FEDERAL COURT OF AUSTRALIA Ferguson Corporation Pty Ltd v Kowalewski [2007] FCA 789 Facenda Chicken Ltd v Fowler (1985) ICH 117 Liberty Financial Pty Ltd v Scott [2004] VSC 414 Liberty Financial v Scott (No 4) (2005) 11 VR 629 Meridian VAT Reclaim Australia Pty Ltd v Agius [2006] VSC 503 FERGUSON CORPORATION PTY LTD (ACN 008 043 646) v HENDRYK KOWALEWSKI, JOPHIEL PTY LTD (ACN 118 004 087) AND ALFRESCO CONCEPTS PTY LTD (ACN 122 503 020) WAD 360 OF 2006 NICHOLSON J 16 APRIL 2007 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 360 OF 2006 BETWEEN: FERGUSON CORPORATION PTY LTD (ACN 008 043 646) Applicant AND: HENDRYK KOWALEWSKI First Respondent JOPHIEL PTY LTD (ACN 118 004 087) Second Respondent ALFRESCO CONCEPTS PTY LTD (ACN 122 503 020) Third Respondent JUDGE: NICHOLSON J DATE OF ORDER: 16 APRIL 2007 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The respondents' notice of motion dated 5 February 2007 be dismissed. 2. The respondents' costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 360 OF 2006 BETWEEN: FERGUSON CORPORATION PTY LTD (ACN 008 043 646) Applicant AND: HENDRYK KOWALEWSKI First Respondent JOPHIEL PTY LTD (ACN 118 004 087) Second Respondent ALFRESCO CONCEPTS PTY LTD (ACN 122 503 020) Third Respondent JUDGE: NICHOLSON J DATE: 16 APRIL 2007 PLACE: PERTH REASONS FOR JUDGMENT 1 The respondents bring a notice of motion to strike out par 5 of the applicant's amended statement of claim and consequentially to also strike out pars 6, 8, 9 and 10 but with no objection to leave being given to re-plead. 2 When the motion first came before me a short time ago, there was elucidation of the extent to which a former employee could retain information from his employment after the cessation of that employment. That was done by reference to the decision in Facenda Chicken Ltd v Fowler (1985) ICH 117, particularly at 135-137. From that it appeared that the implied term which imposes an obligation on an employee concerning conduct after the determination of employment is more restricted in its scope than that which imposes a general duty of good faith during the employment. It was said in Facenda (1985) ICH at 136 that it is clear the obligation not to use or disclose information after cessation of employment may cover secret processes of manufacture or designs or special methods of construction and '... other information which is of a sufficiently higher degree of confidentiality as to amount to a trade secret'. However the reasons went on to state: 'The obligation does not extend to cover all information which is given to or required by the employee while he is in his employment and, in particular, may not cover information which is only confidential.' 3 The hearing was adjourned to give the applicant the opportunity to consider this dicta and whether to amend the statement of claim. Before me today is a minute of a re-amended statement of claim. The minute shows some minor amendments by way of clarification in par 5.3. 4 The claim generally alleges that the applicant employed the first respondent as a technical consultant engaged in the production of sales of stainless steel outdoor kitchen equipment. It then pleads implied terms in his contract of employment. It is then pleaded in par 5 that in breach of the implied terms, firstly, the first respondent (the employee) retained documents described as 'the quotations' and secondly, received and kept two computer diskettes containing fabrication drawings relating to the stainless steel outdoor kitchen equipment and described as 'the drawings'. Thirdly, it is pleaded: 'In August, September and October 2006 the employee took documents in hard copy or soft copy form containing information, not in the public domain but not constituting trade secrets, relating to [the applicant] business of manufacture and sale of stainless steel outdoor kitchen equipment.' This is defined as 'the other information'. 5 That pleading appears in par 5.3. It is particularised in two ways. It is said that the fact that the employee took 'the other information' is to be inferred from the facts relating to the pleadings concerning 'the quotations' and 'the drawings' and to later pleadings concerning the second respondent being knowingly concerned in the contravention of the first respondent and to a further pleading that the third respondent was likewise knowingly concerned. Additionally it is pleaded that further particulars of 'the other information' will be provided after discovery and interrogatories. 6 The respondents say that they would be embarrassed by the pleading in par 5.3 where there is no particularisation of 'the other information' beyond that which I have described. 