Alpha Energy Pty Ltd v Violi

Upon production to the Court of the documents referred to in paragraph 1 the lawyers for the Respondents be permitted to uplift and copy the documents so produced.

The Applicant, through its proper officer, swear and serve on the Respondents an affidavit making full and frank disclosure of its use of the discovered documents and the information contained in the discovered documents in any dealings it has had with any third party or representative of any third party identified in the discovered documents from 29 June 2010 to date;

That the Applicant, Alpha Energy Pty Ltd [ACN 073 737 578], be found guilty of the contempt of Court set out in the Statement of Charge attached hereto and that it be convicted and made liable to such punishment as the Court see fits.

That Bretislav James Jilich be found guilty of the contempt of Court set out in the Statement of Charge attached hereto and that he be convicted and made liable to such punishment as the Court see fits.

That Corey Roberts be found guilty of the contempt of Court set out in the Statement of Charge attached hereto and that he be convicted and made liable to such punishment as the Court see fits.

Such further or other orders as the Court sees fit. 3 The statement of charge states: As against the Applicant, Alpha Energy Pty Ltd (ACN 073 737 578] 1. The Applicant did on 13 October 2010 and 14 October 2010, through its sole director and secretary, Bretislav James Jilich, and its sales manager, Corrie Roberts, having been permitted to inspect and receive copies of the documents produced by the Respondents on discovery on 12 October 2010, wilfully breach the implied undertaking given to the Court not to use, or permit to be used, any copy of the documents produced or any knowledge acquired from such inspection otherwise than for purpose of the proceeding, in that knowledge gained from an inspection of the discovered documents was used by the Applicant to solicit business from Q Video Systems and its representative Stanley El Komala. As against Bretislav James Jilich 2. Bretislav James Jilich on 13 October 2010 and 14 October 2010, having been permitted to inspect documents produced by the Respondents on discovery on 12 October 2010, was knowingly concerned in the breach of the implied undertaking given to the Court by the Applicant not to use, or permit to be used any copy of the documents produced or any knowledge acquired from such inspection otherwise than for purpose of the proceeding, in that he permitted knowledge gained from an inspection of the documents to be used by Applicant's sales manager, Corrie Roberts, to solicit business from Q Video Systems and its representative Stanley El Komala. As against the Corey Roberts 3. Corey Roberts on 13 October 2010 and 14 October 2010 having been permitted to inspect documents produced by the Respondents on discovery on 12 October 2010, was knowingly concerned in the breach of the implied undertaking given to the Court by the Applicant not to use, or permit to be used, any copy of the documents produced or any knowledge acquired from such inspection otherwise than for purpose of the proceeding, in that he used knowledge gained from an inspection of the documents to solicit business from Q Video Systems and its representative Stanley El Komala. 4 In summary, Alpha's account manager, Mr Roberts, in an email exchange with an employee of Q Video Systems (a customer of both parties) on 13 October 2010, referred to Q Video Systems' recent orders of supplies worth approximately $100,000 from Delta V (trading as Fusion Power Systems). The respondents allege that Mr Roberts could only have learnt of the orders from the respondents' documents discovered on 12 October 2010, which contained orders supplied to Q Video Systems totalling about $115,000, approximately $103,000 of which related to a project known as the Garden Island Project. 5 While not denying the relevant email exchange, Mr Roberts gave an alternative explanation for his comments. He testified that representatives of Q Video Systems had informed him: that Delta V had quoted for the Garden Island Project, for which Alpha had also quoted; that there was about $100,000 difference between the quotes for the Garden Island Project received by Q Video Systems; that Delta V's quote was $100,000 lower than that of Alpha; and that Delta V's quote was successful. 6 Mr Roberts testified that he personally prepared Alpha's quote to Delta V for supplies for the Garden Island Project. The quote was for $230,000 (with two higher alternative quotes for different warranty options) which could be reduced by about $44,000 in specified circumstances). 7 Mr Roberts deposed that he inferred, from what Delta V's representatives told him, together with his knowledge of Alpha's quote, that Q Video Systems had recently placed orders worth about $100,000 with Delta V. 8 The respondents contended that, as the representatives of Q Video Systems testified that they did not inform Mr Roberts that Delta V's quote was $100,000 or that Delta V's quote was successful, Mr Roberts' explanation was not credible. The only possible inference was, in the respondents' submission, that the persons charged had misused the discovered documents in breach of the "implied undertaking".

Background to application 9 In the primary proceeding, Alpha, as applicant, alleges that the respondents misused its corporate and confidential information (including financial information and customer lists) and diverted its business; and that the first respondent, Mr Violi, breached his fiduciary duties owed as an officer and employee of Alpha. 10 By an amended application filed on 20 April 2010, Alpha alleges: breaches of ss 181, 182 and 183 of the Corporations Act 2001 (Cth) ("the Act"); breaches of implied terms of employment, the duty of good faith and the obligation to maintain confidentiality; and money had and received, detinue and conversion of goods. 11 Alpha alleges that in mid‑November 2009, Mr Violi, who was its general manager from late 2003 to 2004, offered to buy Alpha's business for a derisory price. Further, on 20 November 2009, Mr Violi established Delta V (of which he is the sole director and shareholder) and on 23 December 2009, resigned from Alpha. 12 Alpha alleges that Mr Violi emailed its data to himself, on 25 November 2009 created two sets of data from Alpha's Net Suite database, and accessed the Net Suite database many times after his resignation. Alpha alleges that while managing director of Alpha, Mr Violi used his position to cause it to pay his personal expenses and to make unexplained payments. Alpha further alleges that Mr Violi diverted its business opportunities, recruited its staff prior to his resignation and effected a wholesale appropriation of its business. 13 Alpha applied for delivery up, damages and injunctions against Anthony Violi and Delta V. Alpha also sought a permanent injunction restraining the respondents from disclosing, copying, using or exploiting information contained in a number of databases including XFH018, Net Suite, and in specified documents. 14 The first respondent, Paul Violi, is a holder of 50 of the 200 shares in Alpha who, as a minority shareholder, has commenced an oppression proceeding in this court against Alpha and another company controlled by Bretislav Jilich, B.J Communications Services Pty Ltd. 15 By a notice of motion dated 9 April 2010 in the primary proceeding, Alpha applied for a search order under O 25 r 2 of the Federal Court Rules. On 12 April 2010, Finkelstein J made an Anton Piller order permitting a search of the premises of Mr Violi and Delta V. By an affidavit affirmed on 20 April 2010, James Ormond, an independent solicitor, deposed to his service of the Anton Piller order on 14 April 2010. 16 On the execution of the Anton Piller order, confidential material, including Alpha's customer list (which included Q Video Systems), was found. Other property of Alpha was recovered from thepremises of Delta V. Interim orders were subsequently made restraining Mr Violi and Delta V from using the confidential information. 17 Further, on 22 June 2010, the Court ordered Delta V to discover invoices, receipts and orders issued by Delta V to about 45 Alpha customers, including Q Video Systems, on a list provided by Alpha. 18 Pursuant to that order, Delta V provided two tranches of documents, in June 2010 and on 12 October 2010 respectively. 19 The present contempt charges relate to the respondents' alleged use made of documents (or information contained in them) provided by Alpha on 12 October 2010.

