Specialized Bicycle Components Inc. v Sheppard Industries Ltd and Anor Hc Ak
| Jurisdiction | New Zealand |
| Judge | Peters J |
| Judgment Date | 19 November 2010 |
| Neutral Citation | [2010] NZHC 2080 |
| Docket Number | CIV 2009-404-8020 |
| Court | High Court |
| Date | 19 November 2010 |
UNDER the Copyright Act 1994
IN THE MATTER OF Copyright Infringement and Breach of Contract
And
[2010] NZHC 2080
CIV 2009-404-8020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
Application to use evidence from a mediation in support of an application for a stay or strike out of proceedings — substantive proceedings related to breach of copyright — parties entered into an oral agreement through mediation — confidentiality agreement and a clause in the meditation agreement stated that evidence and statements made during mediation could not be adduced in subsequent arbitral or judicial proceedings — whether a private agreement prevailed over s57 Evidence Act 2006 (privilege for settlement negotiations or mediation) — whether the exception under s57(3) Evidence Act 2006 (evidence necessary to prove the existence of such an agreement) could be used — consideration of s12 Evidence Act 2006 (evidential matters not provided for).
A H Brown QC and N M Alley for Plaintiff
B D Gray QC and T J G Allan for Defendants
RESERVED JUDGMENT OF Peters J.
The issue I have to decide is whether the Defendants, in support of an application for a stay of proceedings or to strike out proceedings, may adduce evidence of communications made in the course of mediation. The Defendants' position is that they may and they rely on s 57(3) of the Evidence Act 2006 (“Act”). The Plaintiff's position is that the Defendants may not and they rely on the terms of the agreement on which the parties agreed to submit their dispute to mediation.
A determination of this issue requires consideration of:
a) the terms on which the parties agreed to mediation;
b) whether an agreement between parties prevails over s 57 of the Act.
I set out below:
a) the procedural steps taken by the parties to date, so as to put the determination of the issue in context;
b) the evidence which is relevant to the issue and the terms of the mediation agreement which the parties signed;
c) the parties' submissions;
d) the analysis I consider is required by s 12 of the Act.
The Plaintiff commenced this proceeding in December 2009, by filing and serving a notice of proceeding and statement of claim.
In its pleading, and the following points are admitted in the Statement of Defence, the Plaintiff says that it is based in California and that, amongst other things, it designs and sells high end, quality bicycles and bicycle components and accessories. The Plaintiff says it has distributed its products in New Zealand through the First Defendant, pursuant to an agreement dated 31 August 1999. Pursuant to that agreement the Plaintiff granted the First Defendant the exclusive right to sell and distribute the Plaintiff's products in Australia and New Zealand.
In late 2007 a dispute arose between the parties in connection with performance of obligations under the agreement and in respect of an allegation by the Plaintiff that the Defendants had copied some of the Plaintiff's products. The Defendants denied the copying allegation. In August 2009 the parties entered into a deed of settlement to record the terms of a settlement they had agreed (“August deed”).
In the present proceeding, the Plaintiff's causes of action against the Defendants largely concern allegations of copying. The statement of claim comprises 26 pages and the Plaintiff seeks various remedies in respect of various causes of action. The Defendants deny the critical aspects of the claim.
On 4 and 8 February 2010 the parties attended mediation in respect of the dispute, some of the detail of which is set out below. The parties entered into a written mediation agreement (“mediation agreement”), the terms of which are critical to the determination of this matter.
The Defendants filed their statement of defence on 17 March 2010. By way of an affirmative defence, the Defendants alleged, amongst other things, the existence and terms of an accord and satisfaction between the parties dated 8 February 2010.
Also on 17 March 2010 the Defendants applied to the Court for an order staying or otherwise restraining the Plaintiff from continuing this proceeding. This application was also made on the ground that the parties reached an accord and satisfaction on 8 February 2010.
The Defendants filed two affidavits in support of their application to stay the proceeding. One is from Mr Christopher Darlow, a solicitor of Auckland, whose firm acts for the Defendants. The other was from Mr John Struthers, the managing director of each Defendant.
