Cameron Industrial Commercial Pty Ltd v Johnson

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST

S ECI 2020 04782

CAMERON INDUSTRIAL COMMERIAL PTY LTD (ACN 633 231 740)	Applicant
v
JAMES JOHNSON	Respondent

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JUDGE:	Ierodiaconou AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	10 March 2021
DATE OF JUDGMENT:	23 April 2021
CASE MAY BE CITED AS:	Cameron Industrial Commercial Pty Ltd v Johnson
MEDIUM NEUTRAL CITATION:	[2021] VSC 195

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PRACTICE AND PROCEDURE – Preliminary discovery – Whether reasonable cause to believe that applicant has or may have a right to obtain relief against defendant – Whether the applicant has made all reasonable inquiries – Whether there is reasonable cause to believe the respondent has documents in the categories sought – Whether documents relate to the question of whether the applicant has a right to obtain relief – Whether inspection would assist the applicant to decide whether to commence proceeding – Preliminary discovery refused – Supreme Court (General Civil Procedure) Rules 2015 r 32.05 – Trofeo Pty Ltd v Confederation of Australian Motor Sport Ltd [2021] VSC 90.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr R E T Wodak	MST Lawyers
For the Respondent	Mr R A Millar	Hutchinson Legal

TABLE OF CONTENTS

Summary.............................................................................................................................................. 1

Evidence............................................................................................................................................... 1

Background......................................................................................................................................... 1

Colchester Road, Bayswater North............................................................................................ 4
Clare Street, Bayswater................................................................................................................ 5
Whitehorse Road, Balwyn........................................................................................................... 6
Gabrielle Court, Bayswater North.............................................................................................. 6
Correspondence of lawyers......................................................................................................... 7

Applicable principles........................................................................................................................ 8

Is there reasonable cause to believe CIC has or may have a right to relief?........................ 13

CIC’s submissions....................................................................................................................... 13
Mr Johnson’s submissions......................................................................................................... 14
Analysis........................................................................................................................................ 15

Has CIC made all reasonable inquiries?..................................................................................... 21

CIC’s submissions....................................................................................................................... 21
Mr Johnson’s submissions......................................................................................................... 21
CIC’s submissions in reply........................................................................................................ 22
Analysis........................................................................................................................................ 23

Is there reasonable cause to believe the respondent has documents in the following categories and that they relate to the question of whether CIC has a right to obtain relief and inspection would assist CIC to decide whether to proceed?.............................................................................. 25

Category 1.................................................................................................................................... 25
CIC’s submissions............................................................................................................. 25
Mr Johnson’s submissions................................................................................................ 27
Analysis............................................................................................................................... 28

Category 2.................................................................................................................................... 30
CIC’s submissions............................................................................................................. 30
Mr Johnson’s submissions................................................................................................ 30
Analysis............................................................................................................................... 31

Category 4.................................................................................................................................... 31
CIC’s submissions............................................................................................................. 31
Mr Johnson’s submissions................................................................................................ 32
Analysis............................................................................................................................... 32

Category 5.................................................................................................................................... 32
CIC’s submissions............................................................................................................. 33
Mr Johnson’s submissions................................................................................................ 33
Analysis............................................................................................................................... 33

Conclusion......................................................................................................................................... 33

HER HONOUR:

The applicant, Cameron Industrial Commercial Pty Ltd (‘CIC’), operates a real estate agency specialising in the sale and leasing of commercial properties in the south-eastern suburbs of Melbourne. The respondent, Mr James Johnson, was employed by CIC and its predecessor for more than ten years as a sales and leasing agent. On 9 December 2020, Mr Johnson resigned. The following day Mr Johnson commenced employment with First National Treeby Commercial (‘Treeby’), an alleged competitor of CIC. Within one week of Mr Johnson leaving his employment with CIC, four of CIC’s clients left it and engaged Treeby. This ruling concerns CIC’s application for preliminary discovery.[1]
[1]By way of originating motion filed 23 December 2020 and summons filed 18 January 2021.

Summary

The application will be dismissed.

Evidence

CIC relies on the affidavits of its managing director, Mr Ben Cooper, sworn on 22 December 2020 (‘first Cooper affidavit’) and 3 March 2021 (‘second Cooper affidavit’).

Mr Johnson relies on his affidavit affirmed on 5 March 2021 (‘Johnson affidavit’).

Background

The respective affidavits and exhibits include reference to the following background.

On 22 October 2010, Mr Johnson commenced employment with Camcoo Nominees Pty Ltd, then trading as Cameron Industrial Commercial (‘Camcoo’), as a personal assistant to the director. Camcoo is a related entity of CIC.

On 1 July 2012, Mr Johnson was made a sales and leasing agent by letter dated 19 June 2012.[2]
[2]Applicant, Affidavit of Ben Cooper, sworn 22 December 2020, exhibit ‘BC-1’ (‘first Cooper affidavit’).

On 16 October 2014, Camcoo provided Mr Johnson with a deed of confidentiality and restraint of trade to consider and sign. Mr Johnson advised Camcoo that he did not wish to sign the deed. The unsigned deed is exhibited to the first Cooper affidavit containing a handwritten note:

1/5/15 - After a couple of conversations, James advises that he is just not happy signing the document. Did mention at one point that he may have a solicitor look at it. Filed unsigned copy as per Ben Cooper[3]

[3]Ibid exhibit ‘BC-2’.

It is common ground that the deed of confidentiality and restraint of trade is not enforceable.

On 1 July 2019, as a result of an internal corporate restructure, Mr Johnson ceased employment with Camcoo and became an employee of CIC. There is no evidence of a separate written contract of employment with CIC. CIC contends the terms of Mr Johnson’s employment with Camcoo were preserved in their entirety after the transfer of employment. Mr Johnson does not recall being given any information about the terms and conditions of his employment. Nor does CIC contend that he was. At this point, there is a real question as to whether or not there are any written terms of the contract of employment between CIC and Mr Johnson.

Between May 2020 and 19 December 2020, Mr Johnson dealt with four property owners in arranging for the execution of exclusive leasing or sale authorities, which are dated as follows:

(a) Colchester Road, Bayswater, on 18 May 2020 (‘the Colchester Road property’);

(b) Whitehorse Road, Balwyn, on 14 July 2020 (‘the Balwyn property’);

(c) Clare Street, Bayswater, on 17 July 2020 (‘the Clare Street property’); and

(d) Gabrielle Court, Bayswater North, on 25 November 2020 (‘the Gabrielle Court property’).[4]

[4]Ibid exhibit ‘BC-3’. The exhibited exclusive sale authority for the Gabrielle Court property does not appear to have been signed by the vendor.

At about midday on 9 December 2020, Mr Johnson telephoned Mr Cooper and said words to the effect of: ‘I’m leaving. This is not working for me. It’s been a tough year’. Mr Johnson said that he would finish that day.[5] There was no suggestion from Mr Cooper to the contrary. Mr Cooper told Mr Johnson to speak with Mr Nic Sal, CIC’s head of sales and leasing. Mr Johnson then had a short conversation with Mr Sal about his resignation.
[5]Respondent, Affidavit of James Johnson, affirmed 5 March 2021, [13] (‘Johnson affidavit’).

At 12.31pm that day, Mr Johnson sent an email to Mr Cooper and Mr Sal confirming his resignation from his employment effective that day.[6]
[6]Johnson affidavit, [14]; First Cooper affidavit, ‘BC-4’.

As Mr Johnson deposed, shortly afterwards Mr Cooper telephoned him and a discussion took place to the following effect:

CooperI want to get in now. You should play it with a straight bat, especially if you are thinking of going to work for another agent.
JohnsonI don’t know what you’re talking about.
CooperIf you recall, back in 2014, a document was sent around to everyone to sign. This contained restraint periods.
JohnsonI never signed that document.
[Long pause]
CooperWe need to get together to sign off on some legal documents, so we don’t get caught up in the legal crossfire and ramifications.
JohnsonI am not sure exactly what you are referring to, but I need to go.[7]

[7]Johnson affidavit, [15].

