daytraderHQ Ltd v Hometrader Ltd
[2001] WASC 283
daytraderHQ LTD -v- HOMETRADER LTD & ORS [2001] WASC 283
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 283 | |
| Case No: | CIV:1620/2001 | 31 JULY & 11 SEPTEMBER 2001 | |
| Coram: | MASTER SANDERSON | 16/10/01 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Application refused | ||
| A | |||
| PDF Version |
| Parties: | daytraderHQ LTD (ACN 086 972 429) HOMETRADER LTD (ACN 091 509 849) JASON GAVIN DAVIS BARBARA McLEESE EDWARDS JOHN DAY DAVID ROBERT JOHNSON |
Catchwords: | Practice and procedure Preaction discovery Principles to be applied Test to be applied to satisfy requirements of O 26A r 4 Order seeking discovery of competitor's confidential material Discretion to refuse order |
Legislation: | Nil |
Case References: | Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128 Davis v Sagar Pty Ltd, unreported; SCt of WA; Library No 980443; 10 August 1998 McCarthy v Dolpag Pty Ltd [2000] WASCA 106 Acohs Pty Ltd v R A Bashford Consulting Pty Ltd (1997) 37 IPR 542 Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 Charles Lo Presti Pty Ltd v Karabalios, unreported; SCt of NSW; BC 9603276; 31 July 1996 Cohen v Walthamstow Pty Ltd, unreported; SCt of WA; Library No 980148; 30 March 1998 Computer Edge Pty Ltd v Apple Computer Inc [1986] 61 CLR 171 Corrs Pavey Whiting & Byrne v Collector of Customs (1987) 14 FCR 434 Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 Faccenda Chicken Ltd v Fowler [1986] 3 WLR 288 (CA) Kim Riley in his capacity as Trustee of the Ker Trust v Jubilee Gold Mines NL [2000] WASC 114 London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932 Mense & Ampere Electrical Manufacturing Co Pty Ltd v Milenkovich [1973] VR 784 O'Brien v Komesaroff (1982) 150 CLR 310 Stuart v Miller [1979] NSWLR 128 The Commonwealth of Australia v Fairfax and Sons Ltd (1980) 147 CLR 39 Tipperary Developments Pty Ltd v Western Australia (1999) 21 WAR 250 United Energy Ltd v Energy Risk Management Pty Ltd [1998] VSC 133 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
HOMETRADER LTD (ACN 091 509 849)
First Respondent
JASON GAVIN DAVIS
Second Respondent
BARBARA McLEESE EDWARDS
Third Respondent
JOHN DAY
Fourth Respondent
DAVID ROBERT JOHNSON
Fifth Respondent
(Page 2)
Catchwords:
Practice and procedure - Preaction discovery - Principles to be applied - Test to be applied to satisfy requirements of O 26A r 4 - Order seeking discovery of competitor's confidential material - Discretion to refuse order
Legislation:
Nil
Result:
Application refused
Category: A
Representation:
Counsel:
Applicant : Ms C Brown
First Respondent : Dr J T Schoombee
Second Respondent : Dr J T Schoombee
Third Respondent : Dr J T Schoombee
Fourth Respondent : Dr J T Schoombee
Fifth Respondent : Dr J T Schoombee
Solicitors:
Applicant : Corrs Chambers Westgarth
First Respondent : Feinauer & Associates
Second Respondent : Feinauer & Associates
Third Respondent : Feinauer & Associates
Fourth Respondent : Feinauer & Associates
Fifth Respondent : Feinauer & Associates
(Page 3)
Case(s) referred to in judgment(s):
Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128
Davis v Sagar Pty Ltd, unreported; SCt of WA; Library No 980443; 10 August 1998
McCarthy v Dolpag Pty Ltd [2000] WASCA 106
Case(s) also cited:
Acohs Pty Ltd v R A Bashford Consulting Pty Ltd (1997) 37 IPR 542
Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37
Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66
Charles Lo Presti Pty Ltd v Karabalios, unreported; SCt of NSW; BC 9603276; 31 July 1996
Cohen v Walthamstow Pty Ltd, unreported; SCt of WA; Library No 980148; 30 March 1998
Computer Edge Pty Ltd v Apple Computer Inc [1986] 61 CLR 171
Corrs Pavey Whiting & Byrne v Collector of Customs (1987) 14 FCR 434
Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389
Faccenda Chicken Ltd v Fowler [1986] 3 WLR 288 (CA)
Kim Riley in his capacity as Trustee of the Ker Trust v Jubilee Gold Mines NL [2000] WASC 114
London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932
Mense & Ampere Electrical Manufacturing Co Pty Ltd v Milenkovich [1973] VR 784
O'Brien v Komesaroff (1982) 150 CLR 310
Stuart v Miller [1979] NSWLR 128
The Commonwealth of Australia v Fairfax and Sons Ltd (1980) 147 CLR 39
Tipperary Developments Pty Ltd v Western Australia (1999) 21 WAR 250
United Energy Ltd v Energy Risk Management Pty Ltd [1998] VSC 133
(Page 4)
1 MASTER SANDERSON: This is the plaintiff's application for discovery from a potential party. The application is brought under O 26A r 4. That rule is in the following terms:
