Digital Property and Computer Crimes – Collisions in the Digital Paradigm IVA

The Court of Appeal decision in Watchorn v R [2014] NZCA 493 was another case involving property in digital data.  The accused had been convicted on three charges alleging breaches of s 249 of the Crimes Act in that he had access to his employers computer system and dishonestly or by deception and without claim of right obtain property.

Mr Watchorn was an employee of TAG, an oil and gas exploration company, which was engaged in both prospecting and the production of oil and gas.  There was no question that on the 7th June 2012 Mr Watchorn downloaded extensive and sensitive geoscience data from TAG’s computer system onto a portable hard drive.  An executive of TAG described the geoscience folder as holding the “secret recipe” because it contained data relating to the discovery of sites of oil and gas.  The information had a very high value to TAG. Had it been disclosed to a competitor it would have been extremely damaging to the company and beneficial to that competitor.

On the day after the download took place Mr Watchorn and his family went to Canada for four weeks so that he could visit his mother who was ill.  Whilst he was in Canada he met a representative from a company called New Zealand Energy Corporation Limited (NZEC) based in Canada but which carries on business in New Zealand. NZEC is a competitor of TAG.  Following this meeting Mr Watchorn was offered a job with NZEC.

On 31 July 2012 Mr Watchorn down loaded similar TAG information to that which he had downloaded on the 7th June and downloaded it on to a USB memory stick.  On the same day he gave notice of his intention to resign from TAG and commence employment with NZEC.

TAG was very concerned about material being downloaded from its computer system and the day after Mr Watchorn gave notice, TAG’s solicitors sent a letter to Mr Watchorn reminding him of his obligations for confidentiality and inviting him to return an apparently missing hard drive.

Mr Watchorn responding by stating that the only thing he had on his personal hard drive was relating to some of the things that he had helped put in place as well as technical data and work from previous employment.

On 28 August 2012 the police executed search warrants including one at the premises of NZEC.  Mr Watchorn was initially interviewed by the police, then re-interviewed on the 7th December 2012 and arrested.  There was some disparity between the various explanations that Mr Watchorn had given to the police relating to whether or not he had taken the portable hard drive with him to Canada.  However there was no evidence indicating any disclosure of information to NZEC while Mr Watchorn was in Canada, when he later accessed the down loaded material at NZEC’s premises or at any other time.  In fact the evidence was that the data down loaded on the 7th June was not disclosed at any time to any person.

The Court of Appeal noted its decision in Dixon v R where it was held that digital CCTV footage stored on a computer was not “property” as defined in the Crimes Act and so the obtaining of such data by accessing a computer system could not amount to “obtaining property” within the meaning of s 249(1)(a) of the Crimes Act.  The Court accepted that that analysis must apply to the kind of data obtained by Mr Watchorn and observed that it was bound to follow Dixon.  However the issue was whether or not the Court would follow the approach adopted in Dixon and substitute convictions based upon an alternative charge of obtaining a benefit.

The first thing the Court did was to consider whether or not there had to be a “dishonest purpose” for obtaining a benefit.  Despite the fact that the heading to s 249 states “accessing the computer system for dishonest purpose” the Court held that that was not an accurate summary of the offence itself.  It observed that the ingredients of s 249(1) do not include a dishonest purpose.  What the Crown must prove is that the accused “accessed a computer system and thereby dishonestly or by deception or and without claim of right obtained a benefit.”  In light of the definition of “dishonestly” in s 217 of the Crimes Act all the Crown had to prove was that Mr Watchorn did not have TAG’s authorisation to down load the data that he down loaded to his hard drive on the 7th June.

“Dishonestly” in s 217 states “In relation to an act or omission means done or omitted without a belief that there was express or implied consent to, or authority for, the act or omission from a person entitled to give such consent or authority”.

 The Supreme Court in R v Hayes [2008] 2 NZLR 321; [2008] NZSC 3 stated that dishonestly requires an absence of belief that there was consent or authority and that it is not necessary to prove that the belief was reasonable.

The Court of Appeal observed that if Mr Watchorn actually believed he was authorised to download the data then the element of “dishonestly obtaining” that data would not be proven.  Whether he downloaded the data for the purpose of taking it with him to Canada or alternatively to make a backup actually did not address the question as to whether he believed he was authorised to do it.  The evidence before the Court was that the TAG Executives said that Mr Watchorn had no authority implied or otherwise to take TAG geoscience data or the material contained with the TAG drilling and TAG electronic site and well files.  Mr Watchorn’s claim that he thought that he was authorised to download the files and take them to Canada was contrary to his version of events when interviewed by the police.

The Court then went on to consider the issue of “claim of right”, differentiating the concepts of “dishonesty” and “claim of right” by noting that dishonesty addresses whether Mr Watchorn believed he was authorised to download the data.  Claim of right addressed whether or not he believed even if he wasn’t authorised that downloading was permissible.  Mr Watchorn argued that he had a defence of claim of right because he believed there was an industry wide practice in the oil and gas field of employees transferring from one firm to another downloading data relevant to the employees work before leaving the employ of the owner of the data.  There was no evidence in Watchorn’s case that implied entitlement did exist and no evidence that Mr Watchorn believed that it did.  The fact that he had downloaded data from previous employers did not provide a proper foundation for a finding that he was lawfully entitled to do so.

