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[2017] VSC 387
General information, not legal advice.
Supreme Court of Victoria
2017-07-21
McDonald J
Original judgment source is linked above.
APPEAL - Refusal by Associate Justice to make direction for production of supplementary expert report - Decision not attended by legal, factual or discretionary error - Appeal dismissed - Supreme Court (General Civil Procedure) Rules 2015 rr 34.01, 77.06.
1 On 1 March 2017 Ierodiaconou AsJ dismissed a summons filed by the appellants, Gorman and Kelly Commercial Real Estate Pty Ltd and Gorman and Kelly Commercial Property Management Pty Ltd ('G&K'), seeking orders permitting the preparation of a supplementary expert report, and leave to inspect data relating to that report. G&K appealed her Honour's order pursuant to r 77.06 of the ('Rules'). I have determined that the appeal should be dismissed.
2 The orders sought in the summons filed by G&K sought to invoke the Court's powers under r 34.01.[3] That rule provides:
At any stage of a proceeding, the Court may give any direction for the conduct of the proceeding which it thinks conducive to its effective, complete, prompt and economical determination.[4]
3 In the alternative, G&K's summons relied upon ss 9, 47, 48 and/or 65H of the Civil Procedure Act 2010.[5] The summons sought orders that G&K's forensic expert, Mr Justin Geri of Ferrier Hodgson Forensics Pty Ltd, prepare a supplementary report.[6] Mr Geri had previously prepared a report dated 26 August 2016.
4 In the ordinary course of litigation a party has the right to prepare expert evidence which it considers will assist its case. Ordinarily, a party does not require the approval of the Court to do so. As will be apparent from the reasons set out below, the circumstances which led G&K to consider it necessary to seek the Court's approval to file a supplementary expert report weigh heavily on the outcome of the current appeal.
5 The respondents to this appeal, Mr Peluso and Ms Brjozovsky, are former employees of G&K. G&K commenced proceedings against them on 4 November 2015. G&K allege that the respondents breached obligations of confidence which they owed G&K in respect of G&K's client management database. G&K alleges that the respondents have:
(a) Copied, or allowed to be copied, some or all of the database;
(b) Obtained and/or had ongoing access to information drawn from the database without G&K's consent; and
(c) Used or, alternatively, had the ability to use, the contents of the database for purposes other than the approved purpose, including at a time when the respondents were no longer providing services to G&K and were employed by a competitor, CBRE.[7]
6 G&K seeks an injunction restraining the respondents from using information drawn from G&K's database and business records, delivery up of information sourced from the database and business records, and an affidavit concerning use of the information.[8] The respondents have denied any breach of their obligations of confidence.[9]
7 Each of the respondents commenced employment with CBRE following the termination of their employment with G&K. CBRE is not a party to the litigation. G&K and CBRE are direct competitors in the commercial real estate agency market.
8 In order to make good its claims that the respondents have breached their obligations of confidence, G&K sought access to various electronic devices in the possession of the respondents. The devices have been used by the respondents in the course of their employment with CBRE and contain confidential information belonging to CBRE. In light of this, the parties have accepted the need for a regime which prevents inadvertent disclosure of CBRE's confidential information.
9 Orders were made by Ierodiaconou AsJ on 11 March 2016 and 13 May 2016 which governed the preparation of an expert report by Mr Geri. The Court's orders permitting access to the electronic devices in the possession of the respondents were subject to Mr Geri giving a confidentiality undertaking, the form of which was to be agreed between the parties or in default of agreement to be determined by the Court.[10] A form of undertaking was agreed between the parties and was executed by Mr Geri along with a number of other employees of Ferrier Hodgson Forensics Pty Ltd. The undertaking was also executed by a number of solicitors acting on behalf of G&K.
3.1. only for the purposes of the Expert conducting the inspection, and preparing an expert report arising from the inspection ("Report"); and
3.2 on the basis that the data and information contained on the Devices is understood to be such that the disclosure of the same to any person, including but not limited to Gorman Kelly, its past and present directors, officers, agents, servants, advisers, employees, third party contractors and sub-contractors of Gorman Kelly, other than to those persons who have prior executed and delivered to Wilmoth Field Warne ("WFW") an undertaking in a similar form attached to this Deed Poll marked Annexure "A", or such alternative undertaking as may be agreed in writing by the parties to the Proceeding, or in default of agreement to be determined by the Court, may allegedly cause significant injury and/or loss or damage to Peluso and/or Brjozovsky and/or their business activities.
