Spotless Group Limited v Blanco Catering Pty Ltd [2011] FCA 979 | Case summary

Evidence AND fINDINGS 30 It is first necessary to make some observations about the witnesses. 31 I accept that each of the Spotless witnesses was truthful and generally reliable. In one or two relatively minor respects, I considered that the Spotless case was a little overstated, perhaps prompted by the understandable perception that Mr Reynolds had been seriously in breach of his obligations to Spotless over the last two years of his employment. 32 Spotless submitted that the Court should be cautious about accepting Mr Reynolds' evidence where it is uncorroborated by other evidence, and that he was prepared to provide false justification for his conduct. I accept that much of Mr Reynolds' evidence in cross-examination was guarded, but I did not conclude from that that he was deliberately misleading the Court. In my view, Mr Reynolds' evidence reflected the fact that he was aware of his duties to Spotless when he first started to plan a career away from Spotless (as he was entitled to do), but that over time and more particularly as the time for his intended resignation became closer he had a diminished perception of the extent of those responsibilities and so acquired an impaired judgment about what he should or should not have done to satisfy those responsibilities. That is particularly so in the last six months of his employment by Spotless, when (as he acknowledged) he was stringing out his employment in part to tie in with the potential awarding of the contract for the Zoo Project and in part to qualify for pro rata long service leave. With the wisdom of hindsight, as his cross-examination showed, over that last six months or so, he was forced to acknowledge that he had to some degree crossed the line of propriety. Particularly in relation to his evidence dealing with that period of time, I am cautious about relying on his uncorroborated testimony. I nevertheless do not think he was deliberately untruthful. I consider that his evidence reflects the fact that he was not, at the time of the impugned conduct, deliberately transgressing the line of propriety but that before or during his evidence he realised that he may have done so and was therefore endeavouring to explain why he did not earlier have that view. In respect of the earlier period of some 18 months or so, I was not struck in the same way by his evidence having a significant element of defensiveness. Consistent with my view, I have placed greater weight on his evidence about events during that time. In the event, I do not think that, with one qualification, Mr Reynolds' evidence about what he did and why he did it requires me to accept his uncontroverted evidence or alternatively find that he was deliberately untruthful. The conduct speaks for itself, and it is in the Court's assessment of that conduct which informs the conclusion on the Spotless claims and the consequences of the successful claims. 33 The one qualification referred to in the preceding paragraph concerns the claim that Mr Reynolds used work time or after hours to further the interests of himself or Blanco Catering, when that time should have been spent on fulfilling his employment responsibilities with Spotless. Necessarily, such a claim is hard to establish without time sheets or other documentary material. It largely turns on my assessment of Mr Reynolds' evidence. In my view, Mr Reynolds at all times was conscious of his obligation to spend his employment time fulfilling his employment responsibilities to Spotless. His working hours were not fixed. He often worked outside of normal hours. There is nothing to suggest that he did not work long hours for Spotless or that he compromised the performance of any of his responsibilities to Spotless by spending time in his own interests. That is consistent with the evidence of Mr Cook, and that of Aaron Bond, who said Mr Reynolds was usually in the office before him and usually left after him. I am not satisfied that, even in relation to his activities or to the conduct concerning the matters referred to in [28(4)] above, he allowed his personal interests to compromise the time he spent or should have spent otherwise on serving Spotless' interests. It is shown that on a few occasions in relation to the Botanic Gardens tender referred to at [28(2)], those activities occurred during normal working hours. But I accept Mr Reynolds' evidence that when he spent such time during normal working hours, he was very conscious of ensuring that he did not thereby compromise in any way any of the work that he did for Spotless. I accept he worked long hours, often until late at night, and that the nature of his duties with Spotless enabled him to do so effectively. Even in the last six months or so of his employment, whilst his judgment about what was proper in relation to the matters referred to in [28] above might have been compromised, I was persuaded by his evidence that, in terms of the time commitments necessary to otherwise perform his duties effectively, he did not compromise them. 34 Accordingly, I am not persuaded that the matter set out in [24(a)] and [28(4)] above is made out, or that any claim for damages based upon Mr Reynolds failing to work the hours required of him, or during the hours required of him, should succeed. 35 I accept the evidence of Mr Cook who was from June 2008 the General Manager of Alliance Catering and from July 2010 the Group General Manager International Services of Spotless. Much of the uncontentious findings above are based on his evidence, including the events from 25 September 2009 leading to Mr Reynolds' purported resignation on 2 October 2009 on one month's notice and then the termination of his employment by letter of 21 October 2009. 36 Understandably, Mr Cook was concerned that the investigations of material from Mr Reynolds work hard drive, his laptop and his emails, showed that Mr Reynolds had used, or more correctly, had provided to Blanco Catering, financial modelling belonging to Spotless as the basis for the modelling of financial information from Blanco Catering, that Spotless documents had been provided to Blanco Catering, and then had been re-badged but otherwise copied as Blanco Catering's documents, including some work sheets of the financial modelling referred to, and that Mr Reynolds had been engaged in discussions with Blanco Catering to acquire an interest in its business for some extended period of time. There is little doubt that the following is demonstrated by the documents to which he referred: (1) on 24 November 2008, Steve Blanco provided to Franco Boscaini of Boscaini Commercial Property Consultants Pty Ltd in relation to Blanco Catering's expression of interest in relation to the Zoo project a profile of Mr Reynolds as a person involved with Blanco Catering; (2) Mr Reynolds had stored the letter of 3 August 2009 from Blanco Catering to Mr Boscaini expressing interest in the Zoo project, and including revenue forecasts for the conference/function centre at the Adelaide Zoo and, a rent proposal, and details of its three partners including Jane Reynolds (no specific mention is made of Mr Reynolds); (3) a further email from Mr Blanco to Mr Reynolds of 27 November 2008 reporting on discussions apparently with Mr Boscaini, and indicating that Blanco Catering was aware of the Spotless interest in the Zoo project and itself wanted to participate in it; (4) the Blanco Catering proposal for the Botanic Gardens tender dated April 2009 in which included in the annexures or appendices, under the heading "Profiles - Key Personal", and made mention of Mr Reynolds with a brief CV (with no reference to his current employment with Spotless) (NB: it is not suggested that that document is derived from any document of Spotless); (5) an email from Ms Kate Punshon apparently of the Botanic Gardens to Mr Reynolds at an email address "paul.reynolds@blancofood.com.au" seeking information in relation to the Botanic Gardens tender in response to a brief email from Mr Reynolds to Ms Punshon on 14 September 2009 suggesting a further discussion and that he was finalising some changes to the proposed documents; (6) a document entitled "Botanic Gardens & Blanco Catering - review meeting" concerning a meeting of 18 September 2009 at which Mr Reynolds was one of the attendees from Blanco Catering, and a series of items were discussed and forward planned for follow-up partly through Mr Reynolds. 37 Mr Cook makes the point that it appeared from those documents that Mr Reynolds had used Spotless documents and information, some of which he considered to be confidential, for the benefit of Blanco Catering; that he had been in negotiations to acquire an interest in Blanco Catering when it was a key competitor of Spotless; and that such conduct took place during the time that he was working theoretically exclusively for Spotless. It will be necessary to look at those documents in more detail in relation to the first of those allegations. I do not think that the arrangement between Mr Reynolds and Spotless under the terms of his employment necessarily precluded him from discussing with another competitor of Spotless in the catering supply business in South Australia to undertake employment with that competitor, although of course it may have precluded him from undertaking certain activities in relation to that activity. I have also already rejected the proposition that Mr Reynolds did not fulfil his work obligations fully in terms of the hours and times he worked for Spotless. 38 The document referred to in [36(1)] above had been copied to Mr Reynolds. It referred to enclosed documents including the profile of Mr Reynolds, clearly to add to the experience of Blanco Catering. The email also commented: I would also like to request the commercial confidence between yourself and the Zoo's administration of Paul's involvement at this stage. The enclosures included an eight page summary proposal concerning the Zoo project, a lengthy capability statement provided by Blanco Catering with a series of referrals and descriptions as to its role, a lengthy presentation on the Italian Centre which, apparently, was at the time operated by Blanco Catering, and the one page profile of Mr Reynolds' skills and qualifications, including his role as currently managing commercial catering operations across South Australia and Western Australia for Alliance Catering. Lest it be thought that Blanco Catering was a minor business, that other documentation, describes Blanco Catering as a significant caterer in the South Australian catering market, having won the 2008 National Event Caterer of the Year, Caterer of the Year 2003, Event Caterer of the Year 2003, 2004, 2005 and 2007, and the Hall of Fame 2006 Restaurant and Catering SA Awards for Excellence. It is clearly a significant enterprise. 39 Financial modelling was routinely used by Spotless, and completed by Mr Reynolds as part of his role, to seek approval to undertake particular business proposals. It was part of the routine management structure of Spotless. Mr Cook was entitled to reject a proposal based upon financial modelling. For instance, he rejected Spotless' proposed running of a coffee shop at 25 Grenfell Street, Adelaide notwithstanding that, apparently, financial modelling suggested that it would be profitable. He did point out that Spotless did run some retail businesses, including coffee outlets, either by direct ownership or by management for the owner. 