The Baby Hammock Co Limited (‘BHC’) first sought advice from New Zealand’s largest intellectual property law firm, AJ Park, after one of its principals, Mrs Sarah Hannah, got to chatting with her neighbour on a flight from Wellington to Auckland, who happened to be an employee of the firm.
This was back in August of 2004.
That chance meeting led, in the end, to a number of days in the New Zealand High Court in February and March this year, with BHC accusing AJ Park of negligence and breach of fiduciary duty, and claiming damages for loss of profits in the astonishing amount of $53,105,743, as well as additional exemplary damages.
On 13 July 2011, Justice Rodney Hansen in the Auckland Registry of the High Court issued his judgment, finding that:
- AJ Park was not negligent in any advice that they provided to BHC;
- even if they had been negligent, any such negligence would not have been causative of the lack of success in business of BHC;
- while AJ Park owed a fiduciary duty both to BHC, and to another client, Hushamok, which was a competitor to BHC, it was at no time in breach of its duty to BHC;
- the fact that there may be a potential for future conflict between clients is not, in itself, sufficient to establish a breach of fiduciary duty;
- even if there had been a breach of fiduciary duty, BHC could not have demonstrated any loss that had occurred as a result of the breach;
- BHC’s calculations of lost profits were fanciful, being based on flawed assumptions, inconsistent with the historical performance of the market for BHC’s products, and in any event BHC had no capacity to access the market because, at the relevant time, the company was chronically under-capitalised and technically insolvent; and
- exemplary damages would not have been awarded because, even if AJ Park had been in breach of its fiduciary duty to BHC, its conduct would have, at worst, involved an error of judgment, whereas exemplary damages are only appropriate in cases of outrageous conduct.