Orient Capital v Thomson Reuters

[2010] NSWSC 1005

CITATION:	Orient Capital v Thomson Reuters & Ors [2010] NSWSC 1005
HEARING DATE(S):	3 September 2010
JUDGMENT DATE :	9 September 2010
JUDGMENT OF:	Ball J
DECISION:	See paragraphs 36 and 37 of judgment.
CATCHWORDS:	DISCOVERY - claim for damages and injunctive relief for misuse of confidential information - whether documents sought reasonably necessary for defendant to properly defend claim - costs of discovery would be substantial
CATEGORY:	Procedural and other rulings
CASES CITED:	Del Casale v Artedomus (Aust) Pty Limited [2007] NSWCA 172 Wright v Gaswell Pty Ltd (1991) 22 NSWLR 317
TEXTS CITED:	R Dean, The Law of Trade Secrets and Personal Secrets, 2nd ed, (2002)
PARTIES:	Orient Capital Pty Limited ACN 010 142 453 (Plaintiff) Thomson Reuters (Professional) Australia Limited ACN 058 914 668 (First Defendant) Thomson Financial Pty Limited ACN 008 644 666 (Second Defendant) Billabong International Limited ACN 084 923 946 (Third Defendant) Thomsno Reuters (Markets) Australia Pty Limited ACN 002 834 237 (Fourth Defendant)
FILE NUMBER(S):	SC 2009/290181
COUNSEL:	Mr K L Andronos (Plaintiff) Mr J M Hennessy (First, Second and Fourth Defendants)
SOLICITORS:	Henry Davis York (Plaintiff) Gilbert & Tobin (First, Second and Fourth Defendants) Middletons (Third Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BALL J

9 SEPTEMBER 2010

2009/290181 ORIENT CAPITAL PTY LIMITED ACN 010 142 453 v THOMSON REUTERS (PROFESSIONAL) AUSTRALIA PTY LIMITED ACN 058 914 668 & ORS

JUDGMENT

1 The present application concerns orders sought by the first, second and fourth defendants (the Thomson Defendants) that the plaintiff (Orient) give discovery in accordance with a document dated 6 January 2010 specifying categories of documents for discovery. A number of categories are agreed. Fifteen remain in dispute. Before dealing with the disputed categories, I should set out some background concerning the proceedings.

Background

2 Orient and the Thomson Defendants both provide share registry management and investor relations services to publicly listed companies. The Orient services and associated software are known as “miraqle” and “mirlin”. The Thomson Defendants service is known as Thomson ONE. Both services provide detailed information concerning the registries of publicly listed companies, including contact details of relevant individuals and information concerning the beneficial owners of shares in those companies. Both Orient and the Thomson Defendants enter into agreements with customers by which they provide access to their respective services in exchange for the payment of a fee. Access is provided by a web-based application. Orient, and presumably the Thomson Defendants, issue to each individual employee of a customer who subscribes to their service a username and password which permits access to the services for which the customer has subscribed.

3 The miraqle system also permits individual customers to record their own information in the database and, on termination of a customer licence, a customer is entitled to transfer that information to another database. As I understand it, the Thomson ONE system offers a similar facility.

4 Two of Orient’s former customers were the third defendant (Billabong) and Valad Property Group (Valad). Both those customers decided to switch from the service provided by Orient to the one provided by the Thomson Defendants. The licence between Orient and Billabong terminated on 7 August 2009. The Valad licence terminated some time in September 2008.

5 In connection with Billabong’s switch, one of Billabong’s employees who had access to miraqle provided, at the request of an employee of the Thomson Defendants, her username and password to the Thomson Defendants. The Thomson Defendants used that username and password to obtain access to miraqle. Orient says that the Thomson Defendants did so in breach of a duty of confidence that they owed Orient. Orient commenced these proceedings seeking injunctive relief and damages. Originally, Billabong was also joined in the proceedings. However, Orient’s claim against Billabong has recently been settled.

