Data

Date:: 19-07-2011
Country:: New Zealand
Number:: CIV-2007-404-3606 [2011] NZHC 707
Court:: Auckland High Court
Parties:: Divett v Skeates

Keywords

SETTLEMENT AGREEMENT - BETWEEN TWO NEW ZEALAND PARTIES - REFERENCE TO UNIDROIT PRINCIPLES AS A MEANS OF INTERPRETING APPLICABLE DOMESTIC LAW (NEW ZEALAND LAW)

CONTRACT INTERPRETATION - ADMISSIBILITY OF EXTRINSIC EVIDENCE AND IN PARTICULAR OF PRE-CONTRACTUAL NEGOTIATIONS FOR INTERPRETATION OF WRITTEN CONTRACTS - REFERENCE TO UNIDROIT PRINCIPLES (ART. 4.3)

Abstract

Plaintiff, a New Zealand teacher/counsellor, who had developed her own holistic counselling and psycho-educational teaching theory and practice known as "Refocussing”, was associated with Defendant for a number of years. Within this period Defendant received training in Refocussing from Plaintiff. Subsequently Defendant set up her own counselling business in New Zealand and overseas prompting Plaintiff to sue Defendant for breach of copyright in Refocussing.

The dispute was eventually settled by agreement. Subsequently, when Plaintiff apprehended that Defendant had breached the settlement agreement, applied for enforcement of its terms.

The High Court of New Zealand ruled in favour of Defendant, because the breaches of the settlement agreement did not justify injunctive relief but only damages, which however the Plaintiff had not requested. In identifying the breaches of the settlement agreement, the Court referred to the principles of contract interpretation summarised by Tipping J in Vector Gas Ltd v Bay of Plenty Energy Ltd (see it here in UNILEX at http://www.unilex.info/case.cfm?pid=2&id=1611&do=case), including his reference to Article 4.3 of the UNIDROIT Principles.

Fulltext

Background

[1] Dr Divett (the first plaintiff) is a pastor and teacher/counsellor. In the course of her counselling work Dr Divett developed her own ?holistic counselling and psycho-educational teaching theory and practice known as Refocussing?.1
[2] Ms Skeates (the first defendant) was associated with Dr Divett from about early 1997 until about 2001. Within this period Ms Skeates received training in Refocussing from Dr Divett and for a time was a trustee of the second plaintiff whose affairs she assisted Dr Divett to manage and organise.
[3] In or about 2001 Ms Skeates set up her own counselling business and soon built up a following of like minded counsellors and teachers in New Zealand and overseas. The second defendant is Ms Skeates‘s business entity.
[4] The plaintiffs issued proceedings in this matter in June 2007 alleging, inter alia, that Ms Skeates had breached Dr Divett‘s copyright in Refocussing. The proceedings were resolved by mediation and a settlement agreement was entered into on 15 September 2008.
[5] On 22 September 2008 Venning J, by agreement, made an order staying the proceeding subject to leave being reserved to enforce the settlement agreement. An order such as this one is commonly referred to as a Tomlin Order.2 It has the advantage to the parties of bringing a Court action to a conclusion while leaving open the ability of a party to enforce the settlement agreement without the need to issue fresh proceedings.
[6] Subsequently the plaintiffs apprehended that the defendants were in breach of the settlement agreement and applied to enforce its terms. In furtherance of the application the first defendant was cross-examined in July and August 2010. The plaintiffs filed an amended application for orders enforcing the settlement agreement on 20 August 2010 and argument on the amended application was heard before me on 2 and 3 February 2011. The plaintiffs seek, essentially:
(a) Declarations that the defendants have breached the terms of the settlement agreement; and
(b) An order restraining further breach; and
(c) An order directing the defendants strictly to give effect to the terms of the settlement agreement henceforth; and
(d) That leave be reserved for the plaintiffs to bring proceedings for damages.
[7] The amended application for enforcement of the settlement agreement particularises in detail the declarations and orders sought under the above headings.
Settlement agreement
[8] In very general terms, the settlement agreement contained an acknowledgement by Ms Skeates that Dr Divett owned copyright in the Refocussing theory and the various works describing it. Ms Skeates accepted that she was not entitled to use Dr Divett‘s material and she undertook that she would not do so in the future. Instead, she was free to develop her own theory and materials and could teach with reference to those. In addition, she would use her best endeavours to prevent or restrain others within her professional orbit to whom she had provided Refocussing training or materials from using Refocussing.
[9] The plaintiffs allege that Ms Skeates made superficial changes to the Refocussing theory and materials and continued very much on the same basis as she had previously. Further, far from using her best endeavours to cause her followers to cease using Refocussing, she poured vitriol on the name and reputation of Dr Divett and did all she could to frustrate the intent of the settlement agreement.
[10] Ms Skeates denies all of the above. Her case is that she has performed her obligations under the settlement agreement, although she does accept that some of her endeavours thereunder could not properly be described as ?best endeavours?.

