Federal Court of Australia Rauland Australia Pty Ltd v Law (No 3) [2021] FCA 898 File number: NSD 1914 of 2018 Judgment of: STEWART J Date of judgment: 3 August 2021 Catchwords: PRACTICE AND PROCEDURE – order sought that confidential information of one party be provided to employee of the other party for the purpose of assisting party's expert witness – whether assistance of employee is necessary – whether there is a risk that the confidential information is exploited – order sought for approved management accounts for the purpose of preparing expert evidence Legislation: Copyright Act 1968 (Cth) Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Number of paragraphs: 28 Date of hearing: Determined on the papers Date of last submissions: 28 July 2021 Counsel for the Applicant: S Prince SC with T Wong Solicitor for the Applicant: Workplace Law Counsel for the Respondents: T Brennan SC with E Steer Solicitor for the Respondents: Norton White ORDERS NSD 1914 of 2018 BETWEEN: RAULAND AUSTRALIA PTY LTD Applicant AND: HUW LAW First Respondent HILLS LTD (ACN 007 573 417) Second Respondent order made by: STEWART J DATE OF ORDER: 3 August 2021 THE COURT ORDERS THAT: 1. Subject to any existing applicable confidentiality undertakings or, failing that, against the provision by them of confidentiality undertakings acceptable to the applicant, the applicant provide the respondents' lawyers with a copy of: (a) such of its monthly management accounts for the 2020/2021 financial year that have been approved by the applicant as at the date of these orders, within 7 days of these orders; and (b) the management accounts for the 2020/2021 financial year, within 7 days of those accounts being approved by the applicant. 2. The respondents' lawyers be permitted to provide a copy of the management accounts referred to in Order 1 to any forensic accounting expert retained on behalf of the respondents, provided that the expert first provides the applicant with an undertaking in the agreed form. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT STEWART J: Introduction 1 On 16 June 2021, I made orders in this proceeding and in proceeding NSD 480/2019 that the two proceedings be heard together and that the evidence in the one proceeding shall be evidence in the other. The reasons for making those orders included that there is significant overlap in the factual narrative and evidence underpinning the claims in the two proceedings. There is also overlap in the damages that are sought. It is highly desirable that in those circumstances the cases be heard together so as to avoid the risk of conflicting findings in the two cases, and also in the interests of economy and efficiency. 2 One of the consequences of the matters being heard together turned out to be that the trial of this proceeding which has for some time been listed to be heard in September this year has to be vacated. That turned out to be unavoidable. 3 The parties are substantially in agreement as to the program of steps to be taken to prepare the two matters to be ready to be heard together in March next year. There are, however, two issues on which they presently disagree which require determination. The pre-trial orders that are otherwise agreed will be entered separately, albeit only after some tweaking by me. 4 The applicant is Rauland Australia Pty Ltd and the respondents are Mr Law and Hills Ltd. Confidential evidence 5 First, the respondents seek orders that against the provision of a confidentially undertaking (in a form that is acceptable to Rauland) by Scott McMurtrie, an employee of Hills, the respondents' lawyers be permitted to disclose to him the contents of the affidavit of Kristy Aspland dated 1 April 2021 and confidential exhibit KA-1. Rauland resists that course. 6 The necessary background to deciding the question includes the following. 7 Rauland's claim against Hills is that Hills was knowingly concerned in the breach by Mr Law of confidentiality obligations owed by Mr Law to Rauland. Mr Law previously worked for Rauland and then for Hills. It is alleged that he provided to Hills confidential information belonging to Rauland which he acquired when he worked for Rauland. Rauland and Hills are direct competitors in a competitive market that is essentially a duopoly. It is also alleged that Hills used Rauland's confidential information in breach of the Copyright Act 1968 (Cth). 8 In addition to declaratory, injunctive and other relief, Rauland seeks equitable compensation and damages. Rauland's case is that one of the consequences of the misuse of its confidential information was that it lost a tender for a particular project described as the nurse call installation at the Nepean Hospital. A component of the damages that it claims arises from that lost tender. Hills was awarded the tender. 