Whether preliminary hearing appropriate for some orders sought 20 At the hearing of the respondents' notice of motion on 27 October 2010, there was a dispute as to how the matter should proceed. 21 Although the notice of motion contained no indication that it sought various categories of relief in successive stages, the respondents submitted that the contempt charges should not be heard and determined until the application for relief sought in orders 1, 2 and 3 of the notice of motion for production and inspection of documents and an affidavit of disclosure ("production and disclosure relief") was first heard and determined as a preliminary matter. 22 As the respondents did not, in their written submissions, assign any reason for the two stage process advocated, it was initially unclear whether they contended that the present contempt charges were dependent on the outcome of a preliminary application for the production and disclosure relief, and if so, on what basis the charges had been brought. Before me, however, counsel for the respondents submitted that a chain of emails passing between Mr Roberts and Mr Komala of Q Video Systems on 13 October 2010 sufficiently evidenced the current charges of contempt. Counsel further submitted that the material indicated that the respondents' concerns about breach of the Harman implied undertaking should be investigated. Counsel acknowledged that the production and disclosure relief was required principally in order to investigate and discover evidence of any further breaches of the implied undertaking and was unnecessary for the proof of the present charges of contempt. He submitted, however, that a two stage approach to the notice of motion would be more efficacious, as existing and any possible new charges of contempt could be heard together. 23 The respondents relied, in that context, on Hearne v Street (2008) 235 CLR 125, contending that in that case, answers to interrogatories were ordered, which exposed the contempt. 24 The respondents submitted: 9. There is nothing impermissible in the process proposed. The evidence in Hearne v Street was obtained by answers to the interrogatories provide by the contemnors: see Hearne v Street at [77].

10. Alpha Energy may not claim the privilege against self incrimination: see section 187 of the Evidence Act. Privilege in respect of self incrimination, under section 128 of the Evidence Act, has not been personally invoked by the Second and Third Respondents to the Notice of Motion. 25 The alleged contemnors opposed the proposed preliminary hearing, submitting that it was misconceived. Senior counsel for the charged parties submitted that the scope and dates delimiting the production and disclosure orders made clear that they related not to the present charges, but to other possible breaches. A preliminary hearing would necessarily prolong the pendency of the contempt charges, which would hang over the heads of persons charged. It would also impede Alpha from dealing with the 45 customers for whose business the parties were competing, and constitute a continuing distraction. The extremely serious nature of the contempt charges warranted their immediate determination. 26 Senior counsel for the charged parties further contended that there was no proper basis for the production and disclosure relief, which amounted to a fishing expedition.

