Manderson M and F Consulting v Incitec Pivot Ltd
[2010] VSC 63
•9 March 2010
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted | |
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2034 of 2008
| MANDERSON M & F CONSULTING (A FIRM) | Plaintiff |
| v | |
| INCITEC PIVOT LIMITED (ACN 004 080 264) | Defendant |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 March 2010 | |
DATE OF JUDGMENT: | 9 March 2010 | |
CASE MAY BE CITED AS: | Manderson M & F Consulting v Incitec Pivot Ltd | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 63 | |
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PRACTICE AND PROCEDURE – Application to strike out statement of claim – Application to file third further amended statement of claim – Supreme Court (General Civil Procedure) Rules2005, Rules 23.02 and 36.03.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G. Clarke SC with Mr P. Wallis | EKM Legal |
| For the Defendant | Mr P. Anastassiou SC with Mr G. Dalton | Mallesons Stephen Jaques |
TABLE OF CONTENTS
Application................................................................................................................................. 2
Relevant principles..................................................................................................................... 3
Application of relevant principles............................................................................................... 5
Conclusion............................................................................................................................... 11
HIS HONOUR:
Application
By summons dated 9 November 2009, the defendant sought an order striking out the second further amended statement of claim dated 12 October 2009 filed by the plaintiff. In the alternative, the defendant sought an order striking out paragraphs 59, 64 and 67(b) of that second further amended statement of claim.
By summons dated 16 February 2010, the plaintiff sought leave to file a third further amended statement of claim.
The paragraphs of the second further amended statement of claim which are the subject of the defendant’s summons dated 9 November 2009 are contained in the same numbered paragraphs in the proposed third further amended statement of claim. They are in substantially the same terms, apart from paragraph 67 which, in the proposed third further amended statement of claim, contains additions to the pleadings and particulars. For reasons which follow, the additions to the pleadings and particulars in paragraph 67 are not relevant to the purpose of resolving the present applications.
Resolution of the matters raised by the defendant in its 9 November 2009 summons and in its submissions in the course of the present application focus its complaint and concern in relation to the state of the pleadings on paragraphs 59, 64 and 67(b) of the second further amended statement of claim. This focus is, however, raised in the alternative. The substance of its complaints and concerns are, however, more broadly based and go to the application of the relevant principles with respect to the pleading of claims in a confidential information case.
In any event, a strike out application with respect to particular paragraphs of a pleading cannot be determined in the absence of consideration of the particular paragraphs raised in the context of the pleading as a whole and on the basis of application of relevant principles applicable to a pleading of the type of claims raised.
The plaintiff has sought to address the defendant’s complaint and concern in relation to the state of the pleadings, with particular reference to the specific paragraphs which were referred to by the defendant in its summons of 9 November 2009 and, more generally, in terms of its proposed third further amended statement of claim.
Having regard to the nature of the applications by the plaintiff and the defendant, it is, in my view, most productive to direct attention to the contents of the proposed third further amended statement of claim. This is also desirable having regard to the defendant’s position that its application is not presently to strike out the pleadings once and for all but, rather, to seek pleadings which properly plead a claim or claims in a confidential information case in accordance with relevant principles. Additionally, for the purpose of the application of the principles relevant to the pleading of a claim of this nature, the contents of the second further amended statement of claim do not differ in material respects from the contents of the proposed third further amended statement of claim.
Relevant principles
The relevant principles with respect to the pleading of a claim in a confidential information case were stated by Gummow J in Corrs Pavey Whiting & Byrne v Collector of Customs (Vic)[1] with respect to a case of confidence protected in equity rather than in contract. Gummow J said:[2]
“As I have indicated the case is to be approached in terms of the general law, not as a case of confidence protected by contract, but as one, if anything, of confidence protected in equity. It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question; and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information. …”
[1](1987) 14 FCR 434.
[2](1987) 14 FCR 434 at 443.
The relevant considerations for a plaintiff bringing a confidential information case were also explored in some detail in the judgment of Harper J in GlaxoSmithKline Australia Pty Ltd v Ritchie.[3] Harper J said:[4]
[3][2008] VSC 164.
