Plaintiff v First Named Defendant

1. By an originating motion and a summons thereon, the Plaintiff, National Hearing Centres Pty Ltd ("NHC"), seeks an order pursuant to Rules 37.01(2) and 37.02(3) of the Supreme Court (General Civil Procedure) Rules 2005 ("the Rules")[1] that on the next business day after this order (or any other day fixed by the Court), between 9 am and 5 pm NHC, by its solicitors and its Computer Expert, Mr Rod McKemmish, may enter the First Defendant's, VIC O TECH Pty Ltd ("VOT"), and the Second Defendant's, Irina Angelova ("Ms Angelova"), (collectively referred to as "the Defendants") premises at 365 Bay Road, Highett, Victoria ("the Defendants' Premises") for the limited purpose of:

(b) making observations, including by way of non-destructive testing and making forensic images of any electronic file, program or other data derived from any computer of the Plaintiff which is stored on any of the Defendants' desktop, laptop or tablet computers, smart phones, USBs, external hard drives or other external storage devices. (The "First Order").

2. A second order is sought pursuant to Rule 32.05 that within seven days each of the Defendants make,[2] file and serve an affidavit of documents disclosing whether it or she has or has had in its or her possession documents:

(a) identifying any computers outside NHC's computer network which were connected between 23 and 24 November 2011 to NHC's Dell OptiPlex 780 Workstation NHC Reference "MUL-PC-001" which was then assigned to Ms Angelova (Ms Angelova's NHC Computer); and

(b) relating to or evidencing any downloading, emailing, copying, transferring and/or keeping by the Defendants of any electronic file, program or other data from Ms Angelova's NHC Computer or any other computer of NHC.

3. It should be noted that Ms Angelova lives at the Defendants' Premises with her daughter.

4. NHC operates a network of 126 clinics across Australia providing hearing tests and the supply of audiology devices (i.e. hearing aids) to customers. It is the largest non-government supplier of hearing devices in Australia and has the largest network of permanent clinics. Its market share is around 23 per cent for devices fitted to customers based on average sales in the 12 months to 30 June 2012.

5. It currently employs around 677 employees in its clinic network and about 234 administrative staff known as customer service officers. There are about 260 head office employees in NHC including a leadership team, IT and call centre staff.

6. For the 12 months ended 30 June 2012, NHC's business conducted some 179,000 screening appointments, 89,000 assessment appointments and prescribed at least one hearing device to 44,000 customers. A customer may require two hearing devices depending on the extent of hearing loss. The total number of customers shown on NHC's database will be more than 44,000 because it takes into account customers for whom devices were prescribed in previous years.

7. In November 2011, NHC had ten staff in its IT department. They worked at a head office in Mulgrave. The staff included three computer programmers in the software development team who developed and maintained computer software. Since the start of its business, three computer programmers employed by NHC, including Ms Angelova, made the a significant contribution to development of NHC's software.

8. From about 2 November 1999 until Friday 25 November 2011, Ms Angelova, was a senior software programmer for NHC, providing services to NHC under a contract between NHC and VOT.

9. Ms Angelova and VOT assigned their ownership of any intellectual property created by her while working for NHC by a deed executed on 18 August 2005.

10. In November 1999, VOT, through its director, Ms Angelova, started providing software engineering and development services to NHC.

(a) planning, developing and maintaining software systems;

(d) programming the setup and electronic distribution of reports containing statistics regarding the performance of the business; and

(e) project management in relation to enterprise applications, business intelligence and software development.

12. Ms Angelova was one of the key creators of NHC's computer software which supports NHC's business and is known as "HA" (which is used in NHC's head office by management and support staff) and "Visual Centres" (which is used in NHC's clinics by audiologists and customer service officers).

13. There is evidence that NHC's confidential information includes:

(a) computer source code which gives directions and sets rules for NHC's in-house software, HA and Visual Centres;

(b) information entered by NHC's staff into the customer data base which is stored on HA and Visual Centres; and

(c) reports of business statistics, including those programmed and maintained by Ms Angelova, stored on HA and Visual Centres.

14. These matters are opposed to and further detailed in the affidavit of Mr Michael Smith ("Mr Smith"), NHC's Chief Financial Officer, dated 19 October 2012.

