Supreme Court Act 1935 (WA), s 25(9)

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199

Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57

Coco v A N Clark (Engineers) Limited [1969] RPC 41

Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434

Faccenda Chicken Ltd v Fowler [1987] Ch 117

Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670

Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2

Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49

Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533

Madaffari v Labenai Nominees Pty Ltd [2002] WASC 67

Robb v Green [1895] 2 QB 1

Smith Kline & French Laboratories (Australia) Limited v Secretary, Department of Community Services & Health [1989] FCA 384; (1990) 22 FCR 73

Terrapin Limited v Builders' Supply Company (Hayes) Limited [1967] RPC 375

Todd v Novotny [2001] WASC 171

Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110

Wessex Dairies Ltd v Smith [1935] 2 KB 80

Wilson Parking Australia 1992 Pty Ltd v Rush [2008] FCA 1601

1 ALLANSON J: The plaintiff seeks to restrain two former employees and the company that now employs them from soliciting work from, or providing services to, the plaintiff's clients. The plaintiff claims that the first two defendants received information that is confidential to the plaintiff in the course of their employment, and have acted in breach of their duties to the plaintiff by trading in competition with it. These reasons deal with the plaintiff's application for an interlocutory injunction until trial.

2 The plaintiff, Romeg Holdings Pty Ltd, is registered in Western Australia under the Corporations Act 2001 (Cth). It carries on a business of test inspecting of goods and equipment in the oil and gas industry. The plaintiff trades in Western Australia as Rig Inspection Services. There is an associated Singapore-based company called Rig Inspection Services Pte Ltd. I will refer to the plaintiff as Romeg and the Singapore company as RIS Singapore.

3 The first and second defendants, Kelly and Theo, were employees of Romeg. Theo was also an employee of RIS Singapore. The third defendant, Scotia Inspection Consultants Pty Ltd (Scotia), was registered in Western Australia on 20 April 2010.

4 Since the incorporation of Scotia, Theo has been its sole director and is also a shareholder. Since 12 July 2010, Kelly has been employed by Scotia as its General Manager. Six other former employees of Romeg are now employed by Scotia.

5 Romeg and Scotia compete in the same market, referred to in the evidence as the test inspecting of Oil Country Tubular Goods (OCTG) and of lifting and lifted equipment. Two companies that were significant clients of Romeg now contract with Scotia.

6 On 12 October 2010, Romeg commenced proceedings against Kelly, Theo, and the third defendant by writ of summons. Romeg claims relief including damages and compensation. Romeg also seeks a permanent injunction restraining each defendant from using or disclosing its confidential information, described in a schedule to the statement of claim as:

(2) emails from clients containing client contact information or information about work done or services supplied by Romeg;

(4) 'any other information concerning the business of [Romeg] or the work it is or has performed for its clients that has come to the knowledge of the defendants in the course and scope of their employment with [Romeg] and which [Romeg] has not made publicly available'.

7 Romeg applied, initially ex parte, for injunctions restraining the defendants from using or disclosing its confidential information; deleting or allowing the deletion of information from any computer or electronic storage device; and destroying or passing to any third party any document containing material obtained from Romeg.

8 Following the initial hearing, the parties agreed to various orders and undertakings which have limited the areas of dispute. Relevantly, the defendants have undertaken not to use or disclose specified information. The undertaking is to operate in perpetuity. It does not extend to all of the information that Romeg claims is confidential, but includes client lists created by an employee of Romeg while in Romeg's employment; emails between Romeg and its clients or documents created from them; and documents concerning Romeg's business dealings, including documents particularising or summarising its costings, business operations, and contractual arrangements with its clients. The undertaking does not generally extend to knowledge obtained by the defendants in the course of their employment with Romeg, including their knowledge of Romeg's clients.

9 Further orders made by consent established a regime for the inspection of the defendants' computers by an independent expert. The defendants also agreed to each provide an affidavit with regard to the retention or transmission to third parties of Romeg's information or property. Those affidavits have been filed.

