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Palaris Mining Pty Ltd v Short

 

[2012] QSC 224

 

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO:

Trial Division

PROCEEDING:

By way of application

ORIGINATING COURT:

DELIVERED ON:

21 August 2012

DELIVERED AT:

Brisbane 

HEARING DATE:

31 July 2012

JUDGE:

Applegarth J

ORDERS:

1.The search orders made by the Honourable Justice Byrne on 5 July 2012 be discharged.

2.The applicant pay the first respondent and the second respondent’s costs of and incidental to the application on the standard basis to be assessed.

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – Inspection and interim preservation of property – the standard expected of a party on an ex parte application – where a “search order” granted ex parte pursuant to r 261 Uniform Civil Procedure Rules 1999 – where respondents in principal proceedings apply for discharge of search order on the basis of material non-disclosure – whether applicants failed to disclose facts material to granting search order – whether search order should be discharged on the basis of material non-disclosure by applicant

Uniform Civil Procedure Rules 1999 (Qld), r 261

Brink’s Mat Ltd v Elcombe and Others [1988] 1 WLR 1350, applied

Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers [2003] 1 Qd R 683, applied

Hayden v Teplitzky (1997) 74 FCR 7, cited

Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyd’s Rep 428, cited

Thomas A Edison Ltd v Bullock (1912) 15 CLR 679, cited

Town & Country Sport Resorts (Holdings) Pty Ltd and Others v Partnership Pacific Ltd (1988) 20 FCR 540, cited

Williams (as liquidator of Willahra Pty Ltd (in liq) v Kim Management Pty Ltd [2012] QSC 143, cited

COUNSEL:

J W Fenton for the applicants/respondents in the principal proceeding

D P de Jersey for the respondent/applicant in the principal proceeding

SOLICITORS:

Turner Freeman for the applicants/respondents in the principal proceeding

Middletons for the respondent/applicant in the principal proceeding

[1] On 5 July 2012 the applicant in the principal proceeding (“Palaris”) obtained “search orders” following an ex parte application before Byrne SJA.  The respondents (“Mr Short and Ms Thomson”) who were affected by those orders apply to set them aside on the grounds that Palaris failed to make full disclosure.

[2] Mr Short and Ms Thomson were employees of Palaris until 30 May 2012 when they were handed letters of termination.  Mr Short was promised a payment in lieu of notice equivalent to two months’ pay in accordance with his contract and payment of any accrued leave.  He was told that these amounts would be credited to his bank account shortly.  In Ms Thomson’s case she was offered one month’s pay in accordance with her contract in a letter dated 30 May 2012, but then told that she would be given an additional month’s salary if she signed a deed of release prior to the close of the next business day.  She did so.  However, neither Mr Short nor Ms Thomson was paid these promised entitlements.  Their solicitor subsequently sought payment to them of their entitlements orally on 29 June 2012 and in a letter of demand dated 3 July 2012, in which he advised that he held instructions to issue claims in the District Court and expected to be able to file them the next day.  Payment having not been made, separate proceedings were commenced by Mr Short and Ms Thomson in the District Court on 4 July 2012, and these claims were served upon Palaris’ solicitors the same day.

[3] In proceedings filed in this Court on 5 July 2012 Palaris sought a “Search Order” in terms of r 261 of the Uniform Civil Procedure Rules 1999, and other orders in respect of information relating to its business that were alleged to be contained on USB devices, computers or digital devices.  Palaris’ case is that Mr Short and Ms Thomson had copied large quantities of information from their laptop computers to storage devices at about the time their employment was terminated.  Palaris submitted before Byrne SJA that the information included confidential information of a type that an employee may perceive as useful in obtaining other employment in the same industry and that Palaris knew of no reason why it was necessary for the respondents to store, copy and then delete such a large quantity of information. 

[4] In support of the application for Search Orders, Palaris’ managing director, Mr John Pala, swore his belief that Mr Short and Ms Thomson could use their networks in the resources industry and Palaris’ confidential information to set up in competition with Palaris or hinder Palaris’ efforts to tender for further work.  He swore in paragraph 34 of an affidavit dated 4 July 2012 and relied upon before Byrne SJA that:

 

“I have also identified an email sent by Mr Short from his Palaris email address to ET & DT Roberts at email address honey53@activ8.net.au, suggesting that Mr Short and the email recipient tender for work ‘non-Palaris’. Now shown to me and marked ‘JP-4’ is a copy of this email.  I confirmed that Palaris was capable of undertaking this work.”