Later that day, Mr Sal telephoned Mr Johnson and made arrangements for Mr Johnson to return company property at Mr Sal’s home.[8] Mr Johnson drove to Mr Sal’s home and handed him: a desktop computer, monitor, keyboard, mouse, a bundle of stickers (For Sale, For Lease, Sold, etc), an electronic access fob device and a bunch of keys for several properties. In Mr Johnson’s car boot he had some branded clothing items and asked Mr Sal if he wanted them. He did not.[9] They then had a conversation about Mr Johnson’s resignation during which Mr Sal asked about the reasons for Mr Johnson leaving. Mr Johnson replied to the effect ‘[s]ome reasons are known to you already. Jobkeeper was pretty ordinary’.[10]
[8]Ibid [16].
[9]Ibid [18].
[10]Ibid [19].

At 2.34pm that day, Mr Sal emailed all staff of CIC stating that Mr Johnson would finish up immediately.[11]
[11]Ibid exhibit ‘JJ-1’.

At 3.00pm that day, Mr Sal sent Mr Johnson a text stating ‘[m]ate, don’t chuck those coats, hi-vis etc I’ll get em from ya’.[12] Mr Johnson again drove to Mr Sal’s house. He left the clothing items on Mr Sal’s front doorstep as he was not home.[13]
[12]Ibid [21].
[13]Ibid [22].

The following day, namely 10 December 2020, Mr Johnson commenced employment with Treeby.

After Mr Johnson’s resignation, the properties that he managed at CIC were assigned to other consultants including Mr Jake Beckwith and Mr Sal.

Colchester Road, Bayswater North

Mr Johnson deposes that on 10 December 2020, the day after he ceased employment with CIC, the contact for the corporate owner of the Colchester Road property telephoned him. He deposes that she had become a family friend and that he told her that he ‘was no longer working at [CIC], but she said to me that she still wanted to deal with me in leasing the property’.[14] Mr Johnson states further that:

Although Treeby was engaged for the leasing of this property, as far as I understand, [CIC] still manage this particular leased property for [landlord company], as well as all their other leased properties due to a long-term exclusive management authority.[15]

[14]Ibid [30].

[15]Ibid.

Mr Cooper deposes to the following. On 11 December 2020, Mr Beckwith called the contact to discuss the advertised property previously managed by Mr Johnson.[16] The contact was asked if she wanted to advertise another property which was not listed by Mr Johnson. In reply, she requested Mr Beckwith hold off on marketing the second property but that she was happy to advertise off market to interested parties.
[16]First Cooper affidavit, [17]–[20]; Applicant, Supplementary Affidavit of Ben Cooper affidavit, [4] (‘second Cooper affidavit’).

On 14 December 2020, the contact advised Mr Beckwith not to advertise the second property off market. That day, Mr Anthony Treeby, managing director of Treeby, sent an email to Mr Sal to advise that Treeby had received an exclusive authority for the property.[17]
[17]First Cooper affidavit, exhibit ‘BC-6’.

On 16 December 2020, Mr Beckwith called the contact asking why the listing moved to Treeby, to which she responded the reasons were only known to her. Mr Beckwith asked whether it was because of Mr Johnson’s move to Treeby, to which she responded ‘well you can draw that conclusion if you wish’.[18] Mr Beckwith asked whether the listing and off market advertising of the second property was withheld for the same reason, to which she answered ‘yes’.[19]
[18]Ibid [20].
[19]Ibid.

Clare Street, Bayswater

Mr Johnson deposes that on 10 December 2020, the day after he ceased employment with CIC, the owner of the Clare Street property telephoned him. He states:

I told him I no longer worked for [CIC]. He asked if he could still deal with me. I replied that he could, provided he was no longer under an exclusive authority with [CIC]. He checked and later confirmed that he was out of contract with [CIC]. He engaged Treeby to act for him.[20]

[20]Johnson affidavit, [31].

On 14 December 2020, Mr Treeby sent an email to Mr Sal advising that Treeby had received an exclusive authority for the Clare Street property.[21]
[21]First Cooper affidavit, exhibit ‘BC-7’.

Mr Cooper deposes that on 16 December 2020, Mr Sal called the owner of the property who confirmed that he had signed an exclusive authority with Treeby, and was fully aware that Mr Johnson was moving there.[22]
[22]Ibid [21]–[22]; Second Cooper affidavit, [5].

Whitehorse Road, Balwyn

Mr Johnson deposes that on the afternoon of 9 December 2020, the day he ceased employment with CIC, the contact for the corporate owner of the Balwyn property telephoned him. He deposes:

I told her that I had resigned from [CIC] earlier that day. She asked if she could still deal with me – I said that I could only do so if she was no longer under exclusive authority. She said she would check.
[The contact] confirmed that she was out of contract with [CIC] and requested that Treeby act on her behalf.[23]

[23]Johnson affidavit, [32]–[31].

On 14 December 2020, Mr Beckwith spoke with the contact for the Balwyn property to discuss the current ‘deal in progress’ regarding the property. She advised that she was happy for CIC to keep assisting her.[24]
[24]First Cooper affidavit, [23]–[26]; Second Cooper affidavit, [6].

On 15 December 2020, Mr Beckwith called and sent a text message to the contact to arrange an inspection of the retail space at the property.[25] She advised that she would respond the following morning.
[25]First Cooper affidavit, exhibit ‘BC-8’.

On 16 December 2020, Mr Treeby sent an email to Mr Sal advising that Treeby received an exclusive authority for the Balwyn property.[26]
[26]Ibid exhibit ‘BC-9’.

Shortly after he received Mr Treeby’s email, Mr Beckwith exchanged text messages with the contact. The contact confirmed Treeby had been given an exclusive leasing authority and there was no need for further discussion.[27]
[27]Ibid exhibit ‘BC-10’.

Gabrielle Court, Bayswater North

Mr Johnson deposes that on 10 or 11 December 2020, he received a telephone call from the son-in-law of the owner of the Gabrielle Court property. Further, that he:

[t]old him I had left [CIC]. He said he wanted to deal with me on the property, which had not previously been listed with [CIC], [the owner] subsequently engaged Treeby in relation to this property.[28]

[28]Johnson affidavit, [34].

On 14 December 2020, Treeby listed the Gabrielle Court property for sale online.[29]
[29]First Cooper affidavit, [27]–[28], exhibit ‘BC-11’; Second Cooper affidavit, [7].

On 17 December 2020, Mr Johnson’s CIC email address received an email from a conveyancing firm in relation to the sale of the Gabrielle Court property attaching the vendor statement.[30] It appeared the sender was unaware Mr Johnson was no longer employed by CIC.
[30]First Cooper affidavit, exhibit ‘BC-12’.

Correspondence of lawyers

On 14 December 2020, the solicitors acting on behalf of CIC, namely MST Lawyers, wrote to Mr Johnson, setting out obligations said to be owed by him and concerns that he was disclosing confidential information.[31] The letter refers to confidential information as including ‘customer names, contact details and addresses’, particularly in dealing with the Colchester Road, Gabrielle Court and Clare Street properties. While it asserts that CIC has reasonable cause to believe that Mr Johnson retained, disclosed and used its confidential information, no detail is given in this regard. The letter then demands that Mr Johnson confirm in writing his willingness to take a number of steps, including: attending MST Lawyers’ office and deleting ‘all files and documents containing [CIC’s] confidential information’, delivering up all hard copies containing CIC’s confidential information in Mr Johnson’s possession, custody or control and pay CIC approximately $31,224 in damages and reimburse CIC for its legal fees incurred in relation to the matter.
[31]Second Cooper affidavit, exhibit ‘BC-13’.

