After getting a wide-ranging court order to seize business records from a rival construction business set up by former general manager Haemish Reid, Whangarei-based Donovan Group has been told it cannot use heavy-handed judicial processes just to stop a more nimble rival competing in the market.
Mr Reid left Donovan group in 2018, setting up Smartsteel Buildings Ltd in competition. He was taken by surprise when Donovan later turned up with a court order authorising seizure of computer data and business records. Donovan alleges Mr Reid was using confidential information taken from Donovan in breach of his earlier employment contract. Mr Reid disputes Donovan’s definition of confidential. He claims Donovan is deliberately stalling in arguments over what is truly confidential, disrupting his new business.
In the High Court, Associate judge Bell ruled Donovan had to limit its confidentiality claim to projects Donovan had underway at the time Mr Reid left and that Mr Reid subsequently tendered for; seven contracts, the court was told. Mr Reid’s business submitted the winning tender on some, but not all, of these contracts. Donovan is allowed to look at documents relating to those contracts.
Donovan cannot use confidentiality claims to prevent Mr Reid using trade skills and expertise developed whilst employed, Judge Bell ruled. Complaints that Mr Reid used project management and pricing skills learnt whilst at Donovan must be specified in detail, if confidential, he said. These are not processes unique to Donovan. They are general business processes applied by all businesses. Donovan could not claim its building designs and steel-framing methods were confidential, Judge Bell said. Building designs become public knowledge when filed for resource consent. Donovan’s steel framing was protected by patent. Consent applications and patents are on the public record. Anyone can read them. Filing destroys confidentiality.
General or over-broad allegations of breach of confidence cannot be used to stifle competition, Judge Bell ruled.
Donovan Group NZ Ltd v. Reid – High Court (16.12.20)
21.016