Ezystay Systems Pty Ltd v Link 2 Pty Ltd

1. [1]

   These proceedings arise out of a dispute between the plaintiffs (the Ezystay Group of companies) that operate a student accommodation business in Ultimo, NSW, and the defendant companies, Link 2 Pty Ltd (Link 2), the first defendant, and Riches Commercial Pty Limited (Riches Commercial), the second defendant, and the director of Link 2, Gregory Moore Riches, the third defendant, who have started a rival student accommodation business also in Ultimo, NSW.

2. [2]

   There is no issue between the parties that the defendants are entitled to compete with the plaintiffs. Rather the plaintiffs claim that while Mr Riches was a director of the plaintiffs he improperly used the plaintiffs’ documents and information to set up a business in competition with them. The plaintiffs claim that the defendants have refused to deliver up the plaintiffs’ documents and confidential information and material in breach of a covenant in a Deed dated 13 August 2012 terminating the parties’ relationship. The plaintiffs also claim that the defendants have copied and used the plaintiffs’ confidential information in the defendants’ business.

Background

1. [3]

   The plaintiff companies in the Ezystay Group are Ezystay Systems Pty Ltd (Ezystay Systems), the first plaintiff, Ezystay Properties Pty Ltd (Ezystay Properties), the second plaintiff, Sleeping Operations Pty Ltd (Sleeping Operations), the third plaintiff, Sleeping with the Enemy Pty Ltd (Sleeping with the Enemy), the fourth plaintiff, and Sleeping in Australia Pty Ltd (Sleeping in Australia), the fifth plaintiff. Although there are aspects of the Ezystay business that are operated by individual companies in the Ezystay Group I intend to refer the plaintiffs as “Ezystay” except where it is necessary to refer to the individual entities.

2. [4]

   David James Ritchie is a director of each of the plaintiffs. Rujo Pty Ltd (Rujo) is a company controlled at the relevant times by Mr Ritchie and his wife, Diana Ritchie. In 2005 Rujo acquired the companies that later became the Ezystay Group. In 2005 the student accommodation business was operated as ‘backpacker’ hostels. It was later developed into a cleaner and more minimalist type of accommodation with polished floorboards and modern fittings and was from about 2006 or 2007 known as “Ezystay” and “Study House” with associated bed, asset and booking management systems. This new business model was exclusively for the provision of accommodation for international language students. From April 2012 Ezystay operated the business through the website www.studyhouse.com.

3. [5]

   The Ezystay business is conducted at 423, 425, 427 and 617 Harris Street, Ultimo. The first three addresses are conjoined terrace houses. The property at 617 Harris Street, Ultimo is a freestanding house that was being renovated during the relevant period and was completed at some time in 2012. Since 2007 Ezystay Properties has been the registered proprietor of each of these properties.

4. [6]

   Mr Riches was employed with Sleeping with the Enemy between 1 September 2005 and 30 June 2007. He was employed with Sleeping Operations from 1 July 2007 to 31 March 2011. It appears that between 1 April 2011 and 12 September 2012 a contract for services was in place (although not signed) between Ezystay Systems and Riches Commercial pursuant to which Riches Commercial provided the services of Mr Riches to Ezystay Systems.

5. [7]

   Mr Riches was a director of Ezystay Systems from 27 October 2010 to 1 June 2012 and its secretary from 27 October 2010 to 15 August 2012. He was a director of Ezystay Properties from 23 May 2006 to 1 June 2012 and its secretary from 23 May 2006 to 15 August 2012. He was a director of Sleeping Operations from 24 November 2005 to 1 June 2012 and its secretary from 24 November 2005 to 15 August 2012. Mr Riches was a director and secretary of Sleeping with the Enemy from 13 December 2005 to 15 August 2012. He was a director and secretary of Sleeping in Australia from 24 November 2005 to 15 August 2012.

6. [8]

   From about 16 July 2012 Link 2 has operated a business of providing student accommodation through its website www.link2.com.au.

7. [9]

   Mr Riches has been the sole director and secretary of Link 2 since 9 October 2012. Mr Riches is married to Kylie Drew, who is also known as Kylie Riches. Since August 2006 Mrs Riches has been the sole director, secretary and owner of 100% of the share capital of Riches Commercial. Riches Commercial owns 100% of the share capital of Link 2.

8. [10]

   Mr Riches’ duties with Ezystay involved managing the relationship with English Language Company Pty Ltd (ELC), the language college that houses its students at Ezystay’s premises; managing the state of repair of the properties at 423-427 Harris Street; managing compliance issues with regulatory bodies; financial management, reporting and controls; promoting the Ezystay business; managing student issues, payments and receipts; co-ordinating finance and reporting on the progress of the business including the renovation of 617 Harris Street. Mr Riches also prepared Ezystay’s Operations Procedures Manual and was involved with the development of the business generally.

9. [11]

   One aspect of Mr Riches’ duties was developing a software system for the bed asset management system in consultation with software developers and reporting on the progress of that development.

10. [12]

    In May 2011, iNE Australia Pty Ltd, a company specialising in areas including custom software development and web development, of which Jon Davis is the sole director, was retained by Ezystay to develop software for its student accommodation business. Mr Riches advised Mr Davis that Ezystay needed to be able to modify bookings if they changed and to split a booking if a student wished to move beds. Mr Riches also advised Mr Davis that it was essential to develop a feature that would display the bookings per bed, in a calendar display, so that the rooms and bed number were highlighted on the left of the display page and the date for the booking was also displayed.

11. [13]

    Some of the materials that were available from Ezystay’s previous IT consultant’s work were provided to Mr Davis with the instruction that Ezystay did not want him to develop a reservation system but rather a bed asset management system. In the initial discussions Mr Davis suggested that Ezystay might be able to acquire an “off the shelf” hotel booking system rather than incurring the expense of creating a customised system. However Mr Riches advised Mr Davis that Ezystay had looked and could not find anything and there was “nothing out there that meets our requirements”.

12. [14]

    In late May 2011 Mr Davis developed the prototype and completed a proof of concept software to demonstrate an ability to design the database and code that would perform to Ezystay’s requirements. He identified the four (and later five) key stages of the development. Stage One involved the development of the calendar system and incorporation of the property manager login. Stage Two involved the development of a multiple agents booking system that denied dual bookings and provided confidentiality between agents so that student information would be kept confidential between agents. Stage Three included the implementation of the initial reporting structure and user interface design to give the application some form of aesthetic appeal. Stage Four was the implementation of statistics and reporting to track the performance of agents and display the percentage saturations of bookings for the chosen period. Stage Five included functions such as credit card processing and payment tracking for the student bookings.

13. [15]

    Mr Davis completed Stage One between May 2011 and the end of August 2011. Stage Two was completed in September 2011. Stage Three was completed in November 2011. Stage Four was completed in December 2011 and January 2012. Stage Five was only completed in September to December 2012.

14. [16]

    During 2011 Ezystay held discussions with Justin Aitken, the owner of a property not far from the plaintiffs’ properties in Ultimo known as “Bar Broadway”. Those discussions included a proposal to provide accommodation at Bar Broadway using the Ezystay model. Mr Riches informed Mr Ritchie that he had approached the Sydney College of English who were interested in placing some of their students into 423-427 Harris Street, but that they were booked out. Mr Riches informed Mr Ritchie that he had arranged for the Sydney College of English to inspect Bar Broadway because they were interested in placing their students at those premises if the Ezystay model were to be replicated at that property.

15. [17]

    Mr Riches wrote to Mr Aitken at Bar Broadway in March 2011 enclosing a “working draft” of a document and advising him that if he was “prepared to agree in principle to the commercial terms” and confirm by email “especially the obligation of confidentiality” they should start the process of “getting students into your beds asap” [Ex H]. On 3 March 2011 Mr Aitken responded to Mr Riches advising that he was sure that any issues could be worked out “whilst finalising the Agreement”. He also acknowledged that the “need for confidentiality by both parties is paramount”.

16. [18]

    On 3 March 2011 Mr Riches wrote to John Garrett, a consultant to Ezystay, forwarding Mr Aitken’s acknowledgement and advising that “Software” must be the next item on the agenda “to bring up to speed” as discussed [Ex H].

17. [19]

    Mr Ritchie inspected the premises at Bar Broadway with Mrs Ritchie. After this inspection Mr Ritchie had a conversation with Mr Riches in the following terms:

18. [20]

    At this time Bar Broadway had already renovated the first floor of its premises for student accommodation but had less than fifty per cent occupancy. Ezystay developed a proposal to retrofit the model that had been developed for the Ezystay Group into Bar Broadway and manage it for the owner. This proposal included a number of changes to the renovation to adapt to the look and feel of the Ezystay premises (the Ezystay Trade Dress). The estimate for the retrofit was $50,000 minimum and required full adherence to the Ezystay Trade Dress, systems and operational procedures for it to work efficiently.

19. [21]

    In the second half of 2011 Mr Riches reported to Mr Garrett and Mr Ritchie on his discussions with Mr Aitken, including the quotations that he had been arranging, the overall cost of the renovations, whether Ezystay would help fund the renovations and the Facilities Management Agreement that Mr Aitken and Mr Riches were revising.

20. [22]

    On about 14 December 2011 at a management meeting with Mr Ritchie and Mr Garrett, Mr Riches advised as follows:

21. [23]

    On 6 December 2011 Mr Riches sent an email to Mr Garrett enclosing a discussion paper in respect of the future relationship between Ezystay and Riches Commercial and himself. In that document Mr Riches cautioned against unrealistic expectations and expanding at the expense of product quality. He put forward two options: (1) equal shareholding by his and Mr Ritchie’s interests in the Ezystay business; or (2) a structured exit from the partnership. Mr Riches’ recommendations were: (1) the cessation of any further spending on Study House (ie software or design) product development until a decision was made; (2) continuation of the development of 617 Harris Street (with a view to possibly selling it or covering all associated costs); (3) allowing either party to use any IP or IT that had currently been created; and (4) if the structured exit from the partnership was chosen as the appropriate option, allowing either party to pursue any involvement in the market place.

22. [24]

    Mr Garrett advised Mr Riches that the proposal was not acceptable and suggested that he think about it over the Christmas break. Mr Riches advised Mr Garrett that if the proposal was not acceptable, he wanted to leave and to go and do his “own thing with no strings attached”. Mr Garrett advised Mr Riches that some thought should be given to it over the holiday season.

23. [25]

    Mr Davis was contacted by Mr Riches in December 2011 at which time a conversation occurred in relation to the Ezystay software. There is no issue that the conversation took place. There is an issue about some of the words that were used. However Mr Riches gave evidence that the following conversation took place:

24. [26]

    The following day Mr Garrett telephoned Mr Riches. Mr Riches claimed that the following conversation took place with Mr Garrett:

25. [27]

    In late January 2012 Mr Garrett and Mr Riches had the following conversation:

26. [28]

    On 24 January 2012 Mr Riches sent an email to Mr Garrett enclosing a document entitled “Framework Issues for Discussion” for their further meeting later that week. That document included the following:

27. [29]

    After further discussions and communications Mr Riches sent an email to Mr Garrett on 7 February 2012 that included the following:

28. [30]

    From about February 2012 Mr Riches commenced sending Ezystay documents to his personal email and to his wife’s email, the detail of which is discussed later in these reasons.

