4
Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434; [1987] FCA 266
DC Payments Pty Ltd v Next Payments Pty Ltd (2016) 51 VR 151; [2016] VSC 315
Del Casale v Artedomus (Aust) Pty Limited (2007) 165 IR 148; [2007] NSWCA 172
Deta Nominees Pty Limited v Viscount Plastic Products Pty Ltd [1979] VR 167
Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509
Faccenda Chicken Ltd v Fowler [1987] Ch 117
Forkserve Pty Ltd v Jack [2000] NSWSC 1064
Geraghty v Minter (1979) 142 CLR 177; [1979] HCA 42
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6
Halliday and Nicholas Insurance Brokers Pty Limited v Corsiatto [2001] NSWCA 118
Herbert Morris Limited v Saxelby [1916] 1 AC 688
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64
Krishell Pty Ltd v Nilant (2006) 32 WAR 540; [2006] WASCA 223
Metrans Pty Ltd v Courtney-Smith (1983) 8 IR 379
Mid-City Skin Cancer and Laser Centre v Zahedi-Anarak (2006) 67 NSWLR 569; [2006] NSWSC 844
Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535
Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133
Nottingham University v Fishel [2000] ICR 1462
O'Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33
Ocular Sciences v Aspect Vision Care Ltd (No 2) [1996] EWHC Patents 1; [1997] RPC 289
Pilmer v Duke Group Limited (in liq) (2001) 207 CLR 165; [2001] HCA 31
Robb v Green [1895] 2 QB 1
Rosewood Advertising Pty Ltd v Hannah Marketing Pty Ltd [2000] NSWSC 1034
Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2007) 69 NSWLR 198; [2007] NSWSC 104
Southern Real Estate v Dellow (2003) 87 SASR 1; [2003] SASC 318
Stenhouse Australia Ltd v Phillips [1974] AC 391
Sullivan v Sclanders (2000) 77 SASR 419; [2000] SASC 273
Taypar Pty Ltd v Santic (1989) 21 FCR 485; [1989] FCA 543
Trendtex Trading Corp v Credit Suisse [1982] AC 679
United States v Grossman 843 F 2d 78 (2nd Cir, 1988)
Victoria International Container Terminal Ltd v Lunt (2021) 95 ALJR 363; [2021] HCA 11
Vokes v Heather (1945) 62 RPC 135
Warman International Limited v Dwyer (1995) 182 CLR 544; [1995] HCA 18
Williams v Spautz (1992) 174 CLR 509; [1992] HCA 34
Woolworths Ltd v Olson (2004) 184 FLR 131; [2004] NSWSC 849
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65
Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458
Texts Cited: JD Heydon, MJ Leeming, PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, LexisNexis, 2014)
Category: Principal judgment
Parties: LV6 Sydney Pty Ltd (formerly known as Nexgen Sydney Pty Ltd) (First Plaintiff)
Business Telecom Australia Pty Ltd (Second Plaintiff)
Samantha Barakat (First Defendant)
Shane Mitchell (Second Defendant)
Mina Youssef (Third Defendant)
Easytel Australia Pty Ltd (Fourth Defendant)
Easytel Group Pty Ltd (Fifth Defendant)
Representation: Counsel:
R Marshall SC with C Cassimatis (Plaintiffs)
A Hourigan (First, Third, Fourth and Fifth Defendants)
[2]
Solicitors:
Madison Marcus Law Firm (Plaintiffs)
United ACL (First, Third, Fourth and Fifth Defendants)
File Number(s): 2019/370803
Publication restriction: Nil
[3]
Judgment
HER HONOUR: In this matter, the plaintiffs, Nexgen Sydney Pty Ltd (Nexgen), which is now known as LV6 Sydney Pty Ltd (LV6) but to which I will continue to refer as Nexgen, and Business Telecom Australia Pty Ltd (Business Telecom), seek permanent injunctions to restrain a range of defendants from using what is alleged to be the plaintiffs' confidential information; as well as an enquiry into damages or an order for account.
After judgment was reserved in December 2020, there was an application by the plaintiffs effectively to reopen the proceeding in order to amend the pleadings to take into account an assignment that had occurred in the context of what I understand to have been a restructuring within the Nexgen/Business Telecom group of certain assets the subject of the injunctive relief that has here been sought. I will explain the circumstances of that application in due course. However, it led to the unfortunate delay in the determination of this proceeding since final submissions were not received on the issues raised by the amendment to the pleadings until September last year.
Briefly, by way of introduction, both the plaintiffs, on the one hand, and, on the other hand, what I will collectively refer to as the Easytel entities (namely, Easytel Australia Pty Limited (Easytel Australia), the fourth defendant; and Easytel Group Pty Limited (Easytel Group), the fifth defendant) were at the relevant time in the business of selling telecommunications systems hardware and associated equipment. In particular, the plaintiffs sell telecommunications solutions including phone systems, printers and copiers, security systems and services related to voice, internet and data. The Easytel entities similarly operate a business whereby they sell telecommunications hardware and associated office equipment and telephone, data and internet line rental. There is, however, a significant difference in the size of the competing businesses - the plaintiffs being part of a more established and larger organisation than the more recently established Easytel, which only commenced operation in September 2019 with approximately five or six employees.
The plaintiffs allege that the first, second and third defendants (to whom I will refer collectively as the individual defendants), being Ms Samantha Barakat, Mr Shane Mitchell and Mr Mina (Mark) Youssef, each of whom was previously employed with either Nexgen or Business Telecom, have taken or used confidential information of the plaintiffs (which they created or to which they had access during their employment with the plaintiffs), and have used it with their subsequent employer (Easytel Australia and/or Easytel Group).
[4]
Procedural history of the proceeding
Before setting out the chronology of events in more detail, it is convenient at this stage to note the procedural history of the proceeding to which I have briefly adverted above.
[5]
Commencement of the proceeding
The proceeding was commenced on 25 November 2019, by way of summons supported by an affidavit sworn on 25 November 2019 by Mr Ayoub (managing director of both of the plaintiff companies). In that summons, relief (including interlocutory relief) was sought against each of the first to fourth defendants.
By consent, on 29 November 2019 orders were made, recording the proffering to the Court of certain undertakings by Ms Barakat and Mr Youssef. Relevantly, the following orders were made:
10. The Court notes the first and third defendants' undertaking to the Court to serve on the plaintiffs by 13 December 2019 an affidavit which:
(a) identifies whether the first defendant [Ms Barakat] and third defendant [Mr Youssef] or [to] their knowledge, any other person, has photocopied, printed, downloaded or copied to any device able to store or read electronic data, divulge or disclose to any other person other than an employee or director of the plaintiffs, sent by electronic mail from any email account used or accessed by the first defendant and third defendant, or preserved in physical or electronic form any information belonging to the plaintiffs which came to the knowledge or possession of the first defendant and third defendants in relation to its clients in schedule A by reason of their employment with the plaintiffs and in respect of each document or piece of information so identified:
(i) the details of the date on which that occurred;
(ii) the name of the recipient; and
(iii) the present electronic or physical location of all versions or copies of the documents or information to the best of the first, second and third defendants' knowledge, information or belief,
(b) attaches copies of all documents in the first defendants' [sic] and third defendants' [sic] possession, custody, power or control which evidence such matters; and
(c) confirms that the information and documents so provided constitute a complete and accurate disclosure of such matters or things.
Restraints
First defendant
11. The Court notes the first defendant's undertaking to the Court until 29 February 2020, unless discharged earlier, not to:
(a) solicit, canvass, approach, accept approaches from, or attempt to entice away or provide services to any entity in the schedule which is annexed and marked "A" with whom the first defendant was involved during the course of her employment with the second plaintiff;
(b) canvass, solicit, interfere with or entice any employee or subcontractor of the second plaintiff, nor engage any such employee or any subcontractor (either directly or indirectly) or engage any such employee or any subcontractor (either directly or indirectly) from carrying out duties similar to those he, she or it performed when employed by the second plaintiff.
Third defendant
12. The Court notes the third defendant's undertaking to the Court until 2 March 2020, unless discharged earlier, not to:
(a) solicit, canvass, approach, accept approaches from, or attempt to entice away or provide services to any entity in the schedule which is annexed and marked "A" with whom the third defendant was involved during the course of his employment with the second plaintiff;
(b) canvass, solicit, interfere with or entice any employee or subcontractor of the first plaintiff, nor engage any such employee or any subcontractor (either directly or indirectly) or engage any such employee or any subcontractor (either directly or indirectly) from carrying out duties similar to those he, she or it performed when employed by the first plaintiff.
13. The undertaking[s] to the Court given by the First Defendant and Third Defendant are made without any admission and do not displace the plaintiffs' onus should these Defendants withdraw their undertaking, or the plaintiffs seek to vary or extend any injunction.
[6]
Norwich affidavits
On 13 December 2019, each of Ms Barakat and Mr Youssef filed and served an affidavit (eponymously referred to, by reference to Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133, as the Norwich Affidavits), deposing to the matters required by Order 10 of the orders made on 29 November 2019.
In her affidavit of 13 December 2019, Ms Barakat deposed that the spreadsheets exhibited at pp 3-73 of Exhibit EA-2 to Mr Ayoub's 29 November 2019 affidavit (i.e., the EA-2 Spreadsheets) "consisted of prospects on which [Ms Barakat] had worked during [her] employment at Business Telecom" (see at [12.1] of Ms Barakat's affidavit, affirmed 13 December 2019).
However, while the Easytel defendants accept that Ms Barakat has acknowledged that the EA-2 Spreadsheets "consisted of prospects which [she] had worked on during [her] employment at Business Telecom", they emphasise that Ms Barakat does not admit that she created the EA-2 Spreadsheet that has been admitted into evidence. There is a hot dispute as to the provenance of the EA-2 Spreadsheet, it being the Easytel defendants' contention that this document is a "mashup" (or, less colloquially, an amalgamation) of information contained on the spreadsheet as it was stored on Ms Barakat's computer at Nexgen together with information added to the version of the spreadsheet on which Ms Barakat worked when she was later at Easytel (as I explain in due course).
Further, Ms Barakat's evidence is that, while the EA-2 Spreadsheet as exhibited to Mr Ayoub's affidavit only demonstrates information of a professional nature, the entire Excel file (tendered in due course as Exhibit SB-1 to Ms Barakat's affidavit of 13 December 2019, and marked as Exhibit 1 during the course of the hearing) consisted of about 36 tabs, the majority of which were comprised of spreadsheets created for Ms Barakat's own personal use. Ms Barakat says that this was personal information compiled over a period of years, including such matters as travel plans and personal "to do" lists; and Ms Barakat says that, because of this, she did not see any issue in transferring this information upon cessation of her employment with the corporate plaintiffs. Indeed, Ms Barakat's evidence is that the corporate plaintiffs were aware that Ms Barakat was taking her personal information with her (reference here being made to the communication by the plaintiffs to the effect that Ms Barakat should take her personal things with her). In cross-examination, Ms Barakat opined that, in light of the plaintiffs' knowledge of the existence of the spreadsheet, she had presumed that they would have told her not to retain a copy thereof.
[7]
Statement of claim
After the initial interlocutory regime was put in place, the matter then proceeded by way of pleadings. On 7 April 2020, the plaintiffs filed their statement of claim in which allegations were made against the first to fourth defendants (the fifth defendant not yet having been joined to the proceeding) of breaches of confidence; and orders were sought for damages or compensation as well as the orders restraining those defendants from, inter alia, dealing with the confidential information of the plaintiffs. As part of the relief there sought, the plaintiffs claimed an order that:
… the First, Second, Third Defendants…be restrained until the conclusion of this matter, or until further order, from using, copying or distributing or in any other way dealing with the confidential information defined in paragraph 17 [of the statement of claim] and as defined in clause 20.6 of the Barakat Employment Agreement [the text of which I reproduce in due course] …
Confidential information is defined (at [17] of the statement of claim) as "information from the client Prospects", including (but not limited to):
a. key decision makers;
b. direct contact information of the key decision makers;
c. the make and model of phone systems and other hardware currently in use;
d. how many handsets are in use;
e. how many cordless units are in use;
f. whether the client Prospect owns or leases the hardware;
g. how many current landlines the client Prospect has;
h. the current internet provider and current spend;
i. the type of internet in use (i.e. ADSL or NBN); and
j. the contract term and months remaining on any of the above services.
Annexure A to the statement of claim listed 13 entries which the plaintiffs asserted were clients who the individual defendants had allegedly sought to procure for Easytel using the confidential information of the plaintiffs.
The Easytel defendants point out that Mr Ayoub, in his affidavits of 25 November 2019 and 29 November 2019, referred to the entities in Annexure A as "prospects" (not clients). Thus, the Easytel defendants emphasise that none of these companies may actually have been a client of the plaintiffs at the time the proceeding was commenced (but might simply have been a "prospect" - either because it was a data entry purchased from a contact list provider or because it had otherwise been "Google searched" by a telemarketer or the like).
[8]
Filing of defences
On 11 May 2020, the first, third and fourth defendants filed defences to the statement of claim.
[9]
Mr Mitchell's first affidavit
Also on 11 May 2020, Mr Mitchell signed the first version of an affidavit that was ultimately sworn on 12 May 2020 (to which I refer in more detail in due course) and in which he deposed to matters as to the use of the plaintiffs' confidential information (on which the plaintiffs relied to obtain further interlocutory relief). At some point around this time one or more of the Easytel staff became aware that Mr Mitchell had signed an affidavit.
[10]
Anton Piller order - 15 May 2020
At 10.00am on 15 May 2020 (a Friday), the plaintiffs made an ex parte application by telephone to Williams J, sitting as the Equity Duty Judge, for an Anton Piller order to search Easytel's offices at Parramatta for the purposes of taking into custody and copying, inter alia, various electronic devices, including computers, servers, laptops, mobile devices (telephones and tablets) and removable storage devices, and seeking to gain access to all client storage accounts and cloud email accounts. Due to the COVID-19 pandemic, duty applications in the Equity Division were then being heard only by telephone (via dial-in details provided by the judge's associate). I note this because, as I explain below, the plaintiffs contend that Easytel was "tipped off" about a "raid" to take place on Friday, 15 May 2020 (see the evidence summarised below) but it is not clear how Easytel's lawyers (who are reported to have been the source of the "tip") would have gleaned that information.
Due to the exigencies of the duty list on that day, the plaintiffs' ex parte application was stood down in the list and not heard until after the luncheon adjournment. At about 3pm that day, her Honour made the search and seizure orders sought by the plaintiffs (the Anton Piller Orders).
The timing of the making of the Anton Piller Orders became of some relevance because, as adverted to above, there was evidence from two witnesses (Mr Bill Tsioumas and Mr Jad Andraos - both of whom worked for a telecommunications supplier called TelPro at the relevant time) to the effect that Mr Hanna, the director of Easytel) had been told that a raid was imminent; and there was evidence from the independent solicitor appointed under the search orders (Mr Simon Maxwell) to the effect that when the search did take place on Monday 18 May Mr Hanna had asked him whether the search should have taken place on the Friday. I consider that evidence in due course.
The significance of the suggestion that there was advance notice of the "raid" is that the plaintiffs formed the view that hard copy documents and electronic storage devices had been removed from Easytel's offices and that some electronic documents were deleted by the defendants (and presumably if there had been advance notice of the "raid" this might have provided an opportunity for this to occur). The plaintiffs have contended that the inference to be drawn is that the removal or deletion of documents or devices was done in order to avoid relevant information being obtained by the plaintiffs. I return to this contention in due course.
[11]
Execution of Anton Piller orders
Returning then to the chronology of events in relation to the proceeding, the search order was not in fact executed until Monday, 18 May 2020 at about 9.20am. The then solicitors for the plaintiffs (Mr Andrew Stewart and Mr Sam Saadat, of Stewart & Associates) accompanied by the independent solicitor, Mr Maxwell, and the independent computer expert, Mr Le Roux, attended the Easytel office premises and seized numerous documents and data.
[12]
Access to forensic images
On execution of the Anton Piller Orders, Mr Le Roux downloaded forensic images of the relevant computers and copied those images onto two hard drives. However, there was then considerable delay as claims were made for legal professional privilege (in particular, there was delay in determining what documents were the subject of the privilege claims and the need to separate the privileged material on the computer hard drives). Further, access by the defendants to the hard drives was resisted on the basis that there were commercially sensitive documents of the plaintiffs on those hard drives.
Somewhat ironically, both sides have been anxious to protect their commercially sensitive material; and both sides seem to suspect the other of misuse of (or the motivation to misuse) such material in order to compete with the other side. So, for example, much complaint was made by the Easytel defendants as to the fact that the plaintiffs are now in possession (through their legal representatives) of the entirety of their client databases, with the suggestion that the plaintiffs could use that to force the Easytel defendants out of business - an assertion that is difficult to sustain insofar as access was restricted to the legal representatives who would face ethical and professional difficulties (and potentially grave professional consequences) were that information to be provided to the plaintiffs in breach of any ethical or other restrictions on such disclosure
[13]
26 June 2020 - notice of motion
On 26 June 2020, the plaintiffs filed a notice of motion (which the Easytel defendants say was oppressive) in which they sought, inter alia, the following interlocutory relief:
… the first, second, third, and fourth defendants…and each of the first, second, third and fourth respondents … until the conclusion of this matter, or until further order, from directly or indirectly canvassing, soliciting, or dealing with, counselling, procuring or assisting another person to canvass, solicit or deal with any client listed in the client list marked confidential exhibit EA-7.
In support of that application, an affidavit sworn on 26 June 2020 by Mr Ayoub was filed, in which (at [72]) Mr Ayoub deposes that Confidential Exhibit EA-7 (which was admitted into evidence as Confidential Exhibit J) contains a Confidential Client List comprising: current clients of the plaintiffs; or prospects whose details have been added to the CRM from the calls made by employees of the plaintiffs during the course of their employment (including by the three individual defendants). The Easytel defendants point out that the plaintiffs thus here concede that not all the names in Exhibit EA-7 are clients of the plaintiffs.
[14]
Application to discharge Anton Piller orders - 4 August 2020
On 4 August 2020, Easytel Australia filed a notice of motion seeking to discharge the Anton Piller Orders. That application was dismissed by Williams J on 31 August 2020.
Pausing here, the Easytel defendants contend that both the application for, and the making of, the Anton Piller Orders have proven futile in relation to the disposition of the real issues in this matter and (having regard to the concession by the independent computer expert made in the course of the proceeding as to the allegedly missing computer operating system - see below) have unduly complicated and lengthened the proceeding as a whole and the hearing of the matter. This submission can only be relevant to the ultimate issue of costs (and I note that in their written submissions, the Easytel defendants sought the opportunity in due course to make an application for costs in relation to the interlocutory proceedings). I would add, however, in the context of identifying applications that have extended the course of the proceeding, that the stance taken by the Easytel defendants themselves on the application made by the plaintiffs to amend the pleadings after judgment reserved (which related to the apparent restructuring in early 2021 of the plaintiffs' business - see below) and the consequential delay in the provision of final submissions also had that effect.
[15]
Notice of motion to restrain plaintiffs' then solicitors from acting
On 7 August 2020, new solicitors commenced acting for the plaintiffs (following the filing of a notice of motion by the defendants to restrain the existing solicitors from continuing to act on the basis of an allegation that there had been an abuse of process in the taking of an affidavit affirmed on 12 May 2020 by Mr Mitchell - that motion not ultimately being determined because the plaintiffs' solicitors, without admission, ceased to act for the plaintiffs in the proceeding). I consider below the allegations made as to abuse of process. Suffice it here to note that I do not accept that any such abuse of process on the part of the former solicitors has been established (and, given the seriousness of such a finding, I would at the very least have given the former solicitors an opportunity to be heard on the application before making any such finding).
[16]
Application for access to Mr Roux' forensic images of the hard drives
Returning again to the chronology in relation to the proceeding, application was made by the plaintiffs for access to Mr Le Roux' downloaded images in order to ascertain whether there had been (as the plaintiffs contended) any deletions from the defendant's computer (something that it was not possible to do from the forensically imaged copy).
On 21 August 2020, I made orders for access by the plaintiffs' computer expert (Mr Bell) to the relevant computer images downloaded by Mr Le Roux (on an undertaking not to disclose certain material without leave) and to prepare a report by 25 August 2020. The matter had at that stage been listed, with expedition, for a two day hearing to commence on 7 September 2020.
[17]
Plaintiffs' computer expert
On 3 September 2020, the Thursday before the hearing was listed to commence, there was an application brought by notice of motion before Rein J by the plaintiffs for access to confidential documents. His Honour made orders in accordance with the plaintiffs' short minutes of order, which provided that the legal representatives for the plaintiffs were to be partially discharged from their written undertakings such that they were permitted to disclose for inspection to the plaintiffs: tax invoices discovered by the defendants addressed to the entities in Annexure B to the notice of motion; and contracts produced by GC Leasing Sydney Pty Limited to which the entities in the list marked Annexure B were parties. The balance of the notice of motion was stood over until the hearing, listed to commence on 7 September 2020.
On the following day (4 September 2020), i.e., the Friday before the hearing was to commence, the plaintiffs served an expert report from their computer expert (Mr Bell), in which Mr Bell concluded (as noted above), by reference to the computer images he had been given, that there was no computer operating system in place on two computers that had been seized on the execution of the search orders (Ms Barakat's computer - AF2001; and Ms Attard's computer - AF2003).
Mr Bell concluded in this report that the computer operating system for AF2003 had been deleted on the morning of 12 May 2009 (before Williams J made the Anton Piller Orders but, the plaintiffs contended, after Mr Mitchell had affirmed his 12 May 2009 affidavit in which Mr Mitchell deposed to the use of the plaintiffs' documents and to having observed various things in the Easytel offices in that regard). As I understand it, on the timeline to which Mr Bell referred, the deletion was apprehended to have occurred before an email on 13 May 2020 forwarding to Mr Youssef a copy of Mr Mitchell's 12 May 2020 affidavit - and I note that various of the defendants' witnesses were cross-examined as to when they became aware that Mr Mitchell had provided an affidavit to the plaintiffs.
As noted above, the conclusion that the computer operating systems were missing was subsequently established to be simply wrong - based on Mr Le Roux's admitted error in failing to discover the SSDs containing the operating system beneath a piece of metal under which it was located (for which "oversight" he apologised to the Court and the parties). Thus, this issue can only be said to have been an expensive (and time-wasting) red herring.
[18]
Plaintiffs' amended statement of claim
The hearing commenced on 7 September 2020. Since Mr Mitchell was clearly aware of the matter having been listed for hearing (as he was to be a witness at the hearing and I was informed that he was present in the Court at the time), I proceeded to hear the matter without him having formally appeared or filed a defence in the proceeding (see r 29.7 of the Uniform Civil Procedure Rules 2005 (NSW)). As I understand it, the plaintiffs here seek the entry of judgment against Mr Mitchell as well as the other defendants (which seemed somewhat surprising given Mr Mitchell had apparently co-operated with the plaintiffs by providing an affidavit for use in the plaintiffs' case, although of course it would be a matter for the plaintiffs whether they chose to enforce any such judgment).
At the commencement of the hearing on 7 September 2020, the plaintiffs sought, and (over the initial objection by the defendants which was ultimately not pressed) I granted, leave to file an amended statement of claim, adding Easytel Group as the fifth defendant in the proceeding (on the basis that most of the billing was done by that defendant).
The Easytel defendants point out that there is a reference (at [14] of the amended statement of claim) to "Annexure A" in relation to the contention there made that the individual defendants contacted 13 "Prospects" who were clients of the plaintiffs. The Easytel defendants say that the plaintiffs appear at the hearing effectively to have abandoned these propositions (though not on their pleading). There was no demur to this from the plaintiffs in their submissions and I have proceeded accordingly. In any event, there is only evidence that one entity from the list in Annexure A has been contacted, being Dagazo, to which I have already referred.
More pertinent (and this was identified as the crucial part of the amendment) was the allegation at [30B] of the amended statement of claim to the effect that the Easytel defendants had engaged in "further conduct" by using the confidential information after the termination of the employment of the first to third defendants.
Annexed to the amended statement of claim, as Annexure B, was a document headed "Easytel Client Exposure List". Annexure B lists the details of additional entities alleged to have been procured by Easytel using the alleged confidential information of the plaintiffs. The Easytel defendants understand the Annexure B list of entities to be those common to invoices issued by Easytel to current customers and Confidential Exhibit EA-7 (the list of alleged prospects and customers of the plaintiffs).
[19]
Further interlocutory application - 8 September 2020
Meanwhile, on 8 September 2020, the plaintiffs sought leave to file a notice of motion seeking interim orders to restrain Easytel from dealing with its business and to restrain use of the plaintiffs' alleged confidential information (see T 159ff). After some debate, limited interlocutory orders were made (on the usual undertaking as to damages) and without admission on the Easytel defendants' part. The interlocutory relief was made by me on the basis that, having regard to the allegation as to the deletion of the operating systems from Easytel's computers (later proven to be incorrect), I considered that there was a serious question to be tried as to the alleged use of the plaintiffs' confidential information and that the balance of convenience lay in the grant of such relief to preserve the status quo. The Easytel defendants say that, in hindsight, this allegation as to deletion of operating systems was "at least misguided". That is an understatement - it was simply wrong. However, as explained, the fault for this lies not at the feet of any of the parties; it was an error by the computer expert(s).
[20]
Further expert examination of computers
The lay evidence concluded on 14 September 2020. The matter was then adjourned to permit further expert evidence to be obtained. Mr Le Roux was directed to answer a number of questions going to the issue of the purportedly missing operating system and deleted files and, towards the end of October 2020, in response to those questions Mr Le Roux conceded that he did not see the SSD which was located under a metal object in the computer (see his report of 20 October 2020 - marked as Exhibit W) and that his conclusion in relation to AF2003 (being Ms Attard's computer) was wrong.
Further, it was said that Ms Barakat's computer (AF2001) had something on the server that indicated that there was activity on the operating system; and there was a similar conclusion in relation to Ms Attard's computer (which was confirmed by Mr Le Roux on 13 November 2020).
The expert called by the Easytel defendants, Dr Nigel Carson (see Exhibit 11), with whom Mr Bell agreed (see Exhibit V), said that, on inspection of the two computer hard drives (i.e., the ones that Mr Le Roux did not see during the "raid"), the SSDs were in place; and that Ms Barakat's hard drive contained a zip file with thousands of documents in it (see the joint report of the forensic computer experts, being Exhibit Y). In light of this, the Easytel defendants say, and I agree, that any suggestion of any wholesale deletion of documents is without evidentiary foundation.
[21]
Resumption of hearing - 19 November 2020
On 19 November 2020, Ms Barakat and Mr Youssef were recalled to give further evidence following forensic examination of documents on the hitherto "missing" SSD Drives.
The Easytel defendants complain that the plaintiffs used this opportunity further to attack the defendants' credit on the basis of a so-called "Brothel Spreadsheet" (being a list of adult services companies from 2012); and the SSD Spreadsheet retrieved from Ms Barakat's computer following the reconciliation of the hitherto "missing" SSD Drives. I deal with the evidence as to the Brothel Spreadsheet in due course. More relevant (in light of the Easytel defendants' complaint as to "hacking") is the SSD Spreadsheet to which I will return shortly.
[22]
Closing submissions
On 18 December 2020, I heard closing submissions, following which I reserved judgment. One might have hoped the matter would have concluded there (with a judgment during the course of the following few months). Alas, that was not to be.
[23]
Yet further amendment to pleadings
In June 2021, while judgment was reserved, there was a further application by the plaintiffs for leave to amend the pleadings (in effect to reopen the case to do so), which application was (perhaps unsurprisingly given the history of dispute between the parties) opposed by the Easytel defendants. This application arose out of the sale of the "Nexgen" business pursuant to an Asset Sale Agreement dated 29 March 2021 (Asset Sale Agreement) to which I refer in due course below.
After protracted debate, and on the basis of the plaintiffs' contention that the amendment (and re-opening of the case) involved no further evidence other than as to the fact of the assignment, I gave leave for the filing of a further amended statement of claim on 23 August 2021. The Easytel defendants made complaint as to the redaction of the Asset Sale Agreement but ultimately that issue was not pressed. As at that stage, I had rather thought that the most expeditious way of proceeding would be for judgment to be given on liability in respect of the matters that had been argued (and on which I was then reserved) with anything arising as a result of the Asset Sale Agreement to be dealt with once the outcome of those matters was known. However, the Easytel defendants were not content with that course. I therefore acceded to the Easytel defendants' request for a regime to permit more written submissions in order to address that amendment. This involved an extended timetable (to meet the parties' convenience) which meant that the final round of submissions not being completed until 22 September 2021 (an unfortunate state of affairs since it only served to protract the whole litigious saga).
[24]
Further amended statement of claim
The further amended statement of claim relevantly pleads that, on 31 March 2021, the plaintiffs completed the Asset Sale Agreement, the effect of cl 3 of which (as set out in due course) was to transfer all title to, property in, rights in and risk of a number of assets, intellectual property and liabilities from a seller to a buyer, in this case from the first plaintiff (Nexgen) to the second plaintiff (Business Telecom).
The Easytel defendants dispute that the Asset Sale Agreement operates as contended for by the plaintiffs. They maintain that the Asset Sale Agreement shows that Nexgen has no entitlement (and, they say, likely never had any entitlement) to the information the subject of the plaintiffs' claim in the proceeding; and that it does not disclose any interest of Business Telecom relevant to this proceeding (which the Easytel defendants say is otherwise limited at best to a single customer). I address this issue in due course.