15. On 11 November 2011, Ms Angelova told Mr Smith she was leaving NHC and finished her employment on 25 November 2011.

16. From 11 November to 25 November 2011, Ms Angelova continued to work on a major software project for NHC. The project involved the installation of new "dialler" software known as Unified Contact Centre Enterprise designed by Cisco Systems. NHC paid around $645,000 for the software and implementation. Ms Angelova had been involved in the project from its inception.

17. There is evidence that on 23 November 2011, a software application known as "TeamViewer" was downloaded, installed on Ms Angelova's NHC Computer and remained open until 24 November 2011. There is also evidence that there was no reason why Ms Angelova needed to use that program over those two days before she left NHC.

18. "TeamViewer" works as a program for the purpose of connecting one computer with a second computer, including an external second computer.

19. Ms Angelova had access to every aspect of the NHC computer system. NHC is concerned that due to the capabilities of "TeamViewer", Ms Angelova may have copied or transferred NHC's confidential information, including the source code for HA and Visual Centres, together with its customer database and files containing performance statistics for its business.

20. Rule 37.02(3), was relied upon by NHC, and provides as follows:

(3) Where -

(a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from an identified person;

(b) after making all reasonable enquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; and

(c) there is reasonable cause to believe that that person has or is likely to have in that person's possession, custody or power any property relating to the question whether the applicant has the right to obtain the relief and that inspection of the property by the applicant would assist the applicant to make the decision -

the Court may make an order for the inspection, detention, custody or preservation of the property.[3]

21. Rule 37.02(4) provides that, "[a]n order under paragraph (3) may authorise any person to do any of the things referred to in Rule 37.01(2)".[4]

22. I am satisfied, pursuant to Rule 37.02(3)(b) that NHC, having made all reasonable enquiries, does not have sufficient information to enable it to decide whether to commence a proceeding to obtain any relevant relief.[5]

An order under paragraph (1) may authorise any person to -

(a) enter any land or do any other thing for the purpose of obtaining access to the property.[6]

Further sub-paragraphs provide for other steps to be taken which are not directly relevant to this application. It is important to note, however, that the Rule 37.01(2)[7] steps may only be taken in aid of an order being made under Rule 37.01[8] to the effect that the Court may make an order for the inspection, detention, custody or preservation of any property whether or not in the possession, custody or power of a party.

24. Similarly, Rule 37.01(1) does not provide specifically for a search to be conducted of premises for the purpose of finding property which may be relevant to an issue in dispute.[9]

25. NHC relies upon a body of circumstantial evidence to found a reasonable belief that it may have the right to obtain relief from the Defendants pursuant to Rule 37.02(3)(a).[10]

(a) the departure of Ms Angelova from NHC on 25 November 2011;

(b) the particular role of NHC prior to Ms Angelova's departure; and

(c) the evidence that Ms Angelova's computer was kept open and functioning during the last two days of her employment and that during this time it would be accessible to any external user via the "TeamViewer" software when there was no apparent reason why she required the use of this program during this period.

(a) the apparent value of the NHC computer programs which have been developed specifically for NHC's use in its line of business;

(b) the value of the confidential information stored on these programs;

(c) the value of this information to any potential competitor.

28. A commercial motive to infringe NHC's intellectual property therefore exists.

29. However, the Defendants, although accepting for the purposes of this application that NHC has property in the copyright for the computer programs developed for its use and the confidential information contained therein, say that there is no evidence that any intellectual property right has been infringed. In particular they say that there is no evidence of actual transference of information to the Defendants.

30. On this basis the Defendants say there is no reasonable basis for NHC to have come to the view that it may have any right to obtain relief from either of the Defendants.

31. In this respect reliance was placed upon Pacific Dunlop Ltd v Australian Rubber Gloves Pty Ltd ("Pacific Dunlop"). A key finding in the Pacific Dunlop application was that there was no evidence of actual infringement of the copyright in the design of a rubber glove manufacturing machine, and none could be infringed.[11]

32. Nevertheless, standing back and looking at the evidence overall, I am satisfied in the present case that the circumstantial evidence is sufficient for NHC to have formed the necessary belief that it may be entitled to relief from the Defendants and that it has reasonable grounds for having that belief. See Transport Industries Insurance Co Ltd v Longmuir.[12]

33. Although there is evidence the other way, such as the suggestion that it would not have been possible to transfer any sensitive information owned by NHC in the time available to Ms Angelova, without first converting it in to a format which would enable this to happen, I would need to hear and assess expert evidence on this issue before arriving at a concluded view on the matter. Although I take this and the other evidence announced by the Defendants into account, I remain of the view and considering the facts objectively it is reasonable for NHC to have come to the view that it may have a right to obtain relief from either of the Defendants.

