FEDERAL COURT OF AUSTRALIA
Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796
File number: NSD 2221 of 2016 Judgment of: BROMWICH J Date of judgment: 16 December 2020 Catchwords: EMPLOYMENT – applications by two related companies in a group of entities relating to breach by the first respondent of contractual terms, or in the alternative, equitable fiduciary obligations or statutory obligations under Corporations Act 2001 (Cth) s 183 – where by virtue of his employment contract the first respondent had access to two customer databases containing details of customers of the second applicant – where the first respondent was made redundant – where in the period after the first respondent was made redundant, at least 37 customers of the second applicant sought to switch their provider to the new employee of the first respondent, the second respondent – whether the first respondent had entered a new contract of employment provided to him by the applicants in March of 2011 – whether the first respondent was employed by the first or the second or both applicants – whether the first respondent took and used either or both of the applicants’ confidential information – whether any such taking and use by the first respondent was in breach of contractual, equitable or statutory obligations – whether any breach of contractual, equitable or statutory obligations caused loss to either or both of the applicants – the quantum of any loss caused by any breach of contractual, equitable or statutory obligations by the first respondent – held: the first respondent was employed by the first applicant to do work for the second applicant – the first respondent was bound by all the terms of the contract entered into on or about 30 November 2009 with clauses prohibiting the taking and use of the first and second applicants’ confidential information – the first respondent did not enter a later second contract in March 2011 – the first respondent breached express contractual terms during his employment by the first applicant by taking and using the applicants’ confidential information – the first respondent’s breach of contract caused 36 customers of the applicants to switch service provider to the first respondent’s new employer, the second respondent – quantum of loss of customers to be calculated by reference to two expert reports from the applicants’ expert forensic accountant – the first respondent to pay damages and pre-judgment interest in an amount to be calculated on the evidence at trial of the applicants’ expert forensic accountant – the first respondent to pay applicants’ costs Legislation: Corporations Act 2001 (Cth) ss 183, 500
Evidence Act 1995 (Cth) ss 59, 136, 140(2), 161(1)
Cases cited: Armory v Delamirie (1722) 1 Stra 505; 93 ER 664
Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154; 374 ALR 90
Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) [2003] FCA 1525; 137 FCR 317
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- AGLC
- Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796
- Case
- [2020] FCA 1796
- Decision Date
CaseChat Overview and Summary
The case of Central Innovation Pty Ltd v Garner (No 4) involved a dispute between two companies and an individual, where the companies alleged that the individual had breached contractual terms, equitable fiduciary obligations, or statutory obligations under the Corporations Act 2001. The individual, Mr Garner, had been employed by the first applicant and had access to confidential customer databases of the second applicant. After being made redundant, Mr Garner began working for a competitor, and it was alleged that he took and used the confidential information in breach of his contractual obligations. The court was required to determine whether Mr Garner had breached any contractual, equitable, or statutory obligations, and if so, the quantum of any loss caused.
The court held that Mr Garner was employed by the first applicant and was bound by the terms of his employment contract, which prohibited the use of confidential information. The court found that Mr Garner did not enter into a new contract in March 2011 as he claimed, but rather remained bound by his original contract. The court found that Mr Garner had breached his contractual obligations by using confidential information, which resulted in 36 customers switching to his new employer. The court ordered that Mr Garner pay damages and pre-judgment interest, to be calculated by reference to expert reports, and also ordered that he pay the applicants’ costs. The parties were directed to confer and submit agreed or competing orders for the remaining relief sought by the applicants, and the case was listed for a case management hearing.
The court held that Mr Garner was employed by the first applicant and was bound by the terms of his employment contract, which prohibited the use of confidential information. The court found that Mr Garner did not enter into a new contract in March 2011 as he claimed, but rather remained bound by his original contract. The court found that Mr Garner had breached his contractual obligations by using confidential information, which resulted in 36 customers switching to his new employer. The court ordered that Mr Garner pay damages and pre-judgment interest, to be calculated by reference to expert reports, and also ordered that he pay the applicants’ costs. The parties were directed to confer and submit agreed or competing orders for the remaining relief sought by the applicants, and the case was listed for a case management hearing.
Orders
Orders of the court
1. Judgment and verdict be entered in favour of the applicants in respect of 36 of the customers claimed to have been lost, in a sum to be calculated by reference to the evidence of Ms Bateman, plus pre-judgment interest.
