FEDERAL COURT OF AUSTRALIA

EBOS Group Pty Ltd v Team Medical Supplies Pty Ltd (No 2) [2011] FCA 1004

THE COURT ORDERS THAT:

1.    The oral application made today by the first and second respondents to set aside the ex parte orders made on 1 August 2011 be dismissed.

2.    The applicants’ costs of the oral application made today by the first and second respondents to set aside the ex parte orders made on 1 August 2011 be the applicants’ costs in the proceedings.     

3.    The applicants pay the respondents’ costs thrown away by reason of the failure of the applicants to serve the written submissions placed before Flick J on 1 August 2011 at the time of service of the originating process.

4.    The documents identified in notation 6 not be inspected by any person, other than the respondent who produced them, without leave of a judge or until further order.

5.    Leave be granted to the parties to liaise with the associate to Katzmann J to arrange a time for further directions.     

THE COURT NOTES THAT:

6.    In answer to paragraph 1(a) in the originating application, the following documents are produced today to the Court:

(a)    by the first and second respondents: DVDs containing documents from the second respondent’s time as an employee of Vital Medical and some other pamphlet information;

(b)    by the third respondent: six volumes of documents.

THE COURT DIRECTS THAT:

7.    The parties bring in short minutes of order to record the interlocutory regime agreed between them.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    These proceedings were commenced ex parte on 1 August 2011 before the duty judge, Flick J, by an originating application in which the applicants (EBOS) sought an order for preliminary discovery. His Honour had the benefit of submissions made by counsel for EBOS both orally and in writing. The written submissions extended over 15 pages and sought to distil the nature of EBOS’ claims for ex parte relief in the nature of a search order, previously known as an Anton Piller order, requiring production by the respondents of a significant amount of their business information.

The nature of the proceedings

2    The evidence in support of the application consisted of two substantial affidavits. One was affirmed by a computer expert who had examined computers used by the employees of EBOS’ businesses for the purposes of ascertaining whether there was a basis for them to believe that former employees of theirs, including Marijke Vriens and a former manager of EBOS, Pieter Vriens, the second and third prospective respondents, had taken confidential information from EBOS, including customer and supplier lists, prior to their ceasing employment, which assisted them to establish Team Medical Supplies Pty Ltd (Team), the first respondent, and its related businesses.

3    Flick J granted limited ex parte relief for reasons that he outlined in EBOS Group Pty Ltd v Team Medical Supplies Pty Ltd [2011] FCA 862. His Honour was careful to indicate that documents falling within four particular categories identified in the originating application were to be produced initially to the Court and that no inspection of them was to be sought until the prospective respondents had been given the opportunity to be heard: see EBOS Group [2011] FCA 862 at [28]. When the matter was returned before his Honour on 4 August, it appeared that EBOS had not provided the respondents with the detailed written submissions that they had asked his Honour to act on in seeking the ex parte relief. Counsel for Team and Marijke Vriens told his Honour that his clients had done all that they could to comply with the orders, given the time allowed and their width. His Honour also sought to be able to preserve the respondents’ right to seek to apply to set aside the ex parte orders on a later occasion, which they have sought to do today.

4    In the event, a number of documents were produced by the respondents to the Court and they did not object to EBOS being allowed to inspect them. I have been informed that inspection of those documents has taken place. Other documents were either not produced or not the subject of leave to inspect. And, his Honour made orders that extended the time for compliance with the order made on 1 August 2011 for production of documents to this morning.

5    The material before Flick J on 1 August identified that EBOS had two substantive matters that they wished to pursue. The first, for which EBOS did not seek preliminary discovery, involved a claim that the respondents had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law. The second, was a claim for orders for preliminary discovery under Div 7.3 of the Federal Court Rules 2011 (Cth) in order for EBOS to be able to determine whether their suspicions that confidential information had been taken by the respondents or those associated with them were well-founded or that any of those persons had acted in breach of fiduciary duties owed to EBOS as employees. The subject of the present dispute involves documents that relate to the second claim made by EBOS against the respondents.