29. [31]

    On 22 February 2012 Mr Riches wrote to Mr Garrett by email in the following terms:

30. [32]

    At a management meeting on 29 February 2012 Mr Riches presented a basic share sale agreement and forms for change of directorships to Mr Ritchie and Mr Garrett and the following conversation occurred:

31. [33]

    Mr Garrett and Mr Riches had further email communications during the latter part of February 2012 and on 13 March 2012 Mr Riches wrote to Mr Garrett on the subject identified as “Disappointing situation” in the following terms:

32. [34]

    It is apparent that some tension developed between Mr Riches and Mr Ritchie in relation to meetings that Mr Riches had attended with the principal of ELC and allegedly not reported the content of to Mr Ritchie. As ELC was Ezystay’s only client, Mr Ritchie expressed concern that it was anxious about not having matters followed up promptly.

33. [35]

    On 26 March 2012 Mr Riches wrote by email to Mr Garrett in terms that included the following:

34. [36]

    Mr Garrett advised Mr Riches by email on 26 March 2012 that he would review the matters the following day. On 27 March 2012 Mr Riches wrote again to Mr Garrett in terms that included the following:

35. [37]

    It is apparent that in March 2012 Mr Riches spoke with a friend Daniel Sullivan at a company in Sydney known as Konceive about his desire to set up a booking calendar. Amanjeet Singh (also known as Aman Mandaer) worked at Konceive prior to setting up his own business in Punjab, India known as Evomorf that provides, amongst other things, web design and web development. In about 2009 while Mr Singh was working at Konceive he met Mr Riches. On 22 March 2012 Mr Singh wrote by email to Mr Riches in the following terms:

36. [38]

    On 23 March 2012 Mr Riches responded in terms that included the following:

37. [39]

    On 29 March 2012 Mr Riches sent a document entitled “Ezystay Fitout Requirements” to Mrs Riches by email with the subject heading “stock sheet” and the attachment entitled “Stock check sheet Bar Broadway.xlsx” with the message “For your review. xx”. The attachment listed the quantity of stock in the living room/kitchen and bedroom area and the name of the supplier of that stock [Ex A 5804].

38. [40]

    In April 2012 the following conversation took place between Mr Riches and Mr Garrett:

39. [41]

    On 18 April 2012 Mr Riches wrote to Mr Garrett by email in terms that included the following:

40. [42]

    It is clear that by May 2012 Mrs Riches was dealing directly with Mr Aitken at Bar Broadway in preparing for the setting up of the Link 2 accommodation business at those premises. In her email communications with Mr Aitken Mrs Riches referred to the numerous meetings that she had conducted with various language colleges and the fact that Link 2 was formalising partnership agreements with three of those colleges. Mrs Riches also referred to the dialogue with 17 other schools and described the feedback from those with whom she had met as “phenomenal”. Mrs Riches wrote to Mr Aitken on 24 May 2012 as follows:

41. [43]

    On 20 May 2012 Mr Sullivan wrote to Mr Singh and Mr Riches in the following terms:

42. [44]

    On 21 May 2012 Mr Riches informed Mr Singh in a telephone conversation that he was “finalising some stuff” and would get back to him soon to discuss what he wanted.

43. [45]

    On 21 May 2012 Mr Singh wrote the following email to Mr Riches:

44. [46]

    On 21 May 2012 Mr Riches replied, “I will send you info tomorrow and maybe we can skype tomorrow as well?”. On 22 May 2012 Mr Riches wrote to Mr Singh as follows:

45. [47]

    Mr Singh provided Mr Riches with his Skype details once again and suggested that they could talk the following day. It is clear that Mr Singh and Mr Riches communicated by Skype between 23 May 2012 and 30 May 2012 in relation to the preparation of the web page and booking calendar.

46. [48]

    On 30 May 2012 Mr Singh wrote by email to Mr Riches in the following terms enclosing a document entitled “Booking Calendar Features Document” (Features Document):

47. [49]

    On 30 May 2012 Mr Riches prepared letters of resignation from his directorships of Sleeping Property Pty Ltd (the name of Ezystay Properties before 6 December 2011) and Sleeping Operations, the resignation being said to take effect on 1 June 2012 [Ex A 6145; tr 181]. Although Mr Riches may have believed that he had resigned from his relevant directorships, he was still a director of Sleeping with the Enemy and Sleeping in Australia and a secretary of each of the plaintiffs until 15 August 2012.

48. [50]

    On 31 May 2012 Mr Riches sent an email to his wife enclosing a number of Ezystay board reports and tender submissions. The subject of the email was “upload to share file” and the body of the email read “can you add to DD carefully” [Ex A 6179]. The reference to “DD” was to a due diligence file that Mr and Mrs Riches had created for the plaintiffs.

49. [51]

    On 31 May 2012, a friend of Mr Riches, Ian MacLean (employed at that time by Ezystay), forwarded to him an email chain between himself, Mr Ritchie, Mr Garrett and Mr Davis concerning a proposed meeting on 1 June 2012 with the message “Does this make sense to you????” (the Software Email).

50. [52]

    The first email in the chain dated 30 May 2012 was from Mr Ritchie to Mr Garrett, Mr MacLean and Mr Davis which confirmed a meeting on 1 June 2012 at Mr Davis’ business premises the agenda for which was confirmed as follows:

51. [53]

    The second email in the chain dated 31 May 2012 was from Mr Garrett to Mr MacLean, Mr Davis and Mr Ritchie in the following terms:

52. [54]

    On 31 May 2012 Mr Riches forwarded the Software Email to Mrs Riches with the message “fyi” [Ex A 6249].

53. [55]

    On 2 June 2012 Mr Riches sent an email to Mr Singh apologising for the “slow response” in respect of the Features Document and advised him that he would get back to him “over the weekend”.

54. [56]

    On 5 June 2012 Mr Riches advised Mr Singh by email that the Features Document “looks great” and that he only had a couple of changes that he would get to Mr Singh as soon as possible. Later the same day Mr Riches wrote to Mr Singh in the following terms:

55. [57]

    Later on 5 June 2012 Mr Riches sent the Features Document back to Mr Singh with his changes. The Features Document that Mr Singh had prepared based on his conversations with Mr Riches (including Mr Riches responses as underlined) was in the following terms [Ex E]:

56. [58]

    On 6 June 2012 Link 2 was registered.

57. [59]

    On 8 June 2012 Mr Singh sent Mr Riches the first draft of the dashboard for the booking calendar system. That document included reference to the Ezystay property at 423 Harris Street [Ex A 6403.1].

58. [60]

    On 11 June 2012 Mr Riches advised Mr Singh by email [Ex A 6404]:

59. [61]

    During the course of the negotiation process for Mr Riches’ “exit” from Ezystay a plan was made for Mr Ritchie and Mr Garrett to meet with the principal of ELC, David Scott. On 21 June 2012 Mr Riches wrote to Mr Ritchie and Mr Garrett in relation to the proposed meeting with Mr Scott in terms that included the following:

60. [62]

    In response to Mr Riches’ email Mr Ritchie wrote in terms that included the following:

61. [63]

    In late June 2012 Mr Garrett provided some valuations to Mr Riches for discussion at a proposed meeting later that week.

62. [64]

    On 27 June 2012 Mr Riches wrote to Mr Garrett in terms that included the following:

63. [65]

    Mr Riches and Mr Garrett pursued further discussions by email in respect of the valuations.

64. [66]

    On 29 June 2012 Mr Riches wrote to Mr Garrett in terms that included the following:

65. [67]

    Mr Riches went on to suggest that Ezystay should cease dealing with ELC to obtain a letter of intent; marketing Studyhouse; dealing with any software; dealing with builders and contractors; and dealing with any council bodies or certifiers.

66. [68]

    On 2 July 2012 Mr Riches wrote by email to Mr Singh asking him whether he could use the calendar “full time now”. He also asked:

67. [69]

    On 2 July 2012 Mr Singh responded in terms that included the following:

68. [70]

    On 3 July 2012 Mr Riches wrote to Mr Ritchie in response to an email in which Mr Ritchie apparently suggested that Mr Riches had not informed him of his resignation as a director. Mr Riches wrote:

69. [71]

    On 6 August 2012 Mr Riches sent an email to Justin Aitken at Bar Broadway in the following terms [Ex A 7188]:

Deed of Settlement – 13 August 2012

1. [72]

   On 13 August 2012 the Ezystay Group, Mr Ritchie and Rujo entered into a Deed of Settlement with Mr Riches and Riches Commercial (the Deed). The terms of the Deed included the following:

2. [73]

   Link 2 continued its operations at Bar Broadway from August 2012 providing student accommodation and used its booking calendar to allow students and/or agents to book their accommodation.

3. [74]

   In March 2013 Mr Davis became aware that Link 2 was offering student accommodation. Mr Davis accessed the Link 2 webpage and observed that the calendar was “remarkably similar” to the system that he had developed for Ezystay in its design and layout and had certain features that he regarded as unique to the system that he had developed for Ezystay.

4. [75]

   On 18 July 2013 the plaintiffs approached the Court ex parte and obtained a search order directed to the defendants and Mrs Riches. Although the ex parte order was challenged, such challenge was dismissed: Ezystay Systems Pty Ltd v Link 2 Pty Ltd [2014] NSWSC 180. The main claim by the plaintiffs in support of the search order was the alleged breach of the Deed described in the proceedings as the clause 4(c) covenant to return documents and information to the plaintiffs.

5. [76]

   An order was made at the time the search order was obtained for the defendants to file an affidavit in respect of the documents the subject of the search order. In an affidavit sworn on 30 July 2013 Mr Riches stated that he was the sole director of Link 2 and an employee of Riches Commercial and was authorised to make the affidavit on behalf of Link 2 and Riches Commercial. The affidavit included the following:

6. [77]

   The search was completed and the independent computer experts have created a list of what has been described as “Discovered Documents” that were found on the defendants’ and Mrs Riches’ computers and other devices.

The pleadings

1. [78]

   In the Second Further Amended Statement of Claim (SOC) filed on 6 May 2015 the plaintiffs claim that employees, contractors and officers of Ezystay prepared an Operations Procedures Manual (Business Manual), a summary (Elevator Take) and a Systems Manual, each of which is claimed to be confidential and available only to directors, officers and employees of Ezystay and authorised consultants who are subject to confidentiality obligations [SOC 25-26]. The plaintiffs allege that each of these publications contains information, trade secrets, ideas, knowledge, concepts and processes which are confidential and relate to Ezystay, its affairs, business procedures, methodology or systems, business plans or information, described as “Confidential Business Manual Information” [SOC 27].