[25]
Plaintiffs' business
As adverted to above, at the relevant time the plaintiffs carried on business selling telecommunications systems (as described in Mr Ayoub's affidavit sworn 25 November 2019 at [8]-[10]); and, for the purposes of that business, the plaintiffs had purchased databases of names and phone numbers from a lead source supplier for about $20,000 to $30,000 per list, those databases typically containing some 30,000 to 40,000 people or businesses (see Mr Ayoub's 25 November 2019 affidavit at [38]-[39]). The plaintiffs' telemarketing staff would typically contact the people or businesses listed on the database, seeking information as to their telecommunications systems or needs; and then enter that information into the CRM. Mr Ayoub says that the plaintiffs' telemarketing staff (of which Ms Barakat and Mr Mitchell formed part when they were employed within the plaintiffs' business) would typically make around 100 to 150 calls per day (see at [40] of Mr Ayoub's 25 November 2019 affidavit).
The "client" information entered into the CRM (and I interpose to note that the term "client" as here used in fact includes not only existing clients but also prospective future clients - the latter being referred to (as adverted to above) as "prospects" or "leads") typically included matters such as: the client's contact details; what type of phone systems were currently used; which carrier was currently used; how many staff members were employed; how long there was remaining on the current contract; when the person contacted would like a call back; and whether the person contacted was interested in speaking with a sales executive. That information was then used to develop the "client relationship" (Mr Ayoub's 25 November 2019 affidavit at [41] and [44]).
Although the Easytel defendants maintain that this kind of information is not confidential and/or could readily be ascertained by a telephone call, that surely cannot be the case in relation to all of the "client" information. In particular, information as to the prospective client's current contract terms would not necessarily be publicly available and might or might not be readily disclosed on a "cold call" by a telemarketer hitherto unknown to the prospective client. Moreover, there are cases in which the very compilation of information may nevertheless be treated as confidential - as I consider in due course.
[26]
Plaintiffs
As at the time of the hearing, the plaintiffs had an established business that has been operating for more than 10 years in both Australia and overseas, employing approximately 159 staff. Mr Ayoub is the managing director of the plaintiff companies. Another director of those companies is Mr James Harb (see T 43.39-40.).
Ms Barakat, the first defendant, was employed by Business Telecom as an "Appointment Setter" (that is, a telemarketer) (effective from 7 May 2018), having entered into a written employment agreement with Business Telecom. The role of a telemarketer (as the name suggests) is to telephone clients or potential clients, assemble information in relation to their telecommunications needs in the CRM database, and arrange appointments with those entities willing to meet with a sales or business development manager. The role of a sales or business development manager (of which Mr Youssef was one) was different in that such a person would go out to meet the clients or prospective clients and "close" the sales. Ms Barakat ceased her employment with Business Telecom on 29 August 2019 and commenced her employment with Easytel on 3 September 2019 as an "Internal Sales Consultant".
Mr Mitchell, the second defendant, was also employed as a telemarketer by Business Telecom for various periods. Mr Mitchell entered into a written contract of employment with Business Telecom on 1 December 2016. On 31 August 2019 Mr Mitchell ceased employment with Business Telecom. In his first affidavit sworn 12 May 2020 (at [31]), Mr Mitchell deposed that he received a call from Mr Hanna who offered him a job. Mr Mitchell commenced employment with the Easytel group on 13 September 2019. He worked there until 9 October 2019 and then left for a short time before returning to work there again from 6 February 2020 to 20 March 2020. Mr Mitchell no longer works as a telemarketer (as noted above).
Mr Youssef, the third defendant, was employed as a business development manager by Nexgen (commencing in that role on 11 January 2016 - see his 13 December 2019 affidavit at [4]). Mr Youssef commenced his employment with a subsidiary of Nexgen (being Omniview) on or about 8 January 2012 (see Mr Youssef's affidavit of 11 May 2020 at [60]) (although Mr Ayoub deposes at [11] of his affidavit of 25 November 2019 that Mr Youssef instead commenced his employment with Omniview on 28 March 2013 - nothing turns on this discrepancy). On 15 January 2016, Mr Youssef entered into a written contract of employment with Nexgen. Mr Youssef ceased working with Nexgen on 2 September 2019 and commenced working with Easytel on 3 September 2019).
[27]
Easytel defendants
As noted above, the Easytel entities commenced operating in New South Wales in September 2019 (with approximately five or six employees). Easytel Group was incorporated in about April 2019, with Mr Hanna as its sole director and shareholder. Easytel Australia was incorporated in early August 2019, again with Mr Hanna as its sole director and shareholder. Mr Hanna had at an earlier time been employed by Nexgen for about 12 months, resigning in April 2014 (see Mr Hanna's affidavit affirmed 6 July 2020 at [7]). Mr Hanna is related by marriage to Mr Youssef (Mr Youssef being Mr Hanna's wife's first cousin). Mr Hanna's evidence was that he had obtained advice from Mr Youssef about venturing into the telecommunications industry (before setting up Easytel).
[28]
Establishment of the business
It is common ground that, at the time that the Easytel business operations commenced, the Easytel entities were not using a CRM program in their business (see Mr Mitchell's affidavit of 12 May 2020 at [23] and [31], seemingly confirmed by Mr Youssef in his affidavit of 11 August 2020 at [11]-[12]). Mr Mitchell's evidence (see below) was that he was provided with electronic spreadsheets to use and that it was not until he later rejoined the Easytel group that the company was using a CRM program.
As to the acquisition of "leads", the Easytel entities obtained the following databases and systems: Australia on Disc Database on 29 August 2019; "Naj Database" in about September 2019; Leadmaster CRM on or about 16 October 2020; Illion databases on 25 February 2020, containing some 6,111 records; Illion databases on 2 March 2020, containing some 876 records; and ongoing MVF and Comparison Advantage data.
As at the date of Mr Hanna's 6 July 2020 affidavit, Easytel had spent $42,893.84 on databases, marketing companies and referrals since the commencement of Easytel's business in September 2019 (compare this with the amount spent by the plaintiffs which was in the order of $250,000 over 8 years). Accordingly, Mr Hanna contends that Easytel has no use for the plaintiffs' alleged confidential information.
As to the relative amounts spent on the purchase of lead source databases, the Easytel defendants say that the amount of Easytel's expenditure is significant having regard to the relative financial strengths of Easytel compared to the plaintiffs, as well as the relatively short time Easytel has been in business. In light of the expenditure in purchasing databases and leads, the Easytel defendants say that the plaintiffs' suggestion that Easytel purchased databases to disguise that Easytel was using the plaintiffs' confidential information makes no sense.
[29]
Relevant employment agreements
Each of the individual defendants entered into employment agreements which contained a wide-ranging definition of confidential information (see for example cl 20.6 of Ms Barakat's employment agreement) which the Easytel defendants complain is oppressively wide in the context of the post termination obligation in cl 20.1 of that agreement. Clause 20.6 provides:
for the purposes of this clause and paragraphs preceding this clause Confidential Information is taken to mean all information previously communicated and imparted and all information to be communicated, imparted, and passing from the Employer, or from its directors, shareholders, servants, agents, employees, or consultants, or any one more of them to you or otherwise learned by you in any way related to or connected with the business affairs of the Employer or those of any client of the Employer or those of any business, organisation, company or venture in which the Employer holds an interest and of any client of any such business, organisation, company or venture including without limitation trade secrets, know-how, techniques, accounts, balance sheets, financial statements, financial information, business and marketing plans and projections, arrangements and agreements with third parties, customer information, customer information proprietary to customers, customer lists, concepts not reduced to material form, designs, plans, short, medium and long term development programs, drawings, processes, methods and procedures of operations and whether recorded in some tangible form or intangible form or some electronic form, computer record, or other database.
Each employee agreed that, during the term of his or her employment and after it terminated, he or she must not use or disclose or attempt to disclose any confidential information (as defined); and that, in the event of a breach of that clause, the plaintiffs would be entitled to an injunction restraining the employee from committing any breach regardless of proof of actual damage.
[30]
Commencement of the proceedings
Mr Ayoub's evidence is that, in September 2019, the plaintiffs became concerned that Easytel was contacting its "prospects". There was a meeting on 19 September 2019 attended by Mr Youssef and Mr Hanna (and others) (see Mr Ayoub's affidavit dated 25 November 2019 at [23] and Mr Youssef's affidavit of 11 May 2020 at [69]) at which Mr Ayoub accused them of "poaching" the plaintiffs' leads.
At [9] of Mr Ayoub's affidavit sworn 21 August 2020, he recounts a conversation with Mr Mitchell which he said occurred on 7 May 2020, in which he deposes that Mr Mitchell says words to the effect that:
Shane Mitchell: I have emails which I have kept which I sent to Mina during his time with us and Nexgen and Business Telecom customers. They [Easytel] bought a database and would cross reference the leads against our clients. There was Nexgen hard copy applications in the Easytel office and Business Telecom applications stored in folders.
On 22 October 2019, the plaintiffs' lawyers sent a letter of demand to Easytel. This proceeding was commenced on 25 November 2019 (the procedural history of which is as noted above).
[31]
Easytel's "system" with respect to Nexgen and Business Telecom customers
At some point (from about late February to early March 2020 - see email dated 26 February 2020), a system was put in place within Easytel to the effect that, if a prospective client was contacted and it was learnt that this was a Nexgen or Business Telecom customer (or perhaps if the telemarketer wished to call a contact with whom he or she had dealt when at Nexgen or Business Telecom), the staff at Easytel were directed to contact Mr Youssef before proceeding further; and that, if Mr Youssef confirmed that the contact was a "lead" (i.e., from a database that Easytel had purchased), then the telemarketing staff would be told that they could proceed.
In cross-examination, Mr Youssef gave evidence that the process entailed thorough searches of the CRM to remove all entries in the CRM without a lead source (those being any details that might have come from Google, or were otherwise searchable). Where the Easytel telemarketers made contact with a Nexgen or Business Telecom customer, Mr Youssef instructed the Easytel representatives to end the call so that he could search the CRM to ensure that the prospect was a "purchase" lead. Upon confirmation of the foregoing, Mr Youssef would permit the Easytel representative to contact that prospect (see T189.8-16).
While the plaintiffs appear to regard this system as an attempt by the defendants (after the proceeding had commenced) to disguise that they were using the plaintiffs' confidential information (see T 10-11), this seems to me rather to indicate that the defendants were conscious of the need not to breach any obligations in this regard (and were relying only on the purchased leads) - about which the plaintiffs could hardly complain.
[32]
May 2020 "raid"
As it assumed no little significance in the plaintiffs' case, it is relevant to place in the chronological context the events surrounding the execution of the Anton Piller Orders granted by Williams J in the Duty List on 15 May 2020.
In that regard, it is also relevant to bear in mind that Mr Mitchell's first affidavit (on which the plaintiffs relied when seeking the Anton Piller orders) was made on 11 May 2020 and amended on 12 May 2020. It appears that Easytel and/or persons at Easytel were aware that Mr Mitchell had signed an affidavit of some kind even if they had not seen it at that stage (see T 206ff). (There is evidence that a copy of the file may have been overlooked on Mr Youssef's device on 13 May 2020 but there is no evidence as to the email itself being sent.) The significance of this, as noted above, appears to be that the plaintiffs suggest there was advance knowledge of the proceeding (and perhaps the opportunity to remove or destroy evidence adverse to the Easytel defendants).
Ms Barakat recalled being told of Mr Mitchell's 12 May 2020 affidavit before 18 May 2020 (i.e., before the "raid" which took place on Monday 18 May 2020) (T 142.6-13).
Mr Youssef gave the following evidence in respect of the allegation that the defendants knew about Mr Mitchell's first (Anton Piller) affidavit before the search (at T 197.14-36):
Q. This is against the background that you knew that Shane Mitchell had sworn an affidavit for the plaintiffs, isn't it?
A. I didn't know he had done it. I know that Elie called him and offered him $3,000 to write an affidavit.
Q. No, no, no, no, and stop making self-serving answers, just answer my question.
A. That's the information I know. I can only tell you what I know.
Q. What you know is that people at Easytel, like you, understood that Shane Mitchell had gone to the plaintiffs and sworn an affidavit, you knew that on the 15th?
A. No, on the seventh I knew Shane called me and told me that Elie offered him a bribe of $3,000 to write the affidavit.
Q. 30,000 was it?
A. 3,000.
Q. You know that Samantha Barakat says that it was knowledge at Easytel that Shane had sworn an affidavit before the raid, that knowledge?
A. Once Shane told me that conversation, I pulled a meeting and told everyone why it happened and that Shane was offered $3,000 to write an affidavit, I made it aware.
The evidence given by Mr Tsioumas and Mr Andraos as to the events on 15 May 2020 is broadly consistent.
[33]
Discovery
By way of discovery in this proceeding, Easytel produced invoices rendered up to the end of 30 June 2020 (some 458 invoices - albeit not to that number of clients because some of Easytel's clients were invoiced more than once). The plaintiffs say that the co-incidence between those clients of Easytel and the names in the Plaintiffs' Client List (Confidential Exhibit EA-7; admitted as Exhibit J) is high. It is said that Easytel sold telecommunications goods or services to some 80 or so clients (or prospective clients) in the Plaintiffs' Client List in the financial year ended 30 June 2020 (see T 221.20-50).
The Easytel defendants cavil with the proposition by the plaintiffs that the invoices rendered by Easytel up to the end of 30 June 2020 indicate that there is a high coincidence between Easytel's clients and the names in the plaintiffs' list. The Easytel defendants say that there is not the high coincidence as contended by the plaintiffs. It is said that the names in Exhibit EA-7 number in excess of 40,000 entries from sources mutual to the plaintiffs and the Easytel defendants. Relevantly, the Easytel defendants say that the entities named in Annexure B to the plaintiffs' amended statement of claim constitute approximately 0.1% of the approximately 40,000 plus entries in Exhibit EA-7 (being the exhibit marked Exhibit J in the proceeding).
[34]
Asset Sale Agreement March 2021
As noted above, on 29 March 2021, the plaintiffs entered into the Asset Sale Agreement. The Sellers are there defined (in a portion of the document that was redacted before provision to the defendants) as "the parties listed in Part A of Schedule 1". Those included a number of entities, beyond simply the plaintiffs in the present proceeding.
Clause 1 of the Asset Sale Agreement defines "Assets" as follows:
Assets means the assets owned by the Sellers related to or necessary for the conduct of the Business on the Completion Date collectively comprising:
(a) the Plant and Equipment;
(b) the Sellers' customer lists;
(c) the benefit of, subject to the burden of, the Leases;
(d) the benefit of subject to the burden of, the Assumed Contracts;
(e) the Trade Debtors;
(f) the Business Intellectual Property;
(g) the Goodwill;
(h) the Systems;
(i) the Records;
(j) the Databases;
(k) the Inventory;
(l) Work in Progress; and
(m) all other property, rights and assets of the Sellers used solely and exclusively in the conduct of the Business,
but does not include the Excluded Assets.
"Excluded Assets" was defined as meaning the "following assets of the Sellers which relate to the Business", which were then listed:
(a) cash in hand, on deposit or at the bank;
(b) Excluded Records;
(c) Bank Accounts;
(d) insurance policies owned by the Sellers or any related body corporate of the Sellers and the benefit of any claims under those policies;
(e) Statutory Licences to the extent to which these cannot be assigned to the Buyers.
Clause 3 of the Asset Sale Agreement provides:
3.1 Sale and Purchase
Subject to clause 2, the Sellers, as legal and beneficial owners of the Assets listed next to their name in Schedule 2 agree to sell, and the Buyers agree to buy, the rights, title and interest of the Sellers in the Assets listed next to their name in Schedule 2 on the Completion Date with effect from the Effective Time for the Purchase Price free of any Encumbrance, Security Interest and other third party rights or interests.
3.2 Title, Property and Risk
Subject to clauses 3.3 and 3.4, title to, property in and risk in the Assets:
(a) until Completion, remains solely with the Sellers; and
(b) passes to the Buyers on and from Completion with effect from the Effective Time.
3.3 Assignment of Intellectual Property
Subject to clause 2, on Completion the Sellers agree to assign to the Buyers with effect from the Effective Time all rights, title and interest in the Business Intellectual Property together with all statutory and common law rights attaching to it including the right to sue for damages and other remedies in respect of any infringement or misuse of the Business Intellectual Property or other unauthorised acts for the full period of such rights to hold the same unto the Buyers absolutely.
3.4 Assumed Liabilities
On and from Completion and with effect from the Effective Time, the Buyers will assume and be liable for the Assumed Liabilities that relate to the Assets they acquire under this Agreement, or where that is not specified, Business Telecom Australia Pty Ltd will assume and be liable for the Assumed Liabilities, and will indemnify the Sellers in respect of all Claims and Liabilities in respect of such Assumed Liabilities.
[35]
Lay witnesses
The plaintiffs relied on evidence from Mr Ayoub, Mr Tsioumas and Mr Andraos, and the former solicitor for the plaintiffs (Mr Saadat). The plaintiffs also tendered the affidavit of Mr Mitchell sworn 12 May 2020 (and the exhibit thereto), which was marked Exhibit F. In the defence case, evidence was given by each of the individual defendants (Ms Barakat, Mr Mitchell and Mr Youssef) as well as from Mr Hanna, Mr Youssef's wife (Ms Amanda Youssef), and Mr Dalibor Marsic (the director of TelPro).
[36]
Mr Ayoub
Mr Ayoub was cross-examined as to the circumstances in which Mr Mitchell came to make his first affidavit. He gave evidence that he made contact with Mr Mitchell through an employee (which is consistent with Mr Mitchell's account) (T 155). Mr Ayoub says that he indicated to Mr Mitchell that he was in trouble - and he said that this was because Mr Mitchell had no legal representation to that point. Mr Ayoub says that Mr Mitchell said that he was advised by the Easytel directors that he did not have to worry about anything and that Mr Mitchell said he wanted to clear his name (T 155.39-50, 156.1-4). Mr Ayoub said that he told Mr Mitchell on the phone that he had evidence that Mr Mitchell had taken stuff and that he would be in trouble and he said that he told Mr Mitchell to come in and go on the record and "tell us everything".
Mr Ayoub denied that he had offered to give Mr Mitchell money in exchange for his giving of evidence (that being the Easytel defendants' understanding of the position). Mr Ayoub said that he felt sorry for Mr Mitchell because Mr Mitchell had disclosed his financial difficulties and Mr Ayoub offered him a job as a contractor (but that, perhaps not surprisingly, he did not want Mr Mitchell in (or associated with) the business until the matter was resolved) (T 15640-46). As it transpired, Mr Ayoub's evidence is that he did not pay Mr Mitchell because he did not book any appointments, but that if he had booked appointments then he would have been paid for it (T 157.1-9).
As to Mr Andraos and Mr Tsioumas. Mr Ayoub said that he did not offer them work; rather that they were working for an entity (YME) which happened to do work for Nexgen and Business Telecom.
Mr Ayoub clearly feels strongly about the conduct of the defendants (see at T 50.29-31 where he said that "this is IP that they've taken and decided to use the same providers as I am and decided that they would financially gain some IP that we had in our business"). That emotion no doubt has influenced his perception of events.
[37]
Mr Tsioumas
Mr Tsioumas is a telephone technician who was working with TelPro (a telecommunications supplier owned and operated by Mr Dalibor Marsic) at the time of the May 2020 "raid". It appears that TelPro had had dealings with both Easytel and the plaintiffs from time to time (see T 14.6-10 and Mr Tsioumas' affidavit sworn 11 June 2020 at [8] and [11]). By the time of the hearing, Mr Tsioumas was no longer working with TelPro; rather he was working as a contractor for the plaintiffs (see T 52.46-50). The Easytel defendants thus say that it is not in dispute that Mr Tsioumas was given some form of work in connection with the plaintiffs, shortly after providing his affidavit.
Mr Tsioumas gave evidence as to the "raid" (as referred to above). Mr Tsioumas also deposed (at [45]-[46] of his affidavit sworn 11 June 2020) that:
45. Prior to the raid I recall having seen Nexgen books, folders, lead sheets and other hard copy documents in the Easytel offices.
46. To the best of my knowledge I recall having seen them on Amanda Youssef's desk.
In cross-examination, however, Mr Tsioumas conceded (at T 63.35-37) that he did not actually see hard copies of Nexgen documents in Amanda Youssef's possession:
Q. It's never been the case, has it, that Amanda Yousef had copies of Nexgen documents at the office of Easytel?
A. I personally haven't seen them, but there was talk that she did have it, yes.
Insofar as Mr Tsioumas deposed (at [13] of his 11 June 2020 affidavit) to a meeting in or about July 2019 with Mr Youssef, Mr Hanna, Mr Marsic and himself (at the Ettamogah Hotel in Kellyville Ridge - which suggests a specific recollection of the event), Mr Youssef says that he was in Europe at the time (see Mr Youssef's affidavit of 11 May 2020 at [35] and Mr Hanna's affidavit affirmed 11 August 2020 at [9]).
The Easytel defendants raise concern as to the timing and motivation of Mr Tsioumas' evidence, in particular in the context of the evidence of Mr Mitchell to which I have referred above, having regard to Mr Tsioumas' position with TelPro, his commencement to work with the plaintiff(s) as a contractor shortly after his affidavit was made, and the attempt by the plaintiffs to induce Mr Marsic of TelPro to withdraw his business and service from Easytel. (Mr Ayoub agreed - see T 52.25-35 - that he told Mr Marsic that he (i.e., TelPro) could not trade with the plaintiffs as long as he was trading with Easytel but explained that this was because of a conflict of interest.) The Easytel defendants submit that the affidavit evidence of Mr Tsioumas is not reliable and ought not be accepted.
[38]
Mr Andraos
Mr Jad Andraos is also a telephone technician who was associated with TelPro. Mr Andraos swore an affidavit on 14 June 2020, giving evidence as to the "raid" (as referred to above).
Again, the Easytel defendants say that this evidence is not reliable and ought not be accepted, pointing to Mr Andraos' "defection" from TelPro (namely that Mr Andraos was given some form of work in connection with the plaintiffs shortly after providing his affidavit) and the matters referred to above in respect of the evidence of both Mr Mitchell and Mr Tsioumas).
[39]
Mr Saadat
Mr Houssam (Sam) Saadat, the plaintiffs' former solicitor, deposed to the (very serious) accusations levelled against him as to the circumstances in which Mr Mitchell's first affidavit was taken.
Mr Saadat denied that he had suggested to Mr Mitchell that he might face gaol time in any way associated with this proceeding (T 149.8-10). Mr Saadat said that he met with Mr Mitchell in person (see Mr Saadat's affidavit of 14 August 2022 at [9]; cf Mr Mitchell's evidence that the conversation was on the phone at [17] of his affidavit affirmed 28 July 2020); that Mr Mitchell gave him the Hotmail emails (referred to in Mr Mitchell's first affidavit at [50]) by hand on 11 May 2020 (T 148.20-32); and that Mr Mitchell made handwritten notes on the affidavit (the original of which he said was in his possession) (see T 149.36-39). (Any implicit invitation to call for that document was not taken up by the defendants.)
Mr Saadat denied that there was any inducement offered to Mr Mitchell in relation to the making of his affidavit (T 149.44-49, 150.6-10). Mr Saadat also did not consider that Mr Mitchell looked fearful at any point (noting that Mr Mitchell had left the room on multiple occasions - T 151.12-17 - while he was taking instructions in relation to his affidavit). Mr Saadat was adamant that Mr Mitchell had drawn the filing cabinets on a diagram of the Easytel office when Mr Mitchell was in his office (which Mr Mitchell had denied).
[40]
Ms Barakat
Ms Barakat maintains that what she took with her when she left her employment with Business Telecom was her personal email account. It appears that this included the Plaintiffs' Client List which had been transferred by her to a spreadsheet, so that it could be transported by email to her personal email account. In cross-examination, Ms Barakat agreed that she took with her a spreadsheet that had Nexgen information on it (see T 119.20-47).
Ms Barakat's evidence is that she updated the Plaintiffs' Client List (that is, the same electronic file) with clients when she started dealing with clients and prospective clients while working for Easytel. Ms Barakat's evidence is that she kept all her business prospects in one location, for ease of reference and use at Easytel. (See Ms Barakat's affidavit affirmed13 December 2021 at [12.1]-[12.2].) In cross-examination, Ms Barakat said that it was a separate document that she used at Easytel (T 120.1-3); that she had just used the same method of putting a company name and a template for persons (i.e., other telemarketers) to work on and Ms Barakat more than once denied using the Nexgen spreadsheet at Easytel (see T 120.16-18; T 122.10-11; T 124.12-22).
Ms Barakat said that because Easytel and Nexgen targeted the same customers everyone would be a Nexgen prospect (see T 122.21-23) but that if she called a lead from a paid data source given to her by Easytel and the lead identified that it was a Nexgen or Business Telecom client then the process was to end the call immediately and to email either Ms Youssef or Mr Youssef for guidance as to what to do with the contact. Ms Barakat said that Easytel was strict about the rule that if there was a Nexgen prospect or client that was not on an Easytel list then the telemarketers were not allowed to contact the prospect (T 122-123).
Ms Barakat gave evidence that she contacted Ms Youssef about Padstow RSL because the plaintiffs had a lot of clubs in their database but that she had the information about this contact from the client not from the Nexgen spreadsheet and she emphasised that the customer information was not in her brain (and that she would speak to some 150 contacts a day) (T 123.34-50, 124.1-10).
As to Dagazo, to whom a proposal had been made before Ms Barakat left Nexgen, her evidence (T 125.44-50) was that she knew that a proposal had been submitted and an appointment booked but that nothing had happened after that. Her evidence was that she did not send proposals to customers - she just made calls (T 126.1-6) and she was not aware of the logistics of the proposals. Ms Barakat did not know that Dagazo and Century 21 were related - she said that she just knew it from Google as Century 21 (T 126.38-44). Ms Barakat was adamant that she used Google to obtain the details for Century 21.
[41]
Mr Youssef
Mr Youssef's evidence is that he retained all emails he created whilst working for the plaintiffs (Plaintiffs' Emails) and that he transferred the Plaintiffs' Emails to his personal computer (see Mr Youssef's affidavit of 13 December 2019 at [13.1]) (though Mr Youssef denied (at T 179.50, 180.1-2) taking any of the plaintiffs' information when he left). Mr Youssef says that he has not (amongst other things) copied to any device or printed or stored the Plaintiffs' Client List. Mr Youssef's evidence was that his wife, Ms Amanda Youssef, kept a diary that she created during her employment with the plaintiffs which included records of sales achieved and payments generated from each sale.
Mr Youssef has deposed that Easytel had implemented a centralised client database by about February 2020.
In cross-examination, Mr Youssef explained the process that he had followed in relation to the CRM (at T 188-189). Mr Youssef said that by the end of February 2020 he had purchased two basic spreadsheet forms of prospects (from Australia on Disc and Illion) and that had also obtained spreadsheets from some of Easytel's suppliers (T 188.20-37) and that he went through the CRM and deleted everything without a lead source (so anything that could have come from Google or anything of the sort). Mr Youssef explained that in order to triple check (so that they did not have problems with the plaintiffs) if anyone did contact a Nexgen or Business Telecom customer, they would need to "get off the phone" then they would need to email Mr Youssef the records and he would check that it was from a purchased lead from the spreadsheet and then he would give permission for them to contact that client but that if he did not find it then the record would be deleted and they must not contact the client (T 189.4-16). His view was that, after the 6 months' non-compete period (which ended on 2 March 2020) if there was a Nexgen prospect or existing customer in one of the lists then it was just normal business practice to contact that customer or prospect (T 189.18-26).
Mr Youssef agreed that even after 2 March 2020 the process for many Nexgen customers or prospects was that they were not contacted saying that this was because "I don't want anyone coming saying that we've got these records from a source that not solid" (T 189.35-38). Mr Youssef (not surprisingly) said that he and the other defendants did not want drama with the plaintiffs. Mr Youssef said that before 2 March they were not allowed to touch the clients from the non-compete as per his contract, and that after 2 March, the defendants did contact the plaintiffs prospects if the prospect came in a data source that was paid and that they "were just doing normal trade with the source" (see T 189.44-46). Mr Youssef said that they did not give the employees the lists - that it was a serious matter and was left in the hands of management to "triple check" (T 190.3-8).
[42]
Mr Mitchell
Mr Mitchell was called as a witness in the defendants' case. As already noted he was a telemarketer at the relevant time but by the time of the hearing he was working "in warehousing" (T 77.11-12). Mr Mitchells evidence was, to say the least, inconsistent. Mr Mitchell was candid in the witness box as to having an intellectual disability (T 93.20-21) and saying that he was not very good at reading things and writing (see T 91.43-45) and did not understand. With no disrespect, Mr Mitchell's difficulties with the process of examination and cross-examination were apparent from his oral evidence. Mr Mitchell struggled to understand various questions put to him. That has implications for the weight that I can place on either of his (conflicting) affidavits.
In particular, although much criticism is made by the Easytel defendants as to the circumstances in which his first affidavit was made (to which I refer below), it is just as apparent that there were difficulties with his third affidavit - in that it is clear that the affidavit is not expressed in his own words (the third affidavit, for example, used the word "voluntarily" but Mr Mitchell was frank in saying that he did not know what the word meant - see T 93.25-27). It is clear, therefore, that I cannot assume that the affidavits attested by Mr Mitchell were in Mr Mitchell's own words; and given his propensity to become confused as to what had in fact happened (for example, as to whether it was the solicitor, Mr Saadat who had said or done certain things, or Mr Ayoub - see below), I place a great deal of caution in relying on Mr Mitchell's (conflicting) accounts of events.
Mr Mitchell swore three affidavits in the proceeding: the first, dated 12 May 2020, which was apparently relied upon in the context of the application by the plaintiffs to procure the Anton Piller Orders (it being a correction from a version - incomplete on its face - which Mr Mitchell seems also to have signed; see T 80.37-49), which was tendered in evidence at the final hearing by the defendants; the second, an affidavit dated 11 June 2020 (filed 19 August 2020), which was not read by the plaintiffs; and the third, an affidavit of 28 July 2020, which was read by the Easytel defendants (in which Mr Mitchell resiled from much of the contents of the first affidavit).
