UON Pty Ltd v Hoascar
[2020] WASC 271
•24 JULY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: UON PTY LTD -v- HOASCAR [2020] WASC 271
CORAM: ARCHER J
HEARD: 22 JUNE 2020
DELIVERED : 24 JULY 2020
FILE NO/S: CIV 3178 of 2016
BETWEEN: UON PTY LTD
First Plaintiff
LAA INDUSTRIES PTY LTD
Second Plaintiff
AND
GABRIEL HOASCAR
First Defendant
TARANIS POWER GROUP PTY LTD
Second Defendant
Catchwords:
Commercially sensitive documents - Confidentiality regime - Variation - Trade rivals - Proper approach
Legislation:
Nil
Result:
Application for orders varying the confidentiality regime allowed in part
Category: B
Representation:
Counsel:
| First Plaintiff | : | M L Bennett & T J C Elder |
| Second Plaintiff | : | M L Bennett & T J C Elder |
| First Defendant | : | P D C Robinson |
| Second Defendant | : | P D C Robinson |
Solicitors:
| First Plaintiff | : | Bennett + Co |
| Second Plaintiff | : | Bennett + Co |
| First Defendant | : | Williams & Hughes |
| Second Defendant | : | Williams & Hughes |
Case(s) referred to in decision(s):
Alcoa of Australia Ltd v Apache Energy Ltd [No 4] [2013] WASC 377
Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1
Betfair Pty Ltd v Racing New South Wales (No 5) [2009] FCA 1011
Cadbury Pty Ltd v Amcor Ltd (No 2) [2009] FCA 663
Civic Video Pty Ltd v Paterson [2013] WASCA 107
Co‑operative Bulk Handling Ltd v Brookfield Rail Pty Ltd [No 2] [2014] WASC 38
Duckworth v Water Corporation [2012] WASC 30; (2012) 261 FLR 185
Faccenda Chicken Ltd v Fowler [1987] Ch 117
Fortescue Metals Group Ltd v Argus Media Ltd [2020] EWHC 1304 (Ch)
Hadid v Lenfest Communications Inc (1996) 70 FCR 403
ICAP Australia Pty Ltd v Forrest Moebes [2010] NSWSC 738
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 1024
Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 2] [2010] WASC 217
Lenark Pty Ltd v The Chairmen1 Pty Ltd (No 2) [2012] NSWSC 415
Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34
NAK Australia Pty Ltd v Starkey Consulting Pty Ltd [2008] NSWSC 1136
ARCHER J:
Introduction
The plaintiffs seek a variation of confidentiality orders I made at the parties' request on 9 October 2018 in relation to certain documents discovered by the defendants (Regime).
Under the Regime, inspection of documents alleged to be confidential was limited to the parties' lawyers, counsel and experts (who were required to first sign an undertaking), and the court.
The plaintiffs seek to be permitted to inspect those documents personally. They submit that this will enable them 'to properly instruct their solicitors on matters central to the issues in dispute and so that the litigation can be managed with appropriate consideration given to proportionality'. They submit that this legitimate interest outweighs any assertion by the defendants of commercial sensitivity.[1]
[1] Plaintiffs' Submissions in Support of Application for Inspection of Confidential Documents filed 8 May 2020 (Plaintiffs' Submissions) [13] ‑ [15].
The defendants submit that the plaintiffs should not have access to the documents, at least not at this stage of the proceedings.
Factual framework
The heart of the plaintiffs' case is an allegation that their confidential information was misused by the defendants.[2]
The plaintiffs' case
[2] Plaintiffs' Submissions [7].
The first plaintiff (UON) provides power, air and water services to various users, including remote mine sites. This includes supplying electrical equipment such as power generators and undertaking research and development activities to improve electrical systems.
From 2002 until 2015, the then sole director of UON, Mark Keogh, and an employee of UON, Carl Reid, invented and developed an alternative motor starting control and power management system with specific application to remote island mine sites (Invention).[3]
[3] Plaintiffs' Re‑amended Writ of Summons (statement of claim endorsed) filed 14 September 2018 (Statement of Claim) [2]. See also ts 130 ‑ 131, summarising from the affidavit of Mr Keogh filed 20 January 2017 and the affidavit itself.
In simplistic terms, a conventional motor starting system requires a generator that is large enough to start the motor. Once the motor has been started, the excess generator capacity is no longer required and the generator engine may operate at a lower fuel efficiency than it otherwise would.
The Invention is a bespoke system that, among other things, is capable of generating the power needed to start the motor, but can then drop the power down to the level needed for operating. Another feature of the system is that it can be monitored and controlled remotely.
When used in the context of dewatering, the system includes a submersible pump. In addition to the efficiencies achieved by the variable speed generator, the system allows the water level, flow‑rate, and pressure to be monitored and adjusted remotely.
UON was granted a provisional patent and has applied for a standard patent. UON markets the Invention as the 'Pro Power General Motor Control Generator' (GMC Generator).
UON assigned its rights to the standard patent application to the second plaintiff (LAA). The contractual arrangements between UON and LAA are not relevant to this application.
The first defendant (Mr Hoascar) was employed by UON between 30 March 2015 and 14 March 2016 under a permanent employment contract, and then as a casual employee from 15 to 24 March 2016. The plaintiffs assert that, while Mr Hoascar was employed by UON, he was involved in the development of the Invention and provided with confidential information in relation to the Invention.
Around 14 March 2016,[4] while still working for UON, Mr Hoascar commenced employment with the second defendant (Taranis). The plaintiffs allege that Mr Hoascar disclosed UON's confidential information to Taranis, in breach of, among other things, Mr Hoascar's contract of employment with UON.[5] The plaintiffs said that this assisted Taranis to develop the 'VarioGen', which has since been marketed and supplied to customers in competition to the GMC Generator.[6] The plaintiffs plead that the VarioGen incorporates, copies or reproduces the design features or elements of the Invention.[7] Although not explicit in the pleading, the plaintiffs assert that the VarioGen was a springboard development based on confidential information.[8]
[4] Statement of Claim [11], admitted in the defence. In the hearing, at ts 135, the plaintiffs submitted that Mr Hoascar commenced employment on 10 March 2016 and the defendants did not cavil with this. The employment contract was executed on 19 February 2016.
[5] See, for example, the Statement of Claim [15.5].
[6] Plaintiffs' Submissions [9].
[7] Statement of Claim [15.4].
[8] ts 136 and see the table in the Statement of Claim [15.4.2 particular (b)].
In support of their claims, the plaintiffs rely on, among other things, the sequence of factual events. In particular:
(1)While employed by UON, in the period from 8 December 2015 and 28 February 2016, Mr Hoascar emailed information from his UON email address to his personal email address.[9]
(2)He sent two emails on 18 February 2016, the day before he signed an employment contract with Taranis. He sent one email after he had signed the contract. That is, Mr Hoascar emailed information from his UON email address to his personal email address the day before he had signed an employment contract with Taranis and after he had signed it.
(3)Around 14 March 2016, Mr Hoascar commenced employment with Taranis.[10]
(4)Within four months of Mr Hoascar commencing employment with Taranis, Taranis registered the business name 'VarioGen'.[11]
(5)On 10 August 2017, Taranis applied for a patent in respect of the VarioGen, naming Mr Vetrone and Mr Hoascar as the inventors.[12]
[9] Statement of Claim [15].
[10] While still employed by UON on a casual basis.
[11] Statement of Claim [13B].
[12] Statement of Claim [14A].
The defendants deny that Mr Hoascar breached his employment contract. They say, among other things, that Mr Hoascar emailed documents to his personal email address for the purposes of work he was doing for UON. They deny that the VarioGen incorporates, copies or reproduces the design features or elements of the Invention.[13]
[13] And see the Defendants' Outline of Submissions filed 25 May 2020 (Defendants' Submissions) [17].
The plaintiffs also allege that Mr Hoascar, after leaving UON's employment, solicited UON's clients, in breach of his contractual obligation not to solicit.[14] The defendants deny this too.
[14] See, for example, the Statement of Claim [15.8].
