Appellant Applies to Discharge Search Order

MENDES v ATEGA PTY LTD AS TRUSTEE OF THE KACHIRSKI FAMILY TRUST [2022] SASC 68 (11 July 2022)

A Judge of the District Court made a search order at an ex parte hearing. When the search party attended at his house, the appellant applied to discharge the search order. The Court, in determining whether the appeal against the dismissal of the discharge order should be granted, assessed the evidence relied upon by the primary judge. 

Facts:

In 1978 William Kachirski incorporated Atega Pty Ltd, which became the trustee of the Kachirski Family Trust. In that capacity, Atega Pty Ltd commenced trading as the Posture Care Chair Company (PCC). PCC commenced carrying on business tailor-designing, manufacturing, and supplying recliner chairs. PCC imported chairs or components from manufacturers in China who manufactured chairs or components to its designs. 

By 2021, it appears that PCC was importing chairs from a single manufacturer, Lang Haoxuan. In June 2013 Vasco Mendes (Mr Mendes’ father) (Vasco) commenced employment by PCC as Production Manager. In August 2013 Maria Mendes (Mr Mendes’ mother) commenced employment by PCC as Senior Sewing Machinist. In 2017 and 2018 the National Disability Insurance Scheme (NDIS) introduced a program for recliner chairs.

In 2018 the federal government announced government-funded Home Care Packages capable of being used to provide funding towards the purchase of recliner chairs for eligible persons. PCC established a website with the domain name posturecarechair.com.au.

Certain employees of PCC were allocated email addresses being “[name]@posturecarechair.com.au”. In October 2018 Mr. Mendes commenced employment by PCC as Business Development Manager. He was provided by PCC with a laptop computer (Mr Mendes’ work laptop).

Mr. Mendes was presented with a copy of the Employee Handbook then in use by PCC (the Handbook) and signed an acknowledgement that he had received it on 17 October 2018. Under the heading Non-Disclosure, the Handbook stated that the protection of confidential business information and trade secrets was vital to the interests and success of PCC and identified in generic terms examples of confidential information, which included customer lists and preferences. A non-disclosure agreement to which the handbook apparently referred was signed by Mr. Mendes on 4 July 2019 (the Confidentiality Agreement) after he was appointed General Manager on 17 June 2019.  

On 26 July 2019 PCC sent a letter to Mr. Mendes stating that it offered employment in the position of General Manager for 12 months (the Letter of Offer).  The Letter of Offer requested Mr. Mendes to sign the attached copy of the letter and the Unexecuted Standard Terms and Unexecuted Confidentiality Agreement and return them to PCC.  Mr. Mendes never signed or returned a copy of the Letter of Offer, Unexecuted Standard Terms, or Unexecuted Confidentiality Agreement.  

On 7 March 2021, Mr. Mendes used his work laptop to search for the availability of and purchase a domain name “tailormaderecliners” and search for the availability of a business name “tailor made recliners”. On 27 April 2021 PCC was granted a United States patent for a chair with a patented lift and recline mechanism which uses three motors. 

Mr. Kachirski said in his affidavit that this mechanism was first patented in Australia but did not exhibit the Australian patent or identify when it was granted. On 4 June 2021, Mr. Kachirski handed or had handed to Mr. Mendes a letter (the 4 June letter) articulating three allegations of misconduct and provided to Mr. Mendes an opportunity to show cause by 9 June 2021 in effect why his employment should not be terminated.

The first allegation included attempted extortion that allegedly occurred at the 31 May 2021 meeting. The third allegation was of failure to obey a direction to engage in performance management. The second allegation was that at the meeting on 31 May 2021 Mr. Mendes said that a family friend was willing to give him $1 million and he intended to approach the family friend and open an opposition business. Kachirski found the first and third allegations in the 4 June letter proven and the second allegation proven to a degree and Mr. Mendes’ employment was terminated summarily effective immediately.

On 11 August 2021 Camatta Lempens sent an email to Mr. Mendes setting out various obligations said to be owed by Mr. Mendes on termination of his employment, including by reference to clauses 8 to 11 of the Unexecuted Standard Terms and the general law. It demanded the immediate return of any confidential information in the possession of Mr. Mendes and a written undertaking by 19 August 2021 in terms set out in the letter.

