Liberty Financial Pty Ltd v Scott

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FEDERAL COURT OF AUSTRALIA

Liberty Financial Pty Ltd (ACN 077 248 983) v Scott [2002] FCA 345

PRACTICE AND PROCEDURE – application to set aside or discharge Anton Piller order – claim that applicant wrongfully obtained order – whether material non-disclosure – whether duty of candour on ex parte application met – test of materiality – whether real possibility of destruction or disappearance of evidence if order not granted - documents of a commercially sensitive nature – whether order in an appropriate form to safeguard rights of respondents

Anton Piller KG v Manufacturing Processes Ltd [1976] 1 Ch 55 at 61and 62 cited
Thermax Limited v Schott Industrial Glass Limited [1981] FSR 289 at 298 cited
Columbia Picture Industries Inc v Robinson [1987] 1 Ch 38 at 77 cited
Brink’s-MAT Ltd v Elcombe [1988] 3 All ER 188 at 194 cited
Milcap v Coranto (1995) 32 IPR 34 at 35 cited
Microsoft Corp v Goodview Electronics Pty Ltd (1999) AIPC 91-489 cited
Yousif v Salama [1980] 1 WLR 1540 referred to
Dunlop Holdings Ltd and Dunlop Ltd v Staravia [1982] Com LR 3 referred to
Booker McConnell plc v Plascow [1985] RPC 425 at 441-442 referred to
Roger Bullivant Ltd v Ellis [1987] FSR 172 at 181 cited
Dormeuil Freres SA v Nicolian Ltd [1988] 1 WLR 1362 at 1368-1369 cited
Dart Industries Inc v David Bryar (1997) 38 IPR 389 cited
Tate Access Floors Inc v Boswell [1991] Ch 512 at 534 cited
National Australia Bank Ltd v Idoport Pty Ltd [1999] NSWSC 964 cited
Mark Rich and Co Holding GMBH v Krasner (unreported, English Court of Appeal, 15 January 1999) referred to
Garrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676 cited
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 referred to

LIBERTY FINANCIAL PTY LTD (ACN 077 248 983) AND SHERMAN MA v TREVOR WILLIAM SCOTT AND BLUESTONE GROUP PTY LIMITED T/A BLUESTONE MORTGAGES (ACN 091 201 357)
V1256 of 2001

WEINBERG J
26 MARCH 2002
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V1256 OF 2001

BETWEEN:

LIBERTY FINANCIAL PTY LTD (ACN 077 248 983)
FIRST APPLICANT

SHERMAN MA
SECOND APPLICANT

AND:

TREVOR WILLIAM SCOTT
FIRST RESPONDENT

BLUESTONE GROUP PTY LTD t/a BLUESTONE MORTGAGES (ACN 091 201 357)
SECOND RESPONDENT

JUDGE:

WEINBERG J

DATE OF ORDER:

26 MARCH 2002

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.Paragraphs 1 and 2 of the Notice of Motion filed on behalf of the first respondent on 5 February 2002 seeking to have paragraphs 1-14 of the Anton Piller order made on 20 December 2001 set aside and/or discharged, and all documents seized pursuant to that order returned to the custody of the first respondent’s solicitors, be dismissed.

2.Paragraphs 1 and 2 of the Notice of Motion filed on behalf of the second respondent on 12 March 2002 seeking to have paragraphs 1-14 of the Anton Piller order made on 20 December 2001 set aside and/or discharged, and all documents seized pursuant to…

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Details
Case
[2002] FCA 345
Decision Date

CaseChat Overview and Summary

Liberty Financial Pty Ltd and its managing director, Mr Sherman Ma, sought an Anton Piller order against Mr Trevor Scott, who had recently resigned from his position as Senior Relationship Manager at Liberty and started working for a competitor, Bluestone Group Pty Ltd. The applicants alleged that Mr Scott had breached confidentiality agreements by disclosing confidential and commercially sensitive information to his new employer. The primary legal issue was whether the Anton Piller order, which allowed the applicants to search Mr Scott’s premises for evidence of the alleged breach, should be set aside or discharged due to alleged non-disclosure of material facts by the applicants. The applicants denied the allegation of non-disclosure. The court examined the evidence presented by the applicants and concluded that they had established a strong prima facie case against Mr Scott. The court held that the applicants had demonstrated a real possibility that Mr Scott would destroy or delete important evidence if the Anton Piller order was not granted. The court found that the applicants had met the required standard of candour and responsibility in seeking the ex parte order. Consequently, the court dismissed the respondents’ applications to set aside or discharge the Anton Piller order.

