TF Industrial Pty Ltd v Career Tech Pty Ltd & Anor

Supreme Court of NSW|2011-05-27|Before: Slattery J

Judgment 1In November 2009 the plaintiff, TF Industrial Pty Limited ("TF Industrial") acquired the recruitment and labour hire business of Operations and Technical Contracting Pty Limited ("OTC"). TF Industrial's business acquisition brought it into a relationship with the first defendant, Career Tech Pty Limited ("Career Tech"), which had since 2002 provided consultancy services to OTC, through Career Tech's principal, the second defendant, Mr Vince Rayfield. In September 2010 TF Industrial terminated Career Tech's consultancy. In these proceedings TF Industrial claims that after that termination Career Tech and Mr Rayfield have retained and are threatening to misuse certain confidential information that TF Industrial says that it owns and that it acquired from OTC in November 2009. 2TF Industrial relies in support of its claim: upon equitable doctrines of confidence; upon a contention that the defendants are estopped by their dealings with OTC and TF Industrial from denying the confidentiality of the subject information; and, upon a further contention that Career Tech is in breach of a consultancy agreement with TF Industrial, which agreement is alleged to be on the same terms as that which Career Tech made with OTC. 3Career Tech and Mr Rayfield take issue with the plaintiff's confidential information case at several levels. They say: (1) that TF industrial has not sufficiently defined the information it claims is confidential, so as to reach the threshold for the grant of the relief it seeks; (2) that since 2002 Career Tech has contributed to, shared access to and used the subject information in collaboration with OTC and OTC's related entities, in circumstances that indicate that the information was not confidential to OTC alone and is not now confidential to TF Industrial; (3) that the information was not communicated to Career Tech, either by OTC prior to November 2009, or by TF Industrial after that date, in circumstances importing an obligation of confidence; and (4) that Career Tech and TF Industrial do not have a consultancy agreement between them on the same terms as the Career Tech - OTC consultancy and that as a result TF Industrial cannot invoke a contractual obligation of confidentiality against Career Tech. 4The parties did not draw distinctions between the position of Career Tech and that of Mr Rayfield. Mr Rayfield initially dealt with the related entities of OTC in relation to the information but he soon substituted Career Tech for himself in the relationship. The defendants did not contend that there were defences available to Mr Rayfield, for example, that were not available to Career Tech. 5Thus the defendants contend that, even if the information can be adequately identified, an obligation of confidence does not arise because the information does not "have the necessary quality of confidence about it" and was not "imparted in circumstances importing an obligation of confidence": Coco v A N Clark (Engineers) Ltd [1969] RPC 41, at 47, of The Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 51 per Mason J, O'Brien v Komesaroff (1982) 150 CLR 310 at 326 per Mason J and Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 443 per Gummow J. 6Determination of the issues raised requires consideration of the relationship over time between Career Tech and OTC as well as that between Career Tech and TF Industrial. Much of the evidence about conversations between the principals of TF Industrial and Career Tech and about their dealings with the allegedly confidential information was contested. These reasons therefore commence with a detailed account of the facts including findings on the main contested issues and some observations about the credibility of the principal witnesses. 7Mr Ang of counsel represented the plaintiff in the proceedings. Mr Crossland of counsel represented the defendants. The expedited hearing was heard over five days, 23, 24, 25, 26 and 27 May 2011.

Credibility Issues 8Only three witnesses gave oral evidence and were cross-examined, Mr Draper, the principal of TF Industrial, Mr Rayfield, the principal of Career Tech and Mr John Lambert, the principal of OTC. The Court was able to form clear impressions of each of them. 9Mr Rayfield was the most credible witness of the three. It can be seen from the contents of their e-mail exchanges and their conversations that both Mr Draper and Mr Rayfield were quite strongly religious people. Their religious convictions and sense of moral rectitude were clearly important to each of them. But beneath that common outlook they seemed to the Court to be quite different individuals. 10Mr Rayfield was a candid and compellingly credible witness. He was prepared to make admissions against his own interest during cross-examination, when the circumstances required. He did not seem to be motivated by the need to maintain a business edge over Mr Draper. At the time of giving evidence in 2011 he was a man of 63, close to retirement. He parted company with Mr Draper's TF Industrial in 2010 because he wished to work from home as much as possible, from that time on, so he could adequately care for his 97-year-old mother. He struck the Court as an essentially moral person who could be relied upon to represent facts accurately and who did not embellish the truth in the pursuit of self-interest. His correspondence was open and conciliatory in style. Although he believed in what he thought was right, his nature was such that he preferred to avoid an outright confrontation with Mr Draper if he possibly could. This part of Mr Rayfield's personality explains his conduct in not replying to some of the allegations Mr Draper made in correspondence, allegations with which he, Mr Rayfield disagreed. 11Although on the surface Mr Draper professed the same moral and religious values as Mr Rayfield, his correspondence and his performance in the witness box revealed a man much tougher than Mr Rayfield, who was more openly focused on making demands, on having them satisfied and on the pursuit of personal profit and business advantage. In oral evidence Mr Draper was more argumentative and less ready to make appropriate concessions against interest than was Mr Rayfield. I found him to be a less reliable witness than Mr Rayfield. And in a number of places where their evidence was in conflict I prefer Mr Rayfield's evidence to that of Mr Draper. 12Mr Lambert's evidence was generally reliable. The difficulty that he faced when giving evidence was that in 2009 he had sold the business of OTC and was now attempting to recall its historical operations. He was not giving an account of its current operations. He appeared to the Court to be an honest witness, attempting to do his best. I have generally accepted his evidence. But in the places where Mr Lambert's evidence is in conflict with that of Mr Rayfield, I have generally preferred the evidence of Mr Rayfield.

