New Aim Pty Ltd v Leung

Case [2023] FCAFC 67

FEDERAL COURT OF AUSTRALIA

New Aim Pty Ltd v Leung [2023] FCAFC 67

Appeal from: New Aim Pty Ltd v Leung [2022] FCA 722
File number: VID 409 of 2022
Judgment of: KENNY, MOSHINSKY, BANKS-SMITH, THAWLEY AND CHEESEMAN JJ
Date of judgment: 10 May 2023
Catchwords:

EQUITY – confidential information – where the appellant conducted online retail business and sourced products from China – where the first respondent was employee of appellant until resignation – where the first respondent kept contact details of certain persons in the WeChat application on his mobile phone – where the first respondent disclosed some of those contact details to the second respondent – where the primary judge found that the alleged confidential information was not confidential, having regard to a range of relevant factors – whether the primary judge erred by drawing a distinction between information on the appellant’s database and information in the first respondent’s WeChat application

EVIDENCE – expert evidence – where primary judge rejected the entirety of the evidence of expert witness on the basis of the involvement of the applicant’s lawyers in the preparation of the report – where the primary judge stated that he was uncertain as to who drafted different parts of the report – where the primary judge considered that the conduct engaged in in preparing and delivering the expert’s report was misleading – whether primary judge erred in his factual findings concerning the preparation of the expert’s report – whether the primary judge erred in rejecting the entirety of the evidence of the expert witness

Legislation:

Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law

Corporations Act 2001 (Cth), s 183

Federal Court Rules 2011 (Cth), r 23.13

Cases cited:

BrisConnections Finance Pty Limited (Receivers and Managers Appointed) v Arup Pty Limited [2017] FCA 1268; (2017) 252 FCR 450

Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (2009) 81 IPR 1

Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 137
Date of hearing: 18 November 2022
Counsel for the Appellant: Mr PD Crutchfield KC with Mr LA Merrick and Ms M Evetts
Solicitor for the Appellant: Corrs Chambers Westgarth
Counsel for the First, Second and Third Respondents: Mr TP Mitchell with Mr PE Annabell
Solicitor for the First, Second and Third Respondents: Jem Lawyers

ORDERS

VID 409 of 2022
BETWEEN:

NEW AIM PTY LTD (ACN 115 804 432)

Appellant
AND:

MAN HUNG (JACK) LEUNG

First Respondent

BROERS GROUP PTY LTD (ACN 647 179 271)

Second Respondent

SUN YEE INTERNATIONAL PTY LTD (ACN 159 318 224)

Third Respondent

ORDER MADE BY:

KENNY, MOSHINSKY, BANKS-SMITH, THAWLEY AND CHEESEMAN JJ

DATE OF ORDER:

10 MAY 2023

THE COURT ORDERS THAT:

1.The appeal be allowed.

2.Paragraph 1 of the orders made by the primary judge on 23 June 2022, insofar as it relates to the applicant’s claims against the first, fourth and fifth respondents at first instance, be set aside.

3.Paragraph 2 of the…

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New Aim Pty Ltd v Leung [2023] FCAFC 67
Case
[2023] FCAFC 67
Decision Date

CaseChat Overview and Summary

New Aim Pty Ltd, an Australian online retail business sourcing products from China, commenced proceedings against Leung, a former employee who allegedly disclosed confidential information, and Broers and Sun Yee, who were said to have received this information. The dispute centred on whether the alleged confidential information was indeed confidential, the admissibility of expert evidence, and the interpretation of the Corporations Act. The Full Court of the Federal Court of Australia heard the appeal and found that the primary judge erred in his assessment of the confidentiality of the information and in rejecting the expert evidence. The Full Court concluded that the primary judge's findings on the confidentiality issue were flawed and that he erred in his approach to the expert evidence. As a result, the Full Court set aside the primary judge's orders dismissing New Aim's claims and remitted the matter for retrial.

The court examined the grounds of appeal, including the confidentiality of the information, the admissibility of expert evidence, and the statutory claim under the Corporations Act. It was determined that the primary judge had erred in finding that the information was not confidential and in rejecting the expert evidence. The court found that the primary judge's approach to the confidentiality issue was flawed and that the evidence of the expert should not have been entirely rejected. Consequently, the Full Court upheld grounds 1, 2, 7, 9, and 12 of the appeal and set aside the primary judge's orders. The Full Court ordered the appeal to be allowed, the relevant orders of the primary judge to be set aside, and the matter to be remitted for retrial before a different judge. The Full Court also made orders concerning the costs of the appeal and the proceeding at first instance.

