Mirus Australia Pty Ltd v Gage

[2018] NSWSC 35

Supreme Court

New South Wales

Medium Neutral Citation:

Mirus Australia Pty Ltd v Gage [2018] NSWSC 35

Hearing dates:

13 December 2017

Date of orders:

02 February 2018

Decision date:

02 February 2018

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

(1) Order that the first defendant be fined the sum of $40,000.

 

(2) Order that the punishment in order (1) be suspended upon the condition that the first defendant comply with the following condition:

 

Within 7 days of the date of this order, the First Defendant, through his lawyer is to provide to the lawyers for the Plaintiff the “Username” and “Password” details to enable access to the Aged Care HQ cloud service located at url: Make no order as to the costs of the sentencing hearing, to the intent that each party pay his or its own costs of that hearing.

Catchwords:

SENTENCING – penalties – criminal contempt – deletion of electronic records after commencing proceedings

  COSTS – costs of separate sentencing hearing

Legislation Cited:

Crimes (Sentencing Procedure) Act 1999 (NSW) ss 5(1), 8, 9, 10, 10A, 12

Cases Cited:

Admark Property Group Pty Ltd (in liq) v GJ Building and Contracting Pty Ltd [2017] NSWSC 118
Attorney-General (NSW) v Whiley (1993) 31 NSWLR 314
Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98; [1986] HCA 46
Australian Securities and Investments Commission v Matthews [2009] NSWSC 285; (2009) 71 ACSR 279
Circuit Finance Australia Ltd v Sobbi [2010] NSWSC 912
Crane Distribution Ltd v Van Schellebeeck [2009] NSWSC 263
DB Mahaffy & Associates v Mahaffy [2015] NSWSC 1959
Farahbakht v Midas Australia Pty Ltd [2006] NSWSC 1322
Kazal v Thunder Studios Inc (California) [2017] FCAFC 111
Matthews v Australian Securities and Investments Commission [2009] NSWCA 155
McGuirk v University of New South Wales [2010] NSWSC 448
McIntyre v Perkes (1988) 15 NSWLR 417
Mirus Australia Pty Ltd v Gage [2017] NSWSC 1046
NCR Australia Pty Ltd v Credit Connection Pty Ltd [2005] NSWSC 1118
Principal Registrar of Supreme Court (NSW) v Tran [2006] NSWSC 1183; (2006) 166 A Crim R 393
R v Tait (1979) 46 FLR 386
Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309
Wood v Galea (1996) 84 A Crim R 274

Category:

Sentence

Parties:

Mirus Australia Pty Ltd (Plaintiff)
Nicholas Gage (First Defendant)
Simon Wilson (Second Defendant)

Representation:

Counsel:
T Brennan (Plaintiff)
I Pike SC with S Keizer (First Defendant)

  Solicitors:
Kennedys (Plaintiff)
Marque Lawyers (First Defendant)

File Number(s):

2015/00261885

Publication restriction:

Nil

Judgment

1. HER HONOUR: On 11 August 2017, I published my reasons for judgment (Mirus Australia Pty Ltd v Gage [2017] NSWSC 1046), on two related interlocutory motions filed by the plaintiff, Mirus Australia Pty Ltd (Mirus), in proceedings still on foot in this Court that have been brought by it against two of its former senior employees (the first defendant, Mr Nicholas Gage, and the second defendant, Mr Simon Wilson). The interlocutory applications related only to Mr Gage.

2. On the contempt motion, I found that Mr Gage was guilty of contempt by engaging in the conduct described in Charge 1 of the Amended Statement of Charge. That conduct involved the deletion or destruction by Mr Gage of certain electronic files and data on the evening of 7 September 2015, at a time after the present proceedings had been commenced and initiating process had been served on Mr Gage but before any orders were made in the proceeding (other than orders for short service), for the material purpose of preventing some or all of those files and data being produced to the Court and available for use as evidence in these proceedings (see my earlier reasons at [167]-[169]). I was not persuaded beyond reasonable doubt that a second charge of contempt had been established (see my earlier reasons at [180]).

3. On the separate strike out motion, I was of the view that Mr Gage’s conduct was an abuse of process of the Court and that parts of the defence filed by him should be struck out (at [218]-[221]).

4. A sentencing hearing was then scheduled for 13 December 2017. On that hearing, there was evidence on affidavit from Mr Gage, who was cross-examined by Counsel appearing for Mirus. A character reference was tendered on his behalf. I heard submissions and reserved my judgment, indicating that I was not satisfied that a custodial sentence was the only appropriate punishment for the contempt (and hence that I would not be making such an order – see s 5(1) of the Crimes (Sentencing Procedure) Act 1999 (NSW)) and that I had in mind the imposition of a fine to be suspended subject to compliance with a condition that Mr Gage take the necessary steps to give Mirus access to a particular ‘cloud service’ on which a database alleged to have been compiled or created from Mirus’ confidential information was thought to be located. I made directions for the filing of brief written submissions on the issue as to costs of the sentencing hearing and reserved my judgment.

5. I have now had the opportunity to consider the submissions made and the following are my reasons for the sentence I propose to impose following Mr Gage’s conviction for contempt and my reasons on the issue of costs.

Background

6. It is not necessary to set out the factual background to the underlying dispute or the circumstances in which the deletions of electronic files and data occurred, those being set out in detail in my earlier reasons.

General sentencing principles

7. Other than in relation to the issue of costs, there was no real dispute between the parties as to the general sentencing principles to be applied. Mr Gage accepts that the finding of contempt against him was a finding of criminal contempt and that the underlying rationale of sentencing for contempt (be it civil or criminal contempt) is to protect the effective administration of justice (see Australasian Meat Industry Employees’ Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 at 107; [1986] HCA 46). In Kazal v Thunder Studios Inc (California) [2017] FCAFC 111, the Full Court of the Federal Court said (at [97]):

contempt proceedings are essentially protective in nature as to the judicial function and the role of the courts, even if they also serve to vindicate private interests and rights. Contempt proceedings are therefore to be viewed as essential in facilitating courts being able to function properly. ... That view of contempt proceedings can be seen to permeate longstanding sentencing authority in this area.

