The plaintiff, Sundarjee Bros (Aust) Pty Ltd (SBA), is a family company which carries on two businesses. One involves property investment. The other is an export business. SBA has three directors - Murjee Sandarjee (Murjee), Pravin Sundarjee (Pravin) and Hasmukh Sundarjee (Hasmukh). Pravin is Murjee's son and Hasmukh's cousin.
Up until about 20 April 2022, there were seven employees engaged in the export business, including Hasmukh and Hasmukh's son, Sanjay.
In around August 2020, relations between Murjee and Pravin on the one hand and Hasmukh on the other broke down. Following unsuccessful negotiations for Hasmukh to buy the export business from SBA, on 20 April 2022, Hasmukh resigned as an employee of SBA. His resignation was followed closely by the resignation of four other employees who were involved in the export business, including Sanjay and Shaoshen (Cynthia) Yu, who had been employed by SBA as a sales executive. (Two other employees who had resigned withdrew their resignations and continue to work for SBA.)
On 19 August 2022, SBA obtained from Robb J ex parte search orders against Sanjay and Ms Yu. The evidence at that time disclosed that:
1. Sanjay and Ms Yu had established a company known as Damican Pty Ltd and through that company had commenced carrying on an export business that was competitive with the business carried on by SBA;
2. There was a strong prima facie case that Sanjay and Ms Yu had breached duties of confidence they owed to SBA by taking SBA's confidential information that was essential to the effective operation of the export business formerly undertaken by SBA;
3. Having regard to the defendants' conduct there was "a great likelihood" (to use the words of Robb J) that information legitimately required to pursue SBA's case would be destroyed if the search orders were not made.
The material to which SBA had access at the time the application for search orders was made did not suggest that Hasmukh was involved in the business carried on through Damican or had breached his duties of confidence to SBA. Mills Oakley, who act for SBA, had written to Hasmukh on 26 April 2022 setting out the relevant facts and alleging "the Company considers that you have improperly used your position and the Company's information in an attempt to gain a personal advantage to the Company's disadvantage by diverting the business opportunities of the Company to your own competing business (Unauthorised Business) including encouraging other employees of the Company to resign from their employment (with inadequate notice) and join you at your Unauthorised Business". The letter went on to allege that that conduct was "clearly in breach of your fiduciary duties and obligations to the Company".
However, on 18 May 2022, Arnold Bloch Leibler, who acted for Hasmukh, replied to that letter stating:
Your letter contains extremely serious allegations regarding Mr Sundarjee's conduct. We are instructed that those allegations are false, and should not have been made.
…
Contrary to the assertions in your letter, our client has not established or is not otherwise involved in any business competing with SBA.
In the light of that reply, and other denials by Hasmukh, SBA reasonably took the position that it did not have sufficient evidence to pursue a claim against Hasmukh at that time.
The search orders against Sanjay and Ms Yu were executed on 22 August 2022. As a consequence, images of various devices and databases were taken by an independent computer expert with KordaMentha. By orders made on 23 September 2022, the Court permitted SBA's computer expert, KPMG, to access electronic data obtained by the search order for the purposes of determining whether the search orders had been complied with or whether any further orders were required. The orders made on 23 September 2022 also permitted KPMG to disclose non-privileged information to SBA's legal advisers for that purpose. The legal advisers were required to give confidentiality undertakings to the Court in respect of that information.
The material obtained by KPMG suggests that there is a strong prima facie case that Hasmukh, prior to his resignation as an employee of SBA on 20 April 2022, had been involved in plans to establish a rival business to SBA's export business, that he had approached suppliers to SBA shortly after his resignation and that he continues to be involved in Damican's business. The evidence also suggests that Sanjay acquired a laptop for Hasmukh to use in Damican's business, which is supported by a consultant retained by Damican, and that steps were taken to conceal Hasmukh's involvement in the new business. There was also evidence that Hasmukh had wiped the laptop provided to him by SBA before returning it following his resignation. Finally, the evidence disclosed a strong prima facie case that, in connection with the establishment of Damican's business, Sanjay had taken essential business records of SBA including a spreadsheet containing a complete list of suppliers over the past two years or so, the quantity of goods ordered by SBA from those suppliers, the price of the goods and the profit earned on their sale.
By a Notice of Motion filed in Court on 6 December 2022, the lawyers acting for SBA sought to be released from their confidentiality undertakings to the extent necessary to enable them to disclose material evidencing Hasmukh's conduct to Murjee and Pravin for the purpose of obtaining instructions to join Hasmukh to these proceedings and to make an application for search orders against him. I made orders to that effect on 6 December 2022.
By a further Notice of Motion filed in Court on 14 December 2022, SBA applied ex parte for leave to amend its claim to join Hasmukh as a defendant and for search orders against him. I granted those orders and said that I would publish my reasons for doing so when the matter was next before the Court (which was expected to be on 16 December 2022). These are those reasons.
