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[2024] FCA 639
Federal Court of Australia
2024-06-12
Thawley J
Original judgment source is linked above.
INTRODUCTION 1 On 23 December 2022, the applicant (Harlech Enterprises Pty Ltd) commenced this proceeding against the respondent (Beno Excavations Pty Ltd) by filing an originating application and a concise statement (CS). In summary, Harlech contends that Beno (which trades as "Benex Pipelines") retained Harlech to provide various project management services and agreed, but failed, to pay remuneration of 15% of gross profits in relation to what is referred to as the "Icon Water tender", which resulted in the "CX-13 Icon Water contract" and the "CX-14 Icon Water contract": CS at [4], [8] and [9]. Mr Moseley is the sole director of Harlech and the person who performed relevant work. 2 On 5 June 2023, Beno filed a "reply to concise statement" (RCS) and a "concise statement of cross claim" (XC). In its reply, Beno contends that, on 15 March 2017, it agreed to pay Mr Moseley $80 per hour for work performed by him for Beno: RCS at [3]. It says that payments were made to Harlech at Mr Moseley's request: RCS at [5]. Beno denies that there was any agreement to pay Harlech 15% of gross profits, but says that Mr Moseley was paid a bonus based on profits in relation to certain projects: RCS at [7], [8]. Beno also denies the level of profits from the CX-13 project and the CX-14 project: RCS at [16], [20]. 3 By its cross-claim, Beno seeks relief against both Harlech and Mr Moseley. It seeks recovery of amounts of $90,000 and $60,153.23 which it says were mistakenly paid to Harlech in relation to a project called the "CDC Project": XC at [2] to [12]. 4 The cross-claim also claims that Harlech and Mr Moseley owed Beno duties of a fiduciary nature and that Mr Moseley had access to Beno's intellectual property and that he and Harlech have kept and used that property. The intellectual property is described as including: a. manuals, working documents and method statements; b. client contacts and details; c. tender documents; d. accounting, including costs forecasts, projections and profit figures; e. contract specifications. 5 The cross-claim includes the following allegations: 16. Harlech, Moseley, or entities related to them, have used the Intellectual Property for their own reward and to the detriment of Beno by: a. Operating a competing business to Beno; b. Tendering for projects; c. Obtaining profits and reward. 17. In the circumstances above Harlech and/or Moseley have breached fiduciary duties owing to Beno for their own gain. 18. Harlech, Moseley and/or any related entity which has profited from the use of the Intellectual Property now holds those profits as a constructive trustee. 19. Beno seeks accounts of profits of the amounts earned through the exploitation of the Intellectual Property. 20. Beno seeks the value of the profits as at the date of judgment. 21. Particulars of the breaches of duties, the identity of the constructive trustees and the damages will become apparent through disclosure of the business records of Harlech, Moseley and/or their associated entities. 6 On 20 September 2023, Beno filed an interlocutory application seeking discovery from Harlech. On 10 November 2023, the Court made consent orders requiring Harlech to provide discovery by 30 November 2023 of categories of documents, including: A. Any, and each version of the following documents in the possession or control of the first and second cross respondents: i. Style Guide.docx ii. Toolbox.docx iii. Appendix 2 Risk Register.docx iv. Chemical Risk Assessment.docx v. Emergency Response Management Plan.docx vi. Construction Environmental Management Plan 2020.docx vii. Contractor SWMS Review and Approval Form.docx viii. Document Template.docx ix. ECP00I Hazardous Substances.docx x. ECP002 Waste Management.docx xi. HSEQ Inspection Form.docx xii. HSEQ Plan.docx xiii. Incident Investigation Report.docx xiv. Incident Report.docx xv. Induction Brief.docx xvi. Internal Audit.docx xvii. Non-Conformance Report.docx xviii. Plant and Equipment Register.docx xix. Plant Risk Assessment.docx xx. Quality Management Plan.docx xxi. executive management team IMS manual xxii. integrated management system procedures manual B. Copies of any contracts entered with clients, and copies of the associated tender documents, between March 2020 and October 2023, concerning pipe rehabilitation, tunnelling, pipe- bursting, pressure lining or slip lining. C. All documents recording payments received as a result of the contracts set out in B. 7 By an email dated 10 November 2023 sent in the context of agreeing the consent orders, Harlech's solicitor stated that her clients were "prepared to defer any question of confidentiality … reserving their right to seek such an order in respect of particular documents, once they had been identified by the list of documents, under liberty to apply": Exhibit 3. The interlocutory application dated 20 September 2023 was dismissed with no order as to costs based on the consent position. 8 Harlech did not serve its list of documents until 19 December 2023. 