Relief for a breach of confidence
33 All but two of the employees of the first applicant who left it to work for Team were contractually bound "to keep confidential all information [to which they may be privy] with regard to the business affairs of the Company". Both of Ms Vriens's two contracts of employment contained a clause in the following terms:
You represent and warrant that you will not either during your Employment or at any time thereafter, use or disclose to any person any Confidential Information, and will use your best endeavours to prevent the unauthorised use or disclosure of such information to third parties.
34 It is not entirely clear whether, in Ms Vriens's case, the applicants rely on any possible contractual breach. In any case, it would not assist them against Team. But equity will provide relief where information obtained in confidence is used for an unauthorised purpose. In a case such as this, however, it is important to bear in mind, as Gleeson CJ explained in Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 327, that there are two competing public policy considerations:
An employer is not entitled to protect himself against mere competition by a former employee, and the corollary of that is that the employee is entitled to use skill, experience and know-how acquired in the service of the former employer in legitimate competition. It is in the public interest that this should be so: Stenhouse Australia Ltd v Phillips [1974] AC 391 at 400. At the same time the law will protect trade secrets and confidential information, and will intervene to prevent their misuse.
35 To establish an equitable obligation of confidence an applicant must be able to identify "with specificity, and not merely in global terms", what the information is and show that:
(a) the information has the necessary quality of confidence and is not, for example, common or public knowledge;
(b) the information was received by the respondent in circumstances importing an obligation of confidence; and
(c) there is actual or threatened misuse of that information, without the consent of the applicant.
See Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73 at 87 per Gummow J.
36 The question then is whether Mr Norris reasonably believes that the relevant information was confidential, that Team and/or Ms Vriens received it in circumstances importing an obligation of confidence, and that there was or is actual or threatened unauthorised use of it by them or either of them. On a fair reading of the evidence I am satisfied that he does.
37 The relevant information here consists of the VMS and Primary Health customer databases. Mr Norris said, and I accept, that they were valuable assets of the EBOS companies. Over 16,000 customers were included in the Primary Health customer database and over 11,000 in the VMS customer database. A combined customer database made up of the information in the different EBOS databases (created after Ms Vriens left the first applicant's employ but before her brother did) contains details relating to more than 44,000 customers of the group. Mr Norris's evidence was that, apart from the addresses, telephone and fax numbers of the customers, the other information contained in the databases is not and never has been publicly available. Nor have the lists themselves been made public. Ms Vriens had access to the customer lists only because of her employment responsibilities for EBOS. Mr Norris said he believed that Ms Vriens understood that the databases and their contents were not to be used or disclosed otherwise than for the purposes of EBOS's business as she would have understood that it was contrary to her employment obligations, by which I take him to mean the relevant clause in her contract of employment.
38 Here, the information has been identified with some specificity, it is not a matter of common or public knowledge, and Ms Vriens had access to it in circumstances that would import an obligation of confidence. In Telstra Corporation Ltd v First Netcom Pty Ltd (1997) 78 FCR 132 at 138 the Full Court described a customer list as "the most obvious example of information the confidentiality of which the courts will secure by injunctive relief".
39 I therefore accept the applicants' submission that the customer lists are inherently confidential and capable of protection in equity.
40 In his first affidavit Mr Norris said he was "concerned" that one or all of the respondents may have misused and/or are misusing confidential information of EBOS.
41 Mr Norris also said that he "suspected" that Team had a copy of one or all three confidential customer databases because:
(a) The Team customer lists retrieved from the rubbish bin at Ms Vriens's home showed that all but a small number of the Team customers were also current customers of the VMS and/or Primary Health business and included customers who had not been serviced by the sales representatives who had left VMS for Team. He thought it possible that the few Team customers who were not current customers of EBOS businesses were former VMS business customers whose details were not carried over from the old database to the new.
(b) On 21 June 2011 the practice manager of a medical centre in Illawong sent to a VMS business sales representative an order form for Team which lists the prices offered by Team for a number of products that the medical centre had historically purchased from the VMS business. The prices shown in the order form indicate that in respect of a number of key products Team has undercut the VMS prices. Mr Norris said he did not think that Team would have been able to do this without access to the specific prices at which that medical centre had purchased products from the VMS business.
42 Further, Mr Norris gave evidence that he believed that in a conversation with a customer service supervisor he was told (and he believed) that Ms Vriens had told an EBOS warehouse employee that she had taken a copy of the VMS business customer database.
