for dishonestassistance liability, which is also sometimes referred to as dishonest accessory liability.The appellants say that the paragraphs that were struck out in the High Court arerelevant to these causes of action.[17] It was common ground before us that the essential elements of such a claimare:(a) A breach of trust or breach of fiduciary duty by some person(here, Mr Craig).(b) Participation by the defendant in that breach of trust/fiduciary duty,including by procuring or assisting the breach.(c) Dishonesty on the part of the defendant in participating in the breach.Whether the defendant was dishonest turns on whether the defendanthas actual knowledge that the transaction was one in which they cannothonestly participate. Wilful blindness, which equates in equity withactual knowledge, also suffices.4 The knowledge that is relevant hereis knowledge of the breach of trust or fiduciary duty: this is bothnecessary, and sufficient, to establish dishonesty. Dishonesty cannot beestablished by showing that the defendant was committing some otherwrong, or acting for some other unlawful purpose.High Court judgment[18] The Judge summarised the paragraphs of the 2ASC that Spark sought to strikeout (the challenged paragraphs) as follows:5(a) Paragraphs 82(e), 84, 85, 86(a) and 86(b) – in these paragraphs theplaintiffs contend that, in entering into the three sets of agreements,Spark intended to prevent new entrants from acquiring spectrumwithin the 2300 and/or 2500 ranges and thereby intended to reducecompetition in the telecommunications market.(b) Paragraph 100 – this paragraph alleges that a meeting took place on16 December 2015 between representatives of Spark and Mr MalcolmDick, a director and shareholder of Blue Reach Holdings Limited(Blue Reach), another player in the telecommunications industry.During the meeting Mr Dick communicated his interest in acquiringthe 2300 and 2500 spectra. Spark allegedly failed to inform him as tothe existence and relevant contents of the NSA.(c) Paragraph[s] 163 to 179 – these allegations relate to events that beganin February 2016. At this time, Spark offered to provide funding toone of its competitors, Two Degrees Mobile Ltd (2degrees), to enableit to acquire the management rights held by Cayman in relation to the2500 spectrum. This occurred at a time when Spark knew thatMr Dick and his company Blue Reach were interested in acquiring theCayman 2500 spectrum. The plaintiffs allege Spark intended thisarrangement to ensure that management rights within the 2500spectrum were controlled by the three principal players in thetelecommunications market, two of whom were Spark and 2degrees.The effect of the arrangement was to lessen competition within themarket and prevent new entrants (specifically Mr Dick and BlueReach) from acquiring 2500 spectrum.(d) Paragraphs 184 to 186 – in these paragraphs the plaintiffs contend thatSpark's decision to terminate the NSA in July 2016 was for thepurpose of keeping new entrants (including Blue Reach) out of thetelecommunications market.4 Sandman v McKay [2019] NZSC 41, [2019] 1 NZLR 519 at [77]–[78].5 High Court judgment, above n 2, at [14].(e) Paragraphs 194 and 195 – in these paragraphs the plaintiffs allege thatthe purpose of steps taken by Spark following termination of the NSAwas to deprive new entrants, including Blue Reach, of the 2500spectrum.(f) Paragraph 202 – in this paragraph the plaintiffs allege that the termsof the NSA enabled Spark to control any sale of Cayman'smanagement rights in relation to the 2500 spectrum and therebyreduce competition to Spark, including competition from newentrants.[19] The Judge recorded that the Court has the power to strike out a pleading underr 15.1 of the High Court Rules where that pleading is likely to cause prejudice or delayor is otherwise an abuse of the process of the Court. Pleadings that are irrelevant tothe pleaded cause of action have potential to cause prejudice or delay, because theyrequire the opposing party to respond to the pleading when this should not benecessary.6[20] The Judge proceeded on the basis that the focus in the proceedings would beon the circumstances in which Cayman, through Mr Craig, and Spark entered into theSPAs, the GBA, and the NSA (the agreements). He considered that Spark's knowledgeduring the period leading up to execution of the agreements in late November/earlyDecember 2015 would be crucial to determination of whether Spark knowinglyentered into the agreements in circumstances where an honest person in its positionwould not have done so.7[21] The Judge noted that most of the challenged paragraphs related to allegationsthat Spark entered into the agreements, and subsequently terminated the NSA, for thepurpose of keeping other players out of the telecommunications market. It wentwithout saying that acquisition by Spark of further spectrum had the potential