Steadfast ICT Security Pty Ltd v Peak
[2021] ACTSC 199
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Steadfast ICT Security Pty Ltd v Peak |
Citation: | [2021] ACTSC 199 |
Hearing Dates: | 3 – 14 May 2021 |
DecisionDate: | 30 August 2021 |
Before: | Mossop J |
Decision: | See [452] |
Catchwords: | EQUITY – FIDUCIARY DUTIES – Fiduciary duty to employer – where employees and former director of the plaintiff copied confidential information and transferred commercial arrangements to the fourth defendant – where steps by the employees to transfer the business were taken prior to employment ending – where fourth defendant received benefit of the plaintiff’s business – breach of first, second and third defendants’ fiduciary duties established – breach of duty to avoid conflicts established against the fifth defendant EQUITY – REMEDIES – Account of profits– whether fourth defendant was a knowing participant in first defendant’s breach of fiduciary duty – whether fourth defendant liable to account to plaintiff – liability of the fourth defendant established – director of the fourth defendant had knowledge of and cooperated in scheme to take benefit of the plaintiff’s business – account of profits ordered – fourth defendant to disgorge profits over two year period CONTRACTS – CONTRACT OF EMPLOYMENT – Breach of contracts – breach of obligation to act with honesty, care and skill established against first, second and third defendants – breach of obligations in relation to confidential information and intellectual property established against first, second and third defendants – breach of restraint of trade clause established against first defendant – restraint clause not enforceable against second and third defendants CORPORATIONS – STATUTORY DUTIES – Duties of employees and directors – where employees and former director were alleged to have breached duties owed to the plaintiff under ss 180, 181, 182 and 183 of the Corporations Act 2001 (Cth) – breaches established against the first, second, third and fifth defendants |
Legislation Cited: | Corporations Act 2001 (Cth), ss 9, 180, 181, 182, 183, 1317H Supreme Court Act 1933 (ACT), s 34 |
Cases Cited: | Allen v Tobias (1958) 98 CLR 367 Ancient Order of Foresters in Victoria Friendly Society Ltd v Life Plan Australia Friendly Society Ltd [2018] HCA 43; 265 CLR 1 Warman International Ltd v Dwyer (1995) 182 CLR 544 |
Texts Cited: | JD Heydon, Heydon on Contract (Lawbook, 2019) |
Parties: | Steadfast ICT Security Pty Ltd ( Plaintiff) Gareth Peak ( First Defendant) Lachlan Watt ( Second Defendant) Nenad Stefanovic ( Third Defendant) Dreamtime Supply Company Pty Ltd ( Fourth Defendant) David Glavonjic ( Fifth Defendant) |
Representation: | Counsel E Cox SC with A Munro ( Plaintiff) B Buckland ( Defendants) |
| Solicitors Mackenzie Workplace Law ( Plaintiff) Bradley Allen Love ( Defendants) | |
File Number: | SC 333 of 2019 |
MOSSOP J:
Introduction [1]
The plaintiff’s pleaded claim [3]
Dramatis personae [15]
The nature of the evidence in the case [16]
The approach of the parties [20]
Assessment of the witnesses [22]
What happened? [31]
Destruction of documents [250]
My conclusions [255]
Claim against Mr Peak [262]Contract [262]
Breach of clause 3.1 [267]
Breach of clause 13 [269]
Breach of restraint [274]
Fiduciary duty [285]
Corporations Act [287]Claim against Mr Watt [294]
Contract [295]
Breach of clause 3.2 [303]
Breach of clauses 17.1 and 17.2 [310]
Breach of clause 18.1 [311]
Breach of clauses 23.1(a) and (d) [312]
Fiduciary duty [317]
Corporations Act [318]Claim against Mr Stefanovic [320]
Contract [321]
Breach of clause 3.2 [329]
Breach of clauses 17.1, 17.2 and 18.1 [330]
Breach of clauses 22.1(a) and (d) [332]
Fiduciary duty [333]
Corporations Act [334]Claim against Mr Glavonjic [336]
Claim against Dreamtime [341]
Individual clients or potential clients [346]Australian Financial Security Authority [347]
Geo Group [356]
Nectre Mortgages [386]
Strategic Data [391]
University of Canberra [397]
Anomali/Department of Parliamentary Services [405]
Australian Fisheries Management Authority [410]
Indigenous Business Australia [413]
Department of Agriculture [421]Approach to relief [429]
Relief against Dreamtime [434]
Further conduct of proceedings [450]
Orders [452]
Introduction
The plaintiff, Steadfast ICT Security Pty Ltd (Steadfast), claims that its former employees (Gareth Peak, Lachlan Watt and Nenad Stefanovic) and its former director (David Glavonjic), in late 2018 and early 2019 while still employees or a director of Steadfast arranged to copy confidential information, to transfer commercial arrangements to another business, Dreamtime Supply Company Pty Ltd (Dreamtime), to interfere with the plaintiff’s records in a manner which impaired the plaintiff’s business and, on departing, deleted communications and other material stored on the plaintiff’s computers. That conduct is alleged to involve breaches of the employees’ and director’s fiduciary, contractual and statutory obligations.
For the reasons which are set out below, I have concluded that the plaintiff has established the factual basis for granting relief against, at least, Dreamtime. The conduct of the employees and former director of Steadfast involved a course of conduct designed to obtain for Dreamtime the benefit of Steadfast’s business and involved breaches of Mr Peak’s, Mr Stefanovic’s and Mr Watt’s obligations to Steadfast. The conduct of Mr Peak, in particular, was thoroughly dishonest and in flagrant breach of his obligations to his employer. As a consequence, Dreamtime obtained the benefit of Steadfast’s business and profited as a result. Because of the involvement of Mr Glavonjic, a director of Dreamtime, in Mr Peak’s plan, Dreamtime was well aware of Mr Peak’s breach of duty. I have found that the plaintiff is entitled to relief by way of accounting for profits by Dreamtime and will hear the parties as to other orders that should be made in light of my findings.
The plaintiff’s pleaded claim
The plaintiff has claimed that between September 2018 and January 2019, Mr Peak, who was then an employee of the plaintiff breached his contract of employment and his fiduciary duty to the plaintiff in a variety of ways associated with an intention to move the business of the plaintiff to Dreamtime. It alleges that he failed to act faithfully and diligently towards the plaintiff, failed to perform his duties on behalf of the plaintiff with honesty, care and skill and failed to act in the best interests of the plaintiff. It also claims that he breached his contractual duty in relation to the plaintiff’s confidential information and intellectual property. It alleges that he breached his contract by engaging in conduct which was in breach of a restraint clause in his contract. The plaintiff also claims that the first defendant breached his obligations under ss 180, 181, 182 and 183 of the Corporations Act 2001 (Cth).
The pleading against the second defendant, Mr Watt, is that he breached his contract by failing to act with honesty, care and skill and in a manner so as to promote, develop or extend the reputation of the plaintiff. It is also alleged that he breached his contractual obligations in relation to confidential information and intellectual property. It alleges that he acted in breach of a restraint of trade clause in his contract. The plaintiff claims that Mr Watt breached his obligations under ss 182 and 183 of the Corporations Act.
The pleading against the third defendant, Mr Stefanovic, is that he breached his contractual duty by failing to act with honesty, care and skill and in a manner so as to promote, develop or extend the reputation of the plaintiff. He is also alleged to have a breached his contractual duty in relation to confidential information and in relation to the plaintiff’s intellectual property. He is also alleged to have been in breach of a restraint clause in his contract. The plaintiff claims that Mr Stefanovic breached his obligations under ss 182 and 183 of the Corporations Act.
In relation to the fourth defendant, Dreamtime, the plaintiff alleges that there was an outsourcing agreement in relation to particular IT services which Dreamtime obtained by participating in the Australian government’s Indigenous Procurement Policy (IPP). It is alleged that by reason of the conduct of Mr Peak, Mr Watt, Mr Stefanovic and Mr Glavonjic, Dreamtime has:
(a)obtained the clients, customers and/or suppliers of the plaintiff
(b)provided services of a similar nature to those provided by the plaintiff;
(c)obtained and used the plaintiff’s confidential information;
(d)obtained and used the plaintiff’s intellectual property;
(e)profited or been unjustly enriched at the expense of the plaintiff; and
(f)had the use and benefit of the first, second and third defendants’ services in breach of their contracts of employment.
The plaintiff alleges that the court has power to restrain the first to fourth defendants from continuing to breach the contract of employment of the first, second and third defendants and seeks damages pursuant to s 34 of the Supreme Court Act 1933 (ACT).
Mr Glavonjic was a director of the plaintiff from its incorporation on 24 November 2015 until 31 October 2018. The claim made by the plaintiff against him is under the Corporations Act. It is alleged that he breached his obligations under ss 180, 181, 182, and 183.
The plaintiff claims that as a result of the conduct of the defendants it has suffered a loss of clients, customers or suppliers, has suffered loss of income from those sources and has suffered reputational damage.
A variety of relief is sought including injunctions, a wide variety of declarations, an inquiry as to loss or damage, an account of profits, damages, interest and costs.
At the conclusion of the opening by the plaintiff and the defendants, it was necessary to make a ruling as to whether or not the pleadings were sufficient to encompass a claim of breach of fiduciary duty on the parts of Mr Peak, Mr Watt, Mr Stefanovic and Mr Glavonjic. Although the pleadings were less than clear, I ruled that having regard to the formulation of the claims for relief, they were sufficient to raise a claim of breaches of fiduciary obligations, those fiduciary obligations mirroring the equivalent terms of the relevant employees’ contracts of employment.
The other feature of the pleadings worth noting is the minute precision of the long lists of particulars given of the alleged breaches. This precision probably arose as a result of the need to precisely identify what the plaintiff was able to prove from a reconstruction of the records left behind when Mr Peak, Mr Watt and Mr Stefanovic left its employment. The particulars had a tendency, in relation to the conduct of Mr Peak and Mr Stefanovic to describe the trees rather than the forest, even if the trees so described made it clear that there was a forest. In other words, the particulars were sufficiently comprehensive to make clear that the claim was of an overall course of conduct. In the cases of Mr Watt and Mr Glavonjic, the particulars were narrowly drafted and, although describing some of the trees, were so limited that they failed to fully reflect the forest that might have been described. In those cases, the proceedings must be determined on the basis of particularised claims rather than a broader claim which the evidence might have established.
As the case was run by the plaintiff, although all of the claims in contract, breach of statutory duty and breach of fiduciary obligation were maintained, most attention was focussed upon establishing that Dreamtime was a knowing participant in and receiver of the benefit of Mr Peak’s breaches of his fiduciary duty owed to Steadfast. The benefit of this approach so far as Steadfast was concerned was that it opened up the potential for an account of profits to be obtained from Dreamtime and provided a more favourable approach to causation consistent with the prophylactic nature of relief in relation to breaches of fiduciary obligations.
At the close of the evidence in the case, counsel for Steadfast indicated that he would be inviting the court to assess for itself the profits made by Dreamtime rather than to refer that issue off for an assessment, if the appropriate remedy was an account of profits. That led the defendants to reopen their case to tender some further documents relating to expenses incurred by Dreamtime but the defendants did not otherwise oppose that course because of the desirability of avoiding further court proceedings in relation to the assessment of profits.
