Federal Court of Australia

AEI Insurance Group Pty Ltd v Martin (No. 2) [2023] FCA 277

ORDERS

THE COURT ORDERS THAT:

Discovery

1.    The defendant provide discovery of the following categories of documents:

(a)    Communications (whether by email, text, letter or otherwise) or records of any phone call on or after 1 August 2022 between the defendant and:

(i)    any client of AEI (being those listed in Annexure A to these orders) (AEI Client);

(ii)    any employee or agent of any AEI Client;

(iii)    any insurer in respect to any policy of insurance held by any AEI Client; and

(iv)    any repairer or insurer or other person in respect of any insurance claim made by any AEI Client.

(b)    Emails to, from or copied to c.martin@mabrokers.com.au involving any AEI Client (including by their employees, servants or agent).

(c)    Any phone record, itemised telephone call or SMS list in respect of mobile phone service [REDACTED] for the period 1 August 2022 to 24 February 2023.

(d)    Any diary entry or other document, recording any meeting or communication between the defendant and any AEI Client from 1 August 2022.

2.    Any further list of documents by the defendant is to be served by 4:00pm on 18 April 2023.

Delivery and Examination of Mobile Phone

3.    The defendant deliver to the offices of the plaintiff’s solicitors in Sydney by 2:00pm on 28 March 2023 the Oppo AX5 Android Smartphone with International Mobile Equipment Identity number 862877040284760 (the AEI Mobile).

4.    The defendant inform the plaintiff by 3:30pm on 28 March 2023 of any username and password for any messaging, storage or email system which the defendant has used at any time during the period 1 August 2022 to 24 February 2023 that was connected to, or accessed by, the AEI Mobile.

5.    Counsel for the plaintiff and defendant confer, with a view to agreeing by 4:00pm on 28 March 2023 an independent court-appointed expert and orders necessary to give effect to the reasons given appointing an independent expert.

6.    The matter be listed at 4:00pm on 28 March 2023.

7.    The phone number identified in Order 1(c) be supressed in these orders and the transcript available to the public, pursuant to section 37AF of the Federal Court Act 1976 (Cth) on the grounds mentioned in section 37AG(1)(a) of that Act.

