FEDERAL COURT OF AUSTRALIA
Flocast Australia Pty Ltd v Purcell (No 3) [2000] FCA 1020
INTELLECTUAL PROPERTY – Anton Piller order – execution – whether material taken not within order – undertaking to examine some material and return within a reasonable time if found to be not within terms of order – whether free and informed consent of respondent – whether legal advice from respondent’s own solicitor essential – material returned eight months later – whether returned within a reasonable time – other material returned after summary judgment – other material still retained – whether documents referred to “customers of the applicant” – whether past or potential customers included – whether firms acting as agents “customers” – whether material tending to show respondent’s involvement in establishing competing business before leaving employment of applicant within order even if firms referred to were not customers of the applicant
WORDS AND PHRASES – “customer”
Federal Court Practice Note No 10 (1993) 45 FCR 8
Flocast Australia Pty Ltd v Purcell (1998) 39 IPR 177 mentioned
Flocast Australia Pty Ltd v Purcell (No 2) [1999] FCA 309 mentioned
Colombia Picture Industries Inc v Robinson [1987] Ch 38 distinguished
Commissioners of Taxation v English, Scottish and Australian Bank, Ltd [1920] AC 683 at 687 mentioned
G W Plowman & Son Ltd v Ash [1964] 1 WLR 568 mentioned
Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526 at 536, 537-8 mentioned
Spafax (1965) Ltd v Dommett (1972) 116 Sol J 711 mentioned
J C Techforce Pty Ltd v Pearce (1996) 138 ALR 522 distinguished
FLOCAST AUSTRALIA PTY LTD v JAMES DESMOND PURCELL, JODY MARC, TRACEY LEE HOOK and TIGER BRONZE PTY LIMITED
NO VG 379 OF 1994
HEEREY J
1 AUGUST 2000
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA |
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VG 379 OF 1994 |
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BETWEEN: |
FLOCAST AUSTRALIA PTY LTD Applicant
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AND: |
JAMES DESMOND PURCELL, JODY MARC, TRACEY LEE HOOK and TIGER BRONZE PTY LIMITED (ACN 064 627 505) Respondents
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. Further hearing of the first and fourth respondents’ notice of motion dated 12 February 1999 is adjourned to 8 August 2000 at 9.15 am.
2. Costs are reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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VG 379 OF 1994 |
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BETWEEN: |
Applicant
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AND: |
JAMES DESMOND PURCELL, JODY MARC, TRACEY LEE HOOK and TIGER BRONZE PTY LIMITED (ACN 064 627 505) Respondents
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JUDGE: |
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DATE: |
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PLACE: |
REASONS FOR JUDGMENT
1 With the authority of an Anton Piller order (“the Order”) the applicant Flocast Australia Pty Ltd seized a large quantity of documents and electronic material from the home of the first respondent Mr James Desmond Purcell and from other premises. Subsequently Flocast obtained summary judgment against Mr Purcell and his company, the fourth respondent Tiger Bronze Pty Ltd: Flocast Australia Pty Ltd v Purcell (1998) 39 IPR 177. By a notice of motion dated 12 February 1999 (as subsequently amended) Mr Purcell and Tiger Bronze sought (inter alia) an order that there be an enquiry into damage suffered by them as a result of what was alleged to be the improper execution of the Order.
2 The issue of Flocast’s liability on the motion has been heard prior to the determination of damages (if any).
The business of Flocast
3 More detail will be found in the judgment, 39 IPR at 179. For present purposes it is sufficient to say that Flocast was the proprietor of a business, established in about 1962, which involved metal casting. In the late 1960s the business commenced to use a new technique of continuous casting. In about 1985 there was introduced a refinement of this method which operated vertically rather than horizontally. By the time the present litigation commenced Flocast had four vertical continuous casting machines at its premises at Epping in Victoria.
4 Mr Purcell was employed by Flocast as its company secretary and financial controller from 21 May 1990 to 10 March 1994. His principal responsibility was the preparation, maintenance and presentation of Flocast’s financial records as well as cash management. He had complete access to all Flocast’s books and records including its computer system and database.
5 In late February 1994 Mr Purcell told Flocast’s managing director Mr Neil Watt that he proposed to leave the company’s employment on 10 March and go to work for “a New Zealand bedding company in West Heidelberg”. Within a few weeks other employees of Flocast, the second respondent Ms Jodie Marc and the third respondent Ms Tracey Lee Hook, also resigned. The former told Mr Watt that she had found a job selling electrical cable and did not want to do office work anymore. Miss Hook said she was six months pregnant and was leaving on medical advice. In fact both Ms Marc and Ms Hook went to work for Mr Purcell. By June he was building a new continuous casting plant. On 23 September 1994 Mr Watt learned that Mr Purcell had established Tiger Bronze at a site at 23A Beatrice Street, West Heidelberg. Later that month Mr Watt began to receive phone calls and letters from foreign customers and agents informing him that they had been approached by faxes from Tiger Bronze offering to supply product at prices generally below those that had been charged by Flocast.
