Mendes v Atega Pty Ltd as trustee of the Kachirski Family Trust
[2022] SASC 68
•11 July 2022
SUPREME COURT OF SOUTH AUSTRALIA
(Appeal to a Single Judge)
MENDES v ATEGA PTY LTD AS TRUSTEE OF THE KACHIRSKI FAMILY TRUST
[2022] SASC 68
Judgment of the Honourable Justice Blue
11 July 2022
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - DETENTION, INSPECTION AND PRESERVATION - SEARCH ORDERS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PROCEDURAL ASPECTS OF EVIDENCE - EXPERT REPORTS AND EXPERT EVIDENCE
Appeal against dismissal of application to discharge search order.
The respondent instituted an ex parte action in which the principal relief sought was a search order under rule 243.1 of the Uniform Civil Rules 2020.
A Judge of the District Court made a search order at an ex parte hearing. The search order empowered a search party to attend at the house of the appellant and search for and copy defined things. The first defined thing was any document or information identified in certain spreadsheets listing folders and files contained in two OneDrive folders contained on the appellant’s work laptop.
At the ex parte hearing, the respondent relied on an expert report by a computer expert, who expressed the opinion that one of the OneDrives on the appellant’s work laptop was unauthorised. The respondent also relied on an affidavit by its principal which in turn relied upon that opinion by the expert and a purported expression of opinion by the expert that the appellant’s “personal” OneDrive was synced to the business OneDrive.
When the search party attended at his house, the appellant applied to discharge the search order. At the hearing of the discharge application, he adduced affidavit evidence by himself that both OneDrives were established as part of the ordinary operation of the company's business. He also adduced evidence from a computer expert engaged by him addressing the expert report by the respondent’s computer expert.
The Judge dismissed the discharge application. In the course of his reasons for judgment, the Judge said that there was no challenge to the respondent’s computer expert's report.
The appellant appeals, and seeks leave to appeal, against the dismissal of his application to discharge the search order on four grounds:
1The Judge erred in finding that there was no challenge to the report of the respondent’s computer expert.
2The Judge erred in not finding that the respondent had failed to satisfy its duty of disclosure in respect of the issue whether there was sufficient evidence that the appellant possessed important evidentiary material.
3The Judge erred in not finding that the respondent had failed to satisfy its duty of disclosure in respect of alternatives less intrusive than a search order.
4The Judge erred because it was not open to find that there was sufficient evidence that the appellant possessed important evidentiary material.
Held:
1Observation concerning ex parte and inter partes hearings of applications for search orders (at [124]-[144]).
2The Judge erred in finding that there was no challenge to the report of the respondent’s computer expert (at [169]).
3The Judge erred in not finding that the respondent had failed to satisfy its duty of disclosure in respect of the issue whether there was sufficient evidence that he possessed important evidentiary material (at [188]).
4The Judge erred in not finding that the respondent had failed to satisfy its duty of disclosure in respect of alternatives less intrusive than a search order (at [199]).
5PCC's breaches of its disclosure obligations coupled with the fact that the evidence adduced at the ex parte hearing did not justify a search order entailed that it should have been discharged (at [229])
6It was not open to find that there was sufficient evidence that the appellant possessed important evidentiary material (at [257]).
7Leave to appeal should be granted (at [264])
8Leave to appeal granted. Orders by the Judge set aside. Parties to be heard on other orders (at [265]).
Corporations Act 2001 (Cth) s 182, s 183, referred to.
Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55; Bank Mellat v Nikpour [1985] FSR 87; Brink's-MAT Ltd v Elcombe [1988] 3 All ER 188; International Finance Trust Co Ltd v New South Wales Crime Commission [2009] HCA 49, (2009) 240 CLR 319; Lloyd’s Bowmaker Ltd v Britannia Arrow Holdings PLC [1988] 1 WLR 1337; Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955; WEA Records Ltd v Visions Channel 4 Ltd [1983] 2 All ER 589, considered.
MENDES v ATEGA PTY LTD AS TRUSTEE OF THE KACHIRSKI FAMILY TRUST
[2022] SASC 68
BLUE J: The respondent Atega Pty Ltd (Atega) instituted an ex parte action in which the principal relief sought was a search order under rule 243.1 of the Uniform Civil Rules 2020 (SA) (the Rules).
A Judge of the District Court made a search order at an ex parte hearing on 8 November 2021. The search order empowered a search party to attend at the house of the appellant, Bruno Mendes, and search for and copy defined things. The first defined thing was any document, record, file or information identified in certain spreadsheets listing folders and files contained in two OneDrive folders contained on Mr Mendes’ work laptop.
At the hearing, Atega relied on an expert report by a computer expert, who expressed the opinion that one of the OneDrives on Mr Mendes’ work laptop was unauthorised. Atega also relied on an affidavit by its principal which in turn relied upon the opinion by the expert and also a purported expression of opinion by the expert that Mr Mendes’ “personal” OneDrive was synced to the business OneDrive.
When the search party attended at his house, Mr Mendes applied to discharge the search order. At the hearing of the discharge application, he adduced affidavit evidence by himself that both OneDrives were established as part of the ordinary operations of the company’s business. He also adduced evidence from a computer expert engaged by him addressing the expert report by Atega’s computer expert.
The Judge dismissed the discharge application. In the course of his reasons for judgment, the Judge said that there was no challenge to Atega’s computer expert’s report.
Mr Mendes appeals, and seeks leave to appeal, against the dismissal of his application to discharge the search order on four grounds:
1The Judge erred in finding that there was no challenge to the report of Atega’s computer expert.
2The Judge erred in not finding that Atega had failed to satisfy its duty of disclosure in respect of the issue whether there was sufficient evidence that Mr Mendes possessed important evidentiary material.
3The Judge erred in not finding that Atega had failed to satisfy its duty of disclosure in respect of alternatives less intrusive than a search order.
4The Judge erred because it was not open to find that there was sufficient evidence that Mr Mendes possessed important evidentiary material.
Background
In 1978 William Kachirski incorporated Atega Pty Ltd, which became the trustee of the Kachirski Family Trust. In that capacity, Atega Pty Ltd commenced trading as the Posture Care Chair Company (PCC).
PCC commenced carrying on business tailor-designing, manufacturing and supplying recliner chairs. It focused on recliner chairs for aged and vulnerable persons.
PCC imported chairs or components from manufacturers in China who manufactured chairs or components to its designs. No evidence was adduced that PCC had exclusive agreements with these manufacturers. By 2021, it appears that PCC was importing chairs from a single manufacturer, Lang Haoxuan. The fact that Lang Haoxuan advertises products that it manufactures for PCC on its website (referred to below) indicates that PCC’s arrangements are not exclusive.
In June 2013 Vasco Mendes (Mr Mendes’ father) (Vasco) commenced employment by PCC as Production Manager. In August 2013 Maria Mendes (Mr Mendes’ mother) commenced employment by PCC as Senior Sewing Machinist.
In 2017 and 2018 the National Disability Insurance Scheme (NDIS) introduced a program for recliner chairs. In 2018 the federal government announced government-funded Home Care Packages capable of being used to provide funding towards the purchase of recliner chairs for eligible persons. PCC dealt with coordinators in respect of these programs (as well, perhaps, as end customers).
At some stage (not disclosed on the evidence) PCC established a website with the domain name posturecarechair.com.au. Certain employees of PCC were allocated email addresses being “[name]@posturecarechair.com.au”.
In October 2018 Mr Mendes commenced employment by PCC as Business Development Manager. He was provided by PCC with a laptop computer (Mr Mendes’ work laptop). He was also provided with a work email address, which was [email protected].
Mr Mendes was presented with a copy of the Employee Handbook then in use by PCC (the Handbook) and signed an acknowledgement that he had received it on 17 October 2018. He deposed in his affidavit that he returned it upon signing and was not provided with a copy to retain, which was not contradicted by Mr Kachirski in his responding affidavit. Under the heading Non-Disclosure, the Handbook stated that the protection of confidential business information and trade secrets was vital to the interests and success of PCC and identified in generic terms examples of confidential information, which included customer lists and preferences. It then stated:
All employees are required to sign a non-disclosure agreement as a condition of employment. Employees who improperly use or disclose trade secrets or confidential business information will be subject to disciplinary action, up to and including termination of employment and legal action, even if they do not actually benefit from the disclosed information.
A non-disclosure agreement to which the handbook apparently referred was signed by Mr Mendes on 4 July 2019 (the Confidentiality Agreement) after he was appointed General Manager on 17 June 2019 (if he signed an earlier non-disclosure agreement on appointment as Business Development Manager, Mr Kachirski did not depose to its existence or exhibit it). The Confidentiality Agreement contained provision for execution by PCC but the copy exhibited to Mr Kachirski’s affidavit is not executed by PCC. Clause 1 defined “Confidential Information” in broad terms, including technical and business information relating to customers and clients. Clause 2 provided that:
The Recipient agrees not to disclose confidential information obtained from the discloser to anyone unless required to do so by law.
The wording of the Confidentiality Agreement was more apposite to address disclosure for example to a prospective purchaser of a business than to address disclosure by an employee.
Shortly after Mr Mendes commenced employment with PCC, he advised Mr Kachirski that a cloud-based storage system would be more efficient for business. As a result, PCC engaged an information technology contractor to establish cloud-based storage for the business.
The IT contractor recommended the use of Microsoft’s cloud-based storage system called OneDrive. Microsoft categorises OneDrive accounts as “Personal” or “Business/School” for pricing purposes.
Microsoft offers one “Personal” OneDrive account per user together with five gigabytes of storage space for free or the user can purchase additional storage space for a subscription fee. In order to establish a “Personal” OneDrive account, a user must initially sign into OneDrive.com using a Microsoft account username (an email address associated with a Microsoft product such as Office365) with its associated password (if they do not have a Microsoft account the user can select to create one). Once the OneDrive account has been established, a user can use any email address (such as a Gmail address associated with the Google product) as their OneDrive username.
Microsoft also offers one or multiple OneDrive accounts to businesses or schools who subscribe to Office365 or another relevant Microsoft product. In order to establish a “Business/School” OneDrive account, a user needs to sign into OneDrive.com using a Microsoft account username with its associated password. Unlike a “Personal” account, a “Business/School” account must continue to be accessed using a Microsoft account username.
Although Microsoft describes OneDrive accounts as either “Personal” or “Business/School”, once established there is no limitation on the files that can be stored within a OneDrive account. Personal files can be stored on a “Business/School” OneDrive account and business files can be stored on a “Personal” OneDrive account.