6 Considerable evidence was led before me in relation to the costs of giving discovery of the documents sought by Orient. That evidence was given on various assumptions concerning the expected number of documents that would have to be produced if Orient were required to give discovery in accordance with the Thomson Defendants’ categories and the costs of giving discovery in relation to each document. The evidence suggested that the cost could be in the range of $250,000 to $1,200,000.

7 During the course of the hearing I indicated to the parties that I did not think it was important to resolve the dispute between them concerning the likely costs of discovery in order to determine what order should be made. On any view, the costs of discovery are likely to be substantial. Any estimate is necessarily rough, since the total number of documents that Orient may need to discover is unknown. Moreover, and not unexpectedly, none of the estimates provided to me is broken down in a way that clearly identifies the likely cost consequences of the various combinations of orders that could be made. The parties are large commercial enterprises. In those circumstances, I indicated to the parties that I intended to focus on the question whether the documents sought by the Thomson Defendants were reasonably necessary for them properly to defend the case brought against them. If so, it appeared to me that they were entitled to the documents they sought. In doing so, however, it is important to bear in mind that the Thomson Defendants are not entitled to discovery as of right and that the substantial costs of giving discovery need to be considered in determining whether the documents really are necessary for the Thomson Defendants properly to defend the case brought against them.

8 I should mention two other points about the case.

9 One of those is that, broadly speaking, Orient’s claim has three aspects. First, Orient claims that the database it has compiled is confidential, much in the same way as a customer list might be said to be confidential. So far as this claim is concerned, the individual records contained in the database are not themselves necessarily confidential. What is confidential is the collection of information that Orient has put together. Secondly, Orient says that some of the information contained in the miraqle and mirlin databases is itself confidential. In Confidential Appendix 1 to its amended statement of claim, Orient describes the categories of information contained in its databases. Mr Andronos, who appeared for Orient, informed me during the course of the hearing that the information falling within categories 3(a)(i), (ii) and (iv), 3(b)-3(e), 3(f)(i) and (ii) and 3(g) was not claimed of itself to be confidential. It was confidential only by reason of the fact that it was information contained in a confidential database. On the other hand, Orient regards information falling within categories 3(a)(iii), 3(a)(v) and 3(f)(iii) as being in itself confidential. In the case of information falling within 3(a)(iii), Orient says that that information is confidential to the companies with which the information is concerned. In the case of the other categories, Orient says the information is confidential because it has been collected by it from sources which are not publicly available. Thirdly, Orient claims that the features and functionality of miraqle (including the format of the screens that can be viewed by subscribers) are confidential.

10 The other point to note is that it is not claimed that the Thomson Defendants have accessed every item of information and every feature of the miraqle database and software. In fact, Orient has identified the precise web pages that the Thomson Defendants have accessed and consequently it is in a position to know what information and what features and functionalities the Thomson Defendants have had access to. Although Orient has pleaded that all the information contained in and features of the miraqle system are confidential, the case can only be concerned with the confidentiality of the information and features and functions to which the Thomson Defendants have had access. It cannot be concerned with the confidentiality of information or features and functions that the Thomson Defendants have not seen. Clearly, this point is relevant to the scope of any permitted discovery.

Categories 9 and 25

11 Category 9 is in the following terms:

“9. All Documents which comprise, record or refer to Orient’s knowledge, of the use, reproduction or disclosure of the Confidential Information by, or on behalf of, Billabong, from 1 July 2009 to 19 August 2009.”

Broadly speaking, “Confidential Information” is defined to mean the information contained in the miraqle database and information concerning the features and functionality of the miraqle service. The dates of 1 July 2009 and 19 August 2009 were clearly chosen because they fall either side of the date on which the Billabong licence was terminated.

12 Category 25 is in similar terms to category 9 except that it is concerned with Orient’s knowledge of the use, reproduction or disclosure of the confidential information by Valad during the period commencing two months prior to termination of the Valad licence and ending two months after its termination. Subject to one qualification, the parties agree that the same approach should be taken to categories 9 and 25. The qualification is that Orient submits that the period of two months before termination of the Valad licence to two months after the termination of that licence is too long.

13 The Thomson Defendants submit that categories 9 and 25 are relevant to whether Orient knew or expected that its customers would use the confidential information to transition away from Orient and whether Orient accepted or acknowledged the customer’s right to use the information for that purpose.

