Rauland Australia Pty Ltd v Law

The NZ proceeding 4 Mr Conrad Delvo was employed by Rauland NZ as an Account Manager from 2015 to 31 August 2018. In September 2018, he commenced employment with a New Zealand subsidiary, or possibly a trading branch, of Hills (Hills NZ). In December 2018, Rauland NZ commenced the NZ proceeding against Mr Delvo. 5 In the NZ proceeding, Rauland NZ relevantly alleges, and Mr Delvo denies, that he breached his employment agreement with Rauland NZ, including by holding documents and information that is the property of Rauland NZ or Rauland and by breaching certain restraint of trade provisions. Although Mr Delvo's employment contract with Rauland NZ is not in evidence before me, the clauses that Rauland NZ relies on in the NZ proceeding are set out in the amended statement of problem served in that proceeding. 6 Relevantly, Rauland NZ makes the following allegations in the amended statement of problem: (1) Mr Delvo has breached his ongoing obligations as set out in his employment agreement with Rauland NZ including by: (a) retaining, copying, using or sharing copyright works of Rauland NZ or Rauland Australia, or both; and (b) breaching his restraint of trade and consequentially injuring, impairing or reducing Rauland NZ's business. (2) Clause 23 of Mr Delvo's employment agreement sets out obligations in relation to confidential information including: 23.2 You will not at any time either during the continuance of your employment or after termination of your employment for any reason divulge any Confidential Information … 23.3 Any document or written material provided by the Company or used in connection with the Company's business is the Company's property and must not be removed, passed on, copied or disclosed to third parties except with the Company's authority. (3) Clause 30 of Mr Delvo's employment agreement relating to restraint of trade includes: 30.2(b) In addition, you must not, at any time after the termination of the Agreement, do any act or thing whatsoever which may injure, impair or reduce the Company's business, goodwill or reputation or the Company's standing in the eyes of the public. (4) During the course of his employment, Mr Delvo had available to him information of a confidential nature belonging to Rauland NZ or Rauland Australia, or both. (5) Ferrier Hodgson was instructed to conduct a forensic audit of a laptop issued to Mr Delvo by Rauland NZ, which audit found that: (a) There was evidence to suggest that on 24 July 2018, Mr Delvo removed copies of Rauland NZ's confidential information by way of a removable USB storage device. (b) There was some correspondence between Mr Delvo and Rauland NZ's former employees who had commenced employment with Hills, but there was no evidence to suggest that this correspondence was suspicious in any way or relating to his resignation and subsequent employment with Hills. 7 The relief sought by Rauland NZ against Mr Delvo includes an injunction restraining him from publishing, sharing or using Rauland NZ's or Rauland's confidential information or information that belongs to those companies. 8 Although Rauland NZ sought orders in the ERA for discovery against Hills in New Zealand, that was refused. 9 The NZ proceeding is ready to proceed to a hearing, the ERA having recently contacted the parties proposing hearing dates in late November or December 2020.

