Twentieth Century Fox Film Corporation and Others v Dotcom

• Jurisdiction: New Zealand
• Judge: Courtney J
• Judgment Date: 30 July 2014
• Neutral Citation: [2014] NZHC 1789
• Docket Number: CIV-2014-404-001272
• Court: High Court
• Date: 30 July 2014

BETWEEN

Twentieth Century Fox Film Corporation, Disney Enterprises Inc, Paramount Pictures Corporation, Universal City Studios Productions Lllp and Warner Bros Entertainment Inc,

Applicants

and

Kim Dotcom

First Respondent

Bram Van Der Kolk

Second Respondent

RSV Holdings Limited (Formerly Known as Megastuff Limited)

Third Respondent

[2014] NZHC 1789

CIV-2014-404-001272

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application for an ancillary order under r32.5 High Court Rules (“HCR”) (order against judgment debtor or prospective judgment debtor or third party) for the respondent to fully disclose his asset position by providing an affidavit detailing the nature, location and value of his assets (whether legally or beneficially owned) worldwide — applicants controlled five major movie studios and alleged the respondent and others infringed their copyright interest through the operation of online file hosting service Megaupload — respondent was facing criminal charges and extradition to the United States — whether there was jurisdiction to make an ancillary order other than in conjunction with a freezing order — whether the ancillary order fell with the scope of r32.5 HCR — whether it would be unjust to grant the order as the defendant would have to waive his privilege against self-incrimination in order to effectively oppose it — whether a summary of evidence in the US proceeding which was affixed to an affidavit but not attributed to an author was admissible —whether the respondent's fair trial rights would be infringed

Appearances:

M C Sumpter and L L Fraser for Applicants

T J Walker and L F Stringer for First and Second Respondent

No appearance for Third Respondents

B F Fenton for Commissioner of Police

M J Gavin for Recording Industry

JUDGMENT OF Courtney J

Table of Contents

	Para.
Introduction	[1]
Background to the application	[5]
Jurisdiction for ancillary orders
Is there jurisdiction to make an ancillary order other than in conjunction with a freezing order?	[10]
Does the ancillary order sought fall within the scope of r 32.5?	[14]
Would it be unjust to grant the order even if the applicants satisfy the prerequisites?	[16]
A good arguable case
The test	[29]
Is the summary of evidence produced by Ms Thorland admissible?	[32]
Is there a good arguable case?	[42]
Sufficient prospect that a judgment could be enforced in New Zealand	[50]
Would the order sought be inconsistent with the US stay order?	[55]
Is there a danger that a prospective judgment will go wholly or partly unsatisfied because assets are disposed of?	[61]
Result	[75]

Introduction

1 The applicants are plaintiffs in civil proceedings brought against Mr Dotcom in the US claiming over $US100m for copyright infringement. 1 They are concerned that any judgment they obtain may go unsatisfied, even though Mr Dotcom is subject to orders restraining the disposition of assets in New Zealand. A US court issued those orders in criminal proceedings based on the same allegations of copyright infringement and they are registered in NZ (the criminal restraining orders). 2 However, as a result of recent public statements by Mr Dotcom, the applicants believe that Mr Dotcom has access to assets in New Zealand that are outside the scope of the criminal restraining orders and is disposing of them.

2 The applicants have applied for freezing orders in respect of Mr Dotcom's assets but at this stage are seeking an ancillary order under r 32.5 of the High Court Rules requiring 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. Mr Dotcom opposes the application on the grounds that:

• (a) There is no jurisdiction to make the order;

• (b) It would be unjust to make the order because he cannot mount an effective opposition without waiving his privilege against self-incrimination and risking his fair trial rights;

• (c) The applicants cannot demonstrate a good arguable case;

• (d) There is not sufficient prospect that a judgment obtained by the applicants would be enforceable in New Zealand;

• (e) There is no danger that a judgment obtained by the applicants would go unsatisfied as a result of his disposition of assets;

• (f) The order sought would be inconsistent with a stay order made in the US civil proceedings.