4. The Expert UNDERTAKES as follows:
4.1 that the Expert will keep confidential the data and information contained on the Devices and will not disclose the data and information contained on the Devices to any person(s) whatsoever SAVE INSOFAR as the Expert may be expressly authorised in writing by WFW, or by order of the Court, or otherwise as required by law; and
4.2 that the Expert will not use the data and information contained on the Devices for any purpose (including derive any personal benefit) other than strictly and solely for the purposes described in clause 3.1 above.
...
7.1 provided that clause 3.2 hereof is first complied with, the Expert is permitted to disclose in writing to Gorman Kelly's solicitors that data or information;
7.2 if Gorman Kelly's solicitors desire to disclose that data or information to their clients for the purpose of obtaining instructions as to whether the same is a copy of, or derived from, the whole or any part of the Database, then:
7.2.1 Gorman Kelly's solicitors must forthwith provide to WFW a copy of what has been disclosed by the Expert pursuant to clause 7.1 above;
7.2.2 if WFW consent in writing to the desired disclosure, then Gorman Kelly's solicitors shall be at liberty to make that disclosure;
7.2.3 if WFW do not so consent within 7 days, the Plaintiffs shall be at liberty to make application by Summons to the Court for an order permitting such disclosure, providing that the data and information is kept confidential in the process of making any such application.[11]
11 On 12 July 2016 G&K's solicitors provided instructions to Mr Geri for the preparation of an expert report. The instructions included the following:
12 Mr Geri provided a report on 26 August 2016. On 27 October 2016 G&K's solicitors wrote to him requesting the provision of a supplementary report:
An issue has arisen between the parties as to the conclusions to be drawn from your report, and the operation of the regime in clause 7 of the enclosed undertakings.
The issue is whether the findings you have expressed in your Report amount to a conclusion that you have identified data or information (namely the email addresses, emails and attachments referred to in paragraphs 36, 39, 43, 44 and 46 of your Report) which, in your opinion, "is or may be a copy of, or derived from, the whole or any part of the Database".
For relevant background, we enclose copies of the most recent exchange of correspondence on this issue (being our letter dated 19 September 2016 to the defendants' lawyers, and the reply dated 5 October 2016 from the defendants' lawyers).
In order to clarify your Report, we would be grateful if you would confirm whether it is your opinion that you have identified data or information (namely the email addresses, emails and attachments referred to in paragraphs 36, 39, 43, 44 and 46 of your Report) which, in your opinion, "is or may be a copy of, or derived from, the whole or any part of the Database".
Also, as a separate but related matter, we would be grateful if you could deliver a supplementary report on the following matters (if you feel you are able to do so and not precluded from doing so by reason of your confidentiality undertaking):
(a) please provide a list of the email addresses that you identified as being common to both the Surga Documents and the Devices; and
(b) if it is possible/reasonably practicable, please present a summary, for each individual email address referred to in 1(a) above, that provides a total number of emails sent to or received from and then breaks them down in calendar years, so the parties can see the full range of dates in question and the volume of emails sent and received in each calendar year.
If you feel that your confidentiality undertaking precludes you from disclosing this information (or at least precludes you from disclosing this information to persons other than Mr Lurie, Mr Sweeney and Ms Yip, all of whom have already executed the enclosed undertakings), please let us know.
We have copied in the defendants' lawyers to this letter, and we are happy for you to defer providing a response to the parties for, say, seven days from the date of this letter to allow the defendant's lawyers to provide you with any further comments should they wish to do so.[13]
13 The request for Mr Geri to provide a supplementary report prompted a strong response from the respondents. Their solicitors, Wilmoth Field Warne Lawyers ('WFW') wrote directly to Mr Geri and contended that if he provided a supplementary report as requested, he would breach the obligations imposed upon him by cl 4 of the confidentiality undertaking he had previously executed.[14] Mr Bick QC, who appeared with Mr Whelen for G&K, submitted that the effect of WFW's correspondence to Mr Geri was that he was 'warned off' from preparing a further report.[15] I accept that the practical effect of WFW's correspondence of 3 November 2016 was that Mr Geri was not prepared to provide the supplementary report requested.
