Showcase Realty Pty Ltd v Circosta

Showcase Realty Pty Ltd v Circosta - [2022] NSWSC 336 - NSWSC 2022 case summary — Zoe

EX TEMPORE Judgment

HER HONOUR: This is an application by notice of motion filed on 25 November 2021 by the plaintiff, Showcase Realty Pty Ltd pursuant to r 31.20(1) of the Uniform Civil Procedure Rules 2005 (NSW) for leave to adduce expert evidence at the trial from Mr Michael Khoury of KPMG in the capacity of independent digital forensic expert. The notice of motion also sets out relief sought in prayers 2 to 8 as to the mechanics of the expert being provided with access to certain information in terms of electronic hard drives and electronic data obtained pursuant to search orders made by Rein J on 6 October 2020.
The plaintiff relies on the affidavit evidence of Ms Brittany Josephine Byrne, solicitor for the plaintiff and partner at FCB Workplace Law, affirmed 25 November 2021. The plaintiff also relies on two affidavits of Michael John Brattoli, Sales Director at Showcase Realty, sworn 30 August 2021 and 25 January 2022 respectively. The plaintiff further relies on the affidavit of Matthew Nicholas Robinson, affirmed 1 March 2022.
The defendants rely on the affidavit of Jessica Helen Elakis, solicitor at Mills Oakley Lawyers, affirmed 16 December 2021.
The background to the present application arises out of the fact that, in October 2020, an application was made on an ex parte basis for search orders (commonly referred to as Anton Piller orders) in circumstances where there was an apprehension by the plaintiff as to misuse of the plaintiff's confidential information. The background to the underlying dispute that led to the application for search orders is as follows.
The plaintiff is a company which operates a real estate agency in Carlingford in Sydney. The first defendant, Mr Circosta, was employed by the plaintiff as a property manager. On 15 October 2018, the first defendant resigned from his employment with the plaintiff. That notice of resignation was effective as of 12 November 2018. In a round December 2018, the first defendant commenced employment with the second defendant.
On 7 October 2020, the search order made by Rein J was executed and material was seized at the second defendant's premises. The second defendant, I should say, is a rival real estate agency also located at Carlingford in Sydney and, as I understand it, both agencies provide retail property management services to customers referred to as landlord clients.
The items seized on execution of the search order included a number of laptop and desktop computers and mobile phones belonging to the second defendant and a mobile phone belonging to the first defendant.
Forensic images of those devices were taken by the independent computer expert, Mr Michael Petkovic of KPMG.
The independent forensic expert made electronic copies of all of the data contained in the second defendant's customer relationship management (CRM) data bases known as MyDesktop and Property Tree, and the contents of Google email and data accounts used by the first defendant and a number of the second defendant's employees. The independent expert's forensic report dated 27 October 2020 was tendered on this application (and admitted subject to a s 136 Evidence Act 1995 (NSW) limitation that it be used only for the purposes of this notice of motion) as Exhibit A.
Mr Petkovic in his report explained the search of the data sets that had been carried out by reference to key word searches, and noted that a Microsoft Word version of a document headed 'Landlord Contact Details Report' which appeared to be an extract from a CRM system entitled 'Rest Professional Software System' was compared against the electronic copy of the MyDesktop CRM system. Mr Petkovic identified a number of matches, 189 matches in summary, between details of landlords found on the plaintiff's data base and that which was seized from the second defendant.
In November 2020 an application was made by the defendants to set aside the Anton Piller orders that had been made ex parte by Rein J together with an order that the items seized, pursuant to execution of those orders, be returned. That application was heard by Rees J 9 April 2021. For reasons published (see Showcase Realty Pty Ltd v Circosta [2021] NSWSC 355 (Showcase Realty v Circosta)), her Honour made orders setting aside ab initio the search order made by Rein J on the grounds of material non-disclosure. The material non-disclosure in question related to the identity of particular clients who had sought to transfer their custom from the plaintiff to the first defendant and/or second defendant.
