FEDERAL COURT OF AUSTRALIA

Prime Creative Media Pty Ltd v Vranjkovic [2009] FCA 1030

PRIME CREATIVE MEDIA PTY LTD v ANA VRANJKOVIC and MOTORING MATTERS PTY LTD

VID 645 of 2009

RYAN J

14 SEPTEMBER 2009

MELBOURNE

UPON the applicant by its Counsel giving the usual undertaking as to damages THE COURT ORDERS THAT:

1.         The respondents and each of them be restrained until the final hearing and determination of the application or further order from, by themselves their servants or agents or howsoever otherwise, using for any purpose the lists of names, addresses (including email addresses) and telephone numbers appearing on the database or databases compiled by the first respondent in the course of her employment by the applicant which is or are referred to in paragraph 4 of her affidavit sworn 7 September 2009 and filed herein.

2.         There be a case management conference to be conducted by a Registrar of the Court at which there shall be considered, in addition to any other matter which the Registrar may think appropriate, the appointment of an independent expert to examine any computers in the possession or under the control of either of the respondents for the purpose of identifying any information held in or on any such computer which has been derived from the database or databases referred to in paragraph 1 of this Order and which reproduces information contained in the copy of the master database which is Exhibit “Confidential Exhibit JDM-1” to the affidavit of John Daniel Murphy sworn 3 September 2009 and filed herein.

3.         Liberty be reserved to any party to apply on not less that 48 hours’ notice in writing to each other party.

4.         The costs of each party of and incidental to the application for interlocutory relief herein, including the costs of the hearing on 8 September 2009, be costs in the cause.

Note:      Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                          Before the Court is an application for interlocutory relief which, in essence, seeks to restrain the respondents from making use of information contained in a database to canvass or solicit business from the persons listed in the database; and to restrain the respondents from making any copy of that database or its contents.

2                          The applicant, Prime Creative Media Pty Ltd (“Prime”) is a publisher and provider of marketing services in the commercial road transport industry. It publishes, amongst other organs, “Trailer Magazine” and derives income from selling advertising space in those organs, preparing graphic designs for websites, press releases and the like, and from selling subscriptions to its magazines. From 5 January 2004, the first respondent, Ms Vranjkovic, was employed by a predecessor company and then, apparently, by Prime, first as editor of what became “Trailer Magazine” and then as Manager of Marketing Services and Account Manager for “Trailer Magazine”. In the course of fulfilling her duties in those roles, Ms Vranjkovic compiled a database of “contacts” she had made in the course of her employment. The information in the database, it seems, was taken mainly from business cards which she had collected or from other information acquired in the course of her employment.

3                          The evidence also indicates that Prime has, over time, built up and maintained its own database, the “Prime master database”, a copy of which in electronic format was a confidential exhibit to the affidavit of John Daniel Murphy, the Managing Director of Prime, sworn on 4 September 2009. It contains more than a thousand names and contact details.

4                          On 12 September 2008, Ms Vranjkovic left Prime’s employ, having given notice on 2 September. There is some discrepancy in the affidavit evidence about the circumstances of her resignation, although it is not disputed that it was voluntary. In any case, Ms Vranjkovic then posted on line her curriculum vitae, which included some description of the tasks which she had performed whilst in Prime’s employ. After correspondence between Ms Vranjkovic and Mr Murphy, this document was edited and reduced in extent. Mr Murphy has deposed that, later;

[T]here was cause for me to be a little concerned shortly after [Ms Vranjkovic] had left [Prime]’s employ. I was contacted by several clients on my database informing me that she was contacting them… They informed me that [Ms Vranjkovic] had contacted them by email to say hello and that she was keeping in touch and doing some consulting and public relations work on her own…

He therefore, he says, became concerned that Ms Vranjkovic had retained a copy of the Prime master database in her possession, and that she was using it for her own purposes. So he wrote to her, so far as is relevant, in these terms;

Can I also please ask that any cd’s or hardcopies of email/email backup, editorial contacts and general databases that you may have please be returned… Despite your written assurance, I have been informed by several people last week informing me that you have contacted them wanting to catch up as well as informing them that you are offering “work in the PR / Freelance writing field”

Ms Vranjkovic did not specifically respond to Mr Murphy’s apparent concern that she then had in her possession a copy of the Prime master database.

5                          After working in several other positions, Ms Vranjkovic recently came to work as an employee or contractor for Motoring Matters Pty Ltd (“Motoring Matters”), the second respondent. Motoring Matters publishes a magazine, “PowerTorque Magazine”, which, like “Trailer Magazine”, is concerned with vehicles deployed in the commercial road transport industry. However, “PowerTorque Magazine” seems to be directed mainly to the operation of those vehicles whereas “Trailer Magazine” concentrates on vehicles and associated equipment available for purchase or lease by operators in that industry.

