AG Australia Holdings Limited v Burton & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

1640/02 AG AUSTRALIA HOLDINGS LIMITED v NIGEL VICTOR BURTON & ORS JUDGMENT - (Orders) 1 HIS HONOUR: I gave judgment in this matter on 3 May 2002 (AG Australia Holdings Limited v Nigel Burton [2002] NSWSC 170). As contemplated in paragraph 234 of the judgment, application was made to re-list the matter for argument about the form of orders. That argument occurred on 17 May 2002. 2 The plaintiff and the second defendant each put forward a draft of the orders. Helpfully, they followed a common pattern, derived from the Further Amended Summons and the orders in paragraph 235 of my judgment, so the differences between them were readily identifiable. 3 In this judgment I shall use the same acronyms to refer to parties as were used in my earlier judgment. Order 1 - Restraints on Mr Burton Using the Confidential Information 4 The differences between the parties related to the scope of the exceptions that should be made from the restraint in Order 1 of the Further Amended Summons. I accept the contention of the defendants that the injunction ought not impose on Mr Murphy, any restriction which was not contained in his contractual arrangements with the plaintiff. 5 I do not accept the submission of the defendant that it is appropriate to create an exception concerning "information which is now in the public domain". While it is correct that the contract of employment of Mr Burton (the relevant provisions of which are set out at paragraph 17 of my earlier judgment) restricted him disclosing certain information "which is not generally in the public domain", Mr Burton's employer was not a party to the present proceedings. While clause 4 of the Confidentiality Undertaking which GIO sued on in the present proceedings contained an acknowledgement from Mr Burton that that undertaking did not limit the confidentiality obligations under his contract of employment, the confidentiality undertaking which Mr Burton gave to GIO contains freestanding obligations, and it is those which have been sued on. Clause 3 of the Confidentiality Undertaking which was sued on says: "The covenants in this agreement shall not apply to any information which becomes generally known to the public otherwise than as a breach of this agreement or the breach of any similar agreement."