Her Honour found (see from [30]ff) that it had not been drawn to the attention of Rein J that his Honour should not draw any inference from what had happened in 2018 to conclude that there was a risk that in 2020 the first defendant had availed himself of the confidential client list. The material non-disclosure was the failure to inform Rein J that some or all of the clients who had transferred their custom from the plaintiff were actually Mr Circosta's friends and family. Her Honour accepted that this would have undermined the submission that there was a reason for apprehension that there had been a misuse of confidential information. Her Honour said (at [36] of her Honour's reasons) that no explanation had been proffered as to why this information had not been disclosed and her Honour was satisfied that it was appropriate in the circumstances to discharge the Anton Piller order ab initio. Her Honour went on to say (at [36]): … The execution of a search order is a serious invasion of people's privacy. Whilst it is an important tool in ensuring that evidence is preserved so that justice may be done, such orders ought only be made on an ex parte basis if the applicant discharges their duty of candour so that the Court is fully appraised of all relevant matters to the exercise of its discretion in such an important decision. The need for candour is particularly acute on duty judge applications where judges often have insufficient time to review affidavits and documentary evidence in detail.
Her Honour had earlier referred to the principles on an ex parte application and the applicant's duty of candour as described by Allsop J, as the Chief Justice of the Federal Court of Australia then was, in Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 at [38]. And to, amongst other authorities, Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639; [2005] VSCA 213 at [35] per Gillard AJA with whom Ormiston and Buchanan JJA agreed, and at [36] adopting what was said in Brink's Mat Ltd v Elcombe [1988] WLR 1350 at 1356. Rees J in Showcase Realty v Circosta noted at [9] the distinction drawn by Brereton J, as his Honour then was, in Brags Electrics Pty Ltd trading as Inscope Building Technologies v Steven Mark Gregory [2010] NSWSC 1205 at [17], as to the distinction between the setting aside of an Anton Piller order ab initio as opposed to in futuro.
Rees J, among other orders, ordered that the items removed from the first defendant and from the second defendant's premises on 7 October 2020 pursuant to the search orders, including any storage devices containing information that was copied from the items removed from the first defendant and the second defendant's premises, be returned to the defendants forthwith. Her Honour also made an order for payment of the defendant's costs of the notice of motion and that those be paid forthwith.
There are two sets of information here sought to be made use of (by reference to the expert): the "search order information", being the electronic data or hard drives obtained on execution of the now set aside Anton Piller orders; and the information derived from the inspection of Mr Circosta's computer. As to the latter, it is not suggested by the defendants that the plaintiff was not entitled to interrogate (electronically or otherwise) its own computer device for the purpose of obtaining evidence in relation to the proceeding. Rather, the complaint is that this is to be used by reference to information in the search order material. The relevance of that, to my mind, is that this is not a situation such as was the case in DC Payments Pty Ltd v Next Payments Pty Ltd (2016) 51 VR 151; [2016] VSC 315 (where Vickery J struck out parts of a statement of claim based on the misuse of confidential information), nor is it similar to the case where, in Sullivan v Sclanders (2000) 77 SASR 419; [2000] SASC 273, the Full Court of the Supreme Court of South Australia struck out the entirety of the plaintiff's statement of claim in circumstances where it was considered that the plaintiff should not be advantaged by the misconduct that had there occurred.
The defendants on the present application, in summary, oppose the relief that is sought by the plaintiff on the following grounds.
First, it is submitted that the plaintiff's application seeks impermissibly to use the search order as a substitute for discovery and for the purpose of facilitating the provision of further particulars in support of its case against the defendants.
Reference is made, amongst other authorities, to the decision in Findex Group Ltd v iiNet Ltd [2018] NSWSC 1567 in which, inter alia, reference was made to the primary purpose of a search order being to preserve evidence pending the final determination of a hearing, and to the authorities regarding the extraordinary and Draconian nature of Anton Piller orders and search orders, including to the observations made by Powell JA in Long v Specifier Publications Pty Ltd (1998) 44 NSWLR 545 at 547, and Branson J in Microsoft Corp v Goodview Electronics Pty Ltd (1999) 46 IPR 159; [1999] FCA 754 at [26] (Microsoft Corp).
Reference is also made by the defendants to what was said by Flick J in Metso Minerals (Aust) Pty Ltd v Kalra (No. 3) [2008] FCA 1201 at [28] (Metso Minerals) (approved in Re Lamond (No 4) [2017] FCA 820 at [20] per Besanko J (Re Lamond)): In that context, it is considered that the discretion to allow an applicant to inspect seized documents may be exercised to permit: (a) an assessment to be made as to whether or not there has been compliance with the order as made and (possibly) whether any further order pursuant to O 25B may be warranted; (b) the identification and separation from the entirety of those documents that were in fact seized, those documents which do or may provide evidence pending the hearing and determination of a proceeding; and (c) the identification and separation from the entirety of those documents that