EMPLOYMENT LAW – OTHER RIGHTS AND DUTIES OF PARTIES – DUTY OF
GOOD FAITH OWED BY EMPLOYEE – where defendant solicited
work while
employed by the plaintiff - whether breach
Source
Original judgment source is linked above.
Catchwords
EMPLOYMENT LAW – OTHER RIGHTS AND DUTIES OF PARTIES – DUTY OFGOOD FAITH OWED BY EMPLOYEE – where defendant solicitedwork whileemployed by the plaintiff - whether breachEMPLOYMENT LAW – OTHER RIGHTS AND DUTIES OF PARTIES – DUTY OFCONFIDENCE OWED BY EMPLOYEE – whether duties survivetermination ofcontract – whether breachEQUITY - GENERAL PRINCIPLES – RULES AND MAXIMS OF EQUITY –doctrine of clean hands - whether conduct sufficiently connectedto the suit todeprive plaintiff of equitable reliefEQUITY — REMEDIES — MISUSE OF CONFIDENTIAL INFORMATION—Application of "head start" or "springboard concept" tomeasure ofliability.Corporations Act 2001 (Cth) s 183, s 1317HCopyright Act 1968 (Cth) s 36Hearne v Street [2008] HCA 36(2008) 235 CLR 125Maguire v Makaronis [1997] HCA 23
(1997) 188 CLR 449
Malec v JC Hutton Pty Ltd [1990] HCA 20
(1990) 169 CLR 638
Mantonella Pty Ltd v Myles Thompson [2009] QCA 80
Wylie v ANI Corporation [2002] 1 Qd R 320
Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172
Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979
Colour Control Centre Pty Ltd & Anor v Ty & Ors [1995] NSWSC
96
United States Surgical Corporation v Hospital Products International Pty
Ltd (1982) 2 NSWLR 766
Coco v AN Clark (Engineers) Ltd (1968) 14 IPR 587
State Rail Authority of New South Wales v Earthline Constructions Pty
Ltd (1994) 37 AILR 5-018
Canadian Aero Service Ltd v. O'Malley (1973) 40 DLR (3d) 371
Judgment (472 paragraphs)
[1]
EMPLOYMENT LAW - OTHER RIGHTS AND DUTIES OF PARTIES - DUTY OF GOOD FAITH OWED BY EMPLOYEE - where defendant solicited work while employed by the plaintiff - whether breach
[2]
EMPLOYMENT LAW - OTHER RIGHTS AND DUTIES OF PARTIES - DUTY OF CONFIDENCE OWED BY EMPLOYEE - whether duties survive termination of contract - whether breach
[3]
EQUITY - GENERAL PRINCIPLES - RULES AND MAXIMS OF EQUITY - doctrine of clean hands - whether conduct sufficiently connected to the suit to deprive plaintiff of equitable relief
[4]
EQUITY - REMEDIES - MISUSE OF CONFIDENTIAL INFORMATION - Application of "head start" or "springboard concept" to measure of liability.
[1] McMeekin J: The plaintiff, Deeson Heavy Haulage Pty Ltd ("Deeson"), is, as its name implies, a company involved in the hauling of heavy loads. It has been involved in that business for several years.[1] It is based in Mackay. Its sole director is Mr Cameron Strathdee.
[20]
[2] The fourth defendant is a competitor of the plaintiff. Its sole director is now the first defendant. It was incorporated on 4 March 2008 by one Phil Reimers, a friend of the first and second defendants, with those defendants then as directors.
[21]
[3] Until March of 2008 each of the first, second and third defendants were employees of the plaintiff. The plaintiff claims damages, equitable compensation and an account of profits for breach of duties owed to the plaintiff arising out of the employment relationship between it and the first and second defendants. It is claimed that the fourth defendant was complicit in that breach. Similar claims are also made under s 183 of the Corporations Act 2001. The plaintiff has now discontinued against the third defendant.
[22]
[4] The pleadings are complex and extensive. I will not attempt a summary but rather will deal with the individual claims made. Suffice to say at this stage that the plaintiff's claims broadly fall into two parts. The first relates to breaches of contractual and fiduciary duties said to have occurred prior to the cessation of employment. The second relates to breaches of duties said to be owed despite the cessation of the employment relationship - continuing fiduciary obligations and an obligation of confidence attaching to information learnt by the defendants whilst they were employed by the plaintiff and said to have been used by them after their employment had ceased.
[23]
[5] The first defendant counterclaims for leave entitlements of $4,760 owed. There is no significant dispute about that claim.
[24]
[6] Before turning to the plaintiff's claims there is a preliminary issue concerning whether and to what extent the defendants engaged in planning and executing an attack on the plaintiff's business.
[25]
WAS THERE A DELIBERATE PLAN TO DISRUPT THE PLAINTIFF'S BUSINESS?
[26]
The Plaintiff's Characterisation of Background Events
[27]
[7] Much of what follows is common ground. The first defendant, Mr Jason Cox, was the plaintiff's operations manager. He had commenced employment on 4 April 2007. The second defendant, Mr Watson, was the plaintiff's operations supervisor. He had commenced employment in November 2006. The third defendant, Ellen Matthews, was the plaintiff's administration manager and had been since June 2007.
[28]
[8] On 8 January 2008 the first defendant travelled to Brisbane for the purpose of inspecting a prime mover and float - equipment useful for competing with the plaintiff. The expenses associated with this journey were in part at least associated with allegations of fraud later made by Mr Strathdee against Mr Cox and which he reported to the police - Mr Strathdee's evidence was not precise as to when a report was first made but it seems likely it was made on the Tuesday or Wednesday, 4 or 5 March 2008.[2] Those allegations have not been pursued in these proceedings and I was informed that the police have taken no action on the complaint.
[29]
[9] A meeting was held on the evening of 3 March 2008, the day before the incorporation of the fourth defendant, at Mr Reimer's residence between he and the first, second and third defendants. It is common ground that they discussed the establishment of the fourth defendant as a competitor to the plaintiff.
[30]
[10] Three days later, on 6 March 2008, the first defendant left the plaintiff's employment. The next day the second defendant also left the plaintiff's employment. Both immediately commenced working for the fourth defendant. On the same day, 7 March, the fourth defendant carried its first loads and for one of the plaintiff's established customers BIS Logistics ("BIS"). On 11 March the third defendant too left the plaintiff's employment and she too immediately commenced employment with the fourth defendant.
[31]
[11] Until their resignations the first, second and third defendants effectively ran the plaintiff's business from day to day.
[32]
[12] After the departure of the first and second defendants Mr Strathdee discovered that diaries and note books containing information about quotes and other aspects of the plaintiff's business were found to be missing. They had been in the possession of the first and second defendants. A computer programme essential to the workings of the plaintiff's business known as a "Job's Board"[3] did not function properly. Emails had been apparently deleted from the first defendant's computer station. The plaintiff's business was substantially disrupted. Mr Strathdee did not know what jobs had been quoted on or what jobs won.
[33]
[13] Subsequently Mr Strathdee discovered that the fourth defendant was performing work in respect of jobs that he believed that the first and second defendants had quoted on for the plaintiff. Following an Anton Pillar order and search the missing diary and note books were found still in the possession of the first and second defendants. A computer programming expert retained by the plaintiff established that certain of the plaintiff's documents, which the plaintiff contended would be of use in starting up a new business, had been sent from the plaintiff's computers to Karen Reimers, the wife of Mr Phil Reimers.
[34]
[14] An email communication was found dated 4 March, emanating from the first defendant's computer station at the plaintiff's offices, wherein the first defendant informed one Debbie Pegler, an employee of BIS, that he was intending to set up his own business in competition with the plaintiff and seeking a Supplier Request Form, the completion of which was essential to becoming a subcontractor to BIS. Ms Pegler supplied that form to Mr Cox by email on 4 March.[4]
[35]
[15] Further it emerged that in the last days of her employment the third defendant had caused the plaintiff to pay out to the second defendant, and other contractors said to be friendly to the defendants, monies owed to them but contrary to Mr Strathdee's standing instructions as to the terms of trade concerning time of payment. To do so she factored debts to the ANZ bank in a manner not authorised by Mr Strathdee.
[36]
[16] From these facts the plaintiff asserts that a damning picture emerges of the first and second defendants acting in blatant disregard of their obligations to the plaintiff. It is submitted that there was plainly a plan hatched whilst each was an employee of the plaintiff to take as much of the plaintiff's business as possible and cause as much havoc to the plaintiff as possible to impede competition. The attempt to procure equipment, the coincidence of the timing of their departures, the documents taken, the disruption to the Job's Board, the unauthorised payments, and the early procuring of work from a valued client, it is said, all confirm that claim. This, the plaintiff says, provides the background to the specific claims made. Close consideration of the evidence, so the plaintiff claims, justifies significant orders against the defendants and their corporate vehicle, the fourth defendant, which is now under the first defendant's control.
[37]
[17] Before examining the plaintiff's case more closely it is necessary to say something about the credibility and reliability of those involved in the dispute. There are matters that reflect very poorly on Mr Strathdee's reliability, if not honesty.
[38]
[18] The proceedings first came before me by way of an application for urgent injunctive relief to restrain the first and second defendants from breaching restraint of trade clauses in their contracts of employment. Mr Strathdee belatedly discovered that there were no written contracts or any such clauses. He apparently did not know that he had not asked his employees to execute any contracts.
[39]
[19] A significant concern about the plaintiff's bona fides is raised by an email which became Exhibit 169 - an email sent at 8.12 pm on 8 March from Mr Cox's computer station to Mr Strathdee's email address forwarding an email dated 5 March from Ms Pegler to Mr Cox and the reply. The time and date is significant. By then Mr Cox had left the plaintiff's employment, handed in his keys and so had no access to the computer. As well Mr Strathdee had had the passwords changed and so the computers could not be operated by Mr Cox. Finally, there was yet to be any attempt at recovery of emails. The inferences include that Mr Cox did not send the email and that the computer was in the state that Mr Cox left it on his departure.
[40]
[20] The email concerns a request for a quote by Ms Pegler for a string of 12 jobs for BIS and Mr Cox's quote of 5 March. The exhibit was tendered by the defendants from the plaintiff's documents. The plaintiff alleged against the defendants that this was one of the emails that had been deleted[5] and that the first defendant had caused the plaintiff to be deprived of the work mentioned in the quote - work either already won by the plaintiff or which the plaintiff was highly likely to win.[6]
[41]
[21] Through cross-examination based on the plaintiff's own documents the defendants demonstrated that, far from the fourth defendant taking the benefit of these contracts, the plaintiff had in fact performed the contracts and had been paid for them. This work occurred after the defendants' departure from the plaintiff and when, presumably, Mr Strathdee had the day to day management of the company.
[42]
[22] Plainly enough, far from being deleted the email was still on the computer system, and discoverable, after Mr Cox's departure. The only inference possible is that the email was in fact discovered, expressly made known to Mr Strathdee and that he acted on it.
[43]
[23] I am mindful of Mr Land's submission that the document was tendered very late in the trial and that Mr Strathdee was not given the opportunity to respond to the implications I have referred to but I observe that there was no application to re-open the plaintiff's case or call evidence in rebuttal. Nor could Mr Land offer any alternative explanation.
[44]
[24] This was a remarkable error. One would expect Mr Strathdee to be acutely conscious of the work that his company performed after the departure of the first and second defendants. No explanation was ever advanced for this error.
[45]
[25] Nor is this the only claim made by the plaintiff against the defendants which is without substance. The defendants have identified no less than 11 further claims made against them for diverting work away from the plaintiff and to themselves which are beyond any argument baseless. In some cases the plaintiff did the work claimed. In some the work was done by third parties. In some the work was not done by anyone.
[46]
[26] One assumes that allegations, and allegations of the most serious kind involving breach of duties of good faith, are not made in proceedings filed in a court of law without careful consideration and an adequate basis for them. Plainly that care to ensure a proper basis for the claims made was not recognised here. Whilst it may be explicable that Mr Strathdee would not know the detail of his companies' contracts whilst the first and second defendants had the day to day management that explanation cannot apply to work done whilst he had the day to day management. The most charitable explanation for these "errors" is that Mr Strathdee has no idea of the business of his own company and simply assumed the worst against his former employees. That is consistent with the defendants' evidence as to his lack of attention to his own business whilst they were managing it.
[47]
[27] A third problem for Mr Strathdee concerns a letter that he wrote on 7 May 2008 and subsequent to the interlocutory hearing before me.[7] The plaintiff obtained certain documents, including details of the fourth defendant's financial operations, from the defendants as a result of the interlocutory orders made. The documents were plainly confidential to the defendants. Mr Strathdee wrote to BIS referring to these confidential documents and using information from them to allege inappropriate conduct by the defendants in their dealings with BIS. Plainly Mr Strathdee had no right to use the documents in this way. It is ironic that he complains about the defendants' conduct in using his confidential information but has no compunction about using the defendants' confidential information to attempt to harm the defendants' commercial reputation. Allied with this is the use by Mr Strathdee of information, similarly obtained, to inform Mr Nottingham of NQX Freight System of certain confidential pricing information to the detriment of the fourth defendant. Again this does not reflect well on Mr Strathdee.
[48]
[28] At the least the foregoing matters mean that I can place no reliance on anything Mr Strathdee says concerning the affairs of his company unless confirmed by independent evidence. As well caution needs to be exercised with respect to any allegation that the plaintiff makes as Mr Strathdee seems to be unconcerned to ensure that claims made are accurate.
[49]
[29] Save for Mr Strathdee the impression I had was that the witnesses, generally, were endeavouring to be honest and accurate.
[50]
[30] I have outlined above the plaintiff's interpretation of the background picture. Other facts put things in a different light.
[51]
[31] Each of the first and second defendants was well known in the heavy haulage industry. They were well regarded. They had long experience going back over decades. They were well aware of who the principal clients in the industry were and how to go about heavy haulage work. They had known Mr Strathdee, and he them, for many years.
[52]
The Second Defendant's Relationship with the Plaintiff
[53]
[32] The relationship between the second defendant and the plaintiff was not just that of employer-employee. For the first six months or so of its existence Mr Watson had been a co-director of the plaintiff with Mr Strathdee. More significantly, when he returned as operations supervisor in November 2006, the plaintiff engaged the second defendant's company, Townsville Heavy Haulage Pty Ltd, as a sub contractor. The plaintiff was not the only customer of Townsville Heavy Haulage Pty Ltd. That company owned three vehicles. It was free to perform work for other firms that competed with the plaintiff. It in fact did so. This was done with the knowledge and consent of Mr Strathdee.[8]
[54]
[33] It is common ground that Mr Watson gave notice to the plaintiff on 4 February 2008 that he intended to resign on 7 March. He explained that he then planned to return to Townsville where he had his home base. He had been travelling to and from there to work for the plaintiff for over 14 months. It was common ground that that was intended originally to be a short term arrangement. He had tired of the travel. I accept his explanation. It is inherently credible. I observe that the giving of one month's notice is not a step one expects an employee to take who has the intention to maximise the damage to his former employer's business.
