FEDERAL COURT OF AUSTRALIA Coffey Information Pty Limited v Cullen [2015] FCA 28 Citation: Coffey Information Pty Limited v Cullen [2015] FCA 28 Parties: COFFEY INFORMATION PTY LIMITED v ALAN CULLEN, DANE CULLEN, GLEN RICHARDSON, JASON LEE and QUALTEST LABORATORY (NSW) PTY LIMITED (ACN 153 268 896) File number: NSD 173 of 2013 Judge: FARRELL J Date of judgment: 30 January 2015 Catchwords: PRACTICE AND PROCEDURE – application for order for discovery – alleged misuse of confidential information by prospective respondents – whether reasonable belief that prospective applicant may be entitled to relief – whether more than suspicion or assertion – whether insufficient information to determine whether to commence proceedings – whether prospective respondents have relevant material – whether reasonable enquiries undertaken by prospective applicant – exercise of discretion Legislation: Corporations Act 2001 (Cth) Federal Court Rules 2011 (Cth) Cases cited: EBOS Group Pty Ltd v Team Medical Supplies Pty Ltd (No 3) (2012) 199 FCR 533 Ebos Group Pty Ltd v Team Medical Supplies Pty Ltd [2011] FCA 862 Higgins v Hancock (2011) 199 FCR 395 Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73 St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 Uni-Span Height Safety Pty Ltd v Gold Guardrail Pty Ltd [2009] FCA 819 Date of hearing: 22 May 2013, 27 May 2013 Date of last submissions: 27 May 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 152 Counsel for the Prospective Applicant: Mr R Crow Solicitor for the Prospective Applicant: Workplace Law Counsel for the Prospective Respondents: Ms M Painter SC Solicitor for the Prospective Respondents: Kelly Hazel Quill IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 173 of 2013 BETWEEN: COFFEY INFORMATION PTY LIMITED Prospective Applicant AND: ALAN CULLEN First Prospective Respondent DANE CULLEN Second Prospective Respondent GLEN RICHARDSON Third Prospective Respondent JASON LEE Fourth Prospective Respondent QUALTEST LABORATORY (NSW) PTY LIMITED ACN 153 268 896 Fifth Prospective Respondent JUDGE: FARRELL J DATE OF ORDER: 30 January 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application is dismissed. 2. The applicant pay the respondents' costs as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 173 of 2013 BETWEEN: COFFEY INFORMATION PTY LIMITED Prospective Applicant AND: ALAN CULLEN First Prospective Respondent DANE CULLEN Second Prospective Respondent GLEN RICHARDSON Third Prospective Respondent JASON LEE Fourth Prospective Respondent QUALTEST LABORATORY (NSW) PTY LIMITED ACN 153 268 896 Fifth Prospective Respondent JUDGE: FARRELL J DATE: 30 January 2015 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The prospective applicant, Coffey Information Pty Limited (Coffey) has applied for an order for discovery against the prospective respondents (the respondents) pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) (Rules). The application was vigorously opposed by the respondents. I will refer to the first respondent (Mr Cullen), the second respondent (Mr D Cullen) and the third respondent (Mr Richardson) collectively as Departing Employees. Discovery sought 2 Coffey seeks discovery of: (1) all documents which are property of Coffey or its related body corporate, or which at any time came into the possession or control of any of the Departing Employees as a result of their employment with Coffey and any documents containing a copy or reproduction thereof; (2) all documents which are the property of Coffey or its related body corporate, or which at any time came into the possession or control of Messrs Cullen, D Cullen or Richardson as a result of their employment with Coffey which were: (a) sent by any of the Departing Employees to a personal email address used by any of them, or to the fourth respondent (Mr Lee), the fifth respondent (Qualtest NSW) or any other officer, employee or agent of Qualtest NSW; (b) copied, transferred or exported by either of Messrs Cullen, D Cullen or Richardson to a digital storage device including without limitation a computer, hard drive, disc, CD, DVD, USB, iPod or smartphone; (c) printed, photocopied or scanned and subsequently retained by any of Messrs Cullen, D Cullen or Richardson; and (d) any documents containing a copy or reproduction thereof; (3) all documents which record, refer or relate to the acquisition or creation of Qualtest NSW's customer databases; (4) all client lists, training records, training and quality manuals, worksheets for materials testing and equipment calibration, test results, client report forms and any documents prepared for the purpose of, or used in the course of, Qualtest NSW seeking accreditation by the National Association of Testing Authorities (NATA). Statement of belief 3 Coffey relies on a statement of belief by Ms Dawn Watt (Ms Watt) in support of the application for discovery. She states that she believes that: (1) The Departing Employees have taken from Coffey's premises, without its permission or authorisation, copies of Coffey's confidential information, including client lists, training records, training and quality manuals, worksheets for materials testing and equipment calibration, test results, client report forms and correspondence; (2) Mr Lee and Qualtest NSW have received this confidential information of Coffey in circumstances giving rise to an obligation of confidence; (3) The Departing Employees, Mr Lee and Qualtest NSW have made or intend to make unauthorised use of Coffey's confidential information in the business of Qualtest NSW; (4) Coffey has, or may have, the right to obtain relief in this Court from the respondents, including relief for contraventions of ss 182 and 183 of the Corporations Act 2001 (Cth) (Corporations Act), breach of contract of employment, breach of fiduciary duty and breach of confidence; (5) One or more of the respondents have, have had, or are likely to have had in their control documents directly relevant to the question of whether Coffey has a right to obtain relief; and (6) Inspection of documents in the possession, custody or control of the respondents by Coffey would assist in making the decision. 4 Each of Ms Watt and Mr Brian Miller (Mr Miller) affirmed two affidavits in support of Coffey's application and were cross examined. Each of the Departing Employees and Mr Lee also gave evidence by affidavit and were cross examined at the hearing of the application. Despite the evidence of the respondents, Ms Watt did not resile from her belief. Background Coffey 5 Coffey provides laboratory testing services for the geotechnical engineering, mining and resources, civil engineering and quarrying industries; it is accredited by NATA in relation to construction material testing. 6 Coffey is part of the Coffey group of companies which includes Coffey Geotechnics Pty Ltd (Coffey Geotechnics). 7 Mr Miller is the NSW Southern Service Line Manager for Coffey. He says that Coffey has turnover of approximately $60 million per annum and employs approximately 450 staff in 40 locations across Australia. Its Newcastle branch (at Warabrook) employs the most people, with 50 staff, and it is the most profitable branch with turnover of approximately $8 million per annum. Coffey has been in business since 1959 and Mr Miller says it is the market leader. 8 Mr Michael Renehan is the Group Executive, Information for Coffey to whom Mr Miller and Mr Cullen reported. Mr Anthony Crane is the Newcastle Business Manager, Information. 9 Ms Watt is the Operations Excellence Manager for Coffey, based at the Warabrook laboratory. She was employed in that role in July 2008 and she is responsible for safety, quality, training, equipment procurement, customer service, asset management and laboratory information management systems at all 41 Coffey laboratories in Australia and New Zealand. Between 2003 and 2005, Ms Watt had been employed by Coffey Geosciences as a technician and Clean Lab Manager, quarry liaison and part-time draftsperson. Her duties included testing of soil, reporting of results to quarries and drafting geotechnical site plans. She reported to Mr Cullen. In 2005 she left to study and was awarded an MBA in December 2007. Mr Lee, Qualtest NSW and Qualtest Qld 10 Mr Lee was employed by Coffey Partners International Pty Ltd (now known as Coffey Geotechnics) in 1993. From January 2006 until September 2011, Mr Lee was employed by Coffey Geotechnics in the position of Newcastle Office Manager and Geotechnics Business Unit Manager. In March 2010, he was appointed Principal Geotechnical Engineer for Coffey Geotechnics. Mr Lee says that Coffey Geotechnics is a related company of Coffey but independent of it and that he was never employed by Coffey. 11 Mr Lee says that following his departure from the Coffey group of companies in September 2011, he formed the view that there was a gap in the marketplace for a service provider which concentrated on local contractors and consultants and which was not focused on major projects; he formulated his business plan for what would become Qualtest NSW on this basis. 12 Between 19 September 2011 and 7 December 2012, Mr Lee worked for Hatch Associates Pty Ltd (Hatch), including a handover period between September 2012 to 7 December 2012. He devoted time during the latter period to the establishment of Qualtest NSW. During his employment with Hatch in 2012, he referred work worth approximately $400,000 to companies within the Coffey group. 13 Qualtest NSW is in the same industry and competes directly with Coffey in providing laboratory testing services for the geotechnical engineering, mining resources, civil engineering and quarrying industries. Qualtest NSW is dedicated to servicing the Newcastle and Hunter Valley region. 14 An extract of the register maintained by the Australian Securities & Investments Commission reveals that Mr Lee became the sole director and secretary of Qualtest NSW on 2 August 2012 when Mr Rex Fleiter (Mr Fleiter) and Mr Brett Hollingum (Mr Hollingum) retired as directors. Mr Lee and Mr Fleiter each hold beneficially 50 of the 100 shares issued in Qualtest NSW. 15 Mr Lee gave the following evidence: Mr Lee had a personal relationship with Mr Fleiter and Mr Hollingum who were the directors of Qualtest Laboratory Pty Limited (Qualtest Qld). Qualtest Qld has owned and operated a NATA accredited facility for approximately 20 years, during which time it developed its own set of manuals and documentation. Qualtest Qld is owned by Mr Fleiter, who is an accredited NATA assessor. Mr Lee became aware that Qualtest Qld was looking at setting up a laboratory in New South Wales and one of the directors (Mr Hollingum) was retiring and that there may be potential for him to be involved in the laboratory in Queensland down the track. 