(3) Where the parties intend there not to be a concluded contract unless and until a formal document is executed.
46 The recent cases show a fourth class, that is, one where parties are content to be bound immediately and exclusively whilst expecting to make a further contract in substitution for the first contract containing by consent additional terms: Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628 which was affirmed by the Court of Appeal in the same volume at page 631.
47 The answer that Mr Del Grande gave in re-examination about the need for a restrictive covenant and how he was always willing to give it makes it, I think, crystal clear that this case falls into the third class of Masters v Cameron. The parties had yet to agree on a price and had yet to agree on the vital terms: if there was any arrangement at all it was merely indicating where they thought their negotiations might go.
48 Even if I had been of the view that there was a contractual arrangement entered into between the parties, I would have found it very difficult to reach the view that the contract was as pleaded. It will be remembered that the pleading was that the defendants would not be entitled to have transferred to them any customers of the plaintiffs nor receive commissions nor split any business unless and until they paid for them. It is very hard, even accepting everything that Mr Del Grande told the court in his evidence, to spell those terms out of the conversation.
49 It is thus not necessary to go into the question of quantum of damages. However, I should say a little about that.
50 It was quite surprising that the plaintiffs had prepared a considerable bulk of material over a year ago, it would seem, when the case came on for an aborted hearing before Acting Justice Brownie. The material had mainly been assembled by Miss Belinda Zanzerl, who was the office manager of the plaintiffs, but had no accountancy qualifications whatsoever.
51 She appeared to have obtained this material from what she called the database, but whether this was kept in the office or obtainable by some other connections was not clear, but it would seem it came from both. The rule in Potts v Miller (1940) 64 CLR 282 is that where this sort of material is presented by a non-accountant, the original material must be available for examination. This is very difficult when it comes from a computer unless very great care is taken to identify all the base material and to get a hard copy of it. This difficulty can be averted by utilising s 50 of the Evidence Act 1995 for material to get before the court. However, to utilise s 50, people have to act well before the trial and that was not done in this particular case.
52 The material which was produced and which I rejected basically appeared to be clients' status reports which had been assembled by Miss Zanzerl from "generating" - to use the word that was often deployed in Mr Angyal's submissions - a document from the plaintiffs' computer. However, this was material which did not appear to be business records of the plaintiffs and, indeed, it was very difficult to see how the document was a business record at all.
53 There were, however, some representations in the document that I saw going to what was called the surrender value of policies and amount of premiums, which might have been admissible. These might have been tendered as individual representations, but, although Mr Angyal kept reminding me that it was not the document that was admitted but the representations, he only tendered the whole of the documents. There was no segregation of what might be called the sheep from the goats. The whole of the bulk of the material added up to a complete non sequitur, in that even if any of the material had been admitted from the evidence of Mr Lonergan, it would just be completely impossible to extrapolate the "fair value" of the transfer of the clients. The exercise that Ms Zanzerl did was to first get material from her computer, then get material from the insurance company's computer and where there were inconsistencies, to make a choice.
54 In one particular case she had conflicting information as to the amount invested, which differed by about $100,000, and she made a choice of taking the lower amount and then making calculations basically on the assumption that the premiums would be the same for the next period, that there was no cost in earning those premiums, and then multiplying the premiums by three. The documents were excluded as not being within section 69 of the Evidence Act, or even if they were, they were such a confused conglomerate of material that under s 135 of the Evidence Act they should be excluded.
55 That then meant, on the question of quantum, there was little material on which a court could have made a finding as to the quantum of the plaintiffs' loss even if their claim in contract had succeeded. Mr Angyal said that it did not matter too much, it was still the function of the court no matter how difficult it was to find a figure and it could either: (a) find nominal damages (he reminded me that nominal damages and small damages are not to be equated: Baume v The Commonwealth (1906) 4 CLR 97), or (b) alternatively, by extrapolating figures and employing Mr Lonergan's methods. As to the latter, although I strongly hinted that it would be very nice to know how one did that, Mr Angyal did not illuminate me.
56 Had I found liability in contract, I would have had to assess damages. Bearing in mind Mr Lonergan's evidence which I accept and which appeared completely logical, I would have awarded nominal damages at the lower end of the scale not exceeding $10,000.
57 5. The case under the Corporations Act was based on the fact that Mr Rodrigues was a director of the company at least until 20 December 2002 and that under ss 183, 1317E and 1317H he had a liability to pay compensation to a corporation of which he was a director if he was to use information improperly because he had been a director of the company. I accept Mr Evans' submission on that aspect of the case. Although Mr Rodrigues was a director and although documents such as PX46 show that he was more involved as a director than he would have me believe, the evidence does not allow me to find that he obtained this information (that is, the information that was allegedly used to assemble PX43, and to contact former customers of the plaintiffs) because of his role as a director.
