FEDERAL COURT OF AUSTRALIA

Reeve v Aqualast Pty Ltd [2012] FCA 679

THE COURT ORDERS THAT:

1.    The parties are to provide within seven days an agreed form of orders giving effect to these reasons.

2.    In the absence of agreement between the parties on the form of the orders for discovery and on the question of costs, the parties are to provide within 14 days drafts of the orders they seek supported by short written submissions which are not to exceed three pages in length.

Note:    Settlement and entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The prospective applicant, Mr Reeve, seeks preliminary discovery from the prospective respondents by reference to 14 categories of documents.

2    The prospective respondents fall into two broad groups. The first group includes the first, second, third and fifth prospective respondents which are companies associated with the ninth prospective respondent, Mr Joseph. The second group includes the fourth, sixth, seventh and eighth prospective respondents which are companies associated with the tenth prospective respondent, Mr Nikolovski. These groups were separately represented at the hearing of Mr Reeve’s application.

3    For the reasons which follow, the application should be allowed in part.

Background

4    It is necessary at the outset to say something about the somewhat complex history of the relationship between the parties, particularly Mr Reeve, Mr Joseph and Mr Nikolovski. That relationship concerns, essentially, their involvement in the business of manufacturing paint products using a binding ingredient referred to in the paint industry by the descriptions “kick-start”, “millbase” and a variety of other descriptions. It seems that there are a number of such ingredients available for use in the manufacture of paint products. For ease of exposition I will refer to the particular binding ingredient, the subject of the present controversy, as “Millbase”.

5    Mr Reeve claims that the formulation and the method of preparation of Millbase (the Millbase information) is a trade secret constituting confidential information that can be protected at his suit. From the account that follows, it will be apparent that there is a significant dispute between the parties concerning Mr Reeve’s “title” to this information.

6    Mr Reeve says that he acquired the intellectual property rights with respect to the Millbase information from a company in South Africa called Self-Coat Zero VOC Technology Pty Ltd (SCZVT) through his dealings with Andre Moss and Jacques du Buison, who were directors of that company. Mr Reeve has advanced a particular document, dated 9 September 2009, under which he claims to have acquired ownership of that information. It is apparent from certain handwritten notations on the document that others, including Donald du Preez, to whom I will later refer, had or might have had knowledge of the Millbase information, or some part of it, at that time.

7    Mr Reeve is, and was at the time of the events to which I will refer, a resident of the United Kingdom. He says that he is the sole director of, and shareholder in, a United Kingdom company called Self-Coat London Ltd which has for some years carried on business selling and distributing a range of paint products that include Millbase as an ingredient.

8    On 23 September 2009 Mr Reeve executed Heads of Agreement, to which Mr Joseph and the third prospective respondent, Ultralast International Pty Ltd (Ultralast International), were also parties. Ultralast International was identified in the Heads of Agreement as carrying on the business of manufacturing and marketing “Paint & related products” and “Wood Preservative & related products”. Mr Joseph was identified as a director of, and shareholder in, that company.

9    The Heads of Agreement recorded the following matters (amongst other things):

(a)    Mr Reeve and Mr Joseph had agreed to set up a company, Aqualast Pty Ltd (Aqualast), the first prospective respondent, in which they would be officeholders and equal shareholders. Aqualast would hold “Intellectual Properties” to be contributed by Mr Reeve and Mr Joseph.

(b)    Mr Reeve and Mr Joseph had agreed to set up a company, Ultralast Manufacturing Pty Ltd (Ultralast Manufacturing), the second prospective respondent, in which they would be officeholders and equal shareholders. Ultralast Manufacturing would manufacture and market Millbase.

(c)    Certain intellectual property rights (the identity of which is obscure) and Millbase would be sold to individuals and companies on terms and conditions to be agreed by Mr Reeve and Mr Joseph. The income from these activities would be divided and used as set out in the Heads of Agreement.

(d)    The shareholding in Ultralast International would be restructured with Mr Reeve and Mr Joseph each holding 30% of the issued shares, with the balance of the shares being held by certain other identified individuals.

(e)    Mr Reeve and Mr Joseph would each be an officeholder in Ultralast International, along with certain other identified individuals.

10    Following this, the three companies (the Ultralast group) began to manufacture, distribute and sell a range of paint products under various brand names adopting the “Ultra” prefix, in which Millbase was used as an ingredient (the Ultralast products). Mr Reeve had a number of roles in the group. One role was to manufacture Millbase to be used in the Ultralast products. Mr Reeve’s evidence was that he was the only person who had knowledge of the Millbase information.

11    In the period from approximately October 2009 to January 2010 discussions took place between Mr Joseph, Mr Reeve and Mr Nikolovski concerning the prospect that Mr Nikolovski and his associates might take over the sale and distribution of the Ultralast products in Australia.

12    On 27 January 2010 Looklasts Pty Ltd (Looklasts), a company in which Mr Nikolovski and his associates held shares, entered into a Distribution Agreement with Ultralast International and Aqualast under which Looklasts was granted the exclusive rights “to sell, promote, distribute and market” the Ultralast products in Australia (the Distribution Agreement).

13    On 23 March 2010 Looklasts changed its name to Ultralast Australia Pty Ltd (Ultralast Australia).

14    In around June or July 2010 discussions took place between Mr Nikolovski, Mr Joseph and Mr Reeve concerning the prospect that Mr Nikolovski and his associates might also acquire the manufacturing rights for the Ultralast products. In his affidavit evidence Mr Nikolovski said that his motivation for entering into these discussions was his belief that there were inconsistencies and defects in the products being supplied by the Ultralast group to Ultralast Australia, which may have been attributable to out-of-date and poorly functioning plant and equipment used by the group. He said that he and his associates had the capital to improve the manufacturing plant and to purchase new and modern equipment.

15    Ultralast Holdings Pty Ltd (Ultralast Holdings), the fourth prospective respondent, was incorporated on 1 September 2010. Each of Mr Reeve, Ultralast International and MTJ Holdings Pty Ltd was allotted a 5% shareholding in the company.

16    On 11 November 2010 each of the companies in the Ultralast group and Ultralast Holdings (together, the new Ultralast group) entered into a Sale of Manufacturing, Distribution and Sales Rights Agreement (the MDS Agreement). The MDS Agreement recorded the following matters:

(a)    It was agreed that the Distribution Agreement would be terminated.

(b)    Aqualast and Ultralast Manufacturing appointed Ultralast Holdings to be the sole and exclusive distributor for Australia and New Zealand of certain combined products, including the Ultralast products (the combined products).

(c)    Aqualast and Ultralast Manufacturing granted Ultralast Holdings exclusive manufacturing rights in respect of the Ultralast products and the licence to use certain intellectual property rights.

