Eltrak International and Staff Pty Ltd v Collins
[2021] FCA 484
•5 May 2021
FEDERAL COURT OF AUSTRALIA
Eltrak International and Staff Pty Ltd v Collins [2021] FCA 484
File number: QUD 138 of 2021 Judgment of: RANGIAH J Date of judgment: 5 May 2021 Catchwords: PRACTICE AND PROCEDURE – Federal Court Rules 2011 (Cth) rr 7.42 and 7.43 – ex parte application by employer for search orders against former senior employee – where strong prima facie case in respect of multiple causes of action – where serious actual and potential loss to applicant – orders made Legislation: Corporations Act 2001 (Cth) s 183(1)
Federal Court Rules 2011 (Cth) rr 7.42, 7.43, 7.45 and 7.46
Division: General Division Registry: Queensland National Practice Area: Employment and Industrial Relations Number of paragraphs: 11 Date of hearing: 5 May 2021 Counsel for the Prospective Applicant: Mr A Denton Solicitor for the Prospective Applicant: EMA Legal Counsel for the Prospective Respondent: The Prospective Respondent did not appear ORDERS
QUD 138 of 2021 BETWEEN: ELTRAK INTERNATIONAL AND STAFF PTY LTD
Prospective Applicant
AND: BRETT JOHN COLLINS
Prospective Respondent
ORDER MADE BY:
RANGIAH J
DATE OF ORDER:
5 MAY 2021
PENAL NOTICE
TO: BRETT JOHN COLLINS
IF YOU (BEING THE PERSON BOUND BY THIS ORDER):
(A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR
(B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.
ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.TO: BRETT JOHN COLLINS
This is a ‘search order’ made against you on 5 May 2021 by Justice Rangiah at a hearing without notice to you after the Court was given the undertakings set out in Schedule B to this order and after the Court read the affidavits listed in Schedule C to this order.THE COURT ORDERS THAT:
INTRODUCTION
1.(a) the application for this order is made returnable immediately.
(b) the time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 2.00 pm on Friday 7 May 2021.
2.Subject to the next paragraph, this order has effect up to and including 13 May 2021 (‘the Return Date’). On the Return Date at 9.30 am there will be a further hearing in respect of this order.
3.You may apply to the Court at any time to vary or discharge this order; including, if necessary, by telephone to the Duty Judge.
4.This order may be served only between 9.00 am and 2.00 pm on a business day.
5.In this order:
(a)‘applicant’ means the person who applied for this order, and if there is more than one applicant, includes all the applicants.
(b)‘cloud storage facility’ means any online data storage facility, including email accounts, iCloud, Dropbox, Google Drive and Microsoft OneDrive.
(c)‘electronic device’ means any device capable of electronically storing information, including a computer, tablet device, hard drive, portable storage device, disk or smartphone.
(d)‘electronic communication’ includes email, SMS messages, iMessage, or communications using applications such as Whatsapp.
(e)‘independent computer expert’ means the person identified as the independent computer expert in the search party referred to in Schedule A to this order.
(f)‘independent lawyer’ means the person identified as the independent lawyer in the search party referred to in Schedule A to this order.
(g)‘listed thing’ means any thing referred to in Schedule A to this order.
(h)‘premises’ means the premises and any of the premises identified in Schedule A to this order, including any vehicles and vessels that are under the respondent’s control on or about the premises or that are otherwise identified in Schedule A.
(i)‘search party’ means the persons identified or described as constituting the search party in Schedule A to this order.
(j)‘thing’ includes a document.
(k)any requirement that something be done in your presence means in the presence of you or of one of the persons described in (6) below.
6.This order must be complied with by:
(a)yourself;
(b)any partner, employee or agent of yourself; or
(c)any other person having responsible control of the premises.
7.This order must be served by, and be executed under the supervision of, the independent lawyer.
ENTRY, SEARCH AND REMOVAL
8.Subject to paragraphs 10 to 20 below, upon service of this order you must permit members of the search party to enter the premises so that they can carry out the search and other activities referred to in this order.