A reply from lawyers then acting for Mr Johnson, dated 17 December 2020, acknowledged duties owed by Mr Johnson, denied that he retained confidential information and emphasised that the four clients in question approached Mr Johnson.[32]
[32]Ibid exhibit ‘BC-15’.

Applicable principles

Rule 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) is applicable and states as follows.

Discovery from prospective defendant
Where-
(a)there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description the applicant has ascertained;
(b)after making all reasonable inquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; and
(c)there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in that person’s possession any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist the applicant to make the decision-

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).

In Trofeo Pty Ltd v Confederation of Australian Motor Sport Ltd,[33] Matthews AsJ summarised the applicable principles, which I gratefully adopt, as follows.
[33][2021] VSC 90, [36]–[39] (citations as in original).

In Vestas – Australian Wind Technology Pty Ltd v Lal Lal Wind Farm Nom Co Pty Ltd,[34] Delany J summarised this by saying that three components must be satisfied by the applicant before an order for preliminary discovery will be made:[35]
[34][2020] VSC 554 (‘Vestas’).
[35]Vestas, [24].
(a)first, there is reasonable cause to believe the applicant has or may have the right to obtain the relief;
(b)second, after making all reasonable inquiries, the applicant does not have sufficient information to enable it to decide whether to commence a proceeding to obtain that relief;
(c)third, there is reasonable cause to believe the respondent has or is likely to have documents the inspection of which by the applicant would assist the applicant to make the decision.

In Pandolfo v Finadri,[36] Derham AsJ summarised the relevant principles governing the application of r 32.05, as set out below:
[36][2018] VSC 211, [18]-[23] (‘Pandolfo’) (citations in original); followed in Vestas, [27].
18.The rule must be given the fullest scope its language will reasonably allow.[37]
[37]Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728, 733 (Burchett J); Beston Parks Management Pty Ltd v Sexton [2008] VSC 392 [52] (Hollingworth J) (‘Beston Parks’).
19.An applicant does not have to prove that there will be a real benefit in making the order, but simply that there may be some benefit. The benefit may be the preparation of an appropriate pleading and the avoidance of substantial amendments following discovery. Alternatively, the avoidance of unnecessary litigation.[38]
[38]Beston Parks [2008] VSC 392 [53]; see also Australian Football League v Stadium Operations Ltd [2009] VSC 264 [3] (Warren CJ) (‘AFL v SOL’).
20.The principles relevant to the first criterion are as follows:
(a)the applicant is not required to show it that has a prima facie case that it has a right to relief;[39]
[39]Plzen v Wharf Management [2007] VSC 318 [17(e)]
(b)it is also not necessary to show precisely what cause of action the applicant may have; such a requirement would defeat the object of the rule;[40]
[40]Schmidt v Won [1998] 3 VR 435, 465; Beston Parks [2008] VSC 392 [53]; United Energy [1998] VSC 133 [32].
(c)rather, it merely needs be shown that the facts are such that it may reasonably be believed that the applicant may have a right to obtain relief;[41]
[41]Schmidt v Won [1998] 3 VR 435, 465; Beston Parks [2008] VSC 392 [53].
(d)the test for determining whether the applicant has ‘reasonable cause to believe’ is an objective test;[42]
[42]Plzen v Wharf Management [2007] VSC 318 [17(c)].
(e)the word “may” indicates that the applicant’s belief does not have to amount to a firm view that there is a right to relief.[43]
[43]Beston Parks [2008] VSC 392 [53].

21. The second criterion is governed by the following principles:
(a)the requirement is primarily concerned with whether, as an objective fact, an applicant has sufficient information to determine whether to commence proceedings.[44] The fact that an applicant for preliminary discovery already has enough evidence to establish a prima facie case against a proposed defendant does not mean that the applicant has sufficient information to enable it to decide whether to commence a proceeding.[45] An applicant in that position may nevertheless ‘need information to know whether the cost and risk of litigation is worthwhile.’[46] For example, an applicant with sufficient information to plead a prima facie case may prudently wish to obtain preliminary discovery about ‘what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award’.[47]
[44]Beston Parks [2008] VSC 392 [55].
[45]B J Bearings Pty Ltd v Whitehead [2016] VSC 44 [19(2)] (‘B J Bearings’).
[46]Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435, 443; B J Bearings, [19(2)].
[47]St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147, 154 [26(f)] (citations omitted); B J Bearings, [19(2)].
(b)it is for the court to determine whether an applicant has sufficient information available to it; the applicant’s own assertion that it does not is neither determinative nor strictly necessary;[48]
[48]Beston Parks [2008] VSC 392 [81].
(c)accordingly, an application cannot succeed if the applicant has sufficient information (objectively assessed) but is unable to determine whether to commence proceedings due to subjective factors, for example, an overly cautious nature;[49]
[49]Beston Parks [2008] VSC 392 [55].
(d)courts have, however, approved litigants taking a cautious, conservative or prudent approach by applying for preliminary discovery under the rule.[50] This approach is consistent with the policy underlying the rule.[51] It is also consistent with the policy underlying the Civil Procedure Act 2010 (Vic) (‘CPA’) generally, and the ‘proper basis certification’ requirements in s 42 of the CPA in particular.[52]
[50]AFL v SOL [2009] VSC 264 [59]-[61]; United Energy [1998] VSC 133 [103].
[51]AFL v SOL [2009] VSC 264 [61]; B J Bearings, [19(3)].
[52]B J Bearings, [19(3)].
(e)if there is evidence that an applicant has in fact decided to commence proceedings, the application must fail.[53] In determining whether an applicant has in fact already decided to commence a proceeding, irrespective of the outcome of the application, the Court should not give too much weight to posturing in correspondence prior to the making of the application, particularly correspondence alleging the existence of a strong case but nevertheless seeking preliminary discovery by letter prior to making a formal application to the Court;[54]
[53]Beston Parks [2008] VSC 392 [56].
[54]AFL v SOL [2009] VSC 264 [59]–[62]; B J Bearings Pty Ltd v Whitehead [2016] VSC 44 [19(4)].
(f)what constitutes ‘reasonable inquiries’ is a question of fact, to be considered in all the circumstances of the particular case.[55]
[55]Hatfield v TCN Channel Nine Pty Ltd (2010) 77 NSWLR 506, 528 [86]; B J Bearings, [19(5)].

22.For the purpose of the third criteria, ‘possession’ means ‘possession, custody or power’.[56] Little more need be said about the third criteria, which sets out express requirements, the satisfaction of which will turn on the particular facts.
[56]Rule 32.01 of the Rules.
23.Where each element of the rule is satisfied, the Court will ordinarily exercise its discretion in favour of the applicant.[57]
[57]AFL v SOL [2009] VSC 264 [76].

In Alex Fraser Pty Ltd v Minister for Planning,[58] Riordan J observed that:
[58][2018] VSC 391, [53]-[54] (‘Alex Fraser’) (citations in original).
53.The proper test is revealed by the words of r 32.05(a). What is required is the following:
(a)There is cause for a belief in the relevant proposition - a belief being an inclination of the mind towards assenting to a proposition.[59]
[59]See Alex Fraser (n 58), at [49].
(b)The relevant proposition is (on the second limb) that there ‘may be the right’ to relevant relief. The use of the word ‘may’ bespeaks possibility.[60] Given the purpose of the Rule is to advance the administration of justice,[61] r 32.05 should be interpreted as requiring a real (as opposed to a fanciful or remote possibility). However, even a real possibility may be highly improbable.[62]
[60]The relevant definition of ‘may’ in the Macquarie Dictionary is ‘to be possible: this may be achieved in various ways.’ (Emphasis in the original).
[61]Unity Energy Ltd v Energy Risk Management Pty Ltd [1998] VSC 133 [36] (Gillard J).
[62]Inland Revenue Commissioners v Trustees of Sir John Aird’s Settlement [1982] 2 All ER 929, 940 (Nourse J) quoted with approval in Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509 (French J); which was in turn cited with approval in Smith v R (2017) 259 CLR 291 [88] Edelman J.
(c)The test is qualified by a requirement that the cause for the belief in the proposition must be reasonable. It is trite to say that what is reasonable in a particular case will depend upon all of the circumstances of the case.