(d)    Ultralast Holdings agreed to pay Ultralast Manufacturing a licence fee.

(e)    Ultralast Manufacturing would continue to manufacture Millbase.

(f)    Aqualast warranted that it had the right to grant the use of the intellectual property rights to Ultralast Holdings and that the granting of those rights would not infringe the intellectual property rights of any third party.

17    Although the MDS Agreement was entered into on 11 November 2010, Ultralast Holdings did not commence to manufacture under that agreement until approximately May 2011.

18    In his affidavit Mr Nikolovski said that in early 2011 he had formed the view that Mr Reeve “had lost interest in the business”. He gave reasons for this view. It is not necessary to go into those reasons for the purpose of determining the present application. Mr Reeve said that he discussed the matter with Mr Joseph. He told Mr Joseph that he and his associates would consider purchasing Mr Reeve’s shares in the companies in the new Ultralast group.

19    Mr Joseph subsequently informed Mr Nikolovski that Mr Reeve was not willing to sell his shares to Mr Nikolovski but would sell them to him (Mr Joseph). Mr Joseph said that he would then be able to sell them to Mr Nikolovski, if he chose to do so.

20    On 3 April 2011 Mr Reeve entered into an option agreement under which he granted an option to sell his shares in the companies in the new Ultralast group to Mr Joseph and MTJ Holdings Pty Ltd (MTJ Holdings) as trustee for the MTJ Family Trust. The option period was specified as 12 months from the date of the agreement. At the date of hearing the present application, that option had not been exercised. On 3 April 2011 Mr Reeve also resigned as a director of each of the companies, as he was required to do under cl 3.1(a)(i) of the option agreement. Under the option agreement Mr Reeve was still required to provide Millbase, as well as technical services, advice and assistance to the new Ultralast group.

21    In the meantime, on 8 April 2011, Mr Joseph and MTJ Holdings entered into an option agreement with Mr Nikolovski. It seems that, effectively, Mr Nikolovski was granted an option under that agreement to purchase the shares which Mr Joseph and MTJ Holdings would acquire under their agreement with Mr Reeve, if the option in that agreement were to be exercised.

22    From that time at least, the relationship between Mr Reeve, Mr Joseph and Mr Nikolovski began to sour.

23    In his affidavit Mr Reeve said that, following a request from Mr Joseph, he flew to Australia in early May 2011 for the purpose of preparing Millbase. He said that, since that time he has not been asked to prepare, and has not prepared, any more Millbase; nor has he been asked to provide technical services, advice or assistance to the companies in the new Ultralast group.

24     Moreover, a number of new companies have been incorporated, including Alphalast Global Pty Ltd (Alphalast Global), the seventh prospective respondent, Eco GlobalGen Pty Ltd (EGG), the eighth prospective respondent, and Nuecogen Pty Ltd (Nuecogen). Nuecogen is a substantial shareholder in Alphalast Global and EGG.

25    On 21 December 2011 Mr du Preez was appointed a director of Alphalast Global and EGG. He is also a director and shareholder in Nuecogen.

26    Mr Nikolovski is a director of Nuecogen. The evidence indicates that he also has an indirect interest in the ownership of shares in that company.

27    Also, on 21 December 2011, Ultralast Australia changed its name to Alphalast Pty Ltd (Alphalast), the sixth prospective respondent. Mr Nikolovski is a director of Alphalast. The evidence indicates that he has an indirect interest in the ownership of shares in that company.

28    I will discuss the significance of the incorporation of these companies later.

29    Mr Nikolovski said that ever since the MDS Agreement was entered into he has been concerned to ensure that the intellectual property associated with Millbase has in fact been transferred to Aqualast. It is his position that, in entering into the MDS Agreement, the other parties thereto represented that Aqualast was the owner of the intellectual property used by Ultralast Manufacturing to manufacture the Ultralast products. There is certainly a recital to that effect in the MDS Agreement. However, that recital refers to “Intellectual Property” which is specifically defined so as to exclude the “KS Recipe”. The “KS Recipe” is defined as the ingredients and method required to produce “the KS”. “The KS” is defined as “Kick Start, the key ingredient used in the production of the Ultralast products”. My understanding of the evidence is that the “KS Recipe” in fact refers to the formulation and method of preparation of Millbase.

30    It is not necessary, of course, for me to resolve the questions of what precise representations were made in this regard. Similarly, it is not necessary for me to determine the proper construction of the MDS Agreement. That agreement did, however, contain a number of express representations and warranties by the companies in the Ultralast group which were given to Ultralast Holdings and another. Relevantly the representations and warranties were to the following effect:

(a)    There are no existing challenges to any of their right, title or interest in any of the intellectual property or the KS Recipe.

(b)    Their use of the intellectual property and the KS Recipe does not breach the rights of any other person and no claims, disputes, suits or other actions have been asserted challenging their use of the intellectual property or the KS Recipe.

(c)    They are not aware of any use by any other corporation or person of any of the intellectual property or the KS Recipe.

(d)    The KS Recipe is known only by Mr Joseph and Mr Reeve and has not been disclosed in any way whatsoever, whether in part or in full, to any other person or entity.

31    Mr Nikolovski’s evidence was that he had been provided with a copy of the document under which Mr Reeve claimed to have acquired ownership of the Millbase information but not with evidence that those rights had been transferred to Aqualast.

32    Mr Nikolovski said that it subsequently came to his attention “that there were a number of products available and manufactured by other companies essentially the same in performance and durability as those manufactured by the new Ultralast [g]roup”. He said that this was a matter of concern for him at the time because, according to his state of mind, Mr Reeve and Mr Joseph had represented to him that:

(a)    the products of the Ultralast group were superior to and like no other on the market because of the superiority of the Millbase formula that had been used;

(b)    the Millbase formula was secret and known only to Mr Reeve and Mr Joseph; and

(c)    the Millbase formula could not be copied or reverse-engineered.

33    Mr Nikolovski said that he sought to raise this matter with Mr Reeve and with Mr Joseph. He said that Mr Reeve provided no constructive or valuable response, but that Mr Joseph told him that he (Mr Joseph) did not know the Millbase formula and that Mr Reeve “never offered to share the formula with him so as to ensure that it was never leaked and that it remained protected”. That evidence is consistent with Mr Reeve’s own evidence that he was the only person who had knowledge of the Millbase information.

34    Mr Nikolovski subsequently undertook further investigations concerning ownership of the Millbase information. This was because, according to him, the Millbase information was the most valuable asset of the Ultralast group in which he and his associates had invested substantial time and money. He said that, without the Millbase information, the business of the new Ultralast group was practically worthless, especially if others had access to and use of that information.