16 Mr Lee says that Qualtest Qld provided to Qualtest NSW, on a commercial basis, the suite of intellectual property required to obtain NATA accreditation, including the laboratory manual, quality manual, a procedures manual and working instructions, a sample register, a testing register, report worksheets and forms, calibration worksheets and forms and client reports. Qualtest Qld ran the process of obtaining NATA accreditation for Qualtest NSW. He says that Qualtest NSW adopted the Qualtest Qld reporting system which is Microsoft Excel based and was developed in-house over 20 years. In addition, some information used by Qualtest NSW to create its worksheets and report forms was purchased from SAI Global. 17 Qualtest NSW applied for NATA accreditation on 4 November 2012 and obtained it on 15 January 2013. Mr Cullen, Mr D Cullen and Mr Richardson 18 Mr Cullen was employed as Principal Geotechnician under a letter of appointment dated 26 September 2006 issued by Coffey Geotechnics. 19 Mr Miller describes Mr Cullen as follows: 13. Alan Cullen was the NSW Northern Service Line Manager and the employee in charge of the Company's laboratory at Newcastle. 14. Alan was also employed in the position of Principal Geotechnician and he reported directly to Mr Michael Renehan, Group Executive, Information, as Michael's principal technical advisor with respect to quarry materials testing, pavements, subdivisions and earthworks. … 15. I have known Alan since about 1979. Alan is a very prominent specialist in the areas of quarry materials testing, earthworks, subdivisions and pavements in the Newcastle and Hunter Valley areas. He has lived in the region all his life and worked for Coffey continuously for about 32 years. 16. Alan was responsible for generating the testing business for the Newcastle laboratory. He also generated business for the related companies Coffey Geotechnics Pty Ltd and Coffey Environments Pty Ltd. He was the 'face' of Coffey for the Newcastle and Hunter region. Coffey Information has a business development team based in Brisbane but with national responsibility. That team was generally not required in the Newcastle and Hunter region because Alan did the business development work. Clients rang Alan constantly to obtain technical advice. He provided advice and recommendations to quarry owners, civil contracting companies, mining companies, developers, councils and road authorities, on such matters as civil engineering project materials, roads, earthworks, and rail embankments. … 18. Alan was very important to Coffey, and particularly in the Newcastle, Hunter Valley and Northern NSW areas. [Upon learning of Mr Cullen's resignation] I wanted to go and see him so that I could do everything in my power to convince him to stay. … 29. On Wednesday 24 October 2012 Alan Cullen and I discussed the clients that we needed to meet with. Together he and I visited about a dozen principal clients over the next 2 or 3 weeks. 30. I observed in the conversations Alan had with the clients that he had strong personal relationships with all the clients. 20 Mr Cullen and Mr Lee say that they had a conversation in late 2011 in which they discussed approaches which had been made to Mr Cullen to leave the Coffey group and the possibility of setting up an independent testing laboratory. Mr Lee says that he commenced discussions to recruit each of the Departing Employees to Qualtest NSW in August 2012 and discussions went on during September and October 2012. For the purposes of this application I accept that Mr Lee became a director and shareholder of Qualtest NSW on 2 August 2012 and the evidence of Mr Lee and the Departing Employees that Mr Lee approached them individually in August 2012 and that they each decided to accept employment with Qualtest NSW in mid-September 2012. Having secured their interest in taking employment with Qualtest NSW, Mr Lee received quotations for equipment in August 2012 and placed orders in September 2012. Qualtest NSW took possession of premises at 8 Ironbark Close on 1 October 2012 at which it established its laboratory. 21 Mr Cullen resigned to Mr Renehan on 18 October 2012. Mr Miller met with Mr Cullen on 19 October 2012 and Mr Cullen told him that the work he would undertake after he left the Coffey group would be "primarily quarry consulting" and there would probably be "a small lab" associated with the business. 22 In a meeting with Mr Miller and Ms Watt on 19 October 2012, Mr Cullen advised them that Mr D Cullen (who was the Quarrying Materials Team Leader) and Mr Richardson (who was the Earthworks Team Leader) would also be resigning. Messrs D Cullen and Richardson were the next two most senior staff in the Newcastle office after Mr Cullen. 23 Mr D Cullen is Mr Cullen's son. He was employed by Coffey under a letter of appointment signed on 4 February 2009. He was responsible for liaising with clients, scheduling, delivery and billing of quarry materials testing jobs. 24 Mr Richardson was employed by Coffey under an employment agreement signed on 21 October 2010. He was responsible for liaising with clients, pricing, scheduling, delivery and billing of earthworks materials testing jobs. 25 In a conversation between Mr Renehan, Ms Watt, Mr Miller and Mr Cullen on 19 October 2012, Mr Renehan requested that Messrs D Cullen and Richardson submit their resignations to him when he came to the Newcastle branch on 22 October 2012. That is what occurred. 26 Messrs D Cullen and Richardson ceased employment with Coffey on 9 November 2012 and commenced work with Qualtest NSW on 12 November 2012. 27 In the conversation between Mr Renehan, Ms Watt, Mr Miller and Mr Cullen on 19 October, Mr Cullen indicated that he could finish at the end of October or work out the contractual notice period of four weeks. Mr Renehan appears to have agreed to Mr Cullen finishing employment in a two week period (ending 2 November 2012). Mr Cullen says that based on this understanding, he began to make personal arrangements for the period after 2 November 2012 including two events in the week commencing 12 November 2012. Mr Renehan appears to have changed his mind about Mr Cullen's final day of employment; at some time in the next week Mr Miller advised Mr Cullen that Mr Renehan wished him to stay until 9 November. 28 On or about 29 October 2012, Mr Renehan told Mr Miller that he wanted Mr Cullen to stay as long as possible and that he had discussed with Mr Cullen the possibility of his staying until 16 November 2012. Mr Cullen says that Mr Miller told him early in the week of 5 November 2012 that his last day would be 9 November 2012, but on 9 November 2012 Mr Miller told Mr Cullen that Mr Renehan wanted him to go to Queensland in the week of 12 November 2012. Mr Cullen resisted this, indicating that he had a client meeting at Ravensworth in the Hunter Valley on 12 November 2012 and personal arrangements on 13 and 15 November 2012. Mr Cullen said that even though he thought his end date was to be 9 November, he arranged the meeting on 12 November 2012 with the client so as not to leave a project unfinished. Ultimately Mr Cullen met with a client on 12 November 2012 and Mr Cullen was thereafter not required in the office but was on call until 16 November 2012. Mr Miller agreed that Mr Cullen could keep the Toyota Prado provided by Coffey until then. 29 On 14 November 2012, an employee of Coffey told Mr Miller that "they" had set up "down the road at 8 Ironbark Close". 30 In the morning of 15 November 2012, Mr Miller drove to 8 Ironbark Close and entered a large industrial building with an office in front. There he saw the Departing Employees. Mr Miller says that there were empty cardboard cartons and a "substantial quantity" of equipment suitable for testing construction materials. He saw the Toyota Prado parked inside the building with the roller door down. He left and sent a text to Mr Cullen asking if it would be suitable to meet at the building at 10.30 am for a brief discussion with each of the Departing Employees and to facilitate the return of the Toyota Prado. 31 After collecting the letters from his office, Mr Miller returned to 8 Ironbark Close with a letter for each of the Departing Employees which he described to Mr Cullen as "a legal letter relating to your employment contract and spelling out how seriously Coffey are taking the current situation". Mr Miller gave each of the Departing Employees a letter and then left, taking the Toyota Prado with him. The letters set out the obligation not to solicit Coffey employees, obligations with respect to confidential information and the details of the non-compete arrangements. Only Mr Cullen's letter explicitly asked for the return of any confidential information and a requirement for an undertaking to comply with the contractual arrangements. 32 Mr Cullen explains his presence at 8 Ironbark Close as being to collect Messrs D Cullen and Richardson to drive them to a Sportsmen's Lunch to raise money for a local soccer team. 33 Later that day, Mr Lee made a telephone call to Mr Miller. Mr Miller reports that Mr Lee said words to the effect: Brian, I understand that you've seen Alan and that you're aware that he has a lab down the road. I'm ringing to advise you that he works for me. I am the sole director of the company he's working for. I thought you'd have realised what was going on. Most people in the industry already know about this. Coffey seems to be the only ones who don't know. … Hatch knows all about me leaving and they're fine with it. I told Alan not to be alarmed about the letter and that I'd gotten a similar letter when I left Coffey. I told Alan that I was only surprised that he didn't get the letter 2 or 3 weeks ago. Because Alan is working for me, I'm the one seeing clients and the one asking the other staff to be part of it. I've been out of the company greater than 12 months and I'm not restrained. 34 Mr Lee says he did not say "Alan is working for me" but rather that "Alan will be working for me". He also says that he did not say that he had received a similar letter, but rather that he was aware of post-employment obligations from when he left Coffey and he was aware of others who had received such letters. 