Exit Distraction Free Reading Mode
- Unreported Judgment
Champions Ride Days Pty Ltd v McFarlane QDC 236
DISTRICT COURT OF QUEENSLAND
Champions Ride Days Pty Ltd v McFarlane & Anor  QDC 236
CHAMPIONS RIDE DAYS PTY LTD
ACN 106 662 462
JOSHUA PAUL McFARLANE
RECREATION AND COMPETITIVE EVENTS RESOURCES & SERVICES PTY LTD
ACN 098 088 610
27 of 2018 (Beenleigh Registry)
29 November 2019
11, 12 and 13 November 2019
Barlow QC DCJ
DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – REMOTENESS AND CAUSATION – LOSS OF PROFITS – where plaintiff claims unauthorised use of confidential information by first defendant enabled second defendant to enter into contracts for the supply of goods and services that the plaintiff would have otherwise supplied – where defendants contend the loss of contracts for the supply of goods and services by the plaintiff was due to unrelated issues – whether loss suffered by plaintiff – whether loss suffered due to breach of contact
EQUITY – EQUITABLE REMEDIES – EQUITABLE COMPENSATION – where equitable duties owed by the defendants to the plaintiff – whether equitable compensation is available
INTELLECTUAL PROPERTY – CONFIDENTIAL INFORMATION – INFORMATION PROTECTED – where first defendant had signed a “Confidentiality Agreement” with the plaintiff – whether information was confidential
INTELLECTUAL PROPERTY – CONFIDENTIAL INFORMATION – OBLIGATION OF CONFIDENTIALITY – whether defendants owed obligations of confidentiality to plaintiff – whether defendants breached obligations of confidentiality
INTELLECTUAL PROPERTY – CONFIDENTIAL INFORMATION – USE OF INFORMATION – where first defendant sent confidential information to second defendant – whether second defendant used the information to enter into contracts for supply of goods or services
INTELLECTUAL PROPERTY – CONFIDENTIAL INFORMATION – REMEDIES – EQUITABLE COMPENSATION OR ACCOUNTS OF PROFITS – where plaintiff elected for equitable compensation – whether equitable compensation is available
DAMAGES – GENERAL PRINCIPLES – NOMINAL DAMAGES – where defendants contended no actual loss was suffered by the plaintiff – whether nominal damages available – whether nominal damages sufficient
Coco v A N Clark (Engineers) Ltd (1968) 1A IPR 587, applied
Data Access Corporation v Powerflex Services Pty Ltd, Powerflex Corporation Pty Ltd & Bennett (1996) 63 FCR 336, considered
Giller v Procopets (No 2) (2008) 24 VR 1, applied
Jones v Dunkel (1959) 101 CLR 298, applied
Link 2 Pty Ltd v Ezystay Systems Pty Ltd  NSWCA 317, applied
Saltman Engineering Co Ltd v Campbell Engineering Co Ltd  65 RPC 203, considered
Seager v Copydex Ltd  2 All ER 718, applied
Seager v Copydex Ltd (No 2)  2 All ER 415, considered
Talbot v General Television Corporation Pty Ltd  VR 224, applied
Wheatley v Bell  2 NSWLR 544, applied
B Vass for the plaintiff
M Wilson for the first defendant (direct brief)
AJ Greinke for the second defendant
McMillan Criminal Law for the plaintiff
Cranston McEachern Lawyers for the second defendant
- The plaintiff company (Champions) is in the business of organising and holding track days for amateur motorcycle riders in a number of States, relevantly including Queensland and Western Australia. Its directors are Scott Osborne and Nicole Osborne. Such track days are informally referred to as “ride days”. For several years before June 2018, Champions conducted ride days at two tracks in Queensland: Queensland Raceway at Willowbank and Lakeside Park at Pine Rivers. Until 2016, Champions had also conducted race days at Barbagallo Raceway in Western Australia. That raceway was closed to motorcycle riding in 2016, since when Champions has conducted ride days at the Collie Motorplex near Bunbury. Barbagallo reopened to motorcycles in about mid-2018.
- The first defendant (Mr McFarlane) was employed by Champions from 22 September 2014 to 4 May 2018 as a Contracts Manager. It was an implied term of his employment contract and an express term of a confidentiality agreement, both of which he signed, that he would not directly or indirectly disclose Champions’ “confidential information” to any person, other than with Champions’ consent or in the proper course of performing his duties. The information the subject of that obligation was greater under the express term than under the implied term.
- Mr McFarlane ceased employment with Champions on 4 May 2018 and formally commenced employment with the second defendant (RACERS) on 14 May 2018, when he and RACERS signed an employment agreement. However, from about mid-April until 14 May 2018 he worked for RACERS, even while still working for Champions, under an arrangement referred to by Mr O'Neill – the general manager of RACERS – as a subcontract. Mr McFarlane was employed by RACERS until about the end of June 2018. He then commenced employment with an associated entity of RACERS, Track Action Pty Ltd, on 1 July 2018. The sole director of both RACERS and Track Action is John Tetley. Terry O'Neill is and has at relevant times been employed by RACERS as its general manager and was also general manager of Track Action until about September 2019.
- RACERS is a sanctioning body that licences and permits, or sanctions, motorsport recreational and competitive events. RACERS was not, and it appears is not, in the business of organising and holding ride days. Track Action has been in the business of organising and holding ride days since 1 July 2018.
- Another relevant body is Queensland Raceways Operations Pty Ltd (QRO). That company owns, or holds the leases of, the relevant two raceways in Queensland: Queensland Raceway at Willowbank and Lakeside Park at Pine Rivers. Its general manager at the relevant times was Keith Lewis. Mr O'Neill described Mr Tetley and his wife as the “owners” of QRO and QRO as the “owner” of Queensland Raceway, Lakeside Park, RACERS, Track Action and a number of other entities related to motorsport and recreational events. Mr Lewis described Mr Tetley as the “CEO/director” of QRO.
- While still employed by Champions, and shortly thereafter, Mr McFarlane sent a series of emails to Mr O'Neill at RACERS, containing information belonging to Champions. These emails included information pertaining to staff and contractors’ contact details, inventory lists and suppliers, policies and procedures and Champions’ usernames and passwords with its suppliers. The defendants admit that the emails were received by RACERS, however deny that the information was confidential, except for the information containing Champions’ usernames and passwords.
Claim and contentions
- Champions claims damages for breach of contract or, alternatively, equitable compensation for breach of duty. Champions also seeks injunctive relief restraining the further use by the defendants of its alleged confidential information and intellectual property and an order for delivery up of any of that information still in either defendant’s possession or control. Champions claims that the information sent by Mr McFarlane to RACERS was, to the knowledge of both Mr McFarlane and RACERS, confidential information of Champions, Champions did not consent to it being disclosed to RACERS and Mr McFarlane has used the information to establish RACERS’ policies and procedures, marketing, pricing strategies, business documents and customer base. As a consequence, Champions claims, by using the information obtained in the course of his employment and in breach of the duties owed by him, Mr McFarlane enabled RACERS to enter into contracts for the supply of goods and services that Champions would have otherwise supplied, thereby causing loss to Champions of the profits that it would have made from those contracts. The relevant contracts were to conduct ride days at Queensland Raceway and Lakeside Park after 30 June 2018 and at Barbagallo when it reopened for motorcycle riding in mid-2018.
- RACERS admitted that Mr McFarlane sent a number of emails to Mr O'Neill. It did not admit that Mr McFarlane sent an email on 11 May 2018 that attached, in effect, a copy of Champions’ internal manual for conducting race days. RACERS’ contentions at trial were the following. First, that much of the information about which Champions complains was not, in fact, confidential. Secondly, that it did not use any confidential information obtained by Mr McFarlane. Thirdly, that the loss of contracts for the supply of goods and services by Champions was due to issues unrelated to misuse of confidential information. Fourthly, that the springboard doctrine would not apply as the procedures involved in organising and holding ride days were readily observable by Mr McFarlane from his first-hand knowledge and by any person who participates in a ride day. RACERS submitted that ride days throughout Australia operate in very similar ways. Alternatively, it submitted that any springboard advantage gained by the use of Champions’ information has dissipated given the existence and duration of an interlocutory injunction to which the defendants had consented. Fifthly, that Champions’ customer list was not exploited by RACERS. QRO has its own databases of customers, which includes many of Champions’ customers due to QRO collecting indemnity forms from participants in ride days, and QRO made its database available for RACERS to use for its marketing. Sixthly, as to the other information, RACERS contended that it was either public or non-protected scènes à faire material. Finally, RACERS submitted that, in the event an infringement had occurred, the material was removed from its website in any event and has not been further used by it or on its behalf.
- Mr McFarlane admitted that he sent all the emails about which Champions complains. Dr Wilson, appearing for Mr McFarlane, adopted the closing submissions of RACERS. He submitted that the loss of contracts for the supply of goods and services by Champions was due to issues unrelated to any misuse of confidential information. He also submitted that the information utilised by Mr McFarlane for the purposes of his employment with RACERS was not confidential information in any event.
- At the end of the trial, the defendants offered an undertaking to the Court to destroy any remaining copies of the emails sent by Mr McFarlane to Mr O'Neill in April and May 2018 and the information contained in or attached to those emails, and to verify that destruction by affidavits to be filed with the Court.