Career Tech, Technical Focus Pty Limited and OTC - 2002 to 2005

Technical Focus Pty Limited and "Technical Focus" 13Mr Rayfield's path into the recruitment industry helps explain his approach to his dealings with Mr Lambert and then with Mr Draper. Prior to 2000 Mr Rayfield worked as a general manager of Mauri Laboratories Pty Limited, a subsidiary of Burns Philp Limited. In 2000 he entered the recruitment industry as a recruitment consultant working for The Appointments Group Pty Limited. 14Then in early 2002 he commenced providing consultancy services to a company controlled by Mr John Lambert, Technical Focus Pty Ltd. Mr Rayfield had first met Mr Lambert in 1995 when Mr Lambert provided services on behalf of a recruitment firm, to Mauri Laboratories. Mr Lambert started his own recruitment business in 1998, using the corporate vehicle, Technical Focus Pty Limited. 15There was a degree of early confusion in the proceedings about the relationship between Mr Lambert's two companies, OTC and Technical Focus Pty Limited. Technical Focus Pty Limited was the earlier vehicle through which Mr Lambert did business with Mr Rayfield and Career Tech. OTC was the later vehicle. Mr Rayfield seemed to think that Technical Focus Pty Ltd had changed its name to OTC. But Mr Lambert explained that the relationship was more complicated and that the change from one to the other was part of a corporate reorganisation. Mr Lambert explained that Technical Focus Pty Ltd was a separate company to OTC. They both specialised in recruitment of technical specialists to industry, particularly specialists associated with the supply chain involving the preservation and processing of food and food ingredients. 16Technical Focus Pty Ltd stopped trading in about 2006 or 2007 and Mr Lambert bundled its business into OTC. Technical Focus Pty Ltd had always mainly been involved in recruiting and placing permanent employees. Whereas OTC's business was outsourcing its own employees who performed their work as employees of OTC at the premises of OTC's corporate clients under contract between OTC and its clients. This business was quite separate from the placement of permanent employees with corporate clients through Technical Focus Pty Ltd. Mr Lambert's original idea was to keep the operations of these two different kinds of businesses, permanent executive recruiting (Technical Focus Pty Ltd) and outsourcing employees (OTC) in two separate companies. But he decided that because OTC's labour outsourcing business generated most of the income from the group, there would be less administration if the two businesses were merged under OTC's banner. 17But the name "Technical Focus" did not entirely disappear. As Mr Lambert also explained, and I accept, once Technical Focus Pty Limited stopped trading, he nevertheless continued to use the brand or trading name "Technical Focus". He explained that from 2007 all OTC's documentation went out in the name of OTC, reproduced in small print, but stated in larger print, were the words "trading as Technical Focus". As the subsequent legal documentation in issue in these proceedings is to show, from about 2007 Mr Lambert did indeed use "Technical Focus" as a business name to represent OTC, not Technical Focus Pty Ltd, the old company that he had used for permanent executive recruitment up to 2007. Throughout these reasons Mr Lambert's permanent executive recruitment company operated up to 2007 will be referred to as "Technical Focus Pty Ltd" and the business name of OTC used after that date will be referred to as "Technical Focus", or as "OTC trading as 'Technical Focus'". 18In 2002 Mr Rayfield decided to go into business for himself as a recruitment consultant. It was some years before he would set up Career Tech. He applied for his own ABN and immediately entered into a consulting agreement with Mr Lambert's, Technical Focus Pty Ltd, which was still trading. In these early days Technical Focus Pty Ltd was a small enterprise with only two employees. Mr Rayfield was its only recruitment consultant. Technical Focus Pty Ltd took on more employees and recruitment consultants, as its business grew. 19When Mr Rayfield and Technical Focus Pty Limited teamed up in 2002, they took some formal steps to define their legal relationship as that of consultant and principal. But they also took practical steps to deal with the information databases that they each then separately owned. These practical steps were not clearly consistent with the mutual legal relationship that they then defined for themselves. Determination of the matters in issue in these proceedings requires an understanding of both the legal formalities and the practical steps that Mr Lambert's Technical Focus Pty Limited and Mr Rayfield took back in 2002.

The 2002 Consultancy Agreement 20Mr Lambert on behalf of Technical Focus Pty Ltd and Mr Rayfield signed a consultancy agreement in February 2002. This consultancy agreement made no reference to Career Tech. It was made with Mr Rayfield personally. Mr Rayfield did not acquire Career Tech and use it as his trading entity until 2004. 21On the other side, the party contracting with Mr Rayfield is obscure. The 2002 consultancy agreement is headed with a decorative logo "Technical Focus". Although Mr Lambert did not sign the version tendered in evidence he is described as the author of an offer of employment to Mr Rayfield, as "John Lambert, Managing Director". In a clause concerning the protection of confidential client information of various entities, the 2002-consultancy agreement refers to "Technical Focus Pty Ltd" and to OTC by its full name, of "Operations and Technical Contracting Pty Ltd". It also refers to another company apparently associated with Mr Lambert, but which has not yet been mentioned in these reasons, "Technical Focus Contracting Pty Limited". But the counterparty to Mr Rayfield is consistently described in 2002 consultancy agreement simply and without more as "Technical Focus". 22Despite the poor drafting of the 2002 consultancy agreement for several reasons I infer that the other contracting party was Technical Focus Pty Ltd and not OTC or Technical Focus Contracting Pty Limited. First, the later 2005 consultancy agreement was clearly made with the corporate entity, Technical Focus Pty Ltd; secondly, the evidence is more consistent with the trading name "Technical Focus" being used in association with OTC only after 2007; thirdly there is nothing in the 2002 consultancy agreement that points to either OTC or Technical Focus Contracting Pty Limited being the contracting party; and fourthly, the counterparty to Mr Rayfield is described as "the company" at times which is inconsistent with more than one entity contracting on that side with Mr Rayfield. 23The 2002 consultancy agreement describes "Employment Conditions" for Mr Rayfield but it is not a contract of service. It declares Mr Rayfield to be a subcontractor without entitlements to annual leave, sick leave, public holiday benefits or long service leave. It requires Mr Rayfield to issue Technical Focus Pty Limited with an invoice as an independent contractor. Under the agreement Mr Rayfield was entitled to commission at a rate 60% of all sales revenue that he produces excluding GST and 20% of all sales revenue he generated but which is written through other consultants. 24The 2002 consultancy agreement provides for performance reviews and for determination by either party giving one week's notice in writing to the other during the first three months and one month's notice thereafter. But Technical Focus Pty Limited could terminate the contract at any time for serious breach, misconduct, incompetence or behaviour which was prejudicial to the interests of Technical Focus Pty Limited. 25The 2002 consultancy agreement also contained a confidentiality clause in the following terms:- "CONFIDENTIALITY AND NON DISCLOSURE As part of normal duties you will obtain, or have access to, confidential information concerning Technical Focus Pty Limited and/or Technical Focus Contracting Pty Limited, Lambert and Partners Pty Ltd and Operations & Technical Contracting Pty Ltd. Under no circumstances is any use to be made of this information except for the purposes directly related to furthering the business objectives of the above mentioned businesses. Confidential information includes any inventions, improvements, suggestions or ideas, which you devise, discover or conceive whilst employed by Technical Focus Pty Ltd." 26The 2002 consultancy agreement did not have a fixed term. But it was replaced three years later by another consultancy agreement, which will be referred to later in these reasons. There is no evidence that Technical Focus Pty Ltd ever deployed the termination provisions of the 2002 consultancy agreement during its term. 27The 2002 consultancy agreement also contained a provision purporting to protect certain clients of Technical Focus Pty Ltd and Technical Focus Contracting Pty Limited in the following terms:- "CLIENT PROTECTION It is of paramount importance to the security of our employees and our ongoing successful growth as a business that the company protects our consulting relationships with our customers. Therefore, following cessation of employment you will not at any time for a period of 3 months, and within a radius of 25 km of your primary office, directly or indirectly, either alone or in association or partnership or as an employee, a consultant, contractor, sub-contractor or agent for any person: offer to perform consulting services comparable with those performed in Technical Focus for, or (i)any existing client (on our maximiser database before you started work here, in other words a relationship has formed without and prior to your involvement) of Technical Focus Pty Ltd, or Technical Focus Contracting Pty Ltd; or any holding or subsidiary company of such client. (ii)any subsidiary company of such holding company. NB - A client is defined as any person or organisation to whom an invoice has been sent following consulting work within the previous two years of business operations." 28This client protection clause is the only reference in the 2002 consultancy agreement to any particular database that Technical Focus Pty Limited maintained, namely "our maximiser database".

