Blue Badge Insurance Australia Pty Ltd v Farnan

By summons filed on 14 October 2015, the plaintiff, Blue Badge Insurance Australia Pty Ltd ("Blue Badge"), sues the defendant, Ms Christine Farnan ("Ms Farnan"), to ensure the recovery or destruction of Blue Badge's confidential information that was provided to or generated by Ms Farnan in the course of her providing services to Blue Badge. Blue Badge is entitled to the relief which it seeks and Ms Farnan should pay the costs of the proceedings on the indemnity basis.

Before turning to the facts, it is necessary to say something about the procedural history of these proceedings. They were fixed some time ago for hearing before me today with an estimate of three days. Ms Farnan has not appeared. By reason of the matters which I shall now briefly set out, the Court is satisfied that Ms Farnan was aware of today's hearing and that it is appropriate to have proceeded in her absence.

This is the second attempt at the hearing of these proceedings. They were originally fixed for hearing for three days before Slattery J commencing on 14 September 2016. His Honour had made a number of orders against Ms Farnan by way of preparation for that hearing. She did not comply with them.

Shortly before the hearing before Slattery J, Ms Farnan sent an email with an unsigned motion and affidavit requesting an adjournment of the hearing. The basis for her request was her allegation that she was suffering various psychological difficulties that prevented her proper preparation for, and attendance at, the hearing. His Honour acceded to her adjournment application.

On 15 November 2016, the matter was then fixed for hearing before me by the Registrar.

Blue Badge listed the proceedings before me for directions on 23 March 2017. The reason for that being done was what I might neutrally refer to as Ms Farnan’s continued lack of engagement in the proceedings. Ms Farnan did not appear on that day, notwithstanding that she had been given notice of that listing to an email address from which she had sent correspondence. On that day I made a number of directions with a view to the preparation of the matter for hearing before me today. Insofar as those directions required Ms Farnan to do anything, she has not complied with any of them.

Yesterday afternoon my Associate emailed the parties and their legal advisers to inquire whether the matter would be proceeding today. That email was sent at 3.24pm. At 9.32pm last night Ms Farnan sent this email in reply, in what appears to have been an attempt by her to reprise what occurred before Slattery J:

Ms Farnan’s reference to an “FCC case” means proceedings brought by her in the Federal Circuit Court against Blue Badge to which I refer in paragraph [16] below.

When the proceedings were called on for hearing before me this morning, Ms Farnan was called outside the Court. There was no appearance. Mr A R Davis of Counsel appeared for Blue Badge.

Mr Davis submitted that the hearing should proceed in Ms Farnan's absence. He submitted that, to the extent it was relevant, Ms Farnan's email of last night did not, in terms, apply for the adjournment of today's hearing. That is true. Nevertheless, but for the history of this matter, I might have been inclined to treat it as an application for the adjournment of the hearing. However, it is that history which I have set out above which persuaded me that it was appropriate to proceed, provided that Blue Badge was able to demonstrate formally that Ms Farnan had had adequate notice of today's hearing. I say “adequate” because her email of last night proves that she knew about today’s hearing at least from yesterday because of my Associate’s email.

Mr Davis tendered an affidavit and other material which satisfied me that Ms Farnan had received Blue Badge's submissions and the court book (both of which had been prepared in anticipation of the hearing before Slattery J) in good time before the adjourned September 2016 hearing. Other material demonstrated that Ms Farnan had received notice on or about 15 November 2016 of the listing of the hearing before me today. She was also clearly on notice of the hearing which took place before me on 23 March 2017. The orders which I made on that day, which included confirming today's hearing date, were personally served on her on 26 April 2017. Insofar as an additional affidavit was to be relied upon today by Blue Badge, the evidence satisfies me that it had been emailed to Ms Farnan on 7 April 2017 and had been personally served upon her on 26 April 2017.

There is a serious incongruity in the first sentence of Ms Farnan's email of yesterday evening. She states that she is unable to attend “due to ill mental health and being overseas.” I find it difficult to reconcile the two reasons which she has given. The Court finds that Ms Farnan has had proper, and more than adequate, notice of today's hearing and that, for reasons best known to herself, she has chosen to leave the country at this time.

Blue Badge has already been put to the trouble and expense of one hearing that was aborted at the last minute. It would be completely inconsistent with the overriding purpose under s 56 the Civil Procedure Act 2005 (NSW) to deprive Blue Badge of a final hearing today when no proper reason has been proven by Ms Farnan for her absence. I am satisfied that she has deliberately refused to engage with the processes of the Court. The consequence is that the case was heard today in her absence.