"4(1) This Rule applies if a person who may have a cause of action against a person whose description has been ascertained ('the potential party') wants -
(a) to commence proceedings against the potential party; or
(b) to take proceedings against the potential party in the course of an action to which the person is a party,
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
(2) If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this Rule.
(3) The application shall be supported by an affidavit and a copy of both shall be served on the potential party.
(4) On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision."
2 Before detailing the facts of this case I should say something about the way in which this application was argued. It was the defendants' position that the plaintiff had not established that it may have a cause of action against the defendants as is required by r 4(1). The defendants also submitted, as their secondary position, that the plaintiff had already obtained sufficient information to enable it to make a decision as to whether or not to commence proceedings and in fact the evidence showed that a decision to commence proceedings had been taken. The defendants also took issue with the extent of the discovery sought by the terms of the summons. The important points of principle are raised by the first two questions.
(Page 5)
3 Rule 4(1), by its terms, gives no indication of how it is to be determined whether or not a party may have a cause of action. However, I think from the way the rule is worded two things are clear. First, the question of whether a party may have a cause of action is a question of fact, the answer to which depends upon the circumstances of a particular case. Secondly, the test necessarily implies a low threshold which an applicant has to satisfy. To require an applicant to establish a prima facie case or even to establish that there are "reasonable grounds for believing" (a phrase used in O 26A r 5(1)) is to put a gloss on the rule. I think the word "may" as it is used in r 4(1) means "might have" or "could possibly have". This is the approach that I have adopted in dealing with applications under this rule: see Davis v Sagar Pty Ltd, unreported; SCt of WA; Library No 980443; 10 August 1998.
4 In McCarthy v Dolpag Pty Ltd [2000] WASCA 106, the Full Court considered the proper approach to discovery from a potential party. The respondent had obtained an order at first instance that the appellant give discovery as a potential party. The respondent claimed it may have a cause of action for a breach of restraint of trade clause subsisting between the appellant and the respondent. The main ground of appeal was that the respondent had failed to establish that it may have a cause of action against the appellant because the restraint of trade clause on which the cause of action would be founded was void and unenforceable. The court noted that restraint of trade clauses are prima facie contrary to public policy and unenforceable. However, such clauses may be enforced if they are reasonable in all the circumstances, the question being whether the restriction exceeds what is reasonably necessary for the protection of the coventee. Unless the clause affords no more than adequate protection to the party in whose favour it is imposed, the court will generally not enforce it. The Court (Anderson and Scott JJ) concluded (at [12] to [14]):
"[12] We are of the opinion that, in every case, the question whether a restraint of trade clause is or is not reasonable depends upon the facts of the particular case and to come to a conclusion about it in this case, the court would have to try the facts and would need to hear full argument based on the evidence. This is not the function of the court in considering an application under O 26A. …
[13] Mr Solomon also submitted that the test as to whether an applicant for an order under O26A 'may have a cause of action' is or should be a stringent test. There is no doubt that caution must be exercised before making an order
(Page 6)
- and that such orders should not be made as a matter of course. They should only be made when reasonably necessary to achieve the proper administration of justice. … Mr Solomon submitted that Master Sanderson has proceeded on the basis that mere suspicion that there may be a cause of action is sufficient. He referred us to other decisions of the learned Master which, he submitted, show that the Master has consistently adopted a test with a threshold which is too low and much lower than the test adopted in the District Court of this State and in other jurisdictions.