[55]
[34] It is clear that Mr Cox was contemplating his future in early 2008 but far from clear that he decided on a course of action with any certainty. The sub-contract aspect of the relationship between the second defendant and the plaintiff that I have mentioned is significant. It caused Mr Cox to contemplate the same relationship. When he went to Brisbane on 8 January 2008 to look at vehicles one possibility was that he would stay with Deesons. He knew at that time that delivery would take many months - in the order of 14 months. This was a first step in a very long term project. I believe Mr Cox in these claims. Two things are worth noting - no order was in fact placed until April, well after his departure from the plaintiff; and secondly, he did not keep this trip a secret: He discussed the purpose of the trip with Mr Taylor, a co-employee, prior to going to Brisbane,[9] and with Mr Strathdee in late February. There was no evidence that Mr Cox had reason to think that Mr Taylor was partial to Mr Cox's cause or anti-pathetic to Mr Strathdee.
[56]
[35] The genesis of the establishment of the fourth defendant on 4 March and the explanation for the sudden departure of Mr Cox and Ms Matthews from the plaintiff's employment a few days later lies in the events of the week-end of 1-2 March 2008. Mr Strathdee and Mr Reimers were at a hotel in Mackay on the evening 1 March 2008, a Saturday. Mr Strathdee told Mr Reimers that he was having the first, second and third defendants investigated for credit card fraud and that he was going to gaol them. He said that he would be running the plaintiff on his own by Monday.
[57]
[36] Mr Cox learnt of the conversation from Mr Reimers, was upset by what he regarded as false allegations being made against him, and determined to leave the plaintiff's employment. He and Mr Strathdee disagree on whether Mr Cox gave notice. They agree that they met early on the Monday morning. Mr Strathdee says that Mr Cox agreed to pay monies back to the company and was to go on working as usual. Mr Cox says that he indicated that he would work out the week but no more as he could not work under suspicion. He felt that to leave immediately would be tantamount to admitting guilt.
[58]
[37] Bearing in mind the high regard in which Mr Cox was evidently held by others in the industry, the position of trust that he had enjoyed with the plaintiff, and the degree of upset likely to be caused to a person in such a position by not only being accused of fraud but knowing that the allegation had been published on a social occasion at a hotel to a third party who knew Mr Cox, and without giving him the chance to first respond to the accusations, I consider that the probabilities strongly favour Mr Cox's version. Some evidence of his feelings about the matter can be gained from the fact that he visited Mr Strathdee at his home at 4am on the Monday to discuss the allegations. I should record that Mr Cox impressed as a straight forward character in the witness box. Finally, Mr Strathdee's version that the dispute was substantially resolved and that Mr Cox was to continue working for the plaintiff is not consistent with him reporting the allegations against Mr Cox to police on the Tuesday or Wednesday following the confrontation on the Monday morning.
[59]
[38] I am satisfied that by the Monday morning Mr Cox had given notice that his employment would end within the week.
[60]
[39] Mr Reimers says that he called the three who had been accused together on the Monday night at his home for a meeting. He suggested that they become involved in a new venture. Each of the men was to put in $10,000. It was to be run by Jason Cox. Messrs Reimers and Watson would make their trucks available to the business. There had been no prior discussion of any such venture. There was no discussion of deliberate action to disrupt the plaintiff's business or to take contracts already won by the plaintiff.
[61]
[40] I accept Mr Reimers' account. It is in accord with the account of the others present. The claim that there had been no prior discussion of such a venture is consistent too with evidence led from the co-employee, Mr Taylor, of Mr Cox telling him that Mr Cox was undecided as to his future during the Monday and before the meeting.[10] Another witness, Andrew Lanser, the operations manager of the MCG Group, also recalled a conversation in "early March" with Mr Cox whilst he was still at Deesons in which he was told that Mr Cox was leaving Deesons, but in which he made no reference to what his plans were. If the conversation occurred on the Monday it is consistent with there being no plan in place before the meeting that night. Whenever it occurred it is inconsistent with the notion that Mr Cox was working actively to promote his own interests to the detriment of the plaintiff.
[62]
[41] The plaintiff relies on the evidence of a Ms Pegler on this point. She swore that she was informed by Mr Cox on the Monday that he was forming a new business. I found her evidence as to the probable date of the call unpersuasive for two reasons. First, she was far from certain in her manner when giving evidence as to dates. She made it plain that her recollection was not certain - she said that it "could" have been the Monday. Second, she sent an email on the Wednesday, 5 March,[11] in which she said "If you pull the pin..." suggesting that whatever had been said to her by Mr Cox before then had not been conclusive.
[63]
[42] The plaintiff's submission that the defendants' account of the nature of the discussions at the meeting ought to be rejected assumes an improper motive based on inferences that minimise if they do not completely overlook the impact of Mr Strathdee's conduct over the week-end.
[64]
[43] The third defendant was not called by either party. The plaintiff discontinued the proceedings against her. According to Mr Strathdee she gave notice earlier in the week before she left - she left on 11 March.
[65]
[44] It seems clear that Ms Matthews did pay the second defendant's company and two other contractors, T & L Barnes Bulk Haulage Pty Ltd and Full Tilt Transport, before their due time and failed to pay other contractors who were due their monies. The plaintiff argues that an inference should be drawn that this was part of a deliberate plan. Mr Land, who appeared for the plaintiff, submitted that her actions were done to ensure that Mr Watson's company was "cashed up" to enable it to better compete with the plaintiff, and to curry favour with the other subcontractors so they would assist the fourth defendant in its new venture.
[66]
[45] Mr Watson claims that he merely asked Ms Matthews "how the money situation was" as he was getting a bit low and sought payment for the January invoices - to which he was entitled. Such an enquiry is consistent with the fact that he was leaving, as all knew, in a few days time. He received payment for the February invoices as well, but apparently not all such invoices. Plainly enough, the early payment would have helped the second defendant. However, two factors diminish the force of the plaintiff's argument. Early payment to Mr Watson was not uncommon. In any case he was paid every two weeks, he said, so the acceleration to him was of a very short period.
[67]
[46] What motivation Ms Matthews had in paying monies early to the other subcontractor is little more than speculation. Her motivation was not the subject of admissible evidence. Bearing in mind that Mr Reimers told her that Mr Strathdee suspected both Mr Cox and her of defrauding the plaintiff, that she had worked closely with Mr Cox through her entire time at the plaintiff, and resigned apparently to join him in his new venture, one can readily imagine where her sympathies lay. Whilst that is consistent with the inference that the plaintiff seeks be drawn it does not establish that there was a plan or that the three were working in concert.
[68]
[47] The first and second defendants denied that they knew of any intention on Ms Matthews' part to make early payment to contractors or not to pay monies to contractors owed. No evidence was led that the sub contractors paid were in any sense of particular importance to the new venture, or that there was any real advantage gained by the payment. Mr Land's submission seemed to me to suffer from some inherent problems. Why would early payments be accredited to Ms Matthews or the fourth defendant and not Deesons? And if early payments were to be credited to Ms Matthews and not Deesons why would a failure to pay not attract to her and the fourth defendant opprobrium from the contractors not paid on time? Further, there are other possible reasons for the payments other than a sinister one.
[69]
[48] It is not shown that the third defendant's actions had any significant impact on the plaintiff or were the product of any plan. In the absence of any direct evidence I am not prepared to draw the inference the plaintiff contends for.
[70]
[49] The cause of the disruption to the Jobs' Board was never established by the plaintiff. Again the argument that it was the work of the defendants was based on the coincidence between their leaving and the onset of the disruption and an assumed motive.
[71]
[50] The only direct evidence called on the point was from the person who created the programme, Ms Davidson. As well as creating the programme she attended at the plaintiff's premises on 9 March to fix the problem. Ms Davidson thought that the disruption was caused by the attempt by Mr Strathdee to use the programme with a newer version of a Microsoft programme, Vista, which was on Mr Strathdee's computer and not on Mr Cox's computer. Apparently the Jobs Board hadn't been tested on Mr Strathdee's computer whenever that computer was first obtained. This is consistent with Mr Strathdee paying little attention to his business.
[72]
[51] Thus the only explanation proffered, and from an independent witness with some expertise, is an innocent and not improbable one. It explains away the coincidence relied on by the plaintiff.
[73]
[52] Presumably Ms Davidson explained her opinions to Mr Strathdee when she attended to fix the malfunctioning Jobs' Board. Certainly no complaint was made in cross-examination that her opinions were news to Mr Strathdee. No evidence was called to contradict her opinions. The first and second defendants, whatever their expertise in running trucking companies, were not shown to know anything about computers. How they might have sabotaged the plaintiff's computers was not the subject of any evidence. I am not persuaded that they did.
[74]
[53] The diaries and note books that the plaintiff complains were taken were plainly the property of the plaintiff. The defendants should not have taken those documents. The defendants contend that their taking was not malicious but an oversight. Two things can be said about these documents and their taking. First, they are not well organised. Finding information in them, even for the authors, would not be a simple task. They were used to record things said usually "on the run" and as an aide memoir. If a quote was won then the system was to place the details onto the Jobs Board. Second, they were found by the independent solicitor, acting under the Anton Pillar order, in a box[12] - the defendants say the box they left the plaintiff's office in. The defendants deny using the material. The place in which they were found is consistent with that claim. There is nothing to indicate they were ever used.
[75]
[54] I will deal with the evidence in more detail later in respect of specific claims. At this point I observe that Mr Cox explained that he did delete emails but only from his Inbox, not the Sent box. He did so, he says, simply to leave a clear screen, which he did from time to time in the normal course of business. Whilst I can readily understand the plaintiff's suspicions about the matter the compelling point is that Mr Cox did not delete from the Sent box. That is the place that contained the emails confirming jobs won and the terms on which they had been won. If the plan was to disrupt the plaintiff's business then this was a remarkable oversight.
[76]
[55] The evidence concerning the email found on the plaintiff's computer (Exhibit 169) previously discussed is consistent with the first defendant's claim that he did not deliberately delete emails of significance to the plaintiff's business.
[77]
[56] On balance I accept the first defendant's explanation.
[78]
[57] I will deal with the detail of the claims concerning the obtaining of work below. I merely observe four things at this point. First, Mrs Pegler, who provided the Supplier Request Form on 4 March and the work that the fourth defendant commenced on the Friday 7 March, evidently held Mr Cox in high regard. It is plain that she supported Mr Cox because of her perception of his personal qualities.
[79]
[58] Second, a considerable difficulty for the plaintiff with this argument lies in the 12 jobs that I have previously mentioned that the defendants were accused of taking and did not take. On 5 March Mr Cox quoted for these 12 jobs - not on behalf of the fourth defendant but on behalf of the plaintiff. Mr Land's principal argument is that the BIS work was particularly valuable - it was not subject to interruption by rainfall, which had bedevilled work in the months leading up to these events, and it required no police escort ie minimal organisation. It was profitable work. Thus he argued it was ideal work for the fourth defendant to secure for itself. All this is accurate enough. But if Mr Cox was indeed acting as the plaintiff's side contends then this was precisely the work one would expect him to snare for himself. Yet he behaved as a loyal employee should behave.
[80]
[59] Third, it is an interesting feature of the case that Mr Cox evidently did not complete the Supplier Request Form forwarded by Mrs Pegler on 4 March. Mrs Pegler completed it for the fourth defendant the following week. Again that is consistent with the first defendant not actively seeking to take the plaintiff's business during the last days of his employment.
[81]
[60] Four, the plaintiff called no customer, other than Ms Pegler, to support the claim of solicitation of work. Given the number of customers that the plaintiff claimed to have this lack of independent evidence supporting the claim says a great deal. Conversely the defendants called three witnesses who had been customers of the plaintiff and who had by the time of trial used the fourth defendant[13] and each denied being approached by the defendants soliciting work for the fourth defendant when employed by the plaintiff.
[82]
[61] The point of this brief recital is that much of what the plaintiff relied on as indicating a deliberate plan by the defendants to disrupt and take its business is explained away. If there were breaches of duty then I am satisfied that they were not done with any intent at unfair dealing.
[83]
[62] That of course does not save the defendants from the consequences of their conduct. It is not necessary for the plaintiff to show that any breach of a fiduciary or contractual duty was done dishonestly. However where there is no direct evidence and the plaintiff relies on an inference to be drawn about the defendants' conduct based on alleged intention to cause harm to the plaintiff then I am not inclined to draw such an inference.
[84]
[63] Before turning to the particular claims made it may be helpful to make general observations about the heavy haulage business. There are two important aspects of the heavy haulage business relevant to the proceedings. First, a deal of the work is performed by sub contractors. A company such as the plaintiff will not necessarily have the equipment or manpower to perform the work taken on and within the time frame expected by the client.
[85]
[64] Second, there are no long term contracts with clients. Each job is separately quoted for. The industry is competitive. It is not uncommon for a client to obtain several quotes from the firms with which the plaintiff competed. Price was not the only criterion that determined a winning quote. Availability of equipment, a "can-do" attitude and personal relationships all played a part.
[86]
[65] It is not in dispute that implicit in every contract of employment is an implied term under which employees are subject to a duty of good faith and fidelity for the period of their employment. The scope and content of that duty will vary according to the nature and circumstances of the contract of employment.[14]
[87]
[66] I turn then to the content of the duties thereby owed. I will mention the broad principles that apply at this stage. As the terms of the employment contracts were not detailed in any document, or indeed expressly agreed, the duties owed will be governed entirely by the obligations implied by law into such contracts and relationships.
[88]
[67] Santow J summarised the principles relevant to this issue, involving as they do the implied duty of fidelity and good faith in contract, in Colour Control Centre Pty Ltd & Anor v Ty & Ors in these terms:
[89]
"First, an employee may not retain, without approval, any profit or property the opportunity for the acquisition of which was furnished by the employment: Willey v. Syan [1937] HCA 85; (1937) 57 CLR 200; London Corporation v. Appleyard (1963) 2 All ER 834; 1 WLR 982; Reading v. The King (1948) 2 All ER 27 at 28; Reading v. A-G [1951] UKHL 1; (1951) AC 507 at 518 per Lord Oaksey.
[90]
Second, although in general employees are entitled to work in competition with their employer in their own time, special circumstances may give rise to an implied duty not to compete: Hivac Ltd v. Park Royal Scientific Instruments Ltd (supra). In particular, a director or senior employee who takes up a business opportunity within the scope of the company's actual or potential line of business, without the consent of the company upon full disclosure of the facts, may be required to account to the company for any profit made or to compensate it for any loss suffered: Cook v. Deeks [1916] UKPC 10; (1916) 1 AC 554 at 563-4; (1916-17) All ER 285; Pacifica Shipping Co Ltd v. Anderson (1985) 2 NZCLC 96-040; (1986) 2 NZLR 328, Green and Cara Pty Ltd v. Bestobell Industries Pty Ltd (1982) WAR 1. The employee may be liable to account for such profit even where its acquisition did not adversely effect the employer: Boston Deep Sea Fishing and Ice Co v. Ansell (1888) 39 Ch D 339."[15]
[91]
[68] In my view each of the first and second defendants were senior employees subject to the duties that Santow J mentioned.
