Moody Kiddell & Partners Pty Ltd v Arkell

2.1 The four discovery affidavits 3 MKP commenced this proceeding on 21 December 2011. Because of the issues about discovery, the proceeding has not progressed beyond pleadings. 4 The second respondent, Mr Brooke, is a former employee of MKP. MKP specialises in brokerage services for equipment finance. MKP employed Mr Brooke in early 2002. He had no prior experience in brokerage services for equipment finance having previously been employed as a police officer. MKP employed Mr Brooke as a broker. Mr Brooke worked with the first respondent, another broker employed by MKP, Benjamin Arkell. Mr Brooke rose in MKP's ranks over time. By 2006 he was part of MKP's management committee. This committee comprised senior employees entitled to a profit share in MKP's business and directed MKP's business. In his capacity as a senior employee and member of the management committee Mr Brooke had access to all of MKP's confidential information (or, at the least, information alleged by MKP to be confidential) including all accounting records, terms of trade, client lists, business plans, and human resources records. Mr Brooke was also responsible for managing a large number of MKP clients. In addition to his contract of employment, Mr Brooke was subject to a confidentiality deed which included obligations not to publish, disclose or otherwise communicate MKP's confidential information either during or after his employment, not to compete with or solicit any customer from MKP for 12 months after ceasing employment, and to return to MKP all intellectual property, confidential information and other documents belonging to MKP on ceasing employment. 5 Mr Brooke resigned from MKP on 17 March 2010. MKP alleges that in breach of his various obligations Mr Brooke: (i) copied and retained a list of all of the clients of MKP with whom he had dealt on behalf of MKP, (ii) copied and retained a number of other internal documents belonging to MKP including the forms by which MKP dealt with client applications for finance, (iii) used and disclosed this information to and caused the third respondent to use this information in establishing a business providing brokerage services for equipment finance in competition with MKP, and (iv) used this information to compete with MKP and solicit clients of MKP to transfer their business from MKP to the third respondent. Amongst other breaches of his obligations, MKP alleges in paragraph 105 of its amended statement of claim that during his employment and the period of 12 months after he ceased employment Mr Brooke used the list of his clients when he worked at MKP to approach those clients for the purpose of enticing them to give their business to him and the third respondent and assisted Mr Arkell, who also left the employ of MKP and went to work for the third respondent at Mr Brooke's instigation, to do the same. The particulars to paragraph 105 list numerous entities which MKP alleges were clients of MKP, managed by Mr Brooke when he was employed by MKP and listed as his clients on the MKP document Mr Brooke wrongfully copied and retained, which Mr Brooke is said to have approached and enticed to give their business to the third respondent and Mr Brooke instead of MKP. In his defence Mr Brooke denies the allegations of wrongful conduct against him and, in particular, denies paragraph 105. Amongst other things he also does not admit that the various restraints to which he was subject by reason of the confidentiality deed were valid and enforceable restraints of trade. 6 Given the nature of the claims (particularly the misuse of information) discovery was an issue of concern to MKP from the outset. On 15 February 2012 MKP's solicitors sought confirmation from the solicitors for Mr Brooke and the third respondent that they had been advised as to their discovery obligations and had not to date destroyed documents. The solicitors for Mr Brooke and the third respondent said that the respondents had been advised about these obligations and had not destroyed any documents. Proposed discovery categories were served by MKP on 5 April 2012. 7 Mr Brooke swore his first affidavit in respect of discovery on 3 July 2012. That affidavit caused MKP concern because it identified that from 17 March 2010 to present, intermittently, "numerous emails were permanently deleted and I have been unable to retrieve them." 8 MKP's solicitors wrote to the solicitors for Mr Brooke and the third respondent on 27 July 2012 expressing concern about the deletion of emails which contradicted the earlier advice that no documents had been destroyed. A further affidavit as to discovery was sworn by Mr Brooke on 4 August 2012. This second affidavit said that emails had been deleted between March 2010 "to the date these proceedings were filed, being 21 December 2011" and that the reason for the deletions was that the emails "were of no commercial value" and the hard drive of Mr Brooke's computer had failed in November 2011 and was replaced. 9 MKP's solicitors sought further information about the second discovery affidavit by letter dated 23 August 2012. The discovery issue was deferred, however, pending a mediation which had been ordered. The proceeding did not settle at mediation and MKP's solicitors again pressed for a response to their request for further information about discovery. On 9 November 2012 MKP's solicitors served a notice to produce which, amongst other things, required Mr Brooke and the third respondent to make available for inspection and copying by Michael Khoury, a forensic computer consultant, all computers, servers and electronic storage devices used by them during the period 1 January 2010 to 21 December 2011. The notice to produce was required to be answered on or before 14 November 2012. The solicitors for Mr Brooke and the third respondent said access could not be arranged for 14 November 2012. The notice was not answered and on 15 November 2012 I made orders for production to occur before 5.30pm that day. 10 On 4 December 2012 I ordered Mr Brooke and the third respondent to answer the letter from MKP's solicitors of 23 August 2012. I also ordered that MKP file any interlocutory application in relation to alleged inadequate discovery by 11 December 2012, a period subsequently extended to 21 December 2012. 