6                          The pivot on which the relief sought by Prime turns, Mr Murphy has deposed, is that;

I … believe that [Ms Vranjkovic] has taken one or more databases, including the master database, that is confidential information of the Applicant. I further believe she has disclosed the contents of that database or those databases to [Motoring Matters], which is using them to solicit clients or customers of the Applicant whose contact details appear on the database/s. I fear that advertising customers, subscription customer and marketing services customers will be lost to the Applicant as a result of the First Respondent’s disclosure of that confidential information to her new principal, [Motoring Matters].

Prime therefore seeks, as its application reveals, to pursue causes of action including those based on breaches of common law obligations of good faith and fidelity, breach of confidence, breach of the obligations imposed by ss 182 and 183 of the Corporations Act 2001 (Cth) (“the Corporations Act”), and contravention of unspecified provisions of the Copyright Act 1968 (Cth) (“the Copyright Act”).

7                          The major premise of Prime’s claim for interlocutory relief is that Prime’s master database contains information confidential to Prime and that Ms Vranjkovic ought be restrained from making use of that information. In support of that contention, Mr Millar of Counsel, who appeared for Prime, referred to what had been said by Gowans J in Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37, at 40, in relation to the distinction to be observed between information which an employee may legitimately carry over to his or her next employer, and information which will remain confidential even after the termination of a contract of employment, in the course of which the information has been acquired. His Honour said that;

… a distinction has to be maintained between information and knowledge acquired in confidence by an employee during his employment which he uses or discloses for his own advantage while he is still an employee, and information and knowledge so acquired which he uses for his own advantage after his employment is finished. A further distinction has to be drawn between information which forms part of the employee's stock of general knowledge, skill and experience, and that which should fairly be regarded as a separate part of the employee's stock of knowledge (whether it be identifiable as "particular" or "detailed" or "special") which a man of ordinary intelligence and honesty would regard as the property of the former employer.

The information in the Prime master database, Mr Millar said, is of the type identified by Gowans J as that which would ordinarily be regarded as the property of Prime. He then contended that Ms Vranjkovic’s use of that information to the advantage of Motoring Matters was contrary to Prime’s interests and, in itself, a breach of s 182 of the Corporations Act, and that Prime retained the copyright in the master database pursuant to s 35(6) of the Copyright Act.

8                          In advancing those submissions, Mr Millar drew an analogy between the circumstances of this case and those discussed by the Supreme Court of South Australia in N P Generations v Fenely (2001) 80 SASR 151. There, the Full Court of that Court was concerned with whether the respondent, who had taken with her, after the cessation of her employment, information about the business of the appellant real estate agent by which she had formerly been employed. She had later used that information to entice business from her former to her new employer. In the passage to which Mr Millar directed particular attention, Debelle J said (at 157) that:

… if a departing employee takes with her copies of a list of customers which were initially prepared for legitimate purposes, the departing employee has an obligation to return the copies to her former employer… It follows that, on ceasing her employment, she could no longer use her list of names and addresses.

9                          I was then referred to what is sometimes called the “springboard” principle: that is, that a party who has acted in breach of confidence or otherwise unconscionably to gain a “head-start” in a market or commercial activity will be placed at some form of disadvantage by the Court so as to eliminate the advantage which has been unconscionably achieved. This principle, so it was submitted, should be applied in such a way that, where some doubt attends the question of what advantage has actually been obtained or how the restraint to be imposed on the respondent ought to be framed, the Court should err in favour of making a “robust order to restrain an apparent wrong” rather than one which might operate too narrowly; see Wilson Parking Australia 1992 Pty Ltd v Rush [2008] FCA 1601 per Jessup J, at [53], and the authority his Honour there cites, Slevin v Associated Insurance Brokers of Australia (Qld) Pty Ltd (1996) 40 AILR 9-049; see also Roger Bullivant Ltd v Ellis [1987] ICR 464 at 474-5.

10                        The authorities, in my view, require a clear distinction to be drawn between a compilation of information made by an employee in the course of his or her employment, such as a list of customers or a rent roll, and another document in which the employee has recorded information which is part of that employee’s stock of general knowledge. That distinction was the basis of the different treatment accorded by the Full Court of the Supreme Court of South Australia in N P Generations Pty Ltd v Fenely (supra) to an address book containing, amongst other things, the addresses of landlords who had engaged the appellant real estate agent to manage their properties, and a work diary maintained by the same employee which, as Debelle J observed (at 159), could “provide the base for the preparation of a list of at least some of the appellant’s customers”.

