Clover Corporation Limited v Tobias

Introduction 1 On 8 July 2020, the second respondent (Pharmamark) filed an application for leave to appeal from an interlocutory order made by the docket judge in this proceeding, O'Callaghan J, on 24 June 2020 (leave application). The leave application (VID 453 of 2020) has been listed for hearing on 16 September 2020 before me in exercise of the Court's appellate jurisdiction under s 25(2) of the Federal Court of Australia Act 1976 (Cth). The leave application is opposed by the applicants in this proceeding. The second applicant is a wholly owned subsidiary of the first applicant and I will refer to them collectively as the Clover companies. The first respondent, Mr Tobias, has filed a submitting appearance on the leave application. 2 On 17 July 2020, Pharmamark also filed an interlocutory application in this proceeding pursuant to rule 36.08 of the Federal Court Rules 2011 (Cth) seeking a stay of the order made on 24 June 2020, pending the hearing and determination of the leave application (stay application). In support of the stay application, Pharmamark filed an affidavit of its solicitor, Kaye Griffiths, sworn 17 July 2020. The stay application is opposed by the Clover companies. These reasons concern the stay application. 3 The order made by O'Callaghan J on 24 June 2020 was that there be an inspection, pursuant to the protocol contained in Attachment A to the order, of certain documents that had been removed from the premises of Pharmamark pursuant to a search order made by the Court on 21 November 2019. It will be necessary to refer to the terms of the protocol below. 4 On 14 August 2020, I made timetabling orders to hear the stay application. Those orders required Pharmamark to file any further affidavits and an outline submission by 17 August 2020. Pharmamark filed an outline submission but did not file any further affidavit by 17 August 2020. The timetabling orders also required the Clover companies to file any further affidavits and outline submissions by 21 August 2020. The Clover companies had earlier filed an affidavit of their solicitor, Timothy Ewart Clark, affirmed on 3 August 2020 (which affidavit exhibits a copy of his earlier affidavit affirmed on 24 July 2020, filed in VID 453 of 2020 in opposition to the leave application). On 21 August 2020, the Clover companies filed a further affidavit of Mr Clark affirmed 21 August 2020 and an outline submission. 5 Subsequently, on 26 August 2020, Pharmamark filed a reply submission and a further affidavit of Ms Griffiths sworn 26 August 2020. The Clover companies did not object to those materials. By the reply submission, Pharmamark stated that it no longer pressed its application for a stay of the 24 June 2020 order. Instead, it sought the following two orders: (a) The report referred to in paragraph 6 of the protocol contained in Attachment A to the 24 June 2020 order not be published to the parties without further order of the Court. In oral submissions, Pharmamark clarified that it intended the order to apply until determination of the leave application. (b) Any communication in writing or any other communication which occurs between the Clover companies, their lawyers, or any other person on their behalf with either the expert or the technical expert (appointed under the 24 June 2020 order) be disclosed within 24 hours to Pharmamark's solicitors. Insofar as such correspondence is oral the solicitors for the Clover companies must make or ensure the making of a note accurately reflecting the terms of that correspondence and make that available to the solicitors for Pharmamark. 6 At the hearing of the application, Pharmamark proposed a variation to the proposed order (b) above to apply to any communications between the expert and the technical expert appointed under the 24 June 2020 order. 7 The grounds advanced by Pharmamark for the stay application, or the alternative orders set out above, have shifted considerably since the filing of the stay application. Even at the hearing of the application, the grounds altered. For the reasons explained below, I consider that there is no appropriate basis to grant the stay application or to make the alternative orders.

