On 20 October 2015, the Supreme Court of New Zealand delivered its decision in the matter of an appeal by Jonathan Dixon against a conviction on a charge of accessing a computer for a dishonest purpose pursuant to s 249 Crimes Act. It was alleged that Mr Dixon had accessed a computer system and dishonestly and without claim of right obtained any property. In short, what Mr Dixon had done was to copy some digital footage from a CCTV security system operated by a bar in Queenstown. Mr Dixon obtained the footage from a receptionist for the company and transferred the files onto a USB stick, deleting them from a desktop computer where they resided.
The Judge at first instance considered that the digital CCTV files were property within the meaning of the definition of that word in s 2 Crimes Act. When the matter went before the Court of Appeal, the Court disagreed. It concluded that digital information or a data file did not fall within the definition of property.
The Court of Appeal’s decision was the subject of considerable critical comment. It was even suggested that the provisions of s 249 Crimes Act were “unfit for the purpose”. Yet the decision should not have come as any surprise for there is a substantial body of authority, primarily in the civil arena, that supports the Court’s conclusion. Subsequently the Court made similar finding was reached in the case of Watchorn v R.
What the Court of Appeal did in Dixon however, was to substitute another charge which could have been proffered against Mr Dixon – that he accessed a computer and dishonestly and without claim of right obtained a benefit. In its decision the Court of Appeal went to some pains to consider the nature of a benefit and substitute it at charge.
Mr Dixon appealed against that conclusion to the Supreme Court of New Zealand. In its decision, the Supreme Court concluded that the Court of Appeal’s conclusion that a digital file did not amount to property was wrong. It quashed Mr Dixon’s conviction for obtaining a benefit contrary to s 249(1)(a) and it reinstated his original conviction for obtaining property by accessing a computer system for a dishonest purpose. Phyrric victory does not adequately describe the outcome from Mr. Dixon’s point of view.
The Court started by considering the provisions of s 249(1) of the Crimes Act.
249 Accessing computer system for dishonest purpose
(1) Every one is liable to imprisonment for a term not exceeding 7 years who, directly or indirectly, accesses any computer system and thereby, dishonestly or by deception, and without claim of right,—
(a) obtains any property, privilege, service, pecuniary advantage, benefit, or valuable consideration; or
(b) causes loss to any other person.
It then went on to consider the definitions of “access” and “computer system” contained in s 248 Crimes Act. The Court observed that a relevant feature of the definitions was that “computer system” included “stored data” and “access” included receiving data from a computer system. The Court later observed that the definition of a computer system included “software” of which more later.
The Court then went on to consider the definition of “property” contained in s 2 of the Crimes Act.
property includes real and personal property, and any estate or interest in any real or personal property, money, electricity, and any debt, and any thing in action, and any other right or interest
Arnold J, writing for the Court, noted that the definition is:
(a) inclusive rather than exclusive;
(b) circular in that the property is defined as including real and personal property; and
(c) in wide terms and, in particular, includes tangible and intangible property.
The Court went on to observe that within the broader statutory context the term “goods” in the Commerce Act 1986, the Consumer Guarantees Act 1993, the Fair Trading Act 1986 and the Sale of Goods Act 1908 is defined, to avoid doubt, to include computer software. It observed that, when considering the inclusion of software in consumer legislation the Commerce Committee stated:
The interest in the software the consumer receives does not differ significantly from other goods involving the transfer as an interest in intellectual property, and for which the guarantees and remedies relating to goods are more relevant and applicable to the guarantees and remedies related to services. We recommend that computer software be added to the definition of goods for the avoidance of doubt.
In reading the decision in a linear fashion, it was not immediately apparent at this stage of the Court’s reasoning what relevance software as goods might have to the issue of whether data was property but the issue becomes clear later in the Supreme Court’s decision.
The Court went on to consider the Judge’s finding that the definition of “property” in the Crimes Act was wide and, indeed, sufficiently wide to cover a digital file. It then went on to consider the decision of the Court of Appeal. The Court of Appeal’s starting point was that digital files were not property within the meaning of the definition of the Crimes Act because they were pure information. The Court of Appeal had adopted what it described as an “orthodox” view that information, whether confidential or not, was not property. It observed that the medium upon which information could be stored would be property but the information upon it would not. Therefore, the digital footing could not be distinguished from information on this basis. The Court of Appeal observed that it was problematic to treat computer data as being analogous to information recorded in physical form. It observed that a Microsoft Word document may appear to be the same as a visible sheet of paper containing text but in fact was simply a stored sequence of bytes.
