Flocast Australia Pty Ltd v Purcell [1999] FCA 309 (31 March 1999)

Last Updated: 7 April 1999

FEDERAL COURT OF AUSTRALIA

Flocast Australia Pty Ltd v Purcell [1999] FCA 309

PRACTICE AND PROCEDURE - documents and other materials seized under Anton Piller Order - substantive judgment for applicant - later complaint by respondent that materials not covered by the order were taken - whether jurisdiction to award damages pursuant to applicant's undertaking

Air Express Limited v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1980-81) 146 CLR 249 applied

Columbia Picture Industries Inc v Robinson [1987] Ch 38 followed

J C Techforce Pty Ltd v Pearce (1996) 138 ALR 522 cited

Uren v John Fairfax & Sons Pty Ltd [1966] HCA 40; (1966) 117 CLR 118 cited

Everet v Williams (1725), discussed in (1893) 9 LQR 197 mentioned

FLOCAST AUSTRALIA PTY LTD v PURCELL & ORS (NO. 2)

NO. VG 379 of 1994

HEEREY J

31 MARCH 1999

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 379 of 1994

BETWEEN:	FLOCAST AUSTRALIA PTY LTD Applicant
AND:	JAMES DESMOND PURCELL, JODY MARC, TRACEY LEE HOOK and TIGER BRONZE PTY LTD Respondents
JUDGE:	HEEREY J
DATE OF ORDER:	31 MARCH 1999
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The respondents' notice of motion will be adjourned for further hearing on a date to be fixed.

2. The applicant is to file and serve affidavits on or before 3 May 1999.

3. The respondents are to file and serve affidavits in reply (if any) by 17 May 1999.

4. The applicant is to pay the respondents' costs of the hearing on 1 March 1999, such costs to be taxed and paid forthwith.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 379 of 1994

BETWEEN:	FLOCAST AUSTRALIA PTY LTD Applicant
AND:	JAMES DESMOND PURCELL, JODY MARC, TRACEY LEE HOOK and TIGER BRONZE PTY LTD Respondents

JUDGE:	HEEREY J
DATE:	31 MARCH 1999
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 The first respondent Mr James Purcell and the fourth respondent Tiger Bronze Pty Ltd (hereafter "the respondents") by a notice of motion dated 1 March 1999 seek an order for "an enquiry into damages suffered by (the respondents) caused as a result of" an Anton Piller order which I made on 26 October 1994.

2 On the return of the respondents' notice of motion counsel for the applicant sought an order that the motion be dismissed summarily because of what was said to be its "lack of legal foundation". The applicant strongly disputes the respondents' factual allegations but has not yet filed any affidavits.

The Anton Piller order

3 Mr Purcell had previously worked for the applicant. He left its employ and set up his own business through the medium of his company Tiger Bronze Pty Ltd. The applicant complained that in doing so Mr Purcell took a great deal of confidential information relating to manufacturing processes, customer details and the like which was the applicant's property.

4 On 26 October 1994, on the ex parte application of the applicant, I made an Anton Piller order. The applicant gave to the Court the usual undertaking, that is to say "to pay to any party adversely affected by this order such compensation (if any) as this Court thinks just and in such manner as the Court directs". The order itself directed the respondents and/or persons in charge of four specified premises to allow the applicant's solicitors to enter such premises, and to remain on them for a period of 14 hours "for the purpose of searching for, inspecting, photographing and removing from the said premises into the custody of the applicant's solicitors the following". There followed six categories of documents and computer records. These included documents appearing to be the property of the applicant, documents relating to the establishment of a business by the respondents in competition with the applicant prior to Mr Purcell having left the applicant's employ, documents relating to machinery for the production of metal pipes, rods or bars using the vertical continuous casting process, documents showing prospective involvement with or financial interest in any business established in competition with the applicant, documents relating to customers of the applicant and computer records of the applicant's MANPAK computer system and database.

5 The Anton Piller order was executed on 28 October 1994. A large quantity of material was taken away from the specified premises.

Judgment for the applicant

6 In August 1997 the applicant brought on a motion seeking summary judgment. On 19 September 1997 I delivered a judgment granting summary judgment insofar as the applicant sought permanent injunctions: (1997) 39 IPR 177. The applicant was granted leave to discontinue its claim for damages. In the course of the judgment I said as to the material recovered under the Anton Piller Order (at 181):

"A great deal of information was taken, including hundreds of written documents and almost 100 computer hard disks and floppy disks containing tens of thousands of pages of computer information. The information which was retrieved and printed comprised a complete reproduction of part of the applicant's confidential information including customer lists, sales histories of the applicant's customers and summaries of the applicant's sales of particular products for particular years."

In conclusion I said (at 185):

"Mr Purcell was determined to leave his employment and set up a business in competition with his employer. This of course he is quite entitled to do. But in doing so he has simply taken from his employer anything he could lay his hands on which might be useful to his new enterprise."

The orders I made on the motion of the applicant included:

"5. The applicant be released from the undertakings given by it to this honourable Court on 28 October 1994 [sic] and 3 November 1994."