40 Mr Cook referred to financial modelling documentation of Spotless by a template used until about June 2009 and a new template thereafter. It is a "living document" regularly updated over time. It is used by Spotless employees to cost business opportunities and to develop quotations on behalf of Spotless. It contains, through the model, a range of information which includes Spotless' profit margins and costs/revenue assumptions, and other key data which (Mr Cook said), if used by competitors of Spotless, it would enable them to understand Spotless' pricing mechanics and thereby ensure that they were cheaper based on costs or the best tender based on rental paid. He describes them as confidential documents which should not be provided to a competitor of Spotless. He was not challenged as to that evidence. 41 A further concern of Mr Cook was the fact that Mr Reynolds sent to Ms Reynolds by email contact lists containing details of the customers of Spotless. He did so by emails dated 10 and 20 August 2009 and 1, 4 and 14 December 2009. At about August 2009, the Spotless computer system changed so that customer contact details located on an employee's computer could not be synchronised to their mobile phones. That was to improve the security of the Spotless computer system and to control the flow of that information. The details of Spotless customers are, understandably, regarded as confidential to Spotless. In a competitive Australian market, those details if available to a competitor would enable a competitor to identify the correct person within each organisation to contact to discuss potential contractual relationships, and (it is said) give those competitors a greater understanding of the whole market within which Spotless operates. Mr Cook said that "newer entrants" into the Australian catering market would not have ready access to that information. There is a dispute between Mr Reynolds and Mr Cook as to whether Mr Reynolds at about that time told Mr Cook that he would forward those lists to his wife by email as his Spotless phone could not synchronise with the Spotless systems and it was necessary for him to have the customer lists at home to be able to synchronise with his home computer. I do not think it is necessary to go into those allegations in any detail. Mr Cook acknowledged that, since Mr Reynolds left Spotless' employment on 21 October 2009, Spotless was not aware that Mr Reynolds had got any business from any of those listed customers of Spotless in any event. Nor was there any suggestion that he had approached any of them. Whilst the conduct may or may not be significant, it did not produce any loss to Spotless. On the other hand, it is too long a stretch to conclude that Mr Reynolds intended to make use of that list of customers in any improper way. As I have found, he was aware of his responsibilities to Spotless and generally sensitive to them albeit, over the last several months leading up to the termination of his employment, he had a somewhat elastic view as to the nature of those responsibilities for the reasons which I have given. Mr Cook was not re-examined on that part of his evidence. 42 Mr Cook also referred to price lists of Spotless. In particular, he referred to an email from Mr Reynolds to Christopher Horner at Blanco Catering of 11 August 2009 which included five price lists. They were the Coca Cola Amatil (Aust) Pty Ltd standard wholesale price list dated 3 August 2009 and the EBS Supplier price lists of 11 August 2009 which set out the invoice prices at which Spotless purchased the goods listed in those documents from Bunzl Outsourcing, Nelson Peters Icecream, Coca Cola Amatil (Aust) Pty Ltd and Frucor Beverages Pty Ltd. The expression "EBS" refers to an electronic buying system database recording prices negotiated and agreed between Spotless and each of its suppliers in respect of each product that Spotless purchases. It is a database established by Spotless. Mr Cook acknowledged that Spotless sometimes receives rebates or discounts from those prices in respect of volume purchases. He said (although there is no other evidence of it) that in most cases the contracts which Spotless has with its suppliers specify that the prices agreed are confidential. He described the EBS database as highly sensitive information, accessible only to senior members of Spotless, governed by passwords and acceptance of the terms of the Spotless IT policy. 43 The cross-examination threw some further light on those matters. Mr Cook was unable to say whether, in fact, those price lists contained data about prices which was different from that available from those suppliers to other wholesale providers of such products, including other large caterers. He did not know whether the wholesale price lists of the suppliers themselves to large caterers contained different prices. He acknowledged that the prices in those documents did not take account of any negotiated rebate or commission for volume or otherwise provided to Spotless. He indicated that the Spotless system was to be invoiced at the wholesale price, and subsequently received a negotiated rebate or commission from the supplier depending upon reaching certain threshold levels of acquisition. That information, I infer, was available to some in Spotless but it is not clear at what level or whether it was known by Mr Reynolds. Based on Mr Cook's evidence, it is not clear to me that the information on those price lists recorded information different from that which was available upon enquiry by any large caterer to any of these suppliers as wholesale price lists. They did not record the rebate or commission arrangements negotiated by Spotless. The EBS price was the data price which was put into the Spotless financial models, rather than adjusted to reflect the rebate or commissioned price. Despite Mr Cook's description of their confidential character, I do not find that they contained information other than routine wholesale price lists available to any large caterer. 44 A further category of document to which Mr Cook referred was what is called the ACES document. It was sent by Mr Reynolds to Ms Reynolds by email of 3 September 2009, the day after he received it. The ACES document is a document generated by Spotless which contains details of its annual customer survey in respect of all sites at which Alliance Catering provides catering services in South Australia. It is accessible only to area managers, regional and state operations managers and senior site managers. Mr Cook said that if Mr Reynolds had wished to view the ACES document at home, he could have taken his laptop home to view it rather than to send it to Ms Reynolds to view at home, as he had been provided with a wireless card by Spotless to access his work emails whilst not physically in the office. It is clearly a confidential document containing sensitive commercial information, valuable to any competitors of Spotless. It could be used in the hands of competitors to target Spotless high value contacts. He accepted, however, that Mr Reynolds may have required that document to work late at home on Spotless work rather than for any improper purpose. It was sent by Mr Reynolds to his home at 12.45 am. Mr Reynolds said he was working on that document at home at that time in preparation for a series of meetings with the South Australian sales managers later than morning, and wished to get a hard copy of it to use for the meeting. He sent it to his wife's computer to enable it to be printed at home. I accept that evidence. In those circumstances, I make no adverse inference against Mr Reynolds from the fact of the supply of that document at home to his wife at home. 45 Another category of document referred to by Mr Cook was what are described as template letters of appointment and position descriptions. On 11 August 2009, Mr Reynolds sent to Mr Horner, copied to Mr Blanco, an email which apparently enclosed three template letters of appointment containing Blanco Catering's logo, and a position description for an operations manager apparently for the Botanic Gardens tender. Mr Cook pointed out that there are minimal differences between those documents and templates belonging to Spotless, prepared by Spotless employees for use only by Spotless. The four documents are: Letter of Appointment - Award or Agreement - New Employees Full Time or Permanent Part-time (Weekly); Letter of Appointment - New Employee Casual (Weekly); and Letter of Appointment - Salary Award or Agreement / Above Award (Weekly); and Position Description for Operations Manager. The first three of those documents are templates, and the fourth is a position description relating to an operations manager at a different institution. The email from Mr Reynolds of 11 August 2009 also included under the Blanco Catering logo a position description for a Kitchen Operations Manager/Executive Chef for a Blanco Catering production facility. There is no suggested close analogue suggested by Mr Cook from Spotless records for that document. 46 To the extent to which there is a claim of breach of copyright, it will be necessary to consider the differences between those documents. To the extent to which otherwise the content of those documents may have been taken from Spotless documents, their content is relatively routine: appointment and position; employment status; responsibilities; location and travel; award/agreement; rate of pay; hours of work; general conditions; leave; absence; probationary period and such matters. The operations manager position description to a degree is site specific, and contains headings including responsibility statement; key result areas/tasks; and under that a series of sub-headings and topics including performance standards; work environment; supervisory authority; indicative hours; physical demand; unique features of position; and a special note. 47 I am not sure that, in terms of misuse of confidential information, much turns on the above. I suspect it is relatively standard. 48 Finally, Mr Cook referred in his evidence under the heading "opportunities" to the attitude of Spotless to certain business opportunities which Mr Reynolds apparently made available to Blanco Catering. 49 The first of those "opportunities" derives from an email of 30 November 2007 from Mr Reynolds to Judy Szekeres of the University of Adelaide suggesting that Star Anise Catering (a part of Blanco Catering) was interested in providing various services at the University. Mr Reynolds' email commences with the following: Firstly, I need to request that these discussions are kept very confidential regarding my involvement. Obviously some people can get it construed as a conflict of interest, however I feel that you need to get a decent resolution asap and the options seem to be drying up for you. I would hate to seen [sic] the base F&B business at the Uni destroyed as this would effect future opportunities and devalue the Uni and services. 50 He then refers to seeking alternative solutions for her request and that Star Anise seems to be the only interested entity capable of delivering the service in the circumstances. Earlier in that month, Mr Cook and Mr Reynolds had discussed the prospect of Alliance Catering providing services at the University of Adelaide, and Mr Cook had indicated that Alliance would only be interested if the contract was for a period of not less than 12 months. He accepts that, ultimately, Alliance Catering was not interested in pursuing that avenue. 