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Creative Development Solutions Limited v Chorus New Zealand Limited [2021] NZCA 178 (13 May 2021)

Last Updated: 18 May 2021

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements. We certify for second counsel.

____________________________________________________________________

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 all its forms and manifestations, hereinafter the “Confidential Information”) to which the parties will have access, become familiar with, and come into possession of, the improper disclosure or exploitation of which by either party, inconsistent with the terms of this Agreement, would cause material and irreparable business and economic harm to the other party.

• [15] Some degree of definition was added by cl 2:

2. Scope of the Definition of “Confidential Information”.

Confidential Information made available in written form by either party will be clearly marked “Confidential” or with an equivalent conspicuous legend. Confidential Information made available orally or visually by either party to the other will be identified as Confidential Information prior to such disclosure.

Confidential Information received from either party or to which either party may have access during the course of its relationship with the other shall not be deemed confidential or proprietary within the meaning of this Agreement if the receiving party can conclusively prove that such information:

1. was in its possession at the time of receipt or disclosure and was not acquired directly or indirectly from the other party;
2. was at the time of disclosure by the other party lawfully in the public domain as evidenced by printed publication or otherwise;

100. at any time after its disclosure by the other party becomes part of the public domain by publication or otherwise through no fault or act of the receiving party;

4. was obtained from a third party with good legal title thereto and without breach of this Agreement;
5. was independently developed by it without any utilization whatsoever of the Confidential Information.

• [16] The “Purpose” of the Agreement, which was referred to both in the definition of Confidential Information and the obligations assumed in respect of it, was described in the first recital in this manner:

WHEREAS, Creative Development proposes conducting discussions and exchanging information with SUPPLIER, wherein Creative Development will therewith provide to SUPPLIER an in-depth understanding of various of the advanced technologies owned and controlled by Creative Development or its clients, said discussions, exchange, and provision to be regarding the business plans, intellectual property, methods, apparatus, algorithms and software pertaining collectively and individually to the Creative Development business hereinafter and generally known and described as follows: _________ Creative Development Business Products _________(hereinafter collectively referred to as “PRD”), and thus create both a technical and business evaluation opportunity for SUPPLIER regarding said PRD, this for the purpose of SUPPLIER being able to decide in as informed a manner as possible, whether SUPPLIER is then thereafter interested in any further involvement with regarding said PRD or any portion thereof, on any basis whatever, as might arise, be portrayed or proposed during the course of said discussion, and exchanges, or which might otherwise come about thereafter, (hereinafter the “Purpose”);

• [17] The obligations assumed under the Agreement were detailed in the first clause as follows:

1. Confidentiality

SUPPLIER and Creative Development each acknowledge that all items of Confidential Information are and shall at all times remain valuable special and unique assets of the disclosing party, the improper or unauthorized disclosure, conversion, exploitation or use of which, by the other party, could cause substantial and irreparable injury to the disclosing party and result in the loss of profits corporate opportunities and goodwill for which there is no adequate remedy. Accordingly, except as required by law or in the course of each party’s relationship with the other, and acting solely for the benefit and on behalf of the disclosing party, both SUPPLIER and Creative Development hereby undertake and agree:

1. To keep and procure that its directors, employees, agents and consultants keep in strict secrecy, confidence and in safe custody any and all Confidential Information of whatsoever nature, to include without Limiting the foregoing, all information, knowledge, data, drawings, know-how and other materials disclosed to it by the other party;
2. Not to use, nor allow the use of, any Confidential Information for any reason other than the Purpose;

100. Not to reproduce or copy the Confidential Information acquired by or to which either party may have access during the course of their relationship with each other, except strictly for their own internal and limited use for the Purpose;

4. To limit access to the Confidential Information to those of its directors, employees, agents and consultants on a “need to know” basis who reasonably and necessarily require such information for the Purpose, to inform each such director, employee, agent or consultant of all the restrictions contained herein as to confidentiality, disclosure and use of such Confidential Information and to ensure that each of them shall observe such restrictions and, in the case of each such agent and consultant, shall procure that all its personnel of whatever nature observe such restrictions;
5. Not (without the prior written consent of an authorized board member or director of the other party) to:- i) release any press statement or issue any other publicity regarding the arrangements which may exist between the parties; or - ii) disclose to any third party the identity of the other party either on a client list of the receiving party or otherwise.

• [18] The Agreement provided that the obligations were to be binding for the longer of a period of seven years from the date upon which either party communicated in writing to the other its decision no longer to pursue a relationship or until the party divulging the confidential information ceased to use it as part of their respective business activities.

The second meeting

• [19] A second meeting was held at Chorus’s Auckland office on 21 February 2018 which the Judge described in this way:^[12]

[45] At the second meeting, Mr Burns emphasised the importance of the political aspects of presenting a regional development proposal and collaborative approach. During the one and a half hour meeting, there were exchanges about the needs of the Marlborough region and the range of technologies that might possibly be deployed. In notes of the meeting prepared by Mr Phillips, he attributed Chorus representatives with acknowledgements of the importance of aspects emphasised on behalf of Creative and that Chorus recognised the possibilities for looking at different technologies. The notes recorded Mr Lott commending the approach of Creative as very thorough, saying that the whole-of-region approach was unique and not something he had seen before, and commenting that he needed to understand the design and the mapping of potential solutions.

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

• [20] On 27 February 2018 Mr Phillips emailed a briefing note to Chorus, the purpose of which was to “[s]et the stage for further engagement with Chorus as a potential supplier under the [Council’s] RFP for RBI2 deployment in Marlborough”. It stated that if Chorus was happy to engage with the Council as a potential supplier and collaborative partner, then a range of information could be provided quickly. Mr Lott’s response of 2 March 2018 thanked Mr Phillips for the briefing note and stated:

... we’re keen to further understand what’s possible.

Really looking forward to getting your high level design so we can test it against our early thinking.

• [21] On the previous day Mr Phillips had telephoned Mr Linstrom of Chorus and inquired whether Chorus had “pulled out” of the RBI2 round rather than not being awarded anything. Mr Linstrom advised Mr Lott by email on 2 March 2018 of the fact of this communication. It is common ground that Mr Lott subsequently telephoned Mr Phillips and stated that Chorus had pulled out of RBI2.
• [22] Prior to sending the more detailed information that had been foreshadowed, Mr Phillips emailed Chorus on 12 March 2018 stating:

We confirm our understanding that Chorus has withdrawn from the RBI2 Crown Funding RFP bid process for a variety of reasons. If this is not the case, would you please advise immediately.

In cross-examination Mr Lott expressed the view that this email was sent following their telephone conversation. Later that day Mr Phillips emailed a link to a slide pack containing an initial tranche of Creative documents to Mr Lott.^[13]

• [23] In an email the following day Mr Lott confirmed that he and Mr Rogers^[14] would attend a further meeting proposed by Mr Phillips and advised that they had high level plans which they had prepared to discuss with the Council and Creative. However that email did not engage with the statement in Mr Phillips’s 12 March 2018 email that Chorus had withdrawn from the RBI2 bidding process.

The third meeting

• [24] On 16 March 2018 Mr Phillips provided an agenda for a further meeting on 19 March 2018, together with briefing notes which continued to emphasise work in advancing the SSI on the basis of collaboration between stakeholders and providers. With reference to this meeting the judgment stated:^[15]

[56] Minutes of the meeting prepared by Creative record positive and complimentary observations by Chorus about Creative’s network design, and an acknowledgement that Chorus had calculated a smaller number of economic end users (EEUs) than in the work done by Creative and MDC. Comments were attributed to Chorus such as:

• Council had developed an outstanding model which had created opportunities, not previously considered.