54.Accordingly, the jurisdictional threshold under r 32.05 is low.[63] This is consistent with the following:
[63] Glencore International AG v Selwyn Mines Ltd (recs and mgrs apptd) (2005) 223 ALR 238 [16] (Lindgren J).
(a)The primary purpose of the rule is to advance the administration of justice by allowing a prospective plaintiff to make an informed decision on proper material about whether or not to bring a claim.[64] The importance of this rule to the advancement of the administration of justice has been accentuated by the certification requirements on filing of civil proceedings under Part 4.1 of the Civil Procedure Act 2010.[65] It is well established that the rule should be interpreted benevolently.[66]
[64]Unity Energy Ltd v Energy Risk Management Pty Ltd [1998] VSC 133 [36] (Gillard J).
[65]BJ Bearings, [19] (Hargrave J).
[66]Schmidt v Won [1998] 3 VR 435, 445 (Ormiston JA, with whom Charles and Batt JJA agreed).
(b)It would be incongruous if the jurisdiction to order preliminary discovery could not be enlivened because of the lack of evidence, which is the very cause of the application. The purpose of the Rule is to allow an applicant, who has inadequate proof of any cause of action, to discover whether or not evidence is available[67] that will impact (positively or negatively) on the possible proceeding.^[68]
[67] Ibid; Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728, 733 (Burchett J).
[68]Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy and Another (2008) 166 FCR 64, 80 [60] (French, Weinberg and Greenwood JJ). See also Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435, 442 [31]–[32] (Heerey, Gyles and Middleton JJ).

Riordan J also considered principles relevant to the exercise of the Court’s discretion in respect of r 32.05. In Alex Fraser, his Honour stated:[69]
[69]Alex Fraser, [54(c)].
Although the jurisdictional threshold is low, its satisfaction only empowers the Court to exercise its discretion.[70] In the exercise of its discretion, the Court can control any excesses;[71] and assess whether there may be real benefit in making the order.[72] It will be entitled to weigh the full range of relevant matters in determining whether an order is in the interests of justice – including the following:
(i)The level of inconvenience and cost that will be caused to the respondent.
(ii)Whether discovery may cause commercial or other damage to the respondent.
(iii)Whether the respondent will be reimbursed for its costs.
(iv)Whether an order would be inutile because the documents are privileged.[73]
(v)The prospect of the documents sought providing the information required by the applicant.
(vi)Whether the fact that there is no real prospect of success is apparent or discovery will not serve any useful purpose.[74] However, delving extensively in the merits of the existence of a possible cause of action will usually not be appropriate.[75]
Glowatzky v Insultech Group Pty Ltd (1997) 39 IPR 215 (Branson J), 220; Australian Football League v Stadium Operations Ltd [2009] VSC 264 [5] (Warren CJ).
[71]St George Bank Ltd v Rabo Aust Ltd (2004) 211 ALR 147 [26(a)] (Hely J).
[72]Australian Football League v Stadium Operations Ltd [2009] VSC 264 [5] (Warren CJ); Scarletti Pty Ltd v Milwood Printing Co Pty Ltd (Unreported, Supreme Court of Victoria, Court of Appeal, Phillips CJ, Crockett and Southwell JJ, 28 July 1994) BC9400965, 12.
[73]Murdesk v Secretary to the Department of Business and Innovation [2011] VSC 436 [17] (John Dixon J).
[74]Ibid [63].
[75]Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64, 78 [53] (French, Weinberg and Greenwood JJ).

Is there reasonable cause to believe CIC has or may have a right to relief?
CIC’s submissions

There is reasonable cause to believe that CIC has, or may have, the right to obtain relief against Mr Johnson. By reason of his employment with CIC, Mr Johnson owed CIC: an equitable duty of confidence obliging him to maintain confidentiality, duties pursuant to ss 182–3 of the Corporations Act 2001 (Cth) regarding the proper use of information and use of position to gain an advantage or cause detriment; fiduciary duties, including a duty of loyalty and obligations arising from the implied terms of his contract of employment.

Within one week of Mr Johnson ceasing employment with CIC, four clients that he had been responsible for dealing with at CIC became clients of Treeby, and there is evidence that Mr Johnson may have retained CIC’s confidential information. In this regard, CIC points to evidence that Mr Johnson:

(a) retained his REIV diary in which he recorded contacts, appointments and meetings;[76] and
[76]Second Cooper affidavit, [9(a)].

(b) may have engaged in ‘irregular browsing activity’, including accessing and downloading client management information.

As to the latter, Mr Cooper deposes:
On the 22 December 2020, I became aware through Mr Sal and Mr Beckwith of our office of Mr Johnson’s irregular browsing activity (through Chrome history). This included accessing and downloading client management information actively over a week prior to Mr Johnson’s resignation. Mr Johnson actively searched and downloaded information on Sunday 6 December 2020 between 7.20pm and 9.30pm on two databases that we use being Property Base and Released. Other days of irregular excessive use were on 4, 5, 7 and 8 December 2020. Owners’ [sic] information and contractual dates relating to the properties abovementioned in paragraph 13 of this affidavit were accessed. Key client information was also downloaded.[77]

[77]First Cooper affidavit, [35].

The confidential information retained by Mr Johnson consists of the names of customers, their contact details, and their requirement for services of the nature provided by the CIC.

CIC relies upon evidence that Mr Johnson received calls from the four clients almost immediately upon resignation. Additionally, CIC’s evidence is that there was contact between Mr Johnson and the four clients in the period 9–14 December 2020 and that he contacted a customer on the day that he resigned. CIC contends that Mr Johnson may still have been performing employment duties that day, such that if he contacted the customer in the afternoon to inform them he was going to Treeby, it may be a breach of his employment duties of loyalty and fidelity.

In relation to the phone call with the contact for the Gabrielle Court property, Mr Johnson deposes that she was a family friend. There may be a contest over whether that relationship developed in the course of his employment entitling him to retain that relationship. While the same argument is not raised in relation to the other three clients, the suggestion that they are simply clients from whom Mr Johnson received calls almost immediately upon his resignation does not fit neatly with CIC’s information. Mr Johnson may have contacted the clients using CIC’s confidential information.

CIC does not seek to enforce a post-employment restraint. It is accepted that Mr Johnson is entitled to deal with CIC’s customers provided he does not breach his duties to CIC. CIC does not accept that Mr Johnson has given a full explanation and it sits uneasily with paragraphs [17]–[28] of the first Cooper affidavit.

Mr Johnson’s submissions

None of the three limbs of r 32.05 have been satisfied and the application should be dismissed. The material does not provide a basis for the Court to make the orders sought. It fails to disclose reasonable cause to believe that CIC might have the right to obtain relief against Mr Johnson.

It is now common ground that there is no post-employment restraint operable.[78] Without a post-employment restraint, Mr Johnson is entitled to deal with customers of his former employer and accept their approaches, as summarised by Debelle J in NP Generations Pty Ltd v Feneley (‘NP Generations’).[79] Moreover, even if he had gone further and actively solicited those clients, he was free to do so. There is no evidence that Mr Johnson acted improperly or illegally or exposed himself to any asserted or tenable cause of action. In particular, he did not take confidential information and there is no reasonable basis for suggesting that he retained or used confidential information giving rise to any tenable cause of action. The first limb of r 32.05 is not made out on the material.
[78]Applicant, Applicant’s Submissions in Reply, 9 March 2021 [30].
[79](2001) 80 SASR 151, 156 [16] (‘NP Generations’).

Analysis

I am concerned that CIC is attempting to enforce a restraint of trade in circumstances where none exists. Mr Johnson was not bound by such a restraint and is free to compete with CIC, as is Treeby.

An employee has an implied duty of fidelity to an employer not to engage in conduct which impedes the faithful performance of her or his obligations, or is destructive of the ‘necessary confidence between employee and employer’.[80] As recognised in Robb v Green[81] and applied in Faccenda Chicken v Fowler (‘Faccenda Chicken’),[82] the duty encompasses a duty of confidence.[83]
[80]Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66, 81 (‘Blythe Chemical’); Commonwealth Bank of Australia v Barker (2014) 253 CLR 169, 190 [30].
[81][1895] 2 QB 315, 317.
[82][1987] Ch 117.
[83]Blyth Chemical (n 80) 81; Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172 [32] (‘Del Casale’); Plus One International Pty Ltd v Ching (No 3) [2020] NSWSC 1598 [441] (‘Plus One International’).

A balance is struck between protecting a former employer’s information and allowing an employee to use the skills, experience and know-how that they acquired in the course of their employment.[84] In NP Generations, Debelle J (Williams and Wicks JJ agreeing) summarised:

It is convenient to set out some well settled principles.
1.In the absence of a valid restraint of trade clause, a former employer cannot prevent a former employee from simply competing.

2. As a general rule, a former employer cannot, therefore, prevent a former employee from contacting or even soliciting clients or customers of the former employer.
3.An employee after ceasing employment may not use confidential information obtained in the course of that employment for the purpose of competing with his or her former employer or indeed in any other way detrimental to the former employer’s interests.[85]

[84]Riteway Express Pty Ltd v Clayton (1987) 10 NSWLR 238, 240; NP Generations (n 79); JD Heydon et al, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (LexisNexis, 5^th ed, 2015) [42-045] (‘Meagher, Gummow and Lehane’s’); University of Western Australia v Gray (2009) 179 FCR 346 382-3 [161]–[165].

[85]NP Generations (n 79) 156 [16].

What amounts to ‘confidential information’ depends upon all of the circumstances of the case, including: the nature of the employment, the nature of the information and whether the employer impressed upon the employee the confidentiality of the information.[86]
[86]Faccenda Chicken v Fowler [1987] Ch 117, 137–8.

The implied duty of confidence has been recognised as overlapping with the equitable jurisdiction to grant relief against the threatened or actual abuse of confidential information.[87] In order to establish a breach of confidence at equity, it is necessary to satisfy the following elements:

(a) the information in question must be identified with specificity;
(b) it must have the necessary quality of confidence;
(c)it must have been received by [the defendant] in circumstances importing an obligation of confidence, and
(d)there must be an actual or threatened misuse of the information without [the plaintiff’s] consent.[88]

[87]Moorgate Tobacco Co Ltd v Phillip Morris Ltd (No 2) (1984) 156 CLR 414, 437–8; University of Western Australia v Gray (2009) 179 FCR 346 382-3; Plus One International (n 83) [441].

[88]Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281, 290 [39]; Corrs Pavey Whiting & Byrne v Collector of Customs(Vic) (1987) 14 FCR 434, 443; Meagher, Gummow and Lehane’s (n 84) [42-090].

In Del Casale, the Court of Appeal of New South Wales reviewed the approach adopted in Faccenda Chicken. Hodgson JA (McColl JA agreeing) doubted as a general rule the continuation of the implied term imposing the duty of good faith after employment ceased.[89] In his Honour’s view, in the absence of an express contract dealing with the matter, questions of an employee’s confidentiality after employment has come to an end were best dealt with ‘as part of the general law concerning confidentiality’.[90] In this regard, his Honour noted the elements of an equitable breach of confidential information, and identified particular considerations in the context of ‘post-employment use, by an ex-employee, of the confidential information of an employer obtained during employment’. Two classes of confidential information were identified: ‘one of which an ex-employee cannot use (even in the absence of contractual restrictions), and the other of which an ex-employee can use, at least unless there is a valid contractual restraint’.[91] The following list of factors from The Law of Trade Secrets and Personal Secrets was quoted as assisting with the analysis of into which category the relevant information fell:
[89]Del Casale (n 83) [34]. According to Campbell JA (with whom McColl JA also agreed), whether the implied duty of fidelity survived, a proposition for which his Honour saw little basis, perhaps relied upon whether it was necessary ‘for the effective operation of the contract of employment that was once on foot, that the former employee not be at liberty to engage in that particular conduct’.
[90]Del Casale (n 83) [35].
[91]Ibid [38].

1. The extent to which the information is known outside the business.
2.The extent to which the [information] was known by employees and others involved in the plaintiff’s business.
3.The extent of measures taken to guard the secrecy of the information.
4.The value of the information to the plaintiffs and their competitors.
5.The amount of effort or money expended by the plaintiffs in developing the information.
6.The ease or difficulty with which the information could be properly acquired or duplicated by others.
7.Whether it was plainly made known to the employee that the material was by the employer as confidential [sic].
8.The fact that the usages and practices of the industry support the assertions of confidentiality.
9.The fact that the employee has been permitted to share the information only by reason of his or her seniority or high responsibility.
10.That the owner believes these things to be true and that belief is reasonable.
11.The greater the extent to which the ‘confidential’ material is habitually handled by an employee, the greater the obligation of the confidentiality imposed.
12.That the information can be readily identified.[92]

[92]Ibid [40], quoting R Dean, The Law of Trade Secrets and Personal Secrets (2^nd ed, 2002) 190.

Hodgson JA added to the list: ‘the extent to which the particular information could be readily isolated from the employee’s general know-how’. The approach of Hodgson JA was applied by Macaulay J in Advanced Fuels Technology v Blythe,[93] a case in which a defendant had emailed himself a list of personal and business contacts from his work-supplied computer.
[93][2018] VSC 286. See also Plus One International (n 83).

Lists of customers are capable of constituting confidential information.[94] Of particular relevance in this regard has been whether such a list represents the work of the employer.[95] In NP Generations, Debelle J stated:

Where confidential information is entrusted to an employee for a limited purpose, it can only be used for that purpose and no other.
Thus, it is a breach of good faith and a breach of the equitable obligation to preserve the confidence of an employer if an employee, without the consent of her employer, discloses to persons outside the business information on the list of customers … Similarly, it is also a breach of good faith and a breach of the equitable obligation to preserve the confidence of an employer if an employee makes a copy of a list of customers of the employer for use after her employment ends … or deliberately memorises such a list for that purpose makes a copy of a list of customers of the employer for use after her employment ends.
I think that the same principles must apply with equal force to a list of the employer’s customers made by an employee legitimately for the purpose of performing the duties for which she has been engaged in those instances where the employee seeks to retain the list upon the termination of her employment. There is no sound reason why those principles should not apply. Be it a list of some or all of the customers, it is, nevertheless, a list of customers which is capable of being used by the former employee in a way which is unauthorised and which may cause loss or damage to the former employer.[96]

[94]See Ibid [494]–[498].

[95]NP Generations (n 79) [11].

[96]NP Generations (n 79) [19]–[20].

Here, CIC has not precisely identified the confidential information Mr Johnson may have misused. In particular, how the name and contact number of the clients, including one who Mr Johnson deposes is a family friend, and their need for services, amounts to confidential information. MST Lawyers’ letter of 14 December 2020 does not contain a definition of confidential information and simply makes a number of vague assertions:

Post-Employment Obligations – Employment Agreement
We remind you of your ongoing obligations in relation to confidential information belonging to the Company pursuant to your Employment Agreement.
These include obligations not to:
1.Retain or take copies of company property relating in any way to the business or financial affairs of the Company or its customers;
2.Disclose any of the information contained in company documents and materials to any period, firm or corporation; and
3.Use any company information for your own benefit, or the benefit of any other person, firm or corporation.[97]

[97]Second Cooper affidavit, exhibit ‘BC-13’, ‘Post-Employment Obligations – Employment Agreement’, 2.