In his first affidavit of 12 May 2020, Mr Mitchell's evidence is that, in his role with the plaintiffs, he was required to call hundreds of prospective clients in order to book appointments for sales staff to attend onsite meetings to finalise a sale; and that, during his employment with the plaintiffs, he used the centralised CRM database called "Leadmaster", to access client information and develop the profile of each client.
[43]
Mr Hanna
Mr Hanna is a director of Easytel. Mr Hanna has affirmed a number of affidavits filed in the proceeding. Mr Hanna's affidavit affirmed on 6 July 2020 sets out a detailed background of Easytel's business, including the systems and procedures Easytel has in place, and why it is that Easytel and the plaintiffs' businesses come into competition (see at [10]-[47]). Mr Hanna explains that Easytel's business is similar to that of the plaintiffs in that they both purchase leads and databases to contact potential customers to sell telecommunications hardware and services.
Mr Hanna's evidence is that Ms Barakat, Mr Mitchell and Mr Youssef developed the plaintiffs' client database and then Easytel's client database in a similar way, but he disputes that the information they obtained through calls to the clients and prospective clients was "special". Mr Hanna's evidence is that it is generally the case that telemarketers do not make sales; rather, they merely collect information from clients and prospective clients and make appointments for sales consultants to meet the clients or prospective clients to make the sale. Mr Hanna denies that Easytel has any of the plaintiffs' information.
Mr Hanna confirmed that negotiations with suppliers for CRM databases had not occurred when the staff commenced at Easytel but denied that it was his idea to use knowledge gained from Nexgen to help set up appointments or to save costs (T 212.45-50).
At T 213.39-48 Mr Hanna says that at the meeting with Mr Ayoub on 19 September 2019 he denied he was using his leads and told them would put a stop to it. Mr Hanna says that Mr Ayoub said that there was a running bet in the office as to how long Easytel would last (see T 213.38-45).
Mr Hanna also said that Mr Mitchell wrote an affidavit and that Mr Ayoub had offered him $3,000 to write the affidavit (T 215.17-20). (I note that Mr Hanna was not present in Court while Mr Youssef gave evidence of a similar nature - see at T 215.38-40.)
Mr Hanna denied any misconduct; he said that the defendants had implemented a process to check that it was an Easytel paid source to clear those leads (T 214.40-44) and that it was not correct that there were hard copies of Nexgen records in Easytel's offices (T 216.45-48). Mr Hanna confirmed the practice in relation to circumstances where a telemarketer was advised that the customer was currently with Nexgen was that the telemarketer was to call the manager and speak to the manager to check whether the telemarketer could call the contact or not (T 217.43-50, 218.1-8), and said that this was to make sure that they did not call Nexgen customers "if it's going to cause an issue with the plaintiffs" (T 218.35-37).
[44]
Mr Marsic
The defendants read an affidavit affirmed on 11 August 2020 by Mr Dalibor Marsic.
Mr Marsic is a director of TelPro, which provides installation services to a number of companies. TelPro provided services to Nexgen from January 2019 and to Easytel in September 2019.
In cross-examination, Mr Marsic said that he was told "by the Easytel boys" that the plaintiffs had their computer and other electronic devices from Easytel's offices taken away and forensically examined (T 99.27-30). As a technician at TelPro Mr Marsic did not have access to Nexgen's databases but he said that when he was working at Nexgen for two days a week he was training technicians and logging in jobs into their CRM and that he had access to Nexgen's CRM database from Nexgen's offices (T 99.36-44). In his affidavit he had deposed that from April 2019 he had access remotely (18) but in cross-examination he said that this was logging into a phone system not the CRM database. Mr Marsic explained that he could log in remotely to fix issues but did not have remote access to CRM (and did not have any username or password for the CRM; saying that his username and password to access the database was "already in the system" and that he could access the CRM database remotely if he was connected to Nexgen's system. Mr Marsic said that he did not have access rights to access Leadmaster (see T 101.5-14).
Insofar as his affidavit evidence acknowledged (at [58]) that he had access to information, Mr Marsic said that meant Nexgen's IT systems while he was working at Nexgen (see T 38-43).
[45]
Ms Youssef
Ms Youssef was previously employed by the plaintiff(s) but left Nexgen at the end of August 2019 and began working with Easytel in the beginning of September 2019 where she worked in the call centre (T 104.22-25). Ms Youssef said that there were three telemarketers in the call centre at Easytel (Ms Barakat, Ms Attard and Ms Shiva) and that she supervised them. Ms Youssef confirmed that when she started with Easytel there was no CRM program there - just spreadsheets (T 104.4-8). Ms Youssef said that the spreadsheets did not have Nexgen information in them. Ms Youssef said that she was not aware that Ms Barakat brought some with her but that she (Ms Youssef) "definitely" did not bring any (T 105.32-36). Ms Youssef confirmed that she had access to the CRM database at Nexgen and said that when working there she kept a record of every sale (so that she would know how much commission she was making); that record being a yearly diary (that she says she left with Nexgen - see T 105.15-16).
Ms Youssef's evidence is that she did not know that some of Nexgen's customers were being contacted by Ms Barakat and said that she would know if that were the case (T 107.1-15). Ms Youssef agreed that she had instructed the call centre people not to contact Nexgen's clients (and disagreed that the procedure was that Nexgen clients were not to be contacted only if they could not find a client name on the Easytel list). At T 108.1-6 Ms Youssef said that if they came across a Nexgen client then staff were not to have a conversation with them; and was adamant that "if that customer is not in our database then they're not to call that customer". Ms Youssef said that even if the customer was in the Easytel database the "rule" was not to contact Nexgen/Business Telecom clients in the first six months (i.e., presumably by reference to the non-solicitation covenant, although Ms Youssef said that she had a very old employment contract and did not know if her husband had one).
Ms Youssef explained that if there was a customer from a paid source (such as Illion or Australia on Disc) then it was acceptable to contact them, saying that they were not to book in an appointment unless it was from a paid source (T 109.2-3).
Ms Youssef was taken to an email of 13 March 2020 (Exhibit M) sent by Ms Youssef to Ms Barakat, which she explained was to make sure that everyone understood the rules. That email apparently reiterated that Easytel telemarketers were not to call outside their database, and, if they sought to do so, were to ask permission from Ms Youssef. At T 111.30-34, Ms Youssef denied that the spreadsheet in the office contained Nexgen information and was available to telemarketers. Ms Youssef said that the spreadsheets would not have contained comments and notes; that Mr Mitchell (their second telemarketer) would have to fill them out; and Ms Youssef thought that the spreadsheets they worked on were from Australia on Disc. Ms Youssef thought that Easytel obtained a licence to use Leadmaster earlier than December 2019 but said that she did not set it up (see T 112.14-29).
[46]
Conclusions as to lay witnesses
In summary, I take the evidence of all of the witnesses with a degree of caution. There is clearly a degree of emotion felt on both sides - on the part of Mr Ayoub as to the perceived misconduct of Ms Barakat and Mr Youssef in taking client information with them (and in setting up a competing business using the plaintiffs' leads); and on the part of Mr Hanna and/or Mr Youssef (both of whom accused Mr Ayoub of offering Mr Mitchell money in exchange for an affidavit; and in the case of Mr Youssef quick to accuse Mr Ayoub of hacking). Each seemingly had his own agenda to pursue which may well have unconscionably if not consciously influenced his evidence.
As for Mr Tsioumas and Mr Andraos, their evidence was broadly consistent and there is no reason to think they were not genuinely recounting their recollection of events. There was a ring of truth to the accounts given of the CCTV/camera footage being watched on 15 May 2020 in anticipation of the raid and then on 18 May to see if the raid would happen. However, some of the inconsistency between the accounts of Mr Hanna and Mr Youssef (on the one hand) and the plaintiffs' witnesses (on the other hand) can be explained by their different perspectives - it is clear, for example, that some of the evidence is based on things that people have been told or assumed rather than actual observation. Moreover, I agree that ultimately the evidence about the raid goes nowhere as there is no evidence of obstruction or deletion of documents.
Ms Barakat was, I thought, a frank witness. Ms Barakat clearly thought she was entitled to take the spreadsheet template with her and to use it to set up her own template at Easytel. I think it impossible that some of the entries were verbatim in both versions unless there had been a copying across of the information, but there were also sufficient changes and additions to make plausible Ms Barakat's recollection that she added comments based on her own calls while at Easytel. I accept broadly her account of events (though I consider that it is likely she has glossed over the extent to which she made use of the internal template in creating her own).
I consider Ms Youssef to have been a credible witness. I have already explained why I consider Mr Mitchell, though genuinely trying to give honest evidence, was ultimately unreliable due to the inconsistency in his evidence and his affidavits clearly not being in his own words. Mr Mitchell's account of feeling threatened, for example, seems to me most likely to have been his reaction to the situation rather than any actual threat as such; and Mr Ayoub's explanation of the trouble he was in can be explained in a relatively innocent way.
[47]
Expert Evidence
I have referred above, in relation to the procedural history of the proceeding, to the expert evidence in relation to the computer devices seized during execution of the search orders at the Easytel offices.
The Easytel defendants complain that they met resistance when they sought to access user data on AF2001 and AF2003 (the forensic images taken by the Mr Le Roux of Ms Barakat's and Ms Attard's computers); noting that, from 30 June 2020, they had raised the question as to whether there was some corruption or other issue affecting access in respect of AF2001 and AF2003. I accept that the whole saga of the forensic computer examination in the present case was unfortunate.
[48]
Mr Le Roux' 18 August 2020 email
Mr Le Roux, in an email of 18 August 2020, expressed his opinion that AF2001 (Mr Barakat's computer) had been modified on the morning of 18 May 2020, saying that:
As the independent computer expert and noting my duty to report to the court, in the context of the work I performed yesterday at your office, I did however observe that, in my opinion, Computer AF2001 has been modified. From my observation, this occurred at 09h09 am (AEST) on 18 May 2020.
The Easytel defendants complain that this was a baseless allegation, which the plaintiffs sought to promote and exploit without cause or proper investigation; and they further complain that the instructions the plaintiffs provided to their computer expert (Mr Bell) were drawn in a manner that did not seek to resolve or narrow the forensic issues in the proceedings; rather, they say that the plaintiffs' instructions "sought to promote the false narrative" that the Easytel defendants had made an effort to delete operating systems and items. The Easytel defendants complain that this directly contributed to the delay and cost in the proceeding.
[49]
Mr Bell's first report
In Mr Bell's first report (exhibited to his affidavit of 4 September 2020), Mr Bell noted the following modifications within the root directory of AF2001 and AF2003, respectively:
(i) AF2001, the device used by Samantha Barakat, I have identified a deleted and modified Microsoft system folder that suggests the potential modification to the OS on the morning of 18 May 2020 at approximately 9.09am; and
(ii) AF2003, the device used by Tynika [sic] Attard, I have identified a deleted and modified Microsoft system folder that suggests the potential modification to the OS on the morning of 12 May 2020 at approximately 8.59am.
[50]
Report of Mr Nigel Carson
The Easytel defendants then obtained a report dated 14 October 2020 from Mr Nigel Carson (marked Exhibit 11).
Mr Carson's report stated that there was a Windows operating system, installed around 3 March 2019 on both the SSD drives in the HP Computers used by Ms Barakat and Ms Attard. In relation to the deletion or modification of operating system files and/or folders as identified at [4.2.4] of Mr Bell's Report, Mr Carson disagreed that operating system folders had been deleted, especially in the context that the operating system was installed on the SSD drives. Mr Carson identified that the folders most likely being referenced in [4.2.4] of Mr Bell's Report are deleted Microsoft installation folders which are created and deleted by the Windows operating system or application installer packages.
The Easytel defendants say that Mr Carson's report established that Mr Le Roux failed properly to copy the hard drives, and that Mr Bell's analysis at [4.2.4] of his report was incorrect. The Easytel defendants acknowledge that Mr Bell did not have access to the SSD Drives in HP2001 and HP2003. Nevertheless, and having regard to Mr Carson's response, the Easytel defendants submit that it should have been readily apparent to an expert such as Mr Bell that the purported modifications occurring on 18 May 2020 at 9.09am, and 12 May 2020 at 8.59am, were deleted Microsoft installation folders, created and deleted by the Windows operating system or application installer packages. Complaint is made that, notwithstanding Mr Carson's report, the Easytel defendants were subjected to further unfounded and inappropriate aspersions (namely, that they had removed the SSD Drives to avoid the Anton Piller search).
[51]
Further report of Mr Bell
On 10 November 2020, the plaintiffs served a further expert report of Mr Bell (which is exhibited to Mr Bell's 11 November 2020 affidavit (Mr Bell's Second Report). In Mr Bell's Second Report, Mr Bell concedes the matters at [48]-[64] of Mr Carson's report and agrees that Mr Le Roux did not forensically copy the SSD drives in the HP Computers. Mr Bell there accepted that, after the analysis of the SSD drives in the HP Computers, there is an operating system on each of the SSD drives. (The Easytel defendants complain that, despite the overwhelming evidence that Mr Le Roux simply failed to observe the SSD Drives, Mr Bell did not go as far as to say that this is what occurred.)
[52]
Mr Le Roux' 13 November 2020 email
It is noted that, on 13 November 2020, Mr Le Roux sent an email to the parties, attaching a photograph taken 18 May 2020 which clearly depicted AF2001 and AF2003 being used with operating systems in the usual course of business (as the Easytel defendants say they had contended at all times).
Mr Le Roux confirmed Mr Carson's findings that he had overlooked the SSD drives in both AF2001 and AF2003 and apologised for the "oversight", stating that:
The photograph shows that that both of these computer's monitors are turned on and displays clearly that the computers are operating as would be expected, with a functioning operating system. I believe this demonstrates that computer AF2001 was operating after the last modified date of the deleted folder MSI633d7.tmp, as per Mr Carson's report (at paragraph 40 (a)). This supports Mr Carson's finding that I had overlooked the SSD drives in both AF2001 and AF2003 when preparing my report/affidavits. I apologise for this oversight.
The Easytel defendants contend that the plaintiffs had ample opportunity to cooperate with them to resolve the forensic issues in respect of AF2001 and AF2003 (which they submit, and I agree, would have been in the interests of the just, cheap and efficient resolution of the matters in the proceeding); and that, instead, the plaintiffs actively hindered the defendants' efforts, and "used the issue to pursue incorrect and inappropriate allegations of sabotage and criminality" against them. Complaint is made that the plaintiffs continue to perpetuate this contention, including at [109]-[110] of their submissions where they say that: Ms Barakat recalled being told of Mr Mitchell's 12 May 2020 affidavit before 18 May 2020; the "raid" took place on Monday 18 May 2020 and, according to the independent solicitor (Mr Maxwell), Mr Youssef commented to the computer expert "[w]ere you supposed to do this search on Friday?". The Easytel defendants point to the explanation given in cross-examination by Mr Youssef (see above) to the effect that he asked this question because the Anton Piller documents indicated that the search was supposed to have been undertaken on 15 May 2020 (the Friday). The Easytel defendants say that the plaintiffs' contentions are also not supported by the forensic position of the computer experts in respect of the first (Anton Piller) affidavit.
[53]
Evidence of "clients"
The Easytel defendants cavil with Mr Ayoub's claim in his affidavit sworn 13 September 2020 as to the entities that he deposes were clients of the plaintiffs. The Easytel defendants note that at [10] of his affidavit of 13 September 2020 Mr Ayoub defines what is meant by "signed by", being where "a client has signed a contract for services with either of the plaintiffs". The Easytel defendants say that only four of the companies mentioned in [11]-[28] of Mr Ayoub's affidavit of 13 September 2020 were customers of the plaintiffs at the time they were "ported" by Easytel (those being Metalair Pty Ltd, Austeck Pty Ltd, Bars N Racks and A Ioannou & PJ Markos and KC Nguyen). In summary as to the clients referred to in Mr Ayoub's affidavit, the Easytel defendants say the following.
As to a number of the entities, it is said that the relevant contract or agreement did not proceed or was terminated early (see for example, Eastwood Club (at [11]), Wetherill Park Automotive Services Pty Ltd (at [13]); Beverly Park Golf Club (at [18]); Mr Mow (at [22]); VD Jennick (at [26]-[27)); for a number of entities (some of them the same entities as those already referred to that did not proceed), the client was a customer of another telecommunications provider (say Optus or Telstra) at the time it was ported or signed by Easytel (again, Eastwood Club, Wetherill Park Automotive Services Pty Ltd, Beverly Park Golf Club; but also referring to Balmain Veterinary Hospital (which it is noted was only ever on a month to month contract when it was with the plaintiffs), and VD Jennick); and for a number of others the client signed by the Easytel defendants was a different entity to that which was a client of the plaintiffs (such as Quantum Accounting, or Quantum Partners, as referred to in Mr Ayoub's affidavit, which it is said is a different company with a different name and a different ABN to Quantum Accounting Services as signed by Easytel; the same is the case with Absolute Services Pty Ltd).
The Easytel defendants accept that Metalair was a customer "ported" by Easytel from Nexgen but they say that the date that Nexgen signed the customer (as deposed by Mr Ayoub in [17] of his 13 September 2020 affidavit) is incorrect.
Thus, it is said that the plaintiffs' contentions seek to perpetuate the plaintiffs' false narrative that the customers in Annexure B of the amended statement of claim were customers of the plaintiffs (see paragraphs [115]-[273] of the Plaintiffs Submissions), whereas the Easytel defendants say that to a large extent, this was simply not the case. It is said that (except for Austeck, Metalair, Blooms the Chemist, and Bars N Racks) none of the entities in Annexure B of the amended statement of claim was a customer of the plaintiffs when they were "ported" by Easytel.
[54]
Pleaded claims
As ultimately pleaded in the further amended statement of claim, the plaintiffs allege, first, various contractual breaches: breaches of the respective parties' employment agreements (cll 18.3, 19.1 and 19.1.1) by each of Ms Barakat, Mr Mitchell and Mr Youssef in soliciting clients and accepting approaches from clients listed in Annexure A when employed by the Easytel entities (this being defined as the Conduct) (see [27]-[28]); breaches of the employment agreements by using or disclosing or obtaining confidential information (cll 16.1, 19.1, 19.1.2, 20.1, 20.1.1, 20.1.2, 20.1.3 and 20.1.4) (see [29]); breach of the employment agreements (in failing to deliver up confidential information (cl 20.2)); breach of the employment agreement by the Conduct and Further Conduct (see [30C]); the Further Conduct being the soliciting of breach of the employment agreement (see [30A]), and use of confidential information (see [30B]).
At [31] is the allegation of loss and damage for the breaches alleged at [27] -[30C], particularised as loss of custom and goodwill, loss of profits, and loss of confidential information.
Second, it is alleged that there have been contraventions of the Corporations Act 2001 (Cth) (Corporations Act) (see from [32] ff), being: improper use of the defendants' positions to gain advantage, contrary to s 182(1) of the Corporations Act; and improper use of information obtained during the course of the defendants' employment, contrary to s 183(1) of the Corporations Act.
At [32], is the allegation of breach by the individuals as employees of s 182(1) improper use of position to gain an advantage for themselves or others or to cause detriment to the plaintiffs. At [33], it is alleged that there is a breach of s 183 by the individual defendants by improper use of information obtained during their employment to gain advantage or case detriment. At [34] is the allegation of breach by the individual defendants in relation to the allegations at [28]-[30] by engaging in the Conduct and Further Conduct in contravention of ss 182 and 183.
Third, the corporate defendants are alleged to have been knowingly involved in the Corporations Act contraventions - a claim of accessorial liability, causing loss and damage.
Fourth, the plaintiffs allege breach of fiduciary duties by the individual defendants. At [38] it is alleged that the defendants owed fiduciary duties: not to disclose or use confidential information; not to place themselves in a position of potential conflict of interest; not to promote the interests of the corporate defendants where there was a conflict; and to act in the best interests of the plaintiffs to protect the confidential information. At [39]-[40] breach of fiduciary duties is alleged. At [41], the knowledge of the corporate defendants is pleaded (that they knew or ought to have known that the confidential information was the property of the plaintiffs, and was obtained dishonestly). At [42] the plaintiffs make the allegation that the defendants hold the confidential information on trust for the plaintiffs. At [43] there is the allegation that the defendants have caused the plaintiffs to suffer loss and damage.
[55]
Spreadsheets
There was a degree of confusion (and much dispute) as to the provenance of various electronic spreadsheets in evidence (in particular the EA-2 Spreadsheet and the SSD Spreadsheet, the latter being the spreadsheet found on the SSD of Ms Barakat's computer upon its discovery by the computer expert Nigel Carson).
The plaintiffs refer to Mr Bell's evidence that the EA-2 Spreadsheet was found on Ms Barakat's computer which she used at the Easytel business. The plaintiffs contend that the EA-2 Spreadsheet was augmented and developed into the SSD Spreadsheet which was used by Ms Barakat upon her commencement at Easytel (contrary to Ms Barakat's evidence at [16.1] of her Norwich affidavit) (see [47] of the plaintiffs' submissions which refers to Ms Barakat's evidence that she had not downloaded or copied the EA-2 Spreadsheet to any device or divulged or disclosed it to anyone other than the plaintiffs, something which the plaintiffs say is clearly false). In other words, the contention seems to be that Ms Barakat took with her (in electronic form) the EA-2 Spreadsheet when she went to Easytel and that Ms Barakat then used and added to that spreadsheet to produce the SSD Spreadsheet.
The Easytel defendants point out in this regard that [4.2.1] and [4.2.2] of Mr Bell's Second Report were not read; and that Mr Bell's report does not say that the EA-2 Spreadsheet was found on Ms Barakat's computer which she used at the Easytel business. The Easytel defendants say that those (unread) paragraphs of Mr Bell's second report reference search terms (including "SAMS NEW WORK xx") that Mr Bell used to identify files "stored" on Ms Barakat's computer.
The Easytel defendants say that it is common ground that part of Exhibit EA-2 to Mr Ayoub's affidavit of 29 November 2019 is from the spreadsheet titled "SAMS NEW WORK xx" but they say that the other part of Exhibit EA-2 is the spreadsheet known as "TM DATABASE TARA" (which I understand to be a reference to Easytel's Telemarketer database, taken from the SSD Spreadsheet), which they maintain is Easytel property that the plaintiffs obtained by accessing Ms Barakat's personal email address without authorisation. I refer in due course to the Easytel defendants' submissions as to the purported similarities between the SSD Spreadsheet and the EA-2 Spreadsheet.
[56]
Abuse of process
Before turning to the submissions by the respective parties on the substantive allegations, it is convenient first to deal with the complaints made by the Easytel defendants as to the alleged "hacking" of Ms Barakat's personal computer and as to the approach (characterised by the Easytel defendants as anti-competitive conduct) by the plaintiffs to this litigation, one or both of which is said to amount to an abuse of process or otherwise to be a matter which should lead to the refusal to entertain the plaintiffs' claims for relief.
[57]
"Hacking" accusation
As noted above, the Easytel defendants say that the EA-2 Spreadsheet is not a full copy of the spreadsheet at Exhibit SB-1; rather, that it appears to be an amalgamation of more than one spreadsheet, including a spreadsheet belonging to Easytel and containing Easytel information. The Easytel defendants complain that there has not been an adequate explanation by the plaintiffs as to how they came to be in possession of documents containing information belonging to Easytel. The Easytel defendants accuse the plaintiffs of a breach of confidence (the "hacking", later recharacterised as "unauthorised access", of Ms Barakat's personal email account) (see T 270-271) and say that the plaintiffs should not be advantaged by this conduct.
Reference is made by the Easytel defendants to DC Payments Pty Ltd v Next Payments Pty Ltd (2016) 51 VR 151; [2016] VSC 315 (DC Payments) where Vickery J, in a case where the plaintiff's statement of claim was based on information received accidentally in confidence from the defendant, struck out those parts of the statement of claim based on the misuse of confidential information and said (at [1]):
… In litigation founded upon the Plaintiffs' allegations of breach of confidence, the Defendants allege that the Plaintiffs themselves are in breach of confidence by what is said to be their misuse of a customer list owned by a Defendant, which inadvertently fell into the hands of the Plaintiffs. The alleged misuse on the part of the Plaintiffs occurred when they made use of the Defendants' confidential information in pleading certain allegations in an amended statement of claim. This conduct has spawned an arguable case where the ancient phrase 'the pot calling the kettle black' has a tale to tell.
Reference is also made to Sullivan v Sclanders (2000) 77 SASR 419; [2000] SASC 273 (Sullivan) where the Full Court of the Supreme Court of South Australia struck out the entirety of the plaintiff's statement of claim in circumstances where documents stored in Mr Sullivan's briefcase were taken and copied and then returned to the suitcase, and used in the proceedings. Gray J said the following (at [71]):
… The plaintiffs should not be advantaged by what has occurred. The plaintiffs offered, in lieu of a stay, to amend the statement of claim if the appeal were to succeed. However this would lead to considerable debate as to what part of the statement of claim reflected the documents or their contents. A more effective approach to minimise any unfair advantage is to strike out the entire Statement of Claim. The plaintiffs should be at liberty to deliver a fresh Statement of Claim without either directly or indirectly making use of the confidential documents or their contents. In my view, if these steps are not taken equity will not be done.
[58]
Forensic discrepancies and purported similarities
The Easytel defendants note that Appendix F to Mr Bell's second report was admitted into evidence without objection (although it should be noted that not all paragraphs of that report were formally read). The Easytel defendants say that this shows that the "SAMS NEW WORK" spreadsheet: was not accessed on Ms Barakat's computer until December 2019 (following the commencement of the proceeding and the orders in respect of the Norwich affidavits requiring Ms Barakat to disclose the spreadsheet to the Court; and they point out that it was not stored on Ms Barakat's computer (but, rather, was "Autosaved", this being a software program feature that automatically saves an open document or file and is common to Microsoft Excel and Microsoft Word).
Accordingly, it is submitted that the SSD Spreadsheet (i.e., the Easytel Telemarket Database (being the spreadsheet marked Exhibit Z)) could not have been developed from the "SAMS NEW WORK" spreadsheet (and therefore that the plaintiffs' allegations (at [22]-[26] of their submissions) that the Easytel entities have aided or abetted or been knowingly concerned in the alleged breaches by the individual defendants are unsustainable.
Insofar as the plaintiffs contend (at [41] of their submissions) that Ms Barakat conceded giving access to the EA-2 Spreadsheet to Mr Youssef, the Easytel defendants point out that what Ms Barakat deposed in her Norwich affidavit was that:
To the best of my knowledge the only other person with access to the Spreadsheets is the Third Defendant, Mina Youssef, due to the documents being made available to him throughout these proceedings.
The Easytel defendants accept that there are similarities between some of the entries in the EA-2 Spreadsheet and the SSD Spreadsheet but they maintain that such similarities arise for the reasons provided by Ms Barakat during cross-examination, namely that the SSD Spreadsheet was derived from paid data from Easytel as well as referrals and simple Google research; and that Easytel's telemarketers are given a template that they follow to ask prospects and potential customers certain questions (and therefore, because the process is the same for each telemarketer and each prospect, there are similar answers and notes obtained). Pausing here, I have difficulty with this submission in that it does not seem to me to take into account that a number of the entries (though I accept by no means all) appear verbatim in both versions of the spreadsheet and it seems an unlikely coincidence that precisely the same information would be recorded from separate phone calls (once during employment with the plaintiff and once during employment with Easytel). So, for example, the first line entry for the Hunts Avenue Family Practice ("AGE - NEC 5 years old - long long time. Freeze on spending") is exactly the same in both versions. However, there are other entries where there are differences (including the balance of that particular entry) including as to spelling of names (Brendan versus Brendon, for example) or as to the syntax used in the notes which would tend to a conclusion that these were new entries; and entries where the information is substantially different.
[59]
Alleged anti-competitive conduct
The Easytel defendants contend that the true purpose of the present proceeding is to put Easytel out of business and remove Easytel as competitors; and criticise the plaintiffs for seeking to use an alleged breach of confidence or breach of the duty of fidelity to prevent an ex-employee from competing referring to Berkeley Administration Inc v McClelland [1990] FSR 505 (Berkeley Administration) where Wright J dismissed the claims brought against the defendants and said:
… I have come to the clear conclusion … that, whatever the nature of the information in the Blue Book, and however sensitive and worthy of protection the plaintiffs may at any stage have thought it to have been, I am satisfied that the plaintiffs' motivation in mounting this litigation against the defendants was not to protect their legitimate business interests … the true motivation behind the plaintiffs' conduct was an attempt, and a determined attempt at that, to strangle this infant competitor at or shortly after birth. It is unnecessary for me to point out that this is not an aim to which the court will lend its aid.
The Easytel defendants point to the following evidence in cross-examination of Mr Ayoub about MVF Global as a lead source supplier (at T 50.8-26) in the context of their submission that the proceeding is an attempt to prevent competition:
Q. MVF Global is a lead source provider, is it not?
A. Very different to the majority listed, yes.
Q. Quite specialised, isn't it?
A. Very specialised.
Q. And you've been using MVF Global for a period of time?
A. A few years.
Q. And it recently came to your attention that MVF Global were also selling their services to Easytel, didn't it?
A. Correct.
Q. Did you tell MVF Global that if they continued to do that you would no longer do business with them?
A. Correct.
Q. And they withdrew their services from Easytel, didn't they?
A. They did, yes.
As to the complaint made by the Easytel defendants about anti-competitive conduct, Mr Ayoub at T 50.42-43 says that all he said to MVP was that "we'd have to remain away from this program because we wouldn't be competing for the right things with Easytel". Mr Ayoub accepted at T 50.45 that he said he would remove "our business from the program". At T 52.1-19, Mr Ayoub agreed that he was telling people in the industry that he was in a dispute with Easytel but denied that he told people that he would subsume Easytel in legal fees, that is, run up legal fees so that Easytel could not continue in business. Mr Ayoub denied at T 58.7-9 that he was trying to litigate Easytel out of existence.