[4][2008] VSC 164 at [38].
“In these circumstances, careful pleading is required. It ought not be the judge who is left to identify that which, in a breach of confidence case, the plaintiff contends has been misused …
… it must often be difficult for those in whom that information reposes to know with certainty whether any misuse of information has occurred and, if so, to identify that information….
Yet the law must insist not only upon the clear and precise identification of the information upon which the plaintiff relies, but also that that identification be restricted to information that is properly characterised as confidential.”
Harper J then expressly adopted the following considerations which were outlined by Laddie J in Ocular Sciences v Aspect Vision Care Ltd:[5]
“The requirement of particularity may impose a heavy burden on the plaintiff. In a case where the plaintiff has a large quantity of confidential information and much of it has been taken by the defendant, the obligation to identify all of it might involve a great deal of work and time … The normal approach of the court is that if a plaintiff wishes to seek relief against a defendant for misuse of confidential information it is his duty to ensure that the defendant knows what information is in issue. …
… the defendant must know what he has to meet. He may wish to show that the items and information relied on by the plaintiff are matters of public knowledge. His ability to defend himself will be compromised if the plaintiff can rely on matters of which no proper warning was given. It is for all these reasons that failure to give proper particulars may be a particular damaging abuse of process.
These principles do not apply only to the question of the content of the pleadings. Just as it may be an abuse of process to fail properly to identify the information on which the plaintiff relies, it can be an abuse to give proper particulars but of information which is not, in fact, confidential. A claim based even in part on wide and unsupportable claims of confidentiality can be used as an instrument of oppression or harassment against a defendant. It can be used to destroy an ex-employee’s ability to obtain employment or a competitor’s ability to compete. The wider the claims, the longer and more expensive the litigation … A competitor or ex-employee is entitled to copy non-confidential material, but if the plaintiff mixes a large amount of technology together, some of which has been copied by the defendant, there is a risk that the court will jump to the conclusion that some of what was copied must have been confidential.”
[5][1997] RPC 289 at 360; referred to by Harper J at [2008] VSC 164 at [38].
The authorities indicate that it is particularly undesirable in confidential information cases that proceedings be brought which are speculative in character.[6] A heavy responsibility lies on a plaintiff in a confidential information case to both plead its case properly and also to identify specifically the confidential information in respect of which a claim is made.[7] In Meridian Vat Reclaim Aust Pty Ltd v Agius,[8] Harper J said that this is to “protect the courts against abuses of their process, and to ensure that litigation is not used as an instrument of oppression”.[9] Further, Harper J said in Meridian:[10]
“The best means of ensuring that the proceeding is not going forward on a speculative basis is to require a plaintiff who alleges misuse of confidential information to specify with particularity the information which is alleged to (a) be confidential, and (b) have been used in breach of some duty. … The plaintiff either has a case or it does not. If the former, its possession of a good cause of action should be made plain as soon as may be. If it does not, it ought not to commence litigation; but, if it does institute proceedings, its deficiencies ought to be exposed as early as possible. The litmus test will often be the plaintiff’s ability to identify in its statement of claim — not by general, but by particular, words — the information about which complaint is made.”
[6]Creative Brands Pty Ltd v Franklin [2001] VSC 338 at [16] per Warren J, referring to Templeman J in John Zink & Co Ltd v Lloyds Bank Ltd (1975) RPC 385, Whitford J in Reinforced Plastics Applications (Swansea) v Swansea Plastics & Engineering Co Ltd (1979) FSR 182 and Mummery J in Ixora Trading Incorporated and anor v Jones and anor (1990) FSR 251.
[7]GlaxoSmithKline Australia Pty Ltd v Ritchie [2008] VSC 164 per Harper J at [38], Ocular Sciences v Aspect Vision Care Ltd [1997] RPC 289 at 360.
[8][2006] VSC 503.
[9]Meridian Vat Reclaim Aust Pty Ltd v Agius [2006] VSC 503 at [43].
