[2006] 152 IR 395
Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414
Source
Original judgment source is linked above.
Catchwords
[2006] 152 IR 395
Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414
Judgment (2 paragraphs)
[1]
EX TEMPORE Judgment
HER HONOUR: This is an application for interlocutory relief brought by summons filed on 17 February 2022 in the Equity Division Duty List. Orders were made on that occasion in relation to the service of the summons and relevant documents and, on subsequent occasions, orders were made for the matter to be prepared and listed for an interlocutory hearing today.
The application is an application by the plaintiff, Allied Express Transport Pty Ltd (Allied Express), a company carrying on business in Australia providing courier and express freight services. The plaintiff employed the first defendant, Mr Aram Braim, as an on-site supervisor pursuant to terms of employment set out in the Terms and Conditions of Employment, set out in a letter signed by Mr Braim on 13 July 2020.
The position that Mr Braim accepted with Allied Express was as an on-site supervisor. The Terms and Conditions of Employment included a clause headed "Restriction of Activities", which provided the following:
In consideration of your employment by Allied Express, and the salary and benefits specified in this Agreement, you agree that:
• At any time after the date of termination of your employment for whatever cause you shall not represent yourself as still being in any way connected with or interested in the business of Allied Express
• During the term of the employment and for a period of twelve (12) months from the date of termination of your employment, you must not, without Allied Express's prior written authorisation, either on your own account or for any other person, firm or company, engage, solicit, interfere with or endeavour to entice away from Allied Express any employee of or contractor of Allied Express.
• For a period of twelve (12) months after the date of termination of your employment, you must not solicit or endeavour to entice away from Allied Express any customer or client of Allied Express or any of its related bodies corporate. You acknowledge that as an employee, you will gain access to Allied Express's confidential information including its price lists, methods of operation and terms of dealing with its Customers, and you hereby undertake not to make use of this information to solicit Allied Express's Customers' business either for yourself or on behalf of a new employer or other person for the said period of twelve (12) months. A Customer of Allied Express shall be defined as a Customer of Allied Express who was in the habit of regularly dealing with Allied Express at the time of your termination of employment.
• In order to protect the confidential information and the goodwill of the business of Allied Express, you hereby covenant that you will not without the prior written consent of Allied Express for a period of twelve (12) months following the termination of this Agreement for any reason:
○ directly or indirectly canvas, solicit or endeavour to entice away from Allied Express any Customer to any transport company or freight broker/consultant in competition with Allied Express.
○ directly or indirectly assist any transport company or freight broker/consultant in competition with Allied Express, to gain business from Allied Express or to assist such companies to transition Allied Customers to them.
○ provide technical, commercial or operational information regarding Allied Express or its Customer to third parties or others, nor to use this Confidential Information for commercial advantage
○ directly or indirectly (including by becoming an employee of a transport company or freight broker/consultant in competition with Allied Express) provide the same or largely the same services to any Customer as were provided by you to that Customer during your employment with Allied Express
○ approach any Customer or employee or agent of any Customer for the purposes set out above.
You agree that it is reasonable and necessary for Allied Express to have the benefit of the restrictions in this clause.
As extracted above, Mr Braim expressly agreed that it was reasonable and necessary for Allied Express to have the benefit of the restrictions in that clause.
The plaintiff's evidence deposes to the duties performed by Mr Braim in his role as on-site supervisor. In that role, his primary work location was the work site of the plaintiff's major client, South Pacific Laundry Pty Ltd (SPL). The plaintiff's evidence is that Mr Braim's duties involved giving day to day directions and supervision to drivers or couriers who were contractually engaged by the plaintiff, and the allocation of new drivers or couriers for the plaintiff.
Mr Braim resigned from his employment with effect from 19 January 2022. The complaint by the plaintiff is that, since leaving his employment with the plaintiff, Mr Braim has (through the second defendant, which is a company controlled by Mr Braim) provided courier services to SPL that the plaintiff says are in competition with the services it provides to SPL; and has been contacting drivers or couriers contractually engaged by the plaintiff to offer them contracts within the second defendant. There is in evidence an ASIC's search in relation to the second defendant. According to that ASIC search, the company was incorporated in Victoria on 15 July 2015, which predates Mr Braim's employment with the plaintiff.
The plaintiff's case is that Mr Braim's involvement in the provision of courier services by the second defendant to SPL and the "poaching" of the plaintiff's drivers and couriers, contravenes the restraint clauses in Mr Braim's contract of employment, and it seeks to enforce them.
