Deeson Heavy Haulage Pty Ltd v Cox
[2009] QSC 277
•8 September 2009
SUPREME COURT OF QUEENSLAND
CITATION:
Deeson Heavy Haulage Pty Ltd v Cox & Ors [2009] QSC 277
PARTIES:
DEESON HEAVY HAULAGE PTY LTD
Plaintiffs
v
JASON MAURICE COX
First Defendant
And
MARK SHANE WATSON
Second Defendant
And
ELLEN MATTHEWS
Third Defendant
And
CENTRAL QUEENSLAND HEAVY HAULAGE PTY LTD
Fourth Defendant
FILE NO/S:
Mackay Registry S34/08
DIVISION:
Trial Division
PROCEEDING:
Hearing
ORIGINATING COURT:
Supreme Court Mackay
DELIVERED ON:
8 September 2009
DELIVERED AT:
Rockhampton
HEARING DATE:
14 15 16 17 and 18 July 2008 and 16 – 20, 23, 24 , 26 and 27 March 2009
JUDGE:
McMeekin J
ORDER:
1. Judgment for the plaintiff against the first, second and fourth defendants in the sum of $12,120 together with interest in the sum of $1684.68
2. Judgment for the first defendant on his counterclaim against the plaintiff in the sum of $4,760 together with interest in the sum of $718.76
3. The parties have liberty to apply within 7 days.
CATCHWORDS:
EMPLOYMENT LAW – OTHER RIGHTS AND DUTIES OF PARTIES – DUTY OF GOOD FAITH OWED BY EMPLOYEE – where defendant solicited work while employed by the plaintiff - whether breach
EMPLOYMENT LAW – OTHER RIGHTS AND DUTIES OF PARTIES – DUTY OF CONFIDENCE OWED BY EMPLOYEE – whether duties survive termination of contract – whether breach
EQUITY - GENERAL PRINCIPLES – RULES AND MAXIMS OF EQUITY – doctrine of clean hands - whether conduct sufficiently connected to the suit to deprive plaintiff of equitable relief
EQUITY — REMEDIES — MISUSE OF CONFIDENTIAL INFORMATION— Application of "head start" or "springboard concept" to measure of liability.
Corporations Act 2001 (Cth) s 183, s 1317H
Copyright Act 1968 (Cth) s 36
Hearne v Street (2008) 235 CLR 125
Maguire v Makaronis (1997) 188 CLR 449
Malec v JC Hutton Pty Ltd (1990) 169 CLR 638
Mantonella Pty Ltd v Myles Thompson [2009] QCA 80
Wylie v ANI Corporation [2002] 1 Qd R 320
Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172
Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979
Colour Control Centre Pty Ltd & Anor v Ty & Ors [1995] NSWSC 96
United States Surgical Corporation v Hospital Products International Pty Ltd (1982) 2 NSWLR 766
Coco v AN Clark (Engineers) Ltd (1968) 14 IPR 587
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (1994) 37 AILR 5-018
Canadian Aero Service Ltd v. O'Malley (1973) 40 DLR (3d) 371
COUNSEL:
P Land for the plaintiff
C Heyworth-Smith for the defendants
SOLICITORS:
Wallace and Wallace for the plaintiff
Macrossan and Amiet for the defendants
McMeekin J: The plaintiff, Deeson Heavy Haulage Pty Ltd (“Deeson”), is, as its name implies, a company involved in the hauling of heavy loads. It has been involved in that business for several years.[1] It is based in Mackay. Its sole director is Mr Cameron Strathdee.
[1]Incorporated in 1999 but its principal Mr Strathdee traded as Strathdee Haulage for 20 years before that.
The fourth defendant is a competitor of the plaintiff. Its sole director is now the first defendant. It was incorporated on 4 March 2008 by one Phil Reimers, a friend of the first and second defendants, with those defendants then as directors.
Until March of 2008 each of the first, second and third defendants were employees of the plaintiff. The plaintiff claims damages, equitable compensation and an account of profits for breach of duties owed to the plaintiff arising out of the employment relationship between it and the first and second defendants. It is claimed that the fourth defendant was complicit in that breach. Similar claims are also made under s 183 of the Corporations Act 2001. The plaintiff has now discontinued against the third defendant.
The pleadings are complex and extensive. I will not attempt a summary but rather will deal with the individual claims made. Suffice to say at this stage that the plaintiff’s claims broadly fall into two parts. The first relates to breaches of contractual and fiduciary duties said to have occurred prior to the cessation of employment. The second relates to breaches of duties said to be owed despite the cessation of the employment relationship – continuing fiduciary obligations and an obligation of confidence attaching to information learnt by the defendants whilst they were employed by the plaintiff and said to have been used by them after their employment had ceased.
The first defendant counterclaims for leave entitlements of $4,760 owed. There is no significant dispute about that claim.
Before turning to the plaintiff’s claims there is a preliminary issue concerning whether and to what extent the defendants engaged in planning and executing an attack on the plaintiff’s business.
WAS THERE A DELIBERATE PLAN TO DISRUPT THE PLAINTIFF’S BUSINESS?
The Plaintiff’s Characterisation of Background Events
Much of what follows is common ground. The first defendant, Mr Jason Cox, was the plaintiff’s operations manager. He had commenced employment on 4 April 2007. The second defendant, Mr Watson, was the plaintiff’s operations supervisor. He had commenced employment in November 2006. The third defendant, Ellen Matthews, was the plaintiff’s administration manager and had been since June 2007.
On 8 January 2008 the first defendant travelled to Brisbane for the purpose of inspecting a prime mover and float – equipment useful for competing with the plaintiff. The expenses associated with this journey were in part at least associated with allegations of fraud later made by Mr Strathdee against Mr Cox and which he reported to the police – Mr Strathdee’s evidence was not precise as to when a report was first made but it seems likely it was made on the Tuesday or Wednesday, 4 or 5 March 2008.[2] Those allegations have not been pursued in these proceedings and I was informed that the police have taken no action on the complaint.
[2]It seems that a phone report was made at about this time and a meeting held at the local police station on the Friday.
A meeting was held on the evening of 3 March 2008, the day before the incorporation of the fourth defendant, at Mr Reimer’s residence between he and the first, second and third defendants. It is common ground that they discussed the establishment of the fourth defendant as a competitor to the plaintiff.
Three days later, on 6 March 2008, the first defendant left the plaintiff’s employment. The next day the second defendant also left the plaintiff’s employment. Both immediately commenced working for the fourth defendant. On the same day, 7 March, the fourth defendant carried its first loads and for one of the plaintiff’s established customers BIS Logistics (“BIS”). On 11 March the third defendant too left the plaintiff’s employment and she too immediately commenced employment with the fourth defendant.
Until their resignations the first, second and third defendants effectively ran the plaintiff’s business from day to day.
After the departure of the first and second defendants Mr Strathdee discovered that diaries and note books containing information about quotes and other aspects of the plaintiff’s business were found to be missing. They had been in the possession of the first and second defendants. A computer programme essential to the workings of the plaintiff’s business known as a “Job’s Board”[3] did not function properly. Emails had been apparently deleted from the first defendant’s computer station. The plaintiff’s business was substantially disrupted. Mr Strathdee did not know what jobs had been quoted on or what jobs won.
[3]Mr Land described the programme as “a computerised device used by the plaintiff on a daily basis to record an accepted quote when the job is to be performed”
Subsequently Mr Strathdee discovered that the fourth defendant was performing work in respect of jobs that he believed that the first and second defendants had quoted on for the plaintiff. Following an Anton Pillar order and search the missing diary and note books were found still in the possession of the first and second defendants. A computer programming expert retained by the plaintiff established that certain of the plaintiff’s documents, which the plaintiff contended would be of use in starting up a new business, had been sent from the plaintiff’s computers to Karen Reimers, the wife of Mr Phil Reimers.
