Trusted Cloud Pty Ltd v Core Desktop Pty Ltd

Case [2015] FCA 33

FEDERAL COURT OF AUSTRALIA

Trusted Cloud Pty Limited v Core Desktop Pty Limited [2015] FCA 33

Citation: Trusted Cloud Pty Limited v Core Desktop Pty Limited [2015] FCA 33
Parties: TRUSTED CLOUD PTY LIMITED (ACN 083 688 340), INTRAPOWER PTY LIMITED (ACN 123 699 043), INTRAPOWER TERRESTRIAL PTY LTD (ACN 081 193 259), TPG TELECOM LIMITED (ACN 093 058 069) and TPG HOLDINGS PTY LIMITED (ACN 003 328 103) v CORE DESKTOP PTY LIMITED (ACN 161 054 691), MICHAEL AMIRA, YONG CHEN, MICHAEL PAPACONSTANTINOU, KYLE FRASER and ANDREW QUACH
File number: NSD 856 of 2014
Judge: KATZMANN J
Date of judgment: 3 February 2015
Catchwords:

PRACTICE AND PROCEDURE – application for summary dismissal under s 31A of Federal Court of Australia Act 1976 (Cth) – whether applicants have no reasonable prospect of successfully prosecuting the proceeding

EVIDENCE – application under s 192A of Evidence Act 1995 (Cth) before close of pleadings for advance ruling on whether evidence should be excluded at trial because it was allegedly obtained illegally or improperly within meaning of s 138 of Evidence Act 1995 (Cth)

PRACTICE AND PROCEDURE – application to set aside orders – whether orders should be set aside for material non-disclosure
Legislation: Corporations Act 2001 (Cth) s 183
Crimes Act 1900 (NSW) ss 308A, 308H
Evidence Act 1995 (Cth) ss s 75, 138, 192A
Federal Court of Australia Act 1976 (Cth) s 31A
Cases cited: Geneva Laboratories Limited v Nguyen [2014] FCA 1270
J C Techforce Pty Ltd v Pearce (1996) 138 ALR 522
Papas v Grave [2013] NSWCA 308
Professional Administration Service Centres Pty Ltd v Commissioner of Taxation (2012) 295 ALR 52
Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639
Spencer v Commonwealth of Australia (2010) 241 CLR 118
Date of hearing: 6 November 2014
Date of last submissions: 4 December 2014
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 108
Counsel for the Applicants: Mr R Cobden SC with Mr N Murray
Solicitor for the Applicants: Minter Ellison
Counsel for the Respondents: Mr T Cordiner with Mr C Smith
Solicitor for the Respondents: Tisher Liner FC Law Firm

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 856 of 2014
BETWEEN:

TRUSTED CLOUD PTY LIMITED (ACN 083 688 340)
First Applicant

INTRAPOWER PTY LIMITED (ACN 123 699 043)
Second Applicant

INTRAPOWER TERRESTRIAL PTY LTD (ACN 081 193 259)
Third Applicant

TPG TELECOM LIMITED (ACN 093 058 069)
Fourth Applicant

TPG HOLDINGS PTY LIMITED (ACN 003 328 103)
Fifth Applicant
AND:

CORE DESKTOP PTY LIMITED (ACN 161 054 691)
First Respondent

MICHAEL AMIRA
Second Respondent

YONG CHEN
Third Respondent

MICHAEL PAPACONSTANTINOU
Fourth Respondent

KYLE FRASER
Fifth Respondent

ANDREW QUACH
Sixth Respondent

JUDGE:

KATZMANN J

DATE OF ORDER:

3 FEBRUARY 2015

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Order 2 of the orders made on 22 August 2014 be vacated upon the respondents giving the following undertakings to the Court, subject to the applicants giving the usual undertaking as to…

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AGLC
Trusted Cloud Pty Ltd v Core Desktop Pty Ltd [2015] FCA 33
Case
[2015] FCA 33
Decision Date

CaseChat Overview and Summary

Trusted Cloud Pty Ltd brought a proceeding against Core Desktop Pty Ltd, with whom they shared a director, Mr Amira. The applicants sought interlocutory orders for disclosure of documents and to restrain the respondents from using information obtained from the applicants. The respondents opposed the proceeding and sought summary dismissal. They also made an application for an advance ruling that evidence obtained in the course of the proceeding be excluded, and sought to set aside the interlocutory orders on the basis of material non-disclosure by the applicants. The court had to determine whether the applicants had no reasonable prospect of successfully prosecuting the proceeding, whether the evidence obtained by the respondents should be excluded, and whether the interlocutory orders should be set aside. The court found that the proceeding had reasonable prospects of success, that the evidence should not be excluded, and that the interlocutory orders should not be set aside, except for one condition. The court ordered that one of the interlocutory orders be vacated upon the respondents giving certain undertakings, dismissed the interlocutory application with costs, required the respondents to file their defences, and listed the originating application for further directions.

Orders

Orders of the court

1. Order 2 of the orders made on 22 August 2014 be vacated upon the respondents giving the following undertakings to the Court, subject to the applicants giving the usual undertaking as to damages, the respondents’ undertakings to apply until further order:

(1) Should any respondent become aware of the existence of a Confidential Document in their possession or control, they will promptly cause that document, and any copies in their possession or control, to be given to the solicitor for the respondents on instructions to be kept confidential pending further order of the Court.

(2) Each of the respondents, whether by themselves, their servants, their agents or otherwise, will not reproduce, publish, communicate to the public, or make an adaptation of any Copied Document (other than for the purposes of this proceeding).

In these undertakings the following terms have the following meanings:

“Copied Documents” means a document:

(a) copied or taken from one or more of the applicants by or for any of the respondents the copyright in which is or appears to be owned or exclusively licensed to any of the applicants; and

(b) a document comprising a reproduction of a substantial part of any document in paragraph (a); but

(c) does not include any document that only contains personal information of any of the second to fourth respondents and does not relate to any of the second to fourth respondents’ employment with any of the applicants.

“document” includes:

(a) any record of information mentioned in the definition of document in Part 1 of the Dictionary to the Evidence Act 1995 (Cth); and

(b) any other material, data or information stored or recorded by mechanical or electronic means.

“Confidential Document” means a document:

(a) created on or before 20 August 2014 that contains information that is, or appears to be, confidential to any of the applicants; or

(b) derived from confidential information in a document referred to in paragraph (a).

2. The interlocutory application filed by the respondents on 17 October 2014 otherwise be dismissed with costs.

3. The respondents file their defences by 6 March 2015.

4. The originating application be listed for further directions at 9.30 am on 9 March 2015.

5. Liberty to apply on two days’ notice.

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

Background

Background to the litigation

In the alternative, the respondents submitted that the August orders should be vacated because of the applicants’ failure to disclose certain matters to the Court when applying for the ex parte orders.The factual and evidentiary background Before considering any of these questions it is necessary to provide the factual context for the dispute. Unless otherwise indicated, the following account is uncontroversial, at least for present purposes. The TPG group provides a variety of services to business and government. Those services include allocating to a customer a portion of a server controlled by Trusted Cloud known as a “virtual server”. Ms de Ville explained the nature of those services in her affidavit of 19 August 2014 (“first affidavit”): The customer’s data and software applications (for example, Microsoft Office for documents, Outlook Express for emails, Internet Explorer for searching the Internet) are installed on and run off that virtual server. A customer is able to connect remotely to the virtual server (for example from a desktop or laptop computer) using a software program such as Citrix which requires the customer to provide a unique identifier and password. Once the customer has connected to the virtual server, the screen of the remote desktop or laptop computer will display the customer’s software applications (which are running on the virtual server) and allow the customer to access their data (which is stored on a portion of a shared storage device owned by Trusted Cloud that has been allocated to the customer). The services include responsibility for maintaining the security and operation of the virtual desktop and its connection to the customer’s remote computers. The applicants also offer “cloud storage”, which enables customers to store data remotely and to access and manage that data. I shall refer to the cloud services provided by the first three applicants collectively as the “Trusted Cloud business”. In the course of providing those services the applicants create and use a significant quantity of documents which contain commercially valuable and sensitive information, such as pricing information and customer preferences. They also keep confidential documents relating to their employees including details of their remuneration. The applicants take a number of steps to protect the information in these documents by, for example, including confidentiality provisions in employment agreements and restricting access to computer networks and information. Trusted Cloud was first registered in 1998. At the time it was called “Wavenet Pty Ltd” (“Wavenet”) and Mr Amira was its sole shareholder and director. It was he who established the business. The name of the company was changed to “Trusted Cloud Pty Limited” in 2010. In about February 2008 Intrapower purchased 51% of the issued share capital in Wavenet and in 2011 Intrapower was acquired by the TPG group. By 1 January 2013, Trusted Cloud became a wholly owned subsidiary of Intrapower.