It is that wording which should be the source of the wording of any injunction. 6 I accept the submission put for Mr Burton that he should not be at risk of unwittingly being in breach of the injunction, and that in consequence some modification of the scope of any injunction whose wording is derived from clause 3 of the Confidentiality Undertaking is required. The particular modification that is needed is to deal with the situation where information has become generally known to the public through the breach, by someone other than Mr Burton, of a similar agreement to that Confidentiality Undertaking, but where Mr Burton does not know that it is through such a breach that the information has become generally known 7 The defendants referred me to Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 76 ALJR 246 at [45], where Gleeson CJ, Gummow and Hayne JJ said: "Ordinarily, the obligations relating to the use and disclosure of the Information would be construed as limited to subject matter which retained the quality of confidentiality at the time of breach or threatened breach of those obligations. An expression of a contrary intent should, as Judge Learned Hand put it in Picard v United Aircraft Corporation (1942) 128F 2d 632, be explicit." 8 I do not discern any conflict between the principles which are there stated, and giving effect to clause 3 of the Confidentiality Undertaking using the actual words of clause 3. 9 The defendants sought an exception from Order 1 relating to "information which he is required to disclose by law or permitted by any court to disclose". I sought elucidation about in what possible circumstances a court would be able to permit the disclosure of information. In response, Mr Sullivan QC, for the second defendant, referred me to Order 10, Rule 1 of the Federal Court Rules. That rule confers on the Federal Court power at a directions hearing to give, "such directions with respect to the conduct of the proceeding as it thinks proper". Sub rule 2(i) provides that the Federal Court may: "In a case in which the court considers it appropriate, direct the parties to attend a case management conference with a judge or registrar to consider the most economic and efficient means of bringing the proceedings to trail and of conducting the trial, at which conference the judge or registrar may give further directions." 10 Mr Sullivan QC suggests that, in the Federal Court, a direction might be given that a witness statement be taken from all people who are prepared to volunteer it, and that the direction might expressly permit Mr Burton to consult in advance with lawyers for the purpose of preparing such a witness statement. 11 Order 10, Rule 2(i) concerns the directions which can be given to the parties to proceedings. Mr Burton is not a party to the Federal Court proceedings, so I cannot see how a direction given under Order 10, Rule 2(i) to a party to those proceedings can relieve him of his confidentiality obligations. Of course, there may be other orders issued by a court which require Mr Burton to perform acts which are inconsistent with his confidentiality obligations. However, I am at present not persuaded that there is any means by which a court can permit him to disclose what would otherwise be confidential information. Hence, I will not make the exception, "or permitted by any court to disclose". 12 The defendants also seek an exception in relation to information which has been acquired by Mr Burton otherwise than in the course of his employment. I would construe the Confidentiality Undertaking which has been sued on as not relating to that sort of information, and think it is appropriate to make that construction explicit in the form of order. 13 The Order which I shall make is: 1. The first defendant by himself, his servants or agents be restrained from passing, publishing, communicating, using, or otherwise disclosing to any person any information relating to the Reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: a) the past and future revenue and profitability; b) the business, operations and management of the Reinsurance business save in respect of information within any of the following exceptions: (1) Information which (i) is now, or (ii) subsequently comes to be generally known to the public otherwise than as (A) a breach of the Confidentiality Undertaking executed by the first defendant dated 31 May 1999, or (B) a breach, known to the first defendant to be such a breach, of any Confidentiality Agreement between the Plaintiff and another person similar to the Confidentiality Undertaking executed by the first defendant dated 31 May 1999. (2) information which has been approved in writing by the Plaintiff for disclosure subject to any restrictions, limitation or conditions imposed by the Plaintiff in relation to disclosure; (3) information which he is required to disclose by law; (4) information which has been acquired by the first defendant otherwise than in the course of his employment ("The Burton Exceptions"). Order 2 - Orders Against Mr Burton for Delivery Up 14 This is an order for delivery up of materials in Mr Burton's possession, power, custody or control. 15 The plaintiff's draft included making provision for the delivery up of draft witness statements and/or draft affidavits in the Federal Court proceedings, as well as requiring delivery up of documents identified by a more general description. The defendants have omitted the specific reference to the witness statements and/or draft affidavits from their proposed order. In my view, the draft witness statements and any draft affidavits are the most important single example of documents which have been produced in breach of the Confidentiality Undertaking, and there should be a specific order for the delivery up of those documents. 16 There is dispute about to whom the documents should be delivered up. The plaintiff contends that the documents should be delivered up to this Court. The defendants contend that the documents should be delivered to the Federal Court, where they should be placed in sealed containers and marked "By Order of the Supreme Court of New South Wales not to be opened without the order of the Court or the Federal Court of Australia." In following this wording, the second defendant was adapting wording which I had proposed be placed in Order 4 in the Amended Summons, an order directed to Maurice Blackburn Cashman (See paragraph 235 of my earlier judgment). 17 The role of an order for delivery up, in connection with actions for breach of confidence, is explained in Dean, The Law of Trade Secrets, page 333-334: "An order for delivery up, as with an order for account of profits, is at the discretion of the court and will usually be made as an ancillary order to an injunction to fully complete the plaintiff's protection. Where the defendant is barred from using information it is necessary to remove all physical forms of that information from his possession. Further, defendants are not entitled to retain the fruits of the information for their advantage. Hence there are two separate objects. The first is to deliver up that which is the plaintiff's to the plaintiff, for example books of formulae, accounting records, designs and copies of literary works. The property of the plaintiff must be returned regardless of a claim for breach of confidence. Secondly, the fruits of the information must be removed from the defendant's use but cannot be given to the plaintiff who has no property in them. These must be destroyed. The order (or undertaking) requires the object to be dismantled and destroyed either in the hands of the defendant or, given that the defendant has shown himself to have acted wrongfully, in the hands of the plaintiff. This is so even where the defendant has incorporated his own efforts and equipment into the final product. Despite its wasteful result, the order for delivery up for destruction is carried out by the courts with resolve. Where large stocks of tainted materials remain with the defendant the courts will insist that the defendant deliver them up but may suggest that the plaintiff and defendant compromise to each others' benefit. Where parts of the objects may not have been compromised they may be retained by the defendant." (Citations omitted) 18 It is these principles which should be applied in the present case. The draft witness statements and draft affidavits are documents which are not the property of the plaintiff, but incorporate confidential information, and so should be delivered up for destruction. 19 Insofar as any material other than the draft witness statements and/or draft affidavits fall within the more general description, the appropriate place for them to be delivered up to will depend upon whether they are documents which are the property of the plaintiff, or not. Those which are the property of the plaintiff, should be delivered up to it. Those which are not the property of the plaintiff, should be delivered up to the court. 