The Court of Appeal considered whether or not it should depart from this orthodox view, observing that the distinction drawn between information which was not property and the medium upon which it was contained had been criticised as illogical and unprincipled. The Court of Appeal’s view was that there were certain policy reasons militating against the recognition of information as property particularly in that such a decision could impact detrimentally upon the free flow of information and the freedom of speech.
The Court noted that when it enacted the computer crime sections of the Crimes Act there were also amendments to the definition of “property” but that these were limited. The taking of confidential information or trade secrets was encompassed by s 230 Crimes Act. It considered that the provisions in s 249 relating to property were aimed at situations where a person accessed a computer and used, for example, a false or purloined credit card details to obtain goods unlawfully.
Before the Supreme Court counsel for the Crown stepped away from arguing that pure information was property. Rather, the argument was focused upon the fact that digital files were property because they could be owned and dealt with in the same way as other items of personal property. Thus the Court was able to sidestep dealing with the major finding of the Court of Appeal and could approach the problem from a different angle.
Another reason for the Court not considering the “pure information as property” issue was that Mr Dixon had dismissed his lawyer prior to the hearing and, accordingly, the point was not fully argued, and therefore it was considered that it was not an appropriate occasion to reconsider what the Court of Appeal had referred to as the orthodox view.
The Supreme Court started with considering the issue of context and observed that the meaning of the word “property” varies with its context. It referred to comment made by Gummow and Hayne JJ in Kennon v Spry where they stated:
The term “property” is not a term …with one specific and precise meaning. It is always necessary to pay close attention to any statutory context in which the term is used.
The Court then went on to observe that within the context of s 249(1)(a) and in light of the definition of “property” in s 2, there was no doubt that the digital files at issue were property and not simply information. The Court considered that digital files are identifiable, have a value and are capable of being transferred to others. They also have a physical presence although that cannot be detected by means of the unaided senses. It may be that they could be classified as tangible or intangible but nevertheless the Court concluded that digital files were property for the purposes of s 249(1)(a). However, the Court omitted to discuss inconvenient issue of the necessity of exclusive possession as an element of property
The rationale for such a finding started with a consideration of the history of the amendments made to the Crimes Act in 2003. In crafting a new suite of changes to modernise the criminal law in relation to crimes against rights and property, focus was upon the concept of being “deprived of property” rather than the concept of “things that were capable of being stolen”, for it was that latter concept that underpinned property crimes in the 1961 Crimes Act prior to its amendment in 2003.
When the amending bill was first proposed, there was a specific definition of “property” for the purposes of a new Part 10 relating to crimes against property. That new definition arose as a result of the 1999 decision of the Court of Appeal in R v Wilkinson where the Court held that the concept of things capable of being stolen did not cover intangible property.
The new definition for the purposes of Part 10 proposed:
Property includes real and personal property, and all things, animate or inanimate, to which any person has any interest or over which any person has any claim; and also includes money, things in action and electricity.
The Supreme Court considered that had this definition remained, digital files would have been included on the basis that they are things in which a person has an interest.
However, when the bill was reported back by the Law and Order Select Committee, it was observed that the definition of “property” and for the purposes of Part 10, differed from the definition of “property” in s 2 and concluded that there should be one definition for the Act as a whole. The Law and Order Select Committee recommended that the definition be removed from Part 10 and the definition of “property” in s 2 be amended. The problem is that the definition of “property” in s 2 is not as widely stated as the proposed definition for Part 10.
The Court then went on to consider the nature of a document which had an extended definition for the purposes of Part 10. Quite clearly from the definition of a document material held in electronic form falls within such a definition and the Court of Appeal reached a similar conclusion in R v Misic which was decided before the extended definition was enacted.
Anderson J, writing for the Court in Misic, said:
… we have no difficulty accepting that the computer program and computer disk in question are each a document for the purposes of s 229A. Essentially, a document is a thing which provides evidence or information or serves as a record. The fact that developments in technology may improve the way in which evidence or information is provided or a record is kept does not change the fundamental purpose of that technology, nor a conceptual appreciation of that function. Legislation must be interpreted with that in mind. …
He went on to say:
It is unarguable that a piece of papyrus containing information, a page of parchment with the same information, a copper plate or a tablet of clay, are all documents. Nor would they be otherwise if the method of notation were English, Morse code, or binary symbols. In every case there is a document because there is a material record of information. This feature, rather than the medium, is definitive.
