Europa International Pty Ltd v Child - [2016] NSWSC 923

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Europa International Pty Ltd v Child [2016] NSWSC 923
Hearing dates: 11/04/2016, 12/04/2016, 13/04/2016, 14/04/2016, 15/04/2016, 18/04/2016, 19/04/2016, 20/04/2016, 21/04/2016, 22/04/2016, 26/04/2016 and 27/04/2016
Date of orders: 08 July 2016
Decision date: 08 July 2016
Jurisdiction: Equity - Commercial List
Before: McDougall J
Decision:
Note that defendants remain bound by their undertakings to the Court, according to their terms. Proceedings otherwise dismissed with costs. Directions if any further costs orders sought.

Catchwords:
CONTRACT – confidential information – whether confidential information has been identified with requisite specificity – whether defendants entered into confidentiality agreements – whether information has become part of a person’s general skill, knowledge and experience

EQUITY – confidential information – whether such information as is confidential warrants equitable protection – whether such confidential information was received by the defendants in circumstances importing an obligation of confidence
EQUITY – injunctions – whether undertakings provided by defendants are sufficient to protect such information as is confidential
Legislation Cited: Restraints of Trade Act 1976 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Amway Corporation v Eurway International Ltd [1974] RPC 82
Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37
Balstone Ltd v Headline Filters Ltd [1987] FSR 330
Breen v Williams (1996) 186 CLR 71
Briginshaw v Briginshaw (1938) 60 CLR 336
Creative Brands Pty Ltd v Franklin [2001] VSC 338
Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326
Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167
Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629
O’Brien v Komesaroff (1982) 150 CLR 310
Stenhouse Australia Ltd v Phillips [1974] AC 391
Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
Texts Cited: R. Dean, The Law of Trade Secrets and Personal Secrets (Second Edition, 2002)
B T Parsons, Bitters: a spirited History of a Classic Cure all.
Category: Principal judgment
Parties: Europa International Pty Ltd (Plaintiff)
Keith Michael Child (First defendant)
Kylie Robyn Reddy (Second defendant)
Ian Kingham (Third defendant)
Redkin Equipments Pty Ltd (Fourth defendant)
Kindred Pty Ltd (Fifth defendant)
Representation:
Counsel:
J Robson SC / H Mirza (Plaintiff)
M Walsh SC / M Smith (Defendants)
Solicitors:
Carmody Lawyers (Plaintiff)
Philip Gengos & Co (Defendants)

File Number(s): 2015/153024

Judgment

HIS HONOUR: The plaintiff (Europa) manufactures and sells an aromatic bitters known as “Australian Bitters Company” bitters, and other alcoholic products. It claims that the defendants “have engaged in the unauthorised use, modification, disclosure and exploitation of [its] intellectual property…and other confidential, proprietary and commercially sensitive information”. Europa seeks injunctive relief in respect of that alleged conduct. That relief is claimed pursuant to contract (in the case of the first and second defendants, Mr Child and Ms Reddy), and on equitable grounds as against all defendants.
The defendants deny that any of Europa’s information (to use a comprehensive term) that has been sufficiently identified is in fact confidential. They deny that they are using (or intend to use) any such information for their own purposes. Mr Child and Ms Reddy deny that they are bound by any contractual restraints. All the defendants deny that Europa is entitled to relief in equity.
The defendants have given undertakings to the Court. That was done to resolve an interlocutory application for injunctive relief. However, the defendants accept that they will remain bound by those undertakings, according to their terms, regardless of the outcome of the proceedings. Relevantly for present purposes, the defendants have undertaken not to “use, copy, distribute or disclose the Identified Information or any document containing the Identified Information”. The “Identified Information” is defined in the undertakings to include, among other things, the current recipe for Europa’s bitters product and the proportions of its dry and wet ingredients. In addition, the defendants have undertaken to give at least six weeks’ prior written notice of any recipe to be used by them to manufacture their own bitters product, and the identity of the authors of that recipe.

The real issues in dispute

The parties agreed on the real issues arising on the “pleadings”. I set them out, with some minor changes:

Confidential information
1.   What is the proper characterisation of [Europa’s] interest which is sought to be protected?
2.   Has [Europa] identified any confidential information with sufficient specificity?
3.   Does the alleged confidential information have the necessary quality of confidence to warrant protection either:
(a) by an appropriate contractual covenant; or
(b) in equity.
Protection by appropriate contractual covenant
4.   Did either [Mr Child] or [Ms Reddy] enter into a confidentiality agreement as alleged?
5. If they did, does that agreement (and the relevant covenant therein) go further than is necessary to protect a legitimate interest of [Europa]? If it does, can the relevant covenant be read down pursuant to s 4(1) of the Restraints of Trade Act 1976 (NSW)?
6.   Is there evidence of any actual or threatened breach of the terms of any such confidential agreement?
7.    Ought [Mr Child] be restrained from using any information which has become part of his general skill, knowledge and experience?
Protection in equity
8.   On the assumption that any confidential information has been identified with sufficient specificity, does it have the degree of intrinsic importance to warrant equitable intervention?
9.   If so, was such information imparted and received by the defendants in circumstances importing an obligation of confidence?
10.    Is there evidence of actual or threatened misuse of such information?
Relief
11.   Do the undertakings given by each of first, second, third, fourth and fifth defendant on 8 July 2015 provide sufficient protection to [Europa] in regard to its concerns?
12.   If the answer is “no”, what relief is necessary to protect its interests? Is [Europa] entitled to the relief that it seeks in its amended summons?

The parties provided very helpful detailed written submissions at the conclusion of the evidence. Those submissions addressed each of the issues, as set out above. The parties spoke to their written submissions, and replied to the written submissions of the other side.
In dealing with the issues, I do not propose to set out or summarise the respective submissions. That is because, in the main, resolution of the submissions on questions of fact depends very much on my assessment of the witnesses – a topic to which I turn at [21] below. To the extent that the issues do not raise questions of fact, the nature of the competing submissions will be apparent from the way the issues are framed, and in any event from the way in which I deal with them.

The parties

Europa is a company controlled by the Beri family. Mr Amit Raj (known as “Raj”) Beri (for convenience, I will refer to him simply as “Mr Beri”) is, on his own account, the managing director of the company. The directors (or other directors) are his father, Mr Anil Beri, and his mother, Mrs Meena Beri. Mr Beri’s younger brother Mr Sahil Beri also worked for Europa for a time, but does not appear to be a director.
Regardless of the details of directorships and the like, it is clear that Europa is effectively the creature of, and controlled by, Mr Beri.
Mr Child was a consultant to Europa for approximately 18 months from January 2011 to June 2012. From June 2012 to March 2015, he was employed by Europa as its Operations Manager. He held a 10% shareholding in Europa from April 2012 to February 2015.
Ms Reddy was employed by Europa as an Office Manager in July 2010. In November 2012, she became Office Manager and Production Quality Assurance Specialist. She gave notice of resignation in February 2015, and her employment ceased the following month.
The third defendant (Mr Kingham) was, for most of the time period with which these reasons are concerned, the National Merchandise Manager of Australian Leisure and Hospitality Group (ALH), a company owned by Woolworths. He also conducted his own liquor consultancy through his company That Beer Bloke. He continues to provide consultancy services, to Woolworths and others, through That Beer Bloke.
The fourth and fifth defendants (respectively, Kindred and Redkin) are companies set up by Mr Child and Mr Kingham for purposes connected with a business of manufacturing alcoholic liquor products, including aromatic bitters. Kindred is the lessee of a property at Blacktown from which that business is conducted. It is the company that actually carrys on the business. Redkin owns (or holds on lease) the equipment necessary to enable Kindred to carry on that business.
The creator of the recipe used by Europa to manufacture its aromatic bitters product (and also the creator of the manufacturing process initially used by Europa for that purpose) was Mr Miles Thomas. Through his company known as Sultry Spirits, Mr Thomas has licensed the recipe and process to Europa.
Sultry Spirits is not a party to these proceedings. I raised this with the parties in the course of the hearing. They were content for the hearing to proceed without Sultry Spirits being added as a party. It may be noted that Mr Thomas had come to Australia last year for some purpose associated with the proceedings, and at that time he obtained local legal advice on his and his company’s position.