Blue Badge was established for the purposes of offering insurance products to a niche market, being persons with limited mobility. At the time of establishing Blue Badge, there were no other insurers specifically targeting the demographic of the market for which Blue Badge was created.

One of the founders of Blue Badge, Mr James Cotis, had known Ms Farnan since approximately 2003. Ms Farnan had a demonstrated expertise in relation to regulatory and compliance issues in the insurance industry.

Mr Cotis, on behalf of Blue Badge, retained Ms Farnan to provide advice to Blue Badge on regulatory and compliance issues. She was retained by Blue Badge as an independent contractor from April 2013 to November 2014. The conclusion which I have expressed derives from the decision of Judge McNab in proceedings between Ms Farnan, Blue Badge and another company in which Ms Farnan was the unsuccessful plaintiff: Farnan v Insurance Logic Pty Ltd & Blue Badge Insurance Pty Ltd [2017] FCCA 595. His Honour also found, and I respectfully adopt his finding, that Ms Farnan's retainer with Blue Badge came to an end without action on the part of Blue Badge in or about November 2014.

When Ms Farnan commenced her retainer with Blue Badge, she executed a Deed of Confidentiality on 19 March 2013 (the “Deed”) under which Blue Badge was described as the “Provider” and Ms Farnan was the “Receiver”. The Deed included:

However Ms Farnan’s retainer came to an end in November 2014, it does not appear to have been amicable as far as she was concerned. On 21 January 2015, Blue Badge’s general counsel wrote to Ms Farnan reminding her of the provisions of the Deed and, in short, making a demand pursuant to clause 3 of the Deed for her to give Blue Badge access to, and to return to Blue Badge, its “Confidential Business Information” within the meaning of the Deed. In these reasons I shall refer to Blue Badge’s “Confidential Business Information” as defined in the Deed as the “Information”.

There then followed some correspondence between the parties. This went on for some time. The ultimate result was that, despite some suggestions that she was going to comply with Blue Badge’s request, in the end Ms Farnan did not do so.

For the purposes of the indemnity costs order sought by Blue Badge, it is important to note that I am satisfied that Blue Badge did not rush into the commencement of these proceedings. Without purporting to set out all of the pre-action correspondence, I note that a further detailed demand was made by Blue Badge’s solicitors to Ms Farnan by letter dated 9 March 2015, enclosing a draft summons.

On 27 March 2015, Ms Farnan replied by an email in which she made various assertions in support of a proposition that she was not required to return the Information.

On 17 June 2015, Blue Badge's solicitors wrote to Ms Farnan again, refuting the assertions made in her earlier email. That letter also evidences a further attempt by Blue Badge to avoid commencing these proceedings by giving Ms Farnan another opportunity to comply with her obligations under the Deed. That was to no avail.

Finally, on 26 June 2015, Blue Badge’s solicitors wrote to Ms Farnan setting out this offer:

Ms Farnan did not take up this final opportunity to avoid these proceedings being commenced. Blue Badge filed its summons on 14 October 2015.

Insofar as Blue Badge’s rights under the Deed are concerned, Mr Davis read several affidavits describing the work undertaken by Ms Farnan during the course of her retainer by Blue Badge. That evidence also made clear that the majority of Ms Farnan’s work for Blue Badge was undertaken on her own laptop computer. The Court is well satisfied that Ms Farnan was provided with and herself generated material which constitutes the Information. In the absence of evidence to the contrary, I am also satisfied that it is likely that, having received or generated the Information in the course of her retainer, she still has that Information in her possession, custody or control.

Quite apart from that evidence, the Court was also taken to an email of 23 November 2015, in the context of debate about Ms Farnan delivering up the Information, from a solicitor apparently acting on behalf of Ms Farnan to the solicitor for Blue Badge:

That email makes clear, by the admission of a person apparently retained on her behalf, that in November 2015 Ms Farnan had documents which fell within those demanded by Blue Badge pursuant to cl 3 of the Deed. It fortifies me in my conclusion that Ms Farnan still has Information in her possession, custody or control to which Blue Badge is entitled under the Deed.

I will conclude these reasons by saying something about the orders which I propose to make. Those orders are the product of exchanges between bench and bar table based upon a draft helpfully prepared by Mr Davis.

First, the orders provide for the delivery up and inspection of computers or any other electronic storage devices belonging to or used by Ms Farnan which I am satisfied are likely to contain the Information. As I have said, it is clear from the evidence that Ms Farnan did most of her work on her own laptop computer. She was not provided with a computer by Blue Badge. That fact was one of many which were taken into account in the Federal Circuit Court proceedings to inform that Court’s conclusion that she was an independent contractor rather than an employee of Blue Badge.