The 2002 Database merger 29Neither Mr Lambert nor Mr Rayfield gave any thought to the relationship between the 2002 consultancy agreement and how they each expected to deal with the separate databases and recruitment information that each of Technical Focus Pty Limited and Mr Rayfield held at the time. Rather they did with these databases of information what to them then seemed reasonable. As these reasons explain, what they did with these separate databases to merge them into one bore little identifiable relationship with the 2002 consultancy agreement. 30At the time that they entered into the 2002 consultancy agreement both Technical Focus Pty Ltd and Mr Rayfield maintained their own databases of information that supported the operations of their respective recruitment businesses. These databases contained information of various types that now requires more detailed description. 31Before Mr Rayfield began consulting for Technical Focus, he specialised in recruitment for the food industry. Indeed that industry has remained Mr Rayfield's professional focus. Mr Rayfield first came into contact with "Maximiser" software when he worked at Mauri Laboratories. He and the sales force at Mauri Laboratories used it. Maximiser software is designed to facilitate customer relationship management and is flexible enough to be modified and applied to a number of industries. 32By the time Mr Rayfield began consulting to Technical Focus Pty Limited he had developed his own list of clients (companies with whom placements could be made) and candidates (persons who sought placement as employees) as a recruitment consultant. He stored information about the clients and candidates with whom he regularly dealt on his own Maximiser database, which he kept on his home computer. An advantage of Maximiser software was that a user could design and name his or her own search fields to more efficiently retrieve the information most commonly used in a particular industry from the database that had been constructed. For example in the recruitment industry candidates seeking employment would usually supply a curriculum vitae to a recruitment agent such as Mr Rayfield. But even after they were saved in soft copy in their own database, the information in these randomly received CVs was not retrievable efficiently. So information was extracted from them and entered into pre-designated search fields. The soft copy CVs could still nevertheless be usefully searched using proprietary software for large data searches, such as ISYS. In February 2002 Mr Rayfield's Maximiser database contained about 1000 entries for his then clients and entries for about 4000 candidates. In addition to the Maximiser database Mr Rayfield also held an extensive number of his own candidate CVs. 33I accept Mr Rayfield's account that within a few months of him commencing his consulting to Technical Focus he realised that having Technical Focus Pty Limited using one Maximiser database and he using another, was becoming unwieldy. Mr Rayfield decided that the most efficient way for him to continue consulting for Technical Focus Pty Limited was to merge the two separate databases. 34The Technical Focus Pty Limited Maximiser database was larger than Mr Rayfield's Maximiser database. In February 2002 it contained about 4,000 entries for clients and somewhere between 20,000 and 30,000 entries for candidates. Mr Lambert gave slightly different evidence to this about the size of the databases at this time. But I accept Mr Rayfield's account as to the relative size of his Maximiser database and that of Technical Focus, because he was much closer to the technical detail of the two databases than was Mr Lambert. 35I accept Mr Rayfield's account that about three months after he started consulting to Technical Focus Pty Limited that he raised the issue of the need to merge the two databases in a conversation with Mr Lambert. "I said: 'As you are aware, I have my own Maximizer database that I have been using for the purpose of recruitment, it is inefficient for me to maintain data in both your database and my database, because there is the possibility for errors and omissions, it would be to our mutual advantage if we merged the two databases into one' He said: 'I agree in principle, but I'm concerned about maintaining the technical integrity of my (Technical Focus's) database' I said: 'We could do a test merge with a small sample of data from each database' He said: 'Ok'" 36The test merge of data was successful. So Mr Rayfield went ahead and fully merged the two Maximizer databases. The merger was more easily done because both Technical Focus Pty Ltd and Mr Rayfield used the same proprietary Maximiser software to manage each of their databases. Mr Rayfield also merged the candidate CVs that he held with those that Technical Focus Pty Limited held. The evidence in this case is remarkable for the absence of any express negotiation between Mr Rayfield and Mr Lambert in May 2002 about the terms of the ownership of the merged database or about what would happen to the merged database at the eventual end of Mr Rayfield's consulting arrangement with Technical Focus Pty Limited. The explanation of this was in my view that: Mr Rayfield expected that he would be working with Technical Focus Pty Limited for a very long time; he got on well with Mr Lambert; he did not wish to discuss the matter which did not have to be faced immediately and which may perhaps be disagreeable; he was cooperative by nature and not someone who made it a priority to distinguish his own interests from those of others when things were going well; and importantly he thought that there was no question between himself and Mr Lambert that the merged Maximiser database was owned in a kind of joint venture. 37I accept Mr Rayfield's evidence that not only was there no discussion about the ownership of the merged database in May 2002 but there was no discussion about the subject prior to the sale of OTC's business to TF Industrial in November 2009. Nor was there any discussion between Mr Lambert and Mr Rayfield which sought to distinguish in any way between the modification of and the addition of data to the differently sourced parts of the merged database. 38All that happened after May 2002 was that Career Tech signed the 2005 and the 2007 consultancy agreements in the circumstances described in these reasons. On none of those occasions did the parties discuss any interest that Mr Rayfield had or did not have in the merged Maximiser database. 39Through the same period 2002 to 2009, Mr Rayfield continued at first in his own right until 2005, and thereafter through Career Tech to add to the merged database in the course of his work as a consultant to Technical Focus and then OTC. But the issue of the ownership of the merged database never really disappeared. There was no express oral agreement that Technical Focus Pty Limited would acquire for itself all the data that Mr Rayfield had contributed to the merged database. In my view Mr Lambert was never entitled to believe from what Mr Rayfield did and said that Mr Rayfield was gifting his entire interest in his part of the merged database to Technical Focus Pty Limited for no consideration. The relationship between them was wholly commercial, although quite friendly. Such an inference is not appropriate in the circumstances. But for the operation of the legal agreement that Mr Rayfield and Technical Focus had just made in February 2002, the inference in my view to be drawn from these circumstances, an inference that is reinforced by later conduct, is that the parties agreed to share access to all the merged information, including the Maximiser database and CVs. The parties accepted right from this early time that no part of the merged information was confidential to one party only and could be withheld from the other. The merger was one where each party had access to the whole merged database. It will be necessary to consider later to what extent the various consultancy agreements might have varied this practical consensus. 40As soon as the merger was complete the merged database was used in the business of Technical Focus Pty Limited. The merged database was then incrementally added to by Mr Rayfield, Mr Lambert and later by other consultants that Technical Focus Pty Limited was to engage in time. All these people added information to the merged database by modifying existing entries in or adding records to the existing Maximiser data. They added and substituted candidate CVs as well. From the time the two databases were merged no attempt was made to keep the data originally sourced from Mr Rayfield separate from the data sourced from Technical Focus Pty Limited. So much so, that Mr Rayfield said at the hearing that it was impossible by 2011 to distinguish the parts of the merged database that he had contributed in 2002 from the rest of the merged database. I accept the correctness of this evidence and I find that Mr Lambert was well aware that Mr Rayfield was working on the merged data base in this way. Even if the candidates and clients that Mr Rayfield originally contributed to the merged database could be identified, and I do not believe at this time they now could, it would be an impossible feat of memory and analysis to unravel the changes that had been made to those entries since 2002. 41This accretion of data to the merged database became significant over time. I accept Mr Rayfield's evidence that by August 2010 the merged database had grown to a total of about 7000 client records and about 45,000 candidate records. Mr Rayfield estimated, and I further accept, that he contributed over the period May 2002 to August 2010 around 20% of all those entries. He says that he believed he was contributing to a joint database throughout this period. I accept the genuineness of this view. But how it is to be reconciled with the consultancy agreements signed between 2002 and 2007 is a separate issue. 42The merger of the two databases quickly became almost seamless by the way that they were later copied and managed. I accept Mr Rayfield's evidence that shortly after the merger he had a conversation with Mr Lambert in which he said, "I'm going to keep a duplicate of the database at home" to which Mr Lambert agreed. From May 2002 onwards, about once or twice a month, Mr Rayfield duplicated the database on his home computer from the database on the Technical Focus Pty Limited server. I accept that Mr Lambert consented to this occurring over a long period. The principal practical reason for it was that in the early days reliable internet access to the latest version of the database on the Technical Focus Pty Limited server was not readily available at a distance. Then later Mr Rayfield felt that he could work more efficiently off-line at home using a database duplicated from the Technical Focus Pty Limited server. The data was copied onto a CD ROM and transferred by that medium to his home computer. He seems also to have added his own information in the course of this duplication process. Mr Rayfield also used the shared database for his own business purposes and as a resource for his own purely personal, non-business contacts. These personal and business contacts of Mr Rayfield are identified later in these reasons. 43What followed in my view from the failure to deal with the question of the ownership of the merged database was a growing divergence between practical understandings that existed arising from the fact of the database merger and the terms of the consultancy agreements that followed.