The evidence that CIC relies upon is:

(a) Mr Cooper becoming aware of irregular browsing activity, including alleged ‘accessing and downloading client management information’ from electronic databases;

(b) Mr Johnson taking his REIV diary with him, said to contain ‘detailed client information’; and

(c) four clients switching to Treeby in the period immediately after Mr Johnson left CIC, albeit two did not initially indicate that they were leaving.[98]

[98]First Cooper affidavit [29]–[35].

Mr Johnson deposes that the clients in question telephoned him, his diary did not contain a client list, and as to his use of CIC’s electronic resources:[99]

It was part of my job with [CIC] to regularly access the Property Base and Released databases of [CIC]. I would access and update customer information via my [CIC] computer as part of my job. I quite probably did so on the days referred to by Mr Cooper, but only in the course of performing my duties with [CIC]…
I did not copy, print or retain any information from the Cameron’s databases. Any information downloaded was kept on the [CIC] computer which I returned on resignation.[100]

[99]Johnson affidavit [23], [28].

[100]Ibid [35], [36].

CIC’s evidence, in both identifying the confidential information in question, as distinct from general ‘know how’, and establishing the use or retention of that information, is limited. I am troubled by the lack of precision. However, I note that as the threshold for r 32.05 is low, it is not necessary to show precisely what cause of action the applicant has, and, a prima facie case does not have to be established.[101] On balance, I have concluded that there does appear to be reasonable cause to believe that CIC may have a right to relief in respect of breach of confidential information concerning the client details.
[101]Pandolfo (n 36) [20]; Alex Fraser (n 58) [54].

In any event, I am satisfied that there is reasonable cause to believe that CIC may have the right to relief in respect of Mr Johnson’s implied contractual obligations. He deposes that he spoke with the owner of the Balwyn property late on the afternoon of his last day of employment. It may have been after he had given notice of his resignation prior to then, and Mr Sal’s email saying he would ‘finish up immediately’ may also have preceded it. There is a question as to when his employment ceased that is unnecessary to resolve on this application. If Mr Johnson was an employee at the time he spoke with the owner of the Balwyn property, he had an implied duty of loyalty and fidelity to CIC. It would breach such a duty to solicit clients for a competitor during employment.

Accordingly, CIC has satisfied this limb.

Has CIC made all reasonable inquiries?
CIC’s submissions

Relying upon the evidence of Mr Cooper, CIC submits that it has made reasonable inquiries, in that it sought information from Mr Johnson, Treeby and the four clients who left CIC. However, those inquiries have not resulted in sufficient information to decide whether to commence a proceeding. Although Mr Johnson responded via his solicitor, providing some information and denying any misconduct, he did not produce any documents in support of the assertions made in that correspondence.

Mr Johnson’s submissions

Mr Johnson submits that any assertion that CIC does not have sufficient information is at odds with the position adopted by it to date. Relied upon in this regard is MST Lawyers’ letter of demand dated 14 December 2020.[102] In that letter, CIC is said to have held itself out as having sufficient information to assert various matters together with a demand for payment of $31,224.60 in damages. The letter expresses none of the doubts about the strength of CIC’s position that it apparently now has. CIC had enough assurance in the strength of its claim to make demands for payment of its legal fees and damages under threat of proceedings being issued immediately, and ought not to be permitted to now resile from its declared position. The end of the letter makes reference to the prospects of an application for preliminary discovery but afterwards said it will seek instructions to commence legal proceedings.
[102]Second Cooper affidavit, exhibit ‘BC-13’.

A more fundamental point is said to be that it is clear that CIC was gathering material. Paragraph 35 of the first Cooper affidavit suggests that CIC carried out a search of Mr Johnson’s CIC work computer. However, no detail is provided of any alleged wrongdoing beyond an unsubstantiated allegation of ‘irregular browsing activity’. Additionally, although CIC approached the relevant clients, the affidavit material does not disclose their responses. The responses are relevant and should be before the Court in assessing whether CIC has or does not have sufficient information to decide whether to issue a proceeding. The test is whether there is sufficient information not whether CIC likes the information obtained. One cannot conflate the issue with whether the information they have is information that they were hoping to find. The information found clearly does not support the allegation of wrongdoing. If there is information to suggest Mr Johnson did not act improperly, then there is enough information to decide not to issue proceedings. CIC has sufficient information to make that decision which is buttressed by the position it took in the letter of demand.

CIC’s submissions in reply

In reply to Mr Johnson’s submission that CIC had already decided to commence a proceeding, CIC relies upon BJ Bearings v Whitehead.[103] In that case, Hargrave J stated ‘the Court should not give too much weight to posturing in correspondence prior to the making of the application’.[104] It submits that a strongly worded letter does not mean that a decision has been made. The letter of 14 December 2020 identifies Mr Johnson’s obligations including a post-employment confidentiality obligation and reference is made to seeking instructions to commence proceedings or alternatively make an application for preliminary discovery. Additionally, the letter of demand is said to be a discretionary factor, weighed in the full range of relevant matters as referred to by Riordan J in Alex Fraser Pty Ltd v Minister for Planning.[105]
[103][2016] VSC 44.
[104]Ibid [19(4)].
[105]Alex Fraser (n 58) [54].

Mr Johnson’s expectations that computer logs be exhibited is said to be without foundation. CIC is not obliged to put into evidence every piece of relevant information. It is only obliged to demonstrate that it has made reasonable inquiries, not produce the results of all of its inquiries. It cannot mislead the Court, and has filed two detailed affidavits with numerous submissions that provide sufficient evidence.

Mr Johnson’s submission regarding the absence of evidence concerning the responses from the property owners is said to be misguided. According to CIC, the responses are provided in the first Cooper affidavit.[106]
[106]Applicant’s Written Submissions in Reply, [34], citing [16]–[28] of the First Cooper affidavit.

Analysis

I am not satisfied that CIC has made all reasonable inquiries and does not have sufficient information to enable it to decide whether to commence a proceeding.

Firstly, and glaringly given the allegations about misuse of confidential information, there is no evidence as to the results of any forensic examination of Mr Johnson’s work computer. CIC says it is not required to exhibit the results of any such examination. That may be so. However, it could have provided evidence containing the conclusion of a forensic examination of Mr Johnson’s work computer.

Secondly, CIC made inquiries of the four clients discussed above and exchanged communications with them.[107] Mr Johnson provided evidence in response. It is common ground that he spoke with the Balwyn property contact on his last day of employment and informed her that he could work with her if she was not under an exclusive authority (with CIC). This weighs in favour of the conclusion that CIC has sufficient information to enable it to decide whether it should commence a proceeding in relation to Mr Johnson’s implied duty of fidelity. Indeed, CIC draws the conclusion that on the information available, it ‘appears likely that Mr Johnson has breached his obligations to CIC so that CIC is likely to bring a claim against him’.[108] It says, however, that its decision whether to commence proceedings will be ‘substantially informed’ by review of the documents sought.[109]
[107]First Cooper affidavit [17]–[18], [20], [22]–[24], [26]; Second Cooper affidavit [17].
[108]Second Cooper affidavit [19].
[109]Ibid.

Thirdly, CIC is entitled to take a prudent approach in making that decision. Such an approach is consistent with its obligations under the Civil Procedure Act 2010 (‘CPA’). Its submissions and evidence were primarily directed to the question of whether it had sufficient information to establish liability. That sits at odds with its conclusion it is likely Mr Johnson has breached his obligations. This is not a case where the applicant deposes that it has insufficient evidence to ascertain the strength of the respondent’s defences. That is unsurprising given that Mr Johnson’s affidavit foreshadows his defences. Nor is it a case where the applicant deposes it has insufficient evidence to ascertain the likely quantum of damages. Again, that is unsurprising given the four former clients are readily ascertainable and it is common ground they are now clients of Treeby.