9.Having permitted members of the search party to enter the premises, you must:
(a)permit them to leave and re-enter the premises on the same and the following day until the search and other activities referred to in this order are complete;
(b)permit them to search for and inspect the listed things and to make or obtain a copy, photograph, film, sample, test or other record of the listed things;
(c)disclose to them the whereabouts of all the listed things in your possession, custody or power, whether at the premises or otherwise;
(d)disclose to them the whereabouts of all electronic devices at the premises, and the account information of any cloud storage facilities that you have access to, in which any documents among the listed things are or may be stored, located or recorded and cause and permit those documents to be printed out;
(e)do all things necessary to enable them to access the listed things, including opening or providing keys to locks and enabling them to access and operate electronic devices, cloud storage facilities and means of electronic communication, and providing them with all necessary passwords;
(f)permit the independent lawyer to remove from the premises into the independent lawyer’s custody:
(i)the listed things or things which reasonably appear to the independent lawyer to be the listed things and any things the subject of dispute as to whether they are listed things; and
(ii)the copies, photographs, films, samples, tests, other records and printed out documents referred to above; and
(g)permit the independent computer expert to search any electronic device or cloud storage facility and make a copy or digital copy of information stored on any electronic device or cloud storage facility and permit the independent computer expert or the independent lawyer to remove any electronic device from the premises as set out in paragraphs 20 and 21 below.
RESTRICTIONS ON ENTRY, SEARCH AND REMOVAL
10.This order may not be executed at the same time as a search warrant (or similar process) is executed by the police or by a regulatory authority.
11.You are not required to permit anyone to enter the premises until:
(a)the independent lawyer serves you with copies of this order and any affidavits referred to in Schedule C (confidential exhibits, if any, need not be served until further order of the Court); and
(b)you are given an opportunity to read this order and, if you so request, the independent lawyer explains the terms of this order to you.
12.Before permitting entry to the premises by anyone other than the independent lawyer, you, for a time (not exceeding two hours from the time of service or such longer period as the independent lawyer may permit):-
(a)may seek legal advice;
(b)may ask the Court to vary or discharge this order;
(c)may gather together any things which you believe may tend to incriminate you or make you liable to a civil penalty and hand them to the independent lawyer in (if you wish) a sealed envelope or container; and
(d)may gather together any documents that passed between you and your lawyers for the purpose of obtaining legal advice or that are otherwise subject to legal professional privilege or client legal privilege, and hand them to the independent lawyer in (if you wish) a sealed envelope or container.
13.Subject to paragraph 22 below, the independent lawyer must not inspect or permit to be inspected by anyone, including the applicant and the applicant’s lawyers, any thing handed to the independent lawyer in accordance with subparagraphs 12(c) and (d) above and the independent lawyer must deliver it to the Court at or prior to the hearing on the Return Date.
14.During any period referred to in paragraph 12 above, you must:
(a)inform and keep the independent lawyer informed of the steps being taken;
(b)permit the independent lawyer to enter the premises but not to start the search;
(c)not disturb or remove any listed things; and
(d)comply with the terms of paragraphs 25 and 26 below.
15.Any thing the subject of a dispute as to whether it is a listed thing must promptly be handed by you to the independent lawyer for safekeeping pending resolution of the dispute or further order of the Court.
16.Before removing any listed things from the premises (other than things referred to in the immediately preceding paragraph), the independent lawyer must supply a list of them to you, give you a reasonable time to check the correctness of the list, and give you and the applicant’s lawyer a copy of the list signed by the independent lawyer.
17.The premises must not be searched, and things must not be removed from the premises, except in the presence of you or of a person who appears to the independent lawyer to be your partner, employee, agent or other person acting on your behalf or on your instructions.
18.If the independent lawyer is satisfied that full compliance with the immediately preceding paragraph is not reasonably practicable, the independent lawyer may permit the search to proceed and the listed things to be removed without full compliance.
19.The applicant’s lawyer and the independent lawyer must not allow the applicant in person to inspect or have copies of any thing removed from the premises nor communicate to the applicant information about its contents or about anything observed at the premises until 4:30pm on the Return Date or other time fixed by further order of the Court.