[92]
[69] Further the defendants do not dispute that fiduciary duties were owed by the first and second defendants to the plaintiff at least so long as the employment relationship continued. That such a relationship exists in this context is well established.[16] However the scope and content of the obligations thereby imposed depend on the facts of the case.[17]
[93]
(a) Each of the first and second defendants was part of the senior management of a corporate employer. They answered only to Mr Strathdee and he, as I have observed, paid scant regard to the business;
[94]
(b) The defendants represented the plaintiff to its customers, both new and existing;
[95]
(c) By reason of their senior positions they effectively had the day to day management of the plaintiff. They were responsible for quoting for work and ensuring performance of the work won;
[96]
(d) Between them the defendants had full access to the plaintiff's customers and records.
[97]
[71] If it be necessary to so find it is plain that as a result of these matters there was a position of disadvantage or vulnerability on the part of the plaintiff vis-à-vis the first and second defendants which caused the plaintiff to place reliance on them.
[98]
[72] Being part of the senior management of a corporation, the first and second defendants have imposed on them a more exacting duty than would be expected of more junior employees.[18] Santow J has felicitously characterised this duty as one imposing "strict norms of exemplary behaviour".[19]
[99]
[73] O'Keefe CJ set out the fiduciary obligations arising in the employment context more compendiously in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd:
[100]
"Those duties of an employee which are normally characterised as fiduciary relevantly include:
[101]
(i) to act honestly in the service of the employer. This is sometimes expressed as a duty of loyalty or good faith and in appropriate cases survives the termination of the employment. Breaches of this duty include the taking of bribes or secret commissions or acting in one's own interests or the interests of another rather than in the interests of the employer;
[102]
(ii) not to benefit him or herself to the detriment of the employer;
[103]
(iii) to treat confidential information as such and not disclose it to competitors."[20]
[104]
[74] Mr Land placed some reliance on the oft cited judgment of Laskin J of the Canadian Court of Appeal in Canadian Aero Service Ltd v O'Malley[21]:
[105]
"Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer...is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to he properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company.
[106]
An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, the ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that lead him to the opportunity which he later acquired."
[107]
[75] Of significance to this case are two aspects of that statement of principle. First, Mr Land emphasised that given the nature of the heavy haulage business the reference to "maturing business opportunity" is particularly apt here. There are no long term contracts. A contract might not be won, but very nearly so, and the plaintiff was entitled to have such interests protected. I accept that that is right.
[108]
[76] Second, I do not accept that the defendants resignations were "prompted or influenced by a wish to acquire for [themselves] [any] opportunity sought by the company". My findings set out above dispose of any such argument.
[109]
[77] I turn now to the breaches of duty alleged by the plaintiff.
[110]
Acquisition of the Kenworth Prime Mover and Trailer - Paragraph 19A(a),(b) and (c) of the Statement of Claim
[111]
[78] The plaintiff alleges that the first defendant breached the duties owed to the plaintiff in making enquiries regarding the acquisition of a Kenworth prime mover and trailer in January 2008.
[112]
[79] The mere enquiry about the acquisition of a prime mover by an employee in the position of the first defendant cannot, in my view, be in breach of any duty owed to the plaintiff. It was not done in conjunction with any other act designed to set the defendants or any of them up in competition with the plaintiff.
[113]
[80] The most relevant of the many authorities helpfully collected by the parties' legal representatives seems to me to be the statement by McLelland J in United States Surgical Corporation v Hospital Products International Pty Ltd:
[114]
"A failure by an employee to disclose to his employer his preparations to compete may constitute a breach of the employment contract, but would not necessarily do so, depending upon the position and duties of the employee, the nature of the acts of preparation, the effects of non-disclosure upon the employer's business interests, and the motives of the employee..."[22]
[115]
[81] Here the motives were benign[23], the effects of the non disclosure minimal to non-existent, the first defendant's duties were not concerned with the procurement of equipment for the plaintiff, and the intended purchase 14 months away. I cannot see any basis for a finding of a breach of any duty owed.
[116]
[82] Mr Land submits that "the resignation (virtually en masse) of the three top personnel of Deeson to work for the fourth defendant" constituted a breach of the fiduciary duties owed. He submitted that the defendants' actions could be properly characterised as the making of secret arrangements during their employment to compete with his employer after termination of the employment and hence in breach of the fiduciary duty owed. There is certainly authority for the broad statement that such secret arrangements can be in breach of duty.[24]
[117]
[83] However I know of no principle that would prevent an employee from resigning their employment in the absence of any contractual obligation to continue in service. I do not perceive that position changes merely because two other employees also seek to resign at the same time. Nor does it seem to me to be relevant that between them the three defendants effectively ran the plaintiff company.
[118]
[84] The case is even plainer in relation to the second defendant - he had given notice a month before his departure. No authority was cited for the proposition that he came under some obligation not to leave because of the later decisions of the first and third defendants to also leave.
[119]
[85] If the intent of the submission be that the breach is in the taking up of employment with a competitor, the fourth defendant, then I observe that no authority was cited in support of the proposition and such a submission would run counter to well established principle. In GD Searle & Co Ltd v Celltech Ltd. Cumming-Bruce LJ observed in relation to the "free movement of labour":
[120]
"The law has always looked with favour upon the efforts of employees to advance themselves.... In the absence of restrictive covenants, there is nothing in the general law to prevent a number of employees in concert deciding to leave their employer and set themselves up in competition with him".[25]
[121]
[86] Finally Mr Land submitted that there was an obligation on the defendants to each inform the plaintiff of the fact that they were each taking up employment with the fourth defendant and a failure to do so constituted a breach of the fiduciary duties imposed. I accept that in some circumstances there would come onto a member of senior management an obligation to tell the employer details of any proposed plan to compete against the employer. But what of the circumstances here?
[122]
[87] From the time of his meeting with the first defendant on the Monday, 3 March, at 4 am Mr Strathdee could not but have appreciated that the first defendant was almost inevitably going to take up employment with a competitor - he had worked in the industry for the previous two decades, was knowledgeable concerning it, and had no experience in any other business. Nor could Mr Strathdee have been under any illusion that his relationship with the second defendant was likely to continue given the allegation of impropriety made by Mr Strathdee against him and communicated to Mr Reimers. The second defendant was already supplying his vehicle to at least one other competitor even whilst contracting to the plaintiff. That he would almost certainly contract with other competitors or expand his own business must have been evident to Mr Strathdee.
[123]
[88] In addition there arises the question of the extent to which the fiduciary duties under discussion apply to an employee in the position of the second defendant. He was permitted by his contract to pursue his own interests at least to some extent. I had the impression that there had been no discussion delineating the boundaries to which he was entitled to pursue his own interests. It is far from clear that the "rigorous standards" usually applicable to a trustee apply in those circumstances.[26]
[124]
[89] So the question becomes - in the absence of any contractual obligation to do so, was it a breach of the duty of good faith not to inform the employer of the defendants' future employment plans to set up a rival company in circumstances where the principal was well aware the employees were leaving, where the effect of those probable plans were self evident, and where he made no enquiry of them? I cannot see why. The significant point is that Mr Strathdee was on notice of their impending departure.
[125]
[90] These submissions were made in the context of the broader submission that the recruitment of the plaintiff's three most senior personnel to work for the fourth defendant, and whilst all were in employment with the plaintiff, should be considered as part of the preparation undertaken for the new business venture.
[126]
[91] I accept as correct the proposition that the recruiting of the employer's key staff for a new business may involve a breach of contractual or fiduciary duties.[27] Mr Land made particular reference to the comments in Warman International v Dwyer concerning the "persuasion of employees of Warman to leave Warman and join the [the defendants new agency]" by the defendant when head of the Warman's local agency as being a "clear case of a fiduciary breaching his obligations".[28]
[127]
[92] The fallacy in the application of that principle to this case is that here the cause of the employees leaving the plaintiff was not any persuasion by one or other of the defendants. The second defendant had already decided to leave for unrelated reasons. Plainly the trigger for the discontent and resignations of the first and third defendants was Mr Strathdee's own actions in making serious allegations of dishonesty against them. The plan to set up in competition emerged only after the decisions to leave the plaintiff's employment had been taken.
[128]
[93] Mr Land particularly relied on WA Fork Truck Distributors Pty Ltd v Jones[29] as exemplifying the application of the doctrine applicable to this aspect of the plaintiff's claims. That case is instructive if only to highlight the care that must be exercised, and which the High Court has stressed, in closely examining the facts of each case in applying these equitable principles. As Pullin J made clear in that case: "...whether such approaches constitute a breach of contract or fiduciary duties, depends upon the manner in which the approach is made."[30]
[129]
[94] In WA Fork Truck Distributors the relevant defendant, a member of senior management, had secretly planned to set up a business in competition with his employer for 12 months before resigning. He had an accountant prepare business plans, registered a business name four months before his intended resignation, approached key members of the plaintiff to join his new venture, arranged finance, organised for the purchase of equipment essential to competing, and all of this on company time. Deliberate efforts were made to keep these activities secret from his employer. These facts are in stark contrast to the circumstances pertaining here.
[130]
[95] Here the employer well knew that each of the first and second defendants was leaving. Timely notice had been given - in the case of the first defendant either at the time of, or within hours of, forming the intent to resign, in the case of the second defendant a month before he in fact left. The plan to form a new venture emerged in the course of a bar-b-que on the Monday night, three days before the new venture started in business. There was no business plan, no finance arranged and no employees approached save the third defendant who had been the subject of the allegations of dishonesty. In any case it seems apparent that the approach to her was by Mr Reimers, not the defendants, and he was under no obligation to the plaintiff.[31] The planning, to the extent that there was any planning, was undertaken in their own time. The only coincidence between the facts here and those in WA Fork Truck Distributors is that the principal, here Mr Strathdee, was unaware, but here only over three days, of the intention to operate in competition.
[131]
[96] I am not satisfied that there was any breach as alleged.
[132]
[97] As part of its complaint that the defendants were in breach of the contractual and fiduciary duties owed the plaintiff contends that the first defendant, while still an employee, solicited work from Ms Pegler of BIS.
[133]
[98] This is evidenced, it is said, in three ways. First, there was a conversation early in the week of Mr Cox's departure between Ms Pegler and Mr Cox, when he was still an employee, and in his employer's time, in which he informed her that he was setting up his own haulage business, would have a couple of trucks[32], and asked her if she would be interested in using his company. She indicated that she would. That is consistent with Ms Pegler's account of the conversation. Second, consistently it is said with that solicitation and as a result of it, the fourth defendant carried its first loads on the Friday of that week and for BIS. There is no dispute about the fact of carriage. Third, the fourth defendant has enjoyed great support from BIS ever since and the plaintiff has received little support. That too is true.
[134]
[99] The first defendant does not dispute that there was a phone call earlier in the week. He does dispute that he sought work in the course of that call or that the loads carried on the Friday were as a result of that phone conversation earlier in the week. The only independent evidence[33] on that latter point is from Ms Pegler who thought that the arrangement to carry the loads was made on the day that the loads were carried. I see no good reason to reject her account. Thus I proceed on the basis that the only possible "solicitation" that occurred in the course of employment was as Ms Pegler described. I note that Ms Pegler emphatically denied that there was any conversation with the first defendant, much less arrangement, that no further work would go to the plaintiff. I accept her account. Apart from her honest demeanour her evidence was consistent with that given by all other witnesses on the point - the first defendant had no discussions with other potential clients, whilst he was still employed at Deesons, seeking to further his own interests.[34]
[135]
[100] The issues therefore are whether the conduct described by Ms Pegler as having occurred in the phone call a few days before the commencement of the business of the fourth defendant constitutes a breach of the duties owed and if so what consequences follow.
[136]
[101] I find that the first defendant was in breach of his contractual obligation of good faith and fidelity and the fiduciary obligations imposed on him in informing Ms Pegler of his intention to commence business on his own account and in enquiring whether she would support the business. I do so however with some hesitation.
[137]
[102] My concern is that the comment by the first defendant was, at worst, an inducement to take BIS's custom away from the plaintiff of only the most trifling kind. Information that the defendants were in business would inevitably become known to people such as Ms Pegler. Indeed it is conceded that the defendants were entitled, upon cessation of their employment, to compete with the plaintiff notwithstanding any obligation of good faith owed.[35] Thus it is conceded that Mr Cox would have been perfectly entitled to make contact with Ms Pegler on the Friday, a few days after the day he did make the contact, and inform her of the existence of his new business, as by then his employment would have ceased.
[138]
[103] However the authorities seem to support the plaintiff. Mr Land principally relied on Wessex Dairies Ltd v Smith[36] for the proposition that such conduct was in breach of duty. The other authorities to which he referred[37] make reference back to this decision. Wessex Dairies concerned an employed milkman canvassing support for his proposed business in the course of his round by informing customers that he proposed to set up his own business from that evening. The Court of Appeal held that he was in breach of his implied contractual obligation to act with fidelity to his employer which obligation lasted, it was said, "until the last hour of his service".[38] The facts in Wessex Dairies are very close to the facts here. No ground for distinguishing Wessex Dairies was suggested to me and I see none.
[139]
[104] That was a decision in contract but the fiduciary obligation is no less stringent. Plainly it cannot be in the employer's interests for an employee to inform a prospective customer of the existence of a new competitor and to seek support for that competitor. The first defendant's interests conflicted with those of his employer and his duty was plain. The "strict norms of exemplary behaviour" that Santow J spoke of apply. [39]
[140]
[105] I turn then to the consequences of the breach.
[141]
[106] It is claimed that as a result of this breach the first defendant secured for the fourth defendant not only the work that the fourth defendant carried out on the first day of its operations but also all future work from BIS - totalling by the time of trial in excess of $600,000 worth of work. The appropriate remedy, supported by authority it is submitted,[40] was to deprive the defendants of all profits earned and pay them to the plaintiff, and to grant a permanent injunction restraining the defendants from ever again working for BIS. This would have the effect of depriving the fourth defendant of potentially millions of dollars in turnover and profits over the years ahead, and of enhancing the plaintiff's prospects of receiving these future profits, or a share of them, by removing from the field a successful competitor to the plaintiff.
[142]
[107] Indeed Mr Land's submission went further and claimed not only all the profits from the BIS work but that the entire business of the fourth defendant belonged, in equity, to the plaintiff. This was so, it is said, because the acquisition of the BIS work provided the fourth defendant with its reputation and the income to survive.
[143]
[108] All this seems a remarkable result for the making of a telephone call a few days earlier than Mr Cox should have.
[144]
[109] The defendants submit that the phone call earlier in the week caused no damage to the plaintiff. Ms Heyworth-Smith of counsel, who appeared for the defendants, submitted that the fourth defendant was engaged to perform the work that was performed on the Friday of that week, and all subsequent work that it has performed, and the plaintiff did not get that work, because of Ms Pegler's perceptions of the advantages that the fourth defendant offered over the plaintiff - efficiency, competitive quotes and an ability to get the job done. It is of considerable relevance too that Ms Pegler's only contact at the plaintiff had ever been Mr Cox and he had impressed her. Similarly Mr Cox has impressed Ms Pegler's successor at BIS. It has never been doubted that someone in Mr Cox's position is entitled "whilst in the employment of the master, [to] be as agreeable, attentive, and skilful as it is in his power to be to others with the ultimate view of obtaining the benefit of the customer's friendly feelings when he calls upon them if and when he sets up business for himself."[41]
[145]
[110] However, the difficulty with the defendants' submission that the earlier phone call had no causative effect in the obtaining of work on the Friday morning is that the engagement came about directly as a result of information that Ms Pegler acquired in the course of that earlier call. Because of that earlier call Ms Pegler was aware not only that Mr Cox was starting up a new business but that she needed to ring Mr Cox on his personal mobile phone to engage that new business. Whilst the point is not completely clear the implication of her evidence is that she would normally have rung Mr Cox on a Deeson's number.[42] If she had not been previously made aware of these matters in the earlier conversation which is in issue here, then she would not have made the call engaging the fourth defendant for the Friday work to that number.