• We like the approach and benefits of what Council is proposing; it is a full regional economic development approach.

• Great initial design. Submit to CIP on what you have. Chorus had a different plan; MDC SSI more of a Regional development model. If Shane Jones says, What can I get in a year, let’s do this.

[57] During the meeting, Chorus disclosed its own design and provided an explanation of it. Importantly for Chorus, the MDC chief executive advised at the meeting that MDC had spent [Redacted] sums developing their design, and that it would not be spending any more money on it.

• [25] On 23 March 2018 Mr Lott provided Creative with a signed letter of support, intending it to be used by Creative and the Council to support a funding bid to CIP. The letter expressed Chorus’s support for delivery of the Creative/Council project and stated that Chorus was keen to work with the Council in the future, especially with any future RBI extensions or Provincial Growth Fund applications.^[16]
• [26] On 28 March 2018 the Council lodged its response to CIP for RBI2+, including provision of Chorus’s letter of support.

The fourth meeting

• [27] The judgment described the fourth meeting on 10 April 2018 at Chorus’s Auckland premises in this way:^[17]

[61] ... Creative took statements made by the Chorus attendees as evincing an intention to use confidential information Chorus had learned from Creative for Chorus’s own purposes, outside the SSI initiative on which Creative treated Chorus as working collaboratively with them.

[62] Minutes of the meeting prepared by Creative attributed to the Chorus representatives statements acknowledging the benefit Chorus had gained from accessing Creative’s information and that Chorus would adopt a new approach in considering further infrastructure in the rest of the country.

• [28] On 15 April Ms Young^[18] sent Messrs Lott and Rodgers minutes of the third and fourth meetings seeking confirmation as to their correctness. On 28 April 2018 Mr Lott confirmed the minutes were correct. Shortly thereafter on 8 May 2018 Creative’s solicitors wrote a warning letter to Chorus about misuse of confidential information. Further correspondence was exchanged until commencement of the proceedings in July 2018.
• [29] In the interim on 18 May 2018 Chorus submitted to CIP a proposal for participation in the RBI2+ round. While the evidence did not eliminate the prospect that Chorus personnel might have initiated that re-engagement with CIP, the Judge ruled that more would have been required than was available to Creative to displace the quite credible evidence that the re-engagement was a CIP initiative and not Chorus’s.^[19]
• [30] As it happens neither Creative nor Chorus was successful in securing a contract with CIP for the provision of services in the RBI2+ round.

The Creative claim as now confined

Second cause of action: breach of the Agreement

• [31] Although some limited confidential information is said to have been provided to Chorus at the initial meeting on 8 February 2018, it was only subsequent to the execution of the Agreement that Creative provided the confidential information listed in sch A to the second amended statement of claim. That list comprised 32 items, including documentation relating to the SSI initiative, the Council maps, and briefing notes for and file notes of various meetings, including the four meetings between Creative and Chorus personnel.
• [32] The unauthorised use by Chorus of Creative’s confidential information was particularised as follows:

(a) as a result of becoming aware of the position as to CIP seeking RBI2+ proposals, that being part of the Confidential Information, whether or not other Confidential Information was used by Chorus, Chorus took, and continues to take, steps to assess, prepare for, and engage with CIP, other agencies including Ministers and officials with officials in the Ministry of Business, Innovation and Enterprise (“MBIE”), and with other Ministers and officials (particulars of which will be provided following discovery and interrogatories);

(b) the Confidential Information comprising knowledge of the opportunity to bid for CIP RBI2+ funding has been used by Chorus, so that it was able [to] seek to enter the bidding when it would not otherwise have done so;

(c) considering and evaluating how the approach referred to in the Confidential Information (including SSI) can be used for doing the rest of the country, such as in providing telecommunications services outside Marlborough (and then implementing same);

(d) use of the Confidential Information to develop an approach that enabled Chorus to enter RBI2+ and PGF bidding, that information providing a basis for Chorus to render RBI2+ and PGF funded services as viable (when they were not previously seen as viable);

(e) use of Confidential Information ranging from detailed design and EEU counts (whether or incorporated in material that went to CIP and MBIE) through to strategic and stakeholder engagement information (which also was not necessarily incorporated in communications with CIP and MBIE);

(f) developing the plan for all of Marlborough;

(g) asking and assessing how to get the right infrastructure to do so;

(h) picking up on the model in the Confidential Information (including SSI and as to working with WISPs and other parties);

(i) using the Confidential Information, including to give it to Bill Murch, the Chorus Investment Manager, and the Chorus planners, and to instruct Bill Murch and those planners because of use of that Confidential Information, in order for Chorus, Bill Murch and the planners to be able to assess and plan options including finding gaps, Chorus assets, and situations where Chorus does not have assets.^[20]

(j) being stimulated into a wider regional economic development model;

(k) developing projects Chorus can implement across the country;

(l) planning how to deliver across New Zealand including as to seeking and obtaining RBI2 and PGF funding, and executing same;

(m) re-stimulating and refining Chorus’s thinking on how to deliver across New Zealand;

(n) as a result of being engaged by [the Council] and [Creative], and the Confidential Information obtained as a result, altering its approach in rural New Zealand in the manner outlined in this paragraph, whether or not Government funding is involved;

...

Fourth cause of action: estoppel

• [33] The cause of action in estoppel was pleaded in this manner:
  89. Chorus made statements that it had withdrawn from bidding for RBI2 funding.

Particulars

(a) In a discussion with Mike Lott of Chorus on 12 March, Mike Lott confirmed to Dayal Phillips that Chorus had withdrawn from bidding for RBI2;

(b) In [Creative]’s email of 12 March 2018 to Chorus, advising that access to the Confidential Information would be provided, [Creative] noted that Chorus had confirmed withdrawal from the RBI2 funding bid, stating “We confirm our understanding that Chorus has withdrawn from the RBI2 Crown Funding RFP bid process for a variety of reasons. If this is not the case, would you please advise immediately.” Chorus replied by email to that email but made no mention of this statement.

(c) Mike Lott and Kurt Rodgers of Chorus also confirmed withdrawal from the RBI2 at their meeting with [the Council] and [Creative] on 19 March 2018;

90. Chorus thereby created a belief and expectation that it would not bid for RBI2 Extension funding.
91. [Creative] reasonably relied upon those statements, belief and expectation, by providing Confidential Information to Chorus and by continuing to involve Chorus in SSI, when it would not otherwise have done so.
92. [Creative] has suffered and will suffer detriment due to such reliance, for the reasons in the preceding paragraph.
93. [The Council] and [Creative] would not have supplied the Confidential Information to Chorus absent those statements.
94. The supply of the Confidential Information to Chorus has led and will lead to the loss and damage pleaded above.
95. It is unconscionable for Chorus to depart from the belief and expectation created by Chorus.

