Tin-Tagel Majikk Pty Ltd v Hockey

Prior to May 2018, the second plaintiff, Danc Pty Ltd (“Danc”) operated the Ray White Bateau Bay Real Estate Agency (“RWBB”). The two directors of Danc were the first defendant, Wayne Hockey, and the second defendant, Susan Eastway. They were also the major shareholders of that company.

On 17 May 2018 the first plaintiff, Tin-Tagel Majikk Pty Ltd, entered into a Share Sale Agreement (“the Agreement”) with the first to fifth defendants to purchase those defendants’ shares in Danc for $2,300,000. The third and fourth plaintiffs, Kenneth and Kathryn Folley, were the guarantors of Tin-Tagel Majikk Pty Ltd under the Agreement. The Agreement contained a restraint of trade clause, which was both geographical and temporal in nature.

Mr Hockey remained working in the agency as a salesman for a period of time after completion of the sale. On 2 October 2018 Mr Hockey is alleged to have downloaded “Business Confidential Information” belonging to the plaintiffs’ business as RWBB.

“Business Confidential Information” was defined in clause 14.2d of the Agreement in this way:

“Confidential Information” was also defined in clause 1.1 as meaning:

Ray White Berkeley Vale Estate Agency (“RWBV”) had been operated by Boyle & Burnside Partners Pty Ltd until 31 October 2018, and Ian Boyle (the sixth defendant) was a director of that company. On 31 October 2018 Boyle & Burnside Partners Pty Ltd went into liquidation. However, on 25 October 2018 Boyle Partners Pty Ltd (the seventh defendant) had been incorporated. It subsequently operated the agency known as RWBV.

On 19 December 2018 Susan Eastway became the licensee in charge of Boyle Partners Pty Ltd trading as RWBV. That was alleged to be in breach of the Agreement entered into with the plaintiffs.

In January 2019 Christian Purdue, the eighth defendant, terminated his employment with RWBB and commenced employment with RWBV.

In February 2019 Mr Hockey ceased to be employed by the plaintiffs. On 26 July 2019 Ms Eastway ceased to be the licensee in charge of RWBV and Ian Boyle, the sixth defendant, became the licensee in charge.

In October 2019 Mandy King (the ninth defendant) terminated her employment with RWBB and commenced employment with RWBV.

The plaintiffs commenced proceedings against the defendants on 28 May 2020. The present iteration of the claim is a further amended statement of claim filed 31 August 2020. The plaintiffs make a number of claims against the various defendants including the following:

At a directions hearing before the Registrar on 5 February 2021, the plaintiffs sought to obtain discovery after the close of pleadings and prior to the filing of evidence. The Registrar refused to direct discovery at that point and, instead, gave directions about the service of evidence.

On 18 February 2021 the plaintiffs served a notice to produce for inspection pursuant to r 21.10 of the Uniform Civil Procedure Rules 2005 (NSW) requiring production of the following documents.

Correspondence then ensued between the solicitors. The solicitors acting for Boyle Partners suggested that the service of the notice to produce was contrary to the position taken by the Registrar in rejecting discovery before the evidence was completed. A subsequent letter from the solicitors for Boyle Partners disputed that the documents referred to were clearly identifiable, and in that way it was said the notice did not comply with UCPR r 21.10. It was also said that the documents were not relevant to a fact in issue.

There were said to be no documents in categories 7 to 10. They are not in issue here.

On 8 April 2021 the solicitors for the plaintiffs filed a notice of motion seeking an order that Boyle Partners comply with the notice to produce.

On 28 April 2021 the plaintiffs filed and served all but one of their affidavits in chief. The other affidavit was filed and served on 10 May 2021.

On 6 May 2021 the solicitors for the plaintiffs served a notice to produce to the Court pursuant to UCPR r 34.1 seeking production of the following documents:

In response to that further notice, the solicitors for Boyle Partners wrote a letter to the solicitors for the plaintiff setting out why they maintained their objections to both notices, but putting an open offer as follows:

The proposal was not agreed to by the solicitors for the plaintiffs.

On 25 June 2021, the solicitors for Boyle Partners filed a notice of motion seeking orders that both notices to produce be set aside, alternatively, that Boyle Partners be excused from compliance with the notices on the grounds that the documents contained confidential information.