8.    The defendant pay the plaintiff’s costs of and incidental to the interlocutory application filed on 10 March 2023.

9.    Liberty to apply on three days’ notice.

10.    The matter be listed at 4:30pm on 30 March 2023.

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

ANNEXURE A

1.    Freightshift Pty Ltd

2.    Dellmex Pty Ltd trading as Barellan Freighters

3.    Lawroad Pty Ltd

4.    A. Mackay & Son Truckin Pty Ltd trading as Alastair Mackay Transport

5.    Bondwoods Transport Pty Ltd

6.    Boardman Sand & Gravel Pty Ltd

7.    Wilton's Transport Pty Ltd

8.    STA Trucking Pty Ltd

9.    Quickwell Express Pty Ltd

10.    AJ & KG Frederiksen Pty Ltd

11.    G.M Kelly & W.G Kelly trading as WGH & GM Kelly

12.    S And J McMahon Transport (Qld) Pty Ltd trading as S & J McMahon Transport

13.    Eastwells Haulage Pty Ltd

14.    Gerard F and Sandra Morgan trading as GF & S Morgan Transport

15.    Johnnie Bundy Liquids Pty Ltd

16.    JM Treeby Holdings Pty Ltd trading as JMT Transport

17.    Hanicourt Transport Pty Ltd

18.    Bill Humphries Transport Pty Ltd

19.    JVB Transport Pty Ltd

20.    KEDPH Pty Ltd

21.    John Patrick Gonzo trading as Market Gate Logistics

22.    Ricjul Pty Ltd

23.    WSCK Iacono Pty Ltd

24.    All Truck Towing Pty Ltd

25.    Harvey's Towing (QLD) Pty Ltd

26.    The trustee for M & S Payment Family Trust trading as Mick's Bulk Haulage

27.    Danlyn (QLD) Pty Ltd

28.    Rebecca Dargusch ATF Dargusch Family Trust and Keep on Truckin

29.    Bonica Holdings Pty Ltd

30.    Fast Freight Transport Pty Ltd

31.    Redline Express Pty Ltd

32.    Woodsbey Transport & Contracting Pty Ltd

33.    Ozzy Concrete Qld Pty Ltd

34.    Fielding Way Services Pty. Ltd.

35.    KH Brown Linehaul Pty Ltd

36.    HLE Logistics Pty Ltd

37.    Sapar Landscaping Supplies Pty Ltd

REASONS FOR JUDGMENT

(Revised from transcript)

THAWLEY J:

1    AEI Insurance Group Pty Ltd is a heavy motor transport broker. It employed Mr Craig Martin as an account manager in a business development role from 10 July 2011 until about 2 September 2022. Mr Martin resigned on 29 August 2022.

2    Mr Martin entered into a written contract of employment on 1 November 2020. Clause 12(c) provided:

12.     Restraint

The Employee must not either directly or indirectly:

…

(c)    during their employment with the Company and for the Restraint Period, solicit, canvass, deal with or approach or accept any approach from any person or organisation who was at any time during the last 12 months’ [sic] of the Employee’s employment a client or customer of the Company in that part or parts of the business of the Company in which the Employee was employed and with whom the Employee had dealings with or influence over, with a view to obtaining the business of that client or customer in a business that is the same or similar to or in competition with the business of the Company;

3    The “Relevant Period” is defined in the following terms in clause 12.7(b) of the contract:

Relevant Period means each of the following periods commencing from the termination of the Employee’s employment:

(i)    12 months;

(ii)    9 months;

(iii)    6 months;

(iv)    3 months;

4    Clause 13.1(a)(i) of the contract provided:

13.1    Acknowledgment

The Employee acknowledges that:

(a)    all trade and business secrets, other confidential information and any documents (in whatever form, however stored, and including copies and extracts) relating to the affairs and business of the Group or which the Employee acquired in the course of their employment with the Company, whether or not originally supplied by a Group Company, including the following:

(i)    client contacts and client lists;

…

(“Confidential Information”) is the property of the Group;

5    Clauses 13.2(a) and (b) provided as follows:

13.2     Confidentiality and return of Confidential Information

The Employee agrees that:

(a)    they must only use Confidential Information for the purpose of performing their duties for the Company under this Agreement;

(b)    during the Employee’s employment and thereafter, except in the proper course of their duties, the Employee will not use or disclose to anyone any Confidential Information, and will use their best endeavours to prevent unauthorised use or disclosure of the Confidential Information by third parties, unless required by law;

6    Clause 15.6(e) of the contract, under the heading “What happens on Termination”, provided that: “the Employee’s obligations under this clause, and clauses 12 and 13 continue after termination”.

7    On 8 November 2022, AEI commenced proceedings against Mr Martin alleging, amongst other things, that Mr Martin breached clauses 12(c) and 13.2(a) and (b) of the employment contract. It is also alleged that Mr Martin breached s 183 of the Corporations Act 2001 (Cth), which relates to the improper use of information obtained by an employee in the course of his or her employment.

8    AEI also sought interlocutory relief in the nature of an injunction restraining Mr Martin from breaching the provisions of his employment contract earlier mentioned. Justice Wigney made orders granting interlocutory relief on 9 November 2022: AEI Insurance Group Pty Ltd v Martin [2022] FCA 1384. In his reasons, Wigney J summarised the evidence of AEI’s director, Mr Michael Donaldson, in the following way:

15    … During the course of his employment, Mr Martin had access to client details, developed close relationships with clients and was made aware of business opportunities. He was provided with a mobile phone and laptop computer and was able to log into AEI’s client management system. He was paid a relatively sizable base salary.