The Anton Piller order
6 On 26 October 1994 on the ex parte application of Flocast I granted the Order. The Order recited various undertakings including the usual undertaking as to damages and an undertaking to retain in the safe custody of Flocast’s solicitors any document, disk or thing seized pursuant to the order for the sole purpose of the action until further order. The premises at which the searches were to be made included the homes of Mr Purcell and Ms Hook and the premises of Tiger Bronze. Paragraph 1 of the Order directed the respondents and/or such persons as might appear to be in charge of those premises to permit a partner or solicitor from Flocast’s solicitors Freehill, Hollingdale & Page (“Freehills”) to enter on the premises and remain thereon between the hours of 8.00 am and 10.00 pm for the purpose of searching for, inspecting, photographing and removing from the premises into the custody of Flocast’s solicitors the following:
“(a) all plans, drawings, diagrams, documents or things of whatsoever nature appearing to be the property of, received by or for, forwarded to or prepared by, for or at the request of the Applicant together with all copies of such documents or things;
(b) all documents of whatsoever nature relating to the establishment or operation of a business by the Respondents or any of them in competition with that of the Applicant, including the business of the Fourthnamed Respondent, tending to show the involvement of any of the Firstnamed Respondent, Secondnamed Respondent and/or Thirdnamed Respondent in such establishment prior to any such Respondents having left the Applicant’s employ;
(c) all plans, drawing or diagrams of any machinery or equipment or of any part of any machinery or equipment suitable for use in the production of metal pipes, rods or bars using the vertical continuous casting process;
(d) all documents of whatsoever nature tending to show the prospective involvement with, or a financial interest in, or an association between any business established or to be established in competition with the Applicant (including the Fourthnamed Respondent) and one or more of the Firstnamed Respondent, Secondnamed Respondent and/or Thirdnamed Respondent prior to 10 March 1994 in the case of the Firstnamed Respondent, 22 April 1994 in the case of the Secondnamed Respondent and 29 April 1994 in the case of the Thirdnamed Respondent;
(e) all documents of whatsoever nature received from, forwarded to or apparently prepared for or at the request of any of the Respondents, which documents or copies are directed to, received from or in any way related to any of the customers of the Applicant; and
(f) all computer records and copies thereof, whether maintained on hard disc, floppy disc, C.D., tape or any other storage device containing copies of documents or other information of the nature referred to in sub-paragraphs (a), (b), (c), (d) or (e) above, including, but without limiting the generality of the foregoing, copies of all or any part of the Applicant’s MANPAK system and database.”
7 Paragraph 2 provided that the persons authorised to enter the premises were to be accompanied by a solicitor from Stephens Solicitors or Arthur Robinson & Hedderwicks or Malleson Stephen Jacques. Paragraph 3 required the respondents or the persons in charge of premises to disclose to the solicitor from Freehills the present whereabouts of all documents and articles referred to in par 1. Paragraph 5 required the respondents to disclose computer identity codes, passwords etc. Paragraph 6 was as follows:
“6. In the event that anything or any information apparently derived from anything of a description specified in paragraph 1 hereof is stored on, or contained within, a computer disk or storage device, the Respondents and each of them shall permit either the taking or making of a copy of the contents of such computer disks or storage disks by downloading the contents of such computer disks or storage devices on to a suitable device or disks provided the Applicant, or by the printing out of such material by the use of a printer (if any) and shall also permit the removal of such computer disks or storage devices (or where such computer disks or storage devices cannot themselves be readily removed from the computer to which they are fitted, the removal of that computer) from the relevant Respondent’s custody into the custody of Freehill Hollingdale & Page.”
8 The only other provisions of the Order presently relevant were as follows. Paragraph 16(a) required documents or articles seized to be recorded in a list prepared by Flocast’s solicitors at the premises and that the respondents be given reasonable opportunity to check and make a copy of the list before the documents or articles were removed. Paragraph 16(b) provided for reports by the independent solicitors. Paragraph 17 contained an interim injunction in these terms:
“The Respondents and each of them shall be restrained until 4.15 pm on the 3rd day of November 1994 or until further order from:
(a) without the licence of the Applicant:
(i) reproducing in a material form;
(ii) making or causing or permitting the making of an adaptation of;
(iii) publishing;
the Applicant’s copyright works or any part thereof (as described in the Affidavit of Neil Lindsay Watt dated 25 October 1994).
(b) using, publishing, communicating or in any way disclosing or causing, procuring, permitting or suffering the use, publication, communication or disclosure in any way to any person of any of the Applicant’s confidential information (as described in the Affidavit of Neil Lindsay Watt dated 25 October 1994);
(c) dealing in the course of trade or business with any customers of the Applicant.”
9 Subsequently the interim injunction was extended by consent on a number of occasions and remained in place until the summary judgment hearing.
Execution of the Order
10 The solicitor from Freehills who attended at Mr Purcell’s home at Lot 3, Bridge Inn Road, Mernda on 28 October 1994 was Ms Sally Nicolson. The independent solicitor who accompanied her was Mr John McPhail, an employee of Mallesons Stephen Jacques. Also present were Mr David McCahey of Flocast and Mr Rolf Stoccki a computer expert employed by Freehills.