7 The first of those dates should be 26 October 1994, the date the Anton Piller order was granted. The second date was when the various injunctions made were extended until trial.

Respondents' affidavit in support of motion

8 In an affidavit sworn 8 January 1999 Mr Purcell complained that the applicant's solicitors wrongly retained details relating to customers of the respondents who had never been the applicant's customers. As a result, he said, the business of Tiger Bronze Pty Ltd had been destroyed. Some material was retained until nine months after the raid and other material not returned until December 1997. Mr Purcell alleged that the material was seized and retained with the express intention of making it impossible for Tiger Bronze Pty Ltd to stay in business.

9 Mr Purcell further alleged that the applicant's solicitors have acknowledged that some documents fell outside the categories of documents covered by the judgment but their client is not willing to return such documents. This includes information on Mr Purcell's hard drive discs and documents relating to his accounting practice. As I have said, all Mr Purcell's allegations are disputed by the applicant.

The applicant's submissions

10 Counsel for the applicant argues that there is no cause of action for damages as the consequence of an order unless there is in place an undertaking for damages: Air Express Limited v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1979-81) 146 CLR 249 at 318-9. It is then said that since the undertakings have been discharged by my order of 19 September 1997 they cease to have any operation or effect; as from the instant of making the order of discharge, the undertakings ceased to exist.

11 In any event, it is said, the relief sought by the present motion does not travel beyond damages "caused as a result of the Order". Therefore any claim by the respondents can be considered only in relation to whether the making of the order (i.e the Anton Piller order) itself was justified. There is no foundation for that because the applicant has succeeded on its substantive claim. Counsel cited a passage from Spry, "Equitable Remedies", 4th ed at 639, (5th ed at 655):

"In order that the Court may conclude that the defendant should be compensated pursuant to an undertaking earlier given by the plaintiff, it is generally necessary that he should be able to show that the interlocutory or interim injunction in question has been wrongly obtained, wrongly, that is, in the sense that if the matters in issue had been able to be fully investigated at the interlocutory application it would have appeared that the plaintiff was not entitled to relief and accordingly no injunction would have been granted."

12 Since the applicant obtained final relief, it is said that the making of the Anton Piller order has been "completely vindicated by the very substantial volume of material seized, material which it has been found demonstrated the wrong-doing by the respondents".

Columbia Picture Industries Inc v Robinson

13 Much of the applicant's argument can be answered by reference to the judgment of Scott J in Columbia Picture Industries Inc v Robinson [1987] Ch 38, an important decision which was followed in this Court by Branson J in J C Techforce Pty Ltd v Pearce (1996) 138 ALR 522. In Columbia the plaintiffs complained of breach of copyright, passing off and trade mark infringement in relation to pirate videos. On 18 June 1982 the plaintiffs issued a writ and on the same day obtained an Anton Piller order and Mareva injunction ex parte. By a notice of motion dated 24 February 1984 the defendants sought dismissal of the action and the setting aside of the Anton Piller order and an enquiry, pursuant to the plaintiff's undertaking, into damages sustained by the defendants as a result of the order.

14 The action and the defendants' motion were heard together before Scott J in 1985. In a lengthy judgment his Lordship found that there was serious non-disclosure in the plaintiffs' affidavits on which the Anton Piller order was granted and that on the execution of the order the plaintiffs' solicitors took material not covered by the order. His Lordship gave judgment for the plaintiffs for the injunctions sought and ordered an enquiry as to damages for infringement of copyright. He rejected the defendant's application to set aside the Anton Piller order. The application was not made until 18 months afterwards and not dealt with until the final trial of the action. His Lordship concluded that the setting aside of the order could have no practical effect. Under the heading "Damages" his Lordship said (at 87):

"The defendants seek damages under the cross-undertaking given by the plaintiffs. In view of my findings as to the manner in which the order was obtained and executed, the defendants are, in my judgment, prima facie entitled to damages. The problem is quantum.
Damages for breach of a cross-undertaking ought, in my judgment, to be primarily compensatory. But I do not think, in the present case, that is the whole of the basis on which damages can be granted. It is well settled that an increased level of damages, sometimes described as aggravated damages, can be awarded where trespass to land or trespass to goods has been accompanied by circumstances of contumely or affront: see McGregor on Damages, 14th ed. (1980), paras. 1082 and 1127. That has been so in the present case by reason, in my judgment, of the excessive and oppressive manner in which the Anton Piller order was executed. There is not, in terms at least, any claim for exemplary damages in the present case. One of the categories of cases identified by the judgment of Lord Devlin in Rookes v. Barnard [1964] UKHL 1; [1964] A.C. 1129 in which exemplary damages may be claimed is that of cases which involve oppressive, arbitrary or unconstitutional action by servants of the government. Solicitors who execute an Anton Piller order do so, in important part, as officers of the court. It is the court which places them in a position to do that which would, without the court authority, be a flagrant and inexcusable trespass. They are placed in a position in which their actions are likely to cause shock, distress and often outrage to those against whom the orders are executed. If, in execution of these orders, they act outside the terms of the order oppressively or excessively, I am disposed to think that Lord Devlin would have included the case in the category to which I have referred."