Aromatic bitters

Aromatic bitters are products that are used, among other things, to add distinctive flavours to alcoholic and non-alcoholic beverages. In essence, aromatic bitters are made by steeping or macerating a variety of herbs in a solution usually comprised of water and ethanol (also known as ethyl alcohol). Some methods of manufacture macerate all the herbal ingredients together. Others macerate them separately, and combine the resulting “tinctures” to achieve the desired flavour. It is common for bitters to include liquid (usually known as “wet”) ingredients, which are added once the process of maceration has been completed and the resulting herb-infused solvent has been taken off the herbal ingredients. Vanilla essence is a common wet ingredient.
Europa asserts that both its “recipe” for its aromatic bitters product (i.e., the various wet and dry ingredients and their respective quantities) and the precise method of manufacture are confidential information, in the nature of trade secrets. For reasons that will become apparent, I am prepared to assume that this is so as to the recipe. That having been said, it is clear that even a cursory search of the internet will produce numerous recipes for the manufacture of aromatic bitters. Europa said, I think correctly, that in the main, those recipes were simple, and directed at the bitters equivalent of the home brewer.
There is also a published (hardcover) book, Bitters: a Spirited History of a Classic Cure-all. The author of that book is Mr Brad Thomas Parsons. It was published by a company known as “Ten Speed Press”, located in Berkley, California, in 2011. That book includes a history of bitters, numerous recipes for their manufacture, and suggestions for their use in alcoholic drinks.
As I have said, Europa’s bitters recipe was created for it by Mr Thomas. He is a self-proclaimed bitters expert (and in fairness to him, acknowledged as a bitters expert in the Parsons book) from Seattle, Washington. Mr Thomas has had a long fascination with aromatic bitters, and has developed a number of recipes both for his own commercial exploitation (through another of his companies, Scrappy’s Bitters) and for others.
I should make it clear at this point that I do not accept that the process of manufacture is properly described as confidential. Mr Thomas sought to describe the process with the aid of technical jargon, apparently with the intention of making it seem more arcane than it is. But in reality, the process involves no more than the maceration of the dry ingredients in a solution of water and ethanol, with the addition of the wet ingredients thereafter.
According to Mr Thomas, part of the magic of his method resided in the design of the vessel in which the process of maceration took place, and from which the infused solvent was drained. He said, and it may be accepted, that he designed the particular equipment for Europa. However, Europa abandoned his equipment, and now uses a different kind of tank, known as a flatbed tank, designed by Mr Child and built by an external engineering fabricator. Mr Thomas suggested that this was no more than a variant of his design. That claim is only correct at the most basic level: namely, that each piece of equipment allows the dry ingredients to be macerated, and solvent to be drained off from a tap at its base. Visually, the equipment designed by Mr Thomas looks nothing like the flatbed tank designed by Mr Child.

The witnesses in the case

Europa called a number of witnesses, including Mr Beri, Mr Anil Beri and Mr Sahil Beri.
Mr Beri was a totally unsatisfactory witness. He was cross-examined extensively – over (although not for the whole of) a period of 5 days in all. Indeed, Mr Robson of Senior Counsel, who appeared with Mr Mirza of Counsel for Europa, said that I should take into account, as a mitigating factor in my assessment of Mr Beri’s credibility, the fact that his cross-examination had lasted so long. However, as I put to Mr Robson, the cross-examination was prolonged to quite an extraordinary extent by Mr Beri’s repeated – indeed constant – failure to engage with the question and answer process. Had Mr Beri answered questions simply and responsively when they were first asked, his cross-examination, although still lengthy, would have been completed in very much less time than in fact it occupied.
Mr Beri took every opportunity that was offered to him (and many others that were not) to act as an advocate for Europa’s case. He was consistently non-responsive. Consistently, he sought to force upon Mr Walsh of Senior Counsel (who appeared with Mr Smith of Counsel for the defendants) answers that had nothing to do with the question asked. Consistently, he evaded the point of questions, and would not answer until the question had been repeated several times at least.
It became clear in the course of Mr Beri’s cross-examination that, putting matters at their most favourable, he had been prepared to swear to matters in his affidavit that were not true and that he could not possibly have thought were true had he given even a moment’s consideration to them. By way of example only, and without descending into the detail, I refer to his cross-examination on para 123(b) of his affidavit sworn 12 October 2015.
It also became clear in the course of Mr Beri’s cross-examination that there were aspects of his affidavit evidence that were either simply wrong, or that he had embellished beyond the point of accuracy, or that by themselves were misleading. That, no doubt, explains why aspects of his cross-examination were contradictory of his affidavits. Mr Robson sought to suggest that this again was a product of the duration of the cross-examination. I do not agree. Mr Beri at no time appeared to me to be wilting under the force and duration of the sustained attack on his evidence and his credibility. I think that the contradictions simply reflect his inability to maintain consistency as to many of the matters to which he had deposed in his affidavits.
Mr Beri was given to making assertions as to the (lack of) honesty on the part of other people. For example, he said twice that Ms Reddy had lied on her oath. Those assertions were unsubstantiated. Again, Mr Beri attributed conduct to Mr Kingham which, if correct, would have shown him to be a dishonest person who acted in flagrant disregard of his fiduciary obligations towards his employer ALH. There was no objective evidence to corroborate those assertions. Mr Kingham denied them – with some vehemence. I accept Mr Kingham’s denials.
In my view, and leaving aside the obvious point about the pot and the kettle, Mr Beri was a person who was prepared to make false assertions about the conduct of other people, in an attempt to impeach their credibility. That says nothing for Mr Beri’s own credibility (and it supports what I have said as to his attempting to act as an advocate for Europa’s case).
Having observed Mr Beri over the course of his lengthy cross-examination, and having considered the transcript of it, I have come to the conclusion that he is not to be accepted as a witness of truth, or a witness whose evidence can be regarded as reliable. On the contrary, I have come to the view that his evidence ought not be accepted unless it is consistent with contemporaneous documents; or is corroborated by other, acceptable, evidence; or is consistent with the probabilities viewed objectively; or is against interest.
I do not regard the evidence of Mr Anil Beri as providing acceptable corroboration of Mr Beri’s evidence. Mr Anil Beri was prepared to swear to the truth of matters that were shown not to be within his personal knowledge. For example, Mr Anil Beri said in para 10 of his affidavit sworn 2 July 2015 that he “frequently observed Raj emphasising to Ms…Reddy not to disclose any financial or confidential information of Europa to any third parties”. However, in cross-examination, Mr Anil Beri conceded that he had not actually heard any such conversation, and that he gave that evidence because he “was told by Raj” of such conversations (see generally T397-399).
I formed the very clear impression that Mr Anil Beri had little, if any, actual recollection of the relevant events, and that he was saying essentially what Mr Beri wished him to say, and what he himself thought would assist Europa’s case. That is particularly significant in relation to the evidence that Mr Anil Beri gave as to seeing the “folder” said to have contained all the confidentiality agreements signed by all the staff of Europa (and, I might add, on Europa’s case signed as well by all visitors to its premises). I do not accept Mr Anil Beri’s evidence on matters in controversy between the parties.
Mr Sahil Beri gave evidence on a very limited issue, intended to rebut evidence given by Ms Reddy that she had experienced problems with Europa’s email system from time to time, and thus had used her personal email address. It became clear that Mr Sahil Beri (whose evidence in chief had been given at a level of extreme generality in any event) had no real recollection of the matters with which his affidavit was concerned. Whilst I do not find that Mr Sahil Beri was attempting consciously to mislead the Court, I am comfortably satisfied that his evidence is not based on any real recollection, and has little if any probative weight.
Mr Thomas gave evidence of his expertise in the field of aromatic bitters, and of the work he had done to develop for Europa the recipe that it wished to use (and now uses) and the production process that, initially, it used. Whilst I have no doubt that Mr Thomas is a self-taught expert in the field of aromatic bitters, I do not regard him as a witness on whose evidence any great weight ought be placed, in the consideration of contentious matters of fact.
First, as I have indicated, Mr Thomas in my view exaggerated the complexity of the manufacturing process that he had devised. That involved the use of quasi-scientific terms, and reference to physical and chemical processes of which, it became apparent, he was fundamentally ignorant.