11 Ms Nicolson and the others arrived at the house shortly after 8.00 am. Mr McPhail introduced Ms Nicolson to Mr Purcell, informed him of the general nature of the Order, and told him he had the right to obtain legal advice, provided that he sought and obtained it straight away. Mr McPhail asked Mr Purcell whether he had a solicitor. He said he did not, but would try and find one. Mr Purcell then tried to speak to one or two solicitors on the telephone. Eventually he made contact with one, identified only (as far as Mr McPhail was aware) as “Brendan”. At about 8.25 am Mr McPhail spoke on the telephone to Brendan. Mr McPhail explained the position and said the Order was an Anton Piller order in more or less the usual form. Brendan asked whether the premises at which the Order could be executed were named and whether any other premises could be raided. Mr McPhail explained the Order “in concise terms”. He then took Mr Purcell through the Order. Mr Purcell appeared to understand everything “fairly clearly”. In answer to Mr McPhail’s questions, Mr Purcell said he understood everything and did not want anything explained again.
12 At about 10.25 am Ms Nicholson discovered a large number of floppy disks contained in eight boxes. Some of the disks had writing on the cover referring to Flocast or otherwise indicating that the disk contained Flocast material. Others had no identification on the cover at all. A third category had writing which either suggested the disk was not related to Flocast or did not enable Ms Nicolson to ascertain the contents. There was no computer in the house and Ms Nicolson was unable to check the disks in the second and third categories to see whether they contained Flocast material. Ms Nicolson raised the matter with Mr McPhail. He in turn explained the position to Mr Purcell. Mr McPhail suggested to Mr Purcell that Ms Nicolson should take the disks, promptly check them to see what they contained, and that she would undertake to return them within a reasonable time if they did not contain information or data belonging to or related to Flocast or the subject matter of the proceedings. According to Mr McPhail, Mr Purcell appeared “relaxed” about this and said “Yes, fine, most of them are just computer games anyway”. Mr McPhail relayed this to Ms Nicolson.
13 Ms Nicolson prepared a list of the items to be taken away (that is to say all the material, not just the disks in question). The disks which did not appear to contain Flocast information were marked with an asterisk. She checked through the list with Mr Purcell to ensure that everything was listed and described. Mr Purcell asked that a note be put on the list to indicate how dusty (and therefore recently unused) most of the disks were. Ms Nicolson made such a note. Ms Nicolson and her party left the house at 11.15 am.
14 According to Mr Shaun McVicar, a solicitor employed by Freehills, the floppy disks taken subject to Ms Nicolson’s undertaking numbered “many dozens”. The evidence did not indicate the precise number. In June and July the following year 41 were returned. They had been found by Freehills to contain no Flocast information.
15 In total a great deal of information was taken from Mr Purcell’s home and the other premises including hundreds of written documents and almost 100 computer hard disks and floppy disks which subsequently turned out to contain tens of thousands of pages of computer information. The information which was retrieved therefrom and printed comprised a complete reproduction of part of Flocast’s confidential information including customer lists, sales history of its customers and summaries of its sales of particular products for particular years. In addition there were Flocast workshop procedures, quality assurance manuals and engineering drawings.
Subsequent proceedings
16 The matter returned to Court on 3 November 1994 and injunctive relief was renewed by consent. By the end of February 1995 Tiger Bronze had ceased to carry on business. On 19 September 1997 as already mentioned I granted summary judgment in favour of Flocast. Flocast did not seek judgment against Ms Marc or Ms Hook. As against Mr Purcell and Tiger Bronze (hereafter, unless the context otherwise indicates, referred to as “the respondents”), Flocast limited its claims for relief to infringement of copyright and breach of confidence in business documents, including its customer list, and infringement of copyright in its workshop procedures manual, quality assurance manual and certain drawings. In other respects Flocast discontinued its proceedings. It did not pursue its claim for damages. The final orders made were as follows:
“(1) The applicant has leave to discontinue the proceedings, with no order as to costs, insofar as it makes claims not disposed of by these Orders.
(2) Upon the applicant, by its counsel, undertaking to file a notice of discontinuance of the proceeding forthwith insofar as it makes claims not disposed of by these orders, the first and fourth respondents and each of them, whether by themselves, their servants or agents or any of them or otherwise howsoever be and are hereby restrained from:
(a) without the licence of the applicant:
(i) reproducing in a material form;
(ii) making or causing or permitting the making of an adaptation;
(iii) publishing:
(A) each of the drawings described in annexure B to the further and better particulars dated 27 March 1997 to the applicant’s amended statement of claim being the annexure attached to this order and marked “A”;
(B) the applicant’s Workshop Procedures Manual described in par 7 of the applicant’s amended statement of claim;
(C) the applicant’s Quality Assurance manual described in par 7 of the applicant’s amended statement of claim; and
(D) the list of the names, addresses, contact details, buying and credit histories of the applicant’s customers referred to in par 8 of the applicant’s amended statement of claim;
(b) using, publishing, communicating or in any way disclosing or causing, procuring, permitting or suffering the use, publication, communication or disclosure in any way to any person of information derived by them or either of them, either directly or indirectly, from the lists or records of the names, addresses, contact details, buying and credit histories of the applicant’s customers prepared by the applicant.