Dramatis personae
An explanation of the identity and relationships between the persons and entities referred to in these reasons is set out below.
Steadfast ICT Security Pty Ltd
Plaintiff; registered 24 November 2015; 100 issued shares, held by PurpleP Pty Ltd: 90 shares and Peakiham Pty Ltd: 10 shares
Gareth Peak
First defendant; former general manager of the plaintiff; current employee of Dreamtime
Lachlan Watt
Second defendant; former employee of the plaintiff; current employee of Dreamtime
Nenad Stefanovic
Third defendant; former employee of the plaintiff; current employee of Dreamtime
Chris Hampson
Employee of Steadfast placed as a security officer with Australian Financial Security Authority
Dreamtime Supply Company Pty Ltd
Fourth defendant; registered 23 October 2015.
Share structure: 5 B-class shares (held by Christopher Goldsmith); 205 ordinary shares, held by PurpleP Pty Ltd: 45 shares; Access 42 Pty Ltd: 45 shares; D & K Ventures Pty Ltd: 10 shares; Christopher Goldsmith: 105 shares
David Glavonjic
Fifth defendant; former director of the plaintiff; current director of Dreamtime; current director of D & K Ventures Pty Ltd; current director of Dreamtime People Pty Ltd
Melany Batley
Director of the plaintiff since 28 January 2018, bookkeeper for Dreamtime up until 19 October 2018
Nathan Joy
Husband of Melany Batley; current director of Compliance Corp Pty Ltd (t/as Njoy Security); current director of PurpleP Pty Ltd; former director of Dreamtime People Pty Ltd (formerly Sweettree Pty Ltd)
Compliance Corp Pty Ltd (t/as Njoy Security)
Provider of computer security and compliance assessment services in the ICT industry
PurpleP Pty Ltd
Holds 90 per cent of the shares in Steadfast; holds 22 per cent of the ordinary shares in Dreamtime
Dreamtime People Pty Ltd (formerly Sweettree Pty Ltd)
100 per cent of shares held by Dreamtime Supply Company Pty Ltd. Shares formerly held by companies associated with Ms Batley and Mr Joy.
Peakiham Pty Ltd
Holds 10 per cent of the shares in Steadfast issued as part of Mr Peak’s employment contract.
D & K Ventures Pty Ltd
Company owned by Mr Glavonjic and his wife which provided business advice services to the Steadfast, Dreamtime, Nathan Joy and Njoy Pty Ltd
Christopher Goldsmith
Current director of Dreamtime; current director of Dreamtime People Pty Ltd
Satish Punreddy
Senior Vice President, Cloud4C Services, a current customer of Steadfast
Trevor Mason
IT & Communications Manager of Geo Group, a former customer of Steadfast
Martin Zachara
Principal of Pro Mortgage Canberra Pty Ltd, a former customer of Steadfast
Michael Bailey
Director of Access 42 Pty Ltd, a shareholder of Dreamtime
Michael Callan
Computer forensics expert called by the plaintiff.
The nature of the evidence in the case
A distinctive feature of this case is that many of Steadfast’s computer records which would have disclosed the conduct of the defendants were deleted by Mr Peak when he ceased his employment as its general manager. As a result, the plaintiff’s case has been largely dependent upon the fragments of those computer records which were able to be recovered using computer forensic analysis carried out by Mr Joy and Mr Callan and some records which the defendants failed to delete and to which the plaintiff had access. The computer records provide fragments of information about what occurred and the plaintiff’s case against the defendants is largely circumstantial based upon what is disclosed in the computer records and the actions that are shown to have been taken by the forensic analysis of the Steadfast computer system.
It is in that context that the affidavit evidence was given in this case. The witnesses called by the plaintiff were Ms Batley, Mr Joy, Mr Callan and Mr Punreddy. The evidence of Ms Batley involved a very lengthy chronological affidavit describing what had occurred. The evidence of Mr Joy was also very detailed and chronologically arranged. He reported on the information that he was able to recover from various aspects of the plaintiff’s computer system as well as upon actions the defendants were shown to have taken in relation to that system which were disclosed by records which remained on the system. The purpose of Mr Callan’s evidence was to confirm, through an independent expert, the accuracy of the investigations undertaken by Mr Joy. The evidence of Mr Punreddy related to specific conduct undertaken by the defendants which was said to be consistent with an attempt to lure the company for which Mr Punreddy worked (Cloud4C) away from Steadfast. He was not cross-examined.
Each of the individual defendants prepared affidavits and were cross-examined. A notable feature of the evidence given by Mr Peak was that, notwithstanding the extremely detailed analysis undertaken by Mr Joy which disclosed facts consistent with Mr Peak having transferred significant amounts of Steadfast information to Dreamtime and taken unauthorised steps within the Steadfast IT system in order to transfer the benefit of Steadfast business to Dreamtime, most of those actions were not denied or otherwise responded to in Mr Peak’s affidavit evidence. The defendants also called Mr Zachara, a former client of Steadfast who was associated with the business Pro Mortgage and Mr Mason, the IT & Communications Manager of Geo Group. Mr Goldsmith, the other director of Dreamtime also gave evidence.
The court book comprised some 26,000 pages of documents, 16,000 of which were computer logs derived from hardware examined by Mr Joy and Mr Callan.
The approach of the parties
Counsel for the plaintiff recognised that the conduct the subject of the proceedings came against the background of a falling out between the Joy/Batley interests and Glavonjic/Peak interests. While that breakdown of trust and goodwill formed the background for the proceedings, the position of the plaintiff was that the rights and wrongs of the breakdown of that relationship did not need to be adjudicated upon for the purposes of deciding the case. The “no fault divorce” of the individuals formed the context in which the breaches of duty on the part of the defendants were alleged to have occurred. While the parties may have gone their separate ways in a manner consistent with their legal obligations, the plaintiff contended that the defendants had acted in a manner inconsistent with their contractual, fiduciary and statutory obligations by seeking to acquire, by illegitimate means, the benefit of the plaintiff’s business.
The defendants, on the other hand, accepted that the objective material put forward in the plaintiff’s case was a “bad look”. However, that “bad look” did not give rise to a cause of action which sounded in damages. The focus of the defendant’s case was to undermine any causal connection between any breach of duty on the part of the individual defendants and the acquisition of business by Dreamtime after the employees of Steadfast had moved across. They also challenged the reasonableness of the contractual restraints imposed upon the defendants.
Assessment of the witnesses
Ms Batley and Mr Joy were both cross-examined. There was nothing that caused me to doubt their honesty or the reliability of their evidence.
Mr Punreddy, a senior vice president of Cloud4C, affirmed an affidavit dated 2 February 2021. He was not cross-examined. His evidence is consistent with the contemporaneous documentation. I accept his evidence and where there is a conflict between his evidence and the evidence of Mr Peak or Mr Glavonjic, I prefer his evidence.
Mr Callan was a computer forensics expert who gave evidence to support the accuracy of the computer forensic investigation undertaken by Mr Joy. His evidence was obtained in order to ensure that there could be no challenge to the computer forensics evidence given by Mr Joy by reason of the fact that he was not independent of the plaintiff. There was no challenge to Mr Callan’s evidence and I accept that his evidence was honest and accurate.
Mr Watt was the most junior employee of Steadfast. Employment with Steadfast was his first job. He was significantly influenced by Mr Peak. His approach to his legal responsibilities towards his employer was substantially shaped by the environment created by Mr Peak and hence reflected an inadequate understanding of the requirement for honesty and fidelity in relation to his employer. At the time of giving evidence Mr Watt was still working for Dreamtime. In cross examination he made some appropriate concessions. However, he was shown to have inaccurately affirmed that he had not been informed of the conditions of use of his work provided mobile phone. Although that arose in the context of the admissibility of evidence rather than the substance of the issues in dispute, it led me to be cautious about reliance upon his evidence, except where it was against his interest or the interests of other defendants. The need for caution was reinforced by the inconsistency between the picture painted in his affidavit of the circumstances in which he decided to leave Steadfast and what is disclosed about his attitude in contemporaneous messaging communication with Mr Peak, his brother or friends which showed considerable hostility towards Ms Batley, and knowledge of and support for, the scheme of Mr Peak and Mr Glavonjic.
Mr Stefanovic appeared to have a close and familiar relationship with Mr Peak. He appears to have performed the role of loyal deputy and co-conspirator when it came to implementing Mr Peak’s plans. His affidavit evidence was largely directed to dealings with individual companies or Commonwealth entities and the costing of services. The documentary material recovered from Steadfast electronic files presents a different picture of his involvement in Mr Peak’s activities than the relatively anodyne terms of his affidavit evidence. Because of his close involvement in Mr Peak’s activities, I have treated his evidence with considerable caution. I have also treated his estimates of costings with caution given that he was shown to have made some unsupported assumptions very favourable to the defendants in the costings that he provided.
Mr Mason’s evidence was directed to the proposition that he had only engaged Dreamtime in July or August 2019. The documentary records showed much earlier contact between Dreamtime and Geo Group. His cross-examination also demonstrated that Mr Murray Allen, another employee of Geo Group, was the person who had the conduct of the early negotiations with Dreamtime. Mr Allen was not called to give evidence. The manner in which Mr Mason dealt with the cutting off of access to Geo Group’s IT system, his request to be provided with a report in March 2019 and the reasons given for termination of Steadfast’s contract with Geo Group (each of which is dealt with at [228] and [369] below) left me with an uneasy feeling that the court was not being given the full explanation of Geo Group’s approach to the termination of its relationship with Steadfast and its subsequent engagement of Dreamtime.
Mr Peak was an unreliable witness. While he made admissions of dishonest and misleading conduct, he only did so where the documentary evidence compelled him to do so during the course of cross-examination. His affidavit evidence attempted to paint a completely unrealistic picture of his conduct which was inconsistent with the contemporaneous documentation. The largely unchallenged evidence of Mr Joy relating to his deletion and transfer of Steadfast computer files and unauthorised interference with its computer systems indicates a thoroughly discreditable course of conduct which, by his unauthorised deletions of documents from the Steadfast systems, he sought to hide. I did not accept his evidence as being reliable and preferred the evidence of the witnesses called by the plaintiff where there was a conflict between Mr Peak’s evidence and their evidence.
Mr Glavonjic was an unimpressive witness. He had a broad-brush salesman’s story to tell which suggested much less involvement in Mr Peak’s actions against Steadfast than the documentary material and other evidence discloses.
Both Mr Zachara and Mr Goldsmith gave what appeared to be honest evidence. The reliability of their evidence was only affected by the effluxion of time since events in question.
What happened?
The findings that follow set out in chronological form the events that are disclosed by the evidence. For reasons given later, many of them are quite specific matters disclosed by a forensic examination of the computer records of Steadfast. They cover the period from prior to the incorporation of Steadfast and Dreamtime up until shortly after the last of the defendants left the employment of Steadfast. They provide the framework within which it is possible to make conclusions about the course of conduct engaged in by the defendants. Those broader conclusions as to what happened are set out at [255]-[260] below. Findings about what happened in relation to the clients and potential clients of Steadfast following the end of the defendants’ employment with Steadfast are dealt with separately at [346]-[428] below.