[10]Meridian Vat Reclaim Aust Pty Ltd v Agius [2006] VSC 503 at [45].
Application of relevant principles
I turn now to the contents of the proposed third further amended statement of claim, on the basis indicated previously.
Paragraph 4 defines the “Leasa Information” in terms of the whole of the contents of Confidential Annexure A to the proposed third further amended statement of claim. The effect of this definition is to include all the Leasa Information specified in Confidential Annexure A, rather than to limit the elements referred to in the manner in which they are treated in paragraph 4 of Confidential Annexure A which specifies, in paragraph (a), elements which are said to constitute the “Core Structure” and then adds, or may add, further elements or combinations of elements as specified in paragraphs (b), (c) and (d) of paragraph 4 of Confidential Annexure A (“the possible add-on elements”). The effect of the present broad definition in paragraph 4 is to apply subsequent pleadings which refer to the Leasa Information to all documentation provided by the plaintiff to the defendant, regardless of whether it is described as being confidential under the provisions of paragraph 4 of Confidential Annexure A.
The plaintiff’s response to issues which were raised at the hearing of these applications with respect to the breadth of the definition of Leasa Information in paragraph 4 was to propose an amendment to the proposed third further amended statement of claim to constrain the definition of Leasa Information in paragraph 4 to the confidential information, being the Core Structure defined in paragraph 4(a) of Confidential Annexure A with or without, as appropriate, the possible add-on elements. A proposed amendment of this nature would have the effect of narrowing allegations made in subsequent pleadings, but, for the reasons indicated below, would not have the effect of clearly identifying the confidential information which is claimed to have been supplied by the plaintiff to the defendant in the circumstances specified, particularly on the basis that the defendant knew or ought to have known the limited basis upon which that information was made available to it and that it was valuable.[11]
[11]See paragraph 58 of the proposed third further amended statement of claim.
Paragraph 6 of the proposed third further amended statement of claim appears to plead and particularise an allegation that the Leasa Information was contained in certain specified documents.[12] Nevertheless, this is not a pleading that the Leasa Information was expressly identified, set out and specified in any particular documents. For example, sub-paragraph 6(iii)(2) of the proposed third further amended statement of claim appears to confirm this position or, in any event, does not plead that the “Long-Term Lease Arrangement – Key points summary” specifies and identifies the critical Leasa Information. Rather, the particulars say that this is a document which contains the elements of the Leasa Information as set out in Confidential Annexure B. In summary, the pleading is that the documents contained certain elements, not that they specified and set out the nature and extent of the claimed confidential information.
[12]See sub-paragraph 6(iii) of the proposed third further amended statement of claim.
Paragraph 8 of the proposed third further amended statement of claim begins the series of pleadings in relation to the engagement of the plaintiff by the defendant. Paragraph 9 pleads a mutual non-disclosure agreement (which is said to be pleaded in paragraph 8) whereby the defendant agreed to maintain the confidentiality of “all information provided to it by MMFC with respect to the consultancy services to be provided by MMFC referred to in paragraph 8 above”. [Emphasis added]. It is not clear how this pleading would sit with any narrowed definition of the Leasa Information proposed to be pleaded in a narrowed paragraph 4 as discussed at the hearing of these applications.[13]
[13]See paragraph 13, above.
Paragraphs 9 and 10 appear to be pleadings in relation to the basis upon which the defendant engaged the plaintiff. Paragraph 10 pleads that on 10 March 2006 the National Bank executed a mutual non-disclosure agreement by which, among other things, the Bank agreed to maintain the confidentiality of “all information provided to it by MMFC with respect to the provision of services by MMFC with respect to asset financing through leasing using methods and or processes disclosed by MMFC”. [Emphasis added]. This pleading is not limited to the “Core Structure” or other confidential information as described in Confidential Annexure A and appears to add further uncertainty to the nature and extent of the confidential information claimed. In my opinion, it compounds the confusion and uncertainty inherent in paragraph 9.