Split trial

• [34] Approximately one month before trial the parties agreed that the hearing should be confined to liability issues, with matters of quantum adjourned for a later hearing, depending on the outcome of the liability hearing.^[21]

The High Court judgment

The nature of the parties’ relationship

• [35] Mr Wigley’s submissions for Creative in this Court commenced by identifying a “unifying aspect” of the case, namely whether the parties’ relationship was a collaborative partnership or similar. The Judge’s rejection of that portrayal of the relationship was conveniently captured in his concluding observations on costs:

[239] The conduct of both parties was characterised by substantial posturing. For Creative, Mr Phillips exaggerated the “collaborative partnering” character of the relationship that Creative and MDC considered they were fostering with Chorus. Once the relationship soured, Creative made more than it was entitled to of self-serving assertions about the character of the relationship to assert fiduciary and equitable obligations owed by Chorus in what was an exploratory, non-exclusive, pre-substantive contractual commercial relationship.

[240] For Chorus, Mr Lott and others engaged in grossly misleading flattery to encourage MDC to contract with Chorus, during the period in which Chorus was under the impression that MDC had substantial funding (“[Redacted]”) to commit to the cost of extending infrastructure.

[241] A consequence of Chorus’s flattery is that Creative would have assessed its prospects for these proceedings by treating Chorus as having confirmed its own belief in the substantial value to Chorus of Creative’s intellectual property. Because I have found that Chorus was not genuine in the assessments it conveyed to Creative of the value of Creative's intellectual property at the time, those expressions of view have not been determinative in assessing Creative’s causes of action. However, they provide a substantial measure of justification for Creative to embark on proceedings, articulating claims in the terms that it has.

• [36] The Judge described the misleading flattering tone of approval by Chorus of Creative’s intellectual property throughout a period when Chorus’s genuine view was negative and dismissive as a most unusual dynamic.^[22] Although it is no longer necessary to focus on the reasons for the rejection of the fiduciary duty allegation, we note that, in concluding that the parties’ relationship was quite distinct from one in which each depended on and trusted the other, the Judge viewed the relationship disclaimer provision in the Agreement as antithetical to a relationship involving fiduciary obligations.^[23]

Breach of the Agreement

• [37] The Judge heard evidence from experts for each party. Creative’s expert, Dr Arasaratnam Sathyendran, is a consultant with a PhD in electrical and electronic engineering and a graduate diploma in business administration. Chorus’s expert, Mr John Emanuel, is an engineer whose experience included RBI policy and RFP development work for the Ministry of Business, Innovation and Employment as well as contract negotiation and administration. He had worked specifically on policy development for RBI2. As noted below they adopted different approaches to the issues raised by the claim for breach of the Agreement.
• [38] Having considered the evidence of the experts, the Judge made findings on the existence of confidential information in this way:

[168] In applying the contractual terms, I have regard to the prospect that a collocation of information or ideas reflecting individual items, some of which are in the public domain or were known to Chorus prior to its dealings with Creative, but which in combination are not publicly available, may result in such a collocation being recognised as confidential information.

[169] Chorus’s engagement with Creative and MDC exposed it to their definition of the needs Creative/MDC sought to address, and the network design they had developed to deliver on the identified needs. The interaction stimulated Chorus to revisit work it had previously done for RBI2, with the intention of demonstrating to MDC how Chorus would deliver the services MDC sought, within the budget that Chorus then perceived MDC had, or could procure, to develop the network.

[170] Creative perceived its confidential information as reflecting smarter and more innovative technologies than Chorus would use, but I accept the evidence for Chorus that the so-called innovative solutions were not news to it. Much of the information came within the exclusions cited at [145] above, and therefore fell outside the definition of confidential information in the NDA. To the extent that the collocation of information facilitated Chorus in revisiting its previous work on design of infrastructure for broadband in the Marlborough Sounds, that collocation was capable of providing a springboard for Chorus’s next round of that work. The real issue is to what extent Chorus used it as such.

(Footnote omitted.)

• [39] The Judge noted that there was no direct evidence such as of copying Creative’s design or direct application of confidential information conveyed. In those circumstances he considered it relevant to test Chorus’s denial of use of confidential information by considering whether the information it had received had value to it.^[24] The Judge accepted the evidence for Chorus that the detail in the disclosures up to 12 March 2018 would have been of little utility for Chorus in designing a network any differently than it would have done from its own accumulated knowledge and experience. What Chorus had done was to produce a plan showing how it would build the infrastructure for the area which it knew from initial discussions that the Council wished to service. It maximised the use of fibre but extended the fibre cabling further than its previous proposals because Chorus anticipated that new funding, beyond that available for RBI2, would be available to pay for it.^[25]
• [40] His ultimate conclusion on the question of use was expressed in this way:

[203] Standing back, as Mr Elliott urged me to do, I accept that the exchanges of information between Creative and Chorus between February and April 2018 did contribute to the evolution of Chorus’s mode of responding to CIP. In a minor incremental way, Chorus used the work it undertook in dealing with Creative as an influence on the evolution of its own thinking and its mode of dealing with CIP. However, the inarguably dominant influences on that evolution in thinking were independent of any use of Creative’s confidential information. It was not sufficient to characterise any use as a springboard. Accordingly, it is not use that breaches the terms of the NDA.

Estoppel

• [41] The Judge’s analysis reflected the statement of the elements of estoppel by this Court in Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd:^[26]

(a) A belief or expectation by [the plaintiff] has been created or encouraged by words or conduct by [the defendant];

(b) To the extent an express representation is relied upon, it is clearly and unequivocally expressed;

(c) [The plaintiff] reasonably relied to its detriment on the representation; and

(d) It would be unconscionable for [the defendant] to depart from the belief or expectation.

Because we address the detail of the Judge’s reasoning in the context of our consideration of the individual issues, we confine ourselves here to a summary of the findings.

• [42] The Judge accepted that the reference to non-participation in the “RBI2 ... bid process” included RBI2+ (the extension part of RBI2 that was then on foot), reasoning that there would be no relevance in merely confirming the historical circumstance that Chorus had indicated to CIP in August 2017 that it would not further negotiate on the prospect of being allocated funding in the original RBI2 funding round.^[27] The Judge was satisfied that there was a representation in terms sufficiently clear to found an estoppel arising in circumstances where it was reasonable for Creative to rely on it.^[28]
• [43] The Judge rejected arguments advanced by Chorus first to the effect that recognition of an estoppel in the circumstances would harm the orderly regulation of a commercial relationship^[29] and secondly that interpreting the representation as an arrangement between competitors not to compete would risk contravention of the Commerce Act 1986.^[30]
• [44] In the circumstances where the provision of confidential information proceeded primarily in reliance on the contractual confidentiality constraint but the contractual claim had failed, the Judge considered that a discrete analysis was required as to the detriment arising from Creative’s reliance on Chorus’s representation. Given that neither party enjoyed any success in the RBI2+ round of bidding, the Judge appears to have accepted Chorus’s contention that Creative could have suffered no detriment through Chorus’s participation having harmed Creative’s prospects of success.^[31]
• [45] The proposition that Creative had suffered detriment in the form of the loss of the economic value of relaxation of the estoppel was viewed by the Judge as inviting analogy with Wrotham Park damages.^[32] This envisaged that, had Chorus sought release from the constraint it had acknowledged in favour of Creative as representee, then an objective assessment assuming reasonable approaches to valuation of the constraint would lead to a quantification that would compensate Creative for releasing Chorus from the constraint created by the estoppel.^[33] However, in the absence of evidence as to how a notional negotiation of the value of the relaxation would occur, the Judge ruled that Creative was unable to establish any material detriment.^[34]

Issues on appeal

• [46] In respect of the two remaining causes of action the agreed issues are:

Breach of the Agreement

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

(b) Did Chorus breach the Agreement by using confidential information?

