Cronin v Norris
[2010] NSWSC 434
•29 April 2010
CITATION: Cronin v Norris [2010] NSWSC 434 HEARING DATE(S): 29 April 2010 JURISDICTION: Equity JUDGMENT OF: Ward J EX TEMPORE JUDGMENT DATE: 29 April 2010 DECISION: Order the plaintiffs to pay 50% of the defendant's costs CATCHWORDS: PRACTICE and PROCEDURE - preliminary discovery - consideration of requirements for preliminary discovery under Part 5.3 of Uniform Civil Procedure Rules - consideration of discretionary factors - order made for limited preliminary discovery - COSTS - order that plaintiffs pay 50% of defendant’s costs where plaintiffs only partially successful and costs of application may have been unnecessary had a more reasonable stance been adopted by plaintiffs in responding to defendant’s inquiries LEGISLATION CITED: Federal Court Rules (Cth)
Uniform Civil Procedure Rules 2005 (NSW)CASES CITED: Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391
Black v Sumitomo Corpn [2001] EWCA Civ 1819; [2002] 1 WLR 1562
Glencore International AG v Selwyn Mines Limited [2005] FCA 801
Hall v The Nominal Defendant (1966) 117 CLR 423; (1966) ALR 705
Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69
Ian Edward Morton and 5 Ors v Nylex Ltd and 1 Or [2007] NSWSC 562
Malouf v Malouf [1999] FCA 284; (1999) 86 FCR 134; (1999) 167 ALR 383
Panasonic Australia Ltd v Ngage Pty Ltd [2006] NSWSC 399; (2006) 69 IPR 595
Steffen v ANZ Banking Group [2009] NSWSC 666PARTIES: John Patrick Cronin & Timothy James Marshall & Steven James Norris t/as Cronin & Norris (Plaintiffs)
Greg Norris t/as Greg Norris and Associates (Defendant)FILE NUMBER(S): SC 2009/00291493 COUNSEL: R A Parsons (Plaintiffs)
G M McGrath (Defendant)SOLICITORS: Slater & Gordon Lawyers (Plaintiffs)
Hansons Lawyers (Defendant)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
WARD J
THURSDAY 29 APRIL 2010
2009/291493 JOHN PATRICK CRONIN, TIMOTHY JAMES MARSHALL AND STEVEN JAMES NORRIS T/AS CRONIN & NORRIS V GREG NORRIS T/AS GREG NORRIS & ASSOCIATES
JUDGMENT (Ex Tempore)
1 This is an application brought by amended summons filed on 11 December 2009 by the plaintiffs seeking an order for preliminary discovery pursuant to Part 5.3 of the Uniform Civil Procedure Rules 2005 (NSW). The plaintiffs are partners in an accountancy firm trading as Cronin & Norris. The defendant, Greg Norris, was from 2000 an employee of the partnership, one of the then partners of the firm being his father Rick.
2 The background to the current application is set out in an affidavit sworn 5 February 2010 by Mr Timothy James Marshall, one of the current partners of Cronin & Norris. I have admitted some of his affidavit (over objection) subject to relevance. The plaintiffs also rely on an affidavit sworn 27 November 2009 by Mr Van Angelo Moulis, the solicitor for the plaintiffs, who deposes to a number of matters on the basis of instructions from Mr Marshall. Objection was taken to the bulk of Mr Moulis’ evidence as being hearsay. I admitted the affidavit on the basis that the relief sought was an order of the kind which has been considered to be interlocutory in nature (Malouf v Malouf [1999] FCA 284; (1999) 86 FCR 134; (1999) 167 ALR 383) applying the test in Hall v The Nominal Defendant (1966) 117 CLR 423; [1966] ALR 705 and noting that there is nothing in the Uniform Civil Procedure Rules which would preclude an applicant for an order under Part 5.3, from making more than one application thereunder.
3 In any event, it seemed to me that much of Mr Moulis' affidavit went no further than setting out the matters on which he relied (be they correct or not) for his assessment that the defendant would have in his possession certain documents and his assertion (which was in any event already apparent from the correspondence tendered by the defendant) that the plaintiffs are considering whether to commence legal proceedings against the defendant.
4 There are five requirements to be satisfied for an entitlement to an order under Part 5.3. It must appear to the court that the applicant may be entitled to make a claim for relief; that the applicant has made reasonable enquiries; that, notwithstanding those reasonable enquiries, the applicant has been unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant; that the prospective defendant may have a document or thing that could assist in determining whether the applicant is entitled to make a claim for relief; and that inspection of that document or thing would assist the applicant to decide whether or not to commence proceedings.