8. In Australian Securities and Investments Commission v Matthews [2009] NSWSC 285; (2009) 71 ACSR 279 (an appeal from which was dismissed by the Court of Appeal in Matthews v Australian Securities and Investments Commission [2009] NSWCA 155), Barrett J, as his Honour then was, noted the following as being matters relevant when sentencing for contempt (see [26]-[27]): the seriousness of the contempt proved; the contemnor’s culpability; the reason or motive for the contempt; whether the contemnor has received, or sought to receive, a benefit or gain from the contempt; whether there has been any expression of genuine contrition by the contemnor; the character and antecedents of the contemnor; the contemnor’s personal circumstances; the need for deterrence of the contemnor and others of like mind; and the need for denunciation of contemptuous conduct. This was referred to with apparent approval by the Court of Appeal (Tobias JA at [129]-[130], [137], [141], Basten JA agreeing at [181], Campbell JA agreeing) and by the Full Court of the Federal Court in Kazal (at [102]), the Court there noting that it was not an exhaustive list of potentially relevant matters.

9. There is no statutory maximum penalty (whether by way of fine or imprisonment) for the common law offence of contempt (see Attorney-General (NSW) v Whiley (1993) 31 NSWLR 314 at 320).

10. The various alternatives to imprisonment for which the Crimes (Sentencing Procedure) Act provides include: a community service order (s 8); a good behaviour bond (s 9); dismissal of the charges, if the Court is satisfied that it is inexpedient to inflict any punishment other than nominal punishment (s 10); conviction with no other penalty (s 10A); and a suspended sentence of imprisonment (s 12).

Relevant matters to consider

Seriousness of the contempt proved

11. Mr Gage now accepts that the contempt committed by him was serious and does not cavil with or seek to reagitate the findings made in that regard (see affidavit of Nicholas Gage affirmed 25 October 2017 at [54]). It is relevant here to set out my conclusions as to the contempt from [164]-[170] of my earlier reasons:

Determination as to charge 1

As to the first issue, the relevant actus reus, I am satisfied that Mirus has proved beyond reasonable doubt (by reference to the expert evidence of Mr Khoury) that the Surface Pro deletions occurred on 7 September 2015.

The analysis of the volume shadow copy of the Surface Pro as at 4 September 2015 shows the presence on that date of a considerable number of Mirus-related files. They had been deleted by 11 September 2015 when the Surface Pro was inspected. There is no room for doubt, on the expert evidence, that between 6.33pm and 7.19pm on 7 September 2015 the SDELETE function was run on the Surface Pro and that it specifically targeted a numbers of files which were identified on the Surface Pro by reference to Mirus. If the Mirus files had already been deleted by then, (i.e., in the period between 4 September 2015 when they were still on the Surface Pro and the commencement of proceedings on 7 September), there can have been no reason for Mr Gage to run the SDELETE application on 7 September 2015 specifically targeting those files. (To the extent that it be part of the actus reus that the documents deleted were documents potentially relevant to the litigation – and it was not clear to me from the submissions whether Mr Gage’s position is that it is so necessary – I should note that I am also satisfied that the documents targeted by the SDELETE process were documents of potential relevance to the litigation, whether those documents would have supported or undermined Mirus’ case.)

As to the requisite mens rea, there can be no reasonable doubt as to the conclusion that the deletions were intentional. As at the time the SDELETE operation was run, Mr Gage had been served with the initiating process commencing the present proceedings: he knew (and had known since 24 August 2015) that it was alleged that he was in possession of confidential information of Mirus; he knew from about 1pm that day precisely what was being alleged against him in that regard and he knew the relief that was being claimed (both interlocutory and final) in the proceedings; he knew that the matter was before the Court the following day and he had given instructions to his solicitors as to a proposal for the delivery up of certain of his electronic devices. He knew that he had downloaded onto the Surface Pro information which Mirus claimed was confidential to it (since the SDELETE function targeted Mirus information).

I accept that the inescapable inference is that when, between 6.33pm and 7.19pm that night, Mr Gage used SDELETE specifically to target Mirus-related files and information, he did so intentionally for the purpose of preventing that information being located on the computer the following day, when he knew that production of the Surface Pro was likely to be required. That he intended to delete the material can be inferred from the fact that he then made specific internet searches as to how to “restrict access to google drive specific devices” and how to delete activity logs of such deletions. The suggestion proffered in Mr Gage’s defence (that he deleted the information in order to maintain the confidentiality of that information) is fanciful, given that the deletion occurred at a time after he had already been warned not to delete any such material and when he knew it was highly likely (not least because he had instructed his solicitors to proffer proposed minutes of orders in relation to devices of this kind) that he would have to produce the Surface Pro for inspection the following day.

The running of that program the very evening before it was likely that the Surface Pro would be required to be produced for inspection, and notwithstanding the very specific warning that had been given to him by Mirus as to the potential consequences of deletion of that material, is consistent only with an intention to prevent that material being made available in the context of the court proceedings then on foot. I have not, in reaching that conclusion, needed to rely upon, nor have I drawn, any adverse inference from the fact that Mr Gage did not go into the witness box to explain his actions.

Further, having regard to Mr Gage’s admission (at [83(c)] of his defence) that it was by oversight that the deleted files remained on PC04 (due to the fact that it had, contrary to his expectations, failed to synchronise with his personal Google Drive account at the relevant time), I accept that it should be inferred that when Mr Gage produced the PC04 he did so mistakenly believing that, by his conduct, the files had already successfully been deleted and would not appear on that device.

I find that the contempt in charge 1 has been established beyond reasonable doubt. I note that in oral submissions it was accepted for Mr Gage that if, as articulated in the statement of charge, Mr Gage engaged in the activities which he did with the intention, or with the material purpose, of putting the documents he deleted beyond the reach of the Court or making them unavailable, then that in itself would be sufficient mens rea to constitute the charged contempt (T 113-114). I am satisfied that this has been established.

12. The seriousness of Mr Gage’s conduct lies in the fact that he deliberately took the steps he did with the intention of preventing discovery by Mirus (and the Court), by way of forensic access to the documents on his computer devices, of what he had done in relation to the material he had downloaded (having lied about being in possession of the material). This has had the effect that Mirus now cannot know precisely what, if anything, was done with its confidential information (other perhaps than by way of inference from whatever can be ascertained from the material that was taken and the contents of the database that Mr Gage created in relation to the proposed Aged HQ business). Mr Gage admitted that he acted as he did because he thought he would not be caught.

