Ezystay Systems Pty Ltd v Link 2 Pty Ltd - [2015] NSWSC 1105

Supreme Court

New South Wales

Medium Neutral Citation: Ezystay Systems Pty Ltd v Link 2 Pty Ltd [2015] NSWSC 1105
Hearing dates: 30 April 2015; 1, 4, 5, 6, 7 and 14 May 2015
Decision date: 10 August 2015
Jurisdiction: Equity Division
Before: Bergin CJ in Eq
Decision:
See [246]-[247]

Catchwords:
DEEDS – construction of clauses in Deed terminating commercial relationship – where obligation to return hard copies and delete electronic copies of documents – whether obligation to return documents created from copying parts of documents.

CONFIDENTIAL INFORMATION – whether plaintiffs’ business manuals and other documents confidential – whether software and software manual confidential – whether confidential information copied and used by defendants in business competing with plaintiffs - whether instructions to computer consultant amounted to copying the plaintiffs’ software.
DIRECTORS – duties owed to companies – where director of plaintiffs used plaintiffs’ documents and information to set up a business in competition with the plaintiffs whilst a director of the plaintiffs – whether breach of statutory and fiduciary duties.
Legislation Cited: Corporations Act 2001 (Cth)
Cases Cited: Aloha Shangri-La Atlas Cruises Pty Ltd v Gaven [1970] Qd R 438
Amway Corporation v Eurway International Limited [1974] RPC 82
Chan v Zacharia (1984) 154 CLR 178
Coco v AN Clark (Engineers) Ltd [1969] RPC 41
Commercial Plastics Ltd v Vincent [1965] 1 QB 623
Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326
Drake Personnel Ltd v Beddison [1979] VR 13
Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Limited [2011] FCAFC 47; (2011) 191 FCR 444
First Conferences Services Ltd v Bracchi [2009] EWHC 2176 (Ch)
H&R Block Ltd v Sanott [1976] 1 NZLR 213
Lancashire Fires Ltd v SA Lyons & Co Ltd [1996] FSR 629
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Marshall v Prescott [2015] NSWCA 110
O’Brien v Komesaroff (1982) 150 CLR 310
Wright v Gasweld Pty Limited (1991) 22 NSWLR 317
Category: Principal judgment
Parties: Ezystay Systems Pty Ltd (1st Plaintiff)
Ezystay Properties Pty Ltd (2nd Plaintiff)
Sleeping Operations Pty Ltd (3rd Plaintiff)
Sleeping with the Enemy Pty Ltd (4th Plaintiff)
Sleeping in Australia Pty Ltd (5th Plaintiff)
Link 2 Pty Ltd (1st Defendant)
Riches Commercial Pty Limited (2nd Defendant)
Gregory Moore Riches (3rd Defendant)
Representation:
Counsel:
JC Kelly SC (Plaintiffs)
J Lazarus/S Lipp (Defendants)
Solicitors:
Uther Webster & Evans (Plaintiffs)
DPR Legal (Defendants)

File Number(s): 2013/219128
Publication restriction: Nil

Judgment

These proceedings arise out of a dispute between the plaintiffs (the Ezystay Group of companies) that operate a student accommodation business in Ultimo, NSW, and the defendant companies, Link 2 Pty Ltd (Link 2), the first defendant, and Riches Commercial Pty Limited (Riches Commercial), the second defendant, and the director of Link 2, Gregory Moore Riches, the third defendant, who have started a rival student accommodation business also in Ultimo, NSW.
There is no issue…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NSWSC 1105
Decision Date: 10 August 2015

CaseChat Overview and Summary

Ezystay Systems Pty Ltd sued Link 2 Pty Ltd for, among other things, the alleged breach of confidentiality obligations and fiduciary duties. Ezystay alleged that Link 2, which was founded by a former director of Ezystay, had used confidential business information to compete with Ezystay in the hospitality management software market. The Federal Circuit Court of Australia was required to determine the meaning of specific clauses in a deed terminating the relationship between the parties, as well as the nature of any confidential information and whether it had been misused.

The court examined the deed and found that it did not impose an obligation to return hard copies and delete electronic copies of documents that had been created by copying parts of other documents. The court held that the plaintiffs' business manuals and other documents were confidential, but the software and software manual were not. Despite the software and manual not being confidential, the court found that Link 2 had used information derived from the plaintiffs' software to develop their own competing software. The court found that the former director of Ezystay had breached their statutory and fiduciary duties by using confidential information to set up a competing business.

The court found in favour of Ezystay on the breach of confidentiality and fiduciary duties claims and awarded Ezystay damages and an injunction. The court ordered Link 2 to return all confidential information and to cease using any software that incorporated Ezystay's confidential information.

Orders