The Harman documents 10 The three documents in respect of which Rauland seeks to be released from its implied undertaking were listed in Hills's verified discovery schedule that was provided pursuant to its discovery obligations on 20 May 2020. The three documents are the following: (1) Document A: an email from Fiona Johnson to Mr Delvo on 8 November 2018 which refers to a document apparently prepared by Mr Law. It refers in its subject line to that document, which the parties accept is Document C, as "Hills Health Solutions Nurse Call - Rauland System Comparison Document". A subsequent letter from Hills's solicitors, Norton White, stated that Document C was an attachment to the email, Document A. (2) Document B: a chain of emails commencing with Document A, then an email from Mr Delvo to Ms Johnson and Mr Law on 6 March 2019 and a reply on the same date from Ms Johnson to Mr Delvo and Mr Law. Mr Delvo's email refers to the "Rauland v Hills comparison" and asks whether he can provide the comparison to a potential partner or whether there is a more updated version. Ms Johnson's reply says that Mr Delvo can meet with the potential partner to talk through "this document", but that he cannot distribute the document and that she will call "at break time" to explain why. (3) Document C: a document which is described in Hills's discovery schedule as "Comparison to Rauland Oct 18.pdf" dated 16 October 2018. Unlike the other two documents, this document is listed in the "confidential" section of Hills's discovery and was only recently furnished to Rauland's lawyers under confidentiality undertakings that they will not reveal it to anyone else including their client. 11 Documents A and B are in evidence before me. Document C was not put in evidence before me. It was agreed between the parties that the interlocutory application should be decided on the basis that whilst it is contested by Hills that Document C contains Rauland's confidential information, it is accepted that it might ultimately be found, in this proceeding or, possibly, the NZ proceeding, that Document C does contain Rauland's confidential information. It was in any event common ground that Mr Law during his employment by Hills, in order to pursue the commercial interests of Hills, which are in competition with those of Rauland, prepared Document C which sets out some sort of comparison between what Rauland offers in a particular respect and what Hills offers. 12 By way of additional context it can be noted that in a separate proceeding Rauland seeks relief against Ms Johnson and Hills on a similar basis to the relief that it seeks in this proceeding. Ms Johnson was also employed by Rauland, until October 2017, and she was thereafter employed by Hills. It is alleged that she, like Mr Law and Mr Delvo, breached her obligations of confidentiality to Rauland and provided confidential information to Hills or utilised Rauland's confidential information during her employment by Hills.

Applicable principles 13 There is no disagreement between the parties as to the applicable principles. They can be briefly stated. 14 The implied undertaking is that where one party to litigation is compelled, whether by a rule of court or an order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence: Hearne v Street [2008] HCA 36; 235 CLR 125 at [96] per Hayne, Heydon and Crennan JJ. The implied undertaking takes its name from Harman v Secretary of State for Home Department [1983] 1 AC 280. 15 In this case, the documents in question have not been received into evidence in the principal case, or at least not yet. Attention thus turns to the grounds on which, or the circumstances in which, the court may grant leave. 16 It has been said that a party in the position of Rauland that seeks leave to be released from the implied undertaking must show "special circumstances". The notion of "special circumstances" does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient that, in all the circumstances, good reason is shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for another non-litigious purpose. The discretion is a broad one and all the circumstances of the case must be examined. See Liberty Funding Pty Ltd v Phoenix Capital Ltd [2005] FCAFC 3; 218 ALR 283 at [31] per Branson, Sundberg and Allsop JJ. 17 A non-exhaustive list of considerations, depending on the circumstances, includes the nature of the document, the circumstances under which the document came into existence, the attitude of the author of the document and any prejudice the author may sustain, whether the document pre-existed the litigation or was created for that purpose and was therefore expected to enter the public domain, the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information), the circumstances in which the document came into the hands of the applicant, and most importantly, the likely contribution of the document to achieving justice in the other proceeding. See Springfield Nominees Pty Ltd v Bridgelands Securities Ltd [1992] FCA 720; 38 FCR 217 at 225 per Wilcox J, cited with approval in Liberty Funding at [31]. 18 The parties also referred at some length to the judgment of Beach J in State Street Global Advisors Trust Co v Maurice Blackburn Pty Ltd [2019] FCA 1464; 148 IPR 190. In particular, attention was drawn to the following matters. 19 First, it was said (at [7]) that a matter of significance in the exercise of the discretion is a commonality of issues between the proceeding in which the documents were produced and the proceeding in which the documents are sought to be used, and that another consideration is whether there is a unity of parties in the two proceedings or a difference. In that proceeding there was no unity of parties. 20 Secondly, with regard to relevance, some findings were made (at [78]-[83]) along the lines that each of the documents at issue in that proceeding was relevant to one or other issues, or to procedural steps, in the US proceeding for which the documents were sought. The following was then said (at [84]): Now ultimately it will be a matter for the US Court as to whether the Harman documents are relevant and admissible in the US proceeding. But it is sufficient for my purposes to say that the documents may illuminate matters in the proceeding before the US Court. Further, it would be undesirable for me to conduct a mini trial about the relevance or admissibility of material that may be sought to be tendered in the US proceeding. 21 Finally, with regard to a question of confidentiality, his Honour was satisfied (at [94]-[98]) that a protective order could be put in place in the US proceeding that would have the effect of protecting documents designated confidential from being disclosed outside the US proceeding and that any question of confidentiality was thus no bar to releasing the confidential documents.