Preliminary hearing not appropriate 27 The application for a preliminary hearing in relation to the production and disclosure relief implicitly entailed an application for an adjournment of the hearing of the present contempt charges. 28 In my opinion, even if the production and disclosure relief were otherwise unobjectionable, a preliminary hearing was unjustified. The relief sought was unnecessary for the disposition of the contempt charges, yet the preliminary application would inevitably occasion the loss of the hearing date fixed for those charges and cause subsequent uncertainty. If the preliminary relief were granted, Alpha would require time for compliance with the orders, the respondents would need to consider any matters revealed in the material produced and frame any relief sought in consequence, and it would be necessary to fix a new hearing date. Any material produced pursuant to the orders might not, in any event, disclose grounds for new charges. If the relief were not granted, the present hearing date for the current contempt charges would be lost for no good reason. 29 The loss of the current hearing date in order to pursue processes of uncertain outcome in an indefinite timeframe was, in my view, a sufficient reason to refuse the application for a preliminary hearing. 30 Further, although it was not the subject of extensive submissions, significant doubt attended the grant of the production and disclosure relief in contempt or other criminal or penal matters. 31 Assuming, as the respondents submitted, that the court had power to make such orders as incidental to its power under s 31 of Federal Court of Australia Act 1976 (Cth) (invoking the powers of the High Court to punish contempts of the High Court under s 24 of the Judiciary Act 1903 (Cth)), relevant authority indicated that in a criminal or penalty proceeding, defendants should not be compelled to make admissions or give discovery or production. 32 In Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat & Livestock Corp (1979) 42 FLR 204 ("Refrigerated Express"), Deane J stated: It is a well‑established principle that a defendant in proceedings which are solely for the recovery of a pecuniary penalty should not be ordered to disclose information or produce documents which may assist in establishing his liability to the penalty (see, generally, per Isaacs J. in R. v Associated Northern Collieries; Naismith v McGovern and Martin v. Treacher). Even where, as in the present case, the proceedings are not for recovery of a penalty but to prevent and redress civil injury, a party to litigation ought not to be compelled to provide information or produce documents for inspection by the other party if the result thereof will be to provide evidence against him which may be used to establish his liability to a penalty in other proceedings (Mayor of the County Borough of Derby v. Derbyshire County Council). In the former case, that is to say in a mere action for a penalty, a court should, in the absence of statutory provision to the contrary, refuse to make any order at all against the defendant for discovery or production of documents or provision of information for the reason that the whole and avowed object of the proceedings being the imposition and the recovery of a penalty, an order for the production of documents or provision of information against the defendant can, so far as the prosecutor of the action is concerned, properly have no other intended consequence (see R. v. Associated Northern Collieries). This is a broad and unqualified rule whose origins are apparently to be found in a reluctance on the part of the Court of Chancery to lend the aid of its discovery proceedings to the common informer (see Mexborough (Earl of) v. Whitwood Urban District Council and Heimann v. Commonwealth). (Footnotes omitted.) 33 The respondents submitted that privilege against self‑incrimination constituted no impediment because, s 187 of the Evidence Act 1995 (Cth) abolished the privilege against self‑incrimination for bodies corporate, and the other respondents had not formally objected pursuant to s 128(1). 34 In Microsoft Corporation v CX Computer Pty Ltd (2002)116 FCR 372 ("Microsoft"), a case which did not involve the imposition of a criminal or civil penalty, Lindgren J stated (at [45]): Deane J accepted that whereas, in the absence of statutory provision or waiver, a court should not order a defendant to give discovery or to produce documents for inspection in a proceeding which is itself criminal or for the imposition of a civil penalty, ordinarily, in other proceedings the privilege should not excuse a party in limine from giving discovery, and the party should be left to object to producing particular documents for inspection. But his Honour also accepted that it would be appropriate to excuse in limine in the rare case where that course is the only means of protecting against self-incrimination or self-exposure to a civil penalty. 35 In Microsoft, Lindgren J noted that an individual defendant's privilege against self‑incrimination was unqualified save by statute or waiver and, in a criminal case, was a complete answer. His Honour stated (at [39]): In Reid v Howard (1995) 184 CLR 1 … [t]he High Court held that the privilege against self-incrimination was unqualified except by statute or waiver and provided a complete answer to the application. Reid v Howard was followed in this court by Heerey J in Australian Competition and Consumer Commission v J McPhee & Son (Aust) Pty Ltd (No 2) (1997) 77 FCR 217 ; 148 ALR 601 (ACCC v McPhee), a case in which the privilege was held to excuse respondent individuals from any obligation to file witness statements in a proceeding for civil pecuniary penalties. [The officer] relies on these cases, but they are distinguishable: neither was concerned with the question of the giving of discovery in a proceeding such as the present one which is not a proceeding for the imposition of a criminal or civil penalty. 36 Lindgren J stated that under s 187 of the Evidence Act, a company could not assert the privilege on the ground that discovery or production would tend to incriminate its officer, but noted the possibility that the company's compliance should not be compelled if it would require the officer to incriminate himself in making the relevant affidavit of documents. 37 It was unnecessary to determine that issue, however, as it was not established that the relevant officer was the only person who could swear the affidavit on behalf of the company. His Honour concluded that, on the evidence, the officer's privilege against self‑incrimination did not relieve the company from compliance, because he was not satisfied that it would require the officer to engage in self‑incriminating conduct of any kind (at [37]). 38 Lindgren J observed at [40] that the privilege operates to prevent a person from being compelled "to answer any question, or to produce any document or thing, if to do so may tend to bring him into the peril and possibility of being convicted as a criminal". 39 In Television Broadcasts Ltd v Choi Wan Cheung T/A ABM Video [1998] FCA 1318 ("Television Broadcasts"), Lindgren J set aside a notice to produce served on a respondent charged with contempt of court orders. The sole relief sought in the applicants' notice of motion was the imposition of a penalty on the respondent for contempt of court. 40 Lindgren J referred to O 33 r 12(1) of the Federal Court Rules and observed that it had been "interpreted as giving a notice to produce the same coercive effect as a subpoena for production and making compliance mandatory unless production is excused by the Court: CCOM Pty Ltd v Jiejing Pty Ltd (1992) 37 FCR 1 at 3; Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 132". 41 Lindgren J noted that O 33 r 11(1) of the Federal Court Rules provided that where the court by subpoena or otherwise ordered a person to produce any document or thing, if a person made a substantiated sufficient lawful objection to production on grounds of privilege, production should no be compelled except for the purpose of ruling on the objection. 42 Lindgren J stated: In this case the sole object of the applicants' motion is to impose a penalty for contempt and the sole object of their notice to produce is to compel production of documents "for the purpose of evidence" to aid them in achieving that result. I think that in accordance with the authorities the notice should be set aside: The King v Associated Northern Collieries (1910) 11 CLR 738 at 741-743; Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 at 335-336; Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1979) 42 FLR 204 (FCA/Deane J) at 207-208; Master Builders Association of New South Wales v Plumbers and Gasfitters Employees' Union of Australia (1987) 14 FCR 479 at 483. Counsel for the applicants submits that the documents should be produced to the Court at this stage and that claims for privilege against self-incrimination should be made in respect of the individual paragraphs in the notice to produce (there are ten such paragraphs). He refers to the principle that in claiming the privilege against being compelled to answer questions in the witness box, the claim must be made in respect of each question rather than en globo. However, I think that the position is different here. In the ordinary case of oral testimony the answering of some questions may not incriminate and may merely relate to the issues involved in the substantive proceeding in which the evidence is given. In the present case, however, the only purpose of production of the documents is to aid in the imposition of a penalty for contempt of court, since this is the only purpose of the applicants' motion. 43 His Honour noted that the respondent, in her affidavit, put a positive case, as well as denying breach of the relevant orders, but it was not yet known whether testing of the respondent's evidence should be permitted. It was therefore inappropriate to require production of documents which would be held by the court until the respondent's evidence on the hearing of the contempt motion was identified, and pending a decision as to whether she should be compelled to produce documents to assist in testing that evidence. Lindgren J concluded that: In the circumstances, it cannot be said at present that the applicants are entitled to production of the documents on the hearing "for the purpose of evidence"; cf O33 r12(1). 44 Lindgren J concluded that a notice to produce should not be used to compel production of documents for the purpose of evidence to aid in achieving the imposition of a penalty for contempt, as it was premature, even in relation to pending charges. 45 The reasoning in Television Broadcasts indicates that in the ordinary course, an alleged contemnor would be compelled to produce documents for the purpose of gathering evidence to support future possible charges. While in the present case the parties made no submissions on whether the alleged contempt was civil or criminal, contempt charges are always of a grave and penal nature, and the application for the production and disclosure orders did not appear soundly based. The unavailability to corporations of the privilege against self‑incrimination does not resolve difficulties posed by the antecedent question of whether the relevant orders be made. 46 Hearne v Street,on which the respondents relied, is not, in my opinion, authority for making wide‑ranging preliminary orders for compulsory production and inspection of documents, and a statement of disclosure aimed at eliciting evidence of further contempts by charged parties. 47 In Hearne v Street, while the answers to the interrogatories exposed much of the factual material relied on in the contempt proceeding, as the High Court plurality (Hayne, Heydon and Crennan JJ) observed, the interrogatories were not ordered for that purpose and the information was obtained in an "adventitious" way (at [77]). 48 In summary, a preliminary hearing would entail indefinite delay and uncertain consequences. It was unnecessary to the determination of the current charges for which the present hearing date was fixed. Further, no precedent for the production and disclosure relief in the context of pending contempt charges, whether on a preliminary basis or otherwise, was identified. 49 In the circumstances, I refused the application for a preliminary hearing.