Legal principles
I consider that the following propositions are established by the authorities.[15]
[15] Civic Video Pty Ltd v Paterson [2013] WASCA 107 [28] ‑ [31]; Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34; Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd[No 2] [2010] WASC 217 (Murphy JA); Hadid v Lenfest Communications Inc (1996) 70 FCR 403; Alcoa of Australia Ltd v Apache Energy Ltd [No 4][2013] WASC 377 (Le Miere J); Co‑operative Bulk Handling Ltd v Brookfield Rail Pty Ltd [No 2] [2014] WASC 38 (Edelman J).
Generally, a party is entitled to inspect their opponent's documents. This is a prima facie right that is important for the proper conduct of the trial and for informed settlement negotiations.[16]
[16] Lampson [56].
Confidentiality is not, of itself, a sufficient reason to deny inspection. This is because a party obtaining discovery and inspection of documents, and their legal representatives, impliedly undertakes that the documents will be used only for the purpose of the litigation. Ordinarily, this provides sufficient protection to the party producing the confidential document.[17]
[17] Civic Video [26].
However, different considerations arise where the documents are commercially sensitive and the relevant parties are trade rivals.[18] This is because, once a confidential document is inspected by a trade rival, that information cannot be forgotten.[19] Accordingly, in such a case, the court 'must strike a fair balance between the legitimate concerns of the party discovering the documents and the needs of the other party to the litigation'.[20]
[18] Civic Video [26].
[19] Mobil Oil (38). See also Hadid (411) ('The concern that once information comes into the hands of a trade rival the confidentiality in it will be destroyed may, perhaps, be overstated').
[20] Civic Video [28].
In this context, 'commercially sensitive' information means confidential information that a trade rival could use to its advantage and to the disadvantage of the party resisting inspection.[21]
[21] Civic Video [27].
The party objecting to the inspection of a document must prove the trade rivalry. Generally,[22] the party must also prove the existence and degree of confidentiality of that document,[23] and prove that it warrants protection additional to that provided by the implied undertaking.[24] Confidentiality may be proved by direct evidence or may be inferred from the document itself.
[22] It is possible to assess the reasonableness of a proposed regime on a broader basis, without considering claims of confidentiality on a document‑by‑document basis. See Alcoa [21] ‑ [23].
[23] Lampson [57].
[24] Alcoa [8] and [21] (citing in [8] Lenark Pty Ltd v The Chairmen1 Pty Ltd (No 2) [2012] NSWSC 415, which in turn cited, among other cases, Cadbury Pty Ltd v Amcor Ltd (No 2) [2009] FCA 663 (Gordon J) [6] ‑ [7], Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 1024; Betfair Pty Ltd v Racing New South Wales (No 5) [2009] FCA 1011 and ICAP Australia Pty Ltd v Forrest Moebes [2010] NSWSC 738). See also Lampson [62].
If those matters are established, the court should ask itself if it is necessary to destroy a legitimate claim to confidentiality from trade rivals by permitting the principal of that rival to look at the documents. The court should ask if it is sufficient to permit only the parties' legal and expert advisers to do so.[25]
[25] Mobil Oil (38 ‑ 40).
In considering if it is sufficient to permit the parties' legal and expert advisers to inspect the documents, the court should keep in mind that a party should only rarely be excluded from knowledge of relevant information. This is because decisions such as whether to continue or abandon litigation should be made by the party personally on advice, rather than by their advisors.[26]
[26] See Co‑operative Bulk Handling Ltd [8], citing NAK Australia Pty Ltd v Starkey Consulting Pty Ltd [2008] NSWSC 1136 [9]. See also ICAP Australia v Forrest Moebes [11] and Alcoa [8]. See also Hadid (410).
Another option might be to permit only a particular officer or officers of the party to inspect the documents, on an express undertaking of confidentiality.[27]
[27] Lampson [59].
Each case will turn on its own facts.
Relevant factors include the degree of commercial sensitivity, the extent of any prejudice to the party giving discovery, the age of the information, the identity of the persons who will inspect the documents, and the reason or reasons why the inspection of particular documents is necessary.[28]
[28] Civic Video [30].
Where any of those factors turn upon the nature and content of the disputed document, as will usually be the case, the judge should inspect the document.[29]
[29] See Mobil Oil (40).
The assessment of where a fair balance lies may change as the matter progresses to trial.[30]
[30] Civic Video [31].
From this summary, the respective burdens can be seen in the following way.
First, the party objecting to full inspection must establish:
(1)that it is a trade rival with the party seeking inspection;
(2)the existence and degree of confidentiality of each document (or category of documents);
(3)that the document (or category of documents) warrants protection additional to that provided by the implied undertaking.
Second, if these matters are established, the party seeking to inspect must establish why it needs to inspect the documents in the manner it seeks to inspect them.
Third, the court must then assess where a fair balance lies.
In relation to the need to inspect, the plaintiffs contended that the need could be established where, if inspection were not permitted, the plaintiffs could not give instructions that took into account proportionality and case management considerations.[31]
[31] Plaintiffs' Submissions [28] ‑ [29].
The plaintiffs did not cite any authority that directly supports this contention. Nevertheless, it is consistent with the considerations underlying the principles established by the cases. It is also of similar import to the established proposition that a party should only rarely be excluded from knowledge of relevant information because decisions such as whether to continue or abandon litigation should be made by the party personally on advice, rather than by their advisors.
Of course, if such a need were established, it would not be determinative. The court would still need to balance that need against the other considerations to determine where the fair balance lay.
Defendants' submissions
Not obliged to prove that additional protection is warranted
The defendants sought to persuade me that they did not have to establish that the documents warranted protection additional to the implied undertaking.[32] In my view, this requirement is established by the authorities.
[32] ts 161, 169 ‑ 172, 176 ‑ 177.
In Alcoa,[33] Le Miere J referred, with apparent approval, to authorities from other jurisdictions which referred to this as a requirement. While his Honour did not directly state this was a requirement, his Honour clearly considered that it was.[34] The defendants did not suggest otherwise. Further, the defendants said they were not submitting that Le Miere J was wrong.[35] In any event, I am not satisfied his Honour was plainly wrong.[36] On the contrary. His Honour's implicit conclusion that this was a requirement was based on other authorities and is consistent with the considerations underlying the principles established by the cases.
[33] Alcoa.
[34] See, in particular Alcoa at [8] and [21].
[35] ts 167.
[36] See Duckworth v Water Corporation [2012] WASC 30; (2012) 261 FLR 185 [31] (Edelman J).
That said, it is possible that the defendants' asserted position was different only in form. It is possible that the defendants intended to submit that, because 'commercially sensitive' information means information that a trade rival could use to its advantage and to the disadvantage of the party resisting inspection, it is information that, by definition, will not be adequately protected by the implied undertaking. That is, the defendants may have intended to submit that the need for additional protection is demonstrated by the fact that the information could be used by a trade rival to its advantage and to the disadvantage of the party resisting inspection.
Even assuming that was the defendants' position, the defendants did not go much further than asserting that categories of documents could be used by a trade rival to its advantage and to the disadvantage of Taranis. This was despite being on notice that it was not obvious to me why the implied undertaking would be inadequate and that I would therefore need the defendants to explain on a category‑by‑category basis why extra protection was needed.[37]
[37] ts 168.10.
The defendants also elected not to respond to most of the plaintiffs' written submissions in reply.[38]
Nexus with pleading
[38] And see ts 195.
The defendants also asserted on several occasions that the plaintiffs failed to identify the nexus between the particular documents they sought personal access to and the proposed amendment to the statement of claim or proposed new particulars.[39] In my view, the plaintiffs were not required to do this. The authorities cited by the defendants[40] do not support this proposition, it is not consistent with the considerations underlying the principles established by the cases, and it was not required by my orders of 27 November 2019.[41]
Premature application
[39] See Defendants' Submissions [29], [33], [48.1], [49].
[40] Defendants' Submissions [14].
[41] See ts 106, to contrary effect.
The defendants' primary submission was that the plaintiffs should have to fully plead their case before getting access to confidential information. The defendants submit that they still require further particulars in a number of respects.[42]
[42] See, for example, Defendants' Submissions [3] ‑ [7], [53] and ts 157 ‑ 159.
When I explored this with the defendants during the hearing, the defendants confirmed that they were not suggesting that the plaintiffs should never be entitled to look at the documents. Rather, they were saying that they should not be allowed to look at them before the pleadings were closed.[43] Counsel said:[44]
I can't categorically say that directly after the pleadings are closed we would then be content to disclose the lot, but what I can say is we would certainly, I think, be more comfortable with the idea of doing it then than what we would be at this point.