COMPUTERS AND ELECTRONIC DEVICES
20.(a) The search party must include a computer expert who is independent of the applicant and of the applicant’s lawyers (‘the independent computer expert’).
(b)Any search of an electronic device or cloud storage facility must be carried out only by the independent computer expert.
(c) The independent computer expert may make a copy or digital copy of the information stored on any electronic device or cloud storage facility and remove that copy or digital copy from the premises.
(d) The independent computer expert may search the electronic device or cloud storage facility or the copy or digital copy of the information on it at the premises and/or away from the premises for listed things and may copy the listed things electronically or in hard copy or both.
(e) The independent computer expert must as soon as practicable and, in any event, prior to the hearing on the Return Date, deliver the copy or digital copy of the information stored on the electronic device or cloud storage facility and all electronic and hard copies of listed things to the independent lawyer, together with a report of what the independent computer expert has done including a list of such electronic and hard copies.
(f) The independent lawyer must, at or prior to the hearing on the Return Date, deliver to the Court all things received from the independent computer expert and serve a copy of the latter’s report on the parties.
21.(a) This paragraph (21) applies if you are not a corporation and you wish to object to complying with paragraph 20 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(b)You must:
(i)disclose so much of the information required to be disclosed to which no objection is taken; and
(ii)prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and
(iii)file and serve on each other party a separate affidavit setting out the basis of the objection.
INSPECTION
22.Prior to the Return Date, you or your lawyer or representative shall be entitled, in the presence of the independent lawyer, to inspect any thing removed from the premises and to:
(a)make copies of the same; and
(b)provide the independent lawyer with a signed list of things which are claimed to be privileged or confidential and which you claim ought not to be inspected by the applicant.
PROVISION OF INFORMATION
23.Subject to paragraph 24 below, you must:
(a)at or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing as to:
(i)the location of the listed things;
(ii)the name and address of everyone who has supplied you, or offered to supply you, with any listed thing;
(iii)the name and address of every person to whom you have supplied, or offered to supply, any listed thing; and
(iv)details of the dates and quantities of every such supply and offer.
(b)within five working days after being served with this order, make and serve on the applicant an affidavit setting out the above information.
24.(a) This paragraph (24) applies if you are not a corporation and you wish to object to complying with paragraph 23 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(b)You must:
(i)disclose so much of the information required to be disclosed to which no objection is taken; and
(ii)prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and
(iii)file and serve on each other party a separate affidavit setting out the basis of the objection.
PROHIBITED ACTS
25.Except for the sole purpose of obtaining legal advice, you must not, until 4.30 pm on the Return Date, directly or indirectly inform any person of this proceeding or of the contents of this order, or tell any person that a proceeding has been or may be brought against you by the applicant.
26.Until 4.30 pm on the Return Date you must not destroy, tamper with, cancel or part with possession, power, custody or control of the listed things otherwise than in accordance with the terms of this order or further order of the Court.
COSTS
27.The costs of this application are reserved to the Court hearing the application on the Return Date.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
SCHEDULE A
Premises
The premises located at 183 Galaxy Street, Bridgeman Downs QLD 4035, including any vehicle or vehicles under the respondent’s control on or about those premises.
Listed Things
1. Any records (whether in hard copy or electronic form) or electronic communications containing the applicant’s confidential information.
2. Any records (whether in hard copy or electronic form) or electronic communications with, or relating to:
(a) the applicant’s confidential information;
(b) your employment, or proposed employment, with a competitor of the applicant.3. Any electronic communications between (including cc and bcc) you and any person associated with a competitor of the applicant.
“the applicant’s confidential information” for the purpose of this Schedule means:
(a) customer names and contact information;
(b) sales reports;
(c) pricing structures;
(d) discount structures;
(e) margins;
(f) sales campaigns;(g) correspondence with customers (such as SMS messages, WhatsApp messages, emails) including the frequency of those communications;
(h) leads.
Search Party
1. The independent lawyer: Louise Marie Nixon, Partner of Turks Legal, Level 14, 10 Eagle Street, Brisbane QLD 4000.
2. The applicant’s lawyer: John Love, Partner of EMA Legal.
3. Other members of the search party:
(a) Michael Tarnawsky in the capacity of independent computer expert.
