CIO

Secure Logic tangled up in legal battle with former execs

Alleges contractual breaches

Secure Logic's founder and managing partner, Santosh Devaraj, has been named in a legal battle that began when the company launched proceedings against two former executives over alleged contractual breaches.

On 15 June 2016, the Sydney-based managed information security services provider initiated legal proceedings in the NSW Supreme Court against two former employees, Paul Noble, the Secure Logic Group’s former COO, and John Pankhurst, the company’s former business development manager.

In its legal action, Secure Logic alleges that Noble and Pankhurst misused and disclosed confidential business development information, including sales proposals, customer reports and pricing information. It also alleges that Pankhurst was knowingly involved in, and “induced”, Noble’s breaches.

The action calls for a permanent injunction against Noble and Pankhurst using or disclosing Secure Logic confidential information.

ARN understands that on 17 June 2016, the Supreme Court granted temporary injunctions against Noble and Pankhurst.

It is understood that the decision came almost a year after Noble commenced employment with Secure Logic, as its COO, a role that would see him based in Singapore and Malaysia.

Court documents indicate that the position saw Noble charged with functioning as Group COO and delivering on the company CEO’s plans to expand in Asia, including establishing a cyber security operations centre in the Malaysian capital, Kuala Lumpur.

Secure Logic claims that shortly after Noble commenced his employment with the company, he allegedly entered into an employee non-disclosure agreement with the company.

It is understood that in May last year, Noble considered his employment terminated due to breaches of contract. Shortly after, it is alleged Secure Logic suspended Noble’s employment. It is understood that Noble’s official employment with the company ended when court proceedings began in mid-June last year.

Sources suggest that Noble advised Secure Logic of alleged contractual breaches on its part in May, just before proceedings kicked off.

Pankhurst, meanwhile, was managing director for Plush Hosting, which was acquired by Secure Logic, according to court documents, a move which saw him come on board as the company’s business development manager -- a role in which he manage the accounts of his existing customer-base for the Secure Logic Group of companies.

Sources indicate that the initial legal proceedings came after Noble advised Secure Logic of the discovery that his former employer's personnel had accessed and changed his personal online accounts and data. However, this has not been confirmed.

In its legal action, Secure Logic alleges that a document created by Pankhurst containing Secure Logic’s and Plush Hosting's customer contacts, obtained from the company’s internal customer relationship management (CRM) system, was accessed by Noble.

It is also alleged that Noble provided certain "information assistance" to John-Paul Burgess, services director at cloud security player, FirstWave, considered to be a competitor of Secure Logic.

As a result, Secure Logic’s case broadly revolves around the allegation that Noble and Pankhurst both breached the obligations of their non-disclosure agreements with Secure Logic.

Noble and Pankhurst refute the allegations.

Defence documents lodged with the Supreme Court of NSW claim that Noble’s non-disclosure agreement with Secure Logic had no force or effect after as to the “terms upon which any disclosure of confidential information” was made.

Pankhurst, meanwhile, has since denied any knowledge of downloading the specific file containing commercially sensitive information, as alleged by Secure Logic in its legal action. 

The cross-claims

Late last year Noble and Pankhurst initiated cross-claims against Secure Logic, seeking damages for alleged breaches of contractual obligations owed to them by Secure Logic. It is understood the action was launched as soon as the court would allow.

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The cross-claim filed with the court by Noble’s legal team names Devaraj as one of the defendants, along with Secure Logic itself.  

Noble’s cross-claim alleges that in early 2015, Deveraj made representations suggesting that Noble would be transferred a percentage shareholding in a company within the Secure Logic Group. It is understood that the transfer was expected to happen within two months of his employment.

Noble’s action alleges that Devaraj further represented to Noble that if he became an employee of the Secure Logic Group of companies, he would be transferred up to 12 per cent of the total shareholding in the Secure Logic Group.

Devaraj allegedly personally guaranteed Noble a minimum profit of $10 million if the former executive's shares in the Secure Logic Group of companies were sold.

Noble’s cross-claim alleges that Secure Logic and its founder breached the employment contract Noble had entered into by failing to pay him his full salary and expenses according to the contract he had signed upon joining the company, along with what he was owed under an agreed-upon sales and incentive plan (SIP).  

Most importantly, Noble’s action alleges that Secure logic breached its contract with him by not implementing any key performance indicators against which Noble could be eligible to receive six per cent of the total shareholding in the company, as allegedly agreed to in his contract with Secure Logic.

Broadly, the cross-claim sees Noble take action against Secure Logic and Devaraj for losses and damages arising from the alleged loss of salary, expenses, a percentage of the total shareholding in the company, loss of the opportunity to trade shares, and loss of an opportunity to obtain a SIP bonus.

Noble's claims cumulatively amount to a potential value of more than $10 million, according to the court documents.

Secure Logic said it denies the allegations and is defending the proceedings “vigorously”.

A spokesperson for the company told ARN that on 9 November 2017, Noble failed in a bid to obtain evidence to substantiate his alleged cross-claim when the Supreme Court ordered that various notices to produce and subpoenas issued by him be set aside.

“As an information security company we take the preservation of confidential information extremely seriously and this extends to our own business development information,” the Secure Logic spokesperson told ARN.

“We have no hesitation in enforcing our rights when it comes to our own confidential information. We will vigorously pursue any instance where this is breached,” the spokesperson said.

Noble told ARN in a statement that he believes the proceedings were initiated by Devaraj and Secure Logic to prolong judgement on the associated breaches of his privacy and to delay payment of what was owed, and that they have been successful in that respect to date, but that "eventually justice will prevail". 

Noble also said that he invested significant effort to help build the Secure Logic Group and has "not even been paid basic wages and expenses for his period with the company". 

Additionally, he claimed that Secure Logic and Devaraj fought vigorously to prevent the disclosure of full financial accounts across the Group and that he accepts and respects the judgement made that will protect their privacy at this point in the proceedings.

The case continues.