2. [79]

   The plaintiffs also allege that from about 2007 Ezystay developed interior design features and specifications, comprising a specific composition and standard of fixtures, fittings, finishes and equipment, for its student accommodation business, referred to together as “Trade Dress” [SOC 32]. The features pleaded in respect of the Trade Dress are (a) polished wooden floors without carpets or floor coverings; (b) the layout of the rooms, including bedrooms, bathroom, kitchen, common room and laundry fittings; and (c) beds, linen, desk, wardrobe, lamp, noticeboard, stools, black leather sofa, wide screen TV, DVD player, communal iMac computer, fridge, kitchen utensils, ironing board, each of the same type and arranged in the same configuration [SOC 32]. The plaintiffs allege that Link 2 has from 16 July 2012 advertised and marketed student accommodation with features the same or substantially the same as the plaintiffs’ Trade Dress, and as described in the plaintiffs’ Business Manual, the Elevator Take and the Systems Manual [SOC 50a].

3. [80]

   The plaintiffs’ Software is defined in the SOC as “an original software programme” that was “developed to specifications directed by the Ezystay Group, with a password protected interface to enable persons with access credentials to book student accommodation and store information” [SOC 36].

4. [81]

   The plaintiffs allege that from about 20 June 2011 they owned copyright in an original manual for the Software, defined in the pleading as the “Software Manual” [SOC 43]. It is alleged that the Software Manual is confidential and contains what is described as “Confidential Software Manual Information” [SOC 44].

5. [82]

   The plaintiffs allege that Link 2 has employed an accommodation booking software and system which is the same or substantially the same as the Software and that described in the Software Manual [SOC 50b]. The plaintiffs also allege Riches Commercial through its subsidiary Link 2 is guilty of the same conduct [SOC 51]. The plaintiffs allege that Mr Riches caused Link 2 to engage in this conduct [SOC 52].

6. [83]

   The plaintiffs also allege that Mr Riches has from 16 December 2011: (a) used and/or copied the Business Manual, the Elevator Take, the Systems Manual and/or the Confidential Business Manual Information; and/or (b) copied the Trade Dress; and/or (c) used, copied and/or reproduced the Software and/or the Confidential Software Information; and/or (d) used and/or copied the Software Manual and/or the Confidential Software Manual Information [SOC 53].

7. [84]

   It is alleged that Mr Riches and Riches Commercial retained the “Discovered Material” the subject of the covenant in clause 4(c) of the Deed [SOC 51c; 53e]. The Discovered Material consists of 121 documents listed in Schedule A to the SOC selected from a larger number of the Discovered Documents.

8. [85]

   The plaintiffs also allege that Mr Riches’ conduct was and continues to be in breach of his fiduciary duties and/or director’s duties under s 182 and s 183 of the Corporations Act 2001 (Cth) [SOC 56f-g]; in breach of the Confidentiality Covenant (clause 8), IP Covenant (clause 9) and Property Return Covenant (clause 4(c)) in the Deed [SOC 56c-e]; and in breach of the confidentiality term and intellectual property term implied in his employment agreement or an express term in the engagement agreement with Riches Commercial [SOC 56a-b]. It is also alleged that Mr Riches’ conduct was in breach of his “Confidentiality Duty” as an officer or employee of the plaintiffs [SOC 56h]. It is alleged that Riches Commercial, a party to the Deed, breached the same covenants [SOC 57].

9. [86]

   The plaintiffs allege that Link 2 and Riches Commercial gained an advantage from Mr Riches’ breaches [SOC 54-55]; that they were aware of the obligations and duties to which Mr Riches was subject [SOC 58-59]; and knowingly induced him to breach those obligations and duties [SOC 58-60].

10. [87]

    The plaintiffs seek a permanent injunction restraining the defendants directly or indirectly from using and/or copying the Business Manual; the Elevator Take; the Systems Manual; the Trade Dress; the Software; and the Software Manual [SOC 1].

11. [88]

    The plaintiffs also seek an order that the defendants deliver up and return all hard copies of, and destroy all electronic copies of, documents recording the Confidential Business Manual Information; the Confidential Software Information; the Confidential Software Manual Information; the Discovered Material and “any copy of or document derived from” the Discovered Material [SOC 2 a-b].

12. [89]

    The plaintiffs had claimed damages, equitable compensation, an account of profits and/or compensation under s 1317H of the Corporations Act plus interest [SOC 3-4] but these claims were not pressed at trial (tr 138). The plaintiffs also claim their costs of the proceeding [SOC 5].

13. [90]

    In the Defence to the Further Amended Statement of Claim (D) filed on 4 May 2015 (but taken to be in response to the SOC subject to the Undertaking referred to below) the defendants deny the allegations of similarity in relation to Link 2 and claim that Link 2’s student accommodation business is in accordance with industry standard practices; uses a trade dress in accordance with standard industry practice, using fixtures and fittings commonly used in accommodation for the target market; and uses an electronic accommodation booking system which incorporates a presentation and appearance common to online booking systems [D 43 a-d].

14. [91]

    The defendants deny that Mr Riches used and/or copied the various documents, information and Trade Dress or used, copied and/or reproduced the Software [D 46]. The defendants admit that Mr Riches owed certain fiduciary duties as a director as well as obligations under s 182 and s 183 of the Corporations Act but deny any breach of those duties [D 11; 49]. The defendants also deny that Mr Riches breached any covenants in the Deed and deny that Link 2 or Riches Commercial induced or gained an advantage from any such breaches [D 48-52].

15. [92]

    The defendants admit that the Business Manual, the Elevator Take, the Systems Manual, all photographs and lists of the features of the Trade Dress, all “visual output” of the Software and the Software Manual are the subject of the covenant in clause 4(c) of the Deed [D 24; 35; 42; 49]. However the defendants deny that these materials are confidential or that the plaintiffs had any intellectual property in them [D 19-24; 27; 30-31; 33-41].

16. [93]

    The defendants claim that the Business Manual, the Elevator Take, the Systems Manual and the Trade Dress incorporate information that is in the public domain [D 19; 22e; 26a]; is obvious [D 22f; 26b]; is common to student accommodation operators [D 22g; 26c]; and is not unique to the Ezystay business [D 22h; 26d].

17. [94]

    The defendants claim that the plaintiffs have never claimed any intellectual property in the “source code” of the Software [D 30a]. They deny that the Software is confidential in its look or design and claim that it has been made available to third parties such as customers of the Ezystay Group for the purpose of making bookings [D 30b].

18. [95]

    The defendants claim that if there were any breach it was de minimis and there is no evidence of damage [D 56b]. The defendants also claim that damages are an adequate remedy and that the terms of the injunction sought by the plaintiffs would have the practical effect of preventing the defendants from conducting any student accommodation business in circumstances where the Deed does not restrict competition between the parties [D 56a; c].

19. [96]

    The defendants admit that they had possession of the Discovered Documents as at 23 July 2013 but otherwise do not admit the allegations. The defendants refer to an undertaking given to the Court on the first day of the trial [Ex B] and contend, inter alia, that Mr Riches “inadvertently” kept possession of the Discovered Documents by way of “backups, access to the ‘Cloud’ storage systems and email records and archives” [D 44b; 46b; 56d]. That undertaking proffered to the Court on 30 April 2015 (the Undertaking) is in the following terms:

The trial

1. [97]

   The proceedings were heard on 30 April 2015 and 1, 4, 5, 6, 7 and 14 May 2015. Mr JC Kelly SC appeared for the plaintiffs. Mr J Lazarus, of counsel, leading Mr S Lipp, of counsel, appeared for the defendants.

2. [98]

   The plaintiffs read three affidavits of Mr Ritchie, one sworn on 17 July 2013, a confidential affidavit of the same date and an affidavit of 17 November 2014. Mr Ritchie was cross-examined. The plaintiffs also relied upon three affidavits of Mr Garrett sworn on 17 July 2013, 13 September 2013 and 14 November 2014. Mr Garrett was cross-examined. The plaintiffs also relied upon three affidavits of Mr Davis sworn on 16 July 2013, 15 May 2014 and 17 November 2014, the first two of which are confidential affidavits. Mr Davis was cross-examined. The plaintiffs also relied upon the affidavits of Michael Garvin sworn on 16 May 2014 and 21 May 2014 and of Simon Fullerton sworn on 24 April 2015. Neither Mr Garvin nor Mr Fullerton was required for cross-examination.

3. [99]

   The defendants relied upon the affidavit of Mr Riches affirmed on 27 August 2014. Mr Riches was cross-examined. The defendants also relied upon the affidavit of Mr Singh made on 31 July 2014. Mr Singh was cross-examined. On the fourth day of the trial, 5 May 2015, the defendants relied upon an affidavit of Mrs Riches affirmed on 5 May 2015. Mrs Riches was cross-examined.

4. [100]

   The parties relied upon their respective experts who produced various reports including joint reports to which reference will be made later in these reasons. The plaintiffs relied upon the expert opinion of Dr Bradley Schatz. The defendants relied upon the expert opinion of Professor Robin Braun. The experts’ reports are in evidence [Ex PD 1 to Ex PD 5]. Dr Schatz was cross-examined.

5. [101]

   On the sixth day of the trial, 7 May 2015, the defendants sought an adjournment to call further expert evidence having only recently appreciated the plaintiffs’ claim that what was in the Features Document prepared by Mr Singh and approved by Mr Riches was the plaintiffs’ confidential software information (tr 367). That adjournment was allowed. On the last day of the trial, 14 May 2015, the defendants sought to rely upon the report of David Baskind of 13 May 2015. That report was rejected and marked for identification [MFI 5]. I indicated to the parties that having regard to the defendants’ apparent misapprehension of the plaintiffs’ claims, I would revisit the admissibility of the report should it be necessary.

6. [102]

   Mr Baskind was asked to report on a number of questions including whether any of the features in the Features Document were or are now capable of being conceptualised (thought up) by a designer starting from scratch and if so how long it would take; whether any of the features in the Features Document were unique or special; whether any of the features in the Features Document were necessary and/or desirable in an automated calendar booking system for student accommodation; how much labour would be required (in hour terms) to implement the features in the Features Document; and how much skill was required to implement each feature in the Features Document.

7. [103]

   None of the material that Mr Baskind addressed was put to either of the experts, Professor Braun or Dr Schatz (except the question of desirability or necessity (tr 355)), nor was Mr Davis cross-examined about many of them. Certainly Mr Singh was not asked any questions about how long it might take to conceptualise a system “starting from scratch”. Both Mr Davis and Mr Singh gave evidence of how long it took them to create the respective systems. It was not in issue in the proceedings that features within the Features Document could be found in other accommodation web pages. Whether something is “desirable” in a booking system is not a matter that would assist with the determination of the issues in dispute in this litigation. How long it might take people other than Mr Singh or Mr Davis to create a system is also not a matter that would assist the determination of the issues presently in dispute in these proceedings. In many respects Mr Basking had not exposed the reasoning upon which his conclusions were based: Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705. Mr Baskind’s report remains inadmissible.

8. [104]

   On 14 May 2015 final submissions were made and judgment was reserved.

Issues

1. [105]

   The defendants’ Undertaking to delete and/or return documents, including those in the Schedule attached to the Undertaking, is without admissions and does not obviate the need to deal with a number of issues in respect of the defendants’ conduct: (a) in obtaining and retaining the plaintiffs’ documents; (b) copying parts or the whole of those documents; and (c) using the documents created from copying the plaintiffs’ documents in the defendants’ new business.