11                        In respect of the address book, Debelle J, with whom Williams J and Wicks J agreed, observed at 157:

[19]     Thus, it is a breach of good faith and a breach of the equitable obligation to preserve the confidence of an employer if an employee, without the consent of her employer, discloses to persons outside the business information on the list of customers: Faccenda Chicken (at 135-136). Similarly, it is also a breach of good faith and a breach of the equitable obligation to preserve the confidence of an employer if an employee makes a copy of a list of customers of the employer for use after her employment ends (Robb v Green [1895] 2 QB 1; Wessex Dairies Ltd v Smith [1935] 2 KB 80; Faccenda Chicken Ltd v Fowler [1987] Ch 117 (at 136)), or deliberately memorises such a list for that purpose: Faccenda Chicken (at 136); Westminster Chemical NZ Ltd v McKinley [1973] 1 NZLR 659 at 665 per Speight J.

[20]     I think that the same principles must apply with equal force to a list of the employer's customers made by an employee legitimately for the purpose of performing the duties for which she has been engaged in those instances where the employee seeks to retain the list upon the termination of her employment. There is no sound reason why those principles should not apply. Be it a list of some or all of the customers, it is, nevertheless, a list of customers which is capable of being used by the former employee in a way which is unauthorised and which may cause loss or damage to the former employer. The obligation of conscience already mentioned has the necessary consequence that, if a departing employee takes with her copies of a list of customers which were initially prepared for legitimate purposes, the departing employee has an obligation to return the copies to her former employer. To hold otherwise would be to make it quite impossible for an employer to uphold the integrity of the customer list or of any other kind of confidential information. Applying those principles to the names and addresses on this rent roll, those names and addresses could be copied by the respondent into an address book for the purpose of assisting her in the management of the appellant's business but could not be used for any other purpose. It follows that, on ceasing her employment, she could no longer use her list of names and addresses. In other words, the list of names and addresses was confided to the respondent for a specific and limited use, namely, to enable her to manage the appellant's rental property business. Once her employment by the appellant ended, she could no longer use that list or any copy of it.

[21]     It seems that it is not necessary for a former employer to prove actual or apprehended detriment in order to recover a list of customers: Dunford & Elliott Ltd v Johnson & Firth Brown Ltd [1978] FSR 143 at 148; Ohio Oil Co v Sharp 135 F 2d 303 (1943); Attorney-General v Observer Ltd [1990] AC 109 at 256, 270 and 282. In Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 50-51, reliance was placed on the views of Megarry J in Coco v A N Clark (Engineers) Ltd (at 41) which stated that detriment was a necessary requirement to enforce an obligation of confidence. But, as Lord Denning MR pointed out in Dunford & Elliott Ltd v Johnson & Firth Brown Ltd (at 148), Megarry J questioned whether detriment was essential. It is plain that the retention of the list on ceasing employment arms the former employee with a capacity to use the list to the prejudice of the person who gave it without obtaining consent: cf Seager v Copydex (at 931). When customers or clients are approached by the former employee, the former employer will never be able to prove whether the list was used or not. The decision in Commonwealth v John Fairfax & Sons Ltd may, therefore, have to be reviewed. But it is unnecessary to stay with this question as, in this case, the appellant can point to detriment or potential detriment in that the respondent has admitted using the list for the purpose of approaching at least two of the eight landlords first contacted and for the purpose of approaching about one-third of the second group of landlords.

[22]     Given that the address book was compiled from the appellant's records for use in its business, the respondent was obliged to deliver up the address book once her employment had been terminated. The fact that the book contained about 30 entries of a personal nature did not relieve her of that obligation. Obviously, the respondent should have been given an opportunity to make a copy of the personal entries, if she wished to do so.

12                        By contrast, Debelle J observed at 159 in respect of the diary at issue that:

[28]     The diary is clearly a record kept by the respondent in the course of her employment and for the purpose of that employment. It could be used to assist in the preparation of a list of some but not all of the rental properties and the names of some of the landlords. In that sense, it does contain some confidential information which also appears in the rent roll. However, the information is not compiled from the rent roll. Instead, the entries in the diary are made as a consequence of telephone calls or other requests to the respondent which caused her to note an appointment to see a landlord or to visit or inspect a landlord's property. It is equally clear that the respondent would have to undertake a considerable degree of other work to ascertain the addresses of the landlords and their telephone numbers. The diary also includes other information which is not confidential. Furthermore, the respondent was under no obligation of confidence in relation to the diary. The appellant had not required that it be confidential. It includes information which could be fairly described as part of the respondent's general knowledge, skill and experience. These latter factors point to the conclusion that the diary is not confidential information and, in my view, those latter factors prevail over the other factors I have identified. For these reasons, I do not think that the diary constitutes confidential information.

