Plus One International Pty Ltd v Ching

1. [1]

   The plaintiffs in this proceeding are jointly engaged in the provision of advisory and consultancy services in education and migration.

2. [2]

   At all material times, Danniel Bo Lin Lee (known as Danniel Lee) was the director of operations and manager of the plaintiffs’ business.

3. [3]

   The first defendant was employed in the plaintiffs’ business in about November 2016. There is a dispute about the scope of the role and duties of the first defendant, but it appears from the pleadings to be common ground that the first defendant’s role included that of marketing officer.

4. [4]

   The second defendant was employed in the plaintiffs' business in about April 2017. Again, there is a dispute about the scope of the second defendant’s role, but it appears from the pleadings to be common ground that her role included preparing and collating client’s student applications for colleges, visa applications, student insurance applications and preparing submissions for any Administrative Appeals Tribunal appeals. The plaintiffs plead that the second defendant’s role also included marketing the plaintiffs' business.

5. [5]

   There is a dispute about the nature of the information that the plaintiffs gather in the course of their business and whether that information is confidential.

6. [6]

   The plaintiffs plead that they gather a range of information in relation to their clients, including “referral leads from client”, and that the information is confidential. The plaintiffs plead that their business relies heavily on client leads and referrals from previous clients. The defendants plead that the plaintiffs’ business also relies on and obtains “leads and referrals from a network of the agents or staff”.

7. [7]

   The plaintiffs plead that their confidential information, including referral leads from clients, is valuable information which, if released or accessed outside the plaintiffs’ business, would allow competitors to anticipate and understand each client’s education and visa requirements. The plaintiffs claim that access to this information would enable competitors to identify target clients and client leads, provide relevant contact details and timing for competitors to undercut the plaintiffs’ pricing structure.

8. [8]

   It is common ground that each of the defendants owed a duty of confidence to the plaintiffs and were subject to implied obligations as part of their employment contract with the plaintiffs to protect and maintain the confidentiality of the plaintiffs’ confidential information, not to use that information other than in the legitimate exercise of their duties as employees of the plaintiffs and to return all confidential information to the plaintiffs on ceasing employment with the plaintiffs. It is also common ground that the plaintiffs provided the defendants with access to the confidential information for the sole purpose of the defendants carrying out their duties as employees of the plaintiffs.

9. [9]

   The first defendant resigned from the plaintiffs’ employment at the end of August 2018. On 13 September 2018, the defendants informed the plaintiffs that they had started a business under the name “JP International Consultancy” which would offer certain services. The plaintiffs claim that the defendants’ business offers the same services as the plaintiffs. The defendants maintain that JP International Consultancy only provides education services.

10. [10]

    There is a dispute about whether the defendants have used the plaintiffs’ confidential information for the benefit of JP International Consultancy. In their statement of claim filed on 17 December 2018, the plaintiffs seek an order requiring the defendants to return the plaintiffs’ confidential information to them, an injunction restraining the defendants from using the plaintiffs’ confidential information, an account of profits, damages, interest and costs. The defendants deny that the plaintiffs are entitled to that relief. The substantive proceeding is listed for hearing commencing on 24 August 2020 before another Judge of this Court.

11. [11]

    On 17 February 2020 the defendants filed an amended notice of motion seeking to set aside part of one notice to produce and seven subpoenas that had been issued by the plaintiffs on 22 and 26 November 2019. Five of those subpoenas were issued to educational institutions, one subpoena was issued to Australia and New Zealand Banking Group Ltd (ANZ) and one subpoena was issued to Medibank Private Limited (Medibank).

12. [12]

    The amended notice of motion was heard by Registrar Walton on 3 April 2020. Further written submissions were made by the parties on 15 April 2020.

13. [13]

    On 29 May 2020, the Registrar delivered reasons for her decision dismissing the defendants’ application to set aside the relevant parts of the notice to produce, and setting aside the seven subpoenas.

14. [14]

    On 11 June 2020, the plaintiffs filed a notice of motion seeking review of the Registrar’s decision under r 49.19 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) insofar as the Registrar’s decision related to the subpoenas.