From 2013 Mr Joy provided computer security services to the Australian government through his company Njoy Security. In July 2015, Mr Joy engaged Mr Glavonjic through his company D & K Ventures to provide business advisory services.
The Australian government’s IPP was a policy by which majority Indigenous owned companies were encouraged to apply for government opportunities. Mr Joy raised with Mr Glavonjic the idea of creating a new company to capitalise on the IPP. Mr Glavonjic introduced Mr Goldsmith to Mr Joy as part of that proposal. The point of the arrangement was to insert a majority Indigenous owned company between non-Indigenous service providers and the Commonwealth, thereby permitting access to Commonwealth contracts through the IPP and allowing the owners of the Indigenous company to make money even though the services that the company provided were sub-contracted to non-Indigenous companies.
On 23 October 2015, Dreamtime was registered, under its earlier name, the Indigenous Australian Supply Company Pty Ltd (IASC). Because Mr Goldsmith was Indigenous and owned more than 50 per cent of the shares, the company was able to become an entity that could benefit from the IPP. The directors of the company were Mr Glavonjic and Mr Goldsmith. Apart from Mr Goldsmith, the other shareholders were Purplep Pty Ltd, Access 42 Pty Ltd and D & K Ventures Pty Ltd.
Steadfast was incorporated on 24 November 2015. Mr Glavonjic was the sole director of the company at the time of incorporation. The shareholders were Purplep Pty Ltd and Peakiham Pty Ltd, which had shareholdings of 95 per cent and 5 per cent respectively at that time. The arrangement between the Steadfast and Dreamtime permitted Steadfast to gain access to government work on more favourable terms than if it subcontracted to other companies on government panels.
In addition to performing work obtained by Dreamtime under the IPP, Steadfast also had a business providing IT security. It was an authorised re-seller of security software and solutions. In that role, Steadfast purchased a software licence from a supplier and on‑sold it to customers, generally for a fixed term. Steadfast was an authorised re-seller of software provided by AlienVault, Airlock and Fortinet, among others. Steadfast also provided IT security consulting services, created security documentation, and undertook security assessments under the Commonwealth Government Information Security Registered Assessors Program (IRAP). It also provided help desk support and security monitoring services.
On 25 January 2016, Mr Glavonjic sent an email to Mr Joy which attached a one-page strategy document for Sweet Tree, Steadfast and the IASC. In this document, it was set out that Steadfast was established to “… exploit the pre-audit service opportunities uncovered by NJoy, leverage Njoy [sic] identified post-delivery opportunities and become a viable security services company in its own right.” Furthermore, Steadfast would:
· continue to expand the range of services available through forming third party distribution/service agreements with third party suppliers: e.g. Hemisphere.
· Create a database of contract resources to provide resourcing for Steadfast, third party contractors such as Fuji and for direct clients.
· Win new clients directly, and through NJoy and/or IASC.
· Make contact with established contracting houses including Saltbush, Fuji, Finite EY and others to introduce Steadfast and reassure them of the benefits of working with us.
The one-page strategy stated IASC was established “to exploit the new Indigenous Procurement Policy.” Furthermore, IASC would:
· Establish an informative web site [sic] and maintain supply Nation registration.
· Partner with a range of service providers who see merit in using IASC to win contracts.
· Establish broader ties with the indigenous community to maintain credibility and to recruit resources for IASC to use.
· Create a database of resources along similar lines to Steadfast but also specifically to attract indigenous contractors.
· Introduce IASC to all government bodies to facilitate consideration of it when they need to buy services.
· Broaden the reach of IASC by partnering with appropriate suppliers who see value in working with IASC in procurement.
· Consider bringing Synergy Managed Services on board as a shareholder. The CEO Michael Bailey, CEO has strong ties with Batchelor (the Aboriginal Training body) Synergy also offers a range of services which are complementary rather than competitive with Steadfast.
In 2016 Mr Peak was employed as the general manager of the plaintiff pursuant to a written employment contract dated 16 March 2016. The terms of this contract are referred to in more detail below.
On 12 April 2016 Mr Glavonjic sent an email to Mr Bailey and Mr Joy providing a summary of the discussion between these men on 8 April 2016:
“Gents,
I thought a one page bullet point summary of our discussion last Friday ref IASC would be useful. Here are there [sic] bullets:
· Agreed that each partnering company would provide me (as director IASC [sic]) with a one page summary of their company.
· The templates would be incorporated into our web site [sic] under a Partner Page (DSG to arrange)
· Team note that IASC is an independent company and it will select its partners, bid specific, with the objective of winning profitable business.
· IASC will, all things being equal, give priority in selection to existing partners and shareholders. Bid Process agreed will be developed to:
1. IASC will bid as prime, bill and disburse funds to partners as contracted
2. The partner will develop the bid or quotation in detail and submit it to IASC for vetting, approval and submission.
3. IASC will specify the bid time frame and reserve the right to select an alternative partner in the event that the partner selected fails to meet the time frames agreed
4. IASC will insure itself to cover risk of litigation arising from priming contracts and associated professional services indemnity.
5. Each partner of IASC shall provide IASC with a copy of its current professional indemnity insurance cover and maintain currency at all times.
6. IASC’s bids must be approved by DSG before submission.
7. In the event that IASC has two or more capable and interested parties the select ion of bid partner shall be made by DSG whose decision is final.
·Until further notice the partner margins shall be as follows:
1. Hardware including access control hardware:
5%
2. Software, services, integration, telephony, Internet services, human resourcing:
10%
3. Special cases as agreed between the parties.
·Other actions agreed:
·MB undertok [sic] to review and report back on activity undertaken by Trevor O. Parties agreed that market facing activities must be co‑ordinated and approved by Director IASC.
·DSG to build out the call centre/help desk concept preparatory to arranging a meeting with federal Minister Scullion.
·Subsequently DSG to initiate meetings with Major corporates such as Telstra, Service Now, HP and Dell.
·DSG to complete the share transfer to A42 and to develop a relatively simple shareholder agreement to reflect the relationship between the parties; they [sic] key agreed plank being:
1.Holding at all times professional indemnity insurance cover in a form and of a quantum satisfactory to IASC.
2.The shareholder entity/Company or person and/or their Associated entities not entering into an “insolvency event”
3.…
4.Team, I think that about covers our agreed points. If you do not agree with my notes of agreed actions and agreements, please email me with your views ASAP.
(Emphasis in original.)
The defendants emphasised that the arrangement so disclosed did not require all work to be subcontracted to one of the shareholder companies and in particular there was no contract which required Dreamtime to use Steadfast.
The email asked that if either of Mr Bailey or Mr Joy did not agree with Mr Glavonjic’s notes of agreed actions and agreements could they please email him. Although Mr Joy did not agree with the margins identified in the dot point quoted above, he thought that there was sufficient flexibility provided by the possibility that special cases could be agreed between the parties.
On 30 August 2017 Geo Group accepted Steadfast’s proposal for AlienVault configuration and monitoring. The contract was for a three-year period with an option for Geo Group to continue the service for two additional 12-month periods.
On 27 November 2017 Strategic Data Pty Ltd accepted a proposal from Steadfast for what were described as “IRAP Preparation Services”.
On 22 December 2017 Mr Peak entered into an agreement on Steadfast’s behalf with Alien Vault Inc (AlienVault) for the provision of software and a Managed Security Service Provider (MSSP) master licence agreement for a period of three years.
On 26 February 2018 Mr Watt commenced working for Steadfast as a security analyst, under a contract of employment. He had been previously engaged as a trainee. The terms of his contract are referred to further below.
On 19 March 2018 Mr Stefanovic commenced employment with Steadfast as a Security Consultant pursuant to a written contract.
On 26 March 2018 an officer of the Australian Financial Security Authority (AFSA) provided a contract for signature relating to the installation of AlienVault hardware and software for the Personal Property Securities Register. At that time Mr Hampson was outposted to the AFSA as an IT security analyst, pursuant to a long-term contract with Dreamtime which was subcontracted to Steadfast.
In August 2018 Mr Glen Barclay from Anomali sent an email to Mr Peak seeking to promote the Anomali Threat Platform. A demonstration occurred on 13 August 2018.
In September 2018 there were disagreements and a loss of trust between Ms Batley and Mr Joy on the one hand and Mr Peak and Mr Glavonjic on the other. One of the sources of a loss of trust was a disagreement between Mr Joy/Ms Batley and Mr Glavonjic about a profit-sharing arrangement with Dreamtime People. This was the subject of email correspondence between Ms Batley and Mr Glavonjic on 10 September 2018. This precipitated Mr Joy’s suggestion to Mr Peak that Mr Glavonjic was no longer required to continue as a director and business advisor to Steadfast. Mr Peak rejected the suggestion because he said he relied on Mr Glavonjic regularly.
It is from this point that Steadfast alleges that the defendants, most particularly Mr Peak and Mr Glavonjic, developed and implemented a plan to shift Steadfast’s business to Dreamtime.
On 6 September 2018 Mr Peak arranged a meeting with a recruitment consultant from Hays Recruiting, to take place on 17 September 2018. Having regard to what happened subsequently, there must be doubt as to whether this proposed meeting was for the purposes of Steadfast’s business, but the plaintiff has not proved on the balance of probabilities that it was not.
On 11 September 2018 Mr Peak and Mr Stefanovic had an electronic conversation (via a messaging program called Slack) which included the following:
GP: Hell is coming
NS: Damned right it is
GP: no, Hell as in the dumbass shareholders
NS: Oh are they coming in?
GP: Nathan is in a flap and when he’s in a flap he tries to do kneejery stuff
knee-jerk
NS: What’s happened?
GP: he wants to remove David from the company in the next couple of months, but I know with what DG is going to do on Friday that he will accelrate the plan
NS: So we will start working for Dreamtime soon?
GP: no idea
There was competing evidence about this conversation, in particular, about what plan was to be accelerated. Steadfast said that the inference should be drawn that the plan was a plan of Mr Peak and Mr Stefanovic’s. Mr Peak said that the reference to accelerating the plan was to what Mr Joy would do, namely remove Mr Glavonjic from Steadfast. Notwithstanding the unreliability of Mr Peak’s evidence, I consider that the communication referred to Mr Joy accelerating his plan to remove Mr Glavonjic. Such an interpretation makes more grammatical sense. It makes more sense that the acceleration of the plan that is referred to in Mr Peak’s message above would be to a compression of the two months in which “Nathan” was going to remove “David” from the company. Further, Mr Peak’s use of “he” instead of “DG” when referring to the person who would accelerate the plan appears consistent with the first reference to “he” which within the context of the exchange is clearly a reference to Nathan.
