Doble v Chaffey Services Pty Ltd
[2025] WASCA 3
•16 JANUARY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: DOBLE -v- CHAFFEY SERVICES PTY LTD [2025] WASCA 3
CORAM: BUSS P
MITCHELL JA
VAUGHAN JA
HEARD: 4 NOVEMBER 2024
DELIVERED : 16 JANUARY 2025
FILE NO/S: CACV 115 of 2023
BETWEEN: MICHAEL PAUL DOBLE
First Appellant
KIRAHNLEY PTY LTD T/A KTR SERVICES
Second Appellant
AND
CHAFFEY SERVICES PTY LTD AS TRUSTEE FOR CATABY SERVICES TRUST, T/A CATABY SERVICES
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: TOTTLE J
Citation: CHAFFEY SERVICES PTY LTD AS TRUSTEE FOR CATABY SERVICES TRUST, T/A CATABY SERVICES -v- DOBLE [No 4] [2023] WASC 361
File Number : CIV 1854 of 2020
Catchwords:
Corporations - Where appellant found liable for breach of equitable duty of confidence and statutory duties owed as an employee under the Corporations Act 2001 (Cth) by using information relating to the turnover of his employer for the purposes of obtaining finance to establish his own company - Where appellant found liable for breach of fiduciary duty and statutory duties owed as an employee under the Corporations Act by diverting work from his employer to his own company - Whether trial judge erred in finding appellant improperly used his position to gain advantage for himself or someone else under s 182 and s 183 of the Corporations Act - Whether turnover information derived from information that was not confidential was subject to a duty of confidence - Effect of sale of business on confidentiality obligation - Whether use of information was improper within the meaning of s 182 and s 183 of the Corporations Act - Whether compensation may be awarded under s 1317H of the Corporations Act by reference to the profits made by a person resulting from contravention where claimant has not proved they suffered any loss resulting from the contravention
Legislation:
Corporations Act 2001 (Cth), s 182, s 183, s 1317H
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
| First Appellant | : | D H Solomon |
| Second Appellant | : | D H Solomon |
| Respondent | : | B Kremer SC |
Solicitors:
| First Appellant | : | Solomon Brothers |
| Second Appellant | : | Solomon Brothers |
| Respondent | : | Bennett |
Case(s) referred to in decision(s):
Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37
Bents Brewery Co Ltd v Hogan [1945] 2 All ER 570
Capitalink Pty Ltd v Withnall [2024] NSWCA 172
Chew v The Queen (1992) 173 CLR 626
Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39
Dawson v Westpac Banking Corporation (1991) 66 ALJR 94
Doble v Chaffey Services Pty Ltd [2023] WASCA 180
Douglas v Hello! Ltd [No 3] [2005] EWCA Civ 595; [2006] QB 125
Douglas v Hello! Ltd [No 3] [2007] UKHL 21; (2008) AC 1
Elecon Australia Pty Ltd v PIV Drives GmbH [2010] FCAFC 56; (2010) 93 IPR 174
Faccenda Chicken Ltd v Fowler [1987] Ch 117
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979; (2000) 50 IPR 74
Freedom Motors Australia Pty Ltd v Vaupotic [2003] NSWSC 506
Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2; (2009) 81 IPR 1
GDP Group Pty Ltd v Saye [2022] FCA 688
Global Risk Alliance Group Services Pty Ltd v Harmer [2024] NSWSC 79; (2024) 330 IR 208
Grimaldi v Chameleon Mining NL [No 2] [2012] FCAFC 6; (2012) 200 FCR 296
Hill v Woollahra Municipal Council [2003] NSWCA 106; (2003) 127 LGERA 7
Johns v Australian Securities Commission (1993) 178 CLR 408
Kirchner & Co v Gruban [1909] Ch 413
Labelmakers Group Pty Ltd v LL Force Pty Ltd [2012] FCA 512
Lord Ashburton v Pape [1913] 2 Ch 469
McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835
Mid-City Skin Cancer and Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; (2006) 67 NSWLR 569
Moorgate Tobacco Co Ltd v Philip Morris Ltd [No 2] (1984) 156 CLR 414
Neobev Pty Ltd v Bacchus Distillery Pty Ltd [No 3] [2014] FCA 4; (2014) 104 IPR 249
New Aim Pty Ltd v Leung [2023] FCAFC 67
Prince of Wales v Associated Newspapers Ltd [2006] EWCA Civ 1776; [2008] Ch 57
R v Byrnes (1995) 183 CLR 501
Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275
Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73
Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1991) 28 FCR 291
V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013] FCAFC 16; (2013) 296 ALR 418
West Australian Newspapers Ltd v Bond [2009] WASCA 127; (2009) 40 WAR 164
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
JUDGMENT OF THE COURT:
Summary
This appeal arises out of proceedings brought in the General Division of this court by the respondent (Chaffey Services) against the first appellant (Mr Doble) and the second appellant (Kirahnley). Mr Doble is a former employee of Chaffey Services who used Kirahnley to establish a business in competition with Chaffey Services. In the primary proceedings, Chaffey Services alleged that Mr Doble breached a fiduciary duty, a duty of confidence and the civil penalty provisions in s 181 - s 183 of the Corporations Act 2001 (Cth) (Act) while establishing the new business. Kirahnley was alleged to have been a party to the contraventions. Chaffey Services sought equitable compensation, an account of profits and/or compensation under s 1317H of the Act against the appellants.
Chaffey Services' claim was partly successful. The trial judge found that Mr Doble acted in breach of duty in two respects:
1.Mr Doble dishonestly breached an equitable duty of confidence and the statutory duties he owed as an employee under s 182 and s 183 of the Act, by using information relating to the turnover of Chaffey Services' business for the purposes of obtaining finance from the National Australia Bank (NAB) to establish his proposed new business.
2.Mr Doble dishonestly breached his fiduciary duty, and statutory duties he owed as an employee under s 182 and s 183 of the Act, by sending quotes for work from Kirahnley to Chaffey Services' major client, Tronox Management Pty Ltd (Tronox), while he was still an employee of Chaffey Services.
The trial judge found Kirahnley to have been involved in Mr Doble's contraventions of s 182 and s 183 of the Act.
The primary orders awarded compensation to Chaffey Services against Mr Doble and Kirahnley under s 1317H of the Act for breach of s 182 and s 183 of that Act in the amount of $99,793.98. This comprised:
1.$98,026.21, being the gross profit Kirahnley earned as a result of being able to begin operations at an earlier time than would have been the case if Chaffey Services' turnover information had not been used to obtain finance from NAB,
plus
2.$16,900, being the gross profit Kirahnley derived from the diversion of work from Chaffey Services to Kirahnley by the issue of quotes to Tronox while Mr Doble was still an employee of Chaffey Services,
less
3.$15,132.23, representing the gross profits which were common to both heads of claim that were deducted to avoid double‑counting.
The appellants now appeal against the primary orders awarding this compensation together with interest and costs. For the following reasons, the appeal must be dismissed.
Factual findings made by the primary judge
The primary judge made the following findings of primary fact which are of central relevance to this appeal.
The business of Cataby General Services
In 1995, David Chaffey established Cataby General Services to provide mine site maintenance services on a mine site operated by Tronox, by which he had previously been employed. In April 2004, Mr Chaffey incorporated Chafco Pty Ltd and thereafter Chafco owned and operated Cataby General Services. Mr Chaffey is Chafco's sole director, secretary and shareholder.[1]
[1] Chaffey Services Pty Ltd as Trustee for Cataby Services Trust, T/A Cataby Services v Doble [No 4] [2023] WASC 361 (primary decision) [18].
At the Tronox site, Cataby General Services undertook road maintenance, wet hire of machinery (most commonly involving the hire of machinery with fuel and an operator), vehicle hire, bore removal and servicing, building maintenance, minor civil works and waste removal. Mining at that site was undertaken by a mining contractor, Piacentini & Son, and site rehabilitation was undertaken by VMS Contractors Pty Ltd. In 2019, the contract VMS Contractors held with Tronox was extended until 2023.[2]
[2] Primary decision [19] - [21].
Until early 2017, Tronox was Cataby General Services' main client. In 2017, Cataby General Services started providing services to Iluka Resources Ltd. Iluka had begun the development of a mine site close to Mr Chaffey's home near the Cataby town site. The services provided by Cataby General Services to Iluka were fuel supply, road construction, minor civil works, waste removal, dust suppression and road maintenance.[3]
[3] Primary decision [22].
When Tronox wanted Cataby General Services to undertake work it asked for a quote. If the quote was accepted, Tronox issued a purchase order. When the work was completed, an invoice was issued. Cataby General Services had standard rates that had been agreed with Tronox. There were specific rates for the hire of each item of machinery, rates for labour hire and for the hire of facilities such as crib rooms, toilets and lighting towers.[4]
[4] Primary decision [24].
