Supreme Court New South Wales

• Medium Neutral Citation: nearmap Ltd v Spookfish Pty Ltd [2014] NSWSC 1790
• Hearing dates: 28 October 2014
• Decision date: 15 December 2014
• Jurisdiction: Equity Division - Commercial List
• Before: Bergin CJ in Eq

Decision

Application for stay/referral to arbitration dismissed

• Catchwords: [COMMERCIAL ARBITRATION] - where commercial arbitration agreement to refer certain disputes to arbitration - whether arbitral tribunal has power under s 17 of the Commercial Arbitration Act 2012 (WA) or s 17 of the Commercial Arbitration Act 2010 (NSW) to make an order for preliminary discovery of the kind in Uniform Civil Procedure Rules 2005; [PRELIMINARY DISCOVERY] - whether an application for preliminary discovery is a "dispute" within the meaning of the commercial arbitration agreement - whether parties should be referred to arbitration under s 8 of the Commercial Arbitration Act 2012 (WA) or s 8 of the Commercial Arbitration Act 2010 (NSW); [PRACTICE & PROCEDURE] - application for a stay of application for preliminary discovery
• Legislation Cited: Arbitration (Foreign Awards and Agreements) Act 1974 (Cth); Commercial Arbitration Act 2010 (NSW); Commercial Arbitration Act 2012 (WA); Corporations Act 2001 (Cth); International Arbitration Act 1974 (Cth); Trade Practices Act 1974 (Cth); Uniform Civil Procedure Rules 2005
• Cases Cited: Airservices Australia v Transfield Pty Ltd (1999) 164 ALR 330; Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253; Ausgrid v Redbank Project Pty Ltd [2013] NSWSC 1596; Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99; Brazis v Rosati [2014] VSC 385; Erutuf Pty Limited v Westpac Banking Corporation Limited [2014] NSWSC 1679; Ferris v Plaister (1994) 34 NSWLR 474; Flakt Australia Ltd v Wilkens & Davies Construction Co Ltd [1979] 2 NSWLR 243; Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd [2014] VSCA 166; Gilgandra Marketing Co-Operative Ltd v Australian Commodities & Marketing Pty Ltd [2010] NSWSC 1209; Laing O'Rourke (BMC) Pty Ltd v Transport Infrastructure Development Corp [2007] NSWSC 723; Newport Quays Pty Ltd v Urban Renewal Authority [2012] SASC 84; Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10; Rinehart v Welker [2012] NSWCA 95; Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd (2012) 287 ALR 315; Santos Ltd v Pipelines Authority of South Australia (1996) 66 SASR 38; Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332; Timoney Technology Ltd v ADI Ltd [2007] VSC 402; United Group Rail Services Ltd v Rail Corp (NSW) (2009) 74 NSWLR 618
• Texts Cited: Doug Jones Commercial Arbitration in Australia (2nd ed 2013, Thomson Reuters)
• Category: Interlocutory applications
• Parties: nearmap Ltd (1st Plaintiff); Ipernica Holdings Pty Ltd (2nd Plaintiff); nearmap Australia Pty Ltd (3rd Plaintiff); Spookfish Pty Ltd (1st Defendant); Simon John Cope (2nd Defendant); Michael John von Bertouch (3rd Defendant); Guy Perkins (4th Defendant)
• Representation: Counsel: AP Coleman SC/NE Furlan (Plaintiffs); JC Giles/H Mann (Defendants); Solicitors: Kemp Strang (Plaintiffs); Fletcher Law (Defendants)
• File Number(s): 2014/264962
• Publication restriction: Nil

Judgment

1 The plaintiffs, nearmap Ltd (nearmap), Ipernica Holdings Pty Ltd (Ipernica) and nearmap Australia Pty Ltd (nearmap Australia), filed a Summons on 9 September 2014 seeking an order pursuant to rule 5.3 of the Uniform Civil Procedure Rules 2005 (UCPR) that the prospective defendants, Spookfish Pty Ltd (Spookfish), Simon John Cope, Michael John von Bertouch and Guy Perkins, give discovery of certain documents to the plaintiffs.

The Motion

2 On 24 September 2014 the defendants filed a Notice of Motion seeking an order that the Summons be permanently stayed pursuant to s 8 of the Commercial Arbitration Act 2012 (WA) or s 8 of the Commercial Arbitration Act 2010 (NSW).

3 The application for the stay of the Summons was heard on 28 October 2014. Mr AP Coleman SC leading Mr NE Furlan, of counsel, appeared for the plaintiffs/respondents. Mr JC Giles, of counsel, leading Ms H Mann of counsel, appeared for the defendants/applicants.

The Evidence

4 The defendants relied upon the affidavit of their solicitor Paul Francis Fletcher, sworn on 24 September 2014. The plaintiffs relied upon the affidavit of Simon Benedict Crowther (the Chief Executive Officer of each of the plaintiffs) sworn on 8 September 2014. Although Mr Crowther's affidavit evidence was lengthy and detailed it was only necessary on this application to deal with the following salient features of it.

