Websyte Corporation Pty Ltd v Alexander

REASONS FOR JUDGMENT 1 These reasons relate to two interlocutory applications made in January 2012, which came before me as duty Judge on 1 February 2012. Only the applicant and the second respondent appeared on the hearing of these applications. The proceeding itself is in the docket of Dodds-Streeton J. 2 The applicant, Websyte Corporation Pty Ltd, is in the business of developing internet websites, e-commerce websites and advertising. It alleges that the respondents, while in its employ, took steps to establish a business for the marketing and sale of printer cartridges over the internet. It alleges that they reproduced its software for use in their business, so modifying it as to cause the business to be promoted in an electronic business directory hosted by the applicant. These and related allegations made by the applicant are said to give rise to infringements of copyright under the Copyright Act 1968 (Cth), and to breaches of the Corporations Act 2001 (Cth), of the respondents' contracts with the applicant and of the respondents' duty of confidence as employees and former employees of the applicant; and, to the extent that allegations are made of unauthorised access to, and modification of, the applicant's own software, of trespass. 3 Immediately upon the institution of this proceeding on 16 March 2011, the applicant applied for, and secured, the making of a search order, directed to the respondents, in relation to a wide range of documents, computer files, computer software, passwords, usernames and other artefacts, the location and preservation of which was said to be necessary to protect the evidence that might be relevant in the proceeding. That order was made upon the applicant giving certain undertakings, including the following: The applicant will not, without leave of the Court, use any information, document or thing obtained as a result of the execution of this order for the purpose of any civil or criminal proceeding, either within or outside Australia, other than this proceeding. The search order was duly executed with respect to the first respondent, but, I was told, not with respect to the second respondent. 4 On 1 April 2011, the court gave the director of the applicant, Paul Meyers, leave - … to inspect copies of any of the Relevant Data in the possession of the Applicant's solicitor (pursuant to the Order in paragraph 2 above) strictly on an undertaking by him: (a) to inspect the information and data the subject of this order, being the Relevant Data, strictly in accordance with this order; (b) to keep all of the information received, searched and/or inspected by him confidential and not disclose the information received, searched and/or inspected by him to any other persons (except lawyers for the parties or any independent computer expert engaged by the Applicant); and (c) to use the information derived as a result of the searches and inspections referred to above solely for the purpose of these proceedings. The "relevant data" referred to in this order were seized from the first respondent's premises pursuant to the search order made on 16 March 2011. 5 On 2 June 2011, the applicant informed Victoria Police that it wished to press charges against the respondents in relation to alleged contraventions of s 247G of the Crimes Act 1958 (Vic). That section provides as follows: (1) A person who - (a) causes any unauthorised access to or modification of restricted data held in a computer; and (b) knows that the access or modification is unauthorised; and (c) intends to cause the access or modification - is guilty of an offence and liable to level 7 imprisonment (2 years maximum). (2) An offence against this section is a summary offence. (3) In this section restricted data means data held in a computer to which access is restricted by an access control system associated with a function of the computer. In a statement by which that reference to the police was effected, Mr Meyers said: On 17 March 2011, pursuant to the orders of Justice Jessup made on 16 March 2011, the solicitors for Websyte attended the premises of Mr Alexander and obtained copies of all of the computers and digital storage devices in his possession. The purpose of this search was the preservation of evidence. These computer images are in the possession of and have been reviewed by the solicitors for Websyte. Websyte can make an application the Federal Court of Australia for leave to provide this information, or part of this information, to the police. Until the Court grants such an order, however, the information obtained from Mr Alexander's computers must remain confidential. If it would assist the Police, Websyte would be willing to make such an application at its own expense. It does not appear that, at this stage, the applicant was seeking to press charges against the respondents in respect of alleged contraventions of any provision of the Copyright Act. 6 On 4 August 2011, the applicant filed its Statement of Claim in this proceeding. It alleged that, in about August 2010, the first respondent had reproduced the applicant's software by making copies thereof, and commenced to adapt the variables within that software to operate multiple websites by reference to the respondents' printer cartridge domain names. It alleged that the software was uploaded on to the respondents' server, and was thereafter accessed by uploading information relating to the respondents' printer cartridge business. It alleged that modifications were made to the software, including such as would expressly delete references to the name of the applicant, and to remove obvious visual clues that the respondents' websites were being run on the applicant's software, with the intention of concealing their activities from the applicant. 7 The applicant alleged that these modifications were done pursuant to communications between the respondents which, as particularised, included the following: (a) email dated 7 November 2010 8:26 from McGrath to Alexander: "hey mate… I reckon when you can … change the interface to no say websyte ecommerce login … cause that can be one of the only things out there that could get us … is it overly hard to change?" (b) email dated 7 November 2010 10:26PM from McGrath to Alexander: "great work my friend! That looks pretty groovy…. Just gotta get rid of that badge in the site caus im over seeing the word websyte … your [sic] a good man." (c) email 25 December 2010 11:23PM from McGrath to Alexander: "cms websyte crap from the back end of both systems … I hate seeing the word websyte"; (d) email 26 December 2010 12:30PM from McGrath to Alexander: "mate looks FANTASTIC however it still says websyte admin home up the top (like in the explorer toolbar) and the other one says CW admin home - did you mean that to be CN admin home? Looks really good"; (e) email 28 December 2010 11:32PM (subject: traces of websyte everywhere) from McGrath to Alexander and includes the sentence "is our shopping cart section much different to websyte yet?" It is common ground that the emails referred to in these particulars were available to the applicant only as a result of the execution of the search order made on 16 March 2011. The applicant's Statement of Claim contains other examples of communications between the respondents which were obtained in the same way, but what I have set out above will stand as a sufficient indication of the nature of the material sought to be relied on by the applicant, as referred to in its Statement of Claim. 8 At a meeting on 2 November 2011 between Mr Meyers and the detective handling the relevant investigation on behalf of Victoria Police, Det Snr Con Price, the Statement of Claim was provided to the latter. Why Mr Meyers did this was not explained in his affidavit, but he gave oral evidence as follows: My understanding, first of all, is that the statement of claim is a public document and that … was already available to the police. When we provided it to the police my understanding was that they could have obtained that themselves had they needed to or wanted to. The second area was provided during a meeting on or around I think - was it 2 November - as referred to earlier. … During my discussions with the police I had mentioned to them that an Anton Piller search had been conducted, which was under confidence, and that I was unable to speak to them at any detail about what was obtained during that search, either verbally or to provide any of that documentation. We had some discussions about whether the court - or whether we could apply to the court to obtain some of that relevant material, and on that particular day the discussion was around the process of what we required - supporting documentation from the police to enable us to make that application to the court. Mr Meyers also said that he told Det Price "that the information obtained at the Anton Piller search may be useful for them, for their investigation". 9 Also on 2 November 2011, the court made procedural orders by consent. One of those orders was that the parties give standard discovery by 4:00 pm on 15 December 2011. Only the first respondent complied with that order. In his verified list of documents filed on 15 December 2011, the first respondent swore, in effect, that all documets other than court documents and correspondence between the parties and documents in respect of which privilege was claimed had been lost as the result of a "hardware malfunction" in September 2011. The applicant gave discovery on 31 January 2012. The second respondent has not yet complied with his discovery obligation. 10 By interlocutory application filed on 12 January 2012, the applicant and Mr Meyers seek to be released from their undertakings referred to above, and from the implied undertakings by which they would be bound by reason of having secured access to the respondents' documents pursuant to a coercive court process, to the extent necessary to permit certain emails, and the electronic contents of the server of the respondents' "cartridgenet" computer, to be provided to the Victoria Police, in circumstances which I shall presently relate. Those emails, and that server, were amongst the documents seized from the premises of the first respondent pursuant to the search order made on 16 March 2011. 11 The applicant relies upon an affidavit sworn on 12 December 2011 by Det Price, in which it is stated that the police are investigating the respondents for possible offences under s 247G of the Crimes Act, and also under s 132AJ of the Copyright Act, subss (1) and (2) of which provide as follows: (1) A person commits an offence if: (a) the person possesses an article, with the intention of doing any of the following with the article: (i) selling it; (ii) letting it for hire; (iii) by way of trade offering or exposing it for sale or hire; (iv) offering or exposing it for sale or hire to obtain a commercial advantage or profit; (v) distributing it for trade; (vi) distributing it to obtain a commercial advantage or profit; (vii) distributing it to an extent that will affect prejudicially the owner of the copyright in the work or other subject-matter of which the article is an infringing copy; (viii) by way of trade exhibiting it in public; (ix) exhibiting it in public to obtain a commercial advantage or profit; and (b) the article is an infringing copy of a work or other subject-matter; and (c) copyright subsists in the work or other subject-matter at the time of the possession. (2) An offence against subsection (1) is punishable on conviction by a fine of not more than 550 penalty units or imprisonment for not more than 5 years, or both. Det Price said that he was aware of "additional material" that had been obtained pursuant to the search order, and added that the police were seeking access to that material. 