Mr Chaffey's involvement with Cataby General Services was 'hands‑on' in that he undertook much of the work himself. It was not until 2005 that the business started to employ others. By early 2016, there were four people working in the business.
Mr Doble's role at Cataby General Services
Mr Doble started work in the mining industry in 1986. He had experience in a number of different roles including as a machinery operator, supervisor and scheduler. In 1999, he started work on the Tronox site as the site supervisor for an earthworks contractor and he met Mr Chaffey not long thereafter. Subsequently, between 2001 and 2015, Mr Doble was employed by Tronox. While he was working for Tronox, one of Mr Doble's responsibilities was giving directions to VMS Contractors. In 2015, Mr Doble was made redundant by Tronox.[5]
[5] Primary decision [25].
In about April 2016, Mr Doble and Mr Chaffey travelled to Perth together in Mr Doble's car. During the journey the two men discussed the possibility of Mr Doble working at Cataby General Services with a view to ultimately buying the business.[6]
[6] Primary decision [27].
Following those discussions, in mid‑2016 Mr Chaffey employed Mr Doble to supervise the day-to-day operation of Cataby General Services' business on the Tronox site. There was no written contract of employment.[7]
[7] Primary decision [28].
From late 2016, Mr Doble was responsible for providing quotes to Tronox, scheduling and supervising the work that was the subject of Tronox purchase orders and rendering invoices. In so doing, he ran the day-to-day operation of the Cataby General Services business on the Tronox site.[8] Beyond his responsibilities for quoting and invoicing, Mr Doble had no role in the financial management of Cataby General Services. Mr Doble was a salaried employee with no entitlement to any share in the profits of the business.[9]
[8] Primary decision [35].
[9] Primary decision [38].
By mid‑2018 some tension, caused by various operational issues, had arisen in the relationship between Mr Chaffey and Mr Doble.[10] Between 9 July 2018 and 12 December 2018, Mr Chaffey and Mr Doble conducted unsuccessful negotiations as to the terms on which Mr Doble might purchase the business of Cataby General Services and its equipment.[11] While Mr Doble told Mr Chaffey that he would be leaving Cataby General Services,[12] he did not tell Mr Chaffey that he was intending to start a business and would put his own equipment on the Tronox site.[13]
[10] Primary decision [41].
[11] Primary decision [43] - [67].
[12] Primary decision [61].
[13] Primary decision [68].
In late December 2018, by agreement with Mr Chaffey, Mr Doble stopped preparing invoices for Cataby General Services and thereafter the invoicing task was undertaken by Mr Chaffey.[14]
Sale of the business to Chaffey Services
[14] Primary decision [69].
In 2019, Mr Chaffey spoke with Iain McGregor, who had previously expressed an interest in purchasing the business of Cataby General Services, and asked whether Mr McGregor was still interested in the business.[15] Mr Chaffey and Mr McGregor agreed a purchase price of $971,500.[16]
[15] Primary decision [71].
[16] Primary decision [76].
On 2 April 2019, Mr McGregor arranged for the incorporation of Chaffey Services. On incorporation Mr McGregor and Mr Chaffey were appointed directors of Chaffey Services and one share in the capital of the company was issued to each of them. The share registered in Mr Chaffey's name was held on trust for Mr McGregor.[17] The parties entered an agreement for the purchase of Cataby General Services sometime between April and mid to late June 2019.[18] Settlement of the sale and purchase of the business took place on 1 July 2019. The name of the business was changed to Cataby Services.[19]
Mr Doble's role at Cataby Services
[17] Primary decision [79].
[18] Primary decision [92].
[19] Primary decision [108].
After 1 July 2019, Mr Chaffey continued to work in the Cataby Services business, liaising with Iluka to try and get that business established, but did not have any involvement on the Tronox site.[20] Save for some relatively minor organisational changes, Mr Doble continued to work for Chaffey Services and performed the same role with Cataby Services as he had performed with Cataby General Services, which undertook the same scope of work for Tronox as Cataby General Services had done. Mr Doble continued to provide quotes to Tronox and Iluka, working with Mr Chaffey in relation to Iluka. He resumed responsibility for preparing invoices.[21] Mr Doble managed the work undertaken by Cataby Services for Tronox in the manner he had done for Cataby General Services.[22]
[20] Primary decision [122] - [123].
[21] Primary decision [125].
[22] Primary decision [126].
The trial judge summarised Mr Doble's responsibilities as an employee of Chaffey Services in the following terms:[23]
(a)In response to requests from Tronox Mr Doble was responsible for the preparation and provision of quotes for mine site maintenance services using, where applicable, [Chaffey Services'] schedule of standard rates, and otherwise using his discretion and experience, consulting Mr McGregor when necessary.
(b)On receipt of a purchase order from Tronox Mr Doble was responsible for giving directions to [Chaffey Services'] other employees to undertake the work. He was responsible for supervising the work and ensuring it was completed. Thereafter, he was responsible for preparing and rendering invoices in respect of that work. These activities required him to be physically present on the site.
(c)Related to (b), when required Mr Doble was responsible for purchasing materials from [Chaffey Services'] suppliers.
Mr Doble prepares to establish his own business
[23] Primary decision [221].
In August 2019 and September 2019, Mr Doble took a six-week holiday.[24]
[24] Primary decision [132].
In late October 2019 and early November 2019, Mr Doble had discussions about setting up a business. These included discussions with NAB about a possible business loan and discussions with VMS Contractors about the sale of their contract with Tronox to him.[25]
[25] Primary decision [133] - [144].
On 8 November 2019, Kirahnley was registered. Mr Doble and his then wife, Ms Kim Doble, were appointed directors and one share was issued to each of them. Ms Doble was appointed the company secretary.[26]
[26] Primary decision [145].
On 20 November 2019, Mr Doble sent an email to NAB attaching various documents that constituted Kirahnley's application for finance.[27] The documentation included a 'CGS turnover' spreadsheet completed by Mr Doble which contained three workbooks, one for each of the 2017/18, 2018/19 and 2019/20 financial years. Mr Doble had completed this spreadsheet by recording the monthly turnover (exclusive of GST) for each Cataby General Services and Cataby Services customer for each of the 2017/18 and 2018/19 financial years and for the first four months of the 2019/20 financial year. Mr Doble did this by using information derived from the invoices rendered by the two businesses.[28]
[27] Primary decision [148].
[28] Primary decision [152].
On 12 February 2020, an officer of NAB requested further financial information regarding the business which Mr Doble was proposing to purchase.[29] By way of an email sent on 13 February 2020,[30] Mr Doble provided the officer with a document described by him as 'Kirahnley cash flow' being a cash flow forecast in the form of an excel spreadsheet. The spreadsheet included two rows of receipt figures, one entitled 'Kirahnley. Based on [previous] years turnover' and the other entitled 'VMS Average of last 3.5 years turnover'. Each row gave monthly turnover figures for each month from July to June. These figures were the turnover figures of Cataby General Services and Cataby Services that Mr Doble had derived by averaging the value of invoices rendered to Tronox. The total of the figures in the 'Kirahnley' row was $830,443 and the total in the 'VMS' row was $216,000.[31]
[29] Primary decision [164].
[30] Exhibit 269 (Green AB 53).
[31] Exhibit 270 (Green AB 57); primary decision [165].
On 21 February 2020, NAB offered Kirahnley two finance facilities, a 'Business Options Instalment Loan' of $350,000 (required to purchase VMS Contractors' contract with Tronox) and a 'revolving leasing' facility of $300,000 (required to purchase equipment). On 4 March 2020, Mr Doble and Ms Doble accepted NAB's offer on behalf of Kirahnley.[32]
[32] Primary decision [175].
Mr Doble telephoned Mr McGregor on 25 February 2020 and told him that he was resigning. It was common ground that Mr Doble agreed to continue working at Cataby Services, although there was a dispute as to the agreed period.[33]
[33] Primary decision [176].
Between 25 February 2020 and 26 March 2020, Mr Doble caused a series of quotes to be issued by Kirahnley to Tronox for the provision of services and the supply of equipment at the Tronox mine site (relevant quotes).[34] Some of this quoted work was the subject of purchase orders issued by Tronox to Kirahnley and invoices issued by Kirahnley to Tronox.[35] The relevant quotes were for work that Chaffey Services could and would have undertaken had Mr Doble not submitted the relevant quotes on Kirahnley's behalf. Chaffey Services lost the profits that it would have derived from that work and Kirahnley has derived profits that it would otherwise not have made. The total value of the invoices issued by Kirahnley in accordance with the relevant quotes was $35,525 excluding GST.[36]
[34] Primary decision [180].
[35] Primary decision [181] - [186].
[36] Primary decision [323].
