Two infant milk formula companies, one in Auckland, and one in Southland, are trying to determine how to protect their corporate secrets, which may be saved on the same laptop.
Judge KG Smith released an Employment Court interlocutory judgement on September 7, that relates back to a matter where Mataura Valley Milk Ltd is attempting to search the laptop of Graham Scott for documents that may contain confidential information thought to belong to the company that is located on the outskirts of Gore.
Court documents show that in the initial search, six USB drives, two laptops and two hard copy documents were seized.
A hearing into an application to vary a search order, leave to join a party or to intervene, was held at the Employment Court in Christchurch on August 10.
At that time, Mataura Valley Milk applied to inspect the documents and Happy Valley Nutrition Ltd applied to be joined as a third party or to be granted leave to intervene.
Happy Valley Nutrition Ltd’s chief executive Greg Wood explained its plan to construct a premium milk product plant that would compete with Mataura Valley Milk Ltd.
He explained that Scott was engaged by his company as an independent contractor between March 23 and September 23, 2020.
The laptop used by Scott had on it a significant amount of Happy Valley Nutrition Ltd’s confidential information, including the basis-of-design of its proposed plant and design metrics, many of which were developed before Scott was engaged by the company.
While Happy Valley Nutrition Ltd was yet to build a plant, much of the information Wood was concerned about was described as being advantageous to a competitor. Some documents thought to be on the laptop provided a picture of the company’s business strategy, which he considered to be unique in New Zealand.
Mataura Valley Milk Ltd opposed the Auckland company being joined to the proceedings because it was an employment dispute and it had no substantive interest in its outcome.
Judge Smith said the proceeding was about an employment relationship problem arising from an alleged breach of the employment agreement between Mataura Valley Milk Ltd and Scott. What was in issue was the potential use or misuse of Mataura Valley Milk Ltd’s confidential information in breach of that agreement.
Mataura Valley Milk Ltd applied to vary the search order to allow an independent computer expert to inspect the seized items and produce a schedule listing the files identified as potentially including the company’s confidential information.
It also applied for its chief executive, Bernard May, together with the independent computer expert, to be permitted to review that schedule to identify documents, which were Mataura Valley Milk Ltd’s confidential information; and for May and the computer expert to be permitted to inspect the items seized, including the laptop owned by Happy Valley Nutrition Ltd, to identify whether Mataura Valley Milk Ltd’s confidential information had been incorporated into files stored on the devices.
Scott was opposed to May being able to inspect documents. But his objection was not intended to prevent May from inspecting them, but was to propose a process that would enable combined inspection.
Judge Smith says there is something of an irony in the application because allowing an inspection will expose Happy Valley Nutrition Ltd to having its confidential information disclosed to a competitor and that is exactly what is behind Mataura Valley Milk Ltd taking the action.
While acknowledging that irony, in the end a pragmatic result is required because it is inevitable that the files will need to be inspected by May, he says.
Happy Valley’s application to join the proceedings as a third party was unsuccessful but leave was granted to intervene.
Judge Smith granted Mataura Valley Milk’s application to vary the search conditions on the basis that the inspected documents are not to be copied, they are only to be inspected at the office of Wynn Williams and, at all times, that inspection is supervised by an independent solicitor; and there is to be no disclosure of the content of information inspected by May to any person, with the exception of counsel, unless first authorised by the court.