Federal Court Grants Leave for Joinder of New Parties

OUTCOME: Allowed in Part

FEDERAL COURT OF AUSTRALIA

[COMPANY_1] v [COMPANY_3] [2017] FCA 1262 File number: VID 1062 of 2017

Judge: O'CALLAGHAN J

Date of judgment: 26 October 2017

Catchwords: PRACTICE AND PROCEDURE – application for leave to file further amended statement of claim – application to join non-parties to proceeding and for interlocutory relief against proposed new parties – application for procedural orders against existing parties

Legislation: Federal Court Rules 2011 (Cth), r 9.05(1)

Date of hearing: 23 October 2017

Registry: Victoria

Division: General Division

National Practice Area: Intellectual Property

Sub-area: Copyright and Industrial Designs

Category: Catchwords

Number of paragraphs: 17

Counsel for the Applicant: [redacted]

Solicitor for the Applicant: [redacted]

Counsel for the First, Third and Fourth Respondents: [redacted]

Solicitor for the First, Third and Fourth Respondents: [redacted]

Counsel for the Second Respondent: [redacted]

Solicitor for the Second Respondent: [redacted]

BETWEEN: THE [COMPANY_1] (ACN [PHONE])

Applicant

AND: [COMPANY_3] (ACN [PHONE])

First Respondent

[NAME_8]

Second Respondent

[COMPANY_12] (ACN [PHONE])

Third [COMPANY_13] (ACN [PHONE])

Fourth Respondent

JUDGE: O'CALLAGHAN J DATE OF ORDER: 26 OCTOBER 2017

THE COURT ORDERS THAT:

1. By 4:30pm on 27 October 2017, the parties file and serve any such submission as they may wish to make in respect of the form of orders proposed in [17] of these reasons. 2. The case management hearing be stood over to a date to be fixed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O'CALLAGHAN J:

introduction 1 By an interlocutory application filed on 19 October 2017 the applicant seeks: (1) an order that nine further respondents be joined to this proceeding pursuant to r 9.05(1) of the Federal Court Rules 2011 (Cth) and that it have leave to file a further amended statement of claim; (2) interlocutory relief against the nine further respondents and further orders requiring some of them to provide affidavits identifying any dealings they may have had with confidential documents and information, which the applicant alleges were improperly obtained from it; (3) orders that the existing respondents provide to the applicant certain documents and data and that the first, third and fourth respondents make and provide further forensic copies of certain computer backup drives; and (4) directions for the further conduct of the proceeding, including the fixing of a trial date next year. 2 The application came on for hearing on 23 October 2017. The parties agreed to deal with the question of directions in relation to the further conduct of the proceeding after the other issues now in dispute have been determined. 3 Senior counsel who appeared for all of the current respondents (except the second respondent) and for the proposed respondents, did not oppose the making of many of the orders sought by the applicant. He consented to an order that the two corporate proposed respondents, and [NAME_14], be joined to the proceeding. However, he opposed the joinder of the other proposed individual respondents, namely [NAME_17], [NAME_18], [NAME_19], [NAME_22] and [NAME_23] (the proposed individual respondents), on the sole ground that the pleaded case against them does not disclose an arguable cause of action arising out of a breach of confidence. 4 Senior Counsel also agreed that injunctive relief should go against the two new corporate respondents, and against [NAME_14], but not against the proposed individual respondents. At the conclusion of the hearing on 23 October 2017, and upon senior counsel for the applicant giving the usual undertaking as to damages, I made an order, until further order, restraining each of the proposed respondents – that is [COMPANY_24], [COMPANY_24] and [NAME_14], and the proposed individual respondents – whether by themselves, or by their servants or agents or otherwise, from accessing, viewing, downloading, disseminating or otherwise using the "[NAME_25]", as defined in para 50 of the amended statement of claim filed 19 October 2017. 5 The applicant also sought orders that each of the proposed individual respondents make and serve on the other parties to the proceeding an affidavit setting out, to the best of his or her ability and knowledge, all dealings with, and use of, certain confidential materials, defined in the amended statement of claim filed 19 October 2017 as "[NAME_25]", and the content of those materials. The making of that order was opposed. 6 The making of an order that the first, third and fourth respondents ([NAME_26]) obtain forensic copies of any backups of a "P:/drive", a "Q:/drive" and certain email accounts which existed on or about 28 September 2017 was also opposed, on the grounds that the applicant already has such backups as at 10 October 2017, or thereabouts, and that it would cost approximately $2,600 to obtain the backups. The applicant pressed for the orders on the basis that: (1) the order made by [NAME_27] made on 28 September 2017 required [NAME_26] "forthwith" to produce those documents; (2) that order had not been complied with because the documents were not "forthwith" produced; (3) the state of the documents as at around 28 September 2017 is, or may well be, of forensic importance in this proceeding; and (4) the cost of the exercise in the scheme of things is neither here nor there. 7 I take each issue in turn below.