9 On 8 March 2024, Harlech and Mr Moseley lodged an interlocutory application by which they sought an order to the effect that they produce for the inspection of Beno documents numbered 99 - 114 in the list of documents, with redactions "as to information as to prices and costs". They have not yet produced any documents for inspection. 10 Harlech and Mr Moseley relied on an affidavit of their solicitor, Ms Madeleine Louise Ness, in support of their application. Beno opposed the application, relying on affidavits of its solicitor, Mr Joseph Tallarita, Mr Bencic (Beno's director) and his wife, Ms Dijana Bencic (Beno's Business and Administration Manager). 11 In his affidavit, Mr Bencic stated that Mr Moseley resigned from Beno on 3 March 2020. Mr Moseley's letter of resignation of that date noted that he was taking up the position of "Managing Director of Civil and Civic Corporation". 12 Ms Bencic deposed to the fact that she had been contacted Ms Agnew of xcelcivil who was inquiring whether twenty documents provided to her by Mr Moseley were in fact, or based on, documents of Beno. Ms Bencic examined the documents and, in her affidavit, stated: [3] … I saw that: (a) The format and contents of the documents were the same as what Benex used for tenders. There were only small changes made to the names in the documents; (b) There was an evacuation plan included, which should have been for Civil & Civic and contained i[t]s logo, however Benjamin Moseley had not updated the map, and it showed Benex's office in Queanbeyan; (c) There was a Project Organisational Chart that was supposed to be for Civil & Civic, but showed David Bencic as the Managing Director and had [Beno's] structure. 13 Mr Bencic also examined the twenty documents provided by Ms Agnew and stated that each of them was "a close replica" to "documents held in our office". Mr Bencic stated at [4] of his affidavit that the twenty documents were "required in construction matters" and identified each document. The documents were the first twenty types of document identified in Category A of the categories of discovery set out earlier. Mr Bencic stated at [6] to [8]: [6] Jess Agnew sent a further email on 26 August 2020 questioning whether two further documents were actually Beno's documents. They were an executive management team IMS manual and an integrated management system procedures manual. These documents also appear to be copies of documents held by Beno prior to March 2020. [7] These documents are used in tenders and for running projects to ensure that the proper required policies are available. [8] Each time Beno tenders for a project in field of expertise, pipe replacement, it provides a customised set of the documents listed in paragraphs 4 and 6 above in an attempt to win a contract for the work. 14 The documents referred to at [6] are the last two types of document identified in Category A of the categories of discovery. 15 Mr Beno's affidavit states that Ms Agnew sent a further email on 14 October 2020 which attached an invoice dated 2 March 2020 which is said to reveal that an amount of a little over $115,000 was "payable from Civil and Civic Corporation Pty Ltd to Benjamin Moseley … for the creation of the documents which appear to include" the twenty documents which Mr and Ms Bencic examined. Neither the email, nor the invoice, is annexed to Mr Bencic's affidavit. 16 Ms Bencic concluded that Mr Moseley had taken Beno's "files when he resigned and had done a poor job of amending them so that he could use them for his own company … when tendering for projects". Ms Bencic stated: [5] I have reviewed the list of documents that have been provided by Mr Moseley and I understand that he wishes to keep confidential the prices and costs included in a number of documents between October 2020 and July 2023. Those documents relate to projects broadly described as being in these areas: (a) the Wingecarribee Shire Council; (b) Wagga Wagga; (c) Canberra/Queanbeyan; and (d) Cootamundra/Gundagai regional council. [6] They are the types of projects that Mr Moseley was undertaking between March 2017 and March 2020 when he was engaged with Benex for tasks that included tendering for projects. 17 Ms Bencic stated she had a concern that Mr Moseley had used Beno's "documents to win tenders for projects". She stated that Beno relies on work from the councils surrounding the ACT in regional areas and that, over the last few years, Beno had undertaken pipework in Wagga Wagga, Albury, Wingecarribee Shire and other places in and outside of the ACT. She stated: [10] I have the details of the tender documents and contract prices that Benex was using when Mr Moseley left and took that information. Benjamin Moseley had access to that pricing information and our QA documents when he was working for Benex. Without knowing the prices that he used to tender for the projects, and the prices that were included in the contracts, I will not be able to effectively compare the projects to see where he used our information, and our pricing, for his own benefit. [11] I understand that the documents produced in court proceedings should not be used for any other reason. I have no intention to use the pricing information for any reason but to compare what has occurred. Our current projects are priced based on the costs that we know are within our business plus a competitive margin.