Having said that, what is significant is that Mr Stefanovic understood that the consequence of Mr Glavonjic leaving Steadfast would be that there was a possibility that the employees of Steadfast would move to Dreamtime. It is not plausible that Mr Stefanovic himself invented the possibility that the staff would be moving to Dreamtime and mentioned it for the first time in his message. Notwithstanding that Mr Peak responded “no idea” to Mr Stefanovic’s question about moving to Dreamtime, the messages indicate that there had been discussions between Mr Peak and Mr Stefanovic prior to the time of that message of that possibility. Further, it is more likely than not that, given Mr Glavonjic’s close involvement with Mr Peak, Mr Glavonjic’s role as a director of Dreamtime and his necessary involvement with such a proposal that it has also been discussed between him and Mr Peak.
The Friday referred to in the Slack messages between Mr Peak and Mr Stefanovic was Friday, 14 September 2018 when a Steadfast board meeting was scheduled. At that board meeting Mr Glavonjic made reference to “the synergies with Steadfast and Dreamtime”. He said:
I think that’s going well, and we’re trying to keep the balance there as well, which is something I’ve always spoken about, we’re not pushing stuff through dreamtime just because dreamtime’s there, we only push stuff through dreamtime only if it makes business sense.
I think that leverage is working quite well. The risk that I always see that I’m quite conscious of it is that I’m wearing two hats, so I’m quite conscious of the fact that Dreamtime doesn’t start becoming a competitor to Steadfast and we’ve avoided that pretty rigorously at the moment. We just don’t want to have that situation arise at all. If we get an opportunity, and they (the client) are looking for IT&C managed service, and that will come back to Steadfast. Dreamtime is not trying to set up a business in its own right in the IT&C space. The synergy has been effective and I think moving forward it will become stronger because, there has been a lack of effort from Dreamtime in the past but now the clients are pushing more …
The transcript of what was said at the meeting and the other evidence in the case does not disclose what Mr Peak was referring to in his message on 11 September 2018 when referring to “what DG is going to do on Friday”. It may have been the expression of interest in purchasing the shares in Steadfast referred to at [60] below.
The next Thursday, 20 September 2018 in a Slack message Mr Peak and Mr Hampson had the following discussion about Mr Joy:
CH: Pete J said Nathan was on a rant again about David G, I told him Nathan gets no value because he doesn’t listen to David when he should.
GP: yeah he called me to rant too
I just nod and smile and move on
CH: I keep telling Pete I stay out of the management shit. Nathan doesn’t want to listen to anyone anyway so why bother I learnt that the hard way. Petes been surprised lately with some of my answers, I’ve told him Nathan screwed me over and I’m still not 100% OK with it.
GP: yep
sooner we get them out the better
CH: you’ll never get rid of them. they wont sell their share, you make them money
GP: there’s plans in place [smiley face emoji]
Steadfast work may end up being moved along with all the staff to DT itself
along with my share equity
CH: wow that’d really break us away and really break the relationship.
GP: yep, but if that’s what it takes, it’s what it takes
On 3 October 2018 Ms Batley replied to Mr Glavonjic’s email of 10 September 2018 concerning the profit split for Dreamtime People. She asked when that payment was expected to be finalised.
Following the September board meeting, Mr Glavonjic had a conversation with Ms Batley in which he indicated an interest in purchasing her and Mr Joy’s shares in Steadfast. On 8 October 2018 Ms Batley emailed Mr Glavonjic referring to his interest in purchasing her and Mr Joy’s share of the ownership of Steadfast. Having set out some calculations, she indicated that she and Mr Joy would be willing to consider “a reasonable offer in the early seven figures for the purchase of the shares”.
On 9 October 2018 Mr Peak and Mr Stefanovic had a Slack conversation about restricting the access of Ms Batley to the Steadfast’s sales data. Mr Peak stated he had found a way to ensure Ms Batley had ‘read only’ access, and he was trying to find a better way to restrict her permissions.
On 10 October 2018 Mr Bacon from the University of Canberra, who had dealt with Mr Peak earlier in the year, emailed Mr Peak identifying the security advice that the university needed. On the same day, Mr Peak created a draft quote for the University of Canberra titled “Security Advice quote”. The draft quote was for an amount of $11,880.
On Monday, 15 October 2018 Ms Batley emailed Mr Glavonjic again about the profit split for Dreamtime People noting that she had not had a response to her earlier email.
On 15 October 2018 Mr Glavonjic responded saying that he was having a meeting on Wednesday and will have “a resolution on profit split before the weekend”. He apologised for his oversight in not addressing the issue.
On 17 October 2018 Phu Nguyen from Hays Recruiting emailed Mr Peak and Mr Stefanovic referring to a meeting the previous day. Ms Nguyen attached to that email CVs of candidates who had expressed interest in Steadfast and provided information on the candidates’ respective salary expectations. The position in relation to this meeting is the same as in relation to the earlier communication with Hays: see [52] above.
Also on 17 October Mr Glavonjic and Mr Goldsmith met and decided that they would not pursue the acquisition of Steadfast from Ms Batley and Mr Joy.
In anticipation of a meeting with AlienVault on 18 October 2018, on 17 October 2018 Mr Peak emailed Mr Glavonjic asking him to negotiate with AlienVault to get Steadfast the benefits under the current MSSP program. Steadfast was at that time, a MSSP for AlienVault. I do not accept the submission that this communication relates to the Dreamtime AlienVault subscription. Notwithstanding the disloyal conduct of Mr Peak at this time, it appears to be an attempt to get the benefits of the current version of the MSSP program for Steadfast.
On 18 October 2018 Mr Peak, Mr Stefanovic and Mr Glavonjic attended a meeting with representatives from AlienVault in Sydney. During the meeting on 18 October 2018, Mr Peak and Mr Stefanovic exchanged Slack messages in which Mr Stefanovic stated “Now is the time to start pushing the MSSP issue.” Mr Peak replied that Mr Glavonjic was “on it”. Consistent with the email on 17 October 2018, these messages appear to be contemporaneous messages exchanged during the meeting and are consistent with Steadfast improving its position under the MSSP program, rather than relating to anything outside the meeting or to the proposal that Dreamtime also become an AlienVault supplier. However, Dreamtime becoming an AlienVault supplier was an issue discussed at the meeting. Given that by this time Mr Glavonjic had decided not to acquire Steadfast, it is likely that Dreamtime becoming an AlienVault supplier was raised with a view to Dreamtime becoming, at the very least, a competitor with Steadfast.
Following the meeting on 18 October 2018, Mr Benkendorfer from AlienVault sent an email to Mr Peak, Mr Stefanovic and Mr Glavonjic that included the provision for setting up Dreamtime as an AlienVault reseller. At that time, AlienVault was Steadfast’s most profitable product.
On 18 October 2018 at 9:32pm Mr Glavonjic sent an email to Ms Batley indicating that the board of Dreamtime had met on 17 October 2018 and considered the offer and that “the acquisition of Steadfast on the broad terms offered is not of interest and will not be pursued”.
This was clearly a critical point. Given that Mr Glavonjic was not going to purchase the business, the activities of Mr Peak to acquire the benefit of it without payment dramatically increased.
On 19 October 2018, Mr Peak stated to Mr Stefanovic in a Slack conversation:
need a list of stuff to do
new contracts
list of required equipment
emails/o365
transfer of rental agreement
That same day, Mr Stefanovic created a “to do list” in Outlook mirroring the matters referred to in the Slack conversation.
On 19 October 2018 Mr Peak viewed and downloaded his employment agreement with Steadfast (Peak G – Employment Agreement – executed – 16.03.16.pdf) and a document identified as an employment agreement for Brian Edward Peak (Steadfast ‑Employee Agreement – Brian Peak.docx).
On 20 October 2018 Mr Peak created a Microsoft project document titled “Transition”, which was located on the desktop of the plaintiff’s laptop used by Mr Peak. It is into this location that a variety of Steadfast documentation and information was put by Mr Peak. He accepted in cross-examination that he had no entitlement to use Steadfast documents other than for his work for Steadfast and that he had no entitlement to give those documents to Mr Glavonjic after he ceased to be a director or to Mr Goldsmith.
Early in the morning of 23 October 2018 Mr Peak told Mr Stefanovic in a Slack message that he had spoken to Mr Glavonjic and that it was necessary to write a proposal for Strategic Data. That afternoon Mr Stefanovic worked on the document. The draft document had Mr Glavonjic’s signature inserted in it. It referred to Dreamtime being “proud to partner with Steadfast ICT Security” but was clearly a proposal for a contract with Dreamtime.
Notwithstanding the rejection by Dreamtime of the offer to acquire the shares in Steadfast, Mr Peak had not given up the possibility of acquiring those shares. On 23 October 2018 Mr Peak stated to Mr Stefanovic in a Slack conversation that he had spoken to Mr Glavonjic:
I asked him if DT would be willing to purchase less of SF if I could arrange it. DG prefers that SF stays intact
so the plan is that I guilt Nathan into giving me more of SF, DT buys the rest from NJ
and he gets probably 50% of the bank account to fuck off
that leaves us plenty of bank to work with and we get rid of Nathan and I get more of the business
Earlier in the message Mr Peak said that he had spoken to Mr Glavonjic that morning and told him what he was trying to do.
On Wednesday, 24 October 2018 Mr Glavonjic received an email from Seek showing that it had identified 35 candidates for “Professional Consulting and Contractor Roles”, four of which were new.
On 25 October 2018 Mr Peak and Mr Hampson had a Slack conversation about Mr Joy and his conduct, in which Mr Peak stated: “all the more reason to get him out of SF [winking face emoji]”.
On 26 October 2018 Mr Joy met with Mr Peak to discuss an analysis of profit and loss results for Steadfast and Dreamtime. At the conclusion of that meeting, Mr Joy informed Mr Peak that the plaintiff had decided to remove Mr Glavonjic as a director of Steadfast.
On 29 October 2018 Mr Peak and Mr Stefanovic had a Slack conversation about the proposal being prepared for Strategic Data. They prepared a quote on behalf of Steadfast for the provision of IT security services and Mr Peak sent it to Ms Batley and Mr Glavonjic for review.
On 30 October 2018 Mr Joy and Mr Batley met with Mr Glavonjic, to inform him that they wanted him to resign as a director of Steadfast. A follow up email confirmed the request.
Shortly after the email had been sent, Mr Peak requested Mr Stefanovic to go through Steadfast’s current, non-Dreamtime contracts, and record the expiry dates.
At 8:27am on 31 October 2018 Mr Glavonjic resigned from Steadfast. He did so by sending an email to Ms Batley carbon copied to Mr Peak.
From this point on, Mr Peak, in conjunction with Mr Glavonjic, stepped up their efforts to acquire the benefit of Steadfast business for Dreamtime.
That morning, at 10:37am, Mr Peak let Mr Hampson know on Slack that Mr Glavonjic had resigned. The Slack conversation included:
CH: what did DG say to you? just had enough and I’m out. I guess he’s cutting all ties with them
GP: no, we had a good chat
I’ll come see you soon to talk about it better
CH: So you guys have a plan then
GP: Yep
CH: OK that’s good. I really don’t want to work for Nathan again, even though technically we already do
you know what I mean
GP: I know
want to meet for lunch today so I can explain the plan?