An email communication was found dated 4 March, emanating from the first defendant’s computer station at the plaintiff’s offices, wherein the first defendant informed one Debbie Pegler, an employee of BIS, that he was intending to set up his own business in competition with the plaintiff and seeking a Supplier Request Form, the completion of which was essential to becoming a subcontractor to BIS. Ms Pegler supplied that form to Mr Cox by email on 4 March.[4]
[4]Ex 101
Further it emerged that in the last days of her employment the third defendant had caused the plaintiff to pay out to the second defendant, and other contractors said to be friendly to the defendants, monies owed to them but contrary to Mr Strathdee’s standing instructions as to the terms of trade concerning time of payment. To do so she factored debts to the ANZ bank in a manner not authorised by Mr Strathdee.
From these facts the plaintiff asserts that a damning picture emerges of the first and second defendants acting in blatant disregard of their obligations to the plaintiff. It is submitted that there was plainly a plan hatched whilst each was an employee of the plaintiff to take as much of the plaintiff’s business as possible and cause as much havoc to the plaintiff as possible to impede competition. The attempt to procure equipment, the coincidence of the timing of their departures, the documents taken, the disruption to the Job’s Board, the unauthorised payments, and the early procuring of work from a valued client, it is said, all confirm that claim. This, the plaintiff says, provides the background to the specific claims made. Close consideration of the evidence, so the plaintiff claims, justifies significant orders against the defendants and their corporate vehicle, the fourth defendant, which is now under the first defendant’s control.
Credibility
Before examining the plaintiff’s case more closely it is necessary to say something about the credibility and reliability of those involved in the dispute. There are matters that reflect very poorly on Mr Strathdee’s reliability, if not honesty.
The proceedings first came before me by way of an application for urgent injunctive relief to restrain the first and second defendants from breaching restraint of trade clauses in their contracts of employment. Mr Strathdee belatedly discovered that there were no written contracts or any such clauses. He apparently did not know that he had not asked his employees to execute any contracts.
A significant concern about the plaintiff’s bona fides is raised by an email which became Exhibit 169 – an email sent at 8.12 pm on 8 March from Mr Cox’s computer station to Mr Strathdee’s email address forwarding an email dated 5 March from Ms Pegler to Mr Cox and the reply. The time and date is significant. By then Mr Cox had left the plaintiff’s employment, handed in his keys and so had no access to the computer. As well Mr Strathdee had had the passwords changed and so the computers could not be operated by Mr Cox. Finally, there was yet to be any attempt at recovery of emails. The inferences include that Mr Cox did not send the email and that the computer was in the state that Mr Cox left it on his departure.
The email concerns a request for a quote by Ms Pegler for a string of 12 jobs for BIS and Mr Cox’s quote of 5 March. The exhibit was tendered by the defendants from the plaintiff’s documents. The plaintiff alleged against the defendants that this was one of the emails that had been deleted[5] and that the first defendant had caused the plaintiff to be deprived of the work mentioned in the quote – work either already won by the plaintiff or which the plaintiff was highly likely to win.[6]
[5]See paragraph 19A(z) of the Further Amended Statement of Claim (No 3) – all future references to the “Statement of Claim” are to this document.
[6]See paragraph 19B(k) and 19D(b) of the Statement of Claim
Through cross-examination based on the plaintiff’s own documents the defendants demonstrated that, far from the fourth defendant taking the benefit of these contracts, the plaintiff had in fact performed the contracts and had been paid for them. This work occurred after the defendants’ departure from the plaintiff and when, presumably, Mr Strathdee had the day to day management of the company.
Plainly enough, far from being deleted the email was still on the computer system, and discoverable, after Mr Cox’s departure. The only inference possible is that the email was in fact discovered, expressly made known to Mr Strathdee and that he acted on it.
I am mindful of Mr Land’s submission that the document was tendered very late in the trial and that Mr Strathdee was not given the opportunity to respond to the implications I have referred to but I observe that there was no application to re-open the plaintiff’s case or call evidence in rebuttal. Nor could Mr Land offer any alternative explanation.
This was a remarkable error. One would expect Mr Strathdee to be acutely conscious of the work that his company performed after the departure of the first and second defendants. No explanation was ever advanced for this error.
Nor is this the only claim made by the plaintiff against the defendants which is without substance. The defendants have identified no less than 11 further claims made against them for diverting work away from the plaintiff and to themselves which are beyond any argument baseless. In some cases the plaintiff did the work claimed. In some the work was done by third parties. In some the work was not done by anyone.
One assumes that allegations, and allegations of the most serious kind involving breach of duties of good faith, are not made in proceedings filed in a court of law without careful consideration and an adequate basis for them. Plainly that care to ensure a proper basis for the claims made was not recognised here. Whilst it may be explicable that Mr Strathdee would not know the detail of his companies’ contracts whilst the first and second defendants had the day to day management that explanation cannot apply to work done whilst he had the day to day management. The most charitable explanation for these “errors” is that Mr Strathdee has no idea of the business of his own company and simply assumed the worst against his former employees. That is consistent with the defendants’ evidence as to his lack of attention to his own business whilst they were managing it.
A third problem for Mr Strathdee concerns a letter that he wrote on 7 May 2008 and subsequent to the interlocutory hearing before me.[7] The plaintiff obtained certain documents, including details of the fourth defendant’s financial operations, from the defendants as a result of the interlocutory orders made. The documents were plainly confidential to the defendants. Mr Strathdee wrote to BIS referring to these confidential documents and using information from them to allege inappropriate conduct by the defendants in their dealings with BIS. Plainly Mr Strathdee had no right to use the documents in this way. It is ironic that he complains about the defendants’ conduct in using his confidential information but has no compunction about using the defendants’ confidential information to attempt to harm the defendants’ commercial reputation. Allied with this is the use by Mr Strathdee of information, similarly obtained, to inform Mr Nottingham of NQX Freight System of certain confidential pricing information to the detriment of the fourth defendant. Again this does not reflect well on Mr Strathdee.
[7]Ex 79
At the least the foregoing matters mean that I can place no reliance on anything Mr Strathdee says concerning the affairs of his company unless confirmed by independent evidence. As well caution needs to be exercised with respect to any allegation that the plaintiff makes as Mr Strathdee seems to be unconcerned to ensure that claims made are accurate.
Save for Mr Strathdee the impression I had was that the witnesses, generally, were endeavouring to be honest and accurate.
I have outlined above the plaintiff’s interpretation of the background picture. Other facts put things in a different light.
The Defendants’ Background
Each of the first and second defendants was well known in the heavy haulage industry. They were well regarded. They had long experience going back over decades. They were well aware of who the principal clients in the industry were and how to go about heavy haulage work. They had known Mr Strathdee, and he them, for many years.
The Second Defendant’s Relationship with the Plaintiff
The relationship between the second defendant and the plaintiff was not just that of employer-employee. For the first six months or so of its existence Mr Watson had been a co-director of the plaintiff with Mr Strathdee. More significantly, when he returned as operations supervisor in November 2006, the plaintiff engaged the second defendant’s company, Townsville Heavy Haulage Pty Ltd, as a sub contractor. The plaintiff was not the only customer of Townsville Heavy Haulage Pty Ltd. That company owned three vehicles. It was free to perform work for other firms that competed with the plaintiff. It in fact did so. This was done with the knowledge and consent of Mr Strathdee.[8]
[8]Whilst Mr Strathdee seemed to dispute that at one point in his cross-examination (T3-47/50) Mr Watson was not challenged on it and it seems unlikely that Mr Strathdee could not know of such work going on.