11 On 21 December 2012 MKP applied for leave to cross-examine Mr Brooke about his discovery affidavits. In support of this application MKP, amongst other things, filed an affidavit from Mr Khoury setting out the results of his examination of the computers produced on 15 November 2012 and of earlier work he had done for MKP examining Mr Brooke's computer at MKP. Mr Khoury identified various USB devices that had been connected to Mr Brooke's computer at MKP. He also identified that Mr Brooke's computer at MKP had been used to download various documents including Mr Brooke's client list. As to the computers used in the business of the third respondent, Mr Khoury reported that the file destruction applications "File Shredder" and "CCleaner" had been installed on the devices at various dates between May and November 2012 including "CCleaner" having been installed on Mr Brooke's work computer on 14 November 2012 (the date the computers were meant to be produced under the notice to produce) and his home computer on 13 November 2012. 12 Mr Khoury explained that "CCleaner" is a free program, available on the internet, which on its default setting enables files to be deleted from the hard drive but not destroyed. However, its default setting can be changed to enable the files to be destroyed. "File Shredder" is another free program available on the internet. It gives the user an option to permanently destroy files by an overwriting process and can also be used to overwrite unallocated storage areas of the hard drive to prevent recovery of files which have previously been deleted using the standard deletion processes. 13 Mr Brooke swore a third discovery affidavit which was filed on 25 February 2013. In this third affidavit Mr Brooke said he had carried out further searches and found additional discoverable documents. The affidavit also said that Mr Brooke noticed his computer was running slowly in 2012 and a friend of his, Alex Kurcubic, told him that a method to permanently free additional disk space on his computer was to install file shredding software known as "File Shredder" and "CCleaner". Mr Brooke, with Mr Kurcubic's help, put this software on his work computer in May 2012 and his home computer in October 2012. Mr Brooke said he "operated the file shredding software from time to time with no particular pattern, with the intention of freeing space on my computer-system hard drives" and he had not used the file shredding software "in response to the present proceedings in any way". He said he used the software on 13 November 2012 to delete material of a personal nature which he thought others would find inappropriate. He said that he had not at any time during the proceeding used the file shredding software to delete any documents relevant to the proceeding. He also said that he had given to Mr Kurcubic for safe destruction the two failed hard drives from his computer in or about November 2012 and Mr Kurcubic told him he would destroy them. 14 When the interlocutory application came before me on 8 March 2013 counsel appearing for Mr Brooke said that he was instructed that all invoices issued by the third respondent (one of the categories of documents required to be discovered) had now been discovered by the production of a USB device on which all such invoices were contained. Counsel appearing for MKP disputed this. I declined to grant leave to MKP to cross-examine Mr Brooke on the basis that the parties needed to resolve what had and had not been discovered on the USB device. 15 On 2 April 2013 Mr Brooke swore his fourth discovery affidavit. By this time it was apparent from correspondence between the solicitors that the USB device did not contain all invoices issued by the third respondent. Accordingly, the hearing on 8 March 2013 had effectively miscarried by reason of the incorrect instructions given by Mr Brooke to his legal representatives. Despite this, Mr Brooke's fourth discovery affidavit did not explain how the error had occurred. Instead, it produced another USB device containing yet more documents not previously discovered. The affidavit did so, moreover, without clarifying whether all relevant documents had yet been produced or not. 16 The matter came before me again on 3 and then 4 April 2013. Having regard to the history of the matter, I ordered that Mr Brooke attend for cross-examination on his discovery affidavits. This occurred on 27 May 2013. The effect of Mr Brooke's evidence was that: (i) he first said he believed and continued to believe that the MYOB files he had produced contained the invoices, (ii) he then said that while the MYOB files did not contain "hard copies" of the invoices they contained the "content of every invoice", (iii) next he said that the MYOB files allowed invoices to be printed but did not contain the actual invoices as the files "populated the invoices every single time you print it", (iv) he could not print some of the invoices from his MYOB files so obtained copies from his accountant, (v) hence, his instructions to his lawyers that he had obtained all documents in a folder he had prepared from the USB device he had produced was wrong, (vi) the invoices were not sequentially numbered because some matters were not billed as they did not proceed, (vii) he deleted emails he thought were of no use, (viii) he thought his second affidavit (which said he had been deleting emails up until the proceeding commenced on 21 December 2011) clarified his first affidavit (which said he had been deleting emails until the date of his first affidavit, which was 3 July 2012), (ix) the true position, however, was he had been deleting emails continuously up until the present, (x) he alone decided which emails to delete based on his criterion of the emails being of no use, and he did not consult his lawyers about what he was doing, despite having been told by them that he should not destroy any documents relevant to the proceedings, (xi) he installed the file shredding software on his computers after he knew he had discovery obligations in this matter, (xii) he did so because Mr Kurcubic told him this was a way to speed up his computer, (xiii) the material he deleted in November after being aware he had to produce his computers for inspection was pornography but he did not tell his lawyers he was running the file shredding software in the days before his computers had to be produced, (xiv) he did not then know that the effect of running the file shredding software was to scrub his computer as he thought it would just make the computer run faster, and (xv) he could not say that he had not deleted documents relevant to this case. 17 MKP then filed the current interlocutory application seeking an order that the amended defence of Mr Brooke and the third respondent be struck out as an abuse of process of the Court.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (5 paragraphs)

Parties

Cases Cited (6)

Cited By (8)