16    Mr Martin notified AEI of his resignation on 29 August 2022. He initially declined to indicate what his intentions were in terms of future employment, but eventually admitted that he would be working for one of AEI’s competitors, MA Insurance Brokers. AEI subsequently diverted to Mr Donaldson any calls that were made to the phone that had been provided by AEI to Mr Martin.

17    Shortly after Mr Martin’s resignation, Mr Donaldson sent Mr Martin an email which reminded Mr Martin of his obligations under the employment contract in relation to confidential information and restraint.

18    On 5 September 2022, Mr Donaldson became aware that a text message had been sent to one of AEI’s clients. That text message provided information in respect of Mr Martin’s new phone number. When Mr Donaldson became aware of that text, he caused AEI to write to Mr Martin and again draw his attention to clauses 12 and 13 of his employment contract. Mr Martin responded to that communication through his solicitors.

19    Further correspondence ensued between AEI and its solicitors and Mr Martin or his solicitors. In the course of that correspondence, Mr Martin’s solicitors confirmed that Mr Martin had sent a text message advising of his new mobile phone number to all of his contacts, including family and friends. The problem was that Mr Martin’s contacts also included the clients with whom Mr Martin had dealt while he was employed by AEI.

20    In early November 2022, Mr Donaldson became aware that a sizable number of AEI’s clients had withdrawn their business from AEI and engaged with MA Insurance Brokers. The business conducted by MA Insurance Brokers was similar to the business conducted by AEI. They were competitors.

21    Mr Donaldson, along with some other officers or employees of AEI, subsequently contacted the clients who were believed to have shifted their business from AEI to MA Insurance Brokers. They asked the clients why they had shifted their business to MA Insurance Brokers. The results of those enquiries were summarised in a table annexed to Mr Donaldson’s affidavit.

22    The enquiries revealed, in summary, that the clients had shifted their business to MA Insurance Brokers as a result of the fact that Mr Martin had moved to MA Insurance Brokers. Some of the clients confirmed that they had been contacted by someone at MA Insurance Brokers and told that Mr Martin now worked there. At least one of the clients indicated that he had had a conversation with Mr Martin after he had moved to MA Insurance Brokers. A number of the clients indicated that they had had no adverse issues with AEI and had had no contact or dealings with MA Insurance Brokers prior to the shift of their business.

23    Mr Donaldson claimed that 21 former clients of AEI had moved their business to MA Insurance Brokers following Mr Martin’s relocation there.

9    The parameters of the case are now defined by an amended originating application and statement of claim filed on 8 December 2022.

10    Since his resignation, Mr Martin has retained a mobile telephone purchased by AEI for the purposes of undertaking his employment duties with AEI (AEI Mobile). This is an Oppo AX5 Android Smartphone with International Mobile Equipment Identity Number 862877040284760. AEI has unsuccessfully requested the return of the AEI Mobile from Mr Martin on several occasions. AEI has retrieved a laptop used by Mr Martin in his employment with AEI.

11    As Wigney J noted in his reasons at [18], on 5 September 2022 a text message was sent to various clients of AEI providing Mr Martin’s new mobile number. AEI says it has been unable to determine whether the text message, presumed to be sent by Mr Martin on 5 September 2022 was sent from the AEI Mobile or another mobile device.

12    AEI submits that the text message demonstrates communication by Mr Martin with clients and the presence of a new mobile phone or a new mobile phone number.

13    On 30 November 2022, orders were made for standard discovery to occur by 28 January 2023. On 22 February 2023, Mr Martin served his List of Documents. The List of Documents nominated only one item, being the laptop owned by AEI which AEI had recovered on 7 November 2022. There was no discovery of any other document, including the text message sent on 5 September 2022.

14    On 2 March 2023, AEI’s solicitors obtained access to documents produced pursuant to approximately 41 subpoenas which had been issued to various insurers and former clients of AEI that had appointed MA Brokers. Those subpoenas had been targeted towards obtaining information relevant to former clients of AEI who had transferred their business to MA Brokers since the resignation of Mr Martin.