6    Marijke Vriens swore an affidavit on 9 August 2011 in which she said that she had left the employ of one of the EBOS parties on or about 29 September 2010. She said that for about 10 years before that, she had been involved in the preparation of marketing brochures for its business. She also said that after finishing her employment, she engaged in an education course involving web design and commenced discussions with another business, called Warner & Webster Pty Limited, that competed with her former employer. Marijke Vriens said that those associated with Team apparently came to a commercial arrangement under which Webster & Warner provided her with a database of medical product suppliers. She said that she had relied on commercially available databases supplied to her by her partners and had engaged a mail order marketing company for the purpose of sending out Team’s first catalogue to prospective customers. She denied copying any of EBOS’ databases before she left but asserted that she had made copies of her photos, iTunes files and old emails from her family and her contacts from the laptop computer that she used. Marijke Vriens said and that she had found difficulty in opening accounts with some suppliers on behalf of Team after they had been contacted by EBOS.

7    Marijke Vriens also said that EBOS had announced to their staff in about July or August 2010, that they wished to move their offices from their current location at Dural to Kingsgrove, another location in Sydney. She asserted that most staff did not want to make that move. She deposed that Team negotiated a lease of the premises formerly occupied by EBOS at Dural and that Team wished to conduct its business distributing medicines from those premises.

The ex parte hearing on 1 August 2011

8    During the course of the application to Flick J for ex parte relief on 1 August, some attention was focussed on the copying from Marijke Vriens’ computer of a large amount of information shortly before she ceased to be an employee. His Honour identified that issue, which was raised in the forensic computer expert’s affidavit, in his reasons. It is apparent that Marijke Vriens’ evidence today seeks to address and allay the issues raised in that regard.

9    Senior counsel for EBOS acceded to a suggestion made by Flick J that he would proceed on the basis of what was set out in the affidavits themselves without his having recourse to the exhibits. He was assured by senior counsel that that was a safe way to proceed, with one exception that he then explained by taking his Honour to an exhibit to one of those affidavits. That exhibit comprised a private investigator’s report in respect of surveillance activities that EBOS had arranged to be undertaken in respect of various persons, including Pieter Vriens and his family. Senior counsel took his Honour to, and invited him to read, an entry in a report of the investigation of 6 July 2011 which extended over two pages. This entry asserted that, in effect, the investigators had been confronted by Pieter Vriens’ wife (Mrs Vriens), who is not the second respondent, who accused them of following her and her husband for the previous two weeks. Although senior counsel did not expressly read out to his Honour what appeared on the top of the second page of those two pages, the investigators recorded there that Mrs Vriens’ told them that she had gone to the police station and told the police that she and her husband were being followed, to which the investigator’s reply was “You have the wrong people ma’am”. A little further down that page the investigator repeated that assertion saying: “You must have the wrong person”. Senior counsel contended to his Honour that this incident was akin to a trap purchase.

The application to discharge the existing orders

10    Team and Marijke Vriens asked that I discharge the orders made on 1 August 2011 by Flick J for production of documents on the following bases. First, they argued that the requirements of r 7.23(1)(b) could not have been satisfied since EBOS had told his Honour that they already intended to proceed with claims under the Australian Consumer Law. Secondly, they contended that when his Honour’s attention was drawn to the events recorded in the investigator’s report of 6 July his Honour was not properly alerted to the fact that Pieter Vriens and his wife had felt so concerned about being followed that they had taken their complaint to the police. Thirdly, they submitted that in light of Marijke Vriens’ affidavit, there was not a sufficient basis to justify the making of the orders. Team and Marijke Vriens also argued that it was necessary for a person seeking ex parte orders to disclose to the Court “anything of significance”, citing an observation made by Burchett J in Paxus Services Limited v People Bank Pty Limited (1990) 99 ALR 723 at 732. There, his Honour observed that not all correspondence had been placed before him when he had made ex parte orders for production of documents in aid of an application for preliminary discovery. However, his Honour said:

“… what was disclosed plainly revealed that there were other letters to which reference was made. I do not think anything of significance was omitted.”

11    Team and Marijke Vriens argued that by not taking Flick J directly to a matter of significance, namely, the passage in the investigator’s report recording Mrs Vriens’ complaint to the police and her communication of it to the investigator, EBOS failed to draw a matter of significance to his Honour’s attention and that this was sufficient to entitle them to the discharge of the ex parte orders.