A striking example of Mr Thomas’ propensity to exaggerate may be found in his comparison of his recipe and process to an iPhone. He suggested that the two were similar, both in their apparent simplicity of use and in the complexity of the underlying technology that facilitated that simplicity. To put it politely, that evidence was risible.
No doubt in an attempt to uphold the mystique of his method, Mr Thomas spent a lot of time trying to deny that it involved a process of maceration. Plainly (on any reasonable view of the meaning of “maceration”), it did. Ultimately, I think, he conceded that it did. Even then, Mr Thomas sought to suggest that it was a special kind of maceration because it involved “rinsing”. On exploration of the topic of rinsing, it became apparent that he meant no more than that all the solvent, including that which initially lay above the herbal material, was drained through the herbal material. He did not mean that fresh material was added to the herbal residue to “rinse” it in the way that the verb is customarily understood.
I note that Mr Thomas, like Mr Beri, has a financial stake in the outcome of the proceedings. For reasons that will become apparent, I have concluded that Europa is using its claim to confidentiality in an attempt to suppress Kindred’s manufacture of a competitive aromatic bitters product. If it succeeds in that, its place in the Australian market place will be protected (and perhaps, its place in the international marketplace also). That will be of benefit to Europa, for obvious reasons. It would also be of benefit to Sultry Spirits, and through it to Mr Thomas. In my view, each of Mr Beri and Mr Thomas was keenly aware of this. In my view, it was a factor that weighed all too heavily on their minds, and influenced the evidence that they gave.
I had no concerns with the honesty of any of the other witnesses called by Europa: Mr Button, Mr Carmody (its solicitor, who was not required for cross-examination), Mr Dixon and Mr Ingham. Mr Ingham gave evidence that was in significant respects inconsistent with that given by Mr Beri. Where there is such inconsistency, I prefer Mr Ingham’s evidence, although I make allowance for the fact that, as he stopped working for Europa in September 2010, his memory of detail has necessarily dulled with the passage of time.
The principal witnesses for the defendants were Mr Child, Mr Kingham and Ms Reddy. In general, I have concluded that each of them ought be accepted as a witness who for the most part sought to give reliable evidence; and that for the most part, each of them did so. Thus, in general, I prefer their evidence to that of Mr Beri or the other witnesses called by Europa, to the extent that there is a conflict. Specifically, I prefer their evidence to that of Mr Beri, Mr Anil Beri and Mr Thomas wherever there is a conflict.
That is not to say that I had no concerns with the evidence of, in particular, Mr Child and Ms Reddy. And in each case, of course, I accept that they have a financial stake (significant, in the case of the first two) in the outcome of these proceedings.
There were occasions when Mr Child was less than frank with members of the Beri family. For example, when Mr Child gave Mr Beri notice of his resignation (in March 2015), he said that he was leaving work because of his health. However, as Mr Child conceded, he had for some time been planning the creation of his (and Mr Kingham’s) new business of manufacturing aromatic bitters, and that this was part of the reason why he had resigned. He did concede that the explanation he gave Mr Beri was “not totally” correct.
Again, Mr Child received “documentation, sensitive material” of either Europa’s or Mr Beri’s from Ms Reddy. He said he “wasn’t comfortable with the information” and “didn’t like the documentation”. He approached Mr Anil Beri and Mrs Beri, apparently to return the documents in question. They asked him where the documents came from. Mr Child gave an explanation which was false. He said that he did so to protect Ms Reddy. At the time this happened, Mr Child (as he accepted) had “already developed and devised [his] plan to set up a rival business”.
I do not regard those instances of conduct on his part as honest. Those matters, and others (for example, Mr Child’s evidence as whether he ever called himself a “partner” with Mr Beri in the business of Europa) have given me cause to consider very carefully whether, and if so to what extent, I should accept his evidence.
On balance, as I have indicated, I have concluded that on the important factual issues in dispute, Mr Child ought be accepted as a reliable witness. He was consistent in his account of the relevant events. His account was not shaken in cross-examination. Unlike Mr Beri, Mr Child did not act as an advocate in his own cause. For the main part, he answered questions directly and honestly, even when he must have known that the answers might not be helpful to his credibility or his case.
Mr Robson attacked the manner in which Mr Child gave his evidence, and suggested that it had been necessary to “force” him to make concessions. That is not quite correct. Mr Child clearly took a literal view of the questions put to him, and answered them according to his understanding of their terms. The fact that the answers were not as helpful as Mr Robson might have wished in most cases reflects as much the framing of the questions as the content of the responses.
As an example, Mr Robson criticised Mr Child’s evidence in relation to the extent of Ms Reddy’s involvement (whilst she was still an employee of Europa) in assisting him and Mr Kingham to set up the new business. I have considered that evidence very carefully. Doing so, I have come to the view that Mr Child did not seek to evade the questions. He answered them according to their terms. Neither the cross-examination nor any of the objective material to which I was referred support the view that Mr Child’s answers had been inadequate, incomplete or misleading.
Mr Kingham impressed me as a witness of truth, whose evidence was generally reliable. It was apparent that there were occasions when his memory failed him. That is hardly surprising. In general, however, his evidence was consistent and coherent, and was not shaken in cross-examination.
Mr Robson submitted that Mr Kingham had behaved in some way inappropriately in providing to Mr Beri documents produced by Europa’s competitors. I do not accept that proposition. There is no basis for thinking that Mr Kingham received the documents in question in circumstances suggesting any obligation of confidentiality. On the contrary, in my view, it is likely that they were sent to him in the ordinary course of those competitors’ business operations, bearing in mind his position with ALH: a very substantial presence in the market for alcoholic beverages.
I turn to Ms Reddy’s evidence. To some extent, the attacks on her credibility depended on acceptance of one aspect of Europa’s case: namely, that she was not permitted to work from home, and was not permitted to use her private email address for work-related matters. I do not accept that either of those propositions has been made good; on the contrary, I am confident in rejecting the evidence on which they were based (coming, as it does, principally from Mr Beri). Those attacks fail.
That having been said, Ms Reddy did engage in conduct that in my view was not consistent with proper standards of reasonable commercial honesty. When her employment with Europa ceased, she retained a substantial quantity of Europa’s documents. She gave an explanation for retaining some of them (relating to Mr Beri’s tax affairs and the like) which, whilst it might have been misguided in part, I find to be acceptable. However, for other documents, there was no obvious reason why she needed them after she left the employ of Europa, and she was not able to give any, let alone any convincing, explanation of why she had retained them.
Ms Reddy created minutes of at least one meeting, which purported to record the approval of quality control procedures to be adopted by Europa. Those minutes were intended to form part of a chain of documentation that would enable Europa to achieve and retain some sort of quality control accreditation. The detail does not matter. The simple fact is that, as Ms Reddy conceded, the meetings had never taken place and the items of business had never been discussed, let alone agreed.
Mr Child, too, was involved in this. He was said to have taken part in the meetings. He, too, agreed that they had never taken place. I add that Mr Beri, too, was said to have participated in the meetings in question.
I do not regard it as acceptable that false minutes should be created and circulated, so as to achieve and retain quality control accreditation of a particular kind. Quality control is an important part of any organisation’s operations. It is particularly important where (as is the case with Europa) the organisation produces goods for human consumption. Europa made it clear to its customers that it had the accreditation in question. In some cases, it was a requirement of those customers that Europa hold that accreditation. In others, no doubt, it was a comfort that Europa did.
It was not honest for Europa to be held out as having that accreditation, when some of the processes had not been followed through and some of the documents intended to show that the processes had been followed through had been created falsely. It was not honest of those who participated in the creation of those false documents to have done so. However, it does not follow that all the evidence of all those involved must be disregarded.
There were other aspects of Ms Reddy’s evidence that gave me cause to consider whether I should accept her as a reliable witness. For example, she claimed to have been unfamiliar with certain policies of Europa. It was however proved that she had emailed the policies to others within Europa’s organisation. Again, she said, she was unfamiliar with Europa’s suggested procedures for the signature of confidentiality agreements. It was shown that she had witnessed a number of such agreements.
However, weighing all those matters, and taking into account my impression of Ms Reddy in the witness box, I have come to the conclusion that, on the crucial contested questions of fact, I should accept her as reliable. She seemed to me to have a good memory of the relevant events. Her evidence was clear. She did not seek to advocate her own cause. And, at least on the essential points, her evidence was not shaken in cross-examination.
The defendants called a number of other witnesses of fact: Ms Allison, Mr Michael Child (Mr Child’s son), Ms Dissanayake, Mr Gengos (the defendants’ solicitor), and Mr Ugov. The only one who was cross-examined with any intensity was Mr Michael Child. In my view, he was (as was each of the others) an honest and reliable witness. Messrs Gengos and Ugov were not required for cross-examination.

First issue: characterisation of the interest that Europa seeks to protect

It may be wondered why it was necessary for an issue to be stated in these terms. Unfortunately, the necessity arises from the diffuse, opaque and unhelpful nature of the way in which Europa pleaded its case. The consequent problems were not assisted by the way the case was opened: in particular, because some of the language used appeared to suggest that Europa was making a claim to protect some intellectual property right such as a copyright or a registered design. There was no such pleaded case.
Further, both Europa’s evidence and its submissions were replete with references to its “proprietary” information. Quite how there could be property in that information was never explained (see for example Dawson and Toohey JJ in Breen v Williams (1996) 186 CLR 71 at 90). Nor was the nature of the alleged proprietary interest ever identified.
Fortunately, by the time of final submissions, it appeared to be reasonably clear that Europa was seeking to protect the use of information that it characterised as its confidential information. The defendants accepted that such a case was open to be run on the pleadings.
The protection of that interest was sought:

in contract, as against Mr Child and Ms Reddy, on the basis that each of them had executed and delivered a “confidentiality deed” restraining them from using Europa’s “Confidential Information” as defined; and

in equity, as against all defendants.

As to the claim to protection in equity, Europa said that:

Mr Child and Ms Reddy, as former employees to whom confidential information had been imparted in the course of their employment, owed an equitable duty to Europa to keep that information confidential, and not to misuse it, following the termination of their employment;

although Mr Kingham owed no such equitable duty of confidence direct, he had received from Mr Child or Ms Reddy information of Europa that he knew to be confidential to it, in respect of which he knew that they had owed a duty of confidence to Europa; and

as to Kindred and Redkin, they were bound by an equitable duty of confidence for essentially the same reason as was Mr Kingham.