to reducecompetition in the market because it removed the ability of other participants,including new entrants, to acquire that spectrum. But it was not alleged that Mr Craigentered into the agreements with the objective of assisting Spark to reduce competitionat the appellants' expense. Thus, the Judge said, it followed that the allegationsrelating to Spark's allegedly anti-competitive conduct were unconnected to anyalleged breach by Mr Craig of his duties to the appellants. They were also irrelevant6 At [16].7 At [17]–[18].to any knowledge Spark may have had about matters suggesting Mr Craig was actingin breach of his duties to the appellants.8[22] The Judge considered that the challenged paragraphs raised a concern that theappellants may be attempting to use the proceeding to mount a general challenge toSpark's allegedly anti-competitive conduct even though this is not related to whetherSpark knowingly assisted Mr Craig to breach his obligations to the appellants. He saidthat "[i]t would be wrong to permit this to occur because it would result in considerabletime being devoted to the issue during the trial when it will not assist the Court todetermine the core issues relating to the claim as pleaded."9[23] The Judge considered that the allegations in paragraphs 82(e), 84, 85, 86(a)and (b) contain general allegations that in entering into the agreements, Spark intendedto prevent new entrants from acquiring the right to acquire spectrum, and that this hadthe effect of reducing competition in the telecommunications market. These pleadingswould increase the length and complexity of the trial considerably. Spark would haveto respond to them in considerable detail. They would also undoubtedly be the subjectof considerable attention in cross-examination of Spark's witnesses. This wouldcreate unnecessary delay, cost and unfair prejudice to Spark. The Judge did notconsider that Spark should be required to respond to these paragraphs.10[24] Paragraph 100 related to a meeting between Mr Dick and Spark'srepresentatives on 16 December 2015. The Judge considered that given the timing ofthe meeting, it could not be relevant to Spark's knowledge when it entered into theagreements in late November/early December 2015. Spark should not be required torespond to this paragraph.11[25] Paragraphs 163–179 of the pleading related to a proposal under which Sparkoffered to fund the acquisition by 2degrees of Cayman's management rights for2.5 GHz spectrum. This proposal was made approximately three months after Sparkhad entered into the agreements. It did not constitute information that was within8 At [22].9 At [23].10 At [24]–[26].11 At [27]–[29].Spark's knowledge when it entered into those agreements. It had no connection withthem. The Judge considered that this material could only be led as a form of propensityevidence: but propensity reasoning was unlikely to be of assistance in resolving theissues for trial.12 If these allegations were permitted to proceed, the Judge consideredthat the trial would be lengthened significantly. He was satisfied that Spark should notbe required to respond to the allegations about the 2degrees proposal.13[26] Paragraphs 184–186 and 194–195 related to Spark's decision to terminate theNSA in July 2016, and its actions following termination. The appellants allege thatSpark acted during this period with the intention of lessening competition within thetelecommunications market by keeping new entrants out of the market. The Judgeconsidered that the events that led to and followed the termination of the NSA inJuly 2016 could not be relevant to Spark's knowledge when it entered into the NSAnine months earlier. Those events had no relevance to the core issues the High Courtwould be required to decide. Spark should not be required to respond to theseallegations.14[27] Paragraph 202 alleged that the NSA effectively enabled Spark to control anysale of Cayman's 2.5 GHz spectrum, and thus enabled it to reduce competition in thetelecommunications market. For the same reasons given in relation to the otherchallenged pleadings, the Judge considered this allegation was irrelevant to the coreissues the High Court would be required to decide. Spark should not be required torespond to it.15[28] The challenged paragraphs were struck out.16Appellants' submissions on appeal[29] Mr Pilditch KC emphasised three matters.12 At [30]–[31].13 At [32]–[33].14 At [34]–[35].15 At [36].16 At [37].[30] First, he submitted that the Judge was wrong to treat the time of entry into theagreements in late 2015 as the relevant cut-off date for ascertaining Spark's knowledgeof breaches of fiduciary duty by Mr Craig. The pleading alleged ongoing breachesand accretion of knowledge by Spark over time, from before the agreements wereentered into in late 2015 through to late 2016.