3 Counsel for interested parties, the Commissioner of Police and the recording industry, appeared but did not wish to be heard.

4 Mr Dotcom's wife, Mona Dotcom, is also an interested party. She has indicated by counsel's memorandum that she supports Mr Dotcom's opposition but does not wish to be heard and will abide the decision of the Court.

Background to the application

5 The applicants control five major motion picture studios. They allege that Mr Dotcom and others infringed their copyright interests through the operation of the online file hosting service Megaupload and related sites. Their complaints led to the criminal charges against Mr Dotcom. Mr Dotcom is facing extradition proceedings in relation to those charges.

6 The civil action 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. However, a condition of the stay is that the applicants may “institute and pursue any action in the United States or a foreign jurisdiction to preserve the defendants' assets in the event that such action becomes necessary.” That condition was included at the request of the applicants who were concerned that registration of the criminal restraining orders could lapse; a recent application to extend registration was refused and there is currently a temporary extension in place pending appeal against that decision. 3

7 Against the possibility of the Court of Appeal dismissing the appeal, the applicants filed an originating application 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 seeks a freezing order in respect of:

Any assets in New Zealand, being assets listed in the Schedule 4 to this application and any other New Zealand assets owned (beneficially or legally) by the respondents…

8 One of the ancillary orders sought is disclosure by the respondents of their assets, which is a common form of ancillary order and allows both clarity and certainty as to the terms of the freezing order sought in the originating application.

9 Mr Dotcom indicated that he would agree to an interim freezing order to ensure that the applicants' position is not prejudiced in the event that registration of the criminal restraining orders lapses. 5 Notwithstanding that agreement, the applicants have brought this application seeking an ancillary order requiring Mr Dotcom to make immediate and full disclosure of his financial position. The application was prompted by recent public statements made by Mr Dotcom indicating that he has access to substantial funds which are not subject to the criminal restraining orders. The applicants are concerned because, whilst they have never known the exact nature, extent or whereabouts of Mr Dotcom's assets, they had believed that his New Zealand assets were entirely restrained by the criminal restraining orders.

Jurisdiction for ancillary orders

Is there jurisdiction to make an ancillary order other than in conjunction with a freezing order?

10 Under r 32.2(2) the High Court may make a freezing order to “restrain a respondent from removing assets that are located either in or outside New Zealand or from disposing of, dealing with or diminishing the value of those assets”. 6 A freezing order is a powerful order that is sometimes described as draconian; it prevents the respondent from dealing with his or her own assets before any judgment

entered, sometimes for lengthy periods. The purpose of the order must, therefore, be kept firmly in mind when considering an application; it is not intended to place the applicant in a position of effectively having security. The purpose is, rather, to address the risk of a prospective judgment creditor being unable to enforce the judgment because assets have been removed or disposed of

11 The Court may also make an ancillary order under r 32.3:

• (1) The Court may make an order ( ancillary order) ancillary to a freezing order or prospective freezing order if the Court considers it just.

• (2) Without limiting the generality of subclause (1), an ancillary order may be made for any of the following purposes:

  • (a) Eliciting information relating to assets relevant to the freezing order or prospective freezing order;

  • (b) Determining whether the freezing order should be made;

  • (c) Appointing a receiver of the assets that are the subject of the freezing order.

• (3) An ancillary order is subject to the court's jurisdiction to decide an objection raised on the ground of privilege against self-incrimination conferred by s 60 of the Evidence Act 2006.

12 Although Ms Walker, for Mr Dotcom, was critical of the applicants' attempt to obtain an ancillary order other than in conjunction with a freezing order, rule 32.3 clearly contemplates an ancillary order being made before a freezing order and even without any freezing order ultimately following. The jurisdiction to make an ancillary order has been recognised as having the degree of flexibility needed to meet the justice of the individual case. 7

13 The prerequisites for a freezing order or ancillary order are set out at r 32.5:

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