Origin Energy Limited (ABN 30 000 051 696) v Stephen Smart

[2016] NSWSC 1858

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Origin Energy Limited (ABN 30 000 051 696) v Stephen Smart [2016] NSWSC 1858

Hearing dates:

27 October 2016

Date of orders:

15 November 2016

Decision date:

15 November 2016

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Declaration made that defendant breached his contract of employment and his equitable obligation of confidence to the plaintiff – defendant restrained from copying or further disseminating confidential materials

Catchwords:

PRACTICE AND PROCEDURE – plaintiff/employer brings application for summary judgment pursuant to UCPR, r 13.1 – plaintiff claims that defendant/employee disseminated the employer’s confidential information to two competitors in breach of his contract of employment – whether the defendant breached his contract of employment and his equitable obligation of confidence to the plaintiff – whether the defendant should be restrained from using, copying or further disseminating confidential materials.

Legislation Cited:

Uniform Civil Procedure Rules 2005, r 13.1

Cases Cited:

Agar v Hyde (2000) 201 CLR 552
Cactus Imaging Pty Limited v Glenn Peters [2006] NSWSC 717
Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434
Drake Personnel Ltd v Beddison [1979] VR 13
Faccenda Chicken Ltd v Fowler [1987] Ch 117
Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Printers and Finishers, Ltd v Holloway [1965] RPC 239
Silverton Ltd v Harvey [1975] 1 NSWLR 659
Spencer v Commonwealth of Australia (2010) 241 CLR 118
Thomas Marshall (Exports) Ltd v Guinle [1979] Ch 227
Westpac Banking Corporation v Lahood [2011] NSWSC 1057
Wickstead v Browne (1992) 30 NSWLR 1
Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317

Category:

Principal judgment

Parties:

Plaintiff: Origin Energy Limited (ABN 30 000 051 696)
Defendant: Stephen Smart

Representation:

Counsel:

 

Plaintiff: S.R. Meehan
Defendants: n/a

 

Solicitor:

  Plaintiff: Lucienne Mumme, Johnson Winter & Slattery
Defendant: n/a

File Number(s):

2016/22747

Publication restriction:

No

Judgment

1. On 27 October 2016, Origin Energy Pty Ltd (“Origin”), the plaintiff in these proceedings, moved the Court by motion dated 25 February 2016 for declarations and orders restraining its former employee, the defendant in these proceedings, Mr Stephen Smart from disclosing Origin’s confidential information. The motion was framed in part pursuant to Uniform Civil Procedure Rules (UCPR), r 13.1, but as will appear, it was also conducted and decided as a final hearing in the absence of the defendant.

2. Mr Smart was employed by Origin in a number of capacities from September 2013 until December 2015. Origin contends that following termination of his employment, Mr Smart emailed some of its confidential information to two of Origin’s competitors, Supagas and Elgas.

3. On the hearing day the Registrar in Equity referred the plaintiff’s motion to the Equity duty judge, after the defendant had failed to comply with the Registrar’s earlier orders to appear before her that day. Mr S Meehan of counsel represented the plaintiff before the Registrar and before the Duty Judge.

4. The defendant has not filed an appearance, nor has he attended any directions hearings in this matter to date. Indeed, much of the affidavit evidence before the Court related to the plaintiff’s extensive efforts to effect service on the defendant since January 2016.

5. After considering the materials read and tendered at the hearing, the Court made in chambers on 15 November 2016, the orders and declarations that the plaintiff sought. The full text of the orders and declarations made on 15 November 2016 appears at the conclusion of these reasons.

6. In summary, the Court declared that Mr Smart had breached his obligations of confidentiality, good faith and fidelity to the plaintiff by accessing and distributing its confidential information to its competitors. The Court ordered that Mr Smart be restrained from using or otherwise dealing with the plaintiff’s confidential information; and that he deliver up any such information to the plaintiff that was within his possession or control.

7. When it made the declarations and orders the Court indicated that it would provide reasons in due course. These are those reasons. They commence with a narrative of the Court’s findings, based on the evidence read at the hearing.

Origin, Mr Smart and the Confidential Information – 2013 to 2016

Mr Smart’s employment history and employment agreements with Origin

8. During his employment with Origin, Mr Smart served in different transport-related roles operating out of Origin’s work sites. Origin first employed him as a Cylinder Exchange Driver on 30 September 2013. But he was promoted just under a year later to the role of Driver Supervisor, effective from 1 August 2014. Mr Smart held this role until he was made redundant, due to operational restructuring at the plaintiff’s Port Botany Terminal.

9. Mr Smart was informed of his redundancy on 26 June 2015. Following a brief period of sick leave between 29 June and 10 July 2015, Mr Smart was redeployed on 27 July 2015 as a Tanker Driver (Metro Driver Grade 6). He remained in this role until his employment was terminated, on 11 December 2015, following a series of workplace investigations and disciplinary actions, the details of which are set out below.

10. Mr Smart’s changes in workplace tasks generated new employment agreements with Origin, dated respectively 23 September 2013, 20 July 2014 and 30 July 2015. But there was no differences of substance in the operative provisions of these agreements in the essential terms that ground Origin’s claim against Mr Smart in these proceedings.

11. Three main provisions are relevant: Duties of the Employee (cl 9); Confidential Information and Company Property (cl 18); and Termination (cl 15). These clauses appear below, in the form that they appear in Mr Smart’s last employment agreement with Origin.

“Clause 9: Duties of the Employee

In consideration for employment under this Agreement, the Employee agrees to:

(1) Act in good faith and diligently and faithfully serve the Company and any related bodies corporate of the Company (as that term is defined in section 9 of the Corporations Act 2001 (Related Companies) exercising due care;

…

(d)   Act at all times in the Company’s and the Related Companies’ best interests;

(e)   Refrain from acting, or being seen to act, in conflict with the Company’s or Related Companies’ best interests;

…

(g)   Comply with the obligations of confidentiality, non-competition, non-solicitation, and assignment of intellectual property specified in the Agreement.”

“Clause 18: Confidential Information and Company Property

The Employee agrees that during the Employee’s employment and thereafter, the Employee will not use or disclose to anyone any Confidential Information, and will use the Employee’s best endeavours to prevent unauthorised use or disclosure of the Confidential Information by third parties, except in the proper course of the Employee’s duties, or if required by law…

…the property of the Company includes all trade and business secrets, other confidential information and any other documents (in whatever form, however stored, and including copies and extracts) relating to the affairs and business of the Origin Energy Group or, which the Employee acquired in the course and by reason of the Employer’s employment with the Origin Energy Group, whether or not any of this was originally supplied by the Origin Energy Group “Confidential Information”.”

“Clause 15: Termination

On termination, however occurring:

(i)   The Employee will immediately deliver up to the Company all property belonging to the Company which is in the Employee’s possession, including Company documents and any documents incorporating or referring to any of the Company’s Confidential Information.”

12. Mr Smart signed all the employment agreements and was bound by these terms. These three terms were present in substantially the same form in each of Mr Smart’s employment agreements. By those terms he agreed to: i) protect Origin’s confidential information; ii) not remove any of Origin’s confidential information from its premises; iii) not use or disclose Origin’s confidential information except in the proper performance of his employment; and iv) not canvass, solicit or attempt to entice away from Origin any client, customer, or supplier of Origin or its related bodies corporate, or assist or counsel any person to do so.

13. Origin terminated Mr Smart’s employment on 11 December 2015. Mr Smart entered into a Release Agreement with Origin on 18 December 2015, in which he agreed to continue to abide by the terms of his employment agreements with Origin. Relevant provisions of the Release Agreement were entitled Entire Agreement (cl 19); and, Continuing Obligations (cl 15). These are reproduced below.

“Clause 19: Entire Agreement

To the extent permitted by law, in relation to the subject matter of this Agreement, this Agreement:

(a)   Embodies the entire understanding of the parties and constituted the entire terms agreed upon between the parties; and

(b)   Supersedes any prior agreement (whether or not in writing) between the parties.”

“Clause 5: Continuing obligations

5.1   The Employee acknowledges that he will continue to be bound by and comply with the duties owed as a former employee of Origin, including the post-termination obligations in the Contract (in particular in relation to confidentiality and non-competition).

5.2   Nothing in the terms of this Agreement is intended to derogate or in any way detract from those obligations in the Contract, including in particular those clauses which relate to confidentiality and non-competition”.

14. The Release Agreement terms bound Mr Smart. There is no reason to infer otherwise from the employment agreements Mr Smart signed.

Investigations into Mr Smart’s conduct, Disciplinary Action and Employment Termination

15. On 26 June 2015, Mr Smart was informed of the redundancy of his role as Driver Supervisor. This date becomes important in relation to Mr Smart’s conduct in accessing information on Origin’s operating database, known by the acronym “MIST”. Three days later, he commenced a period of sick leave. Whilst Mr Smart was on sick leave, a series of anonymous emails were sent from the email address [email protected] to external media outlets, regulators and Mr Grant King, the CEO of Origin. The emails made a number of allegations regarding safety issues that they suggested would arise out of the redundancy of the defendant’s role.

16. Origin suspected Mr Smart had sent these emails. They refer to him by name, and to the redundancy of his position. And they claimed that Mr Smart was “a great worker” who “always made sure the where (sic) serviced and above spec”. The Driver Supervisor role was the only role that had been made redundant as a result of Origin’s June 2015 restructuring. The emails ceased as soon as Mr Smart was redeployed as a Tanker Driver on or around 27 July 2015. Origin investigated who was responsible for sending the emails. But Origin could not determine whether or not Mr Smart was responsible.