On 12 August 2021 Camatta Lempens sent an email to Mr Mendes contending that there was an agreement in terms of the Unexecuted Standard Terms implied from conduct, to which Mr. Mendes responded denying this and contending that he was bound only by his initial agreement and by the original terms of the Employee Handbook. On 13 September 2021 Mr. Kachirski caused searches to be undertaken in relation to Harrowford. They showed the registration in July of Harrowford as a company and of the business name Harrowford Recliners.

Mr. Kachirski caused searches to be undertaken on the World Wide Web for a Harrowford website or Facebook webpage. Mr. Kachirski said that the website and Facebook webpage depict products that are the same as advertised on PCC’s manufacturer Lang Haoxuan’s website.  

On 1 November 2021 PCC, by its solicitors Camatta Lempens, filed in the District Court an ex parte originating application seeking, amongst other things, a search order against Mr. Mendes supported by Mr. Kachirski’s affidavit. The Judge made a search order in the terms sought by PCC. 

Issue:

Whether or not the Court erred in dismissing the application seeking discharge of the search order. 

Applicable law:

Corporations Act 2001 (Cth) s 182 - provides that a director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a)  gain an advantage for themselves or someone else; or

(b)  cause detriment to the corporation.

Corporations Act 2001 (Cth) s 183 - provides that a person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a)  gain an advantage for themselves or someone else; or

(b)  cause detriment to the corporation.

Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55 - identified the common law power to grant a search order.

Bank Mellat v Nikpour [1985] FSR 87 - held that the principle that no injunction obtained ex parte shall stand if it has been obtained in circumstances in which there was breach of the duty to make the fullest and frankest disclosure is of great antiquity.

Brink's-MAT Ltd v Elcombe [1988] 3 All ER 188 - provides that the material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court, and not by the assessment of the applicant or his legal advisers.

International Finance Trust Co Ltd v New South Wales Crime Commission [2009] HCA 49, (2009) 240 CLR 319 - Isaacs J held that a party asking for an injunction ex parte is duty bound "to bring under the notice of the Court all facts material to the determination of his right to that injunction, and it is no excuse for him to say he was not aware of their importance". 

Lloyd’s Bowmaker Ltd v Britannia Arrow Holdings PLC [1988] 1 WLR 1337 - provides that even though a first injunction is discharged because of material non-disclosure, the court has a discretion whether to grant a second Mareva injunction at a stage when the whole of the facts, including that of the original non-disclosure, are before it, and may well grant a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed. 

Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 - demonstrates the importance of the identification in a clear, coherent and ordered way of the grounds for the search order. 

WEA Records Ltd v Visions Channel 4 Ltd [1983] 2 All ER 589 - provides that ex parte orders are essentially provisional in nature.  They are made by the judge on the basis of evidence and submissions emanating from one side only.

Analysis:

The question of whether an applicant can rely, at an inter partes hearing, on the fruits of the search does not arise on this appeal because PCC did not seek to rely on any fruits of the search at the inter partes hearing. PCC did not comply with rule 243.1(3) because it did not join Mr. Mendes (or anyone else) as a respondent to the originating application. 

This led to uncertainty as to the identity of the parties to the action. First, no order was apparently made at any point joining any respondent to the action. Secondly, the documents filed by PCC in the action are inconsistent in naming respondents.

OneDrive is a cloud storage solution that allows a user access to their data from any location using an internet-capable mobile device or computer. This means Mr. Mendes was able to access the data contained in Mr. Kachirski’s OneDrive account after his employment was terminated. 

The combined discovery of the unauthorised OneDrive account containing The Posture Care Chair Company business data, its access, and availability to Mr. Mendes, and the searches for and subsequent purchase of the “tailor made recliners” internet domain are consistent with activity to utilise the Company data for purposes unrelated to the Company.  

The Judge in his reasons did not refer to the submissions made by Mr. Mendes relating to Mx Noordin’s characterisation of OneDrive as “unauthorised” or PCC’s counsel’s characterisation of it as “personal”. To disregard the challenge to Mx Noordin’s report on the first and primary ground of challenge in characterising the report as unchallenged would be illogical.

It was submitted that Mr. Mendes had synced his own personal OneDrive A to the company’s OneDrive B such that company files contained on OneDrive B were transferred to Mr. Mendes’ personal OneDrive A. However, there was no evidence that he had done this and no suggestion in the Noordin report that he had done this.

Conclusion:

The Court will grant leave to appeal, allow the appeal, and set aside the orders made by the Judge on 10 December 2021.