The contemnor’s culpability

13. So far as Mr Gage’s culpability is concerned, he accepts that his actions in deleting the electronic files from his Surface Pro were neither accidental nor inadvertent; they were deliberate (T 7.21-7.31). While it is submitted that Mr Gage did not do so with any express intention of undermining the integrity of the courts or impeding the administration of justice, he does not cavil with the findings made in my earlier judgment.

14. Mr Gage points to the relevant timeline of events and argues that the dispute arose very quickly after he left his employment with Mirus on 7 August 2015 (the first letter of demand being sent to him on 24 August 2015, followed by further demands on 28 August 2015 and 3 September 2015, and the commencement of proceedings by Mirus on an ex parte basis seeking urgent interlocutory relief).

15. It is submitted for Mr Gage that:

Mr Gage found himself in a very stressful situation that was quickly escalating. He had no job or income, he was trying to set up a new business and he had become embroiled in a dispute with his former employer that he regarded as arising from a misunderstanding by Mirus. He believed that the dispute would resolve itself once he had a chance to explain the situation to his former employer. In particular, he did not regard the Mirus source files (which he had taken with him upon leaving his employment) as having any value to the new business he was trying to establish and he did not intend to use the information in any way that would damage Mirus.

Mr Gage had never previously been involved in any legal proceedings and was, by his own admission, naive as to legal processes. Rather than own up to the fact that he had taken certain source files from Mirus, Mr Gage panicked. This resulted in him making a very grave error of judgment.

(Defendant’s Submissions on Sentencing, [21]-[22])

16. I accept that Mr Gage did not understand the legal implications of what he was doing and that he did not appreciate that what he was doing would have the effect of impeding the administration of justice. It nevertheless was deliberate conduct on his part (coupled with dishonesty on his part in his instructions to his former lawyers and seemingly also in his varying explanations for his conduct, which changed as he realised what Mirus’ expert had been able to discover from the analysis of his computer devices).

17. From September 2015 to November 2016 Mr Gage gave false explanations designed to exculpate himself consistently with the forensic evidence as he understood it at the time. Up to and including his filing and service of an affidavit on 18 November 2016 in response to the contempt and strike out motions, Mr Gage falsely denied any conduct constituting a deliberate deletion of Mirus’ confidential information from his Surface Pro on 7 September 2015 (see [95]-[102]). Once Mirus served Mr Khoury’s Fifth Supplementary Report on 31 January 2017 (which made clear that the results of the forensic analysis were not consistent with Mr Gage’s denials as to the alleged deletions), Mr Gage elected, on 8 May 2017, not to give evidence on those motions. (Mirus points out that it was only after the contempt was found to have been proved that Mr Gage, in his affidavit of 25 October 2017, acknowledged making any of those deletions otherwise than inadvertently.)

18. Mirus argues that the submission that the deletion was a result of panic in a stressful situation should be rejected, noting that Mr Gage had certified in a letter of 7 August 2015 that he had returned all confidential information, he had subsequently received two letters of demand on 24 and 28 August 2015, and his affidavit evidence about panic concerned the risk of loss of use of his laptop for a week.

19. Mirus submits that when Mr Gage instructed his solicitors to convey instructions which he knew to be untrue he had no reason to be concerned of a risk of him being without his laptop (the letters of demand having required responses to questions and delivery up of confidential information in his possession, not the delivery up of his laptop or Surface Pro).

20. Further, it is said that Mr Gage’s explanation concerning that panic is inconsistent with his evidence that he did not identify his Surface Pro or laptop as being potentially relevant to any claim by Mirus until after he became aware of the orders for short service on 7 September 2015.

The reason or motive for the contempt

21. It is submitted for Mr Gage that when the dispute arose, and Mirus first made its demands, Mr Gage was conscious that he had in his possession confidential information of Mirus (though at the time he denied this through his then lawyers) and that it can therefore readily be inferred that Mr Gage was conscious that he should not have had that confidential information and that he knew that one of Mirus’ goals in the dispute was to ensure that he no longer had access to whatever confidential information he had. It is submitted that Mr Gage was naive and unsophisticated with respect to legal processes and the administration of justice and that he was in a very stressful situation. He says that he panicked and that he “securely deleted” the confidential information in the hope that it would make the problem “go away” (Defendant’s Outline of Submissions on Sentencing, [29]; and see affidavit affirmed 25 October 2017 of Nicholas Gage at [42]-[48]).

21. Mr Gage was cross-examined as to some of the explanations he gave as to the deletions (particularly as to the suggestion that he copied material from one device to another as he was going to be without a computer for some time). It was submitted, in effect, that I should not accept that his conduct was panic-driven. I will come back to the import of Mr Gage’s cross-examination and his demeanour in the witness box. Suffice it to say that I consider his conduct (and particularly the varying explanations for his conduct as the dispute escalated) bears the hallmarks of someone seeking to deflect inquiry and becoming trapped in the web of his own deceit.

The circumstances of the deletion

23. There were two classes of confidential information taken by Mr Gage from Mirus and deleted from his Surface Pro on the evening of 7 September 2015: first, records relating to Mirus’ customer relationship management database, (the Mirus Capsule CRM) and Mr Gage’s manipulation of the data in that database including uploading some of it to the Aged Care HQ Capsule CRM and “sharing” (in the sense of making it available for access) that database with Mr Wilson; and second, the source code to the programs constituting Mirus’ core intellectual property.

24. The circumstances in which Mr Gage deleted the confidential information are set out in my earlier reasons.

Capsule CRM

25. As to the Capsule CRM, Mirus points out that Mr Gage was aware from commencement of the proceedings that Mirus had available to it forensic evidence that he had downloaded the Mirus Capsule CRM files to his personal Google drive.