20 If it were the case that Mr Burton retained in his hands any documents which he obtained from the plaintiff, in the course of his duties, the express terms of his Confidentiality Undertaking do not require him to return those documents. It is his Contract of Employment with GIOA which obliged him to return those documents, and to return them to GIOA (see paragraph 17 of my earlier judgment). He has written a letter claiming to have returned all those documents (see paragraph 33 of my earlier judgment). In these circumstance, GIO would be entitled to an order for return of any documents which fell within the scope of the Confidentiality Undertaking on which GIO sues, only on the basis of it being a quia timet injunction. However, the defendants did not oppose the principle of the making of an order for delivery up of documents containing confidential information, but rather argued about the form of such an order. 21 Both defendants contended that delivery up should be to the Federal Court, where the documents should be preserved. The only reason why, in the draft orders in my reasons for judgment, I had suggested that the second defendant be required to deal with documents in its possession by a process of sealing and labelling was because of the Victorian provision requiring solicitors to maintain their files for seven years. Had it not been for that provision, my draft would have included provision for the documents in the possession of the second defendant to have been delivered up for destruction. 22 In the case of the first defendant, there is no analogous reason which requires any documents which should not have come into existence to be preserved in existence. Thus, in the case of the first defendant, in relation to those documents which are not the property of GIO or GIOA, the appropriate order is for the documents to be delivered to this Court, for the purpose of destruction. 23 One of the reasons which Mr Sullivan QC advanced for it being appropriate to deliver the documents to the Federal Court, was to deal with the possibility that the confidentiality of the documents might in future be waived or lost. In my view, the court should make orders on the basis of the facts as they stand today, and not try to deal in any detail with the possibility that the legal basis on which the plaintiff is, today, entitled to an order might conceivably change in the future. After all, it might also happen that, in the future, there is some retrospective legislation which affects the plaintiff's present rights. A court, in making an injunction, does not try to reflect that sort of possibility in the order which it makes, save in the most general terms, like exception 3 which I have made to Order 1. 24 As well, for the defendants to now seek that the information which they obtained in breach of confidence should be packaged up and delivered to the Federal Court to await the possibility of some sort of an application to the Federal Court to use it amounts, it seems to me, to trying to gain an advantage from the breach of confidentiality which has occurred. The orders I am making are designed to stop the defendants from getting any advantage from the breach of confidentiality which has occurred, not to assist them in doing so. 25 There is a difference between the plaintiff and the defendants about the description of the type of documents required to be delivered up. In the form for which the plaintiff eventually contended, it sought the delivery up of documents: "… containing information relating to the Reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability; and (b) the business, operations and management of the Reinsurance business save insofar as the first defendant is expressly authorised in writing by the plaintiff to retain the said documents and materials, or by order of the court." 26 The defendants sought an order for the delivery up of documents: "… insofar as such documents and material comprise information as to the Reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning (a) the past and future revenue and profitability; and (b) the business, operations and management of the Reinsurances business save insofar as the documents and materials comprise information within any of the Burton Exceptions." 27 The evident intent of the defendants' draft is that it be able to deliver up those parts of documents which contain the confidential information, while retaining those portions of the documents which "comprise information within any of the Burton Exceptions". In Industrial Furnaces Ltd v Reaves [1970] RPC 605 Graham J considered a situation where the plaintiff had developed a device which could deliver air, heated to an extremely high temperature, at a particular rate of flow. There was a problem about how to design the apparatus so that it could deliver air heated to the required temperature, without the metal from which the apparatus was made melting. Through experimentation, the plaintiffs arrived at a figure for a "heat transfer coefficient" which was the key to solving this design problem. The defendant came to know of this heat transfer coefficient while working for the plaintiff, then left, set up his own company, and began quoting for the supply of apparatus in competition with the plaintiff. The defendant's designs incorporated the plaintiffs' figure for the heat transfer coefficient. Graham J found that there had been a misuse of confidential information. The defendant had incorporated that confidential information in drawings and other documents. There was argument about whether the appropriate form of relief should be for the defendant to destroy the documents on oath, or for the documents to be delivered up to the plaintiff. (The alternative of delivery up to the court does not seem to have been advanced by the plaintiff.) Graham J, having found that the defendants were untrustworthy, was not persuaded that for the defendants to destroy the documents on oath would suffice. He continued, at 628: "It was suggested by Mr Aldous that a number of these documents might well contain confidential information of the defendant, or at any rate information which was his and upon which he placed a value; and that by delivery up of these documents this material would be placed in the hands of the plaintiffs. To my mind this is an unfortunate incident which the defendant, having been held to have behaved improperly in the past, must put up with. I have already said that I came to the view that the two plaintiffs, the MacMasters, were honest witnesses, and in those circumstances I see no reason for thinking that they might misuse any information of the defendant which they so obtain. If a wrongdoer includes material of his own and adds it to material which he has taken from the plaintiffs in my judgment he cannot complain if equity demands that when he has been found out he should deliver up the documents, even though they may now contain information of his own." 28 In my respectful view, unless there was no practical way of separating out the plaintiff's confidential information from the defendants' confidential information, such an order goes too far. Meagher, Gummow and Lehane, Equity Doctrines & Remedies, 3rd edition, paragraph 2710, explain that the order for delivery up of infringing materials in industrial property cases: "… was promoted by Chancery in the 19th century as a further application of the principles considered earlier in this chapter" (ie, concerning "the delivery up and cancellation of documents in circumstances where those documents have been avoided by the party entitled to avoid them" - Meagher, Gummow and Lehane, op cit, paragraph 2701). An order for delivery up for destruction was made in Prince Albert v Strange (1849) 2 DeG & Sm 652; 64 ER 293. Unauthorised impressions had been made of Prince Albert's etchings, which Knight Bruce V-C ordered to be delivered up for destruction. The Vice-Chancellor said (2 DeG & Sm at 716; 64 ER at 320-1): "With regard to the impressions, it might possibly be right to attend to the defendant's claim, had the impressions been upon a material of intrinsic value - upon a material not substantially worthless, except for the impressions which, by the wrongful act of the defendant, had been placed there. That case, however, does not arise. The material here is substantially worthless, except for that in which the defendant has no property. There consequently can be no reason why the effectual destruction of subject should not be directed by the court; in doing which, I repeat, I abstain from giving any opinion as to the particular mode of proceeding which the court ought to adopt in a case similar in all points except as to the intrinsic value of the material." 29 The basis on which the court operates in making such an order was explained by Cotton LJ in Vavasseur v Krupp (1878) 9 Ch D 351 at 360: "The property in articles which are made in violation of a patent is, notwithstanding the privilege of the patentee, in the infringer if he would otherwise have the property in them. The court in a suit to restrain the infringement of a patent does not proceed on the footing that the defendant proved to have infringed has no property in the article; but, assuming the property to be in him, it prevents the use of those articles, either by removing that which constitutes the infringement, or by ordering, if necessary, a destruction of the articles so as to prevent them from being used in derogation of the plaintiff's rights, and does this as the most effectual mode of protecting the plaintiff's rights - not on the footing that there is no property in the defendant."