12 As to the matter arising under s 247G of the Crimes Act, Det Price said: In relation to the allegations under section 247G of the Crimes Act 1958 (Vic), I have reviewed the allegations in the Statement of Claim and the documents referred to in the particulars. These documents, in particular the communications between Alexander and McGrath, will be relevant to any investigation and provide contemporaneous documentary evidence in relation to those offences. The quotes extracted from those emails indicate to me that Victoria Police is likely to use those emails as part of any criminal investigation and use them as evidence if charges are pressed. As to the matter arising under the Copyright Act, Det Price said: The evidence required to prove an offence under section 132AJ of the Copyright Act 1968 (Cth) is different to that of section 247 of the Crimes Act 1958 (Vic). The Copyright Act offence require an analysis of the software being used by McGrath and Alexander in the furtherance of their business "cartridgenet.com.au" (Cartridgenet). To properly consider whether charges should be laid, the Victoria Police would therefore require access to the contents of the server that was running the Cartridgenet website during the time the alleged offences may have been committed, being between January and March 2011. This will enable us to consider whether the contents of the server contained material that breached any copyright owned by Websyte. The offences under section 132AJ of the Copyright Act also requires proof that McGrath and Alexander possessed an infringing copy with the intention of exhibiting it in public or distributing it for trade. Again, the quotes from the emails referred to in the particulars to the Statement of Claim indicate to me that those emails are likely to provide contemporaneous documentary evidence of any offences that may have occurred. The Crimes Act prosecution would relate to a summary offence, and would need to be commenced before 6 March 2012. Therein lies the urgency of the applicant's interlocutory application. The Copyright Act prosecution would relate to an indictable offence, and would be subject to no such limitation period. 13 In Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283, the Full Court considered an application for a party to be released from the implied undertaking which arose upon the filing, at the behest of that party, of an affidavit by the other party which the court held was "intended to fulfil the role (albeit somewhat extended) of an affidavit of discovery" (218 ALR at 288, [20]). The Full Court said (218 ALR at 289-90, [31]): In order to be released from the implied undertaking it has been said that a party in the position of the appellants must show "special circumstances": see, for example, Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217 ; 110 ALR 685. It is unnecessary to examine the authorities in this area in any detail. The parties were not in disagreement as to the legal principles. The notion of "special circumstances" does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined. In Springfield Nominees, Wilcox J identified a number of considerations which may, depending upon the circumstances, be relevant to the exercise of the discretion. These were: • the nature of the document; • the circumstances under which the document came into existence; 218 ALR 283 at 290 • the attitude of the author of the document and any prejudice the author may sustain; • whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain; • the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information); • the circumstances in which the document came in to the hands of the applicant; and • most importantly of all, the likely contribution of the document to achieving justice in the other proceeding. 14 Liberty Funding did not involve a request for leave to use a document in a criminal investigation or proceeding, as does the present case. Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476 was, however, such a case. There, Lee J undertook a careful examination of the English and Australian authorities, and reached the conclusion that such a request for leave was to be approached by weighing two competing public interests: that involved in the due administration of the civil law insofar as it depended upon the protection of a party's right to privacy and confidence with respect to his or her own documents, save to the extent necessary for the conduct of the proceeding at hand, and that involved in the location and prosecution of criminal offenders. As to the latter, his Honour said ([1995] Qd R at 488): In my opinion, in determining the weight to be given to a public interest of that kind, some of the factors on which the Court will focus include: the nature of the offence alleged; the cogency of the evidence sought to be adduced in support of it; the authority to which the documents are sought to be disclosed; the manner of the authority's intended user; the possibility of misuse by that authority and any prejudice, actual or potential, which may be occasioned to the respondents by the disclosure:…. 