17. On 12 August 2015, another Origin employee, a Mr Daniel Tillyer, alleged that Mr Smart had duplicated Mr Tillyer’s own Facebook account to post disparaging comments about Origin. Again Origin suspected that Mr Smart was involved. Animosity existed between Mr Smart and Mr Tillyer at the time. And the comments posted online contained information of a complaint about Mr Tillyer that was then known only to Mr Smart and Origin’s senior management.

18. In October 2015, Origin investigated Mr Tillyer’s allegations. The investigation revealed that Mr Smart had provided without Origin’s authorisation a written reference to a former employee, a Mr Abby Schembri. After discovering this, Mr John Chalmers, Origin’s local Area Operations Manager, decided to issue Mr Smart with a first and final warning for “poor decision making and judgement (sic) to knowling (sic) take an action to misrepresent the Company without having authorisation to do so”.

19. Another incident led to Mr Stuart’s dismissal. In early December 2015, Mr Smart overfilled liquid petroleum gas (“LPG”) at one of Origin’s customer’s premises. Mr Smart failed to report this incident, which was a breach of Mr Smart’s reporting obligations. Origin only became aware of the incident after the customer reported it.

20. Origin investigated the incident. On 11 December 2015, Origin informed Mr Smart he was being dismissed for breach of his obligations as an Origin employee in failing to report the overfill.

The alleged disclosure of confidential information

21. In his capacity as Driver Supervisor, Mr Smart had access to a computer application, MIST, that Origin used to assist its LPG delivery scheduling by presenting combined data from scheduling, telemetry, work flow and billing systems. Origin decommissioned MIST, on 23 February 2016. MIST was a reporting tool to assist LPG schedulers to plan deliveries by presenting combined data from scheduling, telemetry, work flow and billing systems. MIST was a “live file”, which was constantly being updated with new information, and anyone with access to the application would have access to the most current information. When a user accessed MIST and made a data extract, the application automatically created a temporary folder on the hard drive of the user’s computer called “MIST Documents”.

22. On 11 December 2015 at 10:21am, the day of Mr Smart’s dismissal, and shortly after he had been informed of his dismissal, Supagas, a competitor of Origin, received an email (at the email address [email protected]) from one “mark bonsin” at [email protected] with the subject header “Origin bulk LPG customers for you”. The email read:

“Hi, merry Christmas, here is a list of 5 years’ worth of Origin Lpg customers in Wagga and North Coast.

The rest of Sydney, NSW and Australia is available, can send them on if you like. Approx 20,000 + bulk LPG customers.

Again, merry Christmas, please fwd this spread sheet to sales. Good Luck, hope this helps build your business.

Anonymous”

23. The email attached two documents: with the document titles “MIST Super Qty Rpt – nth coast.xlxs” and “MIST Super Qty Rpt – wagga.xlsx” (“the attachments”). These attachments were Microsoft Excel spreadsheets that contained details of the supply requirements and characteristics of some of Origin’s LPG customers. These included information about: customer addresses, customer type, volumes of LPG delivered to each customer, the customer’s LPG storage capacity, the number of deliveries made to that customer, the delivery service provided and any “out of gas” claims by these customers.

24. On 13 January 2016, this email to Supagas was also forwarded by someone using the name “mark bonsin” to the “Elgas’ blog”. Elgas is another competitor of Origin.

25. This email concerned Elgas. On 14 January 2016 Mr John Evans of Elgas forwarded the email to Mr Andrew Bills, Origin’s General Manager LPG and HSE. Mr Evans said to Mr Bills that he thought that it might contain Origin’s confidential information. Mr Bills analysed the data in the attachments and concluded that they were extracts of customer details taken from Origin’s MIST data for the Wagga Wagga and North Coast areas of NSW.

26. Mr Bills then commenced an investigation to identify any past and present employees who might have leaked the information to Supagas and Elgas. Mr Smart came under suspicion.

Forensic examination of Mr Smart’s work computers

27. Mr Bills initiated a forensic examination of the laptop computer issued to Mr Smart and used by him in the course of his employment with Origin (the Smart-laptop). This forensic examination assisted in establishing that: the Smart-laptop was used to interrogate and obtain the customer information in question from the MIST database; the information in the email attachments was exactly the same as that obtained from MIST; and the Smart-laptop was later used to disseminate the attachments. The forensic analysis shows all of this. And ultimately, this analysis plus the fact that Mr Smart was the only person with authorised access to the Smart-laptop, is a basis to infer that he was responsible for the disclosure of the information to Supagas and Elgas.

28. Date/time and user profile tags in the metadata of the attachments emailed to Supagas and Elgas are two important keys to tracking down the identity of their author. Origin’s expert witnesses explained how the analysis of these tags and other information identify Mr Smart as the person who must have accessed MIST to create the email attachments.

