Showcase Realty Pty Ltd v Nathan Circosta

[2021] NSWSC 355

Supreme Court

New South Wales

Medium Neutral Citation:

Showcase Realty Pty Ltd v Nathan Circosta [2021] NSWSC 355

Hearing dates:

4 November 2020

Date of orders:

9 April 2021

Decision date:

09 April 2021

Jurisdiction:

Equity

Before:

Rees J

Decision:

Set aside Anton Piller order ab initio, with costs

Catchwords:

ANTON PILLER – real estate agent obtains ex parte search order against former employee and new employer – alleged misuse of confidential information – relied on letters handed over by employee 2 years earlier, on joining new employer, terminating property management of 9 properties – letters provided by employee’s friends and family – not disclosed that the clients were the employee’s friends and family, and thus unlikely to have been approached using confidential information – principles at [4]-[9] – non-disclosure of material fact – does not matter whether search order may have been made anyway.

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 36.16(2)(b)

Cases Cited:

Brags Electrics Ltd v Gregory [2010] NSWSC 1205

Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1356

Palaris Mining Pty Ltd v Short [2012] QSC 224

Principal Financial Group Pty Ltd v Vella [2011] NSWSC 327

Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639; [2005] VSCA 213

Singtel Optus Pty Ltd v Almad Pty Ltd [2011] NSWSC 492

Walter Rau NeusserOel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955

Category:

Principal judgment

Parties:

Showcase Realty Pty Ltd (Plaintiff)
Nathan Circosta (First Defendant)
Oproperty Pty Ltd (Second Defendant)

Representation:

Counsel:
Mr D O’Sullivan (Plaintiff)
Mr R Jedrzejczyk (Defendants)

Solicitors:
Fisher Cartwright Berriman Group (Plaintiff)
Mills Oakley (Defendants)

File Number(s):

2020/287946

Judgment

1. HER HONOUR: This is an application by the defendants, Nathan Circosta and his employer Oproperty Pty Ltd trading as “Ray White (Carlingford)”, to set aside Anton Piller orders made ex parte by Rein J on 6 October 2020, together with an order that items seized pursuant to execution of those orders be returned.

2. The application is opposed by the plaintiff, Showcase Realty Pty Ltd, being Mr Circosta’s former employer. In the substantive proceedings – also commenced on 6 October 2020 – Showcase seeks damages for breach of its employment contract with Mr Circosta.

3. On this application, the defendants read affidavits by Mr Circosta and his friends, Andy Rod and Hayden Muscat. The plaintiff read affidavits by its director and real estate licencee, Immacolata (Margot) Brattoli, her son and sales director Michael Brattoli, office manager Christa Jong and client, Naomi Noakes. There was no cross-examination.

PRINCIPLES

4. The principles were not in dispute. On an ex parte application, the applicant has a duty of candour as described by Allsop P in Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 at [38]:

In an ex parte hearing, it is the obligation of the party seeking orders, through its representatives, to take the place of the absent party to the extent of bringing forward all the material facts which that party would have brought forward in defence of the application: Thomas A Edison Ltd v Bullock (1912) 15 CLR 678 at 681-82 per Isaacs J. That does not mean stating matters obliquely, including documents in voluminous exhibits, and merely not mis-stating the position. It means squarely putting the other side’s case, if there is one, by coherently expressing the known facts in a way such that the Court can understand, in the urgent context in which the application is brought forward, what might be said against the making of the orders. It is not for the Court to search out, organise and bring together what can be said on the respondents’ behalf. That is the responsibility of the applicant, through its representatives.