Second and third issues: identification of the information sought to be protected, and whether it is confidential

At [62] of its written opening outline, Europa identified six discrete categories of information, said to be confidential, that it sought to protect. Unfortunately, that statement of the categories was somewhat confused because it was qualified by the words “including information relating to” each of those categories. The categories were:

Europa’s method of manufacture;

Europa’s supplier and customer lists and databases and its financial information;

“Confidential Information” as defined in the confidentiality deeds;

“Intellectual Property” again as defined in those deeds;

“[t]he production and manufacture of identical, similar, derivative or modified versions of [Europa’s] goods (primarily aromatic bitters)”; and

“[a]ny licences held by [Europa]”.

I take the first category to include not just the process of manufacture of aromatic bitters but also the specific wet and dry ingredients used, and their respective quantities. That is confirmed by Europa’s written outline which, having set out the six asserted categories of confidential information to which I have referred, said that those categories include, but are not limited to, the wet and dry ingredients and additives comprising its aromatic bitters product and their combinations; the recipe or formula for that product; and “[t]he gravity extraction method…and the equipment used in that method” to make that product.
I have some difficulty in understanding the distinction between the wet and dry ingredients and additives (and their combinations, unless this is intended to refer to their quantities, i.e. their respective proportions) on the one hand; and the “recipe/formula” on the other. I also have some difficulty in understanding the distinction between the “recipe/formula” and the method of manufacture. However, it seems to be tolerably clear that Europa says that not only the recipe (the list of ingredients and their respective quantities) but also the manufacturing process or technique is confidential. That is then expanded, by the fifth of the six categories stated above, to extend to “similar, derivative or modified” versions of that “recipe/formula” and method, at least if used to produce aromatic bitters.
The confidentiality of the specification of the dry and wet ingredients and additives that are used to make that aromatic bitters product, including the respective quantities of those ingredients and additives, may be assumed. The reason for making that assumption is that the defendants have given undertakings to the Court including those summarised at [3] above. Although those undertakings were given without admissions, they are intended to remain binding according to their terms. For reasons that will become apparent, they provide sufficient protection if the subject information is confidential. Thus, as I have said, the underlying question need not be decided in respect of those matters.
As I have noted, Mr Robson submitted that there were other categories of information that were confidential and that should be protected by injunctive relief. For the reasons that I give at [130] to [156] below, the only information that could sustain a claim for protection in equity on the basis of confidentiality is the financial information to which I refer at [150] and following below.
Undoubtedly, there may be other material caught by the definitions of “Confidential Information” and “Intellectual Property” in the form of confidentiality deed that, Europa said, Mr Child and Ms Reddy had each signed. But since I conclude below that they did not sign any such deed, there is no need to consider the alleged confidentiality of material falling within those very wide definitions. And as I say at [155] below, any claim to protect alleged “Confidential Information” or “Intellectual Property” as so widely defined would be problematic.

Fourth issue: did Mr Child or Ms Reddy make a confidentiality deed?

Europa’s claim to protection in contract was founded on the proposition that each of Mr Child and Ms Reddy had executed and delivered a confidentiality deed. Each of them denied that he or she had done so. For the reasons that follow, I am not satisfied that either of them did. Thus, in my view, Europa has not made out its case for contractual protection.

Europa’s evidence

Mr Beri said that Mr Child and Ms Reddy had each signed a confidentiality deed. (He said, also, that Mr Michael Child had signed one, but no restraint is sought against Mr Michael Child, either based upon that supposed deed or otherwise.)
Mr Beri said that at all times, Europa had a strict system of requiring all its employees, and indeed all visitors (including suppliers and customers, and prospective suppliers and customers) to its factory premises, to sign confidentiality deeds.
Mr Beri identified a particular form of confidentiality deed as that which, at all material times, was available to be signed and required to be signed. That form became Exhibit DX1. I observe at this point that whilst it might be a suitable form of deed to be signed by Europa’s suppliers or customers (prospective or actual), it was in its terms ill-suited to use as between Europa and its employees.
Mr Beri said that all signed confidentiality deeds were kept in a manila folder in the office portion of Europa’s premises. He identified a particular manila folder, on which were written the words:

CONFIDENTIALITY AGREEMENTS – STAFF

Mr Beri said that those words were in Ms Reddy’s handwriting. She denied that they were. The manila folder that was tendered (Exhibit PX12) was remarkably inadequate in size to serve as a repository for the very many confidentiality deeds (or agreements – see at [107] below) that must have been signed and retained, were Mr Beri’s evidence correct. Nor did that manila folder Exhibit PX12 show any sign of the heavy use that it must have received over the years, were Mr Beri’s evidence correct. Perhaps it was the stationery equivalent of George Washington’s axe.
No doubt conscious of this cosmetic problem, Mr Beri said (when taxed with it in cross-examination) that other folders had been used. He said that they could be produced. A call was made for their production. Europa did not produce them. The obvious inference, given the intense dispute as to every element of the factual case concerning the alleged confidentiality deeds signed by Mr Child and Ms Reddy, is that (despite Mr Beri’s assertion) no such folders existed. His evidence that they did was in my view spontaneous embellishment; more bluntly, a false invention.

Regardless, Mr Beri said that he did see, and indeed searched through, the manila folder. He did that, he said, after Ms Reddy’s departure, whilst looking for her confidentiality deed.
Mr Beri contended that the reason that the relevant deeds (Mr Child’s, Ms Reddy’s and Mr Michael Child’s) were missing from the manila folder was that they had been removed, presumably by those parties or persons acting at their direction. That is an allegation of theft: a serious matter, involving application of the Briginshaw approach to fact finding (Briginshaw v Briginshaw (1938) 60 CLR 336; the relevant passage is too well known to require more detailed citation).
Mr Beri volunteered in cross-examination (but had not said in any of his three affidavits) that he saw Mr Child sign a confidentiality deed. However, he said at another point in his cross-examination, he had no way of knowing, one way or another, whether Europa’s employees did sign such a form of deed. That inconsistency is another example of his unreliability as a witness. I add that if Mr Beri had seen Mr Child sign such a deed, the failure to say so in any of his affidavits is remarkable.
Mr Anil Beri said that when Europa was about to enter into a distribution agreement with Coca-Cola Amatil (CCA) – a matter which he rightly considered to be of great commercial significance to Europa – he searched Europa’s records to satisfy himself that all key employees, including Mr Child, Ms Reddy and (curiously, because he was a casual employee only) Mr Michael Child, had signed confidentiality deeds.
Mr Anil Beri said that Mr Beri brought him a manila folder marked (and containing) “CONFIDENTIALITY AGREEMENTS”; ‘that he searched through it; and that he saw that it contained deeds or agreements “executed by all personnel related to Europa, including employees and independent contractors”. Mr Anil Beri said specifically that he “sighted the Confidentiality Deeds executed by personnel of Europa”. These included, he said, “all of the Confidentiality Deeds executed by personnel that worked for Europa at that time, including…Ms…Reddy, Mr…Child and Mr Michael Child”. (The quotations come from his affidavit sworn 2 July 2015 at [5], [6].)
Mr Anil Beri’s cross-examination on the confident and unqualified assertions made in his affidavit showed, to my mind, that his evidence was not given from memory, but was based on an unsubstantiated belief that the folder and its contents should have existed. He gave that evidence, I conclude, not because he knew it to be true but because, in his view, it would favour Europa’s case. His memory as to the detail of what had happened (not just in precise detail, but in broad outline) was so imprecise that its probative weight is, at best, minimal.
Mr Anil Beri was adamant that he had seen the folder in which the deeds were said to repose. However, when asked to describe it, he was unable to do so. Indeed, at one point in his evidence, he said that it resembled a folder (containing copies of Europa’s affidavits) that was with him in the witness box. That folder, I record, was not a manila folder. It was a black plastic lever arch folder. To be fair, Mr Anil Beri said that the folder containing the documents did not have the rings and binding apparatus that the folder before him did. Nonetheless, the folder that he indicated was in every other respect totally dissimilar to the manila folder Exhibit PX12.
Further, Mr Anil Beri was unable to explain how the manila folder in question could have contained the number of agreements that, he said, it did. Although he grossly underestimated the volume (in terms of numbers of pages) of those agreements, even on the estimate he gave, the folder would have been strained far beyond its reasonable capacity. Certainly, the folder could not have borne the almost pristine appearance that Exhibit PX12, when tendered, did. (Regrettably but understandably, the folder’s condition has deteriorated a little since it was tendered. In part, no doubt, that is because it was passed backwards and forwards between the Court, counsel and witnesses. In part, it represents the consequences of other normal wear and tear since the folder was tendered.)
According to Mr Thomas, Mr Beri told him that the people to be trained by Mr Thomas in the art of making aromatic bitters – himself, Mr Sahil Beri, Mr Child and Ms Reddy – “have all signed confidentiality agreements”. However no form of confidentiality agreement, or a document that could answer that description, signed by Mr Beri or by Mr Sahil Beri was put into evidence. Further, although Mr Sahil Beri swore an affidavit on which he was cross-examined, he gave no evidence of signing such a deed. Mr Walsh submitted, and I agree, that the inference to be drawn is that any evidence he could have given on the subject would not have assisted Europa.
Mr Ingham gave evidence that when he was employed by Europa as its General Manager (Operations), from June 2009 to September 2010, he drafted a form of confidentiality deed. That deed was not in the form of Exhibit DX1 – the confidentiality deed that, Mr Beri and Mr Anil Beri said, had been signed by (among others) Mr Child, Ms Reddy and Mr Michael Child.
Mr Ingham said that whilst he was employed by Europa, he “insisted…that all staff and personnel connected with Europa sign the Confidentiality Deed” drafted by him. Further, he said, no one would be employed unless he or she had signed such a deed. Apparently that strict prohibition did not extend to Mr Ingham himself. He did not sign any form of deed when he commenced employment with Europa. He signed one only when he left.
Mr Ingham said that the system instituted by him required that the deed signed by each employee be placed in that employee’s employment file, along with other records relating to his or her employment. That evidence is consistent with Ms Reddy’s evidence, and flatly inconsistent with Mr Beri’s.
Mr Ingham said, in relation to the system, that initially he “was responsible for ensuring that all staff and any personnel connected to Europa or visiting Europa’s premises signed the Confidentiality Deed”. However he said, after “a few months”, he delegated that task to Mr Beri and Ms Reddy.
Mr Ingham gave the following evidence (affidavit sworn 19 August 2015 – from which the preceding quotations come – at [8]):