5 Before turning to those five requirements, it is necessary to provide some background to the application. It is not disputed that in mid 2007 discussions took place as to the possible admission of Mr Norris to the partnership. The substance of those discussions is irrelevant for present purposes.
6 On 23 July 2008 Mr Norris tendered a letter of resignation. That letter states that Mr Norris was resigning effective from 31 July 2008. Further discussions ensued but did not result in Mr Norris remaining with the firm and he left his employment on 31 July 2008. Included in the firm's client base (as clients for whom Mr Norris had for some time had responsibility) were various businesses referred to collectively as the East Group who I am told operate caravan parks along the coast.
7 Mr Marshall deposed to a conversation with Mr Norris on 23 July 2008 (noted in his diary) in which he says that Mr Norris told him that he had already told the East Group that he was leaving the firm. Mr Marshall does not suggest that Mr Norris indicated to him the identity of the person with whom he had spoken at East Group to convey that information. Mr Marshall deposed to a subsequent conversation with Mr Norris on 29 July 2008 (also noted in his diary) in which he says Mr Norris told him that he had signed a 5 year lease the previous Monday of other premises.
8 Mr Marshall says that on 31 July 2008 Mr Norris said to him words to the effect that he was leaving that day to give his new business a go. The day after Mr Norris left the employment of Cronin & Norris, East Group wrote to Cronin & Norris advising that they had decided to support Mr Norris in his new venture and authorising him to collect all files and information pertaining to the East Group that were held at Cronin & Norris on their behalf. That letter was signed, amongst others, by Darren East, a director of the East Group.
9 Mr Marshall deposed to a conversation with Mr East on 5 August 2008 in which Mr East said that he had only found out that Mr Norris had left the partnership on 1 August 2008.
10 Cronin & Norris exercised a lien over the files until fees for the quarter ending 2008 were paid. On 5 August 2008 the office manager of the East Group collected various files from Cronin & Norris and delivered them to Mr Norris' new offices.
11 According to Mrs Norris, who has sworn an affidavit in these proceedings, on 19 August 2008, the office manager of Cronin & Norris advised that the “Easts’ stuff” was ready to be picked up. Mrs Norris collected the company registers and minute books and later that day she and Darren East collected a large amount of files from Cronin & Norris comprising at least 15 archive boxes. There was evidence that a large compactus was purchased in order to store that material. Mrs Norris says the material was not provided by Cronin & Norris in any orderly fashion and it took some time to collate and organise that material.
12 On 29 September 2009, some 14 months after these events, the applicants’ solicitors wrote to Mr Norris informing him that they had been instructed to act in relation to prospective claims against him. Those claims were described as being, first, for the alleged unauthorised copying and misuse of Cronin & Norris confidential information and property and, secondly, for alleged breach of employee duties (itemised as being breach of confidentiality; failure to act in good faith and for proper purposes; and improper use of position). Specifically, the letter alleged that Mr Norris had wrongfully obtained and utilised, to Cronin & Norris’ commercial detriment, copies of electronic MYOB business records and financial data relating to a major former client and, secondly, accounting document templates designed and developed by Cronin & Norris.
13 It was said that those documents were the property of Cronin & Norris and were intrinsically unique and commercially valuable to Cronin & Norris. The letter requested that a copy of documents falling within the very broad categories listed in the annexure to that letter be provided within 14 days, failing which an application for discovery orders was foreshadowed. I should add that Mr Marshall's affidavit deposes to the value or commercial use which he says can be made of electronic documents of the kind of which complaint was made in this letter.
14 Mr Norris’ response by his solicitors on 12 October 2009 (somewhat oddly labelled “without prejudice”) was to deny the allegations. It was said that the electronic business records and the document templates had not been wrongfully obtained, had in fact been handed over by Cronin & Norris, and belonged to the East Group. The letter requested what amounted to particulars of the allegation of misuse of confidential information.
15 Cronin & Norris’ solicitors’ response to that letter (also rather oddly labelled “without prejudice”) was to describe that letter as “time wasting and calculated not to arrive at an early pragmatic and satisfactory conclusion to the dispute between our clients” and notifying their instructions to serve a summons for preliminary discovery, which they duly did in December 2009. With some amendment to the timeframe for the provision of certain categories of documents, the documents which had been sought by way of that request are those now sought in the preliminary discovery application before me.