On 23 March 2010 the Plaintiff filed a notice of opposition to the Defendants' application for stay. The grounds on which the Plaintiff opposed the Defendants' application are as follows:
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a) the terms on which the parties agreed to attend mediation of their dispute preclude reliance by the Defendants on exchanges concerning the dispute, passing between the parties at the mediation;
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b) in any event, the parties did not reach a binding and enforceable oral accord and satisfaction at the mediation.
In support of its application, the Plaintiff filed an affidavit sworn by Mr Edward Mitchell, general counsel of the Plaintiff.
On 30 April 2010 the Plaintiff applied to the Court for determination of a preliminary question under r 10.15. 1
The Defendants did not object to determination of this question and on 14 April 2010 the Court ordered that such determination should be made.
The preliminary question for determination is:
Whether, on the terms of clause 5 of the mediation agreement and the confidentiality agreement signed by the parties on 4 February 2010, and in the absence of a written and signed settlement agreement, the defendants are prevented from adducing:
of the mediation, or any statement made or communication within the mediation.
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i) The evidence in paragraphs 6 and 7 of Mr Darlow's affidavit and paragraphs 7 and 9, part of paragraph 10(b), and paragraphs 10(d) and 10(e) of Mr Struthers' affidavit; and/or
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ii) Any evidence of exchanges and/or statements made and/or discussions held during the course of the mediation, or of any aspect
I refer below to the contentious paragraphs of Mr Darlow's and Mr Struthers' affidavits as the “evidence in dispute”.
It does not appear from the Court's records that either party served the mediator (the Hon Barry Paterson QC) with the relevant documents. Mr Paterson's position, if any, on the matter in issue is unknown. I did consider whether steps ought to be taken to ascertain Mr Paterson's position but, given the conclusion reached, decided it was unnecessary to do so.
So far as it is relevant, the evidence regarding the mediation is as follows.
In his affidavit, Mr Darlow gives evidence:
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a) that the parties met in Auckland on 4 and 8 February 2010 in an attempt to resolve the issues which are the subject of the proceeding and also other matters in issue between them.
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b) Mr Paterson facilitated the discussions.
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c) Mr Darlow and another partner in his firm, Mr Allan, attended the meetings. Mr Struthers attended on 4 February 2010 and Kim Struthers, the Defendants' Group Products Manager, attended on 8 February 2010. Mr Schnell, the Defendants' Chief Financial Officer, also attended on behalf of the Defendants.
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d) Mr Mitchell and the Plaintiff's New Zealand solicitors, Ms Walker and Mr Grey of Simpson Grierson, Auckland, attended for the Plaintiff. Mr Mitchell travelled from San Francisco to New Zealand to attend.
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e) The parties reached agreement on all issues between them on 8 February 2010. Mr Darlow sets out the terms of the agreement which the Defendants contend was reached. This is the evidence to which the Plaintiff takes exception because it discloses exchanges and statements at the mediation.
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f) The agreement reached was not “subject to documentation” and, except to the extent the terms of the agreement are recorded in notes made by those present, including Mr Paterson, the terms of the agreement were not recorded in a written document “then and there”.
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g) With the exception of two matters, the Defendants have performed their “side of the bargain”.
Mr Struthers was not present at the mediation when it resumed on 8 February 2010. Accordingly, to the extent Mr Struthers purports to give evidence of what transpired at the mediation that day, his evidence is hearsay. Mr Struthers does, however, seek to give evidence as to aspects of part performance of the settlement agreement alleged to have been reached.
In his affidavit, Mr Mitchell denies that a binding and enforceable oral settlement was reached at the mediation. His evidence is that the parties reached a resolution in principle but the expectation was that a written agreement, signed by the parties' representatives, would be required before any resolution was binding on the parties. Mr Mitchell also gives evidence that this expectation was borne out by events after the mediation. Mr Mitchell says that the parties exchanged correspondence and draft agreements over a month long period after the mediation, with both parties revising the proposed terms. However, no written agreement was ever finalised let alone executed.
Mr Mitchell goes on to say that one reason why the parties expected that there would have to be a written and signed agreement was that any settlement would require a variation of the August deed. Mr Mitchell's evidence is that he and Mr Darlow negotiated the August deed over many weeks. The August deed contains...
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