35 On 16 November 2012, Mr Miller met with Mr Lee. Mr Miller says that Mr Lee said: Brian, I'm the sole director of the company Alan is working for. I've financed this and no-one else was involved. It's just like having a mortgage. All of them will eventually have ownership but they don't have that now. Alan will have a bigger share than the other two. I'm seeing the clients, not Alan. You have to know that we would not have gone out like this unless we had verbal agreements with clients to do their work already. The name of the company is Qualtest Laboratories (NSW) Pty Limited. This has some association with a business in south east Queensland near Brisbane. We are getting all the necessary NATA documentation from that company. We could've asked Alan to develop the NATA documentation and lab manuals, but they would have looked too similar to Coffey's. 36 Mr Lee disputes Mr Miller's version of their conversation and says it was as follows: Brian, I am the sole director of the company and Alan will be working for me. This has been personally financed. It's just like having another mortgage. Alan, Dane and Glen will all eventually have shares. I have offered Alan, Dane and Glen incentives to join Qualtest and get them on board. Naturally Alan's offer is more substantial than Dane and Glen. I have been making initial contact and seeing clients, not Alan. Plus, as word spreads, clients are contacting us. You have to know that I would not have gone out like this if I did not have the confidence in getting work from a number of local clients. The name of the company is Qualtest. 37 Mr Cullen commenced employment with Qualtest NSW in the role of Principal Geotechnician/Laboratory Manger on 19 November 2012. National Association of Testing Authorities 38 While NATA accreditation is not required to operate a testing laboratory, Mr Lee describes NATA accreditation as a "benchmark for performance within the industry" and a "distinct marketing advantage". Mr Miller says major customers for construction materials testing require this accreditation and in his opinion, a competitor would have to obtain NATA accreditation in order to get clients and maintain a viable business: that would require a comprehensive suite of materials testing and calibration worksheets and report forms, and a quality management system. 39 Messrs Miller and Lee gave evidence that accreditation is assessed every 18 months. As part of that assessment, NATA checks worksheets used in testing services. Calibration and materials testing worksheets contain instructions and formulae for the conduct of equipment calibration and materials testing, and space for the insertion of data obtained during the calibration and materials testing processes. Report sheets are used to report testing results to customers and are completed with information from the worksheets. 40 Some of the information on which Coffey relied to create its worksheets and report forms is available for a fee from Australia Standards published by SAI Global (formerly Standards Australia). Other information in worksheets and forms comes from Coffey's employees' knowledge and expertise. Master forms of these worksheets were maintained in a green folder (Green Folder), although Coffey now makes limited use of paper worksheets and forms. 41 In 2007, Coffey started to use Qestlab software which contains templates for worksheets, calibration sheets, client report forms and data used for performing testing services, including formulae; Mr Miller estimates that Coffey has paid Qestlab approximately $300,000 for the use of the software since 2007. The forms in the Green Folder were scanned onto a hard drive known as a Western Digital "My Book" (Western Hard Drive) for archival purposes. Forensic examination 42 On 30 November 2012, through its lawyers, Coffey engaged Klein & Co, a company that provides specialist forensic information technology services to clients, in connection with the departure of the Departing Employees from employment with the Coffey group. 43 Mr Ardavan Ghorbani (Mr Ghorbani) affirmed an affidavit in connection with the examination of the Western Hard Drive. Mr Ghorbani, who is an employee of Klein & Co, was asked to determine if the Western Hard Drive had been accessed by a computer identified to him as having been associated with Mr Cullen. Klein & Co made a forensic "image" of the entire data contents of the Western Hard Drive in a manner which Mr Ghorbani says is designed not to alter data during the imaging process. 44 Coffey also supplied computers described to Klein & Co as having been used by the Departing Employees. Klein & Co made images of these three computers. When Mr Ghorbani commenced analysis, he found he could not perform relevant analysis because on 27 November 2012 Microsoft Windows 7 Enterprise had been installed on the computers which destroyed previous user profile data. At about 6 December 2012, Coffey provided Klein & Co with an external hard drive described as containing a backup of email messages and user profiles for the Departing Employees. Klein & Co made an image of this hard drive. Keyword searches were performed on email archives and those searches were provided to Coffey's lawyers. 45 Mr Ghorbani notes that the Microsoft Windows operating system does not store information concerning the act of copying or moving data. Based on Mr Ghorbani's evidence, time stamps indicate date of access, but they do not appear to indicate the time during which a document was open to be read. 46 The respondents contested the validity of the provenance of the computers and hard drives tested by Mr Ghorbani and noted differences in formatting between the spreadsheets which were exhibits to Mr Ghorbani's affidavit and those exhibited to Mr Miller and Ms Watt's affidavits. Ultimately, the respondents accepted that for the purposes only of this application, I should accept that exhibits DMW 2 and BSM 9 are spreadsheets which result from Mr Ghorbani's analysis in relation to access to documents stored on the Coffey system and external drives employing passwords associated with the user profiles of the Departing Employees and that, although differently formatted, the spreadsheets contain the same information. 47 On the same basis, I accept that exhibit DMW 3 and exhibit BSM 10 are copies of emails, collated by Mr Ghorbani, sent by Mr Cullen, Mr D Cullen or Mr Richardson respectively to their personal email addresses while they were employees of the Coffey group. Ms Watt and Mr Miller say that the emails contain Coffey's confidential information. 48 Ms Watt marked the spreadsheet DMW 2 in yellow to identify documents that she considered to contain Coffey's confidential information. Mr Miller marked the spreadsheet BSM 9 in green to identify documents that he considered to contain Coffey's confidential information. Both gave evidence that they did not look at the document when they did this, but relied on the URL description of the document. Preliminary discovery 49 Rule 7.23 provides as follows: 7.23 Discovery from prospective respondent (1) A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant: (a) reasonably believes that the prospective applicant may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and (b) after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and (c) reasonably believes that: (i) the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent's control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and (ii) inspection of the documents by the prospective applicant would assist in making the decision. (2) If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1)(c)(i). Principles 50 The principles applicable to the exercise of the discretion by the Court in an application under r 7.23 were not disputed; they were outlined in St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 (St George Bank) at [26] by Hely J: The following propositions emerge from the authorities in which the proper application of Order 15A r 6 has been considered by judges of this Court: (a) the Rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case: Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733; Minister for Health & Aged Care v Harrington Associates Ltd [1999] FCA 549 at [27]; (b) each of the elements prescribed in sub-paragraphs (a), (b) and (c) of the rule must be established: Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at [38]. Preliminary discovery cannot itself be used to remedy deficiencies in the satisfaction of the conditions themselves: Airservices Australia v Transfield Pty Ltd [1999] FCA 886 at [5]; (c) the test for determining whether the applicant has 'reasonable cause to believe', as required by sub-paragraph (a), is an objective one: Hooper at [39]; Malouf v Malouf [1999] FCA 710 at [16]; Quanta Software International Pty Ltd v Computer Management Services Pty Ltd (2000) 175 ALR 536 at [24]; Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391; BC 9602085 at 23. Further, the words 'or may have' cannot be ignored. The applicant does not have to make out a prima facie case: Quanta Software at [24]; Paxus Services at 733; (d) belief requires more than mere assertion and more than suspicion or conjecture. Belief is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 at [13], [14], [17] and [73]; (e) whilst uncertainty as to only one element of a cause of action might be compatible with the 'reasonable cause to believe' required by subparagraph (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe: Glowatzky v Insultech Group Pty Ltd (1997) 39 IPR 215; (f) the question posed by sub-paragraph (b) of the rule is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent. The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court: Quanta Software at [33] – [34], Alphapharm at 24-26. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent's breach and the likely quantum of any damages award: CGU Insurance Ltd v Malaysia International Shipping Corp Berhad (2001) 187 ALR 279 at [21]; Quanta Software at [33] – [34], Alphapharm at 24-26, Airservices Australia at [5]; (g) whether an applicant has 'sufficient information' for the purposes of sub-paragraph (b) also requires an objective assessment to be made: Minister for Health at [44]; Alphapharm at 23-24, Hooper at [40]. The sub-paragraph contemplates that the applicant is lacking a piece (or pieces) of information reasonably necessary to decide whether to commence proceedings; (h) it is no answer to an application under the rule to say that the proceeding is in the nature of a 'fishing expedition': Paxus Services at 733. Indeed Order 15A r 6 'expressly contemplates' what once might have been castigated as 'fishing': Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at [27]. As Burchett J commented in Paxus Services, the rule is (at 733): '... designed to enable an applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent ...'. 