5 The plaintiffs operate a business supplying aerial or geospatial photomosaic images to their customers by subscription. It is not in issue that the plaintiffs have developed hardware and software (the detail of which it is not necessary to describe) over a significant period of time using secret and highly innovative processes and confidential information at a cost of approximately $30 million. nearmap is the parent company of nearmap Australia.

6 Mr Cope was employed as the Chief Technology Officer of nearmap Australia between 1 September 2008 and December 2011 pursuant to an Executive Employment Agreement dated 15 July 2008. Mr Perkins was employed as the Chief Operating Officer of nearmap Australia between 1 September 2008 and 26 March 2010 pursuant to an Executive Employment Agreement dated 15 July 2008. It is not in issue that Mr Cope and Mr Perkins have a continuing obligation to nearmap Australia not to divulge or misuse its confidential information.

7 Mr von Bertouch was one of the original vendors under a Share Sale Agreement (dated 4 September 2008) pursuant to which the shares in nearmap Australia were sold to Ipernica. Mr von Bertouch, an aeronautical engineer and a pilot, is the sole director and a shareholder of Structured Design Pty Ltd (Structured Design) and InnovAero Pty Ltd (InnovAero). He was not an employee of nearmap Australia.

8 nearmap Australia and Structured Design entered into a Consultant Contract dated 23 August 2006 pursuant to which Structured Design agreed to provide certain services to nearmap Australia. Structured Design agreed to ensure that Mr von Bertouch and Walter Thomson carried out the work in respect of the services that it agreed to provide under the Consultant Contract.

9 In January 2013 nearmap Australia executed a Settlement Deed with Structured Design, InnovAero Pty Ltd and Mr von Bertouch (together referred to as "the Designers") and Thomson Design to resolve a dispute concerning whether certain items in invoices submitted to nearmap Australia by InnovAero were reasonably and properly incurred.

10 Nearmap agreed without admission to pay the Settlement Sum ($215,000) to InnovAero within 7 days of the execution of the Deed. The Deed provided for additional obligations including that on payment of the Settlement Sum, the Designers and Thomson Design assigned absolutely their right, title and interest in certain intellectual property identified in the Deed. This included systems known as 0094 and 0114 and the Background IP. It is unnecessary to detail that technology except to identify the following obligation in cl 4.1(e) of the Deed:

The Designers and Thomson Design must keep, and must continue to keep, all information provided to them by NearMap relating to the requirements of the 0094 System, 0114 System and any related technology or software (including without limitation HyperVision) strictly confidential and shall implement at least the same or equivalent security measures that they use to secure their own confidential information to prevent any unauthorised disclosure of the information or any part of it.

11 The Settlement Deed also provided as follows:

3.4 Release by NearMap

Upon the Designers discharging their obligations under clause 4.1 and 4.2 of this Deed, and subject to discharge of their obligations under clause 4.3, NearMap:

(a) releases the Designers from the Released Matters;

...

7.1 Entire agreement

This Deed constitutes the entire agreement of the parties about its subject matter and supersedes all previous agreements, understandings and negotiations on the subject matter.

12 The "Released Matters" were defined as "all Claims arising out of or in connection with the invoices and the Dispute, but excluding any valid Claim for breach or enforcement of this Deed".

13 Spookfish was incorporated on 18 October 2012. Its directors include Mr Cope, Mr Perkins and Mr von Bertouch.

14 On 4 June 2014 White Star Resources Limited (White Star) announced to the ASX that it had entered into a conditional exclusive agreement for an an option to acquire Spookfish. Spookfish was described in the announcement as "an emerging geospatial imagery company focused on high resolution imagery solutions" with "an experienced management and technical team developing technology to capture high resolution images at different heights" to produce "full 3D and oblique imagery" and to provide "a complete end to end solution with web portal delivery".

15 On 17 July 2014 White Star announced that definitive agreements had been signed for an option to acquire Spookfish. On 1 August 2014 White Star announced to the ASX that it had exercised its right to acquire an initial 12.5% interest in Spookfish. On 29 August 2014 and 1 September 2014 White Star made further ASX announcements concerning Spookfish.

16 In June 2014 the plaintiffs' solicitors, Kemp Strang, wrote to White Star Resources and the defendants (Ex B). All of the letters were in identical form and included the following:

Various members of the board and other parties involved with Spookfish Pty Ltd (Spookfish) were previously employed by, or provided consulting services to, nearmap. All such persons are subject to various strict and continuing obligations to protect the confidential information and intellectual property (IP) of nearmap. This is a matter that would undoubtedly be known to all persons involved in the affairs of Spookfish, White Star and must have been apparent during the dealings between Spookfish and White Star.

...

Further, our client has received information that Spookfish has asserted that the technology and services it is to offer is similar but superior to those offered by our client.

There is a remarkable similarity between the description of the business of Spookfish, the technology it is to use and the services it is or is seeking to offer, as outlined in the White Star ASX Announcement and the business of and technology utilised by nearmap.

