Coachair Pty Ltd v Mifsud
[2018] VSC 481
•25 June 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST
S CI 2018 02228
| COACHAIR PTY LTD (ACN 143 743 284) | Applicant |
| v | |
| LEE JAMES MIFSUD | First Respondent |
| NATIONAL PARTS & PRODUCTS PTY LTD (ACN 605 070 013) | Second Respondent |
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JUDGE: | McDONALD J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 June 2018 |
DATE OF RULING: | 25 June 2018 |
CASE MAY BE CITED AS: | Coachair Pty Ltd v Mifsud & Anor |
MEDIUM NEUTRAL CITATION: | [2018] VSC 481 |
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SEARCH ORDER – Breadth of search terms – Expense and inconvenience imposed upon respondent by search terms – Requirement to narrow scope of search terms in order to narrow issues in dispute and ensure costs reasonable and proportionate – Civil Procedure Act 2010 ss 23, 24.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr A Tragardh | Mills Oakley |
| For the First Respondent | Mr D Guidolin | SBA Law |
| For the Second Respondent | Mr R Heath QC and Mr A Manos | Coulter Roache |
HIS HONOUR:
Background
On 14 June 2018 the Court made search orders directed to the first and second respondents. The search orders were executed the following morning, 15 June 2018, at the respective premises of the first and second respondents. Paragraph 23 of the search order made on 14 June 2018 directed to the second respondent was subsequently amended by consent on 20 June 2018.
As is the usual practice, the orders were made ex-parte. At the time of making the orders the Court delivered an ex tempore ruling which set out the basis upon which it considered it appropriate to make the orders sought. Shortly stated, the Court was satisfied that the applicant had established a strong prima facie case that prior to Mr Mifsud's cessation of his employment with Coachair Pty Ltd (‘Coachair’) on 29 May 2018 he had breached obligations of confidence which he owed Coachair by downloading thousands of documents which are the property of Coachair, many of which at face value contain commercially sensitive information.
The application was supported by an affidavit of Mr David Caldwell, a forensic IT expert. Mr Caldwell deposed that, amongst other matters, between 8 May and 14 May 2018, Mr Mifsud downloaded 17,789 Coachair files. Further, on 29 May 2018, numerous Coachair files were accessed by Mr Mifsud and downloaded onto an external hard drive, including an inventory cost and price list, customer lists and part pricing lists.
Mr Mifsud commenced employment with the second respondent, National Parts & Products Pty Ltd (‘NP&P’), on 11 June 2018 as its National Sales and Marketing Manager.
On 22 June 2018 the matter returned to Court. Mr Guidolin of counsel appeared for the first respondent. Mr Heath QC and Mr Manos of counsel appeared for the second respondent. Mr Tragardh of counsel continued to appear for the applicant.
On 22 June 2018, the first respondent filed a summons seeking orders to set aside the search order directed to himself. That application was not pressed on 22 June 2018. The summons has been adjourned for further hearing on 18 July 2018.
Application for injunctions
On 22 June 2018, Mr Tragardh made an oral application for injunctions against both respondents. The terms were:
8. Until otherwise ordered the first respondent be restrained from:
(a) using or dealing in any way with any of the Listed Things defined in Schedule A or Schedule D of the Search Order without the applicant's express consent to do so in writing;
(b) performing employment service with the second respondent.
9. Until otherwise ordered the second respondent be restrained from using or dealing in any way with any of the Listed Things defined in Schedule A or Schedule D of the Search Order without the applicant's express consent to do so in writing.
It is important to note at the outset that the second respondent, although a respondent to an application for a search order, is not a party to the substantive proceeding commenced by writ on 13 June 2018. Mr Mifsud is the sole defendant in that proceeding. I shall return to this matter in due course.
It is also important to note that neither respondent appears to have been given any notice of the injunctions which were sought against them prior to being handed the applicant’s proposed minute of order at the commencement of the hearing on 22 June 2018.
As to the relief sought against Mr Mifsud, Mr Guidolin proffered the following undertaking on behalf of his client: ‘that until 4:00 pm on 18 July 2018, the duties he will perform in the course of his employment with the second respondent shall be confined to the following:
(a) the provision of non-Coachair parts to Mercedes Benz Daimler;
(b) the preparation of a tender for the supply of diesel heaters to Murray's Australia; and
(c) the performance of manual duties in the second respondent's workshop.’
I consider that this undertaking strikes an appropriate balance between Mr Mifsud's legitimate interest in earning a living and the plaintiff's legitimate concerns that Mr Mifsud might damage its commercial interests in the course of his employment with NP&P.