Equitable estoppel

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

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

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

(f) Did Creative suffer detriment as a result of any such reliance?

(g) If the estoppel is established, are negotiating damages available as a remedy?

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

• [47] Save for two points, Creative did not take issue with the High Court’s conclusions on the construction of the Agreement. Its notice of appeal recorded that at [170]^[35] the Judge rightly found that a collocation of information facilitated Chorus in revisiting its previous work and was capable of providing a springboard for Chorus’s next round of work.
• [48] The two qualifications arose from the Judge’s observations on Chorus’s infrastructure plan as follows:

[201] In preparing its own plan for new infrastructure, Chorus was responding to what it saw MDC – as a potential customer – wanted to achieve. The network design it provided to Creative was its own work, but that work was done in response to disclosures by Creative/MDC of what MDC sought to achieve as a facilitator of UFB services within its territory. In denying any resort to Creative's information, Mr Murch overlooks that Chorus was responding to indications from Creative/MDC as to where they wanted extended services to be made available. In the context of this relationship, I am not satisfied that Creative can claim that MDC’s wish list of what it would want Chorus to provide has status as confidential information protected by the NDA.

[202] As Mr Phillips acknowledged, a better outline of where MDC was hoping to provide services is distinguishable from the substantial work that had been done on how Creative recommended that could be achieved. The latter category of information is entitled to protection, but in the circumstances of this relationship I am satisfied that the former was not. I do not accept that the process of Chorus producing its own design of how it would provide infrastructure to meet MDC’s needs, and then sharing that design with them, gave Creative/MDC any right to claim that Chorus's design became their joint property.

• [49] Paragraph 3(d)(iv) of the Creative notice of appeal stated:

the Learned Judge (rightly) found at [201] that Creative could claim that MDC’s wish list of what it would want Chorus to provide has status as confidential information protected by the NDA but erred in portraying such information as a “wish list”;

• [50] We accept Chorus’s submission that in that paragraph Creative misstated the finding at [201]. In fact the Judge concluded that he was not satisfied that Creative could claim that the Council’s wish list of what it would want to provide had the status of confidential information protected by the Agreement.
• [51] Secondly, para 3(d)(v) of the notice asserted that the Judge erred at [202] in finding that, having shared its design with Chorus, Creative had no rights in the joint work product comprising such design. However we did not hear argument in support of the joint ownership proposition. That may reflect the fact that Dr Sathyendran’s analysis led him to the view that Chorus had not copied Creative’s network design.^[36]
• [52] The primary impetus for the first agreed issue is the challenge by Chorus to the finding that even some information conveyed was in fact confidential. The two limbs to this argument were expressed in the notice of support in this way:
  1. The learned Judge held (correctly) that there was no use by the respondent of the appellant’s information. He considered the information’s confidentiality and concluded (Judgment at [168]‑[170]) it may have been or was confidential. He ought to have held that the information was incapable of protection as confidential information as it was not “confidential information” within the proper construction of the NDA or according to the law of equity. Under the NDA and/or the law of equity the appellant’s information was required to possess but lacked novelty, specificity and value in order to be protectable.
  2. To the extent not encapsulated in paragraph [1] above, the Judge decided (Judgment at [170]) that a “collocation” of information (meaning a compilation of public information which by virtue of the work and effort expended in making or arranging it rendered the compilation confidential) was capable of providing a springboard for Chorus’ later work. That decision was not available on the evidence irrespective of the fact that the Judge (rightly) decided the collocation (compilation) was not used.
• [53] Chorus contended that to attract protection information needs to objectively possess the necessary qualify of confidence,^[37] which will be absent if the information is “useless”^[38] or is already public knowledge.^[39] The proposition advanced was as follows:

Whether in contract or equity (although the appeal now restricts the confidentiality cause of action to a contractual basis), a claim for breach of confidence has three elements. They are that the information is confidential, is subject to an obligation of confidence, and it is used in a manner which is not authorised.

• [54] While that statement is accurate in the context of the equitable duty of confidence, as the Master of the Rolls observed in Saltman Engineering Co Ltd v Campbell Engineering Co Ltd the requirement that the information be confidential is “apart from contract”.^[40] As Gurry on Breach of Confidence explains, express terms may theoretically go further than equitable obligations in prohibiting the use and disclosure of information that is no longer confidential.^[41] The point was explored in more than a theoretical context by this Court in Attorney‑General for England and Wales v R where Tipping J addressed the implications of a contractual obligation of confidentiality:^[42]

Interpretation of contract

[91] In the High Court there was argument about the true meaning of the contract. R contended it should be construed as covering only confidential or sensitive information, whereas the appellant argued that is plain words should not be read down and that accordingly “any information” meant literally any information relating to the work of, or in support of, the UKSF. The Judge had to deal with some collateral issues with which we are not concerned and expressed his conclusion in these words at para [56]:

“[56] The question is, whether these references and the background to the requirement to sign the contract justify the submission that the wide words used should be read down. I have concluded that they do not. Although the purpose may be to ensure that sensitive or potentially damaging information is not disclosed, the method of ensuring that that is so, adopted by the agreement, is a complete prohibition on the disclosure without prior consent of any information as described in para 1 of the contract. It is also clear that that obligation is a lifelong one.”

[92] For those reasons the Judge held the contract had the effect for which the appellant contended. By way of cross-appeal R challenged that conclusion. He argued that the parties could not have intended the words “any information” to cover information already in the public domain. In addition it was argued that a so-called confidentiality contract should not be held to apply to information which was not confidential.

[93] To accept those arguments would involve a rewriting of the way in which the contract is expressed. R agreed to keep confidential any information, meaning in context all information, of the kind described. The question of when the Ministry might consent to disclosure is a completely separate matter. I have considered the various arguments advanced on R’s behalf but find myself in the end driven back to the fundamental point that the parties must be taken to have intended what they have clearly said. No amount of debate about the correct way to interpret contracts can justify a departure from that basic proposition.

• [55] The argument for Chorus similarly involves a rewriting of the way in which the Agreement is expressed. The obligations in cl 1 extend to information which was provided and suitably identified as such in the manner specified in cl 2.^[43] While the information protected by the Agreement does not extend to information demonstrated to be in the public domain, the effect of cl 2 is to reverse the onus. It is not for Creative to show that the information is not in the public domain. Rather Chorus, as the receiving party, assumes the burden of establishing that the information is in the public domain.
• [56] Hence the proposition advanced by Chorus^[44] must be read subject to the mechanism which the Agreement provides. The Judge clearly recognised these contractual implications, stating:^[45]

[167] In this case, the obligations of confidence are governed by the terms of the NDA, which contains specific definitions of what is, and importantly what is not, to be treated as confidential information.

We are satisfied that the Judge’s interpretation of the mechanism in the Agreement was correct.