51 I accept Mr Reynolds' evidence that, as far back as 2003, he was able to suggest to an existing or potential Spotless client the name of another caterer if Spotless was not interested in, or able to provide, the services that client or potential client sought. That was a means of Spotless keeping good relations with its clientele. In relation to the contact with the University of Adelaide, I accept that Mr Reynolds pursued that opportunity on behalf of Spotless diligently. When it became apparent that, at that time, the opportunity was for a short term contract only, consistent with Mr Cook's instructions, Mr Reynolds did not pursue it. I also accept that the person from the University of Adelaide with whom he was dealing then asked him if he could suggest another potential caterer. It is in that context that he suggested Star Anise Catering. In my view, Mr Reynolds in doing so had no conflict of interest and was acting in accordance with what he saw as the best interests of Spotless. He had no formal relationship with Mr Blanco, and had met him only a few months before. I attribute the quoted remarks in the email of 30 November 2007 to some hyperbole on the part of Mr Reynolds. 52 In fact, Mr Reynolds had met Mr Blanco in earlier 2007 at a social function. They had learned they were each in the catering business. Later that year Mr Blanco had, in a very informal way, sounded out Mr Reynolds to see if he was interested in working for Blanco Catering, but at the time nothing came of that. I do not consider that the email of 30 November 2007 was an attempt by Mr Reynolds to re-enliven those discussions. 53 From about late 2007 to about mid 2008, at the instigation of Mr Blanco, there were further general discussions between Mr Reynolds and Mr Blanco pertaining to plans of a joint catering business venture. The discussions led to Mr Reynolds preparing a "Business Plan" for the possible joint venture towards the end of 2008. It is not suggested that, of themselves, those discussions were improper or that the Business Plan itself was prepared by adapting or copying any Spotless documents or data. Spotless submitted that the evolution of those discussions led to Mr Reynolds' financial involvement with Blanco Catering, in particular in relation to the Zoo project. Whilst I accept that that was the sequence of events, I think the opportunity for Blanco Catering to participate in the Zoo project was an independent and significant stimulus to Mr Reynolds becoming more closely involved with Mr Blanco in Blanco Catering. Until that progression of events occurred, in my view the other "opportunities" raised by Mr Cook in his evidence or in the pleadings or in cross-examination of Mr Reynolds did not involve him acting improperly in relation to Spotless. 54 I shall address them at this point in these reasons. 55 On 29 October 2008, Mr Reynolds received an email from a friend enquiring if he would be interested in working on a tour with the Eagles, the "Eagles Tour 09". That proposal would have required him to travel with the touring group, arranging catering for the travelling group. The concert venues would have their own catering contractors. Mr Reynolds declined the proposal, but suggested the friend contact Mr Blanco to gauge his interest. He did not refer the proposal to Spotless, as it was a personal invitation and was not the type of catering contract which Spotless had previously pursued. In cross-examination, he did not divert from that evidence. In my view, Mr Reynolds did conscientiously consider the possibility of Spotless being interested in that type of contract and reasonably decided that Spotless would not be interested. He then simply suggested that Mr Blanco might be interested. That is consistent with his unchallenged evidence that, on a social occasion, he mentioned to Mr Cook that he had been offered the opportunity. 56 Another "opportunity" concerns a proposed coffee shop at 25 Grenfell Street, Adelaide. On 21 November 2008, Mr Reynolds sent to a letting agent Jones Lang LaSalle an email suggesting that Blanco Catering might be interested. Mr Reynolds had been approached by the letting agent to see if Spotless was interested, and Mr Reynolds and Mr Cook had discussed the possibility of Alliance taking up that opportunity. The opportunity was quite fully investigated. Mr Cook then told Mr Reynolds that Alliance should not submit a proposal for the contract due to the cost of fitout, the financial risk and the limited potential return. That is, Spotless was not interested in the opportunity. Mr Reynolds was then asked whether he could suggest another potential operator, and as noted he suggested Mr Blanco. In my view, in the circumstances, he had no conflict of interest when responding to that request and acted properly when doing so. It appears that the proposed coffee shop did not eventuate. 57 A further "opportunity" said to be offered to Spotless but not properly pursued is said to arise from an email from Mr Reynolds to Mr Broderick relating to an opportunity to provide catering services to Johnson Control. It was sent from the Business Development Manager of Spotless Services (NZ) Ltd, another entity in the Spotless group, to Mr Reynolds on 9 January 2009 headed "EDS Adelaide Opportunity". Mr Reynolds on 10 January 2009 forwarded the email to Ms Reynolds. The Spotless concerns about that conduct are misconceived. The unchallenged evidence is that, because Mr Reynolds was on leave, he forwarded the email dated 9 January 2009 to his wife so he could print out a hard copy at home. The originating email related to part of a much larger catering opportunity for Alliance Catering in the Asia Pacific region, which included the EDS Adelaide facility. The opportunity was duly reported, and followed up by others within Alliance Catering. Mr Reynolds was not directly involved in that process, and does not know its outcome. There is nothing to suggest that he acted improperly in relation to it in any way. 58 One other matter referred to by Mr Cook should be mentioned. On about 9 September 2009, Mr Reynolds sent to Mr Horner of Blanco Catering an email attaching a PowerPoint presentation prepared by Douwe Egberts about UTZ Coffee. He says that UTZ Coffee is not a proprietary brand of Douwe Egberts. He notes that the covering email from Mr Cook said that it could be sent around, and that he did not consider it to be a confidential document because it was prepared by Douwe Egberts and there was nothing which was confidential to Spotless within the chain of emails. He thought the document from Douwe Egberts would be widely viewed within the industry. I accept that evidence. Mr Cook said that his email of 8 September 2009 also discussed the strategy that Alliance Catering should be adopting when "moving forward for the supply of coffee and equipment" and about his discussion with Douwe Egberts, so that it was clear that the attached document could be sent to other employees of Spotless but not to its competitors. I accept that may have been Mr Cook's intention, but given that no specific contents of either the PowerPoint presentation or of the email of 8 September 2009 have been identified as confidential in fact, I am prepared to accept that Mr Reynolds' evidence that he did not understand it, and reasonably did not understand it, as being of significance. No consequence of its release to Blanco Catering is suggested. 59 Consequently, I do not find that Mr Reynolds breached any duty owed to Spotless by his conduct in relation to any of the University of Adelaide, the Eagle Tour 2009, the coffee shop at 25 Grenfell Street Adelaide, the Johnson's Control tender (referred to at [28(2)(a)-(d)] above) or in relation to the email of 9 September 2009 containing the Douwe Egberts PowerPoint presentation. Nor do I find, even if such conduct involved a breach of duty, that it caused Spotless any loss. 60 In addition, I do not find that Spotless suffered any loss by the provision of Spotless price lists, letters of appointment and position descriptions to Blanco Catering. Indeed, I am not persuaded that those documents contained any confidential information for the reasons already given. Subject to the breach of copyright claim considered later in these reasons, I also do not accept the Spotless complaints referred to in [28(3)] above. To the extent to which Mr Reynolds had access to confidential information, except to the extent considered below in relation to the Botanic Gardens tender and to the Zoo project, I am not persuaded that he misused such information. 61 The more significant transactions to address in the present context are those involving the Botanic Gardens tender and the Zoo project. The Zoo project is the only business opportunity which Spotless claims to have lost, or possibly to have lost, as a result of improper conduct on the part of Mr Reynolds. Spotless through either Alliance Catering or Epicure Catering does not assert that it would have submitted a proposal in respect of the Botanic Gardens tender. The significance of the Botanic Gardens tender, in the sense that Spotless claims to have suffered a loss caused by Mr Reynolds' activities in relation to it, is firstly that Mr Reynolds improperly expended time on the Botanic Gardens tender for Blanco Catering which should have been spent performing his duties for Spotless, and secondly that Spotless' copyright in the "old" Alliance Financial Model Template was breached by its use by Blanco Catering, particularly by Mr Reynolds in the Blanco Catering proposal for the Botanic Gardens tender. I have already rejected the first of those claims. 62 Little evidence was adduced by Spotless in relation to the Botanic Gardens proposal. Understandably, its evidence other than that of Mr Cook was mainly focused on the Zoo project. It is convenient to refer to that evidence before further considering Mr Reynolds' evidence and the documentary evidence to ultimately make findings about those two transactions and matters related to the claims of Spotless more generally. 63 Robert Rutter is the Commercial Manager of the Hospitality and Retail Catering business unit of Spotless. His role includes developing the financial analysis for business opportunities for that division. He was involved in the Spotless tender, through Epicure Catering for the Zoo project, involving the tender for the Adelaide Zoo Convention/Function Centre catering contract. 64 Spotless put in an Expression of Interest dated 30 July 2009 and a Revised Proposal by letter of 21 August 2009 following a meeting on 19 August 2009 at which certain matters were discussed. Underlying those documents included two "revenue profiles" developed from a budget template, and a "corporate model" developed from a corporate template with a summary of the key financial data and assumptions from the "revenue profile" and estimated corporate administration costs. The data outcomes included anticipated total revenue/sales for year 1 of the Zoo project. The second revenue profile had a considerably lower figure, as the anticipated revenue for the first six months of Zoo project from January to June 2010 was much reduced, on the basis that it was a "greenfield site". The revenue projections for years 2-10 of the Zoo project were the same in each document. 