The claim against the second defendant (ASOS Express Pty Ltd) is that, knowing of the restraints (through its sole director, Mr Braim), the second defendant has intentionally induced Mr Braim to breach the restraints; and is otherwise receiving a profit from the breaches.
The managing director of the plaintiff, Ms Michelle McDowell, by affidavit affirmed 16 February 2022, has deposed to the access that she says Mr Braim had to information during the course of his employment that the plaintiff considers to be confidential (see [18]-[22] of Ms McDowell's affidavit). Ms McDowell has also deposed to the alleged breaches and apprehended breaches of the restraint clauses (see [25]-[34] of her affidavit).
By letter dated 6 January 2022, the plaintiff's solicitors wrote to Mr Braim, reminding Mr Braim of the provisions of his contract and the obligations or common law duties of confidence and fidelity in relation to the disclosure and/or use of confidential information. Emphasis was placed on the provision of Mr Braim's employment agreement contractually binding him in terms of the restrictions of his activities after his employment with the company had come to an end. The letter requested that Mr Braim confirm his commitment to the ongoing obligations in the employment agreement by signing and returning a copy of the letter that was attached. Mr Braim did not do so.
By letter dated 9 February 2022, the plaintiff's solicitors again wrote to Mr Braim, reminding him of his contractual obligations and asserting that, following his employment, he had provided transport services directly to one of the clients of the plaintiff, SPL, and in doing so, had enticed a driver (Mr Amrit Mangat) to terminate his contractual engagement with the plaintiff in order to accept a new contract for service with Mr Braim, or a corporate entity of which he was the owner and director. Proceedings were foreshadowed in that letter and a request was made for the urgent provision of a signed undertaking to comply with Mr Braim's ongoing contractual obligations with respect to confidential information and post-employment restriction on activities. The letter of 9 February 2022 was apparently intended to be delivered by email and by hand. It is not clear at what time it was received. The signed undertaking was requested by 5 pm that same day. It was not provided.
By letter dated 11 February 2022, the plaintiff's solicitors again wrote to Mr Braim, again reminding him of the provisions of his employment agreement and making allegations in relation to alleged breaches of the employment agreement, again requesting that there be a provision of a signed undertaking, this time specifying the time within that was to be provided as 5 pm on Saturday, 12 February 2022. That letter was met with a response of the same day from the defendant's lawyers.
The response from the defendant's lawyers made a number of assertions. Relevantly, it was said that the plaintiff, at the time of signing the employment contract with Mr Braim, "and indeed earlier, had every [sic] actual/constructive knowledge to [sic] our client, through his own company, was providing the same services to other third (mutual) clientele". The letter denied that the first defendant had done anything adverse in the course of his employment for the plaintiff or thereafter, which might have affected the plaintiff's business income or standing adversely with the qualification "except the above conflict of interest engagement which your client already knew and consented to".
Second, the letter asserted that the plaintiff did not solicit or steal the plaintiff's driver. Rather, it was said that Mr Mangat was the first defendant's own driver who had followed the first defendant to the plaintiff, and that when the first defendant resigned and left the plaintiff, that driver, "not by our client's doing or alleged enticement which is denied herewith", followed the first defendant again. It was asserted that the driver was never encouraged by the first defendant to leave Allied Express, and that the first defendant was the one who had introduced him to Allied Express, and it was said that if the plaintiff had any course of action against that driver, it was a matter between the client and the driver, and had nothing to do with the client, i.e., the first defendant.
The letter further denied misuse of any intellectual information; stated that the first defendant considered himself bound always to keep the employer's private and confidential information; denied being in breach of the employment contract in any way; denied ever doing anything adverse to the plaintiff's business "(except providing same services to mutual third parties through his own company and being in business already, and for [sic] those arrangements were in place before our client's engagement with Allied Express and as Allied Express consented to or knew"; undertook to comply with the terms and conditions set out in the employment agreement; denied causing the plaintiff any financial losses alleged; asserted that the client was also, through his company, providing services to SPL, and prior to his engagement by the plaintiff; acknowledged the contents of these letters of 6 and 9 February 2022; and confirmed his undertaking to be bound by his terms of employment contract.