(4) Paragraph 17 of the Order of Heerey J made herein on 28 October 1994 as extended by consent on 3 November 1994, 20 December 1994 and 25 January 1995 be discharged.
(5) The applicant be released from the undertakings given by it to this Honourable Court on 28 October 1994 and 3 November 1994.
(6) The first and fourth respondents pay the applicant’s costs of and incidental to this proceeding (including costs reserved).
(7) Liberty to apply is reserved generally.”
17 In the course of my judgment I said (39 IPR at 185):
“Mr Purcell was determined to leave his employment and set up a business in competition with his employer. This of course he was quite entitled to do. But in doing so he has simply taken from his employer anything he could lay his hands on which might be useful for his new enterprise. In seeking a legal remedy for this serious wrong the applicant has already, I do not doubt, expended a vast amount of time and money which would have been much more usefully employed in developing its business for the benefit of proprietors and employees. In my opinion it is only just and fair that the applicant can bring this litigation to an end by summary judgment.”
18 On 1 December 1998 Flocast’s costs were taxed in the amount of $188,847.83. A certificate was served on the respondents and on 13 January 1999 Deputy Registrar Fary made an order under O 62 r 45(3) that the respondents pay Flocast the amount certified. As already mentioned, they issued the notice of motion presently under consideration on 12 February 1999.
19 The motion came on for hearing on 1 March 1999. Flocast moved for summary dismissal of the motion. In a judgment given on 31 March 1999 I rejected that application: Flocast Australia Pty Ltd v Purcell (No 2) [1999] FCA 309. Following Colombia Picture Industries Inc v Robinson [1987] Ch 38 I held (at par 19) that an undertaking as to damages was an adequate legal foundation for an award of damages where a defendant has suffered loss as a result of an Anton Piller order being wrongly executed (for example by seizure of materials covered by the order) and success by the plaintiff on its substantive claim is not necessarily a bar to the defendant recovering damages. I then gave directions for the purposes of the present hearing.
Issues in the present application
20 On different occasions Freehills returned material to Mr Purcell. He says that some of this material was not covered by the Order and thus was wrongly taken. Also he says that some material still retained by Freehills is likewise outside the terms of the Order. The material in dispute is in one or other of the following categories:
(i) Returned in June and July 1995.
(ii) Returned in December 1997.
(iii) Still retained.
21 At this stage I should mention that in the course of argument counsel for the respondents said that, as to some items, they were admittedly properly taken under the Order but after the judgment in September 1997 they could not properly be retained. Senior counsel for Flocast submitted, and I agree, that such arguments are not open under the motion with which I am dealing. The motion is concerned with items which it is alleged should not have been taken on the execution of the Order. If items were improperly taken and have since been returned that would be a circumstance going to the quantum of damage suffered by the respondents. However if an item was properly taken, the question whether it can now be retained by Flocast raises quite different considerations turning on, inter alia, the effect of the judgment.
22 Before considering the material in each of the categories mentioned it will be convenient to turn to some legal issues.
“Customer”
23 For the purposes of par 1(e) of the Order the question arises whether “the customers of the applicant” extends to past customers, that is to say entities who have not had dealings with Flocast for a substantial period of time, and potential customers who have never engaged in dealings but might do so in the future. There is also the question of firms who are agents for ultimate purchasers from Flocast. Flocast does not sell product to such firms as principal; they receive remuneration by way of commission from their own clients.
24 The Order has to be construed objectively, and as at the date it was made. An Anton Piller order is prepared by the plaintiff’s solicitors and, although of course scrutinised carefully by the judge, is made in circumstances where the judge does not have any evidence or argument from the defendant. The plaintiff then takes the order and goes to the defendant’s premises, produces the order and takes away documents and other material from those premises under compulsion of law. The maxim that any ambiguity in a document should be construed contra proferentem applies in the most literal sense.
25 The Macquarie Dictionary gives the primary meaning of “customer” as “one who purchases goods from another; a buyer; a patron”. The Oxford English Dictionary gives, as “the chief current sense”, “one who frequents any place of sale for the sake of purchasing; one who customarily purchases from a particular tradesman; a buyer, purchaser”. A customer may be of recent standing. In Commissioners of Taxation v English, Scottish and Australian Bank, Ltd [1920] AC 683 at 687 the Privy Council took the view that a person who had opened an account on the day before paying in a cheque was a customer of the bank within the meaning of s 88(1) of the Bills of Exchange Act 1909 (Cth). Their Lordships said (at 687):
“The contrast is not between an habitué and a newcomer, but between a person for whom the bank performs a casual service, such as, for instance, cashing a cheque for a person introduced by one of their customers, and a person who has an account of his own at the bank.”