65 The revenue projections are, according to Mr Rutter, the most important aspect of the financial part of any proposal. It informs the profit that is anticipated from the proposed project, which in turn informs the amount of rental which Spotless is prepared to offer pursuant to its tender. He said that Spotless had a significant advantage over smaller caterers when assessing anticipated revenue for the Zoo project because it was a "greenfield site" and Spotless, unlike other smaller caterers, had comparable data to draw from. He did not say whether Blanco Catering fell into that category. Nevertheless, he said he also considered the likely amount a competitor might be prepared to bid for a particular job, including the Zoo project, when formulating the expression of interest or tender. He did not further explain that. I infer that he meant that there would be scope, within reason, to increase the revenue estimate to justify a higher rental offer to successfully tender. Consequently, that causes me to be a little cautious about the reliability of the anticipated revenue, the rental offered, and the anticipated earnings to Spotless over the proposed period of the Zoo project. 66 Mr Rutter said that, on the basis of the Revised Proposal, the net present value to Epicure Catering over the 10 year period of the Zoo project, excluding corporate administration, of anticipated profit is $996,556. He says the expected profit over 10 years (excluding corporate administration) would be: before interest and tax $M4.175 after tax $M2.922 and including the costs for corporate administration: before interest and tax $M2.621 after tax $M1.834 67 He also anticipated efficiency gains for Spotless if it had secured the Zoo project, as it could have used its staff utilised in that project also for the Clipsal 500 Adelaide Carnival in March 2010 (for which it catered) and potentially future years instead of flying to Adelaide its Victorian staff and providing for their accommodation. He quantifies that value at $50,000 to $100,000 per annum. There is little specific information underlying that figure. It may be correct as a matter of arithmetic, but I am not persuaded that the staff used for the Zoo project would have been free to work at the other venue to produce such savings, and I am not persuaded on the limited information available why, if it is necessary for costs of up to some $100,000 per annum to be expended to use Victorian based staff for the Clipsal 500 event, that the asserted efficiency gains would have resulted. It was not explained whether that expenditure was for senior management or otherwise. It was not explained why Spotless, which has very significant operations in South Australia (according to Mr Cook, with some 300-400 local staff), needs to incur that cost in any event. Spotless increases its staff by some 1200 in March each year for that venue, presently largely locally. The fact that the range, even with obviously "ball park" figures, was so wide also leads me to approach that assessment with caution. 68 In the figures provided, Mr Rutter has estimated corporate administration costs of 5% of sales per annum through the life of the contract. The figures referred to above have been calculated on that basis. The difference in the projected profit, and so its capitalised value, is quite significant. The administration expense is $95,110 per annum. On the Profit and Loss Statement for the 10 year period, the profit after tax and notional interest reduces from $2,734,550 to $1,578,584. Of course, there may be other variables to be adjusted. The net present value reduces to $475,962. It is also apparent, no doubt consistent with the practice for long term contracts in the catering industry, that the anticipated profits are back-ended so that the profit (or loss for the first year) increases progressively over the term of the contract. That reflects the anticipated sales progressively increasing over the period of the contract, whilst the percentage of operating cost expenditure to sales remains more or less the same. It may be necessary to revisit those claims later in these reasons. 69 There is no doubt that Mr Reynolds' hard drive contained the following documents: (a) document named "Zoo by Epicure (sic) Rev Build Up", which contains contents identical to the information provided by Mr Bond of Spotless to Mr Rutter of Spotless by an email of 22 July 2009 entitled "Zoo revenue projections.xls"; (b) document named "Zoo by Epicure (sic) Full FM", the contents of which are identical to the source model which included the first revenue profile prepared by Mr Rutter for the Zoo project for Year 1 of that project; and (c) document named "Zoo by Epicure (sic) FM", the contents of which are identical to the corporate document which contained the first revenue profile, which included the model revenue that Epicure Catering expected to earn for each year over a 10 year period of the Zoo project. 70 It is also clear that Mr Reynolds by various emails to Mr Blanco dated 30 July 2009, 1 August 2009, 27 August 2009 and 28 August 2009 provided Excel spreadsheets to Mr Blanco which included work sheets headed "Revenue Summary" containing a Revenue Summary table. In each of the emails, the enclosed document included the identical Revenue Summary table. The contents of the Revenue Summary table is, in turn, identical to the table headed "Sales" in the corporate model revenue profile referred to above, save that the table in the revenue profile commences in July and ends in June of each year (that is financial years rather than calendar years), and the table "Sales" starts from the month of January and ends with the month of December. 71 Mr Rutter has also compared a document entitled "Blanco at Adelaide Zoo" which is described as "Financial Overview of Years 1 and 2" in the discovered documents. The total revenue figure set out in that document in respect of the full year July to June is marginally more, by $6,231 than the first revenue profile of Epicure Catering. There was no cross-examination of Mr Rutter to suggest that Mr Reynolds had not taken those figures from Spotless documents, as is readily inferred from the material. Nor is there any basis for thinking that that information was not then conveyed to Blanco Catering for the purpose of assisting it in its tender for the Zoo project. 72 Mr Rutter's estimates, apart from not including the corporate administration expense, also did not make allowance for rebates received from suppliers. That is a matter discussed above. There is no information upon which the amount of that rebate can readily be calculated, assuming the Zoo project had been allocated to Spotless. He said that he had removed the corporate administration expense, because in his view it was relatively negligible. He said that with a venue the size of the Adelaide Zoo project, the incremental cost in corporate administration would be negligible and so its impact minimal. I am not persuaded that is a correct approach. It may be that the marginal cost of indirect administration by the grant of the Zoo project would be relatively insignificant. On the other hand, I am not persuaded, if that is correct, that it is then appropriate simply to allocate no administrative cost to the Zoo project. The more realistic analysis, practically, would be to allocate the total administration costs pro rata across all of the projects of Spotless or the relevant Business Division. If that were done, there would obviously be a significant administrative cost attributable to the Zoo project (as indeed would have been the fact) and each of the other projects of Spotless may have become marginally more profitable. I do not accept that it is appropriate, in the circumstances, for the purpose of calculating an appropriate loss to Spotless to assume that there was no administrative cost from its principal office in the administration of that project. I am cautious about accepting his evidence, in addition, because of the evidence as to the cost of transferring Victorian staff to South Australia for the purpose of operating the Clipsal 500 Adelaide venue over a period of days. I find it difficult to conceive that staff transferred were merely waiting and serving staff, or at least did not include some senior management. 73 Ian Delmenico, the General Manager of the Hospitality and Retail Catering business unit of Spotless oversaw the Epicure Catering tender for the Zoo project. He signed the Expression of Interest dated 31 July 2009, and had one meeting with Mr Boscaini on 19 August 2009. Otherwise, he left the dealings between Epicure Catering and Mr Boscaini to Aaron Bond. He was eager for Spotless to secure the Zoo project to increase Epicure Catering's share of, and presence in, the Adelaide market and to increase its base infrastructure in Adelaide, and so (he thought) Spotless would be better able to compete for other larger projects in South Australia. Epicure Catering presently has some three of the eight such larger projects in South Australia. He was therefore disappointed not to succeed in the tender. Those views were shared by Mr Bond. 74 Mr Bond is the South Australian Regional Operations Manager of Spotless. He was the primary contact of Epicure Catering for the Zoo project. He spent some weeks developing the proposal. He submitted the Expression of Interest of 30 July 2009 and supervised its preparation, including through Mr Rutter, following an invitation to do so received from Mr Boscaini dated 17 July 2009. He and Mr Delmenico met with Mr Boscaini and John Grenfell from the Adelaide Zoo on 19 August 2009. He then oversaw the preparation of the Revised Proposal in the letter of 21 August 2009. He acknowledged that the meeting of 19 August 2009 raised some significant matters for Epicure Catering to address. It must therefore have been apparent to him that that there was a real risk that Epicure Catering might not be awarded the Zoo project. The Revised Proposal, addressed the apparent concern about catering quality, and the financial offer of Spotless. The proposed 10% turnover fee on gross revenue exceeding $M3 per annum was not changed, but in the Revised Proposal the $M3 per annum gross revenue cut-in point was to be indexed at 4%. 75 The Expression of Interest proposed a base rent of $180,000 in year 1, $300,000 in year 2, and $300,000 for year 3 and then indexed at 4% per annum for each succeeding year. The Revised Proposal changed the indexed rental to commence from year 3. An alternative base rental was for year 3 and subsequent years to be indexed at the CPI rate rather than 4%. It also offered the Adelaide Zoo a discount of up to $50,000 annually on its expenditure on its own events in each year on the basis of the first $25,000 spent would be free and the next $25,000 would be applied pro rata as the Adelaide Zoo spent up to $100,000 on its own events. 76 On 22 September 2009, Mr Bond followed up the progress by telephone to Mr Boscaini. He was told that Epicure was one of the two shortlisted applicants. On 1 October 2009, he was contacted by Mr Boscaini and informed that Blanco Catering had been awarded the Zoo project and that Epicure had not. Mr Bond accepted that he had expected Blanco Catering to tender for the Zoo project, as it provides similar catering services as Epicure in the Adelaide catering market and is a competitor of Epicure. 77 Mr Bond had drawn to Mr Reynolds' attention, in a routine way, that the Zoo project had been advertised in The Advertiser on 14 July 2009. He had been told by Mr Reynolds in mid 2008 that Mr Reynolds and Mr Blanco were longstanding friends. He had no reason to suspect Mr Reynolds, at July 2009, would be interested in the Zoo project. Mr Reynolds' side of the Spotless business was in the Alliance business division. Mr Reynolds at no time suggested that, in any way, was he interested in the Zoo project. 