It is common ground that Mr Watson gave notice to the plaintiff on 4 February 2008 that he intended to resign on 7 March. He explained that he then planned to return to Townsville where he had his home base. He had been travelling to and from there to work for the plaintiff for over 14 months. It was common ground that that was intended originally to be a short term arrangement. He had tired of the travel. I accept his explanation. It is inherently credible. I observe that the giving of one month’s notice is not a step one expects an employee to take who has the intention to maximise the damage to his former employer’s business.
The First Defendant’s Plans
It is clear that Mr Cox was contemplating his future in early 2008 but far from clear that he decided on a course of action with any certainty. The sub-contract aspect of the relationship between the second defendant and the plaintiff that I have mentioned is significant. It caused Mr Cox to contemplate the same relationship. When he went to Brisbane on 8 January 2008 to look at vehicles one possibility was that he would stay with Deesons. He knew at that time that delivery would take many months – in the order of 14 months. This was a first step in a very long term project. I believe Mr Cox in these claims. Two things are worth noting - no order was in fact placed until April, well after his departure from the plaintiff; and secondly, he did not keep this trip a secret: He discussed the purpose of the trip with Mr Taylor, a co-employee, prior to going to Brisbane,[9] and with Mr Strathdee in late February. There was no evidence that Mr Cox had reason to think that Mr Taylor was partial to Mr Cox’s cause or anti-pathetic to Mr Strathdee.
[9]T5 – 74/10
The Establishment of the Fourth Defendant
The genesis of the establishment of the fourth defendant on 4 March and the explanation for the sudden departure of Mr Cox and Ms Matthews from the plaintiff’s employment a few days later lies in the events of the week-end of 1-2 March 2008. Mr Strathdee and Mr Reimers were at a hotel in Mackay on the evening 1 March 2008, a Saturday. Mr Strathdee told Mr Reimers that he was having the first, second and third defendants investigated for credit card fraud and that he was going to gaol them. He said that he would be running the plaintiff on his own by Monday.
Mr Cox learnt of the conversation from Mr Reimers, was upset by what he regarded as false allegations being made against him, and determined to leave the plaintiff’s employment. He and Mr Strathdee disagree on whether Mr Cox gave notice. They agree that they met early on the Monday morning. Mr Strathdee says that Mr Cox agreed to pay monies back to the company and was to go on working as usual. Mr Cox says that he indicated that he would work out the week but no more as he could not work under suspicion. He felt that to leave immediately would be tantamount to admitting guilt.
Bearing in mind the high regard in which Mr Cox was evidently held by others in the industry, the position of trust that he had enjoyed with the plaintiff, and the degree of upset likely to be caused to a person in such a position by not only being accused of fraud but knowing that the allegation had been published on a social occasion at a hotel to a third party who knew Mr Cox, and without giving him the chance to first respond to the accusations, I consider that the probabilities strongly favour Mr Cox’s version. Some evidence of his feelings about the matter can be gained from the fact that he visited Mr Strathdee at his home at 4am on the Monday to discuss the allegations. I should record that Mr Cox impressed as a straight forward character in the witness box. Finally, Mr Strathdee’s version that the dispute was substantially resolved and that Mr Cox was to continue working for the plaintiff is not consistent with him reporting the allegations against Mr Cox to police on the Tuesday or Wednesday following the confrontation on the Monday morning.
I am satisfied that by the Monday morning Mr Cox had given notice that his employment would end within the week.
Mr Reimers says that he called the three who had been accused together on the Monday night at his home for a meeting. He suggested that they become involved in a new venture. Each of the men was to put in $10,000. It was to be run by Jason Cox. Messrs Reimers and Watson would make their trucks available to the business. There had been no prior discussion of any such venture. There was no discussion of deliberate action to disrupt the plaintiff’s business or to take contracts already won by the plaintiff.
I accept Mr Reimers’ account. It is in accord with the account of the others present. The claim that there had been no prior discussion of such a venture is consistent too with evidence led from the co–employee, Mr Taylor, of Mr Cox telling him that Mr Cox was undecided as to his future during the Monday and before the meeting.[10] Another witness, Andrew Lanser, the operations manager of the MCG Group, also recalled a conversation in “early March” with Mr Cox whilst he was still at Deesons in which he was told that Mr Cox was leaving Deesons, but in which he made no reference to what his plans were. If the conversation occurred on the Monday it is consistent with there being no plan in place before the meeting that night. Whenever it occurred it is inconsistent with the notion that Mr Cox was working actively to promote his own interests to the detriment of the plaintiff.
[10]T5 - T76/20
The plaintiff relies on the evidence of a Ms Pegler on this point. She swore that she was informed by Mr Cox on the Monday that he was forming a new business. I found her evidence as to the probable date of the call unpersuasive for two reasons. First, she was far from certain in her manner when giving evidence as to dates. She made it plain that her recollection was not certain – she said that it “could” have been the Monday. Second, she sent an email on the Wednesday, 5 March,[11] in which she said “If you pull the pin…” suggesting that whatever had been said to her by Mr Cox before then had not been conclusive.
[11]Ex 15
The plaintiff’s submission that the defendants’ account of the nature of the discussions at the meeting ought to be rejected assumes an improper motive based on inferences that minimise if they do not completely overlook the impact of Mr Strathdee’s conduct over the week-end.
Early Payment to Subcontractors
The third defendant was not called by either party. The plaintiff discontinued the proceedings against her. According to Mr Strathdee she gave notice earlier in the week before she left – she left on 11 March.
It seems clear that Ms Matthews did pay the second defendant’s company and two other contractors, T & L Barnes Bulk Haulage Pty Ltd and Full Tilt Transport, before their due time and failed to pay other contractors who were due their monies. The plaintiff argues that an inference should be drawn that this was part of a deliberate plan. Mr Land, who appeared for the plaintiff, submitted that her actions were done to ensure that Mr Watson’s company was “cashed up” to enable it to better compete with the plaintiff, and to curry favour with the other subcontractors so they would assist the fourth defendant in its new venture.
Mr Watson claims that he merely asked Ms Matthews “how the money situation was” as he was getting a bit low and sought payment for the January invoices – to which he was entitled. Such an enquiry is consistent with the fact that he was leaving, as all knew, in a few days time. He received payment for the February invoices as well, but apparently not all such invoices. Plainly enough, the early payment would have helped the second defendant. However, two factors diminish the force of the plaintiff’s argument. Early payment to Mr Watson was not uncommon. In any case he was paid every two weeks, he said, so the acceleration to him was of a very short period.
What motivation Ms Matthews had in paying monies early to the other subcontractor is little more than speculation. Her motivation was not the subject of admissible evidence. Bearing in mind that Mr Reimers told her that Mr Strathdee suspected both Mr Cox and her of defrauding the plaintiff, that she had worked closely with Mr Cox through her entire time at the plaintiff, and resigned apparently to join him in his new venture, one can readily imagine where her sympathies lay. Whilst that is consistent with the inference that the plaintiff seeks be drawn it does not establish that there was a plan or that the three were working in concert.
The first and second defendants denied that they knew of any intention on Ms Matthews’ part to make early payment to contractors or not to pay monies to contractors owed. No evidence was led that the sub contractors paid were in any sense of particular importance to the new venture, or that there was any real advantage gained by the payment. Mr Land’s submission seemed to me to suffer from some inherent problems. Why would early payments be accredited to Ms Matthews or the fourth defendant and not Deesons? And if early payments were to be credited to Ms Matthews and not Deesons why would a failure to pay not attract to her and the fourth defendant opprobrium from the contractors not paid on time? Further, there are other possible reasons for the payments other than a sinister one.