The evidence of the plaintiff is, as I have said, that SPL is a major client of the plaintiff, and it is said that during the time that Mr Braim worked on site at SPL for the majority of the time and, on a daily basis, he would: schedule deliveries into runs; change the presentation of the freight to be in line with the run structure; liaise with SPL production staff to advise what to pick and present to be transported; assist customer services and call centre staff with queries, and communicate with SPL if linen was missing (see [12] of Ms McDowell's affidavit). (By way of explanation of the reference to linen, the services provided for SPL appear to be services involving the collection of dirty laundry, and delivery of that laundry to other entities, and then the collection from other entities, and delivery of laundry back to SPL.)
The first and second defendants maintain that the written contract of employment between the plaintiff and the first defendant was "subject to the following verbal carve out". First, that there was a carve out of SPL from the general restraint by reference to the matters set out in [13] and [14] of the affidavit sworn 21 February 2022 of Mr Braim. Second, that the defendants could tender for work with SPL using vans but not trucks (referring to [14], [20] and [21] of Mr Braim's 21 February 2022 affidavit, and annexure A to that affidavit, to which I will return shortly). Third, that the restraint from using trucks on SPL work was limited to the period that the first defendant was employed by the plaintiff (reference there being made to [21] of Mr Braim's 21 February 2022 affidavit).
In the submissions it is asserted that the plaintiff (by which I assume it is intended to mean the first defendant) did not have access to any relevant trade secrets or confidential information of the plaintiff relating to SPL.
The annexure to which I referred above is an email sent on 18 March 2021 from Mr Braim to Mr Adrian Fortuna (the Victorian State Manager for the plaintiff) (see his affidavit affirmed 25 February 2022). The email relevantly included the following:
SPL van tender. The tender for a van working at SPL will start soon and I will be tendering for that. Financially, it is very important to me to be part of this and try to win the tender. To be upfront and make it clear, I mentioned it in our first meeting and [Colin McDowell] was okay with keeping the van, but not trucks. Can we confirm this?
There is not, in the evidence before me, any written response in relation to that email. Mr Fortuna has deposed, in his affidavit of 25 February 2022, that during his meeting with Mr Braim and others concerning the possible employment of Mr Braim as on-site supervisor for the plaintiff's client (SPL) Mr Braim's experience was discussed, and Mr Fortuna recalled Mr Braim saying in the meeting words to the effect "I already supply one van and some trucks to SPL". To his recollection, Mr McDowell stated to Mr Braim words to the effect "You can continue to supply the one van only to SPL, but you need to sell the trucks to be able to work for Allied Express, otherwise it would be a conflict of interest". Mr Fortuna's recollection is that Mr Braim agreed with that request and said words to the effect "Okay, I will sell my trucks" (see [8]-[10] of Mr Fortuna's affidavit).
Mr McDowell is the Chief Executive Officer for the plaintiff and his evidence in his affidavit affirmed 24 February 2022 is to similar effect. There does not, therefore, seem to be a factual dispute as to the issue that there was, in effect, permission given for Mr Braim to continue to provide services to SPL using the one van that he then owned. The issue now seems to be (apart from the fact that it is said that Mr Braim continued to provide some services using trucks but it seems that he has since desisted from that and the trucks have been sold) that Mr Braim, or his company (the second defendant) has more than one van which is providing services to SPL.
The defendants concede, in their written submissions, that the plaintiff has an arguable case (although they do not concede that it amounts to a prima facie case). They maintain that the restriction or restraint against the first defendant is the ultimate issue for determination at the final hearing. The restraint applies for a period of 12 months from the date of termination of the employment, and as is evident from the terms of the restraint as set out above, it includes a restraint on matters such as solicitation of customers of the plaintiff, solicitation of employees, or contractors of the plaintiff and the like.
One issue which must be considered is the fact that where the grant of interlocutory relief is likely effectively to determine the substance of the matter in issue and provide the final relief because of the duration of the term of the restraint, the grant of any interlocutory injunction is generally approached on the basis set out by McLelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535. In relation to the proper approach to applications for interlocutory relief in those circumstances, his Honour there said at (535C-536) that:
[w]here a plaintiff's entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled … Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question … If the Court does decide the question of law the uncertainty is to that extent removed.
Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused … Apart from this, although normally the Court "does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case" (Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622), there are some kinds of case in which for the purpose of seeing where lies the balance of convenience … it is desirable for the Court to evaluate the strength of the plaintiff's case for final relief: see, eg, Brayson Motors Pty Ltd v Federal Commissioner of Taxation (at 292; 285); Castlemaine-Tooheys Ltd v South Australia at 682; 559. One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: see, eg, NWL Ltd v Woods [1979] 1 WLR 1294 at 1306-1307; [1979] 3 All ER 614 at 625-626 per Lord Diplock; Cayne v Global Natural Resources plc.