On 1 July 2021 the solicitors for the plaintiffs filed an amended notice of motion seeking an additional order, that Boyle Partners comply with the notice to produce dated 6 May 2021.

This judgment concerns the amended motion by the plaintiffs and the motion by Boyle Partners.

Rule 21.10 UCPR provides:

Rule 21.9(2) UCPR provides:

Rule 34.1 UCPR provides:

In Norris v Kandiah [2007] NSWSC 1296 Brereton J said at [4]:

In Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869 Barrett J said:

In Norris v Kandiah Brereton J pointed out the difference between the two rules enabling a notice to produce to be given. His Honour said:

In Loulach Developments Pty Ltd v Roads and Maritime Services (No 2) [2018] NSWSC 1465, Leeming JA said:

What must be shown to establish a legitimate forensic purpose has recently been clarified by the Court of Appeal in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145. Whilst that was in the context of a subpoena, the same principles are also relevant for a notice to produce under r 34.1. Justice Bell said:

The expression “on the cards” derives from the judgment of Gibbs CJ in Alister v the Queen (1984) 154 CLR 404, [1984] HCA 85 where his Honour said (at 414):

In Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1955) 72 WN (NSW) 250, Owen J said (at 254):

The plaintiffs relied on expert reports from Kylie Atkinson. Ms Atkinson’s expertise comes from her work within the real estate sector and the technology associated therewith. Ms Atkinson has over 15 years of experience as a trainer and coach in the MyDesktop software. The Ray White Group Australia uses the MyDesktop software and Ms Atkinson is familiar with, and has extensive experience of and expertise concerning, that software as used by the Ray White Group Australia-wide. She also has 29 years of experience in the real estate sector inclusive of sales, property management, trust accounting, database technology and real estate associated software.

Ms Atkinson was asked to make these assumptions:

Ms Atkinson was then asked whether the documents sought in the two notices to produce “are relevant to the allegations made in (a), (b), (c) respectively above”. Objection was taken by counsel for Boyle Partners to Ms Atkinson’s evidence in answer to that question, and I upheld that objection.

The question was an unfortunate one because it is not for the expert to opine on whether documents are relevant to allegations. It is a question of law to be determined by the Court.

However, the substance of Ms Atkinson’s evidence, putting aside her conclusion that the documents are relevant to the allegations, is that Wayne Hockey, or another person using Wayne Hockey’s MyDesktop software login, obtained access to Business Confidential Information in the form of a “data export”. Ms Atkinson went on to say this:

The third plaintiff, Kenneth Folley, who is the sole director and secretary of Danc, provided information in his affidavit about the MyDesktop system. He said it was in place when he entered into the Share Purchase Agreement, and is integrated with the system used by the Ray White franchise, which is called One System.

Mr Folley went on to say:

Ms Atkinson was asked about the documents identified in the notice to produce issued under r 34.1. Ms Atkinson said that the terminology “exported contacts file” is a commonly recognised and understood wording by a person who uses client relationship management software such as the MyDesktop software. She said that there is no ambiguity in what documents are being sought, and that the documents are easily obtainable in the MyDesktop software. Ms Atkinson said that the usual information contained in the documents described in paragraphs 1 and 2 of that notice to produce, includes but is not limited to:

There was evidence from Mr Folley that from an Excel spreadsheet provided to him by Ray White (NSW) Pty Ltd, the agency’s franchisor, he was able to prepare a list of all the properties sold by RWBV from 4 January 2019 to 30 October 2020. He was then able to cross-reference those properties with the database held on the RWBB MyDesktop software. Some 50 of the properties sold by RWBV formed part of the confidential information downloaded from RWBB.

The plaintiffs submitted that the documents sought in the notice issued pursuant to r 34.1 will reveal what is said to be the crux of the case by the plaintiffs against the first, second and seventh defendants, which is whether the contact notes or the contact data downloaded by Mr Hockey was then imported into the data of RWBV.

Counsel for Boyle Partners identified three objections to the notice to produce issued under r 34.1. The first was that it lacked reasonable particularity; secondly, it lacked a forensic purpose; thirdly, it was being used as a substitute for discovery.

Counsel for Boyle Partners submitted that if the notice to produce pursuant to r 34.1 was specific to the 50 properties identified by Mr Folley, there would be no objection to what is sought. He submitted, however, that what has been sought in the notice to produce extends much beyond those properties and would involve production of the whole of the database of RWBV.