26. In the first affidavit filed by Mr Gage in the proceedings (affirmed 18 September 2015), his explanation was (at [14]) that in the final weeks of his employment he thought a copy of the public information in the Capsule CRM would be a useful resource for his future use and so he attempted to export the “public information” from CRM but (see [19]) this attempt on about 7 August 2015 was unsuccessful and so he deleted the file from his Surface Pro computer device.

27. In fact, the evidence reveals that on 13 and 14 August 2015, Mr Gage took steps to extract data concerning various organisations from the Mirus Capsule CRM. He then created a new client relationship management (that new database being the ACHQ [Aged Care HQ]Capsule.crm database). Mr Gage advised Mr Wilson of his success in creating the ACHQ Capsule CRM database on 14 August 2015 and provided to Mr Wilson login details of that database. Mirus’ complaint is that Mr Gage created the customer relationship database for his new business from data sourced from Mirus’ customer database and that he has neither provided to Mirus a copy of the ACHQ database that he “shared” (in the sense of making access available to him) with Mr Wilson on 14 August 2015 or done anything to provide Mirus with assurance that the information in that database is no longer accessible to him or to Mr Wilson.

28. Mirus points out that after Mr Gage became aware on 15 January 2016 that there existed forensic evidence of the deletion of 7000 files from the Surface Pro on 7 September 2015, on 9 February 2016 he deposed (falsely) that his deletion of the Mirus Capsule CRM from the Surface Pro was by use of an ordinary delete function, and that his use of the secure delete function that evening was directed at documents concerning an unrelated business, “World Customs Portal”. (Mr Gage now acknowledges that in doing that he made the situation worse: see his affidavit affirmed 25 October 2017, at [51]). Mr Khoury’s second supplementary report that was served by Mirus on 24 February 2016 showed that none of the documents deleted from the Surface Pro made any reference to “World Customs Portal” or similar terms. Mr Gage then deposed in his 18 November 2016 affidavit (which was not read by Mr Gage in the proceedings but parts of which were tendered by Mirus) that the documents concerned were likely to make reference to “TTA” or “Trusted Trader Advisory” and not “World Customs Portal.”

29. Mirus points to the fifth supplementary report served on 31 January 2017, in which Mr Khoury concluded that none of the “TTA” documents on the Surface Pro had been deleted, that the secure deletion program run on 7 September 2015 had been targeted at Mirus’ documents, and that the Mirus Capsule CRM files were deleted as part of that secure deletion.

Mirus source code

30. As to the Mirus source code, the evidence relied upon by Mirus on the contempt/strike out motions was that in his final weeks of employment, while he was building a major change to the security settings for Mirus’ core program, Mr Gage uploaded to his personal Google drive numerous iterations of the source code of those programs, and that files containing that source code were among those deleted from the Surface Pro on 7 September 2015.

31. Mirus notes that in his defence, Mr Gage admitted to the downloading of the Mirus Capsule CRM data, but says this admission did not extend to the Mirus source code. Mirus says that the admission in relation to the downloading of the Mirus Capsule CRM was made at a time when Mr Gage knew that this download would be proven (because Mirus had the records of the downloading on its own systems and Mr Khoury had set all that out in his report served on 7 September 2015). Mirus notes that, after the evidence disclosing the deletions had been made known, in his affidavit of 18 November 2016 (that was not read), Mr Gage gave the explanation that he had created the folders “Mirus stuff’ and “NickSi” (which contained the Mirus source code) on his Mirus Google drive at work, and had set up an automatic sharing of those folders with his personal drive. Mirus notes that, if true, that assertion would have left open the possibility that deletions from Mr Gage’s devices were caused by deletions being made, after cessation of his employment, by someone in the Mirus environment. Mirus relies on Mr Khoury’s fifth supplementary report for the conclusion that the explanation that copies were due to sharing from the Mirus Google drive was an impossibility.

32. Mirus says that whether Mr Gage maintains access to the Mirus source code is unknown, since there is evidence that he transferred files from his Surface Pro to some other location just before the “mass deletion”, but those deletions prevent identification of which files were transferred and to where they were transferred.

33. Mirus points to the above matters as relevant when considering the circumstances of the deletions.

34. For present purposes, what is relevant is that the deletions were deliberate (which is not now disputed by Mr Gage) and were not only actions designed to conceal (in the sense of destroying) evidence of the downloading but also had the effect of hindering, and perhaps indeed rendering futile as a practical matter, any attempts to obtain evidence of any wrongful conduct (beyond the fact of the downloading itself) in relation to the use of Mirus’ confidential information.

Whether the contemnor has received, or sought to receive, a benefit or gain from the contempt

35. In this regard, it should be kept in mind that the conduct found to have constituted contempt was not the downloading of Mirus’ confidential information (the subject of the substantive dispute in the principal proceedings); rather, it was the deletion of electronic files and data (at a time when Mr Gage knew proceedings had been commenced and that he was likely to be required to produce to the Court his electronic computer devices on which the material had been downloaded).

36. Mirus’ contention in the principal proceedings is, in effect, that Mr Gage downloaded its confidential information in order to make use of that material to set up a new business (“Aged Care HQ”); in other words, to receive a benefit or gain from the use of that material. However, for present purposes whatever benefit was sought from the downloading is not the relevant question as I see it; rather, it is whether Mr Gage has received or sought to receive a benefit or gain from the deletion of the relevant material.

37. Mr Gage submits that the contempt was not calculated to give himself any commercial advantage over his former employer. It is said that, to the extent that his actions prejudiced Mirus’ interests or resulted in benefits to himself, those interests and benefits were strategic and procedural in the context of the ongoing dispute between the parties. It is further submitted that Mirus’ private interests have been vindicated, and that any strategic advantage gained by Mr Gage has been nullified, by means of the striking out of numerous parts of Mr Gage’s defence as an abuse of process. Mirus challenges that submission. Its complaint is that Mr Gage obtained possession of the ACHQ Capsule CRM containing information sourced from the Mirus Capsule CRM, and shared it with Mr Wilson. Its contents, location and use remain unknown.