(b) Mark Gare in the capacity as the applicant’s computer expert.
SCHEDULE B
UNDERTAKINGS GIVEN TO THE COURT
Undertakings given to the Court by the applicant:
1. The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.
2. The applicant will not, without leave of the Court, use any information, document or thing obtained as a result of the execution of this order for the purpose of any civil or criminal proceeding, either within or outside Australia, other than this proceeding.
3. The applicant will not inform any other person of the existence of this proceeding except for the purposes of this proceeding until after 4.30 pm on the Return Date.
4. If the applicant has not already done so, as soon as practicable the applicant will file an interlocutory application for hearing on the Return Date and an originating process.
Undertakings given to the Court by the applicant’s lawyer
1. The applicant’s lawyer will pay the reasonable costs and disbursements of the independent lawyer and of any independent computer expert.
2. The applicant’s lawyer will provide to the independent lawyer for service on the respondent copies of the following documents:
(a) this order;
(b) the application for this order for hearing on the Return Date;
(c) the following material in so far as it was relied on by the applicant at the hearing when the order was made:
(i) affidavits (or draft affidavits);
(ii) exhibits capable of being copied (other than confidential exhibits);
(iii) any written submission; and
(iv) any other document that was provided to the Court.
(d) a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court; and
(e) the originating process, or, if none was filed, any draft originating process produced to the Court.
3. The applicant’s lawyer will answer to the best of the lawyer’s ability any question as to whether a particular thing is a listed thing.
4. The applicant’s lawyer will use the lawyer’s best endeavours to act in conformity with the order and to ensure that the order is executed in a courteous and orderly manner and in a manner that minimises disruption to the respondent.
5. The applicant’s lawyer will not, without leave of the Court, use any information, document or thing obtained as a result of the execution of this order for the purpose of any civil or criminal proceeding, either within or outside Australia, other than this proceeding.
6. The applicant’s lawyer will not inform any other person of the existence of this proceeding except for the purposes of this proceeding until after 4.30 pm on the Return Date.
7. The applicant’s lawyer will not disclose to the applicant any information that the lawyer acquires during or as a result of execution of the search order, without the leave of the Court.
8. The applicant’s lawyer will use best endeavours to follow all directions of the independent lawyer.
Undertakings given to the Court by the independent lawyer
1. The independent lawyer will use his or her best endeavours to serve the respondent with this order and the other documents referred to in undertaking (2) of the above (undertakings by the applicant’s lawyer or lawyers).
2. Before entering the premises, the independent lawyer will:-
(a) offer to explain the terms and effect of the search order to the person served with the order and, if the offer is accepted, do so; and
(b) inform the respondent of his or her right to take legal advice.
3. Subject to undertaking (4) below, the independent lawyer will retain custody of all things removed from the premises by the independent lawyer pursuant to this order until delivery to the Court or further order of the Court.
4.At or before the hearing on the Return Date, the independent lawyer will provide a written report on the carrying out of the order to the Court and provide a copy to the applicant’s lawyers and to the respondent or the respondent’s lawyers. The report will attach a copy of any list made pursuant to the order and a copy of any report received from an independent computer expert.
5. The independent lawyer will use best endeavours to ensure that members of the search party act in conformity with the order and that the order is executed in a courteous and orderly manner and in a manner that minimises disruption to the respondent, and will give such reasonable directions to other members of the search party as are necessary or convenient for the execution of the order.
6. The independent lawyer will not, without leave of the Court, use any information, document or thing obtained as a result of the execution of this order for the purpose of any civil or criminal proceeding, either within or outside Australia, other than this proceeding.
7. The independent lawyer will not inform any other person of the existence of this proceeding except for the purposes of this proceeding until after 4.30 pm on the Return Date.
Undertakings given to the Court by the independent computer expert
1. The independent computer expert will use his or her best endeavours to act in conformity with the order and to ensure that the order, so far as it concerns the independent computer expert, is executed in a courteous and orderly manner and in a manner that minimises disruption to the respondent.