15 Lee J then gave some attention to the "nature of the offence" aspect. His Honour said ([1995] Qd R at 489): There is a clear distinction to be made between offences which essentially involve the infringement of private or individual rights and offences which it may be in the public interest to uncover. That is not to say that the public has no interest in protecting an individual from injury to his reputation, person or property but it is to recognise the reality that in many cases where private or individual rights are infringed adequate civil remedies will be available to the wronged party. In those types of cases the public interest will be suitably served by permitting the individual to continue with or initiate any action which he may have for a civil remedy. Conversely, if a party does not feel sufficiently aggrieved to protect his rights by means of civil action open to him, it is difficult to see why the public conscience should feel any greater insult or burden. Much, of course, will depend on the circumstances of each case, including the nature of the individual's right and the extent to which it has been infringed. With respect, I would associate myself with these observations. 16 I was referred to a number of other authorities in which courts had exercised their discretion one way or the other in situations said to be analogous to the present one. There is, however, no controversy as to the nature of the broad discretion given to the court, nor as to the purpose for its exercise. The applicant has pressed upon me the need for expedition in the preparation of these reasons, given the imminent expiry of the statutory limitation period for the institution of a prosecution under s 247G of the Crimes Act. In the circumstances, this is not the occasion for any more detailed examination of the authorities. 17 The offences which Victoria Police are investigating correspond with civil wrongs in relation to which the applicant sues in this proceeding. Broadly, what is under consideration is the addition of a criminal sanction to the civil remedies which are available here. The offences being investigated fall into the category of those described by Lee J, in Bailey, as involving the infringement of private or individual rights rather than, by contrast, involving conduct which injures or damages the community or a section of it, or alleged criminal conduct which "it may be in the greater public interest to uncover". This is not for a moment to diminish the importance, in the public interest, of offences such as those now being investigated by Victoria Police being uncovered and, where appropriate, prosecuted, but it is a valid distinction nonetheless and one which, like Lee J, I consider relevant to the discretionary exercise upon which I am engaged. 18 A related consideration is that the initiative to set in train the criminal process with respect to the conduct of the respondents was taken by the applicant itself. Again, I recognise that there is a public interest in persons who claim to have been injured by criminal conduct reporting that conduct to the police. But this consideration is of some present relevance in that it reflects the reality that it is the applicant itself, rather than any other company or person or the broader community, which is said to have suffered as a result of the respondents' conduct which is alleged to be unlawful. 19 There is another circumstance which I was urged by the respondents to take into account. It is that the provision by the applicant of its Statement of Claim to Det Price in November 2011 was contrary to the undertaking given to the court on 1 April 2011. It seems clear that, insofar as the Statement of Claim included extracts from documents obtained upon execution of the search order, the provision of the Statement of Claim to the police constituted the use by the applicant of information derived as a result of the searches, within the meaning of that order. It was submitted on behalf of the applicant that the Statement of Claim was provided to Det Price for the purpose of this proceeding, in the sense of providing for the detective a basis upon which he would then be able to express a view whether the police would be assisted in their investigation by being given access to the documents obtained under the search order, thereby providing the applicant with grounds for the very application for release which is now being made. 20 The point of controversy here relates to the purpose for which the Statement of Claim was provided to Det Price in November 2011. That is a question of fact. When he was called to give oral evidence with respect to that subject, and when asked an open question in chief as to his purpose in providing the Statement of Claim to Det Price, Mr Meyers' response was, I would have to say, less than convincing. Before he gave that evidence, he had sat in court while the subject was dealt with in the submissions of counsel for the applicant. He was, therefore, acutely alive to the distinction which lies at the core of the present question. In his evidence, Mr Meyers also made it clear that, in November 2011, he took the view that the Statement of Claim was a public document and that, had they wished it, the police could have obtained it for themselves. In his evidence, Mr Meyers gave me the indication that he thought there was nothing wrong with providing the Statement of Claim to the police, although he was astute to make it clear to them that he was bound by the undertaking not to go further. In the circumstances, I am not prepared to accept his evidence - to the extent that the applicant would wish me to understand that he did give evidence - that he provided the Statement of Claim to Det Price solely for the purpose of making the application which is now before the court. I think it more likely, and I would find, that Mr Meyers also had the purpose of disclosing to the detective the nature of the allegations made against the respondents in the proceeding, with a view to him coming to a better understanding of the material that might sustain the laying of criminal charges. That he should reach that understanding was not, of course, unrelated to the decision to make the present application, in the sense that it enabled Det Price to advise the applicant as to whether there would be any utility in doing so. But such a utility could, I consider, arise only because of an assessment by the detective about the value of the material already disclosed in the Statement of Claim to his investigation. 