Having regard to the previous employment and other engagements between a number of the parties now involved in Spookfish and nearmap, nearmap is concerned that the material announced in the White Star ASX Announcement may involve a breach of nearmap's confidential information or IP. As such nearmap may have causes of action against Spookfish and others associated with the business enterprises of Spookfish. Such causes of action may, broadly speaking, relate to potential infringements of nearmap's confidential information and IP. nearmap's confidential information and IP is unique and the services proposed to be offered by Spookfish appear to use this confidential information and IP and may cause nearmap significant damage.

17 The letters included requests for information and documents in relation to Spookfish's operating systems and the possible use of nearmap's confidential information.

18 White Star's solicitors responded on 27 June 2014 advising that it was apparent from the nature of the requests that the plaintiffs had no reason to believe that either a breach of confidence or an intellectual property infringement had occurred. The solicitors advised that White Star did not propose to respond to the requests. It was suggested that any communication should occur directly with Spookfish.

19 Mr Cope advised by letter of 30 June 2014 that he was aware of his obligations in relation to nearmap's rights in intellectual property and in respect of its confidential information. He advised that since termination of his employment with nearmap Australia he had made no use or disclosure of its confidential information and/or intellectual property. Mr Cope also advised that he was not aware of the basis for nearmap's speculation that Spookfish appeared to be using nearmap's IP. He suggested that nearmap should direct any further enquiries to Spookfish.

20 On 30 June 2014 the solicitors for Spookfish responded to nearmap's requests advising that it considered that the plaintiffs had no entitlement to demand and receive such information. The solicitors asked nearmap to desist from making what it regarded as "unjustified threats". Spookfish's solicitors declined the plaintiffs' requests.

21 On 2 July 2014 Kemp Strang repeated its request to White Star and advised that if no response were forthcoming nearmap would consider making the present application. On 8 July 2014 White Star once again declined the request.

22 Mr Crowther's evidence was that he regards White Star's description of the business of Spookfish in the ASX announcements as bearing "remarkable similarity" to that conducted by the plaintiffs. Mr Crowther has made enquiries about the other officers of Spookfish who were not previously associated in any way with nearmap and has concluded that they are not technologically skilled. Rather, as announced by White Star to the ASX, "the development of the revolutionary Spookfish technology platform is being led by Mike von Bertouch and Simon Cope as Chief Operations Officer and Chief Technology Officer". Mr Crowther does not believe that Mr Cope, Mr Perkins and Mr von Bertouch have the skills or capacity for innovation necessary to develop new technology that could match or rival the efficacy and functionality of the plaintiffs' technology.

23 The plaintiffs are concerned that Mr Cope, Mr Perkins and Mr von Bertouch may have retained confidential information obtained and accessed during their employment and/or engagement with the plaintiffs and that Spookfish may be unlawfully using that information in its business. The plaintiffs consider they may be entitled to make claims against the individual defendants for breaches of contractual obligations of confidence owed to nearmap; and/or for breaches of equitable obligations of confidence; and/or breaches of s 183 of the Corporations Act 2001(Cth); and/or breaches of the intellectual property rights of nearmap and its subsidiaries (the potential claims).

24 Mr Crowther's unchallenged evidence was that the plaintiffs have exhausted their enquiries and have been unable to obtain sufficient information to decide whether or not to commence proceedings against the defendants. Therefore the plaintiffs seek the orders in the Summons to obtain the documents to assist them to make those decisions.

The Arbitration Agreements

25 Each of the Executive Employment Agreements of Mr Cope and Mr Perkins contained the following provision:

21 Arbitration of Disputes

21.1 In the event of any dispute between the parties as to:

(a) the construction of this Agreement;

(b) any of its provisions;

(c) the rights or obligations of a party to this Agreement; or

(d) any other matter arising out of or relating to the contents of this Agreement;

the parties agree to make every effort to resolve the dispute by consultation and negotiation.

21.2 If the negotiation and consultation process referred to in clause 21.1 is exhausted without the dispute being resolved, the parties will refer the matter to the Institute of Commercial Arbitrators, Australia or another arbitrator agreed to by the parties for assistance in resolving the dispute.

21.3 The powers of the appointed arbitrator are set out in the Commercial Arbitration Act 1985 (WA).

21.4 Each party will bear its own costs associated with the arbitration of any dispute.

26 The Consultant Contract between nearmap and Structured Design included the following:

15. DISPUTE RESOLUTION

15.1 Notice of Dispute

If a difference or dispute (together called a 'dispute') between the parties arises in connection with the subject matter of the Contract, then either party shall, by hand or by registered post, give the other party a written notice of dispute adequately identifying and providing details of the dispute.

Notwithstanding the existence of a dispute, the parties shall, subject to Clause 14 and Clause 15.5, continue to perform the Contract.

