In the December 2021 decision in Skytraders Pty Ltd v Ian Wallace Meyer [2021] NSWSC 1670 (an employment and confidential information dispute), the Supreme Court of New South Wales held that the Plaintiff was entitled to have an independent forensic computer expert appointed by the Court to conduct an analysis of the defendants’ documents before pleading and evidence closed, to permit the Plaintiff to gain evidence to support its case against the Defendant employee.

This case highlights what is required to have an early independent examination ordered before the pleadings, evidence and discovery stage.  It also demonstrates the disclosure requirements for a party seeking ex parte orders.

Facts

Mr Meyer (the First Defendant), was employed by the Plaintiff, Skytraders Pty Ltd (‘Skytraders’), as a flight operations manager. Mr Meyer resigned from Skytraders in December 2019 and his employment ended on 12 January 2020.

On 13 January 2020, he commenced employment with the Second Defendant, Air Affairs (Australia) Pty Ltd (‘Air Affairs’). It was alleged, and was not seriously in dispute, that Air Affairs and Skytraders were direct competitors in the same market.

In March 2021, Skytraders says it became aware that Mr Meyer still had access to Skytraders’ Dropbox account (with its documents), and that he had accessed a number of documents in the period since his employment ended. Skytraders brought proceedings in the Supreme Court seeking access to Mr Meyer’s documents, as well as an independent analysis of them.

The primary allegations advanced by Skytraders against Mr Meyer were that:

1. Mr Meyer disseminated Skytraders’ confidential information to a director of Air Affairs after having given notice of resignation from his employment with Skytraders;
2. Mr Meyer obtained unauthorised access to Skytraders’ confidential information on the Skytraders Dropbox Account, which included downloading several documents from the Skytraders Dropbox Account subsequent to his resignation from employment with Skytraders; and that
3. Mr Meyer had retained a significant quantity of Skytraders’ documents in a hard copy form.

Court Proceedings

Skytraders obtained ex parte search orders (‘the Orders’) against Mr Meyer and Air Affairs, requiring them to hand over documents physically held to hand, as well as access to documents and information stored on various identified electronic devices.

The Orders provided for an independent expert to examine that material and undertake a mapping process. This ‘mapping process’ involved forensic experts identifying and analysing the metadata to show Mr Meyer’s use of those documents, contrary to his obligations of confidentiality. 

Mr Meyer and Air Affairs had been served with the Orders and sought to have them set aside.  This was on the basis that in making the ex parte application, Skytraders had not disclosed the true position to the Court.  Secondly, they said that many of the documents were publicly available and that there was no confidentiality attached to them.

The Court’s reasoning

The Court rejected Mr Meyer’s and Air Affairs’ arguments, and upheld the Orders.  It maintained the appointment of the expert and access to Mr Meyer’s documents on his devices.

Orders predate Discovery and Evidence

Supreme Court Equity Practice Note 11 provides that usually, the Court will not make an order for disclosure until parties have served their evidence, and there are exceptional circumstances necessitating disclosure.

The Court referred to Rauland Australia Pty Ltd v Johnson (No 2) [2019] FCA 1175 which states that under narrow circumstances, the Court has the discretion to order access to documents for the purpose of formulating a claim, or an aid to discovery - or to particularise a claim.

This Order was different to a standard order for discovery, and the Orders were permitted prior to close of proceedings and evidence.  This was because, according to the Court, the Orders would assist in determining whether Skytraders had sufficient evidence to mount a case against Mr Meyer.

Skytraders were entitled to know what documents were in Mr Meyer’s possession, and what use was made of any of those documents.

Mapping Report

Skytraders relied on Metso Minerals (Australia) Ltd v Kalra (No 3) [2008] FCA 1201 (‘Metso’) to argue that discretion allowed it to inspect seized documents to permit:

1. An assessment to be made as to whether or not there has been compliance with the Orders, and whether any further order may be warranted;
2. The identification and separation from the entirety of those documents that were in fact seized, those documents which do or may provide evidence pending the hearing and determination of proceeding; and
3. The identification and separation from the entirety of those documents that were seized, those documents which do not provide such evidence so that those documents may be returned.

Rein J considered Metso and found that what Skytraders sought fell within categories (b) and (c). The Court made clear that the orders sought by Skytraders were not a “fishing expedition”. This was a case about documents, some of which had been obtained by Mr Meyer after he ceased employment with Skytraders.

In addition, the mapping proposal would have the beneficial effect of reducing the time and expenses which would have been needed to be spent on interrogation of the documents. 

Confidentiality

Mr Meyer said that Skytraders had overstated the uniqueness and confidentiality of the documents.  He said that most of the information contained in the documents was publicly or commercially available.

Rein J stated that a confidential document does not cease to be confidential because it contains material that is publicly available. Even if the collection of information and data is not of itself confidential, it can be commercially valuable to the party that has invested the time and the effort to assemble the information: Morris v Ashbee (1868) LR7Eq 34 at 34-41.

The Court noted there was evidence from Skytraders that 2 of the documents contained publicly available information, but the rest were confidential, the disclosure of which to a competitor would be to the disadvantage of Skytraders.

Although there may have been scope for argument about the extent to which the documents are or are not confidential in the strict legal sense, Skytraders was entitled to seek to prevent dissemination of its documents and, a fortiori because they all may have had value to a competitor.

Material Non-Disclosure

In respect to the assertion that Skytraders had not properly disclosed information to the Court on the ex parte application, Mr Meyer said that Skytraders was aware that he had access through his Gmail account; Skytraders had failed to turn off that access, and thus, this ought to have been disclosed by Skytraders to the Court in the initial application.

In making his decision, Justice Rein confirmed that Mr Meyer has the onus of establishing material non-disclosure in seeking the ex parte orders (as per Brags Electrics Pty Ltd trading as Inscope Building Technologies v Steven Mark Gregory [2010] NSWSC 1205).

Rein J accepted that Skytraders was aware that Mr Meyer had access to some folders between February 2020 and January 2021, but Rein J did not accept that Skytraders knew he had access until March 2021.

The Court considered it likely that Skytraders personnel who removed Mr Meyer’s Skytraders email account from the Dropbox Account were not aware that Mr Meyer was still able to access other folders within the Skytraders Dropbox Account via his Gmail, because it was not established that Skytraders was ever aware that Mr Meyer had access with his Gmail account.

As such, His Honour was not satisfied there had been any non-disclosure in the ex parte application and rejected this basis to overturn the Orders.

Key takeaways

The case illustrates that the Court will be willing to step in to assist a Plaintiff to investigate a case at an early stage, and to obtain disclosure from a defendant, and permit expert analysis of material, prior to finalisation of pleadings and evidence. 

This will assist Plaintiffs to properly formulate their cases in circumstances where they have strong suspicions, but lack adequate evidence to progress their case.

It also highlights that there is an obligation on applicants for ex parte orders to be truthful, but the standard is not so high as to prohibit the Court making orders in appropriate circumstances.

It is a useful case for employers when they become aware of use of their confidential information by a departing employee, but where they have inadequate evidence to prove breach.

If you have a query relating to any of the information in this piece, or would like to discuss a matter of your own - please don't hesitate to get in touch with Nick Maley, Partner within Holman Webb's Workplace Relations Group.