On 5 March 2020, VMS Contractors sent Kirahnley an invoice for the purchase of its contract with Tronox.[37] Completion of the purchase of the contract occurred on 20 March 2020. On 25 March 2020, Tronox, VMS Contractors and Kirahnley entered into a deed novating the contract in Kirahnley's name.[38]
[37] Primary decision [187].
[38] Primary decision [191].
On 31 March 2020, Mr McGregor telephoned Mr Doble and told him that he was no longer required. This was Mr Doble's last day working for Chaffey Services.[39]
[39] Primary decision [192] - [193].
Statutory context
Section 182(1) of the Act provides that:
A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a) gain an advantage for themselves or someone else; or
(b) cause detriment to the corporation.
Section 183(1) of the Act provides that:
A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:
(a) gain an advantage for themselves or someone else; or
(b) cause detriment to the corporation.
Section 182(2) provides:
A person who is involved in a contravention of subsection (1) contravenes this subsection.
Section 183(2) is in identical terms to s 182(2).
Sections 182 and 183 are civil penalty provisions.[40]
[40] Section 1317E of the Act.
Section 79 of the Act specifies when a person is involved in a contravention and, relevantly by s 79(c), provides that a person is involved in a contravention if that person has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention.
Relevantly, s 1317H of the Act provides:
Compensation for damage suffered
(1)A Court may order a person to compensate a corporation, registered scheme or notified foreign passport fund for damage suffered by the corporation, scheme or fund if:
(a)the person has contravened a corporation/scheme civil penalty provision in relation to the corporation, scheme or fund; and
(b) the damage resulted from the contravention.
The order must specify the amount of the compensation.
…
Damage includes profits
(2)In determining the damage suffered by the corporation, scheme or fund for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence.
…
Recovery of damage
(5)A compensation order may be enforced as if it were a judgment of the Court.
Trial judge's approach
Chaffey Services was not wholly successful in its claim against the appellants. While Chaffey Services commenced an appeal against the primary orders, that appeal was discontinued. This court held that a subsequent attempt by Chaffey Services to institute a cross-appeal in the current proceedings was incompetent.[41] In these circumstances, it is appropriate to focus in these reasons on the basis on which the primary judge upheld the claim by Chaffey Services in part.
Fiduciary duty in relation to quoting and invoicing
[41] Doble v Chaffey Services Pty Ltd [2023] WASCA 180.
The trial judge held that the duties implied by the common law into the employment relationship are not to be automatically equated with fiduciary obligations.[42] In the employment context, it is necessary to identify specific contractual obligations that the employee has undertaken which have placed the employee in a situation where equity imposes fiduciary duties in addition to contractual obligations. This requires a careful consideration of the precise activity to be undertaken by the employee, and to ask if that employee had agreed to perform that activity solely in the interests of the employer to the exclusion of his or her own interests.[43] There is no single test that may be applied to determine whether an employee owes fiduciary obligations to an employer. The inquiry is always fact specific involving questions of degree.[44]
[42] Primary decision [202].
[43] Primary decision [209].
[44] Primary decision [212].
The trial judge held that the degree of Chaffey Services' dependence on Mr Doble in respect of the tasks of quoting and invoicing, and its vulnerability if those activities were not undertaken exclusively in accordance with its interests, required observance of a duty of absolute loyalty, encompassing the proscriptive no conflict and no profit themes or rules. That is, a standard of loyalty beyond that imposed by the common law duty of fidelity was required.[45]
Statutory duty as an employee of Chaffey Services
[45] Primary decision [225].
The trial judge held that, in his capacity as an employee of Chaffey Services, Mr Doble owed a duty under s 182 of the Act not to improperly use his position to gain an advantage for himself or Kirahnley, or to cause a detriment to Chaffey Services. In addition, Mr Doble owed a duty under s 183 of the Act not to use any information obtained by him because he was an employee of Chaffey Services to gain an advantage for himself or Kirahnley, or to cause detriment to Chaffey Services.[46]
Equitable duty of confidence
[46] Primary decision [247].
The trial judge found that Mr Doble owed Chaffey Services an equitable duty of confidence in relation to the following information:[47]
(a)the revenue figures for each month between July 2017 and October 2019 from customers of Cataby General Services and Cataby Services reproduced in the 'CGS turnover' spreadsheet provided by Mr Doble to NAB in November 2019; and
(b)the revenue figures calculated by reference to the revenue of Cataby General Services and Cataby Services and included in the 'Monthly Cashflow Forecast Template' provided by Mr Doble to NAB on 13 February 2019.
(turnover information).
[47] Primary decision [257], [263].
In that regard, the trial judge observed:[48]
I am satisfied that the turnover of a business is information that possesses the necessary quality of confidence to be protected by equity. It is not information that is generally available to those not involved in the financial management of a business and there are a variety of reasons why the owner of a business might wish to ensure that its turnover was not disclosed to customers, employees, competitors or other third parties. This is so even though turnover figures represent the cumulative total of invoices rendered and the invoices themselves are not confidential.
[48] Primary decision [258].
The trial judge held that the rights in respect of the turnover figures of Cataby General Services were transferred to Chaffey Services under its business sale agreement with Chafco.[49]
Breach of duty by providing turnover information to NAB
[49] Primary decision [259] ‑ [262].
The trial judge held that the turnover information was Chaffey Services' confidential information. Mr Doble was not permitted to use it for the purposes of obtaining finance. By using it for his own purposes, Mr Doble breached the equitable obligation of confidence he owed to Chaffey Services and the obligation imposed on him by s 183(1) of the Act not to use information he obtained as an employee improperly.[50]
[50] Primary decision [286].
The trial judge also found that:[51]
[J]udged by the standards of ordinary decent people, I consider that Mr Doble's use of [Chaffey Services'] turnover information was dishonest conduct. He was using information obtained legitimately in one context and for the purposes of [Chaffey Services], his employer, for his own purposes in circumstances in which he must have known that [Chaffey Services] would have objected to its information being used in this way (especially given that it was the target of future competition).
[51] Primary decision [287].
The trial judge found Mr Doble's misuse of Chaffey Services' confidential information to constitute breaches of the duties owed by him as an employee under s 182 and s 183 of the Act.[52]
Breach of duty by issuing the relevant quotes
[52] Primary decision [8](d).
The trial judge found that Mr Doble's conduct in issuing the relevant quotes in Kirahnley's name before his employment with Chaffey Services came to an end was a breach of his fiduciary and statutory duties, in the following terms:[53]
The work which was the subject of the quotes that Mr Doble issued in Kirahnley's name before his employment came to an end was work that was ordinarily undertaken by [Chaffey Services]. As I have found Mr Doble's duties included the preparation of quotes for [Chaffey Services] in respect of mine site maintenance work that Tronox wanted undertaken. In respect of this obligation Mr Doble owed fiduciary obligations. Essentially by not providing quotes in [Chaffey Services'] name as he was obliged to do and instead providing quotes in Kirahnley's name Mr Doble diverted work from [Chaffey Services] to Kirahnley. By doing so he breached his fiduciary obligation by preferring his own interests over those of [Chaffey Services]. Mr Doble's conduct also involved a breach of the duties owed by him pursuant to s 182(1) and s 183(1) of the [Act]. He used his position as site supervisor to gain advantage for Kirahnley and he improperly used information as to the work Tronox wanted done obtained by him because of his position as an employee to obtain an advantage for [Kirahnley]. (original emphasis)
[53] Primary decision [296].
The trial judge also found that Mr Doble's conduct in diverting work from Chaffey Services to Kirahnley was dishonest.[54]
Kirahnley's liability
[54] Primary decision [297].
The trial judge found that Kirahnley was a party to Mr Doble's contraventions of s 182(1) and s 183(1) of the Act and was therefore a person involved in those contraventions within the meaning of s 182(2) and s 183(2) of that Act. This was on the basis that, as Kirahnley acted through Mr Doble and because Mr Doble knew of the breaches, Kirahnley must have been a party to the contravention and thus a person involved in the contravention.[55]
[55] Primary decision [309] - [310].
The trial judge found that it was not open on the pleadings for Chaffey Services to advance a knowing assistance claim against Kirahnley under the second limb of Barnes v Addy.[56] In making that finding, his Honour observed:
Ultimately, this is not a matter of consequence because, on the facts of this case, an order under s 1317H of the [Act] will provide compensation equivalent to the equitable compensation that that would have been available had a knowing assistance claim been open.
Relief in respect of work diverted to Kirahnley
[56] Primary decision [318] - [319].
The trial judge adopted the approach of Mr Barry Honey, a chartered accountant, as to the assessment of the gross profits derived by Kirahnley from the work that Mr Doble diverted to it while he was employed by Chaffey Services. This involved deducting direct costs amounting to 52% of Kirahnley's turnover from the amount of the invoices, save in respect of one invoice for work Mr Doble performed while employed at Chaffey Services. Adopting that approach, the gross profit was $16,900.[57] The trial judge assessed Chaffey Services' loss using the same percentage deduction for direct costs, which produced a loss of profit of $15,132.[58]
[57] Primary decision [323] - [325].