Were the respondents justified in contending the provision of the supplementary report would constitute a breach of Mr Geri's confidentiality undertaking?
14 If the question set out above is answered in the negative, there was no reason why G&K should have been put to the trouble and expense of invoking the Court's jurisdiction under r 34.01 to seek authorisation for Mr Geri to provide a supplementary expert report. Mr Williams QC, who appeared with Mr Paterson on behalf of the respondents, accepted that if the respondents were not justified in contending that provision of a supplementary report would constitute a breach of the undertaking, the appeal should be successful.[16] Shortly stated, if the provision of the supplementary report would not have involved a breach of the confidentiality undertaking, there was no need for G&K to have invoked the jurisdiction conferred by r 34.01. It is therefore necessary to consider whether the respondents had a proper basis for contending that provision of the supplementary report would have constituted a breach of Mr Geri's undertaking.
15 I have set out earlier in this judgment the request contained in the letter of 27 October 2016. I have also set out [4] and [7] of the confidentiality undertaking executed by Mr Geri. Mr Williams submitted that the respondents were entitled to contend that the provision of the supplementary report in the terms sought would have constituted a breach.[17] He placed particular reliance on the matters set out at [3](e) and (f) of WFW's correspondence to Mr Geri of 3 November 2016:
(e) More specifically, the mere fact that a number of email addresses have been identified by you as being common to the Surga Database and one or more of our clients' devices cannot, without more, indicate that such email addresses have been copied or derived from the Surga Database. There are other obvious methods by which such a commonality might occur. As but one example, as a matter of common sense, it is inevitable that people working in the same industry sector will, from time to time, send emails to, and/or receive emails from, the same people. No doubt this is why you did not express the view, anywhere in the Geri 26Aug16 Expert Report, that the mere existence of the common email addresses which you identified was sufficient to enable you to express an opinion as to copying or derivation.
(f) Having regard to the above, it is plain that the preconditions for B2B Lawyers to inspect our clients' confidential data do not exist. If the Plaintiffs wish to seek to persuade a Court to determine otherwise, then that is their right. However, unless and until a Court determines otherwise, we point out that your confidentiality obligations under the Geri Deed Poll do no permit you to:
(i) provide the list of email addresses as requested at paragraph 1(a) of the B2B 27Oct16 Letter;
(ii) present the summary of any emails sent during certain periods as requested at paragraph 1(b) of the B2B 27Oct16 Letter; and
(iii) provide details of any similar telephone numbers as requested at paragraph 2 of the B2B 27Oct16 Letter - noting that the issue of telephone numbers suffers from the same vice as applies to the email addresses.[18]
16 Mr Williams submitted that in light of the matters set out above:
(i) There was no legitimate basis upon which Mr Geri could conclude that all of the emails common to both the G&K database and those contained on the devices 'is or may be a copy of, or derived from, the whole or any part of the database';
(ii) There was no basis upon which Mr Geri could conclude that he could form an opinion which would enliven cl 7.1 of the confidentiality undertaking, thereby entitling him to disclose the relevant information to G&K's solicitors.[19]
17 It is unnecessary to express a concluded view as to whether the provision of a supplementary report in the terms requested would have breached Mr Geri's undertaking. It is sufficient to record my conclusion that it is strongly arguable that it would have done so. G&K and CBRE compete in the commercial real estate agency market. An affidavit sworn by Nicholas Duggal, a solicitor acting for CBRE deposed:
The Laptop issued to Peluso is highly likely to contain CBRE confidential client information in the form of client contact names, email addresses and telephone numbers. That information, if disclosed, would likely be highly valuable to a trade rival such as the Plaintiff.