The pleading/joinder 8 I do not propose, and it is not necessary, to recite in these reasons the history of the proceeding to date; to deal in detail with the proposed pleaded case against each of the proposed individual respondents; or to recite the allegations and proposed allegations of serious wrongdoing made by the applicant in this proceeding. 9 The applicant's application to join the proposed individual respondents arises out of the content of two affidavits, one of [NAME_28] dated 13 October 2017 and the other of the second respondent, [NAME_8], dated 12 October 2017, both filed on behalf of [NAME_26] pursuant to orders previously made by the Court. As the applicant submitted: [Those affidavits] disclosed that the [proposed individual respondents] either personally accessed, used or disseminated the [NAME_25], or employed or otherwise commercially benefited from those people who did so. The allegations made against each of [them] … All arise out of the same course of misconduct sought to be impugned by[the applicant] in this proceeding. In essence, [those affidavits] have revealed that many more people were involved in the misappropriation and misuse of the [NAME_25], for the benefit of additional corporate entities. 10 Senior counsel for the proposed individual respondents submitted that, unlike [NAME_8] (the second respondent) and [NAME_14] (whom it was agreed should be joined as a respondent), no allegation is made against the proposed individual respondents that they improperly or illegitimately accessed the applicant's database. He submitted that the proposed individual respondents are "innocent recipients" of the various documents referred to in the amended statement of claim. He further submitted that because that is so, and that the proposed individual respondents are "only employees" of the relevant corporate respondents, they owe no duty to the applicant and "it can't be said that by reason of some duty owed, accessing and misusing it, if it be the case, confidential information amounts to a breach of confidence". 11 Senior counsel for the applicant submitted, to the contrary, that the amended statement of claim articulates, at the very least, an arguable case that, on the face of the relevant documents referred to in the pleading in respect of each of the proposed individual respondents, it ought to have been apparent to each of them in their positions that the documents with which they had been provided or shown was or contained confidential information that belonged to, and could only have belonged to, the applicant; and that each of the proposed individual respondents had no permission from the applicant to view the information, let alone use it or disclose it to anybody else. Senior counsel submitted that that is a perfectly acceptable basis upon which one may plead a case of breach of confidence. 12 In my opinion, the applicant has, at the very least, pleaded a case against each of the proposed individual respondents of the type described by senior counsel for the applicant. [ADDRESS] was taken to one example of a confidential document that it is alleged was shown by [NAME_14] to [NAME_16], one of the proposed individual respondents. Having viewed the document, which includes references to a trading agreement of the applicant, "member deals" and a claim by the applicant to copyright in the document, it is, at the very least, arguable that [NAME_16] must have known, and/or did know, that the document was confidential, that the information in it belonged to the applicant and that he had no permission from the applicant to use or disclose it. In my view, the pleaded case against each of the other proposed individual respondents may be described in similar terms. 13 Accordingly, I will order that each of the proposed individual respondents be joined as a respondent to this proceeding.

BACKUPS SOUGHT 14 [NAME_26] have not given any good reason why they should not provide the backups sought. I accept the submissions of senior counsel for the applicant recorded at [6] above. [NAME_26] did not timely comply with the order made by [NAME_27] on 28 September 2017 and there is no good reason demonstrated why the applicant should not, in effect, be given the information that ought to have been "forthwith" disclosed. Even allowing for the intervention of the Victorian public holiday associated with the Australian Football League Grand Final, a factor upon which senior counsel for [NAME_26] sought to rely for part of the delay, no good explanation was given for the delay. Further, the submission that, in a case such as this, the expenditure of $2,600 to obtain the backups is meaningful prejudice, cannot be accepted.

Injunctive relief 15 Given that I propose to make orders joining each of the new individual respondents, I will also make the orders sought by the applicant for injunctive relief against all of the new respondents, so that they will be subject to the same restrictions and obligations as the existing respondents.

Affidavits SOUGHT from proposed individual respondents 16 I am not persuaded that there is any particular need for an order that each of the proposed individual respondents make and serve an affidavit setting out, to the best of their ability and knowledge, all dealings with, and use of, the confidential materials. For the time being at least, in my view, it would not be reasonable to impose this burden on the proposed individual respondents. Unless and until it can be demonstrated otherwise, it is sufficient that [NAME_26], having consulted with the proposed individual respondents, disclose the nature and extent of their dealings with the confidential materials, if any, either through the accountants retained or by [NAME_28] and/or others. That said, if the applicant can demonstrate a particular need for evidence to be adduced directly from particular respondents, it may make an application for orders accordingly pursuant to liberty to apply.