Background 8 On 21 November 2019, the Clover companies filed an originating application seeking injunctive and compensatory relief against Mr Tobias and Pharmamark in respect of alleged misuse of the Clover companies' confidential information. By their concise statement, the Clover companies alleged that their former employee, Mr Tobias, made unauthorised copies of their confidential information shortly before he resigned and has disclosed or is threatening to disclose the confidential information to Pharmamark. 9 The Clover companies also made an ex parte application for a search order against the respondents pursuant to Division 7.5 of the Federal Court Rules 2011 (Cth). On 21 November 2019, Wheelahan J made that order, which required the respondents to allow various representatives of the Clover companies to, amongst other things: (a) enter their premises and search for, inspect and make copies of "listed things" described in the annexure to the order; and (b) in respect of any computer to be searched, permit an independent computer expert to make a copy or digital copy of the computer hard drive and remove that copy from the premises so as to conduct a search for "listed things". 10 A large number of electronic documents were copied from the respondents' computers during the execution of the search order and uploaded onto a secure database by the independent computer expert appointed for the purposes of the search order, Korda Mentha. 11 On 6 December 2019, O'Callaghan J made orders setting up a regime to determine which of the seized electronic documents could be inspected by the Clover companies and by which Pharmamark could object to inspection. The orders provided that inspection would occur through a web portal established by Korda Mentha for that purpose. The orders then set out the following steps: (a) The Clover companies would provide Korda Mentha with a set of filtering criteria to be applied to the documents to create a subset of the documents (the initial subset). (b) Korda Mentha would give the respondents and their lawyers access to the initial subset through the web portal for a period of 10 business days for the purpose of identifying any documents in the initial subset to which they have any objection to disclosure. (c) Korda Mentha would make available to the Clover companies and their lawyers all of the documents in the initial subset to which no objection was made. (d) The respondents were then required to provide the Clover companies with an itemised list of objections on a document-by-document basis which was to include a description of the document, the objection and the basis and detailed reasons for that objection. 12 On 6 February 2020, O'Callaghan J made orders extending the time for the respondents to inspect and object to the initial subset of documents under the orders made on 6 December 2020. 13 On 7 February 2020, the respondents filed interlocutory applications seeking variations to the search order made on 21 November 2019 and the inspection order made on 6 December 2019. 14 On 24 February 2020, O'Callaghan J dismissed the respondents' interlocutory applications and made orders further extending the time for the respondents to inspect and object to the initial subset of documents under the orders made on 6 December 2020. 15 On 18 March 2020, O'Callaghan J made orders establishing a confidentiality regime in respect of the disclosure of confidential documents between the parties to the proceeding. 16 On 3 April 2020, the respondents provided their list of objections to the initial subset of documents. Pharmamark's Chief Executive Officer, Guy Drummond, made an affidavit on that day which categorised the initial subset of documents as follows: (a) listed things (to which no objection was taken); (b) not listed things (to which objection was taken because they are not listed things within the terms of the search order); (c) confidential (to which objection was taken on the ground that the documents are confidential to Pharmamark); (d) irrelevant (to which objection was taken on the ground that the documents are irrelevant to the issues between the parties); and (e) confidential and irrelevant (to which objection was taken on the grounds that the documents are confidential to Pharmamark and irrelevant to the issues between the parties). 17 The Clover companies re-categorised Mr Drummond's list as follows: (a) category A, being all documents stated to have been disclosed by Mr Tobias to third parties (comprising 124 documents); (b) category B, being all documents identified by Pharmamark as confidential listed things (comprising 554 documents); (c) category C, being all documents identified by Pharmamark as irrelevant listed things (comprising 33 documents); (d) category D, being all documents identified by Pharmamark as confidential and irrelevant listed things (comprising 21 documents); (e) category E, being all documents identified by Pharmamark as not a listed thing (comprising 13,026 documents); and (f) category F, being all other documents in Pharmamark's list of objections (comprising 19,240 documents). 