SPECIALX HQ SH   News   Canberra   Defence HQ   The main defence buildings in Canberra at Russell   Photograph taken by Andrew Taylor   jat020607.001.002.jpg

The defence precinct at Russell ... Two firms have battled over lucrative training contracts in the Australian Signals Directorate, the nation's cyber-spy agency. Photo: Andrew Taylor

A dispute between two companies that train public servants has revealed the lucrative market value of top-secret security clearances.

The Federal Court ruled this week that DBR Australia's owner, Nigel Huckstep, stole his previous employer's courses to use for his own business.

Once you get in the place with a [top-secret clearance], you can use it to entrench yourself, and go through the place pretty much at will selling yourself from the inside. 

former Australian Signals Directorate employee Stephen Phipps

Justice Lindsay Foster also ordered an inquiry into how much money the trainer had wrongfully exploited by using his sought-after "top secret positive vet" clearance to win contracts from the nation's cyber-spy agency, the Australian Signals Directorate.

Ruth Bayley from Bayley and Associates a Canberra training firm 15 December 2008. Photo by Andrew Meares / Fairfax for AFR Enterprise SPECIAL 12344

Court victory ... Ruth Bayley of Bayley & Associates. Photo: Andrew Meares

The ruling is likely to cost Mr Huckstep many hundreds of thousands of dollars, though the court has not yet calculated the damages payout.

Canberra training firm Bayley & Associates was set up in the 1990s by Ruth Bayley, who, like Mr Huckstep, was a former air force officer.

She employed Mr Huckstep as a senior consultant in November 2007 on a salary of $130,000 a year (about $160,000 in today's wages), though he was promoted to general manager just five months later.

At the time, the business was trying to sell more procurement and project management training to the signals directorate.

Bayley employee Stephen Phipps, who used to work at the spy agency, told the court of the commercial value of a top secret positive vet clearance, one of the highest-level government security passes.

He said it took six to 12 months for a contractor to undergo the extensive background checks involved in positive vetting.

The agency awarded most of its contracts to businesses that already had staff with this clearance, and these contracts were often arranged without obtaining competing quotes, Mr Phipps said.

Court documents also show Mr Phipps told Mr Huckstep at the time: "Once you get in the place with a TSPV, you can use it to entrench yourself, and go through the place pretty much at will selling yourself from the inside."

The signals directorate agreed to sponsor a security clearance for one Bayley employee, and Ms Bayley nominated Mr Huckstep.

However, shortly after he gained his clearance, he set up his own business and told Ms Bayley he was resigning. He offered to continue to work with Ms Bayley as a consultant.

A later investigation found that, by the time Mr Huckstep had left Bayley's employment, "he had stolen 156 documents from B&A's library of courseware. Effectively, this was the whole of B&A's library of courseware."

His business, DBR, subsequently won work with the signals directorate and other Bayley clients.

The judge noted that, in 2010, when the ACT Supreme Court imposed an injunction on DBR using the courses, "Mr Huckstep took steps to steer the [directorate] away from B&A as the preferred trainer for project management".

"In cross-examination, Mr Huckstep agreed that he did, in fact, use his influence to steer work away from B&A in the direction of [competing firm] Apis Group", which gave Mr Huckstep some of its work.

Justice Foster found Mr Huckstep had breached his employment contract by: establishing his own business while working at Bayley; "secretly opening negotiations" with the spy agency; stealing Bayley's confidential documents; and diverting clients away from Bayley to his own company.

The judge also found DBR had breached Bayley's copyright, and he ordered an inquiry to determine the extent to which Bayley should now profit from Mr Huckstep's "wrongful exploitation" of his security clearance.

Mr Huckstep said on Wednesday he was discussing with his lawyers his next action, including whether to appeal.

The federal government's contract register shows DBR has won at least $1.66 million worth of contracts through the Defence Department since August 2009.