Howden Australia Pty Ltd v Minetek Pty Ltd

Federal Court of Australia|2019-11-11|Before: Mr J, Robertson J, Jagot J, Stewart J

Order 1 sought by the applicants' interlocutory application filed on 28 August 2019 be refused.
In respect of order 5 of the applicants' interlocutory application filed on 28 August 2019, on or before 17 January 2020 the respondents give verified standard discovery, not including as to the quantum of any pecuniary relief, where possible identifying the source within the respondents' records of any document listed, and, where possible, where that source was an electronic storage device, the user or users of each such device.
Order 5 be otherwise refused.
The balance of the applicants' interlocutory application filed on 28 August 2019 be stood over to a date to be fixed.
Costs reserved.
The proceedings be stood over to 29 January 2020 at 9:30 AM before Robertson J.
Liberty to apply on 3 days written notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 These proceedings were commenced on 27 May 2019. The background to the case is explained in an earlier interlocutory judgment of Jagot J: Howden Australia Pty Ltd v Minetek Pty Ltd [2019] FCA 981. The matter came before me when it was anticipated that an early final hearing would occur. The parties no longer ask for that to happen. 2 In short, as explained in the interlocutory judgment to which I have referred, the applicants are the owners and licensees of information they claim to be confidential relating to the design and construction of large industrial-scale fans, known as mixed flow fans, which are used in the mining industry to ventilate mine shafts. The third respondent was employed as Howden Australia's senior design engineer and had access to certain information claimed to be confidential. On 1 September 2016, he left Howden's employ and went to work with the first respondent Minetek. At that time Minetek did not produce mixed-flow fans for mine ventilation. Five months later Minetek filed two provisional patent applications for mixed flow fans naming the third respondent as the inventor. 3 Howden commenced this proceeding alleging breach of confidence, breach of contract, and misleading or deceptive conduct. It unsuccessfully sought an interlocutory injunction based solely on the alleged breach of confidence. 4 The proceedings have now reached the stage where there has been filed an amended statement of claim (26 August 2019) a defence (4 September 2019) and a reply (11 September 2019). On the present interlocutory application no remedy has been sought on either side in respect of any claimed deficiency in any of the pleadings I have just identified. 5 On 27 May 2019, Stewart J made the following order, which has not been discharged or varied: 5. Until further order, each of the Respondents, whether by themselves, their directors, servants or agents or otherwise, preserve and not alter, destroy, erase or otherwise part with any of the following in their possession or under their power or control: (a) any document containing any Howden Confidential Information; (b) any: (i) design or engineering drawings for; (ii) specifications for; or (iii) other document that includes specifications for, or calculations in relation to, the design or manufacture of, the Howden Mixed Flow Fan Products, or components thereof; or (c) any: (i) design or engineering drawings for; (ii) specifications for; or (iii) other document that includes specifications for, or calculations in relation to, the design or manufacture of, the High Output Axial Fan, or components thereof.

The applicants' interlocutory application 6 I do not set out the definitions and schedules to the applicants' interlocutory application but it is convenient to set out the substantive orders sought so as better to follow the disposition of the application and my reasons for that disposition. The applicants seek the following: 1. An order that each of the Respondents file and serve an affidavit that explains the steps they have each taken to comply with order 5 of the orders made by Stewart J on 27 May 2019. 2. An order that the Respondents provide to the Applicant's solicitors a list of: a) each Relevant Storage Device. b) the user(s) of each Relevant Storage Device; c) the serial number or other unique identifier of each such Relevant Storage Device; d) the present location of each Relevant Storage Device; e) the on disk encryption key for each Relevant Storage Device. 3. An order that each of the Respondents make available for forensic imaging by Mr Rodney McKemmish, each of the Relevant Storage Devices listed by that Respondent in response to order 2. 4. An order that, in respect of any Forensic Images taken by Mr Rodney McKemmish in accordance with order 3, the Imaging Protocol set out in Schedule A to this application be followed by the parties. 5. An order that the Respondents give discovery of all documents falling within the categories for discovery set out in Schedule B to this Application. 7 I shall not set out all the definitions contained in the applicants' interlocutory application but, relevantly, "Storage Device" is defined to mean: (a) network server(s); (b) personal computer(s) (be they desktops or laptops); (c) tablets or smart phones; (d) External Drive(s); (e) cloud based storage. "Relevant Storage Device" is defined to mean each Storage Device: (a) used to create Documents comprising the Design Work; (b) used to access files used in the course of the Design Work; (c) used to store Documents created or used in the course of the Design Work; (d) used to copy Documents to a Minetek Location for use in the Design Work; (e) used to copy Documents comprising Design Work from a Minetek Location; (f) used to store Howden Documents; (g) used to create Documents including Howden Documents; (h) used to copy Howden Documents and/or Documents including Howden Documents to a Minetek Location; and/or (i) used to copy Howden Documents and/or Documents including Howden Confidential Information from a Minetek Location.