51 The rule under consideration in St George Bank was the predecessor to r 7.23, but despite some differences in language, it is accepted that these principles apply equally to r 7.23: Ebos Group Pty Ltd v Team Medical Supplies Pty Ltd [2011] FCA 862 at [19] per Flick J; Higgins v Hancock (2011) 199 FCR 395 at [55]-[59] per Jacobson J. Breach of contract 52 Clause 9 of the letter of appointment under which Mr Cullen was employed and clause 6 of the letter of appointment under which Mr D Cullen was employed refer to "documentation or information received or developed by you in the performance of your duties, marketing information, customer lists, financial information and business plans in respect of both the Company and its clients." The letters go on to specify that "[t]his documentation or information developed by you on behalf of the Company with the client is referred to as "Confidential Information" and remains at all times the property of the Company". In support of the possibility of a right to obtain relief for breach of contract by Messrs Cullen and D Cullen, Coffey notes that their contracts impose obligations on them as follows: not to engage directly or indirectly in any other business or occupation whatsoever without the prior written consent of the Company; inform the Company immediately if the employee became aware of any potential conflict or anticipated that a conflict could arise; not to use or disclose to any person any Confidential Information of the Company during the continuance of employment or at any time thereafter except in the proper course of the performance of duties as an employee of the Company; not to remove Confidential Information from the Company's premises without written permission and to return any Confidential Information at the Company's request; and to return the Company's property upon termination of employment, including records, reports or files. 53 The letters of appointment for Messrs D Cullen and Richardson are with Coffey. However, Coffey asserted these duties were owed to it by Mr Cullen as well even though his letter of appointment is with Coffey Geotechnics. The letter states that its purpose is to "offer you the position of Principal Geotechnician and to set out the terms and conditions of your employment with Coffey Geotechnics Pty Limited or another subsidiary of Coffey International Limited ("the Company")". Coffey offered no evidence that Coffey had been specified as Mr Cullen's employer. It is therefore not clear that Coffey has any contractual rights with respect to Mr Cullen. This issue was not pursued by Counsel for Mr Cullen. 54 Similarly, although the restrictions on post-employment activities imposed on Messrs Cullen and D Cullen (under clauses 10 and 8 of their respective contracts) extend to inducing employees to terminate their employment with, or soliciting clients of, the Company and its related bodies corporate, the restrictions on use of "Confidential Information" relate only to "the Company". Coffey seeks discovery not only in relation to misuse of its documents but also those of its related bodies corporate. Counsel for the respondents did not pursue this argument either. 55 In support of the possibility of a right to obtain relief for breach of contract by Mr Richardson, Coffey notes that his employment contract contained a similar definition of "Confidential Information" (although it contains a specific carve out for publicly available information) and imposed on him the following duties: during his employment, to act in Coffey's best interests and to refrain from acting in conflict with Coffey's interests and the interests of the Coffey group; during his employment, to avoid being involved in competing or preparing to compete with any Coffey group member or performing work for any person other than a Coffey group member without first obtaining Coffey's written consent; on cessation of his employment, to return to Coffey any document or electronic record held by him or under his control which contains Coffey's Confidential Information relating to Coffey's business, customers, suppliers or staff; to keep confidential the Confidential Information of which he becomes aware or generates during his employment, to use Confidential Information only for the purpose of performing his duties as an employee, and to immediately notify Coffey of any suspected or actual unauthorised use, copying or disclosure of Confidential Information. Corporations Act 56 Sections 182 and 183 provide as follows: 182 Use of position—civil obligations Use of position—directors, other officers and employees (1) A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note: This subsection is a civil penalty provision (see section 1317E). (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). 183 Use of information—civil obligations Use of information—directors, other officers and employees (1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note 1: This duty continues after the person stops being an officer or employee of the corporation. Note 2: This subsection is a civil penalty provision (see section 1317E). (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). Breach of confidence 57 To establish an equitable obligation of confidence, Coffey must be able to show "with specificity, and not merely in global terms" what the information is and that: (1) the information has the necessary quality of confidence and is not, for example, common or public knowledge; (2) the information was received by the respondent in circumstances importing an obligation of confidence; and (3) there is actual or threatened misuse of the information, without consent of the applicant. See: EBOS Group Pty Ltd v Team Medical Supplies Pty Ltd (No 3) (2012) 199 FCR 533 (EBOS) at [35] per Katzmann J; Smith Kline & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73 at 87 per Gummow J. Summary 58 I accept the submission made by Ms Painter, Counsel for the respondents, that it is necessary for the Court to consider the position of each individual respondent. That does not mean that their conduct as one or more of a group of Departing Employees might not also be relevant. 59 The Court must therefore decide in relation to each respondent: (1) whether Coffey reasonably believes that it has a right to obtain relief from the Court in relation to that respondent; (2) whether Coffey has made reasonable enquiries; (3) whether, despite those enquiries, Coffey lacks sufficient information to decide whether to start a proceeding in the Court to obtain the relief; (4) whether Coffey reasonably believes that the respondent has or is likely to have had in his or its control documents directly relevant to the question whether Coffey has a right to obtain the relief; (5) that inspection of the documents would assist Coffey to decide whether it has the right; and (6) if the matters referred to in paragraphs 1-5 have been made out in relation to a respondent, whether the Court should exercise its discretion in Coffey's favour, and if so, to what extent. Qualifications based on Coffey's limited enquiries 60 Even though r 7.23 will generally receive a beneficial construction, where respondents had a legitimate basis for access to the applicant's information it is not enough to demonstrate that they had access to the information and that they are persons who would be in a position to compete effectively with their former employer. More is required to found a reasonable belief that those employees have or would misuse confidential information of that former employer or that they have passed it on to a new employer. 61 Significantly in this case, Coffey has not undertaken any of the enquiries (other than forensic examination of computers) which might have been expected of it in accordance with the authorities to establish a reasonable basis for Ms Watt's statement of belief at [3] or the insufficiency of the information to which Coffey has access to enable it to make a decision whether to start a proceeding to obtain relief. 62 No enquiries were made by Coffey of any of the respondents concerning their possession or use of Coffey's confidential information or any basis for suspecting that a breach of contractual restrictions on approaching other employees or clients may have occurred. I do not accept that the letters Mr Miller handed to each of the Departing Employees on 15 November 2012 constituted enquiries of any kind. They were warning letters reminding the Departing Employees of their contractual obligations as Coffey understood them. I do not accept that enquiry of the Departing Employees would have been futile, having regard to both their evident participation in extensive hand-over activities and their actions since the proceedings commenced. The fact that Mr Miller, Ms Watt or any other relevant executive of Coffey might have been sceptical about the extent of any response to such enquiries does not negate the need to make them. 63 The Departing Employees' evidence is that they have undertaken searches for Coffey property and that they have returned clothing and documents with the exceptions noted below. Mr Cullen has said that he has deleted copies of emails which he sent to his personal computer at home. All have given evidence on affirmation that they have not used confidential information of Coffey otherwise than in the course of their employment with Coffey group. 64 It appears that Coffey's only enquiry was the forensic investigation of computers and hard drives undertaken by Mr Ghorbani. The system used by Coffey has the limitation that forensic examination cannot indicate whether a document was copied; it can only indicate that it was accessed. That makes the need for other enquiries more apparent. 65 Coffey elected to involve the Departing Employees in a significant handover process between 18 October 2012 and 9 November 2012, with Mr Cullen having one client engagement on 12 November. Coffey may not, commercially, have had much choice in this. Mr Miller acknowledged the challenge that their departure represented: as the three most senior employees in that part of the business, they had "a lot of knowledge" and the employees who reported to them had "significantly less training and knowledge". In those circumstances, access by the Departing Employees to Coffey's information does not, by itself, give rise to a reasonable belief that Coffey has or may have a cause of action for misuse of the confidential information. 