• [57] Mr Emanuel analysed the information provided by Creative to Chorus in six categories:

(a) Creative’s business proposition;

(b) service descriptions;

(c) end user data;

(d) Creative-supplied network plan;

(e) proof of concept plans; and

(f) implementation approach

• [58] The Judge recorded that Mr Emanuel assessed much of Creative’s information to have been in the public domain or comprised information that would already have been known to Chorus at the time.^[46] He accepted the evidence for Chorus that Creative’s so-called innovative solutions were not news to Chorus, concluding that much of the information came within the exclusions in cl 2.^[47]
• [59] However, some information was identified by Mr Emanuel as not in the public domain, for example:

(a) In respect of the end user data, the sorting undertaken by Creative was its own work resulting in a data set not in the public domain.^[48]

(b) In respect of the proof of concept plans, the SmartMaps and a spreadsheet provided by Creative containing base station site location and radio system data specific to the project were not in the public domain.^[49]

• [60] Dr Sathyendran started from the premise that the Creative/Council information was confidential and valuable. He did not undertake the same topic-by-topic analysis as Mr Emanuel because his initial instruction involved a comparison of Creative’s concept design with that produced for the Marlborough area by Chorus.^[50]
• [61] In its written submissions Chorus acknowledged that some of the information Creative provided, in particular the Creative network planning information, was not in the public domain. However it relied on Mr Emanuel’s evidence that the compilation of information had little value and none for Chorus. As the Judge noted:

[156] Assessed overall, Mr Emanuel likened what Creative provided to Chorus to similar accumulations of information he had seen prepared as local or regional solutions for other areas in New Zealand. His overall assessment was that the combined impact of the information had little or no value. In particular, he considered that, because of Chorus’s pre-existing industry knowledge, it had no value to Chorus.

• [62] However the value of information divulged is not a matter which the Agreement recognises in cl 2 as a basis for excising such information from the ambit of the Agreement. The Judge did not take account of that factor in his consideration of whether the information was the subject of the obligations under the Agreement.
• [63] While accepting that much of the information was excluded by cl 2, the Judge concluded that the collocation of information recognised at [168]^[51] was confidential information capable of providing a springboard for Chorus’s next round of work for the design of infrastructure for broadband in the Marlborough Sounds.
• [64] Given the terms of the Agreement, that was the correct approach. Furthermore that conclusion was plainly available given not only the testimony of Mr Emanuel but also Chorus’s acknowledgment.

Did Chorus breach the Agreement by using confidential information?

• [65] The Judge viewed the extent of use by Chorus of Creative’s confidential information as the real issue on the second cause of action.^[52] His summary of his analysis of that issue concluded:

[203] Standing back, as Mr Elliott urged me to do, I accept that the exchanges of information between Creative and Chorus between February and April 2018 did contribute to the evolution of Chorus’s mode of responding to CIP. In a minor incremental way, Chorus used the work it undertook in dealing with Creative as an influence on the evolution of its own thinking and its mode of dealing with CIP. However, the inarguably dominant influences on that evolution in thinking were independent of any use of Creative’s confidential information. It was not sufficient to characterise any use as a springboard. Accordingly, it is not use that breaches the terms of the NDA.

• [66] The Judge explained his approach to the determination of the issue of Chorus’s use of Creative’s confidential information in this way:^[53]

[171] In assessing whether Chorus made use of Creative’s confidential information, it is unnecessary for Creative to prove use in the direct sense that Chorus has directly applied an idea or information in an identifiable instance. It will be sufficient if I find Chorus has taken a material advantage from exposure to the confidential information, using it as a springboard to advance its work in a way that it could not have done at that time, without undertaking further work of its own.

(Footnote omitted).

• [67] Creative did not take issue with that approach. However it contended that the Judge proceeded to err in several respects, including by failing to address or not accepting that there was sufficient evidence of breach of the Agreement so that the onus of proof of the absence of breach passed to Chorus and was not discharged. Mr Wigley submitted that there was ample evidence against Chorus, even though the specific information used was not identified, which he said was often the case.
• [68] In support of that submission Mr Wigley cited Norbrook Laboratories Ltd v Bomac Laboratories Ltd, a case involving a secrecy agreement, where Norbrook had accepted that the burden of proving a breach lay on it. Delivering the judgment of the Privy Council Lord Bingham explained the nature of the shifting evidential burden:^[54]

In such a case [where a party seeks to establish a breach of contract] the legal burden of proof lies on the plaintiff and never shifts. But if the plaintiff adduces evidence from which, in the absence of any adequate explanation or answer, an inference of breach may properly be drawn, an evidential or provisional burden falls on the defendant, as explained by Lord Denning in Brown v Rolls Royce Ltd [1960] 1 WLR 210. Thus if A entrusts B in confidence with secret proprietary information not publicly available, and B is precluded by contract from using that information for its own purposes, and the relationship between them ends, and B puts on the market a product which could not ordinarily be made without using A’s secret information, a claim by A for breach of contract is likely to succeed unless B shows that it obtained the information from another legitimate source, or as a result of independent research, or in some other manner not involving misuse of A’s information. This is an approach to decision-making which depends not on abstruse legal doctrine but on the application of common sense.

• [69] In response Mr Smith QC for Chorus emphasised that the prerequisite for a transfer of the provisional burden is the existence of evidence creating an inference of breach and the absence of any adequate explanation. Observing that had not occurred here, he submitted that through discovery Creative was presented with a full description of what Chorus did which precluded any assertion that the Chorus network design was derived from Creative. That response derived support from Lord Bingham’s further observation:^[55]

It is, however, an approach which has little bearing on a case such as the present in which discovery has been given and evidence heard at length on both sides. The question then is whether, in the light of all that evidence, the plaintiff has proved its case on the balance of probabilities ...

• [70] Mr Smith drew attention to the evidence of Mr Murch, a veteran telecommunications engineer with many years of experience with Chorus and its predecessors including the New Zealand Post Office, to the effect that he and his team had produced Chorus’s network plan for the Marlborough Sounds prior to seeing most of the information which Creative supplied. His evidence was accepted by the Judge:^[56]

[181] Mr Murch was in charge of the production of the Chorus plan. His evidence was that his plan, completed by 6 March 2018, did not depend on information conveyed to Chorus by Creative. The core of the work had been done in preparing Chorus’s bid for RBI2 in 2017. I found Mr Murch a straightforward and honest witness, and accept his unequivocal evidence that Chorus’s work in producing its own plan for the Marlborough Sounds did not rely on any confidential information provided to Chorus by Creative.

[182] I accept Messrs Murch and Emanuel’s evidence that the detail in the disclosures up to 12 March 2018 would have been of little utility for Chorus in designing a network any differently than it would have done from its own accumulated knowledge and experience.

• [71] Recognising the difficulty he faced in challenging that finding, Mr Wigley placed emphasis on the parties’ different foci, submitting:

4.2 Chorus and Creative had different cases on confidential information. Chorus focussed on network design and Creative on the overall information particularly the information underlying the design outputs such as the commercial, financial, opportunity and strategic aspects. It is submitted the judgment erred in focussing on the Chorus case around network design.

4.3 Chorus are the experts on network design and implementation; that is why they were brought in by Creative/MDC. Their designs can be expected to have substantial and dominant components developed by them and to be better developed and more suited than the initial designs by Creative, including remedying any errors. Chorus’s criticisms need to be seen in this context, as they focus on their expertise, without regard in this context to the underlying commercial, financial and strategic work underpinning what led to the design. As Chorus admitted, this type of initiative is new to them.