whether production and disclosure relief should otherwise be granted 50 The further question arises whether, although a preliminary hearing was unjustified, the production and disclosure relief should be granted after the contempt charges are determined as a form of preliminary discovery. In my view, it should not be granted. In addition to the significant difficulties already discussed, as set out below, I have found that contempt charges were not made out and no other proper basis for the orders was established.

Adjournment 51 Alternatively to their application for a preliminary hearing of the production and disclosure orders, the respondents sought an adjournment in order to obtain evidence from employees of Q Video Systems, submitting that Messrs Theissen and Komala would contradict Mr Roberts' explanation for his reference to the approximately $100,000 worth of orders by Q Video Systems from Fusion Power Systems. 52 I refused that application, as there was no explanation for the failure to take adequate measures to obtain the evidence in time for the fixed hearing date and nothing to indicate that the relevant persons were unavailable to give evidence on that date. Ultimately, Messrs Theissen and Komala were located in Sydney during the course of the day, and gave evidence by videolink.

Evidence in support 53 The notice of motion was supported by the affidavits of the director of the first respondent, Anthony Violi, sworn 15 October 2010 and 27 October 2010. 54 In his first affidavit, Mr Violi deposed to the orders made on 22 June 2010 requiring Delta V, a company he controlled, to make discovery and inspection of: (a) all invoices and receipts issued by the Second Respondent since its incorporation to customers of the Applicant identified in the customer list provided to the Respondents' solicitor by the Applicant's solicitor; and (b) all orders currently held (but not yet invoiced) by the Second Respondent from customers of the Applicant identified in the customer list provided to the Respondents' solicitor by the Applicant's solicitor. 55 Mr Violi deposed that on 29 June 2010, pursuant to the above order, his solicitors, Moores Legal, provided to Alpha's solicitors, in a first tranche, tax invoices and open sales orders in relation to customers of Alpha identified on the customer list. The documents, which are exhibited to Mr Violi's affidavit, comprise a number of tax invoices and sales invoices under the second respondent's business name, Fusion Power Systems, all bearing dates during 2010, which identify the party to be billed and the party to whom the order is to be shipped. 56 Mr Violi deposed that, after the first tranche of discovered documents was provided: (a) By a letter dated 21 September 2010, Alpha's solicitors, McDonald Slater & Lay, sought further discovery. (b) By a letter dated 29 September 2010, Mr Violi's solicitors responded that pursuant to the order for discovery made on 22 June 2010, the respondents would discover invoices and open orders issued after 29 June 2010 to clients on the list of clients provided by the applicant on 22 June 2010. The letter also alleged that the respondents had become aware that Alpha had used the first tranche of discovered documents to approach customers and disparage the respondents, contrary to the obligations recognised in Harman. (c) Alpha's solicitors responded by letter dated 29 September 2010, acknowledging that Alpha was bound by the implied undertaking in Harman and denying the allegations of misuse. The letter sought further discovery. (d) On 12 October 2010, the respondents' solicitors electronically provided a second tranche of documents, comprising tax invoices and open orders held by Delta V, directed to customers on Alpha's customer list, while reiterating that the documents were provided on the basis that Alpha would comply with Harman obligations. 57 Mr Violi exhibited the transcript of a directions hearing on 12 October 2010, which indicated that after the respondents' counsel complained of an alleged breach of Harman principles, a short discussion of contempt ensued. When subsequently requested by counsel for the respondents to remind all present of the Harman obligation, his Honour stated that the parties should be shown the relevant transcript. 58 On 13 October 2010, the respondents' solicitors wrote to the applicant, again reiterating concerns regarding the proper use of discovered documents. Mr Violi deposed: IMPROPER USE OF DISCOVERED MATERIAL 20. On 13 October 2010 I received a telephone call from Mr Stanley EL Komala who is known to me as the manager of Q Video Systems. Mr Komala told me that he had been contacted that day by Mr Corey Roberts from Alpha Energy and that Mr Corey Roberts sought the business of Q Video Systems and wanted to discuss the pricing that had been offered to Q Video Systems by Fusion Power Systems.

Delta V/Fusion Power Systems had conducted business with Q Video Systems and invoices and open orders from Fusion Power Systems to Q Video Systems were amongst the documents provided to the applicant in the second tranche of discovered documents.

Following our telephone conversation, Mr Komala provided me with copies of his email communications with Mr Corey Roberts which commenced at about 2.49pm on Wednesday, 13 October 2010 and continued until about 3.52pm on that day. A copy of the email thread covering that period of the communications between Mr Corey Roberts and Mr Komala is now produced and shown to me, marked with the letters "APV‑8".