38. I am satisfied that the deletions were performed in order to prevent discovery by Mirus of the use, if any, that had been made of the downloaded material. However, I am not satisfied that the deletions were made for private gain beyond the concept avoiding potential liability in the proceedings. In other words, without knowing what is on the Aged Care HQ database, I cannot conclude that the deletions were for the purpose of enabling Mr Gage with impunity to make use of a database (for private gain) created from the unauthorised use of Mirus’ confidential information. On the evidence before me, I think it more likely that the deletions (and false explanations) were to prevent discovery of any wrongdoing in the downloading and possession of the confidential material.

Whether there has been any expression of genuine contrition by the contemnor

39. For Mr Gage it is submitted that he has now expressed contrition for his actions. He says he first apologised to Mirus for the deletions he made at a mediation that occurred in December 2015 and that he has now formally apologised to the Court. At [56] of his affidavit of 25 October 2017, Mr Gage deposed that:

I have apologised to Mirus directly in person at the mediation in December 2015 and expressed that I was sorry about my actions and this continues to be the case.

40. Mr Gage further deposed in that affidavit to the following:

(at [54]) … I now fully understand and appreciate the impact and seriousness of these misleading responses and truly regret the actions I took in an attempt to resolve the situation myself.

(at [57]) … I regret my decision to take and then delete any information from Mirus and the costs they have incurred to find a resolution.

(at [65]) This is the first and last time I will ever find myself in this situation. I wish to apologise one last time to the Court and Mirus for the needless cost and time they have had to invest in this process.

41. Mirus submits that, contrary to Mr Gage’s submissions on this issue, there is no evidence of genuine contrition. Mirus argues that, in his affidavit, Mr Gage has:

pointedly failed to apologise to either Mirus or the Court for his conduct in deleting the files on 7 September 2015. Rather, the only apology offered by Mr Gage in his affidavit is for the needless cost and time invested in the process of establishing the contempt.

(Plaintiff’s Submissions on Sentencing, [5]).

As to the submission that Mr Gage first apologised to Mirus for the deletions he had made at a mediation that occurred in December 2015, Mirus says that Mr Gage’s own evidence does not go so far as to suggest that he apologised at the mediation in December 2015 “for the deletions he had made” (Plaintiff’s Submissions on Sentencing, [7]).

42. Mirus argues that Mr Gage’s own evidence indicates that the position that he now takes is driven by self-interest leading to self-pity, pointing to Mr Gage’s evidence that: the making of the declaration that he had engaged in contempt, with its criminal implication, was a massive shock to him which continues to cause him concern and anxiety; that that finding has caused him personal stress impacting on his health and causing financial strain; and that his conduct has caused emotional stress to him and his wife.

43. Mirus also argues that there has been no suggestion of any attempt by Mr Gage to purge his contempt. Mirus says that this would require, at a minimum, full disclosure of the contents and current locations of the Aged Care HQ Capsule CRM. It says that, absent any such attempt, any apology is a hollow appeal for leniency and should not be accepted as demonstrating genuine contrition.

44. In response to this last submission, Senior Counsel for Mr Gage pointed to the lack of any request to date for access to the Aged Care HQ database (the substantive proceedings being not yet at the stage of any application for discovery), but in any event obtained immediate instructions to proffer an undertaking as to the provision of access to the said database.

45. I have had the opportunity to observe Mr Gage in cross-examination in the witness box. Far from exhibiting bluster or arrogance, Mr Gage appeared to me to be apprehensive and subdued. He was not argumentative. He did not seek to justify his conduct. And he appeared to be at pains to consider and answer truthfully the questions put to him. I consider that his expression of contrition (albeit proffered only after his conviction) is genuine.

46. As to the complaint by Mirus as to the ambit of the apology proffered by Mr Gage at the mediation (which mediation was obviously unsuccessful), it is impossible, without knowing precisely what was said or its context, to express any view as to whether it was carefully circumscribed so as to avoid apology for the fact of the deletions or not. It seems to be accepted that Mr Gage did offer an apology of some kind. But in any event, Mr Gage is not suggesting that I should treat his contrition as anything other than being made at a late stage of the proceedings. I take nothing further from the evidence of the making of an apology at the mediation than that it is indicative of an attempt by Mr Gage at that stage to appease Mirus in respect of his actions.

The character and antecedents of the contemnor/the contemnor’s personal circumstances

47. I will deal with these factors together. Mr Gage adduced evidence, which is not challenged, as to his previous good character and his family circumstances. As to the former, he deposed that he has never been involved in any other legal proceedings and does not hold a record of having committed any prior offences (affidavit affirmed 25 October 2017, [9]-[10]). As to the latter, he is married with a young baby. At the time of the sentencing hearing, his wife was on maternity leave and currently without an income; Mr Gage was at that time solely responsible for the financial support of his family on what has been described as (and I accept is) a relatively modest income, with uncertain future employment. Mr Gage has given evidence of his employment history since leaving Mirus and his present financial circumstances. Relevantly, he has given evidence as to the impact of this conviction on his employment at a large accounting firm (he no longer being permitted to perform client-facing or external work (see [8] of his affidavit affirmed 12 December 2017).

48. Mr Gage has tendered a character reference from a barrister friend of his who has expressed his opinion that the conduct in which Mr Gage engaged was out of character. Mr Gage has deposed (and I accept) that he will never engage in this kind of conduct again.

The need for deterrence of the contemnor and others of like mind

Specific deterrence

49. It is submitted that Mr Gage has already suffered significantly as a result of his conduct. It is noted that significant portions of his defence have been struck out, with the result that he has, in effect, been forced to admit key parts of the case against him relating to confidential information; that he has incurred significant costs, both by way of his own costs and the costs of Mirus which he has been ordered to pay with respect to both the contempt motion and the associated strike out motion. It is submitted (and I can take judicial note of the likelihood of this) that Mirus’ costs, although not yet quantified or assessed, could readily be expected to be many tens of thousands of dollars, if not hundreds of thousands of dollars, particularly given that Mirus relied on numerous computer forensic expert reports on the hearing of the two motions.

50. It is further noted that the substantive proceedings against Mr Gage were effectively in stasis for about a year while the contempt and strike out motions were determined; and that Mirus is yet to finalise its evidence. It is submitted that if the matter does not come to trial until later this year, Mr Gage will have been left with the stress and uncertainty of serious allegations hanging over his head and unresolved for more than two years (though he accepts that this is partly as a result of his own contempt at the outset of the proceedings).

