Garner v Central Innovation Pty Limited - [2022] FCAFC 64

FEDERAL COURT OF AUSTRALIA
Garner v Central Innovation Pty Limited [2022] FCAFC 64

Appeal from: Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796

File number: NSD 69 of 2021

Judgment of: CHARLESWORTH, STEWART AND HALLEY JJ

Date of judgment: 21 April 2022

Catchwords: INDUSTRIAL LAW – appeal from decision of primary judge that judgment and verdict be entered in favour of respondents in respect of 36 customers lost due to actions of appellant – whether primary judge wrongly departed from the case pleaded by the appellant – whether primary judge erred in finding that respondents established loss or damage – whether primary judge made erroneous findings as to the taking or removal of confidential information by the appellant – whether primary judge made erroneous findings as to the credibility of the evidence given by the appellant – whether primary judge made erroneous findings in assessing the alleged loss or damage – reflective loss principles – principles relevant to breach of fiduciary duties – where no material non-compliance with the rule in Browne v Dunn – appeal dismissed

Legislation:
Corporations Act 2001 (Cth) s 500

Evidence Act 1995 (Cth) s 140

Cases cited:
Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1

Banque Commerciale SA, en liquidation v Akhil Holdings Limited (1990) 169 CLR 279

Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356

Boardman v Phipps [1967] 2 AC 46

Briginshaw v Briginshaw (1938) 60 CLR 336

Browne v Dunn (1893) 6 R 67

Carter v Federal Commissioner of Taxation (2020) 279 FCR 83

Central Coast Council v Norcross Pictorial Calendars Pty Ltd [2021] NSWCA 75; 391 ALR 157

Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796

Commonwealth Securities Ltd v South Pacific Securities Pty Ltd [2003] NSWCA 199

Devries v Australian National Railways Commission (1993) 177 CLR 472

Flightdeck Geelong Pty Ltd v All Options Pty Ltd (2020) 280 FCR 479

Fox v Percy (2003) 214 CLR 118

Francuziak v Minister for Justice (2015) 238 FCR 332

George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] BCC 310; 1 BCLC 260

Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443

Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41

Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1

Jones v Dunkel (1959) 101 CLR 298

Lee v Lee (2019) 266 CLR 129

Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382

NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98

Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204

Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31; 368 ALR 607

Sullivan v Trilogy Funds Management Ltd (2017) 255 FCR 503

Vale v Sutherland (2009) 237 CLR 638

Warren v Coombes (1979) 142 CLR 531

Willoughby v Clayton Utz [2005] WASC 47; 193 FLR 373

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs: 254

Date of hearing: 12 August 2021

Counsel for the Appellant: Ms L De Ferrari SC

Solicitor for the Appellant: AJH Lawyers

Counsel for the Respondents: Mr I Jackman SC with Mr R Jedrzejczyk

Solicitor for the Respondents: SD Commercial Lawyers

ORDERS

NSD 69 of 2021

BETWEEN:
GARY GARNER

Appellant

AND:
CENTRAL INNOVATION PTY LIMITED (ACN 123 240 362)

First Respondent

INTERCAD PTY LTD (ACN 072 666 016)

Second Respondent

ORDER MADE BY:

CHARLESWORTH, STEWART AND HALLEY JJ

DATE OF ORDER:

21 APRIL 2022

THE COURT ORDERS THAT:
1.The appeal is dismissed with costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
THE COURT:

These reasons concern an appeal from orders of a judge of this Court made on 16 December 2020, giving effect to reasons published on that date: Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796 (J).
The proceedings before the primary judge concerned allegations of misuse of confidential information obtained by the appellant, Mr Gary Garner, during an employment relationship with one or other of the respondents, Central Innovation Pty Ltd and Intercad Pty Ltd, and in the course of his subsequent employment with a competitor of the respondents, N C Cadcam Systems Pty Ltd (NCCS), now in liquidation.
The grounds of appeal are summarised at [58] – [63] below.
For the reasons that follow, all of the grounds are rejected.
The appeal should be dismissed with costs.
FACTUAL FINDINGS
The following facts found by the primary judge are relevant to a resolution of this appeal. Most of them are not subject to challenge.
The CI Group
The respondents are part of a group of companies that operate collectively under a business umbrella called the CI Group. Intercad is, and has been since 12 January 2016, a wholly-owned subsidiary of Central Innovation. One or more of the members of the CI Group advise customers in the design, manufacturing and construction industries about optimising their design processes and systems, and supplying them with three dimensional computer aided design and drafting software (3D CAD software). The CI Group employs just under 150 people, approximately 42 of whom perform work for Intercad.
SolidWorks software
The 3D CAD software and related services supplied by one or more of the members of the CI Group came from SolidWorks Corporation (formerly called SolidWorks Inc), a United States-based company and subsidiary of French company Dassault Systèmes. Dassault Systèmes is one of the largest developers of 3D CAD software in the world. SolidWorks has captured approximately 50% of the Australian 3D CAD software market.
Customers who purchase SolidWorks’ 3D CAD software from one of SolidWorks’ resellers acquire both a perpetual licence for the software and a 12-month subscription to software updates. During the subscription period, the reseller also provides technical support, and is known as a “Value Added Reseller” (VAR). A customer of a SolidWorks VAR may have more than one software subscription. At the end of each subscription period, which may or may not be synchronised as between different subscriptions, the customer chooses whether or not to renew any given subscription. CI Group/Intercad subscriptions were synchronised. The information held by a SolidWorks VAR about subscribers is important to the process of servicing their needs and securing the renewal of subscriptions.
Between about 1996 and 2009, Intercad was an exclusive distributor of SolidWorks software in Australia and New Zealand. Since then, Intercad periodically entered into distribution agreements with SolidWorks by which Intercad had the non-exclusive right to sell its software in Australia and New Zealand. Intercad’s business was largely selling licences to use SolidWorks software. Intercad and SolidWorks entered into the relevant distribution agreement on l April 2014 (Distribution Agreement).
Employment of the appellant
The appellant admitted in his defence that he performed work for Intercad, said in his affidavit evidence that he was employed by Intercad, and denied in both his defence and evidence ever having been employed by Central Innovation. The respondents contended that they were each jointly or severally the employer of the appellant, and that he was employed by one, or the other, or both of them.
NCCS
The appellant’s subsequent employer, NCCS, also supplied SolidWorks 3D CAD software as a VAR, confined to Victoria and Tasmania. In 2016, NCCS was Intercad’s only substantial competitor in Victoria and Tasmania.
NCCS was originally the second respondent to the proceedings before the primary judge. It went into voluntary liquidation on 10 April 2019, just under eight months before the trial in early December 2019, preventing the proceedings continuing against it without the leave of the Court: see s 500(2), Corporations Act 2001 (Cth). No leave was sought nor granted for the proceedings to continue against NCCS.
At the core of the dispute before the primary judge was the question of whether, during the time that he performed work for Intercad, the appellant appropriated the respondents’ customer information and misused that information during the course of his employment with NCCS. The principal form of misuse alleged by the respondents was getting a subscriber customer of a VAR member of the CI Group to become an NCCS subscriber customer.
The “VRC” and “SUGAR”
During the period between 30 November 2009 and 22 August 2016, SolidWorks operated an electronic database known as the “Value Added Reseller Resource Centre” (VRC). The appellant had access to the VRC. The text of the Distribution Agreement states that Intercad was to ensure that only “authorized employees” could access the VRC.
During the period between 30 November 2009 and 22 August 2016, the appellant also had access to SUGAR, an electronic customer relationship management (CRM) system used by the respondents.
Employment contracts and access to the VRC and SUGAR
On 30 November 2009, the appellant entered into a contract of employment. The primary judge referred to that contract in his reasons as Contract One.
On 2 December 2009, the appellant was given login details that provided him with access to the VRC.
On 16 March 2011, the appellant received an email with an attached letter, the pages of which comprised a second contract. The primary judge referred to that contract in his reasons as Contract Two.
Between 30 November 2009 and about l March 2013, the appellant’s position was “Business Development Manager”.
On or about l March 2013, the appellant was promoted to the position of “Team Leader, Victoria”. He was given access to SUGAR for the purpose of carrying out his duties and responsibilities as a Team Leader.
During the period between 30 November 2009 and 22 August 2016, the appellant used a laptop computer for the purposes of carrying out his duties as a Business Development Manager and, later, as Team Leader (Intercad Laptop).
