Idoport v National Australia Bank Limited and 8 Ors; Idoport Pty Limited and Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [29]

[2001] NSWSC 530

CITATION:	Idoport & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited and Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [29] [2001] NSWSC 530
FILE NUMBER(S):	SC 50113/98; 50026/99; 3991/00
HEARING DATE(S):	22/06/2001
JUDGMENT DATE:	22 June 2001
PARTIES :	Idoport Pty Limited (Plaintiff) Market Holdings Pty Limited (Plaintiff) National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	Mr M Dicker, Mr R Titterton and Mr R Alkadamani (Plaintiffs) Mr J Sackar QC, Mr John Halley and Ms K Williams (Defendants)
SOLICITORS:	Withnell Hetherington (Plaintiffs) Freehills (Defendants)
CATCHWORDS:	Discovery - experts retained to retrieve data deleted from hard drive
LEGISLATION CITED:	Supreme Court Rules
CASES CITED:	Ebner v Official Trustee 176 Australian Law Reports 644
DECISION:	Defendants' preferred expert excluded from ambit of experts to retrieve data deleted from hard drives.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - COMMERCIAL LIST

EINSTEIN J

Friday 22 June 2001 ex tempore
Revised 27 June 2001

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS

3991/00 IDOPORT PTY LIMITED (“JMG”) v NATIONAL AUSTRALIA BANK LIMITED

1    HIS HONOUR: In proceedings number 50113 of 1998, 50026 of 1999 and 3991 of 2000, a judgment was delivered on 22 May ex tempore and revised on 25 May dealing with amended notice of motion No. 6 filed by the defendants on 2 May 2001, which notice of motion covered several discrete areas.

2    The third section of the amended notice of motion which had been pressed and was the subject of that judgment is to be found referred to in paragraph 23 of the judgment, the defendants having sought an order

"pursuant to part 23, rule 4 (or alternatively, part 25, rule 8) of the Supreme Court rules [that] the plaintiffs allow the defendants to inspect the hard drives of the Texas Instrument computer and the Gateway computer referred to in paragraph 4 of part 2 of the plaintiffs' draft further supplementary list of documents.”

3    The section of that judgment dealing with paragraph 3 of the notice of motion runs from paragraph 23 through to paragraph 32 and is self-explanatory.

4    Following the delivery of that judgment, an issue has been raised by the plaintiffs concerning the propriety of the proposed orders that the plaintiffs give Mr Henley access to the Texas Instruments computer and the Gateway computer for the purpose of Mr Henley taking an image of the hard disk drive of each of the computers and later providing to the solicitors for the plaintiffs:

(a) one or more CD Roms containing any documents and/or data which Mr Henley is able to retrieve from the computers which contain one or more of the search terms contained in a schedule to proposed short minutes of order and/or;
(b) a report (the " Henley report ") setting out:

(i) the process Mr Henley undertook to retrieve the documents and/or data;

(ii) the quantity of material retrieved by Mr Henley and the number of hits for each search term (without disclosing the contents of the material retrieved);
(iii) whether it is possible to identify occasions when documents were deleted from the hard drive and if so the circumstances of the deletion including the time at which the deletion occurred.

5    The problem which the plaintiffs have suggested has arisen is identified in an affidavit made by Mr Stuart William Hetherington on 21 June 2001. Annexed to that affidavit as annexure A is a copy of a letter from Withnell Hetherington to Freehills of 28 May 2001 sent some few days after the judgment to which I have referred was delivered. In that letter, Withnell Hetherington advised Freehills that they were instructed to bring to Freehills' attention

"the fact that our client does not consider it to be appropriate that PricewaterhouseCoopers be involved in this process in view of the apparent close connection which that firm has with your client. Our client's understanding in that regard comes from the fact that when that firm was approached to provide a statement in these proceedings, our client was advised by a Pricewaterhouse Coopers' partner, Mr Graeme Andrews, that PricewaterhouseCoopers would be unable to do so as it had a conflict of interest across a wide range of matters with the NAB."

6    Mr Hetherington in his affidavit of 21 June 2001 has given evidence to the following effect:

“6. Prior to sending the letter which is annexure “A” hereto I was informed by Mr. Maconochie and verily believe that he had had a conversation with Mr. Graeme Andrews of PriceWaterhouseCoopers some months ago in which he had said words to the effect to Mr. Andrews : “Would you be prepared to provide a statement in these proceedings” and Mr. Andrews had responded in words to the effect: “We would not be able to as we have a conflict of interest across a wide range of matters with the NAB”.
7. I am further informed by Mr. Maconochie and verily believe that he is concerned, by reason of the conversation with Mr. Andrews to which I have deposed in paragraph 6 above, that PriceWaterhouseCoopers, if asked by the Plaintiffs to conduct a similar task for them on the defendants’ computers would decline to accept such a task on account of their actual and potential future commercial relationship with the NAB, and therefore he is concerned that PriceWaterhouseCoopers would not be able to exercise the necessary degree of objectivity and impartiality in carrying out the task requested of them by the Defendants.

8. I am further informed by Mr Maconochie and verily believe that apart from the concerns which he has about the objectivity of PriceWaterhouseCoopers arising from the conversation to which I have deposed in paragraphs 6 and 7 herein he is also concerned that PriceWaterhouseCoopers consults to a large number of corporations involved in eCommerce. Mr Maconochie is concerned that any Partners or employees of PriceWaterhouseCoopers who are involved in this matter will or could obtain information which would be of value to them in their general business and whatever the form of confidentiality undertaking that is given by them, it will not be possible for them to segregate any knowledge that they obtain from being involved in this matter so as not to be able to make use of it in other consultancies or work that they undertake.

7    The plaintiffs having re-listed the matter for argument, the course which the court has taken is to have granted leave to the defendants to file an affidavit by Mr Paul Carter of 21 June 2001 and granted leave to the plaintiffs to cross-examine Mr Carter briefly on that affidavit. Mr Carter in his affidavit deposed as follows:

“1. I am a partner in the Dispute Analysis & Investigations (“ DA&I ”) team at PricewaterhouseCoopers (“ PwC ”). Graham Henley is an Associate Director in the DA&I team. Rodney Hay is a Manager in the DA&I team. Both Mr Henley and Mr Hay report to me.
Dispute Analysis & Investigations team
2 One of the services the DA&I team provides to clients is the seizure, retrieval and analysis of data from computers.
3 Specifically for the purpose of performing such work, the DA&I team has a computer laboratory at PwC’s offices at 201 Sussex Street, Sydney. That computer laboratory is secure and enclosed in frosted glass. The computers in the laboratory are stand-alone computers separate from PwC’s main computer systems network. The laboratory also has secure fireproof safes in which disks, tapes and other data storage media are stored when they are not being worked on by a member of the DA&I team.
Confidentiality
4 Members of the DA&I team, including Mr Henley, Mr Hay and myself, are frequently briefed in matters involving a high degree of confidentiality and sensitivity. Organisations for which the DA&I team provides data seizure, retrieval and analysis services include the Australian Securities and Investments Commission, the Independent Commission Against Corruption and the New South Wales Police.
5 Mr Henley has a “Top Secret” security clearance from the Australian Government, which is one of the highest levels of security clearance that the Government issues.
6 The precautions taken with the computer laboratory, referred to above, are to ensure that confidentiality is maintained and that evidence is not tampered with. Because of the nature of some of our work, it is necessary for the DA&I team to meet standards required for safeguarding the integrity of the chain of evidence under the criminal law.
Nature of data retrieval work
7 I have no doubt that Mr Henley, Mr Hay and I would be able to exercise the necessary degree of objectivity and impartiality in carrying out the task which is proposed to be briefed to us.
8 The task required in the proposed instruction is the retrieval of data from computers, and the preparation of a report setting out what was done in the data retrieval process. Data retrieval is the task of using software and techniques available to retrieve data from a computer. That task is very mechanical, and involves almost no subjective element. (I refer to the description of the task in paragraph 7 of Mr Henley’s affidavit sworn 16 February 2001).
9 In contrast, data analysis, which involves drawing conclusions and forming opinions after reviewing retrieved data, does have a subjective element and involves the exercise of professional judgment. The proposed instruction does not include any data analysis.
10 An illustration of the distinction between the nature of data retrieval and the nature of data analysis is the approach taken by ASIC when they brief the DA&I team. That work often involves the seizure of data. A member of the DA&I team may be required by ASIC to attend at a specified location at a specified time, without being informed of the identity of the person or entity whose computers are being seized. It may turn out (and has turned out on a number of occasions) that the person or entity is a client of PwC, for example, an audit client. When that is the case, ASIC has no objection to the DA&I team member carrying out the data seizure and data retrieval tasks. However, any data analysis work, if required, is not given to the DA&I team, but to experts from another firm, when ASIC or PwC has a concern about conflicts of interest. That distinction is due to the mechanical nature of data seizure and retrieval, compared to data analysis which contains a subjective element.
E-commerce
11 The DA&I team is a totally separate section within PwC from PwC’s management consultants who provide strategic and other advice to, amongst other clients, companies involved in e-commerce. None of Mr Henley, Mr Hay nor myself, nor the DA&I team generally, do any work which involves the provision of strategic advice to clients regarding e-commerce issues.
12 I have referred above to the security precautions which are taken in relation to the computer laboratory. One of the purposes of those precautions is to ensure that no partner or employee of PwC (or any other person) has access to confidential data retrieved by the DA&I team other than the persons within the team working on that particular brief.
Prior work for National Australia Bank Limited
13 I have not done any work for NAB in my current role prior to the proposed brief.
14 I am informed by both Mr Henley and Mr Hay, and believe, that neither of them have done any work for NAB in their current role prior to the proposed brief.
15 My role in the proposed brief would be limited to reviewing the report which is prepared by Mr Henley and Mr Hay. The actual task of retrieving the data and preparing the report would be done by Mr Henley and Mr Hay. It is the general practice within the DA&I team that reports issued for the purpose of litigation be reviewed by a partner before being issued.”

8    The cross-examination of Mr Carter elicited the general steps which PricewaterhouseCoopers takes when questions of a possibility of a conflict of interest arise. As I would understand the position, the approach taken by PricewaterhouseCoopers is likely the approach taken by most other major firms of accountants in this country and likely also a similar approach to that probably taken, I would infer, by most very large firms of solicitors in this country. Obviously the approach taken by any particular firm, be it of accountants or solicitors, to the possibility of conflict of interest, is a matter for that firm and the court would infer that there will be different forms of dealing with those circumstances, perhaps on an instant-specific basis and presumably quite often on some reasonably regulated basis.

9    The judgment to which I have referred was very clear in terms of the treatment with the difficult question raised as to the circumstances and occasions when as part of discovery obligations, the court will oblige a party to proceedings to engage or pay for computer experts to undertake experiments in an attempt to resurrect material which once appeared on a computer or was perceived as still reposing in, what is colloquially sometimes referred to as, the computer's deep memory. I made plain that to my observation, that question and the extent to which the court would ever oblige a party to take those steps on discovery, should be determined on an instant-specific basis, depending upon the particular case, depending upon the particular issues, depending on the costs involved and depending also on all of the particular circumstances.

10    In paragraph 30 of the judgment, I made plain that the decision of the court in the exercise of its undoubted discretion to so order, was entirely subject to the court being satisfied as to the imposition of what would amount to stringent conditions of confidentiality and covering expense and covering possible loss to Mr Maconochie in terms of the exercise. In paragraph 31, I said

"In the present instance, the decision which I have announced is subject to the court being totally satisfied if necessary after argument and/or additional evidence, as to the conditions upon which the defendants through Mr Henley and his team are to be permitted to carry out the steps identified in Mr Henley's affidavit."

11    The short position in relation to the plaintiffs' concern now raised by Mr Hetherington and on information and belief through him by Mr Maconochie, is apparently not controversial. Mr Sackar, as I understood him, indicated that there was no real issue but that the substance of the conversation which Mr Maconochie apparently had with Mr Andrews is recorded in paragraph 6 of Mr Hetherington's affidavit.

12    Whilst I have listened carefully to the cross-examination which has taken place today of Mr Carter and have followed carefully the submissions which Mr Sackar has put for the defendants in opposition to the suggestion that PricewaterhouseCoopers ought be excluded from the ambit of appropriate experts to carry out the exercise, I have come to the conclusion that in the exercise of the court's undoubted discretion here, the court should require the defendants to retain experts outside of PricewaterhouseCoopers for the exercise.

13    To my observation, as I indicated in the earlier judgment, the question of the precise conditions which the court would impose when the court made orders of the type here sought by the defendants, will always depend upon the instant circumstances. I do not see that the references by the plaintiffs or the defendants to authority necessarily require to determine the subject application. The situation is not one of determining circumstances where a judge may be required to recuse or ought be held disqualified from hearing a matter, if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide - Ebner v Official Trustee 176 Australian Law Reports 644 at 647. Nor is the question one to be determined by reference to authorities dealing with conflict of interest in circumstances of misuse of confidential information or in one of a variety of circumstances in which conflicts of interest may and do arise. The issue is simply one of the court's discretion in the instant circumstances.

14    Bearing in mind the issues which are raised in the proceedings, bearing in mind the importance to both parties of the issues raised in these proceedings, bearing in mind the scope of the litigation and bearing in mind the general parameters of the litigation, the exercise engaged in in the instant proceedings is clearly such that, to my mind, in the circumstances deposed to by Mr Hetherington in paragraphs 6 and 7 particularly, but also paragraph 8 of the affidavit of 21 June 2000, the court ought not compel Mr Maconochie to make the subject computers available to PricewaterhouseCoopers, even on the undertakings as to confidentiality which are proffered by Messrs Henley, Carter and Hay.

15    There is no evidence before the court, as I understand it, to suggest that the PricewaterhouseCoopers dispute analysis and investigations team is the only team in New South Wales or in this country capable of carrying out like work.

16    An aspect of the difficulty which I have taken into account in this exercise of the court's discretion is the fact that apparently no one is able to tell what type of documents may be accessed in the analysis. The sensitivity of the affairs of Mr Maconochie in relation to the proceedings suggests to me that there should be absolutely not the slightest skerrick of doubt but that an entirely independent expert, in terms of independence from both sets of parties, be retained for the purpose of carrying out the analysis.

17    I decline to order the plaintiffs and more particularly Mr Maconochie, to make available his computers for the purpose of the subject analysis being carried out as proposed by the defendants.

18    Having said that, the question of which, if any, other expert is to be retained by the defendants, must be stood over for further examination on the occasion when an alternative expert is proposed. It is presently unnecessary to go further in terms of examining that matter, but the court would take into account, if it were the case, evidence adduced by the defendants to the effect that there are a very limited number of experts in this country capable of carrying out the subject exercise. If, for example, it were to be proven that the only such experts were partners or directors of companies engaged in some form of activity or having some relationship with the National Australia Bank or one or other of its many branches or satellites, the matter would have to be adjudicated upon the evidence then given.

19    I am satisfied by the evidence given in paragraph 6, 7 and to a certain extent 8 of Mr Hetherington's affidavit, that it is appropriate for the court, to the extent necessary, to revoke so much of the earlier judgment as identified Mr Henley as appropriate, in circumstances where the court has been informed that counsel on the occasion when the matter was argued, had not received instructions as to the difficulties with PricewaterhouseCoopers, to which I have adverted Mr Maconochie claims to exist.

I certify that paragraphs 1 - 19
are a true copy of the reasons
for judgment herein of the
Hon. Justice Einstein
given on 22 June 2001 ex tempore
and revised 27 June 2001

___________________
Susan Piggott
Associate

27 June 2001

Last Modified: 06/13/2002