It is unnecessary to set out in any detail the material relied on by SBA in support of the application to join Hasmukh and for search orders against him. I was satisfied that that material established that there is a strong prima facie case that, contrary to the assertions contained in Hasmukh's solicitors' letter dated 18 May 2022, Hasmukh has engaged in the conduct alleged against him.
Two points followed from that conclusion. First, it explains why it was appropriate that the application was made ex parte. I accepted that there was a real risk that if the defendants had been put on notice of the application they would have told Hasmukh of it and that if that had happened there was a very real risk that Hasmukh would seek to destroy material that would ultimately be discoverable by him in the proceedings. On the other hand, little harm would be caused to the defendants as a consequence of the orders being made ex parte. The orders did not directly affect the existing defendants. It seemed obvious that any claim against Hasmukh should be joined to the existing proceedings given the factual overlap in the claims. It is open to the defendants to make an application for the leave to be revoked.
Second, the facts establish a strong prima facie case against Hasmukh which justified Hasmukh's joinder and satisfied a threshold requirement for the granting of a search order.
An important question on the application for the search orders, and on the application to relieve the lawyers of their confidentiality obligations to the extent described earlier, was whether SBA should be permitted to use the material obtained as a consequence of the previous search orders in support of the application to join Hasmukh and for a search order against him. There was also a question whether the search order against Hasmukh was necessary having regard to the previous orders.
In relation to the first issue, the general principle is that material obtained as a result of the execution of a search order should only be available in accordance with discovery orders made in the substantive proceedings in which the search order was obtained. The purpose of a search order is to preserve material that would, absent destruction, be available to the plaintiff seeking the order in the normal course of the proceedings. The purpose of a search order is not to confer a benefit on a plaintiff that would not otherwise be available to it if the documents were retained. That general principle has limited exceptions. One is where the material is sought to be used to determine whether there has been compliance with the search order itself: see Metso Minerals (Australia) Ltd v Kalra (No 3) [2008] FCA 1201 at [28] per Flick J; see also Skytraders Pty Ltd v Meyer [2021] NSWSC 1670 at [56]ff per Rein J. Another is where the documents are used to test the adequacy of discovery: Rauland Australia Pty Ltd v Johnson (No 2) [2019] FCA 1175 at [55] per Stewart J (Rauland). The use of the documents for that purpose is appropriate in circumstances where the Court has before it evidence that there is a strong prima facie case that the defendant has sought or will seek to avoid its discovery obligations by destroying documents.
Another exception - although not necessarily stated in these terms - is where the Court in the exercise of its discretion is prepared to permit the documents to be used at an earlier stage in the proceedings than would normally be the case. So, for example, in "narrow circumstances", the Court will permit the documents to be used for the purpose of formulating a claim, or as an aid to discovery or to particularise a claim: see Rauland at [55] per Stewart J. This exception recognises the practical reality that to refuse permission to use the documents for a legitimate purpose at an earlier stage in the proceedings may only be productive of wasted time and costs. For example, if the documents are properly discoverable and would on production lead to an application to amend or to the provision of additional particulars, a court may permit them to be used for that purpose immediately rather than wait for orders for discovery to be made and complied with.
It appears that there is no authority which extends the principle stated in the previous paragraph to a case where the plaintiff seeks to rely on the documents to join an additional party. But there is no reason why different principles should apply in such a case. In the present case, the documents that SBA and its legal advisers sought to rely on are almost certainly discoverable because they bear directly on the question whether SBA's confidential information was misused by the defendants. Once discovered, it is to be expected that SBA would or might make an application to join Hasmukh as a party. Accepting that, it was appropriate to permit SBA to rely on the documents for that purpose now. To insist on SBA waiting until orders for discovery are made and complied with was only likely to be productive of delay and wasted costs. And once that was accepted, it was appropriate to permit the legal advisers to disclose the documents to Murjee and Pravin to obtain instructions on whether to make an application to amend to join Hasmukh now.
For similar reasons, it was appropriate to permit SBA to use the documents for the purpose of making an application for a search order against Hasmukh. That order is an incidence of a decision to join him. The purpose of the search order was to preserve documents that would be discoverable by him. I accepted that there was strong evidence that it was likely that Hasmukh would seek to destroy documents held by him given the steps he has apparently taken to date to conceal his involvement in the business carried on by Damican.
On the application, SBA properly raised for the Court's consideration the question whether the search order was necessary having regard to the search orders already made against Sanjay and Ms Yu.
I accepted SBA's submission that it was. There was material before the Court that suggested that the defendants had made attempts to delete information from their computers and mobile phones. Some but not all of that information could be retrieved by KPMG. Further information, which will properly be discoverable in the proceedings, may be available on electronic devices held by Hasmukh.
It was for those reasons that I made the orders I did.
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Decision last updated: 16 December 2022