[58] Primary decision [326].
The trial judge therefore concluded that:[59]
(a)Chaffey Services was entitled to equitable compensation from Mr Doble for breach of his fiduciary duties in diverting work away from Chaffey Services to Kirahnley in the sum of $15,132.
(b)Chaffey Services was entitled to a compensation order against Mr Doble and Kirahnley in respect of the damage resulting from the contraventions of statutory duties constituted by the diversion of work away from Chaffey Services to Kirahnley in the sum of $16,900.
Relief in respect of the misuse of turnover information to obtain finance
[59] Primary decision [327].
The trial judge assessed the damages in respect of Mr Doble's disclosure of the turnover information to NAB by reference to the gain made by Mr Doble in using the turnover information to support his finance application.[60] The trial judge inferred that, had Mr Doble been unable to provide figures that established an historical trading record, it would have been more difficult for Mr Doble to obtain finance and the process would have taken longer. Mr Doble's gain was to be measured by the benefit derived by Kirahnley trading between 25 March 2020 and 8 May 2020.[61]
[60] Primary decision [331] - [333].
[61] Primary decision [334] - [336].
The trial judge found that the combined value of invoices for work undertaken in response to purchase orders received before 8 May 2020 was $204,221.28. Allowing for 52% of direct costs for performing this work, the gross profit was $98,026.21. The trial judge found that this was the financial measure of the gain derived from Mr Doble's breach in respect of the turnover information and that it served also as a measure of Chaffey Services' loss.[62]
[62] Primary decision [336] - [337].
The trial judge said:[63]
Accordingly, [Chaffey Services] is entitled to equitable compensation from Mr Doble for breach of the equitable duty of confidence owed in respect of the turnover information in the sum of $98,026.21.
[Chaffey Services] is entitled to a compensation order against Mr Doble and Kirahnley in respect of the contraventions of the statutory duties constituted by Mr Doble's use of [Chaffey Services'] turnover information in the sum of $98,026.21.
The turnover figure from which the amount of $98,026.21 is derived includes the invoices rendered in respect of work diverted to Kirahnley and care will be required in formulating final orders to avoid double recovery by [Chaffey Services].
[63] Primary decision [339] - [341].
The trial judge concluded his reasons in the following terms:[64]
[Chaffey Services] is entitled to the relief set out in the preceding section of these reasons and is entitled to elect between the alternate forms of relief available to it. I will hear from [Chaffey Services] as to its election and [from] the parties as to the terms of the final orders and costs.
Final orders
[64] Primary decision [344].
The final orders made on 5 October 2023 were that Mr Doble and Kirahnley pay compensation to Chaffey Services in the sum of $99,793.98 pursuant to s 1317H(1) of the Act, and that judgment be entered against them jointly and severally in that sum.
On appeal, no point was taken as to the joint and several nature of the judgment. Nor was there any ground of appeal, or any contention of error, based on the circumstance that Mr Doble had judgment entered against him in respect of profits made by Kirahnley. Accordingly, it is not necessary to consider these matters in addressing the appeal.
The judgment sum was calculated as the $16,900 resulting from the breach referred to at [41] above plus the $98,026.21 resulting from the breach referred to at [47] above, less $15,132.23 in work which would be otherwise double-counted.[65]
[65] Trial ts 956 - 957.
The final orders also provided for payment of interest from 12 August 2020 until the date of judgment, and for Mr Doble and Kirahnley to pay a proportion of Chaffey Services' costs of the primary proceedings.
Grounds 1 and 2: liability for diverting work to Kirahnley
By grounds 1 and 2, the appellants challenge aspects of the trial judge's conclusion as to their liability in respect of the provision of the relevant quotes while Mr Doble was an employee of Chaffey Services.
Ground 1: whether Mr Doble improperly used his position
Ground 1 contends that the trial judge erred in the passage quoted at [47] above in finding that Mr Doble improperly used his position as an employee of Chaffey Services under s 182(1) of the Act in submitting the relevant quotes on behalf of Kirahnley.
Appellants' particulars and submissions
The appellants accept that Mr Doble's duties as an employee of Chaffey Services included preparing and providing quotes to Tronox on behalf of Chaffey Services in response to requests from Tronox for Chaffey Services to provide quotes. However, the appellants say that there was no evidence adduced at trial that Tronox requested Chaffey Services to quote for any of the work the subject of the relevant quotes. The appellants submit that, in the absence of that evidence, the proper inference is that Tronox requested that Kirahnley submit the relevant quotes for work to be performed after Mr Doble had ceased to be employed by Chaffey Services and did not request that Chaffey Services quote for that work. Accordingly, the appellants say that Mr Doble did not improperly use his position as an employee of Chaffey Services in submitting the relevant quotes to Tronox on behalf of Kirahnley.
The appellants rely on the following matters as supporting the inference referred to in the previous paragraph:[66]
1.Tronox was aware from early 2020 that Mr Doble was starting his own business.[67]
2.Mr Aidan Freight, a senior planner in Tronox's maintenance department, was concerned about the ability of Chaffey Services to service the requirements of Tronox after Mr Doble left.[68]
3.Mr Doble taking steps to establish Kirahnley and leave the employ of Chaffey Services was not a breach of duty by Mr Doble.[69]
4.Mr Doble had no responsibility for expanding the business of Chaffey Services.[70]
5.Unrebutted 'presumptions from the ordinary course of business and the presumption against fraud'.[71]
[66] Appellants' submissions, pars 1 - 7 (White AB 11 - 12).
[67] The appellants rely on the trial judge's finding at [158] of the primary decision to establish this.
[68] The appellants rely on the evidence in chief of Mr Freight at trial ts 682 to establish this. Mr Freight's response to the question, 'And what was your impression of the expertise of Cataby Services after Mr Doble left, with respect to those services?', was 'Those services became very limited in both their scope and function'.
[69] The appellants rely on the trial judge's findings at [210] - [211] and [215] - [217] of the primary decision to establish this.
[70] The appellants rely on the trial judge's findings at [227] of the primary decision to establish this.
[71] Appellants' grounds of appeal par 1.2.4 (White AB 8). The appellants rely on decisions in McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835, 848 ‑ 851, 859 - 860, 863; Dawson v Westpac Banking Corporation (1991) 66 ALJR 94 at 99 - 100, 106; and Hill v Woollahra Municipal Council [2003] NSWCA 106; (2003) 127 LGERA 7 [52] for the operation of these presumptions.
The appellants submit that the inference referred to in [63] above should now be drawn by this court because it does not depend on the judge's credibility findings.
Disposition of ground 1
Ground 1 is not established in a way that provides any proper basis for disturbing the primary orders, for at least four reasons.
First, as counsel for Chaffey Services submits,[72] the success of ground 1 would not provide a basis for varying the primary orders. As is apparent from the passage quoted at [47] above, the trial judge found Mr Doble's liability to arise in relation to the issue of the relevant quotes on three independent bases: breach of fiduciary duty; breach of the statutory duty in s 182(1); and breach of the statutory duty in s 183(1) of the Act. Ground 1 in its terms only challenges the finding of contravention of s 182(1) of the Act. Absent a challenge to at least the finding of a contravention of s 183(1) of the Act, any error relating to breach of s 182(1) would be immaterial as there is no prospect that it might have affected the primary orders.
[72] Respondent's submissions, par 2 (White AB 22).
Secondly, the evidence does not support the inference that Tronox requested Kirahnley, rather than Chaffey Services, to provide the relevant quotes.
The witnesses at trial who had direct knowledge of the terms in which Tronox requested the relevant quotes were Mr Doble and Mr Freight. Both witnesses were called by the appellants but neither witness was asked whether, or gave evidence that, requests for the relevant quotes were directed to Kirahnley.
In finding facts on the balance of probabilities, the court considers both the probabilities on the evidence before the court and whether that evidence is an appropriate basis on which to reach a reasonable decision. In considering the second issue, the court has regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so. The court will generally be very hesitant to draw inferences in favour of a party that called a witness who could have given direct evidence when that party refrained from asking the crucial questions.[73]
[73] See the recent discussion in Capitalink Pty Ltd v Withnall [2024] NSWCA 172 [56] - [61], [86], [89].
In this case, the appellants did not bear the onus of proof in relation to either the question of contravention of the civil penalty provisions or whether damages resulted from that contravention. However, the terms in which Tronox had requested the relevant quotes was not within the knowledge of Chaffey Services but was within the knowledge of Mr Doble and, at least to the extent that he requested some of the relevant quotes, Mr Freight. The appellants did not attempt to directly prove the fact which they now ask this court to infer. That counts strongly against drawing the inference invited by the appellants in ground 1, and we are not prepared to draw that inference in those circumstances.