78 As things do, somehow in about early September 2009 Mr Bond heard "on the grapevine" that Mr Reynolds intended to resign from Spotless in October 2009 to work for Blanco Catering after he had completed seven years of service. He then kept material relating to Epicure Catering's tender for the Zoo project secure. 79 The final two witnesses for Spotless were Sally Shepherd, a lawyer acting for Spotless in this proceeding, and James Muller. Mr Muller worked for Spotless between 1998 and February 2008, and then as the National Account and Project Manager of its Alliance Catering business until between February 2009 and February 2010. He confirmed the development and use of the financial model template to June 2009. From April 2009 he worked on redeveloping that template. His evidence shows that the template in use to June 2009 "formed the basis of the financial model" sent by Mr Reynolds to Blanco Catering on 23 August 2009. The redeveloped template and a Re-Tender Model were internally circulated for comment on 25 May 2009, including to Mr Reynolds. On 12 June 2009, he sent to Mr Reynolds a revision of the redeveloped financial model template and a document entitled "Alliance Catering BIS Costing Model Guidelines", which were also generally circulated internally within Spotless around that time. 80 Mr Muller has also examined Mr Reynolds' emails and the attachments to them referred to in [69] above. He said, and was not challenged, that each of the spreadsheets attached to Mr Reynolds' emails was a slightly modified version of the new template. The modifications are: (a) on some worksheets, Alliance Catering's logo had been replaced with Blanco Catering's logo; (b) various figures had been inserted into the new template; (c) a worksheet headed "Revenue Summary" had been added; and (d) a worksheet headed "Lease" had been added. 81 In addition, each of the spreadsheets attached to Mr Reynolds' emails was a slightly modified version of the new template. The modifications are: (a) a worksheet on which appears the words "Scenario 1" at the top left hand corner had been added; and (b) a worksheet on which the names of months appear from "July" to "June" at the top had been added. 82 Most, if not all, of the evidence of the witnesses called by Spotless related to its general processes, the investigations relating to Mr Reynolds when in early September 2009 it was suspected that he had an involvement with Blanco Catering, leading to the termination of his employment and to the Zoo project. 83 I have made some observations about Mr Reynolds' evidence at [32] above. It follows that in many respects I have accepted his evidence. For instance, I have rejected the claim that for the last two years or so of his employment by Spotless he did not work the hours which he should have worked or with the commitment and diligence expected from his employment with Spotless, based largely upon his evidence. I have also accepted his evidence about how and why he came to refer catering opportunities to other caterers in relation to the catering contracts potentially available to Spotless in relation to premises at the University of Adelaide, the proposed coffee shop at 25 Grenfell Street Adelaide, for EDS Adelaide, and the "Eagles Tour 09". It is not necessary to refer to those matters further. 84 Mr Reynolds had extensive experience in the hospitality industry, including working as a catering manager and as a food and beverage manager, before he commenced working for Spotless in 2002. It is not necessary to trace his career path within Spotless. In my view, his relationship with Mr Blanco and Blanco Catering commenced innocently, and was conducted consistently with Mr Reynolds' obligations to Spotless until almost mid 2009. 85 As already stated, Mr Reynolds met Mr Blanco on a social occasion in 2007, and there they learnt that they were both in the catering industry. A few months later, no doubt prompted by what Mr Reynolds had told Mr Blanco about his work experience, Mr Blanco contacted Mr Reynolds about working together. Over the next several months, Mr Reynolds contributed to the shared development of the "Heaps Good Food" concept, with the vague plan to go into business together under that label. The concept was to make and supply pre-prepared sandwiches and convenience foods. Ultimately nothing came of it. However, that led to closer involvement of Mr Reynolds and Mr Blanco with each other. 86 In late 2008, Mr Blanco had been invited by Mr Boscaini, on behalf of the Adelaide Zoo, to give some input into the layout and plans for the new Adelaide Zoo Conference facilities. Mr Blanco in turn sought from Mr Reynolds his input, leading to Mr Reynolds attending a meeting with Mr Boscaini and Mr Blanco to discuss the layout and plans. Mr Reynolds at that meeting told Mr Boscaini of his role with Spotless. Mr Boscaini was an external consultant to the Adelaide Zoo. Mr Boscaini, for his part, indicated that the meeting was not the first step in the calling for expressions of interest for the Zoo project. 87 Nevertheless, I infer that Mr Blanco saw the occasion as an opportunity to get his (or Blanco Catering's) foot in the door when expressions of interest were called for. His "pitch", I infer, included retaining Mr Reynolds' involvement as I am sure he was impressed with Mr Reynolds' style and knowledge. Mr Reynolds, I find, realised that he was therefore part of the "pitch" to Mr Bosciani at that preliminary stage. Moreover, given the discussions between Mr Blanco and Mr Reynolds about the Heaps Good Food concept, I also accept that there was a generally shared view between them that at some stage, if a suitable business option were selected, they could work together more formally in the future. However, I do not accept that Mr Reynolds at that stage was deliberately seeking to advance the interests of Blanco Catering at the expense of Spotless. Mr Reynolds did attend that meeting knowing Spotless may well be interested in the Zoo project, and that his superiors would be concerned about his attendance at that meeting. I find that his attendance was, in the circumstances, ingenuous and inappropriate in fact. Spotless contends that his attendance helped Blanco Catering get its foot in the door. The evidence, in my view, shows that the discussion was not at such a level that Spotless was in fact disadvantaged in any way in relation to the Zoo project tender process at that time. The fact is that Mr Boscaini had chosen to involve Mr Blanco at that early point. There is nothing to suggest that, other than Mr Boscaini, anyone else at the Adelaide Zoo knew of Mr Reynolds' attendance, or indeed of him, or that Mr Boscaini did anything other than take the benefit of whatever layout advice came from that meeting for his own presentation to the Adelaide Zoo. 88 The next step in the relationship between Mr Reynolds and Mr Blanco arose in relation to the Botanic Gardens tender. Mr Blanco became aware in early 2009 of that potential opportunity, by the public invitation calling for expressions of interest. I accept that a few years before Spotless through Epicure Catering had not been interested in an earlier potential tender for the Botanic Gardens catering work. Mr Reynolds was aware of that. There is no evidence to suggest that Epicure Catering responded to the expressions of interest invitation in early 2009. Hence, I do not consider that it was in fact financially disadvantaged in any way by Mr Reynolds' role in relation to the Botanic Gardens tender. It did not express its claim in relation to that tender, or Mr Reynolds' role in relation to that tender on that basis, save for the claim based upon Mr Reynolds' time spent on that tender. I have not accepted that claim. 89 Nevertheless, Mr Reynolds played a significant role in securing the Botanic Gardens tender for Blanco Catering. His conduct involved a breach of his duties to Spotless, because he supplied to Blanco Catering confidential documents of Spotless. It was at this stage, too, Mr Blanco and Mr Reynolds developed a more structured commercial relationship. Those discussions evolved over the period from March 2009. By July 2009, they had advanced to the point where Mr Reynolds and his wife through Chresby Nominees Pty Ltd were to acquire an interest in Blanco Catering, together with another then external investor. That structure was in place before the final Blanco Catering proposal for the Botanic Gardens tender was made. The proposal was accepted in late July 2009 to commence on about 30 August 2009. 90 By that time, I find Mr Reynolds had formed the firm intention to leave the employment of Spotless and to commence working with Blanco Catering. He was anxious to work for Spotless long enough to secure pro rata long service leave, but as noted earlier in these reasons Spotless terminated his employment before he so qualified. 91 Importantly for present purposes, despite Mr Reynolds initially downplaying in his evidence the role he played in relation to securing for Blanco Catering the Botanic Gardens tender, he accepted that the financial model used for its proposal was a modified version of the Spotless financial model template described by Mr Muller and to a significant extent that he used as a starting point from data available to him in his role within Spotless and without which he would have had to expend time and effort assembling and putting into the model. The transition plan he developed was also based upon a Spotless document. 92 At this point, I find that Mr Reynolds was keen to keep concealed from Spotless what he was doing for the benefit of Blanco Catering in relation to the Botanic Gardens tender. He had by then decided to leave the employment of Spotless at some reasonably proximate stage in the future. He was remaining there, in part to qualify for pro rata long service leave, and also to hedge his bets in case neither the Botanic Gardens tender nor the Zoo project were secured by Blanco Catering. 93 In short, in my judgment, he was actively working to advance the prospects of Blanco Catering, which was in general terms a competitor of Spotless, including in relation to the Zoo project to the immediate detriment of Spotless. Furthermore, he was doing so by accessing and using for the benefit of Blanco Catering certain documents of Spotless including the model template for financial modelling. In the case of the Botanic Gardens project, there was no Spotless input data to copy or adopt. That position changed in relation to the Zoo project. I now turn to that topic in more detail. In the circumstances already referred to, in my judgment, Mr Reynolds was in breach of his duties to Spotless. 94 The Zoo Project was foreshadowed to Blanco Catering through Mr Blanco in the way referred to above. In July 2009, formal expressions of interest in relation to the Zoo project were invited. Blanco Catering decided to respond. I am confident that, between Mr Blanco and Mr Reynolds, that decision had been taken earlier following their November 2008 meeting with Mr Boscaini. However, there is nothing to suggest that until July 2009 Mr Reynolds or Mr Blanco had done anything more to advance the prospects of Blanco Catering getting the Zoo project. They had advanced the potential involvement of Mr Reynolds in Blanco Catering generally in the way described above in the period leading up to July 2009. 95 Mr Reynolds' evidence in chief was that he deliberately refrained from any action which might assist Blanco Catering in securing the Zoo project from that time. It was obvious to him that Spotless would not agree to him doing so. I find it was equally obvious to him that, by reason of his employment with Spotless and his awareness that Spotless through Epicure Catering was likely itself to seek the Zoo project, he should not assist a direct competitor for that project. 