For completeness, I will make more detailed reference to the 14 December 2020 letter. The letter demanded that by 18 December 2020 Mr Johnson write to MST Lawyers confirming his willingness to take a number of steps, including reimburse CIC’s legal fees and:

Pay to the Company the following amounts as damages for the loss of income occasioned by the three customers transferring their custom to First National Treeby Commercial:
(a)$11,352.00 for the property at [redacted] Clare Street, Bayswater, Victoria 3153;
(b)$8,322.60 for the property at [redacted] Colchester Road, Bayswater North, Victoria 3153; and
(c)$11.550.00 [sic] for the property at [redacted] Gabrielle Court, Bayswater North, Victoria 3153.[110]

[110]Ibid exhibit ‘BC-13’, 4.

The letter states:

If we do not receive a satisfactory response from you within the deadline stipulated above, we will seek instructions to commence legal proceedings against you (or alternatively making an application for preliminary discovery) without further notice to you.
You must not destroy any documents or information (whether in hardcopy or electronic form) which may become discoverable as evidence in the potential legal proceedings described above.
The Company reserves all of its legal rights.
We recommend that you immediately seek legal advice regarding the matters set out in this letter.[111]

[111]Ibid (emphasis in original).

I do not conclude from the letter that CIC had already decided to issue the substantive proceedings. Despite the demand, CIC left the door open on the issue, referring to the alternative possibility of a proceeding to obtain preliminary discovery. Moreover, the letter stated that instructions would need to be sought from CIC as to the proceedings. That is, the letter does not state that MST Lawyers were instructed to commence the proceedings.

Is there reasonable cause to believe the respondent has documents in the following categories and that they relate to the question of whether CIC has a right to obtain relief and inspection would assist CIC to decide whether to proceed?

Given CIC has not satisfied the previous limb, consideration of this issue is not required. However, I will address it as a matter of completeness.

The schedule of documents in CIC’s summons identifies 11 categories of documents. It is not in dispute that on 5 March 2021, Mr Johnson deposed that he does not hold documents in categories 3 and 6–11.[112] As such, the categories that remain in dispute are categories 1, 2, 4 and 5.
[112]Johnson affidavit [40], [43]–[48].

Category 1

Category 1 is framed as:

1.All bills/tax invoices in respect of the Defendant’s mobile telephone service [redacted] which contain or record call records from 1 January 2020 to the present date.

CIC’s submissions

There is reasonable cause to believe that Mr Johnson has, or is likely to have or have had, in his possession documents relating to the question whether CIC has the right to obtain relief. The categories comprise documents which relate to:

(a) how clients of CIC came to learn that Mr Johnson had left CIC’s employment and became employed with Treeby;

(b) the existence and extent of contact between Mr Johnson and clients of CIC following the cessation of Mr Johnson’s employment with CIC;

(c) whether, and to what extent, Mr Johnson retained and/or used CIC’s confidential information after he left CIC’s employment; and

(d) whether Mr Johnson communicated CIC’s confidential information to Treeby.

Inspection of the documents sought would assist CIC in deciding whether to commence a proceeding against Mr Johnson, that is, whether Mr Johnson breached his duties to CIC. It would assist in ascertaining:

(a) the extent of Mr Johnson’s involvement in clients of CIC, with whom Mr Johnson dealt, becoming clients of Treeby in December 2020;

(b) whether assertions made in correspondence sent on behalf of Mr Johnson in December 2020 are accurate; and

(c) whether Mr Johnson retained and/or used CIC’s confidential information after the cessation of his employment, and the extent to which he did so.

Category 1 is of particular importance. A record of telephone calls made by Mr Johnson during 9–14 December 2020 is relevant to the question of when, and how, the clients came to learn that Mr Johnson had gone to work for Treeby. These questions are of substantial relevance to whether Mr Johnson breached his duties to CIC. The Court ought order Mr Johnson make discovery of documents in this category, which will require him to contact his service provider and seek copies of call records. In this regard, CIC relies on s 55 of the CPA as well as the notion that in r 32.01, possession means ‘possession, custody or power’.

Reference is made to Hanks v Johnston (No 3),[113] in which John Dixon J ordered a party to use specialised software which was not in the party’s possession to make discovery of backups of mobile telephone text messages. It is unclear whether his Honour regarded it necessary to rely on s 55 of the CPA for expanded discovery powers or merely identified a source of power. CIC is not submitting here that this case stands for an unusual principle but it is an example of circumstances where a person was obliged to make discovery of records not in their physical possession. Here, CIC is seeking Mr Johnson make inquiries of his phone company to provide records for relevant periods. It is not an onerous obligation.
[113][2016] VSC 629 (‘Hanks v Johnston (No 3)’).

Mr Johnson’s submissions

There is no reasonable cause to believe that Mr Johnson would have, or is likely to have, any document which would assist in making a decision on whether to issue proceedings. His affidavit goes to each of the categories, and for the most part, documents of the type sought are not in his possession and never existed.

It is not in dispute that the customers concerned have now engaged Treeby and that it will hold documents following from their engagement with the clients. These are not Mr Johnson’s documents, they belong to his employer, and they contain confidential information about terms of engagement which a competitor has no right to obtain. An application for disclosure of those documents ought be made against Treeby under r 32.07 of the Rules, rather than seeking to have Mr Johnson deliver up confidential documents between his employer and its customers.

Documents in category 1 cannot assist in ascertaining whether or not CIC should bring proceedings. Mr Johnson made and received calls while he was employed by CIC. Mr Johnson was doing his job. There may well be all manner of communications passing to and from clients. After he left CIC’s employment there will be phone calls. Mr Johnson admitted to that in his affidavit. Phone records, if they exist, may demonstrate, at most, that he made or received calls. That goes nowhere and does not prove any breach of obligations. This is not a post-employment restraint case.

CIC asserts that confidential information includes client names and phone numbers together with their requirement for services. That is a novel proposition and at odds with established authority, which is that Mr Johnson was entitled to solicit clients once he left his employment with CIC. Even if the contention could be made out that phone numbers and market needs of customers were within the concept of confidential information, that would not shed any light upon whether there was any breach involved. They are not a transcript of what was discussed.

More fundamentally, Mr Johnson responds that he has phone bills but itemised records are no longer provided by phone companies. He could provide a phone account from January 2020 but it will not tell CIC anything. Mr Johnson is being asked to request his service provider create documents that are not in existence and provide them to CIC. It goes well beyond what an application for discovery can legitimately seek. The first problem is the documents do not exist and the second problem is that they would be in the hands of third parties. Hanks v Johnston (No 3) can be distinguished. It concerned whether a party was obliged to make discovery of their own backups of text messages, which were stored on an external repository. Here, it is information that a third party has independently compiled. If those documents are to be produced, they should be produced by the service provider under r 32.07 of the Rules. Mr Johnson should not have to pursue CIC’s investigation process.

Category 1 of CIC’s summons seems to have retreated from seeking documents from 1 January 2020 to the present date. It is, on its face, seeking 15 months’ of bills and tax invoices and focusing on accounts rendered by the service provider, not the creation of new documents. CIC now submits it is requesting documents only focusing on a few days in December 2020. That is not what was sought. The bulk of what was sought is abandoned but the claim is invasive and excessive and ought not be countenanced.

Analysis

I find there is not reasonable cause to believe that Mr Johnson has, or is likely to have, documents in category 1 relating to the question of whether CIC has a right to obtain relief, the inspection of which would assist CIC in deciding whether to proceed.

