Seamez v McLaughlin [1999] NSWSC 9

New South Wales Supreme Court CITATION : Seamez v McLaughlin [1999] NSWSC 9 CURRENT JURISDICTION : Common Law Division FILE NUMBER(S) : 13148/92 HEARING DATE(S) : 9-13 November 1998; 16 November 1998; 19-20 November 1998 JUDGMENT DATE : 29 January 1999

(first plaintiff) Seamez (Australia) Pty Limited (second plaintiff) Baden John Brown PARTIES : (third plaintiff) Geraldine Freeman v (first defendant) Robert J. McLaughlin (second defendant) Richard F. Buckley JUDGMENT OF : Sperling J

COUNSEL : First, second & third plaintiffs: I G Harrison SC/P C See First & second defendants: D J Fagan SC/ W V McManus SOLICITORS : First, second & third plaintiffs: Philip Parbury & Assoc First and second defendants: Colins Biggers & Paisley CATCHWORDS : Solicitor and client - breach of contractual duty - no question of principle involved DECISION : see paragraphs 202 - 254

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

SPERLING J

Friday 29 January 1999

No.13148/92 - Seamez (Australia) Pty Limited & Ors v Robert J McLaughlin & Anor JUDGMENT

HIS HONOUR:

1 The plaintiffs, Seamez (Australia) Pty Ltd ("Seamez"), Baden John Brown ("Brown")and Geraldine Freeman ("Freeman"), have commenced proceedings against the defendants, their former solicitors, Robert McLaughlin ("McLaughlin") and Richard Buckley ("Buckley"), claiming damages for breach of contract and breach of fiduciary duty. 2 I hope without disrespect, I will refer to all those involved by their surnames. 3 The second and third plaintiffs, Brown and Freeman, are directors of Seamez, a company which manufactures and sells cleaning chemicals. 4 The first and second defendants are partners in the law firm McLaughlin O'Riordan, which acted for Seamez in proceedings it commenced in the Federal Court of Australia Ltd against United Systems (Holdings) Pty Limited ("United Systems"), Ian John Barkley ("Barkley"), Elizabeth Barkley and Umberdex Pty Ltd (collectively "the respondents"), being proceedings No. G629 of 1990 ("the Federal Court proceedings"). 5 Prior to the Federal Court proceedings, in December 1986, United Systems had commenced proceedings in the Supreme Court, Equity Division, against Seamez, Brown and Barkley ("the Equity proceedings"). In the Equity proceedings United Systems sought an order restraining Seamez, Brown and Barkley from manufacturing, offering for sale or selling a product produced by Seamez known as "Vanish" and from dealing in any way with the formula and/or manufacturing instructions for United System's product "MP 2000". 6 United Systems alleged that Brown had stolen its formula and manufacturing instructions for the product "MP2000" whilst he was employed by a subsidiary company of United Systems and that Seamez was using the formula and manufacturing instructions to produce Vanish. Barkley was working for Seamez at the time these proceedings were instituted. 7 Seamez's defence was that the formula they were using to produce Vanish was obtained by them from wholesalers, Albright & Wilson, and was not owned or developed by United Systems. 8 In the Federal Court proceedings, which were commenced on 5 November 1991, Seamez alleged that their employee, Barkley, had stolen the formulae and primary data sheets for products developed by Brown, that the formulae were trade secrets and that Seamez had copyright in the primary data sheets, that Barkley provided the formulae to United Systems and that United Systems had produced and sold products using those formulae. The amended statement of claim sought damages and/or an account of profits for breach of confidentiality, breach of copyright, misleading and deceptive conduct under s42 of the Fair Trading Act and s 52 of the Trade Practices Act and breach by Barkley of a restraint of trade covenant in his employment contract with Seamez. 9 The Seamez products, the formulae to which had allegedly been stolen and used by United Systems, were Heavy Duty Soap Gel, Industrial Strength Barrier Cream, Gleam, Emerald, Vitalize, Beer Line Cleaner 1 and 2 and Seamez Concentrate. 10 United Systems' defence was that the formulae were not "confidential", being formulae provided by wholesale suppliers and not therefore owned by either Seamez or United Systems, and/or that the formulae were developed by United Systems and had been stolen by Brown. 11 Initially, Stuart & Mills, solicitors, acted on behalf of Seamez in the Federal Court proceedings. However, on 24 January 1991, Seamez retained McLaughlin O'Riordan to act on its behalf. McLaughlin was the partner with carriage of the matter (although from February 1991 until June 1991 an employed solicitor, Fraser Doak, had day to day conduct of the matter). Seamez did not instruct McLaughlin O'Riordan to act on its behalf in relation to the Equity proceedings because United Systems was not pressing its claim. 12 On 5 November 1991, the Federal Court proceedings were fixed for a hearing of 5-7 days commencing on Monday 23 March 1992 before his Honour Justice Sheppard. The proceedings were to go to trial in the first instance on liability only, with an account of profits to be taken at a later time if the plaintiffs were successful. On the Friday before the date fixed for hearing, 20 March 1992, the matter was settled on the basis of a payment by Seamez to United Systems of $20,000. The terms of settlement were contained in a deed of settlement ("the deed") executed on 20 March 1992 and filed in Court on 23 March 1992.