[31] Second, Mr Pilditch emphasised the guidance provided by the authorities onthe relevance of a defendant's motive for assisting breaches of trust or fiduciary duty.He referred to the observation of the Privy Council in Royal Brunei Airlines Sdn Bhdv Tan, adopted by this Court in McKay v Sandman, that:17[W]hen called upon to decide whether a person was acting honestly, a courtwill look at all the circumstances known to the third party at the time.The court will also have regard to personal attributes of the third party, suchhis experience as intelligence, and the reason why he acted as he did.[32] Mr Pilditch also referred to the following passage from Royal BruneiAirlines:18All investment involves risk. Imprudence is not dishonesty, althoughimprudence may be carried recklessly to lengths which call into question thehonesty of the person making the decision. This is especially so if thetransaction serves another purpose in which that person has an interest of hisown.[33] Mr Pilditch submitted that because dishonesty was alleged, the statementof claim was required to plead detailed facts supporting that allegation.19Thus, Mr Pilditch said, the commercial advantages to Spark from entry into theagreements, including benefits from reduced competition, are relevant to theappellants' claims and are properly pleaded. The greater the benefits, the more willinga party may be to knowingly assist a breach of fiduciary duty, or wilfully turn a blindeye to the potential for such a breach. Benefits to Spark from reduced competitionwere relevant to the appellants' claims, because they shed light on why Spark acted asit did.17 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC) at 391 (emphasis added), quoted bythis Court in McKay v Sandman [2018] NZCA 103, [2018] NZAR 707 at [67]. See also generallySandman v McKay, above n 4.18 At 389 (emphasis added).19 Citing High Court Rules 2016, r 5.17; and Schmidt v Pepper New Zealand (Custodians) Ltd [2012]NZCA 565 at [15].[34] Third, Mr Pilditch submitted that by striking out the challenged paragraphs theJudge had effectively ruled that evidence about benefits to Spark could not be givenat trial. This pre-empted decisions about relevance and scope of evidence that shouldbe made by the trial judge. There was no material risk of prejudice or delay as a resultof the challenged paragraphs as the extent of evidence called in relation to all of thesematters could be controlled by the trial judge under s 8 of the Evidence Act 2006.However striking out the challenged paragraphs before trial pre-empted that decision.DiscussionRelevant pleading principles[35] The High Court Rules require that a statement of claim show the general natureof the plaintiff's claim to the relief sought. It must give sufficient particulars of time,place, amounts, names of persons, nature and dates of instruments, and othercircumstances to inform the court and the party or parties against whom relief is soughtof the plaintiff's cause of action.20[36] That is, the pleading should define the claim before the court so the courtknows what it is required to rule upon; and it should fairly inform the defendant of thecase which it must meet.[37] Each paragraph must so far as possible be confined to a single topic.21This makes it easier to follow. More importantly, it assists in identifying andnarrowing, so far as possible, the issues between the parties. A defendant is muchmore likely to make appropriate admissions in response to a paragraph containing asingle clear allegation of fact than in response to a lengthy multi-pronged paragraph.The broader and more discursive a paragraph in a statement of claim, the less likely itis to elicit a response that assists the parties and the court to identify the real issues fortrial.20 Rule 5.26(a) and (b).21 Rule 5.14(2).[38] The pleading must as a bare minimum set out the facts which, if proved at trial,would establish the plaintiff's cause of action against the defendant. Thus, in the caseof a claim that a defendant dishonestly assisted a breach of fiduciary duty, thestatement of claim must at a minimum plead:(a) the specific acts that are alleged to amount to a breach of fiduciary dutyby the relevant fiduciary, and the factual background relevant to theallegation that those acts amounted to a breach of fiduciary duty;(b) the specific acts that the defendant is alleged to have done by way ofassistance or participation in those breaches; and(c) the knowledge that it is alleged the defendant had of the breaches offiduciary duty, at the time it assisted or participated in those breaches.[39] If a state of mind other than mere knowledge is alleged, particulars must begiven of the facts relied on in alleging that state of mind.22 That is because a state ofmind (which is not directly observable) is usually established through inference fromother (directly observable) facts.