43 Mr Norris offered several reasons to support his concerns regarding the misuse of confidential EBOS information.
44 The first was based on information supplied by Mr Khoury.
45 Mr Khoury said that on 10 September 2010 (19 days before Marijke Vriens's last day of her employment with the first respondent) a large amount of data was burned onto five discs from a laptop computer which Ms Vriens was using at that time.
46 Mr Norris said that he was told by Valeria Volpini, EBOS's marketing manager, that on or about that date Ms Vriens gave her one disc containing copies of an EBOS promotion Ms Vriens had prepared for the Primary Health business. He said that Ms Volpini told him that the disc was provided for the purpose of enabling Ms Volpini to prepare a new EBOS promotion. He added that Ms Volpini told him that she was unaware of any copies of the same disc being given to another EBOS employee on that date.
47 Mr Khoury said that the process of burning (copying) all five discs started at around 1.07 pm and finished at around 5.35 pm. He explained that the DVD drive used to burn each disc was an 8 speed (or 8X) burner, which is capable of burning a full DVDs' worth of data in 8-10 minutes.
48 He said that the standard capacity of a DVD is 4.7 gigabytes and on that basis he estimated that a total of around 23 gigabytes of data could have been burned onto the five DVDs. He noted that this was a substantial amount of data. He said that the evidence from the log file indicates that the user either wanted to burn:
(a) an amount of data so large that he or she had to insert a new DVD each time a DVD was filled to capacity, until a total of five DVDs were filled; or
(b) five copies of the same set of data onto the DVDs.
49 Mr Khoury's opinion, based on the fact that each of the transfers was almost exactly the same duration, was that the second explanation was the most likely. Otherwise, the only circumstances in which the time of data transfer to each DVD would be the same would be where the final batch of data happened to consume the entire DVD.
50 As Flick J observed at [9] of his reasons for judgment, Mr Norris's evidence may explain what happened to one DVD, but the inference is that there was no legitimate purpose for copying the same document five times.
51 The second reason Mr Norris gave for having these concerns was also based on information provided by Mr Khoury.
52 The evidence was that on 29 September 2010 (Ms Vriens's last day of employment with the first applicant) most of the files in a "pictures" subfolder on the desktop folder of Ms Vriens's user profile were sequentially accessed on a laptop allocated to her within seconds or milliseconds of each other. Mr Norris referred to Mr Khoury's opinion that the user would have copied the entire "pictures" folder and pasted it to an external location which may have been a USB stick, a CD or DVD. He said he was told by Ms Volpini (and he believed) that she was unaware of Ms Vriens providing a copy of any digital images to any EBOS employee on or after 29 September 2010. The effect of Mr Khoury's evidence was that amongst the material copied were documents that did not belong to Ms Vriens but to one or more of the EBOS companies.
53 As I have already observed, to succeed on this application the applicants have to show that Mr Norris reasonably believes the applicants have a right to relief.
54 The authorities indicate that a belief is an inclination of the mind towards the proposition and that something more than a mere assertion, suspicion or conjecture is required. See, for example, Telstra Corp Ltd v Minister for Broadband at [58], approving Emmett J in Austrac Operations Pty Limited v State of New South Wales [2003] FCA 1013 at [10].
55 Concern is not necessarily or even ordinarily synonymous with belief. The Oxford English Dictionary relevantly defines "to be concerned" as "to be troubled or distressed either with anxiety, or sorrow for misfortune". There is a similar definition in the Macquarie Dictionary. Still, absent a belief in a matter, it is unlikely one would be troubled or distressed by it.
56 The task here, however, is not to apply a dictionary definition but to determine what Mr Norris meant. For that purpose it is necessary to look to his evidence as a whole. Approaching the matter in this way, I am satisfied that Mr Norris believed that the respondents may have been using information confidential to EBOS. There is no doubt that from the moment he learned about their post-employment activities Mr Norris was worried about what the respondents were up to. I dare say there was a number of reasons for this, not least the prospect of a new competitor in the business. It seems tolerably clear, however, that he was inclined to think (and therefore to believe) they had been using EBOS's confidential information, although he did not in terms say so.
57 Furthermore, Mr Norris's form of expression was not always precise. In his first affidavit he said he "believed" that the respondents may have infringed EBOS's copyright, while in his third affidavit he said he was "still concerned" that they had. This alone might suggest that when he said he was concerned the respondents may have misused and/or are misusing confidential information he meant he believed it.