18 Following an interlocutory hearing on 20 May 2020, O'Callaghan J made orders on 29 May 2020 to the following effect: (a) the respondents were permitted to make reasonable redactions to the documents in categories A to D in respect of claims of confidentiality; (b) Korda Mentha would then make the redacted documents available to the lawyers for the Clover companies who had given confidentiality undertakings in accordance with the regime ordered on 18 March 2020; and (c) in relation to documents in categories E and F, counsel for the parties were required to confer for the purposes of agreeing a means of resolving the dispute regarding inspection and, failing agreement, were to provide a proposed protocol supported by written submissions. 19 The parties were unable to agree on a protocol in respect of categories E and F and each filed written submissions. 20 On 24 June 2020, O'Callaghan J made an order that there be an inspection of the documents in categories E and F pursuant to the protocol in Attachment A to the orders. The terms of the protocol are relevant to the issues raised on this stay application. The protocol was as follows: Appointment of expert 1. The parties propose to appoint a legal practitioner (the Expert) for the purposes of providing a further review of the Category E Documents and Category F Documents (as defined in the Order of Justice O'Callaghan made 29 May 2020 (Orders)) (together, Determination Documents) to determine whether the Determination Documents are "Listed Things" for the purposes of the Search Order of Justice Wheelahan made 21 November 2019 (Search Order). Identity of Expert 2. The Expert shall be chosen by the Applicants. The Expert shall be a practising barrister of no less than 10 years' standing, specialising in commercial litigation, and shall be independent of the Applicants' lawyers. The Applicants will notify the Respondents of the name of the Expert within one day of him or her being engaged. Briefing material 3. Within 7 days, the Applicants shall provide to the Expert a copy of: 3.1 the Search Order; 3.2 the material filed in support of the Search Order; 3.3 the Orders. Provision of Documents in Categories E & F 4. Within 2 business days of being notified of the appointment of the Expert, Grant Whiteley of Korda Mentha (Independent Computer Expert) shall provide access to the Determination Documents through the Relativity One database and web portal (Web Portal) to the Expert. The Expert may consult with, and obtain assistance from, the Independent Computer Expert at any time to assist in the efficient review of the Determination Documents, as the Expert sees fit. Technical consultation 5. Where the Expert is unable to determine the status of particular documents as a Listed Thing then the Expert may consult Mr Adam Tyson of Produco Ltd as an independent technical expert (Technical Expert). The details of Mr Tyson can be found at https://produco.co.nz/business-profile/. Determination 6. As soon as reasonably practicable after receiving the Determination Documents and meeting with the parties, the Expert shall provide a written report to each of the parties in which the Expert indicates: 6.1 which of the Determination Documents are Listed Things for the purposes of the Search Order; 6.2 which of the Determination Documents are not Listed Things for the purposes of the Search Order; and 6.3 for which of the Determination Documents it is not clear to the Expert whether the Determination Documents are Listed Things or not for the purposes of the Search Order. General matters 7. The Expert does not act as an arbitrator of the matters in dispute and the Determination is not an arbitration within the meaning of any law. 8. The Expert shall keep all information disclosed during the Determination confidential, save as where appropriate that information may be revealed to the Court or, where it concerns confidential information of a party, then that information may be revealed to that party. 9. The costs of the Expert, the Independent Computer Expert and the Technical Expert shall be paid by the Applicants and are reserved. 21 As stated earlier, Pharmamark seeks leave to appeal from the order made on 24 June 2020. These reasons concern its application to stay the order pending the determination of its application for leave, as now varied by its reply submissions filed on 26 August 2020.

