Creative Development Solutions Ltd v Chorus New Zealand Ltd

JurisdictionNew Zealand
JudgeBrown J
Judgment Date13 May 2021
Neutral Citation[2021] NZCA 178
CourtCourt of Appeal
Docket NumberCA652/2019
Date13 May 2021
Between
Creative Development Solutions Limited
Appellant
and
Chorus New Zealand Limited
Respondent

[2021] NZCA 178

Court:

French, Brown and Goddard JJ

CA652/2019

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Contract, Commercial — appeal against a High Court decision which dismissed the appellant's claims against the respondent for breach of contractual obligations of confidentiality and equitable estoppel — whether the information provided was capable of protection as confidential information — requirement to prove detriment in order to establish an estoppel at a liability trial — estoppel and commercial relationships

Counsel:

M B Wigley for Appellant

J B M Smith QC and V L Heine for Respondent

  • A The appeal is dismissed.

  • B The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements. We certify for second counsel.

JUDGMENT OF THE COURT
Table of Contents

Para No

Introduction

[1]

Factual background

[6]

Funding of broadband services in remote areas

[6]

The initial meeting

[12]

The Confidentiality Agreement

[13]

The second meeting

[19]

The provision of information and engagement on Chorus's withdrawal from RBI2

[20]

The third meeting

[24]

The fourth meeting

[27]

The Creative claim as now confined

[31]

Second cause of action: breach of the Agreement

[31]

Fourth cause of action: estoppel

[33]

Split trial

[34]

The High Court judgment

[35]

The nature of the parties' relationship

[35]

Breach of the Confidentiality Agreement

[37]

Estoppel

[41]

Issues on appeal

[46]

Was the information provided by Creative capable of protection as “confidential information” under the proper construction of the Agreement

[47]

Did Chorus breach the Agreement by using confidential information

[65]

Did Chorus make a sufficiently clear and unequivocal representation to Creative that Chorus would not be submitting its own bid for RBI2+ funding

[79]

Did Creative rely on such representation, if it was made, and was such reliance reasonable?

[90]

To what extent is Creative required to prove detriment in order to establish an estoppel at a liability trial?

[96]

Did Creative rely on the representation to its detriment?

[99]

Result

[110]

REASONS OF THE COURT

(Given by Brown J)

Introduction
1

The appellant, Creative Development Solutions Ltd (Creative), operates as an adviser and consultant on the provision of telecommunications services. It initiated discussions with the respondent, Chorus New Zealand Ltd (Chorus), concerning the conjoint provision of rural broadband services in more remote parts of the region administered by the Marlborough District Council (the Council). Creative required Chorus to execute a confidentiality agreement 1 prior to supplying information relating to its Smart Services Infrastructure initiative (SSI) described as: 2

… an initiative that pivots around telecommunications broadband services to underserved rural and remote regions and end-users, based on a broader collaborative and partnership approach aimed at larger social and economic objectives.

2

Public funding for the expansion of broadband services was available through a Crown entity known as Crown Infrastructure Partners (CIP). Creative contemplated that funding would be available for the project from the CIP rural broadband initiative. Creative was aware that Chorus had previously been awarded such funding but understood Chorus had withdrawn from further participation. In response to a specific inquiry from Creative, Chorus confirmed it had withdrawn.

3

Following those two events Creative provided its SSI information to Chorus. However, at the invitation of CIP, Chorus subsequently resumed participation in the rural broadband initiative tender process. In doing so it allegedly utilised confidential information supplied to it by Creative.

4

The High Court dismissed Creative's claims against Chorus for breach of fiduciary duty, breach of both contractual and equitable obligations of confidentiality by Chorus's use of SSI information, and estoppel arising from Chorus's response concerning its participation in CIP's current rural broadband initiative funding. 3

5

Creative appealed that judgment, save in respect of the asserted equitable duty of confidentiality which the Judge ruled was precluded by the contractual confidentiality obligation. 4 In the course of the hearing Creative abandoned its challenge to the dismissal of the first cause of action for breach of fiduciary duty. Hence the appeal is now confined to Creative's challenge to the rejection of its claims for breach of a contractual obligation of confidentiality and equitable estoppel. 5 Chorus supports the decision on other grounds, contesting some of the Judge's conclusions.

