Showcase Realty Pty Ltd v Circosta

HER HONOUR: This is an application by notice of motion filed on 25 November 2021 by the plaintiff, Showcase Realty Pty Ltd pursuant to r 31.20(1) of the Uniform Civil Procedure Rules 2005 (NSW) for leave to adduce expert evidence at the trial from Mr Michael Khoury of KPMG in the capacity of independent digital forensic expert. The notice of motion also sets out relief sought in prayers 2 to 8 as to the mechanics of the expert being provided with access to certain information in terms of electronic hard drives and electronic data obtained pursuant to search orders made by Rein J on 6 October 2020.

The plaintiff relies on the affidavit evidence of Ms Brittany Josephine Byrne, solicitor for the plaintiff and partner at FCB Workplace Law, affirmed 25 November 2021. The plaintiff also relies on two affidavits of Michael John Brattoli, Sales Director at Showcase Realty, sworn 30 August 2021 and 25 January 2022 respectively. The plaintiff further relies on the affidavit of Matthew Nicholas Robinson, affirmed 1 March 2022.

The defendants rely on the affidavit of Jessica Helen Elakis, solicitor at Mills Oakley Lawyers, affirmed 16 December 2021.

The background to the present application arises out of the fact that, in October 2020, an application was made on an ex parte basis for search orders (commonly referred to as Anton Piller orders) in circumstances where there was an apprehension by the plaintiff as to misuse of the plaintiff’s confidential information. The background to the underlying dispute that led to the application for search orders is as follows.

The plaintiff is a company which operates a real estate agency in Carlingford in Sydney. The first defendant, Mr Circosta, was employed by the plaintiff as a property manager. On 15 October 2018, the first defendant resigned from his employment with the plaintiff. That notice of resignation was effective as of 12 November 2018. In a round December 2018, the first defendant commenced employment with the second defendant.

On 7 October 2020, the search order made by Rein J was executed and material was seized at the second defendant’s premises. The second defendant, I should say, is a rival real estate agency also located at Carlingford in Sydney and, as I understand it, both agencies provide retail property management services to customers referred to as landlord clients.

The items seized on execution of the search order included a number of laptop and desktop computers and mobile phones belonging to the second defendant and a mobile phone belonging to the first defendant.

Forensic images of those devices were taken by the independent computer expert, Mr Michael Petkovic of KPMG.

The independent forensic expert made electronic copies of all of the data contained in the second defendant’s customer relationship management (CRM) data bases known as MyDesktop and Property Tree, and the contents of Google email and data accounts used by the first defendant and a number of the second defendant’s employees. The independent expert’s forensic report dated 27 October 2020 was tendered on this application (and admitted subject to a s 136 Evidence Act 1995 (NSW) limitation that it be used only for the purposes of this notice of motion) as Exhibit A.

Mr Petkovic in his report explained the search of the data sets that had been carried out by reference to key word searches, and noted that a Microsoft Word version of a document headed ‘Landlord Contact Details Report’ which appeared to be an extract from a CRM system entitled ‘Rest Professional Software System’ was compared against the electronic copy of the MyDesktop CRM system. Mr Petkovic identified a number of matches, 189 matches in summary, between details of landlords found on the plaintiff’s data base and that which was seized from the second defendant.

In November 2020 an application was made by the defendants to set aside the Anton Piller orders that had been made ex parte by Rein J together with an order that the items seized, pursuant to execution of those orders, be returned. That application was heard by Rees J 9 April 2021. For reasons published (see Showcase Realty Pty Ltd v Circosta [2021] NSWSC 355 (Showcase Realty v Circosta)), her Honour made orders setting aside ab initio the search order made by Rein J on the grounds of material non-disclosure. The material non-disclosure in question related to the identity of particular clients who had sought to transfer their custom from the plaintiff to the first defendant and/or second defendant.

Her Honour found (see from [30]ff) that it had not been drawn to the attention of Rein J that his Honour should not draw any inference from what had happened in 2018 to conclude that there was a risk that in 2020 the first defendant had availed himself of the confidential client list. The material non-disclosure was the failure to inform Rein J that some or all of the clients who had transferred their custom from the plaintiff were actually Mr Circosta’s friends and family. Her Honour accepted that this would have undermined the submission that there was a reason for apprehension that there had been a misuse of confidential information. Her Honour said (at [36] of her Honour’s reasons) that no explanation had been proffered as to why this information had not been disclosed and her Honour was satisfied that it was appropriate in the circumstances to discharge the Anton Piller order ab initio. Her Honour went on to say (at [36]):

Her Honour had earlier referred to the principles on an ex parte application and the applicant’s duty of candour as described by Allsop J, as the Chief Justice of the Federal Court of Australia then was, in Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 at [38]. And to, amongst other authorities, Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639; [2005] VSCA 213 at [35] per Gillard AJA with whom Ormiston and Buchanan JJA agreed, and at [36] adopting what was said in Brink’s Mat Ltd v Elcombe [1988] WLR 1350 at 1356. Rees J in Showcase Realty v Circosta noted at [9] the distinction drawn by Brereton J, as his Honour then was, in Brags Electrics Pty Ltd trading as Inscope Building Technologies v Steven Mark Gregory [2010] NSWSC 1205 at [17], as to the distinction between the setting aside of an Anton Piller order ab initio as opposed to in futuro.