In June and July 2016, Mr John Atkinson in his capacity as General Manager of Intercad and Intercad (NZ) Pty Ltd, had discussions with the appellant about a possible restructure of the respondent companies and the sales department.
In about early July 2016, the access permissions to SUGAR for all Team Leaders were altered to prevent any of them from directly downloading any information stored in the SUGAR database.
The appellant was made redundant on 22 August 2016.
On 22 August 2016, the appellant contacted Mr Stalin D’Souza on LinkedIn. Mr D’Souza was the Director of NCCS. He commenced employment with NCCS on 15 November 2016.
During the period between 15 November 2016 and around June 2017, NCCS operated a CRM system known as “Hatchbuck”.
SUGAR database
The SUGAR database is a Central Innovation product that has been provided to Intercad.
SUGAR contains the names, telephone numbers, mailing addresses and email addresses for all former, current and prospective customers of both Central Innovation and Intercad, including the personal contact details of key customer representatives known as “contacts”.
There is more customer-specific information stored within SUGAR than in the VRC. It records prices and subscription renewal fees paid by the customers of the respondents, which are not disclosed to the public nor to other VARs of SolidWorks software.
One of the primary functions of SUGAR is to create an electronic log of communications with the respondents’ customers. SUGAR enables members of the respondents’ sales and marketing teams to save copies of emails exchanged with contacts and to create summaries of meetings and telephone conversations. Thus, SUGAR enables a user to readily ascertain the focus of the respondents’ marketing efforts, the types of software customers have purchased or are interested in purchasing, and the prices offered or charged for those products.
SUGAR can be used to generate customised reports of specific categories of information, such as a report of all sales opportunities pursued by the respondents in Victoria within a particular time period.
As noted above, the primary use of SUGAR was to track the relationship between the respondents and their customers, but it could also be used to assess performance. If, for example, an individual salesperson was underperforming or not meeting targets, then SUGAR could be used to look at their activity in terms of the number of meetings or number of calls logged.
The respondents are both sales-driven organisations, with the remuneration of sales staff depending partly on the sales they made. As such, they were required to record in SUGAR contact made with customers. As noted above, such information could not be added to the VRC. Rather, the information in that database (apart from orders lodged by a VAR) was entered by SolidWorks, who was solely responsible for maintaining it.
At times duplicate information was entered in SUGAR and sometimes the data became out of date. The remedy for any inaccurate information that might exist from time to time in SUGAR was not to be found in the VRC, but rather by updating SUGAR.
It was a matter for disciplinary action if sales staff were found to have put false information into SUGAR. Two members of staff had been dismissed in the month before Mr Atkinson gave evidence for putting false information into SUGAR, but there was no evidence of any such disciplinary action being required during the time of the appellant’s employment.
Sales team members of the respondents may contact existing and potential customers using email, direct telephone calls or social media campaigns in line with the marketing strategies for particular customers or groups of customers.
Each time a sales member team makes or attempts to make contact with a customer or potential customer, he or she creates a record within SUGAR of the date and method of communication and a brief summary of any oral discussion. If a communication takes place by email, a copy of that email, or a version of that email displaying its contents, is saved within SUGAR. The name of the sales team member is also logged in SUGAR.
SUGAR makes it possible to view a complete record of all prior communications with any particular customer or potential customer, which increases the efficiency and effectiveness of sales and marketing activities. That information can be sorted and displayed according to different categories of information, such as customers who have purchased a particular product within a particular time period, or the marketing and sales techniques used. Customised reports of information of the kind already described can also be generated. This information would enable a competitor to understand which customers have been the focus of marketing strategies and the status of attempts to win business from such customers.
Team members were able to use an application within SUGAR to synchronise selected emails with SUGAR and an icon for that application was displayed in a screenshot of the appellant’s Microsoft Outlook inbox, which Mr Atkinson took from the Intercad Laptop.
Mr Atkinson had not received any complaints or feedback from any employee, including the appellant, that they had found SUGAR difficult to use. The appellant’s proficiency in the use of SUGAR is the subject of contested findings discussed elsewhere in these reasons.
Eighteen reports containing data obtained from the report module in SUGAR were located on the Intercad Laptop and were admitted into evidence (SUGAR Reports).
The primary judge held that the appellant had multiple means available to him by which he could copy or export data from SUGAR without the need to generate a report.
The primary judge found that the appellant used SUGAR reasonably extensively in the final three months of his employment with Central Innovation. The Intercad Laptop recorded between 10,634 and 10,638 web visits to SUGAR during that period, an average of over 168 visits per day. In the period immediately leading up the appellant’s retrenchment, a particular kind of usage began to increase, namely accessing the reports module in SUGAR. The reports module in SUGAR enabled users to “build, generate and manage” reports for other modules, such as accounts, contacts and calls.
Searches conducted on the hard drive of the Intercad Laptop revealed that the appellant had created 13 Excel spreadsheets at various times. The primary judge found that some of the information contained in the spreadsheets matched data within a backup version of SUGAR as it stood at the relevant time. One of the Excel spreadsheets, named “Gary list.xlsx”, was a customised report entitled “Gary G list”. It contained contact details for representatives of all customers and leads that had been assigned to the appellant. The primary judge found that the “Gary list.xlsx” file located on the Intercad Laptop was not a .csv export from SUGAR, but rather was very likely copied and pasted from the SUGAR website by the appellant. An examination of a backup version of SUGAR recorded the functions that were available to the appellant within SUGAR, including “Run Report”, “Edit”, “Duplicate”, “Schedule”, “Print as PDF”, “Export” and “Delete”.
An examination of the Intercad Laptop revealed 38 occasions of .csv file downloads from SUGAR between November 2013 and April 2015, that is, sometime before the appellant was made redundant.
One of the spreadsheets on the Intercad Laptop contained, among other things, all opportunities assigned to the appellant and his team that were forecast to close in the month of June 2014.
Entry of customer contacts on Hatchbuck
A total of 131 customer contacts were entered into the NCCS Hatchbuck database by the appellant or by persons acting at his direction in the period between 15 November 2016 and 9 June 2017, but the great majority were entered by the end of February 2017. The appellant personally entered 111 of these 131 customers.
Due to the overlap between the email address entries and the customer contact entries, virtually all of the 131 entries in the Hatchbuck database contained information that was also contained in SUGAR.
The 131 entries in the Hatchbuck database included 40 that were tagged with the notation “Customer with IC”.
Some of the email addresses in the Hatchbuck database contained the same errors that were present for those addresses in SUGAR. Those errors had arisen either because of data entry error or the addresses were no longer current.
Output Files
The confidential data alleged to have been accessed by the appellant was said to have been contained in two reports, generated by the appellant on 30 June 2016, in the form of spreadsheets. These spreadsheets are referred to as Output 26 and Output 27 (together, the Output Files). The information in the Output Files included customer contact information, the types of software licences and subscriptions sold to customers, expiry dates and pricing information. The information was available to the appellant and was in a form that was capable of being copied or sent to him.
The respondents alleged that the appellant accessed the VRC on 30 June 2016 between about 10.19 am and 10.22 am (first period), and again between about 10.29 am and 10.35 am (second period). During the first period, the respondents alleged that the appellant downloaded Output 26 in .csv format, saved it in Excel .xlsx format, and then copied it to an external USB drive. During the second period, the respondents alleged that the appellant downloaded Output 27 in .csv format, saved it in Excel .xlsx format, and then copied it to the same external USB drive.
The appellant’s evidence was that he recalled downloading a large file from the VRC in June 2016 and uploading it onto a USB drive due to its size. He alleged that he gave the USB drive to a salesman who reported to him.
Confidentiality of information in Output Files and SUGAR