Evidence

Evidence Before The Court

Section 138 of the Evidence Act relevantly provides:138 Discretion to exclude improperly or illegally obtained evidence(1) Evidence that was obtained:(a) improperly or in contravention of an Australian law; or(b) in consequence of an impropriety or of a contravention of an Australian law;is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.…(3)Without limiting the matters that the court may take into account under subsection (1), it is to take into account:(a) the probative value of the evidence; and(b) the importance of the evidence in the proceeding; and(c) the nature of the relevant offence, cause of action or defence and the nature of the subject-matter of the proceeding; and(d) the gravity of the impropriety or contravention; and(e) whether the impropriety or contravention was deliberate or reckless; and(f) whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights; and(g) whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention; and(h) the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law.Note:The International Covenant on Civil and Political Rights is set out in Schedule 2 to the Australian Human Rights Commission Act 1986. Section 192A of the Evidence Act relevantly states that “[w]here a question arises in any proceedings … about (a) the admissibility or use of evidence proposed to be adduced; or (b) the operation of a provision of this Act or another law in relation to [that] evidence”, then the court may, “if it considers it to be appropriate to do so, give a ruling or make a finding in relation to the question before the evidence is adduced in the proceedings”. Section 31A(2) of the FCA Act enables the Court to give judgment for a respondent to a proceeding in relation to the whole or any part of the proceeding if the Court is satisfied that the applicant has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. For this purpose, s 31A(3) provides that it is unnecessary that the proceeding or the part of the proceeding be hopeless or bound to fail.The respondents’ case for interlocutory relief The respondents’ case was that:(1)the primary evidence to support the applicants’ claims (a file list and associated metadata from the respondents’ computer system) was obtained illegally (in contravention of s 308H of the Crimes Act); (2)for this reason the Court should not admit the file list and associated data into evidence at the trial;(3)because the primary evidence was obtained illegally, the evidence given by affidavit on behalf of the various respondents pursuant to consent orders made on 22 August 2014 was obtained in consequence of a contravention of an Australian law and ought also be excluded;(4)if these matters are established to the Court’s satisfaction, the proceeding enjoys no reasonable prospects of success and should therefore be dismissed under s 31A of the FCA Act.

Decision

Reasons for decision

Those remarks apply with equal force in the present case. Save for an argument that setting aside the orders would likely be an important consideration in the ultimate adjudication of costs, the respondents did not identify any utility which would result from the setting aside of the orders. There was a delay of nearly two months which attended the making of their interlocutory application. While there were two court appearances in the meantime, on three other occasions the Court made orders by consent in chambers. The respondents apparently complied with the 22 August 2014 orders without any suggestion, let alone complaint, that there was any irregularity in the procuring of evidence to support the ex parte orders. Conclusion The application for a ruling under s 192A is precipitate. There is no sufficient basis to order summary dismissal of the proceeding or part thereof. Upon the respondents giving the agreed undertaking, order 2 of the orders made on 22 August 2014 will be vacated. Otherwise the respondents’ interlocutory application should be dismissed with costs. In these circumstances, it is appropriate to require the respondents to file their defences. I will make an order to this effect.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.