Consideration

12    I reject those arguments. An applicant for an ex parte order before a Court must comply with a high standard of candour and responsibility. It is an ordinary incident of the administration of justice that no person should have orders made against them by the Court when they have not been given an opportunity to be heard in their own defence. However, as Isaacs J said in Thomas A. Edison Limited v Bullock (1912) 15 CLR 679 at 681-682, instances occur where justice cannot be done unless the subject matter of the suit is preserved and if there is a danger of destruction by one party or irremediable or serious damage is imminent, the other party may come to Court and ask for its interposition, even in the absence of an opponent, on the ground that delay would involve greater injustice than instant action. But, as his Honour pointed out, when that occurs, the usual requirement of hearing the other side cannot occur and the party seeking the order incurs what he called “a most serious responsibility”.

13    In such a case, it is the duty of a party asking for ex parte relief to bring to the notice of the Court all facts material to the determination of the right to that relief, and it is no excuse for a failure to do so, to say that he or she was unaware of the importance of the facts. The utmost good faith, or uberrima fides, is required and a party who induces the Court to act in the absence of the other party, fails in that obligation unless he or she brings forward all the material facts which the absent party would presumably have brought forward in its defence to the application. These principles were applied by Mahoney A-P with whom Clarke JA agreed in Garrard (trading as Arthur Anderson and Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 676B-677F.

14    In my opinion, EBOS drew to Flick J’s attention the whole of the passage relied on by Team and Marijke Vriens. Indeed, the very passage which set out the investigator’s assertion that Mrs Vriens must have had the wrong person, was preceded by her assertion to the investigator that she had been to the police station. EBOS discharged their obligation to bring to his Honour’s attention all facts material to the determination of their right to ex parte relief in this respect.

15    The other grounds for the application to set aside the ex parte orders should also be rejected. The first elided the distinction between the cause of action based on the statutory norm of conduct established by s 18 of the Australian Consumer Law, for which EBOS did not seek orders for preliminary discovery, and their uncertainty as to whether or not they had sufficient information for the purposes of r 7.23, after making reasonable inquiries, to decide whether to commence proceedings in this Court to obtain relief in respect of their suspicions concerning the possible use of confidential information and breaches by their former employees of their fiduciary duties. Rule 7.23(1) provides:

“7.23     Discovery from prospective respondent

(1)    A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant:

(a)    reasonably believes that he or she may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and

(b)    after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

(c)    reasonably believes that:

(i)    the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and

(ii)    inspection of the documents by the prospective applicant would assist in making the decision.”

(emphasis added)

16    When r 7.23(1)(b) refers to “that relief” it is referring back to the particular relief referred to in sub-rule (a). EBOS had not asserted that they had insufficient material to commence proceedings based on their allegations of misleading or deceptive conduct engaged in by Team and its associates. To the contrary, they told his Honour that they had sufficient material to commence proceedings for contravention of s 18. Rather, EBOS distinguished the basis on which they propounded that claim from what they asserted they required in order to be able to decide whether to commence proceedings to obtain other relief in respect of the suspicions that they entertained concerning misuse of confidential information and breaches of fiduciary duty.

17    The reliance on Marijke Vriens’ affidavit today to discharge the ex parte orders is also misconceived. That affidavit may or may not consist of evidence that is relevant to the ultimate exercise by the docket judge of her discretion to grant final relief on an application for preliminary discovery under Div 7.3 of the Rules. However, it provides an insufficient foundation to justify setting aside the ex parte orders for production of the documents to the Court that were made by Flick J on 1 August. Those orders simply sought to preserve the subject matter so that if the docket judge ultimately determines that preliminary discovery ought be granted, documents within the categories of documents ordered to be produced on 1 August 2011 will be available to be inspected. Team and Marijke Vriens accepted that no order should now be made in respect of the documents that they permitted be inspected by EBOS.

18    In my opinion, none of the three grounds on which the Team or Marijke Vriens sought that the ex parte orders for production of documents be set aside are sufficient either alone, or in combination, to warrant that relief being granted. I reject the oral application.

Associate:

Dated:    29 August 2011