21 I would find that the Statement of Claim was provided to Det Price in November 2011 not solely for the purpose of this proceeding and was, therefore, provided contrary to the undertaking which Mr Meyers had given to the court on 1 April 2011. This conclusion bears upon the exercise of my discretion in two ways. First, it requires me to view the evidence of Det Price, upon which the applicant relied in support of its application for leave, in a particular way. The assessment of the viability of criminal charges which is in part the subject of that evidence must be seen as depending, to some extent at least, upon information provided to the detective in breach of an undertaking given to the court. And secondly, the applicant's own position, in seeking the favourable exercise of the court's discretion, is necessarily compromised by what must be viewed as an act of self-help on its part, to the extent that it made use of some emails in relation to which it now seeks leave to be released from its undertaking. 22 As against the considerations to which I have referred above, there is the undoubted one that s 247G of the Crimes Act and s 132AJ of the Copyright Act are important provisions which should be enforced in the normal way of the criminal law. On one view, there would be an irony if it were a court of justice which stood in the way of such enforcement by precluding the injured party concerned from providing to the police all the material upon which it could legitimately lay its hands. It seems quite possible that, because of the "hardware malfunction" experienced by the respondents in September 2011, the only versions of the documents and files that might be useful in an investigation under those provisions are those obtained under the search order, and now held by the applicant. In relation to the summary offence under the Crimes Act, there is the additional consideration that, if all that material cannot now be provided to the police, there is a prospect that no charge will be laid because of the expiry of the statutory limitations period to which I have referred. The same consideration does not apply with respect to the indictable offence which arises under the Copyright Act, in which respect I note that, if I were now to hold the applicant to its undertakings, that would not necessarily forever protect the relevant documents from use in a criminal investigation. It would seem that much will depend on the use to which the documents are in fact put in this proceeding. This aspect is, however, a matter upon which I did not receive detailed arguments, and I say nothing further about it. 23 I am influenced by the circumstance that, in March 2011 when the search order was obtained, the applicant might instead have taken the matter directly to the police, who themselves might have used the conventional search procedures for which the criminal law provides to obtain the documents which are now in contention. But such a procedure would have left the applicant without control over the proceeding, and would be unlikely to have produced such sweeping and immediate access to the respondents' documents as the applicant obtained under the search order issued by this court. By adopting the course which it did, the applicant obtained a form of direct and exceptional relief available under the civil law. There was, however, a price to be paid for that expedient, namely, the categorical undertakings which the court required, and the strict limitations upon use of the recovered material which necessarily attended the giving of those undertakings. The court should not, in my view, give any currency to the notion that search orders can be used as what might be, in effect, the first of a two-step process in which, if the documents so recovered appeared to be incriminating, the second step might involve a criminal prosecution for what is essentially the same delict. 24 Weighing up all considerations to which I have referred, I am not persuaded that it would be in the interests of justice, or in the public interest, for the applicant to be released from the undertakings which it has given to the court in connection with the material recovered under the search order. Its interlocutory application for that relief must be dismissed. 25 The other interlocutory application now before the court was filed by the second respondent on 17 January 2012. He seeks a stay of the proceeding as a whole, the setting aside of the procedural orders made by Dodds-Streeton J on 2 November 2011 and the discharge of the search order made on 16 March 2011. It was, however, accepted by counsel for the second respondent that there was no urgency in these applications. The only further step that might be required of the second respondent before the docket Judge is able to give her attention to the applications is the filing and service of a list of documents. If there is any document which the second respondent would be obliged to discover and which might tend to incriminate him, or similar, he might take an objection to having to disclose it in the conventional way. If it can be avoided, I would prefer not, as duty Judge, to determine an application for a permanent stay of a proceeding in the docket of another Judge. 26 The applicant proposed a series of amendments to the interlocutory timetable ordered by the docket Judge on 2 November 2011 with which the second respondent substantially concurred. I am in no position to second guess the parties on these matters, but, particularly given the absence of the first respondent, I am disposed to ensure that the proceeding be mentioned again before the docket Judge as soon as may conveniently be arranged. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.