66 Neither of Ms Watt nor Mr Miller made enquiries of Coffey personnel or clients with whom the Departing Employees said they engaged in handover activities. Insofar as the Departing Employees explain their access to documents held on Coffey's computer system as part of the handover, in the absence of evidence that the continuing Coffey employees or clients named by the Departing Employees contest the explanations, those explanations should be accepted. The unexplained failure of Ms Watt and Mr Miller to make enquiries of those continuing employees and clients is a significant factor against establishing that the concerns they attest to rise above suspicion to the necessary standard of belief on a reasonable basis that Coffey has or may have a cause of action against the Departing Employees or Mr Lee and Qualtest NSW. 67 Both Ms Watt and Mr Miller gave evidence that they marked on DMW 2/BSM 9 the URLs listed for documents which they believed to be confidential; they gave no evidence of the basis for this belief. They performed this task only by reference to the URL of a document on the spreadsheet, not by accessing the document and considering its contents. With the exception of the emails referred to in exhibit BSM 10 and DMW 3, the Court was not in a position independently to assess whether the content of any documents identified by Mr Miller or Ms Watt as confidential might answer that description. While a document with a URL which indicates that it is a client list may prima facie appear likely to have confidential content, the same cannot be said for a document called "SWMS_Safety/2012-002 Safety Alert-Safety Boots.pdf". It is difficult in these circumstances to evaluate Ms Watt or Mr Miller's beliefs as reasonable in the absence of evidence supporting the asserted belief. 68 In the absence of enquiries with continuing employees who participated in a handover, and without Ms Watt or Mr Miller examining the documents whose URLs they marked as confidential, the Departing Employees have been required to explain access to a volume of documents listed in DMW 2/DSM 9, the need for which would have been obviated by those enquiries. The Departing Employees were put in the position of explaining access without the benefit of being shown the relevant documents. I do not consider that appropriate. 69 I accept that the Departing Employees had genuine difficulty in responding in relation to some of the documents highlighted by Ms Watt and Mr Miller on DMW 2 and BSM 9 respectively. Times of day referred to in DMW 2/BSM 9 are very confusing, sometimes being UTC based, (to which a period of 10 or 11 hours must be added to establish local time of access) and sometimes being based on local time. There is a lot of repetition. As Coffey did not supply the underlying documents, evidence was given by the Departing Employees by reference to the URL descriptors and that may have led to error. Mr Cullen said he also gave evidence in some cases by recalling what he was doing at the specified time. In the absence of Coffey making the underlying documents available to the respondents and the Court, some tolerance must be accorded for error or uncertainty in the explanations given by the respondents. 70 Coffey initiated no enquiries of Mr Lee or Qualtest NSW. Mr Lee initiated the telephone call and meeting with Mr Miller referred to at [33]-[36]. I prefer Mr Lee's version of his conversations with Mr Miller on 15 and 16 November 2012. Mr Lee was a careful and convincing witness. His evidence demonstrates that he was aware of restrictions placed on former employees of Coffey group, including himself. Indeed, as Office Manager for Coffey Geotechnics, he had been the signatory of Mr Cullen's employment arrangement in September 2006. Mr Lee appeared to be systematic and calculated in his approach to setting up Qualtest NSW so as to take account of Coffey's contractual arrangements with the Departing Employees. 71 A significant issue which appears to have motivated many of the concerns demonstrated by Ms Watt and Mr Miller about documents accessed by one or more of the Departing Employees was whether Coffey's information was or would be used as a spring board to Qualtest NSW obtaining NATA accreditation, the commercial and competitive benefits of which were described by Mr Lee and Mr Miller at [38] above. 72 In response to a subpoena issued in April 2013 on application by Coffey, NATA produced the documents used by Qualtest NSW in support of Qualtest NSW's application. Ms Watt acknowledged that none of them derived from Coffey. This lends credence to, and I accept, Mr Lee's evidence that Qualtest NSW was assisted in obtaining NATA accreditation by Qualtest Qld, and that Qualtest Qld (with over 20 years' experience) provided it with necessary documentation for operating its business. For these reasons, insofar as concern that Coffey procedural documents to which the Departing Employees had access before 9 November 2012 would be used in Qualtest NSW's business informed Mr Miller and Ms Watt's belief, I do not consider that it has an objectively reasonable basis. 73 Mr Lee has affirmed that to the best of his knowledge neither he nor Qualtest NSW has received any of Coffey's confidential information and that on his own behalf and on behalf of Qualtest NSW, he did not and does not intend to do so. Each of the Departing Employees has attested that they have not used information confidential to Coffey in their employment with Qualtest NSW. Ms Watt acknowledged that she has seen no evidence that any Coffey confidential information was passed to or has been used by Mr Lee or Qualtest NSW. 74 As a result of Coffey's failure to make the enquiries referred to above, the failure by Ms Watt and Mr Miller to look at the documents which they identified as confidential in DMW 2/BSM 9 and their consequent inability to give evidence as to the content of the documents, it is my view that Coffey has used these proceedings as an alternative to those enquiries which are necessary to satisfy the requirements of r 7.23: see Uni-Span Height Safety Pty Ltd v Gold Guardrail Pty Ltd [2009] FCA 819 at [17]. Conduct relied on by Coffey 75 In closing submissions, Coffey submitted that notwithstanding the matters mentioned above, the conduct of the respondents identified in the following subheadings is sufficient to incline the mind towards assenting to, rather than rejecting, the proposition that Coffey has the right to obtain relief from the Court for the misuse of its confidential information. 76 Coffey points out that the documents listed in DMW 2/BSM 9 indicate access by persons using passwords associated with the user profile of the Departing Employees after the Departing Employees had decided to accept employment with Qualtest NSW. Coffey acknowledges that this fact alone does not prove that it was any of the Departing Employees who accessed the relevant document. However, to the extent to which a respondent gave evidence concerning what he understood to be the content of the URL identified on the spreadsheet associated with his username, and that respondent did not deny that it was he who accessed the document, that respondent should be taken to have acknowledged that it was he who accessed that document. I accept that submission. 77 I will address the issues connected with Mr Cullen, Mr D Cullen and Mr Richardson respectively. Mr Cullen Green Folder and Western Hard Drive 78 Ms Watt says she observed that Mr Cullen cleaned his office more thoroughly than usual before his resignation and that a number of books and binders were gone. 79 On 23 October 2012, Ms Watt asked Mr Cullen for the Green Folder and he said that he did not know where it was and suggested that Mr Hamish McDonald had scanned its contents onto a hard drive. Despite a search of the offices, Ms Watt could not find the Green Folder. On 8 November 2012, Ms Watt asked Mr McDonald's colleague for the Western Hard Drive; when she saw it she realised that she had seen it plugged into Mr Cullen's computer in the week commencing on 29 October 2012. Mr McDonald said that he gave it to Mr Cullen because Mr Cullen had said he needed to give it to Ms Watt for the worksheets. Ms Watt says Mr Cullen never gave her the Western Hard Drive. She found copies of the worksheets on the Western Hard Drive on 8 November 2012. 80 On 28 November 2012, Ms Watt reviewed the Western Hard Drive again and says that it also contained Coffey confidential information including a training manual, a list of purchase orders, testing worksheets, calibration forms, superseded quality manuals, proficiency testing results, correspondence with NATA between 2005 and 2009 and other materials; Mr Cullen did not dispute this. Mr Ghorbani's analysis indicated that 20 files on the Western Hard Drive had been accessed on 29 October 2012 from the user profile alan_cullen2. 81 Mr Cullen says that: He tidied his office in August 2012 before a visit from Mr Renehan and because housekeeping had been raised by management from time to time including around August 2012. The clean-up involved not only his office, but also the lunch room.The laboratory, around that time, conducted a clean-up of the laboratory yard workspace, the upstairs mezzanine storage and archive room. He was assisted by Mr McDonald and Mr David Woods. He performed a minimal clean-up immediately before his resignation. He vacated his normal office around 22 October 2012 so that Mr Crane and Mr Miller could use it. The Green Folder had not been held in his office since 2007 and it was normally kept in the archives room. It was his understanding that the worksheets in the Green Folder had been scanned in 2007 when Coffey began to use Qestlab software. After he obtained the Western Hard Drive from Mr McDonald, he initially placed it in Ms Watt's office but upon learning from Ms Amy Shakespeare (the Newcastle office Administration Team Leader) that Ms Watt was in Queensland, he took it back. On 29 October 2012 he plugged the Western Hard Drive into his computer and checked that the worksheets were there. He also looked at old files which had been archived on the Western Hard Drive "out of nostalgia and curiosity' and "because these were old records and I was reminiscing a bit as I had been involved in developing a lot of them years ago". He returned the Western Hard Drive to Mr McDonald's office where it was usually kept. As Mr McDonald was not there, Mr Cullen advised Mr McDonald's colleague, Mr Everleigh, who shared Mr MacDonald's office, that he had done so. Mr Coffey denies using the information on the hard drive. 82 Ms Watt does not accept Mr Cullen's explanation because she says that she was not in Queensland in the weeks commencing on 22 and 29 October 2012; she was in Sydney on 24 October 2012 but in Newcastle on 25 and 26 October 2012. She also says that she does not believe that Mr Cullen would have spent 25 minutes reviewing files out of nostalgia, since he did not normally even stop for lunch. 