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Following a trend of cases being filed by employers against ex-employees in the Federal Court for breach of confidence and copyright infringement, Justice Jackson in Austin Engineering Pty Ltd v Podulova & Ors [2023] FCA 419, has made interlocutory Norwich Pharmacal orders against an ex-employee, Anastasis Podulova (Podulova) as well her new employer, the Schlam group of companies (Schlam).
A Norwich Pharmacal order is a disclosure order which allows information to be obtained from third parties who are caught up in wrongdoing, and helps applicants investigate and ultimately pursue appropriate causes of action.1 As compared to preliminary discovery provided for under the Federal Court Rules, Norwich Pharmacal orders are sought following commencement of infringement proceedings and provide for disclosure beyond what may be sought in preliminary discovery.
The orders made in this case require extensive disclosure of information by the respondents relating to storage devices and computers which are alleged to contain confidential and copyright protected information of Austin Engineering Pty Ltd (Austin). That information includes technical drawings of parts and products it designs and manufactures, sales and pricing information, client tender information and other communications with customers (Austin’s Information).
Until this decision, whether the three criteria to grant a Norwich Pharmacal order under UK law apply in Australia has been left open.2 Justice Jackson has now affirmed that those principles from UK cases apply similarly in Australia.
Background
Austin is an engineering company that designs and manufactures specialised truck parts and other products for use in the resource industry. Podulova was its employee until 13 January 2023. Soon after this date she began working at one of Austin’s competitors, Schlam.
After Podulova ceased employment with Austin, she kept a desktop computer which may have had Austin’s Information on it. Preliminary forensic evidence indicated that Podulova had copied Austin’s Information onto Schlam’s computer systems. Podulova also confirmed that a USB device which contained Austin’s information had been destroyed.
Austin brought proceedings against Podulova alleging she breached confidentiality obligations and infringed copyright in relation to Austin’s Information.
By way of interlocutory application, Austin sought Norwich Pharmacal orders for disclosure of information from Schlam.3 Podulova consented to the orders requiring her to disclose the whereabouts of Austin’s Information and how she used it. Schlam however opposed orders requiring it to produce affidavits from a director of each of the Schlam respondents and disclose requested details potentially relevant to the alleged misuse of the information by Podulova.
Norwich Pharmacal orders
Colloquially known as Norwich Pharmacal orders, this equitable relief was established by Lord Reid in Norwich Pharmacal Co v Commissioners of Customs & Excise [1974] AC 133 at 175B:
…a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers.
There are three well-established conditions to obtain Norwich Pharmacal relief, set out in the UK case of Orb ARL v Fiddler [2016] EWHC 361 (Comm), namely:4
- there must be an arguable case that a wrong has been carried out by an ‘ultimate wrongdoer’;
- the order must be necessary to enable the applicant to bring legal proceedings or seek other legitimate redress for the wrongdoing; and
- the persons against whom the order is sought must be involved in the wrongdoing in a way which distinguishes them from being a mere witness.
Justice Jackson explained that even if all three conditions are met, the Court retains a discretion and can consider any number of relevant factors in deciding whether disclosure should be ordered to do justice.5
Federal Court Decision
Schlam submitted that a Norwich Pharmacal order should not be made unless the Court is reasonably satisfied, on the evidence, that Austin will, or probably will, suffer irreparable damage if there is any delay, and that the orders are necessary for Austin’s long-term protection.6
Jackson J rejected this submission, opining that the authorities do not lay down a pre-requisite that irreparable damage to Austin be established to justify the making of a Norwich Pharmacal order. Rather, his Honour held that once the three, well-established conditions set out above are met, it becomes a matter for the Court’s discretion. This requires relevant factors to be weighed to determine what is in the interests of justice, including the likelihood that the applicant will suffer irreparable harm.7
Justice Jackson concluded that the three criteria were met:8
- there was no dispute between the parties that Austin had established an arguable case that wrongs were committed by an ‘ultimate wrongdoer’, namely Podulova;
- the order was necessary for Austin to bring legal proceedings and to seek redress for the alleged wrongdoing (it cannot bring proceedings unless it knows who might have had access to Austin’s Information and what Podulova did with that information); and
- Schlam was not a mere witness to Podulova’ s wrongdoing, as it employed her and many of the alleged wrongs took place during and/or in the course of that employment. There was reason to believe that Austin’s Information may have been transferred to or used on a Schlam server, and this was sufficient to demonstrate Schlam was ‘mixed up’ in the alleged wrongs, irrespective of whether anyone at Schlam (other than Podulova) knew about the conduct.
As for the exercise of the discretion, Jackson J held that there were good reasons to require Schlam to provide information about what took place, including because if, as Schlam maintains, it had no knowing involvement in Podulova’s wrongs, its evidence as to what has occurred may be valuable to compare with and supplement hers. His Honour also considered that if one of the key USBs containing Austin’s Information was in fact destroyed, Austin cannot use the device to reconstruct what was done with the information on it. Therefore, the disclosures sought from Schlam were found to be the only way Austin could identify whether its information had been further copied or otherwise transferred to Schlam’s network or devices.
In light of the above, Justice Jackson ultimately made the orders as sought by Austin.
Conclusion
This case confirms that Norwich Pharmacal orders are useful tools to obtain evidence and reduce damage in intellectual property infringement cases.
The case also serves as an important reminder that the Court retains a discretion to consider relevant factors in deciding whether disclosure should be ordered, including in contexts where it is likely that evidence has been destroyed and confidential information integrated into a new employer’s systems. In such circumstances, employers are reminded of the importance of including in employment contracts warranties and terms relating to a new employee’s obligations to not breach the confidence and intellectual property rights of its previous employer.
With the advance in computer systems, forensic techniques and remote working, we expect to see more of these orders sought in the future.