[146]
[111] Thus the parties contend for competing causes for the loss of work, one involving a breach of the duties owed. The relevant test in these circumstances, of whether a breach of contract is causally significant, was described by Thomas JA in Wylie v ANI Corporation[43] in the following terms:
[147]
"In contract cases where competing causes exists it seems to be recognised that liability will be found only if the defendant's acts can be regarded as of equal or close to equal potency with other causes."
[148]
[112] I note Thomas JA's reference in Wylie to Devlin J's comment in Heskell v. Continental Express Limited[44] that "... the cause of loss has to be ascertained by the standard of common sense of the ordinary man. Common sense is a blunt instrument not suited for probing into minute points, and I cannot believe that if the ordinary man thinks that two causes are of approximately equal efficacy, he cannot say so without being interrogated on fine distinctions."
[149]
[113] In my judgment, applying that approach, whilst the defendants' submissions have considerable force it seems to me that the effects of the earlier phone call were still of "equal or close to equal potency" to the factors relied on by the defendants, at least as at that Friday morning. Thus I am satisfied that the plaintiff is entitled to damages flowing from that breach measured by the loss of profits in the two loads carried on the Friday.
[150]
[114] So much for contractual remedies. What of equity's approach? As I have indicated the plaintiff's case goes considerably beyond a claim for the profits of those two loads. The plaintiff relies on the equitable remedies said to be available. The plaintiff claims an entitlement to an account for profits for all work subsequently performed for BIS by the fourth defendant.
[151]
[115] The defendants contend that their arguments on causation are a complete answer to the plaintiff's claims. Once Mr Cox was in competition with the plaintiff, as he was entitled to be after his resignation, then the fourth defendant would have won the BIS work. There can be no doubt about the correctness of the factual assertion - the fourth defendant did in fact win the BIS work, at least more often than not, once Mr Cox was in opposition to the plaintiff. I am satisfied that it would have done so whether Mr Cox had made the call to Ms Pegler in the course of his employment with the plaintiff or not. He would certainly have made the call on the Friday, after his resignation, if he had not made it on the Tuesday. The timing of it was irrelevant to the fourth defendant's later success.
[152]
[116] The plaintiff contends that all this is irrelevant. If I follow the submissions made the contention is that the plaintiff has no obligation to establish any causal link between the breach of duty and the work later acquired in order to be entitled to an account of profits. The fact of the breach of a fiduciary duty, apparently no matter how trivial, is said to result in the right to an account of profits in respect of the business contemplated by the first defendant at the time of the breach. Whether the plaintiff would have subsequently won the work or not is said to be irrelevant. Reliance was placed on passages from the judgments in Furs Ltd v Tomkins[45], Warman[46], Consul Developments Pty Ltd v DPC Estates Pty Ltd[47] and Green and Clara Pty Ltd v Bestobell Industries Pty Ltd.[48]
[153]
[117] In my view the submission contains two crucial errors. First it overlooks what McMurdo P recently described in Mantonella Pty Ltd v Myles Thompson[49] as "the cardinal principle of equity ...that the remedy must be fashioned to fit the nature and facts of each case."[50] Second, the submission misstates the true position on causation and the cases cited do not stand for the proposition stated, at least in the circumstances pertaining here.
[154]
[118] There are certainly statements in the cases, and from high authority, which support the contention that "it is neither here nor there to speculate whether, if [the fiduciary] had done his duty, he would to have been left in possession of the same amount of profit."[51] But, in my view, that is far from a universally applicable principle. So much is clear from Muir JA's extensive review of the authorities in Mantonella[52] in the context of a claim by a client against a solicitor. There the fact that there was a fiduciary relationship and that the solicitor was in breach were accepted. Yet the claim was dismissed - the court looked at what would have been, had the duty been performed, and found that no loss had been suffered by reason of the breach of duty.
[155]
[119] The cases cited by the plaintiff support the view that in some circumstances, and depending on the relationship and benefit in question, once it is shown that a fiduciary gains knowledge or opportunity within the fiduciary relationship then the court will not be concerned to enquire as to whether the fiduciary in fact used that information or opportunity to acquire the benefit in question. But that is not the issue here.
[156]
[120] In the present circumstances the better approach is that there must be a "sufficient connection" between breach and profit won as was explained in Maguire v Makaronis, where the High Court held:
[157]
"Different considerations arise where the plaintiff seeks one or other of the further remedies referred to by the Lord Chancellor in Nocton v Lord Ashburton, namely an account of profits, as a personal rather than proprietary remedy, or, as another personal remedy, compensation for that which the plaintiff has lost "by [the fiduciary] acting", to use the Lord Chancellor's phrase, in breach of duty. Likewise where what is sought is a proprietary remedy in the nature of a constructive trust. In these instances, there directly arises a need to specify criteria for a sufficient connection (or "causation") between breach of duty and the profit derived, the loss sustained, or the asset held.
[158]
Where the plaintiff seeks recovery of a profit, the necessary connection has been identified in this Court by asking whether the profit was obtained "by reason of [the defendant's] fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position". Particularly where a complex course of dealing is in issue, minds reasonably may differ as to the outcome of the application of these principles. The point is illustrated by the narrow division of opinion in the House of Lords in Phipps v Boardman, as to the liability of the appellants, advisers to certain trustees, in respect of their profits on share dealings." [53]
[159]
[121] The critical thing is to identify the profit derived or the loss sustained that is in issue. The "profit" in question here is that derived by the fourth defendant from quoting for and winning discrete hauling jobs from BIS from time to time. The relevant "loss" is the loss of the continued receipt of the BIS contracts by the plaintiff.
[160]
[122] BIS had no long term commitment to the plaintiff or any other contractor. In no sense can I see that the defendants obtained any relevant knowledge or opportunity from within the fiduciary relationship. It was not shown that any of the jobs undertaken by the fourth defendant for BIS was known to Mr Cox or Mr Watson whilst they were employed by the plaintiff. Nor was it shown that the defendants only became aware that BIS was a potential client in the industry by reason of their positions with the plaintiff. BIS was evidently a significant user of major hauling companies. Both the first and second defendants had worked in the hauling business for decades. The second defendant had his own business throughout his period of employment. They had each been with the plaintiff for only a relatively short period.
[161]
[123] Alternatively, if the correct question be "whether the loss would have happened if there had been no breach"[54], then I find that the plaintiff would have lost the BIS work if there had been no breach of duty here. The qualities that won for the fourth defendant the BIS work were personal to Mr Cox. True it is that Ms Pegler had come to know him and know of those qualities only during the currency of his employment with the plaintiff but that is no answer to the defendants' submissions.
[162]
[124] I conclude with the observation that there is support for the view that lack of any dishonesty in the defendants' conduct can be relevant to this issue. In Swindle v Harrison[55] Evans LJ said in this regard:
[163]
"... the authorities also show, in my judgment, that what I have called the stringent rule of causation or measure of damages does not apply as regards breaches of equitable duties unless the breach can properly be regarded as the equivalent of fraud. In other cases the plaintiff is entitled to be placed in the same position financially as he would have been in if the breach of duty had not occurred - not necessarily the same as he was in before it occurred."
[164]
[125] I am conscious of the observations made in the joint judgment of the High Court in Warman International Ltd v Dwyer which was particularly urged on me by Mr Land viz:
[165]
"Thus, it is not a defence that the plaintiff was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably."[56]
[166]
The issue here however does not concern the defences available but rather what is an appropriate approach to causation and damage and the remedies that follow.
[167]
[126] The distinction made by Evans LJ in Swindle may not explain the differing approaches taken in the many cases on the question of whether the stringent approach should be adopted. What is clear, however, is that Warman can be distinguished from the present case on several levels. Warman was a case involving active dishonesty on the part of the fiduciary. It concerned the deliberate acquisition secretly of the principal's agency business with its concomitant long term relationships with the clients of the agency. Thus it was quite plain that the breach of duty led to the plaintiff's loss of profits and the consequent gain by the fiduciary. Even so the High Court warned that "the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff."[57]
[168]
[127] This is not a case of the fiduciary dealing with a specific asset. The plaintiff's relationship with BIS was not a "maturing business opportunity" in the sense discussed in Canadian Aero Services[58] and does not have the characteristics of the long standing agency arrangement in Warman. I am of the view that if I acceded to the plaintiff's submissions as to the appropriate remedies then I would be committing the very errors that the High Court warned against in Warman.
[169]
[128] Nor does it seem to me that there is any justification for the imposition of an injunction restraining further dealings between the fourth defendant and BIS. In addition to the matters already mentioned I refer to the observations of Scott J in Balston Ltd v Headline Filters Ltd:
[170]
"These past breaches of duty... cannot, in my judgment, sustain an interlocutory injunction on their own account. Whether an injunction, interlocutory or otherwise, can ever be justified on the ground that the grant is necessary in order to deprive a contract breaker of the fruits of his breach of contract, I regard as highly questionable..."[59]
[171]
[129] If such an injunction ever be justified it is not here.
[172]
[130] The plaintiff also relies on a contravention of s 183 of the Corporations Act 2001 (Cth) and seeks relief pursuant to sec. 1317H of that Act.
Section 183 Use of information - civil obligations
[175]
183(1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:
[176]
(a) gain an advantage for themselves or someone else; or
1317H(1) A court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if:
[180]
(a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation or scheme; and
[181]
(2) In determining the damage suffered by the corporation or scheme for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence.
[182]
[133] The first and second defendants were each employees of the plaintiff and so caught by these provisions. I am doubtful that they were "officers" of the company but it is not necessary to decide that.
[183]
[134] Ms Heyworth-Smith has drawn my attention to the observations of Young J. in Forkserve Pty Ltd v Pacchiarotta[60] concerning s 232 of the Corporations Law as it was in December 1998 (a forerunner to the provision relevant here and not materially different in effect) and its relationship to the common law and equity. His Honour said:
[184]
"[28] As I said in Rosetex Company Pty Ltd v Licata(1994) 12 ACSR 779, the general coverage of the obligations under s 232 are not to any major extent wider than the duties under the general rules of equity. There are some extensions made by the statute in that there is taken away some problems of privity, there is conferred a statutory right to receive damages or compensation where under the general law there would only be an account of profits and other ancillary advantages. However, generally speaking, if there has been no improper use of information under the general equitable principles, there is no improper use of information under the statute. This is logically so when one remembers that sections like s 232 were originally taken by the drafters of the 1958 Victorian Companies Act and the 1961 New South Wales Companies Act from the equitable duties set out by Romer J in Re City Equitable Fire Insurance Company Ltd[1925] Ch 407.
[185]
[29] Thus it follows that as there is no breach under the general rules of equity, there is no breach under s 232."
[186]
[135] I respectfully adopt his Honour's approach. Consideration of these provisions adds nothing to the plaintiff's case - a position that I understood Mr Land to accept.
[187]
[136] The only entitlement that the plaintiff has in respect of this aspect of its claim is the loss of profits from the two loads carried on the Friday. The claim is complicated by the fact that BIS paid the plaintiff for one of those two jobs even though it was performed by the fourth defendant. Mr Strathdee claimed that when the mix-up was discovered the plaintiff was invoiced by Townsville Haulage Pty Ltd (the second defendant's company) and paid that invoice.[61] I assume that there has been an appropriate adjustment arrived at commercially. Thus the only loss that can be claimed is the profit that would have been derived from the remaining job. Ms Heyworth-Smith points out that the gross profit derived by the fourth defendant, before tax, for that work was $120. I adopt that as the measure of the plaintiff's loss.
[188]
[137] The fourth defendant of course received the monies with full knowledge of relevant facts and so is either a constructive trustee of the monies or complicit in the breach. It is liable to pay equitable compensation in the same amount.[62]
[189]
[138] On 18 March 2008 the fourth defendant conveyed, by subcontractors, an excavator described as an RH 340 for NQX Freight System ("NQX") weighing approximately 613 tonnes. NQX paid the fourth defendant $80,885.75 for the job. It is not in dispute that the plaintiff had been negotiating with NQX for the contract and that Mr Cox "had been the person in charge of the job from the Plaintiff's side whilst he was employed by the Plaintiff."[63]
[190]
[139] The plaintiff contends that in performing that contract the defendants breached either the fiduciary duty owed by the first defendant to the plaintiff or misused confidential information acquired by the first defendant in the course of his employment with the plaintiff. The defendants dispute that any duty was owed, or that there was any misuse of confidential information.
[191]
[140] Between 23 January and 1 February 2008, by a series of emails that passed between Mr Andrew Nottingham of NQX, Mr Len Baburin of Anglo Coal (owner of the mine site on which the machine was located) and Mr Cox in his capacity as the plaintiff's manager, the plaintiff arranged to move the excavator across the Peak Downs highway on 19 March 2008. It had originally been intended to move the excavator on 3 February but inclement weather forced a change in plans and that change required amendments to the necessary permits. Mr Nottingham made plain that the emails indicated that from his perspective the plaintiff had the job.[64]
[192]
[141] Because of the size of the machine the job had been subcontracted by the plaintiff to Megalift/Lampsons. The emails demonstrate that Mr Cox was purporting to control the amendments to those permits (and in fact probably did). The permits had been issued in the name of the subcontractor Megalift.
[193]
[142] It is apparent that the re-issuing of permits took some time to organise. Mr Nottingham explained that NQX would be fined under its contract with Anglo Coal if the excavator was not moved on the date nominated in the permit. His evidence was that Mr Cox rang him back about the job, apparently within about 48 hours of the designated day. This placed Mr Nottingham in an invidious position. Mr Nottingham's evidence was that he "pretty much said [to Mr Cox], "Well, you will need to do the job if you've got control of the permits."[65] He was by that time well aware that Mr Cox had set up the fourth defendant.
[194]
[143] Whilst there is no doubt about Mr Nottingham's honesty the defendants dispute the accuracy of his recollections - in particular they dispute that he has an accurate recollection of the dates of the phone calls relevant to the performance of the job. They point out that Mr Cox's phone records establish that there were many calls from Mr Cox to Mr Nottingham from 7 March through to 19 March, several of which, at least, it seems, Mr Nottingham received or responded to. Mr Nottingham seemed to accept that all calls probably related to this job.[66] Thus it seems highly unlikely that the first mention of the job occurred only 48 hours before the designated day.
[195]
[144] As well it seems highly unlikely that Mr Nottingham was unaware that Mr Cox had left the plaintiff's employ until 48 hours before the movement of the excavator. The plaintiff contends that Mr Cox endeavoured to keep the fact that he had left Deesons a secret. The submission depends on an assumption of a dishonest purpose on the part of Mr Cox which I reject. In any case the evidence suggests that Mr Nottingham was dealing with Deesons through this time in respect of other jobs. Mr Cox was his usual contact. As a result he could hardly fail to have been aware that Mr Cox was no longer in the plaintiff's employ. Indeed I am confident that at this stage Mr Cox was keen to make all potential customers aware that the fourth defendant was in business.