26 In G W Plowman & Son Ltd v Ash [1964] 1 WLR 568 the English Court of Appeal was concerned with a restrictive covenant binding an employee within two years after termination of employment not to canvass or solicit business from “any farmer or market gardener who shall at any time during the employment of the employee hereunder … have been a customer of the employers”. Harman LJ held (at 572), although having felt “great doubt”, that
“… if a man was a customer at the beginning of the employment I do not see why hope should be abandoned of his becoming a customer again at the end of it and why, therefore, people who have, for the time being at any rate, ceased to be customers have fallen outside the proprietary interest.”
27 The judgment thus assumed that as a matter of construction “customers” included past customers; the question was whether, so construed, the covenant was unreasonably wide.
28 The Plowman approach was followed in Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526 at 536, 537-8. However in Spafax (1965) Ltd v Dommett (1972) 116 Sol J 711 the Court of Appeal distinguished Plowman (which Lord Denning MR thought “went to the limit”) because the covenant was geographically too wide. Phillmore LJ said that the covenant was
“far too wide and hopelessly vague. ‘Customer’ was a very vague term. It would be difficult to draw the line between regular and other customers.”
29 The nature of a particular business is a critical circumstance in determining whether a given person is a “customer” in relation to that business. The more frequently transactions re-occur with the one person in the course of that business, the more significant will be an absence of dealings in pointing to a conclusion that a given person is no longer a customer. In the present case there is not a great deal of evidence on this point. Mr Watt did however say that he culled his Flocast customer list about every twelve months or so which suggests that in the ordinary course of that business any person who had not had dealings for a year or more would be considered a past customer rather than a customer.
30 However, with possibly one exception, there was no argument in the present case as to whether a particular firm identified in a disputed document was a past customer as distinct from a current customer. Rather Flocast submitted that “customer” in the Order included past customers. I do not think it did. In my opinion, the term “customer” in the context of the Order means someone who has actually dealt with Flocast sufficiently recently for the expectation of future dealings to form part of the goodwill of Flocast’s business.
31 Another relevant consideration is that the Order has to be looked at as a whole. Paragraph 17(c) of the Order contains an injunction against dealing in the course of trade or business with “any customer of the applicant”. “Customer of the applicant” must have the same meaning in par 17(c) as in par 1(e). It is an unlikely construction of an injunction that it would prevent dealings with anybody who had ever dealt with Flocast, however long ago.
32 By the same token, I do not think “customers of the applicant” includes potential customers, that is to say firms with whom Flocast has never dealt and are no more than hoped-for future customers. As to agents however, it does appear that an important feature of the way Flocast does business is that it often deals with agents, in some thirty countries around the world, who are a valuable source of business. I think in a realistic commercial sense such firms are “customers” notwithstanding that they do not buy goods as principal. To illustrate by analogy, a barristers’ clerk might well speak of a solicitor who regularly briefs counsel on the clerk’s list as a “customer”, notwithstanding that the clerk is remunerated not by the solicitor but by commission from the barristers’ fees.
“Tending to show involvement”
33 In the alternative, senior counsel for Flocast argued that whether or not a past or prospective customer or an agent was a customer for the purposes of par 1(e) documents relating to such persons fell within par 1(b) and/or 1(d) on the following basis. A document referring to such a firm being in the possession of Mr Purcell at the time of the execution of the Order would tend to show that, given his access to the books and records of Flocast prior to his termination of employment, he had obtained the fact of the existence of that firm prior to leaving Flocast. Given also the false reasons he and Ms Marc and Ms Hook gave for leaving Flocast and the almost immediate establishment of the Tiger Bronze business, the further inference would be open that Mr Purcell was involved in the establishment of a competing business prior to leaving Flocast’s employ. Such documents would therefore be relevant not only to the limited causes of action on which Flocast sought final judgment but to the case contained in the statement of claim which included breach of contract and breach of fiduciary duty.
34 I accept this argument. To fall within the terms of the Order a particular document does not have to be probative of Flocast’s case in the sense that production of that document would entitle Flocast to a finding on the issue in question. It is sufficient that the document might provide some evidentiary support for the conclusion that Mr Purcell was involved in the establishment of the business of Tiger Bronze prior to leaving Flocast’s employ. For example, it is theoretically possible that a document might tend to show such involvement but countervailing evidence might result in Flocast’s failure on that issue.
35 I have already found (39 IPR at 180) that Mr Purcell had complete access to all books and records of Flocast including its computer system and database. The evidence of Mr Watt was that to the best of his belief and knowledge, and he has had some twenty years in this industry, there are no relevant directories of purchasers or potential purchasers of continually cast products available either to the public or the trade. In opposition to the summary judgment application Mr Purcell swore a number of affidavits. In none of these did he suggest that in fact he discovered the identity of these firms by some independent action of his own after leaving Flocast. On the contrary, his case was that he was entitled to use Flocast’s information because it was not confidential and exclusive. He contended that the firms in question were not customers of Flocast and as such were not covered by the terms of the Order. I turn now to the categories of material already mentioned.