To the best of my memory, I believe that Ms Kylie Reddy signed a Confidentiality Deed and to the best of my recollection observed that the Confidentiality Deed signed by Ms Kylie Reddy would have been stored in Europa’s files for each of its employees. [Balance of paragraph rejected, but supplemented by leave in oral evidence.]

It has to be said that this evidence is not given in the most cogent or convincing terms. On its own words, it appears to be conjecture, based on memory of system and a belief that the system should have been followed.
Mr Ingham did not say in his affidavit who it was that had witnessed Ms Reddy’s signature of the deed. When asked that in cross-examination, he said that although he knew a deed would have been signed (“because it was a document that every member signed”), he was not sure who witnessed it – Mr Beri or a Mr Dart. (Mr Dart is otherwise unidentified in the evidence.)
After giving that evidence, Mr Ingham was pressed and asked whether he had observed Ms Reddy’s signing a form of deed. He said that he believed that he had done so, and that he was physically present when she did.
I find it very difficult to accept that Mr Ingham’s affidavit was silent on this point, but that, some six months after he swore it (and, I emphasise, almost six years after the alleged event), he was able to remember having seen Ms Reddy sign the deed.
If Mr Ingham had indeed been present when Ms Reddy signed the deed, he must have had more than a “belief” that she would have done so, and more than a “belief” that it would have been stored in her personnel file. To my mind, Mr Ingham’s evidence in the witness box is based not upon any actual memory but rather upon a belief (or hope) that the system he said he instituted had been followed. I do not regard what Mr Ingham said in cross-examination as having any probative force. Nor do I regard the generality of his affidavit evidence on the topic of signature as having any probative force.

The defendants’ evidence

Mr Child denied that he had signed any confidentiality deed, either in the form of Exhibit DX1 identified by Mr Beri or otherwise. So too did Ms Reddy. So too did Mr Michael Child. No form of confidentiality deed (or equivalent document) signed by any of them was tendered. As I have said, Mr Beri’s explanation was that they had all been removed – stolen – from the manila folder by persons unknown.
Ms Reddy said that whilst she was employed by Europa, there was no general practice of requiring all employees (let alone, as Europa’s witnesses insisted, all visitors to Europa’s premises as well) to sign confidentiality deeds. Ms Reddy said, further, that such deeds as were signed by employees were placed in the individual employee’s folder, to be kept with the other records relating to his or her employment. This aspect of her evidence is consistent with Mr Ingham’s on the same topic, and I accept it.
Undoubtedly, Ms Reddy was aware that some employees did sign confidentiality deeds. She witnessed a number. She made email inquiries about the whereabouts of the deed signed by one, Toni Donda. To my mind, when she was cross-examined on those matters, she was defensive, and reluctant to expose the full extent of her knowledge. That is one of the matters I have taken into account in making my assessment of her credibility.
Ms Reddy was cross-examined about her knowledge of a procedures document promulgated by Europa. That document required, among other things, that all employees were to sign confidentiality agreements. Ms Reddy suggested that she was unaware of the existence or terms of that document. Again, in my view, her evidence on this topic was defensive and she was unwilling to expose the full extent of her knowledge. It became apparent, as the evidence progressed, that she had on at least one occasion sent an email to another employee forwarding a copy of the policy document. She can hardly have been unaware of its existence. I do however accept that awareness of its existence does not equate to awareness of its terms.
Mr Child went further than denying that he had signed a confidentiality deed, or agreement to similar effect. He said that he would not have done so, and that when at one stage (in the course of the employment) it was suggested that he should sign such a document, he replied that he would rather leave. I accept those aspects of his evidence.
Mr Child did witness at least some other employees’ signatures to confidentiality deeds. He said that his practice was simply to watch the person sign and then sign as a witness. He said that it was not his practice when witnessing the signing of documents to read them, or to inquire as to their content or effect. I accept that evidence.
Mr Michael Child said that he never signed any form of confidentiality deed or equivalent document. Although he was cross-examined, he was not challenged on that aspect of his evidence. Both because Mr Michael Child was not challenged on it and because in my view he was a reliable and honest witness, I accept that evidence.
I referred earlier to other witnesses called by the defendants: Ms Allison, Ms Dissanayake and Mr Ugov. Each of them was employed as a casual worker in Europa’s factory, for a relatively brief period of time. Each of them gave evidence that she or he had not signed any confidentiality deed. Although Ms Allison and Ms Dissanayake were (very gently) challenged on this aspect of their evidence, I accept it. Mr Ugov was not required to attend for cross-examination. I accept his evidence, including that he was not required to sign a confidentiality deed.
It follows, among other things, from their evidence and Mr Michael Child’s that:

there was no such invariable or universal practice as Europa maintains was the case; and

Mr Anil Beri’s evidence of having seen a confidentiality deed signed by Mr Michael Child cannot be correct.

Decision

It is a telling feature of Europa’s case that no deed has been produced for Ms Reddy or Mr Child (or Mr Michael Child). The only explanation for that is that the deeds were removed – that is, stolen – from the manila folder. The evidence is a very long way indeed from satisfying me, on the balance of probabilities but with the necessary quality of actual persuasion, that the explanation offered has been proved.
First, the evidence that there was such a folder, and that all confidentiality deeds were stored in it, is entirely unpersuasive, and is controverted by other evidence (from Mr Ingham) called by Europa. As I have said, this aspect of Mr Ingham’s evidence is consistent with Ms Reddy’s evidence on the same topic, and I accept it. As a matter of practicality, it would seem logical to file an employee’s confidentiality deed (if required, and obtained) with the other records relating to that employee. Europa has not demonstrated any, let alone any convincing, reason why such a deed would have been taken out of or kept apart from employee files, in a general “CONFIDENTIALITY AGREEMENTS” folder.
Second, I regard Mr Beri’s evidence as unacceptable. That follows in part from my finding as to his credibility generally (coupled with the absence of any satisfactory corroboration - a matter to which I shall turn in a moment). But it follows also from the internal inconsistencies in his account of the relevant events, exposed in cross-examination.
Third (and again dealing with Mr Beri for the moment), Mr Beri gave no evidence in any of his three affidavits as to the circumstances in which Mr Child signed a confidentiality deed. However, in cross-examination, Mr Beri asserted that he had been present when Mr Child signed such a deed, and that he himself then executed it on behalf of Europa. That evidence, not having been given in any of the detailed affidavits to which Mr Beri staked his oath, reeks of fabrication. In my view, it was false, and deliberately so. It shows that Mr Beri was deeply conscious of this defect in Europa’s case, and seeking on the spur of the moment to improve it.
Fourth, to the extent that Europa’s case depends on evidence of system, that evidence is worthless. There is the inconsistency between Mr Beri and Mr Ingham as to the mechanics of the system: where the deeds were filed. There is the revelation, which appeared only in the course of cross-examination, that Europa had used not just one form of deed (as Mr Beri had repeatedly asserted), nor even two (as Ms Reddy identified), but three. The first was one drafted by Mr Ingham himself (see at [84] above). The second was the pro forma of the Exhibit DX1 Confidentiality Deed (which Mr Beri said he downloaded from a site called Lawlive). The third was a form of confidentiality agreement that Ms Reddy said she downloaded from the website of a company known as Safety Culture, from which she obtained quality control documentation (including that form of agreement).
Further, the evidence of system is effectively undermined by the evidence of Ms Allison, Mr Michael Child, Ms Dissanayake and Mr Ugov. There is no satisfactory explanation for the apparent departure from procedure in the cases of Ms Allison, Ms Dissanayake, and Mr Ugov. However, even if Mr Beri’s explanation were to be accepted in respect of them, it cannot be correct in the case of the “key employee” Mr Michael Child.
When it was put to Mr Beri that those former employees had not signed confidentiality deeds, he suggested that they were so insignificant in the scheme of things that it had not been necessary to require them to do so. A number of things may be said about that. First, that was not said in any of his affidavits. Second, at least as to Mr Michael Child, what Mr Beri said is flatly inconsistent with Mr Anil Beri’s identification of Mr Michael Child as a key employee. Third, it represents a significant retreat from the absolute proposition advanced: namely, that everyone, whether employee or visitor, was required to sign such deeds. And fourth, it overlooks the fact that all of the individuals in question worked on the factory floor and (on the evidence of Mr Child and Mr Michael Child, which I accept) had access to quality control documents setting out the ingredients used for the manufacture of Europa’s aromatic bitters product and their respective quantities.
I do not regard Mr Anil Beri’s evidence as providing any remotely acceptable corroboration of this aspect of Mr Beri’s evidence. For the reasons I have given, Mr Anil Beri was, at best, giving evidence of belief not based on any actual recollection. More likely, in my view, he had simply started with the premise that there should have been signed confidentiality deeds, and moved thence to a purported but non-existent memory that he had seen such deeds. For the reasons I have given, I do not accept that evidence.
It follows, in my view, that Europa has failed to prove that either of Mr Child or Ms Reddy signed, and is thus bound by, a confidentiality deed.