[60]
Determination
The vexed issue of the respective spreadsheets arises because of the very serious allegations made by the Easytel defendants as to the hacking of Ms Barakat's personal computer and, indeed the Easytel defendants go so far as to accuse the plaintiffs of criminal conduct.
Significant in this regard is the issue as to how (if Mr Ayoub's explanation of the manner in which the plaintiffs' IT person obtained access to the spreadsheets labelled "SAMS NEW WORK" and "TM DATABASE TARA" and "UPDATED - TM DATABASE TEMPLATE" (see [13] of Mr Ayoub's 29 November 2019 affidavit) is to be accepted) the documents there referred to as being stored on Ms Barakat's Nexgen computer devices could have contained subsequent Easytel information. Logically, information entered onto a spreadsheet after Ms Barakat had left the plaintiffs' organisation cannot have been stored on a Nexgen computer device.
I would accept that it is conceivable (though it would seem to me surprising) that someone in Nexgen's IT department might have been able to access Ms Barakat's email account on the Nexgen computer without a password, and I would accept that the conditions of Ms Barakat's employment may well have entitled Nexgen at least during her employment to have access to personal information if stored on the Nexgen office computers (for cyber security or other like purposes, say). However, it does not seem to me that there is a readily available logical explanation (unless the link between Ms Barakat's personal computer and Nexgen's office computer somehow remained live after Ms Barakat left her employment with the plaintiffs - and there was no evidence to suggest that this was the case) for a search of Ms Barakat's office computer to have revealed a document with information later created during Ms Barakat's employment at Easytel.
Therefore, I am troubled by the state of the evidence in this regard. As noted above, the Easytel defendants submit, by reference to DC Payments and Sullivan that the plaintiffs' proceeding has been founded on a breach of confidence, namely, the unauthorised accessing of Ms Barakat's personal email, and that the plaintiffs should not be advantaged by this. While I consider that there is much force to this submission, in the end I am left with sufficient doubt as to how the IT access was in fact obtained not to be in a position to conclude that the plaintiffs' claims should be dismissed on this basis. This is particularly so given the very serious nature of the allegations here made (and given the conclusion I have reached in relation to the claims in any event - see below). I certainly would not be comfortably satisfied to the Briginshaw standard that the unauthorised access amounts to a criminal offence which is what is here alleged in the defendants' submissions.
[61]
Issues for determination
Turning then to the substantive claims made by the plaintiffs, I address these as follows.
[62]
Confidential information
As both the breach of contract claims and the fiduciary duty claims (and to an extent the statutory duty claims) are premised on breaches in relation to confidential information, it is relevant to consider the nature of the information in question.
The plaintiffs submit that they have satisfied the four requisite elements necessary to establish a breach of confidence, namely that: the information in question is identified with specificity; the information has the necessary quality of confidence; the information has been received by the employee in circumstances importing an obligation of confidence; and there has been an actual or threatened misuse of the information without the owner's (here employer's) consent.
The plaintiffs say that the information in the Plaintiffs' Client List contains the requisite degree of specificity, in that it includes such things as: the client name; the content of the last conversation with the client, including what kind of hardware the client has; the age of the hardware; whether the client had been contacted by a competitor (and who); the relevant person at the client to contact going forward; the last time the hardware was updated; an email address of the client; and the hours of work of the relevant contact person.
It is said that none of that information is in the public domain; rather, that all of it was acquired by enquiries made by the individual defendants while they were paid to perform those tasks and after it was initially purchased from a lead source data supplier.
The plaintiffs say that the individual defendants were obliged to keep the information confidential, not only because of their fiduciary duties, obligations under ss 182 and 183 of the Corporations Act, but also by reason of their contractual obligation to keep such information confidential before and after the termination of their employment.
It is submitted that, given the concession by Ms Barakat that the information in the Plaintiffs' Client List was taken from the plaintiffs' computer systems, transported in the spreadsheet, and then uploaded onto Easytel's computer system, the inference to be drawn is that Ms Barakat (at the very least) intended to use the information (for the purposes of profit in competition at Easytel).
As noted, the Easytel defendants dispute the plaintiffs' contentions in respect of the special and confidential nature of much of the plaintiffs' purported confidential information.
[63]
Determination as to confidentiality of the information
Considering the question as to what must be satisfied for an equitable obligation of confidence to arise, in Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434; [1987] FCA 266 (at 443), Gummow J, then sitting in the Federal Court said that:
… The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information …
[citations omitted]
Relevantly, as there noted, for there to be an equitable obligation of confidence, the information must be identified with sufficient particularity. Similarly, when considering any fiduciary obligations owed in the present case (or any obligation of confidence arising as an incident of the contractual employment relationship), the information would have to be identified with sufficient particularity. Here, the plaintiffs identify it (in essence) by reference to the contents of the EA-2 Spreadsheet, i.e., the details recorded of prospects or leads (not necessarily actual clients) including information that is publicly available and information that could only be obtained by contacting the "client" in question. It is relevant here also to note that there can readily be seen to be a distinction between "client" contact details (which may well be public knowledge or able to be identified on common search tools such as Google) and the "client" needs or future requirements (which are unlikely to be public knowledge). Nevertheless, the compilation of contact details in a client contact or prospects list is something which has been recognised as capable of carrying with it the necessary quality of confidentiality (as confirmed in Robb v Green [1895] 2 QB 1 (Robb v Green) and Mid-City Skin Cancer and Laser Centre v Zahedi-Anarak (2006) 67 NSWLR 569; [2006] NSWSC 844 (Mid-City).
So, for example, in Robb v Green it was the compilation of the client information contained in the order book which it was said made the list so valuable (and able to be protected by an equitable obligation of confidence) and in Halliday and Nicholas Insurance Brokers Pty Ltd v Corsiatto [2001] NSWCA 188 (Corsiatto) the client lists (albeit containing publicly available information) were seen to be confidential in nature (see Handley JA at [16]-[17]) (although it appears that there was there evidence that client lists of insurance brokers or sub-brokers were a tradeable commodity, which is not necessarily the case for the kind of list here in consideration).
[64]
Breach of contract
In the amended statement of claim the plaintiffs allege that the first, second and third defendants breached their respective employment agreements insofar as they solicited, canvassed, approached, accepted approaches from, or attempted to entice away or provide services to the clients listed in Annexure A to the amended statement of claim while they were employed by the fourth or fifth defendants. The plaintiffs allege that this conduct was engaged in by the first, second and third defendants (and the confidential information disclosed to the fourth and fifth defendants) with a view to obtaining the custom of those "clients" of the plaintiffs in breach of cll 16.1, 18.3, 19.1, 19.1.1, 19.1.2, 20.1, and 20.1.1-4 of their respective employment agreements. The plaintiffs allege a further breach insofar as the third, second and third defendants failed to deliver to the plaintiffs the confidential information (defined in cl 20.6 of the agreements) in their possession, in breach of cl 20.2 of their respective employment agreements. Finally, the plaintiffs allege that the first, second and third defendant solicited, canvassed, approached, accepted approaches from or attempted to entice away or provide services to the other clients and prospective clients of the plaintiffs (being those listed in Annexure B).
As noted, the breach of contract claims in relation to solicitation or non-competition appear not to be pressed in relation to the Annexure A entities. At best these might have been made good in relation to Dagazo (the Century 21 franchise at Springwood). However, as to the submissions made by the plaintiffs (at [123]-[126]) in respect of Dagazo (being Century 21 Springwood, which Easytel signed in September 2019), the Easytel dedendants say the following. First, that Dagazo was not a client of the plaintiffs (it was a Telecomm Connect client). Second, that in cross-examination Ms Barakat explained her process of googling Century 21 (not Dagazo), on the basis that one of her colleagues had made a sale to another Century 21 and it made sense to Google search contacts for all the Century 21s in the area. The Easytel defendants submit that it is not surprising that there is minimal information in the CRM, noting that this sale occurred before Easytel had installed Leadmaster in October 2019. In any event, the Easytel defendants say that a cursory review of the documents for Dagazo in Exhibit MY-04 shows that extensive client information was gathered by Easytel as part of the sale, including that the client was wanting to upgrade from the previous model of the SV9100. It is said that there is nothing surprising about Easytel selling the customer similar hardware.
[65]
Determination as to breach of contract
In the present case, I find that there was a breach of contract in the conduct of Ms Barakat by taking with her (albeit together with her personal material that she was entitled to remove) the Excel spreadsheet that included the compilation of data in relation to prospective leads (the Plaintiffs' Client List). Simply setting up a template for a spreadsheet to contain similar information at Easytel would not to my mind be a breach (since Ms Barakat's familiarity with the format or structure of the spreadsheets is something that would be part of her acquired knowledge which she would be free to use in her new employment). However, it is difficult not to conclude that the template as used for the structure of the SSD Spreadsheet would have included the comments and notes that then populated the relevant fields in the spreadsheet and it is the compilation of those comments and notes the compilation of which I consider represented the confidential information.
The value of such information is obviously the "head start" that at least some of that information would give to a subsequent user of the spreadsheet. True it is, that one might Google particular categories of businesses (real estate agencies or clubs, for example) and obtain much of the same details but one would not thereby learn, for example, from a Google search the details of prospective clients' existing telecommunications suppliers or the like.
I do not accept that the fact that Ms Barakat's managers may have been aware that the spreadsheet was on her personal computer (and directed that she remove all her personal belongings), assuming that to be the case, amounted to consent to the removal of that spreadsheet.
That said, I do not find that any loss has been established as having been suffered by the breach in question (and hence only nominal damages would be recoverable). I accept Ms Barakat's evidence that the comments added by her to the spreadsheet she created were largely derived from Google searches and calls made while at Easytel and I do not consider that loss has been shown by reference to the fact that she also had the earlier entries (and seems to have copied some of them across). I accept that the fact that potential prospects may have been contacted would mean that there was competition that might or might not have otherwise arisen in respect of the plaintiffs' prospects but in essence the position seems to be that the plaintiffs would regard all businesses as prospects and they cannot reasonably expect to be immune from all competition in relation thereto.
[66]
Breach of fiduciary duties
The plaintiffs say that one of the recognised fiduciary relationships is that of employer and employee; and that the critical feature of the employment relationship is that the fiduciary (employee) undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense (citing Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 (Hospital Products)). The plaintiffs say that the relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.
Pausing here, I do not accept that it will always be the case that an employee will owe fiduciary obligations to his or her employer (see for example the discussion in Anderson v Canaccord Genuity Financial Ltd [2022] NSWSC 58 at [1806]-[1830] (Anderson v Canaccord); see also Woolworths Ltd v Olson (2004) 184 FLR 131; [2004] NSWSC 849 at [212] (Woolworths v Olson)). However, in the present case, the existence of the fiduciary relationship is admitted in the defences filed by Ms Barakat and Mr Youssef (at [38]) so strictly speaking the issue only arises in respect of Mr Mitchell (of whom I would have concluded that he was not in such a role as to be subject to fiduciary obligations).
The plaintiffs say that the relevant fiduciary duties owed by the employees overlap with the duties contained in ss 182 and 183 of the Corporations Act (see below), as well as common law duties of: undivided loyalty and fidelity (during the employment and after it is terminated if there is term extending the duty); the duty to avoid conflicts of interest; and the duty not to misuse the fiduciary position. Reference is made to the decision of the High Court in Pilmer v Duke Group Limited (in liq) (2001) 207 CLR 165; [2001] HCA 31 in which it is said that:
… [T]he fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is "a conflict or a real or substantial possibility of a conflict" between personal interests of the fiduciary and those to whom the duty is owed.
[67]
Determination as to breach of fiduciary duties
The premise on which the fiduciary duties claims are based is that the individual defendants were in an employment relationship with the plaintiffs and thereby owed fiduciary duties. In Hospital Products, Mason J, as his Honour then was, included "employer and employee" among the list of "accepted fiduciary relationships)" and said (at 96--97), that:
… The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. …
In Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 (Grimaldi v Chameleon Mining), the Full Court of the Federal Court (Finn, Stone and Perram JJ), while noting that there was "no generally agreed and unexceptionable definition" of a fiduciary, said (at [177]) that:
… a person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest [citations omitted]
There is no doubt (see Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2007) 69 NSWLR 198; [2007] NSWSC 104 at [129], Rothman J there referring to Concut Pty Ltd v Worrell (2000) 176 ALR 693; [2000] HCA 64 (Concut) per Kirby J at [51]) that the relationship of employer and employee is one "importing implied duties of loyalty, honesty, confidentiality and mutual trust". However, the mere existence of an employment relationship does not necessarily give rise to a fiduciary duty (see Woolworths v Olson at [212] per Einstein J). It has been noted that an employment relationship is to be "contrasted with a number of other relationships which can readily and universally be recognised as "fiduciary relationships" because the very essence of the relationship is that one party must exercise his powers for the benefit of another" (see Nottingham University v Fishel [2000] ICR 1462 (Nottingham University) at 1491 per Elias J).
[68]
Section 182(1) of the Corporations Act
Section 182(1) of the Corporations Act relevantly provides that an employee of a corporation must not improperly use the employee's position to gain advantage for themselves or someone else or cause detriment to the corporation.
The plaintiffs note that an objective standard is to be applied in determining what amounts to an "improper" use of position; and that impropriety is established by "a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case". It is further noted that impropriety might also occur when an employee breaches a contractual obligation not to use certain information in a certain way, for example, in competition. The plaintiffs contend that a contractual term requiring an employee to maintain confidentiality in respect of client information creates an expectation that the employees will not use the information gained in respect of the clients for any other purpose than their employment and the enhancement of the client relationship with the plaintiffs' clients, and for the plaintiffs' purpose.
The plaintiffs point out that it is not necessary, in order to establish a contravention of s 182(1), that the former employee gain an advantage for himself or herself, or cause a detriment to the company but in any event the plaintiffs contend that, in the present case, it is clear that Easytel has entered into contracts for the sale of telephones and hardware with some 80 entities which were "clients" of the plaintiffs (and in some respects, were clients with whom the individual defendants had been dealing prior to the termination of their employment with the plaintiffs). (Pausing here, the evidence does not establish that these were actual clients of the plaintiffs as opposed to prospective clients or leads.)
It is noted that a finding of impropriety for the purposes of this section does not require subjective knowledge of impropriety even if the desired object was not achieved; rather, it is actionable upon the mere use of the information even if no detriment is occasioned (and it is also actionable if the information was used for the advantage of someone else).
The plaintiffs say that, in the present case, from the evidence of at least Ms Barakat, the information was used when it was taken from the central database and saved as an Excel spreadsheet. It is said that it was also used when it was emailed to Ms Barakat's private email account; and that it was then used when it was uploaded to Ms Barakat's computer at Easytel. The plaintiffs say that it also appears to be the case (from the evidence of Mr Mitchell) that the information in the Plaintiffs' Client List was used by the second and third defendants while they were employed by Easytel (the plaintiffs here also referring to the emails Mr Mitchell received from Mr Youssef in March 2020 which are annexed to his affidavit).
[69]
Section 183(1) of the Corporations Act
Section 183 of the Corporations Act relevantly provides that a person who obtains information because they are, or have been, an employee of a corporation must not improperly use the information to gain advantage for themselves or someone else or cause detriment to the corporation.
The plaintiffs accept that, to establish a claim under this section, the plaintiffs must establish that: the employee had been an employee of the plaintiffs; the employee acquired the relevant information and did so by virtue of his or her position as an employee of the plaintiffs; and the employee made improper use of the information in order to gain directly, or indirectly and advantage for himself or herself or some other person (or, alternatively, the employee improperly used the information to cause detriment to the corporation).
The plaintiffs contend that each of the individual defendants contravened s 183(1) in essence for the same reasons as the contravention is asserted in respect of s 182(1).
It is noted that the prohibition in s 183 of the Corporations Act is identical to the equitable duty of confidentiality for a director, which would be contravened if that director used the information that was confidential to the company to make a personal profit, and is said to be akin to the fiduciary obligation to act in good faith.
The plaintiffs say that the information contained in the Plaintiffs' Client List is confidential, the property of the plaintiffs, and not in the public domain such that the taking of it is said to be an act of bad faith in breach of the fiduciary obligation such that it amounts to another justification for the conclusion that the section was contravened. The plaintiffs argue that there would be a contravention if the employee used the information irrespective of whether that information is confidential in equity. In other words, it is said that the statutory provision will be contravened if it is used in competition by the employee regardless of whether the information (such as customer or client lists) is confidential.
In the present case it is said that, given that the parties agreed the definition of confidential information (and it is said that the Easytel defendants have not sought to impugn that definition), it should be concluded that the information in the Plaintiffs' Client List was confidential. The plaintiffs argue that an employee is not permitted deliberately to memorise the employer's information so as to be able subsequently to use it in competition with the employer. (Pausing here, there is no suggestion that anyone here has sought to do so or been able to do so.)
[70]
Determination as to statutory claims
I am not persuaded that the alleged breaches of the above statutory provisions have been made good.
True it is that it has been established that Ms Barakat took with her (as part of her personal files) information in the form of the Excel spreadsheet that she then used in order to create the template for her SSD Spreadsheet, which Mr Mitchell then used at least prior to the acquisition by Easytel of the CRM program; and that Mr Youssef took with him emails when he left his employment with the plaintiffs. However, I am not persuaded the evidence establishes that any particular information in the Plaintiffs' Client List was used by Mr Mitchell and Mr Youssef while they were employed with Easytel. While I find that Ms Barakat did use information from the Plaintiffs' Client List to create the SSD Spreadsheet, I am not persuaded that any loss has been suffered as a result; given the relatively anodyne nature of the information there transposed into the SSD spreadsheet and the ability readily to obtain such information through the usual telemarketer contacts. Relevantly, I am not persuaded that the individual defendants, as former employees of the plaintiffs, have improperly used their position as employees, nor improperly used information obtained in their capacity as employees of the plaintiffs, to gain advantage for themselves or someone else or cause detriment to the corporation.
[71]
Accessorial liability
As to the claim for accessorial liability, the plaintiffs rely on ss 79(a) and (c) of the Corporations Act as against Easytel, contending that it is a person that was involved in the contravention having: (a) aided, abetted, counselled or procured the contravention; or (c) been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to, the contravention.
The plaintiffs say that, in the present case, they had paid to acquire the initial information, and then paid their employees to call the prospective clients to ascertain detailed information that informed the future strategy necessary to succeed in selling the services the plaintiff provided. It is said that the information was agreed in the employment agreements to be confidential; and that it was maintained on a centralised database which was password protected. It is noted that the parties to the employment agreements agreed that any infringement of the confidential information would permit the granting of an injunction to restrain such behaviour. The plaintiffs say that it was clear that the information was not to be shared at all, let alone with a competitor such as Easytel.
The plaintiffs contend that at least Ms Barakat has engaged in "nefarious behaviour" to conceal the taking of the information to facilitate the unfair advantage by use of that very information. Additionally, the plaintiffs say (pointing to Mr Mitchell's evidence as an example) that the information is so vast that it would be impossible to memorise, pointing to the fact that, on the plaintiffs' case, the information spans greater than 30,000 clients (and not just the names, but intricate detail about many aspects of the electronic devices and services they require and when they will next need for goods and services).
The plaintiffs point to the fact that the individual defendants commenced employment with Easytel almost immediately after they resigned their employment with the plaintiffs. It is noted that the Plaintiffs' Client List was located on Ms Barakat's computer at Easytel; and that Mr Mitchell said that he was directed to use the Plaintiffs' Client List. The plaintiffs say that that evidence is corroborated by emails from Mr Youssef in which, after Mr Mitchell identified a client as a Nexgen client, Mr Mitchell was told to "go for gold".
It is said that at all material times, the individual defendants were employees of Easytel and, therefore, agents or representatives of the Easytel defendants who, aided, abetted, counselled and procured use of the information. In the alternative, the plaintiffs say that it could not be said that the individual defendants, in their capacity as employees, were not "in any way directly or indirectly, or knowingly concerned in or party to" the use of the information (such that in those circumstances there has been a contravention of ss 182 and 183).
[72]
Determination as to accessorial liability
As I have concluded that the principal breaches have not been made good the question of accessorial liability strictly does not arise. Had it arisen I would have concluded that Mr Youssef's knowledge should be imparted to the Easytel entities (see Anderson v Canaccord at [1643]-[1684] regarding the principles of attribution of knowledge to corporations) but not that Mr Youssef has sufficient knowledge of the compilation of the EA-2 and SSD Spreadsheets to have been aware of a breach by Ms Barakat. Hence the accessorial claims would have failed.
[73]
Relief sought
The plaintiffs contend that an employee, during employment is not entitled to make, or copy, a list of the employer's customers. It is noted that s 1324 of the Corporations Act provides that where a person has engaged in conduct in contravention of the Corporations Act or, has been knowingly involved (as defined in s 79 of the Corporations Act) the Court may, on the application of an interested person or a person affected by the conduct, grant an injunction on such terms as the Court thinks appropriate. It is noted that, pursuant to s 1324(4) of the Corporations Act, if considered desirable to do so, an interim injunction may be granted pending determination of an application under s 1324(1).
Further, the plaintiffs say that equity will restrain a former employee who seeks to use an employer's information as a "springboard" to gain a head start, even where that information is capable of being independently ascertained (citing Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458 at [201] per Gordon J); and that the springboard doctrine seeks to prevent the misuse by one party of another's confidential information in order to bring out its own product in a manner or time that it would not otherwise have been able to achieve, to prevent unfairness. It is said that it is well recognised that parties are free to use information that becomes public so long as they do not take advantage of the "head start" of having the knowledge ahead of the public.
The plaintiffs further seek equitable compensation and an order for the taking of an account of profits for the alleged breaches of fiduciary duties and the duty of confidence.
The Easytel defendants say that the permanent injunctions sought are excessive. The Easytel defendants say that the plaintiffs effectively seek orders that the Easytel defendants be restrained from contacting any company or person entered into the plaintiffs' CRM (noting that there are some 40,000 entities in Confidential Exhibit EA-7 alone) regardless of the source of the lead, or that the Easytel defendants may have paid somebody for the same lead; notwithstanding that the restraints in the employment contracts of the individual defendants have long since expired, and which the Easytel defendants, in any event, contend are not enforceable because they tend towards protection against competition, and not the protection of the plaintiffs' legitimate interest; and in circumstances where contacts listed in Confidential Exhibit EA-7 are not actually customers of the plaintiffs but, rather, no more than leads or potential customers whose details the plaintiffs have purchased from database supplies in an identical fashion to the way in which the Easytel defendants purchased their information from database suppliers; and notwithstanding that the Easytel defendants have provided the source of leads in Easytel's CRM obtained in the usual course of business from suppliers which both the plaintiffs and the Easytel defendants utilise.
[74]
Determination
I will deal first with the claims for equitable compensation and an account of profits. In Mid-City, Campbell J, as his Honour then was, referred to United States v Grossman 843 F 2d 78 (2nd Cir, 1988) at 86 where a law firm was held to have the right, as against an employee of the firm, to the confidentiality of information disclosed to members of the firm by a client, and went on to say (at [140]) that:
… the same factors which have led to the customer lists of any business being regarded as confidential, and persons working in that business being obliged, by an implied term in their contract of employment to recognise the confidentiality of those lists, apply here. …
As Campbell J said in Mid-City (at [148]):
An employee [and I see no reason why, in principle, an authorised representative would be in any different position] is entitled, once his employment is over, and in the absence of an express and valid contractual restriction on his doing so, to canvass former customers of his employer, to the extent that he has the names and addresses of those customers in his memory as a result of the ordinary carrying out of his duties as an employee: Ormonoid Roofing and Asphalts Limited v Bitumenoids Limited (1930) 31 SR (NSW) 347 at 354-356; 48 WN (NSW) 66 at 69 (Harvey CJ in Eq); Faccenda Chicken Limited v Fowler [1987] 1 Ch 117 at 136; Riteway Express Pty Limited v Clayton (1987) 10 NSWLR 238 at 240 (McLelland J); Weldon & Co Services Pty Limited v Harbinson [2000] NSWSC 272 at [68]-[72] (Bryson J). …
and (at [158]):
… Both the common law and equity take into account, in formulating the extent of obligations they impose in a situation like the present, the public interest that there is in people who have acquired skills and knowledge while working in one situation, such that those skills and that knowledge is part of the mental equipment they carry around with them, being able to use those skills and that knowledge when they take up a later situation. …
In Southern Real Estate v Dellow (2003) 87 SASR 1; [2003] SASC 318 (Dellow), Debelle J, with whom Nyland and Lander JJ agreed, considered a not dissimilar issue in relation to what was held to be the misuse by a director of a rent roll of a real estate business. There, it was said (at [26]) that the director had prepared customer lists with the intention of using them once she had resigned and was thereby placing herself in the most advantageous position to erode the goodwill of the company. It was recognised that, after her resignation (and after the expiry of any fiduciary duties), Ms Dellow was at liberty to make a list of clients from memory and actively to solicit their custom (at [36]). However, Ms Dellow had, in effect, pre-empted that course.
[75]
Asset Sale Agreement - submissions as to standing
In their further submissions dated 17 September 2021 (following the further amended statement of claim), the Easytel defendants made submissions reiterating the complaints made in their earlier submissions (as summarised above) as to the nature of the plaintiffs' claim but also contending that the plaintiffs lack standing and cannot establish any loss or damage.
The Easytel defendants say that there are significant discrepancies between the Asset Sale Agreement and the position contended for by the plaintiffs.
First, reference is made to Mr Ayoub's evidence (at [10] of his affidavit sworn 3 September 2021) to the effect that "Assets" is defined by cl 1 of the Asset Sale Agreement to mean the assets owned by Nexgen relating to or necessary for the conduct of the "business" on the Completion Date, which was comprised of (among other things) Nexgen's property (defined in Mr Ayoub's affidavit as the "Relevant Transferred Property").
The Easytel defendants say that this misconstrues the definition of "Assets" in the Asset Sale Agreement (see as set out earlier in these reasons) in that, contrary to Mr Ayoub's assertions, the word "Assets" is not defined to mean assets owned by Nexgen; rather, it refers to assets of the "Sellers" (it being noted that there are at least four Sellers specified in the redacted Schedule 1 of the Asset Sale Agreement). (The Easytel defendants suggest that there are likely more "Sellers", noting that there are nine signatories to the Asset Sale Agreement and only three of these are named as Buyers in the Asset Sale Agreement.)
The Easytel defendants point to Mr Ayoub's evidence (at [11]-[13] of his 3 September 2021 affidavit) that:
11. Some of the Relevant Transferred Property, contained specific definitions within the ASA, the effect of which, further identified what specific property that was being transferred to Business Telecom.
12. In addition to the Relevant Transferred Property, clause 1 of the ASA also defines the 'Business Intellectual Property' to include all intellectual property rights, both in Australia and thought out [sic] the world, and for the duration of the rights, any right, title and interest in (among other things) any trade secret, 'know-how' (as defined in the ASA), computer software and confidential, scientific technical and product information (Relevant Transferred IP)
13. Clause 1 of the ASA also defines 'Assumed Contracts' to include, among other things, contracts between customers and the 'seller' (Customer Contracts).
[76]
Plaintiffs' supplementary submissions
In commendably brief (two paragraph) supplementary submissions dated 22 September 2021, the plaintiffs maintain that: none of the relevant assets or Business Intellectual Property (as defined in the Asset Sale Agreement) was sold or assigned to anyone other than Business Telecom (though they do not point to any provision of the Asset Sale Agreement to make that submission good); and they note that the Easytel defendants do not contend in their supplementary submissions that the rights of action are not assignable (but that, if such a submission had been made, it would be contended that the causes of action were ancillary to the property rights assigned, citing Trendtex Trading Corp v Credit Suisse [1982] AC 679 at 703 and Meagher, Gummow & Lehane at [6-470]); and that they fall within the ambit of cl 3.1 and 3.2 and (m) ("all other property, rights and assets of the Sellers used solely and exclusively in the conduct of the Business") within the definition of Assets in cl 1.1 of the Asset Sale Agreement).
[77]
Easytel defendants' further submissions in reply
The plaintiffs' supplementary submissions then provoked complaint by the Easytel defendants (in not so brief further submissions in reply filed on 24 September 2021) as to the failure of the plaintiffs' solicitors to respond to an email of 17 September 2021 (a copy of which was attached to the further submissions in reply) from the Easytel defendants' solicitor in which request was made as to whether the plaintiffs' submissions had been filed "so that we may attend to exchange". Following a further email of 22 September 2021 from the Easytel defendants' solicitor (a copy of which was also attached to the further submissions in reply) in which advice was again sought as to when the plaintiffs would be in a position to exchange their submissions (which it was noted were due to be filed on 17 September 2021) the plaintiffs' solicitors served the two paragraph further submissions referred to above.
The Easytel defendants' complaint is that the plaintiffs failed to file their further submissions in accordance with the timetable and thereby "have assumed a forensic advantage", to which the Easytel defendants say the plaintiffs were not entitled. (If there was any such forensic advantage, and it is hard to see, that must surely now be abated by the further submissions that were sent by the Easytel defendants.)
As to the substance of the plaintiffs' further submissions, the Easytel defendants' response was as follows.
The Easytel defendants dispute the plaintiffs' contention that none of the relevant assets or Business Intellectual Property (as defined in the Asset Sale Agreement) was sold or assigned to anyone other than Business Telecom (and say that this position is not supported by the Asset Sale Agreement).
The Easytel defendants contend that the plaintiffs' further submissions are otherwise superfluous for the following reasons. First, they say that the sale or assignment of "assets" from Nexgen to Business Telecom did not occur as contended by the plaintiffs; and that neither of the plaintiffs has any interest in the "assets" required to maintain the present proceeding. Second, they say that, in respect of Mr Youssef, his employment contract with Nexgen was expired and could not be assigned; that no assignment of Mr Youssef's employment contract could occur without it being novated with his consent; and, on the pleadings or the redacted Agreement, there does not appear to be any purported assignment or novation of Mr Youssef's employment contract. Third, in respect of Ms Barakat, that her employment contract was with Business Telecom; and thus could not be sold or assigned from Nexgen to Business Telecom.