15    By an interlocutory application filed on 10 March 2023 amended today, AEI seeks orders:

    that Mr Martin provide “further and better discovery” or, alternatively, discovery in various articulated categories; and

    under rr 14.01 and 20.21 of the Federal Court Rules 2011 (Cth) (Rules) for delivery up and examination of the AEI Mobile and any other mobile which used a specified mobile number (being the new number Mr Martin had advised about in his text message of 5 September 2022), together with various consequential orders.

16    AEI relied on the following affidavits in support of the orders sought:

    Mr Michael Donaldson, a director of AEI, sworn on 28 February 2023;

    Mr Adam Daniel, a Forensic IT Manager at KPMG Australia, affirmed on 6 March 2023; and

    Mr Lachlan McBride, one of AEI’s solicitors, sworn on 10 March 2023.

17    The material produced under subpoena was reviewed by Mr McBride. His affidavit reveals that Mr Martin was copied to various emails to or from former clients of AEI and also that he exchanged some text messages with former clients.

18    Documents produced pursuant to a further three subpoenas became available to AEI’s solicitors on 16 March 2023. The documents were produced by CGU Insurance, Neven’s Haulage and JVB Transport. It was submitted that those documents also included correspondence between Martin and the former clients of AEI including a chain of text messages. However, no evidence in this regard was adduced.

Discovery in categories

19    It is clear from the documents attached to Mr McBride’s affidavit that Mr Martin had documents in his custody or control which should have been discovered. In particular, there are text messages from early September 2022 through October and November 2022 which evidence communications with one of AEI’s clients. This shows that Mr Martin called one of the employees of AEI’s client and gave him his email address at MA Brokers.

20    There is no satisfactory explanation given as to why some of the documents which have been produced under subpoena were not discovered by Mr Martin in accordance with the order for discovery made on 30 November 2022. I am satisfied that some of those documents should have been discovered, in particular some of the text messages.

21    I am satisfied that in these circumstances an order should be made for discovery in categories.

Delivery up of mobile devices

22    Rule 14.01 of the Rules provides:

Order for inspection etc of property

(1)     A party may apply to the Court for an order:

(a)     for any of the following:

(i)    inspection of any property

(ii)     taking a sample of any property;

(iii)    making an observation of any property;

(iv)    trying an experiment on or with any property;

(v)    observation of a process;

(vi)    copying, transcription or production of a document or other material, data or information (however stored or recorded); or

…

(2)    An application under subrule (1) must be accompanied by an affidavit stating the following:

(a)    the property to be inspected, sampled, observed or subject to experiment;

(b)    the process to be observed;

(c)    the document, material, data or information to be copied or transcribed;

(d)    why the order is necessary;

(e)    the access required for entry on to the land or for doing any other act or thing.

(3)     In this rule:

“property” includes land, a document or any other thing, whether or not the land, document or other thing is in the possession, custody or power of a party to the proceeding.

23    The principles relating to r 14.01 are not contentious. There is no question that the inspection of a mobile phone is permitted by r 14.01. In Career Step, LLC v TalentMed Pty Ltd [2017] FCA 492, Robertson J made orders requiring a defendant to grant access to the defendant’s computers to an expert nominated by the plaintiff.

24    Whether an order should be made under r 14.01 depends, of course, on all of the relevant circumstances. Considerations which are often relevant include: whether the evidence demonstrates that the order is necessary or desirable; the utility of the order, including the likelihood that compliance will advance the resolution or determination of the proceedings; the extent of inspection to be allowed, having regard in particular to the interests of the defendant; and what measures can or should be adopted for the proper protection of the defendant’s interests.