If Coachair wishes to re-agitate its application for injunctive relief against Mr Mifsud, it should do so by way of a summons served in conformity with the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’).
I now turn to consider the application for injunction against the second respondent.
Whilst the Court undoubtedly does have the power to grant an injunction against a non-party, it is a power to be exercised with considerable caution, and subject to an undertaking that proceedings will be initiated against that party at the earliest opportunity.
When I asked Mr Tragardh to articulate the plaintiff's cause of action against NP&P, he stated that it was based on evidence that NP&P has possession of Coachair's confidential information.
In particular, he referred to evidence concerning an email exchange between Mr Mifsud and Mr Robert Chapman, the Director and General Manager of NP&P, in respect of a tender for a contract with Precision Buslines, a South Australian based company.
The evidence in respect of this matter is as follows:
(a) On 15 May 2018, Mr Mifsud forwarded from his work email, ‘[email protected]’, to his personal Hotmail account, ‘[email protected]’, an email entitled, ‘Fwd: 8033 Contract Pricing for SA Project’.[1]
[1]Affidavit of Timothy Mamo affirmed 13 June 2018, confidential exhibit ‘TM-4’.
(b) On 20 May 2018, Mr Mifsud forwarded to Mr Chapman an email with the subject line, ‘SA Project’, with an attachment, ‘Quote – Precision Buses – word rev4 .docx’.[2]
(c) On the day of the execution of the search order, Mr Ross Levin, a partner of the firm of Mills Oakley, was part of the search team. He deposed as follows:
In Mr Chapman's office I found a printed email from Mr Mifsud's Hotmail account in mid-May (while he was still employed by Coachair, not NPP) to Mr Chapman which set out in detail how Mr Chapman should go about trying to win the South Australia Precision Buslines contract and how to best defeat Coachair. In relation to when Mr Chapman met with Precision, the email said, “don't mention my name”. To the best of my recollection I believe I found this in a manila folder in a drop file in the bottom drawer of a filing cabinet between Mr Chapman's desk and the chair next to the door.[3]
[2]Affidavit of Jennifer Bolger sworn 22 June 2018, [8].
[3]Affidavit of Ross Joseph Levin sworn 21 June 2018, [16].
Mr Tragardh also relied upon the evidence of Mr Andrew Ball, an independent solicitor present when the search order was executed at NP&P’s premises. Mr Ball deposed:
At 8:17 am I observed Chapman deleting emails on his laptop and I banged on the window three times telling him to stop deleting emails to which he continued to either ignore me or give me the V sign.[4]
[4]Affidavit of Andrew Kenneth Ball sworn 20 June 2018, [12].
Exhibit ‘AKB-1’ to Mr Ball's affidavit is a photograph taken by Mr Ball of Mr Chapman sitting at his laptop deleting emails.
The evidence before the Court supports a finding that Mr Mifsud did forward to Mr Chapman an email which contained information relating to Coachair's tender for the South Australian Precision Buslines tender.
It is not possible at the moment to express any concluded view as to the commercial value of that information, or the extent to which, if at all, it has thus far been utilised by NP&P to the detriment of Coachair.
Save for the evidence in relation to the Precision Buslines email, there is currently no evidence before the Court that any of the thousands of documents downloaded by Mr Mifsud in the final weeks of his employment with Coachair have been forwarded to NP&P.[5]
[5]‘Search Order – Expert Witness Report’ of Scott Mann dated 21 June 2018, [33] (exhibit ‘AKB-7’ to the Affidavit of Andrew Kenneth Ball sworn 22 June 2018).
Whilst there is an arguable case that NP&P has received Coachair's confidential information in circumstances which imposed an obligation of confidence upon NP&P, I have concluded that it does not justify the grant of the injunctive relief sought against a non-party to proceedings.
The breadth of the relief sought extends well beyond the evidentiary foundation for such relief, which is presently confined to the Precision Buslines tender. I accept Mr Heath's submission that the breadth of the injunction would, in a practical sense, bring NP&P’s business to a standstill.
Mr Tragardh argued in the alternative for an injunction specifically in respect of the use by NP&P of Coachair's documents in respect of the Precision Buslines tender. First, there is the practical consideration that NP&P received no notice of this form of relief until Mr Tragardh's submissions in reply. Second, there is a real question as to the utility of the relief sought. An email was forwarded to Mr Chapman by Mr Mifsud on 20 May 2018, some three weeks prior to the execution of the search order. If that information has been deployed by NP&P in any dealings which it may have had with Precision Buslines, then ‘the horse has already bolted’.