35    As a result of his investigations Mr Nikolovski discovered a number of other versions of the agreement under which Mr Reeve said he had acquired ownership of the Millbase information. These versions are in evidence. It is enough for me to say that the existence of these other documents throws into doubt the authenticity of the document advanced by Mr Reeve and thus the rights he claims to have acquired based on that document. Mr Nikolovski adduced other evidence to challenge the existence of the rights claimed by Mr Reeve. There is some evidence, for example, that others claim that they own the Millbase information and that Mr Reeve has no entitlement to it.

36    There is, in any event, no evidence before me that Mr Reeve has in fact transferred any rights in the Millbase information to Aqualast, or to any of the other companies in the Ultralast group.

37    Mr Nikolovski said that, in light of these matters, and in order to avoid “the apparent unauthorised use” of Millbase, he and his associates “resolved that Ultralast Holdings would cease manufacturing, distributing and selling the products pending confirmation of ownership of the [Millbase] formula”.

38    On 25 October 2011 Mr Nikolovski’s solicitor sent a letter to Mr Reeve demanding that Mr Reeve demonstrate that Aqualast owned the Millbase information and threatening that, in the absence of proof of such ownership, proceedings would be commenced against Mr Reeve and his “companies” for damages for misleading conduct and for breach of the warranties that had been given in the MDS Agreement.

39    Mr Reeve responded by letter dated 29 October 2011. His response was, in effect, that the information would be provided but that “your time scales however are not acceptable due to the nature of the request and time required to enable lawyers this end to provide verification to the documentation”. He also said that he would not be providing the Millbase formula. Mr Nikolovski’s solicitors received no further response or other information from Mr Reeve in that regard.

40    In the absence of receiving a substantive response from Mr Reeve, and after informing Mr Joseph of his intention to do so, Mr Reeve instructed his solicitors to give notice on behalf of Ultralast Holdings to each of the companies in the Ultralast group of its termination of the MDS agreement. The notice of termination was given on 20 December 2011.

41    At the same time, Mr Nikolovski gave notice to Mr Joseph and to MTJ Holdings that he rescinded his option agreement with them. In that notice he reserved his rights with respect to all claims for loss or damage (including payment of the option fee) arising from that agreement.

42    Mr Joseph has given evidence that the companies in the Ultralast group and another company, Greenguard Pty Ltd (Greenguard), the fifth prospective respondent, are now no longer trading. Greenguard is a company incorporated by Mr Reeve and Mr Joseph in December 2010. It manufactured wood preservative products called TimberSafe and TermiCoat, and another product called GreaseGobbler (the Greenguard products). Mr Reeve and MTJ Holdings are equal shareholders in the company.

43    I now turn to summarise the evidence of Mr du Preez’s involvement with Mr Reeve, Mr Joseph and Mr Nikolovski.

44    Mr Nikolovski said that he approached Mr du Preez to assist him in carrying out his investigations into the ownership of the Millbase information. As I have previously recorded, Mr du Preez was referred to in the document under which Mr Reeve claims to have acquired ownership of that information. Clause 3.1 of that document, by handwritten notations, identifies persons who are said to have had use of Millbase. The notation with respect to Mr du Preez is as follows:

Donald Du Preez: Worked with Danie Du Buison for ten years.

45    Mr du Preez gave evidence that he knew Danie du Buison, who was a director of Self-Cote Pty Ltd (Self-Cote). Self-Cote was a manufacturer of paint and paint-related products in South Africa and had developed an innovative approach to paint manufacturing by introducing “kick-start” to the manufacturing process. Mr du Preez said that he entered into a joint venture with Mr du Buison and Self-Cote in which he provided technical support in relation to a “kick-start” product called “the B formula”. On the evidence before me, it is possible that this product is the same as Millbase. Mr du Preez said that, notwithstanding his role in that joint venture, the B formula was never revealed to him. He said that he and Mr du Buison “parted ways” in 1998.

46    Mr du Preez said that in 1999, with the assistance of several chemists, he developed a “kick-start” product called Alpha P100 which he considered to be far superior to the B formula. He said that he used Alpha P100 in the manufacture of his own range of products marketed under the brands e-Coat and Aqua Coat.

47    Mr du Preez gave evidence that he had had inconclusive negotiations with Mr Reeve in late 2008 concerning Mr Reeve’s possible purchase of the Alpha P100 formula and Mr du Preez’s paint product range. He also gave evidence of separate inconclusive negotiations on the same subject with Mr Joseph at about the same time. The last-mentioned negotiations at least reached the stage where, according to Mr du Preez, he and Mr Joseph incorporated Ultralast International and Aqualast. Mr du Preez said that he was a director of and shareholder in each company. The company searches in evidence do show that Mr du Preez was a director of Ultralast International in the period 26 May 2009 to 21 September 2009. He is also shown as a former beneficial owner of shares in the company. Those searches do not show him to have been a director of or shareholder in Aqualast, although I note that the search in evidence is incomplete in that a critical page seems to be missing. Mr du Preez said that in about July or August 2009 he and Mr Joseph agreed to part ways, but that he (Mr du Preez) “retained all my right, title and interest in the Alpha P100 formula and the associated intellectual property”. He said that he then resumed his paint manufacturing business in South Africa.

48    Significantly, Mr du Preez gave evidence that in July/August 2009 Mr Moss, to whom I have also earlier referred, sought his assistance to improve the formulation for the “kick-start” product then being used by SCZVT which was, apparently according to Mr Moss’s belief, a derivative of the B formula. Mr du Preez said that SCZVT’s products using this ingredient were showing “inconsistencies” and “not performing to the desired level”.

49    Mr du Preez said that he was given information about this product under obligations of confidentiality. He said that, in the end result, he was unable to make a workable formulation and did not attempt to examine the manufacturing processes used for the products apparently using that ingredient. I infer from this evidence that Mr du Preez knew the “derivative” B formula. He gave evidence that Mr Moss had told him at this time that SCZVT had reached an agreement with Mr Reeve to sell him the formula and associated intellectual property. Mr du Preez said that it was his understanding that Mr Moss wanted him to improve the formula and SCZVT’s manufacturing process “so as to ensure that both were workable prior to them being released to Reeve”.

50    In his affidavit Mr Nikolovski expressed the opinion that the Ultralast group does not own the Millbase information and is not in a position to continue to manufacture and sell the Ultralast products. He said, therefore, that the Ultralast group was worthless and would not be able to compensate him or his associates for losses which he attributed to Mr Reeve’s “wrongful conduct”.