[40] A more detailed factual narrative is now expected than was once common.23But the pleading need not set out how an alleged fact will be proved. Nor need itcontain the full detail which will be contained in the evidence to be given at trial.It need not (and should not) venture into what the plaintiff knows or believes aboutthose facts: thus for example the repeated use of the phrase "upon belief" in the 2ASCin this case is neither necessary nor appropriate.[41] Pleadings matter. As this Court said some 25 years ago:24It has become fashionable in some quarters to regard the pleadings as being oflittle importance. There was an echo of that approach in the implicitsuggestion floated in this case that exchange of briefs of evidence before trialmight be seen as curing any lack of particularity in the pleadings. Any suchview is misguided. Pleadings which are properly drawn and particularised22 Rule 5.17(2) and (3).23 Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at 19.24 At 17.are, in a case of any complexity, if not in all cases, an essential road map forthe Court and the parties. They are the documents against which the briefs ofevidence are or should be prepared. They are the documents which establishparameters of the case, not the briefs of evidence.The pleading in this case[42] The 2ASC is lengthy, discursive, argumentative, and in places opaque. It setsout a general narrative that runs for some 204 paragraphs, before pleading each of thefive causes of action described above. Many paragraphs combine multiple factualallegations, explanatory/argumentative material, and propositions of law. It makesextensive use of defined terms of broad and uncertain scope, including terms that aredefined as having shifting meanings over time (such as "Spark's Knowledge", definedby reference to the knowledge that Spark acquired over the course of the relevantevents).[43] We set out by way of example an extract from the allegations concerningSpark's discussions with 2degrees about acquisition of the spectrum owned byCayman, which was included in the challenged paragraphs struck out in theHigh Court (emphasis in original):170. Upon belief, supported by the timing and Spark's knowledge as to Maland Blue Reach's interest in the Cayman MR, this was done inreaction to that meeting and to keep the Cayman MRs away from Mal,Blue Reach and/or new entrants. That belief is also supported by thecommercial unreality of an MNO helping and funding a competitorinto MRs, enabling it to compete more strongly, implying anothermotive, namely retention within the 3 MNOs to stop new entry.Further particulars will be provided following discovery andinterrogatories.171. Given that 2degrees is a competitor of Spark, as one of three MNOs,a substantial purpose of Spark was to have the spectrum going to2degrees in order to retain the market limited to 3 MNOs.172. Whatever the purpose, the effect would have been as pleaded in thelast paragraph.173. A further purpose was to keep a new entrant out such as Mal andBlue Reach.174. Whatever the purpose, the effect would have been as pleaded in thelast paragraph.175. From the outset, the said purpose and effect, even if limited to justfunding 2degrees into the Cayman MRs, breached the Commerce Act1986 as, among other things, (a) under s 27 such funding has"the purpose, or has or is likely to have the effect, of substantiallylessening competition in a market", where facilitating keeping a newentrant out of the market has that purpose and effect; and (b)unconsummated steps toward such transactions are also in breach ofthe Commerce Act (s 80).176. That conclusion was readily known at the time by telecommunicationsregulatory/competition lawyers, as a straightforward conclusion.[44] Putting to one side the (irrelevant and inappropriate) reference to theappellants' belief, paragraph 170 of the 2ASC runs together multiple allegations aboutwhat was done by Spark, and the purpose for which it was done, coupled withcommentary. We struggle to see how a defendant could plead to this paragraph otherthan by denying it. Nor is it easy to understand what the court would be required todetermine in light of the inevitable denial.[45] An even more problematic example of a pleading that combines multiplefactual allegations and legal commentary is paragraph 175 of the 2ASC, which allegesbreaches of s 27 of the Commerce Act 1986. The commercial advantages to Sparkfrom participation in the transactions may be relevant to Spark's motive, and to anassessment of its honesty. But as Mr Pilditch accepted in the course of argument,whether those commercial advantages were legitimate or illegitimate, and in particularwhether they involved breaches of the Commerce Act, could not be relevant to theclaims against Spark.[46] Similarly, whether particular conclusions about the application of theCommerce Act were "readily known" at the time by certain categories of lawyer, aspleaded in paragraph 176 of the 2ASC, is irrelevant. As is whether that would be a"straightforward conclusion".