The 2005 Consultancy Agreement 44In January 2005 Technical Focus Pty Limited and Career Tech Pty Limited signed an agreement entitled "Independent Contractor Agreement", which superseded the 2002 consultancy agreement. I accept that this came about in the way that Mr Rayfield describes. By then Mr Rayfield had incorporated Career Tech. 45In January 2005 Mr Lambert presented Mr Rayfield with the agreement for signature, saying words to the effect, "Because other consultants have joined, I want to formalise the terms and conditions of each consultant's engagement". Mr Lambert apparently wished to treat Mr Rayfield on an equal basis with the other independent contractor consultants that Technical Focus Pty Ltd had by then engaged. Whilst this was undoubtedly a laudable objective, this 2005 consultancy agreement did not address the issue of the merged databases any more than the 2002 consultants agreement had done. 46The 2005 consultancy agreement incorporated a number of different terms to the 2002 version. It provided for a different remuneration structure for Career Tech, the details of which are not material for present purposes. The 2005 consultancy agreement could be terminated on one month's written notice. 47Mr Rayfield said in an affidavit sworn in May this year that he does not believe he signed a copy of the 2005 consultancy agreement. But I do not think that is correct. His signature does appear as a "proprietor/director" of Career Tech in the document. 48TF Industrial relies upon the confidentiality clause, clause 4, in this 2005 consultancy agreement, which was a more detailed clause than the one contained in the 2002 consultancy agreement. Clause 4 of the 2005 consultancy agreement provides:- "4. Confidentiality 4.1 The Contractor acknowledges that during the engagement the Contractor will have access to and become acquainted with various trade secrets, inventions, innovations, processes, information, records and specifications owned or licensed by the Company and/or used by the Company in connection with the operation of its business including, without limitation, the Company's business and product processes, methods, customer lists, accounts and procedures. 4.2 The Contractor agrees that it will not disclose any of the aforesaid, directly or indirectly, or use any of them in any manner, either during the term of this Agreement or at any time thereafter, except as required in the course of this engagement with the Company. 4.3 All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork/creative, notebooks, and similar items relating to the business of the Company, whether prepared by the Contractor or otherwise coming into its possession, shall remain the exclusive property of the Company. The Contractor shall not retain any copies of the foregoing without the Company's prior written permission. Upon the expiration or earlier termination of this Agreement, or whenever requested by the Company, the Contractor shall immediately deliver to the Company all such files, records, documents, specifications, information, and other items in its possession under its control. 4.4 The Contractor further agrees that, except as required by law, it will not disclose its retention as an independent contractor or the terms of this Agreement to any person without the prior written consent of the Company and shall at all times preserve the confidential nature of its relationship to the Company and of the services hereunder." 49The 2005 consultancy agreement commenced upon execution and continued, "until terminated in accordance with this agreement". It was never formally terminated. Rather it was replaced by another consultancy agreement made in 2007 between the same parties.

The December 2007 Consultancy Agreement 50Mr Lambert asked Mr Rayfield to sign another consultancy agreement in December 2007. I accept Mr Rayfield's evidence that Mr Lambert approached him that month and said words to the effect, "I want to firm up the consulting terms and conditions, you will need to sign this." There was no discussion between Mr Lambert and Mr Rayfield about the terms of the 2007 consultancy agreement. Mr Lambert prepared the form of agreement that he proffered to Mr Rayfield that month and which was entitled "Independent Contractor Agreement". Mr Rayfield initialled the agreement, which is what it invited him to do. 51The parties to the December 2007 consultancy agreement were strangely identified. The heading on the agreement was "Operations and Technical Contracting Pty Ltd trading as Technical Focus Pty Ltd and Supply Chain Careers". This agreement introduced the trading name "Supply Chain Careers" into the mutual consultancy agreements for the first time. 52It is important to identify with whom Career Tech was contracting in the 2007 consultancy agreement. It could have been either OTC or Technical Focus Pty Ltd. The letterhead suggests that OTC was the contracting party and that the name "Technical Focus Pty Ltd" was really being treated as a business name for OTC rather than to identify a specific corporate entity, as the contracting party. This is so despite the fact that the agreement commences with the words "This agreement is entered into as of the first day of January 2008, between Technical Focus Pty Ltd ("the Company") and Career Tech Pty Ltd ABN [not published] ("the contractor")." Mr Lambert signs the 2007 consultancy agreement in several places as CEO of "Technical Focus Pty Ltd". Despite this, the 2007 consultancy agreement letterhead makes clear that where it appears in the document, "Technical Focus Pty Ltd" is intended to refer to OTC. This also conforms with Mr Lambert's reorganisation of the two entities. By then he had folded all of the Technical Focus Pty Limited operations into OTC. It made little sense for him to contract in the name of a company, which was no longer operating. Rather I infer that he was trying to continue to use the trading name "Technical Focus, although with its full corporate description. 53Clause 4 of the 2007 consultancy agreement was identical to clause 4 of the 2005 consultancy agreement, which has been reproduced earlier in these reasons. I accept Mr Rayfield's evidence that before this new agreement was signed he and Mr Lambert did not discuss clause 4 of the 2007 consultancy agreement or how it applied to or affected their respective interests in the merged database. 54Clause 6.4 of the 2007 consultancy agreement provided that "The Contractor is expressly free to perform services for other parties while performing services of the company". This clause expressly provided for a liberty to Career Tech, which Mr Rayfield had long exercised. Indeed he had been using the merged database for his own personal purposes and I infer that Mr Lambert was aware of this.

Technical Focus and OTC Operations 2002 to 2009 55Between 2002 and 2009 the parties gave little attention to the consequences of the merger of the Rayfield and Technical Focus Pty Limited databases and the making of the three consultancy agreements. Rather they were concerned with the practical world of business operations. There the merged data was being used and expanded on a daily basis as the operations of Technical Focus Pty Limited and OTC became more sophisticated. 56Between 2002 and 2007-2008 Mr Lambert treated Mr Rayfield differently from the other consultants to Technical Focus Pty Ltd and OTC. He allowed Mr Rayfield to have the master password for the Maximiser database during this period. Mr Lambert disputed in evidence that he had given such broad ranging permission to Mr Rayfield to use the master password. But again I prefer Mr Rayfield's version on this issue because he was the more credible witness and because of his very close involvement in building and modifying the merged Maximiser database. 57The master password permits a person to change the operation of the Maximiser software, to make changes to the allocation of user rights and to change and to delete users. It also enables the global editing of files and the making of changes to user-defined fields. Mr Rayfield says and I accept that he used the master password to do such work on the Maximiser database on a regular basis over the years between 2002 and 2007-2008. In my view Mr Lambert was aware that Mr Rayfield was doing this, as it was convenient to Mr Lambert for Mr Rayfield take on these responsibilities to improve the quality of the database and its responsiveness to the changing needs of the business. Mr Lambert and his own personal administrative assistant also used the master password to make global changes to the database. Mr Rayfield was involved in training Mr Lambert's administrative assistant from time to time in relation to the use of the master password and the modification of the database. 58Mr Rayfield's special responsibilities for the use of the master password continued until Mr Lambert employed a Ms Suzanne Neville in about 2007 2008. Ms Neville's role included the specific function of fully managing the database. Mr Lambert wanted to more closely control the charges being made to the database through Ms Neville, so Mr Rayfield's use of the master password was not necessary after that time. 59Mr Rayfield's extra functions in relation to the merged database using the master password for at least five years are not explained by the 2002, 2005 and 2007 consultancy agreements. These agreements do not provide any duties for him to work on the database; they do not allocate any such functions to him and they do not provide for him to be paid for such work. His performance of these functions is in my view to be explained outside these agreements by an informal understanding between Mr Lambert and Mr Rayfield. This understanding had its origins in the merger of the two databases in 2002, that Mr Rayfield could, with Mr Lambert's consent, spend his own time, resources and energy to continue to improve the merged database, whilst he also worked as a consultant for Technical Focus Pty Limited. Mr Rayfield's unlimited access to and to mould the merged database through the master password was an acknowledgement by conduct on the part of Mr Lambert that Mr Rayfield shared an interest in and access to the merged database with him, beyond the terms of the consultancy agreement. 60Between 2002 and 2010 the number of client entries on the merged database grew from the combined number of 5,000 (being 1,000 from Mr Rayfield and 4,000 from Technical Focus Pty Limited) in 2002 to about 7000 in 2010. Over time the database became so large that probably only 1000 of the entries were related to clients to whom OTC and TF Industrial actually provided regular recruitment services. Those 1000 client entries contained very detailed information about the client. The remainder of the client entries contained far less information. 61Between 2002 and 2010 the number of candidate entries on the merged database grew from the combined number of 24,000 - 34,000 (4,000 from Mr Rayfield and 20,000 - 30,000 from Technical Focus Pty Limited). These Maximiser candidate files contained fields recording contact information, the employee's seniority, qualifications, experience, specific technical skills, remuneration range, geographic employment references, work history and interview experience. 62Finally during the same period Mr Rayfield used Maximiser for his own personal purposes. He had a Maximiser database entitled "Vince" which contain details of family, friends and contacts related to his professional life. It included personal details including medical information about his mother. 63OTC's business was affected by the global financial crisis of 2008 - 2009. As companies recruited fewer employees, OTC's revenue declined. In 2008 OTC reached the point of financial distress and was in need of capital. At that point Mr Draper took a 25% shareholding investment in OTC through another company Entente Holdings Pty Limited. But OTC continued to be plagued by solvency concerns. It defaulted in the payment of payroll tax to the New South Wales Government. Eventually Mr Draper decided to buy OTC's interest in the business through TF Industrial so that he could protect his investment by tightening up controls and reducing costs.