In order to access the folders or files contained within a OneDrive account, it is necessary to sign in using the username and password assigned to that OneDrive account. The password can be changed by the “owner” of the OneDrive account. The owner can set additional security steps to sign into a OneDrive account, such as two factor verification (for example, requiring entry of a code sent by Microsoft to the owner’s mobile phone number or email address).
A user who has access to a OneDrive account can choose to save a folder or file to the hard drive (or other storage) of their own computer or to the cloud using Microsoft cloud storage or to both. If they save a folder or file to both, it can be accessed either via their computer’s hard drive (or other storage) or by signing into the relevant OneDrive account from any internet-enabled device.
A OneDrive account was established to which the username of Mr Kachirski’s Gmail account [gmail account] was assigned (OneDrive A). Files and subfolders were saved into a folder on Mr Mendes’ work laptop (OneDrive folder A).
Another OneDrive account was established to which the username of Mr Mendes’ work email address ([email protected]) was assigned (OneDrive B). Files and subfolders were saved into a folder on Mr Mendes’ work laptop (OneDrive folder B).
On 17 June 2019 Mr Mendes was promoted to the position of, and commenced as, General Manager. On a date not disclosed by Mr Kachirski in his affidavit, he sent to Mr Mendes an email setting out the job description of the position (the Jobs Description). It included the salary, provision for a bonus (not yet quantified) and title. It included various obligations but did not refer to any restraint after termination of employment or confidential information obligations.
On 26 July 2019 PCC sent a letter to Mr Mendes stating that it offered employment in the position of General Manager for 12 months (the Letter of Offer). The letter attached:
·a document entitled Standard Terms and Conditions of Employment which contained provision for execution by both parties (the Unexecuted Standard Terms); and
·a document entitled Confidentiality Agreement which contained provision for execution by both parties (the Unexecuted Confidentiality Agreement).
The Unexecuted Standard Terms and Unexecuted Confidentiality Agreement defined “Confidential Information”.
The Letter of Offer requested Mr Mendes to sign the attached copy of the letter and the Unexecuted Standard Terms and Unexecuted Confidentiality Agreement and return them to PCC. The letter stated that the three documents were intended to create a legally binding employment contract when Mr Mendes signed and returned the copy of the letter.
There were ongoing negotiations between the parties relating to the terms of Mr Mendes’ employment, including in particular in relation to bonuses. These negotiations were never finalised. Mr Mendes never signed or returned a copy of the Letter of Offer, Unexecuted Standard Terms or Unexecuted Confidentiality Agreement.
In about July 2019 Mr Kachirski sent Vasco to China to visit factories manufacturing chairs for PCC to assist in designing new chairs for PCC. This included Lang Haoxuan.
On 6 January 2021 a formal meeting was convened between Mr Kachirski and Mr Mendes and PCC’s Administration and Finance Manager. The minutes of the meeting record that Mr Kachirski said that he had lost confidence and even trust in Mr Mendes and there was then a detailed discussion in relation to numerous topics, culminating in an agreement on a restructure of processes and procedures of all areas of the business.
On 7 March 2021 Mr Mendes used his work laptop to search for the availability of and purchase a domain name “tailormaderecliners” and search for the availability of a business name “tailor made recliners”.
On 27 April 2021 PCC was granted a United States patent for a chair with a patented lift and recline mechanism which uses three motors. Mr Kachirski said in his affidavit that this mechanism was first patented in Australia but did not exhibit the Australian patent or identify when it was granted.
On 20 May 2021 Mr Mendes sent a text message to Mr Kachirski apologising for an email sent earlier the same day and seeking to discuss an exit package.
On 21 May 2021 Mr Kachirski sent an email to Mr Mendes acknowledging receipt of his text message. He said that, if Mr Mendes considered an exit package to be in his best interests, he should take Monday and Tuesday off to consider his options and let Mr Kachirski know on Wednesday morning. If he chose to remain, they would need to meet to discuss his performance management process. If he chose to resign, Mr Kachirski would hear him on a separation proposal. Mr Mendes responded by email saying that he had no intention of resigning, would be at work on Monday and welcomed his performance to be reviewed at any time.
On or shortly after 25 May 2021 Mr Kachirski handed or had handed to Mr Mendes a letter drafted by PCC’s solicitors, Camatta Lempens. Mr Kachirski exhibited to his affidavit the draft letter received from his solicitors but not the final letter handed to Mr Mendes. The letter set out the history and referred to a letter said to have been written by Mr Kachirski to Mr Mendes earlier in the year, which earlier letter Mr Kachirski did not exhibit to his affidavit.
The letter went on to state that Mr Kachirski would meet with Mr Mendes fortnightly over the next eight weeks, attended by a staff member to take minutes, PCC’s solicitors and, if he wished, a support person. A review would be undertaken at the conclusion of the eight week period. If Mr Mendes’ performance did not improve at a satisfactory rate, he may be subject to further performance management, alteration of his duties and/or remuneration in consultation with him or termination of his employment.
On 31 May 2021, at Mr Mendes’ request, Mr Kachirski met with Mr Mendes with other persons present. There is a dispute on the evidence as to what was said during that meeting.
On 4 June 2021 Mr Kachirski handed or had handed to Mr Mendes a letter (the 4 June letter). The letter articulated three allegations of misconduct and provided to Mr Mendes an opportunity to show cause by 9 June 2021 in effect why his employment should not be terminated. The first allegation included attempted extortion that allegedly occurred at the 31 May 2021 meeting. The third allegation was of failure to obey a direction to engage in performance management. The second allegation was that at the meeting on 31 May 2021 Mr Mendes said that a family friend was willing to gift to him $1 million and he intended to approach the family friend and open an opposition business.
The letter directed Mr Mendes not to attend at work while the subject matter of the letter was being investigated and considered. It directed him immediately to return all property belonging to PCC, including his iPad, work laptop and keys. It stated that he would be paid his normal wages during this period of garden leave.
Mr Mendes departed the PCC premises after being given the 4 June letter. He left behind his work laptop. When Mr Mendes left, there were two OneDrive folders contained on his laptop, OneDrive folder A and OneDrive folder B.
On 4 June 2021 Mr Kachirski handed or had delivered to Mr Mendes a second letter marked “Without Prejudice Save as to Costs”. It set out terms on which Mr Kachirski was open to a proposal for a resolution in relation to the cessation of Mr Mendes’ employment. On the same day Mr Mendes sent a text message in response putting a proposal.
On 7 June 2021 Mr Mendes sent a text message to Mr Kachirski responding to the 4 June letter. In respect of the second allegation, he said that a family friend had approached him during the previous year to open a business and take his parents away given Mr Kachirski’s treatment of them but nothing came of it and Mr Mendes upheld his duties. It respect of the other two allegations, he denied them.
On 10 June 2021 Mr Kachirski sent an email to Mr Mendes attaching a letter. The letter said that Mr Kachirski found the first and third allegations in the 4 June letter proven and the second allegation proven to a degree. It stated that Mr Mendes’ employment was terminated summarily effective immediately.
On 13 or 20 June 2021 Mr Kachirski had a conversation with an unnamed employee of PCC. The Judge admitted evidence of the conversation not as truth of its content but for the limited purpose of explaining Mr Kachirski’s next actions.
The employee showed to Mr Kachirski the website of PCC’s Chinese manufacturer [Lang Haoxuan]. Mr Kachirski identified that one of the chairs on the website was one of PCC’s designs at the time that Vasco went to China in July 2019. He identified that there were other chairs on the website that were part of PCC’s intended new modern product range.
As a result of that conversation (and the earlier conversation with Mr Mendes on 31 May 2021 concerning a competing business), Mr Kachirski caused PCC’s solicitors, Camatta Lempens, to engage Mar Noordin (an information technology consultant at Duncan Powell) to conduct a forensic examination of Mr Mendes’ work laptop to ascertain whether there was any evidence suggesting that PCC’s Property had been copied or distributed.
Neither Mr Kachirski in his affidavit nor Mx Noordin in the Noordin report disclosed when Mx Noordin was engaged or the scope of instructions provided by Camatta Lempens at that stage (other than as described by Mr Kachirski in his affidavit as reproduced in the previous paragraph). By the time that Camatta Lempens sent the first letter to Mx Noordin that was exhibited to Mr Kachirski’s affidavit, the forensic examination had been completed. It may therefore be inferred that Mx Noordin was engaged by late June/early July 2021.
On 2 July 2021 Benny Tak Kin Tang and Van Thuy Truong incorporated a company called Harrowford Pty Ltd (Harrowford). They became equal shareholders, and the directors, of Harrowford. Harrowford registered the business name Harrowford Recliners.
On 9 July 2021 Vasco ceased employment with PCC, having resigned.
In or after July 2021 Harrowford commenced to carry on business as a retailer of recliner chairs. It created a website (the Harrowford website) and a Facebook webpage under the name Harrowford Recliners (the Harrowford Facebook webpage). Harrowford engaged Mr Mendes as a mobile sales and marketing consultant to sell its recliner chairs.
On or before 10 August 2021 Mx Noordin informed Camatta Lempens that the forensic examination had been completed.
On 10 August 2021 Camatta Lempens sent a letter to Mx Noordin stating that they understood that the forensic examination had now been completed. They requested an expert report setting out:
1a detailed summary of the forensic examination undertaken;
2what was found in the course of the examination of Mr Mendes’ computer;
3if digital evidence was found, what were the risks, serious risks and actual damage to the security of PCC’s Confidential Information; and
4is there any evidence that Mr Mendes can access, or has in his possession or control, PCC’s Confidential Information.[1]
[1] Questions renumbered for ease of reference.
On 11 August 2021 Camatta Lempens sent an email to Mr Mendes attaching a letter addressed to him. The letter set out various obligations said to be owed by Mr Mendes on termination of his employment, including by reference to clauses 8 to 11 of the Unexecuted Standard Terms and the general law. It demanded immediate return of any confidential information in the possession of Mr Mendes and a written undertaking by 19 August 2021 in terms set out in the letter.
On 11 August 2021 Mr Mendes sent an email to Camatta Lempens asking for a copy of the “alleged agreement (Employment Contract)” and stating that the terms of the Unexecuted Employment Contract had not been agreed upon and therefore it had not been signed.
On 12 August 2021 Camatta Lempens sent an email to Mr Mendes contending that there was an agreement in terms of the Unexecuted Standard Terms implied from conduct, to which Mr Mendes responded denying this and contending that he was bound only by his initial agreement and by the original terms of the Employee Handbook.