It is common ground that Mr Johnson had communications with the four customers. His evidence is that the customers contacted him.[114] CIC queries whether Mr Johnson contacted the customers. A list of itemised phone records, may be relevant to the question of whether the applicant has a right to relief. That is, who initiated the phone calls and at what time. However, it is not reasonable to believe Mr Johnson has itemised phone records. He has deposed that his phone bills do not include individual call records.[115]
[114]Johnson affidavit, [28].
[115]Ibid [38].

The question then arises as to whether or not orders ought be made requiring Mr Johnson to obtain or generate itemised phone records. In Hanks v Johnston (No 3), John Dixon J expanded a party’s obligation to make discovery via application of s 55 of the CPA.[116] The text messages in question, potentially contained on an iCloud back up, were considered relevant, of small volume, and could be retrieved at a modest cost which the defendant offered to bear. Beyond login and password details, further permission or assistance from Apple was not required to access the text message backups. They already existed and were accessible if the relevant party was provided with specialised software. The circumstances here are distinct as Mr Johnson requires the assistance of his telecommunications provider and the material sought is not ‘backup’ data.
[116]Hanks v Johnston (No 3) (n 113) [29].

CIC also made reference to Palmdale Insurance v Grollo & Co,[117] in which discovery was sought of original tax returns and payroll tax records but the records were held by Commonwealth and State departments. As CIC submits, Marks J reasoned that there was a ‘real likelihood’ that the records would be provided by the departments if they were requested.[118] Also relevant, however, were the following factors: the documents were brought into existence by the defendants; the documents were in their possession prior to lodgement and prima facie, the defendants had a legally enforceable right to inspect them.[119] Again, such circumstances are distinct from those here. CIC has not established that an itemised phone bill is within Mr Johnson’s ‘power’ in the sense that he has an enforceable right to inspect, or obtain possession or control of such a document held by his particular telecommunications provider.[120]
[117][1987] VR 113.
[118]Ibid 115.
[119]Ibid 116. See also LexisNexis, Civil Procedure Victoria, [I 29.01.225] ‘Possession, custody or power’.
[120]Hanks v Johnston (No 3) (n 113) [22]; B v B (Matrimonial Proceedings: Discovery) [1979] 1 All ER 801, 803; Roux v Australian Broadcasting Commission [1992] 2 VR 577, 589; Psalidis v Norwich Union Life Australia Limited [2009] VSC 417.

Category 2

Category 2 is framed as:

2.All personal calendar and diary records of the Defendant from 1 January 2020 to the present date, whether in physical or electronic form, containing information that relate to or refer to any potential, former or current client of the Plaintiff.

CIC’s submissions

Mr Johnson deposes that he disposed of the paper diary he used while employed by CIC. However, he does not depose as to whether he possesses a personal electronic calendar or diary records that relate or refer to CIC’s clients. It is likely that Mr Johnson maintains some form of calendar or diary.

The category could be narrowed, as it was crafted with the REIV diary in mind that no longer exists. The relevant period is from 9 December 2020 in order to identify circumstances in which he came to deal with CIC’s clients, and assess whether there has been a breach of duty. Calendar and diary notes may shed more light on the contents of communications.

Mr Johnson’s submissions

Mr Johnson’s evidence is that he disposed of the diary. As such, even if the diary was relevant, noting that in NP Generations a diary did not represent confidential information, there is no utility in an order being made as he no longer has it in his possession.

Insofar as CIC says there could be other documents about which Mr Johnson has not given evidence, notably a 2021 diary, one might readily assume that he has a 2021 diary and that is not CIC’s business. It cannot help CIC decided whether or not to bring proceedings.

In regards to any electronic diary records, Mr Johnson’s CIC work computer is in the hands of CIC. Mr Johnson deposed he did not use an electronic personal calendar. He does not know whether that extends to the work computer that CIC has. His evidence is that he does not have anything in category 2 in his possession, and he probably has a 2021 diary.

Analysis

I find there is not reasonable cause to believe Mr Johnson has, or is likely to have, documents in category 2 relating to the question of whether CIC has a right to obtain relief, the inspection of which would assist CIC in deciding whether to proceed.

Mr Johnson’s evidence is that he disposed of the REIV diary and he has provided an explanation as to why. CIC has his work computer and could ascertain whether it contains an electronic diary. Mr Johnson has deposed that he did not use an electronic diary.

Category 4

Category 4 is framed as:

4.All emails sent from, received by or copied to the Defendant’s current work email address [redacted] which:
(a) Relate to or refer to any of the following properties:
i.[redacted] Colchester Road, Bayswater North, Victoria, 3153;
ii. [redacted] Clare Street, Bayswater, Victoria, 3153;
iii. [redacted] Whitehorse Road, Balwyn, Victoria, 3103; and
iv. [redacted] Gabrielle Court, Bayswater North, Victoria, 3153; or

(b)Relate to or refer to any of the following potential, former or current customers of the Plaintiff:
[Names redacted]

CIC’s submissions

Mr Johnson deposes that email communications in this category exist and belong to his new employer Treeby. Those emails are said to include confidential information. However, the discovery obligation is to discover documents in one’s possession or power. The emails are discoverable. It is not relevant that the documents are owned by another person. Confidentiality is not a basis to refuse an order for discovery. CIC is willing to enter a confidentiality regime to solve the problem of any commercial damage that may be suffered by Treeby.

The documents are relevant because they could assist in determining whether a breach has occurred. CIC may have a claim depending on when the communication occurred, for example whether the clients were contacted by Treeby.

Categories 1 and 4 are misunderstood by Mr Johnson; he has an obligation to make discovery of documents in his possession, custody or control. The procedure in r 32.07 is available on application of a party to a proceeding only once commenced. Mr Johnson submits the clients called him, CIC believe it is the other way around.

Mr Johnson’s submissions

Mr Johnson’s evidence is responsive and detailed. His response is similar concerning categories 4 and 5 as to the category 1. The documents are third party documents of Mr Johnson’s new employer. Even if they are considered within his possession, custody or control, the Court should not make the order sought as a matter of discretion. If the Treeby documents are to be produced, Treeby should have the opportunity to be heard under r 32.07. CIC’s claim is essentially that Treeby illegitimately acquired a number of customers, and that should be explored in an application for discovery to be made against Treeby.

Analysis

I accept that the emails may relate to the question of relief. They may go to the issue of whether or not Mr Johnson retained CIC’s confidential information.

Mr Johnson may have the emails in his possession. Mr Johnson has deposed the emails belong to his employer, Treeby, and include its confidential information. CIC is prepared to enter into a confidentiality regime in respect of the emails. However, Treeby has not had the opportunity to be heard on the issue and had I allowed this application, I would have given Treeby opportunity to be heard.

Category 5

Category 5 is framed as follows.

5. All documents (including electronic communications) which record, refer to or relate to communications between the Defendant and persons who, at any time during the Defendant’s employment with the Plaintiff, were potential, current or former customers of the Plaintiff, in particular any one of the following persons:
[Names redacted]

CIC’s submissions

Mr Johnson misapprehends that this category relates only to documents created while he was a CIC employee. The category is not time-limited. CIC seeks discovery of communications between Mr Johnson and its customers, including since he commenced with Treeby. There is some overlap with category 4, but the categories are distinct, as category 4 expressly refers to emails whereas category 5 includes other documents such as text messages. Mr Johnson says he no longer owns such documents as they remained with CIC when he returned his CIC computer. He does not identify whether he holds any such documents after he ceased employment with CIC. The documents are said to be relevant as they shed light on Mr Johnson’s new employer.

Mr Johnson’s submissions

Mr Johnson repeats his submissions on category 4.

Analysis

The same analysis applies as for category 4 above.

Conclusion

The application will be dismissed.

Given the application will be dismissed, it is unnecessary to determine whether or not the Court should exercise its discretion to order preliminary discovery.

[2021] VSC 195

23 April 2021