15.2 Conference

Within 14 days after receiving a notice of dispute, the parties shall confer at least once to resolve the dispute or to agree on methods of doing so. At every such conference each party shall be represented by a person having authority to agree to such resolution or methods of resolution. All aspects of every such conference except the fact of occurrence shall be ... (sic) If the dispute has not been resolved within 28 days of service of the notice of dispute, then unless Clause 15.4 applies, that dispute shall be and is hereby referred to arbitration.

15.3 Arbitration

If within a further 14 days of the dispute being referred to arbitration, the parties have not agreed upon an arbitrator, the arbitrator shall be nominated by the person in Item 22(a). The arbitration shall be conducted in accordance with the rules in Item 22(b).

The applicable legislation

27 Between 2009 and 2012 the relevant Australian states undertook reform of their arbitration legislation and introduced statutes modelled, with some adjustments, on the UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985 with amendments adopted in 2006) (the Model Law). The applicable legislation after the reform to which the parties addressed their submissions is the Commercial Arbitration Act 2012 (WA) (the Act), although the relevant provisions are identical to those in the Commercial Arbitration Act 2010 (NSW). The aim of the Act is to facilitate the resolution of commercial disputes by: (a) enabling parties to agree about how their commercial disputes are to be resolved; and (b) providing arbitration procedures for the resolution of commercial disputes in a cost-effective manner, informally and quickly (s 1C(2)).

28 The Act provides that an arbitration is "domestic" if the parties to an arbitration agreement have their places of business in Australia; they have agreed "that any dispute that has arisen or may arise between them is to be settled by arbitration"; and it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 (Cth)) applies (s 1(3)).

29 The Act includes the following provisions:

2. Definitions and rules of interpretation

In this Act -

arbitral tribunal means a sole arbitrator or a panel of arbitrators;

...

arbitration agreement has the meaning given in section 7;

...

interim measure has the meaning given in section 17 (2);

...

party means a party to an arbitration agreement and includes -

(a) any person claiming through or under a party to the arbitration agreement; and

(b) in any case where an arbitration does not involve all of the parties to the arbitration agreement, those parties to the arbitration agreement who are parties to the arbitration;

...

Part 2 - Arbitration agreement

7. Definition and form of arbitration agreement

(1) An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

...

8. Arbitration agreement and substantive claim before court

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless if finds that the agreement is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in subsection (1) has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

9. Arbitration agreement and interim measures by court

It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant the measure.

...

Part 4A - Interim measures

Division 1 - Interim measures

17 Power of arbitral tribunal to order interim measures

(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures.

(2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to -

(a) maintain or restore the status quo pending determination of the dispute; or

(b) take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; or

(c) provide a means of preserving assets out of which a subsequent award may be satisfied; or

(d) preserve evidence that may be relevant and material to the resolution of the dispute.

(3) Without limiting subsection (2), the arbitral tribunal may make orders with respect to any of the following -

(a) security for costs;

(b) discovery of documents and interrogatories;

(c) giving of evidence by affidavit;

(d) the inspection of any property which is or forms part of the subject matter of the dispute;

(e) the taking of photographs of any property which is or forms part of the subject matter of the dispute;

(f) samples to be taken from, or any observation to be made of or experiment conducted on, any property which is or forms part of the subject matter of the dispute;

(g) dividing, recording or strictly enforcing the time allocated for a hearing between the parties (a stop clock arbitration).

30 UCPR 5.3 provides relevantly as follows:

5.3 Discovery of documents from prospective defendant

(1) If it appears to the court that:

(a) the applicant may be entitled to make a claim for relief from the court against a person (the prospective defendant) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and

(b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and

(c) inspection of such a document would assist the applicant to make the decision concerned,

the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief.

31 The plaintiffs did not submit that the defendants' Notice of Motion should not be entertained because it sought a stay rather than the referral to arbitration consistent with the language in the Act. As I understand it, the parties proceeded on the basis that if the defendants were successful there would be an order for referral consistent with the Act.

Are the arbitration agreements in force?

32 The first issue with which I should deal is the plaintiffs' contention that any arbitration agreements between nearmap Australia and Messrs Cope and Perkins are no longer in force. In support of this contention the plaintiffs relied upon Gibbs J's observations in Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109 that the whole of the agreement "has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another".

33 However arbitration agreements have been construed (mainly in commercial, rather than employment contracts) as independent of the underlying contract in which they are contained. In the absence of evidence of a contrary intention in the language used by the parties, the arbitration agreement survives the termination of the underlying contract: Ferris v Plaister (1994) 34 NSWLR 474; Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd (2012) 287 ALR 315 at 351[165]; Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 at [42]-[53].

34 Parties are free to contract in any way they see fit within the confines of the law. One of the aims of arbitration agreements is to ensure the confidential and speedy resolution of disputation. Contracting parties may prefer the confidentiality of the arbitral setting in particular to protect the employment relationship from irremediable fracturing or damage. Those motivations may not be so important when the parties are no longer in a contractual relationship, albeit that there may be some continuing obligations post-termination. However it is the contractual intention of these specific parties that is to be determined.