On 25 August 2021 Camatta Lempens sent a further letter to Mx Noordin requesting that the expert report:
5identify any records pertaining to user login credentials to web services;
6identify any records indicating use of cloud storage services;
7provide a timeline of events from 1 May 2021 to 10 June 2021; and
8identify the significance of the findings in relation to the data exfiltration of PCC’s data and intellectual property.[2]
[2] Questions renumbered for ease of reference.
On 13 September 2021 Mr Kachirski caused searches to be undertaken in relation to Harrowford. They showed the registration in July of Harrowford as a company and of the business name Harrowford Recliners.
Mr Kachirski caused searches to be undertaken on the World Wide Web for a Harrowford website or Facebook webpage. Those searches disclosed the existence of the Harrowford website and the Harrowford Facebook webpage. In his affidavit, Mr Kachirski said that the website and Facebook webpage depict products that are the same as advertised on PCC’s manufacturer Lang Haoxuan’s website.
On 15 September 2021 Mx Noordin provided an expert report to Camatta Lempens (the Noordin report). The report addressed only questions 5 to 7 posed in the second Camatta Lempens letter dated 25 August 2021.
The report was structured under major heading A Introduction and major heading B Findings. Under the heading B Findings, the report briefly described the laptop and number and types of data recovered from it. It then addressed questions 5 to 7 together with a description of Mr Mendes’s Internet search activity on 7 March 2021. Insofar as the report addressed questions 5 and 7, it was inconsequential for present purposes.
In relation to question 6, the report identified OneDrive folder A and OneDrive folder B on Mr Mendes’ work laptop. It stated that:
·OneDrive folder A contained 25,470 files within 53 subfolders (details of which Mx Noordin exported into an Excel spreadsheet (the OneDrive A spreadsheet); and
·OneDrive folder B contained 50,377 files within 81 subfolders within two primary subfolders (details of which Mx Noordin exported into a second Excel spreadsheet (the OneDrive B spreadsheet).
Mx Noordin said that OneDrive A appeared to be a “personal” account because it was not appended with the company name and OneDrive B appeared to be a business account because it was appended with the company name.
The report was accompanied by the OneDrive A spreadsheet and the OneDrive B spreadsheet (collectively the Noordin spreadsheets). Each spreadsheet contained columns as follows:
1A sequential number for identification.
2Filename (the short name of the folder or file).
3Source (the full name of the folder or file).
4Size (in bytes).
5Created UTC (a date and time).
6Modified UTC (a date and time).
7Accessed UTC (a date and time).
8Is Deleted (yes or no – almost exclusively no).
Mx Noordin did not explain the meaning of the columns. Although the first four columns are self-explanatory, there was no explanation of the meaning of the terms “Created”, “Modified”, “Accessed”, “UTC” or “Deleted”.
The report stated that each drive was recorded as last “modified (or synced)” on 31 May 2021 at 6.47 am. The report did not explain what it meant by “drive”, including whether this was each folder or something else. It did not explain whether or how that date and time was recorded in either spreadsheet or otherwise derived.[3] It did not explain what it meant by “modified” or “synced” or the phrase “modified (or synced)” or the significance if any of this to the matter.
[3] That date and time is not apparent in either spreadsheet.
In this section of the report, Mx Noordin inferred that the OneDrive B account was a work account because the words “posturecomfortchair” appeared in its username and the OneDrive A account was a personal account because those words did not appear in its name. There was no assumption or instruction from Camatta Lempens on this topic.
No other relevant findings were made in section B Findings.
The report did not identify when Mx Noordin started examination of the laptop or how long Mx Noordin worked on the matter. The report did not address any of questions 1 to 4 posed by Camatta Lempens in their request dated 10 August 2021. Despite having been requested in questions 1 and 2, the report did not provide a detailed summary of the forensic examination undertaken or what was found in the course of the examination of the laptop. It did not identify whether any of the files listed in the spreadsheets were opened or read or whether any access was made or attempted to OneDrive A or B in the cloud.
In section A Introduction, under the subheading Summary of Findings, Mx Noordin set out what purported to be a summary of findings but in fact contained several findings that did not appear in section B of the report. The summary (with findings that did not appear in section B of the report italicised for identification) was as follows:
1.1I identified an unauthorised OneDrive account using Mr Mendes’ former employer’s (Mr Bill Kachirski) credentials linked on the computer.
1.2This unauthorised OneDrive account appears to contain 25,470 files which relate to The Posture Care Chair Company business.
1.3OneDrive is a cloud storage solution which allows a user access to their data from any location using an internet capable mobile device or computer. This means Mr Mendes was able to access that data contained in Mr Kachirski’s OneDrive account after his employment was terminated.
1.4I identified records of internet searches relating to the availability of internet domains and business registrations for “tailormade recliners”.
1.5I further identified records relating to the purchase and subsequent activation of the “tailormaderecliners” domain.
1.6In my experience, the combined discovery of the unauthorised OneDrive account containing The Posture Care Chair Company business data, its access and availability to Mr Mendes, and the searches for and subsequent purchase of the “tailor made recliners” internet domain are consistent with activity to utilise the Company data for purposes unrelated to the Company.
Mx Noordin did not explain the basis of characterising the OneDrive A account as “unauthorised”; how it was determined that the files contained in that drive related to PCC’s business; how it was determined that Mr Mendes was able to access the data contained in that OneDrive account after his employment was terminated; or why discovery of that account (coupled with the 7 March 2021 Internet activity) was consistent with activity to utilise company data for unrelated purposes.
On 28 October 2021 Mr Kachirski affirmed an affidavit intended to support an application for a search order against Mr Mendes and Vasco (Mr Kachirski’s affidavit). The affidavit contained 43 exhibits, including the Noordin report and the Noordin spreadsheets. It primarily comprised a chronological account of Mr Kachirski’s involvement with PCC, Mr Mendes and Vasco and of his investigations after the termination of Mr Mendes’ employment (which is generally included in the chronological narrative above).
Paragraphs 86 and 87 of Mr Kachirski’s affidavit were as follows:
[86][The Noordin report] sets out that Bruno:
86.1synced his personal OneDrive to PCCC’s OneDrive;
86.2 had and still has access to my personal email account for which we have since changed the passwords; and
86.3 has over 25,000 files belonging to PCCC synced his personal OneDrive.
[87]PCCC’s OneDrive contains Company Property and Confidential Information including that referred to at paragraph [26]. Noordin’s Report shows that Company Property and Confidential Information has been synced to Bruno’s personal OneDrive.
Mr Kachirski did not identify why he referred to OneDrive A as “Bruno’s personal OneDrive”; why he said that the Noordin Report stated that Mr Mendes synced OneDrive A to OneDrive B; or why he said that the Noordin Report stated that Mr Mendes had over 25,000 files synced to OneDrive A.
Curiously, Mr Kachirski did not give any evidence in his affidavit concerning the OneDrive accounts other than his purported summary of Mx Noordin’s report contained in paragraphs 86 and 87 of his affidavit reproduced above.
Beyond the chronological account, Mr Kachirski concluded his affidavit with a section under the heading Anticipated Legal Proceedings. He said that he would take legal advice as to causes of action that could be pursued against Mr Mendes and/or Vasco as a result of the retention and use of PCC’s information and identified the following causes of action against Mr Mendes:
·breach of contract (relying on the Unexecuted Standard Terms and Unexecuted Confidentiality Agreement);
·negligence;
·tortious interference; and
·breach of fiduciary duty in equity and misuse of position and information in breach of sections 182 and 183 of the Corporations Act 2001 (Cth).
He did not include a cause of action in equity for wrongful disclosure or use of confidential information. He did not identify what conduct by Mr Mendes was the subject of each potential cause of action.
Otherwise, Mr Kachirski included the following paragraphs in this concluding section of his affidavit:
[121]I am concerned that Bruno formed an intention to damage PCCC’s reputation and business during the issues relating to his performance as an employee of PCCC. I believe that Bruno has taken active steps to interfere with clients’ confidence in PCCC and has taken steps to cause financial difficulties for PCCC.
[122]I believe that Bruno still has access to and is utilising Company Property and Confidential Information for Harrowford. I do not know but suspect he may also have stock of PCCC.
…
[129]I have already incurred loss, to be quantified, with respect to Bruno’s tortious interference and negligence which has resulted in PCCC’s inability to service its clients. This could have irreparable damage on PCCC’s business.
[130]Should my suspicions be confirmed, and Bruno and/or Vasco, have been found to have utilised PCCC’s information (including confidential information and intellectual property) to establish competing businesses, the potential losses will be immeasurable as a result of PCCC’s niche market.
[131]Not only does PCCC’s information include all of PCCC’s designs and patents but it also held details for all of our customer enquiries and costings which could be utilised by Bruno to undercut PCCC.
[132]Given Bruno and Vasco’s responses to PCCC and refusal to provide declarations as to retaining PCCC’s Property I am concerned that they will seek to cover up their actions and the location of PCCC’s information including confidential material and intellectual property…
[133]I urgently seek that the Court grant the orders sought to protect PCCC’s information (including confidential information and intellectual property) and prevent Bruno, Harrowford and Vasco from making use of PCCC’s Property for their financial benefit.
It is clear from these paragraphs that the purpose of seeking the search order was related to the protection of confidential information of PCC (rather than the restraint of trade covenant in the Unexecuted Standard Terms or the allegations that Mr Mendes had sabotaged the business).
On 1 November 2021 PCC, by its solicitors Camatta Lempens, filed in the District Court an ex parte originating application seeking, amongst other things, a search order against Mr Mendes supported by Mr Kachirski’s affidavit.
On 8 November 2021 PCC’s application for a search order came before the Judge. Counsel appeared for PCC and informed the Judge that the originating application was ex parte. PCC relied on Mr Kachirski’s affidavit and tendered two exhibits: A1 being the Employee Handbook and A2 being an extract taken by counsel from 72 lines from the OneDrive A spreadsheet produced by Mx Noordin.
The Judge made a search order in the terms sought by PCC. The order appointed Paul Bear as the independent lawyer and Mx Noordin as the independent computer expert. It authorised their attendance (together with a solicitor from Camatta Lempens) at Mr Mendes’ house and the search for and copying of the Listed Things. The Listed Things were defined to comprise five categories of things, including any file or information identified in the Noordin spreadsheets and any documents, files, information or property belonging or related to PCC.
The order precluded disclosure to PCC of any material obtained as a result of the search until the return date. The return date shown in the order was 22 November 2021 (later changed to 24 November 2021).
The Judge indicated that he would make an order in due course after the search had been carried out joining Mr Mendes, Harrowford and Vasco as respondents upon notification by PCC that the search had been carried out. It does not appear that any order was ever subsequently made joining any respondent. The Record of Outcome dated 8 November 2021 shows no respondent. The formal sealed search order shows Mr Mendes and Harrowford as Respondents despite there being no apparent order joining them as respondents.