Further, in our view such evidence as there is tends to count against the inference which ground 1 invites this court to draw. A purchase order issued by Tronox in response to one of the relevant quotes refers to 'Cataby General Quote 003', suggesting that Tronox thought that it was dealing with Chaffey Services.[74] The evidence of Mr Freight to which the appellants refer indicates his dissatisfaction with Chaffey Services after Mr Doble left his employment with that company. However, it does not indicate any concern he had prior to Mr Doble's departure which might have dissuaded him from requesting quotes from Chaffey Services while it still employed Mr Doble.[75]
[74] Exhibit 289 (Green AB 61).
[75] See trial ts 680 - 683.
The appellants' recourse to what they refer to as 'the presumption against fraud' and the 'presumption of ordinary course of business' does not support the inference which ground 1 invites this court to draw. The presumption discussed in the cases on which the appellants rely is better described as a presumption of regularity and validity.[76] No question of validity arises in the current context. From the perspective of Tronox, there would be nothing irregular (or for that matter, fraudulent or outside its ordinary course of business) in Tronox requesting a quote from Chaffey Services.
[76] Dawson 99.
Thirdly, the trial judge cannot be said to have erred in failing to draw an inference which he was not asked to draw at trial. Chaffey Services points out that the finding was not sought by the appellants at trial.[77] The appellants do not, in response, identify any point at which they invited the trial judge to draw the inference invited by ground 1. Further, as the point might have been addressed by further evidence, the appellants ought not be permitted to run a case on appeal that they did not run at trial.[78]
[77] Respondent's submissions, pars 9 - 13 (White AB 25 - 26).
[78] See Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [66].
Fourthly, even if this court were to infer that Tronox's request for the relevant quotes was directed to Kirahnley rather than Chaffey Services, that would not lead to a conclusion that there was no breach of duty. Mr Doble accepted that the relevant quotes issued by Kirahnley while he was still employed by Chaffey Services were for work which Chaffey Services ordinarily did.[79] Even if the relevant quotes were issued in response to a request directed to Kirahnley, Kirahnley's response to the request meant that there was no need for Tronox to request a quote from Chaffey Services.
[79] Trial ts 567 - 569.
The relevant equitable principle was summarised by Tracey J in Labelmakers Group Pty Ltd v LL Force Pty Ltd,[80] in the following terms:
One activity which will normally be found to be in conflict with an employee's contractual and fiduciary obligations is approaching clients of the employer and attempting to have them become customers of the proposed new business. As Lord Greene MR said in Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] Ch 169 at 177 '[it] would be a curious result if … [an employee] could set himself during his spare time deliberately to injure the goodwill of his master's business by trying to get his customers to leave him'. See also: Wessex Dairies Ltd v Smith [1935] 2 KB 80 at 85; AMP Services Ltd v Manning [2006] FCA 256 at [60]; Deeson Heavy Haulage Pty Ltd v Cox (2009) 82 IPR 521 at [101].
It matters not whether it is the employee or the prospective customer who initiates the discussion in which the employee seeks to obtain the customer's business for the new enterprise: see Sanders v Parry [1967] 2 All ER 803 at 808-809; Dinte v Hales [2009] QSC 63 at [24]. (emphasis added)
[80] Labelmakers Group Pty Ltd v LL Force Pty Ltd [2012] FCA 512 [113] - [114], cited with approval in Global Risk Alliance Group Services Pty Ltd v Harmer [2024] NSWSC 79; (2024) 330 IR 208 [554].
In our view, these considerations are also relevant when determining whether an employee improperly uses their position as an employee to gain an advantage for themselves or someone else for the purposes of s 182(1) of the Act.
The findings of the trial judge quoted at [47] above as to contravention of s 182(1)(a) of the Act do not depend on whether Tronox requested the quote from Chaffey Services or Kirahnley. The impropriety in this case was that Mr Doble, while owing a fiduciary duty to Chaffey Services in relation to quoting and invoicing, without the consent of his employer took for the benefit of a company he controlled the opportunity to do work within the scope of Chaffey Services' usual business which Chaffey Services could and would have done. There is no challenge to the trial judge's finding that Mr Doble used his position as an employee of Chaffey Services to obtain that opportunity. Accordingly, even if Tronox directed its requests for the relevant quotes to Kirahnley, the provision of those quotes involved Mr Doble improperly using his position as an employee of Chaffey Services to gain an advantage for himself or Kirahnley. Contravention of s 182(1) of the Act would be established on that basis.
Ground 2: whether Chaffey Services would have performed the work
By ground 2, the appellants contend that the trial judge erred in finding that Chaffey Services could and would have undertaken the work if Mr Doble had not submitted the relevant quotes on Kirahnley's behalf. The appellants submit that, in the circumstances, there was no evidentiary basis for the judge to infer that Chaffey Services could and would have undertaken the work because Chaffey Services was not requested to provide a quote to do the work. The appellants' written submissions in support of this ground are confined to asserting that the conclusion contended for follows from certain particulars of ground 1.
In oral submissions, counsel for the appellants accepted that ground 2 could not succeed if ground 1 failed.[81] As ground 1 is not established, it is therefore unnecessary to separately address ground 2.
[81] Appeal ts 87.
Grounds 4 and 5: liability for misuse of turnover information
Grounds 4 and 5 challenge aspects of the trial judge's conclusion as to the appellants' liability in respect of the use of Chaffey Services' turnover information in obtaining finance from NAB.
Ground 4: whether turnover information was confidential
By ground 4, the appellants contend that the trial judge erred in finding that the turnover information was subject to a duty of confidence owed by Mr Doble to Chaffey Services.
Appellants' contention
The appellants rely individually and collectively on the following matters in support of that contention:
1.The source of the turnover information prepared by Mr Doble was invoices prepared by Mr Doble and sent to Tronox, and the invoices were not confidential.
2.As there was no term of Mr Doble's employment restricting his use of the turnover information, he was entitled to use that information to obtain finance for Kirahnley.
3.None of the invoices was an asset of Chafco which was sold to Chaffey Services - they comprise information of historical transactions between the seller of the business assets and the seller's customers to which the purchaser of the business was not a party.
4.The profit and loss figures given to Mr Doble when negotiating with Mr Chaffey were not expressed by Mr Chaffey to have been given to Mr Doble in confidence, were not given to Mr Doble in the course of his employment and related only to Chafco's historical profit and loss figures.
Confidential nature of the turnover information
In Australia, the formulation of the principles on which equity will restrain the disclosure of confidential information commonly adopts the language employed in Lord Ashburton v Pape.[82] The principle is that the court will restrain the publication of confidential information improperly or surreptitiously obtained or of information imparted in confidence which ought not to be divulged. As the authors of Meagher, Gummow and Lehane's Equity: Doctrines & Remedies observe,[83] one advantage of this formulation of the principle is that it emphasises that equity is moved to intervene by reason of the circumstances in which the defendant obtained the information, rather than any intrinsic value or importance in the information itself or by any apprehended damage to the plaintiff in its misuse.
[82] Lord Ashburton v Pape [1913] 2 Ch 469, 475, cited with approval in Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39, 50.
[83] Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies (5th ed, 2015) [42-080].
As Gummow J observed in Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health:[84]
In many situations, where a plaintiff establishes a case of disclosure of confidential information for a sole purpose, then any use of it for any other purpose including disclosure to any other party will be a breach of confidence.
[84] Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73, 94.
In upholding Gummow J's decision on appeal, the Full Court of the Federal Court of Australia noted that the circumstances in which confidential information is supplied may vary widely and the test of the confider's purpose will not be appropriate in all cases. However, the court also recognised that in many cases the proper result will be reached by identifying the limited purpose for which the information was disclosed.[85]
[85] Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1991) 28 FCR 291, 302 - 304.
Essential elements of an action in equity for breach of confidence are that the information was of a confidential nature, that it was communicated or obtained in circumstances importing an obligation of confidence, and that there was an unauthorised use of the information.[86]
[86] West Australian Newspapers Ltd v Bond [2009] WASCA 127; (2009) 40 WAR 164 [41].
The application of these equitable principles to information obtained by an employee in the course of his or her employment was summarised by Young J in Forkserve Pty Ltd v Pacchiarotta,[87] to the following effect:
1.There is a distinction between confidential information and know-how. In the absence of contractual restraint, an employee is entitled to take with him or her, when quitting employment, general knowledge and skills acquired while an employee. Those general skills or know-how become part of the employee's personal property, even though he or she would not have acquired them had it not been for the employer.
2.At the very least, without a contractual restraint a former employer is not entitled to restrain a former employee from competing with the employer after termination of the employment.
