Team New Zealand wins court battle with NZ Herald publisher NZME over secret report

Team NZ boss Grant Dalton has categorically denied any wrongdoing. Photo / Getty Images

Team New Zealand and America's Cup organisers have won their fight - for now - to keep secret the details of allegations around the spending of public money.

This follows a legal battle involving America's Cup Event Ltd (ACE), Emirates Team New Zealand (ETNZ) and NZ Herald publisher NZME that was heard in the Auckland High Court last month.

ACE and ETNZ had obtained an interim injunction order against NZME to prevent the media company publishing or broadcasting details of a report by forensic accountants Beattie Varley about record-keeping and the use of public funds.

NZME fought the interim injunction on the grounds of public interest, given the level of public money involved - including a taxpayer-funded, $40 million hosting fee.

Justice Moore today released a judgment, upholding the injunction that prevents NZME from publishing details of the Beattie Varley report, as well as any recordings of Team NZ/ACE meeting minutes and their transcripts.

"...the court is not 'gagging' NZME in the sense that the allegations contained in the report will never find their way into the public arena. For example, I accept there is a legitimate interest in the public knowing how taxpayer-sourced funds have been applied, spent, or treated," Justice Moore said in his judgment.

"But there can be no legitimate public interest in the publication of allegations, some anonymously sourced, where the public is denied the full picture because those who are subject of the accusations have not yet answered them.

"Any views formed by the public on the restricted factual base of the Report in its present, interim status would be neither informed nor complete. As explained, that information will, all but inevitably, be disclosed at some later point and, as a consequence, be available to the media for publication."

The report, he said, formed only the first stages of a contractually mandated dispute resolution process between the Cup organisers, Team New Zealand and the council/Government.

He accepted the report contained sensitive and confidential details and was "imparted in circumstances importing an obligation of confidence".

The Government has already announced that it is not making any further payments to America's Cup organisers as it investigates claims over the spending of public money.

The Ministry of Business, Innovation and Employment (MBIE) said $40 million had been set aside for the event fee. To date $29m has been paid to ACE, in line with contractual funding milestones.

The Herald earlier reported details of a confidential June 22 letter written by MBIE and Auckland Council and addressed to ETNZ and ACE.

In his judgment today, Justice Moore summarised the letter, saying the council and MBIE were "extremely concerned over ACE's ability to deliver a safe and successful event".

"They complained a lack of detailed event documentation and hinted at the possibility of MBIE withholding milestone payments. They raised concerns as to how the funds advanced had been used. In particular, they signalled concerns raised with them in respect of ACE's financial reporting and certain on-water safety issues."

The letter advised that Beattie Varley had been appointed to investigate and an interim report had been prepared.

"The MBIE letter advised that in MBIE's assessment, ACE was in breach of the warranties and undertakings contained [in the Cup hosting agreement] that is to use the funds solely for the purpose of meeting costs relative to the management and delivery of the events.

"Furthermore, the MBIE letter advised that the Hosts understood that some ACE and Team New Zealand's staff, in breach of their contractual obligation to co-operate, had suggested that they would not assist Beattie Varley in its investigation.

"Also enclosed was a letter from the Auckland law firm of MinterEllisonRuddWatts ("MinterEllison") dated 16 June 2020. This contained various allegations made on behalf of its client, Mayo & Calder, one of ACE's contractors."

ETNZ boss Grant Dalton has steadfastly rejected any suggestion of wrongdoing, and previously said Team NZ was subject of a "deliberate, sinister attack".

Team NZ chairman Sir Stephen Tindall and ACE chairwoman Tina Symmans wrote back to MBIE to say: "In summary, none of the accusations made by Mayo & Calder in the [MinterEllison] letter have substance, they are inaccurate and in our view, are distorted to suit their own purpose and to downplay their own role in the events they criticise. They are also defamatory of ACE, [Team New Zealand] and the individuals involved, who have reserved their rights."

The Government and Auckland Council have poured $250m into hosting the next America's Cup. The council is planning on spending a further $20m to support the regatta and other events next year. It's share of the $250m is $113m.

The Government is spending $136.5m, including the host fee of $40m.

Justice Moore said the Beattie Varley report included interim findings in respect of several serious allegations "raised by an unidentified, so-called, whistle-blower".

"In these proceedings, ACE claims that few, if any, of the allegations had been raised directly with it or Team New Zealand before the report was received. ACE and Team New Zealand strongly deny the allegations. They have since responded by letter setting out their explanations to the various claims."

NZME had advised Team NZ and ACE on July 2 that it had obtained the Beattie Varley and sought comment.

"ACE and Team New Zealand claim that publication of the Report or the recordings, or any part of either, will cause them real and irreparable commercial, competitive and reputational harm, as well as compromising the privacy and reputation of officers and employees of ACE and Team New Zealand," said Justice Moore.

"They seek orders restraining NZME from publishing the Report and the recordings or any part of either on the grounds that to do so would be a breach of confidence."

NZME argued in the High Court on July 6 that there was no actionable breach of confidence and that the "public interest in publication outweighs any interest ACE and/or Team New Zealand may have in the report remaining confidential".

Justice Moore said he was satisfied ACE and Team New Zealand "have a strongly arguable claim for a breach of confidence".

A primary factor, he said, was that the Beattie Varley report was "interim".

"It records the allegations but does not, in any serious or considered fashion, attempt to analyse or reach any conclusions. ACE and Team New Zealand have yet to make an effective response. They claim to have cogent responses to the concerns raised in the Report. The investigation is ongoing."

NZME enjoyed a "well-earned reputation for responsible reporting across a wide range of topics requiring sensitivity and balance", said Justice Moore.

But publication of the report was likely to cause substantial reputational damage to the standing of ACE and Team New Zealand even if the final report vindicated those now accused.

"That reputational damage is likely to have significant adverse effects, such as limiting
ACE's ability to publicly fundraise."

The report also contained "commercially and competitively sensitive information, the disclosure of which may compromise Team New Zealand's ability to successfully defend the America's Cup".

"This observation is made in the context of a competition which has a well-known history of commercial and sporting espionage, where Team New Zealand will be vying with the challengers in both a commercial and sporting setting."