Relevantly, where the determination of the interlocutory application will, in a practical sense, be irrevocable, (in his Honour's words), or will finally determine the matter in issue, what is required is an evaluation of the strength of the plaintiff's case for final relief. The so-called Kolback approach was applied in Romeg Holdings Pty Ltd v Kelly [2010] WASC 404.
In the present case whether the determination of the application for interlocutory relief will, in a practical sense, irrevocably or finally determine the matter in issue, is rather dependant on how quickly a final hearing of the matter can be scheduled. As I understand it, the plaintiff is willing to have a condition placed on the grant of any interlocutory relief such that there would be an undertaking to seek expedition of the final hearing of the matter and to prosecute that hearing expeditiously.
On the present application, there does not appear to have been an issue raised as to the validity of the restraint clauses, albeit that the defendants have raised issues as to whether or not the plaintiff has legitimate interests that require protection in this matter.
In that regard, the defendants have contended that the first defendant has not had access to any relevant trade secrets or confidential information of the plaintiff, referring to [38] of the first defendant's affidavit of 21 February 2022, and have suggested, instead, that there is a strong inference that it was the plaintiff who was relying on the first defendant's trade secrets and confidential information concerning SPL (that assertion being on the basis that the defendants' relationship with SPL considerably predated the first defendant's contract of employment with the plaintiff).
The defendants cavil with the proposition that the plaintiff has a legitimate interest in protecting its goodwill and connection with existing customers on the basis that the only relevant customer is SPL. The defendants concede that the first defendant's contract of employment restrains him from servicing any other existing customer of the plaintiff for 12 months from the date of his employment. However, the defendants say that the defendants already had long-standing goodwill with SPL and suggest that it should be inferred that such pre-existing goodwill with SPL was a primary reason that the plaintiff engaged the first defendant. Moreover, it is asserted in submissions that the defendants are not threatening the plaintiff's connection with SPL; and it is submitted that the plaintiff's connection with SPL is threatened by its own inability properly to service SPL (although it is not clear on what basis that assertion is made).
In any event, the plaintiff submits that it has established an arguable case that the restraints in Mr Braim's employment contract are and remain binding on, and enforceable against, Mr Braim according to their terms; that the restraints are not against public policy in circumstances where it is said that the plaintiff has a legitimate protectable interest; and that the restraint is no more than reasonable for the legitimate protection of that interest.
The plaintiff argues that the balance of convenience strongly favours the grant of interlocutory injunctive relief on the basis that confidential information, once lost, cannot usually be recovered, citing John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995 at [45] and submitting that, if an injunction is wrongly declined, the plaintiff will be deprived, for some period, of the protection that the restraints afford to its business, during which time its business may suffer permanent damage (noting Ms McDowell's evidence which is to the effect that the actions of Mr Braim are causing an estimated damage to Allied of approximately $60,000-$90,000 per week) (see Ms McDowell's affidavit at [36]-[41] and [60].) It is said that the jeopardy to Allied from declining the injunction is great, particularly where the second defendant is a competitor of the plaintiff, and that damages would be an inadequate remedy for the reasons given by Edelman J in Emeco International Pty Ltd v O'Shea [2012] WASC 282 (Emeco) at [21]-[22]:
The reasons why damages are often inadequate in these cases includes (i) the difficulty of detection of breaches of the obligations; (ii) the difficulty of establishing causation between any loss of business with customers and any actions of the ex-employee; and (iii) the difficulty of the calculation of the quantum of any damage arising from loss of business: Huhtamaki Australia Ltd v Botha [2004] NSWSC 386 [17] (Hamilton J).
These concerns will not always apply. There are many cases where detection and proof of breach can be difficult, and cases involving claims for loss of a chance of obtaining, or retaining, a contract often involve assessments (ii) and (iii).
The defendants assert that the present case is distinguishable from the decision in Emeco, including for the following reasons. First, that the case involves a pre-existing relationship between the defendants and SPL, whereas no such pre-existing relationship existed in Emeco. Second, that there was no issue in Emeco as to whether or not there had been any carve out of the terms of restraint. Third, that the reasons in Emeco relied, in large part, on knowledge of clients, price structure and client lists, whereas in the first case, the defendant has denied knowledge of the plaintiff's pricing structure and says that client lists are irrelevant as only one customer (SPL) is involved, with whom the defendants, as noted above, say they have had a pre-existing relationship. Thus, it is submitted that the plaintiff has not established that damages would not be an adequate remedy.
