ISP SecureNet seriously breached its terms of contract with Woolworths by intercepting the email of Woolworths’ executives, says Justice Fisher in the High Court at Auckland.
Fisher made his ruling last month, after SecureNet sought an interim injunction to force Woolworths to resume a security and email filtering contract, struck in 2000 and scheduled to run until 2006.
He ruled the injunction shouldn’t be granted, because SecureNet had seriously breached the terms of the contract — and Woolworths’ trust — by “commercially intercepting” emails sent between Woolworths managers last year which discussed moving to another ISP.
The judge’s summary says SecureNet began intercepting the emails when Woolworths delayed some payments to SecureNet, asked it to lower its charges and threatened to go to another ISP.
From April to July 2002 SecureNet head Shayne Bates monitored the emails of four Woolworths executives, discovering Woolworths had been talking to another ISP.
In May SecureNet served a statutory winding up notice on Woolworths and sought an application for an interim injunction ordering the contract to be resumed, after Woolworths fell behind in its payments.
When Bates showed the intercepted emails to his lawyer the interception stopped, on the lawyer’s advice.
Woolworths found out about the intercepted emails during the legal discovery process, in which documents relevant to a case are exchanged.
At the beginning of February the supermarket operator issued a counter-claim, alleging that by intercepting the emails SecureNet had breached implied confidentiality aspects of the contract.
Woolworths formally pulled out of the contract at the same time, having switched its ISP in alignment with that of new parent Progressive Enterprises, with which it is integrating its IT systems following Progressive’s purchase of the company last year.
Fisher decided SecureNet’s breach of trust in intercepting the emails was a grave one and being able to do so could never be an implied term of any contract.
He declined SecureNet’s application for an injunction forcing Woolworths to pay up and resume its part of the contract.
In an interview with Computerworld, Bates emphasised that Fisher’s ruling is on the injunction application only and that the substantive trial is yet to come. He says the interim injuncion ruling is “likely to be appealed”.
He says the contract expressly authorised monitoring.
“At a time when Woolworths was being sold by its former owner, SecureNet was told Woolworths wanted to reduce the sums which it had contracted to pay SecureNet. As part of this process, SecureNet was placed under extreme pressure by Woolworths. The pressure grew so great that it threatened SecureNet’s ability to make available its services to other customers, and in those extreme circumstances SecureNet authorised certain monitoring.”
He says SecureNet has subsequently received advice from “international experts” that it was entitled to monitor and the results of that monitoring were made available to Woolworths in the discovery process. Fisher noted in his summary of the situation that it was “a provisional account of the facts for interlocutory purposes only and a different factual picture may emerge by the end of a substantive trial”.
He instructed lawyers for both sides to “file memoranda with proposals for all steps necessary to take the matter forward to trial”.
Progressive IT general manager John Donaldson declined to comment.