96 I accept that the line he drew was twofold. Firstly, he had no direct discussions with Mr Bond or others who, on behalf of Spotless through Epicure Catering, were directly dealing with the particular proposal. Secondly, he had no direct dealings with Mr Boscaini (the designated contact for the Zoo project) or any other officers of Adelaide Zoo. 97 That justification was not sufficient to avoid Mr Reynolds breaching his duties owed to Spotless. In fact, he worked behind the scenes for Blanco Catering to develop its proposal, which was ultimately successful, and in doing so he had access to and used the confidential financial model template and the primary data that Spotless used as an input in its initial proposal for the Zoo project. In my view, Mr Reynolds significantly understated his use of that data in his evidence in chief, including by his assertions that the input data for the Blanco Catering financial modelling was derived from another business serviced by Blanco Catering, and that the Spotless template required to be significantly modified. 98 I find that Mr Reynolds actively supported the Blanco Catering expression of interest in the Zoo project. He had by that time taken up an interest in Blanco Catering. When expressions of interest were invited, Mr Blanco immediately involved Mr Reynolds to assist in developing the Blanco Catering proposal. He prepared financial modelling for Blanco Catering which was only a slightly modified version of the then current model created by Mr Muller for Spotless. In a series of financial models he then provided to Blanco Catering between 30 July 2009 and 28 August 2009 the revenue projections for the Zoo project formulated by Spotless through Epicure Catering division. It is clear that he was using and adopting the expertise of Spotless by that conduct. As I have found above, the anticipated revenue flows are an integral and primary step in the development of the rental proposal - the payment offered by the tenderer - by Spotless for the Zoo project. It should also be noted that, as a "greenfields" site, the Zoo project presented challenges to modelling revenue forecasts and that Spotless' previous experience in that regard was an advantage. One of the financial models prepared by Mr Reynolds for Blanco Catering, also contains or reflects one of the potential rental offers of Spotless for the Zoo project. There is no direct evidence that Mr Reynolds either saw, or passed on, the rental proposal of Spotless as contained in the documents it submitted to the Adelaide Zoo. In fact, as noted in a little more detail below, the initial Spotless rental proposal was numerically quite different from the initial Blanco Catering proposal. 99 I accept Mr Reynolds' evidence that he did not simply replicate all that he saw in the Spotless financial modelling. It was part of his experience to "work up" such documents, and I accept that he applied his own judgment, using information in part available to him through Blanco Catering about another of its catering contracts, and in part via his own judgment about expenses and the possible rental offers. However, his starting point for revenue projections was taken from the Spotless financial modelling to which he gained access. 100 Clearly, the work done by Mr Reynolds for Blanco Catering as referred to above was heavily relied upon by Blanco Catering in developing and presenting its proposal for the Zoo project. 101 On 3 August 2009, Blanco Catering submitted its first proposal. That proposal was ultimately completed by someone other than Mr Reynolds. It was probably done by Mr Blanco, although there is no direct evidence of that. It was a proposal that had a similar structure to the first Spotless proposal: a fixed rental for year 1 and an increased rental for year 2, with CPI increases thereafter. However, the numbers were significantly different, and the Blanco rental proposals were lower than those of Spotless. I think the fact of those significant differences indicates that Mr Reynolds did seek to maintain a "cut-out" point for his role. However, as I have found, his role generally in relation to the Zoo project from July 2009 was in breach of his duties to Spotless. 102 In about mid August 2009, Mr Blanco told Mr Reynolds that Blanco Catering was one of the several shortlisted caterers for the Zoo project. Subsequently, it appears that, at the invitation of Mr Boscaini, Mr Blanco and the third investor in Blanco Catering, Mr Horner, met with Mr Boscaini on about 20 August 2009. Mr Reynolds did not attend. Mr Blanco some time later told Mr Reynolds that Blanco Catering had been requested to increase its rental offer if it wished to be the successful tenderer. Mr Reynolds was also told by Mr Blanco that Blanco Catering had to meet the rental proposal of Spotless, and by Mr Blanco what that proposal was. Mr Blanco said he had been told that figure by Mr Boscaini. 103 Spotless had put in its final tender proposal for the Zoo project on 21 August 2009. It did so following a meeting between Mr Boscaini and Mr Bond on 1 August 2009. There was then no further contact with Mr Boscaini until just before the contract was awarded. The final Blanco Catering proposal matched the rental proposal of Spotless. Other terms of the proposal were, in some respects, different. 104 Spotless contends that, through Mr Reynolds, Blanco Catering used both the Spotless modelling template and the Spotless revenue projections to assist it in developing the proposals of Blanco Catering. As indicated above, I accept those contentions. 105 It also contends that, through Mr Reynolds, Blanco Catering had access to the terms of the Spotless rental proposal made on 21 August 2009. That final contention is not accepted. 106 Neither Mr Blanco nor Mr Boscaini were called to give evidence either by Mr Reynolds or by Spotless. Ultimately in the case of Mr Boscaini, I have no reason to think that he was not an available witness to either Spotless or Mr Reynolds. I am cautious about what use I may make of Mr Reynolds' evidence about his conversations with Mr Blanco from about mid August 2009 until the award of the Zoo project to Blanco Catering. What he says he was told is capable of providing an explanation for the largely coincidental final rental offers of Spotless and Blanco Catering. It does not, strictly speaking, prove the accuracy of those stated assertions. On the other hand, there is no direct evidence on which Spotless asserts that Mr Reynolds took from Spotless records pertaining to its revised proposal of 21 August 2009 to assist Blanco Catering in making the matching rental offer. The documentary trail referred to above, including the search of Mr Reynolds' computer, does not show that Mr Reynolds had access to that particular information of Spotless. There is an alternative explanation for its source. There is no direct evidence from Mr Boscaini to confirm or deny that explanation. However, the course of the documents leaves me with the firm impression that Mr Boscaini's communications with Blanco Catering were more extensive and more sympathetic to Blanco Catering than to Spotless. So far as the evidence goes, after Spotless made its revised proposal on 21 August 2009, Mr Boscaini initiated no further communications with Spotless. Blanco Catering had further communications, and the opportunity for some time to refine or improve its rental proposal up to its final proposal on 22 September 2009. It may well be that what Mr Reynolds was told by Mr Blanco about Mr Blanco's communications with Mr Boscaini were accurate. It is sufficient for present purposes to say that, notwithstanding the forceful submissions on behalf of Spotless that I should find, contrary to Mr Reynolds' evidence, that he did have access to the revised Spotless proposal of 21 August 2009, I do not make that finding. I am not persuaded, on balance, of that matter. 107 It also follows that I do not make the further finding that Mr Reynolds, by engaging in such conduct, enabled Blanco Catering to obtain the Zoo project at the expense of Spotless. Such evidence as there is tends to suggest that - for whatever reason - Mr Boscaini on behalf of the Adelaide Zoo preferred Blanco Catering to Spotless as the successful tenderer for the Zoo project, at least once the tenderers were reduced to only a few, and that he provided Blanco Catering enough information to ensure that in financial terms its rental proposal was an approximately matching one. I do not intend to suggest that Mr Boscaini's reasons for so acting were other than entirely proper. There is no reason to suspect that he may have had good reasons for his further approaches to Blanco Catering. Nor is there any reason to think that he did not achieve for the Adelaide Zoo what he considered the best outcome both in rental terms and in other terms. On balance, in my judgment, the source of Blanco Catering's knowledge about the terms of the final rental offer of Spotless was Mr Boscaini and not Mr Reynolds. 108 In the light of those findings, it is difficult to quantify the damages suffered by Spotless by reason of the breaches of duty by Mr Reynolds. I do not accept that, but for his breaches of duty as identified, Spotless would have been awarded the Zoo project. I accept that, by reason of Mr Reynolds' breaches of duty, Blanco Catering was more readily able to undertake the financial modelling which underlay its decision about the rental payment to be offered for the Zoo project. Having regard to the final rental offer it made, and the extent to which that offer had changed from its initial rental offer, I suspect that the modelling may have been used to justify making the offer necessary to secure the contract rather than as the foundation for the offer. The modelled outcomes depend on the assumptions reflected in the inputs. Nevertheless, I decline to assess the loss and damage claimed by Spotless on the basis that, but for his breaches of duty, Spotless would have been awarded the Zoo project or that its position as a tenderer was diminished by Mr Reynolds' breaches of duty.