2. [106]

   There is no issue that the hard copy documents in the defendants’ possession falling within the definition of “Books, Records, Materials and Documentation” in the Deed must be returned to the plaintiffs. Equally there is no issue that the electronic copies of the documents falling within the definition of “Books, Records, Materials and Documentation” in the Deed must be deleted.

3. [107]

   Although many of the plaintiffs’ documents were found in the defendants’ possession when the search was conducted which must be returned to the plaintiffs and/or deleted, the parties were at issue in respect of documents the defendants created from copying: (a) the Business Manual; (b) the Elevator Take; (c) the Systems Manual; (d) the Trade Dress; and (e) the Software and the Software Manual.

4. [108]

   There was an issue whether, on their proper construction, the provisions of clauses 4(c)(i) and 4(c)(ii) of the Deed for the return of hard copies and the deletion of electronic copies of the plaintiffs’ “Confidential Information and Books, Records, Materials and Documentation” require the defendants to return or delete documents they have created by copying parts or the whole of the plaintiffs’ Confidential Information or Books, Records, Materials and Documentation (the hybrid documents).

5. [109]

   The defendants claimed that they were only prohibited from using or reproducing (copying) parts or the whole of the plaintiffs’ documents or information if they fell within the definition of “Confidential Information” in the Deed. Accordingly there are issues whether: the Business Manual, the Elevator Take, the Systems Manual, the Trade Dress and the Software and the Software Manual fall within the definition of “Confidential Information” in the Deed.

6. [110]

   I should refer to the following exchanges during the defendants’ final oral submissions (tr 406; 423):

7. [111]

   Although Mr Lazarus made the abovementioned concessions, the Undertaking contains reservations in respect of whether “any such copies exist”. It would appear that the defendants accept that if they have copied large slabs of the plaintiffs’ documents, confidential or otherwise, the documents as created fall within the definition of “Books, Records, Materials and Documentation”.

Construction of the Deed

1. [112]

   Clause 4 requires Riches Commercial and Mr Riches to return to the plaintiffs all hard copies of Ezystay’s “Confidential Information and Books, Records, Materials and Documentation”. The defendants failed to return or delete copies of the plaintiffs’ Books, Records, Materials and Documentation. However the defendants claim that their failure in this regard was inadvertent, not resulting from any deliberate planning but rather by reason of a mistake.

2. [113]

   In Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, French CJ, Hayne, Crennan and Kiefel JJ said at 656-657 [35] (footnotes omitted):

3. [114]

   The term “Books, Records, Materials and Documentation” is defined in clause 1(n) of the Deed to mean “all books, records, documentation, diagrams, photographs, images, manuals, operations or procedures manuals, plans, and rules”. It is any hard copy of these that must be returned and any electronic copy (wherever stored) that must be deleted (after a copy of the electronic copy has been provided to Mr Ritchie) under clause 4(c)(i) and (ii) of the Deed.

4. [115]

   The plaintiffs submitted that a reasonable businessperson would readily have understood the phrase “copies of” to pick up the product of any form of copying in whole or in part where the plaintiffs’ Books, Records, Materials and Documentation have been taken and stored.

5. [116]

   In this regard the plaintiffs relied upon the following passage of Emmett J’s judgment in EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Limited [2011] FCAFC 47; (2011) 191 FCR 444 at 456-457 [51] as follows:

6. [117]

   The plaintiffs submitted that in copyright law a copy is an item derived from copyright material, either directly or indirectly, and which bears a substantial similarity to that material, the similarities not being the result of mere coincidence.

7. [118]

   The commercial purpose or object of the Deed was to finalise the parties’ relationships, returning to Mr Riches and Riches Commercial an amount of money representing their investment in the Ezystay business and returning to the plaintiffs (or deleting) the copies of the plaintiffs’ Books, Records, Materials and Documentation that the defendants had received by reason of their involvement in the plaintiffs’ business operations.

8. [119]

   The question whether the hybrid documents created by the defendants by cutting large slabs from the plaintiffs’ documents and pasting them into a new document with the defendants’ amendments fall within the definition of “all hard copies” and/or “all electronic copies” of the plaintiffs’ Books, Records, Materials and Documentation in clause 4(c)(i) and (ii) of the Deed seems no longer to be in issue having regard to the exchanges extracted at [110] above. However it does not seem to me to be appropriate to leave the position as it was stated as being “a matter of degree”. This would require an audit of the documents retained by the defendants to decide: (a) which of the plaintiffs’ documents have been copied; and (b) the extent or “degree” of copying. This is simply not feasible.

9. [120]

   In their written submissions, in contrast to the abovementioned concession, the defendants submitted that the language of clause 4(c) of the Deed is to be contrasted with the terms of the negative covenant assumed by Mr Riches and Riches Commercial in clause 8 of the Deed. Clause 8 prohibits the defendants from disclosing, using, copying or reproducing the Confidential Information for any purpose. The defendants submitted that if clause 4(c) is intended to require the defendants to return or delete all material “copied” (in a copyright law sense) then similar language to that in clause 8 would have been used in clause 4(c). It was submitted that clause 4(c) is not intended to operate as a prohibition on copying the plaintiffs’ material.

10. [121]

    The evidence establishes that the defendants retained electronic copies of: the Business Manual and hybrid documents thereof; the Elevator Take and the hybrid document thereof; the Systems Manual and hybrid documents thereof; the Software Manual; and images and diagrams and other records comprising the Trade Dress. In accordance with the defendants’ concession all of these documents fall within the definition of “Books, Records, Materials and Documentation” in the Deed. I am satisfied that they were not deleted or returned on completion. I am satisfied that Riches Commercial and Mr Riches were in breach of clause 4 of the Deed in this regard.

11. [122]

    Although perhaps unnecessary in light of the exchanges at [110] above, I should for abundant caution deal with the next question of whether the provisions of clauses 4(c)(i) and 4(c)(ii) of the Deed for the return of hard copies and deletion of the electronic copies of the plaintiffs’ “Confidential Information” required the defendants to return (or delete) the copies of the hybrid documents. The answer to this question is in the affirmative if the hybrid documents contained the plaintiffs’ Confidential Information as defined in the Deed. The determination of this issue requires an analysis of the relevant documents and information the subject of the plaintiffs’ claims. Before turning to that analysis it is appropriate to refer to those parts of the Deed and the applicable principles relating to confidential information.

Confidential Information

1. [123]

   Clause 8 of the Deed provides as follows:

2. [124]

   Clause 1(d) of the Deed defines “Confidential Information” as follows:

3. [125]

   The information has to be “confidential” as well as having the attributes in paragraphs (i) or (ii) of the definition. The defendants are prohibited from using, copying or reproducing Ezystay’s information about its business that is confidential. In addressing whether the information the subject of the plaintiffs’ claims is confidential, each of the parties relied upon the following passages of Marshall v Prescott [2015] NSWCA 110 at 50-55:

4. [126]

   The information alleged to be confidential must be specific in the sense that it is clear and identifiable as confidential: Amway Corporation v Eurway International Limited [1974] RPC 82 at 86-87; O’Brien v Komesaroff (1982) 150 CLR 310 at 327-328. The defendants relied in particular upon Kirby P’s classification in Wright v Gasweld Pty Limited (1991) 22 NSWLR 317 at 333 as follows:

5. [127]

   Additionally the defendants relied upon the following passage of Wanstall J’s judgment in Aloha Shangri-La Atlas Cruises Pty Ltd v Gaven [1970] Qd R 438 at 446-447:

6. [128]

   The defendants also referred to a number of other cases supporting the proposition that business methods and practices (as distinct from, for example, manufacturing processes) are usually not capable of protection by an action for breach of confidence: Lancashire Fires Ltd v SA Lyons & Co Ltd [1996] FSR 629 at 668 (relating to manufacturing processes); Drake Personnel Ltd v Beddison [1979] VR 13 at 20-21 (relating to trade secrets); H&R Block Ltd v Sanott [1976] 1 NZLR 213 at 217 (relating to business manuals and forms); Commercial Plastics Ltd v Vincent [1965] 1 QB 623 at 641 (also relating to manufacturing processes).

Do the plaintiffs’ documents contain Confidential Information?

1. [129]

   Although there was some initial resistance to the suggestion that the defendants had copied the plaintiffs’ documents, the evidence establishes that Mrs Riches (and/or Mr Riches) copied parts of the Business Manual to create hybrid documents with “Link 2” instead of “Ezystay” on them. The evidence also establishes that Mrs Riches copied material from the Ezystay Systems Model, referred to by the plaintiffs as the Systems Manual, and created the L2 Overview document. The evidence also establishes that Mrs Riches copied the contents of the Ezystay Elevator Take to create the Link2 Elevator Take. It is therefore necessary to determine whether the Business Manual, the Systems Manual and the Elevator Take contain Confidential Information as defined in the Deed. In addition it will be necessary to determine whether the plaintiffs’ Trade Dress is Confidential Information.

2. [130]

   There are also issues as to whether the plaintiffs’ Software and Software Manual are confidential and whether the defendants copied the Ezystay booking software and retained it as part of the Link 2 booking system (the Software claim). I will deal with the Software claim separately and later in these reasons.

3. [131]

   The Operations Procedures Manual (the Business Manual) sets out in detail in section A the “Arrival Process” for the students who are to be accommodated at the “Ezystay house”. Section B deals with “House Rules”. Section C deals with “Departures”. Section D deals with “Cleaning and Maintenance”. Section E deals with “Stock Control, Purchasing and Reporting”. Section F deals with “General” matters.

4. [132]

   The Appendices to the Manual include a detailed checklist for the House Manager to follow on the Check in Procedure; a pro forma Welcome Letter; a copy of the House Floor Plan; the “House Rules”; a Guest Induction Procedure document identifying the documentation that the House Manager is required to have completed and the action to be taken for every guest induction; a copy of the Resident’s Agreement; a pro forma authorisation for credit/debit card payment of the Key Deposit on arrival; a Pre Departure Procedure document showing the documentation the House Manager is required to have completed and the action to be taken for every guest 48 hours prior to departure; a pro forma Departure Letter; a Departure Checklist; a pro forma authorisation for credit/debit card refund of the Key Deposit on departure; a Departure Procedure document showing the documentation the House Manager is required to have completed and the action to be taken for every guest departure; a table showing the documentation that the House Manager is required to use and complete for reporting purposes in order to fulfil parts of the House Manager’s duties; a Cleaning and Maintenance Checklist; a list of important contacts; a Maintenance Request Procedure document showing the documentation the House Manager is required to have completed and the action to be taken for each major maintenance issue; a Maintenance Request Form; a Purchase Order Form; a Petty Cash Expense Form; a pro forma document for the Manager’s Daily Report; and a First Aid Log Sheet.

5. [133]

   Mr Ritchie gave affidavit evidence that the Business Manual “which reflects the Group’s business model” was created by the plaintiffs, in fact by Mr Riches with the assistance of Mr Garrett, and was not available to anyone except for himself, Mr Garrett, Mr and Mrs Riches and Mr MacLean (who was a House Manager at the relevant time). This evidence was not challenged. Rather the defendants contended that (irrespective of the restricted access to the Business Manual) the information in the Business Manual could not be Confidential Information.