35 Provision is made in the Executive Employment Agreements of Messrs Cope and Perkins for the continuation of some, but not all, obligations beyond their employment. They include undertakings that they will not divulge to any person or use any of nearmap Australia's trade secrets or confidential information except in the proper course of their employment or as permitted by nearmap Australia (cl 15.3). The Agreements provided that these obligations "survive the termination" of their employment (cl 15.6). Similarly the restraint of trade provisions in clause 19 operate "after the termination" of their employment. Clause 18 is in the following terms:

18 Continuing obligations

Any provision of this Agreement remaining to be performed or observed by the Executive or having effect after the termination of this Agreement for whatever reason remains in full force and effect and is binding on the Executive.

36 It is the language of the arbitration agreement that it is necessary to construe, having regard to its purpose and object in the particular setting of the employment relationship. No express provision is made for either the continuation or termination of the arbitration agreements after termination of employment. A provision that the employer bear the costs of both parties to the arbitration of any dispute would have been a factor weighing more in favour of a finding that the parties intended the arbitration agreements to come to an end on the termination of the employees' services. However clause 21.4 of the arbitration agreements provided that each party would bear their own costs of the arbitration of any dispute.

37 There is nothing in the language of the arbitration agreements that persuades me that the parties intended that on termination of the executives' employment, the arbitration agreements would no longer be in force.

38 The plaintiffs' contention that the arbitration agreements are no longer in force is not made out.

39 Before moving to the next issue I should record that, if the question of the construction of the Agreements, as to whether the arbitration agreement in clause 21 survived the termination of the underlying contracts, is a dispute "as to" the construction of the Agreements or any of their provisions under clause 21.1(a) and (b), no application was made to refer this dispute to arbitration. The parties requested the Court to determine this 'dispute'.

The parties to the arbitration agreements

40 There was no arbitration agreement between any of the plaintiffs and Spookfish and/or Mr von Bertouch. However the defendants contend that Spookfish and Mr von Bertouch may be party to the arbitration agreements of Structured Design and Messrs Cope and Perkins pursuant to the definition of "party" in s 2 of the Act as "any person claiming through or under a party to the arbitration agreement".

41 Spookfish was not established until well after Messrs Cope and Perkins left nearmap Australia's employment. The plaintiffs submitted that there is no arbitration agreement in respect of Mr von Bertouch. At best the arbitration agreement was between nearmap Australia and Structured Design. In any event the plaintiffs claim that once the Settlement Deed was entered into in January 2013, it superseded all previous agreements in respect of the "subject matter" of the Settlement Deed, including the Consultant Contract. The Consultant Contract was only between nearmap Australia and Structured Design. The brief was:

To Design, build a prototype, test and obtain approval for, an airphoto camera system using standard digital cameras.

42 The Settlement Deed defined the services as including:

Designing, building prototypes, testing, manufacturing, maintaining, consulting and obtaining various approvals for an airborne camera system.

43 The Consultant Contract included an arbitration clause. The Settlement Deed did not include an arbitration clause. Accordingly the plaintiffs submitted that there is no arbitration agreement between nearmap Australia and Structured Design touching upon the matters in respect of confidentiality. There is certainly no arbitration agreement between nearmap Australia and Mr von Bertouch. Even if one were to accept that the word "party" were to include Mr von Bertouch claiming through or defending a claim through Structured Design, it is not a prospective defendant.

44 The phrase "through or under" was construed by the High Court in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332. The appeal in that case involved an application for a stay under the Arbitration (Foreign Awards and Agreements) Act 1974 (Cth) which relevantly provided that a reference to a party included "a reference to a person claiming through or under a party". A foreign company had lodged a proof of debt in a winding up of a company in New South Wales for the price of goods sold under an agreement between those companies which contained an arbitration agreement. The liquidator rejected the proof of debt and the claimant sought an order reversing that rejection. The liquidator applied for a stay and the Court accepted that the liquidator claimed "through or under" the company for the purpose of the stay application. Brennan and Dawson JJ, with whom Toohey J agreed relevantly (at 354), said at 342:

Next, the prepositions "through" and "under" convey the notion of a derivative cause of action or ground of defence, that is to say, a cause of action or ground of defence derived from the party. In other words, an essential element of the cause of action or defence must be or must have been vested in or exercisable by the party before the person claiming through or under the party can rely on the cause of action or ground of defence.

45 The defendants submitted that examples of parties claiming through or under another party include a subsidiary of a company which is party to an arbitration agreement (and vice versa) when claims are brought against both arising out of the same facts: Tanning Research Laboratories Inc v O'Brien at 341-342; Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd [2014] VSCA 166 at [25]-[26] per Warren CJ. The defendants submitted that in this case there are sufficient status based relationships relevant to the claim or defence: Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd at [74] per Nettle JA. These cases are not authority for the proposition that a person claims "through or under" a party merely as a consequence of the status of their relationship with another party. The party must derive their claim or defence through the other party.