This evidence was relied upon in support of submissions that there were compelling reasons why a Search Order should be made under r 261.  It was relied upon to support the argument that Palaris had a strong prima facie case and would suffer serious loss or damage if search orders were not made. 

[5] Mr Short and Ms Thomson submit that a number of material facts within the knowledge of Palaris were not disclosed to Byrne SJA at the ex parte hearing.  These facts include:

 

(a)the history of interaction between the respondents and Mr John Pala;

 

(b)the fact that the respondents’ employment was terminated within one week of revealing to Mr John Pala that they were in a relationship;

 

(c)the fact that the respondents were promised their lawful entitlements such as holiday leave but that the applicant reneged on that promise;

 

(d)the respondents were suing for their entitlements in the District Court;  and

 

(e)that the competitive tender that the respondents were supposedly entering in competition with the applicant was for work that the applicant did not perform.

The allegation of non-disclosure is not made against counsel for Palaris or Palaris’ solicitors.  It relates to non-disclosure by Palaris, particularly by Mr John Pala. 

[6] Palaris responds that the application to discharge the search orders should be dismissed because:

 

(a)there was no relevant non-disclosure when the orders were made by Byrne SJA;

 

(b)the matters which the respondents contend ought to have been disclosed would not have been reasons to refuse to make the orders;

 

(c)affidavit material relied upon by the respondents identifying information which was taken by them shows that the information was indeed confidential and that there is a strong prima facie case that it was used by the respondents after their employment was terminated;

 

(d)that information, together with the strong prima facie case demonstrated when the orders were obtained, shows that there are also strong discretionary grounds to dismiss the application.

Background

[7] Palaris provides specialist services in exploration, geology, engineering, mining, planning, project management, financial evaluation and sustainability.  Mr Pala’s affidavit sworn on 4 July 2012 and Palaris’ submissions before Byrne SJA emphasised that one of Palaris’ main businesses consists of providing due diligence reports to mining companies in relation to the feasibility of proposed mining projects and acquisitions.  In doing so, it obtains sensitive confidential information which is used in conducting due diligence investigations as well as consultancy advice on issues such as environmental and other liabilities.

[8] Mr Short’s employment with Palaris commenced in January 2010 as General Manager Sustainability Services.  Mr Short explained in an affidavit sworn and filed on 19 July 2012 that during the course of his employment the sustainability business unit prepared environmental reports and was rarely involved in due diligence projects.  He contributed to five or six due diligence reports over a period of two and a half years and this contribution was limited to a few pages each of simply environmental matters.  He had no other contribution and did not understand any section contained in a due diligence report other than the environmental and community relations sections.  Those were the only parts of any due diligence report that he would have any input towards.  His environmental discipline is a very small part of what Palaris does in its consulting capacity to mining businesses.  The business unit that he led was the smallest component of Palaris’ business.  Nevertheless, Mr Short had access to Palaris’ information technology systems, electronic files, client information and other information via a laptop computer which was provided by Palaris.

[9] Ms Thomson was employed with Palaris as Senior Manager Sustainability Queensland on 23 January 2012 and had access to similar Palaris information technology systems remotely from the laptop computer that she was provided.

[10] In paragraph 13 of his affidavit sworn on 4 July 2012, and relied upon before Byrne SJA, Mr Pala swore:

 

“In the week commencing 28 May 2012, I decided to terminate the employment of Mr Short and Ms Thomson on the basis of issues with performance of their work duties.”

This statement is hard to reconcile with a more recent affidavit in which Mr Pala swears that:

 

(a) he decided to terminate Mr Short’s employment following an incident at a meeting that occurred on 28 April 2012;

 

(b)on or around 21 May 2012 he told Palaris’ General Manager of Organisational Services that Mr Short’s employment should be terminated at a meeting to take place on 31 May 2012;

 

(c)he decided to terminate the employment of Mr Short and Ms Thomson before he learned of Mr Short’s and Ms Thomson’s relationship (having been told about this relationship on 23 May 2012).

[11] In short, Mr Pala’s evidence before Byrne SJA is that he decided in the week commencing 28 May 2012 to terminate the employment of Mr Short and Ms Thomson on the basis of performance issues.  His later evidence is that he had decided to terminate their employment much earlier.