On the morning of 17 November 2021 the independent lawyer attended at Mr Mendes’ house to execute the search order. He served the order together with the originating application and Mr Kachirski’s affidavit. Mr Mendes asked the him to leave his house while he sought legal advice and read the documents served on him.
On 17 November 2021 Mr Mendes affirmed an affidavit in which he deposed to not having any documents or records of PCC and not having used its confidential information. He said that he was engaged by Harrowford as a contractor to market and sell products owned by Harrowford on its behalf.
On 17 November 2021 Mr Mendes, by his solicitors Campbell Law, filed an urgent interlocutory application seeking discharge of the search order and a stay until that application was heard. The application was made returnable on 22 November 2021 (being the return date shown in the search order) (later changed to 24 November 2021).
On the afternoon of 17 November 2021 the matter came before the Judge. It was agreed that Mr Mendes would produce his Lenovo laptop/notepad and his iPhone immediately after court to Mr Bear as the independent lawyer, who would produce it to Mx Noordin as the independent computer expert, who would mirror the memories on those devices and return them to Mr Mendes when completed. It was agreed that the independent lawyer and independent computer expert would return to Mr Mendes’ house on the following day to search for other devices. The search order was varied consistently with these agreed matters.
The search order was also varied to preclude until further order disclosure to PCC or anyone else (except the independent lawyer, independent computer expert and lawyers for the parties) of any material obtained as a result of the search. It was also varied to limit the scope of the search. The matter was adjourned to the return date of the search order and of Mr Mendes’ interlocutory application to discharge it and was ultimately adjourned for argument on 10 December 2021.
On 30 November 2021 Campbell Law sent a letter to Jean-Pierre du Plessis, an information technology consultant. They requested an urgent expert report seeking his opinion on four questions. On 6 December 2021 Campbell Law sent a further letter to Mr du Plessis providing further materials and requesting that he address seven further questions.
On 3 December 2021 Mr Mendes affirmed an affidavit (Mr Mendes’ affidavit) responding to Mr Kachirski’s affidavit. He deposed to the creation of the two OneDrive accounts as reproduced at [235] below. He denied entering into a contract in terms of the Unexecuted Standard Terms or Unexecuted Confidentiality Agreement.
Mr Mendes said that he was contracted by Harrowford as a mobile sales and marketing consultant. He denied that the products sold by Harrowford were the same as the products sold by PCC. He said that he had returned his work laptop, and all other company property, on 4 June 2021 when his employment was suspended. He said that at that point PCC changed the password to his work email address and he was unable to access OneDrive B.
On 8 December 2021 Mr du Plessis provided an expert report to Campbell Law (the du Plessis report). He said that it was not clear why Mx Noordin regarded the OneDrive A account as “unauthorised” and in his opinion it was not unauthorised because the email account belonged to Mr Kachirski, who must have provided his password to establish the OneDrive account. He expressed the opinion that PCC had control of both OneDrive accounts because the credentials to both accounts were under the control of PCC, which could change the passwords at any time. If the passwords were changed, Mr Mendes would have no access to the accounts. He said that both Google and Microsoft maintained records of password changes.
Mr Mendes also addressed the Noordin spreadsheets and the potential ability of Mx Noordin to identify whether files stored on the OneDrives were downloaded or emailed.
On 8 December 2021 Timothy Campbell affirmed an affidavit exhibiting the du Plessis report and his briefing correspondence to Mr du Plessis.
On 9 December 2021 Mr Kachirski affirmed a further affidavit (Mr Kachirski’s responding affidavit) in response to Mr Mendes’ application to discharge the search order. It is largely reproduced at [236] below.
On 10 December 2021 the Judge heard Mr Mendes’ application to discharge the search order.[4] The Judge delivered ex tempore reasons for dismissing the application.
[4] Mr Mendes filed a second application to discharge the search order on 2 December 2021 but this was otiose (except perhaps as to costs) because his original application dated 17 November 2021 had not been heard or determined and was adjourned for subsequent determination.
The ex parte hearing before the Judge
Counsel for PCC took the Judge through the chronological narrative contained in Mr Kachirski’s affidavit up to paragraph 112. This included detailed references to the confidentiality clauses contained in the Unexecuted Standard Terms and the Unexecuted Confidentiality Agreement.
When counsel reached paragraphs [86] and [87] of Mr Kachirski’s affidavit, emphasis was given to Mr Kachirski’s purported summary of Mx Noordin’s report. Counsel said:
Relevantly it sets out that Bruno had synced his personal OneDrive to the computer that he used for his employment. So essentially there were two OneDrive instances or profiles that were identified on the computer, being Bruno's personal OneDrive and also the company's business OneDrive.
Bruno had access to the business OneDrive for work purposes, however Ms Noordin's also identified that it appears he's synced the documents from the business OneDrive account to his personal OneDrive account.
There were approximately over 25,000 files belonging to the company that were synced to his personal OneDrive which has raised concerns that he still has access to those documents.
…
It appears, based on Mar Noordin's report, that Bruno has and may still have access to those documents by virtue of what is synced to his personal OneDrive account.
…
Ms Noordin's report also provides further background and how it was identified; that the profile, the subject of that report, being users/Bruno/OneDrive appears to be a personal account. That's discussed at para.2.2.1 of her report at 875 [sic]. It notes that that OneDrive was recorded as last modified or synced on 31 May 2021, although I understand that there was access, according to that spreadsheet, on 4 June.
…
It's unclear whether or not and I can say no more than submitting that an inference can be drawn that those documents were copied deliberately, however, it's unclear as to whether this is where when it was last accessed, whether he had his system set up to sync these documents on a regular basis.
Counsel referred to OneDrive A as a “personal” account and used the term personal in the sense that the account had nothing to do with PCC. By contrast, Mx Noordin had characterised it as “Personal” in the technical sense that Microsoft characterises accounts with usernames other than those connected to Microsoft products as Personal. As observed above, in that technical sense, a Personal account may be used for business purposes and a Business account may be used for personal purposes.
Counsel tendered a document which became Exhibit A2 (Exhibit A2). Counsel said that she had sorted the OneDrive A spreadsheet by reference to the date in the “Accessed” column sorted from newest to oldest and printed the first 72 rows out of the 25,000 odd rows in the spreadsheet. When asked what the column heading “Accessed UTC” meant, counsel said that it meant the last date universal time when the relevant document was accessed. Reference was made to the fact that the most recent date in that column was 4 June 2021 and to the fact that most of the rows in Exhibit A2 showed 30 May 2021 or 4 June 2021 in that column, suggesting that Mr Mendes had accessed those files in the last week before his employment was suspended.
There were three broad complaints or potential complaints by Mr Kachirski in his affidavit, namely that Mr Mendes had sabotaged the business, that he was working in a business in breach of the restraint covenants in the Unexecuted Standard Terms and that he was using or disclosing confidential information. However, it is clear from counsel’s submissions at the ex parte hearing (and indeed at the inter partes hearing and on appeal) that the purpose of the search order was related to the protection of confidential information of PCC (rather than the subject of the other two broad complaints).
Counsel signalled an intention to move to the substance of the submissions as to why a search order should be made. Before doing so, counsel said
So the application essentially is made on the base that a search order be granted with respect to Mr Bruno Mendes' residence, and essentially to seek access to his computer to identify whether those documents that have been referred to in Ms Noordin's report, or any further items of company property can be located on the computer drive.
Counsel then turned to work through the terms of the proposed search order and the Judge suggested various modifications.
The Judge then indicated that he was prepared to make the order and did not require counsel to make any submissions in support of the application for the order. This was unfortunate because counsel had not addressed the four prerequisites to making an order; they had not been clearly and separately articulated in Mr Kachirski’s affidavit; and the Judge did not give reasons for making the order. The combination of these factors makes it difficult to know how the Judge was satisfied that each of the four prerequisites had been established.
The inter partes hearing before the Judge
Counsel for Mr Mendes made both written and oral submissions.
Counsel for Mr Mendes relied on three grounds to discharge the search order:
1PCC breached its duty of disclosure, both by failing to disclose material matters and by unintentionally misleading the Judge in relation to the manner in which the technology worked;
2PCC failed to identify alternative, less intrusive, methods of obtaining the information sought to be obtained by the search order and those methods should have been exhausted before applying for the search order;
3The evidence adduced by PCC did not satisfy the onus of establishing the prerequisites for making a search order.
In relation to the first ground, counsel for Mr Mendes referred to Mx Noordin’s characterisation of OneDrive A as unauthorised, which in turn informed paragraphs 86 and 87 of Mr Kachirski’s affidavit. Counsel contended that there was no basis disclosed by PCC for this statement or finding by Mx Noordin. Counsel submitted that this was the central thesis for the suspicion that Mr Mendes had retained company documents after his departure.
Counsel referred to the submissions made to the Judge at the ex parte hearing reproduced at [100] above. Counsel contended that the submission that Mx Noordin’s report showed that Mr Mendes had synced his personal OneDrive A to the company’s OneDrive B was not based on anything contained in Mx Noordin’s report or any other evidence adduced before the Judge. Counsel also referred to the submission to the Judge at the ex parte hearing that an inference could be drawn that those documents were copied deliberately and submitted that there was no basis for that submission.
Counsel referred to the submissions made to the Judge about the meaning of “accessed UTC” at the ex parte hearing and that Mr Mendes had accessed documents in OneDrive A on 30 May 2021 and 4 June 2021. Counsel submitted that there was no basis in the evidence for that submission and indeed the du Plessis report illustrated that it was made without a basis (in that various system maintenance applications such as antivirus and backup typically update the last access date when they run).
Counsel submitted that there was no evidence that Mr Mendes could or did access either OneDrive after he was suspended on 4 June 2021.
Counsel submitted that there was no reference in the evidence to examination by Mx Noordin of individual files and this should have been done and disclosed.
In relation to the second ground, counsel for Mr Mendes submitted that there was no evidence adduced by PCC about any attempts to obtain information sought by other methods. Counsel referred for example to the potential methods identified in the du Plessis report (addressed in more detail below) and to the possibility of Mx Noordin examining what was recorded in the cloud. Counsel submitted that Mx Noordin should have examined these matters and either failed to do so or failed to disclose having done so. Counsel referred to the authorities about the need to exhaust less invasive methods before seeking a search order.
In relation to the third ground, counsel for Mr Mendes submitted that the evidence adduced by PCC did not satisfy the onus of establishing the prerequisite that there was sufficient evidence that Mr Mendes possessed important evidentiary material.