It is apparent from the email communications referred to in the preceding paragraph that the applicant or its staff are inappropriately using documents from the discovery process to: (a) Advance the commercial interests of the applicant; or (b) Try to harm the commercial interests of the respondents.

From the matters told to me by Mr Komala and the matters referred to in paragraph 11 hereof, I believe that Alpha Energy has through its staff made approaches to other customers of Delta V/Fusion Power Systems to disparage me and Delta V, seek to adversely influence customers of Delta V against me and otherwise have directly or indirectly made inappropriate use of the documents or material in the documents discovered in the first tranche and second tranche of discovered documents.

I seek from the applicant all material which shows the approaches made by the applicant or by staff of the applicant to any customers of Delta V/Fusion Power Systems that appear on tax invoices or sales invoices provided in the first or second tranches of the discovered documents. 59 Mr Violi exhibited the following chain of emails passing between Corey Roberts and Stanely EL Komala regarding "Pricing", dated 13 October 2010: (a) Email from Corey Roberts to Stanley EL Komala sent on Wednesday, 13 October 2010 2:49pm: Subject: Pricing Stanley, Regarding our recent conversation regarding pricing - did you want to tell me what price you are getting from Fusion Power, or did you want me to guess? (b) Email from Stanley EL Komala to Corey Roberts sent on Wednesday, 13 October 2010 3:39pm: Subject: Pricing Importance: High Corey, Fusion only do quote; not the price list type that Alpha Energy does. As you know that I have been told you before; we don't move much on normal UPS. Everybody now buys direct with Radum, PSS Distributor sell to everyone as reseller; why to us we gets 20% off reseller pricing. (c) Email from Corey Roberts to Stanley EL Komala sent on Wednesday, 13 October 2010 3:53pm: Subject: Pricing Regardless Stanley, I am aware that you ordered many thousands of dollars worth of product from Fusion Power. Should I give you new pricing so you can pass it on to them? (d) Email from Stanley EL Komala to Corey Roberts sent on Wednesday, 13 October 2010 3:52pm: Subject: Pricing Corey, If you don't want to revised the pricing, that's fine. We need to move on; as we are currently not many selling the UPS anyway. Thank you. (e) Email from Corey Roberts to Stanley EL Komala sent on Wednesday, 13 October 2010 3:58pm: Subject: Pricing Stanley, I am happy to give you revised pricing, but it appears that you are buying your UPS from Fusion Power - you have ordered approx $100,000 worth of UPS from them recently. If I offer you new pricing, will you just pass it on to them to get better discounts, or are we still doing business together? (f) Email from Stanley EL Komala to Corey Roberts sent on Wednesday, 13 October 2010 4:01pm: Subject: Pricing Corey, It's beyond my decision regarding either Fusion or Alpha for Garden Island. Basically Tony Theissen driven the project and at the end my boss Rick Stokes decided the final decision; as this is large project and beyond my pay grade to make a decision. Unfortunately; for Garden Island is not making big money at all due to CNWA also wants to have the project. There are a lot of politics in this Garden Island project. Originally I was trying to push to Alpha Energy; but at the end has been turned down.

Further affidavit of Mr Violi 60 In his second affidavit sworn 26 October 2010, Mr Violi referred to Q Video Systems' tender to provide a UPS system for the CCTV works for the Garden Island Project, an infrastructure upgrade undertaken by the Department of Defence. Q Video Systems, a customer which had dealings with both Fusion Power Systems and Alpha, in turn sought quotes from suppliers for UPS systems for the Garden Island Project. Both Fusion Power Systems and Alpha provided quotes. Q Video Systems ultimately received quotes from four suppliers. 61 Mr Violi deposed to and exhibited a quote by Fusion Power Systems made to Q Video Systems for the Garden Island Project UPS system for $226,044 excluding GST, for the component of the CCTV works. 62 Mr Violi deposed to three further revised quotes which Fusion Power Systems made to Q Video Systems following changes to the specifications for the CCTV works in the Garden Island Project, in the sums of $263,138, $365,118 and $337,877, dated 16 July 2010, 20 July 2010 and 27 July 2010 respectively. 63 Mr Violi deposed that on 11 August 2010, Q Video Systems notified Fusion Power Systems that its quote was successful. On 20 August 2010, Fusion Power Systems received two purchase orders from Q Video Systems for $33,729 and $200,934 (totalling $234,663). 64 Mr Violi deposed that on 12 October 2010, he provided to Alpha's solicitors the second tranche of documents containing sales orders and invoices from 30 June to 28 September 2010. They included Q Video Systems invoices totalling $115,741, comprising three invoices relating to the Garden Island Project totalling $103,226 (representing the supplies made to date). Seven other invoices to Q Video Systems unrelated to the Garden Island Project, totalling $12,513, were also included in the second tranche of discovered documents. 65 Mr Violi deposed that on 13 October 2010, Stanley El Komala of Q Video Systems systematically copied him into the series of emails between Mr Komala and Mr Roberts of Alpha. 66 An exhibit tendered by the respondents at the hearing before me, and marked "R-2", was a quote of Alpha to Q Video Systems for the Garden Island Project, which was produced by the applicant in response to a notice to produce. The quote, which was prepared in August 2010, quoted $235,000, $247,000 with a three year warranty and $382,200 with a five year warranty respectively. The Alpha quote also stated that a reduction of $44,000 could be obtained if Q Video Systems supplied its own cabinetry.