Meagher, Gummow and Lehane, op cit , at paragraph 2710, say of such an order: "Use or sale would be forbidden by injunction and the order for delivery up, by removing from the defendant a source of temptation, operated in aid of the injunction. The court has a discretion to grant or refuse an order or to limit its extent, so that, for example, and consistently with principle, the defendant will usually not be deprived of the articles in question if by an adjustment or modification they may be rendered non-infringing ( Mergenthaler Linotype Co v Intertype Ltd (1926) 43 RPC 381) …". 30 Thus, in Ormonoid Roofing and Asphalts Ltd v Bitumenoids Ltd (1930) 31 SR (NSW) 347 Harvey CJ in Eq considered a situation where the plaintiff's confidential information had been utilised by the defendant in manufacturing a machine. Harvey CJ in Eq ordered that part of the machine which embodied the confidential information to be destroyed, saying (at 362): "The plaintiff company has no property in the defendant company's machine. I am of opinion that the only order I can make is that the roofing machine of the defendant company must be dismantled and delivered up to the plaintiff company for destruction except that part of it which was constructed by the defendant company according to its own particular designs, that is the steel framework on which the machine is mounted. The rest of the machine must be dismantled and destroyed. All drawings and specifications of either the plaintiff company's roofing machine or the defendant company's roofing machine must also be delivered up on oath to be destroyed within 21 days." 31 In Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 there was another situation where the plaintiff's confidential information came to be embodied by the defendants in a machine. Gowans J, at 52, held that the plaintiff was entitled to an injunction against all defendants, and that those injunctions: "… should also include orders in a mandatory form relating to the defendants' machines. But since I have found (or I do find) that neither the framework and its mounting and driving system, nor the tanks and their agitating systems, nor the oven or the formers were the product of misuse of confidential information, they should not be included in the subject of the orders. As to the rest, I think I should order that the defendant company by its secretary or other proper officer should make a full and proper affidavit of what it holds, and that it should within a specified time dismantle the machines and deliver up the parts to the plaintiff for destruction. The nature of the parts, particularly the batten assembly, is such that they should not be left in the hands of the defendant company. They cannot, however, be retained or made use of by the plaintiff, which has no property in them." 32 In Franklin v Giddins [1978] Qd R 72 Dunn J considered a situation where budwood of a newly developed type of nectarine had been stolen from the plaintiff by the defendant, and grafted onto rootstock of the defendant. The budwood was treated by Dunn J as though it was the embodiment of confidential information. His Honour ordered the delivery up for destruction of the whole of each nectarine tree apart from the rootstock. 33 It follows from this discussion that, on this topic of difference between the plaintiff and the defendants, the defendants are in principle right: it is only those parts of the documents which contain confidential information that should be ordered to be delivered up for destruction. There is insufficient material before me for me to be satisfied that any parts of the documents which do not contain confidential information should be treated as mere paper and ink, and hence able to be destroyed on the same principle as the paper on which the etchings were imprinted could be destroyed in Prince Albert v Strange. Rather, there is a real prospect that parts of documents which contain the confidential information will also contain what Mr Sullivan QC refers to as the solicitors' "work product", which is likely to have a value. 34 There remains a problem of how the court can be confident that that principle is correctly applied. It is common enough, when lawyers are working up a case, for documents to go through multiple drafts, and for information derived from many sources to contribute to the final document. In relation to some parts of such a document, it would not be at all unusual if even the solicitor preparing the case, could not honestly say from what source that particular part had been derived. Mr Burton, is likely to have similar difficulties in identifying the precise source of at least some parts of his draft statement. If, in relation to any part of a document which has been produced in preparation of the Federal Court litigation, the court is not able to be satisfied that it did not derive from information disclosed in breach of confidence, the court should not exempt that part from an order for delivery up for destruction. 35 I see no alternative way of dealing with this problem but to put the onus on to Mr Burton to ensure that it is only those parts of a document which he is in a position to swear fall within one of the Burton Exceptions which are excised from any document. As well, the "Burton Exception" relating to "information which he is required to disclose by law" does not have a role to play in this particular context (of requiring the delivery up of infringing documents), so I shall exclude it from the Burton Exceptions for this purpose. 36 A further difference between the plaintiff's and the defendants' draft is whether the documents and materials which are to be delivered up should comprise information "relating to the Reinsurance business conducted by GIO", or "information as to Reinsurance business conducted by GIO". As the terms of the Confidentiality Undertaking define the Confidential Information using the expression "relating to the Reinsurance business", it is that expression which should be included in the injunction. 37 In these circumstances, the Order for delivery up which I shall make against Mr Burton, is as follows: (A) The first defendant deliver to the Court for destruction, all documents and materials, including draft witness statements and/or draft affidavits in Federal Court proceedings No. N955 of 1999, which are in the possession, power, custody or control of the first defendant insofar as such documents and materials comprise information as to the reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability; and (b) the business, operations and management of the Reinsurance business save insofar as the documents and materials comprise information within any of the Burton Exceptions, and save insofar as the first defendant has obtained any such document from the plaintiff (B) The first defendant deliver to the plaintiff all documents and materials which he has obtained from the plaintiff and which are in the possession, power, custody or control of the first defendant insofar as such documents and materials comprise information as to the reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability; and (b) the business, operations and management of the Reinsurance business save insofar as the documents and materials comprise information within any of the Burton Exceptions. (C) If pursuant to Order 2(A) the first defendant delivers to the Court, or pursuant to Order 2(B) the first defendant delivers to the plaintiff, any document which is other than a complete document, the first defendant shall deliver with that document, and in the case of documents delivered under Order 2(A) serve on the plaintiff, an affidavit swearing that any parts of the complete document which are not delivered up consist of either (a) Information which is generally known to the public otherwise than as (i) a breach of the Confidentiality Undertaking executed by the First Defendant dated 31 May 1999, or (ii) a breach, known to the First Defendant to be such a breach, of any Confidentiality Agreement between the Plaintiff and another person similar to the Confidentiality Undertaking executed by the First Defendant dated 31 May 1999, (b) information which has been approved in writing by the Plaintiff for disclosure subject to any restrictions, limitations or conditions imposed by the Plaintiff in relation to disclosure, or (c) information which has been acquired by the first defendant otherwise than in the course of his employment with GIO Australia Ltd. Order 3 - Against Second Defendant, Injunction Preventing Use of Information 38 The principal difference between the drafts of the plaintiffs and the defendants, which is not covered by earlier decisions in this judgment, is that the defendants seek the following exception from the order: "Except insofar as such information, documents or materials comprise information the subject of any of the Burton Exceptions, or the following exception, namely, information obtained from sources independent of the First Defendant or any spouse, relative or agent of the First Defendant ("the Additional Exception"). 39 Material which is contained within the Additional Exception would include material obtained on discovery in the Federal Court proceedings. 40 The defendants are, in my view, correct in seeking to exempt the Burton Exceptions. 41 The point of the rest of the defendants' draft is to cater for the situation where Mr Burton has told them something in breach of confidence, but they have also obtained the same information from another, unpoisoned, source. In principle the defendants are right in proposing an exception of this type, provided that the other source of the information is not one where Mr Burton's wrongful acts have caused them to look. 42 While including a reference to an Additional Exception in the draft of Order 3 will permit the second defendants to use documents obtained on discovery in the Federal Court proceedings, what will not be open to the second defendants, however, is to use such documents as the basis for unrestricted questioning of Mr Burton about the contents of the documents. That is because Order 1 does not contain any exception which permits Mr Burton to engage in such a conversation. Order 1 contains the Burton Exceptions, and Mr Burton would be free, if he chose, to talk to the second defendants about any matter which falls within the Burton Exceptions. However, to the extent to which a discovered document contained information which did not fall within the Burton Exceptions, Mr Burton would not be free to talk to them. This does not, in my view, involve any undue interference with the proceedings in the Federal Court. If the second defendants were to ask the Managing Director of GIO to assist them in the litigation by answering a few questions about discovered documents, the Managing Director would be perfectly free to say that he did not wish to talk to them. The working out of the orders which I have just been explaining requires that Mr Burton put himself into the same situation, so far as the material to which Order 1 is directed is concerned. 43 The Order I make is: The second defendants by themselves, their servants or their agents be restrained from utilising in the course of the preparation of the applicant's case in Federal Court of Australia Proceedings No. N955 of 1999 or otherwise any information, documents or materials which are in the possession, power, custody or control of the second defendants insofar as such information, documents or material comprise information relating to the reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability, and/or (b) the business, operations and management of the Reinsurance Business