83 I do not accept that Ms Watt's belief at [3] which was reaffirmed in her evidence at hearing, insofar as it relies on concerns about the Green Folder and the Western Hard Drive, is reasonable. 84 The kernel of Ms Watt's concern appears to be that the Green Folder or the documents accessed by Mr Cullen would be used by Qualtest NSW to obtain NATA accreditation. For the reasons set out at [72] above, I do not accept that her concern is objectively reasonable. 85 Second, Ms Watt's expectation that Mr Cullen would have the Green Folder appears to be based on her outdated work experience as a technician; it was not itself a well-founded expectation given Coffey's use of computer software for providing worksheets since 2007. 86 Third, Ms Watt acknowledges that she asked Mr Cullen about the worksheets. Given his belief that the material had been archived, it is entirely plausible that he would not have the Green Folders and would have sought out the Western Hard Drive to give to Ms Watt. If she was not in her office (for whatever reason), it is also plausible that he would inspect it to ensure that the worksheets were on it. Ms Watt made no enquiries of any of the Coffey staff mentioned in Mr Cullen's explanation of the clean-up of his office or in relation to what they told Mr Cullen concerning her absence from her office; her conversation with Mr McDonald confirms that Mr Cullen asked for the Western Hard Drive for the purpose to which Mr Cullen attested. Ms Watt's disbelief of Mr Cullen is therefore simply a suspicion which she has done nothing to disturb by enquiry. 87 Fourth, having accessed the Western Hard Drive for the purpose of responding to Ms Watt's query, it is entirely plausible that an employee of 32 years standing who had resigned and was performing handover might spend 25 minutes (or more) glancing at archival documents which represented a body of his work, however hard he usually worked. As Qualtest NSW obtained NATA accreditation independently of any Coffey documentation, and it appears from cross examination of Mr Lee that that process was already in train in October 2012, Mr Cullen's explanation is credible. BSM 9 page 126 88 Ms Watt identified as confidential two documents identified by Mr Ghorbani as having been accessed by user profile alan_cullen on UTC 8 October 2012. They were: at what appears to be UTC 03:03:32 am, file:///C:/Documents and Settings/alan_cullen/My Documents/Copy of Brian Miller-Alan Cullen - Employment Summary.xlsx; and at what appears to be UTC 03:04:49 am, file:///C:/Documents and Settings/alan_cullen/My Documents/Copy of Brian Miller_NSWACT_POTM Client List.xlsx (Putative Client List). 89 Mr Cullen explained that he accessed these documents as part of his management duties at Coffey in order to finalise the annual pay increases to all staff along with bonuses. He says that it had been a "long winded affair" which was only finalised at the last minute, with bonus pays eventually going out on or about 11 October 2012. 90 Mr Miller says that there is no reason for Mr Cullen to have accessed the Putative Client List to finalise annual bonuses. In cross examination, Mr Cullen agreed with that and says that he does not know why he would have accessed it. Mr Cullen said that he did not know what "POTM" stood for. In the absence of being able to see the contents of the document, Mr Cullen said he could not explain why he had opened it. 91 In my view, Coffey has not satisfied the requirements of r 7.23 in relation to the Putative Client List. 92 Neither of Ms Watt nor Mr Miller looked at the Putative Client List to establish that its contents answered the description in the URL. While a client list will usually answer the description of confidential information, it cannot be said that Mr Miller or Ms Watt have made sufficient enquiry as they have not gone beyond the URL to establish that the Putative Client List is indeed a client list. 93 Although it is uncontentious that Mr Cullen had no reason to look at a client list to finalise employee bonuses, Mr Miller gave evidence that one of Mr Cullen's duties was generating new business for Coffey and its related entities. It is therefore not inherently suspicious that Mr Cullen would look at such a list in the course of his ordinary duties on 8 October 2012 even if he could not many months later recall his reason for doing so. 94 Mr Cullen predicated his evidence on the basis that DMW 2/BSM 9 were confusing documents. I sympathise with that characterisation. It would have been appropriate for Coffey to ask Mr Cullen why he accessed the Putative Client List on 8 October 2012 and to either show him the document or, having looked at it to establish its contents, to have described its contents in general terms. Coffey did not do that. In the circumstances I do not consider Mr Cullen's error or his inability to explain his access to that document as giving rise to any reasonable inclination of the mind to a belief that Coffey would or might have a claim because he misused Coffey's confidential information. DMW 2 lines 854 and 855 95 Ms Watt identified two documents which appear to have been accessed on 24 October 2012 by the username alan_cullen from a removable drive which was not the Western Hard Drive and she says that she can see no reason connected with the business of Coffey why Mr Cullen would have accessed them. They are: at UTC 12:40:25 am: file///E:/FW Employment Agreement Request Form Kane Nicholls.docx.msg (Kane Nicholls Agreement); and at UTC 12:43:41 am: file:///E:/Facilities Plan 2013.doc (Facility Plan). 96 Mr Cullen said that he accessed the Kane Nicholls Agreement in the course of his duties to review it for Mr Crane and suggested that he may have forwarded the document to Mr Miller for his sign off although he was uncertain of that. Mr Cullen said that he accessed the Facilities Plan out of interest to have a look at the proposed new Coffey building. 97 Ms Watt asserted that the removable drive, which I will refer to for convenience as a USB, was in Mr Cullen's possession. Mr Cullen denies that and suggests that the USB may have belonged to Mr Crane since he discussed the Kane Nicholls Agreement with him. 98 I do not consider that Coffey established that Mr Cullen's access to the Kane Nicholls Agreement or the Facility Plan by means of the USB reasonably inclines the mind to a belief that Mr Cullen misused or would misuse Coffey's confidential information, nor has Coffey made adequate enquiries regarding this document to found such a belief. 99 Ms Watt gave evidence that she made no enquiries of Mr Crane concerning the matters raised in the affidavits of the respondents. Since Mr Crane was one of the executives of Coffey involved in the handover from Mr Cullen, the failure to enquire of Mr Crane whether he discussed the Kane Nicholls Agreement with Mr Cullen and whether he or Mr Cullen inserted a USB into Mr Cullen's computer for the purpose of reviewing that agreement constitutes a failure to make adequate enquiries to decide whether to start proceedings and critically undermines any reasonable basis for Ms Watt's belief at [3]. 100 Having regard to the proximity of time in which Mr Cullen reviewed the Facility Plan and the Kane Nicholls Agreement it is likely that they were on the same USB. That also would have been established or discounted by enquiry with Mr Crane, as would the issue of whether Mr Crane made enquiries of Mr Cullen which would ground access to both documents. There is no evidence that the USB belonged to Mr Cullen. His explanation establishes a business purpose for reviewing the Kane Nicholls Agreement. While Mr Cullen has not suggested a business purpose for him to look at the Facility Plan, there has equally been no suggestion of how he might misuse that information nor was that issue put to him in cross examination. DMW 2 line 1572 101 Ms Watt identified as confidential a document with the URL file:///C:/Documents and Settings/alan_cullen/Desktop/Copy of Proposed Personnel List.xls accessed on 14 October 2012. 102 Mr Cullen says that he accessed the document on his computer in the course of his duties in order to look at casual pay rates "online" with Mr Crane and Mr Adam Crawford so that they could finalise a pay rate for a new casual employee. 103 Coffey says that this document was accessed via an icon on the desktop of a personal computer and that it was "implausible" that "online" meant "on the computer". 104 Mr Cullen has explained access to the document as being in the ordinary course of his duties. He denied Mr Crow's suggestion it might have been a list of possible employees of Qualtest NSW. There is no evidence that there ever was such a list. Coffey has failed to make rudimentary enquiries of its continuing employees, Messrs Crane and Crawford. If the relevant document was on the desktop of a personal computer, "online" is an inapt term for access to it; the plausible access was "on the computer" on which the icon appears. 105 In these circumstances Ms Watt's evidence establishes no more than suspicion, not a reasonable belief that Mr Cullen did or may misuse Coffey's confidential information. Emails 106 Messrs Cullen and D Cullen sent emails from their Coffey email addresses to their personal email addresses. Copies of these emails were set out in exhibits DMW 3 and BSM 10. These emails were identified as part of Mr Ghorbani's forensic examination. Mr Miller confirmed that the following emails, part of BSM 10, were identified as being the most damaging and put Coffey's case at its highest. Ms Watt and Mr Miller said that the emails contained Coffey's confidential information. 107 Mr Cullen says that he would sometimes send emails to his personal email account at home to either read at leisure or in order to complete work. He said that it was difficult to access work emails at home on the Coffey laptop due to an extremely slow and unreliable internet connection and he had a large screen at home which made them easier to read. I accept this evidence. BSM 10 pp 155-192 108 This is an email dated 30 October 2012 sent by Mr Cullen to his home computer. It attaches publicly available Guidelines for Managing Heavy Vehicle Driver Fatigue issued by the Australian National Transport Commission. The email had been circulated to the members of Coffey's executive management on 30 October 2012 following a meeting at which the possible use of the guidelines had been discussed and records that "[t]he idea would be to use this as a template and redesign for our business". 