Consideration 22 The central point of difference between the parties is as to the relevance or utility of the documents in the NZ proceeding. It was common ground that if the documents, if released, can be of no utility in the NZ proceeding then there would be no reason to release them - no special circumstances would have been established. 23 The first point that is taken by Hills is that the stage at which the NZ proceeding has progressed to is such that the documents would not necessarily be able to be used there. That is because evidence has closed and the documents could only be used with the leave of the ERA. Whether or not such leave would be granted would likely turn, it seems to me, on why the documents had not been produced earlier and the extent to which they are relevant to the issues in that proceeding. No such application can be made until the documents have been released. Thus, it seems to me that the obstacle of leave is irrelevant to my consideration in circumstances where leave is a possibility. The real issue is whether, or to what extent, the documents are relevant to the issues in the NZ proceeding. The more relevant or pertinent they are, the more likely it is that leave will be granted and the more compelling is the case for their release. The reverse is also true. 24 Rauland submits that the Harman documents are directly relevant and highly probative of central issues in the NZ proceeding, namely they potentially constitute direct evidence of the misuse of confidential information. Since the documents cannot be sought by any other means, Rauland submits that they are likely to make a material contribution to the achievement of justice in the NZ proceeding. 25 Hills disputes that characterisation, and submits that none of the documents is shown to be relevant to any claim made in the NZ proceeding. It points to the fact that each of the documents post-dates Mr Delvo's employment with Rauland NZ. 26 With reference to State Street Global, I respectfully agree that it would be undesirable for me to conduct a mini trial about the relevance or admissibility of the Harman documents in the NZ proceeding. That is a matter for the ERA. However, in circumstances where, if relevant, the ERA may allow the documents to be used in the NZ proceeding - whether by way of founding further procedural steps such as discovery, by tender, or in the examination of Mr Delvo or other witnesses - I must be satisfied that the documents have some relevance to the issues in the NZ proceeding before releasing Rauland from its implied undertaking. 27 It is thus necessary to examine the documents to identify what it is that they might establish, and to then analyse whether that is relevant to the issues in the NZ proceeding. 28 The documents tend to show that Mr Law produced Document C which is the document, if any, which contains Rauland's confidential information. He produced that at a time after Mr Delvo's employment by Rauland NZ had ended. The document was then provided to Mr Delvo under cover of Document A on 8 November 2018. It was clearly produced to Mr Delvo for the purpose of his employment with Hills NZ, which was as Enterprise Business Development Manager. I understand that to be a sales role and I infer that it was given to him to use to generate custom for Hills NZ. 29 There is some dispute between the parties as to what Document B shows. Mr Brennan, for Hills, submits that it does not show that Document C was to be used, or was contemplated being used, contrary to the interests of Rauland. He submits that Mr Delvo's email in Document B indicates that he intended to use the document in an effort to establish a partnership with a company referred to as Honeywell to win the business of a "mutual client" to Hills from a company referred to as Austco. On that basis, it was said that even if Mr Delvo had used Document C as contemplated by Document B that would not have been contrary to the interests of Rauland and consequently would not have been in breach of Mr Delvo's employment agreement. 30 I do not accept those submissions. Document C constitutes a comparison of offerings between Rauland and Hills. Use of that document in the market, whether with a prospective partner or to win business from an ultimate client, can on the face of it only be relevant if it is to show that Hills's offering is in some way better than Rauland's. That can only be to Rauland's disadvantage. Further, Mr Delvo's email at Document B specifically refers to the "mutual client" having to choose between Rauland, Austco and Hills. The most obvious inference is that Document C, which by the email Mr Delvo sought authority to use, was intended to be used to win the work for Hills and thus keep or take the work from Rauland and Austco. 