10 The issues for decision were then confined to three interlocutory orders. The court dismissed the application to the extent that it sought an injunction restraining the defendants from soliciting employees to leave the employ of Romeg and become employed by a competitor. No final relief of that nature is sought in the writ, and the interlocutory order is not needed to preserve the rights of the parties pending trial.

11 The court reserved on the other two orders, which would restrain the defendants from:

(a) canvassing or soliciting or any other means seeking to conduct any non-destructive test inspecting of OCTG and of lifting and lifted equipment for 24 current or former clients of Romeg specified in a schedule to the minute of proposed orders;

(b) alternatively, providing in Western Australia non-destructive inspection services of OCTG or lifting and lifted equipment to two of Romeg's former clients:

(i) Weatherford Australia Pty Ltd (Weatherford Australia);

12 The following reasons deal with whether the defendants should be restrained as set out in (a) and (b) above.

13 The court has power under s 25(9) of the Supreme Court Act 1935 (WA) to grant an interlocutory injunction in all cases in which it appears to be just or convenient that the order be made. The remedy is discretionary, but the discretion is not at large. It is necessary to identify the legal or equitable rights which are to be determined at trial and in respect of which final relief is sought: see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199. The court may grant the injunction to keep matters in status quo until the determination of those rights at trial.

14 The considerations to which the court should have regard in such an application are well established. They are conveniently summarised by Beech J in Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] - [12]. I will not repeat them here.

15 The writ of summons has a statement of claim endorsed. The defendants have not yet pleaded. Both parties have filed affidavits and submissions in the interlocutory proceedings which have defined the issues in contention. In some respects, Romeg goes beyond the case it has pleaded. The parties have joined issue on many details of the claim and the evidence. Accordingly, I will deal with the matter in some detail. I start with the case pleaded by Romeg, which may be summarised as follows.

16 Romeg employed Kelly from 13 March 2006. From early 2010, Kelly was employed as Operations Manager. The express terms of his employment contract obliged him to keep confidential certain matters including 'all contractual, commercial and financial matters between [Romeg] and its clients and any third party with commercial motives or potential for the same'. Kelly gave two weeks notice in writing on 28 June 2010, terminating the contract with effect from 9 July 2010.

17 Theo was employed from 1 April 2008 as Chief Executive Officer of Romeg's Perth's operations. The express terms of Theo's employment contract obliged him, during and after his employment, to keep confidential from unauthorised persons Romeg's 'business secrets, operating results, plans of plant, or any other information which had become known to Theo in the course of his employment and the disclosure of which would be detrimental to the interest of [Romeg]'. Theo terminated his contract with effect from 12 June 2010, by giving notice on 12 April 2010.

18 Both Kelly and Theo were subject also to implied contractual duties, and fiduciary duties as employees, and to statutory obligations under s 181 to s 183 of the Corporations Act 2001 (Cth).

19 Kelly and Theo had access to confidential information including Romeg's clients, the individuals within each client with whom Romeg dealt or liaised, the prices quoted to specific clients, and the costing, operational and contractual arrangements between Romeg and its clients.

20 Romeg claims Kelly and Theo breached various duties during their employment.

21 First, Kelly and Theo caused Scotia to be incorporated, and each agreed to be employed by Scotia in a senior managerial position. Scotia began to trade in competition with Romeg while Kelly was still employed by Romeg.

22 Second, while he was still employed by Romeg, Kelly:

(1) sought to induce clients to not award new work to Romeg, or to cease or reduce their level of business with Romeg, and to award new work to Scotia. He used information that was confidential to Romeg, including client lists and contact details, to do so;

(2) removed or deleted records containing information relating to Romeg's clients, including contact details;

(3) sought to persuade or persuaded Theo and six other employees of Romeg to terminate their employment with Romeg and take employment with Scotia;

(4) ordered copies of manuals required for carrying out certain testing and inspection work, which were surplus to Romeg's operational requirements, and which were taken from Romeg when he left;

(5) failed to ensure that Weatherford Australia executed a contract for the supply of services by Romeg.