3.An employee is not entitled to appropriate to himself or herself the employer's confidential information which he or she came to know in the course of the employment. Generally, what is confidential information is a question of fact. Generally speaking, a useful way of testing whether information is confidential information is to consider whether it is to be classified as:
(a)information of a trivial nature or which is easily accessible;
(b) know-how which may have originally been confidential, but which has become part of the employee's skill and knowledge; or
(c)specific trade secrets so confidential that even though they may necessarily have been learned by heart, and even though the employee may have left the employment, they cannot be used for anyone's benefit but the employer's.
[87] Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979; (2000) 50 IPR 74 [18].
Confidential information in the third category will typically include pricing information, profit and loss figures and customer specific information.[88]
[88] See Labelmakers [292] - [295] and cases there cited.
Information which is public knowledge will lack the character of confidentiality which equity will protect if it has entered the 'public domain' because it is public property, public knowledge or common knowledge.[89] However, limited disclosure of information to third parties, even by the party complaining of the breach, is not inconsistent with equity imposing an obligation of confidence. This is illustrated by the decision of the Court of Appeal of England and Wales in Prince of Wales v Associated Newspapers Ltd.[90] There, a staff member of the prince made an unauthorised disclosure of journal entries to a newspaper publisher. The prince had previously given the journal entries to a group of persons. While the case largely turned on the application of the Human Rights Act 1998 (UK), the court held that the information was capable of being the subject of a duty of confidence under the old law.[91] The court applied its earlier decision in Douglas v Hello! Ltd [No 3],[92] where it was said:
It seems to us that information will be confidential if it is available to one person (or a group of people) and not generally available to others, provided that the person (or group) who possesses the information does not intend that it should become available to others.
The court in Prince of Wales held that the journals were 'paradigm examples of confidential documents' notwithstanding that they were sent to selected recipients under cover of a letter signed by the prince in an envelope marked 'private and confidential'.[93]
[89] See, for example, Johns v Australian Securities Commission (1993) 178 CLR 408, 432 - 433 (Brennan J), 437 - 438 (Dawson J), 460 - 462 (Gaudron J), 475 (McHugh J).
[90] Prince of Wales v Associated Newspapers Ltd [2006] EWCA Civ 1776; [2008] Ch 57.
[91] Prince of Wales [28].
[92] Douglas v Hello! Ltd [No 3] [2005] EWCA Civ 595; [2006] QB 125 [55], quoted in Prince of Wales [33].
[93] Prince of Wales [35].
Douglas concerned the publication of photographs of a celebrity wedding surreptitiously taken by a photographer and supplied to a publisher. The celebrity couple had entered into an arrangement with a different publisher who paid for the exclusive right to publish photographs of the wedding and broadly disseminated its own photographs. The view of the majority of the House of Lords was reflected in the speech of Lord Hoffman, who observed:[94]
The information in this case was capable of being protected, not because it concerned the Douglases' image any more than because it concerned their private life, but simply because it was information of commercial value over which the Douglases had sufficient control to enable them to impose an obligation of confidence.
[94] Douglas v Hello! Ltd [No 3] [2007] UKHL 21; (2008) AC 1 [124] (Baroness Hale agreeing [302], Lord Brown agreeing [319]).
The obligation of confidence was held to be imposed for the benefit of the authorised publisher.[95]
[95] Douglas [No 3] [2007] UKHL 21; (2008) AC 1 [123], [129].
The above discussion answers the appellants' submission noted at [83.1] above that Chaffey Services' claim failed because the invoices from which the turnover information was derived were not confidential. The invoices were not common or public knowledge. Authorised disclosure had been confined to Chaffey Services and its employees and the companies to which the invoices had been issued and their employees. That limited disclosure did not deprive the information contained in the invoices of a confidential character which equity could protect. In any event, the submission distracts so far as it is directed to the invoices rather than the turnover information. As the trial judge correctly held in the passage quoted at [42] above, the turnover figures of the business were not generally available and were of a confidential character, even if the figures represented the cumulative total of invoices which were not themselves confidential.
Terms of employment contract
We do not accept the appellants' submissions, noted at [83.2] above, that Mr Doble was entitled to use the turnover information to obtain finance for Kirahnley because there was no term of Mr Doble's employment restricting his use of the turnover information. Even in the absence of contractual restriction, equity will generally prevent an employee from using his or her employer's confidential information for the purpose of establishing a new business in competition with the employer's business.[96] There is also commentary in support of the proposition that, in the absence of an express term, the law may imply a contractual obligation of the employee to keep confidential information acquired through the employment that the employee knows or has reason to know is confidential.[97] It is unnecessary to explore whether such a term might have been implied in the present case, in which Chaffey Services disavowed any claim for common law damages for breach of an implied contractual term.[98] Whether or not such a term is implied in an employment contract as a matter of law, it is clear that an employee's obligation in equity not to use his or her employer's confidential information for unauthorised purposes does not depend on the existence of an express contractual term preventing that use.
Effect of sale of business on confidentiality obligation
[96] See Freedom Motors Australia Pty Ltd v Vaupotic [2003] NSWSC 506 [13] - [18].
[97] Dal Pont [5.43]. An implied term of the employment contract was seen to be a basis of the obligation in Mid-City Skin Cancer and Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; (2006) 67 NSWLR 569 [140] - [146]; Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275, 316; Faccenda Chicken Ltd v Fowler [1987] Ch 117, 135 - 136; Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37, 40 - 41; Bents Brewery Co Ltd v Hogan [1945] 2 All ER 570, 576; and Kirchner & Co v Gruban [1909] Ch 413, 422.
[98] See primary decision [5], [201], [219], [291].
We also do not accept the appellants' contention, noted at [83.3] above, to the effect that Mr Doble's confidentiality obligation did not survive the sale of the business by Chafco to Chaffey Services.
The appellants wrongly focus on the question of whether property in the relevant invoices was assigned by Chafco to Chaffey Services under the terms of the sale agreement. The trial judge was correct to conclude, for the reasons his Honour gave, that property in the trading records of the business - including records of invoices and turnover - were assigned by Chafco to Chaffey Services.[99] However, the continuation of Mr Doble's obligation of confidence did not turn on who retained a proprietary interest in the relevant business records.
[99] Primary decision [259] - [261].
The equitable obligation of confidence does not lie in proprietary right but in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained.[100] While property is not the basis on which equitable protection is given, the effect of that protection makes it appropriate to describe the equitable right to protect confidential information as having a proprietary character.[101] As was recognised by Gummow J in Smith Kline & French Laboratories, and by the High Court in Farah Constructions, the equitable right to restrain the unauthorised use or disclosure of 'trade secrets' is capable of transfer or assignment.[102] That is consistent with the decision of Campbell J in Mid-City,[103] that an equitable chose in action, being the right to restrain the unauthorised use or disclosure of confidential information concerning the operation of a business, was assignable and was able to be enforced by a purchaser of the business. The principle is also reflected in the decision of the Full Court of the Federal Court of Australia (Emmett, Perram and Yates JJ) in Elecon Australia Pty Ltd v PIV Drives GmbH.[104] In Elecon Australia, assignees of assets of a company to whom Elecon Australia owed a duty to maintain the confidence of trade secrets were able to enforce the duty. In a passage cited by the primary judge in the present case,[105] the Full Court adopted the following proposition:[106]
Although confidential information is not property in the usual sense, it may be transferred by one person to another and the person to whom it is transferred has standing to take action to protect the confidentiality of the information. The Court may therefore grant at the behest of the person to whom, as a purchaser, the confidential information is transferred, injunctions and equitable compensation for breaches of the confidence (see TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd[No 3] (2007) 158 FCR 444 at [72] - [77]).
[100] Moorgate Tobacco Co Ltd v Philip Morris Ltd [No 2] (1984) 156 CLR 414, 438 (Deane J).
[101] Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1990) 22 FCR 73, 120 - 121 (Gummow J), in an passage approved by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [118].
[102] The position may be different where the rights assigned comprise the right to use confidential information: see Neobev Pty Ltd v Bacchus Distillery Pty Ltd [No 3] [2014] FCA 4; (2014) 104 IPR 249 [140] - [142].
[103] See Mid-City [196] - [238].
[104] Elecon Australia Pty Ltd v PIV Drives GmbH [2010] FCAFC 56; (2010) 93 IPR 174.
[105] Primary decision [262].
[106] Elecon Australia [35], [41].
Under cl 3.1 of the Business Sale Agreement between Chafco as seller and Chaffey Services as buyer, Chaffey Services agreed to buy the 'Business' of Cataby General Services (including all the legal and beneficial right, title and interest of Chafco in the Business).[107] In our view, Chafco's equitable right to restrain Mr Doble from misusing its confidential turnover information was a beneficial right or interest of Chafco in the Business within the meaning of cl 3.1, which was assigned by Chafco to Chaffey Services under the Business Sale Agreement. Chaffey Services therefore had standing to enforce the duty of confidence which Mr Doble owed in relation to confidential information about the turnover of the business of Cataby General Services which he obtained as an employee of Chafco.