The information in the Output Files and the SUGAR Reports, together with information that could be obtained from SUGAR more generally, was not publicly available and fell within the broad definition of “confidential information” in clause 14.1 of Contract One and Contract Two, and was expressly prohibited from being removed or disclosed in the absence of written consent, as stipulated in clause 16.1 of Contract One and clause 15.1 of Contract Two.
Customer explanations for switching to NCCS
For 25 of the 37 customers of Intercad who switched to NCCS, the reason stated on the relevant account change request was “We would like to try NCCS for their service”. For a further 10 of the 37 customers, a similar phrase such as “Want to try NCCS for their support” was used. For the remaining two customers the reason stated was “I wish to change my service provider” and “consolidating licences”. The 37 customers had been customers of Intercad for periods of between four years and five months, and 22 years and five months. None of them expressed any dissatisfaction with the services provided by Intercad as the reason for changing to NCCS.
There was no evidence to suggest that Intercad’s customers would have switched to NCCS but for the intervention of the appellant. The primary judge accepted that each would have renewed their existing subscriptions with Intercad at their existing rates.
GROUNDS OF APPEAL
The Amended Notice of Appeal contains five paragraphs, each described as a ground of appeal. There are multiple subparagraphs alleging an array of appealable errors. The alleged errors are not logically grouped and are repetitive in some respects. It is convenient to consider the allegations of error by re-grouping them as follows.
Ground One alleges that the primary judge erred in finding against the appellant on a case that the respondents had neither pleaded nor fairly notified to him (Amended Notice of Appeal, [1.1] – [1.4]).
Ground Two alleges that the primary judge erred in finding that Central Innovation (now acknowledged to be the appellant’s employer) had established any loss or damage (Amended Notice of Appeal, [2.1]).
Ground Three alleges that the primary judge erred in failing to find that the respondents had:
(1)failed to prove their case and otherwise erred in making factual findings concerning the appellant’s conduct in accessing, printing, downloading, removing and misusing the information contained in the Output Files, the SUGAR Reports and material referred to as “the SUGAR Extracts” (Amended Notice of Appeal [1.5], [1.6], [1.9], [3.1] [3.2], [3.3], [3.4], [4.3], [4.4], [4.5] and [4.6]) and
(2)failed to comply with the rule in Browne v Dunn (1893) 6 R 67 in respect of some of those findings (Amended Notice of Appeal [1.7] and [1.8]).
Ground Four alleges that the primary judge erred in making an adverse assessment of the appellant’s credit (Amended Notice of Appeal [4.1] and [4.2]).
Ground Five alleges that the primary judge erred in concluding that the respondents’ claim sounded in loss or damage and in assessing the quantum of the remedy (Amended Notice of Appeal [5]).
GROUND 1
The respondents’ pleaded case was that alleged in their Second Further Amended Statement of Claim dated 28 August 2019 (2FASOC).
The primary judge found that the respondents’ case alleging information taken from SUGAR was not confined by the 2FASOC in the manner alleged by the appellant, but if that finding was incorrect then the appellant was on sufficient notice that the case being advanced was not so constrained. The reasoning of the primary judge is principally set forth at J [180]:
I am satisfied that the pleading objection raised by Mr Garner is without substance. It entails reading the relevant parts of the statement of claim not as alternatives, but instead as involving otiose repetition or emphasis. For the reasons that the applicants give, as summarised above, and also by a plain and linguistically sensible reading of the statement of claim, I accept that the confidential information in issue is not as limited as Mr Garner contends, but rather is as broad as the applicants assert. In any event, even if the statement of claim could be read as not extending to the broader source of information within SUGAR that the applicants rely upon, I consider that Mr Garner was on sufficient notice that the case being advanced was not so constrained and conducted the substance of his case upon that basis. It is true that the applicants’ opening submissions focused on information from SUGAR that was derived from replicating the reports module uniform resource locators (URLs) found on the Intercad Laptop. However, the last part of Mr O’Kane’s first report analysed the difference between sessions recorded on the SUGAR server and those recorded on the Intercad Laptop, finding remote access using Mr Garner’s logon but not using the Intercad Laptop, reproducing the data in a table. Mr O’Kane was cross-examined about this evidence in some detail, making it clear that Mr Garner was on notice that part of the applicants’ case did involve an allegation of obtaining data from SUGAR other than via the Intercad Laptop, and therefore was not confined to the 18 SUGAR Reports derived from the report module URLs found on the Intercad Laptop. This is detailed in the evidence considered below.
The phrase “SUGAR Extracts” is used by the appellant to describe a body of information contained in SUGAR, other than the files referred to as the SUGAR Reports or the Output Files. The SUGAR Extracts is that information exhibited to an affidavit of Mr D’Emiolio sworn on 19 September 2019 and consists of all of the information maintained by the respondent relating to customers or prospective customers, including telephone numbers, email addresses and individual contact details.
On this topic, the Amended Notice of Appeal alleges the following appealable error:
1.1The learned primary judge erred ([177], [179], [180], [264], [308] and [309] of the Reasons) in finding against the Appellant, and for the Respondents, on a case both beyond and different from the case that had been pleaded by the Respondents (the ‘Respondents Pleaded Case’).
1.2It was not part of the Respondents Pleaded Case that the Appellant took or removed the SUGAR Extracts and used or misused the SUGAR Extracts during the course of his employment with NCCS, and the learned primary judge erred by so finding, and doing so in a departure from the Respondents Pleaded Case.
1.3The learned primary judge ought not, departing from the Respondents Pleaded Case, have found that the SUGAR Extracts were part of the Respondents’ alleged confidential information, alleged to have been taken or removed and used or misused during the course of the Appellant’s employment with NCCS, in circumstances where:
1.3.1the SFASOC did not plead that the Appellant downloaded, copied, had taken or removed the SUGAR Extracts from the Respondents’ custody, possession or control, nor did it plead that the Appellant used or misused the SUGAR Extracts during the course of his employment with NCCS;
1.3.2in their submissions (written opening submissions, oral opening submission and written closing submissions) the Respondents did not contend (and thus the Appellant was not on notice that) the Respondents’ case was that the Appellant had:
(i)downloaded, copied, printed, had taken or removed the SUGAR Extracts from the Respondents’ custody, possession or control; and
(ii)used or misused the SUGAR Extracts during the course of his employment with NCCS;
1.3.3the Appellant did not acquiesce to any departure from the Respondents Pleaded Case, by the Respondents or by the learned primary judge making findings of fact beyond and different from those alleged in the Respondents Pleaded Case.
1.4Given the terms of the Respondents Pleaded Case and the evidence (concessions during trial made by witnesses called by the Respondents), the learned primary judge ought to have found that the allegation regarding confidential information (alleged to have been taken or removed, and used or misused, by the Appellant during the course of his employment with NCCS) that the Appellant was required to meet at the trial was confined to:
(i)        Output 26;
(ii)       Output 27; and
(iii)      the SUGAR Reports,
and did not include the SUGAR Extracts.
Relevant principles
The principles in relation to the function and rules of pleading and the purpose of particulars are well settled.
In Banque Commerciale SA, en liquidation v Akhil Holdings Limited (1990) 169 CLR 279, the High Court emphasised that the rules of pleadings are directed at ensuring that a party should be given a fair opportunity to meet the case advanced against it. Their Honours explained (at 286 – 287):
The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In liq.), per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, e.g., Browne v Dunn; Mount Oxide Mines.
Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.
(footnotes omitted)
A hearing that departs from the pleadings is not necessarily an unfair hearing. It is necessary to consider what issues were fairly fought between the parties: Sullivan v Trilogy Funds Management Ltd (2017) 255 FCR 503 (at [265(1)]) citing Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 (at 517); Vale v Sutherland (2009) 237 CLR 638 (at [41]); Banque Commerciale SA (at 296 – 297); Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356 (at [51]).
The principal focus on procedural fairness, rather than rigidity in the application of formal pleading rules, was illustrated in the decision of the Full Court in NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98 (Flick, Murphy and Griffiths JJ). Their Honours explained (at [26]):
First, the fact that findings may be made — and even liability established — upon the basis of evidence which goes beyond a pleaded case is not of itself reason to set aside a decision. To so recognise is not to deny the importance of pleadings; it is simply to recognise that a party must be given, by one means or another, adequate notice of the case it has to meet. …
Similar principles apply with respect to particulars. Ultimately, the critical issue is that judgment is delivered on the causes of action pleaded rather than precisely within the scope of the particulars alleged in a pleading. As McKerracher, Robertson and Derrington JJ explained in Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31; 368 ALR 607 (at [65]):
That is not to say that a judgment needs to be precisely within the scope of the ‘particulars’ alleged in a pleading so long as judgment is given on the causes of action pleaded. A fair amount of tolerance can be justified so long as the circumstances are such that all parties to the action have had fair notice of what will be determined. Experience shows that it is not infrequently the case that the evidence adduced at trial diverges from the pleaded particulars to some degree. That is not unexpected given that pleadings are prepared well in advance of all of the relevant information becoming known. In this respect, in Water Board v Moustakas at CLR 497; ALR 197;, the majority of the High Court (Mason CJ, Wilson, Brennan and Dawson JJ) indicated that particulars are less confining than material facts. Their Honours said:
In deciding whether or not a point was raised at trial no narrow or technical view should be taken. Ordinarily the pleadings will be of assistance for it is one of their functions to define the issues so that each party knows the case which he is to meet. In cases where the breach of a duty of care is alleged, the particulars should mark out the area of dispute. The particulars may not be decisive if the evidence has been allowed to travel beyond them, although where this happens and fresh issues are raised, the particulars should be amended to reflect the actual conduct of the proceedings. Nevertheless, failure to amend will not necessarily preclude a verdict upon the facts as they have emerged: see Dare v Pulham (1982) 148 CLR 658; 44 ALR 117. In Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 at 668; 9 ALR 437 at 446, a case having been submitted to the jury which was factually different from that alleged in the pleadings and particulars, Stephen, Mason and Jacobs JJ observed that the pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence. The failure to apply for the amendment in that case was held not to be fatal. But in Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292; 18 ALR 147 Jacobs J, with whom the other members of the court agreed, pointed out (ALJR at 294; ALR at 151–2) that the conclusion in Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 was reached only upon the presupposition that the new issue or new way of particularising the existing issue had emerged at the trial and had been litigated.
Appellant’s submissions
The appellant submits that, contrary to the principles in Banque Commerciale SA (at 286 – 287), his Honour found that the confidential information included that which was outside, beyond and different from the respondents’ pleaded case by including the SUGAR Extracts. The appellant advances the following contentions.
First, the appellant contends that Mr Stephen D’Emilio, the lawyer acting on behalf of the respondents, gave evidence during cross-examination that Annexures A to I to the 2FASOC “effectively contain the case made against the [appellant]”. He contends that Mr D’Emilio also gave specific, confirmatory evidence that the Output Files and the SUGAR Reports comprised the categories of confidential information in respect of which the respondents plead their allegations against the appellant.
Second, the appellant contends that the SUGAR Reports are not the same as the SUGAR Extracts exhibited to the affidavit of Mr D’Emilio sworn on 19 September 2019, which are effectively the entirety of the database containing all information maintained by the respondents relating to customers or prospective customers, including telephone numbers, email addresses and individual contact details. He contends that no case was pleaded that the SUGAR Extracts were confidential information taken from the respondents and used by the appellant during his employment with NCCS.
Third, the appellant contends that the SUGAR Reports do not contain any email or telephone contact information of the customers referred to in Annexure A, B or C of the 2FASOC.
Fourth, the appellant contends that for the Court to depart from the manner in which a case has been advanced for resolution may involve a denial of procedural fairness, referring to Francuziak v Minister for Justice (2015) 238 FCR 332 (at [36]). He submits that the primary judge ought to have found that “the case now sought to be made by [the respondents] … was neither directly nor indirectly pleaded and was not the basis of liability which was pursued in the course of the conduct of the case”, citing Commonwealth Securities Ltd v South Pacific Securities Pty Ltd [2003] NSWCA 199 (at [41]); Stefanovski (at [74] – [81]).
Fifth, the appellant contends that the respondents’ written opening submissions, oral opening submissions and written closing submissions also did not contend, and the appellant was not on notice, that the respondents’ claim against him included allegations that the confidential information allegedly taken included the SUGAR Extracts, or that he had allegedly used the SUGAR Extracts whilst employed by NCCS.
Sixth, the appellant contends that he did not acquiesce to any departure by the respondents from their pleaded case against him or “deliberately choose to allow the [respondents’] case to be conducted on a different basis”. He contends that the “[respondents] were not entitled to escape the deficiencies in the [pleadings]; and as a result, the confidential information allegedly taken and used by the appellant was “limited to Output 26, Output 27, the SUGAR Reports”.
Seventh, the appellant submits that neither the respondents, nor the primary judge, put any questions to the appellant concerning any allegation of remote access to the SUGAR database, nor the copying, printing, extracting or removal of the SUGAR Extracts by way of remote access, nor of use of the SUGAR Extracts whilst the appellant was employed by NCCS. Thus, and in addition to the submissions made above, before any adverse findings can be made against the appellant on those matters, the rule in Browne v Dunn should have been complied with, and it was not. This contention is dealt with separately in our resolution of Grounds 3 and 4.
Consideration
For the reasons that follow, we do not accept the appellant’s contention that the case pleaded against him with respect to the information in SUGAR was limited to the SUGAR Reports and the Output Files, and did not extend to what the appellant describes as the SUGAR Extracts. Nor do we accept that there was any denial of procedural fairness.
Pleading of the information from SUGAR
It is first necessary to consider how the “information from SUGAR” case was pleaded.
It is alleged in [21] of the 2FASOC that the respondents used and maintained SUGAR. The information contained in SUGAR regarding the respondents’ customers, including names of existing and potential customers, their contact details, products sold to them, renewal terms of customer agreements and the content of communications with them is outlined in the 2FASOC at [23]. The case pleaded in relation to the “information from SUGAR” is first advanced in the 2FASOC in the following terms:
Information from SUGAR
82.During the period between 25 May 2016 and 22 August 2016, Garner used the Garner Laptop to access SUGAR and to generate at least 35 separate reports containing information stored on SUGAR.
83.On or about 18 August 2016, approximately four days before he was made redundant, Garner used the Garner Laptop to access SUGAR and to generate 18 reports containing information stored on SUGAR.
84. The information referred to in paragraphs 82 and 83 above:
(a) included:
(i)a list of all of CI’s and Intercad’s existing and prospective customers, grouped or sorted by the type and quantity of software licences purchased by those customers and/or the maintenance expiry dates of the licences;
(ii)information regarding the status of sales negotiations with prospective customers, including the number of telephone calls placed to prospective customers by CI’s and/or Intercad’s sales staff and the dates on which those calls took place;
(iii)information regarding the number of customers who had become customers of CI and Intercad during particular time periods, and the number of software licenses sold to those customers, grouped or sorted by specific marketing methods or opportunities (such as contact through social media platforms);
(iv)the total number of software licences sold by CI and/or Intercad to individual customers and the total dollar value of those licences;
(v)lists of the names and contact details of all CI and Intercad customers who used or subscribed to SolidWorks Products supplied by Intercad, grouped or sorted by the name or type of the relevant software;
(vi)lists of all customers of CI and Intercad who held active subscriptions to SolidWorks Products provided by Intercad, grouped or sorted by particular time periods relating to when the subscriptions or licences were purchased; and
(b)comprised ‘Confidential Information’ within the meaning of cl 14.1 of Contract Two.
Particulars
Particulars to be provided after formal disclosure processes are exhausted and the attainment of expert evidence.