23 Third, between 11 and 19 March 2010, Theo provided information, some of it confidential, to other employees of Romeg, which the recipients had no cause to receive.

24 As a result of these breaches, Weatherford Australia terminated Romeg's services and contracted with Scotia for the provision of equivalent services from 23 August 2010. Another client, Tasman Oil Tools, did not give Romeg any new work after 9 July 2010 and provided such work to Scotia.

25 Scotia was 'knowingly concerned in the breaches of fiduciary duty' by Kelly and Theo. Further, after its incorporation, Scotia adopted their conduct and received benefits arising from it, knowing that those benefit were derived from breaches of duty.

26 Romeg relies primarily on affidavits of Robert Thomas Egan (Chief Operating Officer); David Lee Fook Choy (Company Director); Douglas Gawain Gustavino and Roger Toh (both employees); and two private investigators, Marten Currie and Katherine Young. Its case relies primarily on the inferences which it says the court should draw from conduct and events. There is little direct evidence.

27 Kelly and Theo have each filed affidavits responding to the allegations made.

28 I will deal first with the allegations of breaches of duty while employed by Romeg. I have not made any final findings on contested issues of fact. The affidavit evidence was extensive, but the parties were limited by tight time schedules, there has been no discovery, and (although it was foreshadowed) no party applied to cross-examine any of the deponents. It is, however, necessary to make a judgment about the apparent strength of Romeg's case. Romeg and Scotia are now competitors in the same market. Whether the court grants the orders sought may affect the ability of each of them to compete in that market. In particular, if the first order is made, Scotia will be largely prevented from soliciting work. The grant of an injunction involves balancing the injustice which might be suffered by Scotia if the injunction is granted and Romeg later fails at trial, against the injustice which might be suffered by Romeg if the injunction is not granted and it later succeeds at trial: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670; Madaffari v Labenai Nominees Pty Ltd [2002] WASC 67 [14]. As the apparent strength of Romeg's case diminishes, the balance of convenience moves against the making of an order: Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49, 54 - 55; Todd v Novotny [2001] WASC 171.

29 Scotia was incorporated on 20 April 2010. From then, Theo has been its sole director and secretary, and one of six shareholders.

30 Theo was employed by RIS Singapore. He was seconded to Romeg in Australia, entering into a further (but concurrent) employment contract with Romeg. There is an overlap in his employment with Romeg and RIS Singapore and he may have been employed by RIS Singapore at all times while being variously paid by RIS Singapore and Romeg according to where he was located.

31 Romeg says that Theo gave two months notice on 12 April, and remained its employee until 12 June 2010. Theo disputes Romeg's claims about the period of his employment and the circumstances in which it ended. Theo says that his employment with Romeg was summarily terminated on 19 March 2010, when he was 'stripped of his duties' and told to return to Singapore. He then tendered his resignation from RIS Singapore on 12 April 2010, and it was accepted with immediate effect.

32 Accordingly, Theo says that when he arranged for Scotia to be incorporated on 20 April 2010, it was after his employment with both Romeg and RIS Singapore had ceased.

33 Kelly was employed by Romeg until 9 July 2010. He denies that he caused Scotia to be incorporated. Kelly says that he was approached to join Scotia in mid-April 2010, but declined. It was only after he gave notice in late June that he had further discussions with Scotia with regard to joining that company. The discussions were on 3 and 4 July 2010; he agreed to join Scotia as General Manager on 5 July 2010.

34 Theo also says Kelly was not part of his plans initially, and had no involvement with Scotia until after he had resigned from Romeg.

35 Romeg relies on evidence that between 18 February and 14 June 2010, Kelly telephoned or sent text messages to four of the shareholders in Scotia, and on mobile phone text messages between Kelly and Theo, including a message in which Kelly refers to 'start up funds'.

36 Kelly explains the contact with the shareholders in Scotia. Only three of the telephone calls or messages that Romeg relies on were made before Scotia was incorporated on 20 April 2010. One of them was a telephone call to his mother. Kelly says he had existing relationships, business or friendship, with each of the others. The message to Theo about start up funds was referring to funds to buy a house.