Pharmamark's submissions 22 By its submissions filed on 17 August 2020, Pharmamark advanced the following submissions. First, it submitted that the documents in categories E and F are Pharmamark documents and contain its procedural formulations, pricing information and marketing information. It submitted that those documents contain the information and processes that are critical to the products Pharmamark has developed to sell in competition with the Clover companies and that the documents have nothing to do with the Clover companies' business or the claims in these proceedings. 23 Second, Pharmamark submitted that the orders made on 24 June 2020 allow inspection of the documents without any of the protections afforded by the orders made on 29 May 2020 in regard to categories A to D. It says that the lack of any impediment on the Clover companies' solicitors retaining, instructing, liaising with or making submissions to the experts retained by them under the orders, or any facility for redaction, or the binding of the Clover companies or their agents to confidentiality undertakings in respect of the category E and F documents, will do irreparable damage to Pharmamark commercially. 24 Third, Pharmamark submitted that if the Clover companies are to proceed on execution of the orders made on 24 June 2020 then the position that lies thereafter will be irretrievable. Once published to third parties, the information cannot be retrieved and its future use is not capable of being monitored. It also submitted that the consequence will be that, having seen the documents, the solicitors for the Clover companies and others will be enjoined further from acting in the present proceeding. 25 By its reply submissions filed on 26 August 2020, Pharmamark submitted that its concern is that the experts might communicate the contents of the documents in the "not listed things" categories prior to Pharmamark's leave application being heard, thus rendering the leave application futile. It seeks to prevent that occurring by the two orders it now seeks: that any communications between the Clover companies (or their lawyers or agents) and the experts be recorded in writing and disclosed to Pharmamark and that the report of the expert not be published until the determination of the leave application. 26 In oral submissions at the hearing, the grounds advanced by Pharmamark for the alternative orders it now seeks altered. In respect of the first proposed order, that the expert's report not be published to the parties pending determination of the leave application, Pharmamark submitted that, on the hearing of the leave application, it will contend that the 24 June 2020 order was sought and obtained by the Clover companies for an improper purpose, being to report on whether Pharmamark had complied with an earlier order of the Court. It submitted that an order obtained for such a purpose should be set aside, relying on the principles referred to in Exagym Pty Ltd v Professional Gymnasium Equipment Company Pty Ltd (No 2) [1994] 2 Qd R 129. 27 In respect of the second proposed order, Pharmamark submitted that communications between the Clover companies and the expert during the expert's document review may bear upon the Court's ultimate receipt and reliance upon the expert's determination made under the protocol. Pharmamark submitted that it would be prejudiced if it was not given an opportunity to receive and challenge such communications at the time they were made. Pharmamark further submitted that the technical expert nominated under the protocol was a person involved in the same industry as Pharmamark but was not bound by an obligation of confidentiality. Pharmamark said that it should be given a copy of communications between the expert and the technical expert so that it will know if confidential information is disclosed.

Clover companies' submissions 28 The Clover companies submitted that the orders made on 24 June 2020 do not have the consequences asserted by Pharmamark. The orders merely implement an investigative process intended to identify any remaining documents falling with the scope of the search order from within the pool of seized documents. They argue that there is no prejudice to Pharmamark by the independent expert undertaking an examination of the documents as ordered by the Court having regard to the following protections mandated by the inspection protocol: (a) at paragraph 2, the expert must be a practising barrister of no less than 10 years' standing, specialising in commercial litigation, and must be independent of the Clover companies' lawyers; (b) at paragraph 4, the expert is only provided with access to the documents via the web portal maintained by the independent computer expert; (c) at paragraph 5, if the expert requires assistance of a technical nature to understand any documents, the expert may only consult with an independent technical person; (d) at paragraph 6, the outcome of the expert's review is to produce a written report to each of the parties indicating which of the documents are listed things, which are not listed things and which are not clear to the expert; (e) at paragraph 8, the expert must keep all information disclosed during the determination confidential. 29 The Clover companies submitted that, contrary to Pharmamark's assertion, the orders do not provide for the provision of any documents to the Clover companies or their lawyers. Any application by the Clover companies for access to the documents could only be made after the expert has provided a determination on the documents. 30 In relation to the grounds advanced by Pharmamark at the hearing for the alternative orders it now seeks, the Clover companies submitted that: (a) there is no evidence to support the contention that the 24 June 2020 order was sought and obtained by the Clover companies for an improper purpose, being to report on whether Pharmamark had complied with an earlier order of the Court; (b) the protocol does not contemplate or permit the Clover companies to make submissions to the expert about the conduct of the document review; and (c) in communications between the expert and the technical expert, the expert is bound by the obligations of confidentiality in paragraph 8 of the protocol. 31 The Clover companies further submitted that: (a) the leave application has little prospect of success; and (b) the interests of justice favour the refusal of the stay - the Clover companies are entitled to the benefit of the order and it is desirable that the work of Mr Gardiner pursuant to the protocol be allowed to proceed pending the leave application so as to avoid delay in the conduct of the proceeding.