In context, and read as a whole, it is apparent that the cross reference in [84] to the “information referred to in paragraphs 82 and 83 above” is not to be construed as limiting the alleged confidential information to the “information stored on SUGAR” that was contained in the reports identified in [82] and [83].
The confidential information referred to in [84(b)] is not identified by reference to the content of the reports referred to in [82] and [83] but rather by reference to the information which is pleaded to include all of the material identified in the various sub-paragraphs of [84]. The information pleaded in [84] is stated to include “a list of all of CI’s and Intercad’s existing and prospective customers”, “the total number of software licences sold by CI and/or Intercad to individual customers”, “lists of names and contact details of all CI and Intercad customers who used or subscribed to SolidWorks Products supplied by Intercad” and “lists of all customers of CI and Intercad who held active subscriptions to SolidWorks Products provided by Intercad”.
Further support for that construction is provided by the reference in [84] to the provision of particulars after “formal disclosure processes are exhausted and the attainment of expert evidence”. Such a notation or reservation would have been otiose if the confidential information was limited to the information contained in the reports alleged in [82] and [83].
The balance of the “information from SUGAR” contentions are pleaded in the 2FASOC as follows:
85.During the period between 25 May 2016 and 22 August 2016, Garner copied, saved, printed and/or exported the reports and/or Confidential Information referred to in paragraphs 82 to 84 above onto the Garner Laptop and/or other electronic devices used by Garner.
Particulars
Particulars to be provided after formal disclosure processes are exhausted and the attainment of expert evidence.
86.During the period 26 April 2016 to 17 August 2016 on at least seven separate occasions, and in addition to the occasions referred to in paragraphs 82 and 83 above, Garner used a mobile telephone (or alternatively an electronic device other than the Garner Laptop) to access SUGAR and to generate reports containing information stored on SUGAR.
87. The information referred to in paragraph 86 above:
(a)included some or all of the information referred to in subparagraph 84(a) above; and
(b)comprised ‘Confidential Information’ within the meaning of cl 14 .1 of Contract Two.
Particulars
Particulars to be provided after formal disclosure processes are exhausted and the attainment of expert evidence.
88.During the period between 26 April 2016 and 17 August 2016, Garner copied, saved, printed and/or exported the reports and/or Confidential Information referred to in paragraphs 86 to 87 above onto a mobile telephone and/or other electronic devices used by Garner.
Particulars
Particulars to be provided after formal disclosure processes are exhausted and the attainment of expert evidence.
The distinction between the content of the reports pleaded in [82] and [83] and the confidential information is further reinforced in these paragraphs of the 2FASOC.
In [85] the phrase “the reports and/or Confidential Information referred to in paragraphs 82 to 84” demonstrates that the content or the information in the reports is not synonymous with the confidential information.
In [86] it is alleged that information in SUGAR was accessed in addition to the occasions referred to in [82] and [83].
In [87] it is alleged that the information that is alleged in [86] to have been accessed in SUGAR comprised some or all of the information in [84(a)]. Again, this demonstrates that the confidential information identified in [84] is not limited to the content of the reports referred to in [82] and [83].
Further, [85], [87] and [88] refers to the provision of particulars after “formal disclosure processes are exhausted and the attainment of expert evidence”.
Annexure F to the 2FASOC
The particulars to the appellant’s use of the confidential information alleged in [93] of the 2FASOC, including with respect to the SUGAR components of the confidential information, as defined in [82], [83], [84], [86] and [87], include the following particular:
The customers in respect of whom Garner created new customer accounts and/or contacts on Hatchbuck included at least the customers who are identified in the schedule which forms Annexure F to this SFASOC.
Annexure F is headed “Contacts created on Hatchbuck using information from Sugar”.
In his affidavit sworn on 19 September 2019, Mr D’Emilio explains the process by which Annexure F was created. In summary, the companies and contact names listed in Annexure F were identified from an electronic record of accounts within Hatchbuck. Each of the companies and contact names was first entered on Hatchbuck after the appellant commenced working for NCCS. Mr D’Emilio and his staff then obtained hard copies of extracts from SUGAR of the names of the companies and the contacts from which Annexure F was then completed.
The information contained in Annexure F was extracted from SUGAR generally and was not limited to the information contained in the Output Files and the SUGAR Reports. It included what is characterised by the appellant as the SUGAR Extracts. The evidentiary basis for Annexure F was established by Mr D’Emilio in his affidavit. Mr D’Emilio was cross-examined on the Annexures to his affidavit, including Annexure F. He gave the following evidence:
MR ROBERTSON: Now, Mr D’Emilio, in your affidavit, you produce annexures A to I, which relate to the annexures to the second further amended statement of claim. That’s ---?---You’re referring to my affidavit of 19 September?
Yes, I am?---Yes.
Now, were those – those annexures were prepared under your supervision, were they not? ---Yes, they were.
And they effectively contain the case which is made against my clients in relation to the way in which he, my client – in relation to the way in which he is said to have misused confidential information? ---That’s correct.
Subsequently, Mr D’Emilio was cross-examined more specifically on his evidence concerning the preparation of Annexure F. He gave the following evidence:
Jayco is in the final version. It’s in annexure F? ---Yes. And what’s – what’s that titled?
Annexure F is titled Contract Created on Hatchbuck Using Information from SUGAR? ---Yes.
Alleged concession by Mr D’Emilio
The evidence of Mr D’Emilio that the appellant contends is a concession eschewing any reliance on the SUGAR Extracts needs to be assessed in the context of his evidence referred to above and the following exchange immediately leading up to the alleged concession:
Now, I have put to you yesterday that in the SUGAR reports which are the documents which it is alleged were generated on Mr Garner’s laptop, there are no email or contact addresses whatever?
MR HATCHER: Well, my recollection is that isn’t the way the question was couched, your Honour. That’s only a recollection. We don’t have the benefit of transcript.
MR ROBERTSON: Perhaps I should put the qualification which I recall making which is other than public website information?---I think you need to be careful because the amount of material in Mr O’Kane’s report is extensive. I think you might be referring to the 35 reports in his first report - - -
Yes?--- - - - which was reduced to 18.
Yes?---I have not done the analysis to see whether that email address is in that data because the volume is too extreme. Mr O’Kane also refers to what Mr Garner did especially and specifically in relation to SUGAR in his second report. So we need to be careful what you’re referring to.
What I’m putting to you is that in relation to those 35 reduced to 18 reports which Mr O’Kane extracts at length in his annexures or schedules to his report there is no contact information for any of the customers other than in a few cases, or some cases, public website information?---I don’t know.
And that’s what – I understand you don’t know, but that’s what I’m putting to you is in fact the case?---The reports – Mr Robertson, the reports speak for themselves. They’re – they’re copied in their totality. They’re in the court book.
And it’s those reports, the 35 reduced to the 18, which are the reports which are alleged – contain the confidential information which is alleged to have been obtained, isn’t it?---I – I refer to what you Mr O’Kane says. He’s the expert. It’s in his report.
And those are the reports which are referred to in the pleading in this case, aren’t they – those 35 reduced to 18?---Yes. From memory that’s correct.
Those and Output 26 and Output 27?---Yes.
That constitutes the alleged confidential information wrongly used?---In the pleading.
The cross-examiner was seeking to elicit a concession from Mr D’Emilio that the SUGAR Reports did not contain email or contact addresses and then sought in the alternative a concession that it was the SUGAR Reports, together with the Output Files, that constituted the alleged confidential information wrongly used by the appellant. In context, the alleged concession is relatively equivocal. Mr D’Emilio is somewhat circumspect in his answers when pressed on whether Mr O’Kane relied exclusively on the SUGAR Reports in his second report, confirms that to his memory the reports that are being referred to are the “35 reduced to 18” reports (that is, the SUGAR Reports) and confirms that the SUGAR Reports and the Output Files constitute the alleged confidential information wrongly used “in the pleading”.
The use of the definite article by the cross examiner in the last exchange set forth above before “alleged confidential information” needs to be considered in the context of the earlier evidence given by Mr D’Emilio set out above. It was not expressly put to Mr D’Emilio that the respondents were relying only on the SUGAR Reports and the Output Files as the universe of the confidential information alleged to have been wrongfully used by the appellant. Further, the true construction of a pleading is a matter of law.
Conclusion
We are satisfied that the primary judge was plainly correct in finding that a plain and linguistically sensible reading of the 2FASOC did not limit the scope of the confidential information encompassed by the SUGAR information to the reports identified in [82] and [83] of the 2FASOC or the information contained in them. The primary judge did not wrongly depart from the case pleaded against the appellant.
We are also satisfied by reason of the content of the 2FASOC, the annexures to the 2FASOC, the expert evidence of Mr O’Kane and the lay evidence of Mr D’Emilio that the appellant was made aware of the case upon which the respondents intended to rely in response to the appellant’s evidence.
GROUND 2
The Amended Notice of Appeal contained a reformulation of Ground 2 in the Notice of Appeal. As reformulated, Ground 2 is in the following terms:
Having found that the Appellant’s employer was Central Innovation Pty Ltd under Contract 1, and having regard to the three pleaded causes of action, the learned primary judge erred in finding that Central Innovation Pty Ltd had established any loss and damage.
As originally framed, the errors alleged in Ground 2 in the Notice of Appeal had included an allegation that the primary judge had erred in finding that the appellant was employed by Central Innovation. This claim was not only abandoned in the Amended Notice of Appeal; the contrary position, namely that he was an employee of Central Innovation, was embraced and relied upon to contend that Central Innovation had not suffered any loss or damage.
Relevant principles – Reflective Loss
The English Court of Appeal in Prudential AssuranceCo Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, stated the following principle, in the context of a consideration of the proper plaintiff to pursue a cause of action (at 222 – 223):
… But what [a shareholder] cannot do is to recover damages merely because the company in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a ‘loss’ is merely a reflection of the loss suffered by the company. The shareholder does not suffer any personal loss. His only ‘loss’ is through the company, in the diminution in the value of the net assets of the company, in which he has (say) a 3 per cent shareholding. The plaintiff’s shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property. The deceit practised upon the plaintiff does not affect the shares; it merely enables the defendant to rob the company. …
The principle, however, applies only where each of the company and the shareholder has a cause of action. As the New South Wales Court of Appeal explained in Central Coast Council v Norcross Pictorial Calendars Pty Ltd [2021] NSWCA 75; 391 ALR 157 (Bathurst CJ, Macfarlan and Gleeson JJA agreeing) at [103]:
What has been described as the reflective loss principle articulated by the English Court of Appeal in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 at 223–4; [1982] 1 All ER 354 (Prudential Assurance) (the principle) is that where loss is suffered by a company as a result of wrongdoing in respect of which each of the company and the shareholder has a cause of action, a shareholder cannot sue to recover the diminution in the value of his or her shares (or loss of benefits associated with his or her shareholding) resulting from the loss suffered by the company. The rationale for the principle has been described as the prevention of double recovery (Prudential Assurance at Ch 222; Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 at 62–3, 66–7; [2001] 1 All ER 481; [2000] UKHL 65 (Johnson) per Lord Millett, Lord Goff agreeing), or on the basis that the shareholder does not suffer a loss distinct from the company and the shareholder is barred from pursuing the claim by the principle in Foss v Harbottle (1843) 2 Hare 461 (Foss v Harbottle) (Marex at [10] per Lord Reed PSC, Lady Black and Lord Lloyd-Jones JJSC agreeing), or perhaps because the shareholder has no legal or equitable interest in the company’s assets (Marex at [80] per Lord Reed PSC).
The extent to which a shareholder can seek to recover losses suffered by a company was considered by Lord Bingham in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1. Lord Bingham stated the following propositions in response to a contention advanced in the context of a strike out application that a shareholder could not sue to recover a company’s loss (at 35 – 36):
… (1) Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder’s shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company’s assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss. So much is clear from Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, particularly at pp 222–223, Heron International, particularly at pp 261–262, George Fischer, particularly at pp 266 and 270–271, Gerber and Stein v Blake, particularly at pp 726–729. (2) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding. This is supported by Lee v Sheard [1956] 1 QB 192, 195–196, George Fischer and Gerber. (3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other. I take this to be the effect of Lee v Sheard, at pp 195–196, Heron International, particularly at p 262, R P Howard, particularly at p 123, Gerber and Stein v Blake, particularly at p 726. I do not think the observations of Leggatt LJ in Barings at p 435B and of the Court of Appeal of New Zealand in Christensen v Scott at p 280, lines 25–35, can be reconciled with this statement of principle.
(citations omitted)
The correctness of Lord Bingham’s second proposition was affirmed in Central Coast by Bathurst CJ at [119]. In response to a submission that it should not be accepted, the Chief Justice stated:
I am unable to agree. There seems to be no reason for the principle to apply to circumstances where the company has no cause of action to recover the loss. This is so regardless of the rationale of the principle. If the purpose is to prevent double recovery, there is no prospect of double recovery where the company has no cause of action. If is as I conceive it, the principle is based on the rule in Foss v Harbottle that only the company can sue for a wrong done to the company, the principle is not outflanked because there is no actionable wrong done to the company, the company having no cause of action. If, as Perram J [in Mercedes Holdings Pty Ltd v Waters (No. 2) [2010] FCA 472; 186 FCR 450] suggests, it is associated with the doctrine of maintenance of capital, there is no reduction of capital if a shareholder recovers funds that the company as a matter of law cannot recover. Finally, there is no policy reason not to impose such an exception.
George Fischer v Multi-Construction
The cause of action considered by the English Court of Appeal in George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] BCC 310; 1 BCLC 260 (Glidewell and McCowan LJJ and Sir Michael Kerr), was for breach of contract. The defendant had been contracted to design and construct a warehouse and distribution centre for the plaintiff in Coventry. By reason of the faulty design of three cranes installed on the site by the defendant, the cranes could not work properly. Liability was admitted. The only issue for determination at the trial was an assessment of the plaintiff’s damages. The damages claimed included increased costs of the operation of the warehouse and loss of sales. A wholly owned subsidiary of the plaintiff (GF Sales) occupied the warehouse. GF Sales suffered an increase in its operating costs and loss of sales. In turn, two other wholly owned subsidiaries of the plaintiff, from whom GF Sales purchased goods, suffered a reduction in their volume of sales. The plaintiff submitted (see George Fischer at 313) that it was entitled to recover damages for the losses incurred by its subsidiaries on the basis that it was a:
… 100 per cent shareholder in each of its subsidiary companies, for loss occasioned to the value of its shareholding in each of those companies, or for the loss of its profits resulting from the diminution in the subsidiaries’ profits.
Judge Hicks found that the plaintiff, as a 100% shareholder of each of the subsidiary companies, had suffered a loss equal to the loss suffered by each of them and was entitled to be awarded damages on that basis.
Lord Justice Glidewell, who gave the leading judgment in George Fischer, observed (at 316) that Judge Hicks had concluded:
In this case the plaintiff has an undoubted right of action and its subsidiaries do not. I therefore consider that I am bound by Lee v Sheard and that Prudential v Newman is to be distinguished. That also seems to me to accord with principle. Loss which is actually caused to a plaintiff by the defendant’s actionable wrong should be recoverable, if within the general limits set by concepts such as remoteness and mitigation. Restrictions arising from the need to protect a specific rule primarily concerned with entitlement to sue rather than measure of damages, such as the rule in Foss v Harbottle, should not be applied more widely than their reason for existence requires.