16 What is sought (in respect of a lengthy list of businesses) are:
- 1. Any document relating to the East Family Businesses, including specifically:
- a. electronic MYOB business records and financial data;
b. accounting electronic worksheet templates;
c. invoices issued to the East Family Businesses;
d. timesheets or time entries by employees of Greg Norris & Associates; and
e. signed retainer and costs disclosure agreement between Greg Norris & Associates and the East Family Businesses.
3. Any correspondence and file notes from Mr Greg Norris or employees of Greg Norris & Associates, individually or collectively, to one another or any third parties, individually or collectively, during the period between 1 January 2008 and 1 October 2008 in relation to the East Family Businesses.
4. Any document recording, referring to, or constituting the lease of 1/64 Manning Street, Kiama NSW 2533 by Mr Greg Norris or Greg Norris & Associates, including but not limited to correspondence or communications to:
- a. real estate agents; and
b. the landlord of the premises from which Greg Norris & Associates operates its business.
6. Any document recording, referring to, or constituting the application by Greg Norris & Associates to register its business name or to obtain an ABN.
7. Any correspondence and file notes from Mr Greg Norris or employees of Greg Norris, individually or collectively, to one another or any third parties, individually or collectively, in relation to design, producing or printing business letterheads for Greg Norris & Associates.
8. Any document in relation to the establishment of the business of Greg Norris & Associates.
17 Following the service of affidavits for the plaintiffs, Mrs Norris then swore her affidavit of 8 March 2010. From Mrs Norris' affidavit it should have been apparent (see pars 12) that Mrs Norris (or, perhaps, the defendant's lawyers) were reading the scope of the preliminary discovery request, in particular Category 1 of Annexure A, as being very broad and as extending to the voluminous archive material contained in the compactus which had been purchased in 2008. Hence their complaint in these proceedings in relation to the oppressive nature of the request for provision of copies of that very broad category of documents.
18 Mrs Norris' affidavit noted that if Cronin & Norris were able to identify particular documents it might be possible to locate them and to provide them. Paragraph 13 of Mrs Norris' affidavit acknowledges that Mr Norris' new firm does have the document templates referred to in category 1. Mrs Norris says this is because they were on the floppy discs given by Cronin & Norris to her on or around 19 August 2008.
19 In paragraph 14 of Mrs Norris' affidavit she deposes that, in relation to the other material listed in Mr Van Moulis' lists, as far as she knows "every document we have in relation to the Easts businesses which was dated or created while my husband was still employed by Cronin & Norris was given to us by Cronin & Norris".
20 By letter dated 8 April 2010, and what Counsel for the defendant described as an attempt to avoid litigation, but without acknowledging any entitlement on the part of the plaintiffs to preliminary discovery, Mr Norris’ lawyers enclosed a list of documents (unverified) which was expressed to be in partial answer to that request. The time period of various categories of those documents as listed was limited by the defendant to 31 August 2008. Certain comments were made in that letter in relation to the categories of discovery including for example in relation to categories 1(d) and 1(e), where it is said there are no documents available, and categories 4, 5, 6, 7, and 8, where it is said that the defendant has disclosed all documents it has or of which it was aware.
21 In relation to category 1(a) and 1(b), the letter states:
- “All documents that the Defendant has were supplied by the Plaintiff and for this reason the process of discovery would be extremely time-consuming, intrusive and expensive particularly on a small business with a staff of 2 permanent and 1 casual employee, the Defendant does not intend to produce these documents unless the Court specifically orders that it must.”
22 In relation to categories 2 and 3 it was said:
- “The Defendant is of the view that this category is too wide as it would include documentation from numerous Easts files handed over by the Plaintiff which would have contained all the normal correspondence and communication with the East Family Group in the course of business while the Defendant was working for the Plaintiff and as such would not be relevant to these proceedings. In so far as these categories seek disclosure of written attempts by the Defendants or its servants, agents or employees to solicit the Easts Family Business, the Defendant instructs that no such document exists or ever existed.”
23 The plaintiffs’ lawyers were also advised on that date that the listed documents were available for inspection. It is conceded that the plaintiffs have not availed themselves of that invitation to inspect the documents. Counsel for the plaintiffs (Mr Parsons) says that this is because the first time that the offer was proffered was by the 8 April letter and all necessary instructions to undertake that job in the meantime were not then to hand.
24 In Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69, the Court of Appeal recently considered an appeal from refusal of an application orders under Part 5.3 of the Uniform Civil Procedure Rules. As noted by McColl JA in that case, (at [65]) a decision whether to grant a preliminary discovery order turns on whether the applicant has satisfied the criteria in the Uniform Civil Procedure Rules and then whether, in the exercise of its discretion, the court considers that such an order should be made.