Items returned in June and July 1995
36 On 30 March 1995 Mr Purcell sent a fax to Freehills which stated:
“On behalf of Tiger Bronze Pty Ltd and myself I request you return to Lot 3 Bridge Inn Road Mernda all items seized during the raids that were conducted in the serving of the Anton Piller order. I request the return of all items that have no bearing on the case and return of all items seized.”
37 On 23 June 1995 Freehills sent to Mr Purcell’s then solicitors a number of disks under cover of a letter which stated that they had “now” had the opportunity to examine the disks in detail and believed they were not relevant to the proceedings. Further disks were sent with a similar letter on 26 July 1995. The disks in question contained computer games and music.
38 It was put on behalf of Flocast that if there was any default here it was not a matter of improper execution of the Order but rather a breach of the undertaking given by Ms Nicolson. I do not accept this argument. The undertaking cannot be excised from the setting in which it was given, namely entry under compulsion of law and taking away of material pursuant to the Order.
39 Then Flocast argued that Mr Purcell gave his consent. If, as is necessarily the case with the disks returned in June and July 1995, items are removed which turn out not to be within the terms of the Order, what is the effect, if any, of consent having been given? In Colombia Picture Scott J said (at 62-3):
“There is no doubt at all but that the form of this receipt … was designed by Hamlins to protect the firm against the charge that they had taken documents or articles not covered by the order. And the practice of the firm in taking not simply documents and things which could be seen to be covered by the order but to take also documents or things which further and subsequent investigation might, but might not, prove to be covered by the order, make the need for protection obvious. I have no hesitation in saying that I find this practice an objectionable one. Conceptually at least, the consent of the respondent to an Anton Piller order might protect the executing solicitors against a charge that things not covered by the order had been taken. But, given the nature of Anton Piller orders and the circumstances of surprise and shock which almost always attend their execution, there is a very real danger in allowing the executing solicitors to go outside the terms of the order in reliance on an alleged consent on the part of the respondent.”
His Honour went on as follows (at 77):
“… no material should, in my judgment, be taken from the respondent’s premises by the executing solicitors unless it is clearly covered by the terms of the order. In particular, I find it wholly unacceptable that a practice should have grown up whereby the respondent to the order is procured by the executing solicitors to give consent to additional material being removed. In view of the circumstances in which Anton Piller orders are customarily executed (the execution is often aptly called ‘a raid’), I would not, for my part, be prepared to accept that an apparent consent by a respondent had been freely and effectively given unless the respondent’s solicitor had been present to confirm and ensure that the consent was a free and informed one.”
40 In J C Techforce Pty Ltd v Pearce (1996) 138 ALR 522 Branson J faced a similar question. Execution of an Anton Piller order had taken place in what her Honour described (at 525) as a “highly charged atmosphere”. As with the present case, the order was made and executed as directed by Practice Note No 10 and an independent solicitor was present. A solicitor for the respondents attended for certain periods during the execution of the order but was not there throughout. The particular problem was that those executing the Order came upon items not covered by its terms but which were apparently the property of J C Techforce. After quoting and endorsing the foregoing passages from Colombia Picture her Honour said (at 526):
“Appropriate courses of action available to those executing the order on behalf of J C Techforce upon their discovery of such items included the following:
(a) the making of an immediate application to the court for an order allowing the removal from the premises of items the property of J C Techforce;
(b) contacting the solicitor for the purpose of either:
(i) negotiating through him the consent of the respondents to the removal from the premises of such items; or
(ii) inviting him to seek instructions to take such items into his custody, or to place them in neutral custody, until any disputes as to respective rights of the parties concerning such items could be resolved;
or
(c) the preparation of a list of such items to allow appropriate steps for the recovery of such items to be initiated at a later time.
The assertions by J C Techforce of ownership, and the immediate right to possession, of such documents, even in respect of documents as to which such assertions were uncontentious, did not of themselves give those executing the Anton Piller order on behalf of J C Techforce the right to use the occasion of their entry onto the premises in reliance on the order as an opportunity to seize such documents. Entry onto the premises of another gained by reason only of the compelling nature of an Anton Piller order is not, I consider, to be used for any purpose outside that fairly comprehended by the order itself. The only exception to this position which I am presently able to envisage is that which would arise were the respondents to the order to give a free consent to a departure from the strict terms of the order. Having regard to the exceptional nature of an Anton Piller order, the case will be rare, in my view, in which any consent to a course of conduct potentially adverse to it, given by a respondent which has not first obtained legal advice of its own, will be regarded by a court as having been freely given.
Having regard to the circumstances which prevailed at the premises on 20 December 1995, I am not satisfied that the respondents gave a free consent on that day to the removal from the premises of documents not covered by the terms of the Anton Piller order.
It follows from the above that I do not consider that the course actually adopted by those executing the Anton Piller order on behalf of J C Techforce was an appropriate one.”