13                        Although the evidence does not disclose that Prime expressly required that the information in the database compiled by Ms Vranjkovic be confidential, I consider that the preferable inference from the evidence as it currently stands is that the information in her database was to be treated in that way. That being so, it does not matter that means of contact, including postal and email addresses and telephone numbers of actual or prospective advertisers in Prime’s publications could be ascertained, without a great deal of additional work, from other sources such as Prime’s publication themselves, the “Yellow Pages” telephone directories and other organs circulating in the commercial road transport industry. The critical question for present purposes is how the Court should formulate a restraint (if any) which prevents the respondents from improperly using the database compiled by Ms Vranjkovic during her employment by Prime, but which does not prevent her or Motoring Matters from using her general stock of knowledge including a compilation of information derived from details of potential advertisers appearing in Prime’s publications or from other available legitimate sources, and canvassing or soliciting business from persons and entities on such a list.

14                        Interlocutory protection should only be extended to the information on the database which Ms Vranjkovic took with her after she resigned from Prime, and only while it remains in that form, because it is only that information which imports the necessary element of confidentiality explained, for example, in Smith Klyne & French Laboratories (Aust) Limited v Secretary, Department of Community Services and Health (1990) 22 FCR 73 per Gummow J, at 87, and Dais Studio Pty Ltd v Bullet Creative Pty Ltd (2007) 165 FCR 92 at 112-3.

15                        In arguing against the information possessed by Ms Vranjkovic having the necessary quality of confidentiality, Mr W Gillies of Counsel for the respondents referred me to this passage from the observations of Goulding J in Faccenda Chicken Ltd v Fowler [1987] Ch 117, at 133 (and endorsed by Dodds-Streeton J in I F Asia Pacific Pty Ltd v Galbally (2003) 59 IPR 43, at 80-1);

First there is information which, because of its trivial character or its easy accessibility from public sources of information, cannot be regarded by reasonable persons or by the law as confidential at all. The servant is at liberty to impart it during his service or afterwards to anyone he pleases, even his master's competitor. An example might be a published patent specification well known to people in the industry concerned…Second, there is information which the servant must treat as confidential, either because he is expressly told it is confidential, or because from its character it obviously is so, but which once learned necessarily remains in the servant's head and becomes part of his own skill and knowledge applied in the course of his master's business. So long as the employment continues, he cannot otherwise use or disclose such information without infidelity and therefore breach of contract. But when he is no longer in the same service, the law allows him to use his full skill and knowledge for his own benefit in competition with his former master…

Those observations, Mr Gillies submitted, are equally applicable to the information at issue here, which is easily accessible from publicly-available sources and would not be regarded as confidential in the relevant sense. However, I regard the subject information as deriving its confidentiality, not from any secrecy surrounding its bringing into existence, but its presence on a conveniently-arranged list which was not readily accessible to persons other than Ms Vranjkovic and other employees of Prime in their capacity as such employees. In this sense, the information is similar to that contained in the address book discussed in N P Generations v Fenely, as to which Debelle J held that the former employee, once her employment had ended, “could no longer use that list or any copy of it”.

16                        I therefore consider it appropriate to order that the respondents be restrained, pending the hearing and determination of the application herein, from using for any purpose the list of names, addresses (including email addresses) and telephone numbers appearing on the database or databases complied by the first respondent in the course of her employment by the applicant which are referred to in paragraph 4 of her affidavit sworn 7 September 2009.

17                        On the basis of the necessarily limited information which I have about the matter, it occurs to me that an appropriate form of final relief may be an order requiring the delivery up of deletion from the hard-drive of any computer possessed by either respondent of data downloaded or derived from the database or databases referred to at [2] of these reasons. Against the possibility of such final relief being appropriate or to assist in the formulation of further interlocutory relief, I shall direct that there be a case management conference to be conducted by a Registrar of the Court at which there shall be considered, in addition to any other matter which the Registrar may think necessary, the appointment of an independent expert to examine any computers in the possession or under the control of either of the respondents, for the purpose of identifying any information held in or on any such computer which has been derived from the database or databases referred to at [2] of these reasons and which reproduces information contained in the copy of the Prime master database which is exhibit “Confidential Exhibit JDM-1” to Mr Murphy’s affidavit filed herein.

18                        I shall reserve liberty to apply and order that the costs of all parties of and incidental to the application for interlocutory relief be costs in the cause.  

Associate:

Dated:         14 September 2009