Federal Court of Australia Rauland Australia Pty Ltd v Johnson (No 3) [2022] FCA 138 File number: NSD 480 of 2019 Judgment of: stewart j Date of judgment: 21 February 2022 Catchwords: PRACTICE AND PROCEDURE – application for delivery up and destruction of documents containing applicant's confidential information – alternatively for injunction restraining such destruction – application for costs in the proceeding – relief or delivery up and destruction sought in interlocutory application same as final relief sought – where no well-founded fear of harm if documents destroyed because of backup copies – application dismissed Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Number of paragraphs: 22 Date of hearing: 21 February 2022 Counsel for the Applicant S Prince SC with T Wong Solicitor for the Applicant Workplace Law Counsel for the Respondents I Jackman SC with P Knowles Solicitor for the Respondents Norton White ORDERS NSD 480 of 2019 BETWEEN: RAULAND AUSTRALIA PTY LTD (ACN 056 360 653) Applicant AND: FIONA JOHNSON Respondent HILLS LIMITED T/AS HILLS HEALTH SOLUTIONS (ACN 007 573 417) Second Respondent order made by: STEWART J DATE OF ORDER: 21 February 2022 THE COURT ORDERS THAT: 1. The applicant have leave to file an amended interlocutory application in the form provided to the Court during the hearing. 2. The applicant file the amended interlocutory application referred to in order 1 forthwith. 3. The applicant's amended interlocutory application be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT STEWART J: 1 By interlocutory application filed on 14 February 2022, the applicant seeks orders for the delivery up by the respondents of certain identified hard copy and electronic documents, for the permanent destruction of any copies of those documents remaining in the respondents' possession, and for costs orders. Specifically, the following relief is sought: 1. An order that within 7 days, the Respondents: a) deliver to the Applicant's solicitors all hard copies of, and any material containing, the Employment Information and any other material containing the Applicant's confidential information, in each of their possession, custody or control including but not limited to all electronic versions of the documents in Schedule A, Schedule B, Schedule C of the Third Amended Statement of Claim, Part 1 of the List of Documents dated 18 October 2019 provided by the First Respondent, Part 1 of the List of Documents dated 17 March 2020 provided by the Second Respondent, Part 1 of the List of Documents dated 22 April 2021 and Part 1 of the List of Documents dated 8 February 2022, including metadata and file path locations wherever those documents are located on the Respondents' systems. b) permanently destroy all software, computer files, documents or electronic copies of the Employment Information and any other material containing the Applicant's confidential information, in each of their possession, custody or control to be supervised by Michael Khoury, the Applicant's forensic computing expert and in the presence of Ian Adrian of Norton White, solicitor for the Respondents. 2. Within 2 days of the Respondents complying with order 1 above, each Respondent shall serve upon the Applicant's solicitors an affidavit confirming that the Respondent has complied with order 1. 3. The Respondents are to pay the Applicant's costs of the application and the proceedings on a party and party basis to the date of these orders. 4. Pursuant to the order made by Justice Stewart on 21 August 2020 in Rauland Australia Pty Ltd v Johnson (matter no. NSD1913/2018) (the Search Order Proceeding), the First Respondent is to pay the Applicant's costs of the Search Order Proceeding on a party and party basis. The term Employment Information carries the same definition as in the Third Amended Statement of Claim filed in these proceedings on 24 November 2020. 2 At the hearing of the interlocutory application, the applicant sought leave to amend its interlocutory application. The amendment was not opposed and leave to amend was granted. The amendment inserts the following additional relief: 2A In the alternative to orders 1 and 2 above, an order that until the determination of the proceedings, the Respondents take no steps to delete: a) all hard copies of, and any material containing, the Employment Information and any other material containing the Applicant's confidential information, in each of their possession, custody or control including but not limited to all electronic versions of the documents in Schedule A, Schedule B, Schedule C of the Third Amended Statement of Claim, Part 1 of the List of Documents dated 18 October 2019 provided by the First Respondent, Part 1 of the List of Documents dated 17 March 2020 provided by the Second Respondent, Part 1 of the List of Documents dated 22 April 2021 and Part 1 of the List of Documents dated 8 February 2022, including metadata and file path locations wherever those documents are located on the Respondents' systems; and b) all software, computer files, documents or electronic copies of the Employment Information and any other material containing the Applicant's confidential information, in each of their possession, custody or control. 3 Briefly stated, relevant background to the matter includes the following. 4 The proceeding was commenced in March 2019, nearly 3 years ago, and is listed for trial on an estimate of three weeks commencing on 7 March 2022, i.e., two weeks from now. It was so listed some five and a half months ago. The interlocutory application was listed by me for urgent hearing on the basis, as I understood, that it was required to be dealt with and decided urgently and before the commencement of the trial. 5 In the principal proceeding, the applicant alleges that the first respondent, during the course of her employment with the applicant between February 2015 and October 2017, copied and retained documents that are the property of the applicant. The copied documents are referred to in the pleadings as the "Employment Information". The first respondent, on leaving the applicant's employment, commenced employment with the second respondent, the applicant's principal competitor. The respondents admit that the first respondent copied and retained some information, although they do not admit that this extended to all the Employment Information as defined. 6 The applicant alleges that the first respondent caused some of the Employment Information to be reproduced onto a computer owned by the second respondent. The respondents admit that documents forming part of the Employment Information were located on a computer owned by the second respondent in November 2018. 7 The applicant alleges that during the course of the first respondents' employment with the second respondent, she accessed and used some of the Employment Information. The respondents admit that the first respondent accessed and used some of the Employment Information, but not all of that alleged by the applicant. 8 The applicant alleges that the first respondent was in breach of her employment contract with the applicant by copying, retaining and using the Employment Information. It also alleges breach by her of equitable obligations of confidentiality she owed to the applicant, s 183 of the Corporations Act 2001 (Cth) (which prohibits improper use of information obtained from a corporation by an employee), and the applicant's copyright in the Employment Information. 