[196]
[145] I find then that Mr Nottingham's recollections concerning the timing of the calls is unreliable and that he was probably aware at a much earlier time than he now recalls of Mr Cox's desire to secure the job for the fourth defendant. That finding does not however affect his testimony that he felt obliged to use the fourth defendant because of Mr Cox's apparent control over the permits and his strong desire not to incur a fine from Anglo Coal. If these were misapprehensions, and I am not sure they were,[67] then I find that Mr Cox did not disabuse him of them.
[197]
[146] There is one further preliminary issue of fact. The plaintiff contends that Mr Cox endeavoured to secure the job for the fourth defendant by removing the job from the plaintiff's Job's Board. There is no evidence that he did so. The submission again relies on the first defendant having a dishonest motive. I am not prepared to accept any evidence that Mr Strathdee gives about what may or may not have been on the Job's Board either before or after Mr Cox left the plaintiff's employ.
[198]
[147] I proceed on the basis that no action was taken by the first defendant during the course of his employment with the plaintiff to win the contract in question.
[199]
[148] The issue then is whether Mr Cox was, by reason of the fiduciary duty imposed on him by his earlier employment, not permitted once he resigned, given these circumstances, to secure this job for the fourth defendant, or whether, in doing so, he made improper use of confidential information of which he was aware only by reason of his former employment.
[200]
[149] Ms Heyworth-Smith submitted that the fiduciary duty ended with the termination of employment. Once free of his employment she contended that Mr Cox was perfectly entitled to pursue any business opportunity including competing with the plaintiff for its customers. That latter point seems to follow from the decisions earlier discussed.[68] But freedom to compete does not necessarily mean freedom from obligations already incurred.
[201]
[150] Mr Land relied in particular on the passage from Canadian Aero Service Ltd v. O'Malley that I have earlier set out[69] and the following passage from Warman:
[202]
"A fiduciary must account for a profit or benefit if it was obtained ....by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position".[70]
[203]
[151] I think it beyond argument that, in that sense, fiduciary obligations extend beyond the cessation of employment.[71]
[204]
[152] In my view there is no doubt that Mr Cox took "advantage of opportunity or knowledge derived from his fiduciary position" in seeking out and obtaining this work. He not only knew of the existence of the job from his employment but also of the estimated price that the plaintiff had given for the job. He knew the day it was set to be performed. He knew who the subcontractors were who had been engaged and indeed used that same subcontract arrangement to perform the work. He knew the permits were all in place from his work done in the course of his employment with the plaintiff. As Mr Land submits the continued telephone calls tend to suggest that he assiduously pursued the opportunity to perform the work.
[205]
[153] If the Canadian Aero Service decision sets out the correct test then it is satisfied here - the fourth defendant did not win the job through any "fresh initiative" on the defendants' part. I am conscious of the limitations that it has been said should be placed on that decision in the cases to which Ms Heyworth-Smith has drawn my attention.[72] But the knowledge in question here cannot be considered part of the first defendant's "general fund of knowledge and ... stock-in-trade" which those cases hold can be legitimately used to compete with the former employer.
[206]
[154] There is no suggestion here that the plaintiff was aware of the first defendant's activities or consented to the fourth defendant acquiring the job.
[207]
[155] I am satisfied that Mr Cox was in breach of the fiduciary obligations owed to the plaintiff in pursuing and obtaining this work. I do not understand it to be in issue that the fourth defendant must be found to be a "knowing participant" in any breach.[73] Given my findings I have not considered it necessary to consider the alternative claim that the knowledge in question could amount to a trade secret which could not be used after cessation of employment.
[208]
[156] These facts also establish a breach of s 183 of the Corporations Act and entitle the plaintiff to relief under s 1317H.
[209]
[157] I turn then to consider the appropriate remedy.
[210]
[158] The fourth defendants' accountant gave evidence of the profits earned. After bringing into account trading and other overhead costs he calculated that the net profit earned by the fourth defendant for this job before tax was $11,986.79 and $8390.75 after tax.[74] The parties were in dispute as to the appropriateness of bringing into account costs other than immediate trading costs. The taking into account of such costs is appropriate if it results in the injured party being put into the "same position financially as he would have been in if the breach of duty had not occurred."[75]
[211]
[159] The plaintiff contends that if it had performed the work it would have operated on an approximate 20.62% profit margin. That was the margin that the plaintiff contended reflected its operating profits before fixed costs for the 2008 financial period. Applying that percentage to the gross revenues of $73,532.50 (excluding GST) results in profits foregone of $15,160 approximately. The 20.62% margin however was strongly attacked and with some reason. Ms Heyworth-Smith demonstrated that the so called fixed costs that were excluded to arrive at the 20.62% figure increased considerably with the level of trading undertaken. For example those costs increased 108% between the 2007 and 2008 financial years with a 56% increase in gross sales. In my view her analysis plainly demonstrated that it is appropriate to bring into account costs other than those characterised as trading costs.
[212]
[160] Reference to operating margins was not of assistance. As Ms Heyworth-Smith's calculations show the plaintiff's net operating profit margin over its whole operations for the 2008 year is 2.6% of gross revenue.[76] The fourth defendant's accountant calculated a 16.3% return on gross revenue for this job for the fourth defendant. However a comparison of the two margins is not comparing like with like. As the accountant's calculations show the return on gross revenue can vary widely from job to job. As well the plaintiff's operations included an extensive crane hire service. Thus overhead expenses are not necessarily comparable even on a percentage basis.
[213]
[161] Bearing those criticisms in mind and doing the best I can I am not satisfied that the plaintiff's loss should be calculated any differently to the profit obtained by the fourth defendant.
[214]
[162] The final issue is whether income tax ought to be deducted from the figure arrived at. Ms Heyworth-Smith contended that it should and relied on the analysis of O'Loughlin J in Titan Group Pty Ltd & Anor v Steriline Manufacturing Pty Ltd & Ors.[77] As his Honour's judgment makes plain the issue is determined by deciding whether the compensation awarded has the character of income in the hands of the plaintiff, and so is assessable, or rather property, and not assessable. Here the compensation plainly bears the character of income, assessable in the hands of the plaintiff, and so I should make no deduction.
[215]
[163] Equitable compensation is assessed at $12,000 rounding off the defendants' figures. Given the modesty of the amount involved I am not satisfied that there is any need for a taking of account of profits. I can see no basis for an allowance for the exercise by the defendants of their skill and expertise.
[216]
[164] What the parties have described as the Mac roof chock job involved the movement of 117[78] roof chocks from, originally, Mackay Harbour to the mine at Moranbah North. The chocks weighed between 61 and 64 tonnes. A company JLM Transport and Logistics Pty Ltd ("JLM") - as the Mac Group had become - had won the contract to move the chocks from a shipping entity, Hartrodts, and had obtained a quote from the plaintiff. The fourth defendant performed part of the contract.
[217]
[165] Mr Strathdee claimed that this was a job already won by the plaintiff long before the departure of the defendants, in which they had been intimately involved, and that they used their knowledge gained from their employment to undercut the plaintiff and win the work. If all this was true then there would appear to be a clear breach of the fiduciary duties owed.
[218]
[166] Mr Allan Dillon from JLM gave evidence that he had obtained quotes from a number of haulage companies, including the plaintiff, and, at the time that the Defendants left the employment of the Plaintiff, had not let the job to any of them.
[219]
[167] The chocks in question were the largest of their size to be brought into Australia and hence the job was one well known throughout the industry. Their arrival was anticipated for a very lengthy period. The evidence suggests that the prospective job first came to the notice of the plaintiff in about April 2007 when the second defendant recorded a note of the job in his notebook.[79] The note records a price for transport from both Brisbane and from the Mackay harbour to the mine site. The ex Brisbane price recorded is $8,190 and the ex Mackay harbour price is $1,870 per chock.
[220]
[168] Mr Taylor prepared a quote for the job on the plaintiff's behalf on 26 October 2007.[80] That quote worked out to $2,900 (plus GST) per chock and assumed movement only from Mackay harbour to the mine site. That quote included craneage at the wharf and so included an amount additional to the transport. The transport component was $1,900 per chock. There was no reference to any movement from Brisbane.
[221]
[169] There matters seemed to rest while Mr Dillon awaited news of the arrival of the chocks. That delay is significant. Costs change over time and no contractor would consider that a price fixed in April 2007, or for that matter October 2007, would be necessarily binding 5 to 12 months later. As at 7 March 2008, when the fourth defendant commenced to trade, I am satisfied that no contract had been let and no start date set for the contract.
[222]
[170] Mr Watson's account is that a couple of weeks after he left the plaintiff's employment he rang Mr Dillon enquiring after the job. There was a meeting. Mr Dillon asked him if the fourth defendant would do the job for the same amount as the plaintiff's quote. By this time Mr Watson had forgotten what the amount was that he had recorded the previous April. He asked Mr Dillon what the amount of the plaintiff's quote was and was told $7,850[81], not $8,190 which was in fact quoted. Hence Mr Dillon took advantage of Mr Watson's ignorance of his own record. Mr Watson agreed to do the work for that price. I accept his account. It is inherently credible, consistent with Mr Dillon's account, and consistent with the fourth defendant doing the job for a price that was less than that quoted 12 months before.
[223]
[171] Unbeknown to Mr Watson, on 18 April 2008, Jason Cox quoted $3,080 (plus GST) per chock from Mackay harbour to the mine site - $1,980 for transport and $1,100 for craneage. He also quoted on the basis of differing weights of 61 and 64 tonnes.[82]
[224]
[172] The plaintiff contends that the defendants used Mr Watson's entry in the note book in quoting and winning this work. There is no evidence to support that submission[83] and a deal of evidence against it. Mr Dillon's account accords more or less with that of Mr Watson. That evidence explains what correspondence there is between the prices quoted.[84] The note books had been seized under the Anton Pillar order 10 days before Mr Cox provided his quote and so were unavailable at the time of the giving of the quote. In any case the written quote provided by Mr Cox, unlike the record in the notebook, considers different prices for differing weight chocks - it seems that information that weights were not uniform became available only later in the process.
[225]
[173] I am satisfied that Mr Strathdee's claim that for 18 months the job had been a Deeson's job is quite wrong. It is not even apparent that JLM had won the contract at so early a time. Other companies were quoting to Hartrodts. His claim to have a binding contract is inconsistent with Mr Dillon's account of their conversation, after the defendants' departure, to the effect that Mr Strathdee wanted an extra $1000 per chock. I note too that the fourth defendant did only the Brisbane leg of the job and the plaintiff performed the Mackay to Moranbah North part, and indeed contracted with NQX not JLM. That tends to demonstrate that the plaintiff did not have a binding contract with JLM to move the chocks.
[226]
[174] Several things are clear - Mr Strathdee would not have considered himself bound by a quote given so long before; the details of the job changed over time possibly rendering earlier quotes irrelevant; Mr Cox put his own independent thought into the quote he rendered; and Mr Dillon did obtain various quotes, was free to do so, and plainly was after the most competitive quote he could get.
[227]
[175] I reject too Mr Strathdee's account of speaking with the first and second defendants about the job late in 2007. They deny it. It would be inconsistent with Mr Strathdee's general approach to his business to be concerned with such details. There is nothing to show that the first defendant had anything to do with the job whilst at Deesons. Mr Dillon said that all his dealings were with the second defendant, Mr Watson.
[228]
[176] Whilst the same principles that I have discussed in relation to the NQX job are applicable here it seems to me that there are material differences in the facts as follows:
[229]
(a) The plaintiff had no reason to think that it had won the job and I am confident that Mr Strathdee did not think so. Certainly JLM did not consider that the job had been won by Deesons;
[230]
(b) There was no special knowledge held by the defendants from the time of their employment with the plaintiff. I accept that the second defendant had long forgotten his record of April 2007 and in any case that would need revision 11 months later. Even the quote of October 2007, then 5 months old, would need revisiting;
[231]
(c) The price at which the job was performed came from Mr Dillon;
[232]
(d) The defendants took no advantage of any opportunity that came to them by reason of their employment with the plaintiff. That the second defendant had first learnt of the existence of the potential job the previous April in the course of and because of his employment is clear. But he shared that knowledge with every person involved in the heavy haulage industry. It is more akin to the general stock of knowledge that persons in the industry possess;
[233]
(e) The job was won because of their own fresh initiative in dealing with Mr Dillon and accepting the terms he proposed.
[234]
[177] I am not satisfied that there was any breach of contract, fiduciary duty, obligation of confidence, or the provisions of the Corporations Act by reason of the defendants' conduct.
[235]
[178] Nonetheless I am required to assess compensation. Again the same principles previously discussed apply. However there is an additional argument relevant here. An assumption underlying the adoption of the 20.62% margin figure advanced by the plaintiff is that it assumes that the plaintiff would not have had the need to use subcontractors to the extent the fourth defendant did. I am very sceptical of that claim. It depended on the plaintiff using its own machinery to move the chocks which use was conceded to be uneconomic. Whether the plaintiff would have done so must depend on what other work it had available for its own machinery. The plaintiff had only a limited ability to adjust the schedule to suit itself as there were significant penalties attached if the chocks were not moved within 5 days. There was no analysis of the plaintiff's work schedule to demonstrate that the equipment would otherwise have been available and Mr Strathdee's evidence was that the plaintiff's workload had increased dramatically during the period in question. He eventually conceded he could not say how much the plaintiff could have done without outside assistance.[85]
[236]
[179] Again doing the best that I can it seems to me that the profit derived by the fourth defendant gives as good a guide as can be obtained. The fourth defendant's accountant calculated a net profit before tax for the JLM job for the fourth defendant at $18,000 more or less.[86]
[237]
[180] The plaintiff contends that the first defendant "deleted from the mailbox of the plaintiff's computer system in a way calculated by the first defendant to make it difficult for the plaintiff to become aware of it"[87] certain emails containing quotes directed to MacMahon Contractors Pty Ltd ("MacMahons") and that as a result the plaintiff failed to win the contracts and suffered loss.[88]
[238]
[181] It hardly needs be said that a deliberate sabotaging of the plaintiff's computer system with a view to causing harm would be in gross breach of the contractual and fiduciary duties owed and any loss caused should be compensated.
[239]
[182] The defendants submit that there is simply no proof of deletion or consequent loss. Mr Cox denied deliberately deleting emails containing quotes and Mr Land concedes that there is no direct evidence that he did do so.
[240]
[183] The plaintiff's computers were normally serviced by a computer technician, Mr Hunter. He used a recovery tool which reconstructed Mr Cox's mail box. The "missing emails", so called, were found to be on the reconstructed mail box. However the reconstruction does not distinguish between emails already there and emails recovered. So the fact that the emails were found after the reconstruction does not establish that they had been deleted before the reconstruction.[89]
[241]
[184] It will be recalled that Mr Cox said that he did delete material from his Inbox so as to leave a clear screen (and did so in the ordinary course of his work) but did not delete from his Sent box. That evidence is consistent with the evidence from Mr Hunter that whilst there were a couple of hundred emails in Mr Cox's inbox, there were a couple of thousand emails in his Sent items.[90]
[242]
[185] The plaintiff does not advance its case very far by relying on Mr Strathdee's testimony that he had not seen the emails before the recovery. I have no confidence in the reliability of his observation.