It is not shown that the third defendant’s actions had any significant impact on the plaintiff or were the product of any plan. In the absence of any direct evidence I am not prepared to draw the inference the plaintiff contends for.
The Jobs’ Board
The cause of the disruption to the Jobs’ Board was never established by the plaintiff. Again the argument that it was the work of the defendants was based on the coincidence between their leaving and the onset of the disruption and an assumed motive.
The only direct evidence called on the point was from the person who created the programme, Ms Davidson. As well as creating the programme she attended at the plaintiff’s premises on 9 March to fix the problem. Ms Davidson thought that the disruption was caused by the attempt by Mr Strathdee to use the programme with a newer version of a Microsoft programme, Vista, which was on Mr Strathdee’s computer and not on Mr Cox’s computer. Apparently the Jobs Board hadn’t been tested on Mr Strathdee’s computer whenever that computer was first obtained. This is consistent with Mr Strathdee paying little attention to his business.
Thus the only explanation proffered, and from an independent witness with some expertise, is an innocent and not improbable one. It explains away the coincidence relied on by the plaintiff.
Presumably Ms Davidson explained her opinions to Mr Strathdee when she attended to fix the malfunctioning Jobs’ Board. Certainly no complaint was made in cross-examination that her opinions were news to Mr Strathdee. No evidence was called to contradict her opinions. The first and second defendants, whatever their expertise in running trucking companies, were not shown to know anything about computers. How they might have sabotaged the plaintiff’s computers was not the subject of any evidence. I am not persuaded that they did.
Diaries and Note Books
The diaries and note books that the plaintiff complains were taken were plainly the property of the plaintiff. The defendants should not have taken those documents. The defendants contend that their taking was not malicious but an oversight. Two things can be said about these documents and their taking. First, they are not well organised. Finding information in them, even for the authors, would not be a simple task. They were used to record things said usually “on the run” and as an aide memoir. If a quote was won then the system was to place the details onto the Jobs Board. Second, they were found by the independent solicitor, acting under the Anton Pillar order, in a box[12] – the defendants say the box they left the plaintiff’s office in. The defendants deny using the material. The place in which they were found is consistent with that claim. There is nothing to indicate they were ever used.
[12]T5-69/20-60
Deletion of Emails
I will deal with the evidence in more detail later in respect of specific claims. At this point I observe that Mr Cox explained that he did delete emails but only from his Inbox, not the Sent box. He did so, he says, simply to leave a clear screen, which he did from time to time in the normal course of business. Whilst I can readily understand the plaintiff’s suspicions about the matter the compelling point is that Mr Cox did not delete from the Sent box. That is the place that contained the emails confirming jobs won and the terms on which they had been won. If the plan was to disrupt the plaintiff’s business then this was a remarkable oversight.
The evidence concerning the email found on the plaintiff’s computer (Exhibit 169) previously discussed is consistent with the first defendant’s claim that he did not deliberately delete emails of significance to the plaintiff’s business.
On balance I accept the first defendant’s explanation.
Obtaining of Work
I will deal with the detail of the claims concerning the obtaining of work below. I merely observe four things at this point. First, Mrs Pegler, who provided the Supplier Request Form on 4 March and the work that the fourth defendant commenced on the Friday 7 March, evidently held Mr Cox in high regard. It is plain that she supported Mr Cox because of her perception of his personal qualities.
Second, a considerable difficulty for the plaintiff with this argument lies in the 12 jobs that I have previously mentioned that the defendants were accused of taking and did not take. On 5 March Mr Cox quoted for these 12 jobs – not on behalf of the fourth defendant but on behalf of the plaintiff. Mr Land’s principal argument is that the BIS work was particularly valuable – it was not subject to interruption by rainfall, which had bedevilled work in the months leading up to these events, and it required no police escort ie minimal organisation. It was profitable work. Thus he argued it was ideal work for the fourth defendant to secure for itself. All this is accurate enough. But if Mr Cox was indeed acting as the plaintiff’s side contends then this was precisely the work one would expect him to snare for himself. Yet he behaved as a loyal employee should behave.
Third, it is an interesting feature of the case that Mr Cox evidently did not complete the Supplier Request Form forwarded by Mrs Pegler on 4 March. Mrs Pegler completed it for the fourth defendant the following week. Again that is consistent with the first defendant not actively seeking to take the plaintiff’s business during the last days of his employment.
Four, the plaintiff called no customer, other than Ms Pegler, to support the claim of solicitation of work. Given the number of customers that the plaintiff claimed to have this lack of independent evidence supporting the claim says a great deal. Conversely the defendants called three witnesses who had been customers of the plaintiff and who had by the time of trial used the fourth defendant[13] and each denied being approached by the defendants soliciting work for the fourth defendant when employed by the plaintiff.
[13]Lanser (MCG Group), Dillon (JLM Transport) and Bonnet (Allied)
Conclusion Concerning Planning
The point of this brief recital is that much of what the plaintiff relied on as indicating a deliberate plan by the defendants to disrupt and take its business is explained away. If there were breaches of duty then I am satisfied that they were not done with any intent at unfair dealing.
That of course does not save the defendants from the consequences of their conduct. It is not necessary for the plaintiff to show that any breach of a fiduciary or contractual duty was done dishonestly. However where there is no direct evidence and the plaintiff relies on an inference to be drawn about the defendants’ conduct based on alleged intention to cause harm to the plaintiff then I am not inclined to draw such an inference.
The Heavy Haulage Business
Before turning to the particular claims made it may be helpful to make general observations about the heavy haulage business. There are two important aspects of the heavy haulage business relevant to the proceedings. First, a deal of the work is performed by sub contractors. A company such as the plaintiff will not necessarily have the equipment or manpower to perform the work taken on and within the time frame expected by the client.
Second, there are no long term contracts with clients. Each job is separately quoted for. The industry is competitive. It is not uncommon for a client to obtain several quotes from the firms with which the plaintiff competed. Price was not the only criterion that determined a winning quote. Availability of equipment, a “can-do” attitude and personal relationships all played a part.
THE PLAINTIFF’S CLAIMS
The Law – Contractual & Fiduciary Duties
It is not in dispute that implicit in every contract of employment is an implied term under which employees are subject to a duty of good faith and fidelity for the period of their employment. The scope and content of that duty will vary according to the nature and circumstances of the contract of employment.[14]
[14]Colour Control Centre Pty Ltd & Anor v Ty & Ors, [1995] NSWSC 96 (24 October 1995) at [45] per Santow J citing Wessex Dairies Ltd v. Smith (1935) 2 KB 80 at 84-5; Hivac Ltd v. Park Royal Scientific Instruments Ltd (1946) 1 Ch 169, 1 All ER 350; Timber Engineering Co Pty Ltd v. Anderson (1980) 2 NSWLR 488; Schindler Lifts Australia Pty Ltd v. Debelak (1989) 89 ALR 275 at 300.
I turn then to the content of the duties thereby owed. I will mention the broad principles that apply at this stage. As the terms of the employment contracts were not detailed in any document, or indeed expressly agreed, the duties owed will be governed entirely by the obligations implied by law into such contracts and relationships.
Santow J summarised the principles relevant to this issue, involving as they do the implied duty of fidelity and good faith in contract, in Colour Control Centre Pty Ltd & Anor v Ty & Ors in these terms:
“First, an employee may not retain, without approval, any profit or property the opportunity for the acquisition of which was furnished by the employment: Willey v. Syan (1937) 57 CLR 200; London Corporation v. Appleyard (1963) 2 All ER 834; 1 WLR 982; Reading v. The King (1948) 2 All ER 27 at 28; Reading v. A-G [1951] UKHL 1; (1951) AC 507 at 518 per Lord Oaksey.
