Litigation privilege – Evidence Act 2006, s 56 – Guardian Royal Exchange Co v Stuart principles – dominant purpose of document – interpretation of ‘preparing for’ litigation – entitlement to sue not captured by litigation purpose

HealthAlliance NZ Limited v Hewlett-Packard NZ, Capax Discovery and Zovy [2023] NZHC 1201 per Johnstone J.

A health technology services provider, healthAlliance NZ, sues software company Hewlett-Packard (HP).  In 2015, healthAlliance entered into a contract with HP where healthAlliance would purchase 5,000 perpetual licences to HP’s software solution, and HP would provide ongoing support and maintenance (licence contract). Defendant software companies Capax and Zovy later assumed HP’s support and maintenance obligations. An issue that emerged in litigation was whether there was a valid assignment by HP to Capax and/or Zovy of its obligations under the licence contract.

Between late 2022 and early 2023, Capax/Zovy disclosed two documents: first, a Deed of Assignment dated 25 November 2022, which stated Capax was validly assigned obligations under the licence contract by HP’s successor entity, Micro Focus; and second, a Deed of Indemnity that appeared to accompany the Deed of Assignment. In the Deed of Indemnity, Capax promised to indemnify Micro Focus for costs and liabilities in relation to its proceeding with healthAlliance.

HealthAlliance applied for further discovery of documents created for the purpose of negotiations and other communications between Capax/Zovy, HP and Micro Focus that surrounded the parties’ entry into the deeds. Capax/Zovy claimed the documents were privileged under litigation privilege.

Section 56 of the Evidence Act states that litigation privilege applies to communication or information that “is made, received, compiled, or prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding”.

This provision codified pre-existing common law on the subject. In Guardian Royal Exchange Co v Stuart Assurance of New Zealand Ltd [1985] 1 NZLR 596 (CA), the court considered the ‘dominant purpose’ required of the relevant document was that of “conducting or advising regarding the litigation”.  The rationale for this is that the adversarial nature of litigation wouldn’t work if parties were obliged to disclose communications with prospective witnesses.

Litigation privilege, therefore, is to enable parties to effectively marshal evidence and potential arguments to be deployed in the proceeding.

In this case, neither the deeds themselves nor incidental correspondence were generated for the dominant purpose of preparing for a proceeding. They may have had the purpose of facilitating the proceeding in the sense of assisting Capax/Zovy to acquire or confirm prior acquisition of, rights upon which it can sue or be sued, but that is not the purpose to which s 56 is directed.

Held: The claim to privilege made in respect of negotiations and correspondence surrounding entry into the Deed of Assignment and the Deed of Indemnity is set aside.

healthalliance_v_hewlett-packard_ors