[12] Mr Short and Ms Thomson were issued with termination notices at a meeting on 30 May 2012.  They were asked to return Palaris’ property.  It was not practically possible for them to do so on short notice, with Mr Short living a considerable distance from Brisbane.  Arrangements were made for Mr Short and Ms Thomson to retrieve their personal belongings and they were escorted off the site. 

[13] Mr Short used his laptop for both personal and work related material, and this material was mixed.  Prior to the termination of his employment and during the term of his employment he had backed up his laptop on seven separate occasions to avoid losing electronic material.  He had no easy way of removing the personal material from the work related material in the short space of time that he was given to hand over any work related equipment after his employment was terminated.  He accumulated an enormous amount of personal information on his Palaris laptop, including legally privileged information relating to his divorce and children, other legally privileged information, commercial in confidence material relating to companies in which he is a director and a variety of other material.  Mr Short explains that he intended after termination of his employment to sort the information which was his from the backup and to permanently delete any information that was not his.  Prior to returning his laptop he had deleted information from it because it contained information that was personal to him and which he did not want Palaris to view, keep or distribute.  He says that at the termination of his employment Palaris did not provide him with enough time or resources to sort out his data stored on the laptop from Palaris’ data. 

[14] Ms Thomson also relied upon her laptop to store working copies of documents and other documents.  She denies storing a large quantity of confidential Palaris information, copying it and then later deleting it from her laptop for the purpose of causing damage to Palaris.

[15] Mr Short’s laptop, Ms Thomson’s laptop and some other items belonging to Palaris were returned by Mr Short to Palaris on the afternoon of 31 May 2012, along with a copy of the deed of release that Ms Thomson had signed that day.

[16] Analysis of the laptops undertaken by Christopher Pala, who is employed as a Systems Administrator by Palaris in its information technology section, showed that both Mr Short’s and Ms Thomson’s profiles were completely empty, including general application files that had been apparently deleted.  Mr Christopher Pala ran recovery programs.  He says that he was able to recover 300,000 files that had been deleted from Mr Short’s laptop and 18,000 files that had been deleted from Ms Thomson’s laptop.  He cannot say at what point these files were deleted.  The first of these figures is remarkable, and Mr Short questions it.  These figures have not been verified in an affidavit by an independent, forensic expert.  However, Palaris engaged a computer forensic company to investigate the transfer of documents from the laptops to USB devices and on 20 June 2012 that consultant provided a summary of his findings.  This included the fact that USB storage devices had been used in each computer on various dates in March, April and May 2012.  This seems unremarkable and as Mr Short has more recently explained in an affidavit, quite often a USB device would be plugged into his laptop to enable a wireless mouse or keyboard to be used when he was using his laptop to conduct presentations to clients.  It is also unremarkable that he would back up his laptop to save data and to avoid its loss.  He did so on 30 May 2012. 

[17] Nevertheless, the apparent deletion of a large number of files from each laptop over an uncertain period, and the possibility that each respondent had copied confidential information onto USB devices or similar devices was the basis upon which Palaris brought its ex parte application.  Palaris’ concern was that if the respondents had copied confidential information to removable storage devices and deleted the same information from the laptop computers, then this was done to set up in competition with Palaris.

Principles governing duty of disclosure on an ex parte application

[18] In Siporex Trade SA v Comdel Commodities Ltd, Bingham J (as his Lordship then was) said in respect of an applicant who seeks relief on an ex parte basis:

 

“Such an applicant must show the utmost good faith and disclose his case fully and fairly.  He must, for the protection and information of the defendant, summarize his case and the evidence in support of it by an affidavit or affidavits sworn before or immediately after the application.  He must identify the crucial points for and against the application, and not rely on general statements and the mere exhibiting of numerous documents.  He must investigate the nature of the cause of action asserted and the facts relied on before applying and identify any likely defences.  He must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether to grant the application.  It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state.  If the duty of full and fair disclosure is not observed the Court may discharge the injunction even if after full inquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure.” [1]

[19] In Williams (as liquidator of Willahra Pty Ltd (in liq)) v Kim Management Pty Ltd,[2] Dalton J recently considered the duty of candour on an ex parte application and applied the following principles which had been stated in Brink’s Mat Ltd v Elcombe and Others:

 

“In considering whether there has been relevant non-disclosure and what consequence the court should attach to any failure to comply with the duty to make full and frank disclosure, the principles relevant to the issues in these appeals appear to me to include the following.  (1)  the duty of the applicant is to make ‘a full and fair disclosure of all the material facts:’  see Rex v Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 KB 486, 514 per Scrutton L.J.

 

(2)   The material facts are those which it is material for the judge to know in dealing with the application as made:  materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers:  see Rex v Kensington Income Tax Commissioners, per Lord Cozens-Hardy MR, at p 504, citing Dalglish v Jarvie (1850) 2 Mac & G 231, 238, and Browne-Wilkinson J in Thermax Ltd v Schott Industrial Glass Ltd [1981] FST 289, 295.

 

(3)  The applicant must make proper inquiries before making the application:  see Bank Mellat v Nikpour [1985] FST 87.  The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.

 

(4)  The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application;  and (b) the order for which application is made and the probable effect of the order on the defendant:  see, for example, the examination by Scott J of the possible effect of an Anton Piller order in Columbia Picture Industries Inc v Robinson [1987] Ch 38;  and (c) the degree of legitimate urgency and the time available for the making of inquiries:  see per Slade LJ in Bank Mellat v Nikpour [1985] FST 87, 92-93.

 

...”.[3]

These principles have been adopted in many cases since 1988.  However, similar principles have been long-established in Australian law.  Isaacs J in Thomas A Edison Ltd v Bullock stated:

“... it is the duty of a party asking for an injunction ex parte to bring under the notice of the court all facts material to the determination of his right to that injunction, and it is no excuse for him to say he was not aware of their importance.  Uberrima fides is required, and the party inducing the court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in his defence to that application.  Unless that is done, the implied condition upon which the court acts in forming its judgment is unfulfilled and the order so obtained must almost invariably fall.”[4]  (emphasis added)

This statement of principle has been followed in numerous Australian authorities, including by the Full Court of the Federal Court in Town & Country Sport Resorts (Holdings) Pty Ltd and Others v Partnership Pacific Ltd in support of the proposition that:

“A party who seeks the granting of an injunction on an ex parte basis has a duty to place before the court all relevant matters including such matters which would have been raised by the respondent in his defence if he had been present.”[5]

Matters not disclosed by Palaris

[20] It will be recalled that Palaris, by Mr Pala, supported the contention that the respondents might set up in competition with Palaris or hinder Palaris’ efforts to tender for further work by reference to an email sent on 23 May 2012 by Mr Short to ET & DT Roberts suggesting that Mr Short and the email recipient tender for work “non-Palaris”.  After exhibiting the email, Mr Pala confirmed that Palaris “was capable of undertaking this work”.  The email contained a hyperlink to what appeared to be a Queensland Government tender website.  The documents behind the link were not exhibited to Mr Pala’s affidavit or otherwise disclosed to Byrne SJA. 

[21] The work was not of a type undertaken by Palaris, which is a mining consultancy.  The tender was for non-technical work, being manual labour in the form of planting trees, spraying weeds and building fences.  The tender was for a competitive tender process for a low hourly rate and low cost manual labour type work only.  There was no technical, professional or project management component to the work.  The tendered manual labour was to be supervised by government personnel.  Palaris does not do such work.  It has never tendered for such work. 

[22] Mr Pala’s statement that Palaris was “capable of doing this work” failed to disclose that the work was not of a kind which Palaris undertook or had any intention to undertake.  In the circumstances, the statement that Palaris “was capable of performing such work” was likely to mislead by reason of the non-disclosure of the fact that the work was not of a kind which Palaris undertook or had any apparent interest in undertaking.

[23] The email was sent by Mr Short to his uncle, Mr Roberts, who often performs this kind of work and who was looking for work in 2012.  Mr Short had offered to assist his uncle to compile a professional-looking tender to increase his chances of obtaining this work if he wanted to tender for the contract.  His offer was to his uncle as a family member.  As matters transpired, Mr Short’s uncle did not tender for this work, knowing that Greening Australia was likely to tender at rates of around $20 per hour.  As Mr Short notes, in his two and a half years leading the Sustainability Unit at Palaris it never submitted a competitive tender for any sustainability work, never sought nor completed any manual labour work, never sought nor completed any tree planting, weed spraying or fence building work and never submitted a proposal for this kind of work.

[24] These are matters which Mr Short undoubtedly would have raised in his defence if he had been present before Byrne SJA on 5 July 2012.  These were matters that should have been disclosed.