As CBRE and the Plaintiff are competitors, CBRE fears that it is highly probable that the Laptop will contain such confidential information, even in the absence of any misappropriation or utilisation of the Database and/or the Surga Documents by the Defendants. The same concern arises as to the disclosure and/or inspection of information that 'may be a copy of, or derived from... the Database (Order 1(a)) (emphasis added). The concern remains as to disclosure of any highly confidential and commercially sensitive proprietary information of CBRE, a non-party to the proceeding.[20]
18 As CBRE and G&K are direct competitors it would be surprising if there was not some overlap in the client information contained in their respective databases. Insofar as there are common client addresses and telephone numbers in the respective databases, Mr Geri would have no sound basis for expressing an opinion as to whether client information on the CBRE database had been derived from the G&K database. It is theoretically possible that the data on the CBRE database may have been derived from the G&K database. However, putting theoretical possibilities to one side, the existence of common information on the databases does not, of itself, warrant a conclusion that information on the CBRE database may have been derived from the G&K database.
19 Based on the matters set out above, I consider that there was a legitimate basis for the respondents to contend that, absent an order of the Court, provision of the supplementary expert report sought by G&K's solicitors would have constituted a breach of the undertaking. In light of this conclusion, it is necessary to address the question of whether Ierodiaconou AsJ's refusal to make an order authorising Mr Geri to provide a supplementary report was attended by error. The appeal is by way of rehearing.[21] In order for the Court to exercise the powers conferred upon it by r 77.06, it is necessary for G&K to establish that the decision at first instance was attended by legal, factual or discretionary error.[22] Further, the decision the subject of this appeal is an interlocutory discretionary decision involving a matter of practice and procedure. It is well established that particular caution must be exercised before an appeal court will interfere with such a decision.[23]
20 The following orders were sought in paragraph [1](a) of the appellants' summons dated 15 December 2016:
(a) whether it is the expert's opinion that he has identified any and which data or information (namely the email addresses, emails and attachments referred to in paragraphs 36, 39, 43, 44 and 46 of his report dated 26 August 2016) which, in his opinion, 'is or may be a copy of, or derived from, the whole or any part of the Database'...[24]
Paragraph 1(a) of the summons seeks a supplementary expert report as to whether data or information identified in paragraphs 36, 39, 43, 44 and 46 of the expert report 'is or may be a copy of, or derived from, the whole or any part of the database' (emphasis added). The expert has already made findings in respect of the questions that were posed to him concerning the copying or derivation of data. The proposed supplementary report seeks to expand the request 'may'. It invites the expert to speculate. Such speculation is unnecessary and inconsistent with the CPA and its purpose in granting a request for a supplementary report.
The expert report does not state there has been copying or derivation, as the plaintiffs properly concede. Indeed, paragraph 50 of the expert report concludes that there is an absence of Surga documents on the Devices. The expert report states that there are no matters of significance that the expert considers that are relevant and have been withheld from the report.
The confidentiality undertaking given by Mr Geri contains a trigger clause, clause 7, which is triggered in the event that the expert identifies any data or information which has been copied or derived from the plaintiffs' database. Significantly, the expert did not trigger clause 7.[25]
22 In written submissions dated 14 June 2017, the appellants' stated as follows:
The Plaintiffs submit that her Honour's factual findings were infected by error:
23 The submissions set out above direct attention to paragraphs 36, 39, 43, 44 and 46 of Mr Geri's report of 26 August 2016. These paragraphs are as follows:
(a) No backup of an additional device was found, nor was any data identified that could be related to an additional device.
(b) A review of Mr Peluso's current phone indicates that a number of contacts located in the address book of the phone match contact email addresses in the Surga Dropbox folder.
(c) Of approximately 437 email addresses located in Mr Peluso's mobile phone, approximately 76 matched email addresses in the Surga Documents.
...
24 The appellants submit that [1](a) of the summons simply asked Mr Geri to confirm or refute the inference that the data referred to in the paragraphs of his 26 August 2016 report set out above may have been derived from G&K's client management database. The relevant paragraphs from Mr Geri's report refer to a very large number of documents: 48,000 deleted emails and attachments;[28] and 110,000 emails and attachments.[29] Her Honour concluded that Mr Geri was being invited to speculate as to whether these documents may be derived from G&K's database. This conclusion is correct. In light of the fact that G&K and CBRE are competitors in the commercial real estate agency market, it is difficult to conceive of any basis, other than speculation, upon which Mr Geri could conclude that any of these documents were derived from the G&K database.