Provision of information during sale negotiations
[107] Clause 3.1 of the Business Sale Agreement (Green AB 80). While the agreement also contains definitions of 'Assets' and 'Intellectual Property' of the business, these defined terms are used in warranties relating to those matters rather than the rights which are transferred under cl 3.1 of the agreement.
We also do not accept the appellants' submission to the effect that the duty of confidence owed by Mr Doble in respect of the turnover information he obtained as an employee of Chafco was relevantly affected by the disclosure of profit and loss information to him during the unsuccessful negotiations for his purchase of the business of Cataby General Services.
The trial judge made an unchallenged factual finding that disclosure of profit and loss figures by Mr Chaffey to Mr Doble in November 2018 was made for the limited purpose of enabling Mr Doble to assess whether he wished to buy the business at the price sought by Mr Chaffey and not for any other purpose.[108] Those negotiations did not otherwise relieve Mr Doble from his equitable obligation not to use and disclose the turnover information other than for authorised purposes. The trial judge correctly held that the disclosure during unsuccessful negotiations with Mr Doble for the purchase of Cataby General Services did not amount to a general release of the obligation of confidence in respect of the turnover information.
Ground 5: improper use of information
[108] Primary decision [264].
By ground 5, the appellants contend that the trial judge erred in holding that Mr Doble's use of the turnover information in documents submitted to NAB to obtain finance was an improper use of information obtained by Mr Doble because he was an employee of Chaffey Services. This ground attacks the finding that Mr Doble's provision of the turnover information to NAB for the purpose of obtaining finance contravened s 183(1) of the Act. The appellants' contention is that the use of information obtained as an employee for the identified purposes is only an 'improper use' for the purposes of s 183(1) if there is an improper use of confidential information under the general rules of equity.[109]
[109] Appellants' submissions, par 12 (White AB 13).
The respondent contends that the 'information' referred to in s 183(1) only needs to be obtained by virtue of the person's position and does not need to be confidential.[110] The respondent says that ground 4.1, detailed at [83.1] above, positively asserts that the information was obtained by Mr Doble in his capacity as an employee, and this is supported by the trial judge's unchallenged findings[111] which are based on Mr Doble's own evidence.[112] The respondent submits that is all that is needed to sustain the breach and, even if ground 4 succeeds in respect of confidentiality, the challenge to orders made under s 1317H(1) in respect of the turnover information must fail.
[110] Citing McNamara v Flavel (1988) 13 ACLR 619, 620, 625; ASIC v Somerville [2009] NSWSC 934; (2009) 77 NSWLR 110 [39]; Smart EV Solutions Pty Ltd v Guy [2023] FCA 1580 [71].
[111] Primary decision [152], [165].
[112] Trial ts 522 - 527, 552 - 553.
The concept of 'improper use' as it appears in s 182(1) of the Act was described in the following terms by Brennan, Deane, Toohey and Gaudron JJ in R v Byrnes:[113]
Impropriety does not depend on an alleged offender's consciousness of impropriety. Impropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case.
[113] R v Byrnes (1995) 183 CLR 501, 514 - 515.
It is also established that s 182(1) of the Act is focused on the purpose of the director, officer or employee in engaging in the relevant conduct. An employee may contravene s 182(1) even if the object of gaining an advantage for themselves or some other person, or causing detriment to the corporation, is not achieved.[114]
[114] Chew v The Queen (1992) 173 CLR 626, 633.
Given the proximity of s 182 and s 183 to each other, and the similarity of the terms and structure of those provisions, the reference to 'improper use' of information to gain an advantage or cause a detriment in s 183(1) of the Act would ordinarily be construed as ascribing a cognate meaning to the phrase 'improper use' in s 182(1) of the Act. However, in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd,[115] the Full Court of the Federal Court of Australia adopted an observation of Young J in Forkserve to the effect that, generally speaking, if there had been no improper use of information under the general equitable principles, there would be no improper use of information under the statute under the predecessor to s 183 of the Act.[116] In GDP Group Pty Ltd v Saye,[117] Downs J observed:
It appeared to be common ground that, generally, there can be no improper use of information within the meaning of s 183 [of the Act] if there has been no improper use of the information under the general rules of equity, which is consistent with the authorities: Forkserve Pty Ltd v Pacchiarotta (2000) 50 IPR 74; [2000] NSWSC 979 at [22] ‑ [29]; see also Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (2009) 81 IPR 1; [2009] FCAFC 2 at [44] - [46].
[115] Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2; (2009) 81 IPR 1 [44] - [46].
[116] Forkserve [28] quoted at Futuretronics.com.au [45].
[117] GDP Group Pty Ltd v Saye [2022] FCA 688 [73].
In New Aim Pty Ltd v Leung,[118] the Full Court of the Federal Court of Australia convened a coram of five judges to consider a submission that, on one interpretation of the judgment in Futuretronics.com.au, that matter was wrongly decided. However, the court in New Aim ultimately found it unnecessary to decide whether Futuretronics.com.au was wrongly decided and, in those circumstances, considered it preferable not to determine the issue.[119]
[118] New Aim Pty Ltd v Leung [2023] FCAFC 67.
[119] New Aim [59].
It is likewise unnecessary for this court to resolve the question of whether, and if so when, a use of information which equity would not regard as a breach of confidence can be an 'improper use' of information under s 183(1) of the Act. As ground 4 fails, the trial judge's finding that Mr Doble's use of the turnover information for his own purposes breached the equitable obligation of confidence he owed to Chaffey Services is sustained. Therefore, even on the appellants' construction of s 183 of the Act, that use of the turnover information would also contravene s 183(1) of the Act.
Liability for use of turnover information under s 182 of the Act
Even if grounds 4 and 5 had been established, they would not have justified this court in disturbing the primary orders. As noted at [46] and [49] above, the trial judge found that Mr Doble's use of the turnover information for his own purposes contravened both s 182(1) and s 183(1) of the Act, and that Kirahnley was liable as a party to those contraventions. The appellants' grounds of appeal do not challenge the finding of contravention of s 182(1) of the Act, and that finding would provide an alternate basis for sustaining the primary orders.
Grounds 3, 6 and 7: proper construction of s 1317H of the Act
Grounds 3, 6 and 7 of the appellants' appeal raise a question of construction of s 1317H of the Act. That question is whether compensation may be awarded by reference to the profits made by a person resulting from contravention of a civil penalty provision where the claimant has not proved that they suffered any loss resulting from the contravention. That question arises in a context where the appellants contend that Chaffey Services has not proved that it suffered any loss as a result of contraventions of s 182(1) and s 183(1) of the Act but did prove that Kirahnley made a financial gain from those contraventions.
Grounds of appeal
By ground 3, the appellants contend that the trial judge erred in awarding Chaffey Services compensation for damage in not carrying out the work in circumstances where Chaffey Services failed to adduce evidence of any damage it had suffered by not carrying out the work and had only adduced evidence in support of an account of profits in equity by Kirahnley. By ground 6, the appellants contend that the trial judge erred in awarding compensation under s 1317H calculated by reference to the gain made by Kirahnley. By ground 7, the appellants contend that the trial judge should have held that Chaffey Services was not entitled to compensation under s 1317H because it failed to prove that it suffered any damage within the meaning of s 1317H(1) as a result of Mr Doble's contravention of s 183(1) in using the turnover information to obtain bank finance for Kirahnley.
Appellants' contentions
The appellants contend that s 1317H(1) provides for compensation to be ordered for damage suffered by a corporation resulting from contravention of a civil penalty provision. They say that s 1317H(2) does not vest jurisdiction to order an account of profits in accordance with equitable doctrines. Rather, the appellants contend that s 1317H only enables compensation awarded to a corporation to include profits made by the contravener if the amount of those profits represents damage suffered by the corporation through loss of an opportunity which the corporation was not able to exploit and therefore not able to otherwise recover.
Authority
The appellants refer to two decisions in which s 1317H(2) of the Act has been considered: Grimaldi v Chameleon Mining NL [No 2],[120] and V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd.[121]
[120] Grimaldi v Chameleon Mining NL [No 2] [2012] FCAFC 6; (2012) 200 FCR 296.
[121] V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013] FCAFC 16; (2013) 296 ALR 418.