Rees J, among other orders, ordered that the items removed from the first defendant and from the second defendant’s premises on 7 October 2020 pursuant to the search orders, including any storage devices containing information that was copied from the items removed from the first defendant and the second defendant’s premises, be returned to the defendants forthwith. Her Honour also made an order for payment of the defendant’s costs of the notice of motion and that those be paid forthwith.

There are two sets of information here sought to be made use of (by reference to the expert): the “search order information”, being the electronic data or hard drives obtained on execution of the now set aside Anton Piller orders; and the information derived from the inspection of Mr Circosta’s computer. As to the latter, it is not suggested by the defendants that the plaintiff was not entitled to interrogate (electronically or otherwise) its own computer device for the purpose of obtaining evidence in relation to the proceeding. Rather, the complaint is that this is to be used by reference to information in the search order material. The relevance of that, to my mind, is that this is not a situation such as was the case in DC Payments Pty Ltd v Next Payments Pty Ltd (2016) 51 VR 151; [2016] VSC 315 (where Vickery J struck out parts of a statement of claim based on the misuse of confidential information), nor is it similar to the case where, in Sullivan v Sclanders (2000) 77 SASR 419; [2000] SASC 273, the Full Court of the Supreme Court of South Australia struck out the entirety of the plaintiff’s statement of claim in circumstances where it was considered that the plaintiff should not be advantaged by the misconduct that had there occurred.

The defendants on the present application, in summary, oppose the relief that is sought by the plaintiff on the following grounds.

First, it is submitted that the plaintiff’s application seeks impermissibly to use the search order as a substitute for discovery and for the purpose of facilitating the provision of further particulars in support of its case against the defendants.

Reference is made, amongst other authorities, to the decision in Findex Group Ltd v iiNet Ltd [2018] NSWSC 1567 in which, inter alia, reference was made to the primary purpose of a search order being to preserve evidence pending the final determination of a hearing, and to the authorities regarding the extraordinary and Draconian nature of Anton Piller orders and search orders, including to the observations made by Powell JA in Long v Specifier Publications Pty Ltd (1998) 44 NSWLR 545 at 547, and Branson J in Microsoft Corp v Goodview Electronics Pty Ltd (1999) 46 IPR 159; [1999] FCA 754 at [26] (Microsoft Corp).

Reference is also made by the defendants to what was said by Flick J in Metso Minerals (Aust) Pty Ltd v Kalra (No. 3) [2008] FCA 1201 at [28] (Metso Minerals) (approved in Re Lamond (No 4) [2017] FCA 820 at [20] per Besanko J (Re Lamond)):

Further, in Findex Group Limited v McKay [2019] NSWCA 93 at [26], the Court of Appeal said the following (which is of relevance in the present circumstances):

The defendants also refer to the decision of Stewart J in Rauland Australia Pty Ltd v Johnson (No 2) [2019] FCA 1175 (Rauland), in which his Honour said the following at [55]:

The defendants maintain that the appropriate course in the present case would be for the plaintiff to seek discovery in accordance with the applicable rules, and I note in relation to the complaint that this is for the purpose of facilitating the provision of further particulars in support the case against the defendants, that reference is made to the affidavit affirmed 25 November 2021 of the solicitor acting for the plaintiff, Ms Byrne, in particular to the paragraphs in which Ms Byrne indicates what the expert will be instructed to do in terms of performing an analysis of the Circosta computer if leave is granted (see [18](e)(i)-(vi) of Ms Byrne’s affidavit). It is submitted that this makes clear that part of the purpose of the application is to uncover additional or unknown breaches of the relevant employment contracts, and to attempt to use the data obtained on the search orders in order to obtain that evidence.

The second basis on which the defendants resist, in summary, the application to adduce expert evidence is that the proposed inspection and use of the seized material by the plaintiff’s expert would render futile the Court’s decision to set aside the search orders ab initio and would thereby occasion injustice to the defendants. The rhetorical question was posed in this regard, that if there was nothing to prevent the plaintiff from now making an application of this kind seeking to make use of material obtained on the search orders that have been set aside, then what one might ask, what was the purpose of the defendant’s going to the inconvenience and expense and effort of obtaining decisions setting aside the search order ab initio.