29. The date/time tags on the attachments show that they came from data gathered by interrogating the MIST system. Mr Jonathan Castley, Origin’s Business Process Design Lead - Logistics LPG, deposes from his experience as to operating MIST to the following standard operating procedures. When a user accesses MIST on Origin’s IT computer network, a log of that access was automatically created and retained by the application. When a user who accessed MIST made an extract from that application, that extract would be automatically generated as a Microsoft Excel spreadsheet. When the extract was saved by the user, MIST would automatically create a folder on the hard drive of the user’s computer called “MIST Documents”. The naming format of the automatically generated Excel files would include the date and time the extract was created. By looking at the file name it is possible to ascertain the date and time that a file was created and that it was created from the data then on the MIST database. This unique file name information remains in the Excel spreadsheet metadata as an identifier of the MIST source material and access date and trial for the file.

30. Mr Wayne Edge, the Cyber Security Governance Manager at Origin gave forensic IT evidence about the contents of Mr Smart’s work-issued laptop, the Smart-laptop. He found that a person logged on using Mr Smart’s unique username “SMARTS”, and accessed MIST data once on 22 June 2015 and then again some 20 times on 26 June 2015. Mr Smart was informed of the redundancy of his role as Driver Supervisor on 26 June 2015.

31. In the course of accessing MIST on these 21 occasions the username SMARTS created 21 Excel spreadsheet extracts from MIST data entitled “MIST Super Qty Report”: the metadata from the spreadsheets shows this. These 21 extracts were saved to the Smart-laptop. As expected from the standard operating procedures, these documents were found in a folder called “MIST documents” on the hard-drive of the Smart-laptop. Document comparison software reveals a 100 per cent content match between the contents of the two attachments to the later emails sent to Elgas and Supagas and two of the 21 Excel spreadsheets in the “MIST documents” folder on the Smart-laptop hard-drive.

32. Although Mr Edge noted that these extracts were identical to the attachments sent to Elgas on 11 December 2015 and Supagas on 13 January 2016, he also noted that these two Excel spreadsheet files had been renamed to change the automatically generated date/time information and to include some additional regional based information in the file. The originally generated Excel file “MIST Super Qty Report 26 June 2015.0855 00.xls” was renamed as “MIST Super Qty Report-nth coast.xlsx” and “MIST Super Qty Rpt-26 June 2015 0856 35.xls” was renamed as “MIST Super Qty Rpt-wagga.xlsx”. But the renamed files were not saved to the hard-drive of the Smart-laptop. The Excel file attachments on the Supagas and the Elgas emails had the same names as these renamed files.

33. Mr Smart was uniquely authorised by Origin to access the Smart-laptop using the username profile SMARTS. There is no evidence that persons other than Mr Smart had access to the Smart-laptop on 26 June 2015, a day when Mr Smart is also likely to have felt some resentment towards Origin. The Court infers that it is highly probable that Mr Smart accessed Origin’s IT network using the Smart-laptop, thereby placing the Excel spreadsheet data extracts from MIST onto his laptop.

27. What then happened to two of these 21 documents is revealed through the analysis of another expert from outside Origin. Mr Jackie Kuang, an external Security Forensic Consultant contracted by Origin from Hewlett Packard confirmed Mr Edge’s analysis and completed further analysis. He performed a forensic examination of the hard disk drive of the Smart-laptop. The results of his analysis also implicate Mr Smart in probably copying the two Excel files from MIST documents onto a USB drive, which was later used as a platform to send them to Supagas and Elgas as email attachments, and then deleting the two files from the Smart-laptop.

28. Mr Kuang found: that the two Excel files were opened on the Smart-laptop; that they were later deleted; that a number of different USB devices had been connected to the Smart-laptop over time; that a user of the Smart-laptop had opened the renamed files on the Smart-laptop but not saved them on its hard-drive. This enables Mr Edge to infer that the renamed documents were probably saved to a USB device and the Court so infers as well.

29. Mr Kuang also reviewed the email files for the user account “smarts” on the Smart-laptop. He searched the Microsoft Outlook Sent Box on the Smart-laptop. He ascertained that a person using the username SMARTS had sent an email on 22 June 2015 to “Smarts” with the title “MIST Super Qty Rpt – 22 June 2015 0905 44.xlsx” with an Excel file attachment of the same name.

30. This email was marked as “Deleted” from the “Inbox” folder in Outlook. I infer from Mr Kuang’s evidence that Mr Smart sent the files in question to himself on 22 June and then deleted the received email. The reasons for this step in Mr Smart’s file handling are obscure but it does not contradict the overall conclusions.

The Course of the Proceedings

A Short History of the Proceedings

38. Origin moved quickly after receiving the emails sent to Elgas. Origin commenced these proceedings by Summons filed on 22 January 2016 during the Court’s vacation period. Lindsay J made orders that day for service on Mr Smart, and made the Summons returnable on 28 January 2016.

39. On the return of the Summons on 28 January 2016, Mr Smart did not appear. On Origin’s application that day, Lindsay J made interlocutory orders restraining Mr Smart from dealing with Origin’s confidential information and requiring him to deliver all documents containing confidential information to the Equity Registrar by 2 February 2016. His Honour also listed the matter for further directions before the Equity Registrar on 11 February.