34. The circumstantial evidence arising in this case serves to distinguish it from the facts in Pacific Dunlop, where no circumstantial evidence giving rise to the suspicion which characterises the present case, was present.[13]

35. For this reason I am prepared to make an order under both Rules 37.02 and 32.05, but will do so on a confined basis under Rule 37.02 and subject to a condition as to costs under Rule 32.05.[14]

36. As to Rule 37.02[15] I make the following Orders:

(1) The following items are to be made available by the Defendants to NHC's solicitors for examination by NHC's Computer Expert and the taking of any necessary copies of information derived from these items which are relevant to the issues in this proceeding:

(c) the Defendants' tablet computer or computers if any; and

(d) the Defendants' USBs, external hard drives or other external storage devices if any (the "Defendants' Computers".)

(2) The Defendants' Computers should be made available by 18 December 2012.

(3) The Defendants' Computers are to be returned to the Defendants by 4 pm on 24 December 2012 and in good order.

37. In relation to the discovery order to be made under Rule 32.05[16] I order as follows:

(1) Subject to NHC paying the costs of the Defendants of the order of discovery in the first instance on a party/party basis, it is ordered that pursuant to Rule 32.05 of the Rules by 12 pm on 21 December 2012, they make, file and serve an affidavit of documents disclosing whether it or she has or has had in its or her possession documents:

(a) identifying any computers outside NHC's computer network which were connected between 23 and 24 November 2012 to Ms Angelova's NHC Computer; and

(b) relating to or evidence in any downloading, emailing, copying, transferring and/or keeping by the Defendants of any electronic file, program or other data of Ms Angelova's NHC Computer or other computer of NHC.

38. In making these orders I have not directed that there be any search undertaken by NHC of the Defendants' Premises. I have come to the view that Rule 37.01 does not permit such a step to be taken.[17] Rule 37.01 is confined to the making of an order for the inspection, detention, custody or preservation of any property.[18] It does not specifically make any provision for a search to be undertaken for property on any land. Rule 37.01(2)(a) provides that an order under paragraph (1) may authorise any person to enter any land or do any other thing for the purpose of obtaining access to the property. In my view, although sub-paragraph (2) provides for the obtaining of access to property, it does not make provision for a search for property and such a search is not provided for under sub-paragraph (1).[19]

39. Pursuant to s 13 of the Charter of Human Rights and Responsibilities Act 2006,[20] a person has a right, inter alia, not to have his or her home arbitrarily interfered with. This is a reflection of contemporary exceptions. I construe Rule 37.01 consistently with this provision, and do not read into the Rule a facility for the search of private property which is not expressly provided for.

40. In these circumstances I decline to make any order in favour of NHC that there be any search conducted on the Defendants' Premises.

[1] Supreme Court (General Civil Procedure) Rules 2005 _(_Vic), rules 37.01(2) and 37.02(3).

[2] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 32.05.

[3] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.02(3).

[4] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.02(4).

[5] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.02(3)(b).

[6] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.01(2)(a).

[7] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.01(2).

[8] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.01.

[9] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.01.

[10] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.02(3)(a).

[11] Pacific Dunlop Ltd v. Australian Rubber Gloves Pty Ltd (1992) 23 IPR 46.

[12] Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125, 141 (Tadgell JA).

[13] Pacific Dunlop Ltd v. Australian Rubber Gloves Pty Ltd (1992) 23 IPR 46.

[14] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rules 37.02 and 32.05.

[15] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.02.

[16] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 32.05.

[17] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.01.

[18] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.01.

[19] Supreme Court (General Civil Procedure) Rules 2005 (Vic), rule 37.01.

[20] Charter of Human Rights and Responsibilities Act 2006 (Vic) s 13.