- The issues that I must decide are:
- (a)was any of the information that Mr McFarlane sent to himself or Mr O'Neill for use by RACERS confidential?
- (b)did Mr McFarlane or RACERS know, or should they have known, that any of the information was confidential?
- (c)did Mr McFarlane breach any obligation of confidence that he had to Champions?
- (d)did RACERS use any of Champions’ confidential information?
- (e)if RACERS used any confidential information, did it breach any obligation of confidence that it had to Champions?
- (f)did any breach of an obligation by either RACERS or Mr McFarlane cause Champions to lose (or not obtain) contracts that it would otherwise have had?
- (g)did Champions suffer any (and if so, what) loss as a result of any breach of obligation by RACERS or Mr McFarlane?
- (h)what, if any, relief should be granted against either defendant?
Obligations of confidence
- Champions relies on the nature of the information sent by Mr McFarlane to Mr O'Neill to demonstrate that it was confidential. It relies on both a contractual and an equitable obligation of confidence to prove that Mr McFarlane breached his obligations to Champions by sending the information to RACERS.
- A preliminary issue is whether Mr McFarlane was bound by express obligations of confidence and by what might be considered a wide definition of “confidential information” in the confidentiality agreement entered into between him and Champions.
- Dr Wilson submitted that the confidentiality agreement was not binding on Mr McFarlane because it was separate from the employment agreement and Champions offered him no consideration for his obligations under the agreement. However, immediately above Mr McFarlane’s signature in the employment agreement is the following sentence:
I have read and accept the terms and conditions of my employment as outlined in this letter and the Confidentiality Agreement, as attached.
- The employment agreement clearly incorporates the confidentiality agreement, the terms of which therefore formed terms of Mr McFarlane’s employment.
- Therefore, Mr McFarlane’s principal duties of confidence derive expressly from the confidentiality agreement. That document provides that “confidential information” means:
a) All information that:
i. is disclosed (whether orally, electronically in writing or in any other form) by [Champions] to [Mr McFarlane] from time to time in relation to the Purpose;
ii. is treated by [Champions] as confidential;
iii. relates directly or indirectly to [Champions’] past, existing or future businesses, operations or strategic plans, including, but not limited to, information relating to [Champions’] finances, products, customers, the Purpose and marketing strategies.
b) All copies, notes and records, reports and all related information generated by [Mr McFarlane] based on the Confidential Information or arising out of the disclosure of the Confidential Information.
- “Purpose” is defined to mean “providing customer service, web design, database generation and updates, graphics, marketing and advertising development and ongoing support to [Champions].”
- Clause 2 of the confidentiality agreement provides:
The Recipient [ie, Mr McFarlane]:
a. Must keep the Confidential Information confidential;
b. May use the Confidential Information but only for the Purpose;
c. May copy the Confidential Information but only for the Purpose and must mark any such as “Confidential”
d. May disclose the Confidential Information for the Purpose, but only to those of its employees or consultants who have a need to know (and only to the extent that each has a need to know).
- Finally, clause 5 relevantly provides:
The Recipient’s obligations under this Agreement:
a. Do not apply to the extent that information is:
i. Independently developed or known by the Recipient
ii. Public Knowledge (otherwise than as a result of a breach of this Agreement); or
iii. Required to be disclosed or retained by law; and
b. Continue indefinitely in relation to Confidential Information, even if that Confidential Information is returned to [Champions] or destroyed.
- Thus, unless information was independently developed or known by Mr McFarlane or was public knowledge, Mr McFarlane was obliged during the course of his employment and remains obliged to keep confidential, in broad terms, any information gleaned during his employment from Champions’ activities that Champions treated as confidential.
- That duty was owed not only during the period of Mr McFarlane’s employment, but also after his employment with Champions ceased. This was made clear by clause 5b. of the agreement.
- Even where there is no contractual obligation of confidence, equity will impose one in certain circumstances. Equitable obligations may extend to a person who has no contractual relationship with the information owner, but who receives confidential information in circumstances where the person knows, or a reasonable person in that person’s position would have known, that the information was confidential. A person who receives information in confidence may not take unfair advantage of it, in the sense of using it to the prejudice of the owner of the information. If any of Mr McFarlane’s contractual obligations of confidence ended on the termination of his employment with Champions (contrary to my finding), then he would nevertheless be under a continuing obligation in equity not to use any of Champions’ confidential information thereafter.
- Similarly, if RACERS received any of Champions’ confidential information in circumstances where it knew, or a reasonable person in its position would have known, that the information was confidential, it was bound in equity not to use that information and to keep it confidential.
- I shall now consider each of the documents that Champions contends contained confidential information that Mr McFarlane misused by providing it to, or using it for the purposes of, RACERS.
“Staff” email, 13.4.18
- The first relevant email, sent by Mr McFarlane to Mr O'Neill on 13 April 2018, was headed “Staff”. It contained the names and telephone numbers of the photography company used by Champions and of a number of other people, under the headings “Sign on girl”, “Helpers”, “Tyre fitter & Truck driver”, “Truck driver” and “Flag marshall”. Mr Osborne gave evidence that it was the contact list of helpers for Queensland, which was kept on the secure part of Champions’ website accessible only by staff authorised to do so, using a username and password.
- I did not understand counsel for the defendants, in their closing addresses or otherwise, to contend clearly that the list of “staff” was not confidential. Rather, their contention was that RACERS did not in fact need to use that list, as it obtained its helpers by advertising for them on Facebook and also, when Champions informed its staff and helpers that it would no longer be operating at Queensland Raceway, its helpers were free to apply to RACERS to work for it. They also contended that the name and details of the photography company were not confidential because Champions’ customers were themselves referred to and then dealt directly with that company.
- I consider that the information, except the details of the photography company, was confidential. A list of staff or volunteers and their contact details is a document prepared for the purposes of the business. This list was kept on Champions’ secure website, accessible only by username and password. The information in it is also confidential to the individual persons listed.
“Stock” email, 13.4.18
- The second email sent by Mr McFarlane to Mr O'Neill on 13 April 2018 was headed “Stock needed 04042018”. It contained a long list of items that Mr Osborne described as “everything that we have to run one of our events. It’s exactly what we have right down to pretty much everything that they’re going to require in order to run an event” and that information was located in different parts of Champions’ secure website. The list included links to websites of suppliers or other websites where some of the stock could be found.
- In his cross-examination, Mr O'Neill was asked if he had asked Mr McFarlane to email him information about the stock needed to run ride days. Mr O'Neill said he had asked Mr McFarlane to put together a basic stock list of things like that so that RACERS could go to suppliers with a list and see what deal it could get.
- Despite Mr Osborne’s evidence that this information was kept in Champions’ secure records, the list appears to me to be one that a person with Mr McFarlane’s experience in arranging ride days could put together within no more than an hour or two. It is not a typical list of suppliers, stock items and prices that Champions used to maintain supplies. The web links, for example, included an example of a wheel balancer on eBay and links to publicly known suppliers of various items of equipment. The equipment listed all appears to be “off the shelf”, not specially made for Champions.
- In the circumstances, I do not consider the contents of that email to be confidential, including under the confidentiality agreement. To some extent it was public knowledge and in any event it was, in my view, independently known to Mr McFarlane as a result of his long experience in the industry.
- The third email, sent by Mr McFarlane to Mr O'Neill on 20 April 2018, was headed “WA helpers”. Mr McFarlane described the list, in the email, as a “list of helpers for WA & flaggies.” It contained the names, telephone numbers and email addresses of 21 people under the headings “manager”, “tyres”, “office”, “helpers”, “tuition”, “control” and “photographer.”
- Mr Osborne’s evidence was that it was Champions’ WA helpers’ contact list, but he did not say where it was kept in the company’s records. However, I infer, from his evidence about the first email, that this list was also in the secure part of the website.
- For the reasons stated in  above, I consider that this information, apart from the photographer’s details, was confidential.
- Three documents may be considered together. They are all documents that Mr McFarlane emailed to himself on 2 May 2018. The first is a one page screen shot from his phone. The second and third are apparently, between them, a copy of all the pages that he sent by that email. While no express evidence was given about exhibit 1.13, I infer that it forms part of the document at exhibit 1.12. So much was effectively confirmed by Champions’ counsel when she handed to me (without objection) a clearer copy that includes both those documents.
- Mr Osborne went through each page of exhibit 1.12 and identified whether, in his recollection, it contained material that was on Champions’ public website or secure website. While he said that his wife would be more familiar with the document, he said only two pages out of that document were available on the public website. The balance were from the secure and confidential part of Champions’ website, accessible only by approved usernames and passwords.
- Mrs Osborne said all of exhibit 1.12 comprised extracts from a manual that she had created and that was only accessible on Champions’ secure website with a username and password. She said she had created it over about 20 years. It is a manual setting out “absolutely everything that needs to happen [and] you need to know to run our events.” She also said that (as will become apparent) Mr McFarlane changed its format from a Word document (as exhibit 1.12 appears to be) to an Excel spreadsheet when he on-forwarded its contents to Mr O'Neill on 11 May 2015, but the latter email contained this information. I prefer Mrs Osborne’s evidence where it conflicts with that of Mr Osborne, as she was responsible for and more familiar with the contents of the manual and the other documents on Champions’ secure website.