37 On the evidence currently before the court, Theo may have begun the process of forming Scotia while still employed by RIS Singapore, and perhaps even while still employed by Romeg. Scotia was incorporated before Kelly left Romeg. Otherwise the evidence regarding Kelly is weak. But even if it is established that either defendant took steps towards forming Scotia while still employed, that is not a sufficient reason to now restrain the defendants. A person intending to enter business for himself may prepare for that step, provided he does not breach terms of his contract of employment or breach the confidence reposed in him: Robb v Green [1895] 2 QB 1, 15; Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2. Even assuming preparations began while Theo was still employed by Romeg, the setting up of Scotia was not necessarily a breach of either defendant's duty to his employer.

38 Further, the evidence now available does not enable the court to find when Scotia began to trade in competition with Romeg. Kelly says that when he was approached to join Scotia in mid-April 2010, the business plan for Scotia was to buy and on-sell pipe protection material, other tubular products and equipment rental. If that is correct, Scotia would not have been a direct competitor of Romeg.

39 Romeg relies on other acts which it says were breaches of duty and were in furtherance of a plan by Theo and Kelly to set up Scotia. I now consider those other allegations.

The evidence, as a whole, gives rise to the inference that Kelly, together with Theo, over a protracted period during his employment by the applicant, planned the incorporation of Scotia, and the promotion of Scotia's trading in competition with the applicant, by the enticing of the applicant's clients to move their business or work to Scotia.

42 First, on 8 July 2010, Kelly sent an email to a large number of recipients, including clients of Romeg, advising that he was leaving Romeg and would contact the addressees again as to where he was going. On 12 July 2010, he sent another email advising that he had commenced with Scotia, that Scotia provided oil and gas inspection business services, and saying:

If you or your company do need any assistance on inspection services, please feel free to call me for a non-obligatory discussion.

43 It is alleged that Kelly used Romeg's information to compile the list of recipients' names and addresses. That, however, is a separate issue.

44 Second, Egan deposes that an employee of another client, Baker Hughes, told him that in three emails sent in late June, 'Gavin Kelly was soliciting work for another entity'. The emails are not available - Baker Hughes would not give them to Romeg. There is no further information about them, or about any contact between Kelly and Baker Hughes. Kelly denies the allegation.

45 Third, Romeg alleges that Kelly solicited Weatherford Australia by putting on a barbecue for Weatherford Australia employees. The evidence, however, is that an employee of Romeg (Gustavino) asked Kelly if Romeg could put on the barbecue as a goodwill gesture. The barbecue was on the last Friday of Kelly's employment with Romeg, when Kelly was no longer attending Romeg's premises.

46 Fourth, in August 2010, Weatherford Australia ended its arrangements for Romeg to provide OCTG services. It had no contract with Romeg at the time. Romeg alleges that, from in or around mid-2009, Kelly failed to ensure that Weatherford Australia executed its contract for services to be provided by Romeg. The absence of a contract permitted Weatherford Australia to provide only three hours' notice - the contract would have required notice of a month. The court is asked to infer that, perhaps as early as mid-2009, Kelly was deliberately taking steps to weaken Romeg's contractual position with Weatherford Australia. There is, however, no evidence that in 2009 Kelly was contemplating leaving Romeg, or planned to form or join a competitor. Kelly gives evidence about why Weatherford Australia did not execute the contract, and why it terminated its arrangements with Romeg. It is not necessary to make any findings on that evidence in these interlocutory proceedings.

47 Finally, another significant client of Romeg (Tasman Oil Tools) now contracts with Scotia. It is not in dispute, that by August 2010, Scotia was doing work for Tasman Oil Tools. That is the extent of the evidence. There is no evidence about why Tasman Oil Tools changed its arrangements.

(iii) Kelly removed or deleted records containing information relating to Romeg's clients, including contact information

48 There are two aspects to this allegation. First, that Kelly removed or deleted 'all records' as to the identity of client contacts. Egan deposes that, following Kelly's departure, he could not find information or material that would identify the various contacts at clients who Romeg should deal with in relation to ongoing work. Second, Egan says that he could not locate documents regarding billing and contractual arrangements between Romeg and Weatherford Australia, and this hampered him in trying to resolve problems between the two companies.

49 There is no direct evidence that Kelly removed or deleted the relevant records, and the case for drawing that inference is weak. Egan and Kelly differ in their accounts of Kelly's final days at Romeg. On either account, Kelly did not make a full handover before he left. Some time soon after Kelly's resignation (Kelly says on 2 July 2010), Egan asked Kelly to leave Romeg's premises. He did not return.

51 In those circumstances, there are many alternative explanations for why Egan could not locate information following Kelly's departure.

(iv) Kelly sought to persuade Theo and six other employees of Romeg to leave Romeg and join Scotia

52 Romeg removed Theo from his position as Chief Executive Officer of its Perth operations, and told him to return to Singapore. There is a dispute about the circumstances of his resignation from RIS Singapore. There is no direct evidence that Kelly persuaded or counselled him to go, and nothing from which that inference may be drawn.

53 Three of the others who left were related to Kelly - his partner, his son, and his sister. Egan and Kelly both say that in June 2010 there was an incident in which Egan referred to the whole Kelly family 'getting a good feed off this company'. Kelly says it was following that comment that he and his family discussed their future with Romeg and decided to move on. That discussion was on the weekend of 26 and 27 June 2010, and he resigned on 28 June 2010. His partner resigned at about the same time.

54 There is no direct evidence in relation to any of the others who left. Each of them left Romeg and went to Scotia, apparently at different times, but there is no evidence about why.

55 Kelly may have offered Gustavino a job at Scotia, but that was after Kelly had left Romeg.

56 In late July 2009, and again in November 2009 and April 2010, Kelly ordered multiple copies of manuals required for carrying out certain testing and inspection work. Romeg says the manuals were surplus to its then requirements. After these proceedings commenced, the manuals were found at Scotia's premises.

57 Kelly explains why manuals were ordered in April 2010 - he says they were for a planned expansion of Romeg's operations. No explanation is given regarding the earlier orders. Kelly also describes the circumstances in which the manuals were first kept in his home office, and then brought to Scotia's premises and used there.

58 Even if that explanation were accepted, it does not justify the retention and use of Romeg's property. The manuals are not confidential information. They were, however, the property of Romeg. Romeg alleges that it is open to the court to find that they were ordered for the purpose of taking them, and were taken deliberately. Either would be a gross breach of duty. Even if they were not taken deliberately, it is likely that Scotia retained them even after Kelly (if not others) knew they were Romeg's property. There is a prima facie case of breach of contract, and perhaps breach of other duties in relation to the manuals. The question is whether the restraints sought by the plaintiff are required to preserve the rights of the parties until these issues can be tried.

59 Scotia used the manuals, at least for a period. The evidence does not show what benefit Scotia obtained and what disadvantage Romeg suffered. If the breach of duty is established, Scotia may have the burden of proving its acts did not cause loss. But the restraints now sought by Romeg are not related to the loss or damage that it may suffer as a result of the taking or use of the manuals. In my opinion, the balance of justice can properly be achieved if Romeg is left to its remedies at trial.

(vi) Theo sending information in emails to other employees

60 This allegation is linked to the more general claim that Theo and Kelly were preparing for the formation of Scotia while still employed by Romeg.

61 Between 11 and 18 March 2010, Theo sent emails to other staff about matters, including work on rigs. Romeg says the recipients had no cause to receive that information, and would not need to know it in the ordinary course of their employment with Romeg. The emails are in evidence. The information in them is not confidential - most are links to public internet sites. The recipients, however, were all (and only) those who subsequently joined Scotia.