5. Where search orders have already been executed, the Court may set aside the orders ab initio if there has been a material non-disclosure: Brags Electrics Ltd v Gregory [2010] NSWSC 1205 at [17] per Brereton J. A respondent who applies to set aside an ex parte order on this basis bears the onus of showing that there has been such a non-disclosure: Brags Electrics at [10]. The test for determining whether a non-disclosure is “material” was explained by Ball J in Principal Financial Group Pty Ltd v Vella [2011] NSWSC 327 at [17] (cited with approval in Singtel Optus Pty Ltd v Almad Pty Ltd [2011] NSWSC 492 at [53] per Bergin CJ in Eq):

In order for information to be material for this purpose, I do not think it is necessary that the information would have or was likely to have made a difference to the orders of the court. It is sufficient if the information is information that it could be expected that the opposing party would have wanted to bring to the court’s attention and the court would have wanted to consider before making an order. It is only if the requirement of materiality is interpreted in that way that full disclosure is an adequate substitute for a party’s right to be heard.

6. In Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639; [2005] VSCA 213 at [35], Gillard AJA (with whom Ormiston and Buchanan JJA agreed) described it thus, at [35]:

What is a material fact is a matter which is relevant to the court’s determination. To be material, it would have to be a matter of substance in the decision making process.

At [36], his Honour adopted Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1356 (per Ralph Gibson LJ), “the material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers”.

7. If there has been a material non-disclosure, the Court has a general discretion whether to discharge an Anton Piller order ab initio. As to how the discretion is to be exercised, Gillard AJA explained in Savcor at [33]:

Relevant to the discretion is whether the material non-disclosure was serious or otherwise the importance or weight that should be attached to the omitted fact in the decision making process and also any hardship if the order was set aside. The approach is different if the plaintiff has acted culpably in the sense that the omission to disclose relevant matters was done deliberately to mislead the court. The most likely result in those circumstances would be that the order would be vacated.

8. Further, the question is not whether a search order would have been made, or should be made, on the evidence, but whether there has been material non-disclosure. In Savcor Gillard AJA explained at [22]:

… The order is set aside because of some irregularity and not on the merits. When this jurisdiction is enlivened, the court’s function is to determine on the material that was placed before the judicial officer at first instance, whether a party has failed to discharge the obligation which rests upon any party seeking an order ex parte, namely, making a full and fair disclosure of all matters within its knowledge and which are material, to the court. The court is not concerned whether the order should have been made on the material before the court. …

See likewise Palaris Mining Pty Ltd v Short [2012] QSC 224 at [26] per Applegarth J.

9. If the Court is not minded to set the Anton Piller aside ab initio, the order will operate in futuro only; the respondent may be entitled to compensation under the usual undertaking as to damages: Brags Electrics at [17].

FACTS

10. Showcase Realty conducts a real estate business in Carlingford, selling properties and managing rental properties. Ray White Carlingford is located just five doors down.

11. In 2011, Mr Circosta began working for Showcase; he was then aged 18. He was promoted to Property Management Representative and then Property Management Supervisor. Mr Circosta became responsible for managing all of Showcase’s rental properties. Showcase used a customer relationship management system known as “REST” to store information about properties under management, including telephone numbers and email addresses of landlord clients. The REST system was used by Mr Circosta when he worked for Showcase and was not accessible remotely outside the office. There was some conflicting evidence as to whether it could be, or was, downloaded by Mr Circosta onto his mobile phone, which it is not presently necessary to resolve. Mr Circosta’s employment contract contained restrictions on the use of Showcase’s confidential information (clause 13) and restraints in the event that Mr Circosta left Showcase’s employ; a nine month restraint period applied: clause 18.3(a).

12. Over the years, Mr Circosta brought various family members to Showcase as landlord clients, including his grandparents and cousins, as well as friends including Mr Rod and Mr Muscat.

13. In July 2018, Mr Circosta wished to move from property management into sales and asked Mrs Brattoli to be given more sales-based activities. This happened – to some extent – but it appears that Mr Circosta began looking to move on from Showcase to Ray White Carlingford to further his ambition. On 15 October 2018, Mr Circosta tendered his resignation, giving four weeks’ notice and thanking Mrs Brattoli for giving him the opportunity to start his career at Showcase. Mr Circosta’s last day of employment at Showcase was 12 November 2018.