[243]
[186] The only point of significance that Mr Land could advance is that Mr Strathdee did not pursue the quotes in the emails and it is hardly likely that Mr Strathdee would not have pursued the opportunities shown by the emails if he had been aware of them. That submission presupposes that the plaintiff's office was operating efficiently and that Mr Strathdee made a thorough check of the first defendant's computer. I am not satisfied about either point. The evidence of Mr Vicary (of MacMahons) of his difficulties in dealing with the plaintiff at that time is indicative of the problem in accepting the submission.[91]
[244]
[187] As well the submission is significantly weakened by the dearth of evidence as to what enquiries were made by the plaintiff in relation to the various jobs the subject of the emails, once they had been identified, which they obviously were at some point to enable the claims to be brought in the form they were. The defendants urge that an inference adverse to the plaintiff should, as a result, be drawn.
[245]
[188] I have earlier mentioned the significance of Ex 169 on this question of the deliberate deletion of emails.[92]
[246]
[189] A further problem for the plaintiff is that if Mr Cox deliberately deleted these emails with intention to harm the plaintiff one would expect that he would also endeavour to secure for himself the benefit of these potential contracts. They plainly had not yet been won by the plaintiff. Yet there is no evidence that he took any step to perform the work.
[247]
[190] Whilst I am conscious of Mr Land's submissions about difficulties of proof, and accept the validity of the submission in this context, nonetheless the plaintiff still must discharge the burden on it. Mr Land's reliance on the following passage from the judgment of Lord Wright in Regal Hastings Ltd v Gulliver[93]:
[248]
"...the Court [cannot] adequately investigate the matter in most cases. The facts are generally difficult to ascertain or are solely in the knowledge of the person who is being charged. They are matters of surmise..."
[249]
does not assist. An examination of the context in which those remarks were made shows that they were directed to proof of loss after breach had been established, not to whether there had been a breach.
[250]
[191] I am not satisfied that there was any deletion of emails as the plaintiff alleges.
[251]
[192] Again I am required to consider compensation in the event I am wrong in this. As I have previously explained, in my view the plaintiff must establish causation of loss. It is not presumed.
[252]
[193] There is no suggestion that the fourth defendant did any of this work.
[253]
[194] Where, as here, the task is to assess compensation upon a false premise - the hypothesis that the plaintiff performed the jobs nominated in the emails - then I accept that a degree of speculation is permissible. The correct approach was explained by Brennan CJ and Dawson J in Malec v JC Hutton Pty Ltd:
[254]
"Hypothetical situations of the past are analogous to future possibilities: in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past. Lord Diplock said in Mallett v McMonagle [1970] AC 166, at 176: 'The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards'." [94]
[255]
[195] Mr Land's submission is that the plaintiff won 80-90% of the quotes given to its regular customers, MacMahons was a regular customer of Deesons, and hence it followed that it had sustained loss, best measured by an assumption of an 80-90% success rate.
[256]
[196] There are a number of difficulties with the submission. First, the 80-90% figure depends on the reliability of Mr Strathdee's view of his own business and that gives me little comfort. No detailed analysis demonstrating the truth of the claim was provided.
[257]
[197] Second, there were particular reasons why jobs may not have been won in the time following the departure of the defendants. It is plain from all the evidence that Mr Cox had a very good reputation for the efficient management of the work His departure could well have impacted on the plaintiff's usual success rate. Further, as Mr Vicary of MacMahons explained, one particular job went to another contractor because of the disarray in the plaintiff's office after the departure of the first, second and third defendants.[95] Whilst the disarray was plainly due to their departure (and Mr Strathdee's lack of preparation for that departure), it was not due to any breach of duty on the part of the defendants. That disarray cannot assist the plaintiff.
[258]
[198] Third, other evidence in the proceedings demonstrated that often enough jobs did not go ahead. Mr Strathdee acknowledged that after quotes are given there is often no further communication as to whether or not the job went ahead. At this time there was particularly inclement weather affecting jobs. In the absence of evidence I cannot safely draw any inference that the jobs were done - by anyone.
[259]
[199] The failure of the plaintiff to call an officer from MacMahons to explain what happened with these various jobs, how competitive the plaintiff's quotes were, and that the plaintiff's failure to win the contracts was not due to some cause unrelated to the claimed ignorance of the existence of the quote, means that I cannot be satisfied that any loss has been sustained.
[260]
[200] This claim is brought on a similar basis to the previous one. The claim depends on a finding that the first defendant "deleted from the mailbox of the plaintiff's computer system in a way calculated by the first defendant to make it difficult for the plaintiff to become aware of it" certain emails containing quotes directed on this occasion to Allied Equipment and that as a result the plaintiff failed to win the contracts and suffered loss.[96]
[261]
[201] The reasoning set out above in relation to MacMahons is applicable here. Again I am not prepared to make the necessary finding of deliberate deletion.
[262]
[202] There are some distinguishing features of the evidence relating to loss but none of assistance to the plaintiff.
[263]
[203] Mr Bonett of Allied Equipment was called. He explained that only one job that had been "allocated to Deesons" was done by the fourth defendant. It was not clear to me whether that job was the subject of the disputed emails.[97] In that instance the plaintiff cancelled the job the night before it was due to be performed. Mr Cox was then called and solved the difficulty that the plaintiff could not overcome.[98]
[264]
[204] The claims made by the plaintiff that it had suffered loss by reason of the deletion of emails relating to the movement of an EX 2500 and a 785 CAT[99] demonstrates the dangers of adopting the approach urged by Mr Land without supporting evidence. Mr Bonett gave evidence that in both instances the jobs were performed by the plaintiff. The plaintiff accepts that it hauled the EX 2500 and was paid for it but apparently continues its claim in relation to the 785 CAT. Mr Bonnet explained that the job was mis-described and in fact the machine moved was a CAT 789 and it was moved to a different place. He said that the plaintiff did the work.[100] To put the matter another way the job the plaintiff sues for was never done. I accept his evidence. It is the only reliable, credible evidence on the subject and he is independent of the parties.
[265]
[205] Mr Bonnet further explained that the jobs described in the emails of 19 February and 3 March 2008 which are also the subject of claims by the plaintiff[101] did not go ahead. Again I accept his evidence. No submission is made that I should not.
[266]
[206] Even if emails had been deleted as claimed, which I do not accept, it is apparent that no loss was suffered by the plaintiff. There is no basis for any equitable compensation or account of profits.
[267]
[207] The plaintiff claims that the defendants took certain information that was confidential to it and used that information to the plaintiff's detriment. It contends that the circumstances here attract the operation of the equitable principle of confidentiality. Mr Land's submissions concerned only the plaintiff's "Permit Folder" and Job's Board.[102]
[268]
[208] The cases show that the following three elements, as identified by Megarry J in Coco v AN Clark (Engineers) Ltd[103], need to be established to found a claim for breach of confidence:
[269]
"First, the information itself, in the words of Lord Greene MR, in the Saltman case[104] on page 215, must 'have the necessary quality of confidence about it.' Secondly, that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it."
[270]
Gummow J has identified a fourth element: that the plaintiff must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question.[105]
[271]
[209] The issues here are: What did the defendants take? Was that confidential? Did the defendants use it to the plaintiff's detriment?
[272]
[210] The "Permit Folder" refers to an electronic database kept by the plaintiff on its computer system. It included permit forms that had been prepared by Deeson's staff and used previously and that were needed for particular hauling jobs of particular machinery over particular routes. It also contained traffic management plans. Those plans detailed the roads that needed to be followed for particular jobs which took into account the difficulties that would need to be dealt with - e.g. sometimes roads have obstacles and so must be avoided if the load is of a certain width, sometimes it is necessary to travel onto the wrong side and so certain permissions are needed, sometimes pilots are needed, sometimes police escorts are needed, and so on.
[273]
[211] Mr Strathdee said that the information on the data base had been built up over the years. The evident benefit of the data base was that it saved time in the planning of repeat jobs.
[274]
[212] Mr Watson admits to taking some of the documents contained in the Permit Folder.[106] He did so because he thought that they would be useful as templates. They were sent by him from his computer station at Deesons to Phil Reimers and eventually received by his wife, Mrs Karen Reimers, in Western Australia, possibly on 4 March 2008. Mrs Reimers identified the documents that she received as being those in Ex 131. She forwarded, or attempted to forward, them onto the fourth defendants' email address about two weeks later. There is no suggestion that the documents were of any use to Mrs Reimers or that she in fact used them.
[275]
[213] There was some debate about whether the forms and plans could have the necessary quality of confidence about them. To adapt the test applied by Davison CJ in Pacifica Shipping Co Ltd v Andersen the database was "constructed of materials, some of which were confidential to [the plaintiff] and others of which were obtained from the public domain but which had been brought together in such a way as to provide information which could not be available to outsiders unless they too had worked upon them and brought them together in the way [the plaintiff] had done."[107]
[276]
[214] Hodgson JA in Del Casale v Artedomus (Aust) Pty Ltd thought that to satisfy the test of having the necessary quality of confidence it "may be sufficient that the information is not freely available, particularly if not freely available to competitors of the employer."[108]
[277]
[216] A distinction is drawn in some of the cases[109] between two classes of confidential information - one that that an ex-employee can use and one that the ex-employee cannot use. The former class is usually termed "know-how". True it is that the information contained in the database was generally well known to the first and second defendants due to their decades of experience in the industry. But what is in issue here is not what they might recall about the nature of the roads they had used or the loads they had carried and so construct their permits or plans but rather the particular organisation of all that knowledge into a format that provided easier and relatively quick access. That is of value to someone in the industry - as evidenced by Mr Watson's taking of it. To duplicate the knowledge into a similarly accessible format would take time and expense. I accept that the forms and plans are sufficiently identified and have the necessary quality of confidence about them.
[278]
[217] I do not understand it to be argued that the information was not imparted in circumstances importing an obligation of confidence. The very taking of it by Mr Watson and the manner of its taking supplies some evidence that he considered it to be confidential.
[279]
[218] The real issue relates to the third of the elements identified by Megarry J. Mr Watson denies using the documents. Mr Watson claims that when he received the files they were corrupted and of largely of no use.[110] Whilst I would normally be sceptical of that claim, given the circumstances, there is evidence to confirm his denial.
[280]
[219] First, Mrs Reimers spoke of the difficulties that she had in sending the files and that she interrupted the sending of them because of the slowness of her computer. That may be consistent with a claim that when files eventually arrived at the second defendant's computer they were no longer in a useable format.
[281]
[220] Second, and more cogently, there is no direct evidence of use, nor any evidence from which use can be inferred - e.g. it was not shown that the fourth defendant had performed any jobs with the movement of machinery mentioned in any of the documents taken, over a route shown in any of those permits or plans. Due to interlocutory orders made the plaintiff had available to it complete documentation of the fourth defendants' work since commencement. The absence of evidence of any copying is, in these circumstances, cogent proof.
[282]
[221] Third, documents were found on the fourth defendant's computer that demonstrated that traffic plans and permits had been obtained that in no way relied on the plaintiff's models.[111] These documents were located following a search performed of the fourth defendant's computer system by an independent exert, Mr Hains, pursuant to an order of the Court.[112] There is no reason to think that they were planted there to defeat the plaintiff's case.
[283]
[222] The existence of these documents on the defendants' computer is consistent with the second defendant's claim that on 11 March he obtained from the Main Roads Department permit forms as he had none that were of any use to him.[113]
[284]
[223] Fourth, Mrs Donna Cox, the first defendant's wife, who took over the arranging of permits for the fourth defendant in September 2008, had never used the plaintiff's forms. She denied having seen the plaintiff's traffic management plans save at the solicitor's office in the course of preparation of the litigation. An email of 4 September 2008 was tendered that she received from the Main Roads Department attaching a new route assessment form that the Department preferred be used to the previous practise of using traffic management plans drawn up by the contractors and which she said she used.[114] There is no good reason to disbelieve her.
[285]
[224] I am not persuaded that the defendants made use of the Permit Folder. Hence the claim for breach of confidence is not made out.
[286]
[225] I have mentioned the Job's Board earlier in these reasons.[115] The Jobs' Board is a simple computer programme in the form of a spreadsheet used by the plaintiff to record an accepted quote for a job. The program was originally created by Ms Michelle Davidson from Barrier Reef Computer Services, at the request of Mr Strathdee, using a standard commercially available Microsoft program called MS Access. She replaced an earlier system he had acquired based on a different program, MS Excel. The program contains various fields with associated drop down lists of various items of interest to such a business such as names of pilots, names of customers and typical locations for departure and destination points. The program has been developed to some extent over time. Ms Davidson made alterations to the fields at the request of Mr Cox between September and December 2007.
[287]
[226] Mr Hains found a version of the Jobs Board on the fourth defendants' computer in the course of his search. He described it as a "database file titled 'Deeson Job board'". He could not identify its provenance or whether it was a copy of the plaintiff's file but noted that "one potential indicator" is that upon first opening the initial user screen the file was denoted as "Deeson Heavy Haulage - Microsoft Access".[116] The plaintiff initially assumed that the first or second defendant had simply stolen the plaintiff's Jobs Board. Whilst I can understand Mr Strathdee, and his advisors, initially thinking that was so, it is apparent that did not happen.
[288]
[227] The evidence from Mr Cox and Ms Davidson, which I accept[117], is as follows. A few days prior to 4 April, and after leaving the plaintiff's employment, Mr Cox asked Ms Davidson to provide him with the same jobs board as he had at Deesons. He intended to purchase the program from her. They both obviously considered that Ms Davidson had developed the program and it was hers to sell. As it happened - and unbeknown to Mr Cox - Ms Davidson had recently attended at the plaintiff's office on 8 and 9 March to sort out the problem with the Vista program and had copied the program. She took this copy to the Fourth Defendant's premises and uploaded that program. That explains the denotation described by Mr Hains. She made no alterations to the columns and fields. Personal details, including phone numbers and addresses, were deleted before the copying. Ms Davidson deleted all of the plaintiff's jobs' information at Mr Cox's request.[118] She charged the fourth defendant for the provision of the program.
[289]
[228] Mr Land's submission is that the Jobs Board constitutes confidential information or is a trade secret. He contended for the former categorisation because he submitted the "structure and information (as a whole) contained therein" was not public property; or within public knowledge; and was not industry knowledge; and that the "entity is new and has been brought into existence by skill and ingenuity including the setting out....the information that is capable of being stored and being conveyed." It is, he submitted, "a key to the running of a profitable business". He contended that the Pacifica Shipping test that I have adverted to above[119] is satisfied here.
[290]
[229] He contended for the latter category of trade secret on the basis that "the structure and information has commercial value to Deeson, it is used on a daily basis by Deeson in his (sic) business to run the business and to run it efficiently to allow the business to plan ahead...". Plainly enough if information does not satisfy the test of confidentiality it will not be a trade secret.