62 On 17 March 2010, Theo forwarded minutes of a directors meeting to two of his staff (again, those who later joined Scotia). Romeg claims that this breached Theo's contractual and fiduciary duties in disclosing confidential information, even though the recipients were within Romeg.

63 Theo says that he acted properly, and the minutes were sent to staff members who were to be involved in implementing a particular course of action decided by the directors. The other information he sent was not confidential and would help the staff members who received it to understand aspects of Romeg's work. The defendants also submit that the emails were sent before Theo was told that he was to be removed from his position in Perth, and it cannot be inferred that they were part of plans to leave or to establish Scotia.

64 Romeg further pleads that on 19 March 2010, Theo sent an email to an employee, Jiumsrisukont, which attached a copy of a document 'which summarises the costing, operation and contractual arrangements over the previous five years between the plaintiff and its major client, Weatherford'. Romeg says that Jiumsrisukont had no cause to receive that document. Jiumsrisukont is one of those who left and joined Scotia. The document is in evidence. It does not summarise costing, operation and contractual arrangements. It is a flow chart setting out the process for generating a report. The information in the document may still have been confidential within Romeg, even if, as Theo says, it had been posted on a noticeboard in a common area accessible by all staff.

65 The document is also the property of Romeg. The evidence does not disclose, however, whether any of the defendants now has it, or has used it.

Conclusion on the pleaded breaches of contract

66 As set out above, I cannot now resolve contested factual issues. But I must, on the evidence now available, assess whether the probability that the plaintiff will obtain relief at trial is sufficient to justify the consequences that would flow from making the orders sought. Those orders would prevent Scotia from seeking work from a large part of the market for its services, or, if the alternative relief were granted, would require it to cease work for two significant clients. In a practical sense, the relief could determine the substance of the dispute. That consequence warrants a careful consideration of the merits of the claim: see Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 536 (McLelland J) cited in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [72].

67 Romeg's case is largely based on the inferences it says should be drawn from the various events and circumstances. Except for the allegations regarding the manuals, my view is that the case now made for drawing those inferences is weak. The balance of convenience, on that finding, is against the grant of relief.

68 Romeg's case is not confined to the allegations that Kelly and Theo breached their contractual and other obligations to Romeg during their employment. It submits that there is a 'very real apprehension' that, unless restrained, the defendants would use its confidential information, in particular its client contacts. The court must also determine whether it should restrain the defendants from using information which does not come within the defendants' undertaking, or from using the advantage they may have obtained from the confidential information they had.

69 Both Kelly and Theo were senior employees of Romeg, and had access to information that would be regarded as confidential. The law will intervene to prevent the misuse of confidential information and trade secrets. The court may also restrain the defendants if their conduct would be in breach of a contractual obligation.

70 On the other hand, a person is generally entitled to use the skill, experience and know how acquired in the service of a former employer, even in competition with that former employer. The pleaded claim, seeking to restrain the defendants permanently with regard to 'any other information concerning the business of [Romeg] or the work it has performed for its clients that has come to the knowledge of the defendants in the course and scope of their employment with [Romeg] and which [Romeg] has not made publicly available' is not tenable. Unless there is a contractual basis for the restraint, the plaintiff needs show that the use or disclosure of the information would be a breach of confidence. The elements of that action were set out in Coco v A N Clark (Engineers) Limited [1969] RPC 41, 47 (Megarry J): first, the information itself must have the necessary element of confidence; second it must have been imparted in circumstances importing an obligation of confidence; third there must be an unauthorised use of the information to the detriment of the party communicating it. Further, the plaintiff must be able to identify the information in question with specificity, and not merely in global terms: Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434, 443; Smith Kline & French Laboratories (Australia) Limited v Secretary, Department of Community Services & Health [1989] FCA 384; (1990) 22 FCR 73, 86 - 87.

71 I also take into account that the defendants have given undertakings not to use or disclose certain information which is part of the information that Romeg claims is confidential.

72 These factors make it important to accurately identify and categorise the nature of the information which Romeg says the defendants have, and have misused or are likely to misuse, and the source of the confidentiality obligations claimed. It is here that the weakness of the plaintiff's case is apparent.