were in fact seized, those documents which do not provide such evidence so that those documents may be returned. And, in identifying those documents which should be preserved pending the final hearing and determination of a proceeding: (d) the search is not limited to those documents directly related to the precise cause of action then known: cf Aristocrat Technologies Australia Pty Ltd v Global Gaming Pty Ltd [2006] FCA 862 at [6]-[7] per Allsop J; Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2006] FCA 1707 at [4] per Jacobson J. There may well be other reasons for granting leave to an applicant to inspect seized documents. All of the purposes identified, however, have one thing in common - they allow the documents which have been seized to be inspected in order to ensure that the search order has been complied with and to ensure that only evidence which should be preserved is in fact preserved pending the final determination of a proceeding.
Further, in Findex Group Limited v McKay [2019] NSWCA 93 at [26], the Court of Appeal said the following (which is of relevance in the present circumstances): There was an additional problem with this aspect of the application: as the primary judge correctly accepted, the purpose of a search order pursuant to r 25.19 is to secure or preserve evidence, not to provide discovery, whether at a preliminary stage or in the course of proceedings. Counsel for the applicants was at pains to avoid reference for this purpose to the terms of r 25.19. It provided, he submitted, no guidance as to what was to be done with the documents once seized in terms of access and inspection. That is only true to the extent that one finds no assistance from the express identification of the purpose of a search order. Having regard to that purpose provides an implied constraint on the use which is to be made of the seized documents. The present application appeared to be an opportunistic form of fishing expedition, seen to be available because the documents to be reviewed were available. The primary judge stated: "[123] The plaintiffs maintain … that the purpose of the search order was that of 'obtaining documents for use in anticipated proceedings including, but not limited to, the proceedings of the kind that were identified at the time' and that this purpose will not be fulfilled 'until the plaintiffs have looked at the documents'. That, to my mind, conflates the purpose of preserving evidence (for use in anticipated proceedings) and the function of inspection of that material (as to which it is clear there is no absolute right). It is not a purpose or object of search order provisions to facilitate discovery processes otherwise authorised by rules or to facilitate the provision of further particulars. In Metso Minerals at [34], Flick J warned that construing search order provisions as extending to such a purpose would erode the importance attached by the common law to protecting the privacy of individuals and the constraints otherwise imposed by the rules governing discovery process.
The defendants also refer to the decision of Stewart J in Rauland Australia Pty Ltd v Johnson (No 2) [2019] FCA 1175 (Rauland), in which his Honour said the following at [55]: It is apparent from the above authorities that the Court has a discretion to order access to documents that have been preserved under a seizure order. In the case of access to the seized material for the purpose of formulating a claim, or as an aid to discovery, or to particularise a claim, that discretion may be exercised only in narrow circumstances. However, where parties have already furnished discovery and questions arise as to the adequacy of discovery or discovery has not produced the seized material (which is otherwise assumed to be relevant and not subject to a valid objection to production such as privilege), the discretion might be more readily exercised.
The defendants maintain that the appropriate course in the present case would be for the plaintiff to seek discovery in accordance with the applicable rules, and I note in relation to the complaint that this is for the purpose of facilitating the provision of further particulars in support the case against the defendants, that reference is made to the affidavit affirmed 25 November 2021 of the solicitor acting for the plaintiff, Ms Byrne, in particular to the paragraphs in which Ms Byrne indicates what the expert will be instructed to do in terms of performing an analysis of the Circosta computer if leave is granted (see 18(i)-(vi) of Ms Byrne's affidavit). It is submitted that this makes clear that part of the purpose of the application is to uncover additional or unknown breaches of the relevant employment contracts, and to attempt to use the data obtained on the search orders in order to obtain that evidence.
The second basis on which the defendants resist, in summary, the application to adduce expert evidence is that the proposed inspection and use of the seized material by the plaintiff's expert would render futile the Court's decision to set aside the search orders ab initio and would thereby occasion injustice to the defendants. The rhetorical question was posed in this regard, that if there was nothing to prevent the plaintiff from now making an application of this kind seeking to make use of material obtained on the search orders that have been set aside, then what one might ask, what was the purpose of the defendant's going to the inconvenience and expense and effort of obtaining decisions setting aside the search order ab initio.