Counsel for PCC made submissions in reply, which it is not necessary to summarise. Essentially the same submissions were made on appeal.
The Judge’s reasons
After introducing the application and affidavit material, the Judge’s reasons were as follows (paragraph numbers inserted for ease of reference):
2The essence of [Mr Mendes’ counsel’s] submissions are that there were matters that should have been put before the Court on the ex parte application but were not such that the applicant did not squarely put the respondent’s case. In particular, that there were matters relating to the applicant’s expert report prepared by Ms Noordin that she should have, but did not address.
3I accept there are a number of matters which Ms Noordin, who carried out an investigation as to the respondent’s access to folders and files on the applicant’s computer network, could have done in addition to the work that she did do.
4I adopt with respect the observations of his Honour Judge Burnett DCJ in Road Transport Historical Society v Martin (No 2) [2021] SADC 62 at paras 76-83 and 94.
5Nonetheless, I do not consider that the requirements of UCR 112.3 are not met [when] the extra material the first respondent relies on is considered and, in particular, it does not change the view I formed when deciding to make the order. Further, there is no challenge to Ms Noordin’s report.
6Having considered all the material put before me on this occasion and heard counsels’ submissions, I am satisfied that had the material the first respondent puts before the Court on this occasion been put before me on 8 November 2020, I would have been satisfied as to the matters in UCR 112.
The search order regime
Rules 112.2 and 112.3 of the Rules provide:
112.2—Search order
The Court may make an order (a search order), in any proceeding or in anticipation of any proceeding in the Court, with or without notice to the respondent, for the purpose of securing or preserving evidence and requiring a respondent to permit persons to enter premises for the purpose of securing the preservation of evidence that is, or may be, relevant to an issue in the proceeding or anticipated proceeding.
Note—
For an application in respect of an anticipated proceeding, see Chapter 19 Part 13.
112.3—Requirements for grant of search order
The Court may make a search order if the Court is satisfied that—
(a)an applicant seeking the order has a strong prima facie case on an accrued cause of action;
(b)the potential or actual loss or damage to the applicant will be serious if the search order is not made; and
(c)there is sufficient evidence in relation to a respondent that—
(i) the respondent possesses important evidentiary material; and
(ii) there is a real possibility that the respondent might destroy such material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding before the Court.
Rules 243.1 relevantly provides:
243.1—Institution
(1)A person who seeks a search order under rule 112.2 … in anticipation of instituting a substantive action may institute an action under this rule by filing an Originating Application and supporting affidavit in accordance with rule 82.1.
(2)The supporting affidavit must depose to the matters referred to in rule 112.3 …
(3)The applicant must join the person against whom the order is sought as a respondent but need not serve the Originating Application documents on the person before the application is heard by the Court.
(4)Chapter 10 Part 2 Division 1 and Schedule 2 otherwise apply to an application for a search order.
Rule 112.8 applies Schedule 2 to applications for search orders made under rule 112 or rule 243.
Schedule 2 rule 3 prescribes the requirements for the supporting affidavit in support of an application for a search order. It provides:
3—Supporting affidavit
The supporting affidavit must include the following information—
(a)a description of the things or categories of things in relation to which the order is sought;
(b)the address or location of the premises in relation to which the order is sought and whether they are private or business premises;
(c)why the order is sought, including why there is a real possibility that the things to be searched for will be destroyed or otherwise made unavailable for use in evidence before the Court unless the order is made;
(d)the prejudice, loss or damage likely to be suffered by the applicant if the order is not made;
(e)the name, address, firm, and commercial litigation experience of an independent lawyer who consents to being appointed to serve the order, supervise its execution and do such other things as the Court considers appropriate; and
(f)if the premises to be searched are or include residential premises—whether to the best of the applicant’s belief it is reasonably likely that the only occupants of the premises will be children under the age of 18 or other persons in a position of vulnerability because of age, mental capacity, infirmity, English language ability or otherwise (vulnerable persons).
Schedule 2 rule 8 both recognises the general law requirement and imposes the requirement of full and frank disclosure on an ex parte application. It provides:
8—Hearing of application
(1)An applicant for a search order made without notice to the respondent is under a duty to the Court to make full and frank disclosure of all material facts to the Court.
(2)Without affecting the generality of subrule (1), possible defences known to the applicant and any financial information that may indicate that the applicant is unable to meet the usual undertaking as to damages from assets within Australia must be disclosed.
Schedule 2 rule 9(1) requires a search order to be modelled on form 82A, adapted to meet the circumstances of the particular case. Form 82A contains orders 2 and 3 which provide that the order has effect up to and including a specified Return Date, at which there is to be a further hearing (as required by Schedule 2 rule 11) and the respondent may apply at any time (including before the Return Date) to discharge or vary the order. These orders were included in the search order made by the Judge on 8 November 2021.
There are four prerequisites for making a search order (derived from rule 112.3) of which the judge or magistrate must be satisfied and then the judge or magistrate has a discretion whether to make the order. Those prerequisites in a case, such as at present, under rule 243.1 are:
1the applicant has a strong prima facie case on an accrued cause of action;
2the potential or actual loss or damage to the applicant will be serious if the search order is not made;
3there is sufficient evidence that the respondent possesses important evidentiary material; and
4there is sufficient evidence that there is a real possibility that the respondent might destroy such material or cause it to be unavailable for use in evidence in an anticipated proceeding before the Court.
The supporting affidavit is required (Schedule 2 rule 3) to address why the order is sought and hence to address each of the four prerequisites.
The judgment of Allsop J in Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd[5] reproduced at [134] below demonstrates the importance of the identification in a clear, coherent and ordered way of the grounds for the search order. The supporting affidavit should at some stage address each prerequisite separately, sequentially and comprehensively rather than leaving the court to attempt to ascertain how it is said that each prerequisite is satisfied by combing through the whole affidavit.
[5] [2005] FCA 955.
The prerequisites operate in a cascading fashion. Thus, the loss or damage the subject of the second prerequisite will be loss or damage on an accrued cause of action in respect of which the applicant has a strong prima facie case under the first prerequisite (not for example a cause of action on which the applicant has a weak prima facie case or no prospects of success). The evidentiary material the subject of the third prerequisite will be evidentiary material relevant to a cause of action that meets the first prerequisite, the loss or damage caused by the breach the subject of that cause of action meeting the second prerequisite. The risk of destruction of the evidentiary material the subject of the fourth prerequisite will be the evidentiary material the subject of the third prerequisite.
In relation to the first prerequisite, it is necessary for the supporting affidavit to identify and prove each essential element of the cause of action and how the applicant has a strong prima facie case on each such element.
In relation to the second prerequisite, it is necessary for the supporting affidavit to identify and prove the nature of the loss or damage or the relevant heads of loss or damage, their likely quantum (even if an estimate or a range), and how the damage will be caused by the respondent’s breaches and if the search order is not made.
In relation to the third prerequisite, it is necessary for the supporting affidavit to identify in specific terms the evidentiary material and explain and prove why it is important to the proof of the relevant cause of action.
In relation to the fourth prerequisite, it is necessary for the supporting affidavit to identify and prove the specific facts by reason of which there is such a real possibility.
On this appeal, the only challenge is in respect of the third prerequisite and the issue whether there was sufficient evidence that Mr Mendes possesses important evidentiary material. However, this prerequisite needs to be considered in the context of the other prerequisites and in particular the first and second prerequisites.
A search order is a species of injunction and the principles of injunctions, including in relation to ex parte and inter partes hearings generally apply. The common law power to grant a search order was first identified in Anton Piller KG v Manufacturing Processes Ltd.[6]
[6] [1976] Ch 55.
An applicant who makes an ex parte application has a heavy duty of disclosure. In Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd,[7] Allsop J said:
In an ex parte hearing, it is the obligation of the party seeking orders, through its representatives, to take the place of the absent party to the extent of bringing forward all the material facts which that party would have brought forward in defence of the application:. That does not mean stating matters obliquely, including documents in voluminous exhibits, and merely not mis-stating the position. It means squarely putting the other side’s case, if there is one, by coherently expressing the known facts in a way such that the Court can understand, in the urgent context in which the application is brought forward, what might be said against the making of the orders.
…
The high standard of candour and the heavy responsibility on those who seek ex parte orders is especially the case where (as it was here, and as will often be the case) a discretion is involved. The judge must be given the opportunity of analysing the facts from the perspective of any available case which can be put, or anticipated to be put, by the absent party. That was not done here. Facts were identified, but not in a fashion which illuminated with any clarity the known facts and not in a coherent and ordered way as plainly would have been done by the absent party.[8]
[7] [2005] FCA 955.
[8] At [38], [47] (Citation omitted).
The duty is to disclose all relevant matters that are known or would have been known if the applicant had made all proper enquiries. In Brink's-MAT Ltd v Elcombe[9]Ralph Gibson LJ (with whom Balcombe and Slade LJJ agreed) said:
(1)The duty of the applicant is to make “a full and fair disclosure of all the material facts”.
(2)The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court, and not by the assessment of the applicant or his legal advisers.
(3)The applicant must make proper inquiries before making the application. The duty of disclosure therefore applies not only to material facts known by the applicant, but also to any additional facts which he would have known if he had made such inquiries.[10]
[9] [1988] 3 All ER 188.
[10] At 1356.
A breach of the obligation of disclosure will almost invariably result in an ex parte order being discharged. In International Finance Trust Co Ltd v New South Wales Crime Commission[11] Hayne, Crennan and Kiefel JJ said:
One particular basis for seeking to set aside an order obtained ex parte is exemplified by the decision of Isaacs J in Thomas A Edison Ltd v Bullock… Isaacs J held that a party asking for an injunction ex parte is duty bound "to bring under the notice of the Court all facts material to the determination of his right to that injunction, and it is no excuse for him to say he was not aware of their importance". As Isaacs J went on to say:
"the party inducing the Court to act in the absence of the other party ... fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in his defence to that application. Unless that is done, the implied condition upon which the Court acts in forming its judgment is unfulfilled and the order so obtained must almost invariably fall."[12]
[11] [2009] HCA 49, (2009) 240 CLR 319.
[12] At [131] (Citations omitted).
However, setting aside the order for breach of the obligation of disclosure does not preclude the applicant from seeking a fresh application inter partes and obtaining a fresh order after proper disclosure has been made. In Lloyd’s Bowmaker Ltd v Britannia Arrow Holdings PLC[13] Glidewell LJ said:
[E]ven though a first injunction is discharged because of material non-disclosure, the court has a discretion whether to grant a second Mareva injunction at a stage when the whole of the facts, including that of the original non-disclosure, are before it, and may well grant a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed.[14]
[13] [1988] 1 WLR 1337.