25    AEI sought extensive orders under r 14.01. These included orders:

(1)    for delivery up of the AEI Mobile or the mobile “using [the relevant] mobile phone number” or “constituent parts and storage devices” or any other mobile phone which the defendant used at any time for work during the period 1 August 2022 to 24 February 2023 (the Property);

(2)    permitting an independent expert in the employ of KPMG to image and forensically examine the Property:

(a)    to ascertain whether the mobile phones had been used to facilitate contact between Mr Martin and the persons or organisations identified in the schedule to the interlocutory application and to extract or report on the nature of such contact; and

(b)    to examine the contents of the mobile phones to ascertain the presence of any “confidential documents” of the plaintiff or a client of the plaintiff as identified in the schedule to the amended interlocutory application; and

(3)    requiring the expert to report his or findings to the plaintiff or its solicitors in respect of the findings.

26    By his counsel, Mr Martin agreed that the AEI Mobile could be returned to the plaintiff forthwith. Counsel confirmed that Mr Martin was prepared to inform the plaintiff of the usernames and passwords for any messaging, storage or email systems which he had used at any time during the period 1 August 2022 to 24 February 2023 that were connected with or accessed by the AEI Mobile. It was said that the plaintiff “can do what it wishes with the AEI Mobile”. Although it was submitted that no orders were necessary, given the level of dispute between the parties and the lack of co-operation to date, the better course is to make orders in that regard.

27    The remaining issue is whether orders should be made in respect of any mobile phone using the relevant mobile telephone number during the period 1 August 2022 to 24 February 2023 or any other phone used by Mr Martin for work related purposes during that period. During the course of argument, senior counsel for the plaintiff limited the orders sought to any mobile phone using the relevant mobile telephone number during the period and no longer sought production of any other phone used by Mr Martin for work related purposes.

28    Mr Martin submitted that the proposed orders were invasive, that there was no evidence that the phone number was used for business purposes only and that the orders would lead to a forensic image being taken which would contain a large array of personal information and data including the device’s call history, instant messenger chats and logs, locally stored files, cloud storage data, internet history, location data and system data. Mr Martin noted that there was no evidence to suggest that the defendant has stolen confidential information, and no such allegation was made against him. Mr Martin submitted that the evidence did not establish that such an invasive order was necessary or that other processes, such as subpoenas, were inadequate.

29    Mr Martin also submitted that the orders do not attach to specific property, but rather to property that fits a particular description. He submitted that an order for the inspection of property cannot be made unless the person against whom the order is made is in possession of the property.

30    No evidence was adduced by Mr Martin on this interlocutory application. It follows that there is no evidence that Mr Martin does not have a mobile phone or phones which fit the descriptions put forward or that such phone or phones are not in his possession.

31    I am satisfied that it is appropriate to make orders for any mobile phone which used the relevant phone number during the period 1 August 2022 to 24 February 2023 be delivered to an independent court-appointed expert for examination and report, but in a way more limited than that proposed by the plaintiff. The examination should be limited to what is necessary to report on whether any mobile phone fitting the description was used during the relevant period to facilitate communications between Mr Martin and the entities referred to in Annexure A and to report upon the nature and content of any such communication. The Court takes the view that Mr Martin’s interests are better protected by the expert being one appointed by the Court under r 23.01 as opposed to being retained by the plaintiff. The Court will hear further from the parties in relation to the precise form of those orders.

32    I should also observe that Mr Martin submitted that the order for discovery by categories would be sufficient and that if the Court were to make orders for further discovery, it would be unnecessary to make the order for delivery up of the mobile phone for examination and report. Whilst initially attracted to that proposition, having regard to the discovery which was not made but which should have been made, the Court takes the view that it is appropriate to have an independent court-appointed expert look at the mobile phone which used the relevant mobile phone number in the relevant period and report on specific questions to be more precisely formulated.

33    In the first instance, I will provide time for the parties to seek to agree appropriate orders for the appointment of the independent expert under r 23.01.

Associate:

Dated:    30 March 2023