31 The question then is whether any of that is relevant to what is at issue in the NZ proceeding. There are some difficulties in that regard. For example, it is not specifically pleaded that Mr Delvo used confidential information of Rauland or Rauland NZ which he obtained after his employment by Rauland NZ ended against Rauland NZ's interests. The confidential information that seems to be at issue in the NZ proceeding is confidential information obtained by Mr Delvo during and as a consequence of his employment by Rauland NZ. Clearly, Document C is not such information. 32 Also, the period of Mr Delvo's restraint of trade is not apparent. It is said in his reply to the amended statement of problem that by December 2018 "a significant portion of the restraint period had already passed". Considering that his employment by Rauland NZ ended on 31 August 2018, it may be that the restraint had already ended by the time of Document B, i.e. 6 March 2019. If the restraint was a six-month restraint then it would have ended at the end of February 2019. That would be consistent with a significant portion of the restraint period already having passed in December 2018. 33 However, and in any event, on Mr Delvo's reply in the NZ proceeding, the restraint, if enforceable - a point at issue in the NZ proceeding, was operative at the time of Document A in November 2018. It was then that Mr Delvo was given Document C. The implication is that he was given it for the purpose of his "business development" role at Hills NZ. Therefore, if it contained Rauland's confidential information then his use of it at that time might have been in breach of clause 23.3 or, more likely, clause 30.2(b) of his employment agreement. That is to say, use of Rauland's confidential information during the period of restraint could constitute doing something to injure or reduce Rauland NZ's business or goodwill. 34 I also note that a "member's minute" of the ERA dated 29 April 2020 states that Mr Delvo will be giving evidence at the hearing, which is described as an "investigation meeting". It is also said that his "evidence on these matters can be tested there". It would thus appear to be the case that the Harman documents, if released, may be able to be used in the examination of Mr Delvo in the NZ proceeding. 35 In the latter regard, I note that under the Employment Relations Act 2000 (NZ) the ERA is an investigative body that has the role of resolving employment relationship problems by establishing the facts and making a determination according to the substantial merits of the case, without regard to technicalities (s 157(1)). It may act as it thinks fit in equity and good conscience (s 157(3)). Also, in investigating any matter it may call for evidence and information from the parties or from any other person and it may in the course of an investigation meeting, fully examine any witness (s 160(1)(a) and (d)). 36 From the above, I infer that the ERA is not likely to be overly technical with regard to pleadings. I therefore do not accept that because Mr Delvo's breach of his employment agreement with Rauland NZ by utilising confidential information of Rauland obtained by him only after his employment ended is not specifically pleaded, documents that might establish such a breach will not be utilised by the ERA. Further, because the ERA is an investigative authority with the powers that I have identified, it may be that it will use the documents in such a way as to procure further documents from Mr Delvo or third parties or to examine Mr Delvo. 37 I do not consider that the fact that the parties to the proceeding before me and the parties to the NZ proceeding are not the same as particularly significant. There is a significant overlap in issues between the two proceedings, and the interests of Rauland and Hills, two parties before me, are both at stake in the NZ proceeding in as much as their subsidiaries or local branches have interests in those proceedings. Simply put, the two proceedings are sufficiently closely related for that to be a factor in favour of, as opposed to against, release of the documents. 38 It is also not apparent to me that the authors of the documents will be relevantly prejudiced by the contemplated use of them in the NZ proceeding. The prejudice that Mr Delvo may face in that proceeding arising out of the use of the documents there is not relevant prejudice as it would be use in the service of the interests of justice in that proceeding. 