25 I turn then to the requirements to be satisfied before a preliminary discovery order will be made.
26 The first requirement is that it appears to the court that the applicant may be entitled to make a claim for relief.
27 The prospective claim identified in September 2009, as I noted earlier, was for misuse of confidential information (in particular, use of the electronic records and template) and for breach of employee's duties. In Mr Van Moulis' affidavit it is said that the plaintiffs were considering whether to commence proceedings in respect of unauthorised taking of the plaintiffs' document templates and the defendant's activities in promoting the defendant's business while he was still at the firm. In the outline of submissions prepared by Counsel for the plaintiffs, reference is made to breaches of a duty of loyalty by establishing a business to compete with the plaintiffs’ and in canvassing clients of the plaintiffs.
28 It can be seen that the proposed or potential causes of action have been variously described over the period of time. It does not, however, seem to be suggested that Mr Norris was bound by any restrictive covenant.
29 In Hatfield v TCN Channel Nine, McColl JA set out the principles relevant to an application for preliminary discovery, taken to a large part from the primary judge's exposition of the jurisprudence in this area;
[47] First, “[i]n order for it to 'appear' to the Court that the applicant 'may be entitled' to make a claim for relief, it is not necessary for the applicant to show a prima facie or pleadable case”: Morton v Nylex (at [25]).
[48] Secondly, while “the mere assertion of a case is insufficient…[i]t will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground” : Morton v Nylex (at [25]).
[49] Thirdly, “belief requires more than mere assertion and more than suspicion or conjecture. [It] is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action”: St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 (at [26](d)) per Hely J, referring in turn to John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 (at [13], [14], [17] and [73]) per Emmett J. The use of the word “may” indicates the court does not have to reach “a firm view that there is a right to relief”: Telstra Corp Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; (2008) 166 FCR 64 (at [58]).
[50] Fourthly, the requirement that the matters set out in UCPR 5.3 “appear[s]” to the court to establish an entitlement to an order under the rule may be wider than the requirement in the Federal Court Order 15A r 6 that there “is reasonable cause to believe”: see Panasonic Australia Pty Ltd v Ngage Pty Ltd [2006] NSWSC 399; (2006) 69 IPR 595 (at [22]) per Young CJ in Eq; Papaconstuntinos v Holmes à Court [2006] NSWSC 945 (at [17] per Simpson J; Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1179 (at [33]) per Adams J. Nevertheless Hely J’s statement in St George Bank Ltd (at [26](e)) remains apposite, namely that “whilst uncertainty as to only one element of a cause of action might be compatible with the ‘reasonable cause to believe’ required by subparagraph (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe”.
[52] Sixthly, as Hely J said in St George Bank Ltd (at [26](a)), “the Rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case”.[51] Fifthly, “the question posed by [UCPR 5.3(1)(a)] … is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent [but]… whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences”: St George Bank Ltd (at [26](f)) (emphasis in original); see also Morton v Nylex (at [33]). Thus application of the rule will not be precluded by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief, as there might be matters of defence which could defeat a prima facie case: Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 1500 (at [41]) per Lindgren J; referred to with approval by the Full Federal Court (French, Weinberg and Greenwood JJ) in Telstra Corp Ltd (at [60]).
30 Young JA (at [127]) noted that all the plaintiff in Hatfield v TCN Channel Nine had to establish was that it “may well” be the case that she was entitled to make a claim for relief (citing Black v Sumitomo Corpn [2001] EWCA Civ 1819; [2002] 1 WLR 1562, at 1584) or has a reasonable cause to believe she has a right to claim, (citing his earlier judgment in Panasonic Australia Ltd v Ngage Pty Ltd [2006] NSWSC 399; (2006) 69 IPR 595, at 599). In Panasonic his Honour, (then the Chief Judge in Equity) noted that Part 5.3 of the Uniform Civil Procedure Rules would appear to be wider than that in the Federal Court
- “...and that despite any conservative philosophy a judge might hold about the extent of the law of discovery, courts must proceed on the basis that there has been a deliberate policy decision made to extend the rights of potential plaintiffs against potential defendants and to extend them in the way that the Federal Court set out in cases like Hooper v Kirella "
31 Mr Parsons says that the court can form the view that the applicant has a possible entitlement to bring a claim for relief against Mr Norris, in effect for breach of a duty loyalty in his position as an employee, and a claim for misuse of confidential information. (Seemingly, the latter claim is restricted to use of the document template.)