TF Industrial Purchases the OTC Labour Hire Business 64On 5 November 2009 TF Industrial purchased what a written contract of that date described as, a "Labour Hire and Contracting" business from OTC, for $275,000 under a Contract for Sale of Business (Law Society Edition - 2004). The agreement was made and settled the same day. There was debate between the parties as to whether OTC even sold its interest in the database to TF Industrial under this contract. 65The purchase price was apportioned as to $264,000 to "Goodwill" and as to $10,800 to "Equipment". The business so described was defined in the following terms:- "1. Definitions (a term in italics is a defined term) 1.1 The 'business' means the business identified on page 1 of the contract and includes the chattels, fittings, fixtures, and furniture, goodwill, intellectual and industrial property, licences, permits, plant, quotas and software of the business together with any other items referred to in this contract as forming part of the business." 66On completion the vendors' obligations were:- "20.1 On completion the vendor must give the purchaser - 20.1.1 possession of the business and the premises ." 67For the purposes of sale Mr Lambert gave instructions to graysonline assetservices to value the equipment of the business sold. The valuation as at 13 November 2009 gave a valuation opinion for the fixed assets of the business, the office equipment, at $17,010. The central computer servers in the business mounted in a communications rack, including switching gear, service and hard drives together with backup power systems were valued at a total of $1,200. The database, as intellectual property, was not valued separately. 68Notwithstanding that the database was not expressly referred to in this contract, in my view it is sufficiently encompassed within the expression "intellectual and industrial property" within the definition of the 'business' to be conveyed. It is clear in my view that the parties agreed to transfer OTC's interest in the database to TF Industrial. They seem to have included the value of the database within the allocation of goodwill under the sale contract.

A Post Purchase Conversation between Mr Draper and Mr Rayfield 69TF Industrial concedes that it cannot directly enforce any of the confidentiality provisions in the consultancy agreements against Career Tech or Mr Rayfield. TF Industrial was not a party to the 2002, the 2005 or the 2007 consultancy agreements. Technical Focus Pty Limited was a party to the 2002 and 2005 consultancy agreements and OTC to the 2007 consultancy agreement. But TF Industrial says that it can enforce the terms of the agreements against Mr Rayfield and Career Tech by reason of a conversation that it says occurred between Mr Draper and Mr Rayfield at the time TF industrial acquired OTC's business. 70Mr Draper says in substance that he had a conversation with Mr Rayfield at the time of the sale in November 2009 in which Mr Draper encouraged Mr Rayfield to stay on in the business on the same conditions that Mr Rayfield (and Career Tech) had with OTC. Mr Draper says that Mr Rayfield responds in the affirmative. 71Mr Rayfield remembers a different version of this conversation, a version I prefer. Mr Rayfield says that Mr Draper said to him, "I'll keep you in the business and provide you with the tools of the trade". Mr Rayfield understood that "the tools of the trade" included the Maximiser files. Mr Rayfield does not recall any conversation between the two about staying on in the business on the same terms and conditions as those between Career Tech and OTC. It seemed to the Court that Mr Draper's version involved a significant degree of convenient reconstruction. Not only do I prefer Mr Rayfield's version to Mr Draper's version, but Mr Draper's version is inherently less probable. If Mr Draper was concerned enough to have a conversation with Mr Rayfield in which he went to the trouble to specify that TF Industrial would be adopting the same Career Tech - OTC consultancy terms, a point to which Mr Rayfield is said to have readily agreed, it is difficult to see why Mr Draper did not just take the next simple step and make a new written consultancy agreement on those very same terms between TF Industrial and Career Tech. That he did not take this next step indicates in my view that the conversation was less specific than Mr Draper claims that it was. 72The result of this finding is that there is no contractual basis upon which TF Industrial can enforce the confidentiality terms in any of the 2002, 2005 or 2007 consultancy agreements against Career Tech or Mr Rayfield. But for reasons that will be explained later in this judgment, even if Mr Rayfield and Mr Draper had agreed on this occasion that Career Tech would be bound to TF Industrial on the same terms as it had been bound to OTC, the Maximizer database would not fall within the terms of the confidentiality clauses of any of the consultancy agreements. 73Mr Draper and Mr Rayfield's business relationship did not last very long. Mr Rayfield Mr Lambert had been in a satisfactory business relationship for about seven years from 2002 to 2009. But within nine months of Mr Draper's takeover of the OTC business Mr Rayfield was looking to retire.

The Company Contribution Statement 74Not long after TF Industrial acquired OTC's business Mr Rayfield was asked to complete a management document that indirectly dealt with issues of confidentiality. The effect of the document became one of the issues in the proceedings. 75I accept Mr Rayfield's account that in early 2010 a Ms Vanessa Hall and a Ms Suzanne Neville on behalf of TF Industrial proffered for his consideration a document entitled "Company Contribution Statement" ("CCS"). This document was designed to express in written form the business expectations that consultants and TF Industrial had in relation to one another. As Ms Hall explained when she gave the document to Mr Rayfield, "effective business relationships are based on trust and the mutual acknowledgement of each party's expectations, needs and promises." She asked him to make changes to the document that he felt were necessary so that they could be discussed together. The document was to be found on the TF Industrial server. Mr Rayfield filled it out, met again with Ms Hall and Ms Neville and then signed the document with them. 76The vague language of the CCS provides a basis to infer that it was not intended to be legally binding. It declares its purpose in the following terms:- "The Company Contribution Statement The purpose of the Company Contribution Statement ('CCS') is twofold. One purpose is for you to carefully consider how you would like to maintain a working relationship with Technical Focus. The second purpose is for Technical Focus to carefully consider how it would like to contribute to the growth and success of your recruitment consulting business. The CCS is broken into Expectations, Needs and Promises, the basis of forming and maintaining a trusted work relationship. This (CCS) applies for the 2 years. It is to be reviewed and amended every six months to reflect changes and growth in Technical Focus, and specifically whenever there are actual changes to Technical Focus that may have an impact on you. The first section is from Technical Focus (sic) perspective, with comments from you, the second section is from your perspective, with comments from Technical Focus." 77The confidential information obligation in the CCS was not in the section headed "Key Promises you make to Technical Focus", but in another section of the CCS. TF Industrial's expectations were expressed in the CCS first followed by a statement of agreement from Career Tech in the following terms:- "* Hold strictly confidential all proprietary Technical Focus information. Agreed and already part of confidentiality agreement." 78In my view all that Mr Rayfield's statement in this document expresses is that he regarded himself as generally obliged to respect the confidentiality provided for in the 2007 consultancy agreement that Career Tech made with OTC. But the CCS was not itself attended by sufficient legal formality for it to be treated as a novation between TF Industrial and Career Tech of the confidentiality provisions in clause 4 of the 2007 consultancy agreement. Nor is there sufficient evidence that it was supported by consideration. Nor did the CCS identify which parts of either the Maximiser database or other information was the confidential information in question. It did not in my view create any contractual obligation of confidence between Career Tech and TF Industrial.