58 When one takes into account the fact that Mr Norris believed from what he had been told that Ms Vriens had been talking about setting up a business in competition with EBOS for some time whilst still in the employment of the first applicant, that he had been told she had taken a copy of the VMS business customer database, and that he knew that during her notice period she had burned EBOS documents onto DVDs for no apparent reason associated with her work for the first applicant, it is more likely than not that Mr Norris believed Ms Vriens was using, was likely to have used or to use confidential EBOS material for an unauthorised purpose.
59 In any case, on 4 August 2011 Ms Vriens produced a number of documents to the Court pursuant to an order made by Flick J. Mr Norris has had access to those documents.
60 The mere fact that Ms Vriens produced these documents is further evidence that, after she left the employ of the first applicant, she had in her possession a variety of EBOS documents. They included VMS catalogues and brochures and a DVD. All of these were admitted into evidence. The mere fact of production does not, of course, prove that Ms Vriens had in her possession confidential information. Some of the documents, such as the VMS catalogues, are obviously not confidential. But Mr Norris stated that one of them (document I, which was a copy of an internal EBOS document compiled for the purpose of instructing EBOS customer service operators), was created for internal use only and was confidential to EBOS. He said it contained confidential pricing information. An inspection of that material shows that it also includes product codes, promotional information, EBOS discount deals and other special offers, order forms and forms requesting demonstrations of equipment. Another document Ms Vriens produced on that day (document N4) contains information relating to the organisation and operation of the VMS business. Senior counsel for the applicants correctly characterised it in submissions as a virtual blueprint of how to organise employees into a new business. Mr Norris said that that information was also confidential to EBOS and would be useful to someone setting up a new business, I infer, in competition with the VMS business. The DVD produced by Ms Vriens on 4 August 2011 contained copies of draft employee contracts used in the VMS business, which Mr Norris said were also confidential, disclosing confidential terms on which employees of the VMS business were engaged to work. Mr Khoury's evidence was that the data on this DVD was burned onto it on 23 September 2010.
61 Even if the proper interpretation of Mr Norris's first affidavit is that he was merely suspicious of what the respondents were up to at the time he affirmed it, I am confident that, by 22 August 2011, when he affirmed his second affidavit, he had the necessary state of mind. Although he said in that affidavit that he remained "concerned", his comments about some of the documents that were produced show that he was not merely concerned that the respondents may have had confidential information in their possession, he actually knew of some, although he did not know the full extent. Mr Norris's evidence is that Ms Vriens had established a business in competition with EBOS for which that confidential information could be valuable. In all these circumstances, I am satisfied that Mr Norris's mind is inclined towards the possibility (and therefore believes) that Ms Vriens and Team have confidential information which may have been or may be used for an unauthorised purpose.
62 I am also satisfied that the belief is a reasonable one.
63 Mr Norris gave evidence that Ms Vriens, in her position as marketing and logistics manager for the VMS business, had access to confidential information of EBOS, including the information in the VMS customer database, and, as marketing manager - group primary divisions, she also had access to the Acumen platform that held the Primary Health customer database. The evidence concerning what took place on 10 September 2010 suggests that there is no apparent legitimate business reason for her to have downloaded onto five discs, rather than only one, a large quantity of EBOS data. The documents found in Ms Vriens's rubbish bin and the documents and DVD she produced to the Court indicate that she retained confidential EBOS information, after she left the employ of the first respondent, for no authorised purpose.
64 Furthermore, the evidence Mr Norris gave concerning the order form sent on 21 June 2011 from one of the VMS customers suggests that those responsible for the production of the Team catalogue had access to the VMS pricing system, enabling Team to undercut EBOS.
65 Now it is true that the description of the data on the disc given to Ms Volpini on 10 September 2010 does not establish that it contained confidential information. It is also true that Mr Khoury's evidence points to the likelihood that the data burned on to the five discs was the same. What is not at all clear, however, is whether the data Ms Vriens burned on 10 September found its way onto the DVD given to Ms Volpini "on or about" that date. We simply do not know when the data was burned onto that disc. Ms Vriens could have given evidence about this but she did not.
66 Ms Vriens swore two affidavits in the proceeding. Her counsel chose not to read them but counsel for the applicants tendered them, arguing, with good reason, that the omissions from them were telling. Although it bears on all potential claims, it is convenient to refer to this evidence now.