14 In paragraph 18 of the amended statement of claim, Orient alleges that the disclosures by Billabong to the Thomson Defendants were not authorised by Orient. The Thomson Defendants deny that allegation. It appears that the Thomson Defendants assert that Orient – at least impliedly – authorised Billabong to disclose the information for the purpose of transferring to another supplier. In those circumstances, the documents sought in category 9 are relevant insofar as they are relevant to Orient’s knowledge of the disclosure of allegedly confidential information by Billabong. If Orient knew that Billabong had disclosed allegedly confidential information and had done nothing, that may undermine Orient’s claim of confidentiality, at least where disclosure was made by a customer in order for the customer to transfer to another supplier.

15 On the other hand, I accept Mr Andronos’s submission that Orient’s knowledge of the use or reproduction of the allegedly confidential information by Billabong is not relevant. That is something that Billabong was permitted to do under its licence in any event; and the fact that it did so says nothing about Orient’s claim of confidentiality. It follows that category 9 should be restricted to all documents “which comprise, record or refer to Orient’s knowledge, of the disclosure of the Confidential Information by, or on behalf of Billabong, from 1 July 2009 to 19 August 2009”.

16 The same point applies to Valad and category 25. In addition, there is no reason why the time period should be greater in the case of Valad than Billabong. Consequently, the relevant period should be the period from 6 weeks before the licence terminated or expired to 2 weeks after that time.

Categories 14, 15, 18 and 19

17 Each of these categories seeks documents relevant to the question whether Orient has obtained information concerning Thomson ONE when customers of the Thomson Defendants move to Orient.

18 Mr Hennessy, who appeared for the Thomson Defendants, submitted that documents falling within these categories are relevant because they will provide evidence of what people in the industry (that is, Orient) think is confidential. Mr Andronos submitted that Orient’s subjective beliefs were not relevant to the question whether the relevant information is confidential. I do not accept Mr Andronos’s submission concerning relevance. Whether a party treats information as confidential and industry practice are both matters which are relevant to the question whether information is properly confidential: see Wright v Gaswell Pty Ltd (1991) 22 NSWLR 317 at 334 per Kirby P; Del Casale v Artedomus (Aust) Pty Limited [2007] NSWCA 172 at [40] per Hodgson JA referring to R Dean, The Law of Trade Secrets and Personal Secrets, (2002) 2^nd ed at 190. However, it does not follow that discovery in accordance with these categories should be permitted. In my opinion, it is relevant to know how Orient treated its own information. It is also relevant to know how the Thomson Defendants treated similar information belonging to them. On the other hand, in my opinion, it is of marginal relevance to know how Orient treated information belonging to the Thomson Defendants. If Orient accessed information belonging to the Thomson Defendants, it may have done so because it did not regard the information as confidential, or because in the particular circumstances in which it accessed the information it did not regard itself as breaching any duty of confidence belonging to the Thomson Defendants or because it was prepared to take the risk that its breach would not be detected. For that reason, the documents falling within this category would shed little light on the question whether the information of concern in this case was confidential. In those circumstances, I do not think that the costs of giving discovery in accordance with categories 14, 15 18 and 19 is justified.

Categories 33, 34, 35 and 36

19 Each of these categories raises similar issues. Category 33 is in the following terms:

“All documents which comprise, record or refer to in respect of each type of information alleged to be confidential, being referred to in paragraphs 3(a) to (g) of Confidential Appendix 1:
(a) the source of such information (eg phonebook or website);

(b) the identity of the person(s) who obtained such information on behalf of Orient;

(c) the terms of employment, job descriptions and qualifications (if any) of the person(s) who obtained such information;

(d) the means by which or process by which such information was obtained;

(e) the terms on which such information was obtained by Orient;

(f) any published terms of use (if any) of such information obtained by Orient; and

(g) whether any payments were made by Orient to any person (other than employees of Orient) in return for obtaining such information,

during the Further Period.”

“Further Period” is defined to mean the period from 1 July 2003 to 30 September 2009 – which encompasses the period in which Billabong or Valad held a licence with Orient.