CONSIDERATION 18 Parties to proceedings are subject to an implied undertaking only to use documents obtained on discovery for the purposes of the proceedings - see: Harman v Secretary of State for the Home Department [1983] 1 AC 280 and Hearne v Street [2008] HCA 36; 235 CLR 125 at [1]. 19 In the majority of situations, this implied undertaking provides a party required to produce documents on discovery with sufficient protection from misuse of the documents. 20 However, that is not always the case. Where parties to litigation are commercial competitors, for example, the producing party may legitimately be concerned about the damage to its commercial interests by the disclosure of sensitive business information which, once disclosed, cannot realistically be forgotten by a trade competitor. There is a risk that such information might be used, even subconsciously. 21 The onus of establishing confidentiality, and the necessity or desirability of the making of an order for redactions or non-disclosure, is on the party making the claim: Alphapharm Pty Ltd v Lundbeck Australia Pty Ltd [2006] FCA 1358 at [17] (Lindgren J); AstraZeneca AB v Medis Pharma Pty Ltd [2014] FCA 549 at [10] (Besanko J). The question of whether a claim for confidentiality should be upheld or refused involves a balancing of the competing interests of the parties. Some of the relevant considerations were referred to in AstraZeneca at [10]. 22 Harlech's principal case was that production of the discovered documents should not occur until after the affidavit evidence was complete. Harlech also proposed an alternative regime whereby the documents be provided in unredacted form to an independent expert, conceding that the documents will at least be required to allow Beno to commission expert evidence regarding damages. 23 Beno's solicitors opposed production only after affidavit evidence was filed and submitted that the discovered documents, including those in respect of which redactions were sought, were required to obtain instructions from their client as to each of the contracts for which Harlech successfully tendered. During argument at the hearing, however, counsel for Beno accepted that a permissible way forward would be for unredacted versions of the documents to be provided in the first instance to Beno's legal representatives and the independent expert or experts, reserving liberty to apply in the event that some form of disclosure was required in order for Beno to obtain instructions or otherwise properly to prosecute its claim. 24 In my view, the balance weighs in favour of requiring production of unredacted copies to Beno's legal representative and the independent expert at this stage of the proceedings. I have reached this conclusion for the following reasons: (a) It is not in dispute that Mr Moseley was engaged by Beno for a significant period of time from 2017 to 2020, during which he had access to Beno's confidential information. (b) There is evidence which sufficiently indicates for present interlocutory purposes that Mr Moseley has used Beno's documents in the past without permission for purposes other than advancing Beno's commercial interests. (c) Benno will not be able properly to prepare its case if its legal advisors and expert do not have access to unredacted versions of the documents in the list of discovery. (d) It is true that production of unredacted documents is likely to reveal commercially sensitive information, but (at least at this stage) that information will only be disclosed to Beno's legal representatives and independent expert, both of whom are bound by the implied undertaking referred to earlier. 25 I do not accept that the documents would be used to "reverse engineer" a case as submitted by Harlech. The documents will either support an inference that Beno's intellectual property was used or they will not. Whether or not they do depends on a comparison between Beno's documents and the content of the discovered documents and other information. I do not accept the submission that a "practical way forward" would be to require Beno to file and serve its evidence in chief on the claim and the cross-claim, and for Harlech to serve evidence in reply, after which the Court could rule on discovery. The extent of Harlech's and Mr Moseley's use of Beno's intellectual property (if any) is a matter within Harlech's and Mr Moseley's knowledge except to the extent that Beno might fortuitously discover that use by other means, as appears to have occurred in relation to the twenty-two documents provided to Beno by Ms Agnew. It is appropriate for discovery to occur now. That is also consistent with the overarching purpose in s 37M(1)(b) of the Federal Court of Australia Act 1976 (Cth). 26 I would also note that, on 28 March 2024, Mr Tallarita proposed production of the uncontested documents and production of the redacted documents as an interim measure to progress the proceedings. This proposal was not taken up by Harlech. It is not clear why this proposal was not taken up, given that these documents would need to be produced on any view pursuant to the consent order for discovery to be provided by 30 November 2023. This has caused unnecessary and unsatisfactory delay. 27 For these reasons, the Court will make orders for production of the documents in the way mentioned by Friday, 14 June 2024. I certify that the preceding twenty seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.
Harlech Enterprises Pty Ltd
Beno Excavations Pty Ltd