[14] At 1343-1344. See also Dillon LJ at 1349.
However, an applicant who obtains an ex parte order as result of breaching its obligation of disclosure should not be permitted to enjoy the fruits of that breach. In Bank Mellat v Nikpour[15] Donaldson LJ (with whom Slade LJ agreed) said:
This principle that no injunction obtained ex parte shall stand if it has been obtained in circumstances in which there was breach of the duty to make the fullest and frankest disclosure is of great antiquity… Warrington LJ in R v Kensington Income Tax Commissioners, ex parte Princess Edmond de Polignac … said:
It is perfectly well settled that a person who makes an ex parte application to the court – that is to say, in the absence of the person who will be affected by that which the court is asked to do – is under an obligation to the court to make the fullest possible disclosure of all material facts within his knowledge, and if he does not make that fullest possible disclosure, then he cannot obtain any advantage from the proceedings, and he will be deprived of any advantage he may have already obtained by means of the order which has thus wrongly been obtained by him…
…
As Warrington LJ said in the Kensington Income Tax Commissioners case, the court will be astute to ensure that a plaintiff who obtains an injunction without full disclosure – or any ex parte order without full disclosure – is deprived of any advantage he may have derived by that breach of duty.
…
The rule requiring full disclosure seems to me to be one of the most fundamental importance, particularly in the context of the draconian remedy of the Mareva injunction. It is in effect, together with the Anton Piller order, one of the law’s two “nuclear” weapons. If access to such a weapon is obtained without the fullest and frankest disclosure, I have no doubt at all that it should be revoked.[16]
[15] [1985] FSR 87 (Citations omitted).
[16] At 1343-1344. See also Dillon LJ at 1349.
It has been said that a court has a discretion not to discharge an ex parte order when there has been a material breach of the obligation of disclosure. However, as observed above, technically this involves the court making a fresh order. This should only be done if:
1the breach was not deliberate;
2it was open to the court to make the original order on the material that was placed before the court by the applicant;
3the court is satisfied that the order should be made after taking into account the original material together with the material that should have been disclosed and any additional material adduced at the inter partes hearing (the applicant not being permitted to rely on any material obtained as a result of the breach of duty); and
4it is in the interests of justice that the original order not be discharged notwithstanding the breach of duty.
An ex parte injunctive order is granted on an interim basis to preserve the status quo until both parties can be heard on whether the interim order should continue or be discharged. At the inter partes hearing, the court hears additional evidence that the parties wish to adduce. If on hearing the whole of the evidence the court is not satisfied that the order is justified, the court will discharge the ex parte search order. This is a corollary of the fact that the order was made without hearing the respondent and, if the respondent had been heard and the order would not have been made, the order should be discharged.
In WEA Records Ltd v Visions Channel 4 Ltd,[17] Sir John Donaldson MR (with whom Dunn and Purchas LJJ agreed) said:
As I have said, ex parte orders are essentially provisional in nature. They are made by the judge on the basis of evidence and submissions emanating from one side only. Despite the fact that the applicant is under a duty to make full disclosure of all relevant information in his possession, whether or not it assists his application, this is no basis for making a definitive order and every judge knows this. He expects at a later stage to be given an opportunity to review his provisional order in the light of evidence and argument adduced by the other side, and, in so doing, he is not hearing an appeal from himself and in no way feels inhibited from discharging or varying his original order.
...
If it were now clear that the defendants had suffered any injustice by the making of the order, taking account of all relevant evidence… the defendants would have their remedy and the counter undertaking as to damages.[18]
[17] [1983] 2 All ER 589.
[18] At 593-594.
As a matter of principle, in determining whether a search order should be continued or discharged, the applicant should not be permitted to rely on material obtained as a result of the search because that would permit the applicant to enjoy the fruits of an order that should not have been made. However, in a paragraph omitted from the reasons of Sir John Donaldson MR reproduced above, it was said that:
[T]he defendants seek to go back to the beginning of the action saying that, regardless of whether the fruits of the order are such as to show that it was abundantly justified, the judge had insufficient material to justify his action at the ex parte stage. They therefore invite us to set the ex parte order aside and to order the return of the affidavits to the two personal defendants and the seized material to the defendant’s solicitors.
I regard this as wholly absurd.[19]
[19] At 594.
Sir John Donaldson MR went on in the last paragraph reproduced at [141] above to say that the relevant evidence to be taken into account included the affidavits of the personal defendants and the fruits of the search.
The question whether an applicant can rely, at an inter partes hearing, on the fruits of the search does not arise on this appeal because PCC did not seek to rely on any fruits of the search at the inter partes hearing. I therefore heard no argument from the parties on that question. I would wish to reserve my opinion on whether this aspect of the decision in WEA Records Ltd should be followed.
Although not a point taken on appeal, I observe that PCC did not comply with rule 243.1(3) because it did not join Mr Mendes (or anyone else) as a respondent to the originating application. This led to uncertainty as to the identity of the parties to the action. First, no order was apparently made at any point joining any respondent to the action. Secondly, the documents filed by PCC in the action are inconsistent in naming respondents. The Judge was informed at the ex parte hearing that the respondents were to be Mr Mendes, Vasco and Harrowford. Mr Kachirski’s affidavits show Mr Mendes and Vasco as the respondents but not Harrowford. The 17 November 2021 record of outcome shows no respondent but the formal order shows Mr Mendes and Harrowford as the respondents and not Vasco. The Court’s record of the parties to the proceeding shows only Mr Mendes as the respondent.
PCC explained the non-joinder of any respondent at the ex parte hearing as being due to a fear that, because the application would be listed for a hearing, it would be brought to the attention of the respondents and it was understood that this had occurred in the past. Whatever might have been the case in the early days of ECMS, it is the responsibility of the applicant to serve an originating application and inform the respondent of the hearing date: the court does not notify a respondent of the hearing date in those circumstances. If PCC had been concerned about potential notification, it should have raised the issue with the Registrar.
Because Mr Mendes was treated by the parties and the Court as a respondent from 17 November 2021 and because no point is taken, I proceed on the basis that PCC and Mr Mendes were the parties to the proceeding from 17 November 2021 onwards. However, the matters referred to at [145] above demonstrate the critical importance of applicants complying with rule 243.1(3) and joining the respondent or respondents against whom they seek a search order as the respondent or respondents to the originating application at the outset.
Challenge to Noordin report
I address the merits of the grounds of appeal before addressing leave to appeal.
The first ground of appeal is that the Judge erred in finding that there was no challenge to the Noordin report.
The Noordin report was challenged at the inter partes hearing on multiple levels.
First, as described at [71] above, the opinions of Mx Noordin were contained in the summary at the outset of the report as follows:
1.1I identified an unauthorised OneDrive account using Mr Mendes’ former employer’s (Mr Bill Kachirski) credentials linked on the computer.
1.2This unauthorised OneDrive account appears to contain 25,470 files which relate to The Posture Care Chair Company business.
1.3OneDrive is a cloud storage solution which allows a user access to their data from any location using an internet capable mobile device or computer. This means Mr Mendes was able to access that data contained in Mr Kachirski’s OneDrive account after his employment was terminated.
1.4I identified records of internet searches relating to the availability of internet domains and business registrations for “tailor made recliners”.
1.5I further identified records relating to the purchase and subsequent activation of the “tailormaderecliners” domain.
1.6In my experience, the combined discovery of the unauthorised OneDrive account containing The Posture Care Chair Company business data, its access and availability to Mr Mendes, and the searches for and subsequent purchase of the “tailor made recliners” internet domain are consistent with activity to utilise the Company data for purposes unrelated to the Company.
The italicised passages were challenged at the inter partes hearing. Mx Noordin’s characterisation at 1.1, 1.2 and 1.6 of OneDrive A being “unauthorised” and failure to provide any basis for that characterisation was heavily challenged by counsel for Mr Mendes in both his written and oral submissions. In addition, Mr du Plessis at section 5.1 of his expert report gave contradictory evidence expressing the opinion that, on the face of the matters referred to in the Noordin report, OneDrive A was authorised and identifying the lack of any basis in the Noordin report for a conclusion that OneDrive A was unauthorised. Counsel for Mr Mendes submitted that, on this ground alone, the search order was vitiated. It was necessary for the Judge to address and resolve this issue.
Mx Noordin’s opinion at 1.3 that Mr Mendes was able to access the data contained in OneDrive A after his employment was terminated was also heavily challenged by counsel for Mr Mendes. It was submitted, correctly, that there was no basis disclosed in the Noordin report or elsewhere in the evidence adduced by PCC for this conclusion. Mr du Plessis at section 5.1.4 of his expert report identified some of the facts that would need to be known to determine whether Mr Mendes could obtain access to OneDrive A after termination of his employment, which were simply not addressed in the Noordin report.
Mx Noordin’s opinion at 1.6 was challenged by counsel for Mr Mendes because it again relied on OneDrive A being unauthorised.
Secondly, it was submitted on behalf of Mr Mendes to the Judge that there was a failure by Mx Noordin and PCC to disclose various matters that needed to be known. These included the structure and operation of PCC’s computer systems, including the use of OneDrive accounts; which purported confidential information and intellectual property Mr Mendes had access to during his employment; and which purported confidential information and intellectual property he had access to, if any, after the termination of his employment, including the role of password and other security measures. Mr du Plessis in his report identified various matters that, in his opinion, ought to have been addressed by a computer expert in the position of Mx Noordin.
Thirdly, the manner in which the content of the Noordin report was used by Mr Kachirski in his affidavit was strongly challenged by Mr Mendes during the inter partes hearing. It was submitted that each of the statements contained at paragraphs 86 and 87 of Mr Kachirski’s affidavit, which were said to be derived from the Noordin report, were in fact completely unsupported by the Noordin report (other than the statement by Mx Noordin that OneDrive A was unauthorised, which was itself unsupported).
Fourthly, the manner in which the content of the Noordin report was used by counsel for PCC at the ex parte hearing was strongly challenged by Mr Mendes during the inter partes hearing. While counsel for Mr Mendes made it clear that there was no suggestion that PCC’s counsel deliberately misled the Judge, nevertheless it was contended that submissions made to the Judge said to be based on the Noordin report were not in fact supported by the Noordin report. This included submissions that Mr Mendes had synced OneDrive A to OneDrive B; had and may still have access to those documents by virtue of what is synced to his personal OneDrive account; and that the Noordin spreadsheets showed that Mr Mendes last accessed the files on 4 June 2021.