9 In support of that component of its damages claim, Rauland has filed an expert report of a forensic accountant, Tony Samuel, and the affidavit of an employee of Rauland, Kristy Aspland, and confidential exhibit KA-1 to that affidavit. There is an agreed confidentiality regime between the parties such that the un-redacted affidavit and the exhibit can only be seen by the respondents' external lawyers and advisers who have given undertakings not to reveal their contents to anyone else, including, naturally, any employee of Hills. 10 It is said by Rauland that the purpose of the affidavit and the exhibit is to provide the factual basis for the assumptions on which Mr Samuel's opinions are based. 11 The respondents have retained their own quantum expert, Tamara Lindsay, a forensic accountant. Ms Lindsay, who has given confidentiality undertakings, has been briefed with Mr Samuel's report and Ms Aspland's affidavit and exhibit. Ms Lindsay has informed the respondents' solicitors that in order to prepare her report she requires the assistance of an employee of Hills, Scott McMurtrie, who is a project manager for Hills, to provide her with industry specific explanations and background as to certain matters arising from the affidavit and the exhibit. 12 Specifically, the respondents in correspondence put forward the following justification for the relief that they seek with regard to Ms Aspland's affidavit and exhibit: Ms Lindsay has no experience or expertise in the health equipment and/or construction industry. For Ms Lindsay to prepare her report she needs assistance from a person with such knowledge to discuss the information contained in Ms Aspland's affidavit and exhibits such as the size of the workforce needed to undertake the Nepean Hospital project and the usual practices in the industry in relation to discounts on hardware and software. Without access to such information, Ms Lindsay is not able to comment on the assumptions used and opinions expressed in Mr Samuel's report dated 31 March 2021. 13 Rauland's response in correspondence includes the following: Moreover, it is our view that Mr McMurtrie does not require access to the Aspland Affidavit to provide Ms Lindsay with proper instructions as to the size of the workforce needed to undertake the Nepean Hospital project and the usual practices in the industry in relation to discounts on hardware and software. Mr McMurtrie is a Project Manager at Hills and would be able to provide those instructions based on his role and experience in the industry particularly considering that Hills has mostly [sic] likely been involved in projects similar to the Nepean Hospital Project. Even if Mr McMurtrie were unable to do so, it is our view that some other representative at Hills would be able to provide such instructions without reference to the Aspland Affidavit. 14 The respondents accept, "for present purposes", that the affidavit and exhibit are confidential and commercially sensitive. They submit that Rauland's concern for confidentiality "can readily be accommodated by Mr McMurtrie providing further undertakings (beyond the usual Harman restrictions) in the form that have been provided throughout these proceedings in relation to confidential and commercially sensitive information." They say that they are entitled to brief an expert of their choosing with a view to meeting Rauland's case as best they can. They submit that it is neither fair nor appropriate for the respondents to be prevented from doing so on account of Rauland's rejection of an undertaking in the form that has been proffered. 15 Rauland says that the affidavit and the evidence contain its current financial information, including as to pricing of its products and services which is highly confidential. It says that the evidence in question discloses the pricing strategy, clients detail, itemised cost pricing, estimates, discounts, projected income and profit margins of Rauland in granular detail. It is just this type of information that the proceeding is directed to protecting. 16 Rauland submits that it would cause irreversible damage to its commercial interests if the information were disclosed to an employee of any competitor. It submits that if the information was given to Mr McMurtrie, as an incident of his fiduciary obligations to his employer he would be obliged to make use of the information to his employer's benefit and give it to his employer – there would be an unavoidable tension between his undertaking not to use or disclose the material and his fiduciary obligations. Also, he would not be able to forget or put out of his mind the information which would inevitably lead to him using it in some way to Rauland's detriment. 