40. On 3 February 2016, Bergin CJ in Equity (as her Honour then was) varied Lindsay J’s orders. Her Honour extended the time within which Mr Smart could: i) deliver up all confidential materials to the Registrar; and ii) file an affidavit deposing to the content of the confidential materials and the persons or bodies to whom they were sent. Her Honour also made further orders for service on Mr Smart.

41. When the matter next came before Bergin CJ in Eq on 10 February 2016, Mr Smart did not appear. On that occasion the current listing before the Equity Registrar on 11 February was confirmed.

42. On 11 February 2016, the Registrar granted leave for Origin to file a Notice of Motion for summary judgment against Mr Smart and made further orders as to service. Origin filed its Notice of Motion in accordance with those orders on 25 February 2016.

43. On 1 March 2016, Black J made further orders for service on Mr Smart. On 3 March his Honour varied the dates for compliance with those orders.

44. On 10 March 2016, the Registrar listed the Motion for hearing on 5 July 2016. On 19 April 2016, Origin filed a Notice of Motion seeking that the listing be vacated and that the Motion be relisted. Mr Bills, General Manager LPG and HSE of Origin Energy, was expected to be unavailable on the original date. Registrar Walton relisted the matter before Rein J on 6 September 2016.

45. On 6 September 2016, Rein J was not fully satisfied with service upon the defendant. His Honour stood the matter over to enable Origin to attempt to ascertain the whereabouts of the defendant to obtain a new date for the summary judgment application.

46. On 28 September 2016, Registrar Walton made orders for the service of materials on Mr Smart by posting the materials to an address in Western Australia and by sending the materials to Mr Smart’s Facebook account. Registrar Walton adjourned the matter to 27 October.

47. On 27 October 2016, the defendant once again failed to appear. The Equity Registrar referred the matter to the Duty Judge and in that capacity I heard the motion. On 15 November 2016, I made in chambers the declarations and orders set out below.

Attempts to effect service

48. Much evidentiary material relates to the many attempts to serve Mr Smart. I accept all that evidence, as summarised here. On 22, 23 and 24 January 2016, a licensed process server, Mr Robert Wright unsuccessfully attempted to personally serve Mr Smart. On 25 January, Mr Wright left copies of the Summons and Affidavit of Mr Andrew Bills (filed 22 January 2016) at the front door of Mr Smart’s Jamisontown residential property in Sydney’s Western Suburbs. On the same day, another licensed process server, Ms Evelyn Edwards left a copy of the orders made on 22 January 2016 under the front door of the same property, which reliable evidence indicates was his then place of residence. Text messages containing a hyperlink to the Court’s orders were also sent to two of the defendant’s known mobile telephone numbers.

49. Ms Evelyn Edwards and Mr Jeffrey Edwards further attempted to serve Mr Smart at the Jamisontown property over the period 28 January 2016 to 2 February 2016.

50. On 30 to 31 January 2016, Mr Stephen Goodwin conducted surveillance at the Jamisontown property and did not sight Mr Smart. Mr Wright conducted surveillance at the Jamisontown property on 2 February 2016, and on 4 February he left copies of the orders entered 28 January and 3 February in a sealed envelope under the door of the Jamisontown property. On the same day, Mr James Twigg sent text messages to one of Mr Smart’s mobile telephone numbers containing a hyperlink to the orders and the text of the orders.

51. In late February 2016, a logistics firm, Rock Logistics, informed Mr Steven Bricknell, a private investigator, that Mr Smart was working with Rock Logistics as a truck driver. On 8 March, Mr David Halling attended the premises of Rock Logistics and at a residential unit at 5/84-6 Castlereagh St, Penrith, where Mr Smart was then believed to be residing, leaving copies of the material filed in these proceedings at both those addresses.

52. On 22 April 2016, Ekaterina Kossian, a solicitor at Thomson Geer, mailed copies of Origin’s notice of motion and affidavit in support (filed 19 April 2016) to the same addresses.

53. Mr Mentiplay in his affidavit of 5 September 2016 describes several further attempts that have been made to serve Mr Smart since April 2016.

54. Mr Joshua Heal, a private investigator, states in his affidavit of 27 September 2016 that he had also made attempts to locate Mr Smart in Western Australia. Some evidence indicated that he may have migrated there. But these attempts were all unsuccessful.

55. Mr Mentiplay states in his affidavit of 29 September 2016 that he had been informed by Mr Bills that the mobile phone of Mr Smart, which had previously been used for service on Mr Smart, had been seized by police.

56. I am satisfied that Mr Smart was ultimately served in accordance with the Court’s further directions, via Facebook on 18 October 2016 with the Summons, Motion and all affidavits. The documents served by means of Facebook notified the defendant of the hearing date of 27 October 2016. Ms Palmer’s affidavit of 19 October 2016 annexes all the material served through Facebook.