6. [134]

   The defendants submitted that the Business Manual is little more than a set of ‘rules’ governing the manner in which Ezystay employees will conduct the business of Ezystay. In particular it was submitted that section A represents a set of procedures that are common knowledge and trivial in nature. The Resident’s Agreement is a document distributed to residents and presumably agreed to by residents. It was contended that the section dealing with a Key Deposit cannot be confidential. It was also submitted that the House Rules in section B are communicated to residents and are therefore not confidential. Similarly it was contended that section C deals with the manner of guests’ departures and must be communicated to the guests and cannot be confidential. It was also contended that section D dealing with cleaning and maintenance and section E dealing with stock control are matters of common knowledge and industry practice and are not confidential. It was also submitted that for the greater part the Appendices contain information that is communicated to residents.

7. [135]

   The defendants submitted that no part of the Business Manual is capable of having the necessary character of confidentiality and that the information in it falls exclusively within categories (i) and (ii) listed in Wright v Gasweld, being publicly available or trivial or common to a particular trade.

8. [136]

   In final written submissions dated 13 May 2015 (DWS) the defendants submitted that Mr Ritchie “conceded that every student who stayed at Ezystay’s premises would be aware of the contents of the Business Manual”. The evidence relied upon for this concession was referred to in footnote 60 of DWS as transcript page 57 lines 25 to 28. At this part of the transcript Mr Ritchie was being asked about the Systems Manual (tr 56). Mr Lazarus took Mr Ritchie through sections of that Manual and in particular the “dot points” of paragraph 1.3 therein which contains a “more specific statement of what Ezystay provides” (tr 56). Although some of the evidence has been suppressed by reason of its contents containing confidential information [MFI 6] it is appropriate to refer to Mr Ritchie’s following cross-examination (tr 57):

9. [137]

   The last question and answer in this extract is that which is relied upon by the defendants in support of their submission that Mr Ritchie conceded that “every student who stayed at Ezystay’s premises would be aware of the contents of the Business Manual”. On no reading of the transcript could such a concession be supported. All that Mr Ritchie was conceding in this evidence was that the students who stayed in Ezystay’s accommodation would be aware that Ezystay provided the things to which the first answer in the above extract referred because they were provided with those things. There was no concession in this part of the evidence upon which the defendants relied in respect of the students being aware of the contents of the Business Manual. However Mr Ritchie was cross-examined about the “Study House Handbook” [Ex 6] that is provided to all guests who stay at the Ezystay properties (tr 53-55). Mr Ritchie agreed that these two documents were “basically similar”. However this document does not include the appendices dealing with the operational guidance for the House Manager.

10. [138]

    The Business Manual contains the model (processes and steps) pursuant to which Ezystay operates its business. Ezystay has expended time and cost in putting together the detail of the manner in which it will conduct its business in providing accommodation to the language students in its properties and has restricted access to this model. It is a gathering together of steps to be taken within the business process which (it would be hoped) if followed would give Ezystay a competitive edge over other businesses in the same market.

11. [139]

    Obviously there are some aspects of the contents of the Business Manual, for instance, the Welcome Letter and the Departure Letter that cannot on their own be confidential information because they are provided to the students on arrival and on departure respectively. Equally obviously when a student arrives at the accommodation and goes through the induction process, such process from the extent of the communications between the House Manager and the student and the provision of any relevant documents including the Study House Handbook cannot be said to be confidential. However that does not mean that the Business Manual cannot be said to be confidential.

12. [140]

    The Business Manual contains the processes for the operation of the business and the reporting structure from the House Manager to enable Ezystay to assess the operational efficiencies of its business.

13. [141]

    I am satisfied that the information that Ezystay has gathered together in its Business Manual is its business model or formula for success for the operation of its business. That information relates to Ezystay’s business and procedures. I am satisfied that the Business Manual is within the meaning of Confidential Information in the Deed.

14. [142]

    Mr Ritchie gave affidavit evidence that the “Systems Model”, referred to in the proceedings as the “Systems Manual”, was prepared by himself, Mr Garrett and Mr and Mrs Riches for submission to the Sydney College of English. It is dated October 2011. Although claiming in his affidavit that the document was “confidential” Mr Ritchie did not give evidence in respect of access to this document. Mr Ritchie’s affidavit evidence was that it was “never completed”.

15. [143]

    The Systems Manual has four sections. Chapter 1 is entitled “Introduction to Ezystay” with sub paragraphs 1.1 to 1.3. Chapter 2 is entitled “Accommodation” with sub paragraphs 2.1 to 2.6 and includes a series of photographs of the accommodation. Chapter 3 is entitled “Terms and Conditions” and contains drafts of parts of a “College Agreement” and a “Resident’s Agreement”. Chapter 4 is entitled “Operations and Procedures” with one sub paragraph 4.1 entitled “Overview”. The last paragraph of the Systems Manual records that the Ezystay “Policies and procedures can be viewed in their entirety in the operations manual”. The Systems Manual appears to be in the form of a tender document for the business of the Sydney College of English.

16. [144]

    The defendants submitted that the Systems Manual does not have any specificity and is largely a collection of bullet points describing matters provided by most accommodation providers such as: “Unlimited ‘Wi-Fi’; ‘24/7’ On Call Management; Safe and Secure Facilities; and Large Fridge”.

17. [145]

    It was submitted there is nothing in this document that has the necessary quality of confidentiality. Indeed it was submitted that it was designed to be in the nature of advertising. In this regard the defendants relied upon the following (previously suppressed) passages of Mr Ritchie’s cross-examination (tr 56-58):

18. [146]

    The defendants submitted that the information in the Systems Manual is not confidential and falls exclusively within categories (i) and (ii) in Wright v Gasweld being publicly available or trivial or common to the business of student accommodation providers.

19. [147]

    There is no doubt that the Systems Manual includes material referring to attributes of Ezystay’s business of which a person could become aware upon staying in Ezystay’s accommodation. Although it includes reference to these attributes, skill and work has obviously gone into compiling it and it appears to have been in preparation for a tender for the business of a prospective client. A reasonable person standing in the shoes of the recipient of the information as compiled would have realised that it was provided in confidence: Coco v AN Clark (Engineers) Ltd at 47. It contains information relating to Ezystay’s business and procedures.

20. [148]

    I am satisfied that the Systems Manual contains Confidential Information as defined in the Deed.

21. [149]

    Mr Ritchie gave affidavit evidence that the “elevator take” or “summary” of Ezystay’s business was developed by Mr Garrett, Mr and Mrs Riches and himself in 2011. Although Mr Ritchie’s affidavit evidence contained a claim that the document “is confidential”, there is nothing in the evidence to suggest that its content was restricted only to those persons.

22. [150]

    The Elevator Take is in the following terms:

23. [151]

    When the search was conducted there was an exact copy of the plaintiffs’ Elevator Take found in the defendants’ possession [Ex A 2775]. The hybrid copy found in the defendants’ possession was in near identical terms to the Ezystay document except the name Ezystay had been replaced with the name Link 2 and the web address had been changed to the Link 2 address [Ex A 1962].

24. [152]

    The defendants submitted that the statements in the Elevator Take are designed to encourage third parties to use Ezystay’s services and have the inherent nature of a public statement. The defendants relied upon the following (previously suppressed) passages of Mr Ritchie’s cross-examination in this regard (tr 62):

25. [153]

    The defendants submitted that the Elevator Take is not confidential and falls exclusively within categories (i) and (ii) listed in Wright v Gasweld.

26. [154]

    I am not satisfied that the Elevator Take contains Confidential Information as defined in the Deed.

27. [155]

    Each of the Business Manual and Systems Manual were found on the defendants’ computers at the time of the search. Each of those documents contained the plaintiffs’ Confidential Information. Each of them was the subject of the property return covenant in clause 4(c)(i) and (ii) of the Deed. Riches Commercial and Mr Riches were in breach of that covenant in failing to return those documents to the plaintiffs.

28. [156]

    Any hybrid documents that were created by copying or using the material in the Business Manual and the Systems Manual are the subject of Clause 8 of the Deed. In any event those documents contain Confidential Information and are also the subject of the covenant in clause 4(c)(i) and (ii) of the Deed. Riches Commercial and Mr Riches are in breach of that covenant.

29. [157]

    Although the Elevator Take is not confidential, it and the hybrid copies of it fall within the description of “Books, Records, Materials and Documentation” in the Deed and must be returned.

30. [158]

    Clause 9(a) of the Deed includes the agreement by Riches Commercial and Mr Riches that “All Intellectual Property created or developed by, in relation to or in connection with the Group, belongs to and vests in the Group exclusively”. Riches Commercial and Mr Riches also warranted that they “shall not do any act or thing which directly or indirectly infringes the rights of the Group with respect to its Intellectual Property” (cl 9(c)).

31. [159]

    The definition of Intellectual Property in the Deed includes “trade dress and get-up”. Mr Ritchie described in detail what he regarded as the Trade Dress of the plaintiffs. Those items were as follows:

32. [160]

    The plaintiffs claim by reference to photographs obtained from the Link 2 website that the Ezystay Trade Dress has been substantially copied. Mr Ritchie gave evidence that the photographs display similar fittings, floors and layouts in the Bar Broadway accommodation to that of the Ezystay Trade Dress. Mr Ritchie accepted in cross-examination that polished wooden floor boards are not unique to Ezystay’s accommodation (tr 43); that all student accommodation providers would be expected to provide a television (tr 44-45); that he would not be surprised that all student accommodation providers have sturdy, comfortable single beds (tr 45); and that many of the things found in his description of the Trade Dress are found in other student accommodation (tr 45-46).

33. [161]

    The defendants submitted that Mr Ritchie conceded that in comparing the photographs of the Link 2 and Ezystay premises he had omitted to say that: the appliances used by Link 2 were different; the location of the computer was different; Link 2 has air conditioning and Ezystay does not; the layout of the buildings is different; the stools used were different; there were two fridges at the Link 2 premises and only one at the Ezystay premises and the fridges were of a different style; the dish drainers and kettles were different; the layout of the bedrooms was different and the bathrooms were different. The defendants also relied upon a number of exhibits [Ex 2-5] to compare photographs of other student accommodation suppliers with the Trade Dress claimed by Ezystay. Reliance on these exhibits is in support of a proposition that the Trade Dress is common to the industry, banal and could not be subject of any proprietary right. It was submitted that the retrospective labelling of the “look and feel” of the Ezystay fitout as “Trade Dress” does not make it something that is protected from copying. The first time the expression “trade dress” was used was in the Deed. However that is the terminology that the parties used in terminating their relationship and they accepted that the Trade Dress or get-up was part of the plaintiffs’ intellectual property.

34. [162]

    It is true that the issue of Trade Dress generally arises in cases involving passing off. The defendants submitted that without the protection of a trademark there are no intellectual property rights in the Trade Dress or get-up that attract the operation of clause 9(c) of the Deed. It was noted that there is no allegation that any person was misled into believing that the accommodation offered by Link 2 was in fact accommodation offered by Ezystay.

35. [163]

    The defendants submitted that in the absence of any intellectual property right the covenant in clause 9(c) does not prevent any use of the Trade Dress because there is simply no right that the law would enforce to prevent the copying of it. The defendants submitted that in any event there was no copying of the Ezystay Trade Dress notwithstanding that there are some similarities between the two premises. Finally the defendants submitted that Ezystay has led no evidence that it has lost any profit or suffered any loss by reason of the copying of the Trade Dress.