2. The first respondent pay the applicants’ costs.
3. The parties confer and by or before 27 January 2021, or by such other date as may be sought and allowed, submit:
(a) agreed or competing orders to give effect to the judgment and verdict and interest in dollar sums;
(b) any agreed or competing orders in relation to the remaining relief sought by the applicants; and
(c) agreed or competing procedural orders for any remaining dispute to be adjudicated upon.
4. The proceeding be listed for a case management hearing at 9.00 am on 29 January 2021, or such other date as may be fixed in consultation with the parties.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Mr Garner relied upon:(1)an affidavit from him, upon which he was cross-examined to significant adverse effect; and(2)an affidavit from another information technology forensic expert, Mr Graeme Conn, who was not required for cross-examination. Agreed facts A very limited number of agreed facts were reduced to writing and admitted as the first numbered exhibit at the trial, the substance of which is as follows, with additional comments and cross-references added:(1)Intercad was incorporated on 31 January 1996.(2)Central Innovation was incorporated on 21 December 2006.(3)Intercad is, and has been since 12 January 2016, a wholly-owned subsidiary of Central Innovation.(4)On l April 2014, Intercad and SolidWorks entered into an agreement titled “Distribution Agreement”.(5)During the period between 30 November 2009 and 22 August 2016, SolidWorks operated an electronic database known as the “Value Added Reseller Resource Centre” (VRC) and Mr Garner had access to it. The text of the Distribution Agreement states that Intercad was to ensure that only “authorized employees” could access the VRC.(6)During the period between 30 November 2009 and 22 August 2016, Mr Garner had access to SUGAR. The evidence of Mr Atkinson establishes that SUGAR was an electronic customer relationship management (CRM) system used by the applicants. Mr Garner gave similar evidence.(7)On 30 November 2009, Mr Garner entered into a contract of employment. That contract is referred to in these reasons as Contract One. For completeness, I note that this contract is dated 23 November 2009 at the point signed by Mr Garner and at each point initialled by Mr Garner, and is dated 26 November 2009 at the point signed by the “Regional Sales Manager South West”, Mr Ben Darling. The prior covering letter from Mr Darling confirming the offer and acceptance and seeking to have the enclosed contract signed was dated 12 November 2009. It seems likely that the parties have settled on 30 November 2009 as the contract start date because that appears to be the date from which Mr Garner actually started work, as confirmed by a subsequent letter reproduced in part at [33] below. Nothing turns on this distinction.(8)On 16 March 2011 at 1l.54 am, Ms Penny Myerscough sent an email to Mr Garner, to which was attached a letter, the pages of which comprised a second contract. That contract is referred to in these reasons as Contract Two. (9)On 16 March 2011 at 1.04 pm, Mr Garner sent to Ms Myerscough an email in reply.(10)Between 30 November 2009 and about l March 2013, Mr Garner’s position was “Business Development Manager”.(11)On or about l March 2013, Garner was promoted to the position of “Team Leader, Victoria”.(12)During the period between 30 November 2009 and 22 August 2016, Garner used a laptop computer (HP EliteBook 8560w, serial no. 5CB2261V6H) for the purposes of carrying out his duties as a Business Development Manager and, later, as Team Leader, Victoria. This laptop is referred to in these reasons as the Intercad Laptop, despite being referred to as the Garner Laptop in evidence and submissions.(13)On 22 August 2016, Mr Garner was made redundant.(14)On 22 August 2016, Mr Garner contacted Mr Stalin D’Souza on LinkedIn. Mr D’Souza was the Director of NCCS.(15)On 15 November 2016, Garner commenced employment with NCCS.(16)During the period between 15 November 2016 and around June 2017, NCCS operated a CRM system known as “Hatchbuck”.The key issues in dispute
Evidence
Evidence Before The Court
I was ultimately confined to such inferences as could properly be drawn from the matrix of evidence that was able to be adduced by the applicants, including the effect of potentially contrary evidence. Mr Garner’s case relied quite heavily not just on the asserted inadequacy of the evidence adduced by the applicants, but on the acceptance of contrary evidence from him and adduced on his behalf. Mr Garner’s credibility and reliability was therefore of considerable importance to the outcome of this proceeding.Overview of the evidence The court book containing the evidence adduced by the parties is voluminous, comprising some 17 lever arch folders and over 10,000 pages of material, mostly from the applicants. Despite that, only a relatively small proportion of that evidence required detailed consideration in these reasons. In part, that is due to evidence being required to be adduced by the applicants on all manner of mundane things. That was apparently (and I consider reasonably), seen to be necessary by the