57. The Court is satisfied: that all reasonable attempts at service upon Mr Smart have been made; that all the materials now relied on in Origin’s case have been brought to Mr Smart’s attention; and, that he has been given sufficient notice that various prayers for relief in the Motion were to be heard and determined on 27 October 2016.

Applicable Law

58. The applicable law may be shortly stated. Origin asked the Court to exercise its power to give summary judgment pursuant to UCPR 2005, r 13.1. This case qualifies as one where summary judgment might be given. But in my view, without invoking the Court’s powers to give summary judgment, Origin’s Motion clearly foreshadowed relief in the nature of final relief would be sought at the hearing on 27 October 2016, whether or not summary judgment were obtained. Prayers for relief 2, 3 and 4 of the Motion went well beyond a mere summary judgment motion and sought declarations and orders similar to those in the Summons.

59. The hearing of 27 October 2016 will be treated as a final hearing of the proceedings at which the defendant, Mr Smart after notification on multiple occasions, did not appear and the plaintiff, and at which Origin proceeded to adduce evidence and seek judgment in his absence. But in deference to the detailed submissions that were put on behalf of Origin on the subject, the Court will nevertheless at least briefly review the principles that govern awards of summary judgment. But this judgment decides the proceedings as upon a final hearing, as that is justified in the circumstances and will produce greater finality.

60. The applicable law in relation to Mr Smart’s contractual obligations and his obligations of confidence to Origin is then examined, followed by an analysis of its application to the information in question in these proceedings.

Summary Judgment

61. Summary judgment is applied for under UCPR, r 13.1, which states:

“13.1 Summary Judgment

(1) If, on application by the plaintiff in relation to the plaintiff’s claim for relief or any part of the plaintiff’s claim for relief:

(a) there is evidence of the facts on which the claim or part of the claim is based, and

(b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed,

the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires.

(2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed.

(3) In this rule, a reference to damages includes a reference to the value of goods.”

62. The test applied to summary judgment applications by plaintiffs is the same as that applied to summary dismissal applications by defendants. Shortly stated, “the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion”: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128–129 per Barwick CJ. The Court must therefore have a high degree of certainty about the ultimate outcome of a proceeding before a party in the position of the defendant is to be deprived of the opportunity to have their claim determined in the usual way: Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41, Gaudron, McHugh, Gummow and Hayne JJ at [57]. This test has been variously expressed as including where an allegedly contentious matter is “so obviously untenable that it cannot possibly succeed”, is “manifestly groundless”, is “so manifestly faulty that it does not admit of argument”, or “would involve useless expense”: see General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 ; Westpac Banking Corporation v Lahood [2011] NSWSC 1057 at [15] ; Spencer v Commonwealth of Australia (2010) 241 CLR 118.

63. To make such a determination, the Court may consider questions of law relevant to the application: Silverton Ltd v Harvey [1975] 1 NSWLR 659 at 665. This is not for the purpose of making findings of fact, but to determine whether a tri-able issue is disclosed: Wickstead v Browne (1992) 30 NSWLR 1 at 9. Origin adduced the necessary evidence to satisfy the requirements of UCPR, r 13.1(1)(b). But as the matter was decided as upon a final hearing it was not necessary to make use of this evidence; there was no case for the defendant presented.

64. Origin provided detailed submissions to the Court supporting its claimed entitlement to final relief on two grounds. Origin contends that the defendant: (a) breached his contractual obligation of confidence to the plaintiff; and (b) breached his equitable obligation of confidence to the plaintiff. The defendant, not being present at the hearing, advanced no submissions in defence. The arguments of the plaintiff shall be addressed below.

Contractual Obligations

65. The employment contracts between Origin Energy and Mr Smart are enforceable in terms. They are executed by both parties and were performed for some years. There is no obvious debate about the content of their terms. Those terms included provisions to ensure the confidentiality of Origin’s business information.

66. It was accepted in Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 (“Gasweld”) at 335, per Kirby P, that confidential information, irrespective of whether it constitutes a trade secret, can be protected by a restrictive covenant contained within a contract of employment: see also Cactus Imaging Pty Limited v Glenn Peters [2006] NSWSC 717 at [12].

67. Clauses 9 and 18 of the employment agreements have the ample cumulative effect of ensuring that an employee in Mr Smart’s position would not use or distribute Origin’s confidential information to the detriment of the company. They are quite sufficient to found a restraint on the distribution of the two Excel files in question on the Smart-laptop.

Obligations of Confidence

68. Origin seeks relief in equity as well as in contract. The law relating to the protection in equity of confidential information is well established. In Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 443, Gummow J stated:

“[443] It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge), (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence, and (iv) there is actual or threatened misuse of that information: Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203 at 215; Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 50–1; 32 ALR 485 at 491–2; O'Brien v Komesaroff (1982) 150 CLR 310 at 326–8; 41 ALR 255 at 266–8 . It may also be necessary, as Megarry J thought probably was the case (Coco v Clark (AN) (Engineers) Ltd [1969] RPC 41 at 48), and as Mason J (as he then was) accepted in the Fairfax decision was the case (at least for confidences reposed within government), that unauthorised use would be to the detriment of the plaintiff.”