[43] ts 158.
[44] ts 158.
Counsel conceded that, if the plaintiffs, having amended their pleading, were then given access to the documents and sought to further amend their pleading in light of the documents, the defendants would not oppose the amendment.[45] Counsel explained that the reason why the defendants nevertheless resisted inspection was because commercially sensitive information should not be disclosed any earlier than it has to be.
[45] ts 158.
I do not accept that it will never be appropriate to permit a party to inspect the confidential documents of a trade rival prior to the party finalising their pleadings. I do accept that the time at which inspection is sought is a relevant consideration in striking a fair balance. The balance is likely to weigh more heavily in favour of the party seeking access the closer to trial the application is made.
I accept that it is to be expected that the party seeking access will usually have fully pleaded its case. However, in modern times, pleadings may be amended, without leave, until shortly before trial.[46] Further, it would be illogical to expect a party seeking access to have fully pleaded its case if the documents sought to be accessed bear upon what can or should be pleaded.
[46] Although the other party is entitled to seek that the amendments be struck out - Rules of the Supreme Court 1971 (WA) O 21, r 3(3).
I have no reason to doubt the defendants' submission that some of the particulars of claim they seek do not turn upon the documents sought to be inspected. However, the defendants accepted that some of them do.[47] The defendants did not suggest that they would benefit from receiving, before inspection is granted, the particulars that did not turn upon the documents.
[47] Implicit in their submissions at ts 159.
Further, while there will undoubtedly be amendments to the pleadings in the future, I do not accept that the proceedings are 'essentially starting from scratch'.[48] The foreshadowed amendments are primarily any particulars and amendments that are revealed to be appropriate by the documents sought to be released from the Regime. In addition, discovery has been given.
[48] Defendants' Submissions [4] and ts 164 ‑ 165.
The issues
The issues to be determined are as follows:
(1)Is UON a trade rival of Taranis?
(2)Is the document (or category of documents) under consideration confidential and, if so, to what extent?
(3)Does the document (or category of documents) warrant protection additional to that provided by the implied undertaking?
(4)Why do officers of the plaintiffs, as distinct from the plaintiffs' advisors, need to inspect the document (or category of documents)?
(5)Where does a fair balance lie?
For completeness, I note that the defendants did not suggest that any different approach was required in this case arising from the plaintiffs' consent to an order establishing the Regime until further order.[49] In my view, the defendants were correct not to make such a suggestion. Parties are to be encouraged to agree to protective orders where they consider that more limited access is likely to be sufficient, at least at that stage of the proceedings. In some cases, doing so may avoid the need for any contested hearing as to access.
[49] See the affidavit of Taleesha Jayne Conlan Elder sworn 8 May 2020 [5] (Elder Affidavit).
Is UON a trade rival of Taranis?
The plaintiffs do not deny that UON and Taranis are trade rivals. However, they submit that they were not trade rivals in the dewatering industry or in the supply of variable speed generators until the alleged events that triggered these proceedings.[50]
[50] Plaintiffs' Reply Submissions in Support of Application for Inspection of Confidential Documents filed 2 June 2020 (Plaintiffs' Reply Submissions) [13].
The plaintiffs submit that, on their case, the only reason the parties are in competition in respect of the supply of variable speed generators is the misuse of UON's confidential information that is complained of in these proceedings.[51]
[51] Plaintiffs' Submissions [20].
The plaintiffs accept that whether UON's confidential information was in fact misused is a matter to be determined at trial. However, they submit that, in determining whether a fair balance supports the release of the documents from the Regime, it is relevant that there would be no litigation absent that allegation.[52] The plaintiffs submitted that this is a relevant factor in assessing their need to access the documents.[53]
[52] Plaintiffs' Reply Submissions [15].
[53] ts 200.
In my view, that could only be a relevant factor in determining the fair balance if it could be said that the plaintiffs' case was strong. I raised with the plaintiffs whether it was appropriate or even possible to assess the relative strengths and weaknesses of the parties' cases at this stage of the proceedings. Any such assessment would be based only on the pleadings, apart from some limited evidence filed in relation to this application.
The plaintiffs sought to persuade me that, in the particular circumstances of this case, it was possible to form an assessment that the plaintiffs' case was strong, based on the pleadings alone. In particular, the following is common ground:
(1)Mr Hoascar was employed by UON until 24 March 2016.
(2)The work he did while employed by UON included testing alternator electrical performance, generator testing, testing a new program and implementing automatic flow control (all of which the plaintiffs assert related to the Invention).[54]
(3)Between 8 December 2015 and 28 February 2016, during his employment with UON, Mr Hoascar forwarded emails and attachments from his work email address to his personal email address.
(4)He sent two emails on 18 February 2016, the day before he signed an employment contract with Taranis. He sent one email after he had signed the contract. That is, Mr Hoascar emailed information from his UON email address to his personal email address the day before he had signed an employment contract with Taranis and after he had signed it.
(5)Around 14 March 2016, Mr Hoascar commenced employment with Taranis.[55]
(6)Within four months of Mr Hoascar commencing employment with Taranis, Taranis registered the business name 'VarioGen'.
(7)On 10 August 2017, Taranis applied for a patent in respect of the VarioGen, naming Mr Vetrone and Mr Hoascar as the inventors.
[54] Statement of Claim [10.1, particular (e)]
[55] While still employed by UON on a casual basis.
There is some force in the plaintiffs' submissions. The undisputed facts do call for an explanation. However, experience has shown that what appears to be suspicious may have an innocent explanation. In my view, it is simply too early to be able to make a meaningful assessment of the relative strengths and weaknesses of the parties' cases for the purposes of resolving this application.
This should not be interpreted as a conclusion that it would never be appropriate to make such an assessment. If an application is made later in the proceedings, it would be open to the plaintiffs to seek to persuade me that their case should be assessed as strong and that there is therefore good reason to conclude that there would be no litigation absent the allegation. They would then, however, also need to persuade me that this was a relevant factor.[56]
[56] I have not reached a concluded view as to whether this could be a relevant consideration, but see Co‑operative Bulk Handling [12].
While the plaintiffs maintained the contention just discussed, the plaintiffs accepted that the application could be determined on the basis that the parties are trade rivals.
Categories of documents
The documents that the plaintiffs seek to inspect have been categorised as follows:
(1)Documents relating to research and development of the VarioGen;
(2)Quotes, purchase orders and invoices in respect of the sale or supply of the VarioGen;
(3)Documents summarising Taranis' quotes, purchase orders and invoices, showing the names of clients and the relevant salesperson;
(4)Taranis' financial records;
(5)Emails relating to the provision of the VarioGen (or related services) to customers, and documents evidencing the commercial relationship between Taranis and certain customers, some of which include references to 'alliances' Taranis has made with third parties.
Prior to the hearing, the plaintiffs provided me with a file containing examples of documents in each category (Sample File). The defendants did not seek to put any additional documents before me, and did not suggest that the Sample File was not representative.
Both sides presented their submissions and evidence on a category‑by‑category basis, with some reference to examples within the Sample File.
Having not been provided with all of the documents, the application could only be ruled upon on a category‑by‑category basis rather than on a document‑by‑document basis. The parties were content for me to resolve it on that basis, and I am willing to do so.[57] The only exception to that is category 1, which the parties addressed by reference to six sub‑categories. Several of the sub-categories were comprised of a single document.
[57] See ts 160, 229 ‑ 230.
Category 1: Documents relating to research and development of the VarioGen
The documents in this category are said to be relevant to the stage and rate of development of Taranis' VarioGen. As noted, the parties addressed this category by reference to six sub‑categories of documents within the Sample File. I will do the same.
As to the confidentiality of the documents in this category, the evidence of the defendants was limited. The sole affidavit was of Mr Vetrone, a director of Taranis.[58] In relation to the category as a whole, Mr Vetrone said that the documents were confidential because they showed how Taranis created the VarioGen. He responded to the plaintiffs' submission that the VarioGen has now been commercialised, a patent application has been filed and accepted, and the patent specification is publicly available.[59] Mr Vetrone said that this did not mean that the documents were no longer confidential. He gave as an example some information in the documents in sub‑category 1, which I will discuss when dealing with that sub‑category. He said that that information was not disclosed in Taranis' patent application. He said that, if a trade rival had this information, it could potentially reverse engineer the VarioGen.[60]
[58] Affidavit of Joseph Rino Vetrone filed 3 June 2020 (Vetrone Affidavit).
[59] Plaintiffs' Submissions [34].
[60] Vetrone Affidavit [12] ‑ [17]. And see the Defendants' Submissions [22] ‑ [25].
The defendants did not adduce any evidence of the existence and degree of the alleged confidential information in any of the other sub‑categories of category 1, beyond Mr Vetrone's assertion that they were commercially sensitive because they showed how Taranis created the VarioGen.
Sub‑category 1: Taranis Tranche 1, documents 11, 12, 18 and 22
Are the documents confidential?
As noted, Mr Vetrone gave as an example some information in the documents in this sub‑category. He said that the documents in this sub‑category contain information concerning the programming of the SICES[61] controller which Taranis uses as the generator control system for the VarioGen, in particular the programming of certain functions, features, firmware and communication protocols. Mr Vetrone says that the programming code for the SICES controller is not publicly available to a person who purchases the VarioGen. He says the code is locked and cannot be accessed by a third party, including a purchaser. Mr Vetrone also says that that information is not disclosed in Taranis' patent application.
[61] This is the acronym of 'Società Italiana Costruzioni Elettriche Sumirago'.
The plaintiffs submit that any confidential information is not confidential to the defendants, but is the confidential information of SICES.[62] I do not accept this. In my view, if the documents are confidential, they would be confidential to both the defendants and to SICES. I accept the defendants' submission that the documents show that Taranis was asking SICES to modify SICES's controller in certain ways to achieve particular goals of Taranis.[63]
[62] See ts 152.
[63] See ts 184.
The plaintiffs' lawyers next assert that the documents do not reveal the programming code.[64]
[64] Plaintiffs' Reply Submissions [21].
When pressed for a specific sentence in any of the documents that revealed anything which would impact on the secrecy of the programming code, the defendants were unable to identify any such sentence.[65] The defendants said that the documents included discussions of the speed regulator, the range and the revolutions. They submitted that those discussions related to the code. When asked in what way, the defendants said they could not be any more precise than to say that the documents show what Taranis was trying to achieve and what was ultimately going into the code.[66] In the end, the defendants' counsel said he was 'not sure I can put it any higher … than to say that these documents evidence the research and development of the code for the VarioGen, and that information, we say, is commercially sensitive'.[67]
[65] ts 184 ‑ 187.
[66] ts 186 ‑ 187.
[67] ts 187 ‑ 188.
I accept that the documents contain information concerning the programming of the SICES controller. However, it was not explained how that information could reveal, or could allow a person to work out, the programming code.
The plaintiffs also refer to the age of the documents. The defendants submit that, regardless of their age, the information remains confidential. They did not, however, attempt to explain why that is so. An explanation was necessary given that the documents in the Sample File for this sub‑category are email exchanges between the defendants and SICES three to four years ago about development issues and queries. For example, the documents show that Taranis was looking for a way to modify a SICES controller so that it could be used instead of a 'ComAp' controller, to control a variable speed generator. There are also exchanges about what the controller was capable of achieving, such as whether it could be used to dynamically change the rated speed. There are also questions about whether the controller screen could be customised. I have not been told to what extent, if any, these explorations and queries are of relevance today. Both UON and Taranis now have a product on the market, and each is the subject of a patent application.
During the hearing, the defendants were unable to identify any specific information in the documents that was confidential. The defendants' submissions were, in effect, that documents that related to research and development of the VarioGen were self‑evidently commercially sensitive. I was told that the process by which Taranis developed its product was 'necessarily' of value to Taranis and causative of detriment if a trade rival who sells a competing product could see those documents and gain an insight.[68]
[68] ts 184.
I accept that documents evidencing research and development may well be confidential. However, it will necessarily depend on the facts. For example, it is difficult to imagine that historical research and development in relation to a superseded product would be confidential. While that is not this case, the defendants are required, in my view, to demonstrate why these documents are confidential, at the very least by reference to a specific example. I was given little more than the statement of Mr Vetrone, unsupported by any example from the contents of any of the documents, that the documents are confidential.
The manner in which this matter was argued created some difficulties. I accept that it is part of my obligation to review the documents for myself. However, I am not an engineer or a programmer. Without the assistance of an expert party identifying specific information that is confidential and explaining why, it is difficult to determine whether the documents are confidential.
In addition, if I was to determine that some information was or might be confidential, the plaintiffs would effectively be denied an opportunity to be heard as to why it was not. It was not the plaintiffs' burden to explain to me why the documents were not confidential. Further, given the way the matter was argued, all the plaintiffs could sensibly do was respond to the defendants' submissions and evidence - both of which were expressed in very general terms. In the context of the way the matter was argued, the plaintiffs could not be expected to anticipate which statements in the documents I might conclude were confidential and why. If I was to find from my own review of the documents that particular information in the documents was confidential, the plaintiffs would have had no opportunity to be heard as to why it was not. For that reason, if it would have made a difference to my decision in relation to this category, I would have given the plaintiffs an opportunity to be heard.
In reviewing the documents for myself, I consider, as a layperson, that they may contain confidential information despite their age. For example, on page 10 of the document in tab 3 of the Sample File, there is a long list of information that Mr Hoascar said he would ideally like to 'have over the CAN (PMS CAN Bus) if possible'. It appears that Mr Hoascar was seeking information about specific internal parameters of the SICES controller.
As will be seen, I do not consider that the documents warrant protection additional to that provided by the implied undertaking, even if they are confidential. Accordingly, it is unnecessary to determine whether the documents are confidential. I will assume it.
Do they warrant extra protection?
Mr Vetrone says that, if a trade rival had this information, it could potentially reverse engineer the VarioGen and that this could prejudice Taranis' commercial interests.
The plaintiffs ask, rhetorically, what is it that could potentially be reverse engineered? The plaintiffs submit that, if Taranis' patent application succeeds, the VarioGen will be protected, whether or not the programmable logic controller code is part of the invention.[69] The plaintiffs also submit that the defendants cannot establish that there is anything in the documents that is unprotected by the patent application and separate to the information in the patent application, such that they warrant additional protection.[70]
[69] Plaintiffs' Reply Submissions [20].
[70] ts 145.
The defendants answered the first submission by pointing out that the patent application does not include all of the details of how the VarioGen works and that the patent application may not succeed.[71] The defendants did not, however, address the second submission. They did not identify anything in the documents that warranted additional protection.
[71] ts 188 ‑ 189.
Further, Mr Keogh deposes that UON has no interest in reverse engineering the VarioGen and has no need to 'copy' it. He points out that UON already has a successful working system.[72]
[72] Affidavit of Mark Vincent Keogh sworn 5 June 2020 (Keogh June 2020 Affidavit) [14].
Even though UON does have a successful working system, I queried whether there was nevertheless a risk that the plaintiffs might seek to reverse engineer the VarioGen to see if there was some aspect of VarioGen's design that they could use to improve their product. In response, counsel for the plaintiffs submitted that, among other things, UON would not be tinkering with its design while it had a patent application pending.[73] The defendants did not challenge this submission.
[73] ts 139 ‑ 141.
In my view, the risk that UON would reverse engineer the VarioGen is purely speculative, given that UON already has its own fully operational system. In the circumstances, there is no reason to doubt Mr Keogh's evidence, and I accept it.
Accordingly, even assuming that the documents are confidential, I am not satisfied that the documents warrant additional protection.
Given this, the question of where the fair balance lies does not arise. The documents should be released from the Regime. Nevertheless, I will consider the plaintiffs' asserted need for personal access, in case I am wrong in failing to find that the documents required additional protection.
Why do the plaintiffs need access?
The plaintiffs' lawyers first submit that these documents need to be removed from the Regime primarily because they need their clients to explain the documents to them. In particular, counsel submits that they need to know if the documents show that Mr Hoascar revealed to Taranis how the GMC Generator works, and show that he was assisting Taranis to recreate the functionality of the GMC Generator in a different manner. If so, the statement of claim will need to be amended to more clearly identify that the plaintiffs are alleging, in the alternative,[74] that the VarioGen was a springboard development based on confidential information.[75]
[74] The plaintiffs currently plead that the VarioGen incorporates, copies or reproduces the design features or elements of the Invention - see Statement of Claim [15.4].