I would rather put the issue as being that the decision of her Honour to set aside the search order ab initio must have reflected, and did by reference to her Honour's reasons reflect, a decision to make clear (with a view to having a deterrent effect in general) the importance of the duty of disclosure and candour on an ex parte application. To anticipate my ultimate conclusion, that deterrent effect (and the need to give effect to the deterrent effect) is a matter that I consider weighs in favour of the position adopted by the defendants on the present application, albeit that it needs to be balanced against other factors such as the overriding statutory principles set out in ss 56 to 60 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act).
Coming back to the defendant's objections to the application to adduce expert evidence, the third basis raised in submissions is that the plaintiff has not established, in light of its decision not to seek discovery, any basis on which it is entitled to inspect the seized material that is in the defendant's possession. I would interpose to say that it seems highly likely on the basis of the argument today that in the event that the application were to be refused, one would anticipate that the next step will be that the plaintiff will seek discovery of material in relation to what is referred to as the common landlord clients, in which case that argument has a somewhat circular application.
Finally, it is said that the Court would not exercise its discretion to grant relief in circumstances where the plaintiff has failed to provide a satisfactory explanation for its delay in seeking leave to adduce expert evidence. In that regard, the delay about which complaint is made was addressed in evidence relied upon by the plaintiffs, albeit adduced late, being an affidavit of Mr Matthew Robinson affirmed on 1 March 2022 in which Mr Robinson deposes to the fact that Mr Brattoli, Sales Director at Showcase Realty, had only discovered certain information on the Circosta computer on 24 August 2021 by accident when searching that computer for other matters.
The defendants submit that the relief that is sought on the present application is tantamount to obtaining discovery, and in those circumstances, is inconsistent with or contrary to the authorities which make clear that the purpose of search orders is not as a substitute for discovery (see, for example, Metso Minerals at [36], [43], [49]; Re Lamond at [20]; Microsoft Corp at [26]; and Bugaj v Bates [2004] FCA 1260 at [13]).
The plaintiffs support their application on the basis that, notwithstanding that the Anton Piller order has been set aside, there remains a discretion to authorise a party to deploy information derived from the fruits of Anton Piller order, referring to the decision in Rauland (to which I have referred above) at [48], which is as follows: The fact that a search order preserves evidence for use in a proceeding in due course bears with it the unavoidable implication that there are circumstances in which the preserved evidence will be made available to a party requiring it in order to then make it available in the proceeding; were it otherwise, there would be no purpose to making search orders. It is therefore not the case that a search order will only serve the purpose of preserving evidence, always insulating that evidence from use in the subsequent proceeding. If the evidence is not otherwise produced in the proceeding, there will be a need to access that which was preserved so that it can be adduced in the proceeding. There may also be a need to access what was preserved in order to ascertain whether what has been produced pursuant to, say, discovery procedures is all that had to be produced. But none of that means that access will necessarily be granted at a stage prior to discovery.
The plaintiffs further referred to the consideration by Rein J of Rauland in Skytraders Pty Ltd v Meyer [2021] NSWSC 1670 at [57]: In Metso Minerals (Australia) Ltd v Kalra [2009] FCAFC 57, which concerned an unsuccessful application for leave to appeal from a later judgment of Flick J in the same proceedings, Emmett J (as his Honour then was) recognised the tension between granting access to seized material, which is tantamount to discovery or preliminary discovery, and giving effect to what is the unavoidable conclusion that the preserved evidence will or ought to be made available to the party who required its seizure; otherwise, there would be little purpose for a search order in the first instance. Stewart J similarly acknowledged this tension in Rauland Australia Pty Ltd v Johnson (No 2) [2019] FCA 1175 …
It is submitted that it does not follow from the fact that the Anton Piller order was discharged that the plaintiff cannot refer to information derived from the discharged order to permit it to make an application to access documents or information revealed in the execution of the order. Reference is made to what is said in Heydon, Cross on Evidence (LexisNexis Butterworths, 11th ed, 2017) at [27295], namely that: … The authorities on the admissibility of evidence procured in consequence of any legal search or other unlawful act are uniformly in favour of its reception. …