The orders of the court were as follows: the applications by the first and second respondents to set aside and/or discharge the Anton Piller order and return the seized documents were dismissed. The Anton Piller order remained in effect, allowing the applicants to continue with their investigation into the alleged breach of confidentiality by Mr Scott.

Orders

Orders of the court

1. Paragraphs 1 and 2 of the Notice of Motion filed on behalf of the first respondent on 5 February 2002 seeking to have paragraphs 1-14 of the Anton Piller order made on 20 December 2001 set aside and/or discharged, and all documents seized pursuant to that order returned to the custody of the first respondent’s solicitors, be dismissed.

2. Paragraphs 1 and 2 of the Notice of Motion filed on behalf of the second respondent on 12 March 2002 seeking to have paragraphs 1-14 of the Anton Piller order made on 20 December 2001 set aside and/or discharged, and all documents seized pursuant to that order returned to the custody of the first respondent’s solicitors, be dismissed.

Background

Background to the litigation

The principal ground upon which the respondents move relates to alleged non-disclosure of material facts at the time the Anton Piller order was sought. The applicants deny that allegation.BACKGROUND The first applicant, Liberty Financial Pty Ltd (“Liberty”), is a specialist lender in the business of providing tailored lending products to customers who are unable to obtain finance from traditional sources (“non-conforming loans”). The second applicant, Mr Sherman Ma, is Liberty’s managing director. Liberty commenced operating in January 1997. In May 1997, the first respondent, Mr Trevor Scott, was hired as its Chief Account Manager. In December 1998, he was appointed Senior Relationship Manager. Obviously, in these positions, he had had access to information that was highly confidential and commercially sensitive. During his employment with Liberty, Mr Scott signed three separate agreements. These were:·a Deed of Confidentiality entered into prior to commencing employment;·an Executive Service Agreement entered into on 21 May 1997, upon being appointed Chief Account Manager; and·an Executive Service Agreement entered into on 2 December 1998, upon being appointed Senior Relationship Manager. These three agreements each contained strict clauses concerning the protection of confidential information. According to Mr Ma, Mr Scott was reminded on a number of occasions of the need to ensure that the material to which he was privy was kept confidential. Mr Scott continued as Senior Relationship Manager until 15 December 1999 when he tendered his resignation. He subsequently commenced employment in February 2000 with Australian Financial Group (Victoria) Pty Ltd (“AFG”), an association of financial brokers which was, and still is, one of what Liberty describes as its “introducers”. He remained with AFG until about June 2000. He then commenced employment with the second respondent, Bluestone Group Pty Ltd (t/a Bluestone Mortgages) (“Bluestone”). Bluestone is a direct competitor of Liberty in the business of providing non-conforming loans. In February 2001, as a result of certain information which had come to Liberty’s notice, its solicitors threatened proceedings against Mr Scott in relation to his alleged disclosure of confidential information. On 2 April 2001, Mr Scott pre-empted these threatened proceedings by instituting his own action against Liberty in the Industrial Relations Commission of New South Wales. By that action he sought to have certain of the provisions of his Executive Service Agreements with Liberty set aside or varied. On 29 June 2001, Mr Scott’s solicitors were served with a writ and a statement of claim alleging breach of contract. The action was brought in the County Court of Victoria. On the same day, Liberty, through its solicitors, wrote to Mr Scott threatening to seek interlocutory injunctive relief unless he provided undertakings, within seven days, that he would not, during the term of the County Court proceeding, disseminate any information subject to the Deed of Confidentiality or the Executive Service Agreements.