Consideration 32 The applicable principles concerning the application for a stay were not in dispute. In Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66, the Full Court agreed with the principles stated by the New South Wales Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 at 694-5: (a) it is unnecessary to show "special" circumstances for the grant of a stay and it is "sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour"; (b) a successful party is entitled to the benefit of the judgment obtained and is entitled to commence with the presumption that the judgment is correct; (c) it follows that the onus is upon the applicant for the stay to demonstrate a proper basis for a stay that will be fair to all parties; (d) the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it; (e) if an appeal will be rendered nugatory unless a stay is granted, that will be a substantial factor in favour of the grant of a stay; and (f) while the Court will not generally speculate about the appellant's prospects of success (given that argument concerning the substance of the appeal is typically and necessarily attenuated on a stay application), the Court may make some preliminary assessment about whether the appellant has an arguable appeal in order to assess the competing interests of the parties. 33 In my view, Pharmamark has failed to establish any basis for the grant of a stay of the order made on 24 June 2020 or for the two alternative orders it now seeks. The assertions that it will suffer prejudice by reason of the inspection protocol have no basis. The protocol does not permit confidential documents belonging to Pharmamark to be provided to the Clover companies. The protocol only allows the documents to be inspected by the expert. In that regard, the protocol requires that the expert must be an experienced member of the Victorian Bar who is independent of the Clover companies and who is required to keep all information disclosed to him or her confidential. The evidence shows that Mr Ben Gardiner, a member of the Victorian Bar and the Queensland Bar, has been appointed as the expert pursuant to the protocol and that he is an independent barrister with no connection to either party. I reject the submission that disclosure of the documents to Mr Gardiner, subject to the obligation of confidentiality in the protocol, will occasion any prejudice to Pharmamark. I am also not persuaded that there is any realistic prospect of prejudice being caused if Mr Gardiner seeks assistance form the technical expert nominated in the protocol. 34 Pharmamark now seeks an order that the expert's report not be published to the parties pending determination of the leave application. The evidence as to the likely time required for Mr Gardiner to prepare his report suggests that it is very unlikely that the report will be ready before the Court hears and determines the leave application. Regardless, in my view there is no proper basis for such an order. The report to be published by the expert is required to indicate only: (a) which of the documents are listed things for the purposes of the search order; (b) which of the documents are not listed things for the purposes of the search order; and (c) for which of the documents it is not clear to the expert whether they are listed things or not for the purposes of the search order. 35 On its terms, paragraph 6 of the protocol does not contemplate that the expert will disclose the contents of the documents. The expert is subject to the obligation of confidentiality imposed by paragraph 8 of the protocol and there is nothing to suggest that that obligation does not apply to the report prepared in accordance with paragraph 6. As to Pharmamark's argument that the 24 June 2020 order was sought by the Clover companies, I am not persuaded that there is any basis for the argument. The evidence before me on this application shows that, since the seizure of electronic documents under the search order, the Court has made orders to facilitate inspection of the seized documents subject to a process of objection by Pharmamark. The orders made on 24 June 2020 were a further step in that process. Pharmamark did not take me to anything in the evidence that would provide a foundation for a contention that the Clover companies sought the order for an ulterior and improper purpose. It may be that Pharmamark chooses to pursue this contention on the hearing of the leave application. They are not foreclosed from doing so. However, on this stay application, they have failed to persuade me that there is any evidence to support the contention. 