When a smoking gun is not enough

In a case brought before the Federal Court in Western Australia earlier this year, one company failed in its bid to demand access to a former employee’s private emails, despite having clear evidence that he had emailed company information to a personal email account and to his prospective employer.

The key point illustrated by this case is that even “smoking gun” email evidence is only part of the evidence which will be considered by a court when deciding matters that come before it.

In Cape Australia Holdings Pty Ltd v Iannello [2009] FCA 709, Cape Australia Holdings (“Cape”) and Total Corrosion Control (“Total”) sought access to private emails of a former employee, Darren Ianello. This extended to communications with his new employer, Giovenco Industrial Services Pty Ltd (“Giovenco”).

In legal speak, this is known as an application for “preliminary discovery”. Its purpose is to see a prospective opponent’s documents in order to decide whether there is sufficient evidence to commence potentially costly and expensive legal proceedings.

As Justice Siopis notes in the case, preliminary discovery permits “fishing” for new evidence. Given the cost and burden of discovery, the court needs to be satisfied that there is a “reasonable cause to believe” the applicant has a case against its opponent.

Total, which was acquired by Cape in August, 2007, provided industrial services to the energy and resources industry.
After five years with Total, Darren Iannello resigned on 18 June, 2008. On his last day, he handed over his laptop computer so that all confidential files could be removed from the laptop and transferred to Total’s server.

Three days later, he received a letter from Total reminding him of his confidentiality and intellectual property obligations. The letter also asserted that Mr Iannello had given assurances not to compete with Total after his resignation. While Mr Iannello acknowledged his confidentiality and intellectual property obligations, he rejected Total’s assertion that he had given blanket assurances not to compete with his former employer.

One of Total’s major clients was the BP Oil Refinery Pty Ltd (“BP”) which had a site at Kwinana. Mr Iannello had access to confidential information concerning the site, including Total’s site agreement with BP negotiated shortly before his resignation.

On 21 August, Total discovered that Mr Ianello had accessed the BP site using a card issued to him by Total. Total wrote again, alleging that Mr Iannello was “attempting to lure away” Total’s clients by “leveraging off” confidential information protected by contract.

This event appears to have prompted Total to search its computer systems. It found that, prior to leaving, Mr Iannello had forwarded emails to his personal email account. It also found email communications between Mr Iannello and Giovenco.

It also believed that Mr Iannello had deliberately deleted emails prior to leaving, and held copies of customer contracts and project pricing information.

Total’s solicitors wrote again to Mr Iannello’s solicitors on 3 September setting out these matters, stating this vindicated “our client’s suspicions” and constituted evidence “that Mr Iannello had breached fiduciary obligations and obligations of confidence”.

Mr Iannello denied the allegations and on 10 October, Total applied for preliminary discovery. Total wanted access to a wide range of Mr. Iannello’s private documents, including all:

  • emails from Mr Iannello’s former email account with Total;
  • documents recording communications between Mr Iannello and Giovenco from 1 Jan to 4 Aug 2008;
  • emails from Mr Iannello’s private email account/s to Giovenco from 1 Jan to 4 Aug 2008;
  • documents received or created by Mr Iannello during his employment with Total;
  • documents concerning Giovenco between 1 Jan to 4 Aug 2008.

Mr Iannello said that he did not have any documents in categories (a) – (d) and the category (e) documents were commercially sensitive. What Total needed to show was not that Mr Iannello had its confidential information but that he “had used, or threatened to use, it to its detriment”. Total was asking the judge to infer this from Mr Iannello’s actions in:

  • using Total’s access card when he met with BP on 20 August 2008;
  • emailing his future employer, Giovenco, regarding a fireproofing job whilst employed by Total; and
  • sending emails containing client and confidential details from his work email address to his personal email address shortly prior to finishing with Total.

The judge however disagreed.

On the first matter, given the evidence of two BP employees that Mr Iannello did not represent he was working for Total, and had not referred to any of Total/BP contractual matters in their discussions, he dismissed it.
The second point was also dismissed, as Mr Iannello explained that the fireproofing job was referred to Giovenco as Total was unable to perform it.

On the third matter, the judge disagreed that the documents produced by Total were “on their face” confidential, noting that Total also failed to produce any evidence showing how that information could be used by Mr Iannello to harm Total’s business interests.

The Judge’s Conclusion

In the Cape matter, the court essentially had to decide if Mr Iannello was using his ex-employer’s trade secrets against it or was just engaging in legitimate competitive conduct.

Despite the fact that Mr Iannello had sent emails to himself and to his future employer, after having considered all the circumstances in the matter, it came down on the side of legitimate competitive conduct. The electronic trail had just run cold for Total.

Whilst email can prove to be “smoking gun” evidence, it must be remembered that it will always be considered by the court within the context of the broader circumstances of the case.

David McGrath is Director of e-Litigation Solutions. He currently provides independent e-discovery, information management and technology consulting services to corporates, law firms and the courts. David holds degrees in Law and Computer Science and post graduate qualifications in Technology Management. dmcgrath@elitsolutions.com.au