51. It is submitted that dealing with the emotional stress of the proceedings, while at the same time dealing with the stresses and costs of life with a new baby, has had a significant effect on both Mr Gage and his family. I can well accept that this is so.

52. I do not accept that Mr Gage’s contrition can be dismissed as borne out of no more than self-pity as to his current predicament (as Mirus in effect characterises it). The submissions made as to the impact (both financially and emotionally) of the proceedings are matters directly relevant to Mr Gage’s present circumstances and inform the likelihood that his conviction alone will be a sufficient deterrent against any similar such conduct in the future. These are matters that tend against the need for further punishment to meet the need for specific deterrence in the present case.

53. I accept that there is no prior history of contempt and that it is highly likely that it will also be the last instance of contempt, given the appreciation Mr Gage now has of the wrongness of his actions and the consequences that may flow from them.

54. I accept that in light of the matters considered above there is no need for further punishment to serve the purpose of specific deterrence.

General deterrence

55. As to general deterrence, it was submitted for Mr Gage that there is also no need to impose any further punishment on account of general deterrence, on the basis that the punishment already suffered by Mr Gage will be a salutary and sufficient warning to others contemplating engaging in similar conduct. I do not accept that no further punishment is warranted to serve the purpose of general deterrence. I deal with this further in my conclusions on sentence below.

The need for denunciation of contemptuous conduct

56. In Registrar of the Court of Appeal v Maniam (No 2) (1992) 26 NSWLR 309, Kirby P (as his Honour then was) characterised the various classes of contempt identified in the cases as including technical, wilful and contumacious contempt, saying (at 314ff):

For the purposes of punishment, various classes of contempt have been identified in the cases. They include technical, wilful and contumacious contempt. For technical contempts, the Court will usually accept an apology from the contemnor. It may order that the contemnor pay the costs of the proceedings brought to uphold the authority of the courts of law. An illustration of a technical contempt may be found in Ainsworth v Hanrahan (1991) 25 NSWLR 155. That was a case where counsel, in the course of cross-examination of a party, without leave of the relevant court, used answers given by the party to interrogatories administered in other proceedings. No penalty was imposed.

A similar approach is sometimes taken to contempts which are more than technical and which, although wilful, are not found to have been deliberate.

….

The most serious class of contempt, from the point of view of sanction, is contumacious contempt. Not every intentional disobedience involves a conscious defiance of the authority of the Court which is the essence of this class of contempt: see Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 at 500. This class of contempt is reserved to cases where the behaviour of the contemnor has been shown to be aimed at the integrity of the courts and designed to degrade the administration of justice, as distinguished from a simple interference with property rights manifested by a court order: cf Root v MacDonald 157 NE 684 (1927) at 688; 54 Am LR 1422 (1927) at 1429. In cases where such a measure of wilfulness is established, the court may proceed to punish the convicted contemnor by the imposition of a custodial sentence or a fine or both. In such a case the elements necessary to establish wilfulness, carrying as they do the potential of penal consequences, must all be proved to the criminal standard: see Consolidated Press Ltd v McRae (1955) 93 CLR 325 at 333. The procedures of a criminal prosecution must be strictly observed: see Spindler v Balog (1959) 76 WN (NSW) 391 at 393.

It is not every case of a wilful and deliberate interference in the administration of justice by the courts that attracts a custodial sentence. Sometimes it is sufficient to impose a substantial fine, at least where there are circumstances which explain the behaviour or tend to mitigate its seriousness: see New South Wales Egg Corporation v Peek (1987) 10 NSWLR 72 at 84. Where the behaviour in question has been deliberate or wilful, reckless or grossly negligent and a risk exists of its repetition, substantial (and even very substantial), fines have been imposed: see Director of Public Prosecutions v John Fairfax & Sons Ltd; Director of Public Prosecutions v Australian Broadcasting Corporation (1987) 7 NSWLR 588 at 615.

57. Mr Gage points out that his contempt did not involve disregard of the Court’s orders. Hence, it is submitted, and I accept, that the exercise of the sentencing discretion for this contempt is not aimed at coercing or otherwise ensuring ongoing compliance with particular orders of the Court; rather, the object of sentencing with respect to this contempt is essentially to protect and vindicate the judicial function and the role of the courts. Mr Gage nevertheless also accepts the need for the Court’s denunciation of conduct of this kind.

Conclusion

58. For Mr Gage it was submitted that imprisonment is not an appropriate sentence. I agree. Such a sentence may only be imposed if the Court is satisfied, having considered all possible alternatives, that no other penalty is appropriate. I am not satisfied that a custodial term is the only penalty that is appropriate in the present case, given that Mr Gage was not found guilty of a contumacious disregard of the orders of the Court; nor was this a contempt committed after various earlier contempts. Moreover, this is not a case in which the contemnor has shown no remorse or appreciation of the wrongness of his or her actions. I accept that Mr Gage’s expression of contrition, though late, is genuine and he is unlikely to reoffend.

59. As to the other available sentencing options, Mr Gage has limited financial means to meet any fine that might be imposed. I accept that his current income and assets are modest and that his future income is uncertain. He has a young family to support. He is also already subject to what will likely be a very large costs order against him arising from the contempt and strike out motions. For Mr Gage it was submitted that, in these circumstances, a fine would not be an appropriate sentence to be imposed.

60. Mr Gage’s submission is that he has already been subject to sufficient punishment, directly and indirectly (there being evidence as to the impact of the finding for contempt on his current employment), as a result of the contempt which he committed, and that no further penalty is warranted.

61. Mirus made no submission as to the appropriate sentence, save to submit that an appropriate penalty would constitute a significant deterrent – both specific and general – and that a fine of $10,000 would be “insufficient for general deterrence” (T 48.6-48.7).

62. As to specific deterrence, as I have already made clear, I am satisfied that Mr Gage’s contrition (though expressed only after he was found guilty of contempt and facing the prospect of sentencing) is genuine. I consider that Mr Gage has already been punished for his conduct both in a practical sense – in the effect it has had on his employment prospects and in the public humiliation likely to be suffered as a result of publication of the contempt judgment – and in the financial sense (quite apart from the indemnity costs order I have already made) in that he has incurred no doubt not insubstantial costs in defending the interlocutory motions.

