An IT firm that took advantage of a government policy to stimulate Indigenous entrepreneurship has had most of its appeal dismissed after it was ordered to pay $1.18 million back in profits it gained from a "thoroughly dishonest" campaign to copy information and arrangements from a partnered firm.
The ACT Supreme Court in August 2021 found that the misdeeds against Steadfast ICT Security were led by Dreamtime Supply employee Gareth Peak between September 2018 and January 2019.
At the time, Peak was general manager of Steadfast where he copied confidential information to Dreamtime.
The campaign, which Steadfast described as a "wholesale destruction" of its business, also included poaching employees and directing clients to do business with Dreamtime instead.
The court found that David Glavonjic, a former Steadfast director who then became a Dreamtime director, was knowingly involved in.
The University of Canberra, Department of Parliamentary Services, Indigenous Business Australia, Department of Agriculture and Australian Fisheries Management Authority were some of the clients involved.
At the time, Dreamtime and Steadfast had an outsourcing agreement related to particular IT services that the former obtained by participating in the Australian government's Indigenous procurement policy.
The August 2021 judgment by Justice David Mossop states that there was a concerted effort by Peak to dishonestly copy information to Dreamtime, which included him making a "transition" project document for it.
Nenad Stefanovic and Lachlan Watt, former Steadfast employees, were also aware of the plan and helped implement parts of it.
After a May 2021 hearing, Justice Mossop said most of the blame was with Peak, with the judge describing his conduct as "thoroughly dishonest and in flagrant breach of his obligations to his employer".
He ordered that Dreamtime pay Steadfast $1,187,249.64 back in profits it gained and for hearings about relief against each individual defendant.
In a follow-up judgment, Justice Mossop found all individual defendants breached obligations and duties related to their employment contracts and the Corporations Act.
Because of Glavonjic's involvement in Peak's plan, Dreamtime was aware of the latter's breach of duty.
Peak was ordered to pay $1.18 million and Stefanovic to pay $202,378 in compensation.
As for Glavonjic, no relief for compensation was sought and a declaratory relief was made against him related to only one breach.
The defendants, except for Watt for whom only a declaratory relief was also made, then launched an appeal based on 10 grounds, including the decision to part ways with Dreamtime, of which four were ultimately not pressed during the hearing.
The appeal did not challenge any of Justice Mossop's substantive factual findings and only certain characterisations and conclusions he made as a consequence of those findings.
In a recent Court of Appeal judgment, four of the six grounds were fully dismissed.
Most of ground two relating to the cause of gain in relation to particular clients was also dismissed except for one client, being Nectar Mortgages.
Steadfast was initially awarded $7783.49 on account of profits Dreamtime made from a contract with Nectar.
The appellants challenged this and Steadfast conceded it, resulting in that amount being deducted from the overall $1.18 million.
The ground that was successful was Stefanovic's liability for Dreamtime's profits.
The financial penalty against Stefanovic, who accepted he breached the Act by participating in Peak's scheme and by failing to disclose his own conduct, was reduced to $50,594.69.
Justice Angus Stewart, one of the appeal judges, said reasons for that ground to be upheld included Justice Mossop's finding that Stefanovic's conduct was not by itself the cause of the loss.
Another reason was Steadfast not contending that the initial award of $202,378.75 could otherwise be supported.
The Court of Appeal also ruled that Steadfast may recover only $1,179,466.15 from all defendants exclusive of any amount recovered in relation to the proceedings' costs.
Other orders included Steadfast paying 75 per cent of Stefanovic's appeal costs and the other appellants paying Steadfast's appeal costs.
Fellow appeal judges Justice Michael Elkaim and associate Justice Verity McWilliam said they agreed with Justice Stewart.
Mackenzie Workplace Law, which represented Steadfast, said its client declined to comment. Dreamtime has been contacted for comment.