109 The Guidelines are a publicly available document. Mr Cullen already knew the information that Coffey was considering using it as a template, but that no work had been done in furthering the redesign. This document does not assist Coffey's application. BSM 10 pp 193-4 110 This is an email dated 29 October 2012 attaching a query of the same day from Mr Crawford, a laboratory manager in Coffs Harbour for Coffey, seeking clarification of a rock size specification at the request of a client. Mr Cullen's evidence is that Mr Crane rang him with the query at a time when Mr Cullen was about to leave his office. Later that evening he called Mr Crawford to discuss the specification. Neither Ms Watt nor Mr Miller made any enquiry of Mr Crawford concerning the email. There is no evidence that Mr Cullen's possession of this document was otherwise than for the performance of his duties and it does not appear to be the sort of information which would be apt for any other purpose. It does not assist Coffey's application. BSM 10 pp 196-202 111 On 16 October 2012, Mr Crane sent Mr Cullen an email which had a subject line of "FW: Letter of offer required" and the sentence "[b]it of the thread for the employment issues with [named employee]. More to follow." 112 Mr Crane's email attached an email from Mr Robert Barry outlining procedures to be adopted by Coffey to ensure that it complied with guidelines issued by the Department of Immigration and Citizenship in relation to employment of overseas workers. Mr Crane's email also attached what appears to be a circular from Mr Renehan in relation to the requirement for pre-employment medical assessment. The circular indicates that there is a link to a medical assessment form but the form is not included in the email chain so that the only relevant issue is that relating to compliance with immigration laws. 113 Mr Cullen forwarded a copy of Mr Crane's email to himself on 17 October 2012. Mr Cullen explained that this email related to an employee who had been found to have an existing back complaint before his employment. He does not recall why he sent it home but thinks that it was to read the policy in his own time. 114 While it is true that the email discloses Coffey work practices, that is, the methodology it adopted for compliance with immigration laws, the email appears to be one of a number sent by Mr Crane for the purpose of considering an issue which Mr Cullen was required to deal with in the course of his employment at the time. The issue raised by Mr Crane was a current one. Qualtest NSW was to be a small laboratory which initially employed the Departing Employees for whom immigration clearances would appear to be irrelevant. Despite the proximity of the time at which Mr Cullen sent the email to himself and the time he gave notice of resignation, the fact that he did so does not give rise to an objectively reasonable belief that Coffey would or might have a claim because Mr Cullen was or would misuse Coffey's confidential information. BSM 10 pp 203-295 115 This is an email which Mr Cullen appears to have sent to himself at home on 22 June 2012 at 6 pm. It attaches a copy of an Operations Manual and a NATA document. Coffey concedes that the NATA document is not confidential. 116 The Operations Manual relates to a delegated signatory and supervision procedure. The email to which these documents were attached was an email of the same date sent by Mr Miller at 5:54 pm. Mr Cullen says that Mr Miller's email arrived at about the time he was leaving the office so he forwarded it to his home in order to read it later in the evening. In aggregate the document is 89 pages long. As requested in the email from Mr Miller, Mr Cullen says that he read the data to check accuracy and commented back to Mr Jake Andrew and Mr Marshall Webster. Having regard to the date of the email and Mr Cullen's explanation, and the fact that there is no evidence from either of Mr Andrew or Mr Webster or of any enquiry made by Mr Miller with them which contradicts Mr Cullen's evidence, the fact that Mr Cullen sent the email to himself does not give rise to an objectively reasonable belief that Coffey would or might have a claim because Mr Cullen did or would misuse Coffey's confidential information. DMW 3 pp 55-56 117 On 8 November 2012, Mr Cullen sent to his home email address an email which notified a wide variety of Coffey staff that following a change to NATA rules, the form of the statement of endorsement for compliance with Australian Standards required on test reports had been modified to comply with the rules. Mr Cullen said that he sent it to his home as it was not of critical importance to him. Ms Watt's concern about it is that it was sent so proximately to Mr Cullen's retirement and it was so short that it did not need long to read so there was no basis for sending to his home email address. She suggests that it would assist Qualtest NSW to design a form of certification for inclusion in test reports. 118 Given the simplicity of the form of certification it is very difficult to imagine Ms Watt's concern has any substance at all. Further, Qualtest NSW had not yet received NATA accreditation but Mr Lee's evidence establishes that it would rely on Qualtest Qld for this purpose. I do not consider that this email supports Coffey's application. Other matters 119 Mr Cullen affirmed that he returned to Coffey his computer and mobile phone on 12 November 2012. 120 Mr Cullen admits that when he cleaned up his office soon after his resignation he had taken home personal training records, including inductions, certificates and qualifications and "a tray of old miscellaneous paperwork which I did not have time to go through fully" which was with his personal belongings. 121 He says he arranged for this miscellaneous material to be returned to Coffey through his solicitors. Ms Watt says that she has received from her solicitors "four current documents" which she considers to contain confidential information including: a near loss/hazard report form; safety observation form; housekeeping checklist; and a motor vehicle safety inspection checklist. Again, Ms Watt does not say why she considers the documents to be confidential, nor has the Court had the benefit of seeing them. 122 Mr Cullen says that following receipt of the application in this matter and a copy of the affidavits of Mr Miller and Ms Watt, he deleted from his home computer copies of emails which he sent from Coffey which he did not have time to read during work hours. These included emails referred to in exhibits BSM 10 and DMW3 and older emails from 2009- 2010. 123 Mr Cullen expressly denies that he has used Coffey confidential information in the process of setting up Qualtest NSW or during his employment with it. Conclusion in relation to Mr Cullen 124 Having regard to his evidence and having had the benefit of seeing Mr Cullen tested in cross examination, and having regard to the qualifications at [60]-[73], in my view Coffey has not satisfied the requirements of r 7.23 in relation to Mr Cullen. 125 Although it is clear that Mr Cullen has had in his possession documents which Ms Watt considers may be confidential, there is no evidence that he had them in his possession otherwise than for the purpose of diligently performing his duties for Coffey. In light of his sworn evidence that he has returned all physical property and deleted (including from the trash folder) all electronic documents other than his training records, I do not consider it appropriate to make the orders sought by Coffey in relation to Mr Cullen. Mr Dane Cullen 126 Mr D Cullen says that about a week after his resignation, Mr Crane and Mr Warren Watson (who would take over Mr Richardson's role) asked him to prepare a register of quarries so that they knew where the quarries were located and client contact details. He was asked by Mr Watson to identify the location of the quarries on a map which he provided and to label them. Mr D Cullen says that the contact information contained on the quarry register came from his mobile phone or the internet. DMW 3 pp 52-54 127 This is an email dated 9 November 2012 from Mr D Cullen to Mr Watson. In it is a chain of emails including an email dated 8 November 2012 from Mr D Cullen to a hotmail address which he admits is his. Attached to the email is a list of 11 quarries with contact details for clients. This attachment includes information concerning the geological rock base and product produced at the quarries. 128 Mr D Cullen said that he did not regard the list as confidential because the names and locations were in his head and the contact details were in his phone or derive from the internet. Mr Cullen says that he has not, since sending it to himself, opened the email containing the list of customers, but he does not say he has deleted it. Conclusion in relation to Mr D Cullen 129 Mr D Cullen admits sending the 9 November 2012 email to his hotmail address along with pay slips and his radiation licence. Coffey does not complain about the pay slips or the radiation licence. 130 Mr Crow, Counsel for Coffey, rightly points out that the information generated by the collection of generally available information through diligent enquiry may have the necessary character of confidentiality which the law will provide remedies to protect; it is not clear that all of the information was available from public sources. Ms Watt's belief that Coffey might have a claim in relation to Mr D Cullen's dealing with the 9 November 2012 email is reasonable. 131 However, I decline to make an order for preliminary discovery in relation to it. Coffey has failed to make enquiries of Mr D Cullen, Mr Lee or Qualtest NSW; they are the minimal enquiries which should be made so that Coffey can determine whether it has sufficient information to decide whether or not to commence proceedings: see Guy Carpenter & Company Pty Ltd v Grove [2011] FCA 708. Although Coffey submitted that such enquiries would have been futile, I do not accept that; the Departing Employees and Mr Lee/Qualtest have been forthcoming in their response to the application by giving sworn evidence, including evidence of making searches in relation to Coffey's property. 132 Mr Lee has given evidence that he is not aware that he or Qualtest NSW has any of Coffey's confidential information and that he and Qualtest NSW have not and will not use any such information. Coffey submitted that denials such as Mr Lee's cannot defeat Ms Watt's assertions, based on the comment of Katzmann J in EBOS at [61]. However, Katzmann J qualified her remark by reference to "all these circumstances". In these circumstances Mr Lee (speaking for himself and Qualtest NSW) has demonstrated care to avoid breach of Coffey's contractual arrangements (of which he is plainly aware). There is no evidence that any of Coffey's confidential information has been communicated to Qualtest NSW; that contrasts with the situation in EBOS. 133 On that basis, I find that Coffey has not satisfied the requirements of r 7.23. Mr Richardson 134 There are three issues concerning Mr Richardson. DMW 2 lines 1437-1502 135 These are 65 documents which the URL indicates were on an H drive associated with Mr Richardson accessed between UTC 5:52:21 and 6:03:24 am on 15 October 2012. The H drive is a password-protected drive of each Coffey employee within the Coffey server. With one exception, each of the URLs for these documents contain the initials "SWMS". The exception is described as a Health Safety Security and Environment Policy Statement. 