• [72] Mr Wigley criticised Mr Emanuel for picking apart the work of Creative on a component by component basis, which he said tended not to address the combination of components representing the relevant confidential information. He submitted that there had been use of the underlying information provided by Creative. He took as an example the analysis of the numbers of EEUs. EEU is an acronym for Eligible End‑User which means premises identified by CIP as eligible for funding.
• [73] The Judge had accepted Chorus’s argument that the detail supporting Creative’s view of much larger numbers of EEUs was not information used by Chorus because its subsequent dealings with CIP still required 100 per cent funding.^[57] However Mr Wigley submitted that the judgment addressed only one of two uses of increased EEU numbers which would be of benefit to Chorus. He identified a second purpose in the form of the provision of a justification for revenue and profit in rolling out services into otherwise marginal and unprofitable areas. While it is not apparent how this proposition avoids the fact that Chorus drew on its own knowledge of addresses from public data, we consider that Mr Wigley’s submission is answered by Chorus’s submission that extending a network to a more widespread and sparse number of addresses results in diminishing returns and that, even with the additional addresses, the market in the Marlborough Sounds is not commercially viable to serve.
• [74] We also do not consider that there is substance in two further matters advanced for Creative as affording evidence sufficient to infer misuse of confidential information. The first concerns three additional upgraded sites, said by Creative on the face of it not to be viable, which were added to Mr Murch’s plan for the purpose of the third meeting on 19 March 2018. Mr Wigley says these were likely added due to information shared by Creative, including about adjacent marine farms. Chorus responds that those sites were existing Chorus sites which could be upgraded depending on funding, and regardless marine farms would not justify any upgrades as they would not be customers of Chorus. We accept this submission.
• [75] Finally Mr Wigley referred to the evolving interest of Chorus in what was described as “the last 1%”, suggesting a change in Chorus’s approach to the most remote areas through a greater willingness to co-ordinate extensions to its infrastructure with WISPs. Chorus’s rejoinder was that such a proposition was not only factually incorrect but was also addressed in the judgment.^[58]
• [76] As noted above, the onus was on Creative to prove on the balance of probabilities that there was a breach of the Agreement by Chorus with reference to the limited subject matter which was held to be governed by the Agreement, namely the collocation of information discussed in the judgment at [168].^[59] The Judge recognised the prospect that, to the extent that the collocation of information facilitated Chorus in revisiting its previous work on design infrastructure for broadband in the Marlborough Sounds, it was capable of providing a springboard for Chorus’s next round of that work.^[60] However for the reasons discussed the Judge concluded that, while in a minor incremental way that information may have had an influence on the evolution of Chorus’s thinking, it was not sufficient to characterise any use of it as a springboard.
• [77] Creative did not persuade us to a contrary view or cause us to consider that the Judge’s conclusion on the use of confidential information was in error. Consequently the appeal against the finding on the second cause of action must fail.
• [78] In these circumstances it is unnecessary for us to consider the further points in support of the judgment on this issue contained in Chorus’s notice of support.

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

• [79] It will be recalled that the statements which Creative attributed to Chorus were to the effect that it had “withdrawn from bidding for RBI2 funding”.^[61] Chorus admitted that it had made the factual statement that it was not participating in RBI2, emphasising that the statement was correct. The relevant part of its statement of defence stated:

89.1 in August 2017 Chorus had advised CIP that it did not wish to pursue negotiations in relation to RBI2 funding;

89.2 in March 2018 Chorus advised CDS that it was not then pursuing any negotiations with CIP for RBI2 funding and says further that Chorus did not make any representation that it would not seek funding from or otherwise engage with CIP at some point in the future;

• [80] Creative filed a reply asserting in response to para 89.2 (as well as to other paragraphs) that:

(a) Chorus made two representations that it was not pursuing negotiations with CIP for RBI2+ funding; and

(b) Chorus did thereby represent that it would not seek funding from or engage with CIP at some point in the future (or alternatively it would inform MDC and CDS before seeking to do so).

• [81] The Judge accepted the first of Creative’s propositions, namely that Chorus had made a representation but only to the extent of the RBI2+ tender round.^[62]
• [82] In its notice of support Chorus contended that the Judge was in error in concluding that it was reasonable for Creative to treat the statements and conduct attributed to Chorus as a representation that Chorus would not be submitting its own bid for RBI2+. Chorus viewed the estoppel claim as an attempt by Creative to augment its contractual arrangements with Chorus. It made the point that Creative could have sought, but chose not to seek, an express promise from Chorus that it would not compete for further Government funding, observing that such would have required Creative to expressly identify the scope of the non-compete obligation that it wished to obtain.
• [83] From Chorus’s perspective the pleading attempted to transform a correct express statement of fact, that Chorus was not participating in RBI2, into an implied representation as to future conduct. Chorus submitted that the Court should be naturally cautious in finding that such an implied representation was sufficiently clear and unequivocal to found an estoppel.
• [84] Chorus further submitted that if a promise is objectively capable of more than one interpretation, or if there is uncertainty about the scope of the right or the period to which it applies, then an estoppel ought not to arise. In its view, if a representation is not clear enough to support a contractual obligation, then it is difficult to see how it could be clear enough to support an estoppel.^[63] It amplified the submission by exploring the range of potential interpretations:
  107. Here, while the possibility of further Government funding was well‑known, the precise vehicle and nature of that was unclear. In the absence of any specific engagement on the scope of the restraint which CDS says was created, it is unclear whether it covers: (a) further RBI funding rounds, whether related to RBI2 or not; (b) the entire country or just Marlborough; (c) UFB or specific fibre initiatives (such as fibre to Haast), whether in rural areas or not; or (d) Provincial Growth Fund funding, whether administered by CIP or not.
• [85] These submissions reflected the tenor of Mr Lott’s response to the proposition put to him in cross-examination that it was clear from the question in Mr Phillip’s email of 12 March 2018 that he had a concern about the future and that he was not concerned about “spilt milk”. Mr Lott replied:

There was, the process that was ongoing that we have withdrawn from. It doesn’t suggest are you – will Chorus ever go... If you wanting to be clear with the meaning you’re talking about he would have had to ask would Chorus ever apply for any further government funding. Because that’s I think what you’re implying and that isn’t what that means to me. He has asked – he is confirming his understanding that Chorus had withdrawn from the RBI2 Crown funding and RFP bid process. That’s a formal process that we have gone through and negotiated potential contracts and supplies and was quite a formal involved process that ran through 2017. We had withdrawn from it.

Mr Lott had earlier responded that the statement in the email was completely correct in that Chorus had withdrawn from the bid and had no plans to re-enter. However he also acknowledged that he could understand why Mr Phillips might be concerned whether Chorus was “either with them or against them”.

• [86] The construction of a representation, as Mance LJ said in Primus Telecommunications Plc v MCI WorldCom International Inc:^[64]

... must be judged objectively according to the impact that whatever is said may be expected to have on a reasonable representee in the position and with the known characteristics of the actual representee ...

Where the representation is said to be implied in what is expressly stated, the Court has to consider what a reasonable person would have inferred was being implicitly represented by the representor’s words and conduct in their context.^[65]

• [87] In our view that context was spelled out with clarity in the Judge’s conclusion that the representation was confined to RBI2+:^[66]

[221] I accept that the representations could not reasonably be interpreted as indefinitely committing Chorus to not participating in all subsequent CIP bidding processes. However, as a matter of context, both parties were focused during that period in March 2018 on the prospects of obtaining funding from CIP in its next round. I consider it was reasonable for Creative to treat the statements from Chorus representatives, and the absence of an answer to the 12 March 2018 email enquiry on the topic, as a representation that Chorus would not be submitting its own bid for RBI2+ funding. The relevant context included the prospect of Chorus providing critical components of the infrastructure that Creative/MDC were intending to bid for, to service more remote parts of the Marlborough region. The Chorus representatives dealing with Creative can reasonably be expected to have appreciated that as being the reason why Mr Phillips sought clarification about the point, and ought also to have given them an appreciation of the relative importance of their answer to Creative.