32 As to the first claim based on breach of loyalty, there is already some evidence which might support an inference of such a claim, emerging from what Mr Marshall says Mr Norris himself said prior to leaving Cronin & Norris. As to the claim for misuse of confidential information, as I understand it from the affidavit sworn by Mr Marshall, an inference is sought to be drawn to this effect from the speed with which work for the East Group was subsequently carried out by Mr Norris when he commenced his new firm in relation to the Easts' family business. Counsel for the defendant, Mr McGrath, says however, this is mere speculation and that nothing has been produced by Cronin & Norris that supports the proposition that there may be such a claim. He refers to various paragraphs in Mr Marshall's affidavit in which Mr Marshall makes certain assumptions to support the claims that he is making to point to the hypothetical nature of the allegations (paras 53, 55, 69 and 77).
33 As to the first requirement, insofar as the position is that the court must be satisfied that there “may well” be a claim for relief based on an allegation of breach of a duty of loyalty as employee, it seems to me that the plaintiffs have established there may well be such a case, depending on what was in fact said to the East Group client before Mr Norris left the firm. It seems to me it is perhaps unlikely that Mr Norris would set up a new accounting business without some assurance of business that might flow to the new business from his main client and that this would support an inference that there had been some canvassing of the client beforehand. Similarly, the immediacy of the letter sent by the East Group on 1 August following Mr Norris's departure from the firm and the fact that it was signed by a number of directors might support such an inference.
34 It seems to me, given the liberal construction to be given to the provision in the Uniform Civil Procedure Rules for preliminary discovery and the potentially wider breadth of the scope of preliminary discovery in the Uniform Civil Procedure Rules as they appear as compared to those in the Federal Court, I am satisfied that it appears the plaintiffs may well have an entitlement to make a claim in that regard.
35 As to the misuse of confidential information, it seems to me that there is some criticism that can be made that this is mere assertion. However, insofar as Mr Marshall (at paragraph 69 of his affidavit) has expressed his belief, based presumably on his experience within the partnership, and was not tested on that belief, as to whether or not certain work could have been carried out by Mr Norris within the time it was carried out without making use of the templates and MYOB data, it seems to me that there is room for an inference to be drawn that there could be a claim in that regard.
36 I think that there is a difference here between use of the templates and use of the financial data. The template, as I understand it, is something which Mr Marshall says was developed by and remains the intellectual property of Cronin & Norris. The financial data on the other hand I would have thought would surely have been information which Easts could have called for (and which Easts seemed to have called for) and that if Easts directed that it be conveyed to Mr Norris, then in the absence of any other restriction on Mr Norris making use of it I do not see what claim would lie in that regard. That said, I understand that it is said that use of the financial data (or the way in which it was used) may show whether or not Mr Norris had made use of the template provided to him and thus may enable an assessment to be made of the existence of a claim referable to use of the template.
37 I note that in Glencore International AG v Selwyn Mines Limited [2005] FCA 801 it was said, there considering the Federal Court Rules (Cth), that there was a tension between the requirement that there be a reasonable cause to believe that an applicant has a right to obtain relief and the requirement that there be a reasonable cause that the prospective defendant has or is likely to have possession of the document relating to relief. It was said that the stronger the relevant evidence already available to an applicant of its right to obtain relief the stronger its position under the first requirement but the weaker its position under the second requirement and vice versa.
38 My conclusion in relation to the first requirement is that there may well be a claim for relief by the plaintiffs against the defendant either for breach of his duties as employee by reference to the canvassing of employees or for misuse of confidential information in relation to the template if it be the intellectual property of or confidential to the plaintiffs.
39 As to the second requirement, this is, that reasonable inquiries must be made, in Hatfield v TCN Channel Nine, McColl JA (at [86]) noted that this was a question of fact to be considered in all the circumstances, including the relationship between the parties, citing Steffen v ANZ Banking Group [2009] NSWSC 666, at [15], and adding that these circumstances also include the relationship between the party and any other source of information.
40 Counsel for the plaintiffs says that reasonable inquiries have been made, in that a letter was sent to Mr Norris and an expert was retained in order to review the database to see whether or not relevant documents were on the database and whether any had been removed.
41 Counsel for the defendant says that there were a number of inquiries that could have been made but which were not made. The first is that there was no inquiry made of the East Group officers. In that regard I note that it might be thought that the East Group officers were in Mr Norris' “camp”, to use the terminology adopted by McColl JA in Hatfield v TCN Channel Nine, at [87].