Termination of the TF Industrial - Career Tech Relationship 79Just as OTC was selling the business to TF Industrial, Mr Rayfield's domestic circumstances changed. In September 2009 his elderly mother could no longer live on her own. She moved in with him and he became her primary carer. From about the same time he began to work fewer hours. In mid-2010 Mr Draper said to him "I am only prepared to continue engaging you, if you generate $35,000 by the end of August 2010." A little later Mr Rayfield realised that he would not make the target and told Mr Draper that he would leave "at the end of the month [August]".

The Cross Claim Invoices 80From shortly after the OTC - TF industrial sale in November 2009 until August 2010, TF Industrial did not pay all Career Tech's invoices. Mr Draper used them as a negotiating lever over Mr Rayfield. The e-mail correspondence on the subject of these unpaid invoices makes it clear that Mr Draper was continuing to refuse to pay them whilst Mr Rayfield was asserting an entitlement to use the merged database. 81The invoices in question covered about 8 months of Mr Rayfield's work. The invoices originally the subject of claim were invoices 2508 dated 31 December 2009 for $1,516.34, invoice 2009 dated 27 January 2010 for $7,618.16, invoice 2510 dated 31 January 2010 for $1,823.89, invoice 2511 dated 15th February 2010 for $3,178.79, invoice 2512 dated 28th February 2010 for $1,753.95, invoice 2514 dated 31 March 2010 for $2,374.02, and invoice 2601 dated 16 August 2010 for $5,539.38. 82TF Industrial did not advance any basis for these invoices not being paid other than the outstanding dispute with Career Tech and Mr Rayfield about its database. The parties agreed during the hearing that the total amount then outstanding in respect of these invoices was $28,265.15. But it was unclear from that agreement whether the total agreed included interest or was comprised of other invoices. If interest up to judgment on this agreed amount is to be claimed it will need to be calculated.

The Request For Confidential Information 83The issue of whether Career Tech and Mr Rayfield owed an obligation of confidence in respect of the Maximiser database to TF Industrial lay dormant until Mr Rayfield's termination. In correspondence Mr Draper demanded the Maximizer data before the termination of the parties' relationship on 3 September 2010. In their submissions both sides debated the significance of this correspondence, in which Mr Rayfield was said to have made admissions. 84Mr Draper's email of 31 August 2010 made final arrangements for Mr Draper's separation from TF Industrial and requested information. Relevant extracts are the following:- "Good evening Vince, Sorry I did not respond to this, however, we have had the face to face meeting so I just wish to confirm our positions. As advised I don't see an arrangement, other than working from the office on a regular basis, as being satisfactory for me, so yes, we have agreed to finalise our business relationship in its present form. ... As you are aware Vince, I own Maximizer and all the data contained in there and therefore if you have any copied of TF's Maximiser Program or data files. I would ask that you return those by this Friday. Similarly, all hard copies of the client files and Candidate files belong to TF and I would ask that they are not removed from the office and should you have any files with either Client Data or Candidate Data, that you return those to the office by Friday 3 rd Sept. ... Vince, I wish to thank you for your professional approach to your work and your ethical behaviour (sic) over the period of nearly 2 years that we have been associated. There have been some difficult times for both of us, I hope that life is gentle to you and that you remain in good health over the years. God bless you. Peter Draper" 85Mr Rayfield replied on 1 September 2010 in terms that suggested that he had none of TF Industrial's confidential data. Relevant extracts from his reply are the following. "Hello Peter Thank you for our cordial discussions on Monday and your subsequent email. I agree with all the points raised and will cooperate accordingly. From Friday onwards the only thing that would be useful in my communication with Darrell Lea, is access to TF email. I am happy to communicate with Darrell Lea and candidates using my own email but if you prefer me to use the TF email then access will need to be maintained for the duration of the current assignments. I have no software belonging to TF and will leave all paper files in my office, although I have been going through them and dealing with them as needed. All paper candidate and client files remain in the filing cabinet. ... Thank you too for your good wishes and God's blessing. The latter is ultimately all that matters in life (and beyond). I wish you and your family the same. Vince" 86Mr Rayfield was cross examined as to what he meant by "I agree with all the points raised". He explained that he wanted to leave TF Industrial on cordial terms, that he had had a comprehensive discussion with Mr Draper and he "didn't want to raise a confrontation". I accept that this is why he did not contest the issue, but that he believed he had a joint interest in the database. In a very frank statement he said of his statement that he "had caused and intended no harm whatsoever to the plaintiff. I say again it was really an easy way out and in hindsight not completely honest and open with Mr Draper." Mr Rayfield really wanted a quiet life and a friendly departure. But in my view he never abandoned his view that he had a continuing entitlement to use the merged database.

The Late 2010 Consultation 87Here the matter lay until during correspondence about Mr Rayfield's unpaid invoices, it came to Mr Draper's attention in December 2010, that Mr Rayfield was using the Maximiser database to send out broadcast emails to clients. On 18 November 2010, Mr Rayfield raised the issue of the unpaid invoices. 88On 29 November Mr Draper replied. Mr Draper then formally alleged Mr Rayfield copied the TF Industrial Maximizer files in the following terms:- "Hi Vince, I believe that you have unlawfully copied my Maximizer files together with the client info and candidate info. Until you return or delete all record the files and sign a statutory Declaration that you no longer hold files or any information from your time with TF, I will not be paying your accounts. I will arrange to have my Lawyers Branston Neville prepare the Statutory Declaration. Cheers Peter Draper." 89Mr Rayfield replied by email on 30 November 2010, setting out the position that Career Tech has now advanced in the proceedings in relation to the merger of databases and asserting his own continuing entitlement to use the database. "I have stolen nothing from you and I represent no threat to you or to Technical Focus. ...

In February 2002 I formed a business association with Technical Focus. I was an independent consultant working on commission only from day one. At no time was I an employee of Technical Focus. I continued to maintain my personal data base using Maximizer, which was also the CRM package being used by Technical Focus. Around the end of 2002 John Lambert and I agreed that we would merge the two data bases and did so. From that point onwards it was impossible to subsequently separate the combined data. For the next eight years I maintained a personal copy of the data base and added thousands of date to both the TF and my personal copies. I spent a minimum of 500 hours per year for eight years diligently maintaining the data base of which you continue to be the beneficiary of my efforts and the efforts of others." 90Mr Rayfield says and I accept that he verbally gave to Mr Draper at about this time a similar account of the history of his dealings with Mr Lambert and OTC. Mr Draper's memory of their meeting on 16 December does not contain an account of Mr Rayfield's history of the use of the database. But I prefer Mr Rayfield's version of this conversation which is more consistent with his contemporaneous emails, such as that of 30 November 2010. 91But Mr Draper was not satisfied. He replied accepting part of Mr Rayfield's argument but disputing the rest:- "Hi Vince," Thank you for your response. I do [not] accept your argument about holding our data. I will discuss the matter further with Ken Neville my lawyers. The fact is that you have sent out emails to our clients using our data. At no time did John advise me that you had part ownership of my data base that I paid a very large amount of money for. You did not explain this to me before and so I consider that you withheld vital information to my potential determent. Your history with Maximizer is also of no interest to me. As far as I am concerned I wont the data base and everything on it. Somehow I felt this was going to happen as I suspected that you were collecting data before you left including wanting original software disks. I will not pay any money owing whilst this matter remains outstanding. I will get back to you. Peter Draper" 92Mr Rayfield and Mr Draper did not resolve their differences. TF Industrial commenced these proceedings in December 2010 seeking restraints on Career Tech and Mr Rayfield using the information on the Maximiser database and for the delivery of the parts of the database that were in their possession to a Court expert for analysis. 93Orders were made by Gzell J for delivery up of data on 22 December 2010 to an expert Mr Allan Charles Watt and for restraints on the defendants using the Maximiser database, as sought in paragraph 6, 7, 8 and 9 of the then form of summons. 94The proceedings came before Fullerton J in the vacation list on 7 January 2011 when further machinery orders were made for Mr Watt to report on his findings about the material delivered into his possession from the defendants. Once law term commenced the proceedings were placed in the expedition list and then fixed before me. No evidence was adduced at the hearing from the Court expert Mr Watt.

Mr Rayfield's Personal Information 95As the Maximiser databases now stand Mr Rayfield says, and I accept, that he has added or modified since 2002 two classes of documents to the merged Maximiser databases, being personal files and commercial files from the Career Tech business. They were the following. 96Personal Contacts . AIFST; Australian National University; Bennet Precision Tooling; CGU Insurance; Construction Careers; DIAA; Digital Star Computers; Grow Food Solutions; International Animal Health Products; IREMIT; Low Doherty & Stratford; Masterton Homes; Moore Stephens; MyCareer; Netregistry; Norwest Hearing; Planet Health; Sacco (Italy); SEEK; SHL; Supply Chain Professionals; Sydney University; TAFE; University of NSW; University of Queensland; University of Western Sydney; Westpac Bank; Worldwide Exchange. 97Clients . Allergan Australia; Alphapharm; Amcor; Anchor Products; APS Food and Nutrition; Arnott's Biscuits; Bakels; BASF Construction Chemicals; Bonlac Foods; Cadbury; Carter Holt Harvey; Castlemaine Perkins; Cerebos; Channell; CHR Hansen; Coca Cola Amatil; Cognis; Colgate Palmolive; Danisco; Darrell Lea; Diageo; Doric Products; DSM Food Specialties; Firmenich; Flavour Makers; Fonterra Australia; Fosters Brewing; George Weston Foods; Givaudan; Glaxo Smithkline; Globus Group; Goodman Fielder; Green's Foods; H & H Packaging; Jalco Australia; Johnson & Johnson; Kellogg Australia; Kerry Ingredients; Kiwi Co-operative Dairies NZ; Kraft Foods Limited; Lion Nathan Australia; Macquarie University; Masterfoods ANZ - Confectionary; Masterfoods ANZ - Petcare; McCain Foods; McDonalds; McWilliams Wines; Meadvestvaco; Meat & Livestock Australia; Merck Sharp & Dohme; National Foods; National Starch; Natural Ingredients; Nestle; New Zealand Milk Products Limited; Newlyweds; Nutrimetics; P & N Beverages; Penford; Pernod Rickard/ Orlando Wines; Peters & Brownies Group; Pfizer Healthcare; PPH Industrial Coatings; Procter & Gamble Australia; Quest; Reckitt Benckiser; Rotork; Samuel Taylor; Savannah; SC Johnson; Schweppes; Selleys Chemical Company; Sensient; Smith's Snackfoods; Southcorp Australia; SPC Ardmona Foods; Sunrice; Symise; Thomas Electronics; Tooheys; Unilever Foods Australia; Unilever HPC Australia; Unilever Streets Ice Cream; Visy Industries; Woolworths; Wrigley Company; Yum Restaurants. 98With this summary of the history and upon these findings the Court can analyse TF Industrial's case.

TF Industrial's Estoppel Claim 99In paragraph 31 of the Further Amended Statement of Claim, TF Industrial pleads an equitable estoppel case in which it is claimed that the defendants are estopped from asserting any interest in the merged database. The case pleaded was also articulated by Mr Ang in closing submissions. It was said that Mr Draper assumed when he bought the business that the entirety of the Maximiser files were TF Industrial's together with the candidate CV's, an assumption said to be induced among other things by Mr Rayfield apparently accepting what Mr Draper said to him at the time of TF Industrial's purchase, "I will take you on and provide you with the tools of the trade". Mr Rayfield is then said to have stood by while Mr Draper negotiated on behalf of TF Industrial with Mr Lambert on behalf of OTC and then finally acquired the business, without asserting his own claim to a shared interest in and access to the database. The detriment that TF Industrial relies upon is said to result from the defendant's silence and failure to notify the plaintiff of their claimed proprietary interest in the Maximiser database on or before 5 November 2009, which then allowed the plaintiff to purchase the business from OTC, paying a consideration $275,000. The plaintiff says that it only proceeded because of the defendant's silence. Had it been informed of the defendants' interest then it would have not paid this sum under the contract or possibly not proceeded at all. 100The plaintiff primarily pleads its case in equitable estoppel. The case is based upon doctrines of promissory estoppel stated by the High Court in Waltons Stores (Interstate) Limited v Maher & Anor (1988) 164 CLR 387. The applicable law may be concisely stated. To establish an equitable estoppel a plaintiff must prove: (1) the plaintiff assumed or expected that a particular legal relationship would exist with the defendant and the defendant would not be free to withdraw from that relationship, (2) the defendant induced the plaintiff to adopt the assumption or expectation, (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation, (4) the defendant knew or intended him to do so, (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled, and (6) the defendant has failed to act to avoid that detriment: Waltons Stores (Interstate) Limited v Maher & Anor (1988) 164 CLR 387, at 428 - 429 per Brennan J. 101In my view TF Industrial's equitable estoppel claim fails. It can be accepted that when Mr Draper was negotiating with Mr Lambert for the purchase of OTC's business that he assumed that OTC was the sole owner of the Maximiser database. But the plaintiff's principal difficulty is showing that Mr Rayfield induced Mr Draper to adopt this assumption or expectation. Nor do I conclude that Mr Rayfield through Career Tech, knew or intended Mr Lambert to adopt that assumption or expectation. Thus the problems in this case are with elements (2) and (4). The reasons why these elements are not made out are considered below. 102First, I accept that Mr Draper did say to Mr Rayfield words to the effect "I will take you on and provide you with the tools of the trade" and that in general terms Mr Rayfield understood that "the tools of the trade" might include the Maximiser databases as well as other resources of the business. But this was not Mr Rayfield formally accepting some resupply of the whole Maximiser database to him. His understanding of this exchange with Mr Draper was that he could decide whether or not to become a consultant to TF Industrial, but that if he did not join TF Industrial that Mr Draper would provide him with reasonable "tools" or resources to continue his separate business. I accept that this was his understanding at the time and that he interpreted what Mr Draper was saying as an indication that he, Mr Rayfield, would be able to use the Maximiser database for himself even after he had left the business, if that is what he chose to do. This is my view is entirely consistent with his understanding of the arrangements that he had with Mr Lambert about the database. For that reason he did not seek to correct Mr Draper at all. 103Second, TF Industrial's case lacks evidence of an important element in the assumption pleaded. TF Industrial says that Mr Draper assumed that "OTC was the sole owner of the Maximiser files" and that the defendants did not have any proprietary interest (Further Amended Statement of Claim paragraph 31(e)). But this assumption involves both a positive and a negative proposition: that OTC was the owner of the Maximiser files; and that Career Tech and Mr Rayfield did not have an interest in them. In my view TF Industrial has not made out that Mr Rayfield was aware that Mr Draper thought that Mr Rayfield did not have an interest in the merged database. The plaintiff's case does not include evidence in which Mr Draper clearly asks Mr Rayfield whether he is disclaiming any interest in the database. The fact that Mr Draper was assuming that Mr Rayfield was abandoning any interest in the database was not brought to Mr Rayfield's attention. Such a conclusion cannot readily be inferred from vague statements by Mr Draper that TF Industrial would supply the "tools of trade" to Mr Rayfield and Career Tech, even if that is interpreted the way Mr Draper says. If Mr Draper on behalf of TF Industrial wanted to clearly exclude any claim that Mr Rayfield or Career Tech had over the database, then they could have insisted on a revised consultancy agreement being executed between Career Tech and Mr Rayfield on the one hand and TF Industrial on the other, at the time the business was acquired from OTC. This was not done. Any reasonable enquiry by Mr Draper of Mr Lambert at the time of purchase in November 2009 about the history of the database would be likely to have revealed Mr Rayfield's role in its original merger and development. 104Thirdly, TF Industrial has not established that the defendants knew or intended TF Industrial to rely upon the assumption. The evidence does not support the conclusion that Mr Rayfield knew that Mr Draper on behalf of TF Industrial was going to enter the purchase transaction on this assumption. TF Industrial did not establish that, for example, Mr Rayfield appreciated that an assumption that he or Career Tech had no claim over the database was important to Mr Draper and TF Industrial going ahead with the purchase in November 2009. 105In my view the estoppel case fails for these reasons.