Orders

Orders of the court

1. The appeal be allowed.

2. Paragraph 1 of the orders made by the primary judge on 23 June 2022, insofar as it relates to the applicant’s claims against the first, fourth and fifth respondents at first instance, be set aside.

3. Paragraph 2 of the orders made by the primary judge on 15 July 2022 (which relates to costs) be set aside.

4. The matter be remitted for retrial in relation to:

(a) the applicant’s claims against the first respondent at first instance based on breach of confidence, breach of contract and contravention of s 183 of the Corporations Act 2001 (Cth); and

(b) the applicant’s claims against the fourth and fifth respondents at first instance based on breach of confidence.

5. Subject to paragraph 7, the respondents pay the appellant’s costs of the appeal.

6. Subject to paragraph 7, the costs of the proceeding at first instance (apart from costs relating to New Aim’s Australian Consumer Law claim and New Aim’s copyright claim, which were the subject of costs orders made by the primary judge on 19 April 2022), be reserved for determination by the judge who hears the retrial.

7. Either party may seek a variation of the orders in paragraph 5 and/or 6 above, by filing and serving a short written submission within seven days. In that event, the other party may file and serve a short responding written submission within a further seven days.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

New Aim appeals from the judgment of the primary judge insofar as his Honour dismissed the claims referred to in the preceding paragraph. The notice of appeal raises the following groups of issues:(a)issues concerning New Aim’s breach of confidence claims (ground 1 to 6);(b)issues concerning New Aim’s breach of contract claim (grounds 7 and 8);(c)issues concerning New Aim’s claim based on s 183 of the Corporations Act (grounds 9 to 11); and(d)an issue concerning the primary judge’s rejection of the entirety of the evidence of Ms Fangyun (Lindy) Chen, an expert witness called by New Aim (ground 12) (the expert evidence issue). In the grounds of appeal relating to the s 183 claim, New Aim notes that, if a particular interpretation of the judgment of the Full Court of this Court in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (2009) 81 IPR 1 (Futuretronics) is adopted, New Aim will contend that the matter was wrongly decided. In these circumstances, the present Full Court was constituted by five rather than three Judges. However, for reasons set out later in this judgment, we do not consider it necessary to decide whether Futuretronics was wrongly decided. For the reasons that follow, we have concluded that the primary judge erred in his approach to the issue of whether the alleged confidential information was confidential. Grounds 1 and 2 have therefore been made out. As the primary judge’s conclusions in relation to New Aim’s breach of contract and s 183 claims against Mr Leung were dependent on his conclusion in relation to whether the alleged confidential information was confidential, the conclusions in respect of those claims cannot stand. We therefore uphold grounds 7 and 9. Further, for the reasons that follow, we have concluded that the primary judge erred in rejecting the entirety of the evidence of Ms Chen. We therefore uphold ground 12. We note that the (electronic) Appeal Book (AB) for this matter was prepared in a particular way. Rather than including the relevant evidence and materials from the proceeding at first instance in Part C of the Appeal Book, that Part contained a link to an abridged version of Part B. That abridged version contained a number of tabs. To assist the parties in considering these reasons, we have included some references to where documents are located in the materials before the Court.New Aim’s case at first instance Before outlining the primary judge’s reasons and considering the appeal grounds, we identify the way in which New Aim put its case at first instance. In paragraph 11 of its further amended statement of claim (the FASOC), being New Aim’s pleading as amended during the trial, the alleged confidential information (referred to as the “New Aim Confidential Information”) was described in the following terms:During the course of his employment with New Aim, Mr Leung had access to:(a) [deleted];(b)confidential and commercially sensitive business information of New Aim, comprising each of the following categories:(i)the identity and contact details of the suppliers to New Aim of products as at January 2021 and March 2021 including each of the New Aim Products (save for the identity of the supplier of the outdoor heating products sold by New Aim under the Devanti brand … in respect of which manufacturing details are required to be disclosed under the Electrical Equipment Safety Scheme (EESS));(ii)wholesale product information including wholesale prices for each of the New Aim Products;(together, the New Aim Confidential Information).