51    He gave this evidence:

… So as to attempt to mitigate our losses, my associates and I resolved to explore the possibility of seeking other available business opportunities within the paint industry. In the course of exploring the available business opportunities we also considered approaching Du Preez with the view of acquiring his Alpha P 100 formula which we could use to manufacture paint and paint related products and thus remain in the industry.

52    Mr Nikolovski said that agreement had now been reached with Mr du Preez and the Alphalast group (namely, Alphalast, Alphalast Global and EGG) under which the group has acquired “ownership, all rights, title and interest in, Du Preez’s formula and product range”.

53    Mr Joseph now has an “interest” in the Alphalast group. The nature and extent of that interest has not been identified.

54    It is clear from Mr Nikolovski’s evidence that the Alphalast group is carrying on the business of manufacturing products similar to those that had been manufactured by the Ultralast group.

55    Mr Reeve said that, after entry into the option agreement with Mr Joseph, he received very little information about the operations of the Ultralast group, Ultralast Holdings or Greenguard. He said that these companies operated together to manufacture, distribute and sell the Ultralast products and the Greenguard products to customers in Australia and internationally (notably China, Hong Kong, India and Sri Lanka).

56    A website is maintained with respect to the domain name www.ultralast.com.au (the Ultralast website). Mr Reeve gave evidence that this website is owned and operated by the third prospective respondent (Ultralast International). He said that the website is a valuable asset of the first to fourth prospective respondents. Copies of pages from the website are in evidence. Those pages bear, however, the former corporate name of the sixth prospective respondent (that is, Ultralast Australia Pty Ltd). Moreover, Mr Joseph gave evidence that he is the owner of the website.

57    Mr Reeve’s and Mr Joseph’s evidence as to ownership of the Ultralast website rests simply on assertion, and nothing more. Furthermore, there is no evidence that establishes the ownership of any intellectual property rights, and in particular copyright, in the forms of expression used on the website. It is clear, however, that the website promotes the “Ultralast Ecoating System”, including by reference to product names and projects on which some of the Ultralast products and/or Greenguard products have been used.

58    On about 4 January 2012 the website www.alphalast.com.au (the Alphalast website) commenced operation. Mr Nikolovski is recorded as the registrant and “sole trader”. There seems little doubt that the Alphalast website has been copied, to a significant degree, from the Ultralast website. Mr Joseph gave evidence that the Alphalast website was created by Dan Amadi. He also gave evidence that Mr Amadi maintained the Ultralast website. Mr Joseph said that he provided Mr Amadi with the access codes to the Ultralast website for this purpose. Mr Amadi has not given evidence. However, Mr Joseph said that Mr Amadi used the Ultralast website to create “a working model or basis for the creation of” the Alphalast website.

59    A comparison of the pages from the two sites shows that a number of products on the Alphalast website have adopted names used for the Ultralast products, except that the Alpha-prefix has been substituted for the Ultra-prefix. For example, the product Ultra-BondFirst that is promoted on the Ultralast website finds a counterpart in the product Alpha-BondFirst that is promoted on the Alphalast website. The same product description is used for each product. Other examples include Ultra-Coat/Alpha-Coat; Ultra-Clear/Alpha-Clear; Ultra-MetalPrimer/Alpha-MetalPrimer; Ultra-NuPave/Alpha-NuPave; Ultra-SuperSeal/Alpha-SuperSeal, and so on. The Alphalast website also promotes the Greenguard products TermiCoat and TimberSafe (as does the Ultralast website).

60    On 10 January 2012 Mr Reeve’s solicitors wrote a detailed letter to a number of individuals and companies that included the prospective respondents. In summary the letter:

(a)    asserted that the assets in the Ultralast group (an expression which the solicitors used to include Greenguard and Ultralast Holdings as well as Aqualast, Ultralast International and Ultralast Manufacturing) have been or are proposed to be transferred to companies in which Mr Reeve has no shareholding, thereby rendering worthless his shareholding in the Ultralast group (as described in the letter);

(b)    alleged various contraventions of the Corporations Act 2001 (Cth) (the Corporations Act), including allegations of misfeasance by Mr Joseph and Mr Nikolovski as directors, and breaches of fiduciary duty;

(c)    sought access to the books and records of the companies in the Ultralast group (as described in the letter);

(d)    referred to the fact that the Alphalast website had commenced operation and that its web pages replicated the web pages on the Ultralast website, except that the Ultralast products had been branded as “Alphalast” products;

(e)    sought various undertakings;

(f)    threatened the commencement of proceedings in the Supreme Court of New South Wales; and

(g)    sought access to any shareholders agreement, company constitution, and any minutes of meetings of directors or shareholders of Greenguard, Aqualast, Ultralast Manufacturing, Ultralast Holdings, Ultralast International, EGG and Alphalast Global, in the period 3 April 2011 to 10 January 2012.

Relevant principles

61    Rule 7.23 of the Federal Court Rules 2011 provides as follows:

(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.

(2)    If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1) (c) (i).

62    The terms “prospective applicant” and “prospective respondent” are defined in r 7.21 as follows:

prospective applicant means a person who reasonably believes that there may be a right for the person to obtain relief against another person who is not presently a party to a proceeding in the Court.

prospective respondent means a person, not presently a party to a proceeding in the Court, against whom a prospective applicant reasonably believes the prospective applicant may have a right to obtain relief.

63    It is apparent that r 7.23 proceeds on a tightly structured set of considerations for its application in a given case. Without seeking to supplant the precise language of the rule, and at the risk of some repetition, the prospective applicant must establish:

(a)    the existence of a reasonable belief in a right to obtain relief in the Court;

(b)    the making of reasonable inquiries directed to obtaining sufficient information to decide whether to start a proceeding in the Court to obtain that relief;

(c)    an insufficiency of information to enable that decision to be made;

(d)    the existence of a reasonable belief that the prospective respondent has or had, or is likely to have or have had, documents –

(i)    that are directly relevant to the question whether the putative right to relief exists; and

(ii)    whose inspection would assist in making a decision whether to start a proceeding in the Court to obtain that relief.

64    The language of r 7.23(1) makes clear that the power to order a prospective respondent to give preliminary discovery is contingent upon each of its requirements being established. Even if the prospective applicant establishes these requirements, r 7.23(2) shows that a broad discretion remains in the Court as to whether, and to what extent, discovery should be granted. In this connection the intrusive nature of an order for preliminary discovery should be borne in mind. Nevertheless, the rule is to be construed beneficially so as to be given “the fullest scope that its language will reasonably allow”: St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 at [26].