69. Origin identifies the confidential information in question as extracts of online client lists from Origin’s internal MIST database. Merely because a plaintiff, such as Origin, says that something is regarded as confidential, does not make it so: Drake Personnel Ltd v Beddison [1979] VR 13 at 20. Indeed, Kirby P in Gasweld noted at 334 that “determining what is confidential involves a decision on a question of fact in each case where that quality is asserted”.

70. In Gasweld the learned President went on to expound a number of circumstances, which the Courts have historically found to be relevant, to determine whether or not information is confidential. These circumstances include: whether it was plainly made known to the employee that the material was regarded by the employer as confidential (Printers and Finishers, Ltd v Holloway [1965] RPC 239 at 256; Faccenda Chicken Ltd v Fowler [1987] Ch 117); and, whether usages and practices of the industry support the assertion of confidentiality: Thomas Marshall (Exports) Ltd v Guinle [1979] Ch 227 at 248.

71. The information for which confidentiality is claimed here is customer lists and related data. In relation to such material, Young J summarized the applicable law in Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979, at [19] – [20]:

“[19] I would note that normally, lists of customers and their requirements may constitute confidential information: see Robb v Green [1895] 2 QB 315. However, as Bryson J shows in Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272 at [67]–[72], such information is not necessarily confidential, or may be at a low order of confidentiality, depending on the particular circumstances; see also Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317; 20 IPR 481 and my decision in Kone Elevators Pty Ltd v McNay (1997) 19 ATPR 41-563 . Even though the actual result in that case was reversed by the Court of Appeal at (1997) 19 ATPR 41-564, those matters were not gainsaid.

[20] Bryson J, in the Weldon case at [72], dealt with a distinction between a written list of customers and an employee remembering who the customers were. There is some doubt in the authorities as to how far an employee can make use of his or her memory of customers as distinct from a list. I consider that the proposition in Heydon, The Restraint of Trade Doctrine, 2nd ed, Butterworths, Sydney, 1999, p 80, correctly states the law, namely, “The employee cannot remove, whether by using paper or using memory, a material part of the former employer's business records; but the employee can approach a particular customer or client whom that employee can recall without a list or deliberate memorisation'’. That proposition is, I believe, supported by the decision of Peninsular Real Estate Ltd v Harris [1992] 2 NZLR 216 at 221.”

72. Origin’s information in the email attachments sent to Supagas and Elgas was confidential information. The Court draws that conclusion from the evidence of Mr Andrew Bills, Origin’s General Manager LPG & NSE; from the circumstances in which the information was distributed; and, from the content of the information itself.

73. I accept Mr Bills' evidence that Origin has LPG supply contracts with clients ranging from one year contracts for residential customers to longer term contracts of up to five years for larger business clients. The majority of Origin’s bulk LPG customers are supplied either under contracts which have an exit fee for early termination based on the remaining duration of the contract or they are supplied where there is no current written contract but those customers continue to receive services on a month-to-month basis. This means that most of Origin’s bulk LPG customers and clients are susceptible to interference from a competitor. This risk is substantially increased if the competitor became aware of Origin’s information in the MIST system. Mr Bills explains, and I accept, that a competitor with access to information about delivery timeframes would be able to offer more attractive delivery schedule that may enable a switch of providers to the competitor.

74. The circumstances in which the information was gathered and distributed are telling. Supagas received its email on 11 December 2015, the same day Mr Smart was dismissed. The forensic evidence provides a clear inference that Mr Smart was the author of the email to Supagas. No reasonable hypothesis is available that any other person was the author of the email. But why was the email sent on 11 December 2015 at 10.21am? The probable inference was that it was an act of retaliation against Origin by a just-dismissed employee. Nothing else really explains the timing. Mr Smart had been dismissed before 10.21 on that day.

72. But why would an angry employee send this email to Supagas? Even without looking at the email to Supagas it may be inferred that Mr Smart thought that the information might be damaging to Origin and helpful to its competitors. Why else would a disgruntled employee send the email that day? I infer that Mr Smart thought that the information he was forwarding to Supagas would be damaging to Origin. The emails do not contain anything which would have a negative reputational effect upon Origin. The only other way that Origin might be damaged through these emails is if the information attached were commercially damaging to Origin. I have already inferred that Mr Smart sent the emails. I further infer that he did so because he thought that their contents would be damaging to Origin. The sending of the emails in the circumstances which they were sent was an admission by conduct by Mr Smart of the confidentiality of the attachments.

73. But Mr Smart actually gave a description of what he thought Supagas could do with the information: “please FWD this spreadsheet to sales” and then “Goodluck, hope this helps build your business”. The email strengthens the inference of confidentiality already drawn. Mr Smart clearly thought that the material in the Supagas email would be able to be used to assist Origin’s competitor Elgas commercially and would have the capacity to increase its sales and build its business. Information which could be used in this way is highly likely to be confidential as not being readily available to Supagas or Elgas otherwise.