[25] The non-disclosure of these matters was material.  The fact that Palaris was capable of undertaking the work referred to in the tender was relied upon to support Palaris’ case that the respondents might engage in work in competition with Palaris or hinder Palaris’ efforts to tender for further work.  This was the context in which this evidence was given and Mr Pala’s evidence in this regard was relied upon to submit before Byrne SJA “that the first respondent is apparently tendering for work which the applicant is capable of undertaking”.

[26] I am satisfied that Palaris failed to comply with its duty to make full and frank disclosure.  The facts which it failed to disclose in relation to the tender were material to the decision whether or not to grant the search orders.  It is not necessary for Mr Short and Ms Thomson to prove that the orders would not have been made if there had been full disclosure.  It is sufficient for them to prove that Palaris failed to make full and fair disclosure of all material facts.

[27] As to the other aspects of alleged non-disclosure, the simple statement in paragraph 13 of Mr Pala’s affidavit that:

“In the week commencing 28 May 2012, I decided to terminate the employment of Mr Short and Ms Thomson on the basis of issues with performance of their work duties”,

gave a very short account of the decision to terminate the employment of both respondents.  Remarkably, the uncontradicted evidence of Ms Thomson is that:

 

  • Mr John Pala was nothing but highly complimentary about her abilities at work during the course of her employment;

 

  • she had never been advised by anyone at Palaris that there were concerns that she may not be able to perform her role to the required standard;

 

  • prior to the meeting that she had on the afternoon of 30 May 2012 she had no idea whatsoever that her employment was in jeopardy and that her employment was to be terminated.

Additional uncontradicted evidence is that throughout her employment with Palaris Mr Pala would, in their daily discussions, tell her he was very fond of her abilities and held her in high regard.  In addition to complimenting Ms Thomson about her work and inviting her to join in meetings with senior leadership, Mr Pala was very friendly towards Ms Thomson in non-work contexts.  The uncontradicted evidence is that shortly after Ms Thomson commenced employment at the company, Mr Pala began to regularly contact her by telephone, text messages and emails and these contacts predominantly were of a personal nature, with little being discussed about work.  Mr Pala would discuss personal matters.   Mr Pala would take her to lunch and regular coffee meetings.  Ms Thomson says that she found Mr Pala quite flirtatious with her.  According to Ms Thomson, Mr Pala left her with no doubt of his intense feelings towards her.  Mr Pala denies this.   He explains that he discussed personal matters with Ms Thomson because she said that she was in fear of her husband, and he was concerned for her welfare, just as he is concerned for the welfare of all of his employees.  He would contact her from time to time to inquire about her welfare.  Ms Thomson says that Mr Pala’s behaviour made her feel that Mr Pala was seeking either a short-term or long-term relationship with her.  It is possible that Ms Thomson has misinterpreted Mr Pala’s behaviour, including instances of personal contact. 

[28] On 23 May 2012 Mr Short informed Mr Pala that Mr Short and Ms Thomson were in a relationship.  Mr Short did this as a courtesy, and Ms Thomson explains that she and Mr Short thought it appropriate to inform their employer of the relationship so it would find out from them directly, rather than from any other source.  Prior to this, Mr Pala continued to contact Ms Thomson regularly and talk about mostly personal matters.  After 23 May 2012 she heard nothing further from Mr Pala and he ceased calling her or sending her text messages.  On 28 May 2012 she sent Mr Pala an email, noting that Mr Short had communicated their circumstances to him, and that she was pleased to talk to him about how that should be managed.  Mr Pala responded by email indicating that he would talk to Ms Thomson when he got back from China.

[29] If the affidavit of Mr Pala sworn 4 July 2012 is correct in stating that he decided to terminate the employment of Mr Short and Ms Thomson in the week commencing 28 May 2012, then the inference is open that the decision was prompted by disclosure of the personal relationship between Mr Short and Ms Thomson.  This inference is strengthened by the fact that prior to the termination of Ms Thomson, no issue had been raised with her in relation to her performance.  The uncontradicted evidence is that Mr Pala was highly complimentary of her work before he decided to terminate her employment, and also had a very friendly and supportive relationship with Ms Thomson that extended to significant, non-work related contact.  Given the nature of Mr Pala’s regard for Ms Thomson, it is remarkable that he would not counsel her about perceived deficiencies in her work performance, or have someone else do so.  The uncontradicted evidence before me is that Ms Thomson had never been advised by anyone at Palaris that there were any concerns about her work performance.  This fact calls into question the contention that her employment was terminated because of issues with performance of her work.  It supports the inference that her employment was terminated in response to the disclosure of her relationship with Mr Short. 