65    In Ebos Group Pty Ltd v Team Medical Supplies Pty Ltd [2011] FCA 862 Flick J held that the general statements of principle set out by Lindgren J in Glencore International AG v Selwyn Mines Ltd (recs and mgrs apptd) (2005) 223 ALR 238 at [9]-[16], respecting preliminary discovery under O 15A r 6 of the Federal Court Rules, remain apposite to an application under r 7.23. In Higgins v Hancock (2011) 199 FCR 393 Jacobson J at [55]-[59] expressed the same view. Those statements of principle, translated to the present context under r 7.23, are as follows:

(a)    The test of reasonable belief is an objective test.

(b)    The provision does not allow for third party discovery. Preliminary discovery may be ordered only against the person from whom there is reasonable cause to believe the applicant is or may be entitled to obtain relief.

(c)    A document relating only to the question whether a judgment against a person is likely to be enforceable is not within the rule and such a document is therefore not discoverable. If the only reason why an applicant has not sufficient information to enable a decision to be made whether to commence a proceeding is that the applicant lacks sufficient information as to the respondent’s capacity to satisfy a judgment, preliminary discovery will not be available.

(d)    The measure of any preliminary discovery to be ordered is the extent of information that is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries, to enable a decision to be made whether to commence a proceeding.

(e)    The stronger the relevant evidence already available to an applicant of its right to obtain relief the weaker will its position be to obtain preliminary discovery.

(f)    While a respondent to an application for preliminary discovery is entitled to remain passive, the applicant must place before the Court all of the evidence already available to it relevant to the sufficiency of the information it possesses to enable a decision to be made whether to commence a proceeding. The applicant must not hold back information. This obligation on the applicant to be forthcoming arises from the special and intrusive nature of preliminary discovery and the fact that ordinarily the respondent will not know, or be in a position to expose, the full extent of the information already available to the applicant.

(g)    While the notion of reasonable belief may set the threshold “at quite a low level”, there must be some tangible support that takes the existence of the alleged right beyond mere “belief” or “assertion” by the applicant.

66    To these general statements of principle can be added the summary of principles provided by Hely J in St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360 at [26] as well as the recent discussion by Katzmann J in EBOS Group Pty Ltd v Team Medical Supplies Pty Ltd (No 3) (2012) 199 FCR 533 at [15]-[32], especially as to the similarities and differences between the current and former rules.

Possible claims for relief

67    Mr Reeve submits that the conduct of the affairs of the first to fifth prospective respondents is contrary to the interests of their members as a whole or is oppressive or unfairly prejudicial to or unfairly discriminatory against the prospective applicant within the meaning of s 232 of the Corporations Act.

68    He submits that he may have the right to obtain the following relief against each of the first to fifth prospective respondents in his capacity as a member of each of those companies and, in addition, as a director of the fifth prospective respondent:

(a)    An order under s 233(1)(d) of the Corporations Act for the purchase of shares.

(b)    An order under s 233(1)(f) of the Corporations Act for the companies to institute proceedings against the sixth to eighth prospective respondents for misuse of the Millbase information and the tort of passing off.

(c)    Orders under ss 233(1)(g), 236 and 237 of the Corporations Act authorising the prospective applicant to institute proceedings in the name and on behalf of the first to fifth prospective respondents against the sixth to eighth prospective respondents for misuse of the Millbase information and the tort of passing off.

(d)    An order under s 233(1)(h) of the Corporations Act for the appointment of a receiver and manager to the property of the first to fifth prospective respondents.

(e)    An order for access to the books and records of the first to fourth prospective respondents pursuant to s 247A of the Corporations Act.

(f)    An order for access to the books and records of the fifth prospective respondent pursuant to ss 198F, 247A and 290 of the Corporations Act.

69    Mr Reeve submits that he may be entitled to relief against the sixth to eighth prospective respondents in his capacity as the “owner” of the Millbase information or as a person to whom that information is confidential, or as the plaintiff in any derivative action brought pursuant to s 233 of the Corporations Act.

70    In this connection Mr Reeve submits that he may have the right to obtain the following relief against the sixth to eighth prospective respondents:

(a)    An order for injunctive relief, damages, or an account of profits for misuse of the Millbase information and know-how.

(b)    Orders to unwind any transfer of assets from the first to fifth prospective respondents to the sixth to eighth prospective respondents.

(c)    Declarations that the sixth to eighth prospective respondents hold any assets transferred from the first to fifth prospective respondents on trust.

71    Mr Reeve submits that Mr Joseph and Mr Nikolovski:

(a)    caused or permitted the sixth to eighth prospective respondents to use the Millbase information, and other know-how and confidential information, such as the identity of the first to fifth prospective respondents’ customers, manufacturers and distributors;

(b)    caused or permitted the sixth to eighth prospective respondents to infringe the copyright in the first to fifth prospective respondents’ website and engage in the tort of passing off; and

(c)    caused or permitted the first to fifth prospective respondents to cease trading without any reasonable basis,

to the detriment of the first to fifth prospective respondents and to the benefit of their direct competitors, the sixth to eighth prospective respondents, where they had a clear conflict of interest.

72    Mr Reeve submits that in his personal capacity, or on behalf of and in the name of the first to fifth prospective respondents, he may have the right to obtain relief against Mr Joseph and Mr Nikolovski as follows:

(a)    A declaration under s 181 of the Corporations Act that they have breached their duties as directors to exercise their powers in good faith.

(b)    A declaration under s 182 of the Corporations Act that they have breached their duties as directors not to use improperly their position to gain an advantage for themselves or another or cause detriment to the first to fifth prospective respondents.

(c)    A declaration under s 183 of the Corporations Act that they have breached their duties as directors not to use improperly information gained as a director to gain an advantage for themselves or another or cause detriment to the first to fifth prospective respondents.

(d)    A declaration that they have breached their fiduciary duties to the first to fifth prospective respondents and the prospective applicant.

(e)    Declarations that they have breached their confidentiality undertakings with respect to the Millbase information.

(f)    An order under s 233(1)(i) restraining them from engaging in specified conduct or acts.

(g)    A declaration that Mr Nikolovski is a “shadow” director of the sixth to eighth prospective respondents within the meaning of s 9 of the Corporations Act.

(h)    Orders for injunctive relief, damages or an account of profits with respect to the above.

The right to obtain relief

73    Much of the evidence adduced at the hearing of this application was directed to the question of the “ownership” of the Millbase information. Mr Reeve claims to be the owner of the information. Mr Nikolovski advanced his own concerns about that ownership, and its “transfer” to the first prospective respondent, as a reason for resolving, with his associates, to cease manufacturing, distributing and selling products containing Millbase through the new Ultralast group and to commence business operations in the paint industry through the Alphalast group.

74    The following observations should be made about this question of “ownership” and its significance to the present application.