20 Essentially, the Thomson Defendants say that these documents are relevant to the question whether the relevant information is confidential.

21 In my opinion, with one qualification, documents falling within this category are not sufficiently relevant to justify their production. In general, Orient does not assert that the information referred to in paragraphs 3(a) to (g) of Confidential Appendix 1 is of itself confidential. What is asserted to be confidential is the compilation. Consequently, documents that evidence the general processes and the costs of setting up and maintaining the database are relevant. Documents of that general type are already sought in other categories. However, I think the documents relating to the process or cost of collecting individual records or types of record are of marginal relevance and the cost of requiring their production is not warranted.

22 Information falling within category 3(a)(iii) of Confidential Appendix 1 is said to be confidential in and of itself, but the obligation of confidence is said to be owed to the customers of Orient, not to Orient itself. So far as Orient is concerned, the information is confidential only insofar as it comprises part of a confidential database. In circumstances where that is the assertion, I think that the documents that fall within that category and which are sought in category 33 are of marginal relevance to that claim of confidentiality and production of them is not justified by the costs of doing so.

23 The position is different in relation to documents falling within categories 3(a)(v) and 3(f)(iii). That information is said of itself to be confidential to Orient. Having regard to that assertion, I think that category 33 documents should be produced in relation to information of the type described in those two subparagraphs.

24 There is one further qualification to what I have said. As I have said, the proceedings only concern the information to which the Thomson Defendants have had access. The court is not concerned with whether individual items in the database to which the Thomson Defendants have not had access are confidential. Taking this point into account, category 33 should be amended so that it takes this form or a similar form:

“In respect of information to which the Thomson Defendants have had access and which is of a type referred to in paragraphs 3(a)(v) or 3(f)(iii) of Confidential Appendix 1:

(a) the source of such information (eg phonebook or website);
(b) the identity of the person(s) who obtained such information on behalf of Orient;
(c) the terms of employment, job descriptions and qualifications (if any) of the person(s) who obtained such information;
(d) the means by which or process by which such information was obtained;
(e) the terms on which such information was obtained by Orient;
(f) any published terms of use (if any) of such information obtained by Orient; and
(g) whether any payments were made by Orient to any person (other than employees of Orient) in return for obtaining such information,
during the Further Period.”

25 Category 34 provides:

“All documents created during the Further Period which comprise, record or refer to in respect of each piece of information alleged to be confidential, being referred to in paragraphs 3(a) to (g) of Confidential Appendix 1, any analysis, consideration or assessment of the extent to which the information:

(a) is confidential to Orient;

(b) is novel to Orient;

(c) is in the public domain, in whole or in part; and

(d) is available from other publicly available sources.”

26 In addition to the objections raised to category 33, Orient objects to this category on the basis that Orient’s subjective assessment concerning the confidentiality of the information in question is not relevant. As I have said, I do not accept that submission. Consequently, in my opinion, category 34 should be dealt with in the same way as category 33.

27 Category 35 seeks documents recording work done to obtain the relevant information. Category 36 seeks documents that comprise, record or refer to circumstances in which the relevant information was included in the miraqle system or updated. The parties agree that categories 35 and 36 should be dealt with in the same way as category 33. I should observe for the sake of completeness that the Thomson Defendants no longer press category 36(d).

Category 37

28 This category provides:

“All Documents (including any access record, log file or other equivalent document but excluding computer hardware) which comprise, record or refer to respect of [sic] the information alleged to be confidential, being referred to in paragraphs 3(a) to (g) of Confidential Appendix 1:

(a) the identity of all persons to whom access has been given, or who have seen, that information by means of any proposal for licence or demonstration;

(b) the dates on which any access was given to the information as part of any proposal for licence or demonstration;

(c) the terms on which access has been given to the information or such persons have been allowed to see the information as part of any proposal for licence or demonstration; and

(d) any communications between Orient on the one hand and any person who was given access to the information by means of proposal for licence or demonstration on the other concerning the terms of access to that information,

during the Further Period and the Negotiation Period in respect of the Valad Licence.”

“Negotiation Period” is defined to mean the period during which the terms of the licence was negotiated between Orient and the relevant customer.

29 Essentially, this category seeks documents that show how, in the course of demonstrating the miraqle service to Valad, Orient has dealt with information it claims to be confidential.

30 In the Confidential Appendix 1, Orient claims (in para 5(d)(iv)(B)-(C)) that proposals to potential customers are marked “Commercial in Confidence” and that “demonstrations of the miraqle platform to potential licensees are confined to general presentations of approximately 60 minutes primarily to senior executives of publicly listed companies in circumstances which import an obligation of confidence in respect of the data, features, format and functionality of miraqle which are disclosed in those presentations”. In my opinion, the Thomson Defendants are entitled to test these allegations. They have only sought to do so in relation to presentations to Valad. That appears to me to be a reasonable limitation. In those circumstances, I think that this category should be permitted.

Categories 39, 40, 41 and 42

31 These categories essentially mirror categories 33, 34, 35 and 37, except that they are concerned with the alleged confidentiality of the format, features and functionality of miraqle. For example, category 39 (which mirrors category 33) is in the following terms:

“All documents (including any notes, types records and electronic files) created during the period 1 January 2006 to 19 August 2009 which comprise, record or refer to in respect of each element of the format, features and functionality alleged to be confidential, being referred to in paragraphs 4(a) to (f) of Confidential Appendix 1:

(a) the date on which the format, feature or functionality was developed by Orient;

(b) the identity of the person who developed the format, feature or functionality;

(c) the means by which or process by which the format, feature or functionality was developed;

(d) the terms on which the format, feature or functionality was developed by Orient;

(e) whether any payment was made by Orient to any person in return for the development of the format, feature or functionality; and

(f) any communication between Orient and the person(s) responsible for developing the format, feature or functionality concerning Orient’s use of that format, feature or functionality.”

32 Orient claims that the individual formats, features and functionality described in paragraphs 4(a) to 4(f) of Confidential Appendix 1 are confidential. In my opinion, the means by which Orient developed the particular format, feature or functionality and the circumstances in which it was developed go to the heart of whether the format, feature or functionality can be described as confidential. In those circumstances, I think that the Thomson Defendants should be entitled to discovery in accordance with this category.

33 Again, however, the category should be limited to those formats, features and functionalities to which it is said the Thomson Defendants had access. As I have said in relation to category 33, information to which the Thomson Defendants have not had access cannot be relevant.

34 Category 40 essentially mirrors category 34. It is in this form:

“All documents (including reports) created during the period 1 January 2006 to 19 August 2009 which comprise, relate or refer to in respect of each element of the format, features and functionality alleged to be confidential, being referred to in paragraphs 4(a) to (f) of Confidential Appendix 1 any analysis, consideration or assessment of the extent to which the format, feature or functionality:

(a) is confidential to Orient;

(b) is novel to Orient;

(c) is in the public domain, in whole or in part

(d) is available from other publicly available sources; and

(e) is similar or dissimilar to those offered by the Thomson Services.”

There is no equivalent in category 34 to subparagraph (e). However, I think that documents that fall within that subparagraph are relevant to the question of confidentiality. Consequently, it follows from what I have said in relation to categories 34 and 39 that Orient should be required to produce the documents falling within this category, again subject to the proviso that the format, feature or functionality must be one which is alleged to have been disclosed to the Thomson Defendants.

35 The parties agree that categories 41 and 42 should be dealt with in the same way as 39.

36 I direct that the Thomson Defendants prepare categories of documents for discovery which are consistent with these reasons and serve revised categories on Orient on or before 4.00 pm on 16 September 2010. If there is any dispute between the parties in relation to the question whether those revised categories properly reflect these reasons, the parties may, by contacting my Associate, relist the matter before me for those issues to be resolved. If there is no dispute in relation to the form of the categories, I am prepared to make orders in chambers by consent requiring Orient to give discovery in accordance with those revised categories.

37 Neither party can claim substantial success in this application. In those circumstances, I think the appropriate order in relation to costs is to order that the costs of each party be costs in the proceedings.

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