42 It was also said there was no request made of the defendant but simply a demand (with no offer of payment). I think it is difficult to see the letter of demand as not, albeit in perhaps aggressive tone, constituting a request. As to the fact there was no offer of payment, if that had been an issue in terms of the reasonableness of the request it could have been raised (and was not raised) at the time by the defendant.
43 Further examples of lack of reasonable inquiry (as put by Mr McGrath) were that there was no inquiry apparently made of any of Cronin & Norris’ internal staff as to what documents had or had not been handed over and that, although an expert had been retained, there was no report from the expert. Finally, it was noted that there was no inspection of the documents offered to be made available for inspection in the unverified discovery list. I will refer to that shortly.
44 I should say that I have some concern as to whether all reasonable inquiries could be said to have been made if all that had transpired was that a letter of demand was sent demanding broad categories of documents and threatening court proceedings and then (without responding to the response thereto) court proceedings were commenced almost immediately thereafter. But in the circumstances I think that the plaintiffs have established that some inquiry was made of Mr Norris putting him on notice of the reason for the inquiry and that inquiries were made, via the retention of an expert, in order to determine what material was electronically available to the plaintiffs. I consider that, given the liberal construction to be accorded to Part 5.3, the second requirement is satisfied.
45 As to the third requirement, (whether or not the plaintiffs have been unable to obtain sufficient information), it will be necessary to distinguish between the various categories of documents sought and the two causes of action which have been foreshadowed, but I should say at the outset that access has been offered to a number of the documents and no inspection has been sought thereof. Mr Parsons says that I cannot be satisfied that there is sufficient information in the documents already identified without reviewing what the material is and suggested that it was a matter for the defendant to put that before the court. However the onus is on the plaintiffs to show that there is insufficient information available to them.
46 I note that in Glencore v Selwyn Mines it was said by Lindgren J (at [15]) that the applicant must place before the court all of the evidence already available to it relevant to the sufficiency of the information of which it is possessed to enable a decision to be made and that obligation on the applicant to be forthcoming arises from the special and intrusive nature of preliminary discovery. The Court there noted that ordinarily the respondent will not know or be in a position to expose the full extent of the information already available to the applicant and the tension between the respective requirements for the making of an order ought then be considered. Mr McGrath says that in circumstances where it is submitted that all reasonable inquiries have not been made it cannot be said that there is insufficient information for the plaintiffs to make a decision as to whether or not to commence proceedings.
47 It seems to me, on the face of the list of documents that has been provided, that certain information has already been made available to the plaintiff from which the plaintiff may be able to form a view as to whether or not a cause of action can be maintained, but that nevertheless does not mean that there is sufficient information to make that decision, particularly in relation to the issue of the use that has been made or may have been made of the document template and in circumstances where it is not known what communications there may have been made with the clients or officers of the client in the period leading up to 31 July.
48 I should however address one issue in this regard, which is this. It was submitted that even if documents had already been made available to the plaintiffs, if they had been made available pursuant to an unverified list then the requirement under the Uniform Civil Procedure Rules could not be satisfied. It was said that once proceedings had started, the entitlement of the applicant for a preliminary discovery order under the Uniform Civil Procedure Rules could not in effect be subverted by the subsequent production of the documents on an informal basis. I do not accept that submission. It seems to me that the test as to whether or not the requirements have been satisfied is to be applied as at the time of the hearing and if at the time of the hearing sufficient information is available to the plaintiff from which the plaintiff can make a decision as to whether or not there is a reasonable cause of action or whether or not to commence that cause of action, then the fact that there has been no verified list does not alter the finding that the plaintiff already has sufficient information and cannot satisfy that particular requirement on its application for preliminary discovery.
49 The fourth and fifth requirements I will consider when I deal with the categories of documents requested, but broadly they require the plaintiff to establish that the prospective defendant may have a document which could assist and that inspection of that document would be able to assist it to consider whether it has and should pursue a cause of action. In this regard I note that in Glencore v Selwyn Mines (at [13]) it was said that the measure of any preliminary discovery to be ordered is the extent of information that is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries to enable a decision to be made whether to commence a proceeding (there citing Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391, at [26]-[27]) and similar comments were made in Ian Edward Morton and 5 Ors v Nylex Ltd and 1 Or [2007] NSWSC 562, at [33].
50 Finally, as to the discretion, it was put by Mr McGrath that the delay in commencing these proceedings or in seeking to inspect the documents already listed was a factor which should weigh against the making of a preliminary discovery order. However, it does not seem to me that any relevant prejudice has been shown by such delay. The only step that seems to have been taken since August 2008 by the defendant is that some old records have been destroyed and it is not suggested that those are records that are relevant on this discovery application in the first place.