75    First, the evidence does not establish that any proprietary rights exist with respect to the Millbase information. It is inapposite, therefore, to talk of “ownership” of the Millbase information.

76    Secondly, the evidence, at most, would indicate the possibility of contractual rights existing with respect to the Millbase information. On Mr Reeve’s case, those rights, if they exist, are represented by the document dated 9 September 2009 to which he and SCZVT are shown to be parties. The authenticity of that document is in dispute. However, assuming it to be authentic and to be a manifestation of a valid and binding contract, it is clear that none of the prospective respondents is a party to it. There is nothing in the evidence that would show that any of the prospective respondents has any contractual right or is bound by any contractual obligations arising out of that document or any contract that it might represent.

77    Thirdly, the present evidence shows that Mr Reeve has not disclosed the Millbase information to any of the prospective respondents. Indeed, it was his own evidence that he was the only person who held the knowledge of the formulation of Millbase and how it is prepared, and that he is, and remains, the only person who knows the entire formulation and preparation of Millbase.

78    Fourthly, even if one or more of the prospective respondents knows the Millbase information (a proposition which they deny), that information could only have been acquired outside any relationship or dealings with the prospective applicant.

79    Fifthly, the document on which Mr Reeve relies to establish his “ownership” of the Millbase information shows that others (including possibly Mr du Preez) may have had access to the Millbase information. There is no evidence that would indicate that any of the identified persons was under any fetter of confidentiality so far as concerns the disclosure or use of the Millbase information or the conveyance of that information to others.

80    Sixthly, insofar as it is to be suggested that Mr du Preez knows and has conveyed the Millbase information to the prospective respondents (a proposition which was not clearly articulated but which Mr du Preez denies in any event), Mr Reeve has not established any legal basis on which any such disclosure, of itself, would give him any right to obtain relief in this Court against any of the prospective respondents or, indeed, Mr du Preez, who is not, in any event, a prospective respondent.

81    I am unable to see, therefore, that, objectively speaking, there exists any reasonable belief that Mr Reeve has the right to obtain relief against any of the prospective respondents on the ground that they have misused confidential information represented by the Millbase information.

82    Similarly, I am unable to see that, objectively speaking, there exists any reasonable belief that Mr Reeve has the right to obtain, in a derivative action on behalf of the first to fifth prospective respondents, relief for copyright infringement in respect of the Ultralast website. There is simply no evidence as to the subsistence or ownership of any copyright in that website or in respect of any work shown on it. Whilst it may be readily accepted that the Ultralast website promotes the Ultralast products and the Greenguard products (there seems to be no dispute about that point), it simply does not follow that this gives rise to any copyright which can be exercised by or on behalf of any of those prospective respondents.

83    It is, however, clear on the evidence that, through the actions of Mr Nikolovski and his associates, and Mr Joseph, the operations of the new Ultralast group in manufacturing, distributing and supplying paint products have been shut down and, on one view of things, effectively taken over by the Alphalast group in place of the new Ultralast group. Whether Mr Nikolovski, Mr Joseph and the sixth to eighth prospective respondents were justified in engaging in this conduct is not a matter that calls for determination on this application. It is only necessary that I form a view about whether, objectively speaking, there exists a reasonable belief that Mr Reeve may have a right to obtain relief against the prospective respondents of the kind that he has identified in relation to that conduct. I am satisfied that a sufficient basis exists for such a belief.

84    Specifically, I am satisfied that, in the circumstances I have summarised above, grounds exist for a reasonable belief that Mr Reeve may have the right to obtain the relief he has identified in an oppression suit under s 233 of the Corporations Act in relation to the conduct of the affairs of each of, or one or more of, the first to fifth prospective respondents. I am also satisfied that under either s 233 or s 237 of the Corporations Act, grounds exist for a reasonable belief that Mr Reeve may be entitled to relief that would enable him to institute proceedings in the name of and on behalf of the first to fifth respondents, or one or more of them, against Mr Nikolovski and Mr Joseph, and against the sixth to eighth respondents, or one or more of them.

85    In the case of such proceedings against Mr Nikolovski and Mr Joseph, grounds exist for a reasonable belief that relief may lie for breach of duty under ss 181, 182 and/or 183 of the Corporations Act or for breach of fiduciary duty, in respect of those of the first to fifth prospective respondents of whom Mr Nikolovski or Mr Joseph is a director.

86    In the case of such proceedings against the sixth to eighth prospective respondents, or one or more of them, there is reason to suspect, in the particular circumstances in which the activities of the new Ultralast group were shut down and the Alphalast group were commenced, that the Alphalast group are using at least some of the assets formerly used by the new Ultralast group. I am satisfied, in these circumstances, that grounds exist for a reasonable belief that relief may lie in relation to the possible transfer of assets from one or more of the first to fifth prospective respondents to one or more of the sixth to eighth prospective respondents.

87    I am also satisfied that grounds exist for a reasonable belief that relief may lie in relation to passing off. In this connection the promotion of the business and products of the new Ultralast group, or one or more of them, on the Ultralast website does provide some evidence of a reputation that might be capable of being deployed in proceedings against the sixth to eighth prospective respondents, or one or more of them, seeking relief for passing off based on the use of very similar, if not essentially the same, promotional material on the Alphalast website.

88    Finally, I am satisfied that reason exists to believe that Mr Reeve may be entitled to relief under s 247A of the Corporations Act to inspect the books of the first to fifth prospective respondents and under s 290 to inspect the financial records of the fifth prospective respondent.

The categories of documents sought

89    The 14 categories of documents sought by Mr Reeve from the prospective respondents are as follows:

1.    All documents, created in or relating to the period 3 April 2011 to date, that refer or relate to any decision, or the consideration of any decision, by Mr Joseph or MTJ Holdings to exercise or not exercise their rights under the option agreement with Mr Reeve.

2.    All documents, created in or relating to the period 1 July 2011 to date, that refer or relate to the actual, prospective or contingent sale, transfer, assignment, licence or other disposition of any part of the assets (as defined) to any person or entity other than in the ordinary course of business, including without limitation any memorandum of understanding or other agreement (whether signed or not, and including any drafts) between the ninth and tenth prospective respondents and/or Mr du Preez.

3.    All documents, created in or relating to the period 23 September 2009 to date, that refer or relate to the actual, prospective or contingent disclosure by each or any of the prospective respondents of the Millbase information to any other person (including from one prospective respondent to another) other than disclosure to the officers and employees of the Ultralast companies in the ordinary course of business.

4.    All documents, created in or relating to the period 1 August 2011 to date, that comprise any shareholder agreement (whether signed or not, and including any drafts) between any of the shareholders in any of the Alphalast companies.