[30] Mr Pala’s affidavit sworn 4 July 2012 contained evidence on information and belief that when Mr Dixon of Palaris met with Mr Short and Ms Thomson on 30 May 2012 he handed Mr Short and Ms Thomson their termination letters and discussed the proposed payment to each of two months’ pay.  The affidavit said nothing else about the payment of these amounts and left open the reasonable inference that Mr Short and Ms Thomson had been paid these amounts.  In fact, as Mr Pala well knew, they had not been paid these amounts and, despite demands for payment by their solicitor, Mr Short and Ms Thomson had been required to initiate proceedings in the District Court to obtain payment of these promised entitlements. 

[31] Counsel for Mr Short and Ms Thomson submits on the present application that the history of events supports the inference that Palaris’ withholding of their termination entitlements was a vexatious response to the respondents’ relationship.  Whether or not Mr Short and Ms Thomson are entitled to these payments is a matter for resolution in the District Court proceedings.  However, the withholding of payments and the fact that Mr Short and Ms Thomson had commenced proceedings in the District Court to recover them were matters that permitted Mr Short and Ms Thomson to argue that they had been subjected to a punitive course of conduct as a result of disclosing their relationship, and that the application for search orders was a continuation of that course of conduct. 

[32] The competing inference is that, notwithstanding the promised entitlements, Palaris had some legal foundation for withholding payments and that the application for search orders was in aid of Palaris’ legal rights in relation to possible misuse of confidential information. 

[33] The present application is not the forum within which to decide which inference is the more compelling.  The present issue is that if Mr Short and Ms Thomson had been present before the Court on 5 July 2012 they would have given a more complete history of the relationship, raised the fact that there had been no complaint about Ms Thomson’s work performance and disclosed that Mr Pala had a good working relationship with Ms Thomson and a friendly out of work relationship with her in which no issue had been raised about her work performance.  She would have raised the fact that the termination of her employment was without warning.  These matters would have supported the conclusion that the termination of at least Ms Thomson’s employment was a punitive measure.  This inference would have been supported by additional matters that would have been raised by Mr Short and Ms Thomson, namely the withholding of termination entitlements which had been promised to them and that their solicitor had threatened and commenced proceedings to recover them.

[34] These are matters that Mr Short and Ms Thomson would have raised in their defence if they had been present at the hearing on 5 July 2012.  Palaris had a duty to place those matters before the Court, if only to answer them.  The fact that Mr Pala, in a subsequent affidavit, has rejected the proposition that the employment of each respondent was terminated for any reason other than their unsatisfactory performance and misconduct is not to the point.  The relevant point is that the matters raised by the respondents in these proceedings are matters which should have been disclosed on the hearing of the ex parte application.  The respondents would have raised the matters which they raise in this application, namely that the Supreme Court proceedings initiated by Palaris and the application for search orders were part of a punitive exercise to punish individuals who had displeased Mr Pala by establishing a romantic relationship and that Mr Pala and Palaris had sought to additionally punish the respondents by withholding termination entitlements which each respondent had been promised, thereby causing them financial and personal hardship. 

[35]  I do not accept Palaris’ submissions that none of the matters raised by the respondents were material to the relief claimed.  They would have been relevant to the Court’s consideration of whether the application was motivated, at least in part, by a desire to punish the respondents for matters unrelated to confidential information, rather than made simply in pursuit of Palaris’ legal rights. 

[36] Mr Pala’s claim that Mr Short was apparently tendering for work which Palaris was capable of undertaking was highly material to the decision to grant the relief claimed.  The failure to disclose the true nature of the tender, and the fact that Palaris did not seek such work is, in itself, a serious failure to comply with Palaris’ duty to make full disclosure on an ex parte application.  That serious non-disclosure is made more serious by the other aspect of non-disclosure relied upon by the applicant, which were also material to the decision to grant relief.