51 I have, however, had regard to the fact that in relation to various of the categories of documents that are sought, the evidence before the court of Mrs Norris, which was not challenged in any cross-examination of Mrs Norris, is that an order would be likely to be futile. Mrs Norris on oath has said that there are no such documents or has instructed solicitors to confirm what the position is in relation to provision of documents within particular categories.
52 I turn then to the particular categories of documents sought. The first category (which is in extremely broad terms insofar as it refers to any document relating to the East family businesses and then specifies a number of subcategories included in that overall category), was limited in the course of argument, in effect now being only to documents falling within those limited subcategories. It seems to me that if this had been able to be clarified in advance then much of the cost of this proceeding might have been able to been avoided. The concern that is raised in Mrs Norris' affidavit, and which was the subject of submissions by counsel for the defendant at the outset of this application, was the cost of providing discovery in relation to a volume of archive material which could not, on any view of things, be likely to be thought to assist the plaintiffs in determining whether or not there was a reasonable cause of action of the kind said to be under consideration. In any event, as I understand it, the documents now sought by way of preliminary discovery in category 1 are limited to the documents in subcategories 1(a), (b), (c), (d) and (e).
53 I have already noted what has been said by the defendant in relation to documents in subcategories 1(a) and (b). Those categories are sought as encompassing documents which may assist in determining whether there is a reasonable cause of action for misuse of confidential information. Insofar as the electronic MYOB business records and financial data are concerned, as I understand that the only relevance of those documents to an allegation of breach of an obligation of confidence or use of material in which the plaintiffs may have some proprietary interest would be if it can be determined by reference to the data in those records that use could only have been made of them through the template, which might then establish or allow inferences to be drawn as to the misuse of confidential information. The business records themselves, as I understand it, would not be relevant to any of the claims foreshadowed by the plaintiffs. Furthermore, it would seem to me that it could only be the financial year business records available at the time that Mr Norris left employment that could potentially be relevant and not any business records or financial data at any earlier time.
54 It seems to me that the appropriate order in relation to category 1(a) would be to limit the order for preliminary discovery to electronic MYOB business records and financial data for the current accounting financial year as at 31 July 2008 in the form in which they were held by Mr Norris at or about 31 July 2008 and/or in the period up to 19 August 2008. It would seem to me that that would cover any material from which an inference could be drawn that the material had been taken without authority by Mr Norris as at 31 July 2008 and also would enable a determination of what material, if any, was handed to Mrs Norris on 19 August 2008. I do not see a basis for extending the order to any further MYOB business records or financial data.
55 As to the accounting electronic work sheet templates, it would seem to me that it could only be the template in the form in which it was held by Mr Norris as at 31 July and/or 19 August 2008 which could be relevant to an assertion that it was taken without authority. I note in this regard that Mrs Norris' evidence is that the template came into the hands of the defendant only because it was contained in a floppy disk provided to her and to Darren East, on the authorisation of Easts, on or about 19 August 2008.
56 In relation to category 1(c) (invoices issued to the East family business), as I understand it, what Mr Parsons is seeking is, to use his words, to “dovetail with what appears already”. It seems the plaintiffs consider that the information contained on the invoices may enable them to assess what work was done on the handover, again to see if there is a reasonable cause of action for a breach of employee duty or misuse of confidential information. It seems to me that there is no evidence from which I could infer that Mr Norris has charged the East family group (after he left and commenced his own business) for work which he had undertaken earlier and that no such allegation has been made. Nevertheless, as I understand it, it is suggested that it may be possible to determine from invoices of this kind, whether or not work carried out after 31 July 2008 made use of material which Mr Norris was in some way unable to use by reason of any obligations owed to Cronin & Norris.
57 It seems to me that the appropriate way to deal with this would be to limit a preliminary discovery order to any invoices issued by Greg Norris and Associates to the East family businesses (as defined in annexure A) from 1 August 2008 to the end of that financial quarter which on their face disclose work carried out referable to the period prior to 31 July 2008 or which on their face disclose reference to, or use of, the accounting electronic work sheet templates.
58 I do not propose to make any order in relation to categories 1(d) or (e), because there is evidence that there are no such time sheets or time entries and there is no signed retainer and costs disclosure agreement. I appreciate that this was not specifically addressed in Mrs Norris' affidavit, but it was the subject of correspondence between the solicitors and Mrs Norris was available for cross-examination on her affidavit (if she had been required) and could have confirmed instructions in that regard. I think it is an exercise in futility to make an order for production of preliminary discovery of documents which I am told are not in existence and have no reason to believe otherwise (and in these circumstances the fourth requirement for a preliminary discovery order is not made out).