The Supreme Court then turned to consider the provisions of ss 249-252 Crimes Act dealing with computer crimes and considered, contrary to the view of the Court of Appeal, that the word “property” included in s 249(1)(a) was included for a purpose that was broader than the mere use of credit card details used in conjunction with computer to unlawfully obtain goods.
The Court considered that the broader purpose could be justified by starting with the definition of a computer system which included items such as “software” and “stored data”, which is also referred to in s 250 which deals with damaging or interfering with a computer system. The Court observed that there was no doubt that Parliament had stored data in mind when those provisions were drafted. Similarly, “access” is defined to include receiving data from a computer and is received even although it is copied rather than permanently removed.
The Court observed
Given that Parliament contemplated situations where a person copied stored data from a computer, which of the offences might apply where the person taking the data did so without authority? There are three possibilities – ss 249, 250 and 252. It is not obvious that s 250 would apply. If someone simply took a copy of existing data, but did not damage, delete or modify it, could it be said that the person “interfered with” or “impaired” the data? We rather doubt that it could. Section 252 could apply. It creates an offence of intentionally accessing the computer system without authority and provides for a maximum penalty of two years’ imprisonment. However that offence focuses on unauthorised access implicit, it does not address the issue of dishonest purpose. Where the access if for dishonest purpose, s 249 applies and there are significantly higher maximum penalties.
The Court then discussed the situation where a person without authority located, copied and dealt with valuable digital files contrary to the interests of the file’s owner. The inclusion of that conduct is consistent with the features of the legislation to which reference had been made.
Looking at the issue conceptually, of those concepts identified in s 249(1)(a) – property, privilege, service, pecuniary advantage, benefit or valuable consideration – property seemed most apt to capture what was obtained by Mr Dixon as the result of the unauthorised access. Thus from a conceptual view of what it was that the accused did and what he took, the word “property” seemed the most suitable word to encompass the situation.
The Supreme Court then referred to the fundamental characteristics of property as being something that was capable of being owned and transferred. It observed that the digital files which were downloaded onto his USB stick and then deleted from the computer upon which they were stored, were a compilation of sequenced images. This file had an economic value and was capable of being sold. Although the files remained on the CCTV system, the compilation contained what was valuable in the full files. The compilation had a material presence. It altered the physical state of the medium upon which it was stored – the computer disk or USB stick – illustrated by the fact that electronic storage space can be fully utilised.
This aspect of material presence led to a discussion of some American cases where a different approach to computer files as property has been adopted. The Court referred to the case of South Central Bell Telephone Company v Barthelemy where the physical processes and characteristics of software were examined. The response to the suggestion that software was merely knowledge or intelligence – perhaps another way of stating information – the Court observed that the software was knowledge recorded in a physical form which had a physical existence and which took up space on a tape, disk or hard drive and made physical things happen which could be perceived by the senses. The software was ultimately recorded and stored in the physical form on a physical object.
The Court also referred to a number of other American cases, although noted that the US Courts had not been consistent on the point with some holding that software is intangible property. The decision of Ronald Young J in Erris Promotions Limited v CIR where the argument was whether or not software code was tangible property. The Judge held that it was intangible rather than tangible. The issue of tangibility or intangibility is something of a red herring, having regard to the fact that property can be tangible or intangible according to the definition of property in s.2 of the Crimes Act 1961
In considering the Court of Appeal’s approach in Dixon where it was noted that it was problematic to treat computer data as being analogous to information recorded in physical form, the Supreme Court made two comments. It firstly observed that the definition of “document” of was broad enough to include electronic documents or files. In this regard I observe that the word “document” is used probably for two reasons. The first is the file extension .doc which infers that the file created is a document. The second is that a word processing program is designed to create a file of information which resembles a paper document but which in reality is quite different, being in electronic form. We use the word “document” because it is a word with which we are familiar. Perhaps a better word would be “file” although the definition of “document” is really directed towards the result of a technological process.
In the United States, electronic records and databases had been treated as property capable of being converted although they were intangible. The case of Thyroff v Nationwide Mutual Insurance Co considered whether the tort of conversion could apply to the misappropriation of electronic records and data. The Court’s approach was consistent with the overall view of computer or electronic files in the US – that being that there is an economic value to electronic information which should receive the protection of law.