The appeal to the Court of Appeal in George Fischer was solely on questions of law.
The first and major issue that the Court had to address was formulated as follows (Glidewell LJ, at 313):
… As a matter of law, is a shareholder in a company entitled to recover damages for a diminution in the value of its shareholding in the company or in the distribution by way of dividends or otherwise of profits of the company, where such diminution results from loss inflicted on the company by the defendant’s breach of its contract with the plaintiff?
The Court of Appeal answered the question in the affirmative (at 318). It rejected the submission by the appellant’s counsel, Mr Purchas, that a shareholder suffers no recoverable loss by any diminution in the value of its shareholding or reductions in distribution to him as a member of a company. Lord Justice Glidewell explained (at 315) that the issue under consideration in Prudential Assurance was whether a shareholder had a right in action at all, in circumstances where a company had and was willing to exercise its right of action if a conspiracy were found to exist. His Lordship concluded (at 316):
As I have explained, in my judgment the principle to be derived from Prudential v Newman does not apply to the issue in the present case. However, except that Lee v Sheard was an action in tort, that decision was based on the principle for which Mr Crowther for the plaintiff contends. Like the judge, I think that that principle applies just as much in relation to damages for breach of contract as it does in tort. Save that, for the reasons I have explained, it is not necessary to distinguish Prudential v Newman, but rather to say that it simply does not apply, I agree with Judge Hicks on this issue. I therefore reject Mr Purchas’s argument on this first and major issue.
Both McCowan LJ and Sir Michael Kerr agreed with Glidewell LJ. Sir Michael Kerr made these additional observations (at 318):
… The so-called rule in Foss v Harbottle, and its discussion in Prudential v Newman, were both concerned with situations in which the company in question had a right of action, or would have had such a right if the alleged wrong done to it – whether it be tort or breach of contract or both – were established. The effect of the rule is accordingly that, save in exceptional circumstances, it must be left to the company, i.e. effectively to the majority of its shareholders, to exercise the company’s right of action.
In the present case, however, the position is the opposite. The plaintiff, the 100 per cent shareholder in its three subsidiaries, has an unquestionable – and indeed admitted – right of action for damages (at least nominal) for breach of contract. The companies, on the other hand, have no right of action. The only issues which arise are therefore concerned with the determination of the loss, if any, which the shareholder plaintiff has suffered as the result of the breach of contract, and whether damages may be recovered for it. That determination involves questions of evidence, foreseeability and remoteness which were decided by the judge in favour of the plaintiff on the facts and on which there can be no appeal in this case. It follows that the present case is quite unaffected both by Foss v Harbottle and Prudential v Newman. I would accordingly dismiss this appeal for the same reasons as Glidewell LJ.
Gerber Garment v Lectra
In Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 the English Court of Appeal (Staughton, Hobhouse and Hutchison LJJ) had to determine whether a patentee could claim, by virtue of its shareholding, for losses suffered by its subsidiaries. The Court concluded that, as a matter of principle, where a shareholder had a cause of action against a wrongdoer but the company did not, the shareholder could recover damages in respect of its loss (whether on account of income or capital) by reason of a misfortune that had fallen on the company. For this purpose, it found that damages could potentially be recovered by reference to a reduction in the value of a shareholding (at 456, 478, 481). Lord Justice Hobhouse said (at 477):
The decision in the George Fischer case is authority binding on the court that provided a plaintiff can prove that he has been caused a financial loss which he can quantify as the result of the actionable fault of the defendant, he can recover those losses as damages. It is not an answer to say that he has suffered those losses as the shareholder of a company either through loss of dividends or a fall in the value of his shares.
Lord Justice Hobhouse noted (at 478), however, that unlike the position in George Fischer, in which the official referee had treated as “self-evident” that every dollar lost to the subsidiaries reduced the value of the parent’s shareholding by the same amount, the appellants had a right of appeal on fact as well as on law. His Lordship then observed (at 479):
The position of parent companies and their subsidiaries vary widely. At one extreme there is a simple group of companies all operating within a single country and a single tax system (as was the case in George Fischer). Such a group, so long as it remains fully solvent, probably has only consolidated accounts and all financial consequences are directly felt by the holding company. In such a situation it may be possible to say that a pound lost to the subsidiary is a pound lost to the group and therefore to the holding company. At another extreme one can have a subsidiary which operates in a third world country where strict exchange controls, an inflating local currency and a local tax regime means that a gain or loss to the local company has only very limited significance for the holding company; profits may be heavily taxed; the scope for transfer pricing may be very limited; remittance of profits or capital may be severely circumscribed or even prohibited. In this situation the only thing one can be sure of is that a monetary loss for the local company can certainly not be equated to a directly converted monetary loss for the parent. There is no ‘self-evident’ truth. It all depends on the circumstances. Where, as here, the relevant companies are carrying on business in different countries, the starting point must be that an income loss suffered by one company will normally not translate directly into an equal monetary loss to the other company.
His Lordship also considered the position where the plaintiff company was only an intermediate holding company. He stated (at 479):
A further complication is where, as here, the plaintiff company is not the ultimate holding company but is itself just one intermediate company in the hierarchy of a larger group of companies which is run in the overall interest of the group, i.e. of the ultimate holding company. In such a situation, it does not follow (absent insolvency) that the value of the subsidiary or the result of its trading will be passed on in full or at all to the intermediate parent. Profits and losses may just as probably be passed on to other companies in the group, for example, by using the mechanism of transfer pricing. The artificiality of the plaintiffs’ case is that they use the existence of the group to attribute the subsidiaries’ profits to the plaintiffs when they should on their logic be attributed to the group.
Lord Justice Staughton agreed with Hobhouse LJ that as a matter of principle, a parent company could recover damages in respect of losses incurred by a subsidiary but considered that a more robust approach could be taken to the means by which such damages could be established. He stated (at 456 – 457):
I do, however, differ from Hobhouse L.J. on the question whether the patentees have proved in the present case that they have suffered loss, and, how much in terms of money is needed to compensate them. I readily acknowledge that this is a question on which two views are possible. But I prefer the conclusion of Jacob J that as a self-evident starting point, a dollar lost to the subsidiary is a dollar lost to the parent.
There are many ways in which the prosperity of a subsidiary will result in a monetary receipt by the parent. The subsidiary may pay a dividend, or repay capital to the parent, provided in either case that company law permits that course to be taken. Or the parent may sell the subsidiary. There was evidence at the trial that those possibilities existed, although a judge of the Chancery Division would scarcely need to be told that by a witness. There was not any evidence that any of the possibilities was likely to be imminent. In the nature of things it would, I suppose, be rare for such evidence to be available, at any rate as to capital repayment or sale of the subsidiary. Furthermore in terms of amount it can rarely be possible to forecast by how much a loss of profits in the sum of £x will reduce some future dividend, or capital repayment, or sale price of the subsidiary. Companies are often bought and sold not by reference to their net assets, but by reference to profits in a number of recent years, or other considerations such as the effect of an amalgamation or the prospect of acquiring talented employees; see for example Buckingham v Francis [1986] 2 All ER 738. The market value of shares in a wholly-owned subsidiary is liable to be entirely a matter of speculation, unless and until a purchaser is found.
The reasoning of Hutchison LJ aligned more closely with that of Hobhouse LJ on the question of the assessment of a plaintiff shareholder’s loss, but he otherwise agreed with both Staughton and Hobhouse LJJ that a shareholder could, as a matter of principle, recover damages referrable to losses suffered by a subsidiary. He stated (at 481):
I have had the advantage, on this as on other issues, of reading the judgments of Staughton LJ and Hobhouse LJ in draft. I share their view that, on the facts of this case, it was as a matter of law open to the plaintiff patentees to recover damages reflecting the losses suffered by their subsidiaries by reason of infringements of the patents. The subsidiaries had no cause of action against Lectra, and therefore could not themselves have recovered damages. In those circumstances, for the reasons explained by Hobhouse LJ whose analysis I gratefully adopt, I have no difficulty in accepting that, subject to proof of damage, the patentees can recover the losses they have suffered by reason of the diminution in value of their share holding in or dividends from the subsidiary companies brought about by the infringements. The vital question remains as to whether the judge was entitled to hold that they had proved their loss.
There can be no doubt that the onus which rests on a plaintiff in relation to proof of damages requires, in such cases as the present, that the plaintiff company should establish that it has suffered damage by reason of the losses suffered by its subsidiary company. It is not enough simply to demonstrate that the profits of the subsidiary have been diminished: the plaintiff company can only recover in respect of its own loss. The critical question, it seems to me, is how such an onus can be discharged.
(emphasis in original)
Lord Justice Hutchison did not accept that the primary judge’s approach of in substance reversing the onus of proof by relying on a prima facie presumption, in the absence of any evidence, that a self-evident starting point was that any valuation exercise would be theoretical and that “every dollar lost affects the worth of the company by a dollar” was legitimate. His Lordship explained (at 482 – 483):
Was the judge entitled to approach the matter in the way that he did – in effect (as it seems to me) reversing the burden of proof? I should like to be persuaded that he was, because I am conscious of the difficulties that a plaintiff in the position of the plaintiffs in this case faces when required to prove … such damage. However, I am reluctantly forced to conclude that such an approach is not legitimate. Like Hobhouse LJ, with whose analysis and reasoning on this topic I am in agreement, I consider that at least in a case such as the present it is self-evidently most improbable that the parent company’s loss will exactly equate with that of its subsidiaries. I accept that there may be very simple and straightforward cases in which, upon proof that a wholly owned and solvent subsidiary company had suffered a loss in a certain sum, it would be legitimate to infer an equivalent loss by the parent, even in the absence of any other evidence. The present, so far from being such a case, is one in which, for the reasons given by Hobhouse LJ, it is clear that there certainly would not be such a correspondence.
Staughton LJ has concluded that there is in truth a rebuttable presumption of fact that the loss to the subsidiaries equates with that of the parent company. If it could be said that it was self-evident that in the ordinary case the one loss equated with the other, then a basis for such a presumption might exist. However, this is not in my view self evident: rather the opposite. Nor can I accept as a basis for holding that such a presumption exists the argument that it is impracticable to adduce evidence of the actual level of loss. It may not be easy to do so, but it seems to me that, where the owner of all the shares in a company asserts that by reason of a wrong done to him he has suffered loss, it must be possible to adduce evidence from expert accountants as to the level of that loss. Such evidence would not be confined to the admittedly somewhat theoretical exercise of valuing the shares of the subsidiary, but would extend to an assessment of the impact on the parent company in terms of reduced income from dividends.
Reflective loss propositions
The following propositions relevant to reflective loss emerge from the authorities considered above.
First, if a company suffers loss by reason of the breach of duty owed to it or a breach of a contract to which it is a party, a shareholder has no standing to sue to seek to make good any diminution in the value of its shareholding, even in circumstances in which the company has determined not to pursue any action to seek to recover the loss it has suffered: Gore Wood, Lord Bingham (at 35); Prudential Assurance, Cumming-Bruce, Templeman and Brightman LJJ (at 222 – 223); George Fischer, Sir Michael Kerr (at 318).
Second, where a company has suffered loss but has no cause of action that would permit it to recover that loss, a shareholder in the company may sue in respect of such loss, provided it has a cause of action in its own right to do so, even if the loss is a diminution in the value of its shareholding: Gore Wood, Lord Bingham (at 35); George Fischer, Glidewell LJ (at 316), Sir Michael Kerr (at 318).
Third, there is no necessary presumption that the diminution in the value of a shareholder’s shareholding in a company can be equated to the loss or damage suffered by the company: Gerber Garment, Hutchison LJ (at 482 483).
Fourth, the onus remains on the shareholder to establish that it has suffered loss or damage by reason of the loss or damage suffered by the company in which it holds shares: Gerber Garment, Hutchison LJ (at 482 – 483).
Fifth, satisfaction of that onus could be expected to be more easily achieved in circumstances where the company or companies suffering harm or damage were wholly owned subsidiaries of a parent company operating within a single country and a single tax system with consolidated accounts and not subject to any solvency issues: Gerber Garment, Hobhouse LJ (at 479).
Sixth, it may be possible upon proof that a wholly owned and solvent subsidiary has suffered a loss in a specific amount to infer an equivalent loss was suffered by the parent, even in the absence of any other evidence: Gerber Garment, Hutchison LJ (at 482).
Relevant Principles – Breach of Fiduciary Duties
The accepted categories of fiduciary relationships include relationships described as relationships of trust and confidence, or confidential relationships, owed by an employee to an employer: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, Mason J, as he then was (at 96) citing Boardman v Phipps [1967] 2 AC 46, Upjohn LJ (at 127).
Any obligation on a fiduciary not to exercise power or discretion to the detriment of the person to whom the duty is owed, however, remains subordinate to any contractual obligations. As Mason J explained in Hospital Products (at 97):
That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.
Submissions
The appellant submits that the respondent did not adduce any evidence of loss or damage suffered by Central Innovation that was distinct from loss or damage alleged to have been suffered by Intercad. He further submits, by reference to the expert evidence given by the respondents’ forensic accountant, Ms Fiona Bateman, that the only means by which Central Innovation could obtain any financial benefit from customers or potential customers was by way of dividend or distribution of profits from Intercad and that such “loss” could not be recovered because it was merely a reflection of loss suffered by Intercad, citing Willoughby v Clayton Utz [2005] WASC 47; 193 FLR 373, Newnes M (at [43]); Prudential Assurance (at 210).
The respondents advance the following submissions in response to Ground 2 in the Amended Notice of Appeal.
First, the primary judge made an award of damages in favour of both Central Innovation and Intercad.
Second, the primary judge found that Central Innovation had causes of action for breaches of contract, contraventions of s 183 of the Corporations Act and fiduciary duty, Intercad had a cause of action for breach of fiduciary duty, and both have suffered loss and damage.
Third, in circumstances where both a company and shareholder have causes of action and both have suffered the same loss an orthodox position on reflective loss would be that only the company would have standing to recover that loss or damage.
Fourth, the only relief that the appellant seeks is that the award of damages be set aside but as the order was made in favour of both respondents and no challenge is made to the award of damages in favour of Intercad, Ground 2 raises an entirely academic point and could not lead to the damages order being set aside.
Fifth, nor is there an basis to vary the primary judge’s order to confine it to an award of damages in favour of Intercad because neither the appellant in the Amended Notice of Appeal nor the respondents by way of any notice of contention are seeking that relief.
Consideration
The objective sought to be achieved by the appellant in advancing the reformulated Ground 2 is somewhat elusive. The respondents contend that given the award of damage in favour of both respondents and the absence of any challenge to the award of damages in favour of Intercad it appears not to have any practical utility.
The reformulated ground raises the following questions:
(a)Did the respondents plead that the appellant owed any fiduciary duties to Intercad independently of contractual duties that he owed to his employer, whether that be Central Innovation or Intercad?
(b)Did the primary judge find that the appellant owed and breached any fiduciary duties to Intercad?
(c)If the primary judge did not find that the appellant owed and breached any fiduciary duties to Intercad, did Intercad otherwise have any cause of action against the appellant in respect of the loss and damage it has found to have suffered?
(d)If Intercad did not have any cause of action against the appellant, can Central Innovation recover as its loss and damage an amount calculated by reference to the amount of loss and damage suffered by Intercad? and
(e)Irrespective of the answers to the above questions, does the reformulated Ground 2 necessarily fail because no challenge is made to the award of damages in favour of Intercad?