- There was some clear overlap between the manual and parts of Champions’ public website. Also, of course, the way in which Champions conducted its ride days would be substantially obvious to riders and others who participated in them. Nevertheless, even if it might be said that information contained in the manual is in the public domain, a document such as a business manual compiled in part, or even solely, from publicly available information may be confidential, as it “may have been brought into being by the application of the skill and ingenuity of the human brain.” The issue is often, as in this case, whether skill and ingenuity were used in the compilation of the document so as to confer confidentiality on the finished product notwithstanding the commonplace nature of much of its contents. The question whether something has been “constructed solely from materials in the public domain” to which “the skill and ingenuity of the human brain” has been applied is a fairly undemanding test.
- In my view, a business manual created in the circumstances, with the devotion of considerable effort and for the purposes Mrs Osborne outlined, and which is treated by a company as confidential to its employees who need to see it, is confidential information, even if parts of it can be ascertained by the public because it contains information about public dealings of the company or information that also appears in the company’s website or public documents. While it may be possible substantially to “reverse engineer” such a manual by observing the company’s dealings with the public, that would be a time consuming exercise that would probably be incomplete.
- The documents in exhibits 1.11, 1.12 and 1.13 are therefore by their nature confidential and were treated as confidential by Champions. They certainly fall within the definition of “confidential information” in the confidentiality agreement and they are also confidential under the general law.
Phone booking form
- Exhibit 1.14 is an email dated 2 May 2018 from Mr McFarlane to Mr O'Neill with the subject “Phone Booking Form”, in which the contents of such a form are set out. No specific evidence was given about this part of exhibit 1. It appears to replicate parts of the first page of exhibit 1.12 (which Mrs Osborne said was Champions’ internal form to be completed on taking phone bookings and a form that she had developed and that is kept on Champions’ secure website), but the two documents are not identical. However, given that it was sent by Mr McFarlane to Mr O'Neill on the same day and within half an hour of Mr McFarlane sending himself the contents of exhibit 1.12, I infer that it is part of the information taken by Mr McFarlane from Champions’ secure website. It is therefore confidential to Champions.
- On 11 May 2018 at 7.14am (at which time he was employed by RACERS), Mr McFarlane sent an email to Mr O'Neill that attached a Portable Document Format version of what was apparently originally an Excel spreadsheet. In the body of the email, Mr McFarlane simply said “FYI Test”.
- On the same day, at 2.55pm, Mr McFarlane sent another email to Mr O'Neill that attached an actual Excel spreadsheet with a slightly different name. In the body of the email, Mr McFarlane wrote:
Here is update regarding Racers track manual.
- The spreadsheet attached to the latter email is the document at exhibit 1.17. That document appears to be a reproduction, with some changes, of substantial parts of Champions’ manual. The changes appear to have been intended simply to change references to Champions in the original to become references to RACERS in the altered version, although it was sloppily done and, in some places, the name “Champions” remained in the document.
- Mr Osborne said that Mr McFarlane never really used the manual, although he had password access to it.
- This document clearly contained, indeed substantially comprised, information that was taken from Champions’ manual. As that manual was confidential, the contents of this document were confidential to Champions and, by creating this document, Mr McFarlane purloined Champions’ confidential information.
- Champions also complains that, until about September 2018, many parts of RACERS’ website copied, either word for word or in substantial form, similar parts of Champions’ public website. Champions alleges that RACERS used Champions’ confidential information to produce its policies and procedures, marketing, pricing strategies, business documents and to solicit Champions’ customers, including by producing policies on flag marshalling, safety equipment, a photo package and a “What If Insurance” package. Thus Champions’ case concerning the RACERS website is that the similar or identical parts of RACERS’ website were produced from Champions’ confidential information, particularly its manual (which I have found to be confidential).
- The website pages about which Champions complains can be compared to similar pages on Champions’ website. They are certainly similar and, in some respects, identical. However, Champions’ public website was a public document, so there was nothing confidential about it.
- Both parties addressed the Court about whether the similarities between the two websites comprised a breach by RACERS of Champions’ copyright. RACERS contended that there were no breaches of copyright for a number of reasons, including that there was different wording, or the wording was similar because it was the only way to describe the relevant concept, or the similarities came from the similar concept or idea that is not capable of being a subject of copyright, or that some descriptions were standard industry descriptions for a common practice in the industry, as reflected by the manual of the Confederation of Australian Motor Sport.
- Champions’ manual does cover many of the topics dealt with in the relevant pages. However, information about those topics was also presented to the public on Champions’ website. Any procedures, marketing and pricing and the like that appeared on that website were public information, not confidential. While it may have been a breach of copyright for RACERS to reproduce it on its website, that website does not appear to have been created from Champions’ confidential material, but from its publicly available material.
- Therefore, none of that information was confidential.
Other alleged uses of confidential information
- Champions also alleges that RACERS used its confidential information by using Champions’ “marketing copyright” to market RACERS’ business on Facebook, and by contacting one of Champions’ customers and one of its suppliers. It contends that the contact details of those persons must have come from its customer and supplier databases. This is one source of confusion that became apparent during the trial, over whether Champions’ claim includes damages for breach of copyright.
- As to the use of “marketing copyright”, the allegation appears to be limited to one Facebook post by Mr O'Neill that is attached to further particulars of the statement of claim and is partly reproduced in exhibit 1.22.
- There are three problems with this allegation. First, the copy of the post attached to the particulars and in exhibit 1.22 is clearly incomplete, ending as it does with the words “See More”. Secondly, that part of the post does not, so far as I can see, reproduce anything that was drawn by or for Champions, nor anything confidential to Champions. Thirdly, the allegation is simply a particular of the overall allegation in paragraph 12 of the statement of claim, that Mr McFarlane used the alleged confidential information (a term that is limited to documents attached to the five emails referred to above, none of which appears to have been reproduced in this post) to establish RACERS’ policies, etc and to solicit Champions’ customers: it is not a separate claim for breach of copyright.
- The focus on breach of copyright, both here and in respect of the website similarities, is curious, as Champions does not in fact make any claim for breach of copyright. However, Ms Vass, appearing for Champions, submitted that, if I find that RACERS’ draft manual contains information that does not have a quality of confidence about it, it might nevertheless be the plaintiff’s copyrighted information or works. I understand that she relies on that alleged breach of copyright as a basis for assessing damages for the misuse of confidential material in respect of the manual, assessed as if that misuse were akin to a breach of copyright. While the debate and the legal principles involved in considering a breach of copyright are interesting, I do not need to determine whether any breach occurred, as it is not an issue on the pleadings. I need only determine whether the relevant parts of RACERS’ website were created using Champions’ confidential information.
- So far as the Facebook post and “marketing copyright” are concerned, Champions has not demonstrated any relevant copyright, nor breach, nor that any relevant confidential material was used in Mr O'Neill’s post.
- As to the customer database, the evidence showed that QRO had, for some time before June 2018, required that all riders at raceways that it controlled, including Queensland Raceway and Lakeside Park, complete and sign an indemnity form before they could ride. QRO thereby created a database of riders’ names and contact details, which it then provided to RACERS for its marketing purposes once Track Action took over running ride days at those locations. Mr O'Neill and Mr Lewis both said that QRO and RACERS did not use Champions’ customer database at all. There was no evidence to the contrary. I accept that evidence.
- As for the supplier, the relevant person was the national marketing manager of Kawasaki Motors Pty Ltd. Both the company and that individual were well known within the industry, including personally to Mr O'Neill and Mr McFarlane. There was no need for RACERS to obtain his contact details from any of Champions’ information in order to contact him. Mr O'Neill said that he instructed Mr McFarlane to contact that person. Again, I accept that evidence.
- Therefore, neither of these latter two complaints by Champions has any basis. Champions has not proved to my satisfaction that RACERS used Champions’ customer database, nor its supplier database, in order to contact these persons, nor for any other purpose.
Knowledge that information was confidential
- I have no doubt that Mr McFarlane knew that most of the information he sent to Mr O'Neill and to himself was confidential to Champions. He sent most of the information at a time when he was still employed by Champions and, at the same time, he was engaged by RACERS as a “subcontractor”. He knew about the confidentiality agreement and that the information on Champions’ secure website, to which he was entitled to have access for the purposes of his employment there, was treated by Champions as confidential. He therefore knew that most of the documents he sent were confidential. He must have known that to use that information for the purposes of his prospective or current employment with RACERS would be a blatant breach of his obligations of confidence to Champions.
- At the times he received each of Mr McFarlane’s emails sent before 5 May 2018, Mr O'Neill knew that Mr McFarlane was still employed by Champions and was responsible for managing ride days – a role that he would undertake for RACERS or a related company after he left Champions’ employ. His evidence relevant to the contents of those documents was that:
- (a)he did not need to rely on any list of helpers that had been obtained by Champions in order to get helpers for RACERS’ events;
- (b)he did not know that the emails sent to him by Mr McFarlane contained confidential information;
- (c)he had asked Mr McFarlane to put together a basic stock list of merchandise and things like that so that RACERS could go to suppliers to see what deals it could get;
- (d)he had asked Mr McFarlane to put together the basics of running ride days, leaving it to Mr McFarlane to figure out what he was doing and then himself having a look at and oversight of it, although he did not ask him to put together a manual;
- (e)he did not ask Mr McFarlane to send him a booking form;
- (f)“Basically, I asked Josh to put a whole lot of stuff together and it just started arriving in my – in my email box and I looked at it – as I said, just briefly looked at it – this was very basic information. And I looked at it and I thought, ‘Well, he’s doing his job. He’s getting on with it.’ And so I thought that that was – that’s basically how I left it;”
- (g)in answer to a question, “So these emails looked like he was sending you the things that you had asked him for?” he answered, “Well, I’d asked him to put together the basics of running – of a – a ride day, yes;”
- (h)when he received Mr McFarlane’s emails, he did not realise that they contained Champions’ information: it looked like information that any ride day operator would have;
- (i)he had explained to Mr McFarlane that RACERS was looking at starting to run ride days and was wanting to put the basics in place and Mr O'Neill did not have the time to write down everything and to do it all himself because he was running the RACERS company;
- (j)he looked at some of the emails from Mr McFarlane briefly, but he did not know that they contained Champions’ information, although it was possible and Mr McFarlane was still working for Champions at the time;
(k)he did not open the email (perhaps meaning both emails) of 11 May, because he was concerned that the attachment may be malicious (rather than a genuine email from Mr McFarlane);
(l)he did not ask Mr McFarlane to put together a manual to run ride days because he intended to be running the first few with Mr McFarlane and to train everyone to run them the way RACERS did, which he said was quite unique.
- It is necessary to consider this evidence in the context in which the emails were sent to Mr O'Neill.
- Champions had been running ride days at Queensland Raceway and Lakeside Park for some years. Mr McFarlane had been employed by Champions, at least in part, to be involved in running the ride days. Champions had been told by QRO, in early April 2018, that QRO would be terminating Champions’ contract to run those ride days with effect from 30 June 2018. Unknown to Champions at the time, QRO had already agreed with RACERS that it, or a related company, would run ride days at those locations from 1 July 2018. It was necessary for RACERS to be fully ready to run ride days within about 10 weeks. Although Mr O'Neill had considerable experience in running similar events in other States, he had not done so at those locations and, as he said, he did not have time to prepare for it himself. RACERS engaged Mr McFarlane to get everything ready in time to run successful ride days seamlessly from riders’ point of view.
- I do not accept that Mr O'Neill did not realise that Mr McFarlane was sending him information taken from records kept by Champions, particularly as he had engaged Mr McFarlane to work immediately for RACERS while still working at Champions, he was receiving emails while Mr McFarlane was still employed there and he had agreed to employ Mr McFarlane to set up quickly the processes for running ride days that he had been running for Champions. He must have known, and he certainly had reasonable grounds to suspect, that the information Mr McFarlane was emailing to him was information from Champions’ records that Mr McFarlane intended to use, or to be used, in preparing for RACERS to conduct ride days. There was no other reason for Mr McFarlane to send the information to him.
- A person receives information about a business in confidence where that person knows that the information is being imparted to the person in a confidential matter. Similarly, if information is imparted to the defendant in circumstances that would alert a reasonable person in the defendant’s position to the fact that the information is confidential, then the defendant receives that information subject to a duty to treat it confidentially and, if not authorised by the person whose confidence it is, not to use it nor to pass it on to anyone else.
- In my view, in the circumstances in which Mr O'Neill received the emails of 13 and 20 April and 2 May, a reasonable person in his position and in the circumstances would have known that the information being sent was from Champions’ records and was, or was likely to be, confidential. At the least, he should have made enquiries to check if that was the case, rather than maintaining a wilful blindness and allowing Mr McFarlane potentially to use confidential information for RACERS’ purposes.
- In any event, once Mr McFarlane commenced his employment with RACERS, as the employee with responsibility for preparing for and running RACERS’ or Track Action’s ride days, he knew, as agent on behalf of RACERS, that most of the information he had sent through and himself retained was confidential to Champions.
- Therefore RACERS knew, actually or constructively, that the information that I have found to be confidential to Champions was confidential. RACERS was therefore under a duty not to use that information for its purposes.
Did Mr McFarlane breach a duty of confidence?
- There is no doubt in my mind, and I find, that, in sending Champions’ confidential information to himself and to Mr O'Neill, Mr McFarlane breached his duty to Champions to keep that information confidential. Furthermore, if he then used that information for RACERS’ purposes while engaged or employed by RACERS, then he again breached his obligations to Champions.
Did RACERS use any confidential information?
- The import of Mr O'Neill’s evidence was that he did not use any of the information that Mr McFarlane had sent to him.
- I accept that Mr O'Neill personally did not use that information. However, that does not mean RACERS did not use it. Mr O'Neill was not principally involved in organising and running the ride days. His primary role, as he described it in his own Facebook post on 14 May 2018, was “to run and grow the accreditation side of RACERS’ business and that is why we have had to employ a manager to take on the ride day role at short notice.” Mr McFarlane was acting for RACERS, with direct responsibility for preparing for and organising ride days at the QRO locations on behalf of RACERS or its associated company, Track Action. In that capacity, if he used any of the confidential information, then RACERS used it and, if it was then used by Track Action, RACERS passed on that information to Track Action and in that manner RACERS also used it.
- It is clear that the draft RACERS ride day manual that Mr McFarlane sent to Mr O'Neill on 11 May 2018 was prepared by Mr McFarlane for RACERS and was taken from Champions’ manual. Both Mr and Mrs Osborne gave evidence that it was a copy of that manual, altered to make it appear to be RACERS’ document. Even to me it is apparent that there has been a sloppy and incomplete attempt to change references to “Champions” to “RACERS”. In preparing it, Mr McFarlane was using Champions’ confidential information for RACERS’ purposes and on RACERS’ behalf.
- There is no direct evidence that the draft manual was used by Mr McFarlane or anyone else in RACERS after it was sent by Mr McFarlane to Mr O'Neill. Nor is there any evidence that Mr McFarlane or anyone else in RACERS used any of the other information that Mr McFarlane had sent to Mr O'Neill or to himself. However, Mr McFarlane did not give evidence. In the face of the evidence that he sent this confidential information to RACERS, the inevitable inference is that he intended to use it for RACERS’ purposes. The fact that he sent it through required an explanation of how he did use it or a denial that he used it. He was the officer of RACERS most closely involved in preparing for RACERS or Track Action to run ride days. Both as a party and as a senior officer of RACERS at the time, the Court would expect him to be in the best position to answer the questions whether and to what extent he used the information in carrying out his duties for RACERS.
- It is open to me to draw an inference, from his failure to give evidence on his own behalf or on RACERS’ behalf, that his evidence would not have assisted either his or RACERS’ defence. I attach considerable significance to his absence from the witness box, given that he is a defendant and given his close involvement in all the relevant transactions and his duties for RACERS. It is also clear that he did use Champions’ manual to create a draft RACERS manual. Furthermore, in sending the information to Mr O'Neill, Mr McFarlane was, even before his employment with RACERS, using the information as a “subcontractor” for and on behalf of RACERS. While that does not prove directly that he subsequently used it further, it is almost inevitable, in the circumstances, that he did. He considered the information important and useful enough to take from Champions’ records and to make it available to himself at RACERS. The circumstances give rise to a reasonable and definite inference that he used the information in performing his duties for RACERS, subject to two exceptions.
- The exceptions are the lists of staff and helpers. While I am sure that Mr McFarlane intended that RACERS use these lists to find staff and helpers for its ride days, I am not satisfied that he or RACERS did in fact use it. On 4 June 2018, Champions held a meeting of staff and helpers, informed them what was happening and explained that they would each have to decide whether to stay with Champions at its new location or go to RACERS. Mr O'Neill also gave evidence that RACERS marketed the new ride days through social media and word of mouth and was inundated with people who wanted to work or volunteer for RACERS. He said RACERS did not need to rely on any lists of helpers from Champions to obtain helpers.
- Champions did not call any evidence from its own staff and helpers to seek to demonstrate that they had been approached individually by Mr McFarlane, which may have indicated his use of the lists for Queensland. Nor was there any evidence about Western Australian helpers and staff.
- In all these circumstances, I am not satisfied that Mr McFarlane, or RACERS otherwise, used the two lists of staff and helpers for RACERS’ purposes.
- I find that Mr McFarlane and RACERS used the Champions manual and phone booking form, both of which were confidential information provided by Mr McFarlane, to enable RACERS to prepare for Track Action to run ride days at Queensland Raceway and Lakeside Park.
In using information, did RACERS breach its duty of confidence?
- I have found that RACERS had a duty of confidence to Champions once it received the confidential information.
- I have regard to the following proposition, which I consider to be well-established:
“In establishing a breach of duty of confidence, the relevant question to be asked is, “what is the confidee entitled to do with the information?” and not, “to what use he is [sic] prohibited from putting it?” Any use other than a permitted use is prohibited and amounts to a breach of duty. When information is provided in confidence, the obligation is on the confidee to show that the use to which he put the information is not a prohibited use. … [T]he recipient [carries] a heavy burden … where it is shown that confidential information has been used and the user is called upon to show that such use was permitted.”
- RACERS was not permitted to use Champions’ information for its own purposes. In using that information for its own purposes, RACERS obviously breached its duty.
Did the breaches of confidence cause Champions to lose contracts?
- Champions alleges that the defendants (particularly Mr McFarlane) used its confidential information to obtain for RACERS contracts for the supply of goods and services that Champions would have otherwise supplied, thereby causing Champions loss and damage. The contracts are specifically identified in the particulars of the allegation as “contract [sic] that would allow Champions Ride Days at QLD Raceway and Lakeside Raceway and Hire Agreement at Barbagallo Raceway (WA).” It is therefore necessary to review the circumstances in which Champions ceased to conduct ride days at the QRO locations and did not obtain a new contract to provide ride days at Barbagallo.
- The arrangement between Champions and QRO was not documented, but does not appear to be in dispute. When Champions conducted a ride day at either raceway, it would keep a record of the numbers of riders attending and would split with QRO the fees charged to those riders. Champions was obliged to tell QRO the number of riders and QRO would then produce an invoice to Champions for its proportion of the fees. Champions was obliged to pay that invoice.
- In early April 2018, Mr Lewis of QRO met with Mr and Mrs Osborne and told them that QRO had decided to take the ride day business “in house” and therefore Champions would not be able to conduct any more ride days at either Queensland Raceway or Lakeside Park from the end of June. By then, QRO had made an arrangement with Mr O'Neill to the effect that RACERS would assist another company associated with Mr Tetley to take over ride days at those tracks from July 2018, having first approached him with that proposition on 5 March 2018. As a consequence, Mr O'Neill put steps in place to find a manager of ride days and he approached Mr McFarlane in or before mid-April 2018.
- It is clear to me that QRO had decided, before Mr McFarlane was engaged by RACERS and sent any of the emails to Mr O'Neill, to replace Champions as the organiser of ride days at the QRO raceways as soon as possible. I infer that the decision was made because Champions had, for some time, not been providing rider numbers, nor paying QRO invoices, promptly and QRO was dissatisfied with Champions’ performance.
- That being so, it was not Mr McFarlane’s or RACERS’ improper use of Champions’ confidential information that led to Champions losing the right to conduct ride days at QRO’s raceways.
- In any event, RACERS did not itself take over the conduct of ride days, although it did organise for a QRO-associated company to do so. Track Action has in fact been running the ride days and, from about 1 July 2018, employed Mr McFarlane to do so, effectively taking over his employment from RACERS.
- Therefore, insofar as Champions claims relief on the basis that the defendants’ breaches of confidential information caused it to lose the QRO contracts, its claim is misconceived.
- In any event, the claim is that RACERS obtained the right to provide ride day services for QRO. That is not borne out by the evidence, as the ride days are provided by Track Action. Track Action is controlled by Mr Tetley, who also controls QRO. Although RACERS assisted Track Action to be ready to take over ride days and RACERS appears, from its website, to have had some ongoing involvement in marketing, if not the provision of, ride days at least until September 2018, it does not itself operate the ride days and therefore that part of the claim is misconceived.
- As for the Barbagallo raceway, Champions had conducted ride days there for many years before 2016. However, in 2016 the raceway was closed to motorcycles, for safety reasons. It was reopened to motorcycles at some time in 2018. It appears that Mr Osborne found out in about March 2018 that it was opening later that year, but when he asked to conduct ride days there he was told that the owner of the raceway, WA Sporting Car Club Inc (WASCC), had an exclusive agreement with a hirer for all corporate ride days, so it would not take bookings from anyone else. There is no evidence of when that arrangement was made.
- Mr O'Neill said that WASCC’s general manager contacted him and asked RACERS to re-accredit the raceway for motorcycles. RACERS did that and then WASCC granted Track Action an exclusive licence, for three years from 1 October 2018, to conduct motorcycle ride days at Barbagallo.
- The formal licence is an agreement dated 4 June 2018. There is no evidence of when negotiations for that agreement were entered into, nor is there any evidence that might demonstrate that Track Action would not have secured that licence in the absence of RACERS obtaining Champions’ confidential information.
- In any event, the claim is that RACERS obtained the contract for Barbagallo. The evidence shows that RACERS re-accredited that raceway for motorcycle events, but the licensee conducting the events is Track Action.
- Again, the claim that RACERS secured a contract that Champions would otherwise have obtained is not borne out by the evidence.
Did Champions suffer any loss?
- Having regard to my findings that Champions did not lose contracts to RACERS (or to Track Action) because of the defendants’ breaches of confidence, it is clear that it has not suffered loss caused by either defendant, arising from the loss of those contracts.
- In any event, even if I had found otherwise, Champions did not prove to my satisfaction the extent of any loss resulting from the loss of those contracts. Although both Mr and Mrs Osborne gave evidence that Champions made profits from each ride day and purported to quantify those profits (to support the allegation that Champions had lost those profits), they both said that they had derived those figures from a review of Champions’ accounting records. However, Champions did not disclose, nor seek to tender, any such records. While it was not permitted to disclose documents relating only to damages unless specifically requested to do so, it would still be expected to tender relevant documents at trial. Mr and Mrs Osborne gave no explanation for not doing so.
- I have already commented on the effect of Mr McFarlane’s failure to give evidence. Similarly the unexplained failure of a party to tender relevant documents may lead a court to infer that the missing material would not have assisted the party’s case. The failure by a party to adduce evidence within its control, including to tender documents, on issues on which it has the onus of proof (such as, in this case, the profits Champions made from ride days and therefore the losses that it had allegedly suffered) may also lead the Court to give less weight to the evidence that is given and more easily to reject it.
- I can only infer, from Champions’ failure to tender its relevant accounting records, that they would not have assisted it in proving that it had suffered those losses. In the circumstances, I cannot give any weight to Mr and Mrs Osborne’s evidence of the profits made from ride days when it was impossible for the defendants to test it and the proof of those profits by contemporaneous records lay in Champions’ hands.
- The defendants both submitted that, even if they breached Champions’ confidence, Champions has not proved that it suffered any loss, not only because it had not proved the profits that it alleged it made from ride days but, more particularly, because the loss claimed is limited to the loss of the contracts with QRO and WASCC.
- However, on my reading of paragraphs 14 and 21 of the statement of claim, the loss claimed is not totally limited to loss arising from the “lost” contracts. The allegation in paragraph 14 is:
By reason of the First Defendant intentionally causing, whether directly or indirectly, the Plaintiff’s current and prospective customers to enter into contracts with the Second Defendant, and in misusing the Confidential Information obtained by him whilst employed by the Plaintiff, and taking the benefit of the contracts entered into with the Second Defendant, the Plaintiff has suffered loss and damage particulars of which will be provided after disclosure including non-party disclosure.
- Paragraph 21 relevantly pleads the same as against RACERS (with appropriate amendments).
- Neither defendant sought particulars of Champions’ loss.
- There are three components to the pleaded loss: (1) causing customers to enter into contracts with RACERS; (2) misusing the confidential information; and (3) taking the benefit of the contracts entered into with RACERS.
- RACERS, if not Mr McFarlane, has always clearly been under the impression that Champions’ claim included a claim for damages for breach of copyright, as a result of the allegation in paragraph 12 that Champions’ “marketing copyright” was used to market RACERS’ business on Facebook. But, in the particulars to that paragraph, Champions also alleged that RACERS compiled a number of documents “from [Champions’] policies and procedures.”
- Although not entirely clear, I consider that the second component of the loss, in the light of the pleading and particulars of paragraph 12, encompasses misuse of the confidential information in all respects, not just to secure the relevant contracts.
- I have found that Mr McFarlane and, through him, RACERS misused some of Champions’ confidential information by using it to assist in preparations for Track Action to commence operating ride days at the QRO sites. The relevant confidential information that he used was Champions’ manual and its phone booking form. As I have found, that use did not lead to the loss of the QRO and Barbagallo contracts. The consequent issue for determination is whether it has caused any other loss to Champions.
- Champions contends that, by using the information, RACERS enabled itself to be in a position to conduct ride days at QRO’s sites within a very short period of time, whereas without that information it would not have been ready to start conducting events as early as July 2018. Thus, RACERS secured itself a springboard to launch its own ride days by using Champions’ information. The fact that Mr McFarlane sent the information to RACERS itself leads to an inference that it was helpful to RACERS to have the information. Mr O'Neill acknowledged, in his Facebook post in exhibit 1.19, that RACERS had to take on the ride days at short notice. Mr and Mrs Osborne both gave evidence that it had taken them some months to set up their ride days at the QRO sites and at Barbagallo when they first started. I consider that it is reasonable to expect that it would ordinarily take a new operator about four to six months to prepare to take over the operation of ride days at each site.
- In the case of QRO, RACERS had an arrangement with QRO by about March 2018, but it appears to have done little in practical terms to prepare to take over those operations until it formally employed Mr McFarlane in early May. I consider that it obtained an advantage of about 2 to 4 months by securing Mr McFarlane’s services and the information he took from Champions. RACERS would have had some advantage anyway simply by employing Mr McFarlane, with his extensive knowledge of operating ride days, so its advantage from Champions’ confidential information may be roughly estimated as half of the total advantage it secured. The most practical advantage was the use by Mr McFarlane of Champions’ manual and phone booking form to set up RACERS’ own systems. What the defendants did was “to dispense in certain material respects with the necessity of going through the process which had been gone through in compiling these [documents], and thereby to save themselves a great deal of labour.”
- I find that RACERS secured assistance equivalent to a springboard of two months’ preparation from the use of Champions’ confidential information.
- The next issue is whether that springboard has caused any detriment to Champions: detriment or prejudice to the plaintiff is a necessary element for damages or equitable compensation to be awarded for breach of confidential information.
- RACERS submitted that its use of Champions’ confidential information has not caused Champions any detriment because, even if it assisted RACERS by giving it a springboard, RACERS and Champions did not compete for the provision of ride days because the only tracks in which Mr McFarlane or RACERS had any involvement were the two QRO raceways and Barbagallo. Any profits that RACERS may have earned from those raceways were not profits that might have accrued to Champions had the breach of confidence not occurred because Champions would not, in any event, have secured the contracts for those sites.
- That submission is correct so far as it goes. However, it is not correct to say that RACERS did not compete with Champions for the provision of ride days. RACERS used the information to set up a system for Track Action to operate efficiently‑run ride days from July 2018. Having been told that it would no longer have access to the QRO venues, Champions started conducting ride days at another site in south-east Queensland, near Warwick, and it already conducted ride days at Collie in Western Australia. Therefore, Champions and RACERS, as well as Track Action, can be seen to be competitors for customers, as well as possibly for helpers. It is foreseeably to Champions’ detriment for the defendants to have used Champions’ information to enable Track Action to run ride days effectively and in a similar manner to Champions, in competition with Champions’ ride days, both in Queensland and in Western Australia, at least for the springboard period.
- Thus I find that RACERS’ and Mr McFarlane’s use of Champions’ confidential information caused detriment to Champions. That detriment can be remedied by compensation if it is possible to quantify the extent of the detriment.
- Mrs Osborne gave evidence about how long it had taken her to create the manual and to keep it updated. The phone booking form appears to be part of the manual. It is clear that a considerable amount of brain power, experience and ingenuity were used to create the manual as it was in May 2018. There is clearly a commercial value to the manual and even the temporary use of it to assist a competitor to set up ride days must have a commercial value.
- In my view, Champions has suffered a detriment comprising a loss of the commercial value of the temporary use of its manual for RACERS’ purposes of setting up a system for Track Action to use in running ride days. There is no evidence that Track Action continues to use a manual or system based on the system described in Champions’ manual, but on 20 August 2018 the defendants were prevented, by an interlocutory injunction, from using the documents the subject of this proceeding. That injunction remains in force today, so it is a fair assumption to make that Mr McFarlane and RACERS (to the extent that the latter may still be involved in any way in Track Action’s activities) have not since continued to use the documents referred to in the order.
What is the appropriate remedy?
Damages for breach of contract
- Mr McFarlane breached his contractual duties of confidentiality. However, the plaintiffs have not proved that those breaches led directly to a loss compensable at common law.
- Nevertheless, the breaches were considered and intentional. In the absence of proved actual loss, I may award nominal damages. There is no particular range of damages that might be considered nominal. In my view, it is appropriate to consider the circumstances and the number of the breaches in determining whether nominal damages should be awarded and, if so, in what sum.
- Mr McFarlane breached his obligations on four occasions while he was employed by Champions and he continued to breach his obligation of confidence under the confidentiality agreement after he left Champions’ employ, by using the Champions manual to draft the RACERS manual and then sending it to Mr O'Neill twice. Therefore Champions has proved at least seven breaches of contract by Mr McFarlane.
- I consider that a nominal amount of $100 for each breach is appropriate in the circumstances.
- Therefore I will award $700 damages against Mr McFarlane for breach of contract. I will also award interest on that sum for 18 months at 5%, totalling $52.50.
Equitable damages or compensation
- When put to its election whether to seek an account of profits or equitable compensation for any breach of the defendants’ equitable duties, Champions elected to receive compensation.
- Both Mr McFarlane and RACERS breached equitable duties of confidence owed to Champions. In determining whether I should award equitable damages or equitable compensation, I take into account the following principles.
- Dr Greinke, appearing for RACERS, submitted that equity will not provide a remedy, whether by compensation or by an account of profits, because the object of the equitable remedy is not to strip the profits of a defaulting party or to punish them for wrongdoing, but merely to place the innocent party in the same position as it would have been in had the breach not occurred. He submitted that at most I might award nominal damages for breach of contract against Mr McFarlane but, in the absence of any demonstrated loss, I should award no damages or equitable compensation against RACERS.
- While I accept that the usual object of equitable remedies is as Dr Greinke described, it does not encompass completely the circumstances in which equity will award damages or compensation. It has been noted that “the authority to award financial compensation for breach of confidence is inherent in the exercise of general equitable jurisdiction and does not depend on the niceties of Lord Cairns’ Act or its statutory successors.” Equitable compensation has been awarded for mental distress arising from breaches of personal confidences and it has been said that equity is not incapable of moulding relief appropriate to the circumstances, perhaps in particular when the court is dealing with intentional conduct in defiance of a good faith obligation of confidence.
- In Seager v Copydex Ltd (No 2), the Court of Appeal held that damages in that case should be assessed as the market value of the information as between a willing buyer and a willing seller. But that method for assessment was in the circumstances of the particular case and a court is not restricted to assessing damages in that manner in all cases.
- In Talbot v General Television Corporation Pty Ltd, the defendant breached the plaintiff’s confidence by using his idea for a television programme. In assessing damages for that breach (under the Victorian equivalent of Lord Cairns’ Act), Marks J held that the plaintiff was entitled to monetary relief equating to the value by which his equitable right had been depreciated by the defendant’s breach of confidence. His Honour discussed the appropriate measure of damages, considering a number of cases of breach of copyright, and he derived some guidance from those cases. However, he recognised that there is no one method of measuring or assessing damages for such breaches or for breaches of confidence, but noted that the assessment of market value or fees in an area where none exist would only be an artificial and unsupportable exercise.
- His Honour concluded that, if the plaintiff in that case had been able to use the information to obtain a contract for a series of television programs, his maximum net profit would have been about $100,000. That figure was “a background against which any diminished or impaired value of the right of the plaintiff might for the purposes of assessment be contemplated.” That value had been diminished in a number of ways, including by giving the defendant a head start, which “necessarily implies some depreciation in the value of the plaintiff’s right.”
- In the end, his Honour awarded damages of $15,000 on the basis that “damages by way of compensation can only be predicated on the basis of their being a small proportion of the potential worth to the plaintiff of the activities for which the subject information was to be what has come to be described as ‘the springboard’.” In arriving at that figure, his Honour effectively assessed it by determining the prospect that the plaintiff would have had his idea accepted and would have profited from it.
- The Full Court upheld his Honour’s decision, although Young CJ preferred to describe the right which equity recognises as a right to have the confidential information kept confidential. In dismissing the appeal, Young CJ noted that the fact that the assessment of damages was difficult did not relieve the Court of its duty to assess them and the fact that damages cannot be assessed with certainty does not relieve the wrongdoer of paying damages. Lush J added that, the defendants being wrongdoers, damages should be liberally assessed but the object is to compensate the plaintiff and not to punish the defendants. There is not one single method of assessing damages, but the Court must select the most appropriate method in the circumstances of the case.
- It has also been said that, in appropriate cases, the assessment of compensation for breach of confidence will be a “guesstimate”.
- A learned author on the law of confidentiality says this about equitable damages in the context of a springboard:
“In the context of an award of equitable damages against a confidant who has used confidential information as a springboard, it has been suggested that the law must ‘adjust the measure of damages to accord with the commercial setting of the injury, the likely future consequences of the misappropriation and the nature and extent of the use the defendant puts the trade secret to after misappropriation’. This may, in some cases, justify an award of damages commensurate with the expense the plaintiff incurred in creating the secret that was misappropriated, representing the defendant’s ‘savings’ by misusing the confidential information.”
- Dr Greinke submitted that it would not be correct to assess damages or compensation by reference to the time taken by Champions to develop its information, as it is still conducting ride days and using that information itself. The cost of creating the confidential documents would still have been incurred by Champions and the information is still valuable to it. Nor is there any evidence of any diminution in capital value of the information. Nor is a sum akin to a royalty or licence fee for the use of the information appropriate or calculable on the evidence.
- I do not accept that nominal damages cannot be awarded in equity, as a court exercising equitable jurisdiction has available to it a wide range of remedies and can award damages to suit the circumstances of a case. However, in my view, the deliberate and serious breaches of confidence by Mr McFarlane, together with RACERS’ failure to stop him using that information for RACERS’ benefit – a form of wilful blindness – merit an award of damages or equitable compensation more than merely nominal damages if such compensation is calculable.
- It therefore falls to me to determine a reasoned and equitable approach to the award of damages or compensation. I consider that an amalgam of the time taken by Champions to create and maintain the manual and a fee for the use of that information for about four months (from the time the information was taken to the time the injunction was granted) is appropriate.
- As I have recorded above, Mrs Osborne said she spent a lot of time over 20 years creating and maintaining the manual. She did not put a number of hours on it. She did, however, give evidence that it took her the equivalent of three months working full time to create Champions’ public website. Her annual salary is about $120,000, so she valued her time taken in that process at about $40,000.
- The website and the manual cover similar topics, although the manual has more information, stating as it does the internal processes for dealing with customers, suppliers and applying Champions’ policies. As a “guesstimate” I consider it likely to have taken an equivalent period of time to create and maintain the manual, assessed at the same rate – an appropriate proportion of Mrs Osborne’s present salary, or $40,000.
- Although RACERS itself does not operate ride days, which are conducted by Track Action, RACERS set up the systems for Track Action, which Mr McFarlane operates. Also, RACERS’ website presented itself as if it were running the events until at least September 2018. On this basis, the defendants used the manual and did so for a period of time longer than it took to create it. However, that does not mean that an appropriate level of compensation is the cost of producing the manual, as RACERS can no longer use it and it is still being used by Champions.
- In the circumstances, doing the best I can, I consider that an appropriate amount of equitable damages or equitable compensation, to be awarded against both defendants, is 10% of the cost of producing the manual: that is, $4,000.
- I will allow interest on that sum for 18 months at 5% per annum, totalling $300.
Injunction and delivery up
- The defendants have been prevented, since August 2018, from using the information taken by Mr McFarlane, including information that I have found not to be confidential.
- Champions seeks:
- (a)a permanent injunction restraining the defendants from using the confidential information taken;
- (b)an order for delivery up or destruction on oath by the defendants of any books, records, electronic files or other documents in their possession or under their control that contain information pertaining to Champions which is of a confidential nature; and
- (c)an order for delivery up to Champions of any electronic device capable of storing data that is in the defendants’ possession or control so that Champions or one of its agents may scan, identify and remove any information pertaining to Champions that is of a confidential nature.
- As for delivery up, Dr Greinke submitted that the list of the documents filed on 1 May 2019 on behalf of both defendants includes all the relevant emails and their attachments, which have been extracted from RACERS’ records by an information technology expert. He submitted that they have effectively been delivered up by the disclosure exercise. He said that, as the purpose of delivery up would be the destruction of the relevant records, that could simply be done by the defendants themselves appointing an expert to ensure that all electronic records are located and destroyed and verifying their destruction by affidavit. He submitted that, subject to the defendants giving an appropriate undertaking to undertake that course, there is no need for the court to make an order for delivery up, nor an injunction restraining further use of the information.
- As for an injunction, Dr Greinke submitted that any springboard effect of using the information expired a long time ago – at the latest when the interlocutory injunction was granted – and the defendants have had plenty of opportunity to construct their own systems and policies and, if they choose, a manual. The defendants and Track Action have been running their ride days now for well over a year and there is no basis to apprehend that they intend or wish to have any further regard to any of Champions’ information. Therefore a permanent injunction will serve no purpose, especially if all copies of the material are delivered up or destroyed. He submitted that I should conclude that any springboard advantage has dissipated, so the interlocutory injunction should end and there should be no ongoing injunctive relief against either defendant.
- As I have noted before, Dr Wilson adopted Dr Greinke’s submissions.
- As to those submissions, Ms Vass submitted that, as there was no evidence that hard copies have not been retained, an order for delivery up is appropriate, although an appropriate undertaking may be acceptable. She submitted that any undertaking or order should specifically extend to any documents that may have been created by either defendant that contain Champions’ information, such as the spreadsheet manual (and, I would interpolate, any later versions of that document). She also sought a permanent injunction preventing future use of Champions’ confidential information.
- I do not accept that the process of disclosure constitutes delivery up of the relevant documents. The list sets out the documents that the defendants say they have, but it does not say how many copies (both electronic and printed) of each email each of them has. Service of a list of documents serves a very different purpose to delivery up of wrongly obtained documents.
- In my view, provided that all of Champions’ confidential information is destroyed, there is no need for any further injunction. First, the springboard effect has well and truly ended. Secondly, an injunction could lead to further disputes about whether any of the defendants’ documents being used for ride days now or in the future are taken from Champions’ confidential material. That is not an inviting prospect. Thirdly, the verified destruction of any remaining copies (in paper or electronic form) should sufficiently protect Champions’ interests in the future.
- Therefore I will discharge the defendants from the existing injunction and will not impose a permanent one.
- Since the close of submissions, the defendants have proffered undertakings to search for and destroy any electronic or hard copies of the emails Mr McFarlane sent from his Champions email address in April and May 2018, which covers the emails containing the confidential information, and to verify their destruction on affidavit.
- The proffered undertakings go a fair way toward meeting Champions’ concerns. It might be said that in some respects they may go too far, given that I have found that some of the emails did not contain confidential information. However, even those emails were sent by Mr McFarlane in breach of his implied obligation, as an employee of Champions, not to use Champions’ emails and other systems and information other than for Champions’ purposes. Therefore, I consider it appropriate to include all emails in the orders that I shall make, particularly given that the defendants offered undertakings concerning all the emails.
- However, the undertakings do not go far enough because, from July 2018, Mr McFarlane has been employed by Track Action to run its ride days, so it is entirely possible that Track Action has possession of some or all of the confidential information. If so, they may well not be under Mr McFarlane’s control or in his possession and he may not be able to secure their destruction. Of course, Track Action is not a party, so I cannot make any order requiring it to do anything. However, I consider that the defendants should inform Champions by affidavit whether or not they are aware, or believe, that Track Action has copies of any of the relevant documents. If it does, then Champions can take such steps as it may be advised in dealing with Track Action.
- I do not consider it necessary to order that documents be delivered up to Champions, nor that Champions be entitled to search the defendants’ electronic devices to attempt to identify any relevant documents. Champions’ interests can be sufficiently protected by appropriate orders for destruction verified by affidavit.
- For similar reasons to those discussed at  above, while I accept Ms Vass’ submission that any order for destruction should extend to the spreadsheet manual, I do not consider that it should extend to other unidentified documents containing Champions’ information, as that too is likely to be difficult to determine and could lead to disputes and possibly even an action for contempt.
- Therefore, in addition to the monetary relief, I shall make orders for the destruction of documents and appropriate ancillary orders, to be verified by affidavit.
- I will make the orders set out in the appendix to these reasons.
THE COURT ORDERS THAT:
- Judgment be entered for the plaintiff against the first defendant in the sum of $752.50.
- Judgment be entered for the plaintiff against the first defendant and the second defendant in the sum of $4,300.
- Orders 1 to 5 of the orders made by the Court on 20 August 2018 be discharged.
- By 31 January 2020, the first defendant arrange with an information technology expert to be agreed by the parties or, if not agreed, to be appointed by the President of the Queensland Law Society or her nominee:
- (a)to search for and to delete permanently from his email accounts, and from any other location known to him where they or their contents may exist and which is within his power or control, any emails sent from [email protected] during April and May 2018 (McFarlane Emails), together with any and all attachments to those emails;
- (b)to search for and to delete permanently from his computers and his mobile phone and tablet devices and from any electronic storage devices in his possession or under his control, any copies of the McFarlane Emails and any attachments to those emails, whether saved or in caches;
- (c)to search for and to delete permanently from any cloud storage any copies of the McFarlane Emails and any attachments to those emails;
- (d)to verify the above steps by affidavit to be filed in the Court and served on the other parties.
- By 31 January 2020, the first defendant search for and destroy any hard copies of the McFarlane Emails and any attachments to those emails that are in his possession or under his control and verify that destruction by an affidavit filed in the Court and served on the other parties.
- By 31 January 2010, the first defendant inform the plaintiff of the existence and whereabouts, to his knowledge or belief, of any copies (in any form) of the McFarlane Emails or their attachments that are not in his possession or under his control, including any in the possession or control of Track Action Pty Ltd or any other person, and verify that information by affidavit filed in the Court and served on the other parties.
- By 31 January 2020, the second defendant arrange with an information technology expert to be agreed by the parties or, if not agreed, to be appointed by the President of the Queensland Law Society or her nominee:
- (a)to search for and to delete permanently the McFarlane Emails from its email accounts, computers or computer servers, and from any other location known to it where they or their contents may exist and which is within its power or control;
- (b)to search for and to delete permanently from Terry O'Neill’s computers, phone and tablet devices and from any electronic storage devices in his possession or under his or its control, any copies of the McFarlane Emails and any attachments to those emails, whether saved or in caches;
- (c)to search for and to delete permanently from any cloud storage any copies of the McFarlane Emails and any attachments to those emails;
- (d)to verify the above steps by affidavit to be filed with the Court and served on the other parties.
- By 31 January 2020, the second defendant search for and destroy any hard copies of the McFarlane Emails or any attachments to those emails and verify that destruction by an affidavit to be made by Terry O'Neill and to be filed in the Court and served on the other parties.
- By 31 January 2020, the second defendant inform the plaintiff of the existence and whereabouts, to the knowledge or belief of Terry O'Neill, of any copies (in any form) of the McFarlane Emails or their attachments that are not in its possession or under its control, including any in the possession or control of Track Action Pty Ltd or any other person, and verify that information by affidavit filed in the Court and served on the other parties.
- The defendants pay the respective costs of the above steps, including the costs and fees of the information technology experts.
 T1-13:36 to T1-14:4.
 The express term defined “confidential information” broadly, while the implied term arises under general law, which is much more confined in its effect.
 Exhibits 1.29 and 7.
 T2-15:40-41; T2-16:23-24; T2-16:39-41.
 Exhibits 1.5, 1.6, 1.7, 1.8, 1.9, 1.10, 1.11, 1.12.
 Statement of Claim at  to .
 Statement of Claim at .
 T2-38:31-34; T2-39:5-10.
 That is, any advantage to it in reducing the time that it required to set up and to enable Track Action to operate ride days: Seager v Copydex Ltd  2 All ER 415 at 417 per Lord Denning, quoting Roxburgh J in Terrapin Ltd v Builders Supply Co (Hayes) Ltd, Taylor Woodrow Ltd & Swiftplan Ltd  RPC 128 at 130. Also Coco v A N Clark (Engineers) Ltd (1968) 1A IPR 587 at 592. See ff below.
 T2-46:33-37; T2-46:39 to T2-47:1-2; T2-47:20-23; Data Access Corporation v Powerflex Services Pty Ltd, Powerflex Corporation Pty Ltd & Bennett (1996) 63 FCR 336 at 342-343. See  and footnote 54 below.
 Exhibit 1.2.
 Exhibit 1.3.
 Wheatley v Bell  2 NSWLR 544; Coco v A N Clark (Engineers) Ltd at 591.
 Seager v Copydex Ltd  2 All ER 415 at 417.
 Exhibit 1.6. This is the email as received by RACERS: T1-20:13-20. Its contents are identical to exhibit 1.5, which is a screenshot of the email as it appears on Mr McFarlane’s work phone, which he returned to Champions on his resignation. The other emails are also duplicated in that fashion. Unless otherwise stated, I shall refer only to the versions received by RACERS.
 Mr Osborne refers to this part of the website as the secure website or the “back end” of Champions’ website: e.g. T1-8:27-28. Mrs Osborne referred to this as the “server”: e.g. T1-69:9-10. It appears that what is being described is a secure website where Champions stored information and documents. I will refer to it as the “secure website”.
 Exhibit 1.8.
 T1-18:44 to T1-19:2.
 Exhibit 1.10.
 Exhibits 1.11, 1.12 and 1.13.
 The copy also included some pages that are not in exhibit 1. I have ignored those pages.
 Exhibit 1.12 at 53 and 54.
 T1-21:14 to T1-24:15.
 T1-77:30 to T1-78:30.
 Coco v A N Clark (Engineers) Ltd at 590.
 As stated in Link 2 Pty Ltd v Ezystay Systems Pty Ltd  NSWCA 317 at .
 Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at , quoted and applied in Link 2 Pty Ltd at  and .
 The email is exhibit 1.16. It attached a document entitled “Book 1 (version 1).xlsb.xlsx.pdf”.
 The email is exhibit 1.15. It attached an Excel document entitled “Book 1 (version 1).xlsb(11).xlsx”.
 T1-79:42 to T1.80:23.
 That is, the document at exhibit 1.12.
 Statement of claim, paragraph 12 and particulars (iv) to (vii).
 Comparing exhibits 1.35, 1.37, 1.39, 1.42, 1.44 and 1.46 (from RACERS’ website) with exhibits 1.36, 1.38, 1.40, 1.41, 1.43 and 1.45 (from Champions’ website) respectively.
 Dr Greinke relied in part on a doctrine referred to as scènes à faire and related principles: relevantly referring to Data Access Corporation v Powerflex Services Pty Ltd (1996) 63 FCR 336 at 342-343. The doctrine appears to stem from a number of cases from the United States of America, referred to usefully in Apple Computer Inc v Microsoft Corporation (1992) 24 IPR 225, at 235-236. See also Zeccola v Universal City Studios Inc (1982) 67 FLR 225 at 228.
 Statement of claim paragraph 12, particulars (ii) and (iii).
 Exhibit 1.17.
 T1-91:9-14; T2-7:34-45; T2-34:8-20; T2-36:34 to T2-37:1.
 T1-63:1-11; T2-7:20-30.
 Exhibits 1.6, 1.8, 1.10 and 1.14.
 T2-24:1-7. He did not answer directly the question put to him, which was whether he had asked Mr McFarlane to email him information about stock needed to run race days at Queensland Raceway.
 T2-27:44 to T2-28:5.
 T2-25:45 to T2-26:3.
 T2-28:2-5. That evidence was inconsistent with the submission that ride days throughout Australia operate in very similar ways: see  above.
 Wheatley v Bell  2 NSWLR 544 at 548.
 Wheatley v Bell; Coco v A N Clark (Engineers) Ltd at 591.
 Exhibit 1.19.
 T1-17:42 to T1-18:13; T1-80:7-23.
 Jones v Dunkel (1959) 101 CLR 298 at 304-305, 309-310, 312 and 320-321; O'Meara v Dominican Fathers (2003) 153 ACTR 1 at .
 Dilosa v Latec Finance Pty Ltd (1966) 84 WN (NSW) 557 at 582; ASIC v Adler (2002) 41 ACSR 72 at .
 Exhibits 1.6 and 1.10.
 T1-25:9-26 (I do not take into account the hearsay evidence at lines 27 to 28); T1-62:31-44.
 The confidential information used comprises exhibits 1.11, 1.12, 1.13 and 1.14.
 Lac Minerals Ltd v International Corona Resources Ltd  SCR 574 at 642.
 Statement of claim at  and .
 The particulars were not filed, as they should have been, but a copy was handed to me during the trial and was marked A for identification.
 Exhibit 6.
 Exhibit 3.
 Exhibit 8.
 Uniform Civil Procedure Rules 1999 (Qld) r 221. There is no evidence of any such request.
 Jones v Dunkel at 320-321; Burke v LFOT Pty Ltd (2002) 209 CLR 282 at .
 Blatch v Archer (1774) 1 Cowp 63 at 65, 98 ER 969 at 970; Payne v Parker  1 NSWLR 191 at 200-201.
 In commenting on the statement of claim, I make no criticism of Ms Vass as she did not draw it.
 See  and  above.
 Mr Osborne said about six months for each: T1-43:5-6, 26-27; Mrs Osborne gave much longer estimates of over a year for QRO and 2½ years for Barbagallo: T1-82:7-33.
 Saltman Engineering Co Ltd v Campbell Engineering Co Ltd  65 RPC 203 at 215.
 Seager v Copydex  2 All ER 415 at 417D, E, F, citing and applying statements from Saltman Engineering Co Ltd v Campbell Engineering Co Ltd  65 RPC 203 at 213 and Terrapin Ltd v Builders Supply Co (Hayes) Ltd  RPC 375 at 391.
 Compiled over 20 years of operations: see  above.
 Exhibit 1.12; T1-77:30-37.
 Sending the “staff” and “helpers” lists on 13 April and sending the manual extracts and the booking form on 2 May.
 T2-81:33. Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559, 570.
 Palmer v Monk (1963) 80 WN (NSW) 107 at 110; Houghton v Immer (No 155) Pty Ltd (1977) 44 NSWLR 46 at 56 per Handley J, quoted by Heydon JA in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 at 363 .
 Cadbury Schweppes Inc v FBI Foods Ltd  1 SCR 142 at .
 Giller v Procopets (No 2) (2008) 24 VR 1.
 Giller v Procopets (No 2) at , . Also , , . Although in a different context, the Court awarded damages for mental distress, including aggravated and exemplary damages. The broad range of remedies available in equity applies generally.
  2 All ER 718.
 As to which, see Talbot v General Television Corporation Pty Ltd  VR 224, per Marks J at 244.
  VR 224, commencing at 242.
 At 244.
 At 244-245.
 At 248.
 At 249.
 At 250. The other members of the Court agreed with the Chief Justice.
 At 252 and 253-254 respectively.
 Talbot at 254.
 Ithaca Ice Works Pty Ltd v Queensland Ice Supplies Pty Ltd  QSC 222 at .
 G E Dal Pont, Law of Confidentiality (LexisNexis, 2015) at 324 [16.16]. Footnotes omitted.
 I do not consider it necessary to distinguish between them, as I have jurisdiction to award either in the circumstances of this case, where Champions seeks an injunction.
 Claim, paragraphs 5, 6 and 7 of the relief sought against each defendant.
 He relied particularly on Fractionated Cane Technology Ltd v Ruiz-Avila  1 Qd R 51 at 69, upheld on appeal:  2 Qd R 610.
- Published Case Name:
Champions Ride Days Pty Ltd v Joshua Paul McFarlane and Recreation and Competitive Events Resources & Services Pty Ltd
- Shortened Case Name:
Champions Ride Days Pty Ltd v McFarlane
 QDC 236
29 Nov 2019