5.    All documents, created in or relating to the period 1 September 2009 to 30 April 2011, that comprise any shareholder agreement (whether signed or not, and including any drafts) between any of the shareholders in any of the Ultralast companies.

6.    All documents, created in or relating to the period 1 December 2011 to date, that refer or relate to the design, purchase or registration of the Alphalast website.

7.    All documents, created in or relating to the period 1 December 2011 to date, that show the contents of the Alphalast website.

8.    All documents, created in or relating to the period 1 December 2011 to date, that record the payment of any consideration by any or all of the Alphalast companies to use or modify the content of the website at www.ultralast.com.au.

9.    All applications for the registration of any trade mark that includes any part of the names of the Ultralast products.

10.    All documents, created in or relating to the period 1 August 2011 to date, that refer or relate to the actual, prospective or contingent entry into contracts by the Alphalast companies and any other person or entity to manufacture or distribute the Ultralast products (however named or branded) or to manufacture or distribute any product made using the Millbase information.

11.    All documents, created in or relating to the period 1 August 2011 to date, that refer or relate to the actual, prospective or contingent assignment by any of the Ultralast companies to any other person or entity (including but not limited to the Alphalast companies) or any rights to distribute or manufacture the Ultralast products (however named or branded).

12.    The constitution, memorandum and articles of association for each of the Ultralast companies and the Alphalast companies.

13.    All documents, created in or relating to the period 3 April 2011 to date, that record meetings of directors or shareholders of any of the Ultralast companies or the Alphalast companies.

14.    All documents created in or relating to the period 3 April 2011 to date, that refer or relate to Millbase, the Millbase information or the Ultralast products (however named or branded).

90    On 27 January 2012 orders were made requiring the prospective respondents to file and serve an affidavit or affidavits stating, by reference to these categories, whether or not they have documents in their possession, custody or control. Mr Joseph, as ninth prospective respondent, filed and served an affidavit on behalf of himself and the first, second, third and fifth prospective respondents. Mr Nikolovski, as tenth prospective respondent, filed and served an affidavit on behalf of himself and the fourth, sixth, seventh and eighth prospective respondents. The substance of those affidavits is that:

(a)    none of the prospective respondents has documents within categories 3, 4, 8, 10 and 11;

(b)    Mr Joseph and the prospective respondents associated with him have documents within categories 1, 2, 5, 9, 12 and 14;

(c)    Mr Nikolovski and the prospective respondents associated with him have documents within categories 2, 6, 7, 9, 12, 13 and 14.

91    This evidence should be accepted. It has not been challenged and, in any event, there is no reason to doubt its accuracy.

92    It is thus necessary to consider categories 1, 2, 5, 6, 7, 9, 12, 13 and 14 with a view to determining whether, subject to the findings I have made above (see [73]-[88]), the documents in these categories are directly relevant to the question of whether Mr Reeve has a right to obtain relief against one or more of the prospective respondents of the kind or kinds identified and whether inspection of those documents would assist in making a decision whether to start a proceeding in the Court to obtain that relief. Even if these conditions are fulfilled, there remains the question whether, as a matter of discretion, discovery, as sought, should be ordered to be given.

Consideration

Category 1

93    Mr Reeve submits that discovery of documents in this category should be given because he apprehends that Mr Joseph will not exercise the option agreement for the reason that he (Mr Joseph) will derive all of the commercial benefit he previously derived from the new Ultralast group through the “phoenix” Alphalast group. Mr Joseph resists the giving of discovery on the ground that his deliberations on whether to exercise his option are confidential to him and that, for that reason, he should not be obliged to disclose documents to Mr Reeve.

94    I decline to order the giving of discovery in accordance with this category. In light of Mr Joseph’s submission, I am unable to see how any of the documents in this category are directly relevant to any right to relief that Mr Reeve has identified or how those documents would assist in making a decision to start a proceeding in this Court to obtain the relief that Mr Reeve has identified. Mr Joseph and MTJ Holdings are not under any legal obligation to exercise their rights under the option agreement.

Category 2

95    Mr Reeve submits that discovery of documents in this category should be given because the Alphalast website refers to products that appear to be identical to products formerly manufactured and supplied by the new Ultralast group. He submits that it appears that there has been an assignment or licence of intellectual property, manufacturing equipment or other assets from the new Ultralast group to the Alphalast group.

96    Mr Joseph submits that the discovery of documents in this category should be refused because it is being sought for the ulterior and collateral purpose of ascertaining the likelihood that claims might be brought against Mr Reeve himself (presumably by one or more of the prospective respondents) in relation to representations he has made concerning his ownership of the Millbase information. I reject that submission. I am unable to see how it engages with the category of documents that is sought. Moreover, no satisfactory basis has been established to sustain a submission that, in seeking preliminary discovery, Mr Reeve is acting with an ulterior or collateral purpose such as would deny his entitlement to such discovery if otherwise established.

97    Mr Nikolovski submits that Mr Reeve has more than sufficient information to make a decision whether to commence proceedings for the relief that he has identified. At the hearing he also submitted that discovery according to this category was premature because Mr Joseph and MTJ Holdings might exercise their rights under the option agreement to purchase Mr Reeve’s shares, in which event Mr Reeve could have no continuing claim against the prospective respondents. I am not sure that the last submission is necessarily correct. In any event, as the period for exercising the options has now passed, and as no party has sought to re-open, I propose to consider whether discovery should be given in this category on the evidence that is now before me.

98    I have already found that, in the particular circumstances in which the activities of the new Ultralast group were shut down and the Alphalast group were commenced, there is reason to suspect that the Alphalast group has used and is using at least some of the assets formerly used by the new Ultralast group. I am satisfied that documents in this category will be directly relevant to the question whether Mr Reeve may have the right to obtain relief against one or more of the prospective respondents and would assist in Mr Reeve deciding whether to start a proceeding in this Court for the relief that he has identified.

Category 5

99    No submission was made by Mr Reeve that articulated the basis on which discovery in this category should be given. Mr Joseph submits that, in any event, the only document that he has falling within this category is the Heads of Agreement dated 22 September 2009, a copy of which was annexed to Mr Reeve’s affidavit made 19 January 2012 as Annexure N.

100    In the absence of Mr Reeve demonstrating why documents in this category should be discovered, I decline to order the giving of discovery in accordance with it.

Category 6

101    Mr Reeve submits that the discovery of documents in this category should be given because they will show who owns the Alphalast website and thus the identity of the person who may have infringed the “Ultralast Companies’ copyright subsisting in the Ultralast website”. Mr Nikolovski submits that Mr Reeve has sufficient information to enable him to decide whether to start a proceeding in the Court.