• [88] To those matters might be added the fact that Chorus was to provide (and did on 23 March 2018 provide) a letter headed “Chorus support for MDC Connectivity Bid” which was annexed to the Council’s resubmission of its April 2017 RFP pricing together with technology and delivery enhancements.^[67]
• [89] In this situation, with the focus being on funding going forward, a reasonable person in Creative’s position would have inferred Chorus was referring to future conduct. We therefore answer this issue in the affirmative: Chorus did make a sufficiently clear and unequivocal representation.

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

• [90] The Judge viewed the effect of Creative’s pleading as being that Creative divulged its confidential information to Chorus in reliance on two factors:^[68]

(a) Chorus’s commitment to the Agreement; and

(b) representations by Chorus to the effect that it would not compete with Creative/the Council by submitting its own bid to CIP.

• [91] The actual finding of reliance is embedded in the Judge’s rejection of Chorus’s contention that recognition of an estoppel would distort a commercial relationship:^[69]

[223] The response to this is that reliance on the representation founding an estoppel is an alternative basis for Creative to seek relief for the harm it alleges was caused by Chorus, irrespective of whether Creative can make out misuse of confidential information. Creative embarked on the relationship to the extent it did, and exposed itself to the risk of misuse of its confidential information about the design of UFB services for Marlborough, believing that Chorus would not compete with it. The reality is it subsequently found that Chorus has done so. ...

• [92] Notwithstanding the formulation of the fourth issue as one addressing both the fact of reliance and whether reliance was reasonable, it was apparent that only the latter point was in issue. The relevant part of Chorus’s notice of support criticised the finding in the judgment that “[Creative’s] reliance on that representation was reasonable”. Chorus’s written submissions were similarly focussed. The absence of challenge to the fact of reliance was unsurprising given the acknowledgement by Mr Lott in cross-examination that it was clear to him that, if Mr Lott did not advise Mr Phillips immediately in relation to the statement in the 12 March 2018 email, Mr Phillips would rely on that assurance.
• [93] As to whether such reliance was reasonable, Chorus emphasised that at the time the representations were made the parties were merely in the early arm’s length stages of a possible commercial relationship. Chorus was only a potential supplier and had been given only high level information. Both Creative and the Council knew that the engagement was non-exclusive and that Chorus had invariably sought Government funding for broadband investment as new funding became available. Chorus’s submission asked rhetorically:

In those circumstances, how could [Creative] reasonably believe that Chorus has bound itself in [the] future in such a fundamental way?

• [94] Creative’s submissions acknowledged that the relationship between the parties was at its early stages and, although evolving, fell short of a full relationship such as a joint venture. However it maintained that the context was at least a potential collaborative partnership with fiduciary duties applying even if a collaborative partnership was yet to be concluded. Of course that submission necessarily requires reassessment in light of the abandonment of the fiduciary duty cause of action.
• [95] The basis for the Judge’s conclusion that Creative’s reliance was reasonable is also to be found in [221].^[70] We agree with that analysis. Neither the fact that the engagement was non-exclusive nor Chorus’s previous track record of seeking to participate in new Government funding serve to dilute the reasonableness of Creative’s reliance on the specifically confined representation. As the Singapore Court of Appeal observed in Wee Chiaw Sek Anna v Ng Li-Ann Genevieve the question of reliance is approached from the perspective of the representee.^[71]

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

• [96] The focus of this issue is the Judge’s concluding observation in the discussion of detriment:^[72]

[235] Creative did not present any evidence as to how a notional negotiation of the value of relaxing the constraint would occur. The hearing was limited to liability issues, but making out detriment was a contested element of this cause of action. In the end, I am persuaded that relaxation of the constraint would not attract any more than a nominal value. The consequence is that Creative is unable to make out any material detriment from reliance on the representation as a necessary element in making out its cause of action in estoppel.

• [97] Mr Wigley submitted that this case highlighted challenges for split trials, including where liability and quantum start and stop. The essence of his submission was that all causes of action include components of causation and damages which, in a split trial scenario, are addressed at the quantum hearing. In the context of estoppel it was said that the equivalent of such components is the element of detriment. Hence detriment should be addressed as part of the causation and damages issue at the “follow-on trial”. Consequently proof of detriment is not required at the liability trial.
• [98] We agree with Chorus’s response that, as is apparent from Wilson Parking, the existence of detrimental reliance — a change of position to the representee’s detriment, in reliance on the assurance given — is an essential component of the cause of action.^[73] The role of detriment is not confined to an inquiry as to equitable compensation but is a prerequisite to a determination of liability. Consequently the late decision to hold separate hearings on liability and quantum did not relieve Creative of the obligation to establish detrimental reliance at the liability hearing.

Did Creative rely on the representation to its detriment?

• [99] The reason why Creative sought to have the issue of detriment deferred to a relief hearing became apparent when the focus moved to the identification of detriment. In short, the relief which Creative contemplated was a hypothetical payment by Chorus in order to be released from obligations assumed to Creative. The claimed detriment was in effect the reverse side of the coin, namely Creative having been deprived of the opportunity to request such a release fee from Chorus.
• [100] Relief of that nature was envisaged in respect of all three causes of action but, as Mr Wigley’s overview explained, it was particularly addressed in the context of the estoppel claim:

In terms of remedies, the primary relief sought is payment of what Chorus would hypothetically pay to be released from its obligations as fiduciary, as confidee and/or as the representor under the estoppel cause of action. There are some nomenclature issues in this evolving area around what are variously called Wrotham Park damages, user damages, licence fees, negotiating damages etc. We address this in most detail when dealing with estoppel, using the general descriptor, “release fee” to capture the options ...

• [101] In Creative’s submissions on estoppel the interconnection between the release fee based relief and the asserted detriment clearly emerged:

(b) The damages question is as to what Chorus would hypothetically pay as a “release fee” to remove the constraint, so that it could bid in RBI2+ (when otherwise it could not bid). Although not necessarily the identical question, that also reflects the detriment component in the estoppel cause of action.

(c) It is self-evident, and as night follows day and similar to res ipsa loquitur, that there is real value to Chorus in being released to be able to bid as it did, by paying something material by way of release fee. Hypothetically it would be prepared to pay a material sum to be released from the constraint. That is so clear as to be in the nature of res ipsa loquitur.

• [102] The proposition was summarised by the Judge in this way:^[74]

[230] Creative has pleaded detriment by way of “loss of the economic value of relaxation of the estoppel”. Its proposition invites analogy with what are generally referred to as Wrotham Park damages. That is, had Chorus sought release from the constraint it had acknowledged in favour of Creative as representee, then an objective assessment assuming reasonable approaches to valuation of the constraint would lead to a quantification that would compensate Creative for releasing Chorus from the constraint created by the estoppel.

(Footnote omitted.)