Mr Theissen's evidence 67 Mr Theissen, a business development manager of Q Video Systems, gave evidence on behalf of the respondents. At the hearing, Mr Theissen adopted the following draft affidavit as his evidence: 1. I am employed by Qrsciences Security Pty Ltd, trading as Q Video Systems ("Q Video"). 2. I am employed as the account manager for New South Wales for Q Video. 3. I had the responsibly for obtaining pricing for component works of a large defence project known as the "Garden Island Project" in which Q Video was engaged as a sub‑contractor/supplier. The works involved were to take place on Garden Island, New South Wales 4. Either myself or other relevant staff from Q Video identified the scope of the project the role of Q Video, and sought pricing of component parts from various suppliers, from about June 2010. 5. The parameters of the project changed from between the time that is was first described to potential suppliers in about June 2010 and receiving quotations from those suppliers in about August 2010. 6. The final quotations received from four suppliers, including Alpha Energy Pty Ltd and Fusion Power Systems, ranged from about $325,000 at the highest to about $225,000 at the lowest. 7. I have been provided with a copy of an affidavit by Mr Corey Jamieson Roberts affirmed on 22 October 2010 ("Mr Robert's affidavit"). 8. I spoke with Mr Roberts by telephone on a number of occasions after the quotation was provided by Alpha Energy Pty Ltd to Q Video for work on the Garden Island Project. This was late July to mid-August 2010. I also communicated with him by email. My last communication with Mr Roberts was on 30 September 2010 when I received an email from him. I do not recall responding to that email. 9. I refer to paragraphs 8 and 9 of Mr Roberts's affidavit. In my conversations with Mr Roberts in August 2010, I believe I told Mr Roberts that four suppliers had provided quotations and that their prices varied by about $100,000. I did not advise Mr Roberts of the final price quoted by Fusion Power Systems nor did I advise Mr Roberts that Fusion Power Systems was the successful bidder for the Garden Island Project. I did not say to Mr Roberts that the quote provided by Fusion Power Systems was about $100,000. This could not have been the case given the UPS products which were to be supplied for the Garden Island Project. 68 In cross‑examination, Mr Theissen conceded that he could not recall the precise conversation in which he told Mr Roberts that there were four quotes for the Garden Island Project, which varied by about $100,000. 69 Mr Theissen acknowledged that, in his conversations with suppliers, "my goal is to drive everybody's price down so that I'd get the best price for the project". 70 When asked whether he informed the various suppliers of each other's final quote after the order was placed, Mr Theissen did not clearly deny doing so. He also stated that he provided correspondence to Corey Roberts "that actually had copies of the other tenderers or the other companies quoting for the project…" with the goal of obtaining Mr Roberts' best price. 71 Mr Theissen conceded that there was no reason why he or Mr Komala would not disclose the identity of the successful quoter for the Garden Island Project contract. He agreed that either he or Mr Komala might have done so at some time.

Mr Komala's evidence 72 Mr Komala, a national warehouse and purchasing officer for Q Video Systems, gave evidence on behalf of the respondents. 73 Mr Komala testified that he was not involved in the quoting for the Garden Island Project or the acceptance of the quotes. Mr Theissen controlled that matter, while Mr Komala dealt with the ordering. 74 Mr Komala, while initially uncertain, ultimately testified that he recalled a conversation with Mr Roberts prior to the chain of emails regarding pricing. He testified that the conversation related not to the Garden Island Project but to day to day orders, for which Mr Komala sought revised lower pricing from Alpha due to currency fluctuations. Mr Komala testified that the references in the chain of emails also related to revised pricing for day to day orders, rather than for the Garden Island Project. 75 Mr Komala denied that he told Mr Roberts that Q Video Systems had ordered thousands of dollars worth of product from Fusion Power Systems. He testified that he did not tell Mr Roberts that Q Video Systems had recently ordered approximately $100,000 worth of UPS from Fusion Power Systems. 76 Mr Komala testified that he provided the chain of emails passing between himself and Corey Roberts to Mr Violi to clarify what was happening between Alpha and Fusion Power Systems. 77 In cross‑examination, Mr Komala appeared to concede that he had no reason to be concerned about Mr Roberts knowing that Q Video Systems had sent purchase orders to Fusion Power Systems, or that Mr Roberts knew that Fusion Power Systems had secured the Garden Island Project contract. He conceded that Mr Roberts knew that Alpha had not been successful in obtaining the Garden Island Project business. 78 Mr Komala acknowledged that, like Mr Theissen, he would tell one supplier the price quoted by other suppliers in order to extract the lowest price possible. He agreed that he contacted Mr Roberts in order to obtain a revised price list from Alpha and wished to get the lowest price. Mr Komala agreed that he had systematically passed on Mr Roberts' emails to Mr Violi and said he did so in order to discover what was going on. Mr Komala did not explain why he did not ask Mr Roberts directly. 79 Mr Komala agreed that he had a number of conversations with Mr Roberts during July and August 2010. He testified that he did not tell him that Fusion Power Systems gave the successful quote for the Garden Island Project, because it would be upsetting for Mr Roberts.

Mr Roberts' evidence 80 By his affidavit sworn on 22 October 2010, Corey Jamieson Roberts, the applicant's senior account manager, deposed as follows: 1. I am employed by the Applicant as a Senior Account Manager. Except where the context indicates to the contrary, I make this affidavit from my own knowledge.

2. I refer to paragraphs 20 to 24 of the affidavit of Anthony Paul Violi sworn 15 October 2010 ("the Affidavit") and reply as follows.

3. I deny having used any discovered documents to advance the commercial interests of Alpha Energy or to harm the commercial interests of the Respondents.

4. I am informed by the Applicant's solicitors, and believe, that no documents referring to Q Video Systems were included in the first tranche of documents discovered by the Respondents.