39 There is an additional consideration. It relates to the overlap in the issues. If Rauland's overall claim is right, which is that Hills has through Ms Johnson and Mr Law and Mr Delvo, all of whom used to work for Rauland or its New Zealand subsidiary, utilised for its own commercial advantage Rauland's confidential information which was in effect stolen from Rauland, that is a very serious matter. Of course, it may be that that proves to be an unfounded case. But its seriousness warrants that it is properly investigated, and that weighs in favour of the ERA having the opportunity to use the Harman documents to get to the truth of the allegations before it, if it should find them helpful. 40 It is also significant that Mr Delvo, a party to the NZ proceeding, is a party to each of the emails and a recipient of Document C. It is more likely, it seems to me, to advance justice in the NZ proceeding to make such documents available to be used there, then to deny the opportunity of their use. 41 There is a further consideration which is that the Harman documents are very likely to be tendered in evidence in this proceeding in due course, unless it is settled. Thus their unavailability for use in the NZ proceeding, thus far at least, is only a happenstance of timing. If the NZ proceeding were to come to hearing only after the final hearing in this proceeding, the documents would be available for use in the NZ proceeding. The Harman documents are not, in contrast, documents that have been caught in a wide net of discovery but which will never become subject to public scrutiny. It seems to me that there is less reason to deny a release from a Harman undertaking in respect of documents which are likely in any event to become public. 42 In summary, in my view there is good reason to release Rauland from its undertaking in respect of the documents.

Confidentiality 43 Particular issues arise with regard to Document C because of Hills's claim that it contains confidential information belonging to Hills and that it would prejudice Hills's commercial interests if that information was disclosed to Rauland or any other competitor. As I have indicated, that document has at this stage only been made available to Rauland's external lawyers on the basis of undertakings given by them that they will not disclose the content of the document to Rauland. Mr Martin, who is Rauland NZ's solicitor in the NZ proceeding at the firm Martelli McKegg in Auckland has said that his firm is willing and able to provide an undertaking with respect to the confidentiality of Document C. He says that his firm also holds instructions to give a similar undertaking on behalf of Rauland NZ. 44 Mr Brennan submits that Document C should not be released because its confidentiality will not be able to be satisfactorily protected by way of undertakings from Rauland NZ's external lawyers in New Zealand. He accepts that the ERA has the power to make confidentiality or suppression orders not dissimilar to those that are regularly made in this Court, and so confines his submission to the difficulties of supervision of confidentiality undertakings made to this Court by New Zealand lawyers, and difficulties in disciplining any breach of such undertakings. 45 I do not accept that confidentiality creates a particular difficulty. This Court accepts undertakings from foreign litigants in the form of implied Harman undertakings all the time. Further, this Court regularly makes orders restricting confidential documents to the external (i.e. not internally employed) lawyers of litigants before it, including overseas instructing lawyers. 46 Given the close association between Australia and New Zealand, including similar systems of justice and legal professional ethics, I have no hesitation in accepting an undertaking from a New Zealand lawyer. Further, in the unlikely event that such an undertaking is breached I consider that this Court will be able to entertain contempt proceedings and I have no reason to doubt that any relevant New Zealand professional association or regulator will do what is right in pursuing whatever disciplinary proceedings may be appropriate.

Conclusion 47 It follows from the above that Rauland should have the leave that its seeks, but with regard to Document C that must be subject to suitable confidentiality undertakings being made to the Court by the relevant New Zealand lawyers. 48 Given that Rauland had to make the application for leave in any event, and it needed to persuade me to give it leave, I do not think that Rauland should have its costs of the application. However, given that its opposition to the interlocutory application has failed, Hills should not get its costs of opposition in any subsequent order that might be made for costs in the proceeding. It should therefore be ordered to pay its own costs on the application. Mr Brennan made no submission to the contrary. 49 In the circumstances, I will make the orders as outlined above. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.