15. [15]

    The review application was listed before me for urgent determination in view of the impending hearing of the substantive proceeding.

16. [16]

    UCPR r 49.19 relevantly provides:

17. [17]

    The principles applicable to a review of a Registrar’s decision under r 49.19 were helpfully summarised by Hallen AsJ (as his Honour then was) in the following passage from Noble Earth Technologies Pty Ltd v Hampic Pty Ltd [2012] NSWSC 935 at [39], which I gratefully adopt:

18. [18]

    On the hearing of the review application before me, the plaintiffs relied on the same evidence that they had relied on at the hearing of the defendants’ amended notice of motion before the Registrar. The only difference was one of form, namely that the evidence on the hearing of the review application was contained in an exhibit to the affidavit of the plaintiffs’ solicitor which simply listed the material relied on: affidavit of Gina Bae affirmed on 11 June 2020 and Exhibit GB–1 to that affidavit.

Applicable principles

1. [19]

   As the Registrar noted, UCPR r 33.4 relevantly provides:

2. [20]

   There is no dispute that the defendants' had a sufficient interest to seek orders setting aside the subpoenas, which relief was granted by the Registrar.

3. [21]

   In Elanor Operations Pty Ltd v Chief Commissioner of State Revenue [2020] NSWSC 840, Ward CJ in Eq summarised the applicable principles as follows ([42]–[45]):

4. [22]

   In Rinehart v Rinehart [2018] NSWSC 1102, Ward CJ in Eq said at [47]:

5. [23]

   A subpoena will not satisfy those criteria if it is a fishing expedition in the sense that:

Subpoenas issued to educational institutions

1. [24]

   The subpoenas issued by the plaintiffs on 22 and 26 November 2019 that are the subject of this review application included subpoenas addressed to the following educational institutions:

   1. (1)

      Sydney School of Business and Technology Pty Ltd;

   2. (2)

      Australasia Onsung Church Incorporated trading as Australasia Language College;

   3. (3)

      Training Masters Pty Ltd;

   4. (4)

      Onyx Developments Pty Ltd trading as Australasia International School; and

   5. (5)

      Steps Sunshine Coast International College Pty Ltd.

2. [25]

   Each of the five subpoenas required production of the following categories of documents:

   1. (1)

      Student letters of offer sent to “JP International Consultancy” from 1 May 2018 to the date of the subpoena;

   2. (2)

      College Applications made by “JP International Consultancy” from 1 May 2018 to the date of the subpoena;

   3. (3)

      Any contracts between the educational institution and “JP International Consultancy” from 1 May 2018 to the date of the subpoena;

   4. (4)

      Any invoices issued by “JP International Consultancy” to the educational institution from 1 May 2018 to the date of the subpoena; and

   5. (5)

      Any Agent Application forms submitted by “JP International Consultancy” or the defendants or any other representative of “JP International Consultancy”.

3. [26]

   The significance of the date 1 May 2018 is that there is evidence that the defendants registered their business in May 2018. [1]

4. [27]

   The plaintiffs have documentary evidence indicating that the defendants have been dealing with Sydney School of Business and Technology Pty Ltd, Australian Vocational Training Institute Pty Ltd and Australasia International School in respect of persons alleged to be clients of the plaintiffs. There is some evidence that Australian Vocational Training Institute, Training Masters and Steps Sunshine Coast International College are under the same management, and Australasia International School is under the same management as Australasia Language College. [2]

5. [28]

   The Registrar set aside the five subpoenas issued to the educational institutions on the basis that they were drafted so widely that they were a “fishing expedition”. The Registrar considered that, in the absence of evidence of the way in which the plaintiffs’ client referral system worked, the Court could not be satisfied that documents evidencing communications of the kind in the five categories set out in the subpoenas would materially assist either party in relation to the issue whether the defendants used “referral leads” obtained from the plaintiffs’ clients.

6. [29]

   The plaintiffs submitted that Court should exercise its discretion to review the Registrar’s decision in relation to the subpoenas addressed to the educational institutions because the Registrar misunderstood or misapplied the test for what is a “fishing expedition”. The defendants opposed the review application and submitted that, because the subpoenas went beyond seeking documents involving persons on the plaintiffs’ client lists and there was no evidence of the plaintiffs’ referral system, the subpoenas were fishing.

