The High Court case of Cityside Asset Pty Ltd v 1 Solution Ltd [2012] NZHC 1382 involved a breach of a franchise agreement following its termination. In particular, the plaintiffs alleged the defendants breached restraint of trade and confidentiality provisions by wrongfully continuing the businesses that had been operating under the franchises and were utilising a new company structure to conceal the connection. An email of advice from the defendants' solicitor was inadvertently disclosed to the plaintiffs. That email noted the defendants had "gone to great lengths to hide the fact that you continued to trade in breach". In addition the solicitor advised the defendants, among other things, to permanently delete the accounts and that it would be "better if you were not in possession of" the old computer equipment.

The defendants' claim of privilege over the email was challenged by the plaintiffs under section 67(1) of the Evidence Act 2006, which provides a privilege claim must be disallowed if there is a prima facie case that the communication:

  • Was made or received for a dishonest purpose, or
  • Enabled or aided anyone to commit or plan an offence.

Justice Woodhouse noted that Parliament's use of the term "dishonest purpose" provided a notably lower threshold than the common law which required something akin to a "fraud", "sham" and "trickery". He noted that the test of dishonesty was determined by considering how an honest person would have acted in those circumstances.

The defendants argued there was no dishonesty and that the solicitor advised the defendants to delete the material because to retain it would have been a continuing breach of the restraint of trade. However, Justice Woodhouse found in favour of the plaintiffs. The solicitor's advice that evidence should be destroyed would defeat the plaintiffs' right to that evidence through discovery and established a prima facie attempt to obstruct the course of justice. Further, the email in its entirety was dishonest as it amounted to advice as to how to better conceal the connection between the businesses during the period of exposure that would arise from litigation.