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Government May Be Liable For Huge Compensation to Mr Dotcom

Government May Be Liable For Huge Compensation to Mr Dotcom

Whether New Zealand might need to pay Mr Dotcom hundreds of millions of dollars if his arrest is found to be illegal could depend on what arrangements it has made with the United States Government.

Speaking to TV3’s, “The Nation” this weekend, barrister and commercial litigation specialist, Kenneth Johnston, said the New Zealand Government gave an indemnity to Mr Dotcom to cover damages from the police raid if that was found to be illegal.

That raised the question as to whether the Government could be liable to come[pnsate Mr Dotcom for lost Megaupload income – estimated to be $500 million a year.

“If the New Zealand government was going to have to give an indemnity, it would look for a reciprocal indemnity from the United States government,” he said

“But whether in fact that was sought, or whether it was obtained, I don’t know.

“The test will be whether a judge is prepared to accept that there is a causative link between a loss and the order made to enforce the American order in this country.”

Mr Johnston said it was rare for a country to find itself in this situation, “because we aren’t asked every day to assist foreign authorities with the enforcement of their court orders”.
 
http://www.youtube.com/watch?v=vAtIHg5NWpw&feature=plcp

'THE NATION'

KENNETH JOHNSTON

Interviewed by RACHEL SMALLEY

Rachel There was more embarrassment for the government this week, when Prime Minister John Key was forced to admit that Kim Dotcom was mentioned in one of his spy briefings. It’s the latest revelation in a case that’s been riddled with errors and bungling. The warrants used to raid his home have been ruled invalid. Information was handed to the FBI that shouldn’t have been, and the agency that spied on Kim Dotcom well, it did so illegally. So has this left our government exposed to a potential lawsuit. Kenneth Johnston is a Barrister and specialist in commercial litigation. He joins us now. Good morning Kenneth, thank you for joining us this morning.

Can you explain to me in the first instance the indemnity that New Zealand Police have given to Mr Dotcom?

Kenneth Johnston – Barrister
Well the first point that I think needs to be made is that what we call the Dotcom Litigation is actually a complex and many faceted bit of litigation. One component of it is that the American authorities have asked the New Zealand authorities to take steps here to enforce effectively a freezing order over Mr Dotcom's assets in this country. And the New Zealand authorities in the form of the Commissioner of Police have done that. The legislation that enables them to do that has a specific provision which provides that the court is entitled to ask the applicant to provide an indemnity, or an undertaking as to damages, and that’s been provided by the Commissioner as I understand it, although I haven’t seen a copy of the indemnity myself.

Rachel So this is what Kim Dotcom in essence could use to claim damages for potential lost business?

Kenneth Well certainly if it comes about that the proceedings are unsuccessful and he's suffered some sort of loss as a result of the orders that have been made, he could rely on that indemnity to go back to the court and ask for compensation for that.

Rachel What sort of figures are we talking here? We know that Mega Upload had an annual income of around 500 million dollars. To what degree could the government now be exposed as a result of this indemnity? We've heard a variety of figures so far.

Kenneth Well I agree, there's been a lot of breathless and extravagant comments made by politicians and by commentators, but as I say you’ve got to remember that this indemnity has been given in the context of one small facet of this litigation, and in the end the test will be whether a judge is prepared to accept that there is a causative link between a loss and the order made to enforce the American order in this country.

Rachel Okay, so in essence I think the government seized some 20 million dollars of assets, and in theory the indemnity applies to those assets is my understanding. What we're suggesting here is that actually it could go further because Mega Upload has lost business as a result of these actions taken by New Zealand.

Kenneth Well that’s where the causative link becomes important. It may be that Mr Dotcom or his company have suffered damage of that sort, but it doesn’t follow from that, that that's been caused by the order to enforce the American order in New Zealand. It may well have been caused by something else. Now if there's no causative link – that’s why I say a lot of the comments made are extravagant.

Rachel If the Crown wants to avoid a claim for damages what would it have to prove?

Kenneth Well the matter would come in front of a High Court Judge and it wouldn’t be for the Crown to prove anything, it would be for the applicant to prove that there was a causative link between the order that’s been made, and any damages that have been suffered. And of course bear in mind that all of this presupposes that the court decides that the order should not have been made in the first place.

Rachel Okay, so is the US given that it was America who triggered this action, is the US government liable for any of this, or does the risk lie squarely on the shoulders of New Zealand, because it was this country that signed the indemnity?

Kenneth I don’t know the answer to that. What I would say is that I expect that it would have gone through the minds of those dealing with it at the time, that if the New Zealand government was going to have to give an indemnity, it would look for a reciprocal indemnity from the United States government. But whether in fact that was sought, or whether it was obtained, I don’t know.

Rachel So that’s the key here, if before we gave indemnity to Kim Dotcom did we seek an indemnity as well from America?

Kenneth Well that’s the key to establishing whether the American authorities have any liability or might have if the outcomes that you postulate were to occur.

Rachel Okay, is it rare for a country to find itself in a situation like this, like New Zealand has, in your experience?

Kenneth Well it certainly doesn’t happen every day, but that’s because we aren’t asked every day to assist foreign authorities with the enforcement of their court orders.

Rachel Indeed, Kenneth Johnston, Commercial Litigation Lawyer, appreciate your time this morning and your analysis. Thank you very much.

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