7. [30]

   In my opinion, the evidence in paragraphs 26, 28 and 30 of Mr Lee’s affidavit affirmed on 19 August 2019 [3] establishes that the plaintiffs’ client referral system involved existing clients of the plaintiffs referring or recommending their friends or associates to the plaintiffs or education and/or migration advice or services. I consider that there is a reasonable basis beyond speculation to think that the documents required to be produced under these subpoenas will assist by revealing the extent to which the defendants’ dealings with those educational institutions involve persons who are clients of the plaintiffs or persons recorded in the plaintiffs’ records as having been the subject of referrals by clients of the plaintiffs. There is a reasonable prospect that such evidence, either alone or together with other evidence (including evidence elicited from witnesses in cross-examination), will provide a basis for inferences to be drawn about whether the defendants’ business has been developed using information that the plaintiffs allege is confidential to them, or has been developed by the defendants independently.

8. [31]

   It is the pattern or proportion of commonality between the defendants’ dealings and the plaintiffs’ clients or referral leads that is likely to assist. It is not merely speculative to think that a pattern or proportion is likely to emerge. It is not necessary to be able to discern at this stage whether that pattern or proportion is more likely to assist the plaintiffs or the defendants. It is sufficient that it is likely to assist in the resolution of the issue.

9. [32]

   For those reasons, I have concluded that the Court should exercise its discretion to review the Registrar’s decision in relation to the five subpoenas issued to the educational institutions and paragraphs 2, 4, 5, 7 and 8 of the defendants’ amended notice of motion filed on 17 February 2020 should be dismissed in lieu of order 2 made by the Registrar.

10. [33]

    The parties informed me that the educational institutions have already produced documents in answer to the five subpoenas. At the hearing of the review application, the defendants sought first access to those documents in the event that the Court made the decision that I have indicated above. The plaintiffs submitted that a general access order be made, but accepted that the plaintiffs would suffer no prejudice if the defendants were granted first access for a short period.

11. [34]

    As I understood the defendants’ submissions, they sought first access to check whether the documents contain any private information of the defendants’ clients or information that is commercially sensitive to the defendants, and to consider whether to seek orders in relation to any such information.

12. [35]

    I have concluded that there should be an order that the defendants have first access to the documents produced under those five subpoenas for 7 days from the date of these reasons, and for the plaintiffs to have access to the documents thereafter in the absence of any further order of the Court.

Subpoena to Medibank Private Limited

1. [36]

   The subpoena to Medibank issued by the plaintiffs on 26 November 2019 required production of overseas student health cover policies issued in the name of, and applied for by, the first defendant or JP International Consultancy from 1 May 2018 to the date of the subpoena.

2. [37]

   In his affidavit affirmed on 1 April 2020, Mr Lee deposed that Medibank is commonly used by those in a similar business to the plaintiffs’ business to obtain overseas student health cover policies on behalf of students. Mr Lee deposed that he is aware that some persons who he says were clients of the plaintiffs who went to the defendants’ business obtained policies through AHM Insurance, which Mr Lee says is a business operated by Medibank.

3. [38]

   The Registrar set aside the subpoena to Medibank for the same reasons as the subpoenas issued to the educational institutions were set aside.

4. [39]

   On the review application, the plaintiffs again submitted that the Court should exercise its discretion to review the Registrar’s decision in relation to the subpoenas addressed to the educational institutions because the Registrar misunderstood or misapplied the test for what is a “fishing expedition”. The plaintiffs submitted that the documents would materially assist in establishing the scope of the defendants’ business and the extent to which it was derived from the plaintiffs’ confidential information (including referral leads). The plaintiffs’ submissions acknowledged that, unlike the documents subpoenaed from the educational institutions, the documents produced by Medibank would not assist in identifying any financial gain made by the defendants in providing services using what the plaintiffs allege is their confidential information about clients and client referral leads. As I understand the submission, the Medibank documents would assist in the same manner that I have identified in [30]–[31] above, but it is only the documents produced by the educational institutions (together with the financial records of the defendants’ business) that will assist in identifying financial gain.