[291]
[230] In my view there are difficulties with each of the elements that the plaintiff must establish. The first difficulty I have is to identify what information precisely the plaintiff identifies as confidential - the fourth of the elements referred to above - and then to accept that there is the necessary quality of confidence attaching to that information. The requirement that the plaintiff "must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question" is not met, as Mr Land contends, by the plaintiff merely pointing "to a discrete computer data base on its server in the form of the Jobs Board." That description "Jobs Board" incorporates three quite different things with potentially differing status - the details of the plaintiff's jobs recorded on the Board, the layout of the Board, and the more generic information contained in the drop down lists.
[292]
[231] There is no doubt that details of particular jobs would be confidential, but such details were deleted and never in the defendants' possession. Absent those particulars can the layout and the generic information qualify?
[293]
[232] Mr Land has referred me to several cases on the question of what is capable of being confidential information. Lord Greene MR opined in a well known passage in Saltman Engineering Co Ltd v Campbell Engineering Co Ltd that what would make "a formula, a plan, a sketch... which is the result of work done ... upon material which may be available for the use of anybody" confidential "is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process."[120]
[294]
[233] In Interfirm Comparison Pty Ltd v Law Society of New South Wales Bowen CJ in Eq, after citing that view of Lord Greene, had regard to "the amount of skill, judgment and labour involved in the preparation" of the proposal and questionnaire in issue, as well as the circumstances in which the material was supplied, in determining whether the documents were confidential.[121]
[295]
[234] The amount of "skill, judgment and labour" involved in preparing the Jobs Board was modest. The headings of the various columns and the contents of the drop down lists would be self evident to someone familiar with the haulage industry. The layout was far less sophisticated than the forms in issue in Kalamazoo (Aust) Pty Ltd v Compact Business Systems Pty Ltd,[122]a case on which Mr Land relied.
[296]
[235] If Ms Davidson had not had the digital copy available Mr Cox would have had no difficulty in recreating the various columns and headings. Ms Davidson probably could have done the same. Mr Cox was, of course, completely familiar with the layout of the program. He had used it daily over 11 months, and adapted and improved it over the time of his employment. There is no principle of law preventing him from creating his own computer program to run his business. I think it very doubtful that he would be prohibited from using the headings with which he was familiar and which are both self evident and necessary in such a business. Such information falls fairly readily into the category of a part of his "know -how" that he was permitted to use.
[297]
[236] Similarly could it be seriously argued that Ms Davidson was prevented from recreating the program for another haulage operator? There was no suggestion that any direction was ever given to her that she was to keep the layout confidential. She in fact kept a copy of the Board, and to the knowledge of Mr Strathdee, as she used that copy to send to Mr Strathdee the contents of the Board in an Excel format when he had problems with his computer.
[298]
[237] The involvement of Ms Davidson in the creation of the program and the manner of the defendants' acquisition of the program each further reduce the force of the plaintiff's case. Ms Davidson claimed, and exercised, the right to sell the program. The fact that the program is for sale to the public, and that it was purchased in the market place by the first defendant, would normally spell the end of any claim to confidentiality.
[299]
[238] Mr Land seeks to meet that point by contending that it is the plaintiff that has copyright in the program, that the plaintiff did not authorise the reproduction of the whole or a substantial part of the program, which is what has occurred here, and hence that Ms Davidson had no right to sell the program, relying on s 36(1) of the Copyright Act 1968 (Cth).
[300]
[239] The layout of, and drop down lists contained in, the Jobs Board is plainly not the exclusive work of the plaintiff. Ms Davidson has made a contribution. When she initially adapted the Excel spreadsheet to a Microsoft Access data base (in itself a significant change as it enabled multiple computers to access the database simultaneously), Ms Davidson used the same columns and headings with which she was supplied but she introduced the drop down lists. The information in the drop down lists came from information supplied by the plaintiff. But her recognition of the utility of the drop down lists and the addition of them to the database is at least an original contribution. It is evident that both sides have contributed to the end result.
[301]
[240] Ms Davidson has at least an arguable case that she created the work. She can contend that she has expressed the idea contained in the Excel program in a different form. As Bowen CJ in Eq. observed in Interfirm "the degree of originality required for copyright is not very high."[123] However Mr Land contends that Ms Davidson merely adapted, within the meaning of the Copyright Act, the Excel program, that the plaintiff had the exclusive right (under s 31(1)(a)(vi) of that Act) to adapt the Excel program because it was the owner of the copyright in that program, and copyright in the adaptation necessarily remains with the plaintiff. Alternatively, at worst, Mr Land contends that the plaintiff and Ms Davidson had joint copyright and Ms Davidson had no right to sell the program without the plaintiff's permission.[124] Whilst Mr Land might well be right in these submissions the difficulty is that all this depends on the ownership of the copyright in the Excel program and with the books that were used before it. Mr Land concedes that the Excel program was not created by the plaintiff but rather by someone such as Ms Davidson ie a person knowledgeable in such matters employed by the plaintiff. The issue of ownership of that program was not explored, nor was the comparison of the program with the books kept previously.
[302]
[241] Despite Mr Land's extensive submissions on the law of copyright,[125] this was not argued as a copyright case, at least until the very end, and I am far from convinced that I have the necessary materials to decide whether this program is a "literary work"[126] and if so who has copyright in it.
[303]
[242] I have endeavoured to bear in mind that "adventitious publicity" does not terminate or erode existing confidentiality[127] and that the plaintiff might claim that Ms Davidson herself was subject to an obligation of confidence. The difficulty is that the case was not pleaded on the basis that Ms Davidson owed to the plaintiff, and breached, an obligation of confidence, and that the defendants were knowing accessories to that breach.
[304]
[243] In the end result the question is whether the purchase of a computer program from a contractor, independent of the plaintiff employer, that contractor purporting, rightly or wrongly, to have a proprietary interest in the program attracts the application of the equitable principle of confidentiality. The only relevant connection with the defendants' employment is that by reason of that employment the first defendant knew of the existence of the program and apparently believed that Ms Davidson was the creator of the program.
[305]
[244] By reason of these various considerations I am not persuaded that the layout of the program had the necessary quality of confidence about it.
[306]
[245] Consideration of the nature of the information in the drop down lists, does not add to the force of the plaintiff's case. The information was not in any sense confidential - e.g. pilot and customer names were publicly available and well known to Mr Cox; typical journeys were well known to him. The existence of the drop down lists saved a little time in typing in the necessary information - it did not provide the defendants with information that they did not already possess, or would necessarily posses by the time they came to enter a job. As Ms Heyworth-Smith points out there is no evidence that the defendants used the drop down lists to approach customers or to find pilots or locations. The highest that it can be put is that time and expense would have been required to duplicate the information in the various lists, but not a great deal of either. The information here was of a much simpler order than the information in the Lens Design Booklet that Laddie J thought was not confidential in Ocular Sciences Ltd v Aspect Vision Care Ltd & Ors in respect of which he said:
[307]
"... there must be some product of the skill of the human brain. A mere non-selective list of publicly available information should not be treated as confidential even if putting it together involves some time and effort. No relevant skill is employed."[128]
[308]
[246] In all the circumstances I am not persuaded that the information had the necessary quality of confidence about it so as to satisfy the first element.
[309]
[247] Nor is it plain that the second of the elements mentioned by Megarry J - that the information must have been imparted in circumstances importing an obligation of confidence - is satisfied here.
[310]
[248] Mr Land adduced evidence from Mr Strathdee that on numerous occasions he reminded his employees of the confidential nature of the Jobs Board. It was said too that the confidential nature of it was evident from the fact that not all employees had access to it and passwords were required to access the database. I doubt that Mr Strathdee was so diligent in guarding the Jobs Board and I suspect that the restriction of access had more to do with the practical issue of which employees needed to access the system to carry out their duties. In my view however the evidence does not advance the matter very far as no attempt was made to distinguish between guarding the information concerning jobs entered on the Jobs Board - which I have no difficulty in accepting would be confidential - and the general layout and contents of drop down lists which are now the issue. The probability is that any reminder concerning the confidential nature of the Jobs Board was in the context of the content of the jobs recorded there.
[311]
[249] Mr Land submitted that the test to apply is that set out in Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd where Fullagar J said that the "ultimate enquiry" was: "Would a person of ordinary intelligence, in all the circumstances of the case, including, inter alia, the relationship of the parties and the nature of the information and the circumstances of its communication, recognise this information to be the property of the other person and not his own to do as he likes with?" [129]
[312]
[250] Given my earlier findings concerning the first and fourth elements it is not necessary to decide this issue. However, whilst accepting that the test is necessarily objective, it is not irrelevant to note that here two people, acting honestly, and of at least ordinary intelligence, each assumed that the information was not confidential to the plaintiff.
[313]
[251] Finally there must be an unauthorised use of the confidential information to the detriment of the party communicating it. Accepting, for the sake of argument, the plaintiff's view that the use was unauthorised, I have trouble seeing how the program has been used to the detriment of the plaintiff. There is no evidence of any job lost because of the fourth defendant's ability to have its employees enter details of jobs won by it into a computer program, or enter details of pilot names or customer names or destinations more quickly than the few extra seconds it would otherwise take to type up the entry. I doubt that any customer was minded to use the fourth defendant rather than the plaintiff because of the ease of recording details of the job.
[314]
[252] I am not satisfied that in all the circumstances equity should enforce a confidence in relation to the program acquired by Mr Cox from Ms Davidson.
[315]
[253] A claim is made under the head start or springboard doctrine to which I now turn.
[316]
[254] The roots of the springboard doctrine may now not be clear but its modern formulation is often traced to the judgment of Roxborough J in Terrapin Ltd v Builders' Supply Co (Hayes) Ltd[130] where he commented that the defendant there "could not have avoided starting his dive into the future from the springboard of the confidential information" wrongly acquired. Further his Lordship said:
[317]
"As I understand it, the essence of this branch of the law, whatever the origin of it may be, is that a person who has obtained information in confidence is not allowed to use it as springboard for activities detrimental to the person who made the confidential communication, and springboard it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public."
[318]
[255] The claim depends on the acceptance of various claims already dealt with. The breaches of fiduciary duty that are alleged as providing the basis for this claim are said to be the following acts, in each case accompanied by the failure to inform the plaintiff of the fact:
[319]
1. The incorporation of the fourth defendant during their employment with the plaintiff;
[320]
2. The resignation en masse of the "three top personnel" of the plaintiff to work for the fourth defendant;
[321]
3. The arranging of a premature payment of invoices presented by three chosen subcontractors of the plaintiff so as to make their service available to the fourth defendant without "any lingering ties" to the plaintiff;
[322]
4. Deliberately refraining from paying the January invoices of all other subcontractors of the plaintiff for the purpose of causing disruption and/or loss of the services of those subcontractors by reason of the failure to pay them in accordance with the plaintiff's subcontractor payment policy;
[323]
5. Taking the notebooks and diaries for the purpose of depriving the plaintiff of knowledge of quotes or potential quotes for future business;
[324]
6. Downloading and transferring to the fourth defendant the plaintiff's "Permit Folder" for the purpose of making it easier for the fourth defendant to efficiently and quickly compete against the plaintiff;
[325]
7. Downloading and transferring to the fourth defendant the plaintiff's "Machinery Specs" for the purpose of making it easier for the fourth defendant to efficiently and quickly compete against the plaintiff;
[326]
8. Deliberately refraining from entering the jobs on the Jobs Board for the purpose of causing confusion and disruption to Deeson's business for the ultimate purpose of the plaintiff losing such business thereby making it easier for the fourth defendant to complete against the plaintiff;
[327]
9. Soliciting work from BIS during their period of employment so as to ensure that the fourth defendant had a ready supply of work from the outset, work of a type which was unlikely to be interrupted by wet weather but yet on the other hand comparatively easy to perform because such work did not require pilots;
[328]
10. Requesting, on 4 April 2008, a full and complete copy of Deeson's Jobs' Board.
[329]
[256] As well reliance is placed on the alleged breaches of the obligations of confidence with which I have already dealt and which claims I have rejected.
[330]
[257] The duration of the head start is claimed to be not less than one month to allow for the disarray caused to the plaintiff's office following on the resignations and the need to reinstate the computer system by Mr Hunter, and something more to allow for the "easy acquisition of the Jobs Board".
[331]
[258] As I have explained, in my view the first four factors listed above do not bear the character that the plaintiff seeks to place on them. They do not involve any breach of fiduciary duty. The disarray in the office was the result of Mr Strathdee not having in place any plan to cope with the sudden departure of three key employees, each of whom was entitled to resign when they did.
[332]
[259] As to the fifth point - the taking of the diary and note books - for the reasons earlier set out I am not satisfied either that they were taken with the intent claimed or alternatively that the documents were used.[131] Of significance is that the only entry in the books which was said to be relevant to any later job was the Mac roof chock job. I am satisfied that the second defendant made no use of that record. My findings, set out above, explain why.[132]
[333]
[260] Nor do the sixth and tenth points assist the plaintiff - in the first case I have found a taking but no use and hence no breach of the obligation of confidence; in the second I am not satisfied that there was a breach of the obligation and in any case no detriment to the plaintiff. I observe that I do not accept the accuracy of the submission that the defendants requested "a full and complete copy of Deeson's Jobs' Board". The evidence of Ms Davidson was to the contrary.
[334]
[261] As to the seventh point I received no specific submissions directed to the "machinery specs" folder. I assumed that was so because the evidence seemed to establish that much of the information there contained was obtainable from the internet and could hardly justify the imposition of an obligation of confidence.
[335]
[262] The eighth point depends on findings that there was a deliberate plan to disrupt the plaintiff's business and that Mr Strathdee's testimony is reliable as to what jobs were or were not on the Jobs Board. As I have explained I am not satisfied on either point.[133]
[336]
[263] As to the ninth point I have found that what solicitation there was of BIS has not led to any significant detriment to the plaintiff.[134] The head start gained was expended by Friday 7 March 2008 and is reflected in the allowance of $120.
[337]
[264] I am not satisfied that there was any spring board here.
[338]
[265] An important maxim of equity is that "he who comes into equity must come with clean hands". The defendants contend that the plaintiff should be deprived of any equitable relief by reason of Mr Strathdee's conduct after litigation commenced. They rely on the letter of 7 May 2008 that I have previously referred to, written by Mr Strathdee to BIS, and on Mr Strathdee's communication to Mr Nottingham of NQX of the amount that Lampsons had charged the fourth defendant in respect of the movement of the excavator described as the RH 340 discussed under the heading "NQX Job" above. [135]
[339]
[266] In each case Mr Strathdee obtained the information in question from the defendants' documents which came into his possession solely as a result of interlocutory orders made by me on the plaintiff's application.
[340]
[267] In Hearne v Street Hayne, Heydon and Crennan JJ held that "[w]here a party to litigation is compelled ... by reason of a specific order of the court ... to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given, unless it is received into evidence." [136] That is an obligation imposed by law on Mr Strathdee.
[341]
[268] Here the information was plainly confidential to the defendants, and commercially sensitive. There is no doubt that the principle identified in Hearne applies here. The information had not been received into evidence. No leave was sought. It should not have been disclosed. Mr Land does not contend otherwise.
[342]
[269] The issue is whether Mr Strathdee's conduct affects the remedies to which the plaintiff would otherwise be entitled.
[343]
[270] Ms Heyworth-Smith contends that the doctrine of clean hands comes into play. Mr Land submits that the doctrine applies only to conduct prior to litigation commencing, that the conduct was not directed to the defendants which he contends is an essential pre-requisite, and that in any case it would be inappropriate to apply the doctrine.
[344]
[271] The gravity of Mr Strathdee's misconduct should not be understated. He deliberately set out to undermine the commercial reputation of the defendants with documents and information that he must have realised were confidential and which came into his possession solely for purposes of the litigation. His conduct seems to me to be more serious than that reviewed by the High Court in Hearne which involved the mis-use of affidavits, the contents of which were disclosed by the erring party earlier than intended by the deponents, but which were eventually to be relied on by the deponents in court in the proceedings. Here the information was private and might never have been disclosed at all, or if disclosed to the court, very likely to be sealed up to prevent the public gaining access to it.
[345]
[272] Mr Strathdee claims to have sought legal advice and claims he was told it was appropriate to use the information in this way. I have not heard from the solicitors in question - they represent the plaintiff in the litigation and so cannot advance any thing in their defence. I only remark that the advice one receives often depends on the precise question asked and it would be surprising that solicitors of the calibre in this case would so advise a client. In any case that cannot assist the plaintiff in relation to its rights vis-à-vis the defendants.
[346]
[273] Mr Land's submission that the conduct in question here was not directed to the defendants is in my view wrong. That the conduct must involve an inquity aimed at the defendant seems right - see the discussion by Campbell J in Black Uhlans Incorporated v New South Wales Crime Commission & Ors and his analysis of Jones v Lenthal [1669] Eng R 102; 22 ER 739.[137] The conduct here however was aimed directly at the defendants. The fact that the information was disclosed to a third party to work its mischief is irrelevant.
[347]
[274] Nor am I attracted to the submission that the Court is debarred from considering conduct that occurs after the suit is commenced. The cases Mr Land relies on were concerned with the distinction between the maxim requiring that the plaintiff who seeks equity must do equity - which is aimed at future conduct - and the maxim that a plaintiff who comes into equity must come with clean hands - which looks to past conduct. They were not concerned with the issue here. In my view the line is drawn at the time the court comes to apply the remedy, not the date of filing.
[348]
[275] It is not difficult to find examples of a court bringing into account the conduct of a party in the litigation itself in determining whether to grant equitable relief: Laddie J's decision in Ocular Sciences Ltd v Aspect Vision Care Ltd[138]is an example in a claim for an injunction. Laddie J referred in his judgment to the decision of the Court of Appeal in Armstrong v Sheppard & Short Ltd[139] where the court brought into account the plaintiff's attempt to mislead the court with false evidence as relevant to its decision to grant equitable relief, again in the form of an injunction. Nonetheless, as Laddie J recognised, the issue is not at large - the dishonesty must be related to the issues or relief sought.
[349]
[276] That the impropriety complained of "must have an immediate and necessary relationship to the equity sued for"[140] is well recognised. That, it seems to me, is the only relevant issue here - whether the conduct is sufficiently connected to the suit to justify the denial of the remedy. The doctrine is typically applied where the very subject of the suit is affected by the impropriety complained of. For example the manager in Harrigan v Brown[141] was denied his injunction restraining the group of entertainers he managed from replacing him contrary to their contract with him, because he had kept the accounts in a most improper manner; the tenant in Gill v Lewis[142] who notoriously used premises as a disorderly house was denied relief against forfeiture; the plaintiff in Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd[143] was refused an injunction to prevent passing off where the reputation the plaintiff sought to protect was itself built on a lie.
[350]
[277] Here, if I had been persuaded that the giving out of this information had been part of a plan to destroy a trade rival, and that the bringing of the suit itself formed part of that plan, then I would have held that it would have been appropriate to deny any form of equitable relief. Whilst I hold the view that claims were made here that could not be justified and some that could fairly be described as involving, on any view, fairly trivial complaints, I am not persuaded that the whole exercise was so motivated. Whilst the conduct of Mr Strathdee here deserves condemnation, and whilst the suit itself, which took three weeks to argue, bordered on the vexatious given the modesty of the relief achieved, I am not persuaded to deny the plaintiff any remedy.
[351]
[278] The First Defendant claims unpaid annual leave in the sum of $4,760.00.
[352]
[279] The claim depends upon the acceptance of the following propositions:
[353]
(a) that the first defendant's contract of employment with the plaintiff was subject to the provisions of the Workplace Relations Act 1996 (Cth) ("the Act").
[354]
(b) in the absence of any express term in the employment contract the provisions relating to annual leave found in Division 4 [Annual Leave] of Part 7 [The Australian Fair Pay and Conditions Standard] and, in particular, secs 232 to 238 of the Act are applicable. Ms Heyworth-Smith submits that this entitlement is framed as a guarantee: s 232(2) of the Act. She submits that the parties to an employment contract cannot contract out of this entitlement: s 172(2) of the Act.
[355]
(c) 94 hours leave was owing based on the last pay slip received. Ms Heyworth-Smith contends that the legislation, if applied, would result in the leave outstanding amounting to 132 hours - a greater number of hours than claimed, assuming 48 weeks work and only one day's leave taken.
[356]
[280] Mr Land has made no submission contesting those propositions. There is no suggestion that the defendants' arithmetic is inaccurate. In the circumstances I will allow the amount claimed.
[357]
[281] I assess the compensation to which the plaintiff is entitled in the sum of $12,120.
[358]
[282] There is no need for an account of profits.
[359]
[283] I assess the first defendant's damages in the sum of $4,760.
[360]
[284] I allow interest on the amounts assessed in each case at 10% pursuant to s 47 Supreme Court Act 1995. Interest on the plaintiff's compensation will be awarded from 18 April 2008. Interest on the first defendant's damages will be awarded from 7 March 2008.
[361]
[285] I will hear from counsel as to costs. The orders will be:
[362]
(a) Judgment for the plaintiff against the first, second and fourth defendants in the sum of $12,120 together with interest in the sum of $1684.68
[363]
(b) Judgment for the first defendant against the plaintiff in the sum of $4,760 together with interest in the sum of $718.76
[364]
(c) The parties have liberty to apply within 7 days.
[365]
[1] Incorporated in 1999 but its principal Mr Strathdee traded as Strathdee Haulage for 20 years before that.
[366]
[2] It seems that a phone report was made at about this time and a meeting held at the local police station on the Friday.
[367]
[3] Mr Land described the programme as "a computerised device used by the plaintiff on a daily basis to record an accepted quote when the job is to be performed"
[368]
[5] See paragraph 19A(z) of the Further Amended Statement of Claim (No 3) - all future references to the "Statement of Claim" are to this document.
[369]
[6] See paragraph 19B(k) and 19D(b) of the Statement of Claim
[370]
[8] Whilst Mr Strathdee seemed to dispute that at one point in his cross-examination (T3-47/50) Mr Watson was not challenged on it and it seems unlikely that Mr Strathdee could not know of such work going on.
[371]
[13] Lanser (MCG Group), Dillon (JLM Transport) and Bonnet (Allied)
[372]
[14]Colour Control Centre Pty Ltd & Anor v Ty & Ors, [1995] NSWSC 96 (24 October 1995) at [45] per Santow J citing Wessex Dairies Ltd v. Smith(1935) 2 KB 80 at 84-5; Hivac Ltd v. Park Royal Scientific Instruments Ltd(1946) 1 Ch 169, 1 All ER 350; Timber Engineering Co Pty Ltd v. Anderson(1980) 2 NSWLR 488; Schindler Lifts Australia Pty Ltd v. Debelak[1989] FCA 311; (1989) 89 ALR 275 at 300.
[17]Colour Control Centre Pty Ltd & Anor v Ty & Ors[1995] NSWSC 96 (24 October 1995) at [49]-[50]
[376]
[18]Green & Clara Pty Ltd v Bestobell Industries Pty Ltd[1982] WAR 1 at 16, per Kennedy J; WA Fork Truck Distributors Pty Ltd v Jones(2003) WASC 102 at [56] per Pullin J
[24] See Hospital Products Ltd v United States Surgical Corporation (supra) at 105 per Mason J; McPherson's Ltd v Tate (1993) 35 AILR 225; Blyth Chemicals Ltd v Bushnell[1933] HCA 8; (1933) 49 CLR 66 at 82
[381]
[25][1982] FSR 92 at 101-102 sitting in the UK Court of Appeal. See also Robb v Green [1895] 2 QB 1 at p 15 per Hawkins J; Schilling v Kidd Garrett Ltd {1977] NZLR 243 per Moller J at first instance (at p 244-245). That employees have the right to make arrangements to compete whilst still employed is implicit in the citation with evident approval by Mason J (as he then was) of the American decision of Maryland Metals Inc v Metzner in Hospital Products Ltd v United States Surgical Corporation[1984] HCA 64; (1984) 156 CLR 41 at p104 -105
[382]
[26] See Hospital Products Ltd v United States Surgical (supra) at p102 per Mason J
[383]
[27] E.g. see AF Ralston Associates Ltd v Ralston[1973] NI 229; Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] 1 Ch 469; WA Fork Truck Distributors Pty Ltd v Jones[2003] WASC 102 per Pullin J at [60]
[30] At [61] citing McPherson's Ltd v Tate (1993) 35 AILR 225 at p 225
[387]
[31]GD Searle & Co Ltd v Celltech Ltd. [1982] FSR 92 at p102 per Cumming-Bruce LJ citing Inland Revenue Commissioners v Hambrook[1956] 2 KB 641
[388]
[32] Incidentally on this point Mr Land submitted that the reference to "a couple of trucks" could only be a reference to a plan to have available the truck of T&L Barnes Bulk Haulage. That is not necessarily so - the second defendant had three trucks and there was no evidence that they were not all available.
[389]
[33] I take it that Mr Land contends that Ms Pegler is not independent of Mr Cox given his reference to her evidence being given pursuant to subpoena. A reluctance to become involved in the dispute of others is hardly evidence of bias. I am conscious of her holding Mr Cox's skills in the performance of his work in high regard however I detected no partisanship.
[53][1997] HCA 23; (1997) 188 CLR 449 at 486 (emphasis added). Muir JA has summarised the differing statements of the test to determine the requisite causal connection in Mantonella at [109]. See also Youyang Pty Ltd v Minter Ellison Morris Fletcher[2003] HCA 15; (2003) 212 CLR 484 at 501
[405]
[54]Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd (1966) 84 WN (Pt 1) (NSW) 399 at 405; {1966] 2 NSR 211 at 215 per Street J cited by Muir JA in Mantonella at [99] which test was adopted in O'Halloran v RT Thomas & Family Pty Ltd[1998] NSWSC 596; (1998) 45 NSWLR 262 at 277 (a director's breach of duty case) and Beach Petroleum NL v Kennedy & Ors[1999] NSWCA 408; (1999) 48 NSWLR 1 at [432].
[67] Mr Cox received the permits on 13 March - Ex 139 and T9-33/13
[414]
[68]GD Searle & Co Ltd v Celltech Ltd. [1982] FSR 92 at 101-102; Robb v Green[1895] 2 QB 1 at p 15 per Hawkins J; Schilling v Kidd Garrett Ltd {1977] NZLR 243 per Moller J
[72]Island Export Finance Ltd v. Umanna[1986] BCLC 460 at 481 per Hutchinson J; Rishmont Pty Ltd v. Tweed City Medical Centre Pty Ltd & Anor[2001] QSC 372 at [15]- [17] per Holmes J (as she then was)
[78] Most quotes used this figure but there is some support for 147 chocks.
[424]
[79] See Vol 3 of the tender bundle at p 1200. Mr Strathdee would claim the job was known earlier than this. That seems unlikely. Mr Dillon thought that he first learnt of the job in 2007. There was no independent evidence to support Mr Strathdee. But it does not seem to matter.
[81] Mr Watson's oral evidence was $7,800 but his written entry in his note book (Ex 163 p9) suggests $7,850 is more accurate. The note suggests that the phone call probably occurred on 13 March 2008. Other entries there suggest that he was given accurate information concerning the plaintiff's price ex Mackay harbour
[83] The plaintiff sought to rely on Mr Watson's evidence that he had checked the information given by Mr Dillon with the note book (T11-21/10) but the submission misunderstands the evidence - Mr Watson plainly meant that after the litigation commenced he checked the note book.
[429]
[84] As matters transpired there was no undercutting on the ex harbour job - the plaintiff's quoted price for Mackay to Moranbah North was $2,900 plus GST and the fourth defendant's quoted price for the same journey was $3,080 plus GST.
[430]
[87] See paras 19A(p), (r), (u), (v), (w) of the Statement of Claim
[431]
[88] 19B (b), (d), (g), (h) and (i) of the Statement of Claim
[432]
[91] Ex 87 - Vol 1 tender bundle at p358: Mr Vicary "could not get a sensible response from those in [the plaintiff's] office answering the phone at the time".
[95] Ex 87 - in relation to the job particularised at para 19A(w) of the Statement of Claim. Mr Land concedes this as a cause - para 75 of "McMahon Contractors" submission.
[436]
[96] Here relevant are paragraphs 19A(s), (t), and (y) and 19B(e), (f), and (j) of the Statement of Claim
[437]
[97] Ms Heyworth- Smith's submission of 6/4/09 assumes that it was - para 60 fn 40 - and she may be right.
[100] The fact that the plaintiff did the work that was the subject of emails that it claimed had been deleted and which deletion supposedly deprived the plaintiff of knowledge of the jobs called for some explanation. None was offered. This lack of any explanation is part of the reason behind my comments at [22]-[23] and [26] above.
[440]
[101] Para 19A(s) and (y) of the Statement of Claim
[441]
[102] I assume that the claims concerning the customer lists, machinery specifications and rates schedules are not being pursued.
[105]Corrs Pavey Whiting & Byrne v Collector of Customs (Vic)[1987] FCA 266; (1987) 14 FCR 434 at 443 and Smith Kline & French Laboratories (Australia) Ltd v. Secretary, Department of Community Services & Health[1989] FCA 384; (1990) 22 FCR 73 at 86 - 87. See also Del Casale v Artedomus (Aust) Pty Ltd[2007] NSWCA 172 per Hodgson JA at [36]. For the need for an accurate pleading see Althaus & Anor v Australia Meat Holdings P/L & Anor[2009] QCA 221
[445]
[106] I note that Mr Strathdee in his evidence made no attempt to restrict his remarks to the information received by Mrs Reimers (Ex 131). There was no proof that all the information on the Permits Folder was taken.
[111] E.g. Ex 10 - Vol 1 of the tender bundle at p 60
[450]
[112] The documents he located in that search are contained in Exhibit 10 - Vol 1, section 1 of the tender bundle
[451]
[116] Ex 11- Supplementary Report Vincents 23 May 2008 - Vol 1 tender bundle Section 2 at pp 204-205
[452]
[117] I did not understand their account to be contested. The defendants' claim that there was no direct taking of the Deeson Jobs Board is consistent with Ms Davidson's evidence that whilst she was at the fourth defendants' premises on 4 April the defendants had been using a large notepad to record jobs - T 12-31/30; 12-36/4-30.
[453]
[118] T12-31/ 32 - 50 (Ms Heyworth-Smith points out, accurately I think, that where the transcript reads "keep" at line 49 it should be "key").