[47] Similar issues arise in relation to the following paragraphs in the 2ASC(emphasis in original):184. [Spark] took those steps, both in deciding to do so, and inimplementing that plan, for the (or a) purpose of keeping new entrantsout including Blue Reach and Mal, consistently with the2degrees/Cayman Initiative.185. That is evidenced by, among other things an email exchange betweenLindsay, John and Sasha on 10 June 2016: "I can't see how Caymancan be in compliance I don't think it changes our current course ofaction but could be a useful angle should any sale to Blue Reach beon the cards".186. That was sent 10 days after Spark first wrote formally to Cayman,Craig Wireless and Everest, requiring a bank guarantee of WWNZL'sliability under the NSA, which was the first formal step leadingultimately to termination. Upon belief, a purpose of that notice wasto keep new entrants out including Blue Reach as evidenced by the10 June 2016 email exchange. Telecommunications regulatory andcompetition lawyers would have been aware of the likely competitionlaw breaches that entails. Further particulars will be providedfollowing discovery and interrogatories.[48] Paragraph 184 of the 2ASC bundles together a number of different allegations,including allegations of broad anti-competitive purpose. Paragraph 185 appears toplead the evidence relied on to establish that purpose, which is not necessary.Paragraph 186 is discursive, refers to the belief of the appellants about certainmatters, and in the last sentence goes on to make allegations that are unhelpfullygeneral (which telecommunications, regulatory and competition lawyers?), allegationsabout the "likely" legal significance under the Commerce Act of actions taken, andserious allegations of knowing participation in these "likely" competition law breachesby some or all of the (unnamed) lawyers involved.Should the challenged paragraphs have been struck out?[49] We accept Mr Pilditch's submission that the inquiry into Spark's knowledge ofbreaches of fiduciary duty by Mr Craig is not confined to the period up toNovember/December 2015, when the agreements were entered into. Because theappellants allege that there were continuing breaches of duty, and continuing acts ofassistance by Spark, Spark's knowledge about breaches of duty over the entire periodthrough to December 2016 may be relevant to the pleaded claims. There is no brightline temporal cut off.[50] We also accept Mr Pilditch's submission that the benefit to Spark from entryinto the agreements and subsequent dealings may be relevant when ascertainingSpark's motives, and whether Spark acted honestly. There could be no objection to apleading that entry into the agreements and subsequent dealings provided benefits toSpark, coupled with concise particulars of those benefits (direct and indirect).Indeed such a pleading would be helpful and appropriate in framing the claim that thecourt will need to rule on, and that Spark as defendant will need to meet. The existenceof benefits to Spark from the agreements seems unlikely to be controversial: that isafter all why commercial entities enter into transactions. Obviously Spark saw it asadvantageous to acquire the Craig Wireless spectrum, and to enter into the GBA andNSA. And as the Judge observed, it goes without saying that acquisition by Spark offurther spectrum had the potential to reduce competition in the market because itremoved the ability of other participants, including new entrants, to acquire thatspectrum.25[51] However Mr Pilditch was right to concede that allegations that Spark acted inbreach of the Commerce Act, or other regulatory regimes, are wholly irrelevant to theequitable claims pleaded against Spark. An inquiry into these allegations of unlawfulconduct would be lengthy, complex, time consuming and expensive. The Judge wasplainly right to strike out allegations of this kind. Likewise, allegations that(unspecified) telecommunications, regulatory and competition lawyers would havebeen aware of such breaches are wholly irrelevant, and have the potential to addconsiderable time, complexity and cost to the trial. They are distractions from theissues for trial. Again, the Judge was plainly right to strike out allegations of this kind.[52] The appellants' argument that the lengthy pleadings about matters such asSpark's discussions with 2degrees are necessary to enable evidence to be given aboutthose matters is based on a misunderstanding of the relationship between pleadingsand evidence. Ultimately, it was we think common ground before us that:(a) Strictly speaking, matters going to Spark's reasons for entering into theagreements and related dealings need not be pleaded, as motive is notan essential element of the dishonest assistance cause of action.