In my opinion, Boyle Partners should be required to comply with the notice to produce issued pursuant to r 34.1. There is evidence that either Wayne Hockey or someone using his login, obtained access to the Business Confidential Information belonging to RWBB, and exported that information. There is evidence that the 50 properties identified by Mr Folley formed part of the Business Confidential Information of RWBB, and had been dealt with in some way by RWBV. That evidence means that what is sought in the notice to produce is not only relevant to the principal issue in the case, but it is also “on the cards” that the documents will materially assist the plaintiffs’ case.

The analogy drawn by counsel for Boyle Partners, that what is being sought is the equivalent of a request for a filing cabinet, is inapt. Material stored electronically is not as easily divisible as hard copy documents. On the other hand, the onerous task of going through hard copy documents to identify the relevant documents is considerably reduced when searching electronic storage using electronic means. It is of some significance, although the Evidence Act 1995 (NSW) is not at this stage directly applicable to what is sought, that the definition of “document” in the dictionary to the Evidence Act includes:

It does not seem to me a proper objection that what is contained on what is sought to be produced consists of a large number of different entries within the particular database. In my opinion, what is sought does not offend what was said by Leeming JA in Loulach, by Brereton J in Norris v Kandiah or by Barrett J in Patonga Beach Holdings.

In my opinion, the exported contacts file is relevant to the principal issue in the case, and is likely to throw light on the issue of whether RWBV has used the Business Confidential Information. The evidence to which I have referred demonstrates that what is involved in this notice to produce is not a fishing expedition.

It may be accepted that what is now on the documents sought to be produced will include much more information than was exported from RWBB. That is an inherent characteristic of a database. However, the only way that the plaintiffs can ascertain if, and to what extent, that exported contacts file was uploaded into the systems at RWBV is for the file as sought to be produced. It will then be necessary to make appropriate arrangements concerning confidentiality.

In the light of Ms Atkinson’s evidence, it does not appear that Boyle Partners will have any difficulty understanding what is to be produced.

This notice to produce was issued after all but one of the plaintiffs’ affidavits in chief were filed and served. In that way, the notice to produce does not amount to a contravention by the backdoor of the Registrar’s ruling. I do not consider that it offends any principle which provides that a notice to produce should not be used as a substitute for discovery. Having regard to s 56 of the Civil Procedure Act 2005 (NSW), I consider that the issue of, and compliance with, this notice to produce is likely to result in a more economical approach to issues surrounding the disclosure of relevant documents.

The position is otherwise in relation to the notice to produce issued under r 21.10. I do not consider that categories 1 to 6 in that notice consist of specific documents that are clearly identified in the notice: r 21.10(1)(b). The categories are too widely expressed, particularly in relation to the dates.

If specific documents are not identified, the documents must be identified in the originating process, a pleading, an affidavit or a witness statement filed or served: r 21.10(1)(a). The Listings Report, the Property Notes and the Contact Notes are not referred to in the pleadings and there was no reference to them elsewhere at the time the notice to produce was issued. Subsequently, affidavits were filed on behalf of the plaintiffs where Contact Notes or Property Notes were referred to (the affidavit of Mr Folley, paragraph 56 and following).

I have some considerable doubts that compliance with r 21.10(1)(a) can operate retrospectively by the later filing of an affidavit. However, even if that is so, I consider that the period of time specified in categories 1 to 6 is far too broad for the categories as described to be produced. In any event, it is likely that compliance with the notice to produce issued under r 34.1 is likely to make the earlier notice otiose.

In my opinion, the notice to produce dated 18 February 2021 pursuant to UCPR r 21.10 should be set aside. In relation to the notice to produce filed 6 May 2021 pursuant to UCPR r 34.1, the seventh defendant should be ordered to comply with that notice.

Issues of confidentiality were raised in correspondence but not argued at the hearing of the motions. Such issues will need, in the first instance, to be resolved between the parties, but it is likely that an order in the form of, or similar to, the Consent Order at annexure LJNB-017 to the affidavit of Lachlan John Neish Boughton sworn 25 June 2021 would be appropriate. If agreement cannot be reached, the parties can approach the Duty Judge under the liberty to apply.

In the circumstances where each side has been partially successful, there should be no order for costs in relation to either of the Notices of Motion.

I make the following orders: