International Warehousing Distribution Pty Ltd v Trail
[2015] FCCA 1608
•14 May 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| INTERNATIONAL WAREHOUSING DISTRIBUTION PTY LTD & ANOR v TRAIL | [2015] FCCA 1608 |
| Catchwords: COPYRIGHT – Application for orders to inspect respondent’s computer and other electronic devices – ex tempore ruling. |
| Legislation: Copyright Act 1968 |
| Evans Deakin Pty Ltd v Orekinetics Pty Ltd [2002] QSC 42 British Xylonite Co. v Fibrenyle Ltd [1959] R.P.C 252 |
| First Applicant: | INTERNATIONAL WAREHOUSING DISTRIBUTION PTY LTD (ACN 110 026 330) |
| Second Applicant: | ELIXIR SIGNATURE PTY LTD (ACN 135 297 988) |
| Respondent: | JUSTIN TRAIL |
| File Number: | MLG 2041 of 2014 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 14 May 2015 |
| Date of Last Submission: | 14 May 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 14 May 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Creighton-Selvay |
| Solicitors for the Applicant: | HWL Ebsworth Lawyers |
| Counsel for the Respondent: | Mr Stuckey |
| Solicitors for the Respondent: | Zervos Lawyers |
ORDERS
Pursuant to Rule 1.05(2) of the Federal Circuit Court Rules 2001 (Cth), the Court applies Rule 14.01 of the Federal Court Rules 2011 (Cth) to the application in a case dated 29 April 2015.
Pursuant to Rule 14.01(1) of the Federal Court Rules 2011 (Cth):
(a)By 2pm on Friday, 15 May 2015, the Respondent provide to Mr David Caldwell of Forensic IT Pty Ltd at Level 18/114 William Street Melbourne:
(i)the Respondent’s iPhone and any relevant password;
(ii)the Respondent’s iPad and any relevant password; and
(iii)the password for the ‘[email protected]’ email account (Trail Gmail Account) (collectively, Materials).
(b)Upon receipt of the Materials, Mr Caldwell is:
(i)permitted to access and make a digital copy of all data on the Materials (Copied Data);
(ii)by 2pm on Saturday, 16 May 2015, or as otherwise agreed with the Respondent, make available for collection the iPhone and iPad to the Respondent; and
(iii)By 2pm on Sunday, 17 May 2015, or as otherwise agreed with the Respondent, delete all records of all passwords obtained by the Respondent.
By 4pm on Monday, 18 May 2015, the Applicants are to provide to the Court and the Respondent the proposed terms to be used by Mr Caldwell to search the Copied Data.
The Materials and Copied Data are to be treated as confidential and are not to be disclosed by Mr Caldwell to any other person, pending further Court order.
By 1pm on Friday, 15 May 2015, Mr Caldwell is to provide a written undertaking, to the Respondent and the Court that he will abide by the terms of these orders.
Costs be reserved.
This matter be listed for further directions at 9:30am on Tuesday, 19 May 2015.
| FEDERAL CIRCUIT COURT AT MELBOURNE |
MLG 2041 of 2014
| INTERNATIONAL WAREHOUSING DISTRIBUTION PTY LTD (ACN 110 026 330) First Applicant |
| ELIXIR SIGNATURE PTY LTD (ACN 135 297 988) |
Second Applicant
And
| JUSTIN TRAIL |
Respondent
REASONS FOR JUDGMENT
The matter before the court is an application in a case filed on 29 April 2015. It seeks production by the respondent to an independent forensic specialist engaged by the applicant of certain materials, as they are described. In the application in a case, this is described more particularly as the respondent’s MacBook computer, iPad, iPhone and access to his email account, [email protected]. It is proposed that the expert is to be permitted to copy the materials. The expert is to be permitted to inspect the copied materials for emails referred to in the applicant’s affidavit of discovery sworn by Matthew Stuart Lawrence, together with copies or attachments and anything related to the use or reproduction of them. The emails themselves are said to have been sent on 13 June 2013, which was three of them, and further emails on 18 June 2013 and 24 June 2013.
The application in a case posits arrangements whereby the expert would notify the applicant’s solicitors with a list of the documents found and, further, a confidentiality regime. To understand the application in a case, it is necessary to refer to the pleadings and the affidavit evidence. The amended statement of claim pleads an employment agreement entered into on 27 July 2012. It included a term for the return upon termination of the employment relationship of all confidential information.
The statement of claim pleads a variety of confidential information and so-called literary works and pleads that these were used and accessed by the respondent during his employment. It pleads that on 13 June, the respondent sent the confidential information and literary works to his home email. He thereafter resigned on 26 June 2013. The notice appears to have expired in early July. It is pleaded that the respondent thereafter started work with a competitor of the applicant and that the applicant demanded return of the confidential material, if I can describe it globally in that way. At paragraph 18 of the statement of claim, it was pleaded, and I think I quote:
“To date, Trail has denied that he sent the Confidential Information and Literary Works to his personal email account (and) has refused to return (them)…”
The statement of claim then pleads the legal consequences of the wrongful sending and retention of the material in terms of breach of the employment contract, copyright infringement and conversion. The defence to that document admits the employment agreement and admits employment from 1 August 2012 until 12 July 2013 as national sales manager of the applicant. The respondent does not admit the use and access and so on of the confidential information, and he denies all use or access to literary works altogether. At paragraph 13, the defence denies sending emails from work to his personal email account, and then in the alternative pleads that, if he had done so, it was done properly as part of his employment. The defence confirms that the respondent started work with a competitor in February 2014. Paragraph 18 I will read out:
“The Respondent admits that he denies he sent the confidential information or literary works to his personal email account and he cannot return the confidential information or literary works to IWD or Elixir and has not refused to identify to whom and when he provided the confidential information or the literary works because he has not provided the confidential information or literary works to any person save those with the authority of IWD.”
At paragraph 23 of the defence, the respondent denies making any unauthorised copies of the confidential information and repeats that in respect of the literary works at paragraph 24.
On 23 December 2014, the respondent filed an affidavit. He now admitted to sending the emails outlined in paragraphs 1 to 5 of Mr Lawrence’s affidavit; in other words, the affidavit of discovery. He deposes that this was necessary for his work and says that the same were destroyed on 12 July 2014. That is an obvious typographical error for 2013. The affidavit denies having confidential information or literary works.
On the pleadings and material thus far traversed, there are clearly a number of issues, including, first, did the respondent take the information unlawfully or not as he says and, second, did he make or keep or otherwise deal with any copies. The next affidavit filed was that of Mr Withers filed on 29 April 2015 and presumably served reasonably soon thereafter. He deposes that the documents emailed by the respondent in June 2013 ran to hundreds of thousands of pages. Some of the affidavit is comment upon the respondent’s position, but since the respondent puts these matters in issue, the assertions made as to fact by Mr Withers can receive no weight beyond that which I will explain as I come through the material.
But I do note that exhibit PWC12 is correspondence from the respondent’s solicitors, who expressly denied that the respondent had sent the confidential information to his personal email address. Although the letter says “from” instead of “to”, it is clear that that is what it meant. PWC13 is a letter from the applicant’s solicitors dated 16 February 2015, seeking the respondent’s MacBook, iPhone and iPad for examination. The response to that was exhibit PWC14, which I will read out. It’s a letter from Zervos Lawyers to those of the applicant dated 6 March 2015. The relevant text reads as follows:
“We confirm that throughout this proceeding, we have maintained the position that our client at the time of his resignation from your client’s employment did not have in his possession any alleged confidential information or literary works belonging to your client.
Furthermore, our client has never used this information, nor has the information ever been given to our client’s current employer and nor has it ever used it.
We also note that after requests to you for further and better particulars on 21 January 2015 and February 2015 of your client’s alleged loss and damage, you have refused to provide it.
In the circumstances, we are instructed by our client that he refuses to provide the Macbook, iPhone, iPad or Gmail account for forensic examination, and in the circumstances we invite you to issue any relevant application.”
The respondent filed a further affidavit late on 13 May 2015; yesterday evening, more precisely. Paragraph 5 asserts that the respondent has no longer retained his MacBook because it became inoperable, but this was not asserted in his solicitor’s letter of 6 March 2015. By that stage, the applicant’s desire to obtain possession of the MacBook was perfectly clear to all concerned. It should not have been disposed of. The inference is clear in the failure to address this issue in these terms earlier that the MacBook has been disposed of between the time that its production was refused in March and now. In paragraph 6(h) of his affidavit, the respondent says that he could not recall the confidential documents when he was first asked in June 2014, but in paragraph 6(c), he has a precise memory that from 13 June till 24 June 2013, the applicant’s VPN was not operative, so he had to use his own personal email.
That brings me to the court’s power to make orders sought. There is no issue, as I understand it, that the court has power to order inspection. The application in a case seeks that this court adopt rule 14.01 of the Federal Court Rules. In the circumstances, I accept that that is appropriate. This court’s rules are arguably not wide enough for some of what the applicant seeks, and the applicant should not be defeated by any possible inadequacy in this court’s rules. This court’s rules expressly contemplate the adoption of Federal Court rules when this happens.
The next matter to consider is the nature of this power and the way in which it should be applied. In Evans Deakin Pty Ltd v Orekinetics Pty Ltd [2002] QSC 42 at page 345, the Court was considering Rule 250 of the Uniform Civil Procedure Rules 1999, which is similar in most respects to rule 14.01 of the Federal Court Rules, although perhaps slightly narrower. I will read out the following passages from paragraphs [13], [16]-[17] and [19] of that judgment:
In quoting, as Chesterman J did, at [13] from the case of British Xylonite Co. v Fibrenyle Ltd [1959] R.P.C 252, the following extract was set out:
“…an order for inspection will normally go as of course if a prima facie case of infringement is established; but…it is not necessary in all cases for a plaintiff…to go as far as that. Provided that the defendant's interests are properly and adequately safeguarded…I think that a plaintiff should be allowed inspection if the Court is satisfied that there really is a substantial and genuine issue to be tried. It is, of course, perfectly true that inspection should never be ordered on a mere fishing application, but when, as here, an experienced and well-known independent expert swears that he believes that there has been infringement and gives reason of some significance to support that belief, I see no reason why the order should not be made”
And, of course, I note that there was countervailing expert evidence in that case. At [16]-[17], Chesterman J continued:
“The defendants argue that the evidence does not show a substantial and genuine issue to be tried or that there are formidable grounds for saying that infringement might well be taking place. They point to the paucity of the plaintiff's material in support of the application to inspection. There is one affidavit, and that from the plaintiff's solicitor, who recites, but does not verify, the essential allegations set out in the statement of claim. A point of importance for the defendants is that there is no evidence of the kind suggested by Romer LJ, namely an expert opinion founded on substantial grounds that the apparatus or procedure sought to be inspected infringes or misuses the plaintiff's intellectual property.
There is substance in the argument and my mind has vacillated in the course of considering what order should be made. I have in the end concluded that the plaintiff had made out a case for inspection. The plaintiff's material, sparse though it is, does establish some pertinent facts by the affidavit and by admissions contained in the amended defence. The plaintiff and the first defendant are competitors in the manufacture and sale of machines that separate or extract minerals from enveloping sand. The second defendant was for a number of years employed by the plaintiff.”
At [19], his Honour went on further:
“The question is whether the court should exercise its discretion in favour of inspection. I think the true principle is that explained by Whitford J in Wahl,
“One must look at the evidence to see…whether or not it would be appropriate to make an order for inspection…One does not make orders for inspection save…where… it would be appropriate...”
The discretion conferred by the rule is a wide one. It should not be limited by the superimposition of conditions not found in the rule itself. The order should not be made unless, on the material before the court, it is proper to do so. It must be remembered that the rule exists to promote the efficient and economical conduct of litigation. If the result of an inspection would tend to bring about such a result, the discretion should, I apprehend, ordinarily be exercised in favour of inspection, subject to there being some countervailing circumstance. To say that there must be formidable grounds for alleging infringement before inspection would be ordered is only to say that there must be sufficient grounds for making the order. I do not think there is any benefit in using any more particular or pejorative adjective. It is no doubt true that an order for inspection of property will not be made unless there is some evidence that the plaintiff’s rights are being infringed and that an inspection will facilitate proof of the claim. This is, I expect, all that is meant by saying that there must be a substantial and genuine dispute. There are, of course, degrees of suspicion as well as proof. It is pointless to resort to semantic differences and refuse inspection where there is “mere suspicion” of an infringement but allow it where there is “strong suspicion” or “proof” of it, even if the proof be weak. The discretion conferred by UCPR 250 should be addressed by considering whether, in all the circumstances of a particular case, the plaintiff has shown sufficient grounds for intruding on the defendant’s property.”
I approach this matter with those remarks well in mind.
The applicant accepts that the Court cannot order production of devices the respondent no longer has. This covers the iPhone and MacBook. The respondent has an iPad but says it was given to him since he started work in February 2014. The applicant says the respondent still has the email account, has an iPhone and an iPad. Mr Caldwell has deposed he can extract data from the iPhone and iPad and can take steps, if given the password, to reconstitute the Gmail account, to identify and analyse emails and data relating to deleted emails in the Gmail account. That’s at paragraph 7 of his affidavit.
The applicant seeks that the respondent produce any computing device he uses. Counsel for the respondent says an order of this width would be exceptional and resists the orders sought otherwise. I repeat the test, is it appropriate, in the particular circumstances of the case, to make the order for inspection. As Chesterman J’s language makes clear, however, consideration of these matters has some qualities not dissimilar to injunctive relief in considering whether there is, as his Honour put it in that case, a serious question to be tried. He did not refer to the balance of convenience but self-evidentally, such matters are not irrelevant.
The following points, to my way of thinking, are pertinent. The respondent denied sending emails to his own personal email address. On an interlocutory – and I emphasise that matter, but on an interlocutory basis, I find that impossible to accept. It is the central assertion in the controversy between the parties. He remembers that the applicant’s system wasn’t working, he would have turned his mind at the time letters were written on his behalf to whether he had actually done what he was being accused of doing.
It is noteworthy that he did not say in the first instance, as would have been well open to him given the lapse of a year, that he simply did not remember. He actively denied having sent the emails to his own address. Next, the scope of the documents was very large. The applicant has said this and the respondent has not put it in issue. Third, the respondent did work for the applicant and the emails were just before he resigned. He has, of course, given an explanation for this in his affidavit. He says he had to go and attend upon his father in New Zealand through ill health and those are matters for trial but the broad brush of what I put is incontestable.
Finally, the respondent did not reveal that his iPhone and MacBook had been disposed of in March 2015. One would have expected him to have brought this matter to the attention of the applicant because it might well have been thought decisive. The inference is certainly available that the MacBook has been disposed of since March. If it has, it should not have been. One would express some surprise that this significant matter was not raised earlier. Further, it is known that the respondent is now a shareholder in a competitor organisation.
Taken together, these matters, in my view, amount to what, in the circumstances of this dispute, Chesterman J described as pertinent facts. The rule exists to promote the efficient and economical conduct of litigation. The question of whether the respondent retained and/or used information belonging to the applicant stands at the heart of this case. The resolution of that issue at an early stage would clearly assist an outcome. That brings me to the form of orders it would be appropriate to make.
I am not disposed to make an order that the respondent make available every device which he uses. Mr Stuckey’s submission is quite correct and such an application is far too broad. But the Gmail is extant, an iPhone is extant, even though not that held earlier, and likewise an iPad. That is what there actually is. The MacBook appears to have been disposed of. The damage caused by making the orders sought to make these matters available to the applicant is slight. Mr Caldwell says they can be returned quickly.
A search can also be conducted specifically. If one looks at Mr Caldwell’s affidavit, paragraph 13, Mr Caldwell deposes that when given a series of search criteria, he will be able to search quickly and only for those matters relevant to the application. So the risk of a search for other matters is not necessary. Now, I note that this is not the way the relief is framed in the application in a case. Mr Caldwell says he expects to be given a series of search criteria but none are indicated in the application in a case.
Subject to giving the parties an opportunity briefly to consider their position and to make any further submissions, I am minded to order the respondent to make available to Mr Caldwell by 2 pm tomorrow his G:drive password, his iPhone and iPad. They will be able to be returned to him, on Mr Caldwell’s affidavit, by 5 or possibly 6 at the latest tomorrow. This will provide minimal disruption to Mr Trail’s life and use of his devices. Mr Caldwell will thereafter be able to access the Gmail at his leisure.
But Mr Caldwell is not, at this stage, to do more than copy. The applicant is to provide the respondent and the Court with the search criteria, which Mr Caldwell has indicated he would expect to receive, on or before 4 pm on Monday and I will list the matter for further consideration at 9.30 on Tuesday. Furthermore, Mr Caldwell is to provide an undertaking forthwith to the Court to abide by the orders made. He is not a party to the proceedings, he is not an officer of the Court and while I draw no adverse inference against him, I think it is important that his adherence to the regime I am proposing be properly recorded.
I would expect that matter to be attended to by being forwarded to my chambers tomorrow. I will stand the matter down to give you what will have to be a relatively short space of time to consider any further submissions but as you will understand, I am going to take the first step so the materials can be copied, your client can sort out, probably with Mr Caldwell’s help I suspect, what the search criteria are and give them to Mr Stuckey’s client. This has the great advantage of protecting a trawl through the morass of personal and other information that will doubtless be there and if there is an argument about it, we will sort it out on Tuesday.
I would be reserving costs. This is a case in which most interlocutory stoushes are likely to be costs in the cause. It’s a winner take all sort of a case. But that’s not to say that an improper application won’t receive an appropriate response but I would be minded to reserve costs at this stage.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Date: 12 June 2015
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