(b) However facts relevant to the commercial benefits to Spark from thesedealings could properly be (concisely) pleaded, to assist in identifyingthe matters in issue at trial.25 High Court judgment, above n 2, at [22].(c) Whether or not the benefits to Spark from the dealings are pleaded, theyare relevant matters that can be explored in evidence at trial as they arerelevant to Spark's motives for acting as it did. Evidence can be giventhat is relevant to pleaded allegations that are in dispute, for examplebecause it enables inferences to be drawn about the likelihood that thoseallegations are correct, without needing to set all that evidence out inthe pleadings.[53] We are satisfied that the 2ASC contains sufficient pleadings about the benefitto Spark from the relevant dealings, and why Spark acted as it did, without thechallenged paragraphs. It will be for the trial judge to determine whether the evidenceadduced by each party is relevant to the matters in issue at trial, and whether theprobative value of the evidence in relation to those issues is outweighed by the riskthat the evidence would needlessly prolong the proceeding.26[54] Mr Pilditch sought to reassure us that the time occupied by evidence in relationto the benefits to Spark from reducing competition would not be significant.The appellants have already filed their briefs of evidence for trial. Mr Pilditchindicated that restoring the evidence relating to the struck out paragraphs would onlyresult in the addition of a further six pages or so of evidence in chief from theappellants. Some time would be occupied by the cross-examination of Sparkwitnesses on these topics, but he did not expect it to be lengthy.[55] For Spark, Mr Kennedy readily accepted that it was open to the appellants toexplore the benefit to Spark from entering into the agreements, provided this was donein a proportionate manner that did not needlessly prolong the proceeding. He acceptedthat it would be open to the appellants to do so on the basis of the pleading as it stands,without the challenged paragraphs. We agree.[56] It follows that the challenged paragraphs are not necessary to enable theappellants to present their claims at trial, and to call relevant and proportionateevidence about benefits to Spark in support of those claims. It will be forthe trial judge to determine whether evidence adduced by the appellants, and26 Evidence Act 2006, ss 7 and 8.cross-examination by them, falls within the boundaries set by ss 7 and 8 of theEvidence Act.[57] The difficulty with the very detailed and far reaching allegations set out in thechallenged paragraphs about Spark's desire to keep spectrum away from new entrantsis that these would then become the benchmark against which the trial judge would berequired to assess relevance of evidence. These allegations, if they remained, wouldopen up a broad field of inquiry about market definition, competitive dynamics in therelevant markets, whether Spark had an anti-competitive purpose, whether thedealings had anti-competitive effects, whether any such purpose or effect breached theCommerce Act, and what lawyers with relevant expertise would have appreciatedabout the lawfulness of the dealings. They would constrain the ability of the trial judgeto appropriately limit the scope of evidence about benefits to Spark, and Spark'scommercial objectives, in a manner proportional to their secondary significance asfacts shedding light on Spark's motives, and thus on the likelihood of Spark acting ina manner that dishonestly assisted breaches of fiduciary duty by Mr Craig. All this ina context where the existence of direct benefits to Spark from entering into theagreements was, in any event, obvious.[58] We agree with the Judge that the challenged paragraphs of the 2ASC wouldbe likely to increase the length and complexity of the trial considerably. Sparkwould need to respond to these serious allegations, and doing so would be complexand time-consuming. That is especially clear in relation to the allegations of breachof the Commerce Act, and illegitimate anti-competitive purposes and benefits. But italso applies to the lengthy pleadings in relation to Spark's dealings with 2degrees, andthe allegations in relation to Spark's motives for those dealings. Whether any of thisis relevant is best addressed at trial through the lens of ss 7 and 8 of the Evidence Act,assessed for relevance and proportionality against the remaining allegations in the2ASC.[59] We thus agree with the Judge that the challenged paragraphs in the 2ASC arelikely to cause prejudice or delay. They were appropriately struck out.Result[60] The appeal is dismissed.[61] The appellants must pay costs to the respondent for a standard appeal on a bandA basis, with usual disbursements.Solicitors:Wigley and Company, Wellington for AppellantsMinterEllisonRuddWatts, Auckland for Respondent