The primary judge rejected the appellant’s submissions to the effect that Mr Conn’s inability to find information on the devices provided to him required an inference to be drawn that the information was not there. The primary judge noted that the devices that were able to be made available to Mr Conn did not include “the most obvious and most important of such devices”, the NCCS Laptop: J [210]. The primary judge did not accept that Mr Conn’s inability to find a copy of the Output Files on the appellant’s desktop computer at NCCS or any other available device (not including the NCCS Laptop) provided any sound basis for an inference that the files were not removed in the first place. His Honour declined to draw the inference urged on him by the appellant, including because the appellant had clearly used the NCCS Laptop to work on, as evidenced by him taking it home for that purpose in the Christmas period. It is in that particular context that the primary judge proceeded to determine whether the NCCS Laptop had been stolen as the appellant had alleged.
The impugned finding is that reached at (J [214]):
In the context of the immediately foregoing, and making sense of the totality of the evidence before me, I find on the balance of probabilities that Mr Garner, upon receiving the orders made by Justice Katzmann on 23 December 2016, and knowing what was on the NCCS Laptop, decided to fabricate an account of it being stolen. This finding is supported by the uncanny timing of events and the fact that the supposed theft was not reported to police by Mr Garner until the next week, coupled with Mr Garner’s complete lack of credibility as a witness. However this does not enable me to make any positive finding as to what was in fact on the NCCS Laptop as at 23 December 2016, and I therefore cannot determine what confidential information could or would have been on that laptop and thereby available to be provided to NCCS, including via Mr Garner in the course of his employment.
The “immediately foregoing” included:
212[The appellant’s] argument ignores the most likely place for him to have put any copy of Output 26 or Output 27 in order to make use of it, namely the device that he would most likely have been working on, his NCCS Laptop. A further problem for Mr Garner is that I do not accept that his NCCS Laptop was stolen. The threads of evidence that can now be drawn together for reaching that conclusion are as follows:
(1)Since 30 June 2016, Mr Garner had available to him a copy of Output 26 and Output 27, containing customer and leads information of the applicants, or at least Intercad, on a USB drive.
(2)On 22 August 2016, Mr Garner had been told he had been retrenched by Central Innovation, with that formally taking effect the next day, after he had left, and thereafter he no longer worked for Intercad.
(3)On 22 August 2016, he made contact with, and later on or around 26 August 2016 met with, and spoke to, Mr Stalin D’Souza, the Director of NCCS – this is contextually adverse to Mr Garner’s interest, so may be accepted for this purpose.
(4)As an incoming new salesman for a competitor of the applicants, NCCS, Mr Garner had a strong incentive to obtain new customers for his new employer, and a strong incentive to make contact with customers of the applicants, or at least of Intercad.
(5)In furtherance of that objective, Mr Garner emailed 10 to 12 customers of at least Intercad in November 2016, so made contact with at least that number.
(6)As the evidence relied upon by the applicants analysed below proves, a number of the email address entries in the NCCS Hatchbuck CRM system contained the same errors as were present in SUGAR, due to entry error or becoming non-current or out of date. Especially in the absence of any other explanation being given, that strongly supports an inference that confidential information finding its source in Mr Garner made its way into Hatchbuck, despite the original Excel format file not being copied there. In turn, that strongly supports an inference that Mr Garner obtained that information from either or both of the SUGAR and VRC data that he obtained from his former employer.
(7)The objective of maximising sales was, I infer, materially assisted by confidential information that Mr Garner obtained from the applicants in order to make contact with their customers, or prospective customers. The evidence does not directly establish that this successfully occurred on a great many occasions. Nonetheless, the fact that Mr Garner became the top salesman for SolidWorks in 2017, despite working for a smaller competitor of the applicants and being confined to sales activity in Victoria and Tasmania, lends material support to this inference being drawn. This is especially so given that Mr Garner had, immediately before his time with NCCS, led a sales team that had received feedback to the effect that its sales performance was unsatisfactory less than one year before Mr Garner was formally made redundant in that same role.
213The relevant information that Mr Garner had available to him was from the Output Files, from at least some of the 18 SUGAR reports, especially those downloaded on 18 August 2016 (shortly before he was made redundant), and probably also other information able to be obtained by him from access to SUGAR, especially during the course of protracted access that took place on 4 July 2016. The most logical place for that information to be stored by Mr Garner, so as to be accessible and able to be used by him, was the NCCS Laptop, which Mr Garner had taken home with him on 23 December 2016. Given the provenance of that information, I readily infer that Mr Garner would not want such information to be found on that laptop.
The appellant correctly submits that the finding of fabrication was a serious finding, requiring the evidence to be evaluated according to the principle discussed in Briginshaw v Briginshaw (1938) 60 CLR 336: Amended Notice of Appeal, [4.1]. The standard of proof is that prescribed in s 140 of the Evidence Act 1995 (Cth), which embodies the same principle.
We accept that the finding of fabrication is a serious one, not only because it indicates that a false report was made to the police, but also because it is suggestive of knowing non-compliance with the orders of this Court.
The appellant submits that the finding of fabrication was based on nothing more than the timing of the loss of the NCCS Laptop relative to the orders of Katzmann J, and the circumstance that the alleged theft had not been reported to the police for some days. The appellant submits those circumstances could not furnish positive proof of the fabrication to the requisite standard.
Once again, the appellant’s submissions are premised on an incomplete and inaccurate statement of the materials upon which the impugned finding was based and the manner in which the primary judge reasoned. As the passage at J [212] illustrates, the primary judge did not limit his consideration to questions of timing. Rather, the inference of fabrication was drawn from a multitude of primary facts, none of which has been successfully challenged on this appeal.
Like the primary judge, we consider the timing of the alleged theft to go beyond the realms of coincidence. On its face, the appellant’s assertion that the theft of the NCCS Laptop from a car was not discovered for some days is implausible, given the plain terms of the order of Katzmann J requiring that the appellant maintain possession of it.
Importantly, the finding of fabrication was expressed to have been based in part on the adverse assessment of the appellant’s credit, which included an assessment of his general demeanour in giving evidence at the trial. Affording appropriate deference to the advantages of the primary judge, we do not consider the inference of fabrication should be disturbed.
The respondents submitted that this Court should have regard to a further striking circumstance supporting the inference that the theft allegation had been fabricated. They referred to a further hearing conducted in this Court on 3 January 2017 concerning the orders of Katzmann J and the content of the NCCS Laptop. They submitted that the circumstance that the theft was not revealed to this Court on that day provided a further compelling basis to support the inference that the allegation of theft had been concocted at a later time. In our view, it is not necessary for the proper disposition of this ground of appeal to resort to facts so seriously adverse to the appellant that do not find expression in the reasons of the primary judge. It is sufficient to say that there is no error in the reasoning of the primary judge and no principled basis to interfere with the inference he drew from the facts to which we have referred.
Finally on this topic, even if it was not open to the primary judge to find that the NCCS Laptop had been stolen, it has not been shown that the outcome of the trial could conceivably have been any different. As the primary judge made plain, the finding of fabrication was not a matter that positively went to prove the respondents’ case. The critical conclusion was that the respondents’ misappropriated information was most likely stored on the NCCS Laptop. That conclusion is supported by the totality of the evidence irrespective of whether the NCCS Laptop was subsequently lost or stolen.
The rule in Browne v Dunn
In Carter v Federal Commissioner of Taxation (2020) 279 FCR 83, Jagot, Davies and Thawley JJ stated (at [26]):
The rule in Browne v Dunn can be seen as a rule of procedural fairness to a party: Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 101 (Tamberlin J). It may be inappropriate, for example, to submit that a witness’s version of events should not be accepted if the witness has not been challenged on his or her version of events in cross-examination and there has been no earlier notice that the version of events is disputed. Where, however, it is clear from the course of proceedings that the version of events is challenged, and recognising that each case turns on its facts, strict compliance with the rule is not always necessary.
As explained by Hunt J in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1 (at 22 – 23):
… There are many reasons why it should be made clear, prior to final addresses and by way of cross-examination or otherwise, not only that the evidence of the witness is to be challenged but also how it is to be challenged. Firstly, it gives the witness the opportunity to deny the challenge on oath, to show his mettle under attack (so to speak) although this may often be of little value. Secondly, and far more significantly, it gives the party calling the witness the opportunity to call corroborative evidence which in the absence of such a challenge is unlikely to have been called. Thirdly, it gives the witness the opportunity both to explain or to qualify his own evidence in the light of the contradiction of which warning has been given and also, if he can, to explain or to qualify the other evidence upon which the challenge is to be based. …
(original emphasis)
In Flightdeck Geelong Pty Ltd v All Options Pty Ltd (2020) 280 FCR 479, Markovic, Derrington and Anastassiou JJ observed, however, that the consequences of a failure to comply with the rule in Browne v Dunn will vary according to the circumstances of a particular case; as the rule is directed at the fairness of a trial there may be a multitude of remedial steps that might be taken (at [147]).
The scope of the application of the rule in Browne v Dunn and the significance of a failure to cross-examine on an issue were considered in Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382. As Campbell JA explained (Allsop P (as his Honour then was) and Basten JA agreeing) (at [105]):
While the evidence was not cross-examined on, that does not necessarily mean that the judge was obliged to accept it. A judge can reject evidence that has not been cross-examined on if, for example, it was inconsistent with other evidence that he accepted, or if it was inherently incredible: Sullman v Sullman [2002] DFC 95-248; [2002] NSWSC 169 at [304]–[306]; Caldwell v J A Neilson Investments Pty Ltd (2007) 69 NSWLR 120; [2007] NSWCA 3 at [96]; Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 586–8. Nor did the rule in Browne v Dunn (1893) 6 R 67 (Browne) prevent the judge from rejecting the evidence. That is because Ms Maude had given her evidence on affidavit in advance of the trial (including an account of the conversation with Mr Miles that she told Mr Newport about), and Mr Miles had replied to that affidavit in advance of the trial. Mr Miles’ reply included denying that his client was prepared for the appellant to receive the benefit of all the BBX dollars as BBX dollars were of no use to it, and saying that he did not agree to any proposition that removed his client’s ability to choose whether to take BBX dollars or set aside cash. Exchange prior to trial of affidavits that disclose the position of the respective parties concerning a particular evidentiary matter can prevent a Browne point being successfully raised: West v Mead (2003) 13 BPR 24,431; [2003] NSWSC 161 at [95]–[99]. Thus, I do not accept that the absence of cross-examination required the judge to accept Mr Newport’s evidence.
In this case, the assertion of non-compliance focussed principally on the absence of direct allegations being put to the appellant in the course of cross-examination in respect of particular topics. With the exception of the submissions concerning the scope of the pleaded case (which have been rejected), it was not explained how it was that the appellant was not on notice of the respondents’ case concerning that subject matter in circumstances where detailed pleadings and affidavits (including expert evidence) had been exchanged in advance of the trial. As explained by the primary judge in connection with the appellant’s reasons for downloading information from the VRC (J [221]):
I find on the balance of probabilities that the data was copied onto a USB drive not so that it could be given to Mr Kenny, but rather to facilitate its untraceable removal from the applicants’ premises. While this was not expressly put to Mr Garner to challenge his contrary account as being untrue, it was so clearly a part of the applicants’ case that I do not consider a rote application of the rule in Browne v Dunn (1894) 6 R 67 at 76, so as to produce a rote denial, was required.
In respect of the appellant’s explanation as to the source of the information he entered in Hatchbuck, the primary judge (correctly) observed that the appellant’s assertions were generalised and vague, and that the respondents were under no obligation to help him in that regard by seeking clarification in cross-examination: J [267]. The appellant was plainly on notice of the respondents’ case as to the source of that information, and indeed responded to it in the manner of his choosing by way of a table in an affidavit. Considerations of fairness did not require the respondents to put to the appellant that each and every assertion in the table was false.
As to the ability of the appellant to remotely access SUGAR, objective evidence of his remote access was contained in the affidavit of Mr O’Kane (provided before the trial) who expressed opinions in respect of it. The respondents’ case concerning the appellant’s proficiency in the use of SUGAR and the likelihood that information had been copied from SUGAR and pasted into a spreadsheet titled “Gary G List” was specifically foreshadowed in the report of Mr O’Kane provided in advance of the trial.
The appellant has not shown that the primary judge erred in failing to find material non-compliance with the rule in Browne v Dunn in respect of any of the subject matters referred to in [1.7] of the Amended Notice of Appeal, giving rise to any substantive unfairness in the conduct of the trial.
Credit generally
We reject the contention that the primary judge erred in “finding that evidence given by the Appellant, including where uncontroverted and unchallenged, and further including where also supported by contemporaneous written evidence, could not be accepted, unless corroborated by other witnesses or unless the evidence was against the interest of the Appellant”: Amended Notice of Appeal, [4.2]. As discussed above, it is not correct to characterise the appellant’s evidence as “uncontroverted”. The assessment of credit discussed in the foregoing paragraphs was orthodox and unsurprising. The submissions on this topic did not address the detailed reasons given by the primary judge for making the assessment that he did.
Grounds 3 and 4 must fail.
GROUND 5
This ground is expressed as follows:
5 Erroneous assessment of alleged loss or damage
5.1The learned primary judge erred ([347] and [350] of the Reasons) in accepting that the thirty-seven (37) customers in relation to whom the Respondents make allegations of loss and damage, sounded in damages calculated on the full price claimed by the Respondents.
5.2Given the absence of any evidence of use or misuse of the Respondents’ allegedly confidential information by the Appellant during the course of his employment with NCCS, the learned primary judge ought to have found that the Appellant’s contact (if any) with anyone of the customers referred to at Annexure C of the SFASOC, did not occur by use or misuse of the Respondents’ alleged confidential information, and the Respondents claim against the Appellant could not sound in loss or damage.
5.3Alternatively, in the event that Intercad had established its claim (which is denied) in respect of customer(s) identified at Annexure C of the Respondents’ SFASOC (which is denied), the learned primary judge ought to have found that, in the absence of any evidence to support a finding that customer(s) would have paid the higher price claimed by Intercad, any loss and damage could only be calculated upon the price actually paid by the customer(s), being the price which was paid to NCCS.
Argument on this ground was founded in part on submissions concerning reflective loss, discussed and rejected earlier in these reasons.
Two further issues arise. The first is whether the respondents established to the requisite standard that the use of their confidential information by the appellant was causative of the loss of 37 clients. The appellant’s submissions in this respect once again involved a misguided focus on the absence of direct evidence of the appellant contacting some of the customers by use of the information taken from the respondents and the absence of direct evidence emanating from the customers themselves as to their reasons for engaging NCCS soon after the appellant commenced employment there. As with the other grounds of appeal, the submissions fail to grapple with the circumstantial nature of the case. The real issue is whether inferences may permissibly be drawn in connection with a body of customers by reference to evidence concerning only some of them. The primary judge was keenly aware of the nature of the evidence upon which the respondents relied and rejected submissions from the appellant about its sufficiency.
The primary judge first considered the evidence relating to 15 customers whose information in Hatchbuck was the same as the information contained in SUGAR. Those customers had each advised the respondents of the reason for terminating their services. The reasons were similarly phrased, typically in terms that the customer would like to try NCCS for their support. The primary judge observed that the appellant made no serious attempt to rebut the evidence concerning those customers. His Honour drew an inference that each of the customers were acquired by NCCS as a result of the appellant’s use of the respondents’ confidential information. His Honour described the inference as “strong and compelling”. In light of all that has been said so far, we would draw the same inference.