AND WHICH documents or materials make use either directly or indirectly of, or which information is derived from, (i) any discussions between Nigel Victor Burton and any of the second defendants or their agents or employees; (ii) any correspondence between Nigel Victor Burton and any of the second defendants or their agents or employees; and/or (iii) any documents returned by Nigel Victor Burton to the plaintiff other than documents discovered in Federal Court Proceedings No. N955 of 1999;

including any draft witness statements and/or draft affidavits of Nigel Victor Burton in Federal Court of Australia Proceedings No. N955 of 1999 except insofar as such information, documents or materials comprise information the subject of (A) any of the Burton Exceptions, or (B) information obtained from sources independent of the first defendant or any spouse, relative or agent of the first defendant and where no disclosure of information concerning (a) the past and future revenue and profitability, and/or (b) the business operations and management of the Reinsurance Business by Nigel Victor Burton has caused or contributed to the second defendants having obtained the said information from sources independent of the first defendant or any spouse, relative or agent of the first defendant ("the Additional Exception"). 44 The wording in this order "obtained from sources independent of the first defendant or any spouse, relative or agent of the first defendant" is wording I have adopted from the draft of the defendants, and which was not criticised by the plaintiff so far as its verbiage is concerned. Order 4 - Order Preventing Supply of Witness Statements to Experts 45 The only dispute concerning this draft order is that the defendants seek to add to the plaintiff's draft, "except insofar as such statement comprises information which falls within any of the Burton Exceptions or the Additional Exception." 46 I do not see any such exception as being necessary. The plaintiff's draft order prevents the supply of a particular witness statement to the expert witnesses. It does not relate to the supply to the expert witnesses of some other statement which might be prepared in the future. Order 3 might, however, affect the contents of any statement which might be prepared at some future time for submission to experts. The Order I make on this topic will be: The second defendants by themselves, their servants or their agents be restrained from supplying a copy of the witness statement of Nigel Victor Burton signed in March 2001 to any expert witness retained by them for the purposes of the applicant's case in Federal Court of Australia Proceedings No. N955 of 1999. Order 5 - Order Dealing with Disposition of the Infected Documents 47 The plaintiff's draft seeks an exception, as follows: "save insofar as the second defendants are expressly authorised in writing by the plaintiff to retain the said document or by order of the court or where the documents are discovered in Federal Court proceedings No. N955 of 1999."

The defendants' draft seeks, instead, to include the words "except insofar as the documents and materials comprise information which falls within any of the Burton Exceptions or the Additional Exception".