14. On 11 December 2018, Mr Circosta visited Showcase and told Mrs Brattoli that he had taken up a role with Ray White Carlingford. Mr Circosta handed over pro forma letters signed by family and friends (2018 Clients) which terminated Showcase’s management of nine properties, requested that documentation and keys be made available for collection by Ray White Carlingford, and thanked Showcase for its service. According to Mr Circosta, he told the Brattolis that the letters related to properties that were owned by his family and friends. Mrs Brattoli and Mr Brattoli deny this, but Showcase does not dispute that the 2018 Clients were friends or family of Mr Circosta. It is apparent that this fact was known to Showcase, either when the letters were handed over or soon afterwards. Either way, Mr Circosta’s news was not warmly received. Mr Brattoli said, “I can’t sit here and listen to this scum. I cannot believe this. I’ve got to leave.” Mrs Brattoli asked Mr Circosta to go.

15. On 14 December 2018, Showcase’s solicitors sent Mr Circosta a ‘cease and desist’ letter suggesting that he was in breach of his obligations to Showcase by reason of having taken a position with Ray White Carlingford. The letter continued: (emphasis added)

We are further instructed that you have listed the following properties for property management / sale through Ray White Carlingford and that you obtained each of the following listings through your relationship with the client as a result of your previous status as a representative of Showcase …

16. Seven properties were then set out, all being 2018 Clients. The letter continued: (emphasis added)

Our client has concerns that you also misused its confidential information and leveraging off your prior relationship with these vendors during your employment in order to secure the abovementioned listings. It is clear that you only obtained these listings because of the knowledge you obtained by way of your employment with Showcase. This is precisely the type of wrongdoing which the contractual post-employment restraints were designed to protect our client against.

Mr Circosta was requested to sign a written undertaking, failing which legal proceedings might be commenced without further notice. Showcase’s solicitors forwarded a copy of the ‘cease and desist’ letter to Mr Circosta’s new employer.

17. The defendants submitted that the suggestion that Mr Circosta had used Showcase’s confidential information to contact his own friends and relatives to entice them to move to Ray White Carlingford was a nonsense. That is a fair statement. Showcase submitted that the letter was sent in the context of Mr Circosta having contravened his post-employment contractual obligations in relation to non-compete and non-solicitation. The concern in relation to misuse of confidential information was not confined to the confidential client list, but also referred to pricing structures and margins. That may be so, but the letter fairly read suggested that Mr Circosta had taken the 2018 Clients to his new employer by reason of developing a relationship with the client through his employment at Showcase, which was not the case.

18. Mrs Brattoli contacted at least some of the 2018 Clients in respect of their decision to move to Ray White Carlingford. In respect of Mr Muscat, Mrs Brattoli’s file note of the conversation recorded, “He advised that Nathan Circosta asked him to terminate & give him a go!” In her affidavit relied upon before Rein J, Mrs Brattoli deposed that Mr Muscat said, “Look I’ve got no problems with you & Showcase. Nathan had asked me to give him a go at Ray White and that we should terminate with Showcase.”

19. Mr Muscat said he received a telephone call from Mrs Brattoli asking whether Mr Circosta was “pushing you to go over there”, which Mr Muscat denied and said, “Nathan is a mate of mine. The only reason I came to you in the first place is because of Nathan. Obviously, if Nathan is going to go, then I’m going to go with him, because I know that he’ll do the right thing by me”. Mrs Brattoli then said that Mr Circosta was not doing the right thing by Showcase and Mr Muscat replied, “At the end of the day, Nathan is a mate of mine and I’m going to stick by him”. Mrs Brattoli gave a different version of the conversation with Mr Muscat in her affidavit relied upon on this application, but did depose that Mr Muscat said, “Nathan has begged me to move over to Ray White and he’s my friend so that’s why”.

20. Mr Rod also received a call from Mrs Brattoli wanting to know why he was transferring management of his property to Ray White Carlingford. Mr Rod told Mrs Brattoli, “Obviously, Nathan is a very good friend of mine. When I found out that he was going to Ray White, it was really a no-brainer that I would go with him …”. Mrs Brattoli did not refer to this conversation in her affidavit read before Rein J, nor respond to the conversation as described by Mr Rod in her affidavit read on this application.

21. Months passed. In July 2019, some landlord clients of Showcase, who had earlier terminated their property management arrangements, listed their properties for sale with Mr Circosta. In September 2019, some of Showcase’s clients began to receive email “mailouts” in respect of “latest property listings to have hit the market!” In October 2019, a Showcase client contacted Mrs Brattoli asking why Mr Circosta had “access to our contact details for advertising purpose”. Perhaps unfortunately, a senior property manager at Showcase replied:

Nathan is an ex-employee with Showcase Realty who was terminated from working with our agency over a year ago, moving to Ray White Carlingford (unknown to us – his in breach of his contract).

… Having received marketing material correspondence directly &/or in-directly by Nathan or Ray White would seem he has your contact details & is soliciting marketing material to you. This is extremely unprofessional business practice.

… We take this matter very seriously and will investigating further.

Amongst other things, Mr Circosta had not been terminated but had resigned.

22. In February 2020, further landlord clients changed their business to Ray White Carlingford, although their emails did not mention Mr Circosta nor was he copied into their emails. On being contacted by another Showcase client, Ms Qin, who advised that Mr Circosta had been calling her mobile and sending weekly emails, Mrs Brattoli enquired, also in somewhat unfortunate terms: (emphasis added)

Did you call him or did Nathan just contact you from his phone as he has all previous information including email details. (he kept from when he worked for Showcase).

23. In September 2020, Showcase’s client, Ms Noakes, received a series of emails from Mr Circosta to her personal email address. A voicemail was also left on Ms Noakes mobile phone,

… Just calling on behalf of Nathan Circosta who used to manage your property in Carlingford.just wondering if … you would be interested in selling that property or if you need a property manager … you can contact Ray White in Carlingford that’s where Nathan works now.

Ms Noakes contacted Mrs Brattoli, advising that her mobile number and email were “completely private” and “I think they may have taken your records”. Mrs Brattoli began to suspect that Mr Circosta may have used the REST database to solicit clients.

24. On 22 September 2020, Showcase’s solicitor approached Suzanne Barnes to act as an independent solicitor. On 6 October 2020, two years after Mr Circosta left Showcase’s employ, Showcase commenced these proceedings before Rein J as Duty Judge. An Anton Piller order was sought ex parte. The transcript reveals that his Honour had received two affidavits of Mrs Brattoli and an affidavit by Ms Noakes. In addition, his Honour had received written submissions, which stated:

On 11 December 2018, the First Respondent attended on the office of the Applicant to affect [sic] the transfer of the management of nine (9) properties from the Management Portfolio to the Second Respondent (IB1 at [38]).

There was no mention of the fact that all nine properties were owned by Mr Circosta’s friends and family.

25. At the commencement of the hearing, Rein J observed:

Now firstly just a general comment, I note that the first defendant left your client’s employment in 2018. … There is [no] alleged breaches of restraint clauses … The case is solely founded on alleged removal of confidential information and now use of that information.

… I suppose the reality is there is going to be some issue about whether one can draw the conclusion now that he is using information that he took so long ago given that it’s only surfaced in the last month or so.

26. To this, Showcase’s counsel pointed to Ms Noakes affidavit as “effectively the smoking gun” as her email address was private and the emails received from Mr Circosta were addressed to “Dear Ken”, being the salutation listed in Showcase’s contact list of its landlord clients: (emphasis added)

O’SULLIVAN: And that is really what has crystallised the concern and led to your Honour’s conclusion that this list either wholly or partly has been taken by the first respondent, used by the first respondent for the benefit of the second respondent and possibly the first respondent.

HIS HONOUR: I wonder what’s the theory of why he hasn’t used it until now?