It is necessary to set out what the primary judge said of the remaining 22 customers in full:
321For those 22 customers the available specific evidence is to be considered in the context of the evidence as to:
(1)the information that Mr Garner both copied and took, in the form of the Output files;
(2)the SUGAR Reports that Mr Garner generated, and I readily infer also took, especially the bulk that were generated on 18 August 2016, only one clear working day before he was made redundant;
(3)Mr Garner’s online access to SUGAR despite his disavowal of the information in SUGAR being of any use when he was working for Intercad via Central Innovation;
(4)the significant amount of data matching information in SUGAR and to a lesser extent Output 26 that he entered into Hatchbuck;
(5)the use of that information by Mr Garner to generate email blasts to entities which included customers of the applicants and to make telephone calls to such customers; and
(6)the overwhelming inference able to be drawn that Mr Garner used confidential information obtained from the applicants to secure the loss of 13 of the 37 customers to NCCS.
322The available specific evidence in relation to the further 22 customers lost to NCCS includes the following:
(1)All were longstanding customers of the applicants, as noted above, for periods ranging from 4 years and 5 months to 22 years and 5 months.
(2)Each of them were lost to NCCS after Mr Garner had departed his employment with Central Innovation, working for Intercad.
(3)There is no evidence that any of them had any complaint about the service provided by the applicant – to the contrary, all except one of the account change request forms were expressed in terms that referred only to trying out NCCS, itself an indication that they had been approached in the same way.
(4)None of those 22 customers are recorded in SUGAR as having been assigned to Mr Garner, which tends against a knowhow or memory basis for his knowledge about them, especially as no such focused evidence was given by him.
(5)In relation to one of these customers, the evidence demonstrated that Mr Garner had sent an email to the customer contact who was in SUGAR saying ‘Thanks for taking my call earlier’ on 4 April 2017. This means that it cannot be inferred from the absence of documentary evidence that a customer was entered into Hatchbuck or any other CRM that the customer was not contacted by Mr Garner misusing the applicants’ confidential information.
(6)In relation to the 37 customers said by the applicants to be lost to NCCS, Output 26 contained asset entitlement end dates for at least 30 of them, and specific asset serial codes for at least 26 of them. This means that Mr Garner had access to information about what products most, if not all, of the customers lost to NCCS subscribed to through Intercad, and in at least some cases when those subscriptions were due to expire.
His Honour continued (J [323]):
The inference readily able to be drawn is that each of these further 22 customers had been approached and persuaded to change to NCCS. There was no evidence that this was carried out by anyone at NCCS other than Mr Garner. Mr Garner was in a position to give specific evidence to resist an inference being drawn that he was the person behind this taking place, including as to the use of confidential material obtained from the applicants to achieve this. He elected not to do so, beyond vanilla statements in the copy of the schedule to the defence annexed to his affidavit. He did not specifically deny having caused any of these 22 customers to change from the applicants to NCCS, not referring to several at all in his evidence. This was presumably due to the late addition to the amended schedule to the statement of claim on 30 September 2019 (albeit well before his affidavit was affirmed on 28 October 2019). He did, however, refer to them in his closing submissions schedule (see the schedules relating to Austratek Designs, Pump Technology Pty Ltd, and Scad Designs) and for others said words to the effect of ‘To the best of my recollection, this account was an inbound enquiry to NCCS’ and/or ‘To the best of my recollection, this account handled by another NCCS employee’, without naming who that person was, and/or for a few made reference to his ‘know-how’. While the specific evidence in relation to these 22 customers, taken on its own, supported only a somewhat weak inference that the loss of these customers to NCCS was caused by Mr Garner using confidential information from the applicants, in context the doubts about the capacity to support that ultimate inference being drawn may more easily and safely be overcome. I have no hesitation in drawing that inference in all the circumstances in respect of all of those 22 additional customers. Mr Garner had an ample opportunity to give evidence that might have rebutted the drawing of that additional evidence, but chose not to do so.
The primary judge was plainly alert to the circumstance that there was not an exact correlation between the information contained in Hatchbuck and the information contained in the VCR or SUGAR in respect of these 22 customers.
The above analysis is not expressly based on his Honour’s impression of the appellant as a witness, referable to any advantage in seeing and hearing him give evidence. Accordingly, in respect of this topic we consider this Court to be in as good a position as the primary judge to assess the material and to draw inferences from the facts that have not been challenged or successfully challenged on this appeal. On our review of the facts, we would arrive at the same conclusion as the primary judge, and by the same process of reasoning. The challenges to the findings concerning causation of loss are rejected.
The final argument concerns the quantification of the respondents’ loss. It is alleged that loss ought to have been assessed by reference to the lower fees paid by the customers to NCCS after their custom was wrongly solicited by the appellant. No oral submissions were made in support of the allegation of error and the appellant’s written submissions appear to assert only that it was open to the primary judge to make a different finding.
The finding that the customers would have continued their custom with the respondents were it not for the appellant’s wrongful conduct finds ample support in the evidence. None of the customers who provided explanations to the respondents cited dissatisfaction with the respondents as the reason for terminating their services. Nor was the price of the services put forward as the reason by any of them. As the primary judge correctly found, many of them were long-standing clients of the respondents. The arithmetic employed to assess the respondents’ loss properly involved an assumption that if the clients were not lost to the respondents they would have continued to pay fees at the levels they had previously paid. The evidence adduced by the respondents was capable of supporting that finding. We have no difficulty reaching the same conclusion as the primary judge in respect of the sum awarded.
CONCLUSION
The appeal should be dismissed with costs.