63. I accept his evidence, supported by the character reference tendered on his behalf and reflected in the instructions he has obviously given in relation to the conduct of the sentencing proceedings (including his willingness to make access available to the Aged Care HQ database), that he now appreciates the seriousness of his conduct and, in effect, that he has well and truly learnt a difficult lesson. I think it highly unlikely that he would engage in future such action.

64. This case is certainly one of a wilful and deliberate inference in the administration of justice but, as recognised in Maniam No 2, it is not in every such case that a custodial sentence is warranted.

65. As to where the contempt in the present case falls on the spectrum of contempts that involve wilful and deliberate interference with the administration of justice, and the undermining of the integrity of the Court, this is not easy to place. This is not a case of contumacious disobedience of Court orders (such as flagrant breach of an injunction restraining particular conduct or – as was the case in Maniam No 2 – of repeated failure to comply with a subpoena to attend to give evidence). It was not a case where there was an attempt to interfere with witnesses or to suborn a jury. That said, the deliberate destruction of electronic files with a view to making it impossible for the full picture of alleged wrongdoing to be able to be obtained by the Court, in circumstances where Court proceedings were then on foot and not only was the contemnor aware that production of his computer devices was likely imminently to be required but he had also been expressly warned not to delete files (against the possibility of a contempt charge), is a serious matter.

66. Moreover, the deletion of the files was compounded by the giving of false (apparently exculpatory) explanations of the contemnor’s conduct. Mr Gage accepts that it was done because, colloquially speaking, he thought he could “get away with it”. The delay in expressing contrition is also a factor to take into account.

67. An important purpose in sentencing is to make clear the Court’s disapproval of such conduct (as well as to set a punishment that will further the purpose of general deterrence). As any regular observer of the duty judge list in the Equity Division will know, time and again there are applications brought for urgent (usually ex parte) relief in relation to allegations of misappropriation of confidential information. In the modern electronic era, for those accused of such wrongdoing to consider that they are in a position with impunity to destroy or manipulate electronic evidence in an attempt to render forensic investigation of the subject matter of the complaint impossible cannot be encouraged. Mr Gage, both through his Senior Counsel and in his evidence on the sentencing application, properly concedes that this is a serious matter. The sentence must reflect this.

68. In all the circumstances I consider that the appropriate sentence is to impose a fine of sufficient magnitude to pose deterrence to others who might contemplate similar conduct but (as was done in Maniam No 2) to suspend that fine in the present case, subject to compliance by Mr Gage with a condition. In Maniam No 2, the condition related to community service. It was particularly appropriate in that case where the contemnor was a medical practitioner. In the present case, where Mr Gage is the sole person responsible for the support of his young family at present, and where it may pose difficulties with his ability to work, I do not propose to impose such a condition. Rather, the appropriate condition in my view would be one designed to ameliorate as far as possible in a practical sense the disadvantage to which Mirus has been put in seeking to establish its case (namely, a condition of the kind that Mirus suggested would be necessary for Mr Gage to purge his contempt). That meets (so far as remains possible in light of the admitted deletions) the continued complaint by Mirus that Mr Gage has not disclosed what use (if any) was made of its confidential information in the creation of the Aged Care HQ database.

69. I foreshadowed in the course of submissions the possibility of such a condition, but made clear that it would need to be expressed in very clear terms so as to avoid any doubt as to what would be necessary to satisfy it. As noted, after judgment on the sentencing was reserved, the parties forwarded an agreed form of condition that it was accepted would satisfy my concerns in the event that I were to impose a sentence of the kind I indicated that I had in mind. The wording of the condition as agreed between the parties following the intimation that such a condition might be placed on the suspension of any fine that might be imposed by way of penalty on Mr Gage was as follows:

Within 7 days of the date of this order, the First Defendant, through his lawyer is to provide to the lawyers for the Plaintiff the “Username” and “Password” details to enable access to the Aged Care HQ cloud service located at url: start="70">

As to the size of the fine, I note first that although the Court may derive some assistance from an examination of prior decisions, they do not provide “any safe guide to the proper tariff or punishment for contempt of court … because both the nature of the contempt itself and its consequences vary so greatly in different cases” (see Wood v Galea (1996) 84 A Crim R 274 at 277 per Hunt CJ at CL; Principal Registrar of Supreme Court (NSW) v Tran [2006] NSWSC 1183; (2006) 166 A Crim R 393 at 401 [38] per Buddin J).

There is, moreover, a dearth of comparables. In Maniam No 2 (where there was repeated disobedience to a subpoena to attend and give evidence) the fine was $10,000, but that was back in 1992. More recently, a fine in that amount was imposed in Crane Distribution Ltd v Van Schellebeeck [2009] NSWSC 263 (where there was breach of an asset freezing order), in addition to an order restricting the defendant from taking any step in defence of the proceedings until the contempt was remedied. In Admark Property Group Pty Ltd (in liq) v GJ Building and Contracting Pty Ltd [2017] NSWSC 118, Black J imposed a fine of $50,000 for contempt of Court in circumstances where the respondent had caused a company to breach an undertaking to the court.

Counsel for Mirus intimated that a fine of a more substantial amount than $10,000 may be necessary to deter others in the position of Mr Gage (who was a director of Mirus at the time he downloaded the confidential information) from engaging in such conduct. That, to some extent, focusses on the wrongdoing alleged in the substantive proceedings as opposed to the conduct in deleting the electronic files.

In the circumstances, I am of the opinion that a fine of $40,000 would be sufficiently large to deter others from deliberate deletion of electronic files with the intent of escaping liability for alleged wrongdoing of the kind of which Mr Gage is accused in the substantive proceedings, without being out of kilter with the punishment for contempt in other cases to which my attention was drawn and those to which I have referred above. That fine will be suspended on condition that Mr Gage provides access to the Aged Care HQ database in the “cloud” as per the terms of the agreed condition.

Costs

74. During the course of the hearing, Senior Counsel for Mr Gage submitted that there should be no order as to the costs of the sentencing hearing. Counsel for Mirus argued, to the contrary, that it should have its costs of the sentencing hearing on an indemnity basis. Brief written submissions on that issue were served after judgment was reserved on the sentencing hearing.