[78]
Determination
The competing submissions as to the Asset Sale Agreement do not strictly arise for determination given the findings I have made on the claims themselves. Were they to have arisen I would have concluded that, insofar as any of the "Assumed Contracts" was not a contract entered into by Nexgen (but, rather, was a contract entered into by another Nexgen entity) then the causes of action for damages for breach of covenant or breach of fiduciary duties (even if properly assigned) would not sound in damages or equitable compensation for the loss of clients that were never clients of Nexgen. I accept that the difficulty with the Metalair contract is that it was signed after the restraint period in the relevant employment contracts had ceased; was a "lead" sourced from Illion; and apparently made the decision to leave Business Telecom after the expiry of its contract with Business Telecom due to dissatisfaction with the service provided, and thus the defendants' acquisition of Metalair's custom was in no way illegitimate nor unlawful.
Were it necessary to decide the issue, I would be inclined to find that (to the extent that any of the "Assured Contracts" was a contract to which Nexgen was a party) the rights of action fell within cl 1.1(m) being "all other property, rights and assets of the Sellers [in this instance, Nexgen] used solely and exclusively in the conduct of the Business", and that such rights of action are sufficiently annexed to the confidential information the property of the plaintiffs (see Krishell Pty Ltd v Nilant (2006) 32 WAR 540; [2006] WASCA 223 at [77]), and thus were assignable (and likely assigned) to Business Telecom pursuant to cll 3.1and 3.2 of the Asset Sale Agreement (on the assignment of causes of action, see Anderson v Canaccord at [1265]-[1311]). However, I accept that there is difficulty for the plaintiffs insofar as it is not established that Nexgen was in fact a party to each of the Assured Contracts.
[79]
Conclusion
For the reasons set out above, I find that the plaintiffs have failed to establish an entitlement to the permanent injunctive relief claimed and that any damages for breach of contract referable to Ms Barakat's conduct in taking the EA-2 Spreadsheet and Mr Youssef's conduct in transferring his emails to his personal device would be nominal only.
Costs should follow the event but are to be the subject of separate submissions.
Accordingly, I make the following orders:
1. Order that the first and third defendants pay the plaintiffs nominal damages in the amount of $1 for breach of her or his respective employment contracts.
2. Dismiss the remainder of the plaintiff's amended statement of claim.
3. Discharge the undertaking proffered by Ms Barakat and Mr Youssef on 29 November 2019.
4. Direct that any brief written submissions on costs be filed and served within 14 days with a view to being determined on the papers.
[80]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 24 March 2022
The alleged confidential information comprises data recorded about prospective customers (referred to as "prospects" or "leads"). Both the plaintiffs and Easytel use a particular software program (Leadmaster CRM), that being a Customer Relationship Management tool, to record information about prospective customer leads (though Easytel did not do so until a couple of months after it commenced operation); and both have purchased "leads" (or prospective customer databases) from the same suppliers. Pausing here, the names and contact information of "leads" acquired from third party suppliers cannot logically be confidential information of either side (because it was separately acquired). However, the plaintiffs seem to suggest that the acquisition of such databases by Easytel (a few months after it had set up business) was some sort of device to disguise the use by Easytel of the plaintiffs' confidential information. I address this in due course. Suffice it here to note that the plaintiffs say that the information as to prospects or leads is confidential to them because of the way that Easytel pursues leads from suppliers (asking them for specific types of business and the like) (see T 46.4-17); and I note that the information in the CRM program extends beyond mere names and contact information to include, for example, information as to the prospects' current contractual arrangements and their telecommunication hardware requirements.
Each of Ms Barakat (a telemarketer) and Mr Youssef (a sales or business development manager) has admitted to taking certain documents (such as prospective client lists in Ms Barakat's case and emails in Mr Yousef's case) in electronic form, when each resigned from her or his employment with the relevant plaintiff company; but each denies using that information in her or his subsequent employment with Easytel.
Mr Mitchell, who was also a telemarketer at the relevant time but now works in warehousing, did not file a notice of appearance or any defence in the proceeding (and thus has taken no active role, as a defendant, in the case). Mr Mitchell did, however, attest to a number of affidavits (first, at the behest of the plaintiffs and then at the behest of the other (i.e., the active) defendants (the Easytel defendants) in the proceeding) and was ultimately called as a witness by the Easytel defendants. Relevantly, Mr Mitchell denies that he took any of the plaintiffs' information with him when he left his employment with Business Telecom (and the plaintiffs do not appear to suggest otherwise) but his evidence is that when he was employed in the Easytel group (which he no longer is) he was directed by Ms Barakat and Mr Youssef, and by Easytel, to use the electronic client list that Ms Barakat took with her when she left her employment with Business Telecom. Mr Mitchell later resiled from some of the evidence he gave in his first affidavit, as to which I will say further in due course, but seemed genuine in his belief that he had been using the plaintiffs' client information while employed with Easytel.
The plaintiffs contend that it is no coincidence that Easytel has entered into various contracts for the supply of computer and telephone goods and services with clients or prospective clients of the plaintiffs with whom the individual defendants dealt during the course of their employment with the plaintiffs (identifying some 80 sales in the year ending 30 June 2020 that they say were made to clients or prospects identified by them as on the plaintiffs' database). Rather, they say that this is the result of the wrongful use of the plaintiffs' confidential information (in particular, as a result of the taking of the client lists by Ms Barakat, who it is said shared that information with at least Mr Mitchell and Mr Youssef while at Easytel).
The plaintiffs have no complaint as to the use by the Easytel defendants of the Leadmaster CRM per se (although the use of the same providers or suppliers or leads was the subject of some complaint by the plaintiffs' managing director, Mr Elie Ayoub, in the course of cross-examination - see T 50.28-31). Their complaint in essence is that Easytel has obtained an advantage by making use of client or contact information contained in the notes made in the plaintiffs' CRM database (and which would not appear in the purchased databases).
The Easytel defendants challenge the proposition that the information in question was confidential; raise issues as to the manner in which the plaintiffs obtained access to Ms Barakat's documents (on which the plaintiffs rely to support their contention as to the misuse of what they claim to be their confidential information), accusing the plaintiffs of "hacking" Ms Barakat's personal information; emphasise that the plaintiffs' databases (referred to by the plaintiffs as "client lists") contain a large number of entities that are conceded by Mr Ayoub to be only "prospects" or "leads" and not actual clients of the plaintiffs; and contend that the present application amounts to anti-competitive conduct by the plaintiffs (and an attempt to bully or intimidate them and to force them out of business).
The plaintiffs say that the 29 November 2019 undertakings amounted to an admission that the clients listed in an exhibit to Mr Ayoub's 29 November 2019 affidavit (Exhibit EA-2, which was admitted at the hearing as Exhibit B and is referred to by the plaintiffs as the Plaintiffs' Client List, but also in submissions, as the EA-2 Spreadsheet or spreadsheets) were clients to whom Ms Barakat and Mr Youssef had provided services during their employment with the plaintiffs. However, the undertakings were expressly made on a without admission basis (see Order [13] of the orders of 29 November 2019 above); and the undertakings are framed in terms of any entity in the schedule with whom the relevant person "was involved" during his or her employment - which does not necessarily mean that the entity became a client of the plaintiffs (as opposed to, say, a prospective client that someone such as Ms Barakat might have contacted at one stage). Hence, I would not accept that the undertakings necessarily involved an admission that the entities in the relevant annexure were "clients" of the plaintiffs.
The Easytel defendants say that Ms Barakat and Mr Youssef have complied with the 29 November 2019 undertakings; and that the EA-2 Spreadsheets have not been used in Easytel's business. Further, the Easytel defendants point out that the contractual restraints to which Ms Barakat and Mr Youssef were subject (which the Easytel defendants say were, by their nature, unenforceable anyway) expired in March 2020.
The Easytel defendants are adamant that there has been no use of any of the plaintiffs' alleged confidential information in Easytel's business (including in the spreadsheet at Exhibit SB-1).
The Easytel defendants also say that only one entity of those listed in Annexure A was signed by Easytel, that being Dagazo Pty Ltd trading as Century 21 Springwood (Dagazo), and that this was not a client of the plaintiffs (Dagazo being at the time a client of another telecommunications provider - Telecomm Connect). In this regard, the plaintiffs say that there was a proposal made to Dagazo on 4 July 2019, when Ms Barakat was still with the plaintiffs; and that a further proposal was made on 16 August 2019. The invoice dated 8 October 2019 provided by Easytel to Dagazo referred to the same hardware provider but a different company - GC Leasing (being a leasing company with which both Nexgen and Easytel dealt). Ms Barakat's evidence was that she did not recall the name Dagazo and that after she went to Easytel she had "Google searched" the Century 21 entities because a colleague had signed up another Century 21 franchise (see T 126.47-50).
The Easytel defendants also note that one of the "'prospects" referred to at [12] of Mr Ayoub's affidavit sworn 29 November 2019 is alleged to have said (in a conversation said to have been recorded by Mr Ayoub) that "we're still getting calls from Business Telecom when I'm pretty certain I've said we're not interested at this stage", thus casting doubt on whether the business in question was a prospect or imminent prospect of the plaintiffs.
Ultimately, it does not appear that any claims are pressed in relation to the Annexure A entities (see below).
Suffice it at this stage to say that the plaintiffs' suspicions as to the deletion of electronic material seem to have been heightened by (if not indeed largely based upon) the fact that the independent computer expert (Mr Jarrett Le Roux) did not, during his inspection of the computer devices, identify or forensically image the solid state hard drives (SSD hard drives) in two computer devices (Ms Barakat's and computer Ms Tynieka Attard's computer), and Mr Le Roux subsequently concluded that Ms Barakat's computer had been modified (and that the modification had occurred in the morning of 18 May 2020 at 9.09 am - i.e., just before the "raid"). The plaintiffs' computer expert (Mr Shane Bell) then also identified that there were deleted and modified operating systems.
In essence, what appeared to be contended by the plaintiffs was that the entire computer operating system for Ms Barakat's computer was missing - something that Ms Barakat vehemently denied in cross-examination and which was ultimately proven to be incorrect as confirmed by Mr Bell and for which Mr Le Roux apologised. The acknowledged error was unfortunate not least because it led to further time and expense being incurred by the parties in exploring this issue (as I explain below). Nevertheless, for present purposes it is relevant to note that for some time the plaintiffs contended that the "Plaintiffs' Client List" (a spreadsheet containing detailed information about the plaintiffs' clients - and, I might add, the plaintiffs' prospects or leads) which was uploaded to Ms Barakat's computer in 2019 had been deleted. (I note that the Easytel defendants maintain that, subject to the issue of costs, the Anton Piller matters, including the notice of motion, the Anton Piller Orders themselves and the search are irrelevant to the determination of the substantive issues at the final hearing.)
Mr Bell's report included a table of forensic images from which he concluded that some 512 files had been deleted; although he could not say what had been deleted (or when, other than in May 2019). That conclusion precipitated a further exercise in computer examination and forensic expert evidence.
It is noted that Mr Ayoub agreed during cross-examination that, of the approximately 40,000 entries in Confidential Exhibit EA-7 (being Confidential Exhibit J in the hearing), there is no specific list of which of those leads are clients of the plaintiffs; that any number of those leads could be in a list that Easytel has purchased; and that, where Mr Ayoub refers to certain parties in his affidavits as prospects, it is because they are not customers of the plaintiffs. Indeed, Mr Ayoub said (at T 54.38-39) that the lists in the exhibits were "muddled up for a reason". Therefore, it is not possible to determine from the exhibits to his affidavit which of the entities there listed are (or were at the relevant time) current actual clients of the plaintiffs (as opposed to prospects or leads).
The Easytel defendants point to Annexure A to the affidavit of Mr Youssef of 8 September 2020 and to the similar annexure to his 12 September 2020 affidavit, which contains a list which identifies the relevant Easytel customer (from Annexure B to the amended statement of claim filed on 7 September 2020); the lead source from which the customer was obtained from; and the previous "carrier" or telecommunications service provider from which the customer was "ported". The Easytel defendants point out that the list compiled in Annexure A of Mr Youssef's affidavits, based on Annexure B to the plaintiffs' amended statement of claim contains approximately 62 entities, most of which are current customers of Easytel (save for the reference to "Yews" from Annexure B and three customer applications (Awaliam Pty Ltd, Mr Mow, and VD Jennick Pty Ltd) which were either cancelled or did not proceed).
It is noted by the Easytel defendants that (at [115] of the plaintiffs' submissions dated 19 November 2020), the plaintiffs contend that "the entities listed in annexure B of the amended statement of claim: are clients of the plaintiffs which are listed in exhibits EA-2 and EA-7; and have entered contracts for the supply of phone related hardware services with Easytel which is said to be demonstrated by the invoices produced under subpoena by GC Leasing Sydney Pty Limited".
The Easytel defendants point out that Annexure B of the amended statement of claim contains approximately 58 separate entities that are customers of Easytel. It is said that only four of these were entities were customers of the plaintiffs when they were signed by Easytel (in, the Easytel defendants say, the usual course of reasonable competition), namely: Austeck Pty Ltd (Austeck) on 18 March 2020 (which was a lead sourced from Illion); Metalair on 31 March 2020 (which was a lead sourced from Illion); Bars N Racks on 9 March 2020 (which was a lead sourced from Australia on Disc); and Blooms the Chemist on 25 June 2020 (which was a lead sourced from Illion).
At 30B of the amended statement of claim, the plaintiffs contend that the defendants have engaged in "use of the Confidential Information to achieve sales to the clients listed in Annexure B". The Easytel defendants cavil with the description of the information in this document being confidential information. They also cavil with the proposition that there has been use of the information and the proposition that the listed entities were "clients" of the plaintiffs (as noted above), to which I will return in due course.
The timing of the amendment application was explained on the basis that it had emerged from the discovery ordered shortly before the hearing. Ultimately, as adverted to above, the amendment was not opposed, on the basis that further affidavit evidence would be permitted to address these contentions. However, the Easytel defendants maintained (and this could hardly be disputed) that there was a need to adduce expert computer evidence in reply to Mr Bell's evidence, which meant that an adjournment of the hearing would be necessary (indeed, almost inevitable).
In the interim, however, the hearing nevertheless progressed by the taking of oral lay evidence on 7-8 September 2020 and 14 September 2020 (a third day that had not been anticipated by the parties when the matter was initially set down for an expedited hearing).
Mr Ayoub deposes that the client relationships that develop from the telemarketing calls are referred to as "prospects" (see Mr Ayoub's 25 November 2019 affidavit at [42]). Mr Ayoub's evidence is that, in his experience, generally from all the calls 1% of the names in the purchased databases become "prospects"; and 20% of the "prospects" result in sales (Mr Ayoub's 25 November 2019 affidavit at [43]). Mr Ayoub has explained that, before a "prospect" turns into a sale, a number of appointments are typically scheduled, where sales executives or business development managers (such as Mr Youssef) visit the prospective clients in order further to develop the relationship.
The plaintiffs say that the process of developing a relationship and collecting the data which is entered onto the plaintiffs' CRM system costs about $500 per client per appointment; and that a usual sales process takes about six to twelve months from the first call after the acquisition of the purchased database (see Mr Ayoub's 25 November 2019 affidavit at [44]-[46]). (This, of course, being relevant to any kind of "springboard" advantage that the Easytel defendants might be thought to obtain by access to the plaintiffs' CRM data.) Mr Ayoub has deposed that, on average, a sale will generate approximately $15,000 in the sale of hardware and associated products (Mr Ayoub's 25 November 2019 affidavit at [47]; Mr Ayoub's third affidavit sworn 29 April 2020 at [28]-[30]).
Pausing here, there does not appear to have been much dispute as to the process of telemarketing as adopted by both organisations. I note, however, that Ms Barakat's evidence is that the comments or notes added to the CRM database are made by telemarketers and she says that cannot be changed; and that Mr Youssef, who admits he had access to the CRM database denied that he would add comments to it. Rather, his role, as I understand his evidence, was to attend appointments with prospective clients and to "close" the sales. Thus, it is contended that Mr Youssef could not have added the details the subject of Exhibit EA-7 into the CRM. The plaintiffs, however, appear to suggest that both telemarketers and sales or business development managers would add to the CRM database. Nothing seems to turn on this disparity in the respective accounts of the way in which the CRM database is compiled in the respective organisations.
As the alphabetical list of client names comprising over 900 pages of Exhibit EA-7 of Mr Ayoub's affidavit of 26 June 2020 makes clear, at the relevant time the plaintiffs had over 36,000 clients and prospective clients in their database.
The plaintiffs say that, without the initial investment in the client list, and the developed client relationship through which the plaintiffs acquire information as to the bespoke needs of the clients on those lists (which information is then entered into the CRM), there would be no practical way of selling the products that the plaintiffs sell and, for that reason, the restraints on solicitation of clients already contacted by the defendants whilst they were in the employment of the plaintiffs (or even by other staff), is a legitimate relationship to protect. (The plaintiffs further contend that this is matter of common ground, referring to [29] of the affidavit affirmed on 11 May 2020 by Mr Hanna, the fourth defendant and sole director of Easytel.) It appears that this is also the basis on which the plaintiffs contend that the information contained in the CRM database is confidential information. (In this regard, I consider that there is a distinction between information on leads acquired from a database supplier and "bespoke" information obtained by telemarketers calling the projects or leads. The latter might well be confidential to the plaintiffs' business. I cannot see how the former is.)
The plaintiffs contend (and it does not appear to be disputed) that, in their respective employment roles, all three defendants had access to the plaintiffs' common client or prospective client database (for which a passcode was required). There is, however, great dispute as to whether or to what extent that comprised confidential information. Furthermore, there is a difference between the role of appointment setters or telemarketers (such as Ms Barakat and Mr Mitchell) and the position held by Mr Youssef (to which I will refer in due course as relevant).
Mr Youssef's wife, Amanda, was also employed for a time within the Nexgen group. It appears that her role was an administrative role.
Mr Tsioumas' evidence (see T 64-65 and Mr Tsioumas' affidavit sworn 11 June 2020 at [31]-[37]) is that, on Friday 15 May 2020, he arrived at Easytel's offices at around midday; that Mr Hanna was there and on the phone. Mr Tsioumas says that, at about 1.15pm, Mr Hanna said words to the effect that "the lawyers have advised that we might be raided … Nexgen is in Court now trying to do it". Mr Tsioumas says that Mr Hanna said that no one could be in the office until about 2pm; that he (Mr Tsioumas) watched CCTV footage from the office on Mr Youssef's phone waiting for the raid; and that, at about 2.05pm, he, Mr Andraos, Ms Barakat and others were told by Mr Hanna to go home. Mr Tsioumas' evidence was that, to his knowledge, only the Youssefs (Mark and his wife, Amanda) and Mr Hanna remained in the office. In cross-examination, Mr Tsioumas confirmed that Ms Barakat went home and said that they all walked out at the same time (T 65.6-24).
Mr Andraos similarly deposed (in his affidavit sworn 14 June 2020 at [5]-[13]) that on 15 May 2020 Mr Tsioumas arrived at the office at about 12.30pm; that at 1.15pm Mr Hanna said that the lawyers had told them they were about to be raided; and that he said that they needed to go to the basement (or car park) before 1.30pm (see also his evidence at T 69). Mr Andraos further said that Mr Hanna said that if nothing happened by 2pm then they could not do it (the raid) that day. Mr Andraos said that Mr Youssef was watching on CCTV. Consistently with Mr Tsioumas' evidence, Mr Andraos says that, at 2.10pm, Mr Hanna told them to leave.
Mr Tsioumas says that on the Monday (18 May 2020) he and Mr Marsic were working on a camera installation at other premises and that they watched the raid on a camera from those premises (see Mr Tsioumas' affidavit of 11 June 2020 at [41]-[46] and T 66.27-49, 67.1-14). Mr Tsioumas said that the desks were quite clean and that Mr Mitchell's computer was missing (though as I understand it, it was in fact one that was forensically imaged by Mr Le Roux on 18 May 2020 - see Attachment 1 of Mr Le Roux' affidavit affirmed 20 May 2020).
Mr Tsioumas said that, prior to the raid, he had seen Nexgen's books, files, lead sheets and other hard copy documents in Easytel's office (see at [45] of Mr Tsioumas' affidavit of 11 June 2020).
According to the independent solicitor (Mr Maxwell), during the course of the search at the Easytel offices, Mr Youssef asked the computer expert "Were you supposed to do this search on Friday?" (see Annexure A to Mr Maxwell's affidavit sworn 29 May 2022). The Easytel defendants point to the explanation given in cross-examination by Mr Youssef to the effect that he asked this question because the Anton Piller documents indicated that the search was supposed to have been undertaken on 15 May 2020 (i.e., the Friday). I draw little from this query made by Mr Youssef. Whether or not Mr Youssef's explanation (that he noticed the date on the search orders and seemingly was querying the validity of the raid occurring on a later day) is plausible, the evidence of Mr Tsioumas and Mr Andraos is that there was an expectation on the Friday that a raid was going to occur that day. If there had been some misconduct on the part of the Easytel defendants in removing incriminating material from the office prior to the raid actually occurring on the Monday, it seems unlikely that Mr Youssef would have drawn attention to this by making the query he is reported to have made; and in any event I am not persuaded that the evidence establishes that anything was actually removed or deleted.
As noted above, the evidence of Mr Tsioumas and Mr Andraos about the events on the Friday that the Anton Piller Orders were made is broadly consistent. It seems to me in one sense implausible, in that it is surprising that Mr Hanna's lawyers could have known about an ex parte application in the duty list that was being conducted by telephone; though it is not wholly inconceivable - particularly given that it appears that it had been a busy list that day and no doubt there were a number of matters that were being called through in the duty list; so that it is possible that the lawyers for Easytel might have been in the virtual court room and recognised the matter name). (It also might be more likely that the duty list was being monitored if there was awareness of an affidavit having been prepared only shortly before.) However, ultimately this is no more than speculation.
There is no explanation proffered as to why the staff of Easytel would need to be out of the office during the (then apparently expected to be imminent) raid; nor is it obvious why the staff would be sent home after 2pm when the anticipated raid had not eventuated (that being around the time that the witnesses recall they were told the raid had to have happened if it was to occur on that day). The plaintiffs clearly suspect that this was to permit a deletion or removal of documents or other evidence that afternoon. However, the difficulty with this is that there is no evidence of any bulk deletion of electronic data (other than the now wholly discredited independent computer expert's evidence to that effect and the similarly discredited evidence of the plaintiffs' expert, Mr Bell); and the suggestion that there were some hard copy folders or files marked "Nexgen" or "Business Telecom" that were not later found in the office is vague (and suffers from the difficulty I have with the reliability of Mr Mitchell's memory overall - see below). The observation that desks were clean on the Monday morning (which presupposes that the desks would not otherwise have been clean) takes the matter little further.
Schedule 2 of the Asset Sale Agreement deals with the transfer of specific property. The Easytel defendants make submissions (which I address in due course) as to the content of Schedule 2.
However, Mr Tsioumas in cross-examination gave evidence that there were numerous reasons why he resigned from TelPro (T 62.37-38, 63.1-5) confirming that he left TelPro about two months before the September 2020 hearing and then worked directly as a contractor for Nexgen but also other for other entities.
Ms Barakat used the terminology of "qualified customers" by which I understand her to mean a contact that was on the Easytel CRM (T 128.6-10). So, for example, reference was made to an email of 6 April 2020 at 4.20pm from Ms Barakat to Mr Youssef (Exhibit O) in which Ms Barakat said "[t]his client is qualified in my CRM. It's a Google lead and a Nexgen client". Pausing here, it is necessary to keep in mind the fact that a reference to a client includes a reference to a prospective client. Ms Barakat explained that this contact was in her CRM from Easytel and it was a paid source but when she contacted the lead she was told that it was with Nexgen but was looking for quotes, so she sent the email to Mr Youssef to see what she could do. Importantly, Ms Barakat said "… it was a Nexgen customer and I know that the rules were, do not touch their existing clients, and from myself I knew not to do that anyway without anyone telling me" (see T 129.17-22).
Ms Barakat explained (at T 129.30-38) that qualified meant that she had called the customer and he was in the market. Ms Barakat said that the customer was in the CRM not because it was a Nexgen prospect (and that she only found this out when she called the customer). Ms Barakat said that in her work for the plaintiffs she would only pursue leads - she was not aware of who were existing customers (and it was not her job to call them and re-sign them) (T 129.47-50,130.1-2).
Ms Barakat was taken to an email of 12 March 2020 (Exhibit P) where she had raised a query as to an instruction not to touch a Nexgen client that she thought was in the Easytel CRM list (saying that she had thought the two contacts were related) and she was told by Mr Youssef not to call as the client was not from Easytel's paid database.
Again at T 131.1-21, Ms Barakat denied using information from the plaintiffs, when questioned about an LJ Hooker franchise in Newtown. Ms Barakat said that she had called a lot of real estate agencies (and says that she Googled their details).
It is clear from this that, by early 2020, Ms Barakat (and one would assume other Easytel personnel, similarly) was being careful not to contact any Nexgen "clients" or prospects unless the client or prospect was from a paid source on Easytel's CRM. While the plaintiffs say that this was just Easytel "covering its tracks", I disagree; it seems to me that it is consistent with Easytel being careful only to contact paid sources in order to avoid causing issues with Nexgen and Business Telecom (and in the belief, whether correct or not, that to do so would not be in breach of the obligations owed by Nexgen and Business Telecom's former employees). That seems to me commendable conduct rather than the reverse.
Ms Barakat denied destroying any evidence and maintained that she had been able to use her computer the whole time at Easytel (T 136.24-50, 137.16-25) (evidence that is consistent with the belated discovery that the operating system for her computer was never missing). Ms Barakat's evidence was that she was at work on 18 May 2020, calling customers. Indeed, Ms Barakat was not really sure what an operating system is (see T 137.24-25).
Ms Barakat was quite open about the fact that she (and she said "all of us" knew that Mr Mitchell had sworn an affidavit in May 2020 but said that she had no contact with Mr Mitchell after he left the company (and said that he was deleted off her contacts) (T 137.31-32, 137.47-48). Ms Barakat was not sure how she knew that Mr Mitchell had sworn an affidavit; and said that she did not know the raid was going to happen. Ms Barakat's evidence is that she had gone to move her car at 1pm and went to lunch and she did not recall people talking about the raid (T 138.28-32). Ms Barakat said that she was surprised when the raid happened on the Monday.
Questioned about Mr Mitchell's plan of the office, Ms Barakat said he had mixed up where things were located; saying that Mr Hanna and Mr Youssef shared an office but that Ms Youssef sat outside in the general area (and had a cupboard with folders). Ms Barakat said that it was quite a small office and she did not think it had filing cabinets (see T 139-140).
On 19 November 2020, Ms Barakat was recalled to give evidence after the "missing" operating system was located and the Exhibit B document was located (the EA-2 Spreadsheet). In her affidavit evidence Ms Barakat had deposed that she transferred some data from the plaintiffs to her personal email and that data did not go anywhere else (T 238-239); and Ms Barakat said that her spreadsheet was derived from Australia on Disc data purchased by Easytel, and her research (including Google searches) (see T 242.35-39).
It is said that half of Exhibit B is a coloured spreadsheet and the other half (being the back half) is a separate spreadsheet (T 239.35-49).
At T 242.18-24, Ms Barakat did not accept that she obtained the name Hunts Avenue Family Practice from the coloured spreadsheet that she had on her personal computer; she said that she obtained it from Google.
Ms Barakat said that the spreadsheet on the SSD on her computer was created within the first few weeks of working at Easytel; that she made it from scratch using a template and with information supplied from Australia on Disc and Google (T 242.35-39). At T 243.7-11, it is noted that the document records that it was created on 4 September 2019 at 10.00am and last modified on 11 September 2019 at 2.18pm. Ms Barakat said that she could have opened it to check on a reference but not to add to it. (It is said that if it were opened today, even for a moment or by accident, then the system would indicate that it had been modified.)
Ms Barakat agreed that she did not open or access the document after 11 December 2019 and agreed that the template was created on 4 September 2019.
Ms Barakat did not accept that she had transferred the spreadsheet from the plaintiffs to her personal computer, nor that she had used the names and information from that and placed it in the spreadsheet (T 244.11-15).
At T 246-247, Ms Barakat gave her explanation for similarities between the two spreadsheets. This was, it was said, due to the fact that Ms Barakat was "trained to get the same information from every customer" (at T 247.49-50). Ms Barakat gave evidence that she asks customers or prospects similar questions, receives generally the same answers, and that the same is done by the other telemarketers with the result that they too obtain the same answers, and make similar notes (T 246.16-35). Moreover, Ms Barakat explained that she always uses the same acronyms, and that this practice accounted for much of the similarity between the two spreadsheets. Ms Barakat went on to complain that she had been "hacked" many times, including by the plaintiffs (T 248.6-19).
Finally, with respect to the so-called "Brothel Spreadsheet", Ms Barakat accepted that it was created on 6 September 2019, and last modified on 11 October 2019. Ms Barakat agreed that she added a column to the spreadsheet titled "Easytel Notes". Ms Barakat further agreed that the document was only used by her between those two dates (T 254.34-37).
Mr Youssef was adamant that the EA-2 Spreadsheet was the defendants' "data obtained by Elie hacking Samantha's email" (T 191.7-8). Mr Youssef was adamant that the EA-2 Spreadsheet was Easytel's spreadsheet (T 192). This was in part due to the fact that the EA-2 Spreadsheet includes the name of Tara Burnie, an employee of Easytel. Mr Youssef agreed that Tara Burnie worked on that spreadsheet (as did Mr Mitchell and Ms Barakat) while at Easytel (T 191.25-34). Mr Youssef denied that this spreadsheet was the plaintiffs' spreadsheet (pointing out that EA-2 Spreadsheet beginning at page 65 of the exhibit utilises Easytel's colours, which he says the plaintiffs took from Ms Barakat's personal email) (T 191.45-48).