5. I have never seen the second tranche of documents discovered by the Respondents. Neither Mr. Bretislav Jilich nor any other person has told me of their contents. 81 Mr Roberts deposed that Q Video Systems had been Alpha's client, with whom he had dealt for the past four years. He had also dealt with Q Video Systems in a previous job, so his total dealings extended over a six year period. 82 Mr Roberts deposed that it was Mr Komala's normal practice to inform Mr Roberts of prices quoted by, or price lists of, other suppliers and ask if Mr Roberts could give him a better offer. Mr Roberts was aware that Mr Komala informed other suppliers of Alpha's price lists and quotes. 83 In August 2010, Mr Roberts gave a quote to Q Video Systems for the supply of goods for the Garden Island Project. He deposed: 8. In about August 2010, I quoted for a significant job with Q Video, the Garden Island Project, in New South Wales. I was informed by Mr Komala (and Mr Tony Theissen - Q Video's NSW Account Manager for the project) at that time that Q Video had also received a quote by Fusion Power Systems (the Respondent). 9. In later discussions with Mr. Komala and Mr. Theissen I was told that Fusion Power had provided a lower quote and that Q Video had decided to purchase the goods for the Garden Island project through them. I was not told the exact figure of the Fusion Power Systems quote and cannot now recall the exact words used, but they were to the effect that it was about $100,000. 84 Mr Roberts deposed that subsequently he noticed that Q Video Systems' general purchasing had dropped off. About a week prior to his 13 October email, without being directed to do so, he telephoned Mr Komala to ask why. Mr Komala responded that Q Video Systems' market had reduced significantly and Alpha would have to reduce its pricing in order to recover business. 85 Mr Roberts then explained the chain of emails passing between himself and Mr Komla as follows: 11. That email chain was in the context of the above discussions. My references to "many thousands of dollars worth" and later "approx $100,000 worth" of orders from Fusion Power systems in my email to Mr Komala were in relation to the Garden Island Project, which Q Video had advised me had gone to Fusion Power Systems. My enquiry as to Fusion Power Systems pricing was in the context of Mr. Komala's usual purchasing practice of advising me of other suppliers pricing, as mentioned above. Mr Komala was asking me for a revised pricing, but I was concerned that he would merely use my quote to obtain a cheaper price from Fusion Power Systems. 86 In cross‑examination, Mr Roberts stated that he was responsible for Alpha's pricing. He was generally aware of the primary proceeding and knew that Mr Jilich had provided discovery of documents. 87 Mr Roberts testified that he had prepared Alpha's Garden Island Project quote (tendered as Exhibit R-2). The quoting process began in July and he provided only one written quote in August 2010. He dealt with both Mr Theissen and Mr Komala. He contacted Mr Komala on 13 October 2010 (five or six weeks after learning that Alpha was unsuccessful in quoting for the Garden Island Project) because Q Video Systems' orders were falling off generally. He had already discussed the Garden Island Project with Mr Komala. 88 Mr Roberts asserted that he had learnt that Q Video Systems had given Fusion Power Systems an order of approximately $100,000 for UPS recently from Mr Komala and Mr Theissen. He could not specifically recall the details, as it was part of the general discussion after he had given Alpha's final quotation. He recalled that both Messrs Komala and Theissen told him that Fusion Power Systems had made the successful quote. Further, Mr Theissen "gave him to understand that Fusion Power's quote was $100,000 below" that of Alpha. Mr Roberts testified that Mr Komala may not have spoken of the price, but made it known that Fusion Power Systems was successful. 89 Mr Roberts agreed that the purchase orders and quote by Fusion Power Systems exceeded $200,000, and the invoices for the Garden Island Project were approximately $103,000.

Mr Jilich's evidence 90 Mr Jilich also gave evidence on behalf of the charged parties. He testified that he received the respondents' second tranche of discovery electronically on the morning of 12 October 2010, printed off hard copies and calculated the total sum, prior to attending a directions hearing that afternoon. In cross‑examination, Mr Jilich stated that when totalling up the figures, he was not concentrating on the identity of customers. Mr Jilich did not ordinarily handle quotes, and was unaware that Alpha had lost to Fusion Power Systems on the Garden Island Project quote. 91 Mr Jilich denied that he provided the discovered documents to Mr Roberts or had any conversation with him about their contents on 12 or 13 October 2010.

relevant legal principles 92 The obligation recognised in Harman is well established. In Hearne v Street, the High Court recognised that although commonly termed an "implied undertaking", the obligation not to use documents or information disclosed by a party to litigation on compulsion by reason of a rule or order of the court, for any purpose, other than for which it was given without leave of the court, unless it is received into evidence, is not a voluntary undertaking. Rather, the plurality stated "in truth it is an obligation of law arising from the circumstances in which the material was generated and received" (at [102]). 93 Further, in Hearne v Street, the plurality stated: [103] …that obligation would be of very limited protection if it were only personal to the litigant, which is why it is often said to be extended also to a litigant's solicitor, industrial advocate or barrister, and also to third parties like a shorthand writer or court officer. For that reason the authorities recognise a broader principle by which persons who, knowing that material was generated in legal proceedings, use it for purposes other than those of the proceedings are in contempt of court. … [110] Turning to Australian authorities, in Esso Australia Resources Ltd v Plowman, Mason CJ (with whom Dawson and McHugh JJ agreed) said: "It would be inequitable if a party were compelled by court process to produce private documents for the purposes of the litigation yet be exposed to publication of them for other purposes. No doubt the implied obligation must yield to inconsistent statutory provisions and to the requirements of curial process in other litigation, eg discovery and inspection, but that circumstance is not a reason for denying the existence of the implied obligation."

In Hamersley Iron Pty Ltd v Lovell Anderson J (Pidgeon and Ipp JJ concurring) said: "The implied undertaking is binding upon anyone into whose hands the discovered documents come, if he knows that they were obtained by way of discovery." And Ryan J said in Spalla v St George Motor Finance Ltd: "To be effective, the undertaking must bind the litigant by whom it is given and his or her privies."