25 There was no evidence before Ierodiaconou AsJ which supported a finding that Mr Geri could have addressed the question of derivation without engaging in speculation. Further, there was no evidence which supported a finding that the failure of Mr Geri to address the question of derivation in his primary report was due to mere oversight on his part. The absence of such evidence coupled with the fact that his primary report did not address the question of derivation, supports her Honour's conclusion that Mr Geri would not have been able to do so without engaging in speculation.
26 During the hearing before Ierodiaconou AsJ Mr Williams submitted:
Our learned friends, in paragraph 1(a) of the orders they seek today, want to go back and ask Mr Geri that question again, essentially. That's presumably because they didn't like the answer that they got the first time. If 1(a) stood alone, they wouldn't need a court order. If all they want to do is ask him whether or not he has identified any and which data or information is, or may be, a copy of, or derived from, the whole or any part of the database, they can ask him that, because answering that question doesn't engage him in disclosing any confidential information. We would anticipate that if the question is asked, they will get the same answer because Mr Geri, unlike the plaintiffs, understands his own report.[30]
27 The appellants submit that in light of the submission set out above, Ierodiaconou AsJ should have made the order in paragraph [1](a) by consent, or at the very least, expressed the view that it was not necessary for the Court to make an order in the terms of paragraph [1](a) of the summons.[31] The submission made by Mr Williams does not support a finding that her Honour's refusal to make the orders sought in [1](a) was attended by error. First, the submission was preconditioned on [1](a) of the summons standing alone. The respondents made no concession that her Honour should make an order in the terms of [1](a) in circumstances where relief was also sought in the terms of [1](b) and (c). Second, G&K's summons enlivened the Court's broad discretion under r 34.01 to give any direction 'for the conduct of the proceeding which it thinks conducive to its effective, complete, prompt and economic determination'. Plainly, Ierodiaconou AsJ considered that the granting of relief in the terms of [1](a) would not satisfy these criteria. Having so concluded, an essential precondition for the exercise of the power conferred by r 34.01 was not met.
28 The appellants contend that Ierodiaconou AsJ erred in concluding that principles of relevance which arise in discovery applications were applicable to the determination of whether the relief sought in [1](b) and (c) of the summons should be granted.[32] There is no merit in this contention.
29 Ierodiaconou AsJ noted G&K's concession that the information sought to be produced pursuant to [1](b) and (c) might not be relevant.[33] Her Honour concluded that 'the orders proposed in paragraphs 1(b)(i) and 1(b)(ii) of the summons amount to a fishing expedition and will not be allowed'.[34] In considering whether the directions sought by the appellants satisfied the criteria prescribed by r 34.01, her Honour was entitled to have regard to the relevance of the information sought to be produced. Had her Honour not addressed the issue of relevance, a real question would have arisen as to whether or not her Honour had addressed the prescribed criteria under r 34.01.
30 In the alternative, G&K submit that if principles of relevance did govern the application, the appropriate time for questions of relevance to have been raised was when orders were made in March and May 2016 governing the regime for the inspection by Mr Geri of devices in the possession of the defendants which may have contained CBRE confidential information.[35] G&K point to the fact that no objections were raised at that time on the grounds of relevance of the information sought to be obtained via the inspection process.[36] I reject the submission. The Court orders in March and May 2016 were by consent. The proceeding before her Honour on 6 February 2017 was a contested application which was to be determined in accordance with the criteria prescribed by r 34.01. At the time of that hearing, her Honour had a reference point for considering the question of relevance; ie Mr Geri's initial report and the additional information requested in the letter forwarded to him on behalf of G&K dated 27 October 2016. There was no such reference point in March and May 2016 for considerations of questions of relevance because no report had been prepared at that time.
31 The present appeal highlights the rationale for appeals from interlocutory decisions on matters of practice and procedure being treated with particular caution. The writ in the current proceeding was filed in early November 2015. The orders the subject of the current appeal were made by Ierodiaconou AsJ on 1 March 2017. The notice of appeal was filed on 15 March 2017 and the appeal was heard on 19 June 2017. All up there has been a delay of approximately four months directly attributable to the current appeal proceeding. Unless appeals on matters of practice and procedure are treated with particular caution there is a risk of undermining the overarching purpose prescribed by s 7 of the Civil Procedure Act 2010 of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute.