36 Pharmamark also now seeks an order that any communication which occurs between the Clover companies, their lawyers, or any other person on their behalf with either the expert or the technical expert be disclosed within 24 hours to Pharmamark's solicitors. In my view, there is no basis to make such an order. The protocol does not contemplate communications between either of the parties and the expert or technical expert during the review of the category E and F documents. The protocol requires that the Clover companies appoint the expert, which no doubt requires communications about the terms of the appointment (relating to such matters as the expert's fees). The protocol also requires the Clover companies to provide the expert with a copy of the search order, the material filed in support of the search order and the orders made on 24 June 2020. Otherwise, the protocol stipulates that the expert may seek assistance from Korda Mentha or the technical expert. The protocol does not contemplate further submissions or communications from the parties to the expert in carrying out the task given to the expert and no such communications should occur. Further, the order sought by Pharmamark is not an order in the nature of a stay order. It is an order supplementary to the 24 June 2020 order and is an order that should properly be sought (if it has any basis, which it does not) from the docket judge. It is an order that relates to the question whether the expert's report should be received and relied upon by the docket judge in the determination of the issues in dispute between the parties. Pharmamark did not contend that it had previously sought such an order from the docket judge. This is a matter that could have been and should have been raised before the docket judge, either before the order of 24 June 2020 was made or after. It is inconsistent with the overarching purpose stated in Part VB of the Federal Court of Australia Act 1976 (Cth) for Pharmamark to seek a supplementary order to an interlocutory order of the Court via a stay application in the context of an application for leave to appeal. 37 I also consider that there is no basis for Pharmamark's further variation to its proposed orders, that any communication between the expert and the technical expert be disclosed within 24 hours to Pharmamark's solicitors. First, the expert is subject to an obligation of confidentiality which will extend to the expert's communications with the technical expert. Accordingly, I am not persuaded that the risk of prejudice to Pharmamark from such communications is material. Secondly, the order now sought by Pharmamark does not address the prejudice identified by Pharmamark (the disclosure of confidential information). Third, and most importantly, Pharmamark did not contend that it had previously sought an order from the docket judge relating to the potential disclosure of confidential information to the technical expert. Again, this is a matter that could have been and should have been raised before the docket judge, either before the order of 24 June 2020 was made or after. It is inconsistent with the overarching purpose for Pharmamark to seek such an order through this stay application. 38 For those reasons, no basis has been shown for the stay application or the alternative orders sought by Pharmamark. In those circumstances, there is no need to consider whether Pharmamark has an arguable case on the leave application.

Conclusion 39 For the foregoing reasons, the application for a stay and the application for alternative orders are refused. 40 In relation to costs, Pharmamark sought an order that the costs of this stay application be costs in the leave application while the Clover companies sought an order that Pharmamark pay the Clover companies' costs of and incidental to the application. I consider that the Clover companies are entitled to their costs. The stay application was a discrete application on which Pharmamark failed. Further, for the reasons given above, I consider that the arguments advanced had no proper foundation. 41 The Clover companies also seek an order that the costs of the stay application be costs in the appeal proceeding (VID 453 of 2020). In my view, that is an appropriate order to make. Payment of those costs should not await the outcome of this proceeding (being the principal proceeding) but be made following the determination of the application for leave to appeal. If Pharmamark is successful on that application and receives an award of costs in its favour, the costs of the stay application can be offset. If Pharmamark is unsuccessful and an award of costs is made against it, both sets of costs should then be paid by it. 42 In his submitting notice, Mr Tobias sought an opportunity to be heard on the question of costs. As no order is proposed to be made that affects Mr Tobias, I consider that it is unnecessary to afford Mr Tobias an opportunity to be heard. However, if Mr Tobias seeks such an opportunity, he has leave to make an application to vary the costs orders within 7 days. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.