73 It is not in dispute that Kelly sent an email to various recipients on 8 July 2010, immediately before leaving Romeg. The email included contacts at Romeg's clients in the OCTG market, although it was not limited to those contacts or to companies in that market. Romeg and the defendants do not agree about how many of Romeg's OCTG clients were included in that list. It included Weatherford and Tasman Oil Tools, who were major OCTG clients of Romeg.

74 Romeg also relies on the evidence of Gustavino, who visited Scotia's premises on about 13 July 2010. Gustavino says he saw a whiteboard in one of the rooms with various company names written on it. He 'recognised the names of clients of the plaintiff'. Romeg submits that this shows that shortly after he began work at Scotia, Kelly recorded contact details of Romeg's clients on the whiteboard. This significantly overstates the evidence. Gustavino does not say how many names he saw, or what they were, or how many of them were Romeg's clients. He does not say there were 'contact details'. There is no evidence that Kelly wrote the names on the whiteboard.

75 I accept that an employee's duty of good faith will be broken if the employee makes or copies a list of customers of his employer for use after his employment ends, or deliberately memorises such a list: see Robb v Green (13); Wessex Dairies Ltd v Smith [1935] 2 KB 80; Faccenda Chicken Ltd v Fowler [1987] Ch 117. The email of 8 July was, in effect, a client list in this sense.

76 Further, a person who has obtained information in confidence may be restrained from using it as a spring-board for activities that are detrimental to the person who made the confidential information: Terrapin Limited v Builders' Supply Company (Hayes) Limited [1967] RPC 375, 391. Where the information is about clients of a former employer, the relief may include restraints from soliciting business, or providing information to another person to assist in that person soliciting business, from a client of the former employer: Wilson Parking Australia 1992 Pty Ltd v Rush [2008] FCA 1601.

77 On the evidence before the court, I cannot draw the inference that any knowledge the defendants have about potential clients, and contacts within them, results from the misuse of information that is confidential to Romeg. More generally, there is no evidence that the names of potential consumers of the services offered by Romeg and Scotia would not be known in the industry. The defendants say that the names are generally known. And, in particular, they are known by Paul Carter - another employee of Scotia with industry experience, and not a former employee of Romeg. In these circumstances, the inference that Romeg's confidential information is the source of the defendants' knowledge about clients and contacts, is weak.

78 The defendants have given undertakings that restrain the use of any client list created while employed by Romeg, or any document created from emails between Romeg and its clients. I am not satisfied that more is required. In particular, I am not satisfied that the conduct of Kelly, including the email of 8 July, gives Scotia an advantage which requires the court to now restrain Scotia from continuing to provide services to Weatherford and Tasman Oil Tools, or from soliciting work from any of the 24 other organisations.

79 On the evidence as it now stands, I cannot identify other information which is confidential to Romeg and which Scotia has used in order to obtain contracts, or would use in the provision of services to Weatherford, Tasman Oil Tools or any of the other companies named in the schedule to Romeg's minute of proposed orders.

80 The task of the court at this stage is to find the balance of justice. It needs have regard to the probability of ultimate success, having regard to the nature of the rights asserted, and the practical consequences likely to flow from the orders sought. The case put forward on behalf of Romeg is weak.

81 In the circumstances, I am not satisfied that it would be a sound exercise of the court's discretion to restrain the defendants in the manner sought. I dismiss the balance of the application.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ROMEG HOLDINGS PTY LTD -v- KELLY [2010] WASC 404 (S)

HEARD : 20 & 22 OCTOBER, 11 & 18 NOVEMBER 2010, ON THE PAPERS

Practice and procedure - Costs - Costs of proceedings for interlocutory injunction - Special costs order - Fixing costs

Legal Profession Act 2008 (WA), s 280(2)

3 Oceans Wine Company Pty Ltd v Heyshott Pty Ltd [2011] WASC 12 (S)

Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57

Brookvista Pty Ltd v Meloni [2009] WASCA 180

Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52

Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738

Joyce v Palassis [2006] WASC 242

Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534

Le Brun v Joseph [No 2] [2010] WASCA 52 (S)

Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

Topseal Concrete Services Pty Ltd v Sika Australia Pty Ltd [2008] WASC 57 (S)

1 ALLANSON J: On 22 December 2010 I delivered judgment on an application by the plaintiff, Romeg Holdings Pty Ltd, for various interlocutory injunctions against the defendants. The background is set out in my reasons on that occasion.