- [14] We are not concerned with other decisions of the learned Master. Looking only at his decision in this case, we are not able to identify in his reasons any error as to the test which he applied. Whilst he did say that in his opinion 'the threshold test in relation to O 26A r 4 is a low one', the word 'low' must take its meaning from its context. It is a relative term and in this case it is plain that Master Sanderson acted upon the evidence outlined above and other evidence in coming to the conclusion that the respondent 'may' have a cause of action against the appellants. In our opinion, that evidence does sustain a conclusion that the appellants may have breached the covenant contained in their contracts of service, on any view of the meaning of the word 'may'."
5 When determining what test an applicant under r 4 must satisfy in establish that it may have a cause of action, regard must be had to the circumstances in which such an application is made. To bring itself within the rule an applicant must have made reasonable enquiries but have been unable to ascertain whether or not it has a cause of action against the potential party. Consequently the evidence in the applicant's possession must necessarily be thin and its application must be based to a degree on speculation. To expect much more of an applicant would be to render the rule useless. What the applicant must do is postulate a scenario based upon the facts in its possession which may give rise to a cause of action. That does not permit of wild speculation or allow for nothing more than pious hope. But it is necessarily a low threshold.
6 Once the requirements of r 4(1) and (2) are satisfied then the court retains a discretion as to whether or not to make an order. Rule 4(4) clearly allows for a discretion, even in circumstances where the
(Page 7)
- requirements of subr (1) and subr (2) have been satisfied. In Davis v Sagar Pty Ltd (supra) I suggested (at 11) that once an applicant had satisfied the requirements of subr (1) and subr (2) that an order for discovery ought be granted unless it was brought vexatiously or with mala fides. In Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128, Parker J doubted that this was a correct formulation of the principle. His Honour said (at [48] - [49]):
"[48] It is to be remembered that discovery is a discretionary remedy. According to the circumstances of the case a number of factors may be relevant to the discretion to grant such relief. It does not follow from the circumstances that a power to order relief is drawn widely, so that relief may be obtained where the justice of the case makes that appropriate, that, in the absence of vexation or mala fides it is in the interests of justice to order relief in every case to which the power may be found to extend. …
[49] It is perhaps inevitable that at times it will be difficult to discern where and how the interests of justice are best served. It is necessary to weight inter alia the competing interests of both parties."
8 Turning to the facts, the plaintiff and the first defendant are both corporations engaged in the business of providing training services to individuals who wish to trade shares, options, warrants and other derivatives on their own account. Because of its importance to this case it is necessary to say something more about both the traders and the education system or coaching offered by the plaintiff and the first defendant. The development of the Internet has opened up a range of possibilities for those interested in trading products listed on the Australian Stock Exchange. (Hereafter I will refer to the trading of stocks. In fact, the opportunities exist for trading not only stocks but options, warrants, futures contracts and even more exotic derivative
(Page 8)
- products.) The Australian Stock Exchange licences a number of providers who in turn onsell price information which is accessed by the Internet. Depending on an individual's needs, this can be real time data or end of day data or one of the range of options inbetween. Allied with this provision of price information are computer programmes which allow for its technical analysis. That means it is possible for a person working from home with a personal computer and access to the Internet to obtain share prices and analyse those prices with a view to discerning trends and making investments accordingly. The term "day trader" was originally coined to describe those individuals who buy and sell shares within the same trading day. It has become a generic term describing individuals who generally trade from home and whose strategy is short term profit rather than gain from long term accumulation.
9 The shelves of any decent bookstore are replete with self--help manuals and guides for the day trader. Each author has a different approach to educating the trader and strategies for trading vary considerably. But the essentials of technical analysis and the indicators relied upon are remarkably consistent. Virtually all of the information needed to train a trader is available in the public domain. That is not to say that an educator offering training courses cannot so organise information which is in the public domain so as to entitle the party to protection of copyright on its training system. It is this issue which is at the heart of this application.
10 In support of its application the plaintiff relied upon an affidavit of Ross Henry Smith, sworn 27 April 2001. Smith is a director and the Chief Executive Officer of the plaintiff. (When this matter was first called on for hearing, counsel for the defendants took issue with a number of paragraphs of Smith's affidavit. I dealt with those objections during the course of the hearing and as a consequence, the plaintiff sought and was granted an adjournment to deal with certain matters. Having given reasons why certain paragraphs of Smith's affidavit were inadmissible, I do not propose to say anything further on that question. However, in dealing with this application I have made reference only to those paragraphs of Smith's affidavit which survived the strike-out application).
11 Smith says (at par 3) that the plaintiff is a membership based company incorporated on 14 June 1999 which uses training, Internet technology and information resources to help novice and professional stock market traders. Smith then goes on to detail the history of the plaintiff's business. Smith himself commenced business under the business name InsiderTrader on 2 July 1998. He says that Golden Hind
(Page 9)
- Holdings Pty Ltd ("Gold Hind") was set up as a management company to provide staff and other services to InsideTrader. Smith annexes to his affidavit as annexure "RHS2" a copy of what is said to be an agreement between InsideTrader, that is Smith, and Golden Hind for the provision of management services. Clause 2 of that agreement, under the heading Employees and Agents of the Contractor, is in the following terms:
"The Contractor shall have exclusive control of its employees and agents. The Contractor shall ensure that conditions of employment, working hours, wages and other incidents of employment of its employees and agents conform to applicable laws and regulations. The Contractor shall pay or procure the payment of all taxes and other deductions."
13 There are obvious difficulties in following through this business structure. Annexure "RHS3" to Smith's affidavit is a document described as "Confirmation of Assignment of Business". It evidences an assignment by Smith of the "business" which presumably means the business conducted by him under the business name InsideTrader to TraderHQ Pty Ltd. That assignment may or may not include the obligations, rights and liabilities consequent upon the agreement between Smith and Golden Hind. Without deciding that question I am prepared to assume for the purposes of this application that the assignment of the InsideTrader business by Smith to TraderHQ Pty Ltd included any rights then existing between Golden Hind and Smith.
14 The sale and purchase agreement between TraderHQ Pty Ltd and dayTraderHQ.com Ltd appears as annexure "RHS5" to Smith's affidavit. Pursuant to this agreement dayTraderHQ.com Ltd purchased from TraderHQ Pty Ltd the "Business". The agreement defines Business as being item 1 to the schedule to the agreement and that item refers to "All of the business and undertakings conducted by the Vendor". The "Business Assets" included in the sale cover all contracts "with suppliers
(Page 10)
- to the Business as at the Possession Date": see par (f) of cl 1.1. The sale did not include the business name InsiderTrader.
15 Based upon all of this material it is somewhat difficult to know what relationship exists between the plaintiff and Golden Hind. The reason why this connection is important will become apparent later in these reasons. However, I think that what can be said is that it is arguable that the plaintiff is the successor entitled to any rights Smith, trading as InsiderTrader, may have had consequent upon his agreement with Golden Hind. I should emphasise that I am making no findings of fact on this question. The state of the evidence does not allow me to do so. I would simply conclude that the position is arguable.
16 Smith says by par 24 of his affidavit:
"The second respondent was employed by me as an independent contractor from 5 October 1998 until 31 January 2001 to provide technical support, training and to develop software for InsideTrader."