I would rather put the issue as being that the decision of her Honour to set aside the search order ab initio must have reflected, and did by reference to her Honour’s reasons reflect, a decision to make clear (with a view to having a deterrent effect in general) the importance of the duty of disclosure and candour on an ex parte application. To anticipate my ultimate conclusion, that deterrent effect (and the need to give effect to the deterrent effect) is a matter that I consider weighs in favour of the position adopted by the defendants on the present application, albeit that it needs to be balanced against other factors such as the overriding statutory principles set out in ss 56 to 60 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act).

Coming back to the defendant’s objections to the application to adduce expert evidence, the third basis raised in submissions is that the plaintiff has not established, in light of its decision not to seek discovery, any basis on which it is entitled to inspect the seized material that is in the defendant’s possession. I would interpose to say that it seems highly likely on the basis of the argument today that in the event that the application were to be refused, one would anticipate that the next step will be that the plaintiff will seek discovery of material in relation to what is referred to as the common landlord clients, in which case that argument has a somewhat circular application.

Finally, it is said that the Court would not exercise its discretion to grant relief in circumstances where the plaintiff has failed to provide a satisfactory explanation for its delay in seeking leave to adduce expert evidence. In that regard, the delay about which complaint is made was addressed in evidence relied upon by the plaintiffs, albeit adduced late, being an affidavit of Mr Matthew Robinson affirmed on 1 March 2022 in which Mr Robinson deposes to the fact that Mr Brattoli, Sales Director at Showcase Realty, had only discovered certain information on the Circosta computer on 24 August 2021 by accident when searching that computer for other matters.

The defendants submit that the relief that is sought on the present application is tantamount to obtaining discovery, and in those circumstances, is inconsistent with or contrary to the authorities which make clear that the purpose of search orders is not as a substitute for discovery (see, for example, Metso Minerals at [36], [43], [49]; Re Lamond at [20]; Microsoft Corp at [26]; and Bugaj v Bates [2004] FCA 1260 at [13]).

The plaintiffs support their application on the basis that, notwithstanding that the Anton Piller order has been set aside, there remains a discretion to authorise a party to deploy information derived from the fruits of Anton Piller order, referring to the decision in Rauland (to which I have referred above) at [48], which is as follows:

The plaintiffs further referred to the consideration by Rein J of Rauland in Skytraders Pty Ltd v Meyer [2021] NSWSC 1670 at [57]:

It is submitted that it does not follow from the fact that the Anton Piller order was discharged that the plaintiff cannot refer to information derived from the discharged order to permit it to make an application to access documents or information revealed in the execution of the order. Reference is made to what is said in Heydon, Cross on Evidence (LexisNexis Butterworths, 11th ed, 2017) at [27295], namely that:

In the course of oral submissions there was discussion as to the principles applied by the High Court in Kadir v The Queen (2020) 267 CLR 109; [2020] HCA 1 which I considered in Eastlings Pty Ltd v Calidu Import Export Pty Ltd [2020] NSWSC 1041. The plaintiff submits that it is not necessary to determine whether or not in the present case documents obtained pursuant to the authority of a search order that has been set aside ab initio should be admitted into evidence or not. That being an issue that will arise, if it arises, at trial and that at present, the issue is an issue as to appropriate case management principles and the application thereof.

As I have indicated earlier I am concerned that the Court should not be seen to be condoning a failure to comply with the obligation of full disclosure of material facts and candour on an ex parte application. But I must balance that with the overriding statutory mandate that applies when considering the exercise of discretions such as this under the rules, and that mandate is to be found in ss 56 to 60 of the Civil Procedure Act. It does not seem to me to be consistent with the just, quick and cheap resolution of the real issues in dispute to have an exercise whereby expenses incurred in a discovery process in order to produce documents that both parties already know exist, and which are likely to be of significant probative value in determining the issues in the proceedings before the Court.

The submission for the plaintiff is that the plaintiff is entitled to marshal evidence in support of the case which it seeks to prove, and that disapproval of the conduct or misconduct for which Rees J made orders setting aside the Anton Piller orders ab initio and payable forthwith costs orders, should not deprive the plaintiff of the means of proof all together.

Balancing the need for deterrence and the need not to condone the conduct that has occurred in the present case, against the entitlement of the plaintiff to prove its case by reference to evidence that it is able legitimately to obtain, and the likelihood that dismissal of the application would simply lead to a discovery application which would seem to me to be highly likely to be successful in circumstances where the evidence is clearly of probative value and can be confined in its scope, I am of the view that the orders sought should be made, but in circumstances where the data copy or the material obtained from the execution of the Anton Piller orders is limited to what is referred to as the MyDesktop Customer Relationship Management database contained in the data copy rather than the breadth of the documents that were apparently obtained on the execution of the search orders.

In those circumstances I make the following orders:

I am of the opinion that the appropriate order is that the costs of the Notice of Motion be the plaintiff’s costs in the cause.