136 Mr Richardson says that he opened the files as part of a clean-up of the drive and to ensure that all of the correct files were saved on the main server where they could be used by his replacement. He says he did this by moving his "Letter Templates" folder "during the handover process". Mr Richardson said they were letter templates and other documents he had created over the years and some Coffey documents which he put onto the H drive for ease of access. Though he could not recall the exact date, he suggested that it was around 24 October 2012, and he says that between that date and 9 November 2012 he opened the documents a number of times to explain them to Mr Watson, Mr Crane and Mr Luke Diggins. Mr Richardson appears to advert to doing this at [26]-[28], [32] and [124] of his affidavit. At [27], Mr Richardson says that around 24 October 2012 he told Mr Watson and Mr Crane: I have moved the folder "Letter Templates" to the public network drive. It contains templates which can be used to create: • Fee proposal templates • Quotation templates • Advice to Clients • Summary Reports • Different letter templates for different materials encountered on site • Safe Work Method Statement (SWMS) • Radiation Safety Information & Licensing forms • Staff Licences/Certificates • Testing specifications 137 Ms Watt did not accept Mr Richardson's explanation, suggesting that it is inadequate and contradictory because: (a) The documents [at lines 1437-1502] are Safe Work Method Statements, Safety Alerts, a Health Safety, Security and Environment Policy Statement and four documents concerning Richardson's training and competencies. They do not include templates for correspondence, fee proposals and other matters as claimed by Richardson in paragraphs 26 and 27 of his affidavit. (b) Furthermore, they were accessed on 15 October 2012 before Richardson had tendered his resignation. He could not have accessed them as part of the handover of his responsibilities on or about 24 October 2012 as he claims in paragraph 27. (a) Safe Work Method Statements are controlled documents stored on the Coffey Intranet. The Health, Safety, Security and Environment team have sole authority to change these statements and changes are made continuously as the need arises. As soon as a change is made, the revised document is made available to all employees who have access to the Coffey intranet. There is no utility, and it is dangerous, to copy a Safe Work Method Statement in force at a particular point in time to an employee's H drive, because it will rapidly cease to be current. (d) There are 65 documents and they were all accessed within a nine minute period. In my experience, each of these documents takes several seconds to open. The time is insufficient to read them. 138 There is certainly ambiguity in Mr Richardson's language about when he moved the documents. However, the fact that Mr Richardson formally tendered his resignation on 22 October 2012 is beside the point; Mr Cullen advised Ms Watt and Mr Miller on 19 October that Mr Richardson would be tendering his resignation. Mr Richardson appears to have accessed more than 120 documents from the H drive on the UTC date 15 October 2012. Although the UTC dates of these approximately 120 documents are all 15 October 2012, access to documents between 9:10:05 - 11:56:21 pm would have occurred in the morning of 16 October 2012 local time. That Mr Richardson would move documents which he used in the performance of his duties at Coffey held on his H drive soon before he tendered his resignation, and without knowing whether he would have access to them to do so after Coffey became aware of his intention to resign, is consistent with his evidence that it was part of the handover process. 139 It appears from the URLs that the 120 or so documents moved on UTC 15 October 2012 fall into the categories referred to in [27] of Mr Richardson's affidavit. For instance, items 1508-1512 and 1516-1524 opened between 4:24:18 and 5:45:32 am on 15 October 2012 all bear the designation Letter Templates for various clients. Document 1539 relates to test methods, according to its URL. The URL of many of the documents refer to competencies. 140 Further, although it may well not have been good practice on Mr Richardson's part to maintain safety work method statements and the like on his H drive, and even if it was inconsistent with Coffey policy or bad practice as Ms Watt suggests, it is plain that Mr Richardson did so; that is the evidence provided by DMW 2. Mr Richardson did not say that he read the 65 documents to which Ms Watt refers, rather that he transferred them so that others would have access. That is consistent with the rapid rate to which Ms Watt adverts. While Ms Watt describes safety work method statements as "controlled" documents and confidential, there is no evidence that those documents were created by Coffey as opposed to publicly available documents which Coffey adopts for use by its employees. 141 Finally, Ms Watt made no enquiry of the Coffey employees referred to in Mr Richardson's explanation. 142 I am therefore not satisfied that Ms Watt's belief that Mr Richardson did or would misuse Coffey's confidential information is reasonably based. DMW 2 lines 65, 161-168 and 176-180 143 Mr Richardson describes the documents referred to at lines 65 and 161-168 as calibration worksheets/check files and forms. They were accessed on UTC 7 and 8 November 2012. Mr Richardson says that in his role as Earthworks Manager and Radiation Safety Officer he was responsible for ensuring that nuclear densometer gauges and equipment was safe, calibrated, serviced and checked each month. Most of the time the work of servicing and calibrating was done by a senior technician, Mr Geoff Buckley. He says that worksheets and forms were needed to perform the calibration and checks and that in the course of his duties during handover to Mr Buckley Mr Richardson opened them to show Mr Buckley where they were located and to print them off so that they could be completed for the month of November. 144 Ms Watt suggested that if this was a task Mr Buckley usually performed there should have been no need to show him where the necessary documents were located. 145 Mr Richardson says the documents referred to at 176-180 relate to radiation emergency procedures, a gauge material safety data sheet, a radiation management plan and re-registration of radiation devices which he accessed to show Mr Crane as part of the handover. It appears that he accessed these documents on UTC 7 November 2012. 146 Ms Watt says that the documents at lines 161-168 and 177-180 were opened in such rapid succession that they could not have been read by Messrs Richardson and Buckley to do a proper handover. 147 However, Ms Watt made no enquiry of Mr Buckley about his normal mode of operation and whether, for instance, Mr Richardson normally printed off forms for Mr Buckley to use. She made no enquiry of Mr Buckley or Mr Crane at all. Having regard to the fact that the documents at 164-168 and 176-180 are all located in Mr Richardson's H drive, to which only he had access, it would appear it was necessary for him to access them for handover purposes. Further, the fact that they were accessed in quick succession does not mean that they had to be read as quickly; the information in DMW 2 does not demonstrate how long a document was open for or whether it was copied to a drive available to Mr Crane or Mr Buckley. In these circumstances, Ms Watt was not in a position to form a view which is relevant for the purposes of this application. DMW 2 lines 1006-1011, 1209-1213 148 Mr Richardson identifies these documents as Mr Cullen's "personal training records" of competencies which he copied to a removable disc at Mr Cullen's request. They appear to have been accessed on UTC 19 October and 24 October 2012. He also copied personal items of his, but denies taking any Coffey confidential information. Mr Richardson said that he was "aware that employees who had previously left Coffey Information had had difficulty in obtaining copies of personal records and documents after they left so I wanted to ensure I had my personal information before I resigned". 149 Ms Watt says that one of her responsibilities is the supervision of employee training and accreditation. She says that the personal records of technicians include a record of their material testing competencies. She says that in her opinion each record of competencies contains confidential information about the procedures developed by Coffey for the achievement of competencies by employees. She says that it took Coffey two years to satisfy NATA requirements and only a few companies in Australia have developed NATA approved competency assessment procedures. She notes that NATA would imminently require construction material testing laboratories to meet requirements for competency assessment and that in her view documents recording Coffey's procedures would assist a competitor who had not yet attained NATA approval. 150 Coffey did not put into evidence any certificate of competency. While Ms Watt might believe that they are confidential, Coffey has not established that by evidence. The Departing Employees assert that the certificates of competencies are bland documents. Mr Cullen gave evidence under cross examination that Mr Webster sent him copies of his training records in electronic format in Mr Cullen's last days of employment. In these circumstances, Coffey has not established that Ms Watt's belief that Coffey may have a right to claim relief in relation to the certificates is reasonably based. Conclusion in relation to Mr Richardson 151 In my view Coffey has not satisfied the requirements of r 7.23 for the foregoing reasons in relation to Mr Richardson. Conclusion 152 For the foregoing reasons, I dismiss Coffey's application and order that it pay the respondents' costs of the proceedings. I certify that the preceding one hundred and fifty-two (152) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell. Associate: Dated: 30 January 2015