I certify that the preceding two hundred and fifty-four (254) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Charlesworth, Stewart and Halley.
Associate:
Dated: 21 April 2022

Appeal from:	Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796
File number:	NSD 69 of 2021
Judgment of:	CHARLESWORTH, STEWART AND HALLEY JJ
Date of judgment:	21 April 2022
Catchwords:	INDUSTRIAL LAW – appeal from decision of primary judge that judgment and verdict be entered in favour of respondents in respect of 36 customers lost due to actions of appellant – whether primary judge wrongly departed from the case pleaded by the appellant – whether primary judge erred in finding that respondents established loss or damage – whether primary judge made erroneous findings as to the taking or removal of confidential information by the appellant – whether primary judge made erroneous findings as to the credibility of the evidence given by the appellant – whether primary judge made erroneous findings in assessing the alleged loss or damage – reflective loss principles – principles relevant to breach of fiduciary duties – where no material non-compliance with the rule in Browne v Dunn – appeal dismissed
Legislation:	Corporations Act 2001 (Cth) s 500 Evidence Act 1995 (Cth) s 140
Cases cited:	Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1 Banque Commerciale SA, en liquidation v Akhil Holdings Limited (1990) 169 CLR 279 Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356 Boardman v Phipps [1967] 2 AC 46 Briginshaw v Briginshaw (1938) 60 CLR 336 Browne v Dunn (1893) 6 R 67 Carter v Federal Commissioner of Taxation (2020) 279 FCR 83 Central Coast Council v Norcross Pictorial Calendars Pty Ltd [2021] NSWCA 75; 391 ALR 157 Central Innovation Pty Ltd v Garner (No 4) [2020] FCA 1796 Commonwealth Securities Ltd v South Pacific Securities Pty Ltd [2003] NSWCA 199 Devries v Australian National Railways Commission (1993) 177 CLR 472 Flightdeck Geelong Pty Ltd v All Options Pty Ltd (2020) 280 FCR 479 Fox v Percy (2003) 214 CLR 118 Francuziak v Minister for Justice (2015) 238 FCR 332 George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] BCC 310; 1 BCLC 260 Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 Jones v Dunkel (1959) 101 CLR 298 Lee v Lee (2019) 266 CLR 129 Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382 NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98 Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31; 368 ALR 607 Sullivan v Trilogy Funds Management Ltd (2017) 255 FCR 503 Vale v Sutherland (2009) 237 CLR 638 Warren v Coombes (1979) 142 CLR 531 Willoughby v Clayton Utz [2005] WASC 47; 193 FLR 373
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs:	254
Date of hearing:	12 August 2021
Counsel for the Appellant:	Ms L De Ferrari SC
Solicitor for the Appellant:	AJH Lawyers
Counsel for the Respondents:	Mr I Jackman SC with Mr R Jedrzejczyk
Solicitor for the Respondents:	SD Commercial Lawyers

ORDER MADE BY:	CHARLESWORTH, STEWART AND HALLEY JJ
DATE OF ORDER:	21 APRIL 2022