In the course of oral submissions there was discussion as to the principles applied by the High Court in Kadir v The Queen (2020) 267 CLR 109; [2020] HCA 1 which I considered in Eastlings Pty Ltd v Calidu Import Export Pty Ltd [2020] NSWSC 1041. The plaintiff submits that it is not necessary to determine whether or not in the present case documents obtained pursuant to the authority of a search order that has been set aside ab initio should be admitted into evidence or not. That being an issue that will arise, if it arises, at trial and that at present, the issue is an issue as to appropriate case management principles and the application thereof.
As I have indicated earlier I am concerned that the Court should not be seen to be condoning a failure to comply with the obligation of full disclosure of material facts and candour on an ex parte application. But I must balance that with the overriding statutory mandate that applies when considering the exercise of discretions such as this under the rules, and that mandate is to be found in ss 56 to 60 of the Civil Procedure Act. It does not seem to me to be consistent with the just, quick and cheap resolution of the real issues in dispute to have an exercise whereby expenses incurred in a discovery process in order to produce documents that both parties already know exist, and which are likely to be of significant probative value in determining the issues in the proceedings before the Court.
The submission for the plaintiff is that the plaintiff is entitled to marshal evidence in support of the case which it seeks to prove, and that disapproval of the conduct or misconduct for which Rees J made orders setting aside the Anton Piller orders ab initio and payable forthwith costs orders, should not deprive the plaintiff of the means of proof all together.
Balancing the need for deterrence and the need not to condone the conduct that has occurred in the present case, against the entitlement of the plaintiff to prove its case by reference to evidence that it is able legitimately to obtain, and the likelihood that dismissal of the application would simply lead to a discovery application which would seem to me to be highly likely to be successful in circumstances where the evidence is clearly of probative value and can be confined in its scope, I am of the view that the orders sought should be made, but in circumstances where the data copy or the material obtained from the execution of the Anton Piller orders is limited to what is referred to as the MyDesktop Customer Relationship Management database contained in the data copy rather than the breadth of the documents that were apparently obtained on the execution of the search orders.
In those circumstances I make the following orders: 1. Pursuant to r 31.20(1) of the Uniform Civil Procedure Rules 2005 (NSW) I grant leave to the plaintiff to adduce expert evidence at the trial of this proceeding from Michael Khoury of KPMG in the capacity of independent digital forensic expert (Expert). 2. Within three business days of the date of these orders, the solicitors for the defendants deliver up to the Expert the hard drive, being a copy of the electronic data obtained from the first defendant and from the second defendant's premises on 7 October 2020 pursuant to the search orders made by Rein J on 6 October 2020 in his possession arising from order 1(a)(ii) of the orders made by Rees J on 5 May 2021 (data copy). 3. Within seven days from receipt of the data copy, the Expert must take a forensic image of the MyDesktop customer relationship management database contained in the data copy and return the data copy to the solicitor for the defendants (first forensic image). 4. Within seven days of the date of these orders, the Expert is to take a forensic image of the computer held at the plaintiff's premises that was used by the first defendant during his employment with the plaintiff as at August 2018 (second forensic image). 5. Within 14 days of the date of these orders, the Expert must return to the plaintiff the computer held at the plaintiff's premises that was used by the first defendant during his employment with the plaintiff as at August 2018. 6. The Expert must at all times keep confidential the data copy, the MyDesktop client relationship management database contained in the data copy, the first forensic image and the second forensic image until further order of this Court. 7. The Expert is to submit a confidential expert report to the Court, on a date to be fixed, in relation to findings from the first forensic image and second forensic image (Expert Report). 8. Subject to further order of the Court, the Expert Report is to be kept confidential and access is to be confined to the parties legal representatives and any Judge of the Court hearing the proceedings or conducting the trial.
I am of the opinion that the appropriate order is that the costs of the Notice of Motion be the plaintiff's costs in the cause.

At a glance

Court

Decision date

Before

Source

Judgment (4 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (25)

Cited By (1)