46 The defendants also submitted that a natural person may in appropriate circumstances be found to claim (whether in the sense of bringing a cause of action or raising a ground of defence) through or under a company which he or she controls. Assuming that to be right, there are no such appropriate circumstances in the present case.

47 I am not satisfied that Spookfish or Mr von Bertouch come under the extended definition of "party" in the circumstances of this case. This is an application for preliminary discovery. The analysis of the matters for determination on this application for the stay/referral to arbitration should not be subsumed into or elided with the prospective claims that the Court will consider on the application for preliminary discovery. In any event the claims the plaintiffs contend they may be entitled to bring against the individual defendants are for misuse of confidential information pursuant to alleged continuing obligations under the original contracts with nearmap Australia. If Spookfish knowingly received confidential information belonging to nearmap Australia from any of the individual defendants and used it in establishing its own business, it will be defending the application in its own right. Each of the prospective defendants will defend the proceedings in their own right and not through one of the other parties.

48 I am not satisfied that there is any arbitration agreement between any of the other parties to the proceedings. The only arbitration agreements are between nearmap Australia and Mr Cope and nearmap Australia and Mr Perkins.

A matter the subject of an arbitration agreement

49 The next issue for determination is whether there is an action before the Court in a matter that is the subject of an arbitration agreement within the meaning of s 8 of the Act.

50 Section 8 of the Act introduced a significant change to the principles governing stay applications. The previously existing discretion that the Court "may" make an order staying the proceedings, has now been replaced with the mandatory provision that the Court "must" refer the parties to arbitration. The expression "stay" is not used in the Act. It has been replaced by the concept of referral to arbitration. Under the present provisions, if the statutory circumstances are established, the Court "must" refer the parties to arbitration: Gilgandra Marketing Co-Operative Ltd v Australian Commodities & Marketing Pty Ltd [2010] NSWSC 1209 at [46]; Brazis v Rosati [2014] VSC 385 at [59]-[60].

51 The statutory circumstances required by s 8 of the Act to ground an order referring the parties to arbitration are: (1) that there is an arbitration agreement between the parties to the proceedings; (2) that there is a matter, in relation to which the action is brought, which is the subject of the arbitration agreement, namely, (a) it is within the scope of that arbitration agreement; and (b) it is arbitral; and (3) the request for a stay (or referral to arbitration) has been made before the requesting party's "first statement on the substance of the dispute".

52 The first circumstance is established as between nearmap Australia and Messrs Cope and Perkins but not any of the other parties. Having regard to my findings below I need not address the problems that may arise when only some of the parties to the litigation are parties to an arbitration agreement. There is no issue that the third circumstance is established. There is an issue about the existence of the second circumstance, which I will now address.

53 The defendants initially relied upon Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253. In that case Marshall J dealt with two issues, which his Honour described as "interlinked matters". The first was whether the proposed proceedings should be stayed pending arbitration. The second was whether the prospective applicant should have pre-action or preliminary discovery.

54 The moving party, Amcor Packaging (Aust) Pty Limited, sought preliminary discovery from Baulderstone Pty Ltd. Baulderstone sought a stay of the application for preliminary discovery. Amcor and Baulderstone had entered into negotiations in respect of what was known as the B9 Project (which related to the design and construction of a building to house a large piece of equipment and also the installation of that equipment). Baulderstone's parent company, Bilfinger Berger AG, a German company, was at the relevant time planning to float Bilfinger Berger Australia (later known as Valemus Australia).

55 Amcor and Baulderstone entered into a Project Delivery Proposal Agreement (PDPA) which contained an arbitration clause. At the same time the parties were negotiating entry into a Guaranteed Maximum Price (GMP) form of contract for the substantive works. Baulderstone completed the Stage 1 works under the PDPA in the first half of 2010, during which time the parties were still negotiating and amending a proposed GMP contract. In July 2010 Bilfinger postponed its public float of Valemus Australia. Some weeks later Baulderstone advised Amcor that Bilfinger had withdrawn approval for Baulderstone to be involved in the B9 Project if it were to be governed by a GMP contract.

56 Amcor sought preliminary discovery on the basis that it might have the right to obtain relief against Baulderstone in respect of alleged breaches of s 52 of the Trade Practices Act 1974 (Cth) (TPA); breaches of its contractual obligation to negotiate in good faith and act honestly and fairly; and for equitable compensation. There was a further suggestion that the proposed personal respondents (officers of Baulderstone) may have been knowingly concerned or involved in Baulderstone's alleged breaches of s 52 of the TPA.

57 The relevant provision of the arbitration clause included the term "any dispute arising out of or in connection with this Contract". Marshall J said at [39]:

Each of the proposed causes of action identified by Amcor to be relied upon in the foreshadowed proceeding arises "out of or in connection with" the PDPA and is subject to the arbitration clause contained in cl 31.1 of the PDPA. Those claims concern the alleged failure of Baulderstone to keep Amcor informed about any complications for the B9 Project relating to the role of Bilfinger in failing to approve Baulderstone's involvement. It follows that Amcor's application for preliminary discovery concerning those claims falls within the scope of a dispute arising out of or in connection with the PDPA.