75. Mirus seeks its costs of the sentencing hearing on the indemnity basis. It submits that where contempt has been found the practice of the Court is to order that the prosecutor have the costs of the penalty hearing, even where the prosecutor is a public authority. In what is said to be a paradigm example, Mirus refers to Maniam No 2, where the contemnor was ordered to pay the costs of the whole of the proceedings (at 319). Mirus notes that, there, the prosecutor was the Registrar and the finding of contempt had been made in an earlier decision (referring to 309). Mirus further notes that in that case the expression of regret had been made at the liability hearing (see 313, 318).

76. Mirus argues that where liability to pay costs is a consideration in the penalty to be imposed, “the practice, perhaps rising to a principle” is that costs are ordered on an indemnity basis in favour of a private prosecutor (citing for that proposition McIntyre v Perkes (1988) 15 NSWLR 417 at 426-427; Farahbakht v Midas Australia Pty Ltd [2006] NSWSC 1322 at [59]). It argues that that practice or principle is applied in cases of a separate hearing on penalty (citing NCR Australia Pty Ltd v Credit Connection Pty Ltd [2005] NSWSC 1118 at [102]; McGuirk v University of New South Wales [2010] NSWSC 448 at [44]-[47]; Circuit Finance Australia Ltd v Sobbi [2010] NSWSC 912 at [9], [10]).

77. Mirus argues that its participation in the sentencing proceeding was of utility and submits that, to the extent that this is an appropriate description, it was “largely successful” on the questions in issue. In this regard it argues that at the sentencing hearing, it had changed his position from that foreshadowed in his first affidavit and written submissions in a number of ways.

78. Mr Gage submits that the authorities cited by Mirus for the contention as to the practice (or a principle) that, on contempt charges, a successful prosecutor will ordinarily have its costs of any separate hearing on penalty (even if the prosecutor is a public authority) do not support such a submission and it should not be accepted. He contends for the order that I indicated at the sentencing hearing I was inclined to make, namely that each party bear its own costs of the sentencing hearing.

79. Mr Gage notes that in many cases, the question of costs is not dealt with upon the determination of contempt, but is left to the hearing on penalty (as was the case in Maniam No 2 and Circuit Finance Australia Ltd v Sobbi). Reference is also made in that regard to DB Mahaffy & Associates v Mahaffy [2015] NSWSC 1959. Mr Gage submits that the costs orders that were made in those cases were the costs of the entire contempt proceedings (not the sentencing hearing as a separate hearing).

80. Mr Gage notes that in NCR Australia Pty Ltd v Credit Connection Pty Ltd, where the contemnor pleaded guilty to the contempt charges, which concerned breaches of a Mareva injunction (at [1]), the only hearing was the hearing on penalty and, again, the costs order that was made against the contemnor was with respect to the contempt motion as a whole (not with respect to the penalty hearing as such).

81. As to the case of McGuirk v University of New South Wales, where there were separate hearings on contempt and on penalty and James J made a separate costs orders against the contemnor with respect to the penalty hearing, Mr Gage submits that that costs order was not made because of some general practice or principle, but rather because his Honour concluded that no other penalty for the contempt was available to him in the particular circumstances of that case (at [36]-[41]). Thus the costs order with respect to the penalty hearing was the only further form of sanction for the contempt that was available (see [43]).

82. Mr Gage argues that, by contrast, in the present case, a costs order has already been made in favour of Mirus in respect of the hearing of the contempt motion on an indemnity basis. He submits that that is, in itself, part of the penalty for the contempt; and that the question whether there should be any further costs order with respect to the sentencing hearing is simply a matter of the Court’s discretion (not the subject of any usual rule or practice).

83. It is submitted for Mr Gage that, on the sentencing hearing, Mirus was in a position akin to that of a prosecutor upon an ordinary criminal sentencing hearing (referring to Kazal v Thunder Studios Inc (California) at [159]) and therefore was obliged to act “fairly and in an even-handed manner” in presenting the relevant facts and otherwise making its submissions (referring to R v Tait (1979) 46 FLR 386 at 389 per Brennan, Deane and Gallop JJ). He submits that Mirus attempted to overreach on the sentencing hearing insofar as it submitted that a penalty of imprisonment might need to be considered to constitute significant deterrence. It is also argued that Mirus attempted to agitate various issues (either in submissions or in cross-examination) that were essentially irrelevant to the question of sentencing the contempt of which Mr Gage had been convicted). Mr Gage further submits that Mirus’ submissions as to there being a change of position between his first and second affidavits are without basis (see at [7]) and should be rejected.

Conclusion as to costs

84. Costs remain in the discretion of the Court. I am not persuaded that there is an invariable practice in this regard nor that, as a matter of principle, there should be a costs order against the contemnor of a sentencing hearing occurring separate from the hearing of the contempt charge itself. In the present case, I am not persuaded that the costs of the sentencing hearing should be awarded against Mr Gage. I consider that the indemnity costs order imposed for the hearing of the contempt/strike out motions provides a sufficient sanction for the contempt, particularly in circumstances where Mirus’ submissions on sentencing appeared to be redolent of a desire to punish Mr Gage not only for the deletions that occurred but also for the downloading of the information in the first place. While Mirus’ condemnation of Mr Gage’s actions, and his attempts to avoid discovery of his wrongdoing, is understandable, its stance on the sentencing hearing had an adversarial flavour. I have already attempted to make orders to ameliorate the forensic disadvantage Mirus has suffered by Mr Gage’s conduct in striking out parts of his defence. I consider that a further indemnity costs order is not warranted.

Order

85. For the above reasons I make the following orders:

1. Order that the first defendant be fined the sum of $40,000.

2. Order that the punishment in order (1) be suspended upon the condition that the first defendant comply with the following condition:

3. Within 7 days of the date of this order, the First Defendant, through his lawyer is to provide to the lawyers for the Plaintiff the “Username” and “Password” details to enable access to the Aged Care HQ cloud service located at url: no order as to the costs of the sentencing hearing, to the intent that each party pay his or its own costs of that hearing.

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Decision last updated: 02 February 2018