O’SULLIVAN: Could I say this your Honour, we’ll turn our minds to it. First of all, it is possible that he has used it already. In the confidential affidavit of Ms Brattoli, if I can take you to that, at paragraph 20 and 21, it’s under the heading “Loss of Management and Unprecedented Churn”. Paragraph 21, and I might pause [a] couple of times here, we have shortly after the first respondent left the employ of the applicant, he turned up with authorities to transfer nine properties.

HIS HONOUR: Yes, I know.

That piece of evidence had clearly been observed by his Honour in reviewing the material before the hearing commenced, and identified as potentially significant.

27. The paragraphs of Mrs Brattoli’s confidential affidavit referred to by Showcase’s counsel detailed clients which Showcase had lost since Mr Circosta’s departure including (in paragraph 21(a)) the 2018 Clients, which Mrs Brattoli referred to in her affidavit as “lost clients”. Mrs Brattoli did not mention that she knew these landlords to be Mr Circosta’s friends and family. Nor did Mrs Brattoli refer to her conversation with Mr Rod after Mr Circosta’s departure, in which Mr Rod told her that he went to Ray White Carlingford to follow his friend: see [19]. Mrs Brattoli did refer to her conversation with Mr Muscat, but not in terms which revealed that he had told her that the reason why he left was, at least in part, by reason of his friendship with Mr Circosta: see [17]-[18]. Whilst Showcase submitted that Mrs Brattoli’s affidavits were put together in a short period of time, I note that Showcase approached the independent solicitor a fortnight beforehand and, thus, presumably had adequate time to prepare Mrs Brattoli’s affidavit.

27. The transcript continued: (emphasis added)

O’SULLIVAN: Straight after that your Honour the applicant, and rightly so through their legal representatives, wrote to the first respondent and the second respondent raising their concerns with respect to possible contraventions of a number of parts of the first respondent’s contract of employment, but in particular a concern that there was a breach of the confidential information clause of the employment agreement, also section 183.

Now one could hypothesise that with that shot across the bows that the first respondent laid low for a while, thought that things had sort of calmed over, and then commenced using the confidential information. …

29. His Honour’s attention then moved to the form of the orders sought. Other matters were canvassed, which are not relevant for present purposes. The orders were made. The Anton Piller order was executed on 7 October 2020. On 21 October 2020, the defendants filed the motion presently before the Court.

CONSIDERATION

30. Showcase submitted that at no stage did Showcase lead evidence nor make submissions that Mr Circosta had used Showcase’s confidential client list to contact the 2018 Clients; its case before Rein J was said to have been incorrectly characterised and misconstrued. Rather, it was Ms Noakes’ evidence that had led to the concern that the list had been taken by Mr Circosta. I agree that Showcase relied heavily on Ms Noakes’ evidence as “crystallising” its concerns, but Showcase’s evidence went beyond that matter to the 2018 Clients.

31. Showcase submitted that the reference to the “shot across the bows” was in response to an invitation by his Honour for Showcase to provide a hypothesis as to why the defendants had waited so long to use the confidential client list. It was said to be implicit in his Honour’s question that Rein J had determined on the basis of the evidence and submissions that neither of the defendants had used the confidential client list to contact the 2018 Clients. Further, Showcase pointed out that Mrs Brattoli’s affidavit evidence also referred to five other clients lost more recently, albeit Mrs Brattoli fairly disclosed that the contact details of two of these clients could have been ascertained without recourse to the confidential client list. Showcase submitted that, as the plaintiff’s case was not that the 2018 clients indicated a misuse of the confidential client list, it was not misleading, nor was there material non-disclosure when referring to the 2018 clients, to not tell Rein J that those clients were actually Mr Circosta’s friends and family. The fact that they were referred to at all was said to be just background.

32. I do not agree. It was never drawn to Rein J’s attention that his Honour should not draw any inference from what had happened in 2018 to conclude that there was a risk that, in 2020, Mr Circosta had availed himself of the confidential client list. Without that clarification, his Honour was entitled to assume that the evidence in relation to the 2018 Clients was relied upon by Showcase, together with other evidence, as pointing to the relevant risks of dissipation and destruction of information such that an Anton Piller order should be made on an ex parte basis.