Remedies 119 Spotless seeks orders in the following terms: (a) Mr Reynolds (whether by himself, his servants or agents, or any companies controlled by him, or otherwise howsoever) be restrained from using or disclosing any of the Confidential Information (as defined in [20] of the Statement of Claim). (b) Without limiting the order in paragraph (a) above, Mr Reynolds (whether by himself, his servants or agents, or any companies controlled by him or otherwise howsoever), be restrained from soliciting, approaching, or causing to be approached any of the customers (or former customers) of Spotless with the intention of inducing such customers (or former customers) to deal with him (whether by himself, his servants or agents, or any companies controlled by him or in which he has an interest, or otherwise howsoever) in any way which involves use of disclosure of the Confidential Information (as defined in [20] of the Statement of Claim). (c) Within seven days, Mr Reynolds deliver up upon oath to Spotless all documents and every other recording under his possession, power or control containing the Confidential Information (as defined in [20] of the Statement of Claim) or any part of it. (d) Within seven days, Mr Reynolds serve an affidavit which confirms that he has delivered up to Spotless all documents and every other recording under his possession, power or control containing the Confidential Information (as defined in [20] of the Statement of Claim) or any part of it. (e) Mr Reynolds pay Spotless damages and/or equitable compensation for breach of statutory/fiduciary and/or contractual duty. (f) Mr Reynolds pay Spotless damages for breach of copyright. (g) Mr Reynolds pay Spotless additional damages for breach of copyright. (h) Mr Reynolds pay Spotless statutory interest on the amounts awarded in sub-paragraphs (e) to (g) above. (i) Mr Reynolds pay the costs of Spotless of the proceeding. 120 The damages claims were quantified in closing submissions in the following way. 121 Damages claimed for breach of duty/breach of contract were under two headings: (1) Zoo Project: net present value of expected profits of Spotless of $996,556 plus loss of efficiency gains of $50,000-$100,000; and (2) Wasted Expenditure: 50% of salary between March 2009 and October 2009 of $44,784 and 25% of salary between November 2008 and February 2009 of $11,249. 122 Damages claimed for breach of copyright under s 115(2) or s 115(4) of the Copyright Act were for - (3) Use of New Template Spotless Financial Model for Zoo Project - in the same loss as the Zoo Project claim; and alternatively for damages at large of $15,000 (s 115(2)); (4) Use of Old Template Spotless Financial Model for Botanic Gardens Project: damages at large of $15,000 (s 115(2)); and (5) Additional damages at large of $30,000 (s 115(4)). 123 The amount of equitable compensation to which Spotless will be entitled for breach of the employment obligations is the amount necessary to restore Spotless to the position which it would have enjoyed but for the wrongful conduct. The remedy of equitable compensation is more absolute in nature than the common law obligation to pay damages for tort or breach of contract. It is not necessary to consider specifically foreseeability and remoteness. In any event, in the present circumstances, those concepts would not feature so as to limit the recoverable damages. Spotless contends that all it needs to show is "that the breach of duty was a cause of the loss suffered, not the cause". The inquiry is simply whether the loss would have happened if there had been no breach. This has been described as a more stringent causal test than ordinarily applies at common law: see eg O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 272-278; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 90-94; Maguire v Makaronis (1997) 188 CLR 449; Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1; AMP Services Ltd v Manning [2006] FCA 256 at [64]-[69]. 124 The Court is also entitled, with the full benefit of hindsight, not to speculate against the interest of the plaintiff. In GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers & Ors [2005] VSCA 113 at [71] per Warren CJ (Chernov and Dodd-Streeton JJ agreeing): This allows the plaintiff to lead only a minimum of evidence to discharge the evidentiary burden of causation. Indeed, in this regard it has been said that "[e]quity must strive to repair the breach of fiduciary duty lest the fiduciary in default be exonerated too easily … [and] the courts be seen to wink at wrong-doing. 125 Further, in assessing equitable compensation, the Court may make a determination on the basis of loss of opportunity. As Finkelstein J stated in AMP Services Ltd v Manning at [69]: When dealing with equitable compensation a court is often faced with the challenge of placing a monetary value on an elusive loss such as a "loss of opportunity", a loss that defies precise measurement: O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262, 273 adopting Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129, 163. To this end the court is permitted to use somewhat subjective "tools" in arriving at a valuation; tools such as commonsense and general notions of justice and fairness. 126 Ultimately, the amount of equitable compensation that the Court will order if the applicants succeed in their claim based on breach of fiduciary duty/breach of confidence is a matter of discretion. It will be determined by a process of "judicial estimation on the available indications". 127 A compensation order under s 1317H of the Corporations Act will only be granted if damage "resulted from" the contravention of ss 182(1) and 183(1). In Adler v Australian Securities and Investments Commission [2003] NSWCA 131, the New South Wales Court of Appeal held that the meaning of the words "resulted from" in s 1317H did not import the same stringent causal enquiry that applied in respect of breach of fiduciary duty. Rather, the words meant that "only the damage which as a matter of fact was caused by the contravention can be the subject of an order for compensation" (at [709]). The Court in that case likened the causal enquiry under s 1317H to that applicable under s 82 of the Trade Practices Act 1974 (Cth). Section 82 of the Trade Practices Act 1974 (Cth) has been held to take up the "common law practical or common-sense concept of causation" discussed in March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506. 128 For breach of contract, the relevant causal enquiry was recently described by McKeekin J in Deeson Heavy Haulage Pty Ltd v Cox (2009) 82 IPR 521 at [111] as follows: The relevant test in these circumstances, of whether a breach of contract is causally significant, was described by Thomas JA in Wylie v ANI Corporation in the following terms: In contract cases where competing causes exist it seems to be recognised that liability will be found only if the defendant's acts can be regarded as of equal or close to equal potency with other causes. I note Thomas JA's reference in Wylie to Devlin J's comment in Heskell v Continential Express Limited that "… the cause of loss has to be ascertained by the standard of commonsense of the ordinary man. Commonsense is a blunt instrument not suited for probing into minute points, and I cannot believe that if the ordinary man thinks that two causes are of approximately equal efficacy, he cannot say so without being interrogated on fine distinctions". 129 In circumstances where the breach of employment obligations has resulted in a failure on the part of the respondent to property perform his/her duties to their employer, damages may also be awarded by reference to either the net value to the employer of the work the employee would have done if properly performing his/her duties or, if it is not possible to assess that value, the employer may claim expenditure wasted as a result of the employee's breach. See generally Oldcastle v Guinea Airways Ltd [1956] SASR 325. In this matter, such considerations do not appear to me to be an apt basis to assess damages payable to Spotless. 130 In the case of claims for breach of copyright, the purpose of an award of damages for infringement of copyright is to compensate copyright owners for the loss which they have suffered as a result of the defendant's breach: see Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW (1975) 6 ALR 445 at 466 per Bowen CJ; A/Asian Performing Rights Assn Ltd v Grebo Trading Co Pty Ltd (1978) 23 ACTR 30 per Blackburn CJ. Accordingly, there is no one fixed method of assessment which can be applied to all cases, and damages will therefore need to be assessed by the Court according to the circumstances of each case. 131 In some instances, the appropriate measure will be the fee that the copyright owner might otherwise have fairly charged for the use of their work by the defendant, a task that may be relatively straight forward where the applicant has a practice of licensing its material or where there are readily available market comparators. In other situations, where licensing would be highly unlikely but the parties are in actual or potential competition, loss of a commercial opportunity, such as the loss of profit on a potential contract or potential sponsorship arrangement may be a more appropriate measure, so long as this is not purely speculative and can be attributed to the infringing conduct of the defendant: see generally Bailey v Namol Pty Ltd (1994) 53 FCR 102. The loss that is recoverable is loss of profit: see TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) (2007) 158 FCR 444 at 495. It also includes secondary loss such as the loss of sales of non-copyright work that is sold with the copyright work. The issue of whether or not such secondary loss is recoverable is one of causation. 132 Further, where a claim of copyright infringement in respect of an unpublished work is made together with a claim for breach of confidence, the measure of damages will generally be the same in each case and will not be awarded cumulatively: Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW (1975) 6 ALR 445; Fortuity Pty Ltd v Barcza (1995) 32 IPR 517 at 532. 133 However, in certain circumstances, the assessment of damages for copyright may simply be "at large". That will be the case where, for example, the applicant has no previous practice of licensing the copyright material and is unable to prove any specific loss of commercial opportunity as a result of the respondent's infringement of that copyright. In such cases, the Court will seek to give "what amount I think right as if I were a jury" and the fact that damages cannot be calculated precisely should not prevent the Court from making an award of damages, even if some element of speculation and guesswork is involved: see generally Fenning Film Service Ltd v Wolverhampton, Walsall and District Cinemas, Limited [1914] 3 KB 1171 at 1174; Autodesk Australia Pty Ltd v Cheung (1990) 94 ALR 472 at 477 per Wilcox J; Columbia Picture Industries Inc v Luckins (1996) 34 IPR 504 at 510 per Tamberlin J; Enzed Holdings Ltd v Wynthea Pty Ltd (1994) 3 IPR 619 at 637 per Sheppard, Morling and Wilcox JJ; Foxtel Management Pty Ltd v Mod Shop Pty Ltd (2007) 165 FCR 149 at [315]-[336] per Siopis J. 134 Even if the plaintiff cannot establish that it has suffered any damage as a result of the infringement of its copyright, it is "entitled to nominal damages to vindicate the invasion of its proprietary rights": MJA Scientifics International Pty Ltd v S C Johnson & Sons Pty Ltd (1999) 43 IPR 275 at 281 per Sundberg J. 135 The Court also has a statutory discretion to award additional damages under s 115(4) of the Copyright Act having regard to the flagrancy of the infringement, the need to deter similar infringements of copyright, the conduct of the defendant after the act constituting the infringement, any benefit shown to have accrued to the defendant by reason of the infringement, and all other relevant matters. 136 So far as the origin of s 115(4) is concerned, Legoe J of the Supreme Court of South Australia has commented that the provision gave an Australian Court "the widest possible discretionary power to compensate the plaintiff for its loss and damage occasioned by the infringement, whether such loss or damage is classified as of an exemplary or aggravated or even punitive nature": Concrete Systems Pty Ltd v Devon Symonds Holdings Ltd (1978) 20 SASR 79 at 85. 137 Infringement of copyright will be "flagrant" if it is knowing and deliberate. In Fortuity Pty Ltd v Barcza (1995) 32 IPR 517 at 533, where a disloyal employee copied her employer's copyright material in the course of preparing to launch her own business and solicited the customers of her employer while still engaged by the latter, the Court found this to be a flagrant infringement of copyright and that "additional damages should be awarded … as an example to those in the community … who might be tempted to make unfair use of the work of others in similar fashion". 