Grimaldi concerned officers of Chameleon Mining breaching s 181 and s 182 of the Act by assisting another corporation's acquisition of a valuable mining tenement. Chameleon Mining sued the officers for both breach of fiduciary duty and contravention of the civil penalty provisions. Chameleon Mining sued companies associated with the officers for knowing participation in the breach of fiduciary duty and the breach of the civil penalty provisions.[122] The trial judge in Grimaldi made orders under s 1317H requiring each defendant to compensate for the profits made by that defendant only. The relevant issue in Grimaldiwas whether the trial judge in that case was obliged to order compensation by reference to profits made by others. Chameleon Mining contended that if a compensation order was made under s 1317H it must include profits made by any person.[123] The Full Federal Court rejected that contention and adopted the following construction of the provision:[124]
[T]he 'include profits' formula is simply definitional in the sense that it brings with the compensatory scheme of the section a type of claim (ie for profits made) which would not otherwise necessarily fall within the formula 'damage suffered by the corporation' as, for example, where the contravenor or a third person made profits as a result of the contravention, but without loss to the corporation. Put shortly, it empowers the Court to compensate for profits made from a contravention without proof of a corresponding loss.
[122] An overview of the complex transactions and claims is given in Grimaldi [6] - [27].
[123] Grimaldi [629].
[124] Grimaldi [630] - [631].
In the course of its determination of this question, the court in Grimaldi reviewed the legislative history of s 1317H,[125] which replaced an earlier provision (the former s 1317HD(1)) that had clearly provided for the recovery of profits or loss resulting from a contravention. The court described s 1317H as 'opaquely worded',[126] and s 1317H(2) as a 'poorly executed drafting contrivance'.[127] The court thought that the most probable explanation for the change was that the clearly worded old provision was given 'a plain English rewrite'. The court referred to a discussion in the 10th edition of Ford's Principles of Corporations Law in the following terms:[128]
If, as Ford suggests (at 3.400), s 1317H reflected no more than 'simplified' drafting, then under the section:
… the corporation or scheme still has the statutory right to recover from the contravening party an amount equivalent to profits made either by that party or by a third party from the contravention, regardless of whether the corporation or scheme has also suffered a loss. Doubt is created because the drafting treats profits as a component in the calculation of damages, and does not confer a specific right of recovery of profits. Nevertheless, it seems that the new drafting has not altered the law.
We have no need to express our general agreement with the Ford view given the particular issue of construction that has been raised. Nonetheless, the conclusion we have reached lends support to it so far as it goes.
[125] Grimaldi [622] - [625].
[126] Grimaldi [625].
[127] Grimaldi [626].
[128] Grimaldi [625] - [626].
In V-Flow, a director and two employees of Holyoake Industries were found to have breached their fiduciary duty and s 181 - s 183 of the Act in acquiring a business which competed with that of Holyoake Industries using V-Flow (a knowing party to the contraventions) as a vehicle for the acquisition. The trial judge in V-Flow assessed an account of profits for breach of fiduciary duty in the amount of $1,469,178 and statutory compensation in the same amount. The trial judge assessed equitable compensation for Holyoake's loss of opportunity to itself acquire the business at $1,046,923. Holyoake elected to receive statutory compensation. V-Flow's appeal concerned the trial judge's calculation of V-Flow's profit resulting from the contravention of the civil penalty provisions. In resolving those questions, the Full Federal Court observed:[129]
The language of s 1317H is singularly inelegant. Section 1317H(1) provides that the court may order a person to compensate a corporation for damage suffered by the corporation, if the damage resulted from a contravention of relevant provisions of the Corporations Act by that person. Section 1317H(2) then appears to direct the court determining the damage suffered by the corporation to include, as damage, profits made by any person resulting from the contravention. That appears to refer to profits made, irrespective of whether there was countervailing damage suffered by the corporation. That is to say, the effect of s 1317H(2) is definitional, in the sense that it brings into the compensatory scheme of s 1317H the capacity for the court to order that the compensation include profits, even though there was no corresponding loss on the part of the corporation: [Grimaldi] [630] ‑ [631]. That scheme involves a conflation of the concepts of equitable compensation or damages, on the one hand, and account of profits, on the other.
[129] V-Flow [54].
The court found the trial judge in V-Flow to have erred in failing to take account of interest and director's salary costs in calculating the profit made as the result of the contraventions. When allowance was made for those matters, the profit reduced from $1,469,178 to $788,710.[130] The court then observed:[131]
The damages for the lost opportunity included the anticipated profits that Holyoake would have earned had the respondents not acted as they did and instead allowed Holyoake to exploit the opportunity of acquiring Variflow's business. If profits made by V-Flow and Messrs Aloe and Matkovic were added, under s 1317H(2), to Holyoake's damages for loss of opportunity, in arriving at the damages payable under s 1317H(1), the overall award would be inflated unjustifiably by double counting of the profit element. There may be cases where the wrongdoer's conduct results in damage from loss of opportunity that both the wrongdoer and the injured party could not exploit, where it would be appropriate to make a cumulative award under s 1317H(1) and (2) that includes the wrongdoer's profits. That would be because those profits would not have taken account of the value of the opportunity that the injured party could not exploit as a result of the wrongdoer's conduct. But that is not this case. In the present case, the value of Holyoake's loss of opportunity will compensate it for the profits the wrongdoers in fact earned as well as further loss it incurred that resulted from their contraventions. (emphasis added)
[130] V-Flow [81].
[131] V-Flow [82].
The Full Federal Court concluded that Holyoake should be permitted to elect an account of profits of $788,710, compensation under s 1317H in the same amount or equitable compensation for loss of opportunity in the amount of $1,046,923.[132]
Proper construction of s 1317H of the Act
[132] V-Flow [86].
The proposition which the appellants seek to draw from V‑Flow is that an amount of compensation under s 1317H which includes profits of the wrongdoer is only appropriate if the wrongdoer's conduct resulted in damage from loss of opportunity that both the wrongdoer and the injured party could not exploit.[133] As Chaffey Services submits, that is not a fair reading of the judgment in this case. Rather, as the emphasised portion of the passage quoted at [116] above indicates, the situation identified by the appellants is one in which a cumulative award of loss and profits may be appropriate. Absent unusual circumstances of that kind, it would generally not be appropriate to award both damage suffered by the corporation and profits made by the contravener as a result of the contravention.
[133] Appellants' submissions, par 18.3 (White AB 15).
The appellants place reliance on the observations by the Full Federal Court that s 1317H(2) is a definitional provision. While those observations of the Federal Court were plainly correct, they do not assist the appellants. What s 1317H(2) is defining, albeit inelegantly, is the 'damage suffered by the corporation' which may be the subject of a compensation order under s 1317H(1) of the Act. Grimaldi and V-Flow hold that s 1317H enables the court to compensate for profits made from a contravention without proof of a corresponding loss. The appellants' construction of s 1317H of the Act is inconsistent with the principle established by those decisions of the Full Federal Court.
For these reasons, the appellants' construction of s 1317H of the Act is incorrect. The trial judge approached the determination of the damage suffered by Chaffey Services resulting from the contraventions of s 182(1) and s 183(1) in the manner contemplated by s 1317H of the Act. Therefore, grounds 3, 6 and 7 are not established.
Ground 8: 'election' in relation to double counting
By ground 8, the appellants contend that the trial judge erred by ordering that judgment be entered for $99,793.98 pursuant to s 1317H(l) without requiring Chaffey Services to elect how much of that judgment sum was to be allocated to each of the separate causes of action upheld at [327](b) and [340] of the primary decision after deduction of double-counted amounts.
This ground is misconceived. As contemplated by the primary decision, Chaffey Services was required to elect between the amounts referred to at [52] above as compensation for the diversion of work to Kirahnley. It elected to receive the amount of $16,900 referred to at [52](b). It was also entitled to an award of $98,026.21 in respect of the misuse of its turnover information. A reduction to avoid double counting of profit made by Kirahnley as a result of the contraventions was required. However, there was no need for the final orders to separately identify the amount awarded for each head of claim after making a deduction to avoid double-counting. As the trial judge correctly observed,[134] this was not a matter of election but of calculation to avoid Chaffey Services recovering the same amount under two separate compensation orders. No error was involved in awarding a single amount as compensation under s 1317H, calculated by adding the amounts allowed for the separate heads of claim and then deducting the profits which were common to both heads of claim.
[134] Trial ts 958.
In any event, as counsel for the appellants accepted,[135] ground 8 only arose in the event that only one of Chaffey Services' claims based on the use of turnover information or the issuing of the relevant quotes was upheld on appeal. As both claims have been upheld, it is unnecessary to determine ground 8. It is also unnecessary to deal with the appellants' submission that, contrary to the approach taken in V‑Flow,[136] an election of alternative remedies is irrevocable and cannot be revisited if the primary decision is disturbed on appeal.
[135] Appeal ts 50 - 51.
[136] V-Flow [86].
Respondent's notice of contention
Chaffey Services advances a notice of contention directed to supporting the amount of compensation awarded by the primary orders under s 1317H as an award of equitable compensation or an account of profits in equity. As none of the grounds of appeal are established, it is unnecessary to deal with the notice of contention.
Orders
For the above reasons, the appeal should be dismissed. We would hear from the parties on the question of costs, which prima facie should follow the event.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KP
Associate to the Hon Justice Mitchell
16 JANUARY 2025
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