Factual background
Funding of broadband services in remote areas
6

The cost of the infrastructure required to provide broadband services in more remote areas of New Zealand is recognised to be greater than can feasibly provide an economic return. Consequently the progressive extension of broadband services required significant government subsidisation. Government involvement in promoting the expansion of broadband services was undertaken by CIP. 6

7

The broadband network programme which commenced in 2010 evolved into a first round of contracts, namely the Ultra-Fast Broadband initiative and the Rural Broadband Initiative which became known respectively as UFB1 and RBI1. 7 Chorus contracted for approximately 70 per cent of UFB1 and a substantial proportion of the RBI1 tender.

8

The UFB programme expanded to a second round which was tendered and negotiated in two tranches known as UFB2 and UFB2+ in which Chorus was again a successful participant. However, when in early 2017 CIP tendered RBI2, Chorus was offered less than the minimum amount specified in its tender bid. Hence Chorus elected not to pursue RBI2 further. A letter from CIP to Chorus dated 30 August 2017 recorded:

Chorus advised [CIP] on 08 August 2017 that it did not wish to conclude an agreement with [CIP] for RBI2 Grant Funding based on the scope proposed by [CIP]. [CIP] and Chorus discontinued negotiations accordingly.

9

In March 2016 Creative undertook a scoping and feasibility study for the Council to establish its requirements for delivery of region-wide digital technology infrastructure including better and more extensive broadband and cellular coverage. In March 2017 Creative and the Council responded to CIP's request for proposals for RBI2, proposing services for areas within the Council's region. Although that bid was

unsuccessful, Creative contemplated making a bid for a further round (RBI2+) which was an extension of RBI2
10

As the Judge explained 8 the context in which Creative approached Chorus was that CIP had not achieved all of the coverage it had contemplated in RBI2. It was indicating to those who had bid in that round the availability of further funding for extensions to the areas of coverage that would be achieved with RBI2. Having withdrawn from the RBI2 round, Chorus was not among those whom CIP approached.

11

Creative initiated contact with Chorus with a view to co-operate with Chorus in providing enhanced coverage in the Marlborough region. The events relevant to this appeal occurred between February and May 2018 which included four meetings between Creative and Chorus personnel.

The initial meeting
12

The first of four meetings between Creative and Chorus personnel was held in Chorus's Wellington office on 8 February 2018. It was described by the Judge as follows: 9

[38] Mr Phillips was most concerned to receive an acknowledgement from Chorus that Creative/MDC would be making disclosures of confidential and commercially sensitive information to Chorus, and that Chorus would agree to receive it subject to the terms of an NDA, completion of which was required by Creative. His evidence was that, in reliance on the Chorus representatives' assurances that it would complete an NDA, he disclosed valuable information about Creative's approach to designing and analysing the financial viability of broadband services in the Marlborough region. Mr Phillips treated his contributions to the meeting as revealing to Chorus an innovative way of combining technologies and providers, in particular maintaining open and co-operative dialogue with WISPs. Creative treated its work as also applicable to devising solutions for extending coverage in other parts of New Zealand where similar challenges arose.

[39] Mr Phillips stated that the Chorus representatives responded appreciatively to these new insights, acknowledging the value of the concepts on which Creative and MDC had worked. He acknowledged that he advised Chorus that Chorus was one of a number of potential suppliers/partners with whom Creative and MDC intended to have

discussions. The minutes of the meeting that Mr Phillips produced are consistent with his evidence about what transpired at it.

The Judge observed that from comments at this meeting Chorus inferred the Council had access to funding separate from any grants which might be obtained from CIP. 10

The Confidentiality Agreement
13

A Confidentiality Agreement (the Agreement) was executed by Chorus (described as the “Supplier”) on 13 February 2018. As the Judge observed, 11 it is a prolix document which included under the heading “Integration” an entire agreement provision.

14

The confidential information to which the Agreement extended, although not particularised, was described in the second recital in this way:

WHEREAS, in connection with the Purpose, both parties have developed or possess certain confidential and proprietary information of a sensitive nature (collectively in...

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2 cases
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    ...COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA CA652/2019 [2021] NZCA 178 BETWEEN CREATIVE DEVELOPMENT SOLUTIONS LIMITED Appellant AND CHORUS NEW ZEALAND LIMITED Respondent Hearing: 20 and 21 October 2020 Court: French, Brown and Goddard JJ Counsel: M B Wigley for Appellant J B M ......

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