59 As to category 2 (seeking correspondence and file notes between Mr Greg Norris or employees of Greg Norris and Associates and the East family businesses during the period between 1 January 2008 and 1 October 2008), I think, first, that this category should be limited to correspondence up to and including 31 July 2008. I do not see that correspondence thereafter is relevant to what correspondence there may have been earlier in relation to the setting up of the new firm. I also think that this category should be limited to correspondence referring or relating to an intention on the part of Mr Norris to leave Cronin & Norris or an intention of Mr Norris to set up his new business because it seems to me that the only relevance of correspondence of this kind would be if it were to be suggested that there was canvassing or solicitation of clients whilst Mr Norris was an employee of Cronin & Norris.
60 I have given consideration to whether or not that time period should be further limited in that the evidence suggests that the commencement of attempts to arrange for a lease for the proposed new business that took place some time in June 2008, but in the circumstances I think it would not be oppressive to order the period to be from 1 January 2008 to 31 July 2008 if the category is limited to correspondence or communications expressing, or relating to, that intention.
61 In relation to category 3, I think it should be limited to correspondence referring or relating to solicitation of clients of Cronin & Norris or the canvassing of clients of Cronin & Norris and similarly should be during the period between 1 January 2008 and 31 July 2008.
62 I do not consider that any order for preliminary discovery should be made in relation to the documents in categories 4, 5, 6, 7 and 8 in circumstances where I note that there has been production of a list of documents (albeit unverified) in those categories. An unverified list has been supplied and the plaintiffs have not to date chosen to avail themselves of the invitation to inspect those documents. It cannot be said in those circumstances that there is insufficient information from which to form an assessment as a potential claim – the plaintiffs have chosen not to have reference to such material as there is to assess its sufficiency.
63 I will make preliminary discovery orders accordingly and hear any submissions to be made as to costs.
64 [In relation to submissions made as to the costs orders to be made] The defendant sought an order for his costs of the proceeding, primarily on the basis that the defendant was substantially successful in defending the application and on the basis that this was consistent with my observation that much of the costs could well have been avoided had the issue of the extent of discovery sought in respect of the Cronin & Norris accounting records been clarified before the hearing of the application.
65 In the defendant's submission it was clear from the very first response and from the affidavit of Mr Norris that that was the primary issue and that all other matters were open, and in particular that the plaintiffs could have had particular documents if they had chosen to ask for them. It was also said that the Cronin & Norris documents were, in the hands of accountants, subject to a duty of confidentiality. Mr McGrath referred to the authorities in relation to the appropriateness, where there was a duty of confidentiality, for a defendant to come to court requiring an order before the production of documents (though conceding this was a weaker argument than the first two arguments).
66 The plaintiffs submitted that although there were five categories out of 8 in respect to which they had failed to obtain an order, an order had been granted; and that on the five categories where they had failed this was by virtue of an initiative of the defendant only 21 days ago. The plaintiffs’ pointed to the fact that there had been partial success and submitted that it would be appropriate for each party to bear its own cost on the application.
67 There are a number of cases which have considered costs in this context. The factor that I take into account in dealing with costs in this case is that although there has been a measure of success by the plaintiffs on the preliminary discovery application it has been limited. It seems to me that the preliminary discovery application as initially conceived and even as pressed today was extremely broad. It was open to the defendant to consider that what he was being asked to do was to provide discovery of all documents relating to any communications with the East family group and that would have imposed a considerable burden on the defendant (and potential breach of any confidential obligations owed to the East family group). In those circumstances it was not unreasonable for the defendant to take the stance he did. I note that he offered to make available particular documents if they could be identified and had explained his concerns as to the oppressive extent of the discovery sought, without any suggestion by the plaintiffs that this was an incorrect construction of the discovery request.
68 It would seem to me in the circumstances that there should be an apportionment of costs to reflect the fact that the plaintiff was successful only on a very small portion of what it sought overall and to reflect the fact that in some respects I think it was a fairly fine line between success and failure even on the categories on which the plaintiffs succeeded. It is my impression that had a more reasonable stance been adopted by the plaintiffs in relation to the request, the need for this application, and the costs incurred in relation to the application, could have been avoided.
69 In the circumstances I think the appropriate order would be that the plaintiffs pay 50% of the costs of the defendant on this application and bear their own costs of the application.
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