17 On the information presently available to me, I do not see the justification for disclosing the confidential information in the affidavit and the exhibit to an employee of Hills. There are a number of reasons for that. 18 First, it does not appear to be within the role of Ms Lindsay to have to query or interrogate the accuracy or underlying assumptions of Ms Aspland's evidence. Whether that evidence is correct or incorrect does not appear to be a matter of forensic accounting expertise – if it was, then no doubt Ms Lindsay could deal with it without the assistance of anyone else. Since she cannot "comment on" it without assistance, it clearly is not within her expertise. 19 Secondly, to the extent that Ms Lindsay may require someone with industry-specific knowledge to, perhaps, explain aspects of the evidence or its significance, there is no evidence before me to suggest that there is no person independent of Hills who could assist Ms Lindsay in that way. On the evidence, there is no foundation to the implicit assertion that it is only an employee of Hills who could give Ms Lindsay the requisite assistance. 20 Thirdly, if Ms Lindsay requires assistance with information such as the size of the workforce needed to undertake the Nepean Hospital project and the usual practices in the industry in relation to discounts on hardware and software, as asserted by the respondents in their correspondence, she should be able to acquire that from Mr McMurtrie (or someone else) without disclosing any of the information in the affidavit and the exhibit. As I understand the position, Hills was the successful tenderer for the project. It should readily be able to provide that sort of information. 21 Fourthly, I accept the Rauland's submission that Mr McMurtrie will be in a position of conflict or tension as between the confidentiality undertaking that he will be required to give and his obligations towards his employer. That can, of course, be dealt with to some extent by the employer authorising Mr McMurtrie to give the undertaking, but even then Mr McMurtrie will inevitably be in possession of what on any view is highly sensitive and valuable confidential pricing and strategy information of his employer's major competitor. I am not satisfied that he will be able to successfully put that information out of his mind so that his exposure to it will not, in a real sense, be potentially prejudicial to Rauland's interests. 22 In the circumstances, I reject the relief that the respondents seek in respect of Ms Aspland's affidavit and exhibit. Management accounts 23 Secondly, the respondents seek an order that their lawyers be provided with a copy of: (1) such of its monthly management accounts for the 2020/2021 financial year that have been approved by the applicant as at the date of these orders, within seven days of these orders; and (2) the management accounts for the 2020/2021 financial year, within seven days of those accounts being approved by the applicant. 24 The respondents also seek an order that the respondents' lawyers be permitted to provide a copy of the management accounts to any forensic accounting expert retained on behalf of the respondents, provided that that expert provides Rauland with an undertaking in the agreed form. 25 Ms Lindsay has informed the respondents' solicitors that in order to prepare her report she requires access to Rauland's 2020/2021 management accounts. They say that the accounts are necessarily relevant to Ms Lindsay's assessment of loss, which includes three heads of loss alleged to have been incurred in the 2020/2021 year. They cite examples that demonstrate this. 26 Rauland says that Mr Samuel did not have access to the management accounts that are being sought by the respondents at the time of preparing his report because those accounts had not been finalised at that time, and they are still not yet finalised. Rauland says that once the management accounts are completed, it will file a supplementary report from Mr Samuel which will address the data in the management accounts which obviates the need for the orders sought by the respondents. 27 There is barely any difference between the parties. The applicant appears to accept that the management accounts in question, once finalised, will be relevant to the assessment of the quantum of their claim. That must follow from what they say about Mr Samuel preparing a supplementary report. As relevant primary source documents, the applicant will be obliged to furnish those to the respondents, albeit under an appropriate confidentiality regime. 28 In the ordinary course I may have been inclined to leave the matter there, confident that the applicant would comply with its ongoing discovery obligations and furnish the management accounts to the respondents' lawyers once they had been finalised. However, correspondence from the applicant's solicitors in response to the request for the management accounts states rather emphatically – perhaps more so than what was intended – that "our client will not provide this information." In those circumstances it seems prudent to make appropriate orders. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate: Dated: 3 August 2021