There are also references in the evidence to at least one other computer which may have been used by Ms Farnan to store Information. Clause 3 of the Deed clearly entitles Blue Badge to delivery up of computer and other electronic storage devices which contain the Information. I am satisfied that the regime proposed by orders 1 to 7 set out in paragraph [38] below gives effect to Blue Badge’s rights while appropriately balancing Ms Farnan’s rights insofar as she may be entitled to the return of such computers or other equipment once the Information has been deleted.

I also propose to make orders for the delivery up of documents containing the Information. There is ample evidence that, in addition to working electronically, Ms Farnan produced and used hard copy documents in the course of her retainer.

Order 10 provides for the provision of an affidavit dealing with Information which Ms Farnan once had in her possession, custody and control but no longer does. Blue Badge has confined the legal basis for its relief to the Deed. It has not invoked the equitable principles in relation to the preservation of confidential information. While the rights which Blue Badge seeks to enforce are therefore confined to those specified in the Deed, I am satisfied that as part of the Court’s power to give effective relief, it is within the inherent power of the Court to require the provision of an affidavit of the kind contemplated by order 10. It is not dissimilar to the kind of affidavit which the Court is empowered to, and regularly does, order in connection with asset preservation orders. One source of that power is the inherent jurisdiction of the Court. I do not see why that same inherent jurisdiction should not be invoked so as to provide, as it were by way of further and better assurances, information to be provided by Ms Farnan to ensure that Blue Badge can achieve some level of certainty as to what has happened to its Information.

Insofar as the definition of the Information in the orders is concerned, I raised with Mr Davis the Court’s desire to ensure that what Ms Farnan was required to produce should be expressed clearly and unambiguously. Furthermore, and obviously enough, it also had to be confined to “Confidential Business Information” as defined in the Deed. There is some degree of specificity in the evidence about particular documents. These have been identified in the proposed definition. Furthermore, insofar as more generic descriptions of documents have been used, I am satisfied that they fall within the definition of “Confidential Business Information” under the Deed and, on the evidence, are documents of the kind almost certainly produced or used by Ms Farnan in the course of her retainer by Blue Badge and which she still has in her possession, custody or control. I am also satisfied that, as far as is practicable, the orders will not catch documents which, by Blue Badge’s own proper admission, have lost their confidential quality with the effluxion of time.

Given the penal consequences of non-compliance with its orders, the Court has been anxious to ensure that Ms Farnan knows exactly what she has to do to comply with those orders. However, I should note that the Court will not permit Ms Farnan to take advantage of her own non-compliance to stand in the way of Blue Badge's relief. By this I mean that where, as here, a defendant such as Ms Farnan has flagrantly declined to participate in the proceedings and ignored the directions of the Court, the Court will not, in exercising its discretion to grant specific performance, hold Blue Badge to an unreasonable standard of precision about the material which it seeks.

If Ms Farnan had chosen to participate actively in the proceedings, evidence may well have emerged that might have enabled more precise identification of the material to which Blue Badge is entitled which remains in her possession, custody or control. She has not done so. In those circumstances it is sufficient for me to record that I am satisfied that the identification of the various categories of documents in the orders is sufficiently clear both to reflect that to which Blue Badge is entitled under the Deed and to ensure that Ms Farnan is on notice of precisely what she must do to comply with the orders.

Finally, it is necessary to say something about the costs of these proceedings. Blue Badge applies to have its costs of the proceedings on the indemnity basis. Costs are at the discretion of the Court, provided that discretion is exercised judicially: i.e. rationally, for the purpose for which it was intended and having regard to the evidence. The usual position is that costs follow the event and that those costs are payable on the ordinary basis. However, the Court is entitled to make an order for indemnity costs where it is satisfied, for example, that a defendant has acted unreasonably. In this case the Court is satisfied that Ms Farnan has behaved unreasonably both procedurally and substantively.

The procedural history which I have set out above, up to and including Ms Farnan's email of last night and her non-compliance with any of the recent orders made either by Slattery J or me, are the basis for my conclusion that Ms Farnan has behaved unreasonably in relation to her conduct of these proceedings. Turning to the merits, none of the material to which my attention has been drawn suggests that Ms Farnan has ever had an arguable defence to the relief sought by Blue Badge. I have no doubt that, properly advised, she ought not to have maintained her defence of these proceedings. She was given more than enough opportunities to avoid the litigation and unreasonably refused a very sensible pre-action offer made by Blue Badge (see paragraph [23] above). I am satisfied that all she has done (or not done) has been in an attempt to thwart both Blue Badge in the pursuit of its clear rights and the processes of the Court. Both substantively and procedurally, her unreasonable conduct warrants the making of an order that she pay Blue Badge's costs of the proceedings on the indemnity basis.

The orders of the Court are: