Home Insights Delays and debacles: Securing urgent interlocutory orders for misuse of confidential information in recent court decisions

Delays and debacles: Securing urgent interlocutory orders for misuse of confidential information in recent court decisions

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Read time
5  minute read
Date published
21 August 2024
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Tara Koh, Associate and Leanne Oitmaa, Principal discuss the misuse of confidential information and the difficulties that are likely to be encountered when seeking urgent relief.

If a business knows or suspects that its confidential information has been or is about to be leaked the best way to minimise the damage is often to obtain urgent relief from the Court.

Two recent decisions from the Federal Court of Australia concerning alleged misuse of confidential information highlight some of the difficulties that applicants are likely to encounter when seeking urgent relief.

If you suspect there has been a breach of confidential information you should:

  • act promptly and seek relief from the Court as soon as possible;
  • ensure that all relevant information and material facts are disclosed to the Court;
  • if search orders are required, be precise with the form of orders sought and, if granted, execute them with diligence and care.

Transportable Shade Sheds Australia Pty Ltd v Aussie Shade Sheds Pty Ltd [2024] FCA 584

In Transportable Shade Sheds the Prospective Applicant (TSS) sought an urgent ex parte interlocutory injunction against Aussie Shade Sheds, three former employees of a group of companies that were in the business of designing, making, selling and delivering pre-engineered but unconstructed shade sheds (referred to as the “vendor companies”) and ESheds Pty Ltd (ESheds).

Mr James Mogford was the director of TSS and ESheds. The vendor companies went into liquidation and Mr Mogford, on behalf of ESheds, acquired the assets, intellectual property rights and associated rights from the liquidator (Assets & Rights). ESheds then granted an exclusive licence to TSS to use the Assets & Rights.

During December 2023 and January 2024, Mr Mogford became aware that Aussie Shade Sheds was competing with TSS using one or more of the Assets & Rights. On 13 March 2024, Mr Mogford sent a letter of demand to Aussie Shade Sheds alleging that it had fraudulently extracted a substantial amount of the confidential information that TSS had purchased and that its conduct amounted to infringement of TSS’ intellectual property rights. By agreement the deadline for compliance with TSS’ letter was extended to 2 April 2024. On 9 April 2024, TSS instructed its lawyers to prepare the application for urgent relief and on 1 June 2024 the application was filed.

In considering whether to grant the relief sought, the Court observed that Mr Mogford and TSS had been aware of the circumstances for several months and found it “difficult to accept[1] that the application was urgent. However, the Court also noted that “[a]n applicant for an ex parte order is under a heavy burden to disclose all relevant facts”;[2] that the level of detail in the affidavit evidence supported a finding that all relevant facts to the knowledge of TSS had been disclosed; and that it had taken “some time[3] for TSS to accumulate supporting evidence. The Court also accepted that the Prospective Respondents were likely to destroy important evidence if they were notified of the application and referred to the observations of Isaacs J that an applicant “may come to the Court, and ask for its interposition even in the absence of his opponent, on the ground that delay would involve greater injustice than instant action.”[4]

In the circumstances the Court was satisfied that there was a serious question to be tried as to TSS’ entitlement to relief; TSS was likely to suffer injury for which damages would not be an adequate remedy; and the balance of convenience favoured the granting of an interlocutory injunction.

Fortescue Ltd v Element Zero Pty Ltd [2024] FCA 590

This matter concerns former employees of Andrew Forrest’s company, Fortescue Ltd (Fortescue), who are alleged to have taken copies of confidential documents relating to Fortescue’s research and development work into “green (carbon dioxide free) iron” technology and attempted to commercialise it through their start-up, Element Zero, in what the Fortescue described as an “industrial-scale misuse”.

The Court was persuaded by Fortescue to make search orders, also known as “Anton Pillar” orders. The purpose of search orders is to “preserve evidence, so as to assist in the proof of an applicant’s claim, which may be in jeopardy of destruction, concealment or perhaps removal from the jurisdiction … By their very nature, such orders invariably are made upon an ex parte application on behalf of applicants.[5] So as to prevent subversion of the search order by publicity of the application and the making of the order the Court suppressed the identities of the parties as well as the proceedings.

The search order was subsequently executed. Without making any findings on the merits, the Court described the aftermath as an “industrial-scale forensic debacle”.[6] According to the Respondents the manner in which the search orders were drafted caused the recovery of an “unduly extensive volume and scope of material”.[7] Of the “extraordinarily large volume[8] of material that was captured much of it was “entirely unrelated to Fortescue’s pleaded claim[9] and resulted in the “extraordinary invasion of the privacy of the respondents”.[10] The Respondents complained that confidential information belonging to third parties (who were in competition with Fortescue) had been taken; hard copies had been removed and not returned; and the independent solicitor had not been present at all necessary times.[11] The Respondents further claimed that the Fortescue parties had omitted materially significant information from their application for the search orders, including details of how one of the respondents, whilst still employed by Fortescue, was allegedly authorised to make copies of documents and distribute them using their personal email account; and another respondent had signed a non-disclosure agreement on behalf of Element Zero to facilitate the two-way sharing of information with Fortescue.[12]

On 1 May 2024, a Fortescue employee concluded that the Respondents had misused Fortescue’s confidential information.[13] On 9 May 2024, the Fortescue parties approached the duty judge for urgent relief and on 14 May 2024 the Court granted the search orders. Unlike the parties in Transportable Shade Sheds, the Fortescue parties approached the court without delay.

Although Fortescue was successful in its application for search orders the Court considered that the circumstances of this case highlighted the “potentiality for the application for and execution of the search orders to have been what I termed an ‘industrial-scale forensic debacle’”.[14] Moreover, in declining the Respondents’ application to continue a general suppression of the proceedings and the identity of the parties on the basis that the Respondents’ reputation would be irreparably damaged the Court considered that drawing attention to the “debacle” might actually work in their favour.

Conclusion

Whether the claims of TSS and Fortescue will be substantiated remains to be seen as each of the proceedings are still before the Court. Nonetheless, the cases of Transportable Shade Sheds and Fortescue show that in spite of the inevitable need to respond quickly to suspected breaches of confidential information, there are benefits to be gained from taking the time to prepare the necessary evidence, disclosing all the relevant facts to the Court, and drafting and executing search orders with care. However, this must be balanced against the need to act promptly and to mitigate further damage to the applicant.


[1] At [33].

[2] At [36].

[3] At [33].

[4] In Thomas A Edison Ltd v Bullock [1912] HCA 72; (1912) 15 CLR 679 at 681-682.

[5] At [2].

[6] At [10].

[7] Affidavit of Michael John Wiliams dated 29 May 2024 at [49], made available by the Federal Court of Australia at https://www.fedcourt.gov.au/__data/assets/pdf_file/0004/119443/2024-06-04_Affidavit-of-Michael-John-Williams-on-29-May-2024_E1776959_v1.pdf.

[8] Ibid at [21](c).

[9] Ibid at [21](c).

[10] Ibid at [21](d).

[11] See fn 7 above.

[12] Second Affidavit of Michael John Wiliams dated 29 May 2024, made available by the Federal Court of Australia at https://www.fedcourt.gov.au/__data/assets/pdf_file/0005/119444/2024-06-04_Affidavit-of-Michael-John-Williams-on-29-May-2024_E1776958_v1.pdf.

[13] Applicant’s Confidential Outline of Submissions dated 8 May 2024 at [38](e), made available by the Federal Court of Australia at https://www.fedcourt.gov.au/__data/assets/pdf_file/0019/119440/2024-06-03-Outline-of-Submissions-Redacted-for-online-file.pdf.

[14] At [18].