C21 Pty Ltd (Trustee) v Hou (No 3)
[2023] FedCFamC2G 162
Federal Circuit and Family Court of Australia
(DIVISION 2)
C21 Pty Ltd (Trustee) v Hou (No 3) [2023] FedCFamC2G 162
File number(s): SYG 2055 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 3 March 2023 Catchwords: INTELLECTUAL PROPERTY – Practice and procedure – applications for discovery – whether certain categories of documents ought to be discovered – orders for discovery made. Legislation: Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 14.02(2)(b) Cases cited: C21 Pty Ltd (Trustee) v Hou [2022] FedCFamC2G 527 Division: General Number of paragraphs: 23 Date of hearing: 2 March 2023 Place: Sydney Counsel for the Applicant: Mr C McMeniman, by video Solicitor for the Applicant: Gilbert + Tobin Counsel for the Respondents: Mr L Merrick, by video Solicitor for the Respondents: MGA Lawyers ORDERS
SYG 2055 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: C21 PTY LTD ATF THE RAMADAN FAMILY TRUST (ABN 65 592 475 152)
Applicant
AND: KATE HOU
First Respondent
HIBI DESIGN PTY LTD (ACN 654 588 717)
Second Respondent
order made by:
JUDGE MANOUSARIDIS
DATE OF ORDER:
3 March 2023
THE COURT ORDERS THAT:
1.Subject to order 2, pursuant to r 14.02(2)(b) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules), by 16 March 2023 the respondents give verified discovery of the documents falling within categories 1-6 described in the document titled “Applicant’s proposed discovery categories” (Applicant’s Categories).
2.For the purposes of order 1 “documents” has the meaning given to “document” in the Applicant’s Categories, except that the following is substituted for paragraph (c) of that definition:
does not include any affidavit (including all documents annexed or exhibited to such affidavit) filed by the applicant or by the respondents;
3.Pursuant to r 14.02(2)(b) of the GFL Rules, by 16 March 2023 the applicant give verified discovery of the documents falling within category 16 described in the document titled “Documents and Classes of Discoverable Documents Sought from the Applicant” (Respondents’ Categories).
THE COURT NOTES THAT:
4.The parties will confer with a view to the respondents formulating a clearer description of the documents falling with category 20 of the Respondents’ Categories, and the applicant including in the verified discovery required by order 3 documents that fall within the clearer description.
THE COURT ORDERS THAT:
5.The costs of the applications in relation to discovery are reserved.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
introduction
At 9:30 am on 3 March 2023 I pronounced orders in relation to a dispute I heard on 2 March 2023 about discovery, noting that I would publish my reasons later. These are my reasons.
background
In reasons for judgment I published on 29 June 2022 I described the causes of action the applicant maintains against the respondents in this proceeding, and the defences the respondents have filed.[1] These reasons for judgment assume familiarity with that description.
[1] C21 Pty Ltd (Trustee) v Hou [2022] FedCFamC2G 527, at [3]-[6]
On 22 November 2022 I made orders in chambers by consent that the parties exchange proposed categories of discovery, they confer and notify each other of the categories not agreed to, and to make any interlocutory applications for discovery and affidavits within the time specified in the orders.
On 25 January 2023 the parties exchanged proposed categories of discovery. The applicant sought the discovery of the nine categories of documents described in a document titled “Applicant’s proposed discovery categories” (Applicant’s Categories). The respondents sought the discovery of the 29 categories of documents described in a document titled “Documents and Classes of Discoverable Documents Sought from the Applicant” (Respondents’ Categories).
The parties conferred about their respective categories of documents, but were unable to agree on some of them. The respondents objected to all but categories 7 and 8 of the Applicant’s Categories. In the course of the hearing counsel indicated that the parties had resolved the dispute in relation to category 9 of the Applicant’s Categories. The applicant, on the other hand, objected to a number of the Respondents’ Categories but by the conclusion of the hearing the parties remained in dispute only in relation to categories 16 and 20.
These reasons for judgment, therefore, deal with the disputes in relation to categories 1-6 of the Applicant’s Categories and categories 16 and 20 of the Respondents’ Categories.
Applicant’s categories
Categories 1 and 2
Categories 1 and 2 describe classes of documents by reference to their recording or referring to the matters described in categories 1 and 2. The respondents object to the inclusion of “or referring to”. The respondents submit the words “or referring to” render the categories impermissibly broad. The respondents submit the documents should be qualified by the words “or demonstrating the use of”.
I do not agree that the words “or referring to” impermissibly broaden the categories of documents. On the contrary the words “or referring to” limit the location and disclosure of documents that are described in categories 1 and 2.