138 As regards the consideration of "any benefit" shown to have been accrued to the defendant for the purposes of assessing additional damages, it does not import any particular quantitative or qualitative requirement. Even though there is no precise evidence as to the profits or income derived by the defendant as a result of their infringing conduct, courts will readily assume that their activities are profitable and that the use of the plaintiff's copyright material was not unimportant to its success. There is here no evidence upon which I could assess the benefit to Mr Reynolds. His relationship with Blanco Catering had been more or less set. The benefits of the Zoo project, and of the Botanic Gardens tender, to Blanco Catering are not identified. The claim against Blanco Catering has been resolved. 139 In Flags 2000 Pty Ltd v Smith (2003) 59 IPR 191 at 198, Goldberg J commented that there was no necessary or proportionate relationship between an award of compensatory damages under s 115(2) and an award of additional damages under s 115(4). However, often additional damages will not be awarded where compensatory damages are thought sufficiently large and vice versa. That happened in Amalgamated Mining Services Pty Ltd v Warman International Ltd (1992) 111 ALR 269 at 286-287 where Wilcox J stated: … had compensatory damages not justified an award as high as $3 million, I would have imposed additional damages to take the award to that figure. If copyright protection is to mean anything, the court must take a severe view in cases as blatant as this. 140 I have rejected the claim that Spotless should be compensated for Mr Reynolds' breaches of duty on the basis that, but for those breaches, it would have been awarded the Zoo project. I have reached the opposite conclusion that, even if Mr Reynolds had not breached his duties to Spotless, Blanco Catering nevertheless would have been awarded the Zoo project. I have found that the source of the knowledge of Blanco Catering about the revised rental offer made for the Zoo project on 21 August 2009 was not Mr Reynolds. The Spotless revenue projections facilitated Blanco Catering in tendering for the Zoo project, but I consider that Mr Reynolds could and would have produced modelling to support Blanco Catering's tenders in any event. 141 Blanco Catering, through Mr Reynolds, benefited from being able to use the Spotless templates first to determine how it would present its rental proposal for the Botanic gardens tender. But it did not use Spotless' confidential modelling information for that purpose. The use of that document was as a "pro forma" with Mr Reynolds himself creating the input data. It also used the Spotless templates for that purpose in relation to the Zoo project. In addition, in relation to the Zoo project, Mr Reynolds provided the Spotless revenue projections and at one point its possible the (modelled) rental proposal to Blanco Catering. The revenue projections, as distinct from the form and structure of the document, were used in the modelling done for Blanco Catering. That information did not result in Blanco Catering initially making a rental proposal the same as, or even like, that of Spotless. Subsequently, when Blanco Catering did make a rental proposal directly to match (or in effect to match but be slightly different from) the revised Spotless proposal, I have found on balance that neither Mr Reynolds nor Blanco Catering obtained access to the terms of the revised Spotless proposal from any Spotless document. The revenue projections taken from the Spotless template were apparently still accessed by Blanco Catering, although in minor respects Mr Reynolds made some timing and other slight adjustments. For instance, the Blanco Catering revenue projections developed for its first rental proposal, as modelled, were different from the date taken from the Spotless template. There was a need for Blanco Catering, for its modelling purposes, to increase those revenue projections if it were to justify by its financial modelling the rental proposal it finally made. It may have been comforted by being aware of the initial Spotless revenue projections. I have noted above that, as Spotless itself said, the projections might be altered if it were perceived necessary to match or better a competitor's tender. I consider that, to the extent to which Blanco Catering through Mr Reynolds, adjusted the Blanco Catering modelling using the Spotless revenue projections, it was to justify the Blanco Catering revised matching rental proposal. The result dictated the inputs, rather than the reverse. That is, in my view, consistent with the evidence of Mr Rutter to which I have referred. 142 The proposed finding put forward by Spotless in its final submission was that Mr Reynolds' "use of Spotless confidential financial information as to the revenue it expected to make from the Zoo project and the rental it was prepared to pay, enabled Blanco Catering to secure the Zoo Project and resulted in Spotless losing it". I do not make that finding. 143 I therefore do not make an award of damages for loss of profits as sought in [119(1)] above. I have also indicated earlier in these reasons why I do not make an award of damages for awarded expenditure as also sought in [119(2)] above. 144 In my judgment, having regard to the findings, Spotless should recover from Mr Reynolds an amount of general damages for the breach of his duties in the order of $100,000. There is no science to that figure. It reflects, but only in a very general way, the loss of opportunity to secure the Zoo project because the use of the Spotless templates made the task of Mr Reynolds in doing the financial modelling for Blanco Catering for its rental proposal easier and because its revenue projections may have given it some comfort when it decided to match the revised Spotless rental offer, as well as the general considerations relating to the assessment of such damages. It was not asserted that, without the use of the template, Mr Reynolds could not have done modelling of a similar nature - perhaps not so sophisticated - or that some form of modelling could not have been done using a commercially available spreadsheet and program. The same comments apply in respect of the use of the first Spotless template in relation to the Botanic Gardens project. 145 In reaching that conclusion, I have had regard also to the damages for breach of copyright I would have awarded, but for the fact that it would be doubling up. Having regard to the matters to which I have referred, I would have assessed the damages of Spotless in the particular circumstances: (a) for breach of copyright in the first template, in relation to the Botanic Gardens project at $5,000; (b) for breach of copyright in the second template and including the revenue data in relation to the Zoo project at $30,000; and (c) for the circumstances in which those breaches of copyright occurred, namely that Mr Reynolds knew it was wrong to do so and used the templates "because they were readily available to me and I considered it unnecessary to reinvent the wheel", a further $10,000. 146 To avoid that issue of duplication, especially as the conduct which informs my assessment of general damages for breaches of duty takes account of the conduct which constitutes the breaches of copyright, I will make no separate order for damages for breach of copyright. I am conscious that the copyright may not have vested in Mr Reynolds' employer Spotless Management Services Pty Ltd. But in the course of the hearing and in the final submissions no especial focus was given to that issue. 147 I will also make injunctive orders, more or less along the lines requested by Spotless but having regard to the findings made above. I will hear the parties as to costs. For that purpose, the parties are given a time within which to file and serve any submissions as to costs, and I will determine that issue on those written submissions. I have anticipated that, in the first instance, Spotless will simply seek the costs of the proceedings from Mr Reynolds. 148 The orders of the Court are: 1. Mr Reynolds, whether by himself, his servants or agents or any companies controlled by him, be restrained for a period of three years from the date of these orders from using or disclosing the financial model templates of Spotless in the form used and attached to any of: (d) the email of 22 August 2009 from Paul Reynolds Alliance Catering email account to christopher.horner@blancofood.com.au which attached an Excel spreadsheet with enclosed financial information; (e) the two emails of 30 July 2009 and an email of 1 August 2009 from the said account to Mr Blanco: steve@italiancentre.com.au which attached financial models that set out financial information in relation to the Zoo project; (f) the two emails of 27 and 28 August 2009 from the said account to Mr Blanco: steve@blancofood.com.au which attached a financial model that set out financial information in relation to the Zoo project. 2. Mr Reynolds, whether by himself, his servants or agents or any companies controlled by him, be restrained for a period of three years from the date of these orders from approaching or causing to be approached any of the customers (or former customers) of Spotless with the intention of inducing such customers (or former customers) to deal with him (whether by himself, his servants or agents, or any companies controlled by him or in which he has an interest, or otherwise howsoever) in any way which involves use of disclosure of the financial model templates referred to above, or the information contained in either of the said financial model templates. 3. Within seven days, Mr Reynolds deliver up upon oath to Spotless all documents and every other recording under his possession, power or control containing the information the subject of Order 1 hereof or any part of it. 4. Within seven days Mr Reynolds serve an affidavit which confirms that he has delivered up to Spotless all documents and every other recording under his possession, power or control containing the information the subject of Order 1 hereof or any part of it. 5. Mr Reynolds pay to Spotless Management Services Pty Ltd damages of $100,000 for breach of duties owed to it. 6. Spotless and Mr Reynolds have liberty to file and serve such written submissions as to costs as they may be advised: (a) Spotless within 14 days of the date of these orders; (b) Mr Reynolds within 14 days of the service of the Spotless submissions; (c) Spotless reply within a further seven days of the date of service of Mr Reynolds' submissions to the intent that the Court will make an order for costs of the proceedings after consideration of the written submissions as to costs. 149 I observe that the injunctive orders are more confined than those sought by Spotless because, in respect of certain matters, I did not find Mr Reynolds had breached his duties to Spotless in the way asserted. I have also limited the period of the injunctions, because it is generally undesirable to impose injunctions of indefinite duration and the period of three years, in the light of the evidence, is likely to have exhausted any real benefit to Spotless of the material referred to in those orders. 150 I note that interest at the prescribed rate will accumulate on the judgment sum from the date of these orders. I certify that the preceding one hundred and fifty (150) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Spotless Group Limited v Blanco Catering Pty Ltd

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