Jun 222015
 

The Federal Circuit Court has ordered an ex-employee of International Warehousing Distribution Pty Ltd (“International Warehousing”) to submit his personal Gmail account, iPhone and iPad for inspection by an independent specialist to determine whether he misappropriated confidential business information.  In coming to this decision, the Court accepted that access to these personal electronic devices was essential for determining the viability of the employer’s case and had minimal personal effect on the former employee.

Did he or didn’t he?

Mr Trail’s employment agreement with International Warehousing included a term requiring the return of all confidential information on termination of the employment relationship.  International Warehousing alleged that Mr Trail sent hundreds of thousands of pages of confidential information and “literary works” to his personal email on 13 June 2013, before resigning two weeks later.  When Mr Trail began work with a competitor, he was contacted by International Warehousing and asked to return all confidential information.  On 16 February 2015, International Warehousing’s solicitors contacted Mr Trail seeking his MacBook, iPhone and iPad for examination.

Although Mr Trail originally denied sending emails to his personal email account, he later admitted that he sent information necessary to continue his work while he visited his sick father in New Zealand.  He further argued that he deleted the information contained in the emails on 12 July 2013 and denied holding confidential information or literary works. 

The Court’s Consideration

The Court identified that there were two issues raised in the proceedings thus far:

  1. Did Mr Trail take the information unlawfully? and,
  2. Did Mr Trail make or otherwise deal with any copies?

At this stage, it was not the Court’s duty to determine whether or not Mr Trail was in breach of his legal obligations.  Rather, it had to consider whether there was “a substantial and genuine issue to be tried” that warranted an order to inspect Mr Trail’s personal electronic devices.  On this matter, Justice Burchardt noted:

“The question of whether the respondent retained and/or used information belonging to the applicant [International Warehousing] stands at the heart of this case.  The resolution of that issue at an early stage would clearly assist the outcome.”

The matter was somewhat complicated as Mr Trail had disposed of his old MacBook computer and iPhone without informing International Warehousing.  This is despite the fact, as the Court found likely, that at the time of disposal, International Warehousing’s intention to obtain possession of the MacBook “was perfectly clear to all concerned”.  Although the Court had evidence from an expert that the Gmail account could be reconstructed with the password, Mr Trail’s disposal of this piece of evidence negatively impacted on his credibility.

Thus, the Court ultimately found in favour of International Warehousing on the following grounds:

  • It was impossible to accept Mr Trail’s denial of ever sending the emails;
  • It was open to Mr Trail to say that he did not remember whether he sent the emails, but instead he denied sending them;
  • The scope of the documents was very large;
  • The emails were sent just before Mr Trail resigned; and
  • Mr Trail did not disclose that his MacBook and iPhone had been disposed of when his solicitors contacted International Warehousing in March 2015.

The orders demanding Mr Trail submit his personal electronic devices for inspection were considered appropriate because the devices would likely be returned to Mr Trail on the same day as they were handed in, if not the next afternoon.  Furthermore, International Warehousing was not given the right to search the collected data until they submitted the search criteria to the Court and opposition for approval.

The order for inspection was limited to Mr Trail’s Gmail account, iPhone and iPad on the basis that access to every device that he uses would be too broad. 

Notes for Employers:  What do we learn?  What do we do?

If your employee departs to a competitor leaving a trail of company information from your business to their personal email accounts, you may be able to get access to personal email accounts, telephones and computer equipment. 

Your internet and email policy should state that employees are not to send company information to personal accounts, devices or equipment or if they do, they will deliver to the employer the devices and passwords to access any company information held or transmitted on them.

You can read the case here:  http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCCA/2015/1608.html?stem=0&synonyms=0&query=title(%222015%20FCCA%201608%22)

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