Second, although in general employees are entitled to work in competition with their employer in their own time, special circumstances may give rise to an implied duty not to compete: Hivac Ltd v. Park Royal Scientific Instruments Ltd (supra). In particular, a director or senior employee who takes up a business opportunity within the scope of the company's actual or potential line of business, without the consent of the company upon full disclosure of the facts, may be required to account to the company for any profit made or to compensate it for any loss suffered: Cook v. Deeks (1916) 1 AC 554 at 563-4; (1916-17) All ER 285; Pacifica Shipping Co Ltd v. Anderson (1985) 2 NZCLC 96-040; (1986) 2 NZLR 328, Green and Cara Pty Ltd v. Bestobell Industries Pty Ltd (1982) WAR 1. The employee may be liable to account for such profit even where its acquisition did not adversely effect the employer: Boston Deep Sea Fishing and Ice Co v. Ansell (1888) 39 Ch D 339.”[15]
[15][1995] NSWSC 96 at [46]
In my view each of the first and second defendants were senior employees subject to the duties that Santow J mentioned.
Further the defendants do not dispute that fiduciary duties were owed by the first and second defendants to the plaintiff at least so long as the employment relationship continued. That such a relationship exists in this context is well established.[16] However the scope and content of the obligations thereby imposed depend on the facts of the case.[17]
[16]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96; Pilmer v The Duke Group Ltd (in liq) (2001) 207 CLR 165 at [70].
[17]Colour Control Centre Pty Ltd & Anor v Ty & Ors [1995] NSWSC 96 (24 October 1995) at [49]-[50]
The material facts here include:
(a) Each of the first and second defendants was part of the senior management of a corporate employer. They answered only to Mr Strathdee and he, as I have observed, paid scant regard to the business;
(b) The defendants represented the plaintiff to its customers, both new and existing;
(c) By reason of their senior positions they effectively had the day to day management of the plaintiff. They were responsible for quoting for work and ensuring performance of the work won;
(d) Between them the defendants had full access to the plaintiff’s customers and records.
If it be necessary to so find it is plain that as a result of these matters there was a position of disadvantage or vulnerability on the part of the plaintiff vis-à-vis the first and second defendants which caused the plaintiff to place reliance on them.
Being part of the senior management of a corporation, the first and second defendants have imposed on them a more exacting duty than would be expected of more junior employees.[18] Santow J has felicitously characterised this duty as one imposing “strict norms of exemplary behaviour”.[19]
[18]Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 at 16, per Kennedy J; WA Fork Truck Distributors Pty Ltd v Jones (2003) WASC 102 at [56] per Pullin J
[19]Colour Control Centre Pty Ltd & Anor v Ty & Ors, [1995] NSWSC 96 at [54]
O'Keefe CJ set out the fiduciary obligations arising in the employment context more compendiously in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd:
"Those duties of an employee which are normally characterised as fiduciary relevantly include:
(i) to act honestly in the service of the employer. This is sometimes expressed as a duty of loyalty or good faith and in appropriate cases survives the termination of the employment. Breaches of this duty include the taking of bribes or secret commissions or acting in one's own interests or the interests of another rather than in the interests of the employer;
(ii) not to benefit him or herself to the detriment of the employer;
(iii) to treat confidential information as such and not disclose it to competitors."[20]
[20]at 52
Mr Land placed some reliance on the oft cited judgment of Laskin J of the Canadian Court of Appeal in Canadian Aero Service Ltd v O'Malley[21]:
“Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer...is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to he properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company.
An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, the ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that lead him to the opportunity which he later acquired."
[21](1973) 40 DLR (3d) 371 at 382
Of significance to this case are two aspects of that statement of principle. First, Mr Land emphasised that given the nature of the heavy haulage business the reference to “maturing business opportunity” is particularly apt here. There are no long term contracts. A contract might not be won, but very nearly so, and the plaintiff was entitled to have such interests protected. I accept that that is right.
Second, I do not accept that the defendants resignations were “prompted or influenced by a wish to acquire for [themselves] [any] opportunity sought by the company”. My findings set out above dispose of any such argument.
I turn now to the breaches of duty alleged by the plaintiff.
Acquisition of the Kenworth Prime Mover and Trailer - Paragraph 19A(a),(b) and (c) of the Statement of Claim
The plaintiff alleges that the first defendant breached the duties owed to the plaintiff in making enquiries regarding the acquisition of a Kenworth prime mover and trailer in January 2008.
The mere enquiry about the acquisition of a prime mover by an employee in the position of the first defendant cannot, in my view, be in breach of any duty owed to the plaintiff. It was not done in conjunction with any other act designed to set the defendants or any of them up in competition with the plaintiff.
The most relevant of the many authorities helpfully collected by the parties’ legal representatives seems to me to be the statement by McLelland J in United States Surgical Corporation v Hospital Products International Pty Ltd:
“A failure by an employee to disclose to his employer his preparations to compete may constitute a breach of the employment contract, but would not necessarily do so, depending upon the position and duties of the employee, the nature of the acts of preparation, the effects of non-disclosure upon the employer’s business interests, and the motives of the employee…”[22]
[22](1982) 2 NSWLR 766 at 807 per McLelland J referring to Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 and British Syphon Co Ltd v Homewood [1956] 1 WLR 1190
Here the motives were benign[23], the effects of the non disclosure minimal to non-existent, the first defendant’s duties were not concerned with the procurement of equipment for the plaintiff, and the intended purchase 14 months away. I cannot see any basis for a finding of a breach of any duty owed.
[23]See my discussion above at [34]
Recruitment of Employees
Mr Land submits that “the resignation (virtually en masse) of the three top personnel of Deeson to work for the fourth defendant” constituted a breach of the fiduciary duties owed. He submitted that the defendants’ actions could be properly characterised as the making of secret arrangements during their employment to compete with his employer after termination of the employment and hence in breach of the fiduciary duty owed. There is certainly authority for the broad statement that such secret arrangements can be in breach of duty.[24]
[24]See Hospital Products Ltd v United States Surgical Corporation (supra) at 105 per Mason J; McPherson's Ltd v Tate (1993) 35 AILR 225; Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 82
However I know of no principle that would prevent an employee from resigning their employment in the absence of any contractual obligation to continue in service. I do not perceive that position changes merely because two other employees also seek to resign at the same time. Nor does it seem to me to be relevant that between them the three defendants effectively ran the plaintiff company.
The case is even plainer in relation to the second defendant – he had given notice a month before his departure. No authority was cited for the proposition that he came under some obligation not to leave because of the later decisions of the first and third defendants to also leave.
If the intent of the submission be that the breach is in the taking up of employment with a competitor, the fourth defendant, then I observe that no authority was cited in support of the proposition and such a submission would run counter to well established principle. In GD Searle & Co Ltd v Celltech Ltd. Cumming-Bruce LJ observed in relation to the “free movement of labour”:
“The law has always looked with favour upon the efforts of employees to advance themselves…. In the absence of restrictive covenants, there is nothing in the general law to prevent a number of employees in concert deciding to leave their employer and set themselves up in competition with him”.[25]
[25][1982] FSR 92 at 101-102 sitting in the UK Court of Appeal. See also Robb v Green [1895] 2 QB 1 at p 15 per Hawkins J; Schilling v Kidd Garrett Ltd {1977] NZLR 243 per Moller J at first instance (at p 244-245). That employees have the right to make arrangements to compete whilst still employed is implicit in the citation with evident approval by Mason J (as he then was) of the American decision of Maryland Metals Inc v Metzner in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at p104 -105
Finally Mr Land submitted that there was an obligation on the defendants to each inform the plaintiff of the fact that they were each taking up employment with the fourth defendant and a failure to do so constituted a breach of the fiduciary duties imposed. I accept that in some circumstances there would come onto a member of senior management an obligation to tell the employer details of any proposed plan to compete against the employer. But what of the circumstances here?