102    In my view there is a more fundamental objection to discovery being ordered in accordance with this category. As I have found, there is simply no evidence as to the subsistence or ownership of any copyright in the Ultralast website or in respect of any work reproduced on it. Mr Reeve seems to have proceeded on a number of assumptions. The first is that copyright subsists either in the Ultralast website itself as an original copyright work, or in some other work or works shown on the website. His position is not clear. The second assumption is that, because products that were manufactured or supplied by the new Ultralast group are promoted on the Ultralast website, one or more of the first to fifth prospective respondents must own the assumed copyright. The documents sought in this category do not, of course, address those fundamental assumptions, the validity of which are indispensable to whether any copyright claim exists at all. As I have stated, I am not satisfied that there exists any reasonable belief that Mr Reeve has the right to obtain, in a derivative action on behalf of the first to fifth prospective respondents, relief for copyright infringement in respect of the Ultralast website. As this step has not been established, preliminary discovery of documents in this category should be refused for this reason alone.

103    In any event, Mr Reeve’s own evidence is that Mr Nikolovski is the owner (registrant) of the Alphalast website. Documentary evidence of that fact is annexed to Mr Reeve’s affidavit. Mr Reeve does not dispute that fact. Thus the articulated purpose for which Mr Reeve advances the need for discovery in this category has been provided by his own evidence. Moreover, Mr Joseph has given evidence that Mr Amadi used the Ultralast website to create “a working model or basis for the creation of” the Alphalast website. Thus Mr Reeve has sufficient information on the question of the ownership of the Alphalast website to assist him to make a decision concerning the question of whether he has a right in a derivative action on behalf of the first to fifth prospective respondents to relief for copyright infringement.

104    In these circumstances I decline to order the giving of discovery in accordance with this category.

Category 7

105    Mr Reeve submits that the discovery of documents in this category is relevant to determining the extent of any infringement of copyright or passing off. He also submits that the documents might be relevant to determining whether there has been any misuse of the Millbase information “as it appears from the Alphalast website that its products are identical to Ultralast’s products”.

106    Mr Nikolovski submits that Mr Reeve is already in possession of these documents; Mr Reeve has annexed to his affidavit a printout of the entire Alphalast website as at 11 January 2012.

107    I decline to order the giving of discovery in accordance with this category. In my view Mr Reeve’s own evidence is sufficient to enable him to decide whether to start a proceeding claiming relief for passing off based on representations made on the Alphalast website. I will not repeat the comments I have made concerning the absence of any reasonable basis for relief in relation to alleged misuse of the Millbase information or for copyright infringement. I would only add these comments. First, I am unable to see how the contents of the Alphalast website are directly relevant to whether Mr Reeve has any right to relief for misuse of the Millbase information. Secondly, insofar as copyright infringement is concerned, Mr Reeve’s own evidence of the state of the Alphalast website as at 11 January 2012 is sufficient to enable him to decide whether there has been a reproduction of a substantial part of the Ultralast website or of any work or works shown on that website.

Category 9

108    Mr Reeve submits that the discovery of documents in this category is “relevant to determining whether Alphalast may be infringing any registered trade mark of the Ultralast Companies”.

109    Mr Joseph says that he has the certificate of registration of the trade mark “Ultralast” but not the application for registration of that mark. He says that neither he nor the prospective respondents associated with him have applied to register any other trade marks.

110    Mr Nikolovski submits that any documents pertaining to trade mark registration “are available by the appropriate searches”. Mr Nikolovski also gave evidence that the “trade name” “TermiCoat” is registered in the name of Ian Peter Marchesi and the “trade name” “TimberSafe” is registered in the name of the fourth prospective respondent. It is unclear whether this evidence is directed to trade mark registrations or business name registrations.

111    I decline to order the giving of discovery in accordance with this category. There is nothing in the evidence before me to indicate that Mr Reeve has any right to relief in respect of trade mark infringement. Indeed, he has not articulated any claim, including by way of a derivative action, for infringement of any registered trade mark. I would add that, if any such application for registration has been made, that fact can be ascertained by searching publicly available records. If any of the prospective respondents has made an application for a registered trade mark which Mr Reeve believes he may be justly entitled to oppose, he can exercise such rights as he might have in opposition proceedings before the Registrar of Trade Marks once acceptance has been advertised for any such application.

Category 12

112    Mr Reeve submits that discovery of documents in this category is “relevant to determining whether the decision to cease trading was properly made” and, in the case of the sixth to eighth prospective respondents, “to determining the objects of those companies”.

113    Mr Joseph submits that he has instructed his solicitors to provide these documents to Mr Reeve’s solicitors. Mr Nikolovski submits that these documents are not necessary in order to consider whether to start proceedings in the Court for the relief that has been identified.

114    I decline to order the giving of discovery of documents in accordance with this category. These documents can be readily obtained by searching publicly available records, if they have not already been provided.

Category 13

115    Mr Reeve submits that the discovery of documents in this category is “relevant to determining the real reason why the Ultralast Companies ceased to trade and whether the decision was properly made in the best interest of the Ultralast Companies”. Mr Nikolovski deposed to having such documents.

116    In light of his acceptance that he is in possession of relevant documents, I propose to order that Mr Nikolovski give discovery in accordance with this category. I am satisfied that documents in this category will be directly relevant to the question whether Mr Reeve may have the right to obtain relief against one or more of the prospective respondents and would assist in Mr Reeve deciding whether to start a proceeding in this Court for the relief that he has identified.

Category 14

117    Mr Reeve submits that discovery should be given in accordance with this category because “the documents are relevant to determining whether there has been any disclosure of the Millbase [information] to the Alphalast Companies and the extent to which the Alphalast Products are identical to or derived from the Ultralast Products”.

118    Both Mr Joseph and Mr Nikolovski submit that this category is too broad. I agree. The category calls for a very broad class of documents that are unconfined to the specific matters referred to in Mr Reeve’s submissions.

119    In any event, I have already remarked that I am unable to see that, objectively speaking, there exists any reasonable belief that Mr Reeve has the right to obtain relief against any of the prospective respondents on the ground that they have misused confidential information represented by the Millbase information.

120    For these reasons I decline to order that discovery be given in accordance with this category.

Disposition

121    I have found that Mr Reeve is entitled to limited preliminary discovery. The parties are to provide within seven days an agreed form of orders giving effect to these reasons. I will also hear the parties on the question of costs, unless that question can also be agreed between them.

122    In the absence of agreement between the parties on the form of the orders for discovery and on the question of costs, the parties are to provide drafts of the orders they seek supported by short written submissions which are not to exceed three pages in length. The drafts and supporting submissions are to be provided within 14 days.

Associate:

Dated:    29 June 2012