9 The applicant alleges that the second respondent was knowingly concerned in the first respondent's breach of equitable obligations of confidentiality owed to the applicant by which it benefited and caused the applicant loss and damage, and that the second respondent was involved in the first respondent's breach of s 183 of the Corporations Act 2001 (Cth). 10 The issues for determination at the trial are principally: (1) Whether the Employment Information includes confidential information. (2) What access and/or use was made of the Employment Information by the respondents. (3) What loss and damage the applicant has suffered that was caused by that access and/or use. 11 In addition to declarations of breach of various obligations and damages, in its amended originating application the applicant seeks injunctions restraining the respondents from keeping or using the Employment Information. It also seeks the following mandatory injunctions: 8. Within 7 days, the Respondents shall: a. deliver to the Applicant's solicitors all hard copies of, and any material containing, the Employment Information and any other material containing the Applicant's confidential information, in each of their possession, custody or control; and b. permanently destroy all software, computer files, documents or electronic copies of the Employment Information and any other material containing the Applicant's confidential information, in each of their possession, custody or control. 9. Within 2 days of the Respondents complying with order 8 above, each Respondent shall serve upon the Applicant's solicitors an affidavit confirming that the Respondent has complied with order 8. 12 Two observations are immediately apparent. 13 The first is that the principal relief sought by the applicant in its interlocutory application (orders 1 and 2) is almost identical to the relief sought by it in its amended originating application which is due to be adjudicated at trial in a few weeks' time. The second is that that relief is final in nature. It is therefore neither interlocutory nor interim. There is no apparent justification why it should or can be dealt with by way of interlocutory application. 14 The applicant submits that the relief is justified because the respondents have proposed to unilaterally delete the applicant's information and that the way in which they propose to do that is deficient in various respects. In particular, the applicant says that not all the applicant's information will necessarily be identified and deleted and the information will not be delivered up to the applicant. That is, however, no justification for seeking a final mandatory injunction by way of interlocutory application on the eve of the trial. It is that consideration that led the applicant to introduce alternative relief in the form of paragraph 2A to its interlocutory application, to which I now turn. 15 In essence, the applicant seeks by paragraph 2A to ensure that no documents or, more accurately, electronically stored information, that might become relevant at the trial is deleted or destroyed in advance of the trial. It therefore seeks to restrain the respondents from deleting or destroying information that could have a bearing on the presence and use of its information on the respondents' computer systems. 16 The fear that information may be deleted or destroyed arises from a proposal by the second respondent to remove any of the applicant's information from a place accessible by the second respondent's employees. That proposal includes retaining all the second respondent's backups on its backup system referred to as VEEAMS. It will not make deletions from that system because of the expense and time involved in doing so. In essence, the system is designed as a backup system to retain information which makes it particularly difficult to delete information from it. It was also explained that there is not a single backup but a series of daily, monthly and ad hoc backups. The second respondent will, however, have a protocol that only allows access to the backed up information by its authorised IT personnel. 17 The result is that on the evidence before me a backup of all the information that the applicant is concerned to ensure is not deleted or destroyed will be maintained. Moreover, there is nothing to support the submission that accessing the backups will be difficult or time-consuming, and on the face of it there are backups for any potentially relevant point in time. 18 Senior counsel for the applicant points to a number of difficulties and deficiencies with that arrangement. However, the applicant's forensic IT expert, Mr Khoury, was asked whether there was any difficulty with the second respondent's proposal from the perspective of the "preservation of the integrity of evidence", and he did not say that there was. The second respondent's IT expert, Mr Carson, responded to Mr Khoury's report and said that they are no such concerns. 19 There is therefore no evidence before me that identifies that there is any deficiency in the system of backups that is sought to be maintained, and in the light of that I am not persuaded by senior counsel's criticisms of the system to be employed. There is therefore no well-founded fear that any evidence will be destroyed. Paragraph 2A should accordingly be dismissed. 20 Order 3 of the relief sought in the interlocutory application includes the costs of the proceeding (i.e., the principal proceeding over the last three years). That is also final relief. It is also obviously premature to determine those costs at this time, particularly because the proceeding involves far more than merely the issues at stake in the interlocutory application; critically, it includes the question of damages. I understood the applicant to accept as much in the hearing. 21 Order 4 of the relief sought in the interlocutory application is for the costs of a separate proceeding for search orders (proceeding NSD1913/2018) which the applicant brought prior to the present proceeding. It was pursuant to the search orders that it ascertained that the first respondent had taken and retained the Employment Information and that the second respondent had some of the Employment Information on a computer belonging to it. In the search order proceeding, I made an order on 23 July 2020 (not 21 August 2020 as stated in the interlocutory application in the present proceeding) that the costs in that proceeding, except for some specific identified costs, be reserved for decision in the present proceeding. Entitlement to, and liability for, those costs is best determined when the proceeding as a whole is determined. There is, in any event, no justification for seeking those costs in an interlocutory application shortly before the final hearing in the principal proceeding. Again, I understood the applicant to accept as much. 22 In the circumstances, the applicant's interlocutory application falls to be dismissed with costs. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart. Associate: Dated: 21 February 2022