As to the plaintiffs' files and lists of prospects that Ms Barakat was said to have transferred to her personal account, Mr Youssef's explanation for this (at T 193.10-12) is that Ms Barakat transferred Easytel's spreadsheets to her private email when Easytel's internal email system was down (and this is consistent with Ms Barakat's evidence to the effect that the details were on her personal email).
As to Mr Tsioumas' evidence that he saw Nexgen folders at the Easytel office, Mr Youssef said that there was no such thing as a "Nexgen" folder at Nexgen, let alone at Easytel, and quite plausibly said that he tried not to use paper (T 195.35-43).
Mr Youssef confirmed that Easytel did not have CRM when Mr Mitchell started and that he was given spreadsheets in electronic form (T 201-202). Mr Youssef said that Easytel got the CRM around 16 October 2019 (T 202.1-2) and that Ms Youssef started putting in all previous sales entries at that time. Mr Youssef said that there was a trial period for Leadmaster starting on 16 October and that the first invoice was in December 2019 (T 202.17-18).
Mr Youssef says that it was Ms Barakat who sent the emails and gave Mr Mitchell a table with comments and notes. Mr Youssef's evidence was that Mr Mitchell left for personal issues (not because of concerns about Nexgen information) and that following that (in the New Year) Mr Mitchell started asking for his job back and by then Leadmaster was in place (T 195.31-49).
Mr Youssef confirmed that after 2 March 2020, the "rule" (at Easytel) was that if a plaintiffs' contact was identified the staff had to call him. This is consistent with the evidence of others at Easytel (including Mr Hanna, Ms Youssef and Ms Barakat) and is consistent with a desire to avoid disputes with the plaintiffs (which both Mr Youssef and Mr Hanna expressed).
As to the events of 15 May 2020, Mr Youssef did not agree that Mr Hanna had said that the lawyers had referred to a raid (T 197.4-6). Mr Youssef agreed that there were TelPro personnel in the office. Mr Youssef said that the TelPro people went for a cigarette in the car park and that they (the Easytel staff) had joined them (he said that he recalled this because they were laughing at an email sent by Mr Ayoub to Mr Andraos calling him a "fat dog") (T 197.8-12).
Mr Youssef appeared keen to get into evidence that Mr Ayoub had called Mr Mitchell and offered him $3,000 to make an affidavit, saying that Mr Mitchell told him as much (see at T 197.14-30, and again at T 207.39-42). Mr Youssef said that he called a meeting and told everyone at Easytel what had happened once Mr Mitchell told him that (T 197.32-36).
Mr Youssef said that he did not know that there was going to be a raid before the weekend of 16 to 17 May 2020; and denied that he had taken steps to delete information or "cover his tracks" (T 197-198). Mr Youssef confirmed that he was in attendance when the raid occurred (T 198.8-10) and says that the document served had Friday listed as the date on which the search was to take place (T 198.12-17).
As to the entry in the CRM for Dagazo, Mr Youssef says that after a Century 21 at Riverstone was signed, Ms Barakat called every Century 21 around the area at the time on 10 September 2019 and booked in a few appointments (T 201.3-5). Mr Youssef said that 11 September 2019 was the first appointment with Dagazo and that, at that time, Easytel had no CRM and he agrees that this entry was put into the CRM afterwards. His evidence was that the 11 September 2019 entry was typed in by Ms Youssef on 17 October 2019 at 10.35am and says that this information was in the calendars (produced on discovery) (see T 203.20-48).
As to Mr Bell's report in relation to Mr Youssef's computer (AF2006), which reviewed the deleted files, it is said that the computer has a record of Mr Mitchell's affidavit having been sent by somebody to Mr Youssef's email on 13 May 2020. Mr Youssef's evidence was that he was not sent a copy of the affidavit, but rather the first time he saw the affidavit was when Mr Maxwell and Mr Le Roux entered the Easytel office (T 206.43-45).
With respect to the text message from Mr Hanna (marked Exhibit T) which provided "we need to tell them that we need to stick together to get out of this, just like how everyone at Nexgen sticks together", Mr Youssef said that he did not recall getting the message, but that it was motivated by the knowledge of the purported attempt by Mr Ayoub to induce Mr Mitchell into swearing an affidavit, and not due to knowledge of the existence or contents of the 12 May 2020 affidavit itself (T 207.39-42).
When Mr Youssef was recalled for further cross-examination on 19 November 2020, he was cross-examined in relation to a spreadsheet from 2012 (admitted as Exhibit AA) (referred to as the Brothel Spreadsheet). Mr Youssef's evidence was that the Brothel Spreadsheet was a spreadsheet from 2012 created by a former employee of the plaintiffs, Mr Ronnie Hock (T 256.18-27). Mr Youssef gave evidence that the Brothel Spreadsheet was provided by Mr Hock to Mr Hanna at a meeting during Easytel's first week of business (about September 2019) (see T 257.8-23). It is said by Mr Youssef that Mr Hock offered spreadsheets, including the Brothel Spreadsheet, together with a number of other spreadsheets, to Mr Hanna on a USB, seeking to encourage Easytel to engage Mr Hock to facilitate a call centre in the Philippines from which Mr Hock expected business; and that Mr Hanna gave the USB with the Brothel Spreadsheet to Mr Youssef who emailed it to Ms Barakat on about 6 September 2020 (T 257.41-48).
Mr Youssef's evidence was that he was not aware whether or not this was a document that came from the plaintiffs (as it was nearly a decade old) (see T 257-258); and Mr Youssef said that nothing came of the Brothel Spreadsheet in respect of Easytel's business (T 258.4-10). (Mr Youssef became somewhat testy when pressed about this - see at T 258.35-41, asking if the cross-examiner could remember what happened in 2012.)
The Easytel defendants maintain that (contrary to the plaintiffs' submissions at [57]) Mr Youssef did not give evidence during cross examination that he used any spreadsheets of "clients" in the adult services industry obtained from the plaintiffs; rather, his evidence was that the spreadsheets were given to Mr Hanna by Mr Hock.
The Easytel defendants contend that it is clear that even if the Brothel Spreadsheet is the same spreadsheet that was sent to Mr Youssef in 2012, it does not contain any commercially valuable or confidential information; that the Brothel Spreadsheet was not obtained from the plaintiffs, but was received from a third party in good faith, and without impropriety on the part of the Easytel defendants; and that the Easytel defendants did not benefit (and the plaintiffs have not suffered any detriment) in respect of the Brothel Spreadsheet. I agree. The cross-examination on this issue seemed directed to a credit submission rather to any loss claimed to have been suffered by the plaintiffs as a result of the pleaded misconduct.
As noted above, after Mr Mitchell resigned his employment with Business Telecom, he commenced employment with Easytel. Consistent with Mr Hanna and Mr Youssef, Mr Mitchell's evidence is that Easytel did not have a centralised client database when he commenced his employment. Mr Mitchell deposed in his (first) 12 May affidavit (and see his oral evidence at T 78.13-24) that he was given spreadsheets in electronic format which contained information about clients such as company name, phone number, address, directors name, comments and notes which had highlighted sections and which referenced work conducted by other telemarketers. Mr Mitchell's affidavit evidence includes that he recognised that the electronic spreadsheets he was given included entities he had dealt with while employed by the plaintiffs, and had a degree of detail which he could not memorise. Mr Mitchell deposed that he raised concerns with Mr Hanna (the director of the Easytel entities) about using the spreadsheet and that Mr Hanna said to him "[j]ust call them don't worry about it" (see at [38] of Mr Mitchell's 12 May affidavit).
Mr Mitchell's evidence was that he observed: other employees at Easytel use the same spreadsheets for telemarketing; Ms Youssef email or pass around hard copy leads to the second defendant and other telemarketers which he recognised to be clients or prospects of the plaintiffs; two filing cabinets at Easytel's premises which contained hard copy folders labelled "Nexgen" and other documents labelled "Business Telecom" (those filing cabinets he placed as being between Mr Youssef and Mr Hanna's desks and near Ms Youssef's desk, respectively); and, in those folders, documents which contained lead sheets and old contracts and client information which Mr Mitchell recalled was information of the plaintiffs' customers and plaintiffs' prospects. Mr Mitchell also gave evidence that he received emails from Mr Youssef (whilst employed by Easytel) to approach the plaintiffs' clients.
Mr Mitchell says that, when he returned to work for Easytel after a short time away, he observed that Easytel had implemented the same CRM centralised database as the plaintiffs (known as Leadmaster); and he also observed that the electronic spreadsheet he was using there previously was still in use to win new business. (Consistently with the other witnesses, Mr Mitchell gave evidence of the process by which he checked with Mr or Ms Youssef whether he was able to approach Nexgen prospects - see T 79.1-19.)
Mr Mitchell's evidence was that it was his experience, working as a telemarketer, that he needed to call a prospective client 10 to 15 times to obtain enough information to secure a deal.
Mr Mitchell also says that he observed Mr Dalibor Marsic work for Easytel as a subcontractor.
In his third affidavit, Mr Mitchell deposed to a conversation during which he says Mr Ayoub threatened him with jail and offered him $3,000 and a job with the plaintiffs. (In the witness box, Mr Mitchell seemed to say that it was Sam (the solicitor) who had threatened him - see T 89.25-28.) In that affidavit, Mr Mitchell resiled from much of what he had said in the first affidavit; he denied that he said he was passed hard copy leads by Ms Youssef; denied that there were filing cabinets on the plan that he drew of Easytel's office; and denied that he saw hard copy folders labelled Nexgen or Business Telecom whilst working at Nexgen ([sic], presumably meaning Easytel) (see [40]-[42] of Mr Mitchell's third affidavit).
The Easytel defendants submit that, when read together, the first and third Mitchell affidavits demonstrate misconduct on the part of the plaintiffs in the prosecution of this proceeding and that the first such affidavit ought not be accepted. (I rather think that the two affidavits and Mr Mitchell's oral evidence suggest that I cannot place much weight at all on the reliability of his evidence.)
The Easytel defendants say that, during cross-examination, Mr Mitchell maintained his position that, upon the making of the first affidavit, he felt scared and threatened; there were threats that he could go to jail; there was an offer of money from the plaintiffs; and there was an offer of work from the plaintiffs. The Easytel defendants say that, consistent with his evidence in the third affidavit, it is not in dispute that Mr Mitchell, shortly after providing the first affidavit, was offered some form of work by the plaintiffs.
I consider that Mr Mitchell's oral evidence cannot be accepted at face value. In that regard, I note the following as to his evidence in cross-examination.
As to the process of making his affidavits, Mr Mitchell said that he did not type up his affidavits (which I can readily accept having regard to his evidence as a whole in the witness box); rather, he said that the solicitor did that (T 82.11-16). He said (at least in relation to the first affidavit) that it was a "very long process". Mr Mitchell referred to discussions with Mr Ayoub and then on a second occasion with Mr Harb and Mr Saadat (T 82.18-50). Mr Mitchell then said that he had tried to contact Mr Saadat to ask him questions about his affidavit and, when the solicitor did not return his calls, he tried to contact Mr Ayoub (T 83.24-34). Mr Mitchell said that there was a lot that was not right about his (first) affidavit but, when asked, he could not really remember the corrections that he had made (T 88.45-50, 89.1-14) but thought that the things wrong were the names of certain persons. Mr Mitchell said that his communications were with Mr Saadat and Mr Mitchell referred to "WhatsApp" communications between himself and Mr Saadat and Mr Ayoub (T 84.15-30). For his third affidavit, Mr Mitchell said that he went to the solicitor's office after he met with Mr Youssef and his wife; that he met the solicitor and then the barrister; and that he was in a boardroom (Mr Youssef not being in the boardroom at the time) (T 87-88).
Mr Mitchell did not understand the concept of giving instructions in relation to his affidavit (T 88.7-15).
As to the allegation that Mr Mitchell had been threatened, it is significant that Mr Mitchell said at one stage in cross-examination (T 89.16-17) that he was not threatened. Then he said that he was on a three-way call with Mr Saadat to Mr Ayoub; and he said that either Mr Ayoub or Mr Saadat had said there would be "complications" (perhaps intending to say "consequences", presumably if Mr Mitchell did not give his first affidavit). Mr Mitchell nevertheless maintained that he felt threatened by Mr Saadat (and said that was why he took his partner to the meeting); then said that Mr Saadat did not threaten him directly but rather by adverting to the possible the end result if he did not comply (T 89-90). It is not clear but the manner in which this was framed in Mr Mitchell's oral evidence suggests that it is possible that what was being emphasised by Mr Saadat (in the context of the affirmation that was being administered) was the importance of giving truthful evidence in his affidavit but that is of course mere speculation. What seems inherently unlikely, however, is that a solicitor would be threatening (or even adverting to) the possible consequence of imprisonment for conduct such as the alleged misuse of confidential information that would not self-evidently seem likely to constitute a criminal offence.
In any event, Mr Mitchell's evidence was that he felt scared because they (the plaintiffs) had another employee contact him via Facebook (at T 90.1-6) (something that it is not immediately apparent would of itself be threatening depending on what was said in that communication but which indicates perhaps a pre-disposition to feelings of intimidation).
In his third affidavit, Mr Mitchell had deposed that Mr Ayoub had said to him words to the effect that "you're in so much trouble you're going to gaol". However, in cross-examination (at T 90.26-32) Mr Mitchell said that it was "Sam" (Mr Saadat) and that "well basically Elie [Mr Ayoub] is asking Sam to tell me … what would actually happen"(T 90.44-46), or "could" happen (see T 90.48-49); and that Mr Saadat said that was the worst case scenario (T 91.3-4).
As to his affidavit evidence that he had been offered money in connection with the making of his first affidavit, Mr Mitchell said in cross-examination that it was said but not in the three-way conversation involving the solicitor (T 91.5-13).
Insofar as Mr Mitchell had deposed at [43] of his third affidavit that he had never read the affidavit signed by him on 12 May 2020, in cross-examination he said that he meant he never read it on the day of signing the affidavit (a not insignificant difference) (see T 92.32-36). As noted above, although he deposed that he did not give the affidavit "voluntarily" he did not understand what the word "voluntarily" meant (see T 92.31-40 and at T 93.25-30).
Mr Mitchell was insistent that he felt threatened and scared in the office when he first met Mr Saadat but, with no disrespect to him, that could equally have been due to the formal aspect of attending a conference in a lawyer's office rather than being due to anything in particular that was said to him before or at that conference. As already noted, Mr Mitchell gave evidence that he has an intellectual disability, and it seems to me clear from his oral evidence that there would have been ample scope for him not to have understood the process in which his affidavit evidence was taken and to have regarded the whole process as intimidating without any explicit threats at all having been made.
The accusations that have been made by the Easytel defendants (of intimidation, threats and suborning a witness) are very serious allegations to make (particularly when levelled at a solicitor) and they would need to be established to the Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (Briginshaw) standard of satisfaction. I am not satisfied that such misconduct has been established and, ultimately, I can place little weight on Mr Mitchell's affidavit evidence (whether his first or his third) because of the contradictions in that evidence and his general unreliability as a witness.
As to the raid (Mr Hanna quite genuinely responding to a question about this with a wry "how could I forget"), Mr Hanna denied that there was a tip-off or that the solicitor had told him that there was going to be a raid or that he had told people that there was going to be a raid (T 219.1-16). Mr Hanna denied deleting anything or modifying anything. As to the deletion of Ms Barakat's operating system which was disproven in any event, Mr Hanna said that there was a simple explanation (at T 220.1-5).
As to the text messages shown to Mr Hanna in the course of cross-examination, and marked Exhibit T, Mr Hanna rightly identified that text messages ascribed to him were in fact incoming, not outgoing, and said that he could not remember receiving those text messages (see T 220-221). He was insistent that he was not tipped off about the raid.
Ms Youssef denied that Mr Mitchell left because of concerns in relation to the use of Nexgen information. Ms Youssef said that Mr Mitchell was replaced by someone called Tara and that Tara then left and Mr Mitchell returned in February 2020. Ms Youssef said that they were always going to get a CRM and that they could not work off Excel spreadsheets (T 113.48-50, 114.1-2).
Taken to a 2 March 2020 email (Exhibit N) between Ms Youssef and Ms Barakat in relation to the Padstow RSL (where Ms Barakat enquired if that client was on Australia on Disc), Ms Youssef said that if Ms Barakat was asking her this it was because she had Googled it (T 114.34-40).
Asked about the events on 15 May 2020, Ms Youssef denied the account given by Mr Tsioumas but then agreed that she was not there at the time (T 115-116) and says that on 18 May 2020 she was at home (T 116.35-43).
I have already commented on Mr Saadat's evidence. I accept that he presented as an honest witness and I have no reason to disbelieve him.
Annexure A of Mr Youssef's affidavits of 8 and 12 September 2020 contains a table which identifies, inter alia, the relevant customer pursuant to Annexure B of the plaintiffs' amended statement of claim, the previous carrier, and the location of the primary evidentiary material in Confidential Exhibits MY-04, and to a lesser extent, MY-06, which contains copies of the billing application naming the customer's previous carrier and a copy of the phone bills from that previous carrier. The Easytel defendants say that MY-06 also contains a similar table which references the primary evidentiary material for each lead source. It is noted that the plaintiffs' submissions (at [120]-[273]) reference the Confidential Court Book containing Confidential Exhibit EA-7 in respect of each separate claim that the above customers were customers of the plaintiffs. However, the Easytel defendants point out that the plaintiffs have conceded that the entities listed in Confidential Exhibit EA-7 are not all clients of the plaintiffs, and they say that there is no way to discern from EA-7 which, if any, are in fact clients of the plaintiffs.
As to the claim by the plaintiffs (at [274]-[291]), as to a number of other entities that are not in Annexure B to the amended statement of claim, the Easytel defendants say that none of these entities is a client of Easytel (and they suggest that it is likely, from the way these entities are described in the plaintiffs' submissions at [274] as either "clients or prospective clients of the plaintiffs", that none of these entities is a current client of the plaintiffs). In any event, it is said that the plaintiffs have not established the extent to which any are current clients or simply appear upon a list of data sourced from third party suppliers.
Insofar as the plaintiffs (in their submissions from [120]-[273]) refer to a lack of evidence provided by the defendants as to nature of the leads and sales to the customers in Annexure B of the amended statement of claim, the Easytel defendants point out that the plaintiffs are in possession of the vast majority of Easytel's business records; and that the plaintiffs bear the onus to establish their case. It is said that the plaintiffs have been unable (or unwilling) to identify which of the entities in Annexure B or Confidential Exhibit EA-7 are in fact customers of the plaintiffs; why the information the plaintiffs seek to protect is special or confidential; and why the defendants should be restrained in circumstances where the plaintiffs cannot show how or where the Easytel defendants, as the plaintiffs allege, used the plaintiffs' purported confidential information to procure these customers.
The Easytel defendants say that the plaintiffs have failed to discharge their onus of establishing that the Easytel defendants used information that was confidential and belonged to the plaintiffs to obtain the customers in Annexure B.
The Easytel defendants also take issue with the assertion (at [121] of the plaintiffs' submissions) that the profile for the first customer referenced (being Art of Kitchens Pty Ltd) in the CRM database contains no real information about the client's needs. The Easytel defendants point out that the CRM record for Art of Kitchens has an entry which includes: the price ($311); the term (60 months); the number and specifications of equipment (2x sv9100) and the locations of the customer's premises; and that the CRM records include additional usual information such as: the name of the contact; the company's address; an email address for the contact; a phone number; rental; install date; and sales representative.
Insofar as it is suggested that the CRM records are less than perforce or should contain more information, the Easytel defendants point out that it is common ground that when Easytel first commenced its business it did not have a CRM in place. It is said that Easytel's CRM was not implemented until about 16 October 2019, and that the relevant information for the client has apparently been uploaded after the sale was made to this customer for Easytel's records (Art of Kitchens).
The Easytel defendants also refer to Swimart, another entry pursuant to Annexure B of the plaintiffs' amended statement of claim; and they say that Swimart was a Comparison Advantage Lead received by Easytel on 1 June 2020 (well after Easytel had implemented its CRM), pointing out that the CRM entry for Swimart contains five pages of notes. Further, in respect to Swimart, it is noted that the plaintiffs have stated (at [272] and [273] of their submissions) that there is no information on the profile prior to 1 June and that there is no evidence to support the assertion by the Easytel defendants that they acquired the information about this entity through "CA/MVF" nor is there any evidence of the kind of information that was supplied. The Easytel defendants say that this submission is incorrect and demonstrates a lack of understanding in relation to the manner upon which these leads are obtained.
First, it is noted that a copy of the Comparison Advantage Lead for Swimart is in Confidential Exhibit MY-06. It is noted that the record shows that the lead was emailed from Comparison Advantage to Easytel on 1 June 2020 and contains contact information; address; phone number; email; company name; and additional comments detailing: the customer's requirements; the current provider (Optus); and number of phones. Reference is made to Mr Youssef's 12 September 2020 affidavit in which he explains that both MVF and Comparison Advantage (CA) are business to business or "B2B" information hubs which enable businesses to seek comparative quotes for various equipment that businesses may need.
The Easytel defendants say that the customer has submitted a request to Comparison Advantage which has been forwarded to Easytel on 1 June 2020, which is why there would obviously be no information in the CRM prior to this date (as noted by the plaintiffs).
The Easytel defendants say that, of the approximately 58 customers in Annexure B, Easytel has sold the SV9100 system to about 18 of these because it is one of the current models being sold in the industry.
Insofar as criticism is made in the plaintiffs' submissions (see for example at [214]; [219]) of the use of Google as a lead source, the Easytel defendants say that this is "undeniably the world's most preeminent search engine".
As to the reference to the trustees for the Dales of Berry, and the trustee for the Salib Trust (in respect of which the plaintiffs say that there is no evidence in support of the assertion that these were Google leads; nor is there any evidence of the kind of information that was obtained), the Easytel defendants point out that it is referred to in the EA-2 Spreadsheet (albeit under the name S&P Family Medical Practice) but they reiterate their denial that they used the EA-2 Spreadsheet. In any event, it is said that the entry for this company does not contain anything resembling confidential or special information, nor could it be suggested that it could have had any utility for the defendants (noting that the entry is simply the name of the practice, its address and "no p/m WENDY"); whereas Easytel's CRM record contains information about the customer's current phone system (which was with Commander, not the plaintiffs), which the Easytel defendants say has apparently been entered after someone at Easytel called the customer.
Insofar as there is criticism (throughout [127]-[273] of the plaintiffs' submissions) as to a purported lack of evidence for leads including those the Easytel defendants say are from Australia on Disc; Illion; Naj Database; and TelPro, the Easytel defendants say that they have provided copious primary and other records to show where Easytel obtained its customers. In support of this argument, the Easytel defendants referred to the exhibits to the 6 July 2020 affidavit of Mr Hanna of 6 July 2020 in Confidential Exhibit JH-02 (marked Confidential Exhibit 2) which contains a printout of Easytel's Leadmaster CRM showing the lead and its source; Mr Youssef's affidavit affirmed on 12 September 2020 (including Annexure A, which is said to be essentially an index of Confidential Exhibit MY-06, which contains: receipts evidencing proof of purchase of the Australia on Disc Records, work orders and emails forwarding the Illion Records; emails and invoices from TelPro in respect of client referrals; the CA/MVF, Australia on Disc and the Illion records for the clients referable to them; the full CRM entry for the client showing, inter alia, the source of the lead); and a copy of the Naj Database as provided to Mr Hanna.
The Easytel Defendants further say that even if it were to be accepted that Easytel's records are not sufficient, then so too would it have to be accepted that much of the records provided by the plaintiffs (in particular Confidential Exhibit EA-7) are also not sufficient.
It is submitted that the plaintiffs' Exhibit EA-7 is far more tenuous than the records that the plaintiffs here criticise, as it is nothing more than a printout of company names with: no further information; no evidence of source; no dates or indications of when or how the information was obtained or entered or by whom; no evidence that either of the individual defendants had access to or worked on the companies in the list; no distinction about which of the companies the plaintiffs say are their clients (if any); and no evidence to say that these companies are even former clients or prospects of the plaintiffs or whether they are simply company names which the plaintiffs may intend to contact in the future.
The Easytel defendants submit that EA-7 does not establish any degree of ownership in the parties listed nor any confidentiality in the information which it is contended to convey; and the Easytel defendants submit that they should not be prohibited from contacting companies in such circumstances.
Insofar as there is criticism that, in some cases, Easytel has been able quickly to "close" certain customers and it has been suggested that Easytel has achieved sales to clients and prospective clients of the plaintiffs in a short time, and with little necessary client information or the need for multiple contacts, the Easytel defendants say that Easytel has been successful in, inter alia, independently obtaining its own substantive information (as demonstrated by its records particularly those in Confidential Exhibits, JH-02, MY-04 and MY-06), and they say that a key theme of the plaintiffs' case has been to exaggerate, inter alia, the importance of the information and the efforts required to achieve a sale.
The Easytel defendants contend that nothing can be drawn from the speed or ease of a sale (since, as in any business, some sales or deals will be easier than others). It is said that there is nothing difficult or strange about a customer who needs a new phone system being quickly supplied with the same. The Easytel defendants say that the plaintiffs are here attempting to give the purported confidential information a character and a value that it does not have. In particular, the Easytel defendants say that Mr Ayoub provides no evidence to support his assertions (see [43], [45], [46], [47] of Mr Ayoub's affidavit of 25 November 2019; and his 29 November 2019 affidavit) as to the purported value and effort required to develop information into a sale; and it is said that these assertions are contrary to business efficacy (reference being made to Easytel's records in respect of Swimart which was signed by Easytel after a Comparison Advantage lead was sent within about 2 weeks).
Insofar as the plaintiffs also seek to rely on Ms Barakat's evidence in cross-examination as to the sales process (that it could take up to ten calls to a prospect to secure an appointment; that each time an employee calls a prospect, it affords that employee an opportunity to learn more about that prospect and build the database; and that it is very difficult to achieve a sale without meaningful information about the client), the Easytel defendants say that this is not an accurate reflection of Ms Barakat's evidence. First, it is said that there is no reference in the transcript to Ms Barakat saying that "it is very difficult to achieve a sale without meaningful information about the client"; second, that while Ms Barakat does agree when asked, that it could take up to 10 calls to get an appointment, she added that it could take 5, and that "…if you're a skilled telemarketer you can do that in the first or second call" (T 121.19-25).
The Easytel defendants also note the following further examples in respect of the plaintiffs' contentions (at [120]-[273] of their submissions) in relation to particular "clients".
First, as to JM Languido Pty Ltd, the Easytel defendants say that, contrary to the plaintiffs' contentions, this was a Red Telecom client (referring to the billing application and Red Telecom bill); and that it is incorrect for the plaintiffs to contend that there is no evidence that Easytel acquired the information about this entity through the Naj Database (or as to there being no evidence of the kind of information that was supplied). The Easytel defendants point to Mr Youssef's evidence that the Naj Database was provided to Mr Hanna by Najla Manolis, an IT consultant, in September 2019. The Easytel defendants say that the unchallenged evidence of Mr Hanna was that when he started up a business, he met with an old colleague (Ms Manolis) who gave him an old database on a USB containing a few records. It is said that a copy of the Naj Database provided to Mr Hanna in September 2019 shows numerous leads and extensive information including for JM Languido (and other entities referred to in the plaintiffs' submissions such as: Brightset Printing; Medlife Medical Practice, the trading name for JM Languido Pty Ltd; Wetherill Park Automotive Services Pty Ltd; and Southwest Community Transport).
Second, as to Australian Lawn and Turf Supplies, the Easytel defendants say that, contrary to the plaintiffs' contentions, this was a Buroserv client (referring to the billing application and Buroserv bill in evidence). The Easytel defendants again say that it is incorrect for the plaintiffs to contend that there is no detail about the information that was obtained from TelPro, referring to [19]-[20] of Mr Youssef's 12 September 2020 affidavit where he deposes that:
19. Easytel also engages with a number of industry partners, and referrers.
20. For example, Australian Lawn and Turf Supplies Pty Ltd was a referral from TelPro Pty Ltd, a telephone installation company ("TelPro"). The representative from TelPro who provided Easytel the initial contact information was Dalibor Marsic, who is a Director of TelPro. At pages 16-19 of Confidential Exhibit MY-06 is an email from Dalibor Marsic in which he provided Easytel with the contact information for Australian Lawn and Turf Supplies Pty Ltd.
It is noted that an email from Mr Marsic to Mark and Amanda Youssef contains about 36 leads and contact information, including for Australian Lawn and Turf (which is the first entry in the email) and the following other entities listed in Annexure B of the plaintiffs' amended statement of claim: Blindman; Ekornes; and Lower Mountains Landscape Supplies which is a trading name LMLS Group Pty Ltd.
Third, as to the Beverly Park Golf Club, the Easytel defendants say that, contrary to the plaintiffs' contentions, this was a Telstra client (referring to the billing application and Telstra bill in evidence). Reference is made to Confidential Exhibit MY-06 which contains a screenshot of the Illion Record; and the CRM Record which notes Illion as the lead source. It is noted that the plaintiffs make similar claims in respect of Australia on Disc records, such as in relation to Hills Community Aid which was a Telstra customer (referring to the billing application and Telstra bill in evidence). Reference is made to the copy of the copy of the CRM record noting Australia on Disc as the lead source and a copy of a screenshot of the Australia on Disc record (see MY-06).