41 The thrust of what both Scott J and Branson J say is that it is wrong to remove material not covered by an Anton Piller order unless there is free and informed consent by the defendant. I respectfully agree. But while legal advice from the defendant’s own solicitor is highly desirable, and the absence of such advice a relevant factor, I do not think the receipt of such advice is an essential pre-condition in law to a finding that such consent was free and informed. Branson J does not suggest that it is.
42 In the present case Mr Purcell did not have advice on this question from his own solicitor. Such advice as he received from Brendan occurred well before the question of the disks arose. But Mr Purcell did have the advice of Mr McPhail. Indeed it was Mr McPhail’s suggestion that Ms Nicolson take away the disks on an undertaking to return them within a reasonable time. Having read Mr McPhail’s careful and comprehensive report to the Court – the accuracy of which was not challenged by the parties – I am satisfied that he carried out his important and delicate task in a way that was fair to all concerned. The solution he proposed was a commonsense one. It is likely that a competent solicitor acting for Mr Purcell would have tendered the same advice. Theoretically Mr Purcell could have been advised to take a hard line and decline to release material not clearly within the terms of the Order. But in such event Freehills would no doubt have returned to Court and obtained a variation of the Order, perhaps one allowing them to take away the material subject to undertakings or to return to the house with a computer. All this would have involved affidavits, solicitors and counsel, probably with a four figure bill that even at that stage might be reasonably foreseeable as ultimately payable by Mr Purcell.
43 Further there is the circumstance that Mr Purcell indicated that in effect the contents of the disks were not of immediate importance to him.
44 I conclude therefore the taking of these disks was subject to a free and informed consent and did not breach the terms of the Order. But it necessarily follows that retention of disks not within the Order for more than the reasonable time stipulated in Ms Nicolson’s undertaking would be a breach.
What was a reasonable time?
45 There was no direct evidence as to how much time was taken to check the disks the subject of the undertaking. Even assuming that the task was confined to one person and not carried out continuously, it seems unlikely that more than a few days would be required, perhaps a week at the most. What was needed was not a detailed analysis but just a check to ensure that nothing relating to Flocast or its business or its customers was included on each disk. Making allowance for some time to set up arrangements for the overall task of analysis of all material taken from all premises, I think one month was, at the outside, a reasonable time to check the disks the subject of the undertaking and to return those found not to be within the terms of the Order.
46 What in fact was done emerges from affidavits sworn in 1995 by Mr McVicar. Previously Mr Purcell had sworn an affidavit in support of an application for a speedy trial. In that affidavit he complained that on the execution of the Order “the vast majority” of his business and personal records were seized and none had been returned and that Tiger Bronze could not carry on business. In response Mr McVicar deposed in an affidavit sworn on 21 February 1995 that many hundreds of written documents and almost 100 computer hard disks and floppy disks containing tens of thousands of pages of computer information were seized pursuant to the Order. He continued:
“Because of the sheer volume of the information seized and in particular the size of the computer records maintained on the hard and floppy disks, the applicant has not yet completed an analysis of all of those records. By way of example, merely going through, identifying and printing each of the files maintained on the hard disk of the computer removed from the premises of the thirdnamed respondent [Ms Hook] involved several hundred hours of solicitor time together with external consultant time. In the course of that exercise, several thousand pages of information were printed from that computer disk. That information which was retrieved and printed comprised a complete reproduction of part of the applicant’s confidential information including customer lists of the applicant, sales histories of the applicant’s customers and summaries of the applicant’s sales of particular products for particular years. Thus the task of analysing every single piece of computer information is a massive one and is still continuing.”
47 The first request that Mr Purcell made to Freehills for the return of information was, as already mentioned, a fax dated 7 March 1995. On 30 March 1995 Mr McVicar deposed:
“As a result of that facsimile our attentions have now turned to analysing the information received from Mr Purcell’s premises which include many dozens of floppy disks. For the reasons mentioned in my affidavit of 21 February 1995, and in particular the large amount of time required to analyse the information it has not yet been possible to identify the extent of the information, if any, contained on the various disks seized that is not relevant to these proceedings. However we are progressing this task as expeditiously as possible.”
48 Thus the root of the problem was that no attempt was made to attach any priority to examination of the disks the subject of Ms Nicolson’s undertaking. They were in a rather special position. It was recognised at the time of execution of the Order that at least some of them might well be totally free of material within the scope of the Order. Regardless of their intrinsic value, they were the property of Mr Purcell and if they were not within the Order there was no lawful basis on which they could be taken or retained. It was not until five months after the raid that Flocast’s solicitors even turned their minds to this task. I do not doubt Freehills had a vast amount of work to do, but they had to start somewhere and the disks in question stood on a different footing from all the other material. I find therefore that the material returned in June and July 1995 should have been returned by the end of November 1994.
Items returned in December 1997
49 Judgment in the summary judgment application was given on 19 September 1997. Under cover of a letter dated 10 December 1997 Freehills returned to Mr Purcell a number of items that were no longer required.