Fifth issue: Restraints of Trade Act

Since I have found that Mr Child and Ms Reddy did not enter into confidentiality deeds, this issue does not arise. In circumstances where its resolution (if necessary) would require no additional findings of fact, I see no point in dealing with it.

Sixth issue: evidence of breach

In respect of the recipe and information relating to the terms of the licensing agreement and amended licensing agreement, there is no evidence of actual or threatened misuse; and in any event, the defendants’ undertakings to the Court give Europa adequate protection against possible misuse. As to the only other information that in my view is confidential – the financial information taken by Ms Reddy and apparently shared with, at least, Mr Child – there is no evidence whatsoever that it has been used or may be used (or that there is any possible reason why the defendants might wish to use it). I deal with this at [150] to [152] below.

Seventh issue: Mr Child’s know-how

For the reasons I give at [130] to [138] below, there is no basis for restraining Mr Child from using such information as was imparted to or learned by him in the course of his employment with Europa that has become part of his general skill, knowledge and experience.
There is another point that was made in this context. As Mr Walsh submitted, an action for breach of confidentiality should not be used for the purpose of obtaining a restraint against competition. That is clear in principle. In Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629 at 639 [35], Harper J quoted with approval the judgment of Scott J in Balstone Ltd v Headline Filters Ltd [1987] FSR 330 at 351 – 352. His Lordship there said:

This case is… yet another example of an attempt by an employer to use the doctrine of confidential information to place fetters on the ability of ex-employees to compete. Technologically based industries abound. All have what they regard as secrets. Employees, particularly those employed on the scientific or technical side of the manufacturing business, necessarily acquire knowledge of the relevant technology. They become associated with technological advances and innovations. Their experience, built up during their years of employment, naturally equips them to be dangerous competitors if and when their employment ceases. The use of confidential information restrictions in order to fetter the ability of these employees to use their skills and experience after termination of their employment to compete with their ex-employer is, in my view, potentially harmful… Employers who want to impose fetters of this sort on their employees ought in my view to be expected to do so by express covenant. The reasonableness of the covenant can then be subjected to the rigorous attention to which all employee covenants in restraint of trade are subject.

It is clear that Harper J was of the same mind. So, it appears from what Harper J said at [33] to [35], was Warren J in Creative Brands Pty Ltd v Franklin [2001] VSC 338.
In the present case, I think that Mr Beri and Europa are trying to use an application to restrain alleged misuse of allegedly confidential information to procure in effect a restraint of trade for which they had not bargained. Even if, contrary to my conclusion on the point, Mr Child had signed the confidentiality deed, it included no restraint of trade.
In the present case, if Europa were to be granted the wider relief that it seeks, the effect would be to stifle Mr Child’s use, other than in the employment of Europa, of his personal skill and experience. As Lord Wilberforce (speaking for the Privy Council) said in Stenhouse Australia Ltd v Phillips [1974] AC 391 at 400:

The accepted proposition that an employer is not entitled to protection from mere competition by a former employee means that the employee is entitled to use to the full any personal skill or experience even if this has been acquired in the service of his employer: it is this freedom to use to the full a man's improving ability and talents which lies at the root of the policy of the law regarding this type of restraint. Leaving aside the case of misuse of trade secrets or confidential information (which is separately dealt with by clause 3 of the agreement and which does not arise here), the employer's claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation. For while it may be true that an employee is entitled - and is to be encouraged - to built up his own qualities of skill and experience, it is equally his duty to develop and improve his employer's business for the benefit of his employer. These two obligations interlock during his employment: after its termination they diverge and mark the boundary between what the employee may take with him and what he may legitimately be asked to leave behind to his employers.

Eighth to tenth issues: protection in equity

Relevant principles

The starting point is that if Europa is to obtain equitable protection for its alleged confidential information, it must first identify, with some degree of specificity, the information that it claims to be confidential. See Mason J (with whom Murphy, Aickin, Wilson and Brennan JJ agreed) in O’Brienv Komesaroff (1982) 150 CLR 310 at 326. His Honour said:

It is at this point that the respondent has consistently failed to identify the particular contents of the documents which he asserts constitute information the confidentiality of which he is entitled to protect. The consequence is that he has failed to formulate a basis on which the court could grant him relief on the assumption that some part or parts of the documents constitute confidential information.

The reason for this was pointed out by Brightman J in Amway Corporation v Eurway International Ltd [1974] RPC 82 at 86-87 (in a passage cited with evident approval by Mason J in O’Brien at 327-328). Without precise identification of the confidential material, the grant of an injunction would place the defendant in “a most embarrassing situation”, because they would not know “what business methods, literature and paperwork to avoid using in order to keep clear of contempt of court”.
Another problem exposed by the decisions in Amway and O’Brien is the difficulty of classifying “know-how” as confidential information. In Amway, Brightman J said at 87 that the business literature in respect of which the plaintiffs claimed confidentiality was “merely know-how which the plaintiffs cannot keep exclusively to themselves. It is know-how which the law does not protect…”. In O’Brien, Mason J said at 328 that the alleged confidential information which the respondent sought to protect “resemble[d] know-how” because it “represents his accumulated knowledge, skill and experience in a particular field”.
To jump ahead for a moment: the process of manufacture that is applied to and using the dry and wet ingredients is, in my view, a matter of know-how. The process of maceration is public knowledge. The process of draining a solvent through powdered or granular matter so as, on the way through, to extract chemical compounds, can hardly be described as novel.
The distinction between confidential information on the one hand and know-how on the other may be difficult to draw in particular cases. There is no sharp demarcation; rather, there is a continuum. But at the ends of the continuum, the distinction is clear enough. In my view, assuming that the recipe itself is confidential information, it is close to one end of the continuum. But the process of extracting flavouring compounds from herbs by the passage of a well-known solvent through them is nothing more than generalised know-how, residing at the opposite end of the continuum.
The essence of confidential information (of a kind that equity may protect) is that it is kept confidential. That involves both subjective and objective considerations. On the subjective side, there is the claimant’s approach to the information: is it important to the claimant that confidentiality be preserved? On the objective side, there are factors of the kind discussed by Kirby P in Wrightv Gasweld Pty Ltd (1991) 22 NSWLR 317 at 333-334. At 334, his Honour listed factors that “courts have found to be relevant, in particular cases”:

was skill and effort expended to acquire the information?

Was the information closely guarded, not made readily available to employees, and such that it could not without effort and risk be acquired by others?

Was it made known clearly to the employee that the employer regarded the material as confidential?

Do any industry usages and practices support the assertion of confidentiality?

Has the employee in question been permitted to share the information only by reason of seniority or responsibility?