In the course of oral submissions, the defendants proffered the following undertakings. First, an undertaking that, with the exception of SPL, the defendants would not compete in relation to any clients of the plaintiff and would not seek to engage any current driver of the plaintiff (T 23.15). As I understand it, that undertaking was proffered for the 12-month period prior to termination of the employment on 19 January 2022.
Second, after an adjournment in which the parties sought to reach agreement in relation to an appropriate interlocutory regime pending the final hearing of the matter, a further undertaking was proffered; in effect, an undertaking that the defendants would not, for a period of 12 months following termination of Mr Braim's employment, undertake deliveries between SPL and any person or entities who were customers of the plaintiff during the period the first defendant was employed (T 29.15-30.24). I was informed (although there is no evidence of this on the present application), that the defendants perform deliveries to and from SPL, and some 158 SPL customers, none of whom (it is said) has previously been a customer of the plaintiff, and most of whom (it is said) were customers of the defendants before the first defendant's employment with SPL. Insofar as the last of the undertakings that was proffered is concerned, in submissions the plaintiff identifies as the relevant clause of Mr Braim's terms and conditions of employment which would be breached by the collection of or provision of services to SPL in relation to the collection of laundry for delivery to or from entities who were not clients of the plaintiff, the particular clauses in the third bullet point under the heading "Restriction of Activities" and the fourth bullet point under the first subclause of that contract of employment. On the present application the plaintiff proffers the usual undertaking as to damages.
I have considered in HiTech Group Australia Limited v Riachi [2021] NSWSC 1212 the principles applicable in circumstances where there is an application for interlocutory injunction to enforce negative covenants in an employment contract (see [36]-[51] of those reasons.) At [36]-[39] I observed that:
36. [a] negative covenant restraining a former employee from competing against his or her former employer will be enforced only to the extent that it is necessary for the reasonable protection of the business interests of the employer (see also Buckley v Tutty (1971) 125 CLR 353; [1971] HCA 71 at 376 per Barwick CJ, McTiernan, Windeyer, Owen and Gibbs JJ); and even then there remains a discretion to withhold or limit injunctive relief if a proper basis is established at the hearing (see Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852 (Tullett Prebon v Purcell) at [88]; [91] per Brereton J).
37. It has been recognised that negative covenants of this kind (commonly referred to as non-compete covenants) protect a legitimate business interest in circumstances where, for example, they prevent the misuse of confidential information for the benefit of a competitor (see Woolworths Ltd v Olson [2004] NSWCA 372 (Woolworths Ltd v Olson)).
38. In AT Kearney Australia Pty Ltd v Crepaldi [2006] NSWSC 23 (AT Kearney v Crepaldi), McDougall J set out (at [47]-[54]) the principles relevant to the enforcement of restraints of trade … Suffice it to note that his Honour there affirmed that: a person seeking to enforce a restraint of trade must show that the restraint is no wider than is reasonably necessary to protect its legitimate interests - the test directing attention to the nature of the interest that is sought to be protected …
His Honour went on to note three other matters: first, that the onus of showing that a contract in restraint of trade is reasonable as between the parties lies on the party alleging this (citing North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 at 470 per Viscount Haldane LC); second, that the onus of showing that a contract in restraint of trade is injurious to the public interest likewise lies on the party alleging that (citing Attorney-General of Australia v Adelaide Steamship Co [1913] AC 781 at 797 per Parker of Waddington LJ); and, third, that the question of the validity of a covenant in restraint of trade depends on the terms of the particular covenant and the factual circumstances (citing Dawnay, Day & Co Ltd v d'Alphen [1998] ICR 1068 at 1111-1112 per Evans LJ (with whom Nourse and Ward LJJ agreed)). Ultimately, in the course of the argument, the issue seems to me to have narrowed to the question whether or not the carveout in relation to the restriction of activities under the terms and conditions of employment was limited to the use of a single van for the purposes of provision of services to SPL or encompassed more than one van. The parties are in dispute in relation to that. Part of that dispute relates to the conversation and/or email in relation to the SPL van tender from which it is sought to be inferred that the plaintiffs were on notice that the defendants would be contemplating or seeking to use more than one van for the provision of services to SPL.
