Cokinos & Ors v Walker & Ors

George Mark Cokinos - First Plaintiff Nicholas Cokinos - Second Plaintiff PARTIES : John Cokinos - Third Plaintiff Mark Walker - First Defendant Zen Dan Kwan Pty Ltd - Second Defendant Zumu Pty Ltd - Third Defendant

COUNSEL : Mr J Johnson - Plaintiffs Mr G McGrath - Defendants

SOLICITORS : Maguire & McInerney Lawyers - Plaintiffs Hansons Lawyers - Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4406/07 GEORGE MARK COKINOS & ORS v MARK WALKER & ORS EX TEMPORE JUDGMENT 1 Yesterday I rejected an ex parte application for a search order of the type referred to in Practise Note SC Gen 13. There was no direct evidence of a likelihood of destruction, hiding or removal of the things to be searched for. The application is repeated today. I have now had the advantage of submissions on behalf of the defendants. 2 On 30 August 2007, the solicitors for Mark Walker, the first defendant, wrote to the solicitors for the plaintiffs in which it was acknowledged that Mr Walker held property of the plaintiffs being one computer, one network printer and assorted boxes of records and files. The letter stated: "All other computers and printers and equipment in the office are the property of Mark Walker. Our client is more than happy to hand over the above property on payment to our firm of the monies owing by your client which are particularised in this letter." 3 Counsel for the defendants stated that he had instructions that the items would be delivered up without payment on a without admission basis. 4 Counsel for the defndants referred to EFG Australia Ltd & Anor v Kennedy & Ors, unreported, NSWSC, Bryson J, 2 August 1995. In an ex parte application for an order of the kind that is sought before me today, his Honour had this to say: "I approach the application on the basis that the ordinary procedure of the court, whether for small matters or large matters and even for matters in which the allegations are severe and involve breaches of trust and dishonesty, is that parties have a duty to produce relevant documents on discovery and verify lists of them, and that the court will enforce that duty. It is not the ordinary approach taken by the court that it is attributed to defendants that they will probably defy their duty to give discovery or that they could well destroy or conceal documents.

The ordinary course should be departed from where there is some substantial ground for expecting that there will be extraordinary behaviour with respect to discovery. I would look for some ground going beyond the indications of dishonesty involved in this case, a ground which would show that active concealment or measures which are criminal or in the nature of criminal conduct should reasonably be feared. Examples of what I would look for are instances of destroying or concealing documents, threats to do so or signs of preparation to flee. I do not attempt to define the cases where the ordinary course should be departed from, as the decision must remain discretionary and there must be a capacity for a decision which responds to the facts in evidence. Anton Piller orders are for extreme cases: there probably could be a wide range of extreme cases but this is not one." 5 It was submitted that if there was competition between the defendants and the plaintiffs and if there was an approaching of the plaintiffs' clients by the defendants, "so what". That was a matter of commercial dispute and did not call for the extreme measure of an order in the nature of an Anton Piller one. 6 It was submitted that there was no evidence of a real possibility that important evidentiary material might be unavailable for use in evidence and there was no evidence of the likelihood of destruction, hiding or removal. 7 In Anton Piller KG v Manufacturing Processes Ltd & Ors [1976] 1 Ch 55 it was said that an order that a defendant permit persons duly authorised by a plaintiff to enter his or its premises to inspect and to remove all documents and articles relating to specified matter is only justified in the most exceptional circumstances and only where there is no other way that justice is done to the applicant. At 61, Lord Denning said: "…it should only be made where it is essential that the plaintiff should have inspection so that justice can be done between the parties: and when, if the defendant were forewarned, there is a grave danger that vital evidence will be destroyed, that papers will be burnt or lost or hidden, or taken beyond the jurisdiction, and so the ends of justice be defeated: and when the inspection would do no real harm to the defendant or his case." 8 That this form of relief stands at the extremity of the court's powers and should only be granted in the extreme case, has often been stated in texts and in the authorities (see, for example, Spry, "Equitable Remedies", 6th ed at 561-562, Long v Specifica Publications Pty Ltd (1998) 44 NSWLR 545 at 547, International Entertainment New Zealand Ltd (No 2) Ltd v Lewis (1998) 42 IPR 162 at 168). 9 It was submitted that the fact that Mr Walker had retained possession of the articles of the plaintiffs to which I have made reference, was the opposite of a concealing, hiding or destroying of assets and the threat of such occurrences was a necessary prerequisite to the making of such a search order. 10 But that evidence does show that there was a retention by Mr Walker of some assets of the plaintiffs and it does show an intention not to return them unless and until the demand for payment was made. 11 It is true that in a commercial dispute where a former employee has retained property of his employer and has approached and canvassed former clients of the employer, Anton Piller orders are rarely issued. But the instant circumstances are different. In those cases, the employer retains possession of the major assets of its business and is able to identify those which have been taken by the former employee. In this case, Mr Walker was in entire control of the plaintiffs' business. 12 Having now heard from the defendants, I am not persuaded by the submissions of their counsel that there is no justifiable fear of the plaintiffs that if an order for search and removal is not made, assets may be destroyed, concealed or removed. 13 The affidavit material establishes that there is missing software of vital importance to the plaintiffs' business, being a Unix server running four computers and two dumb or slave terminals with two printers as part of a system, a local area network, using the Unix server and a modem connection to the United States of America for head office to log into the system, the necessary software for which was loaded onto the system. That software was written in COBOL and loaded by programmers employed by Educational Funding Company of which the proprietors are the plaintiffs. 14 In addition a software system for credit card merchant services is missing. A direct debit system has not been handed over. None of those systems has been identified by Mr Walker as an asset to be returned to the plaintiffs. 15 A telephone number of the plaintiffs is now used by Zumu Pty Ltd, the third defendant, a company with which Mr Walker is associated. And the web site of the plaintiffs has been closed. 16 In addition, Mr Walker has contacted studios with students of the plaintiffs and asked that those studios transfer their student accounts and payments history to Zumu, effective immediately. 17 Having been put on notice that there were allegations of a failure by the defendants to return assets of the plaintiffs, beyond those specifically mentioned in the solicitor's letter, no attempt has been made to do so and no submission was made on behalf of the defendants with respect to those missing items. 18 There is authority for the proposition that the risk of destruction or removal of documents can be inferred from untrustworthy conduct (Yousif v Salama [1980] 1 WLR 1540). 19 Mr Walker having been in the entire control of the assets of the plaintiffs' business in Australia, having resigned on 24 August 2007 and immediately thereafter approached clients of the plaintiffs' business canvassing the transfer of their business to Zumu, and there having been no response today to the evidence of the further missing assets of the plaintiffs' business to which I have referred, this case is, in my view, one of those rare cases in which extreme measures are called for. I propose to make an order of the nature of that set out in Practise Note SC Gen 13. 20 I stand the matter down to allow counsel to discuss the terms of the proposed order.

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