Counsel for the respondents submitted that requiring the respondents to discover not only documents that record, but also documents that refer to, the documents described in categories 1 and 2 would unfairly burden the respondents. There is no evidence on the basis of which I could assess this submission. I am in any event unable to appreciate how a search on any electronic device for documents that relate to a particular subject would involve materially more effort than conducting a search on the same electronic device for documents that record the same subject.
I therefore do not accept the respondents’ objections to categories 1 and 2 of the Applicant’s Categories.
Category 3
Category 3 are documents recording or referring to:
(a) Ms Hou’s download of RAMA’s Google drive using Google Takeout on 22 August 2021;
(b) Ms Hou’s copying of the RAMA discussion channels from the program “Slack” on 24 August 2021; or
(c) Ms Hou’s download of RAMA’s Google drive using Google Takeout on 14 September 2021.
The respondents submit that this category of documents relates to “[s]ignificant aspects” of allegations which are admitted, and in any event calls for the discovery of documents that have already been disclosed in the course of the implementation of the “IT Protocol”. (The “IT Protocol” is a reference to a process to which the parties agreed for the identification and extraction of documents from electronic devices of the respondents.)
Counsel for the applicant, on the other hand, submits the IT Protocol dealt with the extraction of information from particular electronic devices, and the applicant has reasonable grounds for suspecting that documents falling within the category 3 are stored in electronic devices that were not the subject of the IT Protocol. The applicant further submits that the Applicant’s Categories avoids duplication by excusing from the definition of “document”:
. . . anything which has previously been provided to the Applicants [sic] pursuant to the Forensic IT Examination Protocol ordered in these proceedings by Judge Baird on 3 December 2021; and
. . . any documents annexed to and/or exhibited to any affidavit filed by the Respondents in this proceeding.
Counsel for the respondents submitted that the second of these exclusions should also exclude documents annexed to or exhibited to any affidavit filed by the applicant. Counsel for the applicant, on the other hand, submitted that this would be inappropriate because it would relieve the respondents from discovering a copy of the documents that are annexed or exhibited to the affidavits the applicant has filed, even if the respondents had obtained such documents otherwise than by having been served with the applicant’s affidavits.
I am satisfied there would be utility in requiring discovery of the documents identified in category 3, even though documents falling within the category have already been disclosed in the course of the implementation of the IT Protocol; and that any duplication could be avoided by excluding documents that have been disclosed under the IT Protocol, and by excluding affidavits the applicant and the respondents have filed, including the documents annexed and exhibited to the affidavits. The exclusion would not cover copies of the documents annexed or exhibited to the affidavits that have been filed and served on the respondents that have come into the possession or control of the respondents other than their being annexed or exhibited to affidavits with which they have been served.
I propose to order that the respondents give discovery of the category 3 documents, excluding documents disclosed in the implementation of the IT Protocol, and affidavits, together with the documents that are in fact annexed or exhibited to the affidavits, that have been filed and served.
Categories 4 and 5
These categories describe documents recording or referring to communications between the first respondent and customers of the applicant from 1 June 2021 to 27 September 2021 (when she was still employed by the applicant), and documents recording or referring to further communications between the respondents and the senders of communications referred to in an exhibit to Ms Hou’s affidavit made on 22 December 2022.
The respondents submit that “or referring to” impermissibly widens the scope of discovery. For reasons I have already given in relation to categories 1 and 2, I do not accept that submission.
The respondents also submit that the categories need to be limited by subject matter. The categories are sufficiently limited to ensure that only documents that are relevant to issues in the proceeding are required to be discovered.
Category 6
The respondents submit that “or referring to” impermissibly widens the scope of discovery. For reasons I have already given in relation to categories 1 and 2, I do not accept that submission.
respondents’ categories
The respondents submit that categories 16 and 20 relate to keycap collaborations which, broadly speaking, the applicant alleges have been lost to it or diverted from it to the respondents. The respondents submit that the documents are relevant to damages.
In its counsel’s written submissions, the applicant submits that the documents are irrelevant because loss of sales is irrelevant to a fiduciary’s liability to account for a profit or gain. That, of course, is correct. Counsel for the applicant submitted that category 20 is in any event unclear. Counsel for the respondents accepted that category 20 is unclear and said that, if I were otherwise to hold that the documents are relevant to damages, the respondents would submit a clearer description of the category.
As the respondents correctly submit, the applicant alleges that it suffered loss and damage because of the respondents’ alleged conduct. The applicant has not made any election in relation to remedies. I am therefore satisfied that the applicant should give discovery of documents that fall within category 16 and a properly reformulated category 20.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 3 March 2023
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