(Footnotes omitted.) 94 The plurality in Hearne v Street observed that not all proceedings for contempt were criminal in nature, although all charges must be proved beyond reasonable doubt (at [132]). Their Honours stated that the distinction between civil and criminal contempt may depend upon whether it is clear that the proceedings are remedial or coercive (seeking to ensure compliance with the relevant obligation) or, on the other hand, punitive (seeking to punish for past breaches of the obligation). The distinction hinged upon the substantial character of the remedies sought for the alleged contempt and could be difficult to draw (at [133]). 95 Contempt, even if civil in nature, is nevertheless always of a serious and penal quality, and may be punished by imprisonment or a fine. 96 The party bringing the charge bears the onus of proof, and all contempts, whether or not classified as criminal, must be proved according to the ordinary criminal standard of proof beyond reasonable doubt. Therefore, as Gibbs, Stephen and Mason JJ in their joint judgment in Barca v R (1975) 133 CLR 82 (at 104) stated: When the case against an accused person rests substantially upon circumstantial evidence the jury cannot return a verdict of guilty unless the circumstances are "such as to be inconsistent with any reasonable hypothesis other than the guilt of the accused": Peacock v The King. To enable a jury to be satisfied beyond reasonable doubt of the guilt of the accused it is necessary not only that his guilt should be a rational inference but that it should be "the only rational inference that the circumstances would enable them to draw": Plomp v The Queen; see also Thomas v The Queen. (Footnotes omitted.) 97 Questions of possible contempt should be determined as expeditiously as is reasonably possible, "having regard to the interests of justice and the proper administration of the law, and having regard also to the interests of the [party] himself so that he knows where he stands with respect to the matter": Sharpe v Deputy Commissioner of Taxation (NSW) (1998) 20 ATR 164 at 169, per Lockhart J. 98 Order 40 of the Federal Court Rules deals with contempt. Order 40 Division 2 establishes procedures for contempt other than contempt in the face of the court. 99 O 40 r 6 provides for a statement of charge. 100 O 40 r 7 provides that subject to subrule (2), the evidence in support of the charge shall be by affidavit. By subrule (2), the Court may permit evidence in support of the charge to be given otherwise by affidavit. 101 The rules and procedure applicable to a contempt proceeding must be strictly observed. No matter can be introduced which is not in evidence against the charged party, and every relevant fact must be strictly proven: McLeod v Henty (1900) 25 VLR 648. When contempt proceedings are brought within a principal proceeding, it is regarded as a separate, rather than an interlocutory, proceeding. 102 Although the alleged contemnor may simply require the party bringing the charge to prove its case (see WR Carpenter & Co Pty Ltd v Wollongong Instant Scaffolds Pty Ltd (1992) 36 FCR 10), if the charged person files an affidavit answering the charge, the court may permit cross‑examination: see Australian Securities and Investments Commission v Reid [2005] FCA 1274 and also Television Broadcasts, supra.

the parties' principal submissions 103 Senior counsel for the parties charged submitted that in the present case, their use of discovered documents in breach of the "implied undertaking" was not the only rational inference to be drawn. 104 Both Messrs Jilich and Roberts had denied such use on oath. Mr Jilich was aware of the nature of the implied undertaking and the serious consequences of its breach. Further, no strong motive for the particular alleged misuse was established, as it secured no significant advantage. 105 Senior counsel for the parties charged submitted that Mr Roberts' explanation for his reference to the $100,000 (a figure close to that disclosed in the discovered documents) was, although neither precise nor entirely clear, plausible. 106 The respondents submitted that Mr Roberts' explanation was not credible and the only available inference was that he had obtained and used information contained in the discovered documents. Mr Roberts was aware that Alpha's quote was $235,000 to $282,000, and Mr Theissen testified firmly that he did not advise Mr Roberts of the amount of Fusion Power Systems' final quote. Mr Roberts must have been well aware that Fusion Power Systems' quote was for $200,000 plus, not $100,000. 107 Further, the respondents submitted that the documents discovered on 12 October 2010 showed that orders for the Garden Island Project totalling $103,000 had been invoiced. The tone of the relevant emails also suggested that Mr Roberts was revealing information knowing that Mr Komala was hitherto unaware he possessed it.

Discussion 108 In my opinion, Mr Roberts' explanation for the reference to around $100,00 worth of orders of UPS from Fusion Power Systems is, despite his imprecise recollection, not implausible. Mr Roberts knew that Alpha's lowest quote for the Garden Island Project (which he had prepared) was about $230,000, which could be reduced by about $44,000. Mr Roberts deposed that Mr Theissen had told him that there was a difference of about $100,000 between the quotes Q Video Systems had received for the Garden Island Project and, in oral testimony, he also stated that Mr Theissen had given him to understand that there was $100,000 difference between Alpha's quote and Fusion Power Systems' quote. 109 Mr Theissen did not deny that he had indicated a difference of about $100,000 between the quotes received by Q Video Systems. In so far as the evidence of Messrs Theissen and Komala contradicted that of Mr Roberts, it was not, in my view, clear, consistent or compelling. While Mr Theissen denied that he informed Mr Roberts that Fusion Power Systems gave the successful quote, he ultimately conceded that he may have done so. A denial that they informed Mr Roberts of Fusion Power Systems' quotes or prices, or of its success in quoting for the Garden Island Project, appeared inconsistent with the testimony that Mr Theissen and Mr Komala routinely informed suppliers of other suppliers' quotes and prices in order to drive down prices. 110 It was, in my view, impossible to draw any firm inferences adverse to Mr Roberts from the tone or phraseology of the chain of emails, which, as an informal exchange, did not expose its background or assumptions. Moreover, Mr Roberts' assertion in the email that he did not know the current prices which Q Video Systems was obtaining from Fusion Power Systems, and his request for that information, appear inconsistent with his having already obtained access to the discovered documents. 111 Mr Jilich gave unshaken testimony that he did not provide the discovered documents to Mr Roberts or inform him of their contents on or prior to 13 October 2010. Mr Roberts' testimony that he did not receive the documents, or information from them, was likewise unshaken. 112 In the circumstances, I cannot be satisfied according to the requisite standard that the relevant references in Mr Roberts' emails were based on the discovered documents or information included therein. Mr Roberts' explanation, although imprecise and contradicted in some aspects by that of the respondents' witnesses, is plausible. It follows, in my opinion, that it is not proved beyond reasonable doubt that any of the persons charged breached the Harman obligation by making improper use of the respondents' discovered documents. The charges of contempt are not made out and the relief sought in the notice of motion dated 15 October 2010 should be refused.

conclusion 113 In my opinion, the notice of motion dated 15 October 2010 should be dismissed. I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds‑Streeton.