17 As a statement of fact that paragraph is demonstrably wrong. There is no evidence at all that Smith, either in his personal capacity or trading as InsideTrader, engaged the second defendant as an independent contractor. To support his claim, Smith refers to annexure "RHS14". This document is described as a "Non Disclosure Agreement". The parties to the agreement are Smith and the second defendant. A reading of the agreement shows that it is what it purports to be - that is, an agreement that the second defendant will not disclose certain information passed on to him by Smith. It does not purport to be an employment agreement. It says nothing about rates of pay, hours of work, nor does it deal with any other matters generally associated with employer/employee relationships. Annexure "RHS15" on the other hand is an agreement, pursuant to which the second defendant purports to undertake to provide certain services to Golden Hind as a contractor. This agreement sets out rates of remuneration, times to be worked and details the rights and obligations as between the second defendant and Golden Hind. Two clauses of this agreement are of particular importance. They are respectively cl 4 and cl 7. They read as follows:
"4. All intellectual property rights, copyright or other property rights, information, ideas, documentation or codes developed by the Contractor under this Agreement or in connection with the work shall belong to the Client
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- and/or its nominee. As far as may be necessary, the Contractor agrees on request to formally transfer any right, title or interest to the Client and/or its nominee.
- …
7. The relationship between the parties hereto shall be of principle and independent contractor. At no time shall there be any deemed employer/employee relationship or any agency relationship between the parties. Jason Davies warrants that in providing services under this Agreement he is adequately covered by the appropriate insurances and guarantees the fulfilment of all employer statutory obligations including any liability under the Payroll liability under the Payroll Tax Act, Income Tax Act, Fringe Benefits Tax Act, Training Guarantee Act and Superannuation Guarantee Act."
18 There is one further document to which reference ought be made. It is alleged by the plaintiff that from time to time the defendants other than the first defendant have logged on to the plaintiff's website. To access this website a party is obliged to consent to the "Terms and Conditions of Use": see par 30 of Smith's affidavit. A copy of these Terms and Conditions of Use appear as annexure "RHS16" to Smith's affidavit. The plaintiff places reliance on cl 1 and cl 2 of these terms and conditions which are in the following terms:
"1. Other than for my own personal use, I shall not program a computer, reproduce, distribute or disclose to any person or entity any or all of the contents of the website and/or training notes that is provided to me during training without the written permission of daytraderHQ.
2. Other than for my own personal use, I shall not program for a computer, reproduce, distribute or disclose to any person or entity any information orally presented by daytraderHQ at any seminar without the written permission of daytraderHQ (This includes any and all information recorded during the seminar.)"
19 Against that background must be overlaid two facts which are not in dispute. First, as I have said, the plaintiff and the first defendant are in the same business. Both provide education services for aspiring sharetraders. Secondly, a number of individuals who were at one time clients of the
(Page 12)
- first defendant now are clients of the second defendant. Reference is made to these individuals in par 54 through to par 57 of Smith's affidavit.
20 Up to this point I have dealt with the application so far as it concerns the first and second defendants. The discovery sought from each of the defendants is generally the same. The third defendant was a subscribing member of the plaintiff between July 1999 and February 2000. On 2 July 1999 she executed a service agreement: see annexure "RHS17" to Smith's affidavit. From time to time the third defendant has accessed the plaintiff's website and accepted the Terms and Conditions of Use. Further, the third defendant was a former director and major shareholder of the first defendant. The plaintiff seeks discovery from her of documents so as to establish whether or not she was involved in setting up the first defendant's business and preparing its training programmes and training notes.
21 The plaintiff alleges the fourth defendant was employed as a sales executive with InsideTrader from 30 January 1999 until 28 January 2000. In fact the documents produced to support that assertion do not bear it out. Appearing as annexure "RHS18" to Smith's affidavit is a copy of a draft agreement for the provision of contract services between Life in Verse Pty Ltd as trustee for Daycorp Enterprises and Golden Hind. Life in Verse Pty Ltd is a company controlled by the fourth defendant and Daycorp Enterprises is the fourth defendant's family trust. The exhibited agreement is a draft and there is no evidence that any formal agreement was actually signed. The draft agreement makes no mention at all of the fourth defendant. Any connection between the plaintiff and the fourth defendant is dubious at best.