36. [164]

    It is obvious that there are similarities between the presentation of the accommodation that Ezystay provides and that provided by Link 2. The evidence demonstrates that student accommodation providers attempt to achieve a clean and attractive environment using polished floorboards and modern furniture. Notwithstanding that the defendants have used some of the ideas and presentation gleaned from the Ezystay accommodation I am not satisfied that they have copied the Trade Dress as pleaded.

37. [165]

    The plaintiffs’ Trade Dress claims against the defendants fail.

Consideration of evidence of copying

1. [166]

   There were more of the plaintiffs’ documents that Mrs Riches copied to create documents for Link 2 than those claimed in the SOC to contain Confidential Information. The process adopted by Mrs Riches was that she would cut and paste material from the Ezystay documents to create the hybrid documents, sometimes with very little amendment and at other times with additional material added to the document.

2. [167]

   It is appropriate to analyse this conduct in considering the surrounding circumstances to the defendants’ establishment of the Link 2 booking calendar and website and the plaintiffs Software claim.

3. [168]

   On 21 February 2012 Mr Riches sent an email to his wife attaching a document entitled “L2 Overview”. The document contained a summary of the Link 2 business [Ex A 5516]. Although Mr Riches sent this document to Mrs Riches he claimed that it was put together by her (tr 174). The L2 Overview document has large slabs pasted into it from the Ezystay Systems Manual without amendment but for the change of name from Ezystay to Link 2. I will not extract these aspects of the document because I am satisfied that the Systems Manual falls into the category of “Confidential Information” as defined in the Deed.

4. [169]

   Mr Riches accepted in cross-examination that another document entitled “Link2 Group Business In Summary” [Ex C] was prepared “for the commercial purposes of Link 2” and that it was prepared “somewhere between March and July of 2012” (tr 165; 167). He also accepted that parts of the “Ezystay Systems Group Business In Summary” document had been copied into the “Link 2 Group Business In Summary” document [Ex D; tr 168].

5. [170]

   An Ezystay PowerPoint presentation for ELC was a document discovered on the computers of the defendants during the search [Ex A 2868]. Parts of this document were copied or cut and pasted into a Link 2 Presentation document [Ex F]. The first four pages of the Link 2 presentation are substantially different to the Ezystay presentation. However other parts of the Link 2 presentation are identical to the Ezystay presentation. For example, the final page of the Link 2 presentation includes 4 tables identical to those in the Ezystay presentation, capturing lists of features under the headings Arrival Process, Induction Process, Ezystay Living/Link 2 Living and Departure Process [Ex A 2870]. Mrs Riches agreed that she had copied the page from the Ezystay document that had been retained and that she had cut and pasted some parts of Ezystay documents into the Link 2 presentation (tr 308; 314-315). The same page can be seen on the Link 2 presentation to Bar Broadway, which was sent by Mrs Riches to Mr Riches on 27 March 2012 under the subject “Justin Pres” [Ex A 5723; 5727].

6. [171]

   On 21 February 2012 Mr Riches sent his wife a document entitled “Phone Call to schools” which contained short instructions for contacting schools on behalf of Link 2 (CB 5522; tr 171). Mr Riches’ evidence was that Mrs Riches “did not make these calls because she told me she wouldn’t” (tr 173). However Mrs Riches said in cross-examination that she had contacted “many schools” before 13 August 2012 and accepted that the Link 2 presentation (that in large parts had been copied from Ezystay’s presentation) had been sent to the schools (tr 317; 319).

7. [172]

   Mr Riches was asked in his examination-in-chief about the Software Email (referred to earlier in these reasons) that he forwarded to his wife on 31 May 2012. He gave the following evidence (tr 154):

8. [173]

   Mr Riches also forwarded the same email to his personal email address and was asked about this in examination-in-chief as follows (tr 155):

9. [174]

   Mr Riches was asked a number of questions in cross-examination about the Link 2 documentation. That evidence included the following in respect of the Elevator Take (tr 162):

10. [175]

    When Mr Riches was pressed to explain the retention of documents that should have been deleted he gave the following evidence (tr 164-167):

11. [176]

    The circumstances in which Mrs Riches came to give evidence arose from Mr Riches’ evidence in cross-examination in which he said that after they “were alerted to the fact of a raid potentially happening” Mrs Riches “went through and made sure she cleaned up, checked to see if she had anything” (tr 210). That evidence included the following (tr 211-212):

12. [177]

    Mr Riches was then taken to the affidavit referred to above that he swore on 30 July 2013 pursuant to an order of the Court in respect of documents that were the subject of a search order. Mr Riches was further cross-examined as follows: (tr 211):

13. [178]

    On 5 May 2015 Mrs Riches’ affidavit of that date was served on the plaintiffs. That affidavit dealt with the communication from Mr MacLean about the “raid”. Mrs Riches said that she did not specifically recall the date but said that it was “in about April 2013”. The affidavit then referred to a conversation that Mrs Riches said she had with Mr Riches at that time in which the following was said:

14. [179]

    Mrs Riches then referred to Mr Riches’ conversation with their solicitor, David Rydon, who advised them not to delete anything on the computers. Mrs Riches claimed that she reviewed what was on the computers and she did not delete any document or move any document. Mrs Riches said that she did not make changes to any of the documents that were on the computer while she reviewed them or subsequently.

15. [180]

    Mrs Riches was cross-examined about some of the documents that Mr Riches had sent her while he was still a director of the plaintiffs. In particular Mrs Riches was asked about the email dated 21 February 2012 with the attachment in relation to phone calls to schools. Mr Riches claimed in his evidence that none of the plaintiffs’ documents that he had forwarded to himself or his wife were used in Link 2’s business. However Mrs Riches gave the following evidence (tr 300-301):

16. [181]

    The presentation (discussed earlier at [170]) that Mrs Riches claimed that she sent to the agents was called for by the plaintiffs and was produced overnight. Mrs Riches was cross-examined further the following day in respect of that document. In that cross-examination Mrs Riches accepted that the document that she created was “similar” to Ezystay’s presentation (tr 308). She accepted that she copied Ezystay material into her presentation and gave the following evidence (tr 309):

17. [182]

    Mrs Riches accepted that there was part of Ezystay’s document within the presentation that she created sometime between March and June 2012. She then said “late June” (tr 314) and subsequently agreed it was 8 May 2012 (tr 316-317). She gave the following rather extraordinary evidence (tr 314-315):

18. [183]

    The comparison between the Ezystay presentation and the presentation created by Mrs Riches demonstrates clearly that she cut and pasted the material from the Ezystay document into the document that she sent to the agents. Mrs Riches gave evidence that she discussed this with Mr Riches (tr 317). If this is to be accepted Mr Riches’ evidence that the Ezystay material was not used in the Link 2 business was not true.

Software Claim

1. [184]

   Mr Ritchie gave affidavit evidence (17 July 2013) that the Ezystay Software was developed by Mr Davis in 2011 and 2012. However by July 2013 the plaintiffs had yet to use the system publicly. At that time it was only being used internally. However Mr Ritchie said that once the system was available to the public, it would only be accessible with credentials that would be provided to users who entered into an agreement with terms relating to confidentiality and intellectual property. The only people who had access to the Software system were Mr Davis and his employee, the subcontractors Mr Davis engaged to develop part of the system, Mr Garrett, Mr Riches, Mr MacLean and himself.

2. [185]

   The Software Manual was developed by Mr Davis and contains descriptions and instructions of how to manipulate the Software; specific features of the Software; and the steps to be taken in viewing a split booking, deleting a booking and editing a booking. The Software Manual was dated 28 May 2012 and was found on the defendants’ computers [Ex A 6253]. This document was a work in progress that belongs to the plaintiffs and access was restricted to those officers of the plaintiffs who needed to assist with the development of the Software.

3. [186]

   I am satisfied that the Software Manual and the Software for the design of the booking calendar that was being developed by Mr Davis is the confidential information of the plaintiffs.

4. [187]

   The plaintiffs contend that Mr Riches copied the design of the Ezystay Software in late May and/or early June 2012 when he spoke to Mr Singh and instructed him what features he wanted him to build into the booking calendar system for Link 2. The plaintiffs contend that the features “are the design features of the Ezystay Software” as found in the Features Document extracted earlier.

5. [188]

   The issue for determination is whether the defendants have used or copied or reproduced the plaintiffs’ confidential information in creating the Link 2 booking calendar and website. The plaintiffs sought to establish that this is what the defendants did by showing that the instructions Mr Singh received from Mr Riches were a description, element by element, of the Ezystay Software. Mr Singh recorded Mr Riches’ instructions in the Features Document and Mr Riches added further instructions when he returned that document to Mr Singh.

6. [189]

   A comparison of the elements in the Features Document with the elements in the Ezystay system was carried out by the experts [Ex PD 4] and that evidence is referred to below. There was also expert evidence of the comparison of the user interface implementations of the Ezystay web application, the Link 2 web application and parts of the Features Document [Ex PD 2]. However it is appropriate to consider the evidence given by Mr Riches in respect of his instructions to Mr Singh before referring to the experts’ evidence.

7. [190]

   In evidence-in-chief Mr Riches said that the Link 2 website became “live” around September 2012 (tr 151). He gave the following evidence (tr 153):

8. [191]

   Mr Riches agreed in cross-examination that on 16 December 2011 he asked Mr Davis for a copy of the booking calendar software that was then in the process of development for Ezystay. He agreed that up to that date the software had been developed by Mr Davis “in effect” on his instructions. He agreed that he was aware of the “strengths of the software” that had been developed to that stage by Mr Davis and its “various functional features”. He agreed that it was on “that basis” that he wanted an electronic copy of it for himself (tr 222).

9. [192]

   Mr Riches was cross-examined about his evidence-in-chief in respect of the instructions that he gave to Mr Singh. He gave the following evidence (tr 223).

10. [193]

    In further cross-examination Mr Riches agreed that he did not mention any Ezystay addresses to Mr Singh and that he assumed that Mr Singh would believe that what he was talking about was part of the business of Ezystay (tr 225). He agreed that he just allowed Mr Singh to assume that he was contacting him in the course of his business on behalf of Ezystay (tr 226). He agreed that this was even to the point of allowing Mr Singh to “guess” that the booking calendar system that he wanted him to design involved the Ezystay properties (tr 227).

11. [194]

    Mr Riches was cross-examined further as follows (tr 227-228):

12. [195]

    Mr Riches resisted giving details of his instructions to Mr Singh at around the end of May or beginning of June 2012. He gave the following further evidence in cross-examination (tr 230):

13. [196]

    Mr Riches became argumentative and was clearly irritated (tr 228). However Mr Kelly pressed on and the following evidence was given in further cross-examination (tr 233):

14. [197]

    Mr Riches once again became argumentative but more co-operative after Mr Kelly mentioned that he had a particular document. That evidence was as follows (tr 234-238):

15. [198]

    Although Mr Riches acknowledged that this last-mentioned feature was the same as in the Ezystay system he said he could not recall mentioning the Ezystay system to Mr Singh. However he certainly recalled referring to the Ezystay booking calendar in this conversation with Mr Singh with reference to the pop-up facility (tr 239).