From the time of his meeting with the first defendant on the Monday, 3 March, at 4 am Mr Strathdee could not but have appreciated that the first defendant was almost inevitably going to take up employment with a competitor – he had worked in the industry for the previous two decades, was knowledgeable concerning it, and had no experience in any other business. Nor could Mr Strathdee have been under any illusion that his relationship with the second defendant was likely to continue given the allegation of impropriety made by Mr Strathdee against him and communicated to Mr Reimers. The second defendant was already supplying his vehicle to at least one other competitor even whilst contracting to the plaintiff. That he would almost certainly contract with other competitors or expand his own business must have been evident to Mr Strathdee.
In addition there arises the question of the extent to which the fiduciary duties under discussion apply to an employee in the position of the second defendant. He was permitted by his contract to pursue his own interests at least to some extent. I had the impression that there had been no discussion delineating the boundaries to which he was entitled to pursue his own interests. It is far from clear that the “rigorous standards” usually applicable to a trustee apply in those circumstances.[26]
[26]See Hospital Products Ltd v United States Surgical (supra) at p102 per Mason J
So the question becomes – in the absence of any contractual obligation to do so, was it a breach of the duty of good faith not to inform the employer of the defendants’ future employment plans to set up a rival company in circumstances where the principal was well aware the employees were leaving, where the effect of those probable plans were self evident, and where he made no enquiry of them? I cannot see why. The significant point is that Mr Strathdee was on notice of their impending departure.
These submissions were made in the context of the broader submission that the recruitment of the plaintiff’s three most senior personnel to work for the fourth defendant, and whilst all were in employment with the plaintiff, should be considered as part of the preparation undertaken for the new business venture.
I accept as correct the proposition that the recruiting of the employer's key staff for a new business may involve a breach of contractual or fiduciary duties.[27] Mr Land made particular reference to the comments in Warman International v Dwyer concerning the “persuasion of employees of Warman to leave Warman and join the [the defendants new agency]” by the defendant when head of the Warman’s local agency as being a “clear case of a fiduciary breaching his obligations”.[28]
[27]E.g. see AF Ralston Associates Ltd v Ralston [1973] NI 229; Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] 1 Ch 469; WA Fork Truck Distributors Pty Ltd v Jones [2003] WASC 102 per Pullin J at [60]
[28](1994-95) 182 CLR 544 at p 556 and 566
The fallacy in the application of that principle to this case is that here the cause of the employees leaving the plaintiff was not any persuasion by one or other of the defendants. The second defendant had already decided to leave for unrelated reasons. Plainly the trigger for the discontent and resignations of the first and third defendants was Mr Strathdee’s own actions in making serious allegations of dishonesty against them. The plan to set up in competition emerged only after the decisions to leave the plaintiff’s employment had been taken.
Mr Land particularly relied on WA Fork Truck Distributors Pty Ltd v Jones[29] as exemplifying the application of the doctrine applicable to this aspect of the plaintiff’s claims. That case is instructive if only to highlight the care that must be exercised, and which the High Court has stressed, in closely examining the facts of each case in applying these equitable principles. As Pullin J made clear in that case: “…whether such approaches constitute a breach of contract or fiduciary duties, depends upon the manner in which the approach is made.”[30]
[29](2003) WASC 102
[30]At [61] citing McPherson's Ltd v Tate (1993) 35 AILR 225 at p 225
In WA Fork Truck Distributors the relevant defendant, a member of senior management, had secretly planned to set up a business in competition with his employer for 12 months before resigning. He had an accountant prepare business plans, registered a business name four months before his intended resignation, approached key members of the plaintiff to join his new venture, arranged finance, organised for the purchase of equipment essential to competing, and all of this on company time. Deliberate efforts were made to keep these activities secret from his employer. These facts are in stark contrast to the circumstances pertaining here.
Here the employer well knew that each of the first and second defendants was leaving. Timely notice had been given – in the case of the first defendant either at the time of, or within hours of, forming the intent to resign, in the case of the second defendant a month before he in fact left. The plan to form a new venture emerged in the course of a bar-b-que on the Monday night, three days before the new venture started in business. There was no business plan, no finance arranged and no employees approached save the third defendant who had been the subject of the allegations of dishonesty. In any case it seems apparent that the approach to her was by Mr Reimers, not the defendants, and he was under no obligation to the plaintiff.[31] The planning, to the extent that there was any planning, was undertaken in their own time. The only coincidence between the facts here and those in WA Fork Truck Distributors is that the principal, here Mr Strathdee, was unaware, but here only over three days, of the intention to operate in competition.
[31]GD Searle & Co Ltd v Celltech Ltd. [1982] FSR 92 at p102 per Cumming-Bruce LJ citing Inland Revenue Commissioners v Hambrook [1956] 2 KB 641
I am not satisfied that there was any breach as alleged.
The BIS Work
As part of its complaint that the defendants were in breach of the contractual and fiduciary duties owed the plaintiff contends that the first defendant, while still an employee, solicited work from Ms Pegler of BIS.
This is evidenced, it is said, in three ways. First, there was a conversation early in the week of Mr Cox’s departure between Ms Pegler and Mr Cox, when he was still an employee, and in his employer’s time, in which he informed her that he was setting up his own haulage business, would have a couple of trucks[32], and asked her if she would be interested in using his company. She indicated that she would. That is consistent with Ms Pegler’s account of the conversation. Second, consistently it is said with that solicitation and as a result of it, the fourth defendant carried its first loads on the Friday of that week and for BIS. There is no dispute about the fact of carriage. Third, the fourth defendant has enjoyed great support from BIS ever since and the plaintiff has received little support. That too is true.
[32]Incidentally on this point Mr Land submitted that the reference to “a couple of trucks” could only be a reference to a plan to have available the truck of T&L Barnes Bulk Haulage. That is not necessarily so – the second defendant had three trucks and there was no evidence that they were not all available.
The first defendant does not dispute that there was a phone call earlier in the week. He does dispute that he sought work in the course of that call or that the loads carried on the Friday were as a result of that phone conversation earlier in the week. The only independent evidence[33] on that latter point is from Ms Pegler who thought that the arrangement to carry the loads was made on the day that the loads were carried. I see no good reason to reject her account. Thus I proceed on the basis that the only possible “solicitation” that occurred in the course of employment was as Ms Pegler described. I note that Ms Pegler emphatically denied that there was any conversation with the first defendant, much less arrangement, that no further work would go to the plaintiff. I accept her account. Apart from her honest demeanour her evidence was consistent with that given by all other witnesses on the point – the first defendant had no discussions with other potential clients, whilst he was still employed at Deesons, seeking to further his own interests.[34]
[33]I take it that Mr Land contends that Ms Pegler is not independent of Mr Cox given his reference to her evidence being given pursuant to subpoena. A reluctance to become involved in the dispute of others is hardly evidence of bias. I am conscious of her holding Mr Cox’s skills in the performance of his work in high regard however I detected no partisanship.
[34]Lanser, Dillon and Bonett
The issues therefore are whether the conduct described by Ms Pegler as having occurred in the phone call a few days before the commencement of the business of the fourth defendant constitutes a breach of the duties owed and if so what consequences follow.
I find that the first defendant was in breach of his contractual obligation of good faith and fidelity and the fiduciary obligations imposed on him in informing Ms Pegler of his intention to commence business on his own account and in enquiring whether she would support the business. I do so however with some hesitation.
My concern is that the comment by the first defendant was, at worst, an inducement to take BIS’s custom away from the plaintiff of only the most trifling kind. Information that the defendants were in business would inevitably become known to people such as Ms Pegler. Indeed it is conceded that the defendants were entitled, upon cessation of their employment, to compete with the plaintiff notwithstanding any obligation of good faith owed.[35] Thus it is conceded that Mr Cox would have been perfectly entitled to make contact with Ms Pegler on the Friday, a few days after the day he did make the contact, and inform her of the existence of his new business, as by then his employment would have ceased.
[35]See e.g. Independent Management Resources Pty Ltd v Brown [1987] VR 605; Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275; McPherson’s Ltd v Tate (1993) 35 AILR 225
However the authorities seem to support the plaintiff. Mr Land principally relied on Wessex Dairies Ltd v Smith[36] for the proposition that such conduct was in breach of duty. The other authorities to which he referred[37] make reference back to this decision. Wessex Dairies concerned an employed milkman canvassing support for his proposed business in the course of his round by informing customers that he proposed to set up his own business from that evening. The Court of Appeal held that he was in breach of his implied contractual obligation to act with fidelity to his employer which obligation lasted, it was said, “until the last hour of his service”.[38] The facts in Wessex Dairies are very close to the facts here. No ground for distinguishing Wessex Dairies was suggested to me and I see none.
[36][1935] 2 KB 80
[37]Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] 1 Ch 469; Timber Engineering Co Pty Ltd v Anderson (1980) 2 NSWLR 488
[38]Per Greer LJ at p 85
That was a decision in contract but the fiduciary obligation is no less stringent. Plainly it cannot be in the employer’s interests for an employee to inform a prospective customer of the existence of a new competitor and to seek support for that competitor. The first defendant’s interests conflicted with those of his employer and his duty was plain. The “strict norms of exemplary behaviour” that Santow J spoke of apply. [39]
[39]Colour Control Centre Pty Ltd & Anor v Ty & Ors, [1995] NSWSC 96 at [54]
I turn then to the consequences of the breach.
It is claimed that as a result of this breach the first defendant secured for the fourth defendant not only the work that the fourth defendant carried out on the first day of its operations but also all future work from BIS – totalling by the time of trial in excess of $600,000 worth of work. The appropriate remedy, supported by authority it is submitted,[40] was to deprive the defendants of all profits earned and pay them to the plaintiff, and to grant a permanent injunction restraining the defendants from ever again working for BIS. This would have the effect of depriving the fourth defendant of potentially millions of dollars in turnover and profits over the years ahead, and of enhancing the plaintiff’s prospects of receiving these future profits, or a share of them, by removing from the field a successful competitor to the plaintiff.
[40]Particularly Warman International v Dwyer (1994-95) 182 CLR 544
I am not satisfied that in all the circumstances equity should enforce a confidence in relation to the program acquired by Mr Cox from Ms Davidson.
The Head Start or Springboard Claim
A claim is made under the head start or springboard doctrine to which I now turn.
The roots of the springboard doctrine may now not be clear but its modern formulation is often traced to the judgment of Roxborough J in Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd[130] where he commented that the defendant there “could not have avoided starting his dive into the future from the springboard of the confidential information” wrongly acquired. Further his Lordship said:
“As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as springboard for activities detrimental to the person who made the confidential communication, and springboard it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public.”
[130][1967] RPC 375
The claim depends on the acceptance of various claims already dealt with. The breaches of fiduciary duty that are alleged as providing the basis for this claim are said to be the following acts, in each case accompanied by the failure to inform the plaintiff of the fact:
1. The incorporation of the fourth defendant during their employment with the plaintiff;
2. The resignation en masse of the “three top personnel” of the plaintiff to work for the fourth defendant;
3. The arranging of a premature payment of invoices presented by three chosen subcontractors of the plaintiff so as to make their service available to the fourth defendant without “any lingering ties” to the plaintiff;
4. Deliberately refraining from paying the January invoices of all other subcontractors of the plaintiff for the purpose of causing disruption and/or loss of the services of those subcontractors by reason of the failure to pay them in accordance with the plaintiff’s subcontractor payment policy;
5. Taking the notebooks and diaries for the purpose of depriving the plaintiff of knowledge of quotes or potential quotes for future business;
6. Downloading and transferring to the fourth defendant the plaintiff’s “Permit Folder” for the purpose of making it easier for the fourth defendant to efficiently and quickly compete against the plaintiff;
7. Downloading and transferring to the fourth defendant the plaintiff’s “Machinery Specs” for the purpose of making it easier for the fourth defendant to efficiently and quickly compete against the plaintiff;
8. Deliberately refraining from entering the jobs on the Jobs Board for the purpose of causing confusion and disruption to Deeson’s business for the ultimate purpose of the plaintiff losing such business thereby making it easier for the fourth defendant to complete against the plaintiff;
9. Soliciting work from BIS during their period of employment so as to ensure that the fourth defendant had a ready supply of work from the outset, work of a type which was unlikely to be interrupted by wet weather but yet on the other hand comparatively easy to perform because such work did not require pilots;
10. Requesting, on 4 April 2008, a full and complete copy of Deeson’s Jobs’ Board.
As well reliance is placed on the alleged breaches of the obligations of confidence with which I have already dealt and which claims I have rejected.
The duration of the head start is claimed to be not less than one month to allow for the disarray caused to the plaintiff’s office following on the resignations and the need to reinstate the computer system by Mr Hunter, and something more to allow for the “easy acquisition of the Jobs Board”.
As I have explained, in my view the first four factors listed above do not bear the character that the plaintiff seeks to place on them. They do not involve any breach of fiduciary duty. The disarray in the office was the result of Mr Strathdee not having in place any plan to cope with the sudden departure of three key employees, each of whom was entitled to resign when they did.
As to the fifth point – the taking of the diary and note books – for the reasons earlier set out I am not satisfied either that they were taken with the intent claimed or alternatively that the documents were used.[131] Of significance is that the only entry in the books which was said to be relevant to any later job was the Mac roof chock job. I am satisfied that the second defendant made no use of that record. My findings, set out above, explain why.[132]
[131]See para [53]
[132]See para [172]
Nor do the sixth and tenth points assist the plaintiff – in the first case I have found a taking but no use and hence no breach of the obligation of confidence; in the second I am not satisfied that there was a breach of the obligation and in any case no detriment to the plaintiff. I observe that I do not accept the accuracy of the submission that the defendants requested “a full and complete copy of Deeson’s Jobs’ Board”. The evidence of Ms Davidson was to the contrary.
As to the seventh point I received no specific submissions directed to the “machinery specs” folder. I assumed that was so because the evidence seemed to establish that much of the information there contained was obtainable from the internet and could hardly justify the imposition of an obligation of confidence.
The eighth point depends on findings that there was a deliberate plan to disrupt the plaintiff’s business and that Mr Strathdee’s testimony is reliable as to what jobs were or were not on the Jobs Board. As I have explained I am not satisfied on either point.[133]
[133]See paras [17]-[28] and [61]-[62]
As to the ninth point I have found that what solicitation there was of BIS has not led to any significant detriment to the plaintiff.[134] The head start gained was expended by Friday 7 March 2008 and is reflected in the allowance of $120.
[134]See paras [97]-[136]
I am not satisfied that there was any spring board here.