[75] Plaintiffs' Reply Submissions [22] and ts 155 ‑ 157.
Second, the plaintiffs' lawyers submit that, where they can determine without their clients' input that information in the protected documents warrants an amendment to the pleading, they could not make such amendments without breaching the Regime. That is, the plaintiffs' lawyers submit that the act of pleading would effectively disclose the information to their clients.
The plaintiffs' lawyers accepted that the first need could largely be met by an independent expert. However, this would obviously be less efficient, and more expensive.
The second need could not be met by an independent expert.
The defendants submit that it is too early in the proceedings for the documents to be released from the Regime.[76] The defendants submit that it is not appropriate for the plaintiffs to get access to any of the documents until the plaintiffs have fully identified the confidential information of the plaintiffs that they allege the defendants misused. The defendants submit, in effect, that unless the material sought to be released from the Regime was first identified as having come from the plaintiffs' confidential information, seeking to have it released was impermissible fishing.[77]
[76] ts 192.
[77] See, for example, ts 194.
I do not accept this. The plaintiffs have a sufficient factual basis from which they were able to allege that their confidential information was misused.[78] The plaintiffs' lawyers consider that documents protected by the Regime may provide a basis to plead a different manner of misuse, or to more specifically identify confidential information that was misused, or provide additional evidentiary support for allegations already pleaded. Having regard to the documents in this sub‑category, this is a reasonable expectation.[79]
[78] See the list of the matters that are common ground under the heading 'Is UON a trade rival of Taranis?'
[79] See, for example, the Sample File tab 1 page 11.
The plaintiffs need the Regime to be relaxed so that their lawyers can obtain confirmation from them as to what the documents show and so their lawyers can amend the pleading without breaching the Regime. This is not fishing.
In my view, the plaintiffs have a legitimate need to personally inspect the documents.
Conclusion on sub‑category 1
Assuming that the documents are confidential, I am not satisfied that they need additional protection beyond what is provided by the implied undertaking. Accordingly, the documents should be released from the Regime.
I have also found that the plaintiffs have a legitimate need to personally inspect the documents. I am not, however, able to assess where the fair balance would lie if I ought to have found that the documents needed additional protection. This is because that assessment would require me to weigh up the extent of the confidentiality and the potential damage to Taranis and benefit to UON if the documents were released against the plaintiffs' need to personally inspect the documents. I cannot do that without knowing why I was wrong in failing to find that the documents needed additional protection.
Sub‑category 2: Hoascar Tranche 2 document 59 and Taranis Tranche 3 document 138 (same document)
Is the document confidential?
The defendants consent to disclosure of the email itself but not the attachment. The attachment is a 'Technical Note' about, among other things, issues that arose when the VarioGen was being installed at the Iron Valley mine site.
The plaintiffs' lawyers submit that the Technical Note is not confidential because:[80]
The problems identified are sourced from emails that are not confidential (they were produced on subpoena by PIHA; duplicates of these emails discovered by the defendants are to be the subject of consent orders removing them from the … Regime); and
The information is stale, being issues encountered in the early operation or testing of the VarioGen and the steps taken (or to be taken) to rectify these issues.
[80] Plaintiffs' Reply Submissions [24].
The defendants submit that the Technical Note sets out the problem and solution in detail. They submit that that information is commercially sensitive, 'because it shows how Taranis optimises the VarioGen to meet a particular problem identified'. When asked why this was confidential when it related to issues encountered in the early operational testing four years ago, the defendants submitted that the age of documents was not as relevant to documents relating to research and development, compared to quotes or purchase orders.[81]
[81] ts 192.
The plaintiffs' lawyers asserted that the defendants consented to the disclosure of another document (Hoascar tranche 2, document 65) which was an email from Chris Gee of TruFlo Pumping Systems (TruFlo) complaining about the teething problems disclosed on page 5 of the Technical Note.[82] The defendants did not challenge this.
[82] ts 198.
Having looked at the document, some of the solutions would clearly not be confidential. For example, the fact that hardware was replaced on being found to have been, among other things, incorrectly crimped, seems like an obvious solution. The defendants did not attempt to explain why any of the solutions were actually confidential, beyond the broad assertion that the document was commercially sensitive 'because it shows how Taranis optimises the VarioGen to meet a particular problem identified'.
In view of the contents and the age of the document, I am not persuaded it is confidential.
Does it warrant extra protection?
In case I am wrong in failing to find that the document is confidential, I will consider whether it would warrant extra protection. In doing so, I will assume that the document is confidential.
When asked why the document required extra protection beyond the implied undertaking, the defendants submitted that the document could allow UON to 'shortcut the problem‑solving process'. When it was put to them that UON appeared to have already solved the problems, and had a fully functioning and complete system, the defendants submitted that that did not mean that UON might not benefit from having access to this sort of information. The defendants said UON might be able to use it to fine tune or improve their system.[83]
[83] ts 193.
In my view, this is entirely speculative and, given the circumstances, improbable. UON already has a fully working system that presumably does not suffer from the problems identified in the Technical Note. I am not satisfied that the information in the Technical Note could be used by UON to its benefit or to Taranis' detriment.
Accordingly, even assuming that the document is confidential, I am not satisfied that the implied undertaking would be inadequate.
Given this, the question of where the fair balance lies does not arise. The document should be released from the Regime. Nevertheless, I will consider the plaintiffs' asserted need for access.
Why do the plaintiffs need access?
The plaintiffs' lawyers submit that the Technical Note needs to be shown to the plaintiffs so that they can give instructions as to whether these issues were also encountered by UON while Mr Hoascar was employed by them, and, if so, whether similar steps were taken to rectify the problems.[84]
[84] Plaintiffs' Reply Submissions [25].
The defendants did not argue that the need was not real. Rather, they argued that, unless the material was first identified as having come from the plaintiffs' confidential information, these sorts of inquiries were impermissible fishing.[85] I have already explained why I do not accept this.
[85] ts 194.
I accept the plaintiffs have a legitimate need to personally inspect the document.
Conclusion on sub‑category 2
I am not satisfied that the document is confidential or, if I am wrong about that, that it needs additional protection. Accordingly, I consider that the document should be released from the Regime.
For the same reasons as for sub‑category 1, I am unable to assess where the fair balance would lie if I ought to have found that the document was confidential and needed additional protection.[86]
Sub‑category 3: Hoascar Tranche 2 document 64 and Taranis Tranche 3 document 54 (same document)
Is the document confidential and does it warrant extra protection?
[86] See under the heading 'Conclusion on sub‑category 1'.
This document is an email chain in July 2016 relating to the potential supply of generator sets to Mr Gee of TruFlo. In one email internal to Taranis, Mr Hoascar sets out some recommendations to Nick Robinson, the business development manager of Taranis, including as to the size of the generator required for different sized pumps.
The defendants submit that the document is commercially sensitive because it shows how Taranis calculates the size of the generator for a particular application, citing Mr Vetrone's affidavit.[87]
[87] ts 196.
In dealing with category 5, Mr Vetrone deposes that information relating to how Taranis calculates the size of the generator for the particular application for which VarioGen is to be used is commercially sensitive. He says that disclosure of such information would enable a trade rival to determine how Taranis approaches creating a solution for a customer.[88]
[88] Vetrone Affidavit [22] ‑ [23].
The defendants did not develop this in their submissions.[89] However, I am willing to accept that the document is confidential. I am willing to accept that disclosure of such information could enable a trade rival to determine how Taranis approaches creating a solution for a customer. However, there is no basis upon which to conclude that it would give UON an advantage or cause a detriment to Taranis. Indeed, on the material available to me, the converse may be inferred. UON operates entirely differently to Taranis.[90] Further, UON already has a fully operational system.
[89] The defendants' submissions on this sub‑category are contained in the Defendants' Submissions [28] ‑ [29] and at ts 195 ‑ 196. See also the discussion of sub‑category 5 and category 5.
[90] See, for example, Keogh June 2020 Affidavit [17] ‑ [20].
Accordingly, I am not satisfied that the document warrants additional protection.
Given this, the question of where the fair balance lies does not arise. The document should be released from the Regime. Nevertheless, I will consider the plaintiffs' asserted need for access.
Why do the plaintiffs need access?