TF Industrial's Contract Claim 106In paragraph 11 of the Further Amended Statement of Claim the plaintiff pleads a contract based upon the terms of the 2007 consultancy agreement between OTC and Career Tech, which is said to have founded the engagement of Career Tech by TF Industrial in a conversation between Mr Draper and Mr Rayfield around 5 November 2009. I have already found that I do not accept Mr Draper's version of this conversation. There were undoubtedly discussions between Mr Draper and Mr Rayfield at this time about the percentage of revenue that Mr Rayfield would earn as a consultant in relation to work sourced through him. But I do not accept that it was otherwise agreed that Career Tech (and Mr Rayfield) would have a consultancy on exactly the same terms as had existed between OTC and Career Tech. 107In final submissions Mr Ang, for the plaintiff, put an argument that in the absence of an express incorporation of the terms of the OTC-Career Tech contract into the TF Industrial-Career Tech contract, that it was an implied term of a contract within the recruitment industry, that a consultant holds an implied duty of confidentiality in respect of databases with which the contractor is provided. In my view such a term would not be implied in circumstances such as the present, where the party alleged to be subject to the obligation of confidence has used the subject database for his own purposes for a long time prior to the making of the contract. This then leads to the plaintiff's breach of confidence claim.

TF Industrial's Breach of Confidence Claim 108The plaintiff seeks orders over the merged database described as follows:- (a)'The TFI Maximiser Data Files'; (b)The 'TFI Industiral File Server'; (c)The file 'TF passwords.xls'; (d)The Candidate 'CVs'." In my view there are many problems with TF Industrial's breach of confidence case. 109First, a plaintiff's primary obligation in such a case is to identify with specificity and not merely in global terms what is said to be the information in question and the subject of the obligation of confidence: Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 per Gummow J. In this case, in my view, TF Industrial, has not done that. TF Industrial has given evidence about the "TF Industrial file Server", the use of the passwords and the CV database. But the plaintiff has not sought to separate out from the general merged database any database in which Career Tech or Mr Rayfield may have an interest, any personal information that Mr Rayfield entered at home, or any information that Mr Rayfield added himself believing that he and Career Tech were jointly using the database with OTC. The plaintiff's case is not assisted in this respect by the failure to call any evidence from Mr Watt, the Court appointed expert, about the data. 110TF Industrial's primary obligation is to show that the information, the subject of the claim, has the necessary quality of confidence about it and secondly that the information must have been imparted in circumstances importing an obligation of confidence: Del Casale & Ors v Artedomus (Aust) Pty Limited [2007] NSWCA 172 at [103] per Campbell JA. In my view, as a result of my findings TF Industrial fails on both these elements. 111Mr Rayfield used the merged database for Career Tech's own purposes for many years after 2002 and it was added to and improved by Mr Rayfield and on behalf of Career Tech with Mr Lambert's knowledge pursuant to an understanding that it was a jointly used resource which could be copied and used by Mr Rayfield and Career Tech for their own purposes from time to time. 112Nothing in the consultancy agreements altered this position. The merged database stood outside the consultancy agreements. The 2002 consultancy agreement states that Mr Rayfield "will obtain or have access to confidential information concerning Technical Focus Pty Limited" and ideas "which you devise, discover or conceive whilst employed by Technical Focus Pty Limited" belong to Technical Focus Pty Limited. None of that easily applies to the merged database. These provisions could not be taken as a declaration that the merged database was really owned by Technical Focus Pty Limited and was only being used by Mr Rayfield and Career Tech with its permission. That would be contrary to the substance of the transaction: see Wentworth Partners Estate Agents Pty Limited trading as Re Max Gold v Gordony [2007] NSWSC 1135at [31] per Young CJ in Eq. 113Clause 4 of the 2005 and 2007 consultancy agreements assists the plaintiff no more. This clause is predicated upon the acknowledgement of the contractor that it "will have access to and become acquainted with various trade secrets, inventions, innovations, processes, information, records and specifications owned or licensed by the company". Neither these words at Clause 4.1 or Clause 4.3 in my view apply to the merged database, or Mr Rayfield's work on it, to which he contributed and already had consensual access. 114In my view the information is subject to the plaintiff's claim was information which could also be freely used by the defendants and was not imparted to them in circumstances importing an obligation of confidence.

Conclusions and orders 115In the result therefore I have found that TF industrial has not established its estoppel claim, its contract claims, nor its claim that Career Tech and Mr Rayfield owe it an equitable obligation of confidence. 116The plaintiff's claim therefore should be dismissed. And the cross claim succeeds in the agreed amount of $28,265.15. A full calculation of the amount of interest due up to judgment on the cross claim has not yet been done. Career Tech is entitled to interest up to judgment in accordance with the terms of the various invoices that it issued in 2010. That calculation should be done, provided to the cross defendant and presented to the court in time for any final argument about costs. Judgment on the cross claim will not be entered before then. 117There are a number of other procedural matters that still need to be resolved. Ordinarily costs would follow the event but one or other party may seek to argue for a special costs order. An opportunity should be provided for such argument. The TF Industrial's contempt application may fall away as a result of the findings now made. But it may perhaps still be pursued. A decision will need to be made about that as well. I will fix the proceedings for further short argument on these, and any other, matters that remain between the parties at 2 pm on Friday, November 2011. 118The orders of the Court today therefore will be: (a)The plaintiff's claim is dismissed; (b)Judgment on the cross claim in the sum of $28,265.15 plus interest to be calculated; (c)List the proceedings for further argument in relation to costs, the calculation of any interest up to judgment on the cross claim and in relation to the proposed course for the plaintiff's contempt application, at 2 pm on 11 November 2011; (d)Direct the parties to exchange submissions about all issues for argument on 11 November 2011, by 5 pm on Wednesday 9 November 2011; and (e)Grant liberty to apply.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 November 2011

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Cases Cited (6)