The discretion to not set aside the orders

[37] In a case in which there has been a failure to make full disclosure on an ex parte application, the Court has a discretion whether or not to set aside the ex parte order.  The following additional points were made in Brink’s Mat Ltd v Elcombe and Others:

“(5)If material non-disclosure is established the court will be ‘astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure ... is deprived of any advantage he may have derived by that breach of duty:’  see per Donaldson LJ in Bank Mellat v Nikpour, at p 91, citing Warrington LJ in the Kensington Income Tax Commissioners’ case ... .

(6)Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application.  The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.

(7)Finally, it ‘is not for every omission that the injunction will be automatically discharged.  A locus poenitentiae may sometimes be afforded:’ per Lord Denning MR in Bank Mellat v Nikpour ... .  The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms.”[6]

[38] In Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers,[7] Holmes J (as her Honour then was) was concerned with a case of material non-disclosure in respect of the granting of a freezing order made under r 260 of the Uniform Civil Procedure Rules.  Following earlier authority,[8] her Honour stated that the exercise of the discretion should have regard to “all the circumstances of the case including the importance of the mis-statements and non-disclosure ..., the applicant’s culpability and the merits of its case otherwise.”[9]  Other authorities have suggested a more rigorous response.  For example, in Hayden v Teplitzky, Lindgren J stated:

“Prima facie, the parties should be restored to their pre-injunction positions pending the hearing and determination of any fresh application by the plaintiff, even though the defendant being now aware of the plaintiff’s intention will have the opportunity of disposing of assets”.[10]

In that case, Lindgren J discharged the injunction, but after considering the matter afresh, granted a further injunction. 

[39] Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers illustrates the application of the principles discussed by Holmes J in the circumstances of a case in which there was a real risk of dissipation of assets by the respondents and, having assessed all the circumstances, Holmes J concluded that, on balance, it was just and convenient that the respondents continue to be restrained from disposing of their assets.  I follow the principles discussed by Holmes J.  Discharge of ex parte orders that are made in circumstances in which there has been a failure to make full and frank disclosure of material facts is not automatic.  In deciding whether to exercise the discretion, regard should be had to all the circumstances of the case, including the degree and extent of the culpability with regard to non-disclosure or misrepresentation.  It may be added that the discharge of an ex parte order does not prevent a fresh application being heard and determined in the light of all relevant facts.[11]

[40] Palaris argues that:

 

(a)it demonstrated a strong prima facie case for relief before Byrne SJA;

 

(b)the affidavit material relied upon by the respondents shows that the information which was taken was indeed confidential and that there is a strong prima facie case that it was used by the respondents after their employment was terminated.

[41] I accept that there is evidence that the respondents kept confidential information on their laptops, including confidential information relating to Palaris.  Each respondent has provided an explanation of the circumstances under which information was kept on their laptops and, in the case of Mr Short, a detailed account of the circumstances under which it was backed up. 

[42] The copying of information to backup devices and the deletion of material held on the laptop may have been undertaken in the circumstances disclosed by the respondents, and without an intent to use information that was confidential to Palaris after their employment was terminated.  These matters cannot be resolved by me on an application of the present kind.  The respondents’ explanation of events having now been given in affidavits, Palaris’ case is not as strong as it was on the hearing of the application for relief before Byrne SJA.  One reason why the respondents, or at least one of them, may possess confidential material is that they were not given sufficient time to go through the material which had been backed up in order to sort Palaris’ information from other information that had been backed up from the laptop. 

[43] The respondents’ solicitor conducted an inspection and preliminary analysis of certain documents, and classified them as either irrelevant or privileged.  Palaris disputes that many of the documents are irrelevant and in paragraph 73 of Mr Pala’s affidavit sworn 27 July 2012, he suggests that a number of documents may be relevant and indicate that Mr Short is operating a consultancy business related to the mining industry.  That may be so, but Mr Short is not contractually inhibited from conducting a consultancy business related to the mining industry, or even from being engaged by mining companies that have dealt with Palaris in the past.  The scope of the non-solicitation clause in his contract and the non-solicitation clause in Ms Thomson’s contract bears careful scrutiny. 