5. [40]

   The defendants opposed the review application and submitted that, because the subpoenas went beyond seeking documents involving persons on the plaintiffs’ client lists and there was no evidence of the plaintiffs’ referral system, the subpoenas were fishing.

6. [41]

   For the reasons I have explained in [30]–[31] above, I do not consider that the subpoena is “fishing” on the grounds that it goes beyond documents relating to persons on the plaintiffs’ client list. However, I do not consider that the documents will materially assist in circumstances where, on the plaintiffs’ case, the core of the defendants’ business is education and migration services, the plaintiffs’ have subpoenaed a wide range of educational institutions for the categories of documents that I have referred to above, those documents will assist in identifying the proportion of the defendants’ clients who were clients or client referral leads of the plaintiffs and the fees earned by the defendants for acting for those clients, and arranging health cover is merely an ancillary activity to the defendants’ provision of education services and dealings with those educational institutions.

7. [42]

   The plaintiffs have not persuaded me to exercise the Court’s discretion to set aside the Registrar’s decision in relation to the subpoena issued to Medibank.

ANZ

1. [43]

   The subpoena issued to ANZ on 26 November 2019 seeks production of bank statements for the period since 1 May 2018 in respect of accounts in the name of the first defendant or JP International Consultancy and any account opening applications in the name of JP International Consultancy.

2. [44]

   There was no evidence before the Court on the hearing of the review application to suggest that the defendants’ business banks with ANZ. I was informed on the hearing of the review application that Commonwealth Bank statements for the defendants’ business had already been produced. The plaintiffs submitted that the defendants may bank with the ANZ because they are aware from their previous employment of the first defendant that the first defendant banks with the ANZ. In my opinion, this is speculation.

3. [45]

   The plaintiffs also submitted that the subpoena has a legitimate forensic purpose insofar as it requires production of the first defendant’s bank statements because the first defendant may have received payments relating to the defendants’ business into their personal bank account. Again, I regard this as speculation.

4. [46]

   If an examination of the defendants’ financial records that have been produced under the notice to produce and the Commonwealth Bank statements had revealed any reason to believe that payments relating to the defendants’ business are likely to be deposited into other accounts in addition to the Commonwealth Bank account, it would have been open to the plaintiffs to adduce evidence of this at the hearing of the review application. They did not do so.

5. [47]

   The plaintiffs have not persuaded me to exercise the Court’s discretion to set aside the Registrar’s decision in relation to the subpoena issued to ANZ.

Costs

1. [48]

   The plaintiffs have been successful on the review application in relation to five of the subpoenas. It was those subpoenas that occupied most of the time on the hearing of the review application. No party adduced any evidence or provided any written submissions specifically for the review application. Both parties simply relied on the written submissions and evidence that had been before the Registrar. In those circumstances, the appropriate order in my opinion is that costs should follow the event and the defendants should pay the plaintiffs’ costs of the review application. However, I will hear from the parties in the event that any party submits that a different costs order should be made.

Conclusion and orders

1. [49]

   For the reasons above, I make the following orders:

   1. (1)

      Set aside order 2 made by the Registrar on 29 May 2020 and, in lieu thereof, dismiss paragraphs 2, 4, 5, 7 and 8 of the defendants’ amended notice of motion filed on 17 February 2020.

   2. (2)

      Order that the defendants have first access to the documents produced under the following subpoenas for a period of 7 days from the date of these orders, and the plaintiffs have access thereafter:

   3. (3)

      Order that the plaintiffs’ notice of motion filed on 11 June 2020 is otherwise dismissed.

   4. (4)

      Subject to order 5 below, order that the defendants pay the plaintiffs’ costs of the notice of motion filed on 11 June 2020.

   5. (5)

      Grant liberty to any party seeking an alternative costs order to order 4 above to provide written submissions of no more than two pages to the Associate to Williams J by 28 July 2020 in support of the alternative costs order. Grant liberty to the other party to provide written submissions in reply of no more than two pages to the Associate to Williams J by 31 July 2020. Any such application for an alternative costs order is to be determined on the papers.