22 Smith alleges in his affidavit (par 44) that the fifth defendant "was employed as an independent contractor, and was contracted by the applicant to conduct sales seminars". No documentary evidence is provided to support this proposition. If the contract was an oral agreement no details are given as to when it came into existence and its terms. It does appear that from time to time the fifth defendant logged on to the plaintiff's website and accepted the terms and conditions.
23 On any view of the matter the application with respect to the third, fourth and fifth defendants is superfluous. There is nothing in the material filed by the plaintiff that suggests that any one of the third, fourth and fifth defendants would have any relevant material not in the possession of the first and second defendants. What the plaintiff is seeking is access to documents held by the first defendant to establish how similar they are to
(Page 13)
- documents used by the plaintiff. The plaintiff also seeks access to documents which were produced in the course of the first defendant establishing its educational programme and its course materials. Access to those documents would undoubtedly disclose what role, if any, was played by the third, fourth and fifth defendants. It is access to the documents of the first two defendants which is the prime interest of the plaintiff.
24 As will be apparent from the foregoing, I have had considerable difficulty working out the contractual relationships between the plaintiff and each of the defendants. It has not been easy given the state of the evidence to reach any conclusion about the rights and liabilities of the plaintiff and each of the defendants. As I have indicated above, in applications of this nature it is to be expected that a plaintiff will not be in a position to provide detail as to its potential claim against a defendant. But in this case the plaintiff must have all of the evidence necessary to establish with some precision the nature of its contractual relationship with the second through to fifth defendants. It is difficult to understand why this evidence was not fully detailed and carefully presented. It represents a deficiency in the plaintiff's case.
25 The evidentiary basis on which the plaintiff alleges that the first defendant is using the education systems developed by the plaintiff is, as is to be expected, rather limited. It is detailed in par 15 through to par 23 of Smith's affidavit. Essentially it relates to two areas. First, the plaintiff says that the business model and training programmes used by the first defendant as detailed on the first defendant's website are substantially similar to those used by the plaintiff. Secondly, the plaintiff produces an extract of its training notes for selecting a stockbroker. This is compared with the first defendant's training notes and it is alleged that they are similar. Not only is the format roughly the same but the variables referred to when considering the selection of a stock broker are almost identical. Counsel for the defendants maintained that a careful comparison of the plaintiff's material and the first defendant's material showed considerable differences which could in no way justify a conclusion that the first defendant's documents were based upon, or plagiarised from, the plaintiff's documents. Without undertaking a detailed analysis of the documents involved it seems to me that there is enough similarity between the two sets of documents to justify the plaintiffs having a suspicion that the first defendant's documents are based upon, if not directly drawn from, the plaintiff's documents. The position can be put no higher than that and, I think, from the plaintiff's point of view, it is the most favourable view of the matter.
(Page 14)
26 The plaintiff, in its written submissions, suggested three possible causes of action against the defendants. These are breach of fiduciary duty, breach of the contractual duty of confidentiality as between the plaintiff and all defendants and breach of copyright. In oral submissions counsel for the plaintiff did not pursue the first two of these possible causes of action. It is not difficult to see why. There is no basis in the evidence for suggesting that a fiduciary relationship exists or ever did exist between the plaintiff and the defendants. With respect to the breach of contract it is not possible to say with any certainty what confidential information has been used by the defendants contrary to the provisions of any agreement. The plaintiff's position is made more difficult by the fact that there is no real dispute that the information itself is in the public domain. That leaves the plaintiff's only cause of action being a claim for breach of copyright.
27 The plaintiff's argument on the copyright issue can be summarised in this way. It was submitted that the plaintiff had a set of materials and protocols for educating prospective sharetraders over which the plaintiff held copyright because, although the material itself was in the public domain, it was organised in an original way. It was further submitted that even from the limited material available, taking into account the history of involvement between the plaintiff and particularly the second defendant, the evidence showed the plaintiff may have a cause of action against the defendants. All defendants denied that they had in any way breached any copyright held by the plaintiff. The defendants maintain that their training protocols were all original and did not draw in any way upon the plaintiff's material. Further, the defendants argued that the existence of any copyright was dubious at best. They referred to evidence which showed that the plaintiff's educational materials were drafted at least in part by the second defendant. It was submitted that under s 35 of the Copyright Act, the copyright now asserted by the plaintiff rested with the second defendant.