After considering some other issues the Court went on to consider whether or not it should substitute the convictions against Mr Watchorn for convictions based on obtaining a benefit.  In Dixon the benefit had been the opportunity to sell a digital CCTV footage that had been obtained by accessing his employer’s computer.  In this case there was no evidence that Mr Watchorn had tried to sell the data but the issue was whether or not the word “benefit” was limited to a financial advantage or something wider.

The Court referred to a High Court decision of Police v Leroy  (HC Wellington CRI 2006-485-58, 12 October 2006 Gendall J) where a District Court Judge had held that the term benefit meant a benefit that could result in the advancement of a person’s material situation and was limited to a benefit of a financial nature.

Gendall J held otherwise.  He said that a non-monetary advantage may nevertheless comprise a benefit.  The advantage might be the acquisition of knowledge or information to which one was not otherwise entitled.  An advantage might be an invasion of another’s privacy.  It might be knowledge or information that could be used to exploit another person.  He gave the example of wrongful access of email communications of another for the advantage of disclosure or for use for political purposes or the purposes of embarrassment.  He held that information obtained might also be used for the benefit or advantage of a wrong doer enacting in such a way as to harass another in breach of the Harassment Act 1997 or be used to assist in the breach of a protection order under the Domestic Violence Act 1995.  It was noted that the words property, pecuniary advantage and valuable consideration relate to matters financial but the same is not necessarily true of benefit, privilege or service and the Court concluded that it was not necessary to confine the concept of benefit to financial benefits.

However that conclusion did not necessarily resolve Mr Watchorn’s case.  The Court considered the legislative history of the computer and other provisions of Part 10 of the Crimes Act 1961 in considering whether or not the scope of the word “benefit” was limited to a financial advantage and concluded that it did not.  However it concluded that the issue of what constituted a benefit in Watchorn’s case was more nuanced than that of Dixon.  The Court considered that it was arguable on the facts of Watchorn’s case that the advantage that he gained was his ability to access the data outside his work environment and without the supervision of his colleagues including after he had left the employment of TAG.  Indeed the Court said that it could be argued that he did not in fact exploit the advantage given to him by selling the data or making it available to his new employer.  It did not in fact reduce the ability that he had to do any of those things.

However the problem was that the Crown did not actually formulate the nature of the benefit that Mr Watchorn might have received.  The failure of articulating such a benefit meant that Mr Watchorn did not have any notice of that allegation that he could properly contest.  The Court held that he was entitled to such notice.  The Court considered that the evidence that could be adduced might include whether or not there was in fact any advantage to him in having possession or control of the data and because the prosecution had restricted its theory of the case to obtaining property the entitlement that Mr Watchorn had to prior notice of the benefit was not present.

The Court distinguished Watchorn from Dixon where in the latter case the Court was able to identify the benefit Mr Dixon hoped to obtain from the facts proven at trial.  Accordingly the Court was not prepared to substitute new verdicts and indeed the grounds for substituting such verdicts were not meet.

 Comment

This case is helpful because it demonstrates the importance of bringing a proper charge under the Computer Crimes sections of the Crimes Act.  The case of Police v Robb [2006] DCR 388 demonstrated the need for a prosecuting authority to exercise considerable care in drafting the charge that it brings.  In Robb the allegation arose pursuant to s 250(2)(a) of the Crimes Act in that it was contended that the accused deleted files the property of his employer without authorisation.  Part of the problem facing the Court was the mental element in the offence.  The Judge held that “deletion” in and of itself did not amount to damaging or interfering of the computer system contrary to s 250.  To establish a criminal offence of damaging or interfering with a computer system it was necessary to exclude innocent or accidental data deletion.  The Judge observed that wiping a file required an additional conscious decision over and above simple deletion.  Forensic evidence could not determine whether a file was deliberately deleted or not.

It is quite clear from both the decisions in Dixon and Watchorn that any charge suggesting the obtaining of property where what in fact has been obtained is digital material cannot be sustained and one of the alternatives in s. 249 must be considered.  For this reason the Court’s exposition of the nature of a benefit and the crystallisation of that benefit must be undertaken by a prosecuting authority.

However the final paragraph of the decision of the Court of Appeal in Watchorn is instructive.  The Court said “the decisions of this Court in Dixon and the present case have identified some drafting issues and inconsistencies in some Crimes Act provisions.  We respectfully suggest that consideration be given to remedial legislation.”

Obviously the question of the nature of any property in digital data must be considered but at the same time it must be carefully thought out.  Although it might be attractive for the definition of property simply to include digital data the problem that arises is that what amounts to copyright infringement within the digital space could well become a criminal offence and the presently incorrect adage advanced by copyright owners that “copyright infringement is theft” could well become a reality.

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