74. The contents of the email attachments, derived from MIST, bespeak their own confidentiality. MIST was a current up-to-the-minute customer information database only accessible with a username and password issued to a limited number of persons who needed to use its contents in the course of Origin’s business. Each customer entry in MIST was rich with information, which would enable another vendor to sell competing product to those customers. Along with the customer addresses and names, the data was enriched with sales-related customer information such as, the customer type, delivery volumes, customer storage capacity, delivery frequency, kind of delivery service, and occasions the customer had run out of gas.

75. This list of customer characteristics demonstrates how the information would enhance the capacity of a third party with the information to sell to one of Origin’s customers on the list. Authorities speak of situations where some customer lists may not be confidential. But the enriched customer information held in MIST is quintessentially confidential information.

76. In my view the plaintiff’s claim is made out both in contract and in equity that the material over which a restraint is sought is confidential.

77. The remaining issue is the form of relief. The confidential information must be described with precision. It is sufficiently described by identifying that what is to be restrained is the information required by the defendant, Mr Smart, in accessing the plaintiff’s MIST application. That will sufficiently capture any other instances of misuse of the MIST software that have not been caught by what has been discovered so far and will capture further distribution of the MIST documents already identified.

78. The restraint should not be unlimited in time. There is no clear evidence before the Court as to the churn rate of Origin’s LPG customers. But an unlimited time period for the restraint is not appropriate. Considering Mr Bills' evidence that some LPG customers have five year contracts it seemed appropriate to frame the terms of the restraint for no more than a five year term.

Conclusions and Orders

82. For the reasons given the Court made the following orders and declarations in chambers on 15 November 2016:

83. The Court declares that, by his unauthorised conduct in accessing the plaintiff’s Confidential Information and disclosing it to competitors of the plaintiff, namely Supagas and Elgas, on 11 December 2015 and 13 January 2016 respectively, the defendant breached his contract of employment with the plaintiff.

1. Other than for the purposes of compliance with Order 2 below, the defendant be restrained for a period of 5 years from the date that these Orders are made from:

1. using the Confidential Information of the plaintiff;

2. copying, forwarding, distributing or disclosing to any person or entity, destroying, or in any other way defacing or interfering with, all documents containing the plaintiff’s Confidential Information in his possession, custody or power, including documents in any electronic form that he obtained from or has in his possession, custody or power as a result of his employment by the plaintiff;

3. counselling, procuring or assisting any other person to do any of the things referred to in subparagraphs (a) and (b) above.

2. The defendant must do all things reasonably necessary to permit the plaintiff, under the supervision of the plaintiff’s solicitors, and through the Independent Computer Expert, to:

1. conduct an audit of the defendant's personal information technology property and systems to determine whether the defendant holds, or has used or disclosed to any person or entity the plaintiff’s Confidential Information;

2. copy all Confidential Information discovered in the defendant's possession, and retrieve and record details of all use or disclosure of any Confidential Information;

3. permanently delete from the defendant's personal information technology property and systems all Confidential Information.

3. For the avoidance of doubt, for the purposes of Order 2, "all things reasonably necessary" includes the following:

1. within 10 days of service of these Orders, delivering up to the Independent Computer Expert (or his or her agent), all of the defendant's personal information technology property, including computers, laptops, tablets, smart phones, electronic storage devices and electronic storage media;

2. providing to the Independent Computer Expert, all passwords necessary for the Independent Computer Expert to gain access to any such personal information technology property or online electronic storage of the defendant, whether disclosed by the defendant or discovered by the Independent Computer Expert without the defendant's assistance, and otherwise disabling any security measures on such personal information technology property and online electronic storage.

4. Within 28 days of the date of service of these Orders, the defendant file and serve on the plaintiff’s solicitors an affidavit verifying the steps he has taken to comply with Order 3.

5. The defendant is to pay the plaintiff’s costs of and incidental to the proceedings.

6. The interlocutory Orders made by Lindsay J on 28 January 2016, as varied by Bergin CJ in Eq. on 3 February 2016, be dissolved.

7. For the purpose of these Orders:

1. ‘Confidential Information’ means all information (regardless of the form in which it is stored) that was acquired by the defendant by accessing the plaintiff’s MIST Application which contains customer details in respect of any bulk LPG customers of the plaintiff in Australia.

2. ‘Related Body Corporate’ has the same meaning as that term does as defined in section 9 of the Corporations Act 2001 (Cth).

3. ‘Independent Computer Expert’ means an independent computer expert chosen and retained by the plaintiff and notified to the defendant.

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Amendments

06 April 2017 - Order 4 changed, typographical errror

06 April 2017 - Category changed - coversheet

16 March 2017 - [62] - "manifestly fault" to "manifestly faulty"

[73] and [81]- reference to Mr Bill's to Mr Bills' and also "Bill" to "Bills"

Decision last updated: 06 April 2017