(Note that in Australia exemplary damages are not limited to the Rookes v Barnard categories: Uren v John Fairfax & Sons Pty Ltd [1966] HCA 40; (1966) 117 CLR 118.)

15 Scott J declined to order an enquiry as to the damages done to the defendants' businesses at the two premises where the order was executed. The compensatory element of any damages should compensate the defendants for damage to legitimate business interests. As to the first premises, although there were video tapes taken which were not the property of the plaintiffs, they were pirate videos; thus the whole business was illegal and an enquiry as to damage would in his Lordship's view be an account of an illegal enterprise like the highwayman's case (Everet v Williams (1725), discussed in (1893) 9 LQR 197).

16 The business at the second premises, although in part legitimate, continued for some time after the execution of the Anton Piller order and ceased for other reasons.

17 His Lordship nevertheless continued (at 88):

"I propose, therefore, to make an assessment here and now of the sum that the plaintiffs ought to pay the defendants under the cross-undertakings in damages. In spite of what I have said, there must be some compensatory element in the damages to be awarded. The combination of Anton Piller order and Mareva injunction made it impossible for the defendants to obtain credit. The retention by Hamlins [the plaintiffs' solicitors] of all the documents of the businesses made any continuity of business very difficult. There was a legitimate part, both of the 8, Frederick Street business and, perhaps to a very small extent, of the Mill Street shop business. The defendants' chance to continue on a small scale a legitimate business was impaired by the ex parte order being obtained and executed. In addition, this is, in my judgment, a case in which aggravated damages are justified."

18 In the event his Lordship awarded damages of [sterling]10,000.

19 Implicit in Scott J's approach are the propositions that:

(i) a plaintiffs' undertaking as to damages is an adequate legal foundation for an award of damages where the defendant has suffered loss as a result of an Anton Piller order being wrongly executed (for example, by seizure of materials not covered by the order);

(ii) success by the plaintiff on its substantive claim is not necessarily a bar to the defendant recovering damages (see also Spry, 5th ed, 656-7).

20 If I may respectfully say so, it would be most unjust if the law were otherwise. In the course of argument I was attracted to the suggestion that the respondents should be left to their remedies in the appropriate State court in trespass, conversion and detinue. However, it was only an order of the Federal Court, granted on the applicant's undertaking as to damages, which enabled the applicant to do what it did. This was an order "at the very limit of the in personam jurisdiction proper to be exercised by the courts": Columbia at 73. I do not think this Court should wash its hands and decline to adjudicate on the respondents' complaint that the applicant abused the exceptional power which the Court gave it.

21 Air Express is consistent with this conclusion. In that case a defendant who succeeded at trial failed to obtain damages on the plaintiff's undertaking given when an interlocutory injunction was granted. The trial judge (Aickin J) and the Full High Court on appeal held that the loss flowed not from the injunction but from the litigation itself. Thus the issue was one of causation. Stephen J said (at 320):

"... it will only be if damage is suffered because of the grant of the injunction, and would not have been suffered but for it, that the Court should compensate a defendant who claims damages under the undertaking. Its grant must be shown to be the causa sine qua non of the damage complained of before the defendant can be entitled to be compensated for what turns out to be the erroneous grant by the Court of the injunction against it."

22 Similarly Mason J said (at 324):

"The party seeking damages must show that he has sustained damage `by reason of this Order'. The words connote a causal connexion between the damage and the interim injunction."

23 In my opinion those observations are equally applicable where the question is not whether the interlocutory order was wrongly obtained (in the sense discussed by Spry, supra) but whether abuses were perpetrated in the execution of the Order. If what Mr Purcell says is true, the respondents have been "adversely affected by" the Anton Piller order because had it not been for that order the applicant would not have gained access to the respondents' premises and taken away their property against their will: see the passage in Columbia cited at par 14 above.

24 That part of the final judgment which discharged the applicant from its undertakings is not to be read as an absolution of the applicant for any wrongs it may have committed to date. This is particularly so in a context where, unlike Columbia, the hearing on the substantive claim did not deal with complaints as to the execution of the Anton Piller order. As Spry said (6th ed at 657):

"It has long been established that the jurisdiction of the court to award damages pursuant to an undertaking does not come to an end merely because the proceedings of the plaintiff are finally disposed of at a subsequent hearing. Even after his action has, for example, been dismissed, the power to award damages remains, for it is a power that arises, not from the original institution of proceedings, but rather from the giving of the undertaking itself."

Orders

25 The respondents' notice of motion will be adjourned for further hearing on a date to be fixed. The applicant is to file and serve affidavits on or before 3 May 1999. The respondents are to file and serve affidavits in reply (if any) by 17 May 1999. The applicant is to pay the respondents' costs of the hearing on 1 March 1999, such costs to be taxed and paid forthwith.

I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.

Associate:

Dated: 31 March 1999

Counsel for the Applicant:	Mr D Shavin QC
Solicitor for the Applicant:	Freehill Hollingdale & Page
Counsel for the Respondent:	Mr M Strang
Solicitor for the Respondent:	V G Peters & Co
Date of Hearing:	1 March 1999
Date of Judgment:	31 March 1999