Conclusion 17 For those reasons, I propose to make the following orders, subject to further submissions from any party (if any), which I will direct be made by 4:30pm tomorrow: (1) Pursuant to r 9.05(1) of the Federal Court Rules 2011 (Cth), the following persons be joined as respondents to this proceeding: (a) [COMPANY_24]; (b) [COMPANY_24]; (c) [NAME_15],; (d) [NAME_17]; (e) [NAME_18]; (f) [NAME_19]; (g) [NAME_22]; and (h) [NAME_23] (collectively, the New Respondents). (2) Until trial or further order, the New Respondents be restrained, whether by themselves, or by their servants or agents or otherwise, from accessing, viewing, downloading, disseminating or otherwise using the "[NAME_25]", as defined in para 50 of the amended statement of claim filed 19 October 2017 (the ASOC). (3) The New Respondents refrain from deleting any evidence relating to the accessing, viewing, downloading, dissemination or other use of the [NAME_25] from any of their personal computers, smartphones, or portable storage devices. (4) [NAME_26] must, by no later than Friday, 27 October 2017, instruct [NAME_29] forthwith to take all practicable steps to obtain forensic copies of: (a) any backup of the P:/ drive of the [NAME_2] identified in para 64(b)(i) of the affidavit of [NAME_28] (the [NAME_28]) affirmed 13 October 2017 which existed on or about 28 September 2017; (b) any backup of the Q:/ drive of the HTH network identified in para 64(b)(ii) of the [NAME_28] which existed on or about 28 September 2017; (c) any backup of the email accounts of [NAME_8], [NAME_15], [NAME_18] and [NAME_19] identified in para 64(b)(ii) of the [NAME_28] which existed on or about 28 September 2017. (5) [NAME_26] must, by no later than Monday, 30 October 2017, cause [NAME_29] to provide to all of the [NAME_30], who have signed and provided an undertaking in the form of Annexure to the orders made by O'Callaghan J on 5 October 2017, the full forensic copies of: (a) the [NAME_8] laptop, the meeting room computer, the [NAME_14] laptop, the [NAME_14] phone, the [NAME_16] laptop, the [NAME_16] phone, the [NAME_20] laptop, the [NAME_20] phone, and the [NAME_20] phone, as identified in para 60 of the [NAME_28]; (b) all email activity (including retainable deleted items) for the email accounts of [NAME_8], [NAME_15], [NAME_18] and [NAME_19], as identified in para 61 of the [NAME_28]; (c) each of the backups identified in para 62 of the [NAME_28]; and (d) each of the backups identified in order 4 above. (Collectively, the Forensic Copies.) (6) By no later than Friday, 3 November 2017, all of the [NAME_30] who received the Forensic Copies pursuant to order 5 above must notify [NAME_26] as to whether they consider the Forensic Copies to constitute satisfactory forensic images. (7) If the [NAME_30] notify [NAME_26] that the Forensic Copies constitute satisfactory forensic images, then: in accordance with the procedure set out below, [NAME_26] are to instruct [NAME_29] securely to delete, and ensure the secure deletion of, all [NAME_25], and all materials containing reference to the [NAME_25], from: (a) the [NAME_8] laptop, the meeting room computer, the [NAME_14] laptop, the [NAME_14] phone, the [NAME_16] laptop, the [NAME_20] laptop, the [NAME_20] phone, and the [NAME_20] phone, as identified in para 60 of the [NAME_28]; (b) the P:/ drive of the [NAME_2], as identified in para 64(b)(i) of the [NAME_28]; (c) the Q:/ drive of the HTH network, as identified in para 64(b)(ii) of the [NAME_28]; (d) the email accounts of [NAME_8], [NAME_15], [NAME_18] and [NAME_19], as identified in para 64(b)(ii) of the [NAME_28]; and (e) any backups of the aforesaid drives and accounts. (Collectively, the [NAME_31].) (8) If the [NAME_30] notify [NAME_26] that the Forensic Copies do not constitute satisfactory forensic images, then the [NAME_30] are forthwith to be provided with access to the [NAME_31] for the purpose of undertaking the tasks identified in para 5 of the orders made by O'Callaghan J on 5 October 2017. (9) For the purpose of the deletion of the [NAME_25], and all materials containing reference to the [NAME_25], from the [NAME_31], the [NAME_30] shall provide to the legal representatives of all respondents, a list of the materials they propose to be deleted from the [NAME_31], being materials constituting, or containing reference to, the [NAME_25]. (10) Upon receipt of the list referred to in order 9 above, the respondents' legal representatives will, within three business days, inform the applicant whether they have any objection to the materials referred to in order 9 above being securely deleted from the [NAME_31]. (11) If all of the respondents' legal representatives inform the applicant that the respondents have no objection to the materials referred to in order 9 above being securely deleted from the [NAME_31], [NAME_29] shall forthwith securely delete the materials referred to in order 9 above from the [NAME_31]. (12) If any of the respondents' legal representatives inform the applicant that any of the respondents has an objection to any of the materials referred to in order 9 above being deleted from the [NAME_31], the respondents legal representatives will advise the applicant and [NAME_29] of the basis for such objection, and if the matter cannot be promptly resolved between the parties, will contact the Court and the other parties to ask for the matter to be listed. (13) [NAME_29] shall provide written confirmation of the secure deletion of any [NAME_25], or any materials containing reference to the [NAME_25], from the [NAME_31], once completed, to the Court and to the parties within two business day of such deletion. (14) The case management hearing be adjourned to a date to be fixed. (15) Costs reserved. (16) Liberty to apply. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan.

Associate: Dated: 26 October 2017