Harvey, J. v Fluid Thinking P/L

[1994] FCA 435

43s 9't

JUDGMENT No. . .A . , , .,.,.-,

PRACTICE - interlocutory proceedings to restrain divulging of confidential information - whether serious issue to be tried - where balance of convenience lies.

EQUITP - Fiduciary obligations of ex-director to company - alleged breach of confidentiality.

8 W C H 1994
SYDNEY

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No. NG 723 of 1993

POSTER J

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IN THE FEDERAL COURT OF A U S T a I A	)
1
NEW SOUTH W U E S DISTRICT REGISTRY )	No. NG 723 of 1993

1

GENE= DIVISION 1

BE'1WESnx JOHN HARVEY

First Applicant

DALMAN NOMINEES PTY

LIMITED

Second Applicant

AND: FLUID THINKING PTY

LIMITED

First Reepondent

JOHN EDWIN BERTRAND

Second Reepondent

PAUL GREGORY

Third Respondent

JAMES RICHARD WDONALD

Fourth Respondent

PETER JOHN MORRIS

Fifth Respondent

m LIMIlSG ORDERS: FOSTER J

-a 8 MARCH 1994

PLACE: SYDNEY

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<v',. I # 1. Pending the determination of the proceedings,

, that the croes-respondent be restrained by

IN THE FEDERAL COURT OF AUSTRALIA )

1

NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 723 of 1993

)

GENERAL DIVISION )

BFlWEKRx JOHN HARVEY

Firat Applicant

DALMAN NOMINEES PTY

LIMITED

Second Applicant

AND: FLUID THINKING PTY

LIMITED

Pirat Reapondent

JOHN EDWIN BERTRAND

Second Reapondent

PAUL GREGORY

Third Respondent

J-S	RICHARD McDONALD
ERSKINE
Fourth Reapondent

PETER JOHN MORRIS

Fifth Reapondent

CORALL:	FOSTER J
DATBr	8 MARCH 1994

PLXE: SYDNEY

(Extempore)

HIS HaROIlRc In these proceedinga, the firat applicant,

John Harvey ("Harvey") and the second applicant, Dalman himeelf, his servant8 or agents, including any journalirrt, from diecloeing any information which came into hie poeeeeeion whilet a director of the croee-claimant concerning the deeign, conetruction, development, funding or aponeorehip of a yacht to participate in the challenge for the 1995 America'e Cup, where such information came into hie poeeeeeion exclusively in the document which is confidential exhibit A in these groceedinge.

2.    The eecond order ie not preeeed.

3.    The coeta of this application will be coete in the cauee.

4.    Liberty to apply be granted to either party on eeven daye' notice.

- 8 Settlement and entry of orders ie dealt with in
Order 36 of the Federal Court Rulee.

Nominees Pty Limited, a company through which Harvey operated, have sued a company, Fluid Thinking Pty Limited and a number of other respondents, claiming various grounds of relief in relation to the termination of a consultancy agreement between the first respondent company and the second applicant.

At all relevant timem, Harvey wam a director of the first respondent and was, of course, as a director, privy to decisions made by the other directors and to information available to them. The second to fourth respondents, whom I shall not name in theme short reasons, were also directors. The fifth respondent, Peter John Morris ("Morris") has presented, through affidavit and oral evidence, evidence which is relied upon by the cross-claimants.

This application is not concerned with the application brought by Harvey and his company. It is concerned with a cross-claim brought by Fluid Thinking Pty Limited against Harvey. This cross-claim relates to events which have occurred since the termination of the consultancy

of Harvey's directorship of Fluid Thinking Pty Limited.	agreement, to which I have made reference, and the cessation
Harvey ceased to be a director on 1 September 1993. Since that time he has had, quite clearly on the evidence, interviews with various journalists in relation to events occurring in the period when he was a director. I should indicate that he was not only a director of the first
reapondent, but he wae aleo a director of an aeeociated company, One Auetralia Americae Cup Team 1995 Pty Limited.
Both these companiee were closely involved in what a described in the evidence as the 1995 America's Cup challenge. In particular, they were engaged in reaearch and developent for the purpoee of the deeign and construction of a yacht to repreeent Auetralia in that future America's Cup Challenge. The companies were aleo involved in the obtaining of nscemsary funde for that reaearch, development and construction through obtaining eponsorehip from outeide organiaationa and funding from those eponaora.
The complainte made in the croee-claim in relation to activitiee of Harvey, put succinctly, were that he undertook activities which were in breach of his fiduciary obligations am a director of the cross-claimant company. In addition, he wae aleo arguably in breach of obligations of confidentiality, which he owed, as' a reeult of being in poeaeaaion of confidential material whilat he waa a director,
America's Cup challenge. The allegations made epecifically in and operating in the companiee and in the general area of the
the croaa claim are that he discloeed confidential information, or part8 of it, to certain journalist8 and that he encouraged journaliete to publieh and disclose certain part6 of the confidential information in a manner calculated to damage the plane and intentions of the croee-claimant for the design, constructions and sponsorship of a yacht to cmpete in the challenge.
These proceedings are, of course, brought on a guia timet basis, in order to restrain breaches which the cross- c l a k t apprehends may be made if a restraining order is not made at this point of time. That is, the cross-claimant fears that there will be breaches in the future by way of divulging or dismerminating confidential information obtained from documents and other material of which Harvey became aware whilmt a director and being operative in the companies. These proceedings are, of course, interlocutory in nature. The Court has to consider whether there has been demonstrated a serious issue to be tried and, if it be so satisfied, to determine where the balance of convenience lies.
The order which is sought on an interlocutory basis ham been modified as a relrult of discussion during the course of the hearing and is now in a much narrower form than was originally sought. It is clear, however, that prior to the launching of the cross-claim and the seeking of thilr interlocutory relief, that it was being asserted on behalf of
Harvey that he was not relevantly bound by any obligations of confidence and was effectively free to discuss with the public at large, matters that had come into his knowledge as a result of his prior association with the cross-claimant company and, pxesumably, the other companies associated with the challenge.
Much of the evidence in this application has centred upon a particular document, which is confidential Exhibit A in theme proceedings. It is referred to in the affidavits am Project Managers Report No 3. The applicants assert, through the evidence of X r Morris, that the report contains material which 'is of a confidential nature and is most important to the viability of matters relating to the development of a challenging yacht. Quite clearly details such as final plans and the like relating to the construction of this yacht were not in existence at the time of the termination of Harvey's directorship and of his association with the company.
But there were other matters which were indicative of the manner in which the vessel was being constructed or, in reapect of which, approaches to that construction were being taken. Hr Morris used a suitable phrase to describe these general conceptions. He said that aspects of the report provided a "road map", indicating the direction in which the companies and personnel interested in producing the challenge were heading. I found his evidence in this regard fairly compelling. Whilst it is true, and established on the
evidence, that, in many respects, there are mattera canvassed
in that document which have also come into the public domain by dint of media releases given by the cross-claimant in the associated companies along the way, this does not detract from the importance that such information should remain confidential.
To take one example, there is no mystery, of courrre, as to the identity of the main sponsors. There may well have been a quite reasonable desire to keep confidential matters relating to the remuneration, in one form or another, of important participants in the project. I am not entirely clear, from the evidence, as to whether it could properly be said that at the time when Harvey's directorrrhip terminated in theme companierr, that those matters were public or not public. I doubt, however, on the evidence, that they were public in any specific way.

I have been given evidence by Mr Morris which is, in

my view, of considerable significance, that even though

sponsors were necessarily kept informed of matters relating to the development and progress of the project, there were, nevertheless, matters which, it was felt proper, should be retained with the circle of confidence of the cross-claimant company and associated companies. Those matters are dealt with in the evidence, so there is no need to repeat them here.

I am satisfied, to the degree necessary for this application, that Harvey's activities in dealing with the press, and in relation to his seeking to send a reporter as his proxy to a company meeting, provided reasonable bases for apprehension on the part of the cross-claimant that he was rreeking to make public, matters in his knowledge which should reaeonably be protected by an obligation of confidence arising either from the nature of the material in hie poeeeeeion or from him prior engagement am a director.

I think that a aerious ieeue to be tried ham been made out on the evidence put before me. Not a great deal of attention ham been given by either aide to the balance of convenience. It eeeme to me however that there is no particular convenience that can be urged on behalf of Harvey againmt being restrained in the limited way now eought by the applicant, ae oppoeed to the obvious inconvenience that would be occaeioned to the applicant if diecloeuree of confidential matterm were to be made by Harvey, pending the diepeal of theee proceedings. I therefore propoee to make the order which is now nought.

Thie order is made, of couree, on the baeie that the cuetomary undertaking ae to damage8 it3 given. The order that I make then is that, pending the determination of the proceedinge, that the croee-reapondent be restrained by himmelf, hie eervante or agente, including any journaliet,

whilmt a director of the crome-claimant concerning the deeign,	from disclosing any information which came into hie poeeeseion
conetruction, development, funding or sponsorship of a yacht to participate in the challenge for the 1995 America's Cup, where euch information came into hie poeeeeeion exclueively in the document which ie confidential exhibit A in them proceedinga.
The second order sought is not pressed. The costs of this application will be costs in the cause. I should indicate I grant liberty to apply to either party on seven dayst notice.

I certify that this and the preceding seven (7) pages are a true copy of the reasons for judgment herein of the Honourable 1Lr Justice M. L. Foster.

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Associate I

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Date :  8 MARCH 1994

COUNSEL FOR THE AF'PLICANT:	MR C.S. LEAHY
INSTRUCTED BY:	SLY AND WEIGALL

COUNSEL FOR THE RESPONDENT:	MR J. IRELAND Q.C.
INSTRUCTED BY:	ABBOTT TOUT
DATE OF HEARING:	8 MARCH 1994
DATE OF JUDGHENT:	8 MARCH 1994