Paragraphs 18 to 55, and possibly also paragraph 17, of the proposed third further amended statement of claim plead the process of alleged disclosure of the Leasa Information to the defendant. Having regard to the breadth of the definition of Leasa Information in paragraph 4 which, in summary, includes everything specified in Confidential Annexure A, “Core Structure” or the possible add-on elements, it is very unclear how it is alleged that the defendant received the confidential information. The nature and extent of the confidential information is not described, and even if the paragraph 4 definition of Leasa Information were to be narrowed, as discussed previously,[14] it is not clear how or why the confidential nature of the information is evident to the extent that this is relevant with respect to the claimed breaches. This is particularly so where the alleged confidential information, which appears to apply to most of it, is somehow embedded as elements in the various documents referred to, particularly as it is not alleged in these pleadings or in the pleadings with respect to the alleged default or breach on the defendant’s part, how this confidential information was or should have been evident to the defendant.
[14]See paragraph 13, above.
Various particular instances are pleaded (for example, paragraph 33) with respect to how the residual value of assets was determined and used under the Leasa system. It is not indicated how this relates to the “Core Structure” and the possible add-on elements as specified in Confidential Annexure A. Nor is it stated whether communication of these matters is to be taken as provision of confidential information to the defendant sufficient to found the plaintiff’s claim or merely an element or stage in the provision of the totality of the alleged confidential information specified in the “Core Structure” and the possible add-on elements referred to in Confidential Annexure A.
Paragraph 54 of the proposed third further amended statement of claim pleads that the documents referred to in paragraphs 18 to 53, being the section of the pleadings to which reference has been made,[15][OU1] contain the elements of the Leasa Information as specified. Consistently with the nature and approach of the preceding pleadings, there is no pleading in paragraph 54 or in the preceding pleadings which identifies or specifies how or why the defendant knew or ought to have known that the documents referred to in these preceding pleadings contained any of the confidential elements referred to in paragraph 4 of the Confidential Annexure A, whether “Core Structure” or any of the possible add-on elements.
[15]That is, paragraphs 18 to 53 of the proposed third further amended statement of claim.
Paragraph 56 of the proposed third further amended statement of claim pleads that the plaintiff made the Leasa Information available to the defendant and its professional advisers in the documents and discussions referred to in paragraphs 17 to 55 of the pleadings. Nevertheless, even if the definition of “Leasa Information” is narrowed, as discussed previously,[16] from the present position where it includes all information supplied to a position where it is a reference to the “Core Structure” and the possible add-on elements under the terms of paragraph 4 of Confidential Annexure A so that the nature and extent of the alleged confidential information is defined, it is not clear how it is alleged in paragraph 56, with reference to paragraphs 17 to 55, that the confidential information was provided to the defendant in such a way that it knew or ought to have known the nature and extent and value of that confidential information (which is the basis of the claim put in paragraph 58).
[16]See paragraph 13, above.
In my view, a pleading that the confidential information is embedded in various documents and discussions, with the inference that by some means or in some circumstance or circumstances not specified the defendant did or ought to have been able to discern the nature and extent of this confidential information, is not a sufficient pleading as the basis for a claim of this nature. This deficiency is highlighted by the pleading in paragraph 58 of the proposed third further amended statement of claim which is in the following terms:
“IPL received the Leasa Information in circumstances in which it knew or ought to have known:
(a) the limited basis upon which the Leasa Information was made available to it by MMFC; and
(b) that the Leasa Information was valuable commercial information of MMFC which was confidential to MMFC.
Particulars …”
It will be observed that paragraph 58 as contained in the proposed third further amended statement of claim presently applies to all information (by reason of the present definition in paragraph 4) and is not limited to “Core Structure” and the possible add-on elements, being the confidential information referred to in terms of elements in paragraph 4 of Confidential Annexure A. In this respect, I should note, specifically, that in my view this deficiency in the pleadings will not be cured with respect to paragraphs 56, 58 or otherwise by the recasting of the definition of “Leasa Information” in paragraph 4 more narrowly, with reference to the confidential elements as specified in paragraph 4 of the Confidential Annexure A.[17]
[17]See paragraph 13, above.