THE DEFENDANTS’ CLAIMS
Clean Hands
An important maxim of equity is that “he who comes into equity must come with clean hands”. The defendants contend that the plaintiff should be deprived of any equitable relief by reason of Mr Strathdee’s conduct after litigation commenced. They rely on the letter of 7 May 2008 that I have previously referred to, written by Mr Strathdee to BIS, and on Mr Strathdee’s communication to Mr Nottingham of NQX of the amount that Lampsons had charged the fourth defendant in respect of the movement of the excavator described as the RH 340 discussed under the heading “NQX Job” above. [135]
[135]See para [27] above and commencing at [138]
In each case Mr Strathdee obtained the information in question from the defendants’ documents which came into his possession solely as a result of interlocutory orders made by me on the plaintiff’s application.
In Hearne v Street Hayne, Heydon and Crennan JJ held that “[w]here a party to litigation is compelled … by reason of a specific order of the court … to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given, unless it is received into evidence.” [136] That is an obligation imposed by law on Mr Strathdee.
[136](2008) 235 CLR 125 at 166
Here the information was plainly confidential to the defendants, and commercially sensitive. There is no doubt that the principle identified in Hearne applies here. The information had not been received into evidence. No leave was sought. It should not have been disclosed. Mr Land does not contend otherwise.
The issue is whether Mr Strathdee’s conduct affects the remedies to which the plaintiff would otherwise be entitled.
Ms Heyworth-Smith contends that the doctrine of clean hands comes into play. Mr Land submits that the doctrine applies only to conduct prior to litigation commencing, that the conduct was not directed to the defendants which he contends is an essential pre-requisite, and that in any case it would be inappropriate to apply the doctrine.
The gravity of Mr Strathdee’s misconduct should not be understated. He deliberately set out to undermine the commercial reputation of the defendants with documents and information that he must have realised were confidential and which came into his possession solely for purposes of the litigation. His conduct seems to me to be more serious than that reviewed by the High Court in Hearne which involved the mis-use of affidavits, the contents of which were disclosed by the erring party earlier than intended by the deponents, but which were eventually to be relied on by the deponents in court in the proceedings. Here the information was private and might never have been disclosed at all, or if disclosed to the court, very likely to be sealed up to prevent the public gaining access to it.
Mr Strathdee claims to have sought legal advice and claims he was told it was appropriate to use the information in this way. I have not heard from the solicitors in question – they represent the plaintiff in the litigation and so cannot advance any thing in their defence. I only remark that the advice one receives often depends on the precise question asked and it would be surprising that solicitors of the calibre in this case would so advise a client. In any case that cannot assist the plaintiff in relation to its rights vis-à-vis the defendants.
Mr Land’s submission that the conduct in question here was not directed to the defendants is in my view wrong. That the conduct must involve an inquity aimed at the defendant seems right – see the discussion by Campbell J in Black Uhlans Incorporated v New South Wales Crime Commission & Ors and his analysis of Jones v Lenthal [1669] Eng R 102; 22 ER 739.[137]The conduct here however was aimed directly at the defendants. The fact that the information was disclosed to a third party to work its mischief is irrelevant.
[137][2002] NSWSC 1060 at [161]-[162]
Nor am I attracted to the submission that the Court is debarred from considering conduct that occurs after the suit is commenced. The cases Mr Land relies on were concerned with the distinction between the maxim requiring that the plaintiff who seeks equity must do equity – which is aimed at future conduct – and the maxim that a plaintiff who comes into equity must come with clean hands – which looks to past conduct. They were not concerned with the issue here. In my view the line is drawn at the time the court comes to apply the remedy, not the date of filing.
It is not difficult to find examples of a court bringing into account the conduct of a party in the litigation itself in determining whether to grant equitable relief: Laddie J’s decision in Ocular Sciences Ltd v Aspect Vision Care Ltd[138]is an example in a claim for an injunction. Laddie J referred in his judgment to the decision of the Court of Appeal in Armstrong v Sheppard & Short Ltd[139] where the court brought into account the plaintiff’s attempt to mislead the court with false evidence as relevant to its decision to grant equitable relief, again in the form of an injunction. Nonetheless, as Laddie J recognised, the issue is not at large – the dishonesty must be related to the issues or relief sought.
[138][1997] RPC 289 at pp 404- 409
[139][1959] 2 QB 384
That the impropriety complained of “must have an immediate and necessary relationship to the equity sued for”[140] is well recognised. That, it seems to me, is the only relevant issue here - whether the conduct is sufficiently connected to the suit to justify the denial of the remedy. The doctrine is typically applied where the very subject of the suit is affected by the impropriety complained of. For example the manager in Harrigan v Brown[141] was denied his injunction restraining the group of entertainers he managed from replacing him contrary to their contract with him, because he had kept the accounts in a most improper manner; the tenant in Gill v Lewis[142] who notoriously used premises as a disorderly house was denied relief against forfeiture; the plaintiff in Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd[143] was refused an injunction to prevent passing off where the reputation the plaintiff sought to protect was itself built on a lie.
[140]Dewhurst v Edwards (1983) 1 NSWLR 34 at 51
[141][1967] 1 NSWLR 342
[142][1956] 2 QB 1
[143](1934) 35 SR (NSW) 108
Here, if I had been persuaded that the giving out of this information had been part of a plan to destroy a trade rival, and that the bringing of the suit itself formed part of that plan, then I would have held that it would have been appropriate to deny any form of equitable relief. Whilst I hold the view that claims were made here that could not be justified and some that could fairly be described as involving, on any view, fairly trivial complaints, I am not persuaded that the whole exercise was so motivated. Whilst the conduct of Mr Strathdee here deserves condemnation, and whilst the suit itself, which took three weeks to argue, bordered on the vexatious given the modesty of the relief achieved, I am not persuaded to deny the plaintiff any remedy.
Counterclaim
The First Defendant claims unpaid annual leave in the sum of $4,760.00.
The claim depends upon the acceptance of the following propositions:
(a) that the first defendant’s contract of employment with the plaintiff was subject to the provisions of the Workplace Relations Act 1996 (Cth) (“the Act”).
(b) in the absence of any express term in the employment contract the provisions relating to annual leave found in Division 4 [Annual Leave] of Part 7 [The Australian Fair Pay and Conditions Standard] and, in particular, secs 232 to 238 of the Act are applicable. Ms Heyworth-Smith submits that this entitlement is framed as a guarantee: s 232(2) of the Act. She submits that the parties to an employment contract cannot contract out of this entitlement: s 172(2) of the Act.
(c) 94 hours leave was owing based on the last pay slip received. Ms Heyworth-Smith contends that the legislation, if applied, would result in the leave outstanding amounting to 132 hours - a greater number of hours than claimed, assuming 48 weeks work and only one day’s leave taken.
Mr Land has made no submission contesting those propositions. There is no suggestion that the defendants’ arithmetic is inaccurate. In the circumstances I will allow the amount claimed.
Conclusion
I assess the compensation to which the plaintiff is entitled in the sum of $12,120.
There is no need for an account of profits.
I assess the first defendant’s damages in the sum of $4,760.
I allow interest on the amounts assessed in each case at 10% pursuant to s 47 Supreme Court Act 1995. Interest on the plaintiff’s compensation will be awarded from 18 April 2008. Interest on the first defendant’s damages will be awarded from 7 March 2008.
I will hear from counsel as to costs. The orders will be:
(a) Judgment for the plaintiff against the first, second and fourth defendants in the sum of $12,120 together with interest in the sum of $1684.68
(b) Judgment for the first defendant against the plaintiff in the sum of $4,760 together with interest in the sum of $718.76
(c) The parties have liberty to apply within 7 days.
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