Fifthly, it was submitted on behalf of Mr Mendes to the Judge that Mx Noordin ought to have addressed alternative methods of seeking to ascertain whether Mr Mendes had taken possession of or used company documents, being methods identified by Mr du Plessis. Mr du Plessis at sections 5.4, 5.8, 5.9 and 5.10 of his report said that Microsoft and Google keep records available to PCC of password changes and expressed the opinion that an computer expert in the position of Mx Noordin could have ascertained whether a storage device (such as a USB drive) had been used on Mr Mendes’ work laptop and potentially (depending on the circumstances) could have ascertained whether Mr Mendes had emailed company documents to an external email address or whether the files of OneDrive A or OneDrive B had been downloaded to other devices outside PCC’s business.
Although Mr Kachirski stated at paragraph 131 that PCC’s designs were confidential, he did not identify how they were confidential, particularly in circumstances in which the chairs in question are, according to his affidavit, publicly displayed on the Lang Haoxuan website. It is theoretically possible that aspects of the internal workings of the chairs are confidential, but there would appear to be no impediment to any competitor purchasing a PCC chair and ascertaining its internal workings. It was incumbent on Mr Kachirski to identify what aspects of the designs were confidential and how they were confidential. He ought also to have identified at least one document listed in the Noordin spreadsheets (the document itself and not merely its file name) that contained confidential designs.
Mr Kachirski stated at paragraph 131 that PCC’s records of customer inquiries and costings are confidential. He did not state that the identity of customers (as opposed to other information relating to customers) is confidential and did not explain how PCC’s records of customer inquiries and costings could be used to undercut PCC or cause serious loss or damage to PCC. He ought also to have identified at least one document listed in the Noordin spreadsheets (the document itself and not merely its file name) that contained customer details.
Despite these inadequacies, Mr Mendes does not contend that the documents listed in the Noordin spreadsheets did not contain confidential information, the disclosure or use of which was liable to cause serious loss or damage to PCC. I proceed on the assumption that they did.
The parties contest the meaning of “possesses” in rule 112.3(c)(i) in the context of cloud storage. Mr Mendes contends that the mere fact that a person might have the means of accessing data stored in the cloud does not entail that that person has possession of the data. PCC contends to the contrary. I will proceed on the assumption that a person has possession of data in the cloud if they have the means of accessing it and an intention of doing so.
The parties also contest the meaning of “sufficient evidence” in rule 112.3(c). Mr Mendes contends that it means proof on the balance of probabilities. PCC contends that it means a reasonable suspicion. The parties do not cite any authorities on the meaning of that term, despite the fact that the rules in relation to search orders are common in the rules of superior courts across Australia and were preceded by the common law.
I consider that the word “sufficient” is used deliberately to give flexibility to the court in determining what will amount to enough evidence in all of the circumstances. Ordinarily, it will be more than a reasonable suspicion but not necessarily proof on the balance of probabilities.
The evidence adduced by PCC at the ex parte hearing was not sufficient evidence that Mr Mendes possessed confidential information of PCC. PCC’s case in this respect relied primarily on proving that the creation and use of OneDrive A was a private secret venture by Mr Mendes to use PCC’s confidential information for his own purposes in a business competing with PCC’s business. However, at the ex parte hearing, PCC adduced no admissible evidence to this effect. Although Mx Noordin in the summary at the commencement of the Noordin report described OneDrive A as “unauthorised”, Mx Noordin was given no instruction by Camatta Lempens to that effect, nor did Mx Noordin identify any basis for so characterising OneDrive A or any reasoning for concluding that OneDrive A was unauthorised. The statement, whether of opinion or purported fact, was simply admissible.
Mr Kachirski did not in his affidavit include any evidence of his own knowledge concerning OneDrive A or OneDrive B. All that he did was make his own interpretation (which was in fact a misinterpretation) of what the Noordin report showed. Nor was any evidence otherwise adduced by PCC from any other employees or from any information technology consultant concerning the information technology systems within PCC.
In addition, Mx Noordin provided only an extremely superficial description of how OneDrive works in general. No description was provided by Mx Noordin or any other witness concerning the means of access available to PCC or Mx Noordin to OneDrive A either on Mr Mendes’ work laptop or in the cloud, such as its password, whether the password was stored in the memory of the laptop or otherwise.
PCC contends that, even if any evidence relating to OneDrive A is ignored, the other evidence contained in Mr Kachirski’s affidavit was capable of amounting to sufficient evidence that Mr Mendes had possession of important evidentiary material. I reject that contention.
The other evidence contained in Mr Kachirski’s affidavit was clearly capable of proving that, after the termination of his employment, Mr Mendes was working (whether as an employee or a contractor) for Harrowford. However, Harrowford was only incorporated and its business established after the termination of Mr Mendes’ employment. The mere fact that he started working for another business in the recliner chair industry after cessation of his employment is not probative that he took or was using PCC’s confidential information.
Mr Kachirski’s affidavit was clearly capable of proving that in March 2021, while still employed by PCC, Mr Mendes registered the domain name “tailormaderecliners”. Assuming that this was probative that Mr Mendes contemplated, or even intended, to work in the recliner chair industry after the termination of his employment, it is not probative that he took or was using PCC’s confidential information.
Mr Kachirski’s affidavit was clearly capable of proving that Harrowford was marketing and selling recliner chairs displayed on its website that appeared to be similar to recliner chairs displayed on Lang Haoxuan’s website, which in turn appeared to be similar to (and may well have been the same as) recliner chairs manufactured by Lang Haoxuan in accordance with PCC’s designs. However, this is not probative that anyone associated with Harrowford (such as Mr Mendes or Vasco) is using PCC’s confidential information concerning its designs. First, all it shows is that, at its highest, the external appearance of the recliner chairs is similar or even the same: it says nothing about the internal workings. Secondly, on the evidence contained in Mr Kachirski’s affidavit, Harrowford can obtain the chairs by purchasing them from Lang Haoxuan: it does not need to even know the internal workings.
PCC contends that Mr Mendes refused to provide the undertakings sought by Camatta Lempens in their letter dated 11 August 2021 and implicitly contends that it can be inferred from this that he had possession of confidential information.
I reject that contention. The Camatta Lempens 11 August 2021 letter referred to and relied upon clauses 8 to 10 of the Unexecuted Standard Terms and clauses 2.2 to 2.4 of the Unexecuted Confidentiality Agreement. It sought extensive written undertakings, including that Mr Mendes had not and would not use or disclose Confidential Information and would make available to PCC all electronic devices in his possession or control for forensic examination.
Mr Mendes responded by saying that, before he commented on any of the statements, he requested copies of the allegedly signed agreements. Camatta Lempens admitted that there were no signed agreements but asserted agreements arising from conduct to which Mr Mendes demurred on 12 August 2021. Camatta Lempens did not on the evidence respond to Mr Mendes email of 12 August 2021, nor reiterate their demand for written undertakings. Mr Mendes had no obligation to provide the undertakings. The mere fact that he did not do so cannot be used as a makeweight for PCC to establish what it was required to establish by evidence.
Given the significant breaches by PCC of its obligation of disclosure (albeit not suggested to be deliberate) and the fact that, on the evidence adduced at the ex parte hearing, PCC failed to establish the prerequisite that there was sufficient evidence that Mr Mendes possessed important evidentiary material, the appeal must be allowed and the order made by the Judge dismissing Mr Mendes’ discharge application must be set aside.
Sufficient evidence of possession
The fourth ground of appeal is that the Judge erred because it was not open to the Court to find that there was sufficient evidence that Mr Mendes possessed important evidentiary material.
At paragraphs 5 and 6 of his reasons for judgment reproduced at [117], the Judge said that he remained satisfied of the four prerequisites on the material adduced at the inter partes hearing. The Judge did not give reasons for that satisfaction. The Judge’s conclusion on this question is vitiated by the error the subject of ground 1. It is necessary to consider the question afresh.
I turn to the evidence adduced at the inter partes hearing on 10 December 2021 that was additional to the evidence adduced at the ex parte hearing on 8 November 2021.
The evidence contained in the du Plessis report included an explanation of how OneDrive operates; that in the opinion of Mr du Plessis OneDrive A was not unauthorised and there was no basis in the Noordin report for a conclusion that it was unauthorised; that the “Accessed UTC” date could be generated by system maintenance applications as opposed to user activity; and that there were techniques available or potentially available to Mx Noordin to ascertain whether Mr Mendes had connected a USB drive to his laptop or downloaded or emailed files to other devices.
The evidence contained in Mr Mendes’ affidavits included that he had no documents or records of PCC and had not used its confidential information (in his first affidavit) and, when his employment was suspended, he returned all of PCC’s property (in his second affidavit). He admitted registering the domain name “tailor made recliners” (saying that he had not used it and did not intend to do so) and admitted that he was contracted to Harrowford as a mobile sales and marketing consultant.
Mr Mendes included a description of the establishment of OneDrive A and OneDrive B in the following terms:
21 In relation to paragraphs 83 to 87 of the Affidavit and say as follows:
21.1 Shortly after I commenced my employment with the Applicant, I advised that a cloud-based storage system would be more efficient for the business and the Applicant engaged an IT contractor (“the Contractor”) to set this up for the business.
21.2 There were OneDrive accounts which were linked to Mr Kachirski’s email address that were the central or main account for the Business and then each employee that had a company email address, as I did, had a OneDrive account linked to their email address.
21.3 Each employee that had a company email address had a licenced 365 Microsoft package and these automatically had a OneDrive account.
21.4 To be clear I had a OneDrive account linked to my email address [email protected]. It is unclear to me whether this is the “personal OneDrive account” identified by Mar Noordin in their report.
Mr Kachirski’s responding affidavit addressed this paragraph. It included the following:
3The first time I recall being made aware that my gmail account [gmail account] was associated with the subject One Drive account was when I was informed by Mar Noordin (Noordin) during or after the examination of the Respondent’s work device.
4I was asked by Noordin whether I had authorised the use of my gmail account for this purpose.
5I recall in my discussions with Noordin that I did have a gmail account which had been set up some time ago. I told Noordin that I would not have and did not authorise any other person to associate this gmail account with OneDrive.
…
7Once informed by Noordin that my gmail account had been used, I attempted to change the password with assistance from IT. I did not recall what the password was when we attempted to change it, the recovery email may have belonged to a former employee whose email was no longer valid.
8I relied on the Respondent to assist me with all technology based matters on my personal and business devices. The Respondent told me he had high level skills and a background in IT. Because of this, he had access to my personal and business passwords and log in details because I trusted him. I never authorised the use of my personal details for any other purpose except for assistance logging in on my personal device and only when on request.