[44] A number of the documents that Mr Pala discusses in paragraph 73 of his affidavit simply relate to possible work that Ms Thomson may be interested in pursuing either directly with participants in the mining industry or as an employee of Mr Short’s consultancy business.  Ms Thomson has not responded to paragraph 73 of Mr Pala’s affidavit which was filed on 27 July 2012.  A few of the entries raise legitimate suspicions that one or both of the respondents may be pursuing business opportunities at Palaris’ expense.  The document referred to in paragraph 73(q) is an example.  However, this falls short of providing strong evidence that the respondents are doing so by the use of confidential information, as distinct from information that they are entitled to use.  The relevant non-solicitation clause, if valid, prevents each respondent from soliciting or enticing “from Palaris or any related entity” any person or entity who has, during the 12 months prior to the date of termination of the contract, been a client or customer or potential client or customer of Palaris or any related entity.  The validity and scope of that clause is a matter for further consideration if Palaris seeks to rely upon it.  Palaris’ present complaint largely relates to the use of confidential information, not a breach of the non-solicitation clause.  In any case, the non-solicitation clause is not breached if former clients of Palaris seek out Mr Short or Ms Thomson to work on projects. Mr Short and Ms Thomson are free to respond to inquiries from participants in the mining industry, even if this involves competing with their former employer. 

[45] The matters raised in paragraph 73 of Mr Pala’s affidavit may warrant further investigation.  Some of them seem a rather weak basis to contend that the respondents, or either of them, have used confidential information.  On the basis of the material before me, Palaris has a basis to argue that the respondents have retained (perhaps innocently and understandably but nevertheless in breach of contract) certain documents which were downloaded to USB devices or similar backup devices.  The matters raised in paragraph 73 of Mr Pala’s affidavit indicate that the respondents are seeking work in the mining industry.  This is unremarkable, given their background and experience and the fact that their employment was terminated recently without payment of termination entitlements.  Their desire to earn a livelihood and thereby support their families does not strongly support the conclusion that they are doing so in breach of their obligations to Palaris.  The few documents mentioned at paragraph 73 of Mr Pala’s affidavit which provide Palaris with reasonable grounds for suspicion have been identified.  The respondents are on notice of these documents and any destruction or deletion of them would have serious civil and possibly criminal consequences.

[46] In deciding how the discretion should be exercised, I have regard to the merits of the case.  The resolution of that turns, in part, on disputed questions of fact.  The respondents have emphatically denied any misuse of confidential information.  It is impossible to conclude that Palaris has as strong a case as presented before Byrne SJA.  Its case that the respondents have misused confidential information to compete with Palaris is not particularly strong.

[47] In deciding how the discretion should be exercised, I have regard to the degree and extent of the non-disclosure.  I regard the non-disclosure by Palaris as serious.  A relevant consideration is that it should not enjoy the benefit of documents that were obtained pursuant to an order that was obtained following a serious failure to fulfil its duty to make full disclosure.  There is a distinct possibility that the orders would not have been made on 5 July 2012 if there had been full disclosure.  However, even if after full disclosure, the search orders had been made, the Court retains a discretion to discharge the orders.  Having considered the circumstances under which Palaris failed to observe its duty of full and fair disclosure, and the other relevant circumstances, I consider that the appropriate course is to grant the relief sought by Mr Short and Ms Thomson.

Orders

[48] I make the following orders:

 

1.The search orders made by the Honourable Justice Byrne on 5 July 2012 be discharged.

 

2.The applicant pay the first respondent and the second respondent’s costs of and incidental to the application on the standard basis to be assessed.

[49] I will hear the parties concerning the form of any other orders that are required in respect of orders made by Margaret Wilson J on 26 July 2012 pending the hearing and determination of the present application.

 

 

Footnotes

[1] [1986] 2 Lloyd’s Rep 428 at 437.

[2] [2012] QSC 143.

[3] [1988] 1 WLR 1350 at 1356-7.

[4] (1912) 15 CLR 679 at 681-2.

[5] (1988) 20 FCR 540 at 543.

[6] Supra at 1357. These principles were recently applied by Dalton J in Williams (as liquidator of Willahra Pty Ltd (in liq) v Kim Management Pty Ltd [2012] QSC 143.

[7] [2003] 1 Qd R 683; [2002] QSC 400.

[8] W v H [2001] All ER 300.

[9] Supra at 695 [54].

[10] (1997) 74 FCR 7 at 12.

[11] Town and Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (supra) at 543.

Close

Editorial Notes

  • Published Case Name:

    Palaris Mining Pty Ltd v Short & Anor

  • Shortened Case Name:

    Palaris Mining Pty Ltd v Short

  • MNC:

    [2012] QSC 224

  • Court:

    QSC

  • Judge(s):

    Applegarth J

  • Date:

    21 Aug 2012

Litigation History

No Litigation History

Appeal Status

No Status