Evidence

Evidence Before The Court

On 20 December 2001, the applicants applied to me, ex parte, for an Anton Piller order against Mr Scott, and also for injunctive relief. They were successful in relation to the Anton Piller order. That order was carefully drawn. In addition to the safeguards normally contained in such orders, it provided for the attendance of two independent solicitors at Mr Scott’s home during the execution of the order. Those solicitors were both named, and were members of the firm Blake Dawson Waldron. Their role was to supervise the execution of the order, and to prepare a written report to be filed with the Court. The order also provided for the preparation by the applicant’s solicitors of an inventory, specifying and describing each item to be removed from the premises. It further provided that any documents so removed were to be delivered into the custody of the supervising solicitors pending the further hearing of the application for interlocutory relief which I adjourned to 24 December 2001.THE EVIDENCE IN SUPPORT OF THE APPLICATION FOR THE ANTON PILLER ORDER The application for the Anton Piller order was brought, as a matter of urgency, on the afternoon of 20 December 2001. It was supported in the main by two affidavits, that of Mr Ma and another of Mr Suresh Kanapathippillai, who was Liberty’s Group Project Manager and Company Secretary. Mr Ma recounted the events leading up to Liberty’s formation and described the nature of its business. He discussed Mr Scott’s role with Liberty and emphasised the degree to which he had access to confidential and commercially sensitive information. He said that he had told Mr Scott on several occasions of the absolute importance of confidentiality. He exhibited copies of internal memoranda addressed to staff dealing with that subject. Mr Ma said that in late November 2000 he became aware that a new competitor, Phoenix Capital Pty Ltd trading as Bluestone Mortgages (“Phoenix”), had entered the market offering non-conforming loans. Phoenix was based in Sydney and had since changed its name to Bluestone Group Pty Ltd (t/a Bluestone Mortgages). In December 2000 Mr Ma discovered that in July 2000 Mr Scott had commenced employment with Bluestone. In January 2001 Mr Ma became aware of a table published by Bluestone which compared the non-conforming loan products on offer at that time by five providers of such loans to the Australian market (the “comparative table”). In March 2001 Liberty commenced a proceeding in this Court against Phoenix alleging that the comparative table contained misleading and deceptive information. That action was ultimately settled. Mr Ma said that he believed that some of the information used by Bluestone to produce the comparative table could only have come from Mr Scott . That information must have been provided in breach of his obligations of confidentiality to Liberty. Mr Ma elaborated upon the action instituted by Mr Scott against Liberty in the Industrial Relations Commission of New South Wales. In that proceeding Mr Scott sought to have clause 9 of his Executive Service Agreement of 2 December 1998 declared void, or varied, so that a restraint upon his revealing confidential information would only apply for a period of six months from the date of termination of his employment. He also sought to have clause 7 of that agreement varied so that the definition of “confidential information” in that clause was limited to information that was not already in the public domain, and was still commercially sensitive.

Decision

Reasons for decision

WEINBERG J
Finally, counsel for the applicants referred to National Australia Bank Ltd v Idoport Pty Ltd [1999] NSWSC 964, where Santow J observed that although the court placed great importance on the obligation to make full and frank disclosure of all material circumstances in ex parte matters, there was no automatic discharge in the event of non-disclosure even of matter which was material, or arguably so. The fact that his Honour considered that on balance it would have been better had the material been disclosed did not lead to the conclusion that the ex parte injunction should be discharged. He said that the “courts should not encourage the discharge of otherwise meritorious applications on the grounds of trifling errors”: see also Mark Rich and Co Holding GMBH v Krasner (unreported, English Court of Appeal, 15 January 1999).CONCLUSION In Garrard v Email Furniture Pty Ltd (1993) 32 NSWLR 662 Mahoney AP observed that where an order has been made ex parte, the party against whom it has been made has two inter-related rights. First, he is entitled, on learning of the order to apply for its discharge. This he may do irrespective of any irregularities in the making of it. Second, he may make application for the discharge of the order upon the ground that it was irregularly obtained. As his Honour said at 676:“The courts have, for many years, required a high standard of candour and responsibility of those who seek ex parte orders … Dalglish v Jarvie (1850) 2 Mac & G 231; 42 ER 89.” His Honour went on to refer to the observation of Isaacs J in Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 to the effect that it is the duty of the party asking for an injunction ex parte to bring to the notice of the court all facts material to the determination of his right to that injunction, and it is no excuse to say that that party was not aware of their importance. The principles which lie behind the duty of candour to which the authorities refer are not in doubt. It is their application to the facts of this particular case which is in issue. Notwithstanding the comprehensive attack which the respondents have mounted upon the conduct of the applicants in obtaining the Anton Piller order, and the voluminous evidence which has been placed before me in an effort to have that order set aside and/or discharged, I am firmly of the view that the order should stand. In my opinion the evidence adduced by the applicants in support of the Anton Piller order plainly established the existence of a strong prima facie case against Mr Scott. The inferences for which they contended were clearly open upon the material. In the absence of cogent evidence to rebut those inferences, some or all of them would be likely to be drawn. There is no doubt in my mind that the applicants were entitled to submit, on that evidence, that there was a real possibility that unless the Anton Piller order were granted, Mr Scott would cause important evidence to be destroyed or deleted. In arriving at that conclusion, I bear in mind the relative ease with which such evidence can be destroyed or deleted, the propensity evidence regarding the comparative table, the powerful incentive on the part of those who may have misappropriated confidential and commercially sensitive information to conceal evidence of their wrongdoing, and that fact that, unlike Bluestone, Mr Scott did not deny the allegations made against him on affidavit.

Ratio Decidendi

Legal Principle Established

Established by: WEINBERG J

Full text does not contain this section.