• [103] From the subsequent discussion in the judgment, it is apparent that at trial Chorus engaged with Creative’s proposition, contending that a notional negotiation would not attribute anything more than a nominal value to the release from the constraint.^[75] The Judge also engaged with the point, concluding that, Creative not having presented any evidence as to how a notional negotiation for relaxation of the constraint would occur, Creative was unable to establish any material detriment.^[76]
• [104] In our view there is a more straightforward answer to this issue, which was reflected in Chorus’s submissions on the appeal. First, the argument that Creative suffered detriment because it was deprived of the opportunity to ask Chorus for a release fee is circular. As we have ruled, detrimental reliance is a component of the equitable estoppel cause of action. Creative needs to establish that as a result of relying on the representation by Chorus it changed its position in a manner that would leave it worse off than it otherwise would have been absent such reliance, in order to justify the intervention of equity.
• [105] If the cause of action is established, then equitable compensation in the nature of expectation damages might be available. But the prospect of such relief cannot provide the basis for establishing the detriment element of the cause of action in the first place. Put another way, equitable relief in this context is designed to respond to a detriment resulting from reliance on the relevant representation: failure to obtain equitable relief cannot itself be the relevant detriment.
• [106] Secondly, as Chorus submitted, Creative’s proposition is inconsistent with this Court’s judgment in Doig v Tower Insurance Ltd.^[77] The prejudice justifying equitable intervention is not merely the denial of the representation itself but relates instead to something done by the plaintiff in reliance on the representation. It is not the fact of the unmet expectation that creates unconscionability and provokes the intervention of equity, but rather the conduct of the plaintiff in acting upon the representation.^[78]
• [107] In our view it cannot be said that Creative suffered any material detriment by supplying confidential information to Chorus given the fact that any confidentiality was protected by the terms of the Agreement. Under the Agreement any confidential information provided to Chorus could not be used by Chorus in a manner that would prejudice Creative. So there could be no prejudice to Creative provided that Chorus complied with the Agreement, as we have held it did. Nor, on the facts, could Creative claim that its lack of success in RBI2+ was caused by the unsuccessful participation of Chorus in that extended tender round.
• [108] Creative argued that the practical risk of misuse of information it provided to Chorus was sufficient detriment for this purpose, despite the legal protection provided by the Agreement. However it seems to us that in circumstances where the Agreement protected Creative’s interests provided that Chorus complied with it, and Chorus did in fact comply with the Agreement, there was no detrimental reliance by Creative of a kind that could justify some further intervention by equity.
• [109] For these reasons Creative failed to demonstrate that it suffered any material detriment as a result of its reliance on Chorus’s representation. Consequently the equitable estoppel cause of action was not established. In those circumstances, the final issue, which would more appropriately be considered in the context of the separate relief hearing in any case, does not fall to be addressed.

Result

• [110] The appeal is dismissed.
• [111] Creative must pay Chorus costs for a standard appeal on a band A basis and usual disbursements. We certify for second counsel.

Solicitors:
Wigley and Company, Wellington for Appellant
Chapman Tripp, Wellington for Respondent

^[1] Referred to throughout the High Court judgment as a non-disclosure agreement (NDA).

^[2] This description is sourced from Creative’s statement of claim.

^[3] Creative Development Solutions Ltd v Chorus New Zealand Ltd [2019] NZHC 2959 [High Court judgment].

^[4] At [208].

^[5] The second and fourth causes of action respectively.

^[6] Formerly known as Crown Fibre Holdings Ltd (CFH). For clarity, in this judgment we refer to it by its current name of CIP.

^[7] RBI1 was tendered by the Ministry of Business, Innovation and Employment (MBIE), not CIP.

^[8] High Court judgment, above n 3, at [117].

^[9] Mr Dayal Phillips was a shareholder and director of Creative and a designer of telecommunications systems.

^[10] At [40].

^[11] At [144].

^[12] Mr Brendan Burns was a shareholder and director of Creative and a former journalist, media adviser and Member of Parliament. Mr Michael Lott was the head of innovation at Chorus. The Judge observed that Mr Lott was to the forefront of dealings between the parties: at [28].

^[13] These comprise items 1 to 23 of the specified list of documents pleaded as containing confidential information in Creative’s statement of claim.

^[14] Mr Kurt Rogers was a network strategy manager at Chorus with experience as a telecommunications engineer.

^[15] High Court judgment, above n 3.

^[16] Some changes to the letter requested by Mr Phillips were made by Mr Lott on 27 March 2018.

^[17] High Court judgment, above n 3.

^[18] The chief information officer at the Council.

^[19] High Court judgment, above n 3, at [132].

^[20] Mr William Murch was the investment manager (physical works) at Chorus. He was an engineer with 45 years’ experience at Chorus and its predecessors, New Zealand Post Office and Telecom.

^[21] High Court judgment, above n 3, at [6].

^[22] At [242].

^[23] At [141]–[142].

^[24] At [158].

^[25] At [182]–[183].

^[26] Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44].

^[27] At [217].

^[28] At [226]

^[29] At [222]–[223], citing Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 (CA) at 586.

^[30] At [224]–[225].

^[31] At [228]–[229].

^[32] Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 (Ch).

^[33] High Court judgment, above n 3, at [230].

^[34] At [235].

^[35] At [38] above.

^[36] High Court judgment, above n 3, at [162].

^[37] Citing Coco v A N Clark (Engineers) Ltd [1969] RPC 41 (Ch) at 47.

^[38] Citing Attorney-General v Guardian Newspapers (No 2) [1990] 1 AC 109 (HL) at 282.

^[39] Citing Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 (CA) at 215; and O’Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310 at 326.

^[40] At 215.

^[41] Tanya Aplin and others Gurry on Breach of Confidence: The Protection of Confidential Information (2nd ed, Oxford University Press, Oxford, 2012) at [4.17].

^[42] Attorney-General for England and Wales v R [2002] 2 NZLR 91 (CA).

^[43] At [15] and [17] above.

^[44] At [53] above.

^[45] High Court judgment, above n 3.

^[46] At [148].

^[47] At [170].

^[48] At [152].

^[49] At [154].

^[50] At [163].

^[51] At [38] above.

^[52] High Court judgment, above n 3, at [170].

^[53] Citing Aquaculture Corp v New Zealand Green Mussel Co Ltd [1985] NZHC 158; (1985) 5 IPR 353 (HC) at 384.

^[54] Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2006] UKPC 25 at [31].

^[55] At [31].

^[56] High Court judgment, above n 3.

^[57] At [187].

^[58] At [188]–[190].

^[59] At [38] above.

^[60] At [170].

^[61] At [33] above.

^[62] High Court judgment, above n 3, at [221].

^[63] See Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 (HL) at 757–758.

^[64] Primus Telecommunications plc v MCI WorldCom International Inc [2004] EWCA Civ 957 at [30].

^[65] Raiffeisen Zentralbank Österreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm), [2011] 1 Lloyd’s Rep 123 at [83], citing IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm), [2007] 1 Lloyd’s Rep 264 at [50].

^[66] High Court judgment, above n 3.

^[67] See [25] above.

^[68] High Court judgment, above n 3, at [211].

^[69] We construe the statement at [216] noted by Chorus to be merely a record of Creative’s argument.

^[70] At [87] above.

^[71] Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] SGCA 36 at [43].

^[72] High Court judgment, above n 3.

^[73] At [41] above.

^[74] High Court judgment, above n 3.

^[75] At [232].

^[76] At [235]. See [96] above.

^[77] Doig v Tower Insurance Ltd [2019] NZCA 107, (2019) 20 ANZ Ins Cas 62-222.

^[78] At [46].