The defendants have apparently agreed that a redacted version of the document may be inspected by the plaintiffs, limited to the words:
And … we should follow up with Joel from BHP and try to contact Mike - his boss. Maybe to ring OnSite Newman, as they have very good connections within the company and provide our product and services … VarioGen S, VarioGen L, VarioGen P, VarioGen F and VarioGen M.
This would apparently address the plaintiffs' interest in the alleged solicitation of UON's clients. However, the plaintiffs' lawyers submit that the document also appears to be relevant to the development of the VarioGen because the emails discuss necessary components.
The plaintiffs' lawyers submit that the plaintiffs need to be able to give instructions as to 'the recommendations Mr Hoascar makes, and particularly whether they are the same as UON's recommendations for the GMC. This is particularly important given the recommendations are specifically with reference to submersible pumps (a matter which Mr Vetrone says is not a core business activity for Taranis.[91])'.[92]
[91] Vetrone Affidavit [9].
[92] Plaintiffs' Reply Submissions [27].
The defendants again submitted that the Regime should not be relaxed until the pleadings were closed. They noted that the plaintiffs did not plead that Mr Hoascar's recommendations were based on the plaintiffs' confidential information.[93] I have already explained why I do not accept this is an obstacle to the plaintiffs being able to establish a need to personally inspect documents.[94]
[93] Defendants' Submissions [28] ‑ [29] and ts 196.
[94] See under the subheading 'Premature application'.
I am satisfied that the plaintiffs have a legitimate need to personally inspect the document.
Conclusion on sub‑category 3
I am not satisfied that the document needs additional protection. Accordingly, the document should be released from the Regime.
For the same reasons as for sub‑category 1, I am unable to assess where the fair balance would lie if I ought to have found that the document needed additional protection.[95]
Sub‑category 4: Hoascar Tranche 2 document 71 and Taranis Tranche 3 document 60 (same document)
Is the document confidential and does it warrant extra protection?
[95] See under the subheading 'Conclusion on sub‑category 1'.
The defendants did not suggest any basis upon which this document should be considered confidential to the defendants, or that it required extra protection.[96] Accordingly, I am left with the defendants' submissions about category 1 as a whole.
[96] The defendants' submissions on this sub-category are contained in the Defendants' Submissions [30] ‑ [32] and at ts 196.
Nor is it obvious from the document itself that it is confidential or warrants extra protection. It is an email exchange in 2016 between Mr Robinson of Taranis and Mr Gee of TruFlo in 2016, copied to Mr Hoascar. Mr Robinson[97] of Taranis asked if Mr Gee knew a person at BHP and said that BHP were looking at a particular UON solution:
BHP are looking seriously at a UON solution which is a Genset on Trailer with pipeworks (see attached pic) that has:
1.Rosemount flowmeter
2.Siemens Pressure Transmitters (1 upstream of the valve and 1 downstream of the valve)
Any thoughts?
[97] Mr Robinson of Taranis is not related to the defendants' counsel.
Mr Gee responded as to what TruFlo could offer BHBP, in alliance with Taranis, in very general terms.
I am not satisfied that the document is confidential or, even assuming that it is, that it warrants additional protection.
Given this, the question of where the fair balance lies does not arise. The document should be released from the Regime. Nevertheless, I will consider the plaintiffs' asserted need for access.
Why do the plaintiffs need access?
The plaintiffs' lawyers submit that, for the same reason as for the sub‑category 1 documents, this document also needs to be removed from the Regime.
The defendants query how an email from Taranis to TruFlo and copied to Mr Hoascar could evidence disclosure by Mr Hoascar of confidential information.[98] The plaintiffs' lawyers submit that it could do so if it could be proved that the information had to have come from Mr Hoascar. The plaintiffs' lawyers submit that they therefore need to be able to get instructions as to whether that information was in the public domain or was disclosed to customers who may have passed on the information, or if it was known only to employees of UON who worked on the GMC Generator.[99]
[98] Defendants' Submissions [32].
[99] Plaintiffs' Reply Submissions [29].
In my view, this is a legitimate need.
Conclusion on sub‑category 4
I am not satisfied that the document is confidential or that it needs additional protection. Accordingly, I consider that the document should be released from the Regime.
For the same reasons as for sub‑category 1, I am unable to assess where the fair balance would lie if I ought to have found that the document was confidential and needed additional protection.[100]
Sub‑category 5: Hoascar Tranche 2 document 77 and Taranis Tranche 3 document 66 (same document)
Is the document confidential and does it warrant extra protection?
[100] See under the heading 'Conclusion on sub‑category 1'.
This document is an email exchange between Mr Hoascar and Mr Gee of TruFlo in 2017 about preparing a quote for a BHP job.
The only specific matter identified by the defendants as confidential was that it included specifications in respect of Taranis' selection criteria for generators.[101] This appears to be limited to the last email in the email chain.
[101] The defendants' submissions on this sub‑category are contained in the Defendants' Submissions [33] and at ts 196 ‑ 197.
This was the same matter raised in relation to sub‑category 3, discussed earlier. For the same reasons, I am not persuaded additional protection is required.
Given this, the question of where the fair balance lies does not arise. The document should be released from the Regime. Nevertheless, I will consider the plaintiffs' asserted need for access.
Why do the plaintiffs need access?
The plaintiffs' lawyers submitted that, for the same reason as for the sub‑category 1 documents, this document needs to be removed from the Regime.
In response, the defendants submitted only that it was not clear how one of the extracts relied upon by the plaintiffs could relate to research and development of the VarioGen. The defendants submitted that the extract related to Taranis and TruFlo tendering for a BHP job involving the supply of the VarioGen.[102]
[102] ts 196 ‑ 197.
I am satisfied that the plaintiffs have a legitimate need to see this document. I accept that the exchange as a whole is Taranis and TruFlo tendering for a BHP job involving the supply of the VarioGen. However, I am satisfied that it relates to the development of the VarioGen. Mr Hoascar and Mr Gee are, among other things, discussing a way in which they can reach a point where, working together, they could match or better what UON was offering.
Conclusion on sub‑category 5
I am satisfied that the document is confidential. I am not satisfied that it needs additional protection. Accordingly, I consider that the document should be released from the Regime.
For the same reasons as for sub‑category 1, I am unable to assess where the fair balance would lie if I ought to have found that the document needed additional protection.[103]
Sub‑category 6: Taranis Tranche 3 documents 74, 135, 136, 139
[103] See under the heading 'Conclusion on sub‑category 1'.
These documents are duplicates of documents in Hoascar Tranche 2 that the defendants concede can be disclosed to the plaintiffs.[104]
Other documents in category 1
[104] Defendants' Submissions [34].
The Sample File contained other documents as examples of a category 1 document that were not specifically addressed in the parties' written submissions. These were attachments to an email sent in 2016 from Mr Hoascar to a Mr Forte at Atlas Copco. Mr Forte had asked Mr Hoascar to provide him with copies of the documents that he had 'handed out to the guys from BHP'.[105]
[105] Sample File tab 7A.
The defendants did not make any submissions about these documents. Even assuming they are confidential, there is no basis upon which I could conclude that they require additional protection. The documents should be released from the Regime.
For completeness, I note that the plaintiffs' lawyers submit that they need their clients to explain the documents to them.[106] This is a legitimate need.
[106] ts 151.
Category 2: Quotes, purchase orders and invoices
Are the documents confidential?
Mr Vetrone notes in his affidavit that the documents contain the names of Taranis' customers, Taranis' pricing, and the types of goods and services that Taranis supplies for a particular price. Mr Vetrone asserts that this information is commercially sensitive and that it would allow a trade rival to determine who Taranis supplies its goods and services to and for how much. He asserts that disclosure of this information would prejudice Taranis' commercial interests.[107]
[107] Vetrone Affidavit [18] ‑ [19].
The defendants submit that '[i]t ought be uncontroversial that quotes, purchases orders, invoices, client lists and financial records are prima facie commercially sensitive documents that a trade rival ought not be permitted to inspect personally'.[108] The defendants were unable to provide any authority for this proposition.[109]
[108] Defendants' Submissions [35]. See also ts 208 ‑ 209.
[109] ts 208 ‑ 209.