The Court observed that the position in England was different, although the cases in England involved civil aspects of electronic information as property. It observed that the case of Your Response Limited v Datateam Business Media Limited concluded that it was not possible to exercise a common law possessory liens over an electronic database on the basis that it was not tangible property of a kind capable of forming subject matter of torts that are concerned with interference and with possession. The Court in Your Response Limited followed the decision of OBG Limited v Allan. What should be observed in those cases, and a matter which the Supreme Court seems to have sidestepped, is that possessory liens and some other torts involving interference with property are premised upon the concept of exclusivity of possession. In the electronic environment it is capable for a person to obtain a copy of a data file by dishonestly accessing a computer, but by leaving the “original” upon the target computer. In Dixon’s case, although the digital file that he took was a compilation of a larger CCTV record, nevertheless the original CCTV record remained in the possession of the “owner”. Thus, two people had possession or control of the same data and the element of exclusivity was absent.
The issue of tangibility or intangibility of an electronic file is, as observed above, resolved by the provisions of s 2 Crimes Act which includes both tangible or intangible property. The Court then went on to say that what emerged from the brief discussion of the US authorities is that although they differ as to whether software is tangible or intangible, there is general agreement that software is property. The Court then encompassed data files as property by observing, “There seems no reason to treat data files differently from software in this respect”.
From a technological point of view, software files are operating instructions for a computer. Data files are raw information which may be processed by a software program. A .doc file created by the utilisation of the software Microsoft Word is rendered readable by the software. Software does something within the computer environment. Data is something that software manipulates. This is recognised by the separation of “software” from “stored data” in the definition of a computer system in s. 248 of the Crimes Act 1961. The Supreme Court chose not to address this functional difference between software and data. Although the Court had discussed the nature of software as goods, that merely heightens the distinction between software and data. There can be no doubt that data can have a value, although it must be associated with some form of processing software to be rendered comprehensible. But data is not protected by the Consumer Guarantees Act or other consumer protection legislation.
Finally, the Court made some observations about the decision in Watchorn, observing that the digital files that Mr Watchorn obtained were property for the purposes of s 249(1)(a) and that he should have been convicted.
In considering the Supreme Court’s decision, the first thing that should be noted is that the Court went to some pains to state that its definition of “property” was within the context of the legislation and particularly within the context of s 249(1) Crimes Act. Given that limitation, it could well be argued that its holding that a digital file amounts to property is limited in application.
However, it may well be if the decision is utilised in a broader sense, that there will be certain unintended consequences and one comes to mind. It involves the person who accesses a computer system dishonestly and without claim of right, and obtains a digital file containing embarrassing or damaging information. That information, if published, could have significant consequences. The “hacker” for so he is, puts the information onto a USB stick. The information is delivered to a third party. There are no criminal implications in the hacker giving the third party the USB stick. Property in the USB stick itself and as a medium is validly transferred. What of the digital file on the USB stick? The third party is aware that it was obtained dishonestly and by unauthorised access to a computer system. The question which may need to be asked and answered is whether or not the receipt of the digital file on the USB stick would be sufficient to constitute the offence of receiving by the third party.
What to do? Clearly the information as property issue needs to be addressed and it may well be that the answer lies in considering adopting the American approach together with clarifying the fact that digital data to exist must be associated with a medium be it a hard drive, a USB drive or stored in the Cloud. It is this aspect of a digital file that gives it its tangibility albeit limited.
The issue of virtual property remains an open question and must depend upon the nature of the terms and conditions that exist between the provider and the customer. It may be that legislation will address this problem in the future, recognising that in a paradigm of continuing disruptive change, changes to perception of whether what may fall within the category of intangibles may have value needs to be recognised along with a further recognition that existing remedies under “traditional” fields of law, such as intellectual property and breach of confidence, may be too limited to accord sufficient protection. The concept of no property in pure information could remain; information that is not associated with a medium could remain as intangible and without property implications. But the digital file associated with a medium could have a level of tangibility sufficient to attract the protection of the civil and criminal law.
But wait! There’s more! What proprietary interests does a subscriber have to that piece of virtual real estate in Second Life? And if it is “property” acquired during the course of a relationship, may it attract the attention of the Property (Relationships) Act 1976? What about that “amped up” magic sword that the player uses in Word of Warcraft. The game is not over. In fact, it has only just begun.
  NZSC 147
  3 NZLR 504
  NZCA 493
 Consumer Protection (Definitions of Goods and Services) Bill 2001 (154–2) (select committee report) at 4.
  HCA 56,  CLR 366 at 
  1 NZLR 403 (CA).
  3 NZLR 1 (CA).
 Above n 1 at 
 643 So 2d 1240 (Lou 1994).
  1 NZLR 811 (HC).
 8 NY 3d 283 (NY 2007).
  EWCA Civ 281,  QB 41.
  UKHL 21,  AC 1.