It is clear from what Kirby P said that his Honour did not regard this as some form of universal checklist. In Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167, Fullagar J at 193 pointed out the undesirability of deciding any particular case solely by reference to factors found to be relevant in other cases. His Honour said, of a similar list of factors set out by Gowans J in Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 at 50, that it was not appropriate for someone “slavishly [to] check off the factors against the information, as if one were counting spots on some strange creature to see if it was indeed the species of leopard illustrated in the picture book”.
It was common ground, and rightly so, that an equitable duty of confidence will not attach to all information and general know-how that becomes known to an employee during the course of his or her employment. And even where confidential information properly so called is imparted by an employer to an employee in the course and for the purposes of the latter’s employment, so as to become part of the employee’s general know-how, the employee may be entitled to use that know-how after the employment ceases. That point was made by Hodgson JA (with whom McColl JA agreed) in Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [41] to [46].
In that decision, Hodgson JA cited at [40] a list of some 12 factors found in Dean, The Law of Trade Secrets (Second Edition, 2002) at 190. I set out that paragraph, whilst noting that what I have said at [125] above is as much applicable to it as it is to the list of factors given by Kirby P in Wright:

[40]   In Wright v. Gasweld, at NSWLR 334, Kirby P listed some factors that helped in determining whether information may be considered confidential. That list has been expanded by R. Dean, The Law of Trade Secrets and Personal Secrets, (2002) 2nd Ed., at 190 to include:
1.    The extent to which the information is known outside the business.
2.    The extent to which the trade secret was known by employees and others involved in the plaintiff’s business.
3.    The extent of measures taken to guard the secrecy of the information.
4.    The value of the information to the plaintiffs and their competitors.
5.    The amount of effort or money expended by the plaintiffs in developing the information.
6.    The ease or difficulty with which the information could be properly acquired or duplicated by others.
7.    Whether it was plainly made known to the employee that the material was by the employer as confidential.
8.    The fact that the usages and practices of the industry support the assertions of confidentiality.
9.    The fact that the employee has been permitted to share the information only by reason of his or her seniority or high responsibility.
10.    That the owner believes these things to be true and that belief is reasonable.
11.    The greater the extent to which the “confidential” material is habitually handled by an employee, the greater the obligation of the confidentiality imposed.
12.    That the information can be readily identified.

At [41], Hodgson JA addressed another factor: “the extent to which the particular information can be readily isolated from the employee’s general know-how which the employee is entitled to use after the end of employment”. His Honour enlarged on that at [42], [43]:

[42] In cases where the confidential information is of the nature of a secret formula or process, involving a number of elements such that independent discovery by enquiry or experiment is unlikely to occur, that confidential information can quite readily be distinguished from an employee’s general know-how. In those cases, the courts are ready to restrain use of that information by an ex-employee: see, for example, Amber Size & Chemical Co. Limited v. Menzel [1913] 2 Ch. 239.
[43] However, where the confidential information is something that is ascertainable by enquiry or experiment, albeit perhaps substantial enquiry or experiment, and the know-how which the ex-employee is clearly entitled to use extends to knowledge of the question which the confidential information answers, it becomes artificial to treat the confidential information as severable and distinguishable from that know-how; and in that kind of case, courts have tended not to grant relief.

His Honour illustrated the distinction in the following three paragraphs:

[44]   In E. Worsley & Co. Limited v Cooper [1939] 1 All ER 290, an ex-employee’s knowledge of the sources of particular types of paper sold by the employer was treated in that way. In a passage at 308 (quoted by Gleeson CJ in Wright v Gasweld at 325-6), Morton J noted that the information in question was “information which a determined and persistent trade rival, with sufficient skill and knowledge of the paper business, could have ascertained at the cost of considerable enquiries of considerable length”; and he went on to say that if a customer came to the ex-employee and asked if he could supply paper the same as a particular type of paper sold by the employer, it could not be wrong for the ex-employee to tell the truth and say he could. I note however that it was not suggested in that case that the ex-employee had been warned during employment that this particular information was confidential.
[45]    In Balston Ltd v Headline Filters Ltd [1987] FSR 330, the relevant confidential information was knowledge of the satisfactory degree of dilution of a standard solvent for a particular purpose; and Scott J, at 344, noted the hopeless artificiality of suggesting that the ex-employee should be required to carry out experiments to ascertain the satisfactory degree of dilution when he had that information from his employment. The ex-employee could not be prevented from using his know-how to the effect that the particular purpose could be served by the standard solvent diluted to some degree or other, so it was unrealistic in the extreme to suggest he could be prevented from using his recollection as to the satisfactory degree of dilution.
[46]    Although the consideration was not spelt out precisely in this way in Wright v Gasweld, I think it was implicit in the view of Gleeson CJ at 325-6, Kirby P at 334-5 and Samuels JA at 341, that the confidential information in that case was not such that the employee would be prevented from using it after the termination of employment, in the absence of a contract to that effect. The information in that case, that four suppliers in Taiwan of particular types of goods, out of a total of about 3,000 suppliers, had proved reliable, was very difficult to isolate from the ex-employee’s general experience and know-how. The four suppliers could not be prevented from dealing with the ex-employee, nor would it be reasonable (without a contract to that effect) to preclude the ex-employee altogether from dealing with those suppliers; so again, there would be the artificiality of requiring the ex-employee to engage in some exercise of trial and error to ascertain reliable suppliers, in circumstances where the ex-employee already had the knowledge that these four suppliers were reliable.

Decision

The decision in Del Casale points to what in my view is a very real problem facing Europa. Even if the know-how involved in Europa’s manufacturing process were found to have been in some way treated and kept as “confidential”, the simple fact is that it is know-how of a kind that could be replicated without too much time or effort. (I am talking of the manufacturing method, not of the actual recipe to which that method is applied.) The method involves very simple steps and processes. Solvent material is added to the dry ingredients, and (after a time that could readily be determined by trial and error) drawn off using gravitational force. Wet ingredients are then added. The resulting product, which is stored in bulk containers known as Intermediate Bulk Containers (IBCs), is in due course bottled.
That basic process is know-how that has become an integral part of Mr Child’s own know-how; his own stock of knowledge, skill and experience.
Mr Child has used his know-how for the benefit of Kindred. He has done so, no doubt, in many ways; but I refer in particular to his design of a flatbed tank to be used by Kindred for the purpose of manufacturing aromatic bitters.
There can be little doubt that the flatbed tank that Mr Child designed for Kindred was based on the design that he had prepared for Europa whilst in its employ. However, the Kindred flatbed tank incorporates a refinement (which in Mr Child’s view is an improvement). That refinement is the addition of a pump to recirculate solvent from beneath the mass of herbal material that is being macerated to above it, so that the solvent continues to percolate through, and infuse the flavour compounds from, the herbal material.
Mr Child has also modified the maceration process from that used by Europa. The Europa (Mr Thomas/Sultry Spirits) method requires all the dry ingredients to be macerated together. The length of maceration is controlled by a tap beneath the herbal material, through which (when the tap is opened) the infused solvent drains out.
The Kindred method involves differential steeping times for different dry ingredients. It appears to be based on the “teabag” method referred to in the Parsons book. It is clearly, in the view of Mr Child at least, a refinement of and improvement to the Europa method.
Further, in this context, it must be noted that Europa no longer uses the vessel designed by Mr Thomas for the process of maceration: the inverted cone vessel. Instead, it uses the flatbed tank designed by Mr Child. It is self-evident that this design resulted from Mr Child’s application of his own knowledge, skill and experience – his own know-how – to the particular manufacturing problem that Europa was facing: namely, how to produce aromatic bitters in quantities greater than those that could be produced using Mr Thomas’ design of vessel.
For those reasons, in my view, Europa’s method of manufacture is not confidential.
Further, and in any event, the proposition that Mr Child might be restrained, from exploiting as he has done his knowledge, skill and experience, or know-how, following termination of employment (and in the absence of any contractual restraint) strikes me as untenable.
I should note that whilst I have said repeatedly that I am prepared to assume that Europa’s recipe is confidential, this was a matter in contest. As I have noted at [124] above, one of the matters often considered, in assessing a claim for confidentiality, is the vigilance with which the claimant guards the allegedly confidential information. In this case, there was unchallenged evidence from Mr Child and Mr Michael Child that, as an incident of Europa’s quality control regime, each IBC had affixed to it a product information sheet giving details of the ingredients used to manufacture the aromatic bitters product contained in it.
Those documents, each of which appears to have comprised two or three pages, set out with precision each of the dry ingredients and its weight; and each of the wet ingredients and its volume. Thus, anyone who wished to do so could read at least the first page of that product information sheet.
Mr Child and Mr Michael Child said that the documents were kept on a clip board which was affixed to the IBC. They said that all the employees who worked in the factory (most of whom were casual employees only) passed back and forth through aisles between the IBCs, and could read the product information sheets if they chose to do so. They said, further, that visitors to the factory also passed through those aisles, and also could read the product information sheets if they wished to do so.
In those circumstances, Mr Walsh submitted that the recipe had not been kept so carefully – had not been so closely guarded – as to justify the claim for confidentiality. Mr Robson submitted, with some force, that the lists of dry and wet ingredients (each occupying its own page) were so detailed, both as to the specification of the ingredients and as to the specification of their quantities, that it would be difficult for anyone to stop, read and remember them. That may be so; but it would not be an act of enormous difficulty for a passer-by to use his or her mobile phone to photograph the sheets in question; and it could be done within a couple of seconds.
There is no need to decide whether in fact the matters to which I have referred would be sufficient to defeat the claim for confidentiality, and I shall leave the question at that point.
Europa claimed protection for its supplier and customer lists and databases and financial information. There is no doubt that the defendants – specifically Ms Reddy – took such information with them when they left Europa. Whatever were their (or her) reasons for doing so does not matter. However, that is not the end of the inquiry.
The list of suppliers of herbs and spices can hardly be considered confidential. It may very well be that Ms Reddy and (to the extent that he did) Mr Child learned of them through and in the course of their employment by Europa. But it is information of a kind that could be ascertained by a simple internet search. In the old days, no doubt, it could have been ascertained by consulting the Yellow Pages.
Customer lists might seem to have some element of confidentiality to them. However, the fact is that for aromatic bitters, Europa has only one customer: CCA. Europa was introduced to CCA by Mr Kingham. It can hardly be suggested that Mr Kingham should put out of his mind the fact, known to him before his association with Europa, that CCA was a potential distributor of aromatic bitters products.