16. [199]

    Mr Riches was then asked about Mr Davis’ booking window which contained a number of fields including names and other details of the student. He agreed that he asked Mr Singh to include a feature of a booking window which contained key number, student number, first name, last name, email, phone, nationality, agency, booking from and to and a space for notes. He said he did not believe that he asked Mr Singh to include “gender”. However he agreed that all of these features were in Mr Davis’ system (tr 240-241). Although he had previously agreed that he had asked Mr Singh to include an email entry in this feature he subsequently said he did not believe that he had asked for this feature (tr 241). He was then cross-examined as follows (tr 241-242):

17. [200]

    Mr Riches was asked about other features that he sought to replicate from Mr Davis’ system including the deletion of active bookings and moving or splitting bookings (tr 242). He gave the following further evidence in cross-examination (tr 243):

18. [201]

    Even if it is assumed that Mr Riches may well have been entitled to expect the plaintiffs to conclude their relationship with him and Riches Commercial more promptly, and that he may have felt frustrated and irritated with the delay in that regard, it must be remembered that he was paid about half a million dollars on his departure with a promise to return the hard copies and delete the electronic copies of the plaintiffs’ Confidential Information and Books, Records, Materials and Documentation. He did not do this and his presentation in the witness box was most unimpressive indeed.

19. [202]

    Mr Riches chose to give the additional evidence in his evidence-in-chief in relation to his instructions to Mr Singh. This had not otherwise been dealt with in his affidavit evidence. Although initially denying that what he was describing to Mr Singh were the features that he knew existed in Mr Davis’ booking calendar (tr 227), the persistence of the cross-examiner demonstrated that this is what he was doing. He later admitted that he made reference to Mr Davis’ calendar explicitly (tr 233). He suggested that he did not mention any properties to Mr Singh and assumed that Mr Singh would believe that he was talking about Ezystay properties. However Mr Singh’s Features Document records his instructions that a drop-down was to enable the person using the system to choose whether they could see all the listed properties or only the assigned properties.

20. [203]

    Mr Riches’ suggestions in his cross-examination that there were flaws in Mr Davis’ system and that Mr Davis could “barely deliver” the things Mr Riches asked of him, did not sit well with the simple fact that Mr Riches wanted a copy of this software for his own purposes. The stages of work described by Mr Davis in creating the Software, referred to earlier, were not the subject of any cross-examination. By December 2011 Mr Davis had reached what he referred to as Stage Four in the development. Mr Riches had been working alongside Mr Davis in the process of the development of the Software. As the communications between Mr Garrett and Mr Riches establish, Mr Riches proposed to Mr Garrett that he would continue with the software development “debugging” in conjunction with Mr Davis until settlement at which time he agreed that Rujo would have 100% ownership of the software product.

21. [204]

    The affidavit sworn by Mr Riches in July 2013 extracted earlier is difficult to accept as an accurate reflection of his understanding at the time. He had been a party to forwarding to his wife a hybrid document reflecting the Ezystay Systems Manual (the L2 overview email). The peculiarity of that email is that by the time he forwarded it to Mrs Riches it was already cut and pasted from the Systems Manual. This oddity was not cleared up in the evidence and it seems to me that it may have been Mr Riches that created that document notwithstanding that he has given evidence that his wife was the person who was doing the cutting and pasting and preparation of the hybrid documents. His affidavit evidence in July 2013 was that he had no knowledge of the document and he did not have any copies of it. Having regard to the conversations alleged to have occurred between Mr and Mrs Riches when they were tipped off about the so-called “raid” it is very difficult to accept that evidence as an accurate reflection of Mr Riches’ understanding at the time.

22. [205]

    Mr Riches also claimed in that affidavit that he had no copy or copies of the Ezystay Software Manual. The substance of that document had been sent to him by Mr MacLean on 31 May 2012. Not only did he send it to his wife but he sent it to his personal email address. This was during the period that he was instructing Mr Singh. I do not accept that the statement in this regard in Mr Riches’ affidavit of 30 July 2013 was an accurate reflection of his understanding at the time. Mrs Riches alerted him to the fact that documents had not been deleted. Yet he was able to swear an affidavit that he had no copy of this document when clearly he did.

23. [206]

    Mr Riches’ evidence in relation to the new booking window was rather telling. He suggested that although he may have instructed Mr Singh to put various aspects in the booking calendar with a new booking window he did not believe that he instructed him to put in a reference to email or gender. The Features Document lists not only the same entries as that in the Ezystay booking window but in the exact same order. I have no doubt that Mr Riches’ instructions to Mr Singh were an exact copy of the Ezystay booking window. In this regard the defendants submitted that Mr Riches’ knowledge of the software and his knowledge from his experience in the accommodation business and any calendar system cannot be separated from the information the plaintiffs seek to protect. It was submitted that this was part of his “know-how”: Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [37]. This submission may have had force but for the exactness of the copying of the items in the booking calendar.

24. [207]

    The defendants’ submissions included a number of statements that the defendants did not use the materials that they had copied for the purpose of the Link 2 business [DWS 7; 95; 100]. These submissions could not be accepted in the light of Mrs Riches’ evidence. It appears that this was recognised by the defendants in their submissions in reply dated 14 May 2015 when in paragraph 26 it was stated that “only a small number of documents were ever used in the defendants’ business”.

25. [208]

    Mr Riches was using the plaintiffs’ documents to create documents for his business that was in competition with the plaintiffs while he was still a director of the plaintiffs. He used the services of his wife to make calls to the agents and the schools to entice them to deal with the Link 2 business using a presentation that plagiarised the documents of the companies of which he was a director. His evidence that his wife told him that she did not make the telephone calls cannot be accepted in the light of the fact of the many calls that Mrs Riches said that she did make and her evidence that Mr Riches was aware of this.

26. [209]

    The defendants relied upon the expert opinion of Professor Robin Braun who holds a BSc (Hons) in Electronic Engineering and an MSc and PhD in Microwave Engineering [Ex PD 1]. Professor Braun referred to the difficulty of proving that one application is the copy of another by inspecting the Source Code. In a helpful table, Professor Braun compared the two “functionality relationships” of Ezystay and Link 2 with the addition of a widely available accommodation website known as “Wotif”. Professor Braun concluded that the Wotif functionality was very similar to that of Ezystay and Link 2. He also commented upon a “multitude of other systems” that had much the same “Use Case”.

27. [210]

    The plaintiffs relied upon the expert opinion of Dr Bradley Schatz, the Managing Director of Schatz Forensic. Dr Schatz holds a PhD in Digital Forensics and a BSc in Computer Science. His report of 10 November 2014 [Ex PD 2] identified his instructions to prepare a report in relation to “whether it was theoretically possible that the defendants, or anyone on their behalf, copied or used any of the Plaintiffs’ software including any of its design or design code”. Dr Schatz defined the term “design” in paragraph 10 of his report as follows:

28. [211]

    Dr Schatz reported that in approaching his task it was relevant to consider a number of things: (a) copy of visual design, which he defined as “fonts, layout and colours”; (b) copy of interaction design, which he defined as “user interface”; (c) copy of information design, which he defined as “data model & information presentation”; (d) copy of software design, which he defined as “how the software functions”; and (e) copy of software implementation, which he defined as “the source code implementing” the matters in (a) to (d).

29. [212]

    Dr Schatz’ report includes the following:

30. [213]

    Dr Schatz provided a number of hypotheses as to how such a design similarity could have occurred. They were: (a) that Mr Singh had reference to a depiction of it; (b) that Mr Singh had provided to him in a document form, element by element, a design similar to it; (c) that Mr Singh had described to him the design, element by element, while he transcribed the design; or (d) that Mr Singh had described to him in a more general form the goals and purpose of the web application to be developed but with such terminological precision that explains the “near exact terminology and ordering of terms” as described in the section of his report titled “New User Booking Interface”.

31. [214]

    During the course of Dr Schatz’ cross-examination it was established that aspects of the comparison of the screen shot of the Ezystay website and the Link 2 website were different. Those differences include that the date range selection drop-downs were in a different location and had a different look; that in respect of the search student functionality, one was on the left hand side and the other on the right hand side; the logout my account function was in a different location and had a different look; the property address had a different look but a similar location; the property images were in a different location; the upcoming events function was similar in look in a similar grouping area but located differently; the date range selected was in a different location and had a different look; the header containing the day, month, date and year had a different look and a different location; and the various pop-up windows had a different “look and feel” (tr 347-350).

32. [215]

    Dr Schatz also gave the following evidence in cross-examination (tr 350):

33. [216]

    Dr Schatz was then asked about the section of his report dealing with the “move/split user interface” in which he compared the Ezystay user interface for the edit booking facility with the Features Document. He agreed that he had access to the Link 2 system when he prepared his Report and was cross-examined as follows (tr 351):

34. [217]

    After further cross-examination in which Dr Schatz agreed that the upcoming events user interface of the two systems had a “look and feel” that was “very different” (tr 353), the real issue in respect of the appropriate comparison was identified. That issue is whether the features in the Features Document were in the Ezystay system. That is a step that needed to be taken to determine whether, as alleged, Mr Riches copied the Ezystay system by setting out the design, element by element, in his instructions to Mr Singh as recorded in the Features Document. The experts were then asked to produce that comparison which is the subject of their joint report [Ex PD 4].

35. [218]

    Dr Schatz and Professor Braun prepared the joint report [Ex PD 4] on 6 May 2015 to indicate which of the features or design elements in the Features Document are in the Ezystay system. That Report identified the following limitations:

36. [219]

    The experts then listed the features in the Features Document and identified whether they were present in the Ezystay system by the word “Yes” and if not by the word “No”. “Yes” appears 43 times and “No” appears only 8 times.

37. [220]

    One feature that was the subject of “No” was the reference to “Dashboard”. Mr Singh gave evidence that this was his terminology but that he was recording Mr Riches’ requirements under that heading (tr 262). The experts also recorded “No” in respect of the category “Dropdown to choose whether to see all the listed properties or only the assigned properties”. Mr Riches had been cross-examined in respect of this category as follows (tr 229):

38. [221]

    The plaintiffs submitted that in this passage of evidence Mr Riches was denying that he gave Mr Singh instructions to include a dropdown which allowed a choice to be made between showing multiple properties or only one. However Mr Singh’s evidence was that Mr Riches gave him that instruction (tr 267). In any event, when Mr Riches amended the Features Document and returned it to Mr Singh on 5 June 2012 he wrote “I think users could see all properties but only book in the ones they have been given access to”. The plaintiffs submitted that this language, in particular the use of the word “could”, is a reference back to what users “could” do with the Ezystay system. I agree with this submission. The context in which it was written, at the time it was written and the language used leads to the irresistible conclusion that Mr Riches was referring to what could be done in the Ezystay system. Mr Singh also made reference to what could be done in the Ezystay system in his email to Mr Riches on 2 July 2012, referred to earlier in these reasons (at [69]).

39. [222]

    The third item in which “No” is recorded as well as the fifth item being “On clicking any property list item it drops down to show the booking calendar for that particular property (so in this case user can click and open the booking calendars for only those properties that he requires)” and “View bookings related to all properties” respectively are in the same category.