The plaintiffs' lawyers submit that whether or not such documents are confidential will depend on the circumstances. The plaintiffs quote from a recent English authority in which Miles J said, after reviewing relevant case law:[110]
These cases show that information about prices may or may not be confidential depending on the circumstances. There is no one-size rule that fits all cases, and the issue is highly sensitive to the particular facts. So, where the information is about a tender for a particular contract, or concerns the specific prices charged to particular customers, it is more likely to be confidential. Other factors will include the extent to which the claimant has taken steps to keep the price secret in the past. Practices or usages of a given market are likely to be important. Some of the factors which may be relevant were set out in Faccenda, but that case like all others needs to be read in its factual context (in that case an employee's covenant).
[110] Fortescue Metals Group Ltd v Argus Media Ltd [2020] EWHC 1304 (Ch) [49]. The reference to 'Faccenda' was a reference to the well‑known case of Faccenda Chicken Ltd v Fowler [1987] Ch 117, 140.
The plaintiffs point out that the Vetrone Affidavit contains none of this detail.
The plaintiffs point out that the defendants have not adduced any evidence as to how Taranis arrives at its pricing, whether its pricing is kept secret, the extent to which prices are negotiated, or whether it offers different prices to different customers.[111]
[111] Plaintiffs' Reply Submissions [37].
The plaintiffs' lawyers also submit that the quotes, purchase orders and invoices could only be of limited commercial sensitivity due to their age. The documents in this category include quotes sent in 2017, and the most recent is dated 10 July 2019. The plaintiffs' lawyers do not submit that this is why the documents should be released from the Regime. Rather, they submit that this is an additional factor, tipping the balance further in their favour.
In my view, whether or not such documents are confidential will depend on the particular circumstances. There can be no fixed rule. It is easy to imagine quotes that would clearly not be confidential (for example a very old quote) and quotes that clearly would be (for example a quote in a tender process currently on foot in which the trade rival is a competing tenderer). Similarly, a client list may well be confidential. However, if a company publishes its client list for self‑promotion purposes, the client list would clearly not be confidential.
That said, while it will always depend on the circumstances, I consider that the starting point should be that such documents are prima facie confidential.
Accordingly, despite the absence of probative evidence from the defendants, I accept that these documents are confidential.
Do they warrant extra protection?
The defendants submit that it is the sort of information that a trade rival could inadvertently or unwittingly take advantage of in supplying a customer.[112]
[112] ts 210 ‑ 211.
In his second affidavit, Mr Keogh explains, in considerable detail, why the information would not be useful to UON, and, in particular, why it could not be used to undercut Taranis or obtain a commercial advantage. In short, he deposes that:[113]
(1)UON has a different business model;
(2)what UON offers in terms of installation, training and other services as part of its solution is different;
(3)UON has a different supply chain and cost structure;
(4)UON does not retrofit any generators.
[113] Keogh June 2020 Affidavit [16] ‑ [20].
I accept Mr Keogh's evidence. I am not satisfied that the documents warrant protection additional to what is provided by the implied undertaking.
Given this, the question of where the fair balance lies does not arise. The documents should be released from the Regime. Nevertheless, I will consider the plaintiffs' asserted need for access.
Why do the plaintiffs need access?
In July 2019, the defendants provided to the plaintiffs on an open basis a summary record of Taranis' sales transactions (Summary Spreadsheet).[114] The Summary Spreadsheet purported to summarise the quotes, purchase orders and invoices discovered by Taranis. It did not include the clients' names, a description of the work performed or the equipment supplied. It did not include quotes that did not result in sales.
[114] Affidavit of Mark Vincent Keogh sworn 7 May 2020 Annexure MVK‑1.
The plaintiffs' lawyers submit that the quotes, purchase orders and invoices need to be released from the Regime because the Summary Spreadsheet does not provide sufficient information to enable the plaintiffs to provide particulars of their loss or to prove they suffered a detriment, a necessary element of their claim of an equitable breach of confidence. They submit that it is necessary to show those documents to the plaintiffs' witnesses, particularly Mr Keogh[115] (managing director of UON and sole director of LAA; co‑inventor of the GMC Generator) and another director of UON,[116] 'in order to proof them and obtain instructions in relation to the fact of the plaintiffs' detriment (not just the quantification of that detriment)'.[117]
Particulars of loss
[115] Mark Keogh.
[116] Kenny Keogh.
[117] Plaintiffs' Submissions [49].
In relation to the particulars of loss, the defendants submit that disclosure for these purposes is premature. The defendants concede that, until it is disclosed, the plaintiffs cannot fully particularise the extent of their loss. Accordingly, the defendants said they would no longer press for particulars of loss and damage at this stage.[118]
Detriment
[118] See ts 213 ‑ 214. And see ts 204.
In relation to proof of detriment, the defendants submit[119] that, if the plaintiffs succeed in proving that Taranis' VarioGen incorporates the plaintiffs' confidential information, then the fact the VarioGen has been sold at all establishes the 'fact' of detriment. The defendants also submit that Mark Keogh has previously sworn an affidavit deposing to a detriment.
[119] Defendants' Submissions [44.1].
The defendants have not formally admitted that, if Taranis' VarioGen incorporates the plaintiffs' confidential information, then UON has suffered a detriment. If the defendants were to do so, the plaintiffs would not have a need to inspect the documents in this category to establish a detriment. Unless or until that occurs, the plaintiffs have a legitimate need.
In my view, the fact that Mr Keogh has previously sworn an affidavit deposing to a detriment is not inconsistent with the plaintiffs having a need to inspect these documents to support an assertion of detriment, and to enable the plaintiffs to be fully informed as to the evidence available to support that assertion, so that they are in a position to assess the strength of their case and issues of proportionality.
Conclusion on category 2
The defendants did not adduce evidence to support their claims that the documents were confidential. Nevertheless, I am willing to accept that they are.
I am not, however, satisfied that additional protection is required. In view of the evidence of Mr Keogh, I consider that the defendants will not be prejudiced by their release from the Regime. The way UON conducts its business means that it could not take advantage of the information.
Accordingly, the documents should be released from the Regime.
In case I am wrong in failing to find that additional protection is required, I will assess where the fair balance would lie on the assumption that the information could be used by UON to undercut Taranis in quoting for work.
I accept that the plaintiffs need to see the documents for legitimate reasons, to ensure that they are fully informed as to the evidence available to support the assertion of detriment, so that they are in a position to assess the strength of their case and give instructions when issues of proportionality arise. However, it is not clear why the plaintiffs need, at this stage, to see the actual prices to assess the strength of their case in relation to detriment. Their detriment is what they allegedly lost, not what Taranis gained.
I accept that the information as to prices may be relevant to determining proportionality issues that arise, but this on its own would not be of great weight in the balance.
Had I been satisfied that the documents did require additional protection, I would have found that a fair balance required the release of the documents from the Regime, but that, at this stage, the prices should be redacted.
Category 3: Documents summarising Taranis' quotes, purchase orders and invoices
The documents within this category in the Sample File are documents 242 and 243 in Taranis Tranche 4. They show the names of clients and the relevant salesperson.
The parties agreed that whatever ruling is made in relation to the previous category should be made in relation to this category of documents.[120]
[120] ts 214.
Accordingly, the documents should be released from the Regime.
Category 4: Taranis' financial records
The documents within this category in the Sample File are documents 1263 ‑ 1271 in Taranis Tranche 5.
Are the documents confidential?
These documents are clearly confidential. Taranis is an exempt proprietary company.
Do they warrant extra protection?
Mr Vetrone deposes that disclosure of these documents to a trade rival would prejudice Taranis' commercial interests because it would enable a trade rival to determine, for example, whether Taranis is running at a profit or loss, or how much Taranis outlays on a particular item of expenditure.
I accept that such information could, depending on the circumstances, warrant protection additional to that provided by the implied undertaking. However, in the circumstances of this case and these documents, it is difficult to understand how the information could be impermissibly used by UON to its advantage or Taranis' detriment. I can of course see that UON could use the information to assess whether any judgment they obtain is likely to be satisfied, and in making decisions in relation to the litigation, such as whether to incur particular costs and in making settlement offers. This, however, would not be an impermissible use. Indeed, as will be seen, this is part of the reason why the plaintiffs say they need to see the documents - to enable these sorts of decisions to be made.
In oral submissions, the defendants highlighted that the documents showed how much Taranis had spent on research and development.[121] Again, it is difficult to understand how that information could be impermissibly used by UON to its advantage or Taranis' detriment. UON already has a fully operational system.