The submissions of the parties summarised 8 The applicants submit that in order to ensure the documents relevant to the case are preserved, it is necessary for the respondents' computers and storage devices to be imaged. The contention appears to be that the earlier order of Stewart J made on 27 May 2019 requires that to be done. 9 The applicants submit that their real concern at this stage is not so much pursuing the respondents for any breach of the 27 May 2019 order but to stop whatever loss has been occurring on the respondents' system by the making of a forensic image now. Orders 2 and 3 were squarely aimed at ensuring that the subject matter of the proceeding was preserved, Senior Counsel submitted. 10 The applicants submit that discovery in the categories set out in their interlocutory application is necessary and appropriate, and will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. The applicants submit that discovery by categories, rather than standard discovery, will reduce the burden on the respondents by pinpointing the documents relevant to the applicants' allegations. The applicants provided in Schedule A to their written submissions a brief explanation of the relevance of each proposed category. 11 The respondents submit there is no justification shown for proposed order 1. They submit that no common sense construction of the preservation order in question leads to the suggestion that in order to preserve documents, the respondents were not to make normal use of their computer system. Minetek accepts that it has continued to use its computer system for its normal business operations. The respondents submit that the central issue in dispute in these proceedings is whether Minetek used information confidential to Howden to design and develop the Minetek fan. They submitted originally that the Court may consider it appropriate to make an order that the respondents provide verified standard discovery of all documents in their possession or control relevant to the development and design of the Minetek fan. They had no objection to that order. Senior Counsel for the respondents made clear on the resumed interlocutory hearing that his clients accept that an order for general discovery should be made, but contended for a threshold limitation on their obligations, to which I will return. 12 There is a dispute as to the evidence of Mr Stack, who alleges that Minetek was in possession of confidential Howden documents at the time of designing and developing the Minetek fan. It appears that the applicants assert that on that basis non-standard discovery by categories is warranted.

Consideration 13 As to proposed orders 1-4, it was explained by Senior Counsel for the applicants that proposed orders 2-4 are now sought further, or in the alternative, to proposed order 1. 14 As to proposed order 1, I infer that the respondents have not imaged their relevant devices. However, I am not persuaded that it is appropriate to make an order that each of the respondents file and serve an affidavit explaining the steps they have each taken to comply with order 5 of the orders made by Stewart J on 27 May 2019. This is because I would not construe that order as requiring imaging. If the order required the respondents to image their computers or storage devices potentially containing the information the subject of that preservation order then in my view the order would have said so. Similarly, if the order had required the respondents to use (or not to use) their computers or storage devices so as to preserve the data in its form on 27 May 2019 then, in my opinion, equally, it would have said so. I was told by Senior Counsel for the applicants that the issue of imaging was not debated before Stewart J. 15 As to proposed orders 2-4, I also do not see it as appropriate at this stage that each of the respondents' relevant storage devices as broadly defined in the applicants' interlocutory application should be required to be made available for forensic imaging. 16 In my view, given the stage which the proceedings have presently reached, although imaging may in due course be appropriate, I find it is not presently appropriate by reference to the wide-ranging scope of the orders sought by the applicants. I base this conclusion in part on the time which has elapsed since 27 May 2019 and in part because standard discovery, to which I next turn, requires the disclosure of documents that are, or have been, in the party's control: see r 20.14(1)(c) of the Federal Court Rules 2011 (Cth). Senior Counsel for the applicants submitted that the imaging exercise would avoid any issues arising under r 20.14(1)(c). That may be so but I would not propose to anticipate the outcome of the respondents' obligations under the rule. I do not accept, in anticipation, that the respondents will not comply with their obligations. 17 If there is an issue about deleted documents then that can be dealt with once discovery is given when any such issue will no longer exist in the abstract. I do not accept the submission made by Senior Counsel for the respondents that some express limitation should now be put on the respondents' general discovery obligations by deeming them to have undertaken their search obligations in certain circumstances. I do not see it as appropriate to seek to define beforehand what is a reasonable search within r 20.14(1)(b) of the Federal Court Rules. 18 Turning then more generally to discovery, I accept that discovery before evidence is appropriate. I find that ordering discovery at this point will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. 19 However, in my opinion, the applicants' proposed order 5 and the categories set out in Schedule B to the interlocutory application are at once too detailed and too contentious. The appropriate course now is to make an order for verified standard discovery. Thereafter, if the applicants consider it necessary or appropriate to bring an application in respect of what they may then regard as inadequate discovery, they may do so. 20 Speaking generally, I am not in favour of ordering discovery by categories at a relatively early stage where the parties do not agree either with such an approach or with the categories. It may be that some or all of the 21 categories will be discovered under standard discovery. No doubt the respondents will be aware of those categories, the applicants' explanation as to their relevance and indeed the applicants' list of issues in the present interlocutory application at paragraph 5, in deciding whether particular documents are discoverable. 21 It may be that the applicants' categories are, as Senior Counsel for the applicants submitted, narrower than general discovery but I do not see it as apposite in the present circumstances to relieve the respondents of the task of assessing relevance in giving standard discovery in accordance with r 20.14 of the Federal Court Rules. 22 As to what I understood, at least at the outset of the hearing of this interlocutory application, to be an alternative category proposed by the respondents in response to the applicants' categories, I would refuse to make an order in such terms and for the same reasons. 23 As I have indicated, I am not persuaded that at present it is in the interests of justice to proceed by reference to categories where that approach is contested and where it is not sufficiently apparent what may remain in dispute after standard discovery is given.

Orders 24 I propose to make orders accordingly. I will give counsel an opportunity to be heard in relation to the detail of those orders. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Federal Court Rules 2011(Cth)rr 20.11, 20.14

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