The SPL tender was not in evidence (albeit THAT a copy was forwarded to my associate during the course of the hearing) but it seems to me that on the affidavit evidence in relation to the issues there is a serious question to be tried as between the parties as to the scope and extent of the so-called carveout from the restriction clause in the terms and conditions of employment.
In those circumstances, I accept that there is a serious question to be tried as to whether or not the activities of the defendants in relation to the use of the multiple vans for the provision of services to SPL is in breach of the contract of employment.
I have had some concern as to the breadth of the interlocutory relief that is sought; in particular, having regard to the fact that negative covenants restraining employees from competition against an employer will only be enforced to the extent that those covenants are necessary for the reasonable protection of the business interests of the employer and that an employer is not to be protected from mere competition per se by employees that have ceased employment with that entity.
So, for example, in Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852, Brereton J sitting at first instance as his Honour then was said at [55] that "[t]he mere circumstance that the parties have agreed to it cannot of itself provide the requisite justification, else every contractual restraint would be justified; the question must be whether the restraints are more extensive in scope, area or duration than necessary for the reasonable protection of the employer's legitimate interests." His Honour went on to say at [70] that "equity will [not] lend its aid to achieving indirectly what it will not permit directly … as Barrett J has observed (in Tradition Australia Pty Ltd v Gunson [2006] NSWSC 298; [2006] 152 IR 395, [30]), with reference to the judgment of Fry LJ in De Francesco v Barnum (1890) 45 Ch D 430 at 438, in this field courts 'are bound to be jealous, lest they should turn contracts of service into contracts of slavery'". I note that a restraint beyond the period reasonably required for the protection of the employer's legitimate interests would serve only to sterilise the employee and prevent competition.
As to the balance of convenience, I accept that there is an issue of some uncertainty as to the extent to which the first defendant has knowledge of confidential information, the use of which, consciously or otherwise, might impact upon the business of the plaintiff. I note that when considering issues as to balance of convenience factors that are of relevance to take into consideration generally would include matters such as the right to a livelihood, the delay in seeking relief, the impact on third parties, whether the employee was warned and went into the employee's position with eyes wide open, whether any hardship that would be visited on the defendant has come about because the defendant is the author of his or her own misfortune, the strength of the case, the adequacy or inadequacy of damages, and the undertakings that have been given. I accept that, in the case of negative covenants of the kind presently sought to be enforced, damages usually will be considered to be an inadequate remedy having regard to difficulties of proof of loss and damage.
In the present case there has been no relevant delay. As to any impact on third parties, it would seem from the oral submissions that there is a suggestion that this might have an impact on the ability of SPL to have services provided to it but there is no evidence in relation to that. It is certainly the case that the first defendant (and through the first defendant the second defendant) was put on notice prior to the cessation of his employment of the relevant provisions that the plaintiff is now seeking to enforce.
To my mind the provision of undertakings of the kind that have been proffered by the defendants would obviate the necessity to grant interlocutory relief in order to protect the legitimate interests of the plaintiff other than in relation to the issue as to the number of vans that can be used in relation to the provision of services to SPL. I accept that, given that SPL is a major client and there are estimated damages of a not inconsiderable amount being incurred or likely to be incurred, that is a factor that must also be taken into account.
Balancing those factors, and noting the usual undertaking of the plaintiff as to damages, I consider that there is a basis for granting limited interlocutory relief, solely to restrain the defendants from utilising more than one van for the purposes of the provision of services to SPL pending the final hearing of the matter, provided that, as I have noted the plaintiff has indicated it will do, the plaintiff undertakes to seek expedition of the final hearing and to prosecute that final hearing expeditiously.
In the circumstances, therefore, I will make the following orders:
1. On the usual undertaking of the plaintiff as to damages, and on the undertaking of the plaintiff to apply for expedition of the final hearing of the matter and to prosecute the preparation and conduct of the matter to hearing expeditiously, and noting the undertakings that have been proffered by the defendants not to compete for a 12-month period in relation to any clients of the plaintiff other than SPL and not to seek to engage any current drivers or employees of the plaintiff, I order that, until further order, the first and second defendants be restrained from performing transport services of the kind carried on by the plaintiff in its normal course of business to South Pacific Laundry Pty Limited other than by use of a single van as contemplated by the plaintiff prior to the engagement of the first defendant as employee pursuant to the contract of employment.
2. Reserve the question of costs to be determined following the conclusion of the final hearing.
3. The matter be listed for directions in the Expedition List on Friday 18 March 2022.
[2]
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Decision last updated: 17 March 2022