The Easytel defendants point to Mr Youssef's explanation in cross-examination that the Illion and Australia on Disc records are screenshots or extracts intended to show the source of the lead, not full copies of the relevant record (see also the plaintiffs' Exhibit EA-7). It is noted that there are further Australia on Disc records showing the extent of the information usually provided in the emailed spreadsheets (see Exhibit MY-2 to Mr Youssef's 11 August 2020 affidavit, which are the spreadsheets which Mr Youssef sent to Mr Mitchell in September 2019).
Fourth, the Easytel defendants refer in particular to United Cinemas Australia Pty Ltd, which they say is a telling example against the plaintiffs' credit. The plaintiffs say that this entity is a client of theirs (as to which they contend that Easytel has not provided sufficient information in respect of the lead source referral). The Easytel defendants, however, note that United Cinemas Australia Pty Ltd (United Cinemas) is owned by the family of their solicitor, Mr Peter Mustaca. It is noted that the sales agreement was signed by Peter Mustaca's father, Mr Roy Mustaca, on behalf of United Cinemas. The Easytel defendants say that United Cinemas Australia is not a client of the plaintiffs, and was referred to Easytel by Mr Peter Mustaca, solicitor on the record for the Easytel defendants.
Finally, in this context, the Easytel defendants say that, insofar as the plaintiffs have made much of the practice implemented by Easytel in about March 2020 about not contacting the plaintiffs' clients that were not in the CRM this was because Easytel did not want to invite further harassment from the plaintiffs, as was clear from the evidence of Mr Hanna and Mr Youssef (T 189.31-39, 213-214).
Annexure B to the amended statement of claim contains a list of entities whom the plaintiffs contend are clients or prospective clients of the plaintiffs, and which they say the defendants have procured using alleged confidential information of the plaintiffs. It is contended that a permanent restraint is warranted as there is a risk that the defendants will use the plaintiffs' confidential information in the future.
It is relevant to note that the plaintiffs make no complaint as to the use by the defendants of the Leadmaster CRM; rather, they complain that the defendants are still using the information in spreadsheets taken from the plaintiffs.
With respect to the EA-2 Spreadsheet, being an "amalgamation" of various documents created by Ms Barakat during her employ with both Nexgen and Easytel, reference is made by the Easytel defendants to Mr Ayoub's affidavit of 29 November 2019, at [13] in which he deposes that:
I have instructed our IT department to examine Samantha Barakat's computer which she used whilst under the employ of Business Telecom. Saved on a drive were spreadsheets labelled "SAMS NEW WORK xx", "TM DATABASE TARA" and "UPDATED - TM DATABASE TEMPLATE (version 1) Shane (version 1) …
The Easytel defendants complain that the plaintiffs obtained copies of the spreadsheets (which included information belonging to Easytel) by accessing without authorisation (i.e., hacking into) Ms Barakat's personal email account. The inference is invited that the explanation given by Mr Ayoub as to the instruction given to Easytel's IT department (see above) is an attempt to avoid that suspicion.
The Easytel defendants refer to the evidence of Mr Ayoub in cross-examination as to the manner in which the plaintiffs came to be in possession of the spreadsheets:
Q. In your affidavit you say something along the lines of, someone in your business was able to recover that document. Are you able to explain where that document was recovered from?
A. Sure.
Q. Can you explain it to the Court?
A. Absolutely. So when we found out that there was all these things happening and we sort of started investigating, we looked at emails - so Outlook, which is typically what we use. We couldn't find anything deleted in her company email. What we did find is when the IT person went to her PC, when he turned on her PC, Hotmail opened up and in his possession was an email, and so he forwarded those emails to myself, which contained several different spreadsheets, including some attachments of SS and a few others, which I later recognised - people within the business later recognised they were Shane Mitchell's spreadsheets that he maintained and as well as Samantha Barakat's spreadsheets, which is those colourful things that you have seen.
Q. This is Ms Barakat's private email account, not a work email account?
A. It is her Hotmail account, correct.
Q. Right. And the computer that you say was opened up and just defaulted to this email - is that what you say?
A. Something along those lines. I don't know the specifics, but from what I recall was when a browser was opened - and the hotmail was a favourite of some sort - when that was opened everything became available.
Q. Was there a password required?
A. No.
Q. You know that or you--
A. No, no, I know that. The passwords were already saved into the browser account.
Q. So it wasn't the case that someone went into and forced access to a private email account?
A. Absolutely not.
Q. And you agree that it was from a Nexgen computer that that was accessed?
A. Correct.
Q. Did you say that in any of your affidavits?
A. I don't recall.
Q. Would it surprise you if you didn't give that explanation in any of your affidavits until today?
A. It probably would be surprising, yes.
It is submitted by the Easytel defendants that Mr Ayoub's affidavit of 29 November 2019 does not disclose the true position as to how the plaintiffs came to be in possession of the spreadsheets, and reflects unfavourably upon Mr Ayoub's credit, as well as the manner in which the plaintiffs have pursued this proceeding against the defendants.
The Easytel defendants say that, contrary to [13] of Mr Ayoub's affidavit of 29 November 2019, the spreadsheets were not saved on a drive on the computer that Ms Barakat used whilst at Nexgen. It is noted that Mr Ayoub conceded in cross-examination that: the plaintiffs' IT person accessed Ms Barakat's personal email account on a Nexgen computer; the spreadsheets were obtained by the plaintiffs when the plaintiffs' IT person accessed emails in Ms Barakat's personal email account; and that Mr Ayoub knew that the email account was Ms Barakat's personal email account, and that the spreadsheets had come from emails in her personal account that were forwarded to him.
Ms Barakat says that part of the EA-2 Spreadsheet - an Excel spreadsheet, which became Exhibit B in the proceeding - was on her computer at Nexgen and she agrees that she took the spreadsheet with her but she says that some information on the document that is now the EA-2 Spreadsheet was inserted into it by her when she was employed by Easytel (and it is thus argued that the plaintiffs could only have come into possession of that document by unauthorised access to her personal email which contained a copy of the updated spreadsheets).
The Easytel defendants say that the plaintiffs were not authorised to access Ms Barakat's personal email account; and they complain that the manner of the plaintiffs' unauthorised access to Ms Barakat's email account is yet another example of the plaintiffs' approach to the defendants (which they say is to bully, harass and intimidate the defendants out of business in competition with the business of the plaintiffs).
In that regard, the Easytel defendants say that the fact that the password to Ms Barakat's personal email account may have already been saved in the browser did not give Mr Ayoub or anyone else at his direction (or the direction of the plaintiffs) permission or authority to access Ms Barakat's personal email account, or the files contained therein. (More problematic, from my perspective, as I explain in due course, is that the version of the spreadsheet which is the EA-2 Spreadsheet appears to contain information added after Ms Barakat commenced work at Easytel.)
The Easytel defendants say that Mr Ayoub's 29 November 2019 affidavit (at [13] or the information given to him by his IT department which does not form part of the evidence) is inconsistent with Mr Ayoub's evidence in cross-examination, insofar as Mr Ayoub conceded in cross-examination that the files comprising the EA-2 Spreadsheet were not saved on the drive of Ms Barakat's computer, as he had deposed in his affidavit, but rather were retrieved from Ms Barakat's personal email account. It is noted that the plaintiffs in their submissions have referred to Mr Ayoub's concerns having been heightened in about 26-29 November 2019 "when an examination of a computer formerly used at the plaintiffs' office by Ms Barakat revealed the first defendant had transferred data from the plaintiffs' CRM, in spreadsheets [sic] form" which Ms Barakat had saved as: "SAMS NEW WORK xx" and "TM DATABASE TARA" and "UPDATED-TM DATABASE TEMPLATE (version 1) SHANE VERSION 1"; and the plaintiffs have gone on to submit that:
This highlights the possibility that Ms Barakat left this open on her work computer whilst she was employed by the second plaintiff. This is inconsistent with Ms Barakat's evidence in her affidavit of 13 December 2019 that her email account was hacked.
…
That she believed her computer at the fourth and fifth defendants had been hacked by the plaintiffs, as there was personal information in EA2 that postdated her departure from the plaintiffs. This was explained by Mr Ayoub in cross examination. There was no hacking.
The Easytel defendants cavil with the proposition that Mr Ayoub relevantly explained anything in cross-examination as to this. Rather, they say that what occurred was a direct admission by Mr Ayoub that: the files were not on a computer at the plaintiffs' office (which it is said could never have been the case given that Exhibit EA-2 contained an Easytel spreadsheet and information); and the plaintiffs had accessed without authorisation Ms Barakat's personal email to obtain the spreadsheets in EA-2 (even if there was no forcing of access).
The Easytel defendants emphasise the definition of hacking as "unauthorised access". They say that the relevant aspect of the plaintiffs' conduct is not some forced or "high-tech" attack on Ms Barakat's email account; rather, it is the fact that the plaintiffs, with knowledge and intent, caused unauthorised access to Ms Barakat's personal email. In that regard, the Easytel defendants also point to what they said to be the offence of knowingly and intentionally causing "any unauthorised access to or modification of restricted data held in a computer", referring to the offence pursuant to s 308B of the Crimes Act 1900 (NSW) (Crimes Act). The offence of unauthorised access within Pt 6 of the Crimes Act requires intent to commit a serious indictable offence (see s 308C).
The Easytel defendants submit that, having regard to the matters considered in DC Payments and Sullivan, and insofar as the plaintiffs have engaged in a breach of confidence (and what the defendants) submit to be a breach of s 308B of the Crimes Act) (in that they accessed Ms Barakat's email without authorisation, and used information they obtained from her email to advance their claim) their claim should be dismissed with costs.
The Easytel defendants say that the evidence supports Ms Barakat's position in that regard (including the contents of the plaintiffs' so-called "Grey and Apricot Schedule" (MFI1)), noting that: the EA-2 Spreadsheet contains approximately 1305 prospects whereas the SSD Spreadsheet contains approximately 1080 prospects; that the plaintiffs have identified 61 entries (being about 58 prospects after taking into account duplication) which they say are similar; and that, out of the 1305 prospects in the EA-2 Spreadsheet, the plaintiffs have been able to identify only 58 similar entries (about 4%). The Easytel defendants contend that, having regard to the circumstances, this is hardly a high coincidence of overlap.
Further, it is submitted that if, as the plaintiffs suggest, Ms Barakat developed the SSD Spreadsheet from the EA-2 Spreadsheet, it should follow that there would be a direct forensic likeness in the structure, order, colour and layout of the spreadsheet, and the number of entries; and that this is not the case.
The Easytel defendants maintain that, save for some of the similarities in individual entries identified by the plaintiffs, the SSD Spreadsheet does not bear any resemblance to the "SAMS NEW WORK" spreadsheet contained in the EA-2 Spreadsheet.
As to the "Grey and Apricot Schedule" prepared by the plaintiffs (MFI1), the Easytel defendants say that the individual entries in the Schedule contain several discrepancies which do not support the assertion by the plaintiffs that Ms Barakat copied the information from the EA-2 Spreadsheet to the SSD Spreadsheet (and they have identified some errors in the compilation of MFI1 - see the schedule handed up headed "Defendants Response to Grey and Apricot Schedule").
The Easytel defendants point to Ms Barakat's evidence to the effect that she would Google many leads and obtain information from calls made to prospective customers; for example, clubs (noting Ms Youssef's observation that this was a favoured area of Ms Barakat and most telemarketers because they are easy to sell at T 114.42-45). The Easytel defendants say that the SSD Spreadsheet supports Ms Barakat's position as the information that is common to both spreadsheets is information that is either publicly available or was obtainable by calling the prospect.
Further, the Easytel defendants say that many of the entries claimed to be similar by the plaintiffs are erroneous as some of the purported "similarities": are wrong in that the Grey and Apricot Schedule attributes information to an entry in a spreadsheet that is not there, or omits detail showing that entries are not similar; and are only similar in that they have common information that is public information (such as name, address, phone number, accessible from Google) (see their response schedule). It is submitted that the discrepancies between the entries do not support the plaintiffs' contentions that the information was copied.
It is noted by the Easytel defendants that Ms Barakat's evidence in cross examination was that the "SAMS NEW WORK" spreadsheet contained in the EA-2 Spreadsheet was not used by the defendants in Easytel's business; and that the SSD Spreadsheet was not developed from the EA-2 Spreadsheet (or "SAMS NEW WORK" spreadsheet).
The Easytel defendants contend that the plaintiffs' conduct in respect of MVF is consistent with the plaintiffs having, since the inception of Easytel's business, engaged in a pattern of conduct and interference, with the aim of putting Easytel out of business, and removing Easytel as a competitor in the market.
Further, in that regard the Easytel defendants note: Mr Ayoub's admission that he had a conversation with Mr Marsic, in which he told Mr Marsic that he could not trade with Easytel as long he was trading with the plaintiffs (see at T 52.25-35); the unchallenged evidence of Mr Youssef that a representative of the plaintiffs, Noha Taleb, told an Easytel customer (Blooms the Chemist) that it should cancel with Easytel, saying in effect that Easytel was a "one man band" and was in a legal dispute with the plaintiffs and would shortly be bankrupt (see the affidavit of Mr Youssef sworn 27 August 2020 at [16]).
Reference is also made to the affidavit evidence of Mr Mitchell, Mr Tsioumas and Mr Andraos, which the Easytel defendants contend reveals the lengths to which the plaintiffs are willing to go to disable Easytel's business.
The Easytel defendants submit that the special character that the plaintiffs seek to attribute to the purported confidential information cannot here be made out. They say that the information is not consistent with that of a novel or valuable idea, demonstrative of any particular skill of the human brain, or such as to give it the character of a trade secret or special information; rather, that it is information that is publicly available and can be obtained with relatively minimal skill or expenditure.
Further, in light of the relief sought and the wide definition of confidential information, the Easytel defendants submit that what the plaintiffs are here seeking is that they be restrained from contacting any company or person entered into the plaintiffs' CRM regardless of the source of the lead; notwithstanding that the restraints in the employment contracts of the individual defendants have long since expired (and which the Easytel defendants contend are not enforceable because they tend towards protection against competition, and not the protection of the plaintiffs' legitimate interest); in circumstances where contacts listed in the Exhibit EA-7 are not actually customers of the plaintiffs but, rather, customers whom the plaintiffs may have contacted, or may intend to contact in the future; and notwithstanding that the Easytel defendants have provided the source of leads in Easytel's CRM obtained in the usual course of business and which both the plaintiffs and the Easytel defendants utilise.
On this basis, the Easytel defendants submit that the plaintiffs' claim is an abuse of process.
As to the alleged anti-competitive conduct in the plaintiffs' conduct of the litigation, the Easytel defendants contend that the plaintiffs' conduct effectively, amounts to breach of the Competition and Consumer Act 2010 (Cth), in particular, the prohibitions against exclusive dealing (s 47), and misuse of market power (s 46). It is submitted, in consideration of Berkeley Administration and Ocular Sciences v Aspect Vision Care Ltd (No 2) [1996] EWHC Patents 1; [1997] RPC 289 (Ocular Sciences), that: however sensitive and worthy of protection the plaintiffs consider the alleged confidential information to be, the plaintiffs' motivation in mounting this litigation was not to protect their legitimate business interests, but, rather, was to crush Easytel as a competitor before its business has a chance to develop.
As noted, the Easytel defendants say that the plaintiffs have not properly identified the confidential information such that any restraints in the terms sought by the plaintiffs will be of uncertain scope; and that the plaintiffs' failure to give proper particulars, and their assertion of publicly available information as being confidential, is an abuse of process.
The Easytel defendants have also expressed the concern that the plaintiffs' approach to the litigation (having shown what is said to have been an obsessive and unrelenting desire to put Easytel out of business), will use the information provided by Easytel to target Easytel's customers, particularly in circumstances where there is a significant disparity in financial power and resources. Reference is made to Mr Hanna's evidence in respect of Edyco Group to the effect that Mr Hanna had telephone conversations with its director, Greg, shortly after Easytel signed them in which Greg told him that "Nexgen called [him] and said they would beat [Easytel's] price by 10-20%. They also mentioned that you're in court proceedings with them" and that "When Nexgen found out that I signed with you, Charlie Harb rang me and said they would do the system for free".
As to the aggressive stance seemingly taken by the plaintiffs to the litigation, it seems to me that there is a distinction between the plaintiffs' apparently seeking to make use of their market strength or contacts (say in withholding the use of services of a company that was also dealing with Easytel) and an abuse of process per se.
Giving the plaintiffs the benefit of the doubt, I would treat the plaintiffs' conduct of the litigation as based on their genuine perception that they have been wronged by the defendants' conduct and a genuine intention to protect their legitimate commercial interests.
Thus, I do not consider that the claims should be dismissed as an abuse of process. In Williams v Spautz (1992) 174 CLR 509; [1992] HCA 34 the Court held (at 525) that, when considering an abuse of process constituted by an improper, illegitimate, or collateral purpose, the "existence of an unworthy or reprehensible motive for bringing the action [is] not enough", but rather, the question is whether the "immediate purpose" "sought to be effected by the litigant in bringing the proceedings was not within its scope and was improper" (see also Victoria International Container Terminal Ltd v Lunt (2021) 95 ALJR 363; [2021] HCA 11 at [38] per Edelman J). Such is not the case here.
The Easytel defendants note that in correspondence (on 14 August 2020, and 25 August 2020), the plaintiffs' solicitors said, as to the Easytel business, that they did not accept "the generalised proposition that documents concerning your clients business and customers can be nothing but confidential" and that it was untenable for the Easytel defendants to suggest that any document that concerned their business and customers must, by the very nature of the nexus or relationship with the business, be confidential to the Easytel defendants. The Easytel defendants do not cavil with those contentions but say that they are also apposite to the business of the plaintiffs. In particular, the Easytel defendants emphasise that much of the information which the plaintiffs contend is confidential is publicly available (such as company names and phone numbers); alternatively, is available to anyone for purchase from lead source suppliers.
It is noted that, generally, plaintiffs must identify clearly and precisely the information claimed to be confidential in breach of confidence claims. The Easytel defendants say that it is not sufficient to assert that all information learned by a defendant in the course of employment, negotiations, or resulting from a professional association, is confidential, and the Easytel defendants say that simply bestowing the word "confidential" on information will not necessarily transform non-confidential information into confidential information that is capable of protection.
Reference is made to what was said by Laddie J in Ocular Sciences, his Honour noting, among other things, that the requirement of particularity may impose a heavy burden on the plaintiff, where the plaintiff has a large quantity of confidential information and much of it has been taken by the defendant, the obligation to identity all of it might involve a great deal of work and time but that a defendant must know the case the defendant has to meet and that requires the defendant to know what is contended to be confidential information:
… It is for all these reasons that failure to give proper particulars may be a particularly damaging abuse of process.
These principles do not apply only to the question of the content of the pleadings. Just as it may be an abuse of process to fail properly to identify the information on which the plaintiff relies, it can be an abuse to give proper particulars but of information which is not, in fact, confidential. A claim based even in part on wide and unsupportable claims of confidentiality can be used as an instrument of oppression or harassment against a defendant. It can be used to destroy an ex-employee's ability to obtain employment or a competitor's ability to compete. The wider the claims, the longer and more expensive the litigation …
… The defendant is left no alternative but to fight on in heavy litigation, spending money on lawyers which he would much prefer to spend on building up what may be a new business. The attractions of this to a plaintiff bent on harming a competitor's business are obvious …
The Easytel defendants point out that Laddie J recognised that a mere non-selective list of publicly available information is not confidential (even if putting it together involves some time and effort) as no relevant skill is employed.
The Easytel defendants maintain that the business models of the parties in the present case are not particularly sophisticated; that there is little that is novel or that comprises trade secrets or complex designs; that the business is that of telemarketing; and that little matters in terms of securing an appointment with a prospect save for price and service. Thus, it is submitted that success in this industry rests not so much on the information but on the skill, service and persistence of the business and its employees (the Easytel defendants referring to Ms Barakat's evidence in cross examination as alluding to this).
The Easytel defendants say that the plaintiffs' reliance (see at [5] of the plaintiffs' submissions) on Del Casale v Artedomus (Aust) Pty Limited (2007) 165 IR 148; [2007] NSWCA 172 (Del Casale), and the number of factors which they say are determinative of whether "know how" is confidential, is misconceived.
First, it is said that the plaintiffs have failed to establish that the information meets the criteria cited; in particular, the Easytel defendants say that the information is information that is extensively known outside the plaintiffs' business, and could (and was) readily obtained by the Easytel defendants from third party suppliers, customers, and the public domain.
Further, it is said that the information does not constitute a trade secret, and is common information throughout the industry; that the sharing of the information was not limited to senior staff or executives (noting that none of the individual defendants was a director or the like); and that the plaintiffs have not demonstrated any sufficient measures to show that the plaintiffs regarded the information as confidential or guarded the secrecy of the information (particularly having regard to Mr Hock, and Ms Barakat's evidence that management at the plaintiffs were aware that she would forward the whole of her spreadsheet to herself at the conclusion of her employment).
The Easytel defendants say that the facts in Del Casale were distinct from the present case and, in any event, they note that the Court there held that "if the confidential information can be readily distinguished from an employee's general know-how and is not ascertainable by enquiry or experiment, then it is more likely to be treated as confidential".
The Easytel defendants say that the corollary of the statements contained in the plaintiffs' solicitors' correspondence of 14 August 2020 and 25 August 2020, to which I have referred above, is that the plaintiffs' business and customers cannot be confidential, particularly in consideration of circumstances where: much of the information which the plaintiffs contend is confidential is publicly available (such as company names and phone numbers); the information and/or more detailed company information is available to anyone for purchase from lead source suppliers and can also be obtained by calling businesses; and there is reason to suspect that the majority of the approximately 40,000 companies named in Confidential Exhibit EA-7 are not current customers of the plaintiffs.
Further, and placing reliance upon Advanced Fuels Technology Pty Ltd v Blythe [2018] VSC 286 (Advanced Fuels), it is said that the information the plaintiffs seek to protect is not a trade secret and lacks the quality of confidential information. The Easytel defendants contend that the facts of Advanced Fuels are analogous to the present proceeding (that case involving an employee sending himself information comprising a combination of personal and business contacts). The Easytel defendants contend that the plaintiffs' information is not information subject to any duty of confidence, and the individual defendants have not breached, nor has Easytel been involved in, or aided or abetted any breach of, a fiduciary or contractual duty of confidence or otherwise.
It is said that the information that Ms Barakat forwarded to herself upon the conclusion of her employment (being SB-1 or part of the EA-2 Spreadsheet), was a mix of personal and business information, which she did not use, and which (so far as the business information was concerned) was easily attainable without reference to these documents.
Insofar as the plaintiffs rely on Forkserve Pty Ltd v Jack [2000] NSWSC 1064 (at [21] of their submissions) to assert that an employee is not permitted deliberately to memorise the employers' information to use subsequently in competition, it is said, first, that the plaintiffs have not established that Ms Barakat deliberately memorised the plaintiffs' alleged confidential information; and, second, that this submission is contrary to the plaintiffs' later submission (at [50]-[51] of their submissions) that the plaintiffs' alleged confidential information is impossible to memorise. In any event, it is said that the information was not copied or deliberately memorised by Ms Barakat; and that the information was ascertained by enquiry from third party suppliers, customers, and the public domain.
The Easytel defendants emphasise that, due to the almost identical nature of the goods and services offered by the plaintiffs and Easytel, they operate in direct competition, often competing for the same customers, and using similar sales techniques, business models and client lists purchased from third party suppliers; and they say that it is therefore unsurprising that the individual defendants performed similar, if not the same duties for the plaintiffs and then Easytel in the course of their respective employment with each of those entities.
It is noted that, common to both the plaintiffs' and Easytel's business models is the purchase of leads and databases from third party suppliers to contact prospective customers; and that both sides use Leadmaster CRM to record information about prospective customers. It is said that Easytel's leads inevitably overlap with those of the plaintiffs in that Easytel and the plaintiffs purchase leads from the same suppliers. Reference is made to the Confidential Exhibit JH-02 to Mr Hanna's 6 July 2020 affidavit, which contains an extract of Easytel's Leadmaster CRM which records the names of Easytel's current and prospective clients, and the corresponding source of the lead. Mr Hanna deposes that the source of Easytel's leads overlap with those of the plaintiffs, in that Easytel and the plaintiffs purchase leads from the same suppliers.
The Easytel defendants say that Easytel's customers are obtained bona fide leads from third party sources and referrals, and not from any of the plaintiffs' alleged confidential information; and that the defendants have not used the plaintiffs' alleged confidential information to obtain customers of the plaintiffs or otherwise.
The Easytel defendants contend that the fact that Ms Barakat kept the spreadsheet containing both prospects of the plaintiffs (together, they point out, with a multitude of personal information in the spreadsheet), is simply an example of an oversight or confusion on Ms Barakat's part due to this overlap, rather than any wilful act of corporate espionage.
On balance, while I consider that much of the information contained in the EA-2 Spreadsheet would not in isolation be confidential, I have concluded that the compilation of the information (whether that be in the CRM database or as part of an Excel spreadsheet used by telemarketers in the plaintiffs' business) would cloak the information so compiled with the necessary quality of confidence so as to lead to the conclusion that it would not be open to Ms Barakat (consistent with her obligations as an employee) to take and use that information in her new employment. Thus, I consider that the necessary quality of confidentiality has been established.
As to the balance of the breach of contract claims, and apart from the complaint as to the lack of confidentiality of the information contained in the Plaintiffs' Client List, the Easytel defendants say that cl 20.6 of the Barakat Employment Agreement contains an oppressively wide characterisation of confidential information in the context of the post termination obligation in cll 20.1 and 20.2 of that Employment Agreement, particularly given the global nature of the claim by the plaintiffs and the character of the information.
Further, the Easytel defendants say that the plaintiffs have been unable to demonstrate a breach of cl 19.1.1 insofar as the plaintiffs have not established or even addressed what an "imminent" prospective client is; have not established that any of the plaintiffs' alleged potential clients were "imminent" prospective clients; have not established that any clients of the plaintiffs were procured by the defendants during the restraint period; and have not established that any clients of the plaintiffs were procured by Easytel, in circumstances requiring the Easytel defendants to use or disclose allegedly confidential information belonging to the plaintiffs.
It is submitted that, in any event, the restraint as drafted in cl 19 of the various employment contracts is void for uncertainty, in that "imminent" prospective client is not defined; and that it breaches the principles against restraint of trade, in that the clause contains no limits (and, on the plaintiffs' application by reference to Confidential Exhibit EA-7, it would have the effect of restraining the Easytel defendants from contacting some 40,000 potential clients in Australia); and there was, and is, no way for the Easytel defendants to know if they were purportedly in breach given the extent of the argued restraint, the nature of the parties' businesses and the number of companies the plaintiffs seek to quarantine, and of which the Easytel defendants do not have a record.
The Easytel defendants note that a restraint clause that imposes obligations upon employees after their employment terminates is prima facie void unless it imposes no greater restraint than is reasonably necessary to protect the legitimate interests of the party seeking to enforce it; and that the onus of demonstrating the reasonable character of the clause rests upon the person alleging that it is of that character (citing Herbert Morris Limited v Saxelby [1916] 1 AC 688). They point in this context to the public policy that a person is not to be restrained, either by contract or otherwise from using after employment, personal skill, knowledge and experience.
Reference is made by the Easytel defendants to O'Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33, which involved a global claim for protection pursuant to an alleged breach of confidence where the contents of documents included matters of common knowledge. It is noted that while Mason J, as his Honour then was, considered that in some respects the information which the respondent sought to protect in that case resembled "know-how" (in that it represented the respondent's accumulated knowledge, skill and experience in a particular field) his Honour rejected the proposition that all of it included confidential information, saying (at 328) that:
… Obviously this cannot be right. Much of it is common knowledge, as the findings of fact made by the primary judge indicate…Even so, if the respondent were able to identify some particular pieces of information and show that they were confidential or that an obligation of confidence had arisen with respect to them he would be entitled to protection of them. But this is just what the respondent has failed to do. He has persisted in making a global claim for protection that covers the entirety of the schemes that were evolved and the entirety of the documentation by which they were implemented. He is not entitled to that protection and, accordingly, his claim must fail …
The Easytel defendants also refer to Metrans Pty Ltd v Courtney-Smith (1983) 8 IR 379 where Kearney J said (at 383-389) that:
The firm impression created in my mind by the evidence is that the first defendant's skill and ability resulted in her acquiring many customers for the plaintiff, and enabled her to maintain accounts of other customers of the plaintiff by reason of her efforts and efficient and assiduous attention to their needs. The knowledge of such customers which she acquired during her employment with the plaintiff seems to me to fall into the category of general knowledge inevitably acquired by her as a necessary consequence of her employment - especially having regard to the way in which it was acquired. Likewise, the knowledge which she acquired of the methods and procedures of the plaintiff's business appeared to me to fall into the same category as constituting her stock of general knowledge and experience which she acquired in the ordinary course of her activities as sales manager of the plaintiff.
Reference is also made to what was said by Hamilton J in Rosewood Advertising Pty Ltd v Hannah Marketing Pty Ltd [2000] NSWSC 1034:
There may be circumstances in which the identity of customers, prices and contract details are of high confidentiality. However, one important piece of evidence in this case was that of the content of a website of the plaintiff, on to which it had placed the identity and location of a very large number of relevant customers. The price of the cards was also upon the website. That appears to be quite clear since the website was accessed by somebody at the defendant's solicitor's firm. There is also evidence which suggests that lists such as the lists of information which are the subject of proceedings, were openly posted up in offices of the plaintiff. Although the evidence is not at this stage of any great specificity, there is the suggestion in evidence that the content of sales made by the plaintiff was posted up in public places as promotional material. There is certainly evidence that suggests that prospective customers who were approached were given considerable information about contracts that the plaintiff had with other persons in their industry, again for promotional purposes.