applicants because of Mr Garner’s pleaded defence to the applicants’ case. This was ultimately in response to the second further amended statement of claim (statement of claim) and was replete with denials of “each and every allegation”, often contradicted by counter pleading that in fact admitted key aspects of what was alleged. This approach by Mr Garner greatly increased the burden in writing this judgment. Once capable of being proven, most of the formal and background facts were not disputed by Mr Garner in opening or closing submissions, but that did not absolve the Court from needing to make numerous factual findings. The documents principally relied upon by the applicants were as follows:(1)Two affidavits with exhibited documents from Mr John Atkinson, the Director of Applications Development for Central Innovation, who had been the General Manager of “Intercad, ANZ”, which is a joint reference to Intercad and Intercad NZ Pty Ltd. Mr Atkinson had access to various books and records of both applicants. He was narrowly cross-examined for a little over two hours, with little of what he deposed to being challenged.(2)Two expert reports from a forensic information technology specialist and computer expert, Mr Matthew O’Kane, and two expert reports from a forensic accountant, Ms Fiona Bateman, both of whom were briefly and narrowly cross-examined, with much of what they deposed to being only indirectly challenged.(3)Three affidavits from their solicitor, Mr Stephen D’Emilio, who produced a large volume of documents, and who was cross-examined at some length about the limitations of that material. Mr Garner relied upon:(1)an affidavit from him, upon which he was cross-examined to significant adverse effect; and(2)an affidavit from another information technology forensic expert, Mr Graeme Conn, who was not required for cross-examination. Agreed facts A very limited number of agreed facts were reduced to writing and admitted as the first numbered exhibit at the trial, the substance of which is as follows, with additional comments and cross-references added:(1)Intercad was incorporated on 31 January 1996.(2)Central Innovation was incorporated on 21 December 2006.(3)Intercad is, and has been since 12 January 2016, a wholly-owned subsidiary of Central Innovation.(4)On l April 2014, Intercad and SolidWorks entered into an agreement titled “Distribution Agreement”.(5)During the period between 30 November 2009 and 22 August 2016, SolidWorks operated an electronic database known as the “Value Added Reseller Resource Centre” (VRC) and Mr Garner had access to it. The text of the Distribution Agreement states that Intercad was to ensure that only “authorized employees” could access the VRC.(6)During the period between 30 November 2009 and 22 August 2016, Mr Garner had access to SUGAR. The evidence of Mr Atkinson establishes that SUGAR was an electronic customer relationship management (CRM) system used by the applicants. Mr Garner gave similar evidence.(7)On 30 November 2009, Mr Garner entered into a contract of employment. That contract is referred to in these reasons as Contract One. For completeness, I note that this contract is dated 23 November 2009 at the point signed by Mr Garner and at each point initialled by Mr Garner, and is dated 26 November 2009 at the point signed by the “Regional Sales Manager South West”, Mr Ben Darling. The prior covering letter from Mr Darling confirming the offer and acceptance and seeking to have the enclosed contract signed was dated 12 November 2009. It seems likely that the parties have settled on 30 November 2009 as the contract start date because that appears to be the date from which Mr Garner actually started work, as confirmed by a subsequent letter reproduced in part at [33] below. Nothing turns on this distinction.(8)On 16 March 2011 at 1l.54 am, Ms Penny Myerscough sent an email to Mr Garner, to which was attached a letter, the pages of which comprised a second contract. That contract is referred to in these reasons as Contract Two. (9)On 16 March 2011 at 1.04 pm, Mr Garner sent to Ms Myerscough an email in reply.(10)Between 30 November 2009 and about l March 2013, Mr Garner’s position was “Business Development Manager”.(11)On or about l March 2013, Garner was promoted to the position of “Team Leader, Victoria”.(12)During the period between 30 November 2009 and 22 August 2016, Garner used a laptop computer (HP EliteBook 8560w, serial no. 5CB2261V6H) for the purposes of carrying out his duties as a Business Development Manager and, later, as Team Leader, Victoria. This laptop is referred to in these reasons as the Intercad Laptop, despite being referred to as the Garner Laptop in evidence and submissions.(13)On 22 August 2016, Mr Garner was made redundant.(14)On 22 August 2016, Mr Garner contacted Mr Stalin D’Souza on LinkedIn. Mr D’Souza was the Director of NCCS.(15)On 15 November 2016, Garner commenced employment with NCCS.(16)During the period between 15 November 2016 and around June 2017, NCCS operated a CRM system known as “Hatchbuck”.The key issues in dispute
Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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