Why do the plaintiffs need access?
[121] ts 219 ‑ 220.
The plaintiffs' lawyers submit that it is necessary to disclose information in relation to Taranis' overall financial position so as 'to obtain the plaintiffs' instructions in respect of proportionate management of the litigation, whether to narrow certain issues in dispute or pursue certain remedies, and in order to advise them in respect of any settlement offer they propose or receive'.[122] The plaintiffs' lawyers offered, as an example, using the documents to demonstrate to their clients that, even though Taranis is an exempt proprietary limited company, its financial position means that it would be able to meet an award of damages.[123] The documents would also show other matters that could be relevant to an assessment of prospects of success. For example, there was a significant increase in sales in Karratha after Mr Hoascar joined Taranis.[124]
[122] Plaintiffs' Submissions [60].
[123] ts 217.
[124] ts 217 ‑ 218.
The defendants submit that the Summary Spreadsheet provides sufficient information at this point in the proceedings.
I accept the defendants' submission. If the plaintiffs' solicitors reached the view that the information was crucial to a concrete decision that needed to be made now, the position would be different. For example, if the plaintiffs' solicitors considered that the financial position of Taranis was weak and their clients should consider a low settlement offer, it is likely that a fair balance would require the documents to be released from the Regime. Similarly, if there was a specific forensic decision[125] that would incur significant costs (such as whether to engage an expert), it is likely that a fair balance would require the documents to be released from the Regime.
[125] The Elder Affidavit, filed on behalf of the plaintiffs, referred to numerous difficulties the plaintiffs' solicitors experienced because they could not show the documents to the plaintiffs and their witnesses - see at [7]. However, the difficulties were described in very general terms and were, at least in one respect, historical - see [7.3].
The plaintiffs also submit that it may be open to them to seek an account of profits by reference to the entire capital value of the business acquired by Taranis.[126] They submit that they are entitled to inspect the relevant financial documents that will inform their decision in respect of any election as to remedy.[127] The plaintiffs point out that the decision as to whether to make an election is for them to personally make. They also point out that, until they see the information, they cannot give instructions as to whether to brief experts and incur the associated costs.[128]
[126] See Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1.
[127] Plaintiffs' Submissions [61].
[128] ts 218.
The defendants submit that the plaintiffs do not need to personally inspect the financial records in order to make an election.
I accept that the plaintiffs do not need to personally inspect the financial records in order to make an election, at least not before an expert report has been prepared to inform that decision. This does not address the plaintiffs' submission that, until they see the information, they cannot give instructions as to whether to brief experts and incur the associated costs. I accept this is a legitimate need. I am not, however, satisfied that the need exists right at this moment.
Conclusion on category 4
The documents are confidential.
It is not obvious that the documents require protection additional to that provided by the implied undertaking. Although Mr Vetrone asserted that disclosure of these documents to a trade rival would prejudice Taranis' commercial interests, his reason for making this assertion was unpersuasive. However, for present purposes, I am willing to accept what is effectively his opinion that they do.
I accept the plaintiffs have a legitimate need to see the documents, but am not satisfied that they need to see them now.
Weighing up each of these factors, I consider that a fair balance does not require the release of the documents from the Regime at this stage.
I record, however, that, if the plaintiffs renew their application for access to these documents in the future, the defendants will need to present more compelling reasons if they intend to resist the application.
I also record my view that the balance would favour the release of the documents if, and when, one of the above‑mentioned circumstances occurs. That is, the balance would favour the release of the documents if and when the plaintiffs' solicitors wanted instructions in relation to making or responding to a settlement offer, or in relation to a specific forensic decision that would incur significant cost (including as to whether experts should be briefed), in circumstances where the plaintiffs' solicitors considered that the decision could be influenced by the contents of these documents.
Category 5: Emails to customers
This category is described as 'Emails relating to the provision of the VarioGen (or related services) to customers, and documents evidencing the commercial relationship between Taranis and certain customers, some of which include references to "alliances" Taranis has made with third parties'.
The defendants conceded that some of the documents in this category could be released.[129]
Are the documents confidential?
[129] See ts 225.
Mr Vetrone deposes that these emails contain commercially sensitive information such as Taranis' pricing for the VarioGen and information related to how Taranis has created a particular VarioGen package for the prospective customer. He says that an example of this is information relating to how Taranis calculates the size of the generator (in kVA) for the particular application for which the customer is using the VarioGen.[130]
[130] Vetrone Affidavit [22].
I accept that at least some of these documents are confidential.
Do they warrant extra protection?
Mr Vetrone deposes that disclosure of this information to a trade rival would prejudice Taranis' commercial interests because it would enable a trade rival to determine how Taranis quotes for particular jobs in terms of both pricing and how Taranis approaches creating a solution for a customer.[131]
[131] Vetrone Affidavit [23].
In relation to pricing, the documents in this category in the Sample File did not include actual figures.[132] To the extent that they showed Taranis' approach to quoting (as distinct from the amounts), I am not satisfied this could be of any benefit to UON or cause a detriment to Taranis. UON operates entirely differently to Taranis.[133]
[132] See tabs 25 ‑ 28 in the Sample File.
[133] See, for example, Keogh June 2020 Affidavit [17] ‑ [20].
In dealing with sub‑category 3 of category 1, I dealt with the submission that information such as how Taranis calculates the size of the generator would benefit a trade rival. I explained why I did not accept it would benefit UON or cause a detriment to Taranis.
Given this, the question of where the fair balance lies does not arise. The documents should be released from the Regime. Nevertheless, I will consider the plaintiffs' asserted need for access.
Why do the plaintiffs need access?
The plaintiffs allege, among other things, that Mr Hoascar solicited the business of various customers of UON, including PIHA, BHP and Rio Tinto, and that the VarioGen was subsequently sold or supplied to BHP and Rio Tinto by Taranis.[134]
[134] See ts 226.
The plaintiffs' lawyers submit that the documents in this category appear to show that, where the VarioGen was supplied to BHP and Rio Tinto sites, it was not supplied directly but was supplied through third parties, including National Pump & Energy (NPE) and TruFlo.[135]
[135] Plaintiffs' Submissions [63].
The plaintiffs' lawyers submit that '[i]t is imperative that the plaintiffs be informed of this, as it is central to the plaintiffs' solicitation claim and is likely to affect their claim for damages'.[136]
[136] Plaintiffs' Submissions [64].
I accept that this information provides a basis to amend the pleading to plead indirect solicitation. I accept the information could affect the assessment of potential damages.
The plaintiffs' lawyers submit that the information will also inform the proper terms and addressees of future subpoenas. They submit that the plaintiffs should be told why their lawyers recommend subpoenaing entities such as TruFlo and NPE, particularly when doing so exposes them to liability for the recipients' unknown costs of compliance with a subpoena. The plaintiffs' lawyers also submit that it is possible that the plaintiffs will need to subpoena entities shown by the confidential documents to be customers of both Taranis and UON.[137] They submit that, before any such subpoenas are issued, the risk of any commercial fallout will need to be assessed against the potential benefits in the litigation.[138]
[137] It appears that this would only apply to BHP and a company called Atlas Copco - see ts 227 ‑ 229.
[138] Plaintiffs' Submissions [64] ‑ [65].
I accept that the plaintiffs should not be required to make forensic decisions blindly. I accept that the plaintiffs should not be required to decide whether it is worth risking upsetting a customer without knowing what the potential value might be.
I am satisfied that the plaintiffs have a legitimate need to personally inspect the documents.
Conclusion on category 5
The documents are confidential. However, I am not satisfied that the documents need additional protection. Accordingly, I consider that the documents should be released from the Regime.
For the same reasons as for sub‑category 1 of category 1, I am unable to assess where the fair balance would lie if I ought to have found that the documents needed additional protection.[139]
[139] See under the heading 'Conclusion on sub‑category 1'.
Conclusion
For the reasons I have given, I consider that the documents in categories 1, 2, 3 and 5 should be released from the Regime.
I will hear from the parties as to the form of the final orders, including as to whether the orders should be stayed to permit the defendants to appeal this decision if they wish to do so.
I will also hear from the parties as to costs. In view of the outcome, my preliminary view is that the defendants should pay the plaintiffs' costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SW
Associate to the Honourable Justice Archer24 JULY 2020
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