Paragraph 59 of the proposed third further amended statement of claim presently compounds the problems referred to with respect to paragraphs 56 and 58 and the preceding paragraphs 17 to 55 on which these pleadings rely. Paragraph 59 introduces a new concept into the pleadings with respect to the Leasa Information, as defined in paragraph 4 and is apparently intended to define the information said to be confidential more narrowly than was the position in the preceding paragraphs of the pleadings. Paragraphs 4 to 57 of the pleadings essentially define or refer to the confidential information as all information provided to the defendant by the plaintiff, orally or in various documents. These earlier pleadings do not indicate how this information is said to have been discerned or discernable by the defendant for the purposes of the pleading contained in paragraph 58.
The position is exacerbated by the narrowing of the definition of the relevant confidential information or elements for the purposes of paragraph 58. This is because the effect of the pleadings as drawn is that not only must the defendant know or ought to have known of the elements provided to it as specified in paragraph 4 of Confidential Annexure A, but in some manner or on some basis unspecified it must know or be in a position to know of the nature and extent of the combinations of those elements which are alleged to be the “Core Structure” and the possible add-on elements which constitutes the confidential information for the purposes of paragraph 4 of Confidential Annexure A. This is an essential bridge that the present pleadings do not provide, and it is a bridge which will not be provided by a narrowing of the description of “Leasa Information” by amendment of paragraph 4 to reflect the narrowing of this description, which follows from the pleading in paragraph 59, particularly in the context of paragraph 58.
The allegations of breach by the defendant appear in the pleadings from and including paragraphs 59A to paragraph 68 of the proposed third further amended statement of claim.
Paragraphs 64 and 67 are principal allegations of breach against the defendant. Paragraph 67 raises further allegations on the basis of the matters set out in paragraphs 60 to 66. Clearly, any allegations of breach must be founded on a clear articulation in the pleadings of the nature and extent of the alleged confidential information and the obligations with respect to that information said to apply to the defendant. For the reasons indicated, I am of the opinion that this foundation has not been laid and consequently any allegations of breach must suffer from the inherent lack of specificity and uncertainty besetting the earlier pleadings. Consequently, it is not possible at this stage to assess the sufficiency of the pleadings contained in paragraphs 59A and following and, particularly, the pleadings contained in paragraph 67. It also follows that any issues with respect to the pleadings by way of defence to these allegations, the pleadings themselves, their particularisation and any consequential discovery issues must await resolution of issues with respect to the plaintiff’s pleadings.
Conclusion
For the reasons indicated, I am of the opinion that the second further amended statement of claim should be struck out in its entirety. This is the primary relief sought by the defendant in its summons dated 9 November 2009. Also for these reasons, I am not prepared to give leave to the plaintiff to file its proposed third further amended statement of claim.
Nevertheless, at this stage of these proceedings, I am not of the opinion that it would be appropriate to deny the plaintiff the opportunity to provide a pleading by way of a statement of claim which is in accordance with the relevant principles applicable to a pleading of a confidential information claim of the kind it seeks to bring and, in particular, which addresses the deficiencies which I have highlighted. I note that it was also the defendant’s position, in the course of the hearing of these applications, that this would be the appropriate course.
Accordingly, I order that the second further amended statement of claim dated 12 October 2009 be struck out in its entirety and that the plaintiff’s application for leave to file the proposed third further amended statement of claim, which is the exhibit marked “Confidential KJE-19” to the affidavit of Kevin John Elkington sworn 16 February 2010, be refused.
In relation to the question of costs, I am of the opinion that it is appropriate that the costs of the present applications be reserved until a later time in the process of determining issues raised by the parties with respect to the state of the pleadings and, possibly, consequential discovery issues in the proceeding. Each of the parties will have liberty to apply for an order for costs, but having regard to my opinion as to the appropriate time for such an application.
[OU1]Actually refers to Annexure B
2