58 His Honour made an order that the "proposed proceeding" be stayed (notwithstanding that it had not been commenced). In any event this order prevented the commencement of such proceedings. His Honour also stayed the application for preliminary discovery.

59 In my view, if the claims that a party may be entitled to make are subject to an arbitration clause it does not follow automatically that the preliminary discovery application to enable the party to decide whether to bring such claims is also subject to such a clause. It will all depend on the facts of the particular application. In any event, as I understand their submissions, the defendants later resiled from their reliance on this case in support of their contentions on this point (tr 14-15).

60 However the defendants submitted that if the prospective proceedings are subject to an arbitration agreement, then preliminary discovery is prima facie not available. In support of this submission the defendants relied upon a number of decisions at first instance. The first was that of Stevenson J in Ausgrid v Redbank Project Pty Ltd [2013] NSWSC 1596. I do not read his Honour's reasons as supporting that proposition. It is true that the argument was raised in that case that because there was a mechanism between the relevant parties to go to arbitration in respect of the dispute, there was no reasonable cause to believe that the party "may be entitled" to make a claim against the other party "from the Court" (at [38]). However his Honour did not conclude that any dispute between the parties was bound to be resolved by arbitration and not by "relief from the Court" (at [55]). His Honour concluded that the submission was "not so clearly correct" as to warrant the conclusion that no such relief may be sought from the Court (at [56]-[59]).

61 The next decision relied upon by the defendants in this regard was Timoney Technology Ltd v ADI Ltd [2007] VSC 402. In that case Hargrave J dealt with, inter alia, a submission that the preliminary discovery rule had no application because of the existence of arbitration agreements (at [56])-[72]). His Honour said that, notwithstanding that it may be a breach of an arbitration agreement to commence proceedings in a Court, an arbitration agreement does not oust the jurisdiction of the Court (at [68]). His Honour concluded that the applicant was not "by reason only of the arbitration agreement, unable to obtain discovery" under the relevant rule if it could otherwise establish the requirements of the rule and there were no discretionary grounds to refuse relief (at [71]).

62 The final decision relied upon in this regard by the defendants was Newport Quays Pty Ltd v Urban Renewal Authority [2012] SASC 84. In that case the respondents to the application for preliminary discovery submitted that the applicant was seeking to obtain the documents for use in a subsequent arbitration between the parties. Lunn J did not accept that submission. His Honour concluded that the applicants would pursue proceedings in the Court as opposed to in an arbitral arena (at [20]). In any event that case is not authority for the proposition propounded by the defendants that if prospective proceedings are subject to an arbitration agreement then preliminary discovery is prima facie not available.

63 The defendants contended that the dispute can be characterised in two ways. The first is that there had been a request for the documents and a refusal to produce them (tr 12). The second is whether there is an obligation on the defendants to produce an enumerated set of documents or a subset thereof by reason of their suspected wrongs (tr 16).

64 The plaintiffs submitted that their application for preliminary discovery is not appropriately defined as a "dispute" under the arbitration agreements. It was submitted that, irrespective of whether a request for documents might have been made, the plaintiffs are entitled to seek documents from the defendants to decide whether they are entitled to make a claim against the defendants in respect of their suspected misconduct.

65 It was submitted that before s 8 of the Act is engaged the Court must have before it an action in a "matter which is the subject of an arbitration agreement". A "matter" was defined in the context of stays of arbitration proceedings as "any claim for relief of a kind proper for determination in a court": Flakt Australia Ltd v Wilkens & Davies Construction Co Ltd [1979] 2 NSWLR 243 at 250. That formulation was referred to by Deane and Gaudron JJ in Tanning Research Laboratories Inc v O'Brien at 351. Both Flakt and Tanning consider the provisions of the Commonwealth legislation governing international arbitration.

66 It was submitted that the only "matter" in the proceedings currently on foot is the plaintiffs' application for preliminary discovery of documents pursuant to UCPR 5.3 with respect to the prospective proceedings. It was submitted that on the basis of Mr Crowther's affidavit the "matter" to be determined in the prospective proceedings is the plaintiffs' entitlement to recover damages and possibly other relief.

67 Agreements referring to arbitration any dispute or difference arising out of the agreement should not be construed narrowly: Rinehart v Welker [2012] NSWCA 95 at [117]-[120]. Terms such as "arising out of" or "in connection with" in the context of arbitration provisions are capable of very wide construction and they are usually given a wide meaning: Laing O'Rourke (BMC) Pty Ltd v Transport Infrastructure Development Corp [2007] NSWSC 723 at [98] (unaffected by the appeal in United Group Rail Services Ltd v Rail Corp (NSW) (2009) 74 NSWLR 618). There is no issue that the arbitration agreements in this case should not be construed narrowly and should be given a liberal interpretation.

