Harris v. Digital Pulse Pty. Ltd. [

2003] NSWCA 10. (2003)

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Nature of the Case

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Facts

Digital (P) conducts an information technology business that includes Web design. Harris and Eden (Ds) were employed in marketing and web design respectively. In December 1999, they worked secretly for the benefit of their own business, which was incorporated as Juice-D Media Pty Ltd (Juice) on 27 January 2000. They did projects for existing or potential clients of P. In some cases those clients were charged a fee, being invoiced by Juice. Harris was dismissed on 4 February 2000 and Eden resigned the next day. P sued Ds for breach of contract, fiduciary duty, duties under the Corporations Act 2001, and other obligations. P sought compensation, an account of profits, and exemplary damages. The court held that Ds had breached their contractual and fiduciary duties of loyalty and Harris (D) had additionally misused confidential information with respect to an Advertising Strategy document. There was a finding that this caused loss to P as well as producing unjustified gains for Ds and their company. The losses were not exactly commensurate with the gains, although Juice's profits were used as one integer in the assessment of the sum due by way of compensation. Damages to P appeared to be something less than $10,000. Harris (D) was found liable to pay compensation in the sum of $11,000 for his misuse of the confidential information. P elected to take the account of profits, calculated at $13,119.51. The judge noted that the purposes of exemplary damages were punishment, deterrence (both specific and general) and amelioration of the victim's sense of grievance, thereby abating the urge for self-help or violent retribution, to the danger of the public peace. The judge awarded the sum of $10,000 against each employee. The court reasoned that Ds acted with conscious dishonesty, in breach of positions of trust and responsibility, and in a manner calculated to produce harm to P and profit to themselves. The subversion of P's business was carefully planned and clandestine. Ps' exultation in their success demonstrated contumelious disregard of P's rights. Probably more profit was gained than P had been able to uncover. Confidential information was misappropriated in the process and the employees had worked during P's time in the execution of their dishonest scheme. The judge reasoned that when the Court encounters a case of conscious wrongdoing in contumelious disregard of the plaintiff’s rights it must not shrink from expressing the community’s disapprobation of the wrongdoer’s conduct “in an emphatic and public way.” The Court must award exemplary damages to punish the wrongdoer, to deter others of like mind from similar behavior, and to vindicate P’s outraged sense of injustice. P says that when he discovered that his trusted employees had lied to him and had diverted business opportunities to Juice, he felt betrayed. The toll on his business and personal life was such that he considered closing P down after five years of hard work. The judge held that it was illogical and unprincipled to confine the remedy of exemplary damages to tortious causes of action. Ds appealed.