CH: no worries let me know when you are in the area.
On 31 October 2018 at 12:50pm Ms Batley sent through her comments on the Strategic Data proposal. She had no further involvement with the proposal.
On 31 October 2018 at 2.14pm Mr Peak used his Steadfast laptop to conduct a Google search for “dynamic IT company names”. That is consistent with him considering that this time the establishment of a separate company to take Steadfast’s business rather than it being taken directly by Dreamtime.
At 2:25pm Mr Stefanovic had a Slack conversation with Mr Peak which included the following:
GP: about to have SD meeting, should I mention the proposal?
NS: Hmm it should be re written with DreamTime seriously. We do not want anything to go to Steadfast anymore. Working on ctract stuff now inbetween my boots being chewed on
GP: ta
About 15 minutes later the conversation continued:
GP: …
SD asked about proposal
I said our parent company is looking to move the services, etc to a new company which we will be transferring to, so just trying to shore that up forst
;D
NS: I F*&king love you!
At 2:55pm on 31 October 2018 Mr Peak had a Slack conversation with Mr Stefanovic about a conversation Mr Peak had with Mr Hampson:
GP: let him know what’s going on
he’s counselled I get proper legal advice
which was sensible
NS: Re what is happening? Yep totally agree
When will the firings start? I can’t imagine it will take them long
Mr Stefanovic responded to Mr Peak’s request of 30 October 2018 about current contracts and expiry dates by email at 4.52pm on 31 October 2018. He identified Steadfast’s contracts with AFSA, AIHW, Geo Group and ProMortgage, their expiry dates and any options for extension. At 9.36pm the text of Mr Stefanovic’s email was included in Mr Peak’s “Transition” file. I find that the purpose of Mr Peak’s request for information from Mr Stefanovic was to assist in planning for the move of Steadfast’s business to Dreamtime.
The same day, Mr Peak shared the Transition folder with Mr Goldsmith, Mr Glavonjic and Mr Stefanovic and created a number of subfolders in which he saved information. The evidence indicates that the sharing of the folder permitted those persons to access the folder but does not establish whether any of those persons read the contents of the folder. The file contained a number of subfolders titled “Vendors”, “Equipment and Environment”, “Financial”, “Employees”, “Xero”, “Contracts” and “Status - Tasks”.
The vendors file included contact information for vendors who had supplied to Steadfast. It also included annotations describing the status of Dreamtime such as “Dreamtime is now signed up for both ArrowECS and Sophos.”
The “Equipment and Environment” subfolder contained details of a licence agreement which had been sent to Mr Peak to licence the occupation of certain offices and car parking spaces. The information came from an email from “Chris” but the date of the email and the identity of the sender is not contained in what is visible in the document. It also contained a list of computer equipment and software that would be required to be purchased for a new office. The list included a description of computers and Office 365 accounts identified as being for “Gareth”, “Nenad”, “Lachlan” and “Aimee”. The list was clearly designed to integrate with what Mr Glavonjic already had. This is illustrated by the entry in relation to a speakerphone: “Jabra Speak 510 $159 - DG has one already? NOT REQUIRED”. It identified that and MSSP licence would be required for AlienVault as well as monthly subscription for clients “Geo $982 USD” and “AIHW $485 USD”.
He added to the “employees” subfolder copies of employment contracts or employment information for himself, Mr Watt, Mr Hampson, a “Brian Peak” and Mr Stefanovic and Ms Harvey. There was also a pdf document added on 2 November containing leave balances of employees with Steadfast.
There were then sub subfolders for the AIHW (Australian Institute of Health and Welfare), AFSA (the Australian Financial Security Authority), ARC (the Australian Research Council), C4C (Cloud4C), GEO (Geo Group), Strategic Data and UC (University of Canberra). Some of these included PDF or Word documents. There were notes in the AFSA sub subfolder about the need to have a new contract for Chris Hampson, the costing of that contract and a further person possibly suited for a role at AFSA. The notes record that “I’d like to talk to them post-migration”.
There can be no doubt that at this point it was Mr Peak’s intention to move the business, the employees and the clients away from Steadfast to another entity. The references to Dreamtime indicate that his intention at that point was that the entity be Dreamtime. This folder is highly incriminating. Not only does it show how he aggregated the confidential information of Steadfast for the benefit of Dreamtime but it also partially illustrates the consequences of his subsequent deletion of documents from the Steadfast system.
Subsequent steps taken in relation to the “Transition” folder shortly after the resignation of Mr Glavonjic were:
(a)On 2 November 2018 at 7.10am Mr Peak added to the “Financial” subfolder in the Transition file, an Excel document containing the Steadfast budget for 2018‑2019. He then also added an Excel files containing “Steadfast-Cash Summary” for November 2017 to October 2018 and “Steadfast-Profit Loss” for August 2017 to November 2018. At 11.09am he added a pdf document containing leave balances for Steadfast staff with the note “Brian’s leave balance does not need to come across”.
(b)On 6 November 2018 Mr Peak added information to a sub subfolder within the Equipment and Environment subfolder which contains the text of an email sent to Mr Glavonjic showing that the domain names for certain Dreamtime related websites were held by Ms Batley or Mr Joy, recommending that the domain name ownership be transferred to him and providing instructions on how Mr Joy and Ms Batley might do so.
(c)On 7 November 2018 he added to the “Xero” subfolder, customers and suppliers lists from Steadfast’s Xero account.
On 1 November 2018 at 1:04pm Ms Batley directed Mr Peak that as Mr Glavonjic had resigned, his access to any files, email and group drives was to be removed and disabled. A “ticket” was generated and sent to Ms Harvey, Mr Hampson, Mr Peak, Mr Watt and Mr Stefanovic for the job of removing Mr Glavonjic’s access to the Steadfast office account.
On 1 November 2018 Mr Peak had received an enquiry from another IT company offering subcontracted work for cyber security testing. Mr Peak requested that a subcontractor who had worked for Steadfast, Jude Jayamanne, prepare a quote for penetration testing and advised him to “tailor your quote to Dreamtime Supply Company”. He provided details of the scope of works to him and referred the matter to Mr Glavonjic saying: “I have explained that Dreamtime have a penetration tester on hand and we can fulfil the rest of the requirements working as Dreamtime.” Mr Jayamanne’s company provided a quote to Dreamtime on 2 November 2018. Mr Peak’s evidence was that he did a cost benefit analysis and decided that it was not worth Steadfast’s effort to provide a quote. I reject that evidence. It was a false explanation by which he sought to avoid the consequences of his attempt to divert work to Dreamtime.
At 11:10am Mr Glavonjic sent an email to Mr Benkendorfer following up “the proposal that we move forward and appoint Dreamtime to be a reseller” of AlienVault. This email was also sent to Mr Peak and carbon copied to Mr Stefanovic.
At 11:46am on 1 November 2018, Mr Joy’s Dreamtime email account was deleted, and all data was transferred to Mr Glavonjic.
Between 2pm and 3pm on 2 November 2018, Mr Hampson had a Slack conversation with Mr Peak as follows:
CH: I saw the very official email from mel asking for david’s access to be removed, any further conversations/suggestions from them?
GP: nope
CH: I’m sure they’ll be cooking stuff up over the weekend then. I’m surprised I haven’t heard from Pete.
GP: we’ve had a minor change in plans too, moving into DT instead of a separate entity
CH: OK so why is that, not legal to do it the other way
GP: too grey for our comfort levels
CH: your comfort levels
GP: mine and Davids
too much risk if there is legal battles, lose all the clients
CH: yeah that’s what I thought when we spoke as well. how hard to move it all to DT?
GP: it’s identified as part of the “Group”
so all IP and stuff is transferable
CH: I still think they will lose their shit and who know WTF he’ll do or try to do. You and Dave need a water tight case.
GP: Yep
CH: I’m on your side by the way
GP: Oh I know, you’re my devil’s advocate
I need it
[smiley face emoji]
CH: so what’s the next steps?
GP: meeting with DG and CG now
CH: roger out
The reference to DG is a reference to Mr Glavonjic and the reference to CG is a reference to the other director of Dreamtime, Mr Goldsmith.
On 5 November 2018 at 9:47am Ms Batley asked Mr Peak to confirm that Mr Glavonjic’s access had been removed. Mr Peak sent confirmation to Ms Batley that Mr Glavonjic’s access had been removed on 1 November.
Mr Peak failed to comply with an instruction given on 1 and 5 November 2018 to remove Mr Glavonjic’s access to all of Steadfast’s IT systems and information. Although he said he had done so, there is no log entry in Steadfast’s Microsoft 365 account confirming these steps were taken.
On 5 November 2018 Watt discovered that Mr Glavonjic had established a new Dreamtime Microsoft Office 365 account. Mr Watt and Mr Peak had a Slack conversation in which Mr Peak gave Mr Watt instructions about setting up some IT system relating to Dreamtime People as well as setting up folders in the Dreamtime Office 365 accounts called “Dreamtime common” and “Dreamtime Executive”. Mr Peak also asked Mr Watt to take a screenshot of Steadfast’s AlienVault passwords. Mr Watt complied and posted the screenshot on Slack. In oral evidence, Mr Watt described the password as being one relating to a particular AlienVault alarm. It is not possible to reach a conclusion as to whether or not the password was a master password for the Steadfast AlienVault account or one relating to a particular alarm.
On 5 November 2018 Mr Peak used his Steadfast laptop to create a folder called “Transform”. That same day he also created a folder titled “transition” on the desktop of his Steadfast laptop. He used that folder to store a bulk email archive folder named “backup.pst”, being a file type likely to contain archived Steadfast emails. He downloaded 4476 files from the Steadfast Microsoft Sharepoint site. Those files were saved to a OneDrive folder on Mr Peak’s Steadfast laptop, titled “OneDrive – Dreamtime Supply Company”. The files were automatically copied from that folder to the new Dreamtime Microsoft Sharepoint site. Mr Peak downloaded an email archive file from Steadfast’s Microsoft 365 account, named “[email protected]”, and another archive file named “Njoysecurity.pst”. Mr Peak set up a forwarding rule in the Steadfast Microsoft 365 account, to blind copy all emails received to Mr Peak’s Steadfast email account, to his Dreamtime account.
On 5 November 2018 Stefanovic and Mr Peak discussed in a Slack conversation whether he could organise a meeting with Indigenous Business Australia (IBA) on 16 November 2018. Mr Peak replied, confirming that he could and requesting that Mr Glavonjic be included. Mr Stefanovic emailed a representative of IBA proposing a meeting on 12 November 2018 and stating that the attendees for Steadfast would be himself, Mr Peak and Mr Glavonjic. The purpose of the meeting appears to have been to discuss the report of the earlier project. At this stage Mr Glavonjic was not a representative of Steadfast as he had earlier resigned his directorship.
On 6 November 2018 at 2:48pm Mr Stefanovic emailed a representative of Comp Now, providing him with a list of IT equipment that he needed a quote for. This equipment was not procured for Steadfast. Mr Stefanovic provided the quote to Mr Peak on 21 November 2018. Consistent with Mr Stefanovic spending time investigating the purchase of new computer equipment for Dreamtime, a few minutes after his email to Comp Now, he discussed with Mr Peak in a Slack conversation matters relevant to the acquisition of a computer server and printer.