For reasons which I have already given, the defendants' version is preferable. 48 The second defendants seek an order for delivery of the infected documents to the Federal Court. It is clear enough that, once there, it would be the subject of an application to the Federal Court for use of the documents, in a similar way to the way in which application was made to the Federal Court for specific discovery of the documents which Mr Burton at one time returned to GIO (see paragraph 37 and following of my earlier judgment). I can see no basis upon which the defendants are now seeking to have the documents lodged with the Federal Court, other than that the defendants know of the contents of the documents, and believe they will be useful in the Federal Court proceedings. That knowledge is itself the product of Mr Burton's wrongful disclosures. In these circumstances, I am not prepared to order that the documents should be delivered to the Federal Court. 49 The defendants also propose that the circumstances in which the container in which the documents are placed should be opened, should be if there is an order of the Federal Court to that effect. The plaintiff proposes that this Court, and the Federal Court, should each have power to make such an order. In my view, the plaintiff's approach is preferable. This Court must, at the least, retain the power of supervising its own orders. This Court needs to be in a situation where, if need arises, it can dissolve, or modify, the injunctions it has granted. 50 I have accepted the defendants' proposal that the material which should be sealed should have an exception, "except insofar as the documents and materials comprise information which falls within any of the Burton Exceptions or the Additional Exception".

I note, however, that the scope of the "Burton Exceptions or the Additional Exception" is something which has the capacity to change with time. Where Order 5 is the type of order which requires documents to be identified and sealed, those exceptions must be construed as at a particular time. It seems to me that the appropriate time is the time of swearing of the affidavit referred to in Order 6. 51 Order 5 will be: The second defendants identify, place in sealed containers, each container prominently marked " By order of the Supreme Court of New South Wales. Not to be opened without the order of the Court or the Federal Court of Australia" store at a location away from any office at which work is carried out relating to proceedings No. N955 of 1999 in the Federal Court of Australia and not to open or use the contents of any such container without an order of this Court or of the Federal Court of Australia, all documents or materials which are in the possession, power, custody or control of the second defendants insofar as such documents or materials comprise information as to the Reinsurance Business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability; and/or (b) the business, operations and management of the Reinsurance Business AND WHICH documents or materials relate to, or are based on, or make use either directly or indirectly of: (i) any discussions between Nigel Victor Burton and any of the second defendants or their agents or employees; and/or (ii) any correspondence between Nigel Victor Burton and any of the second defendants or their agents or employees; and/or (iii) any documents returned by Nigel Victor Burton to the Plaintiff; including draft witness statements and/or draft affidavits of Nigel Victor Burton in Federal Court of Australia Proceedings No. N955 of 1999, except insofar as the documents and materials comprise information which falls (as at the date of swearing the affidavit referred to in Order 6) within any of the Burton Exceptions or the Additional Exception. Orders 6 - Affidavit Verifying Steps 52 The two drafts agree in principle that such an affidavit should be provided. The only difference concerns the time for swearing it. The defendants want 42 days. The plaintiff grumbles about the length of time proposed, but does not seriously oppose it. Order 6 will be: The second defendants file and serve within 42 days an Affidavit specifying the steps undertaken by them in compliance with Order 5 and identifying and describing each of the documents or materials falling within Order 5. The Plaintiff's Proposed Order 7 - Injuncting Mr Murphy and Other Solicitors From Continuing to Work on the Case 53 The plaintiff proposes an injunction which would prevent Mr Murphy and other solicitors at MBC from, broadly, doing any work on the Federal Court case in those areas where their having received information from Mr Burton might affect their performance of their duties. The plaintiff does not propose an injunction which would prevent Mr Murphy, and the other solicitors who have received information from Mr Burton, from working on the case completely - the plaintiff recognises that there are some topics in the litigation, such as each plaintiff's proof of loss, which are highly unlikely to be affected in any way by their having received Mr Burton's wrongful disclosures. The second defendant opposes the making of any such order. Alternatively the second defendant suggests it should be limited so as not to apply once Mr Burton has given any evidence-in-chief. Assuming for the moment that it was somehow possible for Mr Burton to be called to give evidence-in-chief in circumstances which did not involve there having been an infringement of my Order 3, it is not necessarily the case that, once Mr Burton had given any evidence-in-chief, everything which he had ever, wrongly, told Mr Murphy of GIO's confidential information would then be generally known to the public. Hence, I am not prepared to limit any order so that it applies only up to the conclusion of Mr Burton's evidence-in-chief. 