32 The appellants have failed to establish that Ierodiaconou AsJ's refusal to authorise Mr Geri to produce a supplementary expert report was attended by error. As such, the appeal must be dismissed. I will provide the parties with an opportunity to make submissions on costs.
[1] Order of the Honourable Associate Justice Ierodiaconou dated 1 March 2017.
[2] Notice of Appeal dated 15 March 2017.
[3] Plaintiffs' Summons dated 15 December 2016, [1].
[4] Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 34.01(1).
[5] Plaintiffs' Summons dated 15 December 2016, [1].
[7] Statement of Claim dated 4 November 2015, [9].
[10] See Order of the Honourable Associate Justice Ierodiaconou dated 11 March 2016, [3]; Order of the Honourable Associate Justice Ierodiaconou dated 13 May 2016, [1].
[11] See Affidavit of Faith Yip sworn on 15 December 2016, "FY-4", [3]-[4], [7].
[15] Transcript of Proceedings, Gorman and Kelly Commercial Real Estate Pty Ltd v Peluso (Supreme Court of Victoria, S CI 2016 00912, McDonald J, 19 June 2017) T11 L31 - T12 L1.
[16] Ibid T72 LL24-26, T73 L20 - T74 L2.
[18] Affidavit of Faith Yip sworn on 15 December 2016, "FY-11", [3](e)-(f).
[19] Transcript of Proceedings, Gorman and Kelly Commercial Real Estate Pty Ltd v Peluso (Supreme Court of Victoria, S CI 2016 00912, McDonald J, 19 June 2017) T83 LL9-L30.
[20] Affidavit of Nicholas Duggal sworn on 6 February 2017, [15]-[16].
[21] 'Plaintiffs' Submissions' dated 14 June 2017, [6]; Transcript of Proceedings, Gorman and Kelly Commercial Real Estate Pty Ltd v Peluso (Supreme Court of Victoria, S CI 2016 00912, McDonald J, 19 June 2017) T95 LL27-31.
[22] 'Plaintiffs' Submissions' dated 14 June 2017, [6]; Transcript of Proceedings, Gorman and Kelly Commercial Real Estate Pty Ltd v Peluso (Supreme Court of Victoria, S CI 2016 00912, McDonald J, 19 June 2017) T94 LL19-20. See also Oswal v Carson [2013] VSC 355, [11]; Hou v Westpac Banking Corp Ltd [2015] VSCA 57, [44].
[23] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 176-7, 180; G4S Australia Pty Ltd v Kamasaee [2017] VSCA 121, [13]; Smith v J Z Lee Interiors Pty Ltd [2017] VSCA 65, [4].
[24] Plaintiffs' Summons dated 15 December 2016, [1](a).
[25] Gorman and Kelly Commercial Real Estate Pty Ltd v Peluso [Ruling No 3] (Unreported, Supreme Court of Victoria, Ierodiaconou AsJ, 20 February 2017) [58]-[60].
[26] 'Plaintiffs' Submissions' dated 14 June 2017, [20].
[27] Affidavit of Faith Yip sworn on 15 December 2016, "FY-5", [36], [39], [43]-[44], [46].
[30] Transcript of Proceedings, Gorman and Kelly Commercial Real Estate Pty Ltd v Peluso (Supreme Court of Victoria, S CI 2016 00912, Ierodiaconou AsJ, 6 February 2017) T37 LL6-19.
[31] 'Plaintiffs' Submissions' dated 14 June 2017, [21].
[33] Gorman and Kelly Commercial Real Estate Pty Ltd v Peluso [Ruling No 3] (Unreported, Supreme Court of Victoria, Ierodiaconou AsJ, 20 February 2017) [65].
[35] 'Plaintiffs' Submissions' dated 14 June 2017, [26].
Gorman & Kelly Commercial Real Estate
Peluso [2017] VSC 387
(1981) 148 CLR 170