50 During the course of the hearing of the summary judgment application on 6 August 1997 Mr Purcell (who was then not represented) asked for the return of certain documents. At the request of senior counsel for Flocast I stood over that application so that the parties could attempt to reach agreement as to which items Flocast could retain and which it should return. As a consequence Freehills prepared a list of documents which were sent to Mr Purcell on 12 September. By a letter of that date Freehills offered to return to Mr Purcell certain documents identified in the accompanying list. On 23 September Mr Purcell, having examined the list of documents, accepted that offer. The only respect in which Mr Purcell departed from Freehills’ offer was that he requested the return of the three computer hard drives alleging that they contained private and personal information. The documents ultimately returned on 10 December were the documents set out in the list which accompanied Freehills letter of 12 September.
51 Counsel for the respondents accepts that the return of these items does not constitute an admission that they were wrongly taken under the Order.
52 The items returned were:
(i) Plans, drawings or diagrams of machinery or equipment suitable for use in the vertical continuous casting process.
(ii) General business documents.
The documents in (i) were within par 1(c) of the order and were properly taken.
53 The general business documents fall into two categories. The first category consists of documents passing between Tiger Bronze and firms who were not customers of Flocast but which documents contained references to firms which were. It is sufficient for present purposes if I identity those documents by reference to Flocast’s discovery. The documents in question were items 109, 110, 112, 294, 318 and 326. By way of example, these documents included a fax from the Singapore firm Lim Kok Kow to Tiger Bronze, material provided by the firm TSK Trading and facsimiles from the Indonesian Consulate and the Indonesian and Malaysian Trade Commissions. Flocast did not suggest that Lim Kok Kow or TSK Trading were its customers. However the documents referred to some firms which were Flocast customers such as Teck Huat Hardware Pte Limited and Seng Huat Hardware and Industry Pte Limited. These documents therefore related to customers of Flocast and were properly taken under par 1(e) of the Order.
54 The second category consists of documents which contain details of firms which were the subject of confidential files kept by Mr Watt in his personal office. The firms in question were either past or prospective customers, namely PT Boutraco Batramas, George Kent, PT Stilmetindo and Kuriyama Corporation. In my view these documents were within pars 1(b) and 1(d). There was no direct evidence that Mr Purcell removed or inspected copies of the files in Mr Watt’s office. But in the light of the evidence that he had general access to the books and records of the company and was obviously a trusted and senior employee and, as already mentioned, the circumstance that he has never suggested he acquired the knowledge of these firms through independent enquiries, these documents would tend to show involvement of the kind mentioned.
Items still retained
55 These include three computer hard drives, items 105, 255 and 295 in Flocast’s discovery. All these include material which contained information of the kind referred to in par 1(a), (b), (c), (d) or (e) (albeit that they contained other information) and are thus within par 1(f) of the Order. I should note that the computer hard drives include, amongst other things, details of Mr Purcell’s taxation and accounting clients. As a result of discussions between Mr Purcell and Freehills in 1997 he was provided with copies of the relevant directories of the computer hard drives so that he could identify the files he required.
56 Item 108 is a fax from Vette Industrial Sales to Tiger Bronze and item 324 is a manila folder containing correspondence between those two firms. Flocast had sold product to Vette in the early 1990s. Mr Watt had a confidential file in his office of correspondence relating to Vette and it appeared on Flocast’s list of customers. Mr Watt regarded Vette as a customer. Applying the construction that I have adopted, I think Vette was not, objectively speaking, a customer of Flocast; it was a past customer with whom it was hoped further dealings might take place. However it does fall within Flocast’s alternative argument as tending to show Mr Purcell’s involvement in a competing business prior to departure. Thus the documents were properly taken.
57 The remainder of these items at issue namely items 111, 112, 257, 258 (Mr Purcell’s 1994 diary), 291 and 292 (a bundle of purchase orders and eight invoices) were items which counsel for the respondents accepted were properly taken but contended could no longer be retained. For the reasons already mentioned no relief can be granted in the present motion in respect of such documents.
58 Item 252 (floppy disk 12B) includes, as well as Mr Purcell’s material, part of the backup of Flocast’s MANPAK system. It is therefore within par 1(f) and par 6 of the Order.
Orders
59 I will adjourn the further hearing of the motion to 8 August 2000 at 9.15 am for submissions as to the further course proceedings should take in the light of my findings that some disks were wrongly retained between late November 1994 and June and July 1995 but that otherwise there has been no breach of the Order. Costs will be reserved.
60 Finally I note that the respondents were represented by Mr Daryl Williams of counsel under the Court’s pro bono scheme. This was a substantial and difficult case. I record my appreciation for Mr Williams’ valuable assistance.
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I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. |
Associate:
Dated:
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Counsel for the Applicant: |
Dr C L Pannam QC and B N Caine |
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Solicitor for the Applicant: |
Phillips Fox |
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Counsel for the Respondents: |
D J Williams |
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Date of Hearing: |
17, 18, 19 July 2000 |
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Date of Judgment: |
1 August 2000 |