The issues

[11] The settlement agreement is a contract between the plaintiffs and the defendants. It‘s interpretation is governed by the common law principles summarised by Tipping J in Vector Gas Ltd v Bay of Plenty Energy Ltd:3

"[19] The ultimate objective in a contract interpretation dispute is to establish the meaning the parties intended their words to bear. In order to be admissible, extrinsic evidence must be relevant to that question.4 The language used by the parties, appropriately interpreted, is the only source of their intended meaning. As a matter of policy, our law has always required interpretation issues to be addressed on an objective basis. The necessary inquiry therefore concerns what a reasonable and properly informed third party would consider the parties intended the words of their contract to mean. The court embodies that person. To be properly informed the court must be aware of the commercial or other context in which the contract was made and of all the facts and circumstances known to and likely to be operating on the parties‘ minds. Evidence is not relevant if it does no more than tend to prove what individual parties subjectively intended or understood their words to mean, or what their negotiating stance was at any particular time.5
[20] Although subjective evidence would be relevant if a subjective approach were taken to interpretation issues,6 the common law has consistently eschewed that approach. The common law focuses strongly on the agreement in its final form as representing the ultimate consensus of the parties. Hence it is regarded as irrelevant how the parties reached that consensus. To inquire into that process would not be consistent with an objective inquiry into the meaning of a document which is generally designed to be the sole record of the final agreement.7 A party cannot be heard to say – never mind what I signed, this is what I really meant".

[12] I adopt the principles discussed in Vector Gas in interpreting the agreement between Dr Divett and Ms Skeates.

(...)

Summary
[148] A summary of my findings on each of the applicants‘ claims is as follows:
(a) Clause 1(a) of the agreement is an acknowledgement clause and does not impose obligations on the defendants;
(b) The same applies for clause 1(b);
(c) In respect of the defendants‘ alleged continued use of the word Refocussing in breach of clause 2:
(i) There is no fiduciary relationship (of agency, partnership or otherwise) between Ms Skeates and the members of the European network, and Ms Skeates is not liable for their actions;
(ii) There is no evidence that Ms Skeates has continued to promote, teach, sell or disseminate materials containing the word Refocussing (except to the limited extent admitted at [23] above);
(iii) Insight Focused Therapy or IFT is not confusingly similar to Refocussing therapy and RFT respectively;
(d) The defendants failed to comply with clause 3(a) in respect of www.refocussing.dk, but subsequently it was transferred to the plaintiffs in February 2010. The defendants do not have ownership or control over the other domain names sought by the plaintiffs to be transferred to them;
(e) Ms Skeates did not use her best endeavours to procure the transfer of domain names and other uses of Refocussing from third parties in accordance with clause 3(b);
(f) The defendants have not breached clause 5, which requires destruction of materials described in clause 2, as there is no evidence that Ms Skeates has those materials within her power, possession or control;
(g) Clause 6 is permissory; it allows Ms Skeates to produce her own written materials but it does not impose obligations on the defendants;
(h) In respect of the defendants‘ alleged continued use or reproduction of a substantial part of Dr Divett‘s works:
(i) The materials described at [78] and [80] above are substantially derived from or based on Refocussing and therefore breach clause 7(a). However, that breach was admitted in the defendants‘ memorandum of 8 October 2010 and Ms Skeates undertook to remove those exercises from her materials;
(ii) The plaintiffs have not proven on the balance of probabilities that Ms Skeates has continued to use or reproduce any other materials substantially derived from or based on the plaintiffs‘ works;
(i) I am not satisfied on the balance of probabilities that Ms Skeates has continued to use in the context of Refocussing therapy terminology coined or created by Dr Divett in breach of clause 7(a);
(j) The plaintiffs have proven dissemination in breach of clause 7(b) only in respect of the materials described at [78] and [80] above;
(k) The defendants failed immediately to destroy, in accordance with clause 8, the materials described at [78] and [80] above;
(l) The agreement did not impose an obligation on either party to release the public statement in clause 10; it is a permissory clause;
(m) Ms Skeates made negative or derogatory statements in respect of Dr Divett in breach of clause 11;
(n) There is no evidence that Ms Skeates breached clause 12 by failing to refer persons interested in Refocussing to the plaintiffs. Crediting trainees from Refocussing to Insight Focussed Therapy is not a breach of clause 12.
[149] I am satisfied that there have been breaches (at least to some degree) by the defendants of clauses 2, 3(a), 3(b), 7(a), 7(b), 8 and 11 of the settlement agreement.
[150] I emphasise that in this judgment I have not made any findings of copyright in favour of the plaintiffs or conversely of breach of copyright against the defendants. My findings reflect only that the plaintiffs have established on the balance of probabilities that some of the settlement terms have been breached. That said, a number of the plaintiffs‘ claims have not succeeded.

Remedies

[151] It is not necessary for me to make declarations in respect of the findings of breach. The settlement agreement is a contract between the parties; I have heard allegations of breach and I have determined them.
[152] The breaches I have identified do not lend themselves to injunctive relief. With two possible exceptions they do not go to continuing conduct.
[153] The first such possibility is the failure to use best endeavours to procure the transfer of names or indicia as required by clause 3(b) of the agreement. I am not prepared to direct, as the plaintiffs seek, that the defendants now use their best endeavours including paying thousands of dollars if that is necessary. To direct the use of ?best endeavours? would be to impose an undefined obligation. To impose within that obligation a direction to pay significant sums of money would be to go beyond the natural construction of the agreement itself. It is best left as a finding of breach answerable, if quantifiable, by damages.
[154] The second such possibility is the breach of clause 11 (the obligation not to make negative or derogatory statements). I do not consider that an injunction would be appropriate for this breach. I have found that there has been a breach. The clause is still operative, the obligation a continuing one. Further breaches could be dealt with effectively as breaches of the agreement.
[155] I reserve leave for the plaintiffs to apply for an award of damages. However, I do not encourage them to do so.}}

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