On 7 November 2018 Mr Peak told Mr Stefanovic on Slack that Mr Glavonjic was coming to the next week’s team meeting.
On 7 November 2018 Mr Peak set up a forwarding rule in the Steadfast email account so that all emails sent to “[email protected]” were sent to Dreamtime. Mr Peak used his Steadfast laptop to make a complete backup of the Steadfast project management tool, which contained all past and current projects.
On 7 November 2018 at 1:38pm Mr Mason circulated an agenda for a meeting with the staff of Steadfast that day. On 7 November 2018 Mr Stefanovic accepted a meeting invitation from Mr Glavonjic in relation to “GEO Discussion”.
On 7 November 2018 at 1:43pm Mr Peak included a note in the Transition folder which indicated the progress of his systematic activities directed towards setting up Dreamtime to operate Steadfast’s business. That note was as follows:
Teamwork (Projects) - Trial Licence up and running, need to import all the contacts and accounts from SF one.
Fresh desk (ticketing) - Dreamtime system configured and rules are set up for tickets
Slack - Dreamtime workspace configured
Office Space - looks good, is definitely workable
Equipment - costings for most equipment has been completed. DG has a Jabra Speak already?
Prioritised desktops, then laptops then server for office. Pricing for server has come from the Dell site, can RWTS provide a better quote?
Alienvault - discussions in progress-new quote coming in comparable to current costs but with NFR licences.
EMT/Airlock - GP to notify that Dreamtime will be taking over the contract
Arrow - DT already signed up
GEO discussion - is Monday available for a call with Murray and Trevor?
What’s the plan for the other staff RE leave?
Contract review - Friday (MB was assigned by DG)
WEBSITE COPY – Complete
(Emphasis in original.)
The comprehensive nature of this takeover plan is notable. It involves taking over Steadfast staff – hence the enquiry as to leave. It involved taking a copy of the Steadfast website, which had already been done. It disclosed the plans, at this early stage, to take the Steadfast client Geo Group – hence the proposed discussion with Mr Allen and Mr Mason of Geo Group.
At 4:09pm on 7 November 2018 Mr Benkendorfer of AlienVault sent an email to Mr Peak and Mr Glavonjic, with a quote for Dreamtime to become a reseller.
At 4.56pm on 7 November 2018 Mr Peak sent a meeting request, with the subject “Team Meeting”, to persons including Mr Watt, Mr Stefanovic and Mr Glavonjic. This had the effect of changing the location and time of the weekly team meeting. The meeting was moved from the Boardroom to the Southern Cross Club and changed from Wednesday at 10am to Friday at 4pm. Mr Glavonjic accepted the invitation at 5.07pm.
On 9 November 2018 at about 9:30am Mr Peak had a conversation on Slack with Mr Stefanovic. Mr Peak disclosed that he got a quote from AlienVault for the Tasmanian government:
GP: …
1.3 million USD for the licenses for 12 months
NS: is that good?
GP: it’s 132K a month in fess [sic] DT will have to pay to AV
152*
I think it’s a bit expensive
actually Eddie [Benkendorfer] can go fuck himself and provide platinum pricing for this instead of Silver.
…
At 1:06pm that day Mr Peak communicated on Slack to Mr Stefanovic: “Paul from AFSA is all good with Dreamtime [beaming face with smiling eyes emoji]”.
On 13 November 2018 Mr Peak communicated to Mr Stefanovic on Slack: “just worded AFSA up to kill the PO once PPSR project is finished so it can be requoted at same price via DT”. The reference to PO is a reference to a purchase order and the reference to the PPSR is to the Personal Property Securities Register maintained by the AFSA.
At 8:39am Mr Peak identified in a Slack conversation with Mr Stefanovic that the National Health and Medical Research Council had sought tenders for a matter. Mr Stefanovic asked “are we interested as Dreamtime attending?”.
At 9:40am on 13 November 2018 Geoff Noble at Anomali sent a proposed reseller agreement for Dreamtime to Mr Glavonjic. He indicated that in his email he was not sure whether he should send it to Mr Glavonjic or to Mr Peak at Steadfast. Mr Glavonjic provided a copy to Mr Peak who send it on to Mr Stefanovic. At 4:23pm Mr Stefanovic sent the completed reseller agreement back to Mr Glavonjic suggesting that he review it and then send it back to Geoff Noble. I infer in the circumstances that it was completed in a way so as to make Dreamtime the reseller.
At 2:32pm Mr Stefanovic created a note in the OneNote program which he shared with Mr Peak about the Department of Agriculture “Levies Online” project. The description of the project is consistent with the IT security work involving more than a Security Risk Management Plan.
At about 9am on 14 November 2018, Mr Peak and Mr Stefanovic had a Slack conversation, discussing Mr Peak’s restraint clause:
GP: Think I have a way forward with my restraint clause. It’s going to hurt me but I’ll manage
NS: Oh I forgot to talk with you about that and the advice you received.
GP: Yeah wasn’t good… I am not confident Jan knows corporate law well enough
So my plan is to call Chris from AFSA for 6 months and I fill the position. As it’s a Dreamtime direct client not a “SF” one it won’t trigger. I can also do Ag and UC etc
NS: Well no you won’t be doing AG as Chris will have to do that. Remember we have to find stuff for Chris to do for six months
GP: Yep. gotcha
NS: Did you want me to come over for lunch and a chat? Don’t have to buy anything. We can look longingly into each other’s eyes.
GP: yes please
In oral evidence Mr Peak implausibly suggested that he could not recall the surname of the lawyer “Jan” referred to in the messages. He was clearly contemplating that his contractual restraint was only for a period of six months and could be avoided if he worked at AFSA in Mr Hampson’s place
In a later Slack conversation that day between Mr Peak and Mr Stefanovic, Mr Peak asked Mr Stefanovic to take an existing Strategic Data proposal and for it to be “badged as Dreamtime.” It appears that Mr Glavonjic sent through the rebadged proposal to Strategic Data later that day: see [135] below.
On 15 November 2018 at 9:58am in a Slack conversation between Mr Peak and Mr Watt the following exchange occurred:
LW: so I guess doing steadfast documentation isn’t very useful, is there anything else else I can help work on?
GP: it is, we just find/replace SF with DT [winking face emoji]
At 10:34am Mr Stefanovic reported to Mr Peak that he had completed two proposals for services to be provided to Strategic Data. Mr Peak replied that he had deleted them from the Steadfast SharePoint system, including a wink emoji at the end of his Slack message.
On 15 November 2018, from 10am there was a lengthy Slack conversation between Mr Peak and Mr Hampson following Mr Peak’s disclosure that he would be resigning.
GP: hey mate. I’ve let Aimee and Lachie know that I’m resigning
and Nenny
CH: ummm WTF?
I thought that you were going to move us all to a new company, so do we all resign? Did you tell me this already and I’ve forgotten?
GP: yep you’ve forgotten
CH: Are you sure?
OK so do we all resign?
GP: the original plan was to move to a new one, but then after having lunch with you I followed your advice. I did tell you this LOL
I’ll be resigning and starting a new position within DT
CH okay are you sure you told me? Anyway doesn’t matter, so do we all have to resign?
GP: that’s pretty much the plan. unless you want to continue working for Nathan and Mel
CH: so now I have questions about benefits etc. what happens with all of them
GP: yep, absolutely
which is why the team meeting tomorrow
CH: I rely on my income protection policy to make up my lost income, does that come with me? What about long service leave, holidays and sick days?
GP: as I have clauses within my contract regarding inducement, I’m not in a position to make any sort of offer or answer
sorry [disappointed face emoji]
definitely ask me because I’ll pass on to DG for his answer
income protection policy is paid for as part of your current package, or paid by you?
CH: part of current package, not paid for by me. I won’t be eligible to get another policy
GP: contracts will most likely be mirrored from SF to DT (to remove any question of inducement)
CH: so can the transfer of my policy come over to DT? This is actually a big deal for me. It’ll cost me up to 10K a year to lose that money
GP: yep it’s an important question
I’m not qualified to answer it, are you able to ask Zurich?
CH: what about a pay rise? I haven’t had one to 3 years. Our pays aren’t linked to CPI or the cost of living so in real terms I’m loosing money each year.
GP: me either
neither has any of the staff (except Lachie due to age) or the APS
but that will have to be negotiated after sign-on (inducement)
…
GP: so what I think could be the best option is to have a three-month “probationary” contract at the current package rate with renegotiation of contract with an increase in $$$ once probation completes. I’ll have to ask David
I’m tiptoeing through a legal minefield [dissapointed face emoji]
…
Two points about this conversation can be noted: first, the reference to the “team meeting” the next day, to which reference will be made shortly, as an opportunity to discuss issues associated with the move of staff from Steadfast to Dreamtime; second, the clear awareness on the part of Mr Peak of his obligations to not induce staff to leave and the unsophisticated attempts to avoid those obligations.
On 15 November 2018, Mr Watt exchanged Facebook messages with his brother in which he said:
Big fight with directors which I cbf texting, end resulting in our figure head director and business advisor being fired so the company is run by an idiot dick who’s fucking over Gareth so he is quitting and had unofficially said he can get us all new jobs if we want with him
In a Slack conversation between Mr Peak and Mr Hampson on 16 November 2018 at 10:10am, Mr Peak stated:
GP: spoke to DG about pers/ls leave stuffs
they’ll transfer all personal leave credits from SF to DT
and continued service for LSL
CH: that’s good to know. I just read the cert for my income protection and Mel is named as the adviser, I’ve asked if she can be removed fully from the policy.
GP: excellent
On 16 November 2018 Mr Stefanovic communicated with a representative of Strategic Data. Although the request had been sent to Steadfast, the proposal for Strategic Data signed by Mr Glavonjic had been sent through by Mr Glavonjic the previous day.
On 16 November 2018, a “team meeting” took place at the Southern Cross Club. The invitation sent by Mr Peak had identified it as “Afternoon drinks and team meeting!”. This was the meeting which had been notified by Mr Peak on 7 November. Exactly who attended this meeting is not clear. However the earlier conversation with Mr Hampson made it clear that the intention was that the transfer of staff to Dreamtime would be a matter that was to be discussed. Insofar as Mr Watt and Mr Peak sought to suggest that the meeting was only a belated farewell for Mr Glavonjic, I reject that evidence as I consider their evidence to be unreliable and it is inconsistent with the contemporaneous communications between Mr Peak and Mr Hampson. It is also inconsistent with the communications of Mr Watt immediately after the meeting which are described in the next paragraph. Finally, it is inconsistent with the evidence of Mr Stefanovic who said that although it was mainly a farewell for Mr Glavonjic, there were discussions of the arrangements for the move to Dreamtime.
Between 6:25pm and about 10:30pm on 16 November Mr Watt communicated with his brother Jacob as follows:
LW: im quitting next moth
month
JW: ye nice didya put in notice
LW: nah I’ll put my 4 weeks notice early december
I can get bonuses at the new job for hitting targets, just gotta decide what bonuses to write in the contract
JW: Hahaha fuck yeah the one with Gareth?
LW: Yeah
The director said we can request whatever will make us work harder
He even gave out a holiday in the past
Cash bonuses or if we want (not sure if I can or not) shares in the company
Btw the company is a multi-million dollar company
Consistent with the “team meeting” being used to do discuss the transfer of staff, that evening Mr Watt also exchanged Facebook messages with Nawar Ayoub. Between 6:27pm and about 6:45pm Mr Watt and Mr Ayoub exchanged the following messages:
LW: So my general manager is quitting and getting a job with our old director who owns a multimillion dollar business and he talked to all of us and said that there are positions for all of us if we want.
NA: That major shareholder sounds like a dumb cunt
are you gonna go work for your old director?
LW: fuck yeah
On 19 November 2018 Mr Peak set up a forwarding rule in the Steadfast email account, to blind copy all emails received to Mr Stefanovic’s Steadfast email account, to a Dreamtime email address bearing Mr Stefanovic’s name. This rule ensured that all emails received by Steadfast that were sent or carbon copied to Mr Stefanovic were delivered to Mr Stefanovic’s new Dreamtime email account.
Also on that day Mr Stefanovic deleted emails from his Steadfast email account which related to AlienVault and Dreamtime’s August 2018 meeting, as well as emails relating to the Department of Agriculture, Strategic Data, IBA and Anomali.
On 20 November 2018 Mr Peak set up a forwarding rule in the Steadfast email account to blind copy all emails received to Jude Jayamanne’s Steadfast email account, to the non-Steadfast email address “[email protected]”. Once again, the effect of this was that all email received by Mr Jayamanne’s Steadfast email account was delivered to his personal email account.
On 20 November 2018 Mr Stefanovic deleted emails relating to IBA, AlienVault meeting invites received from Mr Glavonjic’s Dreamtime email address, emails relating to Anomali, Strategic Data, the Department of Agriculture and a meeting with a Hays recruiter.
On 20 November 2018 there was a meeting between Mr Joy, Ms Batley and Mr Peak. Mr Joy and Ms Batley discussed a range of issues about the operation of the business. Mr Peak made no disclosures of his activities or his intentions to undermine the business and transfer the benefit of Steadfast’s business to Dreamtime.
On 21 November 2018 Mr Peak attended a system design workshop for Cloud4C. Cloud4C was a client of Steadfast which provided AlienVault managed services to it as a result of a contract entered into in August 2018. The workshop involved Cloud4C seeking providers for a Network Operation Centre. During the workshop, Mr Peak proposed that Steadfast provide not only the security services that Cloud4C required but also non‑security IT personnel. Mr Joy, who was also present, said that it would not be a good idea for Steadfast to do so because it was a large project involving 24-hour support and the timeframes were “very aggressive”. Mr Punreddy, a senior vice president of Cloud4C agreed with Mr Joy. He told Mr Joy and Mr Peak that he would only use Steadfast for security services. During the workshop, Mr Peak invited Mr Punreddy to come back to the Steadfast office. When he arrived at the office building, he was met by Mr Peak who escorted him to a café in the Woden shopping centre where Mr Stefanovic and Mr Glavonjic were present. Although Mr Punreddy had dealings with Mr Stefanovic, he had not met Mr Glavonjic and did not know who he was. Mr Peak introduced Mr Glavonjic as being from Dreamtime, an indigenous company that could provide network operation centre services. Mr Glavonjic enquired as to the name of Cloud4C’s ultimate customer but Mr Punreddy declined to provide the customer name as there was no nondisclosure agreement between Cloud4C and Dreamtime. Nobody told Mr Punreddy that Mr Glavonjic was a former director of Steadfast. Prior to the meeting, Mr Punreddy had not been aware that Dreamtime existed. He had expected to discuss with Mr Peak the security monitoring services to be provided by Steadfast. He did not expect to be taken to a café to meet Mr Glavonjic.
On 21 November 2018 at 8:57pm, Mr Watt stated in a Facebook message to “Kelly”:
…our old director owns a multi-million dollar business who said he was happy to hire us all since gareth is putting in his resignation 3rd december so all of us at steadfast are moving over to the new business …
On 21 November Mr Peak received the quotation for computer equipment from Comp Now: see [112] above. The terms of the quotation were discussed by Mr Stefanovic and Mr Peak in a lengthy Slack conversation on that day. Also in that conversation there was a discussion of signing a one to three month contract with a client in the name of Steadfast and then restarting the contract as Dreamtime. The Slack conversation does not make it clear which client this relates to although it appears to be one of the attendees at the Cloud4C workshop that day.
Indigenous Business Australia
In July and August 2018 Steadfast had done work for IBA which had been contracted through Dreamtime. The final report for this project was sent on 20 September 2018.
On 5 November 2018 Stefanovic and Mr Peak discussed in a Slack conversation whether he could organise a meeting with IBA on 16 November 2018. Mr Peak replied, confirming that he could and requesting that Mr Glavonjic be included. Mr Stefanovic emailed a representative of IBA proposing a meeting on 12 November 2018 and stating that the attendees for Steadfast would be himself, Mr Peak and Mr Glavonjic. The purpose of the meeting appears to have been to discuss the report of the earlier project. At this stage Mr Glavonjic was not a representative of Steadfast as he had earlier resigned his directorship.
On 20 December 2018 Mr Peak downloaded documents relating to IBA from the Steadfast SharePoint site. The title of these documents indicate that they were proposals for security audit services and security compliance services prepared by Mr Peak and Mr Stefanovic respectively.
The activities of Mr Peak, Mr Stefanovic and Mr Glavonjic relating to IBA in November and December 2018 are described at [111] and [194]‑[195] above. When seen in the context of the other activities carried out by Mr Peak at the time, they were clearly consistent with his overall scheme to take the benefits of the Steadfast business to Dreamtime.
In September 2020 IBA awarded a contract to Dreamtime. Mr Stefanovic’s evidence was that Dreamtime has issued invoices totalling $76,312.50 to IBA for services provided. The contract that was in evidence was for a range of IT security consultancy services to be provided by Mr Peak.
The evidence of Mr Peak was that IBA had a policy of using indigenous businesses before engaging non-indigenous businesses to provide services.
Although the evidence of Mr Peak, Mr Stefanovic and Mr Glavonjic’s actions in 2018 is limited, in the context in which they occurred, they may be seen as part of the overall scheme of ensuring that business opportunities that had been available to Steadfast were made available to Dreamtime. It is notable that the November meeting, while relating to a contract that was made through Dreamtime was discussed directly with Steadfast rather than even notionally through Dreamtime and that Mr Glavonjic was identified as a representative of Steadfast. This is consistent with the parties understanding the reality that the entity doing the substantive work was Steadfast even if the contract had, for procurement purposes, been made with Dreamtime. Having regard to the timing and context in which this meeting occurred, I infer that Mr Glavonjic was included so as to advance in one of a variety of possible ways the transition of the opportunities that had been available from Steadfast to Dreamtime.
The written and oral submissions of the plaintiff made only minimal reference to IBA, although the profits made through its contract with Dreamtime were identified in the schedules to the written submissions identifying profits made by Dreamtime. Because of the focus of IBA in procuring from indigenous businesses the work ultimately procured was not work available directly to Steadfast. However, that does not preclude equitable relief being granted in relation to the defendants’ breaches of fiduciary duty.
Department of Agriculture
In December 2017 Mr Peak had prepared a Steadfast quotation for the Department of Agriculture to prepare a security risk management plan. This quotation was accepted. A subsequent contract was entered into by Dreamtime with the Department in April 2018. That included Steadfast as the subcontractor. A further contract with Dreamtime using Steadfast as a subcontractor was entered into in May 2018. Another contract in which Dreamtime used Steadfast as a subcontractor was completed in October 2018. Each of the three contracts was worth $14,850 with Dreamtime receiving 10 per cent of that amount.
At the 14 September 2018 board meeting Mr Peak had advised the board of Steadfast that the Department had been discussing more documentation work and that the price discussed for that work was $40,000.
The actions of Mr Peak and Mr Stefanovic in relation to a “Levies Online” Security Risk Management plan are described at [125], [155] and [192] above.
After both had departed from Steadfast, a contract for the Levies Online Security Risk Management Plan was awarded to Dreamtime. Another contract for Security Assessment Services was entered into on 5 November 2019. The total value of that contract was $300,000 although not all of it had been billed by the time evidence was prepared for the purposes of these proceedings. Between June 2019 and August 2020 the Department was invoiced $91,681 between June 2019 and August 2020.
Mr Stefanovic’s evidence was that each of the contracts awarded to Dreamtime was obtained using a competitive tender process and that two of them (the Levies Online project and a security assessment services project contract which did not proceed) were expressly available on a limited tender basis for which Dreamtime had been invited to bid for work. There is no evidence that Steadfast had been invited to bid for that work although, as found above, there were clearly discussions relating to the possibility that Steadfast would do the work of the subject of the Levies Online Security Risk Management Plan.
The plaintiff submitted that prior to January 2019 Steadfast had performed work for the Department of Agriculture under direct contracts. The plaintiff contended that the defendants should compensate the plaintiff for the benefit received by Dreamtime or the loss received by Steadfast by reason of the contravention of the restraint clauses.
The defendants submitted that the two contracts awarded to Dreamtime in 2019 were awarded following a competitive limited tender and there was no evidence that Steadfast was invited to tender for that work.
The defendants also submitted that Steadfast had chosen to no longer provide services to Commonwealth entities. While this submission is unpersuasive having regard to the findings made about Mr Peak’s conduct, the former would require careful consideration for the purposes of considering relief for contractual or statutory breaches.
Approach to relief
In the pleadings Steadfast sought injunctions, Lord Cairns Act damages in lieu of injunctions, damages for breach of contract, damages under s 1317H of the Corporations Act and an account of profits.
As the case was run at trial the emphasis was on an account of profits based upon the breach of fiduciary duty or damages for breach of the contractual restraints. The claim for an injunction was not pressed as the period during which the injunction might have operated had elapsed prior to trial.
The account of profits is the most appropriate remedy because it most accurately responds to the course of conduct engaged in by Mr Peak and the consequences of that course of conduct for Steadfast. Assessing contractual or statutory damages is more difficult because of the necessity to work out the position that would have existed but for the breach of contract and hence the loss incurred by Steadfast. It would involve resolving many of the causation submissions left unresolved by the findings in relation to individual entities set out above.
The target for the account of profits is Dreamtime as that is the vehicle through which profits were made as a result of the wholesale transfer of the business of Steadfast to Dreamtime. I have found at [344] that Dreamtime was a knowing participant in and beneficiary of Mr Peak’s breach of fiduciary duty. Therefore, in the first instance it is necessary to address the liability of Dreamtime to account.