As to Dagazo, which was signed by Easytel, it was not a client of the plaintiffs and what the plaintiffs lost was at best an opportunity to obtain Dagazo's custom, thereby rendering what was a prospect into a client. However, I would not rate the loss of that opportunity as of any particular value (not least because there is no suggestion that the plaintiffs pursued the proposal for this client after Ms Barakat left the employ of the plaintiffs). As such, as adverted to above, Ms Barakat's breach of her employment contract would only sound in nominal damages (and I would award the sum of $1).
As to whether the contractual provision is unenforceable as a restraint of trade, I have noted the submissions made by the Easytel defendants. At common law, a restraint of trade is contrary to public policy and thus void unless it can be shown by the party relying upon the restraint that it is reasonably necessary to protect the interests of the parties, or is reasonable by reference to the public interest (see, for example, Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288; [1973] HCA 40 at 307 (Amoco Australia); Belflora Pty Ltd v Vinflora Pty Ltd [2021] NSWCA 178 at [26]). A stricter approach to restraints of trade is taken in respect of covenants between employer and employee (see, for example, Geraghty v Minter (1979) 142 CLR 177; [1979] HCA 42 at 185; and Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 at [11] (Cactus Imaging)). A mere restraint against competition is unenforceable (Amoco Australia at 295).
In light of the findings I have made, it is not necessary here to determine this issue. Had it been necessary I would have concluded that the global reach of the restraint went beyond what was reasonably necessary to protect the legitimate interests of the plaintiffs. The restraint in question does not protect the plaintiffs' legitimate interest in preserving a customer connection (see, for example, Cactus Imaging at [32]-[34]; see also Stenhouse Australia Ltd v Phillips [1974] AC 391) but rather amounts to a restraint against competition (insofar as it seeks to protect against prospective customer connections).
As to the position of Mr Mitchell, his own evidence would support a conclusion that there was a breach of his contractual obligations but I have sufficient doubt as to the reliability of Mr Mitchell's evidence not to make any such finding.
As to Mr Youssef, insofar as his taking of the emails was in breach of contract, I cannot see what loss could be said to have flowed therefrom and at best this would sound in nominal damages, for which again I would award the sum of $1.
The plaintiffs say that, as each of the individual defendants was an employee of (one or other of) the plaintiffs, the individual defendants owed fiduciary obligations to act in the plaintiffs' best interests and not to misuse his or her fiduciary position. In the circumstances, it is said that they owed the plaintiffs a duty not to use the information (which the plaintiffs say appears to have first been taken by Ms Barakat, and then uploaded to the computer system at Easytel, in breach of the fiduciary duty).
The Easytel defendants, however, invoke Advanced Fuels where Macaulay J found that the relevant employee (who had sent both personal and business contact files on this employer's computer to his private email address) held no fiduciary office with the employer nor was he subject to the statutory duty of good faith (not being an officer of the company) (at [327]) and that the only applicable duty operating after his resignation was the prohibition found in s 183 of the Corporations Act against improperly using information (at [325]). Macaulay J considered that, although the contacts were acquired during the course of employment, the contact data (names, email addresses and telephone numbers) did not amount to information that was subject to any duty of confidence, and noted that the list included information available through public sources and was intermixed with personal contacts (at [179). Macaulay J noted that the contact details for the relevant persons could be readily acquired or duplicated by others; and held that the information did not have the character of a trade secret and lacked the quality of confidential information. It was considered unlikely that the employees would have been unable to remember and contact most if not all of the customers and suppliers with whom they dealt whilst at their former employer, even without the contact details; and that, while having the contact details may have provided an easier or quicker means of reaching those people than had they not kept those details, there was no evidence of them having actually made use of the data (at [180]). It was said in that case that the employer was not deprived of the ability to communicate with customers and suppliers simply because the employee had retained a copy of the contract data (and had the source email from which the list had been sent to the employee's private address).
The more senior an employee, the more likely that the employee's duties will be fiduciary in nature (see, for example, Colour Control Centre Pty Ltd v Ty (1993) 39 AILR 5-058 at [48] per Santow J). However, the test requires one to take into account the features of the particular employment relationship in question (including matters such as ascendancy, influence, vulnerability, trust, confidence or dependence) as to whether there is a reasonable expectation that a party will act in another's interest to the exclusion of his or her own or a third party's interest. As discussed by Foster J in Bayley Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 at [230]-[232] (Bayley v DBR), while it is more often accepted that senior employees with managerial responsibilities owe fiduciary obligations, the question as to the existence of fiduciary duties on the part of the employee remains one of degree.
In the present case, but for the admission in the relevant defences, I would have concluded that none of the individual defendants was in a fiduciary relationship with the relevant plaintiff employer (and in the case of Mr Mitchell, who filed no defence, there is no bar to me making that finding). None was in a position of ascendancy; none had powers or discretions vested in him or her; none was in a position where the employer was particularly vulnerable to a misuse of power or where the employer had reposed particular trust in him or her; and, critically, I do not see that the employment relationship of any of them demanded a standard of loyalty exceeding the duty of fidelity prescribed by the employment contract (see Bayley v DBR at [232]).
To the extent that fiduciary obligations are admitted by Mr Youssef and Ms Barakat to have been owed by him or her , then the obligations are recognised as proscriptive not prescriptive and would extend to a duty not to place himself or herself in a position of conflict of interest or to prefer another's interests to those of the entity to whom the fiduciary obligations were owed. While that no-conflict duty would have precluded use of confidential information for the benefit of a prospective future employer while he or she was an employee of one or other of the plaintiffs, the scope of that duty after each had left the employ of the plaintiff(s) is less clear and would in any event be covered by the contractual duties of confidence.
As to whether, apart from a fiduciary relationship, as such, an equitable obligation of confidence would be imposed, see Coco v AN Clark (Engineers) Limited [1969] RPC 41 where Megarry J suggested that the imposition of the obligation of confidence was to be objectively determined and said that:
It seems to me that if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence.
In the present case, there is some room for doubt as to whether a telemarketer would conclude that notes of enquiries made of prospective leads would be information given to them in circumstances where a duty of confidentiality would arise. Nevertheless, in that context it is not insignificant that Mr Mitchell at the very least had concerns as to whether he was able to use client contact information that he considered had come from the plaintiffs. That said, a very different answer might follow in relation to the use of information gleaned from client leads purchased by Easytel from suppliers of such information to that in respect of information obtained by Ms Barakat personally while employed by Nexgen.
The conceptual difficulties that may arise in circumstances where there are potential claims both in contract and for breach of an equitable obligation of confidence, were considered by Campbell J in Mid-City (at [270]-271]). There, his Honour, raising the question whether an account of profits was available, as a remedy in equity's auxiliary jurisdiction, for a breach of contract, said:
There are difficulties of principle concerning whether an account of profits is available as a remedy, in equity's auxiliary jurisdiction, concerning a breach of contract: Gleeson and Watson, "Account of profits, contracts and equity" (2005) 79 Australian Law Journal 676. I have expressed the view that even if an account of profits is sometimes available in circumstances where there has been a breach of contract, something more than a mere breach of contract is needed to demonstrate the appropriateness of awarding the equitable remedy: Town & Country Property Management Services Pty Limited v Kaltoum [2002] NSWSC 166 at [83].
An argument might be open that, if the relationship between contracting parties is such that if there had been no term in the contract imposing an obligation of confidence, equity would have imposed an obligation in its exclusive jurisdiction which was no less onerous than the parties by their contract have agreed to, that is a sufficient justification for the award of an account of profits in relation to a breach of the contractual obligation of confidence. It is clear law that if an equitable obligation imposed in the exclusive jurisdiction is breached, the remedies available include whichever the plaintiff elects of equitable compensation, and an account of profits. That equity allows that choice of remedy concerning a breach of an obligation of confidence in its exclusive jurisdiction might be argued to be a reason why it would regard the common law remedy of damages for breach of a contractual obligation of confidence as inadequate in a situation where it would have imposed an obligation of confidence if the parties had not agreed on such an obligation.
The significance of a finding that a contractual obligation of confidence is owed would be that the plaintiffs would ordinarily be left to their rights in contract since the need to invoke equity's exclusive jurisdiction in relation to breaches of confidence would not arise (see JD Heydon, MJ Leeming, PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, LexisNexis, 2014) at [41-020] (Meagher, Gummow & Lehane), where reference is made to Vokes v Heather (1945) 62 RPC 135 at 142; Deta Nominees Pty Limited v Viscount Plastic Products Pty Ltd [1979] VR 167 at 191 and Faccenda Chicken Ltd v Fowler [1987] Ch 117 at 135-138, in exhorting the courts to resist in these circumstances the introduction of equitable concepts).
I have found that the plaintiffs suffered no loss as a result of the respective breaches of contract, and thus the plaintiffs' rights in contract are limited to the recovery of nominal damages. The absence of causation likewise defeats the plaintiffs' claims for equitable compensation and an account of profits for breach of fiduciary duty, insofar as the plaintiffs suffered no relevant loss due to any breach (see Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 681-683, 687; Meagher, Gummow & Lehane at [5-255]).
I have thus concluded that the claims for breach of fiduciary duties fail.
It is noted that the factors which help determine whether information, including "know-how", is confidential include (by reference to those factors enumerated in Del Casale at [40]-[41]): the extent to which the information is known outside the business; the extent to which the trade secret was known by employees and others involved in the business; the extent of measures taken to guard the secrecy of the information; the value of the information to the plaintiffs and their competitors; the amount of effort or money expended by the plaintiffs in developing the information; the ease or difficulty with which the information could be properly acquired or duplicated by others; whether it was plainly made known to the employee that the material was considered by the employer as confidential; the fact that the usages and practices of the industry support the assertions of confidentiality; the fact that the employee has been permitted to share the information only by reason of his or her seniority or high responsibility; the greater the extent to which the "confidential" material is habitually handled by an employee, the greater the obligation of the confidentiality imposed; that the information can be readily identified; and the extent to which the particular information can be readily isolated from the employee's general know how - which the employee is entitled to use after the employment ends.
It is noted that the words "aided" and "abetted", have the same effect and refer to a person who takes some part in the contravention, which requires that the person have knowledge of the essential matters which made up the contravention, regardless of whether he or she knew of those matters were in law a contravention (see Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 at 667 per Mason ACJ, Wilson, Deane and Dawson JJ).
Further, it is noted that a person will be knowingly concerned in, or party to, a contravention within the meaning of s 79(c) if that person is an intentional participant in the contravention, which in turn, requires that the intentional participant has knowledge of the essential elements of the contravention which must exist at the time of the alleged contravention (see Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509 at [170]-[171] per Gordon J, her Honour then sitting in the Federal Court). The plaintiffs say that knowledge of the essential elements of the contravention may be inferred from the fact that the person is exposed to the obvious (although they accept that constructive knowledge is not sufficient).
The Easytel defendants note that it must be shown not only that the information is confidential in quality and that it was imparted so as to import an obligation of confidence, but also that there will be an unauthorised use of that information to the detriment of the party communicating it (in order to justify the grant of permanent injunctive relief). The Easytel defendants further point to the judicial caution ordinarily exercised when considering the grant of relief that may deprive people of their ordinary mode of livelihood, or impinge severely upon it; and to the public interest against the unnecessary restraint of competition.
The Easytel defendants maintain that they are operating a legitimate business which by its nature competes with the business of the plaintiffs. They complain that, pursuant to the Anton Piller Orders made on 15 May 2020, and the orders for discovery made on 27 July 2020, the plaintiffs are now effectively (by their legal representatives) in possession of the entirety of Easytel's business. (I do not place weight on this last submission, since the legal representatives will be constrained by their professional and ethical obligations in dissemination of any such information.)
The Easytel defendants say that, if the orders sought by the plaintiffs are granted, the permanent injunction sought by the plaintiffs will effectively disable Easytel's business and prevent Ms Barakat and Mr Youssef from working in the industry. As noted above, complaint is made that the plaintiffs have failed clearly and precisely to identify and explain why the information is confidential, in circumstances where much, if not all, of the information can be obtained from the public domain and third party suppliers. It is said that the plaintiffs' pleadings identify about 58 companies they say the defendants have procured by using their alleged confidential information, but have not shown: (i) how this information differs from that which the defendants can obtain on their own by: searching the public domain; purchasing databases; and making calls to prospective clients in the usual course of business; (ii) that the alleged confidential information was used by the defendants to procure these customers; or (iii) why, despite the limited number of companies named in the plaintiffs' amended statement of claim, the defendants should be restrained from contacting some 40,000 additional companies being those "prospects" contained in Confidential Exhibit EA-7.
The Easytel defendants maintain that: Easytel's customers are obtained from bona fide leads from third party sources and referrals, and not from any of the plaintiffs' alleged confidential information; and they say that they have not used the plaintiffs' alleged confidential information to obtain customers of the plaintiffs or otherwise.
Further, it is said that, by the plaintiffs' own admission, the extent of the information that the plaintiffs seek to protect, in particular that contained in Confidential Exhibit EA-7, are not clients of the plaintiffs, nor can the information be truly classified as confidential or special information belonging to the plaintiffs. The Easytel defendants say that the plaintiffs' case in that regard is untenable; and that this litigation is an attempt to bully, harass and intimidate them; and to stifle competition.
Conduct that accelerated the acquisition of leads in advance of the time in which Ms Barakat could lawfully have dealt with those clients and competed with Nexgen would be akin to the situation in Dellow. The acceleration (or advantage) thereby wrongly obtained was compensable by way of an award of damages for the loss of value to the business.
In Corsiatto, the court considered a situation where an employee of the appellant insurance brokers resigned to act as sub-broker for the second respondent insurance brokers. He had prepared customer lists containing confidential information in breach of his fiduciary duty to the appellant and he used those lists to canvass his former clients. Many of those former clients nominated the second respondent as their broker and the respondents then obtained details of their current insurance arrangements and substantial brokerage/commission was earned. It was not established that second insurance brokerage firm knew that the lists had been obtained by breach of fiduciary duty. The relief granted at first instance was an account of profits for six months or, in the alternative, equitable compensation. On appeal, Handley JA referred to Warman International Limited v Dwyer (1995) 182 CLR 544; [1995] HCA 18 at 558-559 where the court said:
… What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty …
It is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts. …
Handley JA noted (at [27]) that an account of profits against a fiduciary is based on the receipts of the defendant, not the loss of the plaintiff and that, as a general rule, a court will not apportion profits in the absence of an antecedent arrangement for profit-sharing but will make allowance for skill, expertise and other expenses. In Mid-City, Campbell J said (at [273]):
The onus is on any plaintiff who seeks an inquiry as to profits to persuade the Court that it is appropriate to make such an order. Whenever an account of profits is ordered in relation to a breach of an equitable obligation, where that breach has resulted in the person in breach receiving money in consequence of both the breach of the obligation, and his or her own expenditure of time effort and skill, an allowance is ordinarily made for the value of that time, effort and skill: Green v Folgham (1824) 1 Sim & St 398 at 406; 57 ER 159 at 162; Boardman v Phipps [1967] 2 AC 46 at 104, 112; Warman International Limited v Dwyer (1995) 182 CLR 544 at 562.
Where, as here, only a limited number of leads can be shown to have been acquired as clients of Easytel, the measure of profits obtained by breach of any fiduciary duty or equitable obligations of confidence in this case would be difficult to assess. In Dellow, for example, the loss in question was a substantial reduction in the number of clients remaining on the rent roll but here it is difficult to assess which of the leads were actual clients as opposed to potential clients. No assessment could be made of any loss of net income from those potential clients. I do not consider that the case of an enquiry as to damages or taking of account would be warranted in the present case.
As to the grant of permanent injunctive relief, I am of the view (as I was in AIIB Pty Ltd v Beard [2009] NSWSC 1001 at [227]) that a perpetual injunction should not be granted. I am of that view in circumstances where the client contact information and notes as contained in the spreadsheet taken from the plaintiffs when Ms Barakat ceased her employment represent information which could either have been compiled from public sources and/or by enquiry made by the telemarketers at Easytel in any event. I consider that the grant of an injunction of the kind here claimed would in my view go far beyond any reasonable restraint of trade or non-solicitation covenant; and is not warranted because the risk of use of (by now presumably increasingly outdated) information is not established. Further, I consider that any springboard advantage must by now well and truly have dissipated. The suggestion that any further restraint beyond that in effect imposed by the undertakings that the Easytel defendants have proffered and that have been in place now for some time is not tenable in my opinion.
The Easytel defendants contend that the evidence does not substantiate the plaintiffs' claim that all right, title and interest in the various assets has been transferred from Nexgen to Business Telecom. It is noted that, at [11] of Mr Ayoub's affidavit, he refers to the Asset Sale Agreement containing specific definitions identifying specific property that was being transferred to Business Telecom but he does not elaborate on this. The Easytel defendants say that on their review of the (redacted) Asset Sale Agreement, the only section that deals with the transfer of specific property is Schedule 2; and that Schedule 2 does not include any reference to a transfer of assets from Nexgen to Business Telecom.
The Easytel defendants point to the following in relation to Schedule 2 of the Asset Sale Agreement.
First, that it provides that customer lists and contracts were sold to Nexgen Investment Group Pty Ltd (Nexgen Investment Group) (i.e., not Business Telecom) by the Seller which is party to the contract or owns the customer list. It is noted that this does not specify if Nexgen was one of the Sellers; nor which, if any, customer lists or contracts were sold by Nexgen.
Second, that it does not provide that contracts through which Nexgen purchased databases were sold by Nexgen to Business Telecom (as contended by the plaintiffs' further amended statement of claim). It is said that the only specific assumed contracts in Schedule 2F of the Asset Sale Agreement are "Aussiepay" and "BT Super" (these being payroll, and superannuation companies, respectively), which were sold by Nexgen Australia Group Pty Ltd (Nexgen Australia Group) to Business Telecom. The Easytel defendants note that the balance of the assumed contracts in Schedule 2F is redacted; and say that, in any event, the majority of these appear to have been sold by Nexgen Australia Group to Nexgen Investment Group and Nexgen Capital Pty Ltd (Nexgen Capital).
Third, that the Asset Sale Agreement does not provide that intellectual property was sold by Nexgen to Business Telecom. It is noted that, under the heading "Business Intellectual Property" in Schedule 2, it is said that the businesstelecom.com.au domain was sold by Nexgen Australia Group to Business Telecom (i.e., not by Nexgen); and that all other Business Intellectual Property not listed in the Schedule was sold by each Seller to the extent that the Seller owns any Business Intellectual Property not listed in the Schedule.
Fourth, that the Asset Sale Agreement provides for the sale to Business Telecom by each Seller (to whom a Trade Debt is owed) of all receivables of the Business owing to the Sellers by debtors of the Business as at Completion; and by each Seller (to the extent that it owns the same) of Goodwill; Systems; Records; Databases; Inventory; and Work In Progress.
Finally, that the Asset Sale Agreement does not provide that all property rights and assets used solely and exclusively in the conduct of Nexgen's business were sold to Business Telecom. It is noted that the final paragraph of Schedule 2 provides that other Assets not listed in Schedule 2 are sold by Each Seller, to the extent that it owns any other Assets, to Business Telecom.
The Easytel defendants note that there are multiple Sellers named in the Asset Sale Agreement, and that the Asset Sale Agreement does not disclose what, if any, Business Intellectual Property, Trade Debts, Goodwill, Systems, Records, Databases, Inventory and Work In Progress or other Assets were sold to Business Telecom by Nexgen.
Further, it is noted that Schedule 2 expressly provides that Nexgen Australia Group (not Nexgen), is the Seller in respect of 4,033 customers' active billing contracts (Active Billing Contracts). It is noted that the Asset Sale Agreement provides that the Active Billing Contracts are sold (see Schedule 2 Part F) by Nexgen Australia Group to Nexgen Investment Group (i.e., not to Business Telecom).
The Easytel defendants thus contend that the Asset Sale Agreement is at odds with the plaintiffs' position as pleaded at [43]-[46] of the further amended statement of claim, and Mr Ayoub's affidavit of 3 September 2021.
The Easytel defendants say that the Asset Sale Agreement does not evidence the transfer of Nexgen's business or interest in this proceeding to Business Telecom; rather, that it evidences, as a minimum, that 4,033 customers' active billing contracts owned by Nexgen Australia Group (not Nexgen), were transferred to Nexgen Investment Group. It is said that nowhere in the Asset Sale Agreement is there a similar reference to a transfer of billing contracts from Nexgen to Business Telecom or any other entity.
Insofar as Mr Ayoub has deposed (at [18] of his affidavit) to his belief that customers affected by the assignment or transfer of the customer contracts have been given written notice of any relevant assignment or transfer pursuant to the Asset Sale Agreement, the Easytel defendants argue Mr Ayoub's belief that Nexgen's customers have been notified of the assignment of their contracts to Business Telecom is at odds with material provided to the Easytel defendants by a "Nexgen" customer, a copy of which is exhibited at page 3 of the bundle of documents being Exhibit PM2-2021 to the affidavit of Peter Mustaca, solicitor for the first, third, fourth and fifth defendants, affirmed 14 September 2021.
The notification exhibited to Mr Mustaca's affidavit (issued on or about 31 March 2021) states that:
… Nexgen has been acquired by Spirit Technology Solutions Limited (Spirit) effective 1st April 2021 … moving forward, NEXGEN INVESTMENT GROUP is entitled to, and assumes responsibility for all NEXGEN AUSTRALIA GROUP rights and obligations under the Service Agreement as if NEXGEN INVESTMENT GROUP had been originally named in the Service Agreement …
All existing direct debit authorities according to your Nexgen Service Agreement with NEXGEN AUSTRALIA will remain in place under the novation to NEXGEN INVESTMENT GROUP …
The Easytel defendants contend that the notification to customers specifies an assignment from Nexgen Australia Group to Nexgen Investment Group, not an assignment from Nexgen to Business Telecom.
Further, the Easytel defendants note that the Mr Ayoub's affidavit of 26 June 2020 provides extensive comment on Nexgen's business and exhibits Confidential Exhibit EA-7; but that Mr Ayoub does not identify which of the plaintiffs owns the purported customer or prospect lists contained in that confidential exhibit. It is noted that Schedule 2, Part F of the Asset Sale Agreement lists various Assumed Contracts and that, while most of these have been redacted, the Schedule does indicate that the majority of these contracts belonged to Nexgen Australia Group, and have been transferred to Nexgen Investment Group or Nexgen Capital.
The Easytel defendants thus contend that, at the very least, the Asset Sale Agreement suggests that the transfer of assets contended at [43]-[46] of the plaintiffs' further amended statement of claim is misguided; and the customers and prospect lists said to belong to Nexgen in the proceeding actually belonged to Nexgen Australia Group.
It is noted that (at [9] and [16] of his affidavit of 3 September 2021), Mr Ayoub deposes to the structure of the "Nexgen consortium". The Easytel defendants contend that the relevance of this evidence is not clear; that it is of no utility; and they suggest that this is an attempt to "gloss over" the fact that, based on the above analysis, there has been no transfer from Nexgen to Business Telecom (arguing that Nexgen apparently did not have standing to bring the proceeding in the first place).
The Easytel defendants submit that Nexgen has no interest in the present proceeding and is not (nor was it ever) capable of transferring assets to Business Telecom as contended in [43]-[46] of the further amended statement of claim. Alternatively, they say that Nexgen, having purported to sell its various assets, has no ongoing interest in the proceeding (particularly the interlocutory and permanent restraints sought in the further amended statement of claim).
As to the claim by Business Telecom, the Easytel defendants say that, to the extent that Business Telecom has any interest in the proceedings, it does not have any claim against Mr Youssef, whose contract was with Nexgen and is, in any event, expired; and it does not have any interest in the proceeding pursuant to the purported transfer of rights from Nexgen to Business Telecom (as contended in [43]-[46] of the further amended statement of claim).
Further, insofar as Business Telecom is listed as a Buyer in the Asset Sale Agreement, the Easytel defendants contend that Business Telecom does not maintain any interest in the proceeding of itself.
Insofar as Nexgen (now LV6) was the "lead plaintiff" in the proceeding, the Easytel defendants say that its purported entitlement to customers and prospect lists appears to have never been its entitlement (upon the premise, as the material indicates, that these "assets" actually belonged to Nexgen Australia Group, and other entities not involved in the proceeding).
The Easytel defendants (as noted earlier) say that of the approximately 58 separate entries in Annexure B of the amended statement of claim only four of these were entities were customers of the plaintiffs when they were signed by Easytel (see above). It is said that, of those four entities: the contract with Austeck Pty Ltd was not with Nexgen, but with Nexgen Australia Group; the contract with Bars N Racks was not with Nexgen, but with Nexgen Australia; and the contract with Blooms the Chemist was not with Nexgen, but with Nexgen Australia Group. Thus, it is said that, out of these four contracts, the only contract that was specified to be with either of the plaintiffs was the Metalair contract which was with Business Telecom.
The Easytel defendants submit that, to the extent that Business Telecom has any claim in the proceeding, it is limited to the Metalair contract. It is noted that Metalair: appears in the Illion database and also the Naj Database and apparently made the decision to leave Business Telecom because it was not satisfied with the service and after its contract with Business Telecom appears to have expired. Further, it is noted that this entity was not procured by Easytel during any restraint period of the first, second or third defendants (even leaving aside the Easytel defendants' position that such restraints are unenforceable) it being signed on 31 March 2020.
The Easytel defendants say that the Asset Sale Agreement indicates that any purported right, title or interest of Nexgen in customers and prospect lists actually belonged to Nexgen Australia Group, and has been transferred to Nexgen Investment Group, neither of which is a party to this proceeding; and that the Asset Sale Agreement does not disclose any express transfer of rights from Nexgen to Business Telecom.
The Easytel defendants contend that the Asset Sale Agreement does not disclose any interest of Business Telecom relevant to these proceedings, but that it would, in any event, be limited to the customer, Metalair (which the Easytel defendants maintain is a bona fide Easytel customer rightfully obtained).
The Easytel defendants also contend that, even if the plaintiffs were "technically successful", the extent of any award of damages would be nominal. It is noted that such nominal damages would obviously be dwarfed by the reported sale price of Nexgen's business (being $50,000,000).
The Easytel defendants emphasise that they have consistently asserted that this proceeding was commenced to bully, harass and intimidate Easytel out of business. They contend that, in the absence of detailed disclosure by the plaintiffs, having regard to the value of the Nexgen sale transaction, and the involvement of a publicly listed company, Spirit Technology Solutions Ltd (Spirit Technology), that: the Asset Sale Agreement does not encapsulate the whole transaction, particularly since it does not include any reference to any sale price; and the sale of the Nexgen business has been in motion for some time, and likely well in advance of the conclusion of the proceeding. Insofar as that is the position, the Easytel defendants contend that the plaintiffs have maintained the proceeding in the absence of any, or any material, utility, and in so doing have caused the parties to incur unnecessary costs which far exceed any purported harm claimed by the plaintiffs (which is denied by the Easytel defendants in any event).
The Easytel defendants contend that this is particularly relevant noting that the controlling minds of the plaintiffs' when the proceeding was first commenced (namely, its directors Mr Ayoub and Mr Harb) do not appear to have any further interest or involvement in the "Nexgen" business given the sale of the business and the various changes to directorships, shareholdings and names of the companies which is reflected upon the searches in the affidavit of Mr Mustaca affirmed on 14 September 2021.
The Easytel defendants note that the companies which list Mr Ayoub and Mr Harb as directors are generally named "LV6 …" and do not have any apparent interest in the business; and that the companies listed as purchasers of the business in the Asset Sale Agreement, whilst having the same names, are now controlled by an entirely new board. It is noted that the ultimate holding company of Business Telecom and Nexgen Capital (Nexgen Investment Group) is also now wholly owned by Spirit Technology.
The Easytel defendants point out that the further amended statement of claim filed on 23 August 2021 contains an affidavit verifying the pleading signed by Mr Ayoub as a director of both the plaintiffs. They say that, after the Easytel defendants raised the issue that Mr Ayoub was not a director of Business Telecom, the plaintiffs on 7 September 2021 served (but, it is said, refused to file), a further version of the further amended statement of claim with new verification affidavits: signed by Mr Ayoub as a director of Nexgen and by Mr Solomon Lukatsky, as director of Business Telecom (noting that Mr Lukatsky has not previously participated in these proceedings). (It is difficult to know what to make of this submission when the document does not appear to have been filed.) The Easytel defendants thus submit that the plaintiffs have failed to establish any evidentiary basis for their claim or the Orders they seek; that the plaintiffs' proceeding suffers from a lack of standing; and that the plaintiffs cannot establish any loss or damage.
It is said that even if the assignment occurred in the manner contended by the plaintiffs, Business Telecom is not competent to sue the defendants. Reliance for this proposition is placed on Taypar Pty Ltd v Santic (1989) 21 FCR 485; [1989] FCA 543, where there was a question whether the assignee was entitled to sue for infringements committed prior to the assignment and Spender J stated (at 491) that:
… In my view the owner of a copyright or the respective owners of parts of the copyright are the only persons entitled to bring an action for infringement of the copyright or the respective parts of the copyright, and it is not competent for an assignee of a copyright to bring an action in respect of an infringement that occurred prior to his becoming the owner of the copyright, merely by virtue of being the assignee of the copyright.
The defendants say that there was nothing retrospective in any assignment effected; and, in particular, that there was no assignment or purported assignment of any right to litigate in respect of earlier breaches of the copyright.
It is noted that a bare right of action is not assignable and the Easytel defendants say that no encouragement should be given to litigation by the introduction of parties to enforce those rights which others are not disposed to enforce.
Further (and referring to the Easytel defendants' primary contention that the plaintiffs have no interest for the reasons set out in the defendants' 17 September 2021 submissions), it is said that the purported assignment of rights from Nexgen to Business Telecom contended by the plaintiffs: does not grant Business Telecom any retrospective right to sue for earlier alleged breaches (which are denied); and would only be effective from completion of the Asset Sale Agreement on 31 March 2021, which occurred after the conclusion of the hearing and subsequent to the conduct alleged by the plaintiffs in their further amended statement of claim.