Decision

Reasons for decision

For the above reasons, ground 12 should be upheld.Conclusion It follows from the conclusions we have reached above that the order of the primary judge dismissing New Aim’s claims against Mr Leung based on breach of confidence, breach of contract and contravention of s 183 of the Corporations Act and New Aim’s claims against Broers and Sun Yee based on breach of confidence, needs to be set aside, and these claims need to be remitted for retrial. We will therefore make orders to the effect that:(1)The appeal be allowed.(2)Paragraph 1 of the orders made by the primary judge on 23 June 2022, insofar as it relates to the applicant’s claims against the first, fourth and fifth respondents at first instance, be set aside.(3)Paragraph 2 of the orders made by the primary judge on 15 July 2022 (which relates to costs) be set aside.(4)The matter be remitted for retrial in relation to:(a)the applicant’s claims against the first respondent at first instance based on breach of confidence, breach of contract and contravention of s 183 of the Corporations Act 2001 (Cth); and(b)the applicant’s claims against the fourth and fifth respondents at first instance based on breach of confidence. In the circumstances, we consider that it would be appropriate for the retrial to take place before a Judge other than the primary judge, but we do not consider it necessary for this to be specified in the order. In relation to the costs of the appeal, there is no apparent reason why costs should not follow the event. We will make an order to this effect, but will give the parties the opportunity to file submissions if they seek a different order. In relation to the costs of the proceeding at first instance (apart from costs relating to New Aim’s Australian Consumer Law claim and New Aim’s copyright claim, which were the subject of costs orders made by the primary judge on 19 April 2022, which are not sought to be disturbed), it would appear to be appropriate for these costs to be reserved for determination by the judge who hears the retrial. Again, we will give the parties the opportunity to file submissions if they seek a different order.

Ratio Decidendi

Legal Principle Established

We therefore uphold ground 7. It is unnecessary to decide ground 8.Grounds relating to s 183 of the Corporations Act Grounds 9 to 11 relate to New Aim’s claim against Mr Leung based on contravention of s 183 of the Corporations Act. Ground 9 is a general ground, by which New Aim contends that the primary judge erred in dismissing New Aim’s claim against Mr Leung for contravention of s 183. By ground 10, New Aim contends that the primary judge erred in finding that the concept of “information” in s 183 is limited to information which equity would restrict a person from using for his own benefit. The ground includes a statement that New Aim will contend that the decision of the Full Court in Futuretronics was wrongly decided insofar as it is said to support that finding. By ground 11, New Aim contends that the primary judge erred in finding that it was not improper (within the meaning of s 183) for Mr Leung to access and use the details of New Aim’s suppliers stored in his WeChat application for his own benefit and/or the benefit of Broers and Sun Yee. Section 183(1) provides:A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:(a)gain an advantage for themselves or someone else; or(b)cause detriment to the corporation. The primary judge outlined the competing contentions of the parties as regards s 183 at [248]-[249]. At [250], his Honour referred to Futuretronics at [44]-[45] and quoted [46] from that judgment. The primary judge then stated at [251]:I consider myself bound to apply that reasoning and in accordance with my findings on the equitable breach of confidence case, the statutory claim fails. However, even if the broader view is the correct approach there must still be, objectively, an improper use of the information. On the facts that I have found, it was not improper for Mr Leung to have access to and to use the WeChat information as part of his accumulated knowledge. It is apparent from the first sentence of the above paragraph that the primary judge did consider Futuretronics to stand for the proposition that “information” for the purposes of s 183 must be information which would be protected at equity. However, that view was not determinative: his Honour found that, even if the broader view (which focussed on whether the use of the information was improper) were correct, the s 183 claim would still fail in light of his earlier findings. In reaching these conclusions (in respect of both the narrower view and the broader view), his Honour relied on his earlier consideration of the confidentiality of the information (at [157]-[234]). In light of our conclusion that the primary judge erred in his approach to the breach of confidence issue, the primary judge’s conclusion in relation to the s 183 claim cannot stand. It is therefore unnecessary to determine whether or not the primary judge’s interpretation of Futuretronics was correct and whether or not Futuretronics was correctly decided. In these circumstances, we consider it preferable not to determine those issues.