7 In Meridian VAT Reclaim Australia Pty Ltd v Agius [2006] VSC 503 at [45] his Honour (Harper J) stated: 'The litmus test will often be the plaintiff's ability to identify in its statement of claim - not by general, but by particular, words - the information about which the complaint is made.' He then continued at [46] by stating that: 'There will be instances where the plaintiff's claim is based on inferences. In such cases it may be more difficult than in those in which the direct evidence is relied upon to specify before discovery (or otherwise before trial) the precise information that has been misused.' His Honour continued by saying that: 'The plaintiff seeking to rely on an inference or inferences should in those circumstances plead, (or, which will more often be appropriate, in particulars) the facts upon which it is alleged the inference is to be drawn. The statement of claim would then allege that it is in the circumstances not possible to be more precise than the inference allows.' In Meridian [2006] VSC 503, the statement of claim contained no such pleading. 8 The respondents, however, took me to two other decisions of his Honour which preceded Meridian [2006] VSC 503. The first was Liberty Financial Pty Ltd v Scott [2004] VSC 414. There at [7] his Honour said the plaintiff's position was that they had no evidence to substantiate what they anticipated would be the proper inference to draw from a comparison of the several modus operandi of the first plaintiff and the second defendant. The plaintiffs there suspected that discovery, if properly made would disclose that the comparison they seek to make can be made and when made will lead to the inference to which was in issue. 9 His Honour continued at [8] by stating that it seemed to him that the plaintiffs were essentially engaged in a fishing expedition which was not permitted by the rules of discovery. That also was a claim against a former employee and present business rival in respect of the alleged unlawful transmission of confidential information. 10 In Liberty Financial v Scott (No 4) (2005) 11 VR 629 at [12] his Honour said that in many cases the line dividing specialised, protectable knowledge and information on the one hand from accumulated know-how on the other would be difficult to draw. 11 Nevertheless he considered the task was central. The Court must, his Honour continued at [12], distinguish between the two categories of knowledge, that is, it must determine where the line is to be drawn. A mere description of the information would not generally be sufficient. This was a fortiori, the position, in a situation where a former employee was alleged to have stolen confidential information. He said the identification and the pleadings must be in more than general terms and must employ words that are more than merely descriptive. 12 His Honour further found at [25] that the substantiated statement of claim in that case was embarrassing in that it failed to set out the actual information said to have been misused so that it could not be pleaded too. 13 I regard the paragraph at issue on the re-amended statement of claim as falling midway in all of the dicta to which I have been directed in the reasoning of his Honour. Importantly the respondents say they would have no difficulty responding to the pleading in respect of 'the quotations' and 'the drawings'. These are particularised, that is they are described with sufficient particularity in the paragraph. It is only to par 5.3 and the reference to 'the other information' that their motion is now directed. That is, I think, significant in itself because this is therefore not a case where par 5 is challenged by the respondents' motion so the reference to 'the other information' in par 5.3 is appearing in a context of the paragraph as a whole which is already, as it were, two-thirds of the way sufficiently pleaded in the view of the respondents. 14 As to the reference to 'the other information', it is, I think, importantly constrained by the words that the documents were taken by the employee. This is not a case where there is a completely open-ended pleading, even in par 5.3. First of all the discovery must disclose the documents which were taken. Unless that fact appears prima facie on the discovery, then there can be no 'other information'. If it does appear on the discovery, then the issue is at large in relation to it. In my view, reading par 5 as a whole and viewing par 5.3 in the context of pars 5.1 and 5.2 referring to 'the quotations' and 'the drawings', this is a pleading which is not embarrassing even if care and sensitivity would be required ultimately to the application of par 5.3. 15 For those reasons I consider that the motion should be refused in respect of par 5 and specifically, as it's now moved in relation to par 5.3. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson. Associate: Dated: 8 June 2007 Counsel for the Applicant: TJ Carmady Solicitor for the Applicant: Williams & Hughes Counsel for the Respondents: MN Solomon and PB Dobson Solicitor for the Respondents: DLA Phillips Fox Date of Hearing: 16 April 2007 Date of Judgment: 16 April 2007