58 6. I thus pass to probably the most difficult aspect of this case and that is the confidential information aspect. Although the plaintiffs sue both in contract and in equity and despite the fact that I generally accept Mr Del Grande's evidence, I cannot be satisfied on the balance of probabilities that there was any express term in the contract or various versions of the contract between the plaintiffs and the defendants, that the material in the computer was to be kept confidential. The parties appeared, from all the material, to have a fairly loose arrangement in which, to use Mr Angyal's words, "they trusted each other". I cannot see how Mr Del Grande did anything more than give some general comment to staff about not letting outsiders see what was in the computer rather than there being any express term or instruction as to confidential information.
59 So far as an implied term is concerned, again one must look at all the aspects of the relationship which I have set out mainly in heading 2 of these reasons. Mr Rodrigues was not an employee, he was a person earning commission. However, he was more closely involved than a mere commission agent in that some aspects of the work which earned revenue for the plaintiffs came about because of Mr Rodrigues' other efforts, using his own licences, while others came about because he used the licences of the plaintiffs. I do not consider that there was even any implied term to be gleaned, from the business efficacy or otherwise, that all the material in the computer was to be considered as confidential information.
60 Indeed, it is difficult to identify just what was in this database and just what was confidential and what was not. I have already set out details from paragraph 15 of the statement of claim as to what it was that the plaintiffs said was confidential.
61 However, when one looks at it, it must be a borderline situation. In Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 334, Kirby P goes through a number of the criteria that were relevantly involved in that particular case, one of which was that an employee was using material as to the identities and whereabouts of suppliers. Having referred to leading cases such as Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117 at 133, and the decision in that case at first instance of Goulding J, as he then was, in [1984] ICR 589 at 598, Kirby P considered that that sort of information in the absence of any express covenant might not be protected by equity. He took into account the way in which the information was guarded by the employer, whether general instructions or particular instructions were given to employees, the practice of the industry and whether the information was made available for all employees or only employees at a particular level of seniority. In all situations the learned President said it was a question of fact.
62 In this case the information was available to employees of any status. The material contained matters which any employee dealing with a customer would already know, namely, the name of the customer and the person from whom the customer had been referred. In this, I accept Mr Rodrigues' evidence that some of the customers of a particular type were referred by chartered accountants and others who had particular methods of superannuation tax or estate planning and the transactions were then processed by Mr Rodrigues or the plaintiffs. As I have said earlier, I do not consider that there were specific instructions given by Mr Del Grande to Mr Rodrigues or to the staff generally, other than very, very general warnings.
63 As the textbooks say, the employer has rights in confidential customer lists and connections and it is quite clear that employees cannot take or copy a list of customers with the intention of using the list later for their own benefit. But in the absence of a valid legally enforceable restrictive covenant, an employee is entitled to rely upon any retained knowledge of the customers, their identity, requirements and so on, and this is especially the case where the ex-employee has personally dealt with the customer for some time and could reasonably be expected to recall their details in his mind. I have paraphrased what is in Hull's: Commercial Secrecy: Law and Practice (Sweet & Maxwell, London, 1998) paras 7.48 and 7.49. Again, I have been referred to previous cases which show that this sort of material is in a borderline position such as Coco v AN Clark (Engineers) Ltd [1969] RPC 41; (1968) 1A IPR 587 and my own decision in Forkserve Pty Ltd v Pacchiarotta (2000) 50 IPR 74.
64 Each case, as Kirby P said in Gasweld, must be looked at on the facts.
65 In this case the matters set out in paragraph 15 of the statement of claim really all turn around the name of the customer. Once one has the name of a customer, then virtually all the other information can be obtained by, as happened in this case to a great degree, getting the customer's assent to diversion of that customer's business and then forwarding the relevant documents to the insurance company. There is, of course, the necessity of finding out the policy numbers, but that can hardly, to my mind, be the confidential information of the plaintiffs. Once one has the names and if one has in one's head the name of the accountants or other intermediary who sends the business on, then there is no need at all to have to access any of the computers of the plaintiffs or the plaintiffs' information.
66 Although it is a borderline sort of case, to my mind the plaintiffs have not established that the defendants have used their confidential information. I take into account the rather detailed list in PX43 which sets out 223 customers, and it is tempting to say that that must have been obtained from the plaintiffs' computers, but there are no addresses on it, just names, and I consider that there was insufficient material there, for me to draw that inference.
67 7. As I said earlier, the other aspects of the defence are relevant. Accordingly, it follows that I should dismiss the proceedings with costs and give liberty to the defendants to apply in respect of any undertaking as to damages granted as a condition of interim relief. Exhibits to remain for 28 days and if there is an appeal they are to be forwarded to the Registrar of the Court of Appeal.