The defendants submitted that damages (or, I infer, other monetary relief) were not recoverable in relation to Commonwealth government agencies because Steadfast had decided in December 2018 or January 2019 that it would not do any further Commonwealth government work. This submission is based upon a direction given to Mr Peak on 21 December 2018 not to use Dreamtime as a procurement method anymore and Ms Batley’s admission that she had no intention for Steadfast to do any further Commonwealth government work in January 2019, aside from the existing AIHW monitoring contract. As I have indicated earlier in these reasons (see [355] above), that is a convenient but unrealistic submission for the defendants to make. Even though Ms Batley had not yet discovered the full scope of the defendants’ perfidy, any decision occurred in a context where the effects of the defendants’ conduct were being fully felt by the company. Given the absence of work in the pipeline, itself a result of the defendants’ conduct, Ms Batley had already terminated Mr Stefanovic and was carrying out the necessary steps in order to be able to make Mr Peak redundant. In my view, it is not open to the defendants to rely upon actions of Steadfast that were themselves a response to the defendants’ own breach of contract in order to reduce their liability for the consequences of those breaches or breaches of their fiduciary duties.
Relief against Dreamtime
The position in relation to Mr Peak and Dreamtime arising from Mr Peak’s breach of fiduciary duty is the most straightforward. Mr Peak’s course of conduct amounted to a very clear breach of his fiduciary duties to his employer. The effect of his conduct, carried out with, to a greater or lesser extent, the assistance of Mr Glavonjic, Mr Stefanovic and Mr Watt, was to transfer, without payment, the whole of the benefit of Steadfast’s business to Dreamtime.
So far as Dreamtime is concerned, the principles that may be applied to the claim against Dreamtime are those articulated in Foresters. The majority judgments rejected the proposition that the liability of the appellant who knowingly assisted persons who acted in breach of their fiduciary obligations to their employer was limited to those profits that were the direct result of the particular acts by which it committed the equitable wrong of knowing assistance: Foresters at [5]. That was because the consequences of those acts were inseparable from the consequences of general scheme of the employees who had breached their fiduciary obligations which was to achieve a wholesale acquisition of the benefit of the business of the fiduciary’s employer. The involvement of the company which knowingly assisted them was an integral part of the errant fiduciary’s strategy: see [8].
The starting point was the proposition, derived from Consul Development Pty Ltd v DPC Estates Pty Ltd (1935) 132 CLR 373 (Consul Development) at 397 that “a person who knowingly participates in a breach of the duty is liable to account to the person to whom the duty was owed for any benefit he has received as a result of such participation.”
The plurality in Foresters (Kiefel CJ, Keane and Edelman JJ) emphasised that:
(a)the causal question involved a precise examination of the particular facts of the case: [9];
(b)the equitable disgorgement principle was a prophylactic rather than a restitutionary principle: [9]; and
(c)it is sufficient to show that the profit would not have been made but for the dishonest wrongdoing and a defendant cannot avoid liability by showing that the profits might have been made honestly: at [9].
So far as quantification is concerned, the plurality said that where causation was sufficiently established “the onus is upon the errant fiduciary or participant to show that he or she should not account for the full value of the advantage”: [13]. That may be done in two ways. First, by making an allowance for costs incurred in labour and skill employed [14]. Second, by demonstrating that the benefit or advantage is beyond the scope of the liability for which the wrongdoer should account for profits because the profit or benefit has no reasonable connection with the wrongdoing: [15]. So far as the second matter is concerned the plurality said that no precise test is prescribed but the fact that profits were derived from deliberate and dishonest conduct and were those desired to be achieved was relevant: [16].
The reasons of Gageler J were perceived by the plurality as involving some “revision of principle”: Foresters at [1]. Although the plurality judgment (unhelpfully) does not identify with precision the revision of principle to which it referred, one area of his Honour’s reasons that might be said to involve a revision of the principle articulated in Consul Development is his explanation of causation at [86]-[88]. In that passage his Honour said that a “but for” connection between the fiduciary’s breach of duty and the benefit or gain to the knowing participant would be sufficient to make the participant liable to the equitable remedy of account. That “but for” connection will be sufficient even though other contributing causes might be at play: [88].
In the present case these differences in reasoning are not of significance. The role of Dreamtime was central to the implementation of Mr Peak’s scheme. A director of Dreamtime, Mr Glavonjic, was aware of the scheme and cooperated with its implementation. I infer (even though it is not necessary in light of Mr Glavonjic’s knowledge) that the other director of Dreamtime, Mr Goldsmith, was also aware of the scheme. To adapt the words of the Full Court of the Federal Court in Lifeplan Australia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd [2017] FCAFC 74; 250 FCR 1 (Lifeplan), the scheme involved the “wholesale plundering of the confidential information and business records of” Steadfast: see Lifeplan at [8].
The benefit that Dreamtime gained was the whole of the confidential information of Steadfast, the whole of its business systems and records and its history of dealing with clients. The dishonest taking of that material and resulting capacity to operate an identical business from within Dreamtime made it almost inevitable that the staff of Steadfast would follow Mr Peak to Dreamtime. While loyalty to Mr Peak was obviously an additional and significant factor in the decision of staff to move with him to Dreamtime, the fact that, to their knowledge he was intending to take the business and the clients was a significant causal factor.
The claim made by the plaintiff is not for the whole of the profits of the business undertaken by Dreamtime in the period following Mr Peak’s departure. Rather it was quantified by reference to contracts performed for entities with which Steadfast had a previous relationship either by reason of having done work for it or because an opportunity arose in relation to it during Mr Peak’s employment. As pointed out (at [340]) above, calculations provided by Steadfast took account of the variable costs incurred by Dreamtime in performing those contracts but excluded fixed costs associated with the employment of the employees who carried out the work.
In circumstances where:
(a)Dreamtime and at least one of its principal directors was intimately involved in Mr Peak’s scheme;
(b)Mr Peak’s scheme involved the dishonest and unlawful taking of the confidential information and clients of Steadfast; and
(c)Mr Peak was involved in the destruction or nondisclosure of records relating to his conduct
requiring Dreamtime to disgorge the profits arising from its contracts with those clients over a two-year period is appropriate. It corresponds to the period during which it might be expected Dreamtime would be benefiting from the disloyal conduct of Mr Peak and the other defendants at the end of 2018 in the beginning of 2019. This period appears to be consistent with the approach taken by the High Court in Foresters and in Warman International Ltd v Dwyer (1995) 182 CLR 544 which take into account the full range of benefits or advantages obtained by the breaches of fiduciary duty when assessing the period during which the profits should be accounted for. There is inevitably considerable doubt as to precisely the information and resources that were taken by Mr Peak and others and exploited for the purposes of establishing and operating the business of Dreamtime. However, having regard to the nature of the breaches of contract and fiduciary duty and the destruction of documents by Mr Peak, it is a case in which it is appropriate to emphasise the prophylactic effect of the remedy of an account of profits in order to vindicate the strictness of the duties owed by the defendants. It is not a case in which the defendants have demonstrated that the benefits or advantages obtained are beyond the scope of the liability for which the wrongdoer should account for profits because the profit or benefit is no reasonable connection with the wrongdoing. It is a case where the deliberate and dishonest conduct on the part of Mr Peak had as its desired goal the making of profits by Dreamtime and that he achieved that goal.
The submissions of the plaintiff included various alternative calculations of the profits made by Dreamtime in relation to work previously performed by Steadfast that was directed to Dreamtime or for federal government work subsequently performed by former Steadfast staff. I have adopted for the purposes of assessing the profits made by Dreamtime the calculations identified as Version 2.3.
Those covered a period of 24 months. While the period during which an account of profits should be given may be a matter of considerable uncertainty, in the present case a period of 24 months is appropriate as it allows the capture of profits over a period sufficient to address most of the benefits that Mr Peak obtained through his diversion of contracts, theft of information and exploitation of goodwill associated with his involvement in the Steadfast business. It also corresponds to the period of his contractual restraint.
The figures in Version 2.3 take into account the software costs incurred by Dreamtime in providing the services where those were proved in evidence. They also take into account staff costs where those were proved in evidence as well as where they could be assumed to have been incurred by reference to the nature of the work undertaken and where the likely cost of the time spent by staff on those matters was able to be estimated. They incorporated within the assessment of wages costs, amounts for superannuation and workers compensation insurance but not other general costs of running the Dreamtime business. However, the calculations in Version 2.3 needed to be adjusted so as to take account of the fact that Mr Peak’s time needed to be costed at a rate which reflected the amount paid to him as well as the amount paid to Brian Peak: see [278] above. This had the effect of increasing the hourly cost of Mr Peak’s work to Dreamtime from $60.01 to $90.30.
Even though the causal connection between Mr Peak’s (and Mr Watt’s and Mr Stefanovic’s) conduct and the acquisition of the relevant client by Dreamtime varies, it is appropriate, in my opinion, that the profits made in relation to each of the entities set out in the table below be recoverable.
Although included in the schedule were amounts relating to contracts performed for Education Services Australia, the evidence relating to this entity was not read by the plaintiff and no submissions were made in support of the claim for damages or profits relating to that entity. I have therefore not included any amounts relating to that entity notwithstanding that they were included in the schedule to the plaintiff’s submissions.
With these adjustments to the figures in Version 2.3, the profits made from the various entities are as follows. The headings are those which appear in the plaintiff’s schedule.
| Work previously done by Steadfast directed to Dreamtime | |
| Australian Financial Security Authority | $92,300 |
| Nectre Mortgages | $7783.49 |
| Strategic Data | $69,738.41 |
| Geo Group | $234,521.09 |
| University of Canberra | $40,340.34 |
| Sub total | $444,683.33 |
| Work done for Federal Government in 24-month period | |
| Australian Financial Security Authority | $243,936.41 |
| Australian Financial Security Authority | $76,255.30 |
| Australian Fisheries Management Authority | $122,432.82 |
| Department of Agriculture | $63,846.43 |
| Indigenous Business Australia | $22,783.50 |
| Department of Parliamentary Services | $213,311.85 |
| Sub total | $742,566.31 |
| Total | $1,187,249.64 |
Further conduct of proceedings
Although it is possible to make a final order in relation to Dreamtime, the submissions at the conclusion of the hearing were not sufficient to permit complete determination of the claim against Dreamtime or a determination of final relief in relation to the other defendants.
I will need to hear the parties further on the issue of final relief in light of the findings that I have made in these reasons and the relief that has been granted against Dreamtime. The proceedings will therefore be adjourned for a short period so as to permit the parties to consider these reasons and then return for directions as to the process for resolution of the remaining issues.
Orders
The orders of the Court are:
1. Order that Dreamtime Supply Company Pty Ltd account to Steadfast ICT Security Pty Ltd for profits in equity in the sum of $1,187,249.64.
2. Direct that the parties be further heard in relation to:
(a) any further orders in relation to Dreamtime Supply Company Pty Ltd;
(b) the orders to be made in relation to the claims against the first, second, third and fifth defendants in light of the findings of the court.
3. All questions of costs are reserved.
4. The proceedings are listed at 9:30am on Friday, 3 September 2021 for directions.
| I certify that the preceding 452 [four hundred and fifty‑two] numbered paragraphs are a true copy of the Judgment of his Honour Justice Mossop. Associate: Date: 30 August 2021 |
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