2. The independent computer expert will not, without leave of the Court, use any information, document or thing obtained as a result of the execution of this order for the purpose of any civil or criminal proceeding, either within or outside Australia, other than this proceeding.
3. The independent computer expert will not inform any other person of the existence of this proceeding except for the purposes of this proceeding until after 4.30 pm on the Return Date.
4. The independent computer expert will use best endeavours to follow all directions of the independent lawyer.
SCHEDULE C
AFFIDAVITS RELIED ON
Name of deponent Date affidavit made (1) Lissi Whyte 3 May 2021 (2) John Love 3 May 2021
NAME AND ADDRESS OF APPLICANT’S LAWYERS
The Applicant’s lawyers are:
EMA Legal
Level 6, 33 Franklin Street, Adelaide SA 5000
Contact:
John Love, Partner
Tel: (08) 8213 3333 or 0429 446 101 (after hours)
Email: [email protected]REASONS FOR JUDGMENT
(DELIVERED EX TEMPORE AND REVISED)RANGIAH J:
The applicant has made an ex parte application for a search order against the respondent pursuant to r 7.42 of the Federal Court Rules 2011 (Cth). The order would allow, inter alia, a search party to enter the respondent’s residential premises and remove electronic devices containing what is alleged to be confidential information belonging to the applicant.
The applicant conducts a business, involving the manufacturing and distribution of fence and gate fittings, throughout Australia. The respondent was employed by the applicant for some 16 years, and was the applicant’s most senior employee in Queensland for some nine years, until his resignation in March 2021.
The applicant alleges that the respondent was asked to provide the applicant with information including customer history and contact details before he left his employment, but that he failed to do so. The applicant alleges that the respondent conducted business using a mobile phone and, although the respondent returned a mobile phone which he said had been issued to him by the applicant, the phone he returned was in fact a different phone. It is alleged that the information stored on the phone that was returned had been wiped. It is alleged that the respondent admitted that he had uploaded customer information from his mobile phone onto his personal iCloud account, linked to his personal Apple account.
The applicant alleges that the respondent has never provided the applicant with the customer information and other information that the applicant had requested, and alleges that the confidential information possessed by the respondent includes the applicant’s pricing structures and profit margins. The applicant also alleges that a number of its customers have been contacted by the respondent since he resigned, raising the inference that he may be working for a rival business. The applicant asserts that this inference is reinforced by its sales having dropped by some 25 per cent since the end of March, this being out of line with its sales performance in other States.
Rule 7.43 of the Federal Court Rules provides:
7.43 Requirements for grant of search order
The Court may make a search order if the Court is satisfied that:
(a)an applicant seeking the order has a strong prima facie case on an accrued cause of action; and
(b)the potential or actual loss or damage to the applicant will be serious if the search order is not made; and
(c) there is sufficient evidence in relation to a respondent that:
(i)the respondent possesses important evidentiary material; and
(ii)there is a real possibility that the respondent might destroy such material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the Court.
The applicant submits that it has causes of action against the respondent for breach of the employment contract, breach of s 183(1) of the Corporations Act 2001 (Cth), equitable breach of confidence and breach of fiduciary obligations. I accept that the applicant has demonstrated a strong prima facie case in respect of each of these causes of action, although it must be borne in mind that the respondent has not yet had an opportunity to make submissions.
I accept that the actual and potential loss to the applicant is and will be serious if a search order is not made. I take into account the magnitude of the drop in sales volume since the resignation of the respondent.
I am satisfied that there is sufficient evidence that the respondent possesses important evidentiary material, and that there is a real possibility that the respondent might destroy it or cause it to be unavailable for use in evidence in the anticipated proceeding if a search order is not made.
I am satisfied that a search order should be made. I have heard submissions as to the appropriate form of the order and have had regard to rr 7.45 and 7.46 of the Federal Court Rules and the Search Orders Practice Note (GPN-SRCH), in particular. While I indicated that I was not prepared to make an order which left the term “confidential information” undefined, I am satisfied that the redrafted order now appropriately defines and limits the scope of that expression.
The matter will be made returnable before the Court in one week.
I will make orders in terms of the amended draft.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rangiah. Associate:
Dated: 11 May 2021
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