40. [223]

    The fourth “No” in the table relates to the “Number of day in the date range selected”; the seventh relates to “Booking Id” and the eighth to “Student number”. The plaintiffs submitted that when one views the system as a whole these are minor details in the scheme of things. That may be so. However they are aspects of the Features Document that are not in the Ezystay system. The sixth “No” is under the heading “Room and Bed Numbers” and relates to the feature described in the Features Document as “a block that stays on the screen even on scrolling left/right” which is dealt with earlier in respect of some of the evidence that Mr Riches gave during the course of his cross-examination.

41. [224]

    The plaintiffs submitted that the surrounding circumstances also support a finding that the Ezystay Software was copied. The first matter upon which the plaintiffs rely is the fact that Mr Riches asked Mr Davis for a copy of the Ezystay Software in December 2011. It was submitted that he would not have done so if he had not wanted a copy of the Ezystay Software for his own purposes.

42. [225]

    Next the plaintiffs pointed to the fact that from as early as 21 February 2012 and continuing up to and beyond 31 May 2012, Mr and Mrs Riches pursued a course of conduct in which they “effectively stole” as many of Ezystay’s documents and materials as possible and adapted them for use in the Link 2 business, notwithstanding that Mr Riches was a director and under a fiduciary and statutory duty not to obtain an unauthorised benefit and not to use his position or the plaintiffs’ information to his advantage or to the plaintiffs’ disadvantage.

43. [226]

    Mr Riches signed a resignation letter in respect of his directorships of two of the plaintiff companies. However he did not resign as a director from all the plaintiff companies on 30 May 2012. Link 2 was not registered until 6 June 2012. However prior to that time Mrs Riches, at Mr Riches’ direction, was making telephone calls and using the hybrid presentation that she had created from the Ezystay documents to market the new business of Link 2 with the “many agents” that she said that she contacted.

44. [227]

    The fact that Mr Riches received a copy of the confidential Software email from Mr MacLean on 31 May 2012 at the time he was instructing Mr Singh in respect of the features that he required for the Link 2 system is also a matter to be considered in determining whether the defendants copied Ezystay’s Software. The plaintiffs rely upon the fact that when Mr MacLean sent Mr Riches the Software Manual on 31 May 2012 Mr Riches forwarded it to Mrs Riches on the same day and later went to the trouble of emailing it to himself from his Ezystay email address to his personal Gmail address. The excuses or explanations given by Mr and Mrs Riches in respect of why these emails were sent and/or received were strikingly similar. Mr Riches said that he was forwarding the material to his wife as “another example of the plaintiff continuing to develop the business without my knowledge while I was involved” and that he wanted her to have a record “of the business being developed without any of our consent or knowledge” (tr 154). Mrs Riches said that she received the email as her husband was advising her “what was going on in the business without our knowledge” (tr 287; 289).

45. [228]

    The plaintiffs claim that there is no reason to suppose that taking a copy of the Ezystay Software would be an exception to the way in which Mr and Mrs Riches were conducting themselves at that time in copying all of the plaintiffs’ other documents, some of which included Confidential Information.

46. [229]

    It was submitted that Mr Riches would have the Court believe that he thought so little of the design by Mr Davis that he did not want it. However it is difficult to accept that evidence having regard to Mr Riches’ request of Mr Davis and indeed in itemising the 43 matters that were also in the Ezystay system when he instructed Mr Singh.

47. [230]

    The plaintiffs also relied upon the fact that Mr Riches was not candid with Mr Singh. Mr Singh was labouring under the belief that he was dealing with Ezystay until the email from Mr Riches on 11 June 2012 advising him that he was no longer involved with Ezystay and that he should correct the calendar to remove the reference to the Ezystay properties. A further matter relied upon by the plaintiffs in this regard is Mr Riches’ email of 6 August 2012 to Mr Aitken at Bar Broadway asking him to remove aspects of the website so as not to alert his “ex partners” to his involvement. This of course was only days prior to the entry into the Deed pursuant to which Mr Riches was paid approximately half a million dollars.

48. [231]

    The plaintiff also submitted that Mr Riches was not a witness of truth. In this regard focus was placed on his affidavit of 30 July 2013. It was submitted that this affidavit was clearly inconsistent with what Mr Riches well knew and indeed Mrs Riches well knew at the time the affidavit was sworn. Only twelve weeks earlier in what must have been rather extraordinary circumstances when they were tipped off about a “raid”, they had a discussion about the very matters that were part of the subject matter of the affidavit. Each of them well knew that their computers had Ezystay documents on the system and that Mr Riches was so incensed that Mrs Riches had left the documents on there that he rang their solicitor. It is difficult to accept that the description Mrs Riches claimed Mr Riches gave to the stored documents (“load of shit”) was made or if made was his true belief, in the light of the fact that they had together been gathering this information and copying it and Mrs Riches, with Mr Riches’ knowledge, had been using the hybrid document to entice agents or schools to work with Link 2.

49. [232]

    Mrs Riches asserted in her evidence that she deleted the email of 31 May 2012 to which the Ezystay Software Manual was attached. Unfortunately that email and its attachment were extracted from her Gmail account as a result of the search.

50. [233]

    I have taken into account the limitations referred to by the experts in their joint report. Notwithstanding these limitations and indeed the inherent complexities of this aspect of the plaintiffs’ case, the comparison of the items in the Features Document and the elements in the Ezystay system; the evidence of Mr Riches in forwarding to himself and his wife the Software Email; the request for Mr Aitken to remove aspects from the Bar Broadway webpage; the matters identified in the surrounding circumstances; and the copying and plagiarising of the plaintiffs’ documents are all matters relevant in the consideration of whether I am satisfied that the plaintiffs’ Software was copied.

51. [234]

    I do not accept Mr Riches’ evidence that although he forwarded the Software email to himself and to his wife he did not open the iNE document or read it. I am satisfied that his conduct in giving Mr Singh explicit instructions that matched identically those parts of the interface contained in the plaintiffs’ booking system and Software amounts to copying the plaintiffs’ Software.

52. [235]

    I am satisfied that the plaintiffs’ Software and Software Manual contained Confidential Information. I am satisfied that Mr Riches was in breach of clause 8 of the Deed by copying and using the plaintiffs’ Software. I am also satisfied that the defendants were in breach of clause 4 of the Deed in failing to return hard copies and/or delete the electronic copies of the plaintiffs’ Software Manual and Software.

53. [236]

    I am satisfied that from sometime after 16 July 2012 Link 2 employed an accommodation booking software and system which was the same or substantially the same as the Ezystay Software and that described in the Software Manual. Mr Riches as the sole director of Link 2 caused it to engage in such conduct.

Breach of duties claim

1. [237]

   The plaintiffs rely upon the same facts and circumstances in support of a claim that Mr Riches, as a director of the plaintiffs, owed a fiduciary duty or alternatively a statutory duty as a director of the plaintiff companies not to obtain an unauthorised benefit from his relationship: Chan v Zacharia (1984) 154 CLR 178 at 198-199.

2. [238]

   In First Conferences Services Ltd v Bracchi [2009] EWHC 2176 (Ch) at [25] although Peter Smith J was referring to “employees the following observations are apt to the circumstances of this case:

3. [239]

   Mr Riches owed a fiduciary duty to the plaintiffs to protect their confidential information and not to deploy it for the benefit of a third party or for himself. It is clear that Mr Riches was using the plaintiffs’ documents, some of which contained confidential information and in respect of which he owed a duty of confidentiality to the plaintiffs whilst he was a director, in his and Mrs Riches’ dealing with Bar Broadway. This is not a case in which it is claimed that Mr Riches diverted a business opportunity from Ezystay to himself and Link 2. It is limited to a claim that he breached his fiduciary duty (or statutory duty) in using the plaintiffs’ documents and confidential information in a business that was competing with a business operated by companies of which he was a director.

4. [240]

   During the period December 2011 up to the time that the Deed was executed Mr Riches copied and used the plaintiffs’ documents, some of which were confidential, for the benefit of Link 2. The benefit included a saving of time cost and effort in putting together its own presentation by cutting and pasting the plaintiffs’ presentation and other documents. The evidence given by Mrs Riches and the detail of the communications between Mrs Riches and Mr Aitken at Bar Broadway demonstrates quite clearly that Mrs Riches, at Mr Riches’ behest, was using the plaintiffs’ documents to obtain clients, the feedback from which she described as “phenomenal”. While Mr Riches was a director of the plaintiff companies he owed them a duty not to conduct himself whereby he or a third party gained an unauthorised advantage from the plaintiffs’ business documents and confidential information. He breached that fiduciary obligation by providing documents and materials to Riches Commercial and Mrs Riches for the purpose of preparing presentations to market the new business to agents and schools in competition with the plaintiff companies of which he was then a director.

5. [241]

   Mr Riches also breached that fiduciary duty by copying confidential information in instructing Mr Singh to prepare the software for Link 2 prior to the time that he resigned his two directorships and well prior to the time that he resigned from his other directorships.

6. [242]

   Mr Riches provided the confidential information to Mrs Riches for the purpose of use in the business of Link 2. Mr Riches was also in breach of his confidentiality duty in this regard.

7. [243]

   Mr Riches improperly used his position as a director to gain an advantage for himself and for Link 2 (and Riches Commercial) by reason of the use of the Ezystay documents and information. Mr Riches’ conduct in this regard was in breach of s 182 and s 183 of the Corporations Act.

Other matters

1. [244]

   The defendants submitted that the plaintiffs led no evidence of any damage arising from the copying or use of the Manuals or the Software. It was submitted that the plaintiffs could not have suffered any loss by reason of the trivial nature of the alleged conduct. Indeed the defendants submitted that it would be “absurd” to make a suggestion that they could have suffered loss.

2. [245]

   It is true that the plaintiffs have not claimed that they have lost custom to the defendants. The plaintiffs have been put to the cost of pursuing a search for documents and hybrid documents that have been improperly withheld by the defendants. The plaintiffs have been put to the cost of seeking orders for the return of their confidential information which has been retained and used by the defendants in breach of the Deed. Notwithstanding the submission that was made by the defendants that this does not represent any “loss” to the plaintiffs, I am satisfied this expenditure was lost to the business operations of the plaintiffs. I am also satisfied that Mr Riches caused Link 2 to use the plaintiffs’ Confidential Information in its business.

Summary of conclusions

1. [246]

   For the reasons stated, the plaintiffs have succeeded in their claims against the defendants in respect of the Business Manual, the Systems Manual and the Elevator Take. The plaintiffs have also succeeded in their claims against the defendants in respect of the Software Manual and the Software. The plaintiffs’ claim against the defendants in respect of the Trade Dress fails.

2. [247]

   Having regard to the plaintiffs’ submission that the form of final relief should abide the delivery of these reasons and the defendants’ contention that the injunction as presently sought may be in restraint of trade, it is appropriate to give the parties the opportunity to reach agreement on the form of final orders. Irrespective of whether the parties reach agreement they should make contact with my Associate by no later than 28 August 2015 to relist the matter to finalise the proceedings whether by consent or after further argument.