67 In her first affidavit, sworn on 9 August 2011, 11 days after Mr Norris's and Mr Khoury's first affidavits, Ms Vriens denied making any copy of the EBOS database "in September 2010". She did not, however, deny making a copy of the database at any other time. She did not explain what she did with the five discs copied on 10 September. That circumstance alone may permit an adverse inference to be drawn for the purpose of this proceeding: Blatch v Archer (1774) 1 Cowp 63; 98 ER 969. Ms Vriens said she copied her personal photos and her iTunes files from a laptop computer she had previously used, together with old emails from her family in the Netherlands. She also said she had copied her "contacts". But she did not say whether those contacts included business contacts she acquired through her work for the first applicant or whether they included the contacts in the EBOS databases. Amongst the pictures Mr Khoury said he believed were copied from the pictures folder were pages of a VMS catalogue and pictures of medical equipment and supplies obviously used in the production of the VMS catalogues. Some of the pictures appear in the Team brochure. Ms Vriens offered no explanation for copying these photographs, which are plainly not personal, or for how they came to appear in the Team brochure.
68 Ms Vriens did not expressly deny making or taking with her copies of EBOS documents for unauthorised purposes. She did say that she relied on commercially available databases and a database that had been supplied to her by her "partners", by which I understand her to be referring to Warner & Webster Pty Ltd, which, together with Ms Vriens, holds shares in Team. She did not say, however, that she relied exclusively on these databases. She provided no explanation for why she had in her possession, more than ten months after she severed her association with EBOS, a DVD containing EBOS pricing information and product codes, promotional information, EBOS discount deals and other special offers, order forms, forms requesting demonstrations of equipment, employment contracts drawn by or for the benefit of the first applicant, an organisational chart for the VMS business and job descriptions. Nor did she explain why, on 23 September 2011 - six days before she was due to leave the employ of the first applicant - she burned that material onto a DVD and kept the DVD after her departure. I accept the applicants' submission that the fact that Ms Vriens took some EBOS confidential information heightens the apprehension that she may well have taken some or all of the customer databases.
69 The respondents relied on affidavit evidence from Ian Barry Ross, a director of Warner & Webster and a shareholder of Team. Mr Ross confirmed that he had supplied Ms Vriens and Team with certain information. He described that information as the Warner & Webster stock master file (without selling prices), mailing lists for Queensland, New South Wales and part of Victoria, images for brochures, supplier price lists and Warner & Webster sales histories for quantities and stock. Ms Vriens annexed to her affidavit a quote from a marketing firm, Cegedim Asia Pacific Pty Ltd for distributing the Team brochure. It referred to data supplied by Team and by Cegedim. It indicated that data relating to general practitioners in the NSW metropolitan area and between Wollongong and Newcastle, and podiatrists in the same areas of NSW as well as the Victorian metropolitan area and Geelong would be supplied by Cegedim, and the remaining data (3,500 addressees) by Team. Mr Norris listed in his first affidavit customers who had either received the Team brochure or to whom Team employees had spoken. That list demonstrates that Team had access to information concerning potential customers outside the areas covered by Cegedim and Warner & Webster. The information supplied by Warner & Webster and Cegedim does not account for Team's contact with practices in South Australia, Western Australia, or the Australian Capital Territory. Counsel for the respondents suggested an innocent explanation for these contacts. Ms Vriens, however, who availed herself of the opportunity to give evidence, did not offer one. It is reasonable to infer from her evidence that, if there might be an innocent explanation, it does not apply here.
70 In her second affidavit (sworn on 9 September 2011, 18 days after Mr Norris's second affidavit) Ms Vriens annexed a tax invoice from Cegedim for the mailing of the May launch catalogue (the Team brochure) and an invoice from a computer services company for the provision of software, the relevance of which was unexplained. Her affidavit asserted that she had not "used nor caused to be used any material that might have remained in [her] possession from [her] employment with [the first applicant]" and was not required to execute any deed containing covenants when she left the company. She did not say she had no intention of using EBOS material and she did not say whether or not she had received any material belonging to EBOS from Mr Vriens. Whether or not she was required on departure to execute a deed containing a covenant is no answer to the question of whether she might have misused confidential information. In any event, the confidentiality clause in her contract of employment applied to the use or disclosure of confidential information both during and after her employment.
71 Moreover, the Team quotations found in Ms Vriens's rubbish bin on 21 June 2011 are identical in format to VMS business quotations generated under a software system used while Ms Vriens was employed by the first applicant (Distrib, since superseded by Acumen) and they use the same fonts and paragraph spacing. Once again, there may be an innocent explanation for this, but here, too, Ms Vriens did not offer one. Nor was any explanation given for the presence in Ms Vriens's rubbish bin of the torn copy of a VMS business order and the copy of the VMS business vaccine price list that appeared on the reverse side of it, nearly nine months after she left the employ of the first applicant.