9While the Respondent was employed, he instructed and provided direction to our IT staff and any contractors engaged by PCCC. This is because this was his area of expertise. It is not mine. I trusted him with the IT side of the business and to do what was in the best interests of PCCC.
10I am aware that there is a PCCC OneDrive with access to PCCC documents. The Respondent was authorised to access this account during his employment.
11I was not aware that there were other OneDrive accounts, and I was not aware that PCCC documents were stored on any other OneDrive account apart from the business OneDrive account… There is no commercial necessity for this and this was not authorised.
There is at least an apparent inconsistency between the evidence of Mr Mendes reproduced at [235] above and the evidence of Mr Kachirski reproduced at [236] above. The Judge in his reasons did not refer to this evidence or make any finding in relation to it.
The issue whether Mr Mendes created OneDrive A secretly and without authority for his own personal purposes as opposed to its being created by PCC’s IT contractor or being used for company purposes was a critical issue in relation to the third prerequisite. For the reasons given in the previous section, in the absence of PCC proving that it was the former, the other evidence adduced by it was incapable of amounting to sufficient evidence that Mr Mendes was in possession of important evidentiary material.
Given the apparent inconsistency, there were three ways in which theoretically the issue could have been dealt with at the inter partes hearing:
1PCC accepted or assumed for the purpose of the application that Mr Mendes’ account was correct and contended that nevertheless the other evidence adduced was sufficient evidence that he was in possession of important evidentiary material;
2PCC cross-examined Mr Mendes (and potentially Mr du Plessis) and Mr Mendes cross-examined Mr Kachirski (and potentially Mx Noordin) to examine whether and to what extent their evidence was inconsistent to enable the Judge to make factual findings in relation to the disputed issue;
3Mr Mendes accepted or assumed for the purpose of the application that Mr Kachirski’s account was correct and contended that nevertheless there was not sufficient evidence that he was in possession of important evidentiary material.
At the inter partes hearing, neither party conceded that the evidence of the other party’s witness was correct (although each party adopted a fallback position in terms of 1 and 3 above respectively). In these circumstances, it was incumbent on PCC to apply to cross-examine Mr Mendes and cross-examination should have been permitted, which would in turn have led to the cross-examination of Mr Kachirski. Unfortunately, this did not occur.
Mr Mendes indicated a willingness to adduce oral evidence from Mr du Plessis and PCC indicated a willingness to cross-examine Mr du Plessis but the Judge discouraged this and neither party made an application for oral evidence to be adduced from Mr du Plessis. Neither party suggested that Mr Mendes or Mr Kachirski give oral evidence and the Judge did not raise the possibility.
It will not always be appropriate to permit cross-examination on an application in relation to a search order or make findings of fact when the factual issue is or will be an ultimate issue in a substantive proceeding. For example, it would be unusual that cross-examination would be effective in relation to the first prerequisite that the applicant has a strong prima facie case because, for that purpose, the evidence of the applicant will usually be taken at its highest. However, where the factual issue relates to a primary or intermediate fact relevant to the third prerequisite, it will usually be necessary for the judge to make a finding of fact on the balance of probabilities in relation to that factual issue.
On appeal, PCC contends that, assuming that Mr Mendes’ account in relation to the creation and use of OneDrive A was correct, nevertheless the other evidence adduced was sufficient evidence that he was in possession of important evidentiary material. I reject that contention for the reasons given above.
The evidence of Mr Mendes in relation to the creation and use of OneDrive A was corroborated to a substantial degree by the content of the Noordin spreadsheets.
The OneDrive A spreadsheet shows that OneDrive folder A was created in October 2018, which was at the commencement of Mr Mendes’ employment, and all of the subfolders and files (apart from two 2017 Christmas schedule spreadsheets) were created in August 2019, which was shortly after Mr Mendes was promoted to the position of General Manager. It is inherently unlikely that Mr Mendes created a secret and private OneDrive so early in his employment. Further, the spreadsheet shows that all but one folder and five files (including the 2017 Christmas schedule spreadsheets) were last modified by August 2019. This suggests that virtually no files were saved to OneDrive A after August 2019, which tends to negate that OneDrive A was created or used by Mr Mendes for nefarious purposes.
The OneDrive B spreadsheet shows that a large number of subfolders and files in OneDrive folder B were created in August 2019 at the same time as the subfolders and files in OneDrive folder A were created. This tends to suggest that both OneDrive folders were populated with subfolders and files initially at the same time. The OneDrive B spreadsheet shows that additional subfolders and files were created on a monthly basis between September 2019 and June 2021, in contrast to OneDrive A. If Mr Mendes was using OneDrive A for nefarious purposes, it may be expected that he would have saved files to OneDrive A after September 2019.
In addition, if Mr Mendes established OneDrive A for nefarious purposes, it is odd that he connected it to his work laptop and used Mr Kachirski’s gmail address as the username rather than connecting it to his personal computer.
None of these matters was explored in cross-examination because Mr Mendes was not cross-examined.
PCC did not adduce evidence that it might be expected to have adduced to rebut Mr Mendes’ contention that OneDrive A was created for work, rather than his own private, purposes. Mr Mendes’ evidence was that OneDrives linked to Mr Kachirski’s gmail were “the central or main account for the Business”. PCC did not adduce any evidence from any other employee to rebut this. Nor did it adduce any evidence to explain how the OneDrive accounts were set up.
In Mr Kachirski’s responding affidavit at paragraph 11, he included a sentence “I contacted the PCCC IT consultant on 9 December 2021 to check this and this remains my understanding and belief”. This is plainly inadmissible. While hearsay may be permissible at a directions hearing under rule 101.4(1) if it will save time or expense, Mr Kachirski failed to identify the name of the person to whom he spoke and failed to set out what he was told: it is inadmissible for Mr Kachirski merely to say that his understanding was not changed as a result of that conversation. Mr Kachirski gave no evidence that it was not practicable to obtain an affidavit from that person. Moreover, the evidence of the IT contractor was critical and in the circumstances first hand evidence was required.
On the face of Mr Kachirski’s responding affidavit, there are limitations and qualifications in his statements about OneDrive A. His evidence at paragraphs 8 and 9 was that he left the establishment of information technology within PCC to Mr Mendes and the IT consultant. It is not inconsistent with that evidence that two OneDrives were established as Mr Mendes testified and this was generally known within PCC but not to Mr Kachirski (or that he did not understand it or did not recall it). This is why it was critical that PCC adduce evidence from other PCC employees and the IT consultant.
Mr Kachirski did not explain the context or purpose of his providing his Gmail username and password to Mr Mendes. It would be very odd if he provided them to Mr Mendes so that Mr Mendes could view Mr Kachirski’s private emails: it seems inevitable that they were provided for business purposes, which is consistent with Mr Mendes’ evidence that they were used to establish OneDrive A.
In addition, PCC did not adduce evidence as to what examination was made or could have been made of Mr Mendes’ laptop or OneDrive A in the cloud. For example, it did not adduce evidence from Mx Noordin or anyone else that the password to the OneDrive A in the cloud was stored in the memory of Mr Mendes’ laptop so that the OneDrive A in the cloud could be explored without having to be known or entered on the laptop. Nor did it adduce evidence from Mx Noordin as to whether any techniques were available, and whether any attempts were made, to gain access to the OneDrive A in the cloud.
PCC observes that, in his affidavit, Mr Mendes explicitly states that, when his employment was suspended, PCC changed the password to his work email address and this precluded access by him to the OneDrive account linked to that email address (OneDrive B); whereas he did not address OneDrive A in this respect. Whether or not this was a deliberate omission is something that should have been explored in cross-examination of Mr Mendes. However, it is not a makeweight that makes up for the failure of PCC to adduce critical evidence to rebut Mr Mendes’ evidence concerning the creation and use of OneDrive A.
Upon consideration of the whole of the evidence adduced at the inter partes hearing, PCC failed to adduce sufficient evidence to rebut Mr Mendes’ account of the creation and use of OneDrive A. Given that the other evidence was not sufficient evidence that Mr Mendes possessed important evidentiary material, PCC failed to establish that he did possess important evidentiary material.
In addition, for the reasons given in the section commencing at [189] above, PCC failed to establish there were not alternatives open to it less intrusive than the search order to obtain the evidence it sought in relation to the use or potential use by Mr Mendes of its confidential information. It therefore failed to establish that, on the evidence adduced at the inter partes hearing, a search order should have been granted.
This ground of appeal is established.
Leave to appeal
Mr Mendes accepts that, pursuant to rule 213.1(a) of the Rules, leave is required to appeal against the orders made by the Judge on 10 December 2021 because they were interlocutory orders.
PCC opposes leave to appeal. PCC contends that the decision of the Judge is not attended by sufficient doubt; substantial injustice will not be occasioned if leave to appeal is refused because the search order has largely been executed; the appeal relates to a matter of practice and procedure; and the appeal does not raise an issue of principle or general importance.
The rationale for generally requiring leave to appeal in respect of interlocutory orders is a combination of one or more factors:
1A decision reflected in an interlocutory order can usually be challenged as part of an appeal against the final determination of the proceeding. It is often not in the best interests of the administration of justice to fragment appeals by permitting appeals at the interlocutory stage and substantial injustice will not be occasioned by refusal of leave to appeal.
2A decision reflected in an interlocutory order often involves a decision on a matter of practice or procedure rather than the substantive rights of the parties and substantial injustice will not be occasioned by refusal of leave to appeal.
3It is desirable that there be a filter on appeals against interlocutory orders to ensure that such appeals only proceed where they are reasonably arguable.
In the case of a search order made under rule 243.1 of the Rules, a decision dismissing an application by the respondent to discharge an ex parte search order is final in the sense that there is no substantive proceeding that will later be determined on which determination the respondent can include a contention that the court erred in not discharging the search order. The first rationale for requiring leave to appeal does not apply in the present case.
In the case of a search order made under the Rules, the order does not relate to a mere matter of practice or procedure but rather determines the substantive right of the applicant to obtain, and the substantive duty of the respondent to afford access to, documents or other property of the respondent. The second rationale for requiring leave to appeal does not apply in the present case.
I have already concluded that the Judge erred in failing to discharge the search order. If leave to appeal is granted, the Judge’s order must be set aside. Applying the filter the subject of the third rationale for requiring leave to appeal entails that leave to appeal should be granted. If leave to appeal is not granted, substantial injustice will be occasioned to Mr Mendes.
Leave to appeal should be granted.
Conclusion
I will grant leave to appeal, allow the appeal and set aside the orders made by the Judge on 10 December 2021. I will hear the parties concerning other orders.
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