54 When a solicitor has confidential information of a former client, the courts will frequently injunct the solicitor from acting at all in a transaction to which the confidential information is relevant, recognising the severe practical difficulties that any solicitor has in compartmentalising in his or her mind the sources from which he or she has obtained his knowledge of a subject matter. The defendants submit that Order 3 provides the plaintiff with adequate protection. I do not agree. Insofar as the court grants an injunction at the suit of a former client against a solicitor for the purpose of protecting confidential information, I see no relevant difference to the present situation. It is true that on occasions when a court grants an injunction at the suit of a former client against a solicitor there are factors other than the protection of confidential information involved, such as the court exercising control over its own officers, and the fact that a solicitor had actually undertaken fiduciary duties towards his or her own client. In the present case, recognising that the second defendant has never been a client of the plaintiff (so far as the evidence establishes) it still seems to me that an order like Order 7 is needed to provide full relief concerning the confidential information which the second defendant has wrongly received. I have been prepared to allow the editing of documents, so that Mr Burton does not need to deliver up for destruction, and MBC do not need to seal up, portions of documents which they can swear do not contain infected material. That editing and excision process is one which can be carried out in a considered way, treating each document individually, and resolving any uncertainties against the defendants. In the complex and sometimes high-pressure and fast-moving activity of running litigation, of the type that the Federal Court proceedings exemplify, there is, at least sometimes, not the same opportunity for reflection, and making sure that one is confident that a particular piece of information does not derive from an infected source. In my view, without an order like Order 7, the court could not be satisfied that no advantage would, in fact, be derived from the wrongful disclosures having occurred. If Mr Murphy and the other solicitors keep working on the reinsurance aspects of the case, the risk that an advantage might be derived from the wrongful disclosures having occurred is one which seems to me to be not a remote and theoretical one, but a real one, which needs to be protected against. I should make quite clear that, in saying this, I am casting no cloud at all over the honesty and integrity of Mr Murphy, and any of the other solicitors at the second defendant's office who have worked on the case. The plaintiff has expressly disclaimed any attack on the past bona fides of these people, and there is not the slightest basis for me to doubt their future bona fides. The reason for my lack of satisfaction is that I am not satisfied that a careful, diligent and honest person, placed in the situation in which Mr Murphy and the other solicitors would be if they continued to be actively involved in the running of the reinsurance aspects of this litigation, might not unwittingly make use of information derived from a poisoned source. Thus, it is appropriate that there be an injunction in the present case of the type the plaintiff seeks. I will make an Order as follows: "Bernard Murphy and any other of the second defendants, their servants or agents who conferred with the first defendant or received instructions or documents or materials from him in the period from 28 November 2000 to date in the course of the preparation for proceedings No. N955 of 1999 in the Federal Court of Australia be restrained from giving or receiving instructions or otherwise providing any legal services to the applicants in proceedings No. N955 of 1999 in the Federal Court of Australia, being services: (a) in connection with any calling of, or any testimony sought to be obtained from the first defendant (b) in connection with the calling of, or the testimony sought to be obtained from any other witness intended to be called by the said applicants whose instructions or, in the case of expert witnesses, assumptions, contain material derived from any communications between the first and second defendants, not being material which consists only of material within the Burton Exceptions or the Additional Exception. Proposed Stay 55 The second defendants seek a stay of Orders 5 and 6 for a period of 28 days, and if any notice of appeal is filed by the second defendant in that period, then a stay of Order 5 until the further determination of that appeal. 56 I do not think it is appropriate to stay those orders. All that Order 5 requires is that the infected documents be segregated and not used. The reason for being granted is that it is ancillary to the injunctions contained in Orders 3 and 4. There is no practical purpose in staying Order 5, when Orders 3 and 4 are not sought to be stayed, beyond saving any time and effort involved in making the segregation. It is the defendants who sought the opportunity to edit documents containing confidential information, and the defendants who have brought about the situation where confidential information they should never have had has become mixed with other information, so I do not place great weight on the fact that there might be time and effort involved in complying with Orders 5 and 6. There is no evidence to show that the time and effort will, in any event, be great. Against that, when the plaintiff has established that its rights have been infringed, it should have a fully effective remedy as soon as it can be provided. There should, however, be a stay of Order 2, to the extent that it requires the destruction of the documents, once delivered up. Costs 57 The defendants accept that, consistently with the reasons for judgment, an order for costs should be made against the defendants. As the second defendant has indemnified the first defendant against its costs, the second defendant proposes that the order for costs be made against the second defendant alone. The plaintiff does not oppose that course. I shall make an order accordingly. Liberty to Apply? 58 The plaintiff seeks liberty to apply. As this is a final hearing, and this judgment disposes of all matters raised by the suit, I cannot see that there is likely to be anything to apply about. This is not the sort of case where the granting of an injunction is conditional upon the plaintiff pursuing some specified course of conduct (in which type of case reserving liberty to apply can be appropriate - see Spry, Equitable Remedies, 6th edition, page 593-594). If at any time circumstances change so that it is appropriate for the injunctions to be dissolved or varied, separate application for that purpose can be made. Orders 59 I make the following orders:

The first defendant by himself, his servants or agents be restrained from passing, publishing, communicating, using, or otherwise disclosing to any person any information relating to the Reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning:

a) the past and future revenue and profitability; b) the business, operations and management of the Reinsurance business save in respect of information within any of the following exceptions: (1) Information which (i) is now, or (ii) subsequently comes to be generally known to the public otherwise than as (A) a breach of the Confidentiality Undertaking executed by the first defendant dated 31 May 1999, or (B) a breach, known to the first defendant to be such a breach, of any Confidentiality Agreement between the Plaintiff and another person similar to the Confidentiality Undertaking executed by the first defendant dated 31 May 1999. (2) information which has been approved in writing by the Plaintiff for disclosure subject to any restrictions, limitation or conditions imposed by the Plaintiff in relation to disclosure; (3) information which he is required to disclose by law; (4) information which has been acquired by the first defendant otherwise than in the course of his employment ("The Burton Exceptions").

(A) The first defendant deliver to the Court for destruction, all documents and materials, including draft witness statements and/or draft affidavits in Federal Court proceedings No. N955 of 1999, which are in the possession, power, custody or control of the first defendant insofar as such documents and materials comprise information as to the reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability; and (b) the business, operations and management of the Reinsurance business save insofar as the documents and materials comprise information within any of the Burton Exceptions, and save insofar as the first defendant has obtained any such document from the plaintiff. (B) The first defendant deliver to the plaintiff all documents and materials which he has obtained from the plaintiff and which are in the possession, power, custody or control of the first defendant insofar as such documents and materials comprise information as to the reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability; and (b) the business, operations and management of the Reinsurance business save insofar as the documents and materials comprise information within any of the Burton Exceptions. (C) If pursuant to Order 2(A) the first defendant delivers to the Court, or pursuant to Order 2(B) the first defendant delivers to the plaintiff, any document which is other than a complete document, the first defendant shall deliver with that document, and in the case of documents delivered under Order 2(A) serve on the plaintiff, an affidavit swearing that any parts of the complete document which are not delivered up consist of either (a) Information which is generally known to the public otherwise than as (i) a breach of the Confidentiality Undertaking executed by the First Defendant dated 31 May 1999, or (ii) a breach, known to the First Defendant to be such a breach, of any Confidentiality Agreement between the Plaintiff and another person similar to the Confidentiality Undertaking executed by the First Defendant dated 31 May 1999, (b) information which has been approved in writing by the Plaintiff for disclosure subject to any restrictions, limitations or conditions imposed by the Plaintiff in relation to disclosure, or (c) information which has been acquired by the first defendant otherwise than in the course of his employment with GIO Australia Ltd.

The second defendants by themselves, their servants or their agents be restrained from utilising in the course of the preparation of the applicant's case in Federal Court of Australia Proceedings No. N955 of 1999 or otherwise any information, documents or materials which are in the possession power custody or control of the second defendants insofar as such information, documents or material comprise information relating to the reinsurance business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability, and/or (b) the business, operations and management of the Reinsurance Business

AND WHICH documents or materials make use either directly or indirectly of, or which information is derived from, (i) any discussions between Nigel Victor Burton and any of the second defendants or their agents or employees; (ii) any correspondence between Nigel Victor Burton and any of the second defendants or their agents or employees; and/or (iii) any documents returned by Nigel Victor Burton to the plaintiff other than documents discovered in Federal Court Proceedings No. N955 of 1999; including any draft witness statements and/or draft affidavits of Nigel Victor Burton in Federal Court of Australia Proceedings No. N955 of 1999 except insofar as such information, documents or materials comprise information the subject of: (A) any of the Burton Exceptions, or (B) information obtained from sources independent of the first defendant or any spouse, relative or agent of the first defendant and where no disclosure of information concerning: (a) the past and future revenue and profitability, and/or (b) the business operations and management of the Reinsurance Business by Nigel Victor Burton has caused or contributed to the second defendants having obtained the said information from sources independent of the first defendant or any spouse, relative or agent of the first defendant ("the Additional Exception").

The second defendants by themselves, their servants or their agents be restrained from supplying a copy of the witness statement of Nigel Victor Burton signed in March 2001 to any expert witness retained by them for the purposes of the applicant's case in Federal Court of Australia Proceedings No. N955 of 1999.

The second defendants identify, place in sealed containers, each container prominently marked "By order of the Supreme Court of New South Wales. Not to be opened without the order of the Court or the Federal Court of Australia", store at a location away from any office at which work is carried out relating to proceedings No. N955 of 1999 in the Federal Court of Australia and not to open or use the contents of any such container without an order of this Court or of the Federal Court of Australia, all documents or materials which are in the possession, power, custody or control of the second defendants insofar as such documents or materials comprise information as to the Reinsurance Business conducted by GIO Insurance Limited, including but not limited to information concerning: (a) the past and future revenue and profitability; and/or (b) the business, operations and management of the Reinsurance Business AND WHICH documents or materials relate to, or are based on, or make use either directly or indirectly of: (i) any discussions between Nigel Victor Burton and any of the second defendants or their agents or employees; and/or (ii) any correspondence between Nigel Victor Burton and any of the second defendants or their agents or employees; and/or (iii) any documents returned by Nigel Victor Burton to the Plaintiff; including draft witness statements and/or draft affidavits of Nigel Victor Burton in Federal Court of Australia Proceedings No. N955 of 1999, except insofar as the documents and materials comprise information which falls (as at the date of swearing the affidavit referred to in Order 6) within any of the Burton Exceptions or the Additional Exception.

The second defendants file and serve within 42 days an Affidavit specifying the steps undertaken by them in compliance with Order 5 and identifying and describing each of the documents or materials falling within Order 5.

Bernard Murphy and any other of the second defendants, their servants or agents who conferred with the first defendant or received instructions or documents or materials from him in the period from 28 November 2000 to date in the course of the preparation for proceedings No. N955 of 1999 in the Federal Court of Australia be restrained from giving or receiving instructions or otherwise providing any legal services to the applicants in proceedings No. N955 of 1999 in the Federal Court of Australia, being services: (a) in connection with any calling of, or any testimony sought to be obtained from the first defendant (b) in connection with the calling of, or the testimony sought to be obtained from any other witness intended to be called by the said applicants whose instructions or, in the case of expert witnesses, assumptions, contain material derived from any communications between the first and second defendants, not being material which consists only of material within the Burton Exceptions or the Additional Exception.

Second defendants to pay costs of the plaintiff.

To the extent (and only to the extent) that Order 2 requires the destruction of documents, Order 2 be stayed for a period of 28 days and if any notice of appeal is filed by the second defendant in that period, then, to that extent and only to that extent, the operation of Order 2 will be further stayed until the final determination of that appeal.

Summons otherwise dismissed. **********

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