It is also significant that CCA is unlikely to be a distributor for Kindred’s aromatic bitters products, at least while the Europa/CCA distribution agreement is on foot. Under and during the term of that agreement, each party must deal exclusively with the other in respect of aromatic bitters.
Another customer of Europa’s, although for another product (frozen cocktail mixes rather than aromatic bitters), is a company known as Brown Forman. Again, it was Mr Kingham who introduced Europa to that company. Why should he be prevented from using his pre-existing knowledge of the products that Brown Forman might be interested in acquiring or distributing? And why should he be prevented from using that knowledge for the benefit of Kindred? There is no answer to be found in Europa’s evidence or submissions to either of those questions.
Europa did make much, in the course of evidence and in submissions, of a list of locations at which its “slushie” machines were located across Australia. However, there is no evidence that this information was confidential. Someone of Mr Kingham’s vast experience in the liquor industry could, I think, put together a list of outlets or potential outlets for such products. Why should Mr Kingham be restrained from using his general stock of knowledge, skill and experience to identify suitable outlets? Again, no answer appears from the evidence or submissions put forward by Europa.
Europa pointed also to its financial documents that Ms Reddy had taken. Those documents included purchase orders and invoices for its products (in which prices and quantities were specified), bank records and the like. Those documents seem to me to be in a different category to the categories of information with which I have dealt so far. They seem to me on their face clearly to be confidential, and documents of a kind (or documents containing information of a kind) that ordinarily a company would be expected to keep confidential. Equally, in the ordinary way at least, that company’s employees would understand that it should be kept confidential.
There is no evidence that the defendants propose to exploit any of that information. Equally, there is no justification for their retaining it. As to the former point: I have no doubt that Mr Child and Mr Kingham between them can price Kindred’s aromatic bitters (and, in the future, other) products accurately and competitively. In Mr Child’s case, his knowledge of the costs of the process of manufacture – the ingredients, the labour, the equipment and the like – have nothing to do with whatever (if anything) he might know from Europa’s confidential documents.
Mr Kingham said that he could price Kindred’s products either “bottom up” or “top down”. I understood him to mean, by “bottom up”, that he could produce an elemental costing that would enable Kindred to achieve a profit on the products that it sold. By “top down”, I understood him to mean that he could produce a selling price that would be competitive in the marketplace and profitable to Kindred. In each case, it seems to me, his ability to do so depends on his stock of knowledge, skill and experience (or know-how), and is not related to any of Europa’s pricing information that (Europa suggests) may have been communicated to him. I hasten to say that there is no evidence that any such information was in fact communicated to him.
The only licences held by Europa are the licensing agreements (the agreement and the amended agreement) between it and Mr Thomas’ company Sultry Spirits. Information relating to the terms of those licenses is included in the definition of “Identified Information”, the subject of the undertakings given to the Court by each defendant. Thus, on the assumption that information relating to those licences is confidential, the undertakings give sufficient protection.
That leaves “Confidential Information” and “Intellectual Property” as defined in the confidentiality deed. Since I have concluded that Mr Child and Ms Reddy did not execute any such deed, the relevance of those categories of information may be doubted. However, it is desirable to set out the definitions of those terms:

“Confidential Information” means all information of whatsoever kind or nature including Trade Secrets that in any way relate to the Business, the Intellectual Property or any of the Discloser’s products that is at any time Disclosed before or after the entering into of this Deed by the Discloser to the Recipient and includes without limitation all information relating to Intellectual Property (as defined) and includes without limitation any such information in any document (whether in hard form or electronic) that is marked “confidential”, “secret”, “not to be disclosed”, “private” or with similar words and also includes all information which by its nature is confidential.
“Intellectual Property” means all Intellectual Property recognised by Legislation and/or by any Convention and also includes product, ideas, design concepts, product designs (whether registered or not), trade marks, copyright and rights in the nature of copyright, patents and any rights under licence or agreement relating to any of the foregoing.

Even without going to the other defined terms used in those definitions, it is self-evident that they are so widely drafted that they range far beyond describing information susceptible of protection in equity. And as to “Intellectual Property”, there is no evidence as to what property Europa might have that could fall even within the terms of that very generous definition.
I conclude that Europa has not made good its claim to protection in equity.

Eleventh and twelfth issues: sufficiency of the defendants’ undertakings

For the reasons I have given, the undertakings given to the Court by each of the defendants provide sufficient protection to Europa for its information that is or may be confidential. It follows that there is no need for further relief.

Conclusion and orders

Europa has failed to make out a case for any protection, either in contract or in equity, beyond that provided by the undertakings that each of the defendants gave to the Court on 8 July 2015.
On the face of things, Europa has substantially failed. On the face of things, it should pay the defendants’ costs (compare UCPR r 42.1). However, against the possibility (“inevitability” might be a better word) that some other costs order will be sought, I shall give directions for that to be articulated by submissions. My present view is that any such application should be dealt with on the papers once the submissions have been completed.
I make the following orders:

Note that each of the defendants remains bound by the undertaking to the Court that he, she or it gave on 8 July 2015, according to its terms.

Order that the proceedings otherwise be dismissed.

Order the plaintiff to pay the defendants’ costs.

Direct that any party seeking to set aside or vary order (3) is to serve on the other party or parties, and deliver to my Associate, within 14 days of publication of these reasons, written submissions setting out the order or orders that it seeks and the reasons why such orders are sought, together with any evidence to be relied upon in support of the making of those orders.

Direct that the party or parties against whom those further orders are sought is to serve on the other or others, and deliver to my Associate, within a further 14 days, its submissions in opposition and any evidence on which it proposes to rely.

Direct the first party to serve and deliver to my Associate, within a further 14 days, any submissions in reply.

Direct that, subject to the further order of the Court, any such dispute as to costs is to be dealt with on the papers.

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Amendments

08 July 2016 - Paragraph [115] - citation amended and typographical error in quote

Decision last updated: 08 July 2016

Medium Neutral Citation:	Europa International Pty Ltd v Child [2016] NSWSC 923
Hearing dates:	11/04/2016, 12/04/2016, 13/04/2016, 14/04/2016, 15/04/2016, 18/04/2016, 19/04/2016, 20/04/2016, 21/04/2016, 22/04/2016, 26/04/2016 and 27/04/2016
Date of orders:	08 July 2016
Decision date:	08 July 2016
Jurisdiction:	Equity - Commercial List
Before:	McDougall J
Decision:	Note that defendants remain bound by their undertakings to the Court, according to their terms. Proceedings otherwise dismissed with costs. Directions if any further costs orders sought.
Catchwords:	CONTRACT – confidential information – whether confidential information has been identified with requisite specificity – whether defendants entered into confidentiality agreements – whether information has become part of a person’s general skill, knowledge and experience EQUITY – confidential information – whether such information as is confidential warrants equitable protection – whether such confidential information was received by the defendants in circumstances importing an obligation of confidence EQUITY – injunctions – whether undertakings provided by defendants are sufficient to protect such information as is confidential
Legislation Cited:	Restraints of Trade Act 1976 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Amway Corporation v Eurway International Ltd [1974] RPC 82 Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 Balstone Ltd v Headline Filters Ltd [1987] FSR 330 Breen v Williams (1996) 186 CLR 71 Briginshaw v Briginshaw (1938) 60 CLR 336 Creative Brands Pty Ltd v Franklin [2001] VSC 338 Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629 O’Brien v Komesaroff (1982) 150 CLR 310 Stenhouse Australia Ltd v Phillips [1974] AC 391 Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
Texts Cited:	R. Dean, The Law of Trade Secrets and Personal Secrets (Second Edition, 2002) B T Parsons, Bitters: a spirited History of a Classic Cure all.
Category:	Principal judgment
Parties:	Europa International Pty Ltd (Plaintiff) Keith Michael Child (First defendant) Kylie Robyn Reddy (Second defendant) Ian Kingham (Third defendant) Redkin Equipments Pty Ltd (Fourth defendant) Kindred Pty Ltd (Fifth defendant)
Representation:	Counsel: J Robson SC / H Mirza (Plaintiff) M Walsh SC / M Smith (Defendants) Solicitors: Carmody Lawyers (Plaintiff) Philip Gengos & Co (Defendants)
File Number(s):	2015/153024