As to the future, I consider it extremely unlikely that, if it be the case that NP&P does have any information which has been sourced from Coachair, about which I express no concluded view save for as already set out above, that NP&P will make any use of such information prior to the hearing and determination of the current proceeding. Any such course of action would be ill-advised.
The application for injunctive relief against NP&P is dismissed.
If Coachair wishes to re-agitate a claim for an injunction, it should join NP&P as a party to the proceeding, articulate the basis of its claim against the company, and file and serve a summons in conformity with the Rules.
Orders
I now turn to other matters which were ventilated on 22 June 2018. On that day, there was considerable debate between the parties regarding the form of orders consequential upon the execution of the search orders.
During the course of the hearing, the applicant refined the form of orders it seeks in relation to any hard copy documents which were removed from the premises of the first and second respondents on 15 June 2018. It also refined the orders it sought by way of amendment to paragraph 23 of the search order made in respect of Mr Mifsud.
The revised orders which I propose to make are as follows. Paragraphs one, two, three and four are substantially in the form of the revised orders which were the outcome of exchanges with Mr Tragardh during the course of the hearing, and to which I understand there was no significant issue taken.
In other matters ‘listed things’ does not include any document generated for the purpose of the administration of the applicant's business, and any document generated or related to any legitimate business activities undertaken between the applicant and the second respondent.
The most contentious issue as to the form of orders concern the ‘listed things’ on the electronic devices removed during the execution of the search orders on 15 June 2018. The respondents expressed legitimate concern that the regime proposed by the applicant will impose an onerous and expensive burden upon them, particularly when reviewing metadata provided by the applicant for the purpose of assessing and making claims that documents should not be disclosed to the applicant, by reason that they are privileged or confidential.
The genesis of this issue lies in the breadth of the term ‘listed things’ in Schedule A and Schedule D of the search orders made on 14 June 2018. When Schedules A and D are read in conjunction, there are currently 37,507 key words to be searched from the data retrieved from the premises of Mr Mifsud and NP&P on 15 June 2018. This data comprises hundreds of thousands of documents. The Seagate hard drive alone which was obtained from Mr Mifsud contains 244,000 documents. In his report dated 21 June 2018, Mr McLeish stated as follows:
I commenced loading the search terms and identified that the number of search terms for Mr Mifsud’s data set was extensive. I identified 37,507 keywords to be searched for over the entire dataset. I commenced loading the search terms into Intella and once the searched data started returning results I quickly identified that there were "false positives" being produced. A false positive result means that a search term used has identified a "hit" or "result" and on examination of the search result, the item or file is not actually relevant. This intervention has caused the process to slow because of the number of false positives being identified.
Now that the Seagate drive has been received and the data contained within the hard disk indexed, I believe that the list of key words could be refined based on the content of the Seagate hard disk itself. Once the list has been refined a more precise search of the data across all the devices forensically imaged can be conducted.
Based on my understanding of the matter and my experience with other similar cases, I understand that the Court is seeking to assure that the relevant data contained on the Seagate hard disk drive:
(a) has not been transferred to or used on the new business computer/s or to the benefit of the new business;
(b) has not been accessed and/or copied or moved to another place such as cloud storage, another computer/notebook or other portable device; and
(c) has not been accessed on any device being used in connection with the new business.
At the time of this expert report, I am seeking additional time to complete my analysis of the data to provide the above assurances. I estimate the time required to complete the assurance and to provide a report to the Court, is a further week. I estimate the return date of the additional work will be Friday 29 June 2018.[6]
[6]‘Search Order – Expert Witness Report’ of Andrew McLeish dated 21 June 2018, [75]–[78] (exhibit ‘DW-6’ to the Affidavit of David Weinberger sworn 22 June 2018).
I consider that the breadth of the search terms needs to be reduced. This is consistent with the obligations under sections 23 and 24 of the Civil Procedure Act 2010 to narrow the issues in dispute and to ensure that costs are proportionate to the real issues in dispute.
Mr McLeish states in his report that he seeks additional time to complete his analysis of data. He also refers to his belief that the list of key words can be refined. I propose to order that supplementary reports of Mr McLeish and also Mr Mann be filed by 4:00 pm on 2 July 2018 and that such reports are to specifically address the question of how the 37,507 search terms can be refined.
I will order that by 4:00 pm on 6 July 2018 the applicant is to file and serve a revised list of search terms. It is the Court's expectation that the revised list will be significantly smaller than the current list.
If there is no agreement between the parties as to the revised list that issue will be the subject of a further directions hearing at 2:15 pm on 13 July 2018.
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