28 In my view there is little to be gained by attempting a detailed analysis of incomplete evidence. Furthermore, there are disputes between the deponents to affidavits which cannot be resolved in an application such as this. The state of the evidence and the contested evidence makes only the most tentative of conclusions possible.
29 On balance, I am satisfied that the plaintiff may have a cause of action against the defendants. In reaching this conclusion I have placed the most beneficial possible interpretation on the evidence provided by the plaintiff. In the end, it seems to me that two factors are important. First,
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- the second defendant was for a time engaged by the plaintiff and must have gained some knowledge of the way the plaintiff's business was operated. The second defendant is now the prime mover of the first defendant. This then leads on to the second point. The first defendant is in competition with the plaintiff. From the limited material available there is at least a similarity between the education courses being offered by the plaintiff and the first defendant. It is at least arguable that the plaintiff has copyright protection of its materials because of the original way in which they are organised. On that basis the plaintiff may have a cause of action against the first defendant and perhaps against the other defendants for a breach of copyright.
30 Having reached that conclusion the question then is whether or not it is in the interests of justice that I make orders sought by the plaintiff. On balance I am satisfied that such an order would not be justified. I have reached that conclusion for two main reasons. First, although I am satisfied that the plaintiff may have a cause of action against the defendants, I am by no means satisfied that the plaintiff has a strong case. As I have indicated above, r 4(1) establishes a low threshold; and the plaintiff only just cleared that threshold. The strength of the plaintiff's case is, I think, a relevant consideration in determining whether or not an order should be made. Secondly, and perhaps most importantly, what the plaintiff is seeking is access to the first defendant's training notes and accompanying manuals. It is seeking much other material as well, but it is the training notes and manuals which are of prime importance. This is the first defendant's stock in trade. It is this material which allows the first defendant to market its services and earn its income. It is being asked to disclose this material to a competitor. Even allowing for the fact that any documents disclosed are subject to implied undertakings as to confidentiality, in reality any inspection of the first defendant's most sensitive documents by a competitor is likely to confer upon that competitor a commercial advantage. In exercising my discretion I should take into account that commercial advantage to the plaintiff and only make an order if it is in the interests of justice to do so. When the commercial sensitivity of the documents in question is married up with the strength, or lack of it, of the plaintiff's case, I am satisfied that this is not a proper case in which to make orders sought by the plaintiff.
31 It is possible in a circumstance such as this to make an order allowing inspection of the discovered documents only by the legal representatives of the plaintiff. Those representatives can then advise the plaintiff whether or not a cause of action exists. This approach has about it an air of unreality. Eventually the decision whether or not to proceed
(Page 16)
- with litigation must be made by the client. That decision cannot be fully informed if the client has not had access to the documents on which the decision is to be based. While an order limiting access to the documents to the plaintiff's solicitor is superficially attractive, it is, in my view, impractical.
32 Having reached that conclusion it is unnecessary for me to say anything about the defendants' argument that the plaintiff had already determined to take action and therefore r 4 had no application. In deference to the fact that this point was argued by the parties I should say that I am not satisfied on the evidence that the plaintiff has concluded that action should be taken. Smith says in his affidavit that such a conclusion had not been reached. Faced with that direct evidence and in the absence of cross-examination of Smith, I could not reach a conclusion that a decision had been taken.
33 In large measure throughout these reasons I have dealt with the plaintiff's application against the first and second defendants. In my view the plaintiff's case against these two defendants was somewhat stronger than the case against the other defendants. It follows as I would not make an order against either the first or second defendants, I also would not make any orders against any of the other defendants. The plaintiffs summons will be dismissed. Subject to hearing from the parties I think the proper order is that the plaintiff pay the defendants' costs, including any reserved costs.
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