33. As Mr Circosta submitted, Showcase’s application for an ex parte Anton Piller order suffered from an important temporal problem as, aside from the 2018 Clients, the earliest date on which the other “lost clients” terminated their arrangements with Showcase was 1 June 2019, whilst the bulk did not leave Showcase until late 2019 and 2020. The amount of time that had passed between Mr Circosta’s departure from Showcase and the movement of “lost clients” to Ray White undermined the proposition that Mr Circosta had used Showcase’s confidential information to secure for himself and his new employer a competitive advantage. It also meant the Court could infer that, in the time between Mr Circosta leaving Showcase and later selling the “lost clients’” properties through Ray White, it was equally likely that Mr Circosta and/or Ray White had obtained those clients’ contact details through legitimate means. Showcase’s reliance on the 2018 Clients assisted Showcase to overcome the temporal problem as it appeared to indicate that Mr Circosta may have used Showcase’s confidential information to secure the transfer of a non-trivial number of clients within a matter of weeks after his resignation.

34. It is clear from the transcript that the transfer of the 2018 Clients to Ray White Carlingford shortly after Mr Circosta ceased working for Showcase was relied upon by Showcase’s counsel as evidence suggesting that Mr Circosta had already used Showcase’s confidential information: “it is possible, that he has used it already.” That is, the letters transferring the nine properties may be the product of Mr Circosta’s misuse of Showcase’s confidential information. No mention was made to his Honour that the nine properties were owned by Mr Circosta’s friends and family, that is, the reason why the 2018 Clients moved with Mr Circosta could readily be explained as entirely unconnected with any misuse of Showcase’s confidential information. This was a significant piece of information. Showcase’s reliance on the ‘cease and desist’ letter – the terms of which were equally problematic as considered at [16] – compounded the problem.

35. I am satisfied that Showcase did not bring material facts to Rein J’s attention, being facts which the defendants would have brought forward in opposing the application for an Anton Piller order if the application had been heard inter partes. It was incumbent upon Showcase to squarely put before his Honour the fact that the 2018 Clients were friends and family of Mr Circosta and thus their departure to Ray White Carlingford was likely unrelated to any misuse of Showcase’s confidential information. Such a matter would have been relevant to the Court’s determination.

36. No explanation has been proffered by Mrs Brattoli as to why this information was not disclosed in her affidavits. I am satisfied that it is appropriate in the circumstances of this case to discharge the Anton Piller order ab initio. The execution of a search order is a serious invasion of people’s privacy. Whilst it is an important tool in ensuring that evidence is preserved so that justice may be done, such orders ought only be made on an ex parte basis if the applicant discharges their duty of candour so that the Court is fully appraised of all relevant matters to the exercise of its discretion in such an important decision. The need for candour is particularly acute on Duty Judge applications, where judges often have insufficient time to review affidavits and documentary evidence in detail.

ORDERS

37. For these reasons, I make the following orders:

1. Order pursuant to rule 36.16(2)(b) of the Uniform Civil Procedure Rules 2005 (NSW) that the orders made by Rein J on 6 October 2020 (search orders) be set aside ab initio.

2. Order that the items removed from the first defendant and from the second defendant’s premises on 7 October 2020 pursuant to the search orders, including any storage devices containing information that was copied from the items removed from the first defendant and the second defendant’s premises, be returned to the defendants forthwith.

3. Order that the plaintiff is to pay the defendants’ costs of their notice of motion filed 21 October 2020.

4. In respect of the defendants’ application that their costs of the motion be payable forthwith:

1. Direct the defendants to provide any evidence or submissions in support of this application within 14 days, and advise whether the defendants are content for the application to be determined on the papers.

2. Direct the plaintiff to provide any evidence or submissions in reply within 14 days thereafter, also advising whether the plaintiff is content for the application to be determined on the papers.

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Decision last updated: 09 April 2021