68 The characteristics of applications for discovery under UCPR 5.3 (and similar rules in other jurisdictions) have been described in numerous cases. Those descriptions are conveniently summarised in Airservices Australia v Transfield Pty Ltd (1999) 164 ALR 330 at 332[5] and Erutuf Pty Limited v Westpac Banking Corporation Limited [2014] NSWSC 1679 at [11]-[13].

69 The plaintiffs' requests in June and July 2014 were directed towards obtaining information and/or documents from the prospective defendants (and indeed others) that would assist the plaintiffs in deciding whether nearmap Australia's confidential information had been utilised in the establishment of Spookfish's business.

70 The defendants submitted that a dispute exists where a claim has been made and rejected and will also exist where a party has advanced a claim which has been denied or simply ignored: Santos Ltd v Pipelines Authority of South Australia (1996) 66 SASR 38 at 44. The defendants claim that the refusals of the plaintiffs' requests, means that the parties are in dispute in relation to the production of documents sought by way of preliminary discovery. It is contended that a dispute has arisen under clause 21.1(c) of the arbitration agreements of Mr Cope and Mr Perkins "as to" their "obligations" to produce the documents and "as to" nearmap Australia's "right" to obtain them.

71 The expression "rights or obligations of a party to this Agreement" in clause 21.1(c) of the arbitration agreement does not justify a free-wheeling analysis of any rights or obligations as between the parties generally, but is confined to those rights and obligations found in the particular contractual relationship into which the parties have entered. There is nothing in the Agreements dealing with the production of information or documents on request. There is no dispute "as to" the rights or obligations of Mr Cope or Mr Perkins. They accept that they are obliged to keep confidential nearmap Australia's trade secrets and IP. The dispute that might arise is a claim (as opposed to a decision that there may be an entitlement to make a claim) that they are in breach of their obligations and a denial that they are so in breach.

72 A claim by nearmap Australia that Messrs Cope or Perkins breached their obligation not to disclose nearmap Australia's confidential information and denials of such breaches would, prima facie, amount to a dispute as to the rights or obligations of a party to the Agreements. However the question whether the plaintiffs are entitled to make a claim under UCPR 5.3 is in my view not a dispute as to the rights or obligations of a party to the Agreements. Nor does it arise out of or relate to "the contents of this Agreement" (cl 21.1(d)). It is a right independent of the Agreements. It a right arising under the Uniform Civil Procedure Rules and any obligation to produce the documents arises from a judicial determination, having regard to whether the prerequisites in the Rule have been satisfied. It is true that in that process the Court must consider whether the plaintiffs "may be entitled to make a claim" against the prospective defendants and in so doing it will have regard to the obligations of the parties to the Agreements but it is not dealing with "a dispute" as defined in the Agreements. It is dealing with the plaintiffs' entitlement to the relief under UCPR 5.3.

73 The application under UCPR 5.3 arises out of the plaintiffs' contention that they may be entitled to seek relief from the Court in respect of matters that, if a Court finds that they are so entitled and if they then bring proceedings, might well result in a dispute "as to" the matters referred to in clause 21.1 of the arbitration agreements. But that is for later debate rather than on this application for a stay or referral to arbitration.

74 There is presently no matter in relation to which the action is brought under UCPR 5.3 that is the subject of an arbitration agreement.

75 Although that puts an end to the defendants' application I should address their submission that the arbitral tribunal has the power under s 17(3) of the Act to order preliminary discovery. If by that submission the defendants contend that the arbitral tribunal has the same power as the Court under UCPR 5.3, then I disagree. There is nothing in the Act setting any pre-requisites to such an order and the legislature cannot have intended that arbitrators would be permitted to "mandate mere rummaging through another's affairs": Airservices Australia v Transfield Pty Ltd at [5]. I should also say that there is nothing supporting this proposition within the commentary in the text by the learned author Doug Jones in his text Commercial Arbitration in Australia (2nd ed 2013, Thomson Reuters) at [7.210]-[7.280], albeit that the general topic of discovery in s 17(3) is discussed.

76 The "discovery" referred to in s 17(3) of the Act is in respect of the "interim measure" that the arbitral tribunal may grant "at any time prior to the issuance of the award by which the dispute is finally decided". It is discovery relevant to the issues between the parties in respect of any application for the quasi-injunctive relief set out in s 17(2) of the Act. The interim measure referred to in s 17(2)(d) of the preservation of "evidence that may be relevant and material to the resolution of the dispute" is not a vehicle for preliminary discovery. It is to secure evidence in respect of which a party to an already existing dispute of which the arbitrator is seized, may entertain fears of destruction or dissipation in the absence of such an interim measure. It is not a power to be exercised to provide such "evidence" to an applicant to decide whether they should commence proceedings against the person the subject of the "interim measure".

77 I am not satisfied that the arbitral tribunal has power to make an order for preliminary discovery of the kind in UCPR 5.3.

78 I am not satisfied that there is an action before the Court in a matter that is the subject of an arbitration agreement within the meaning of s 8 of the Act.

79 The defendants' Notice of Motion is dismissed.

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Decision last updated: 15 December 2014