2 The defendants have now applied for costs in relation to the interlocutory proceedings. They seek the following orders:

1. plaintiff to pay the defendants' costs of the motion, with those costs to be taxed if not agreed;
2. the above costs be subject to a special costs order removing the limits on the costs fixed in the determinations that are applicable under the scale;
3. those costs be payable forthwith.

3 To determine that application it is necessary to set out a chronology of these proceedings in some greater detail.

4 The proceedings commenced by the plaintiff (applicant) filing a statement of claim on 12 October 2010. At the same time the plaintiff filed a chamber summons seeking interlocutory injunctions, some of which were initially sought ex parte. Relevantly, the chamber summons sought the following orders:

1. Pending further order the respondents be forthwith restrained and an injunction is hereby granted restraining them from:

(a) canvassing or soliciting or by any other means seeking to conduct any non-destructive test inspecting of Oil Country Tubular Goods and of lifting and lifted equipment for any person who was a customer or client of the applicant in the period 1 January 2010 to the date of this Order;

(b) alternatively to paragraph 2(a) providing in Western Australia non-destructive inspection services of Oil Country Tubular Goods or of lifting and lifted equipment to:

(i) Weatherford Australia Pty Ltd;

(ii) Tasman Oil Tools Pty Ltd;

(c) using or disclosing any confidential information of the applicant (being confidential information described in the schedule hereto);

(d) deleting, or instructing or allowing any other person to delete, any information (including any document or email communication) from any computer or electronic storage device in their possession or under their control;

(e) destroying or passing to any third party any document that is or contains material obtained from the applicant;

(f) soliciting, enticing or inducing, whether directly or indirectly, any manager of employer of the applicant to leave the employ of the applicant and become employed by any person, firm or company which trades in competition with the applicant.

1. The first and second respondents be directed to deliver up to the Registrar of this Court by no later than 4 pm on 25 October 2010:

(a) any computer or electronic storage device in their possession or under their control;

(b) all copies of any confidential information (being the confidential information described in the schedule hereto) of the applicant and the respondents' possession, custody or control;

(c) an affidavit by each respondent stating:

(i) whether he or it has caused or permitted any of the applicant's confidential information to be passed to any other person, and if so, the description of that information, the identity of the person to whom it has been passed, and how and when it was so passed;

(ii) he or it has delivered up every computer or electronic storage device in his or its possession or under his or its control;

(iii) he or it has not retained any copy of any confidential information or other property of the applicant including in any electronic form.

5 A schedule to the application set out categories of confidential information. These were client lists; emails from the plaintiff's clients; documents relating to its business; and other information concerning the plaintiff's business or the work it performed for its clients, that had come to the defendant's knowledge in the course and scope of their employment with the plaintiff and which the plaintiff had not made publicly available.

6 On 20 October 2010 I made orders ex parte in terms of orders 3(c), (d) and (e) of the application.

7 The matter came before me again on 22 October 2010, with the defendants (respondents) now represented. Further orders were made by consent as follows:

1. Pending further order, the respondents be forthwith restrained and an injunction is hereby granted restraining them from:

(f) soliciting, enticing or inducing, whether directly or indirectly, any manager or employee of the applicant to leave the employ of the applicant and become employed by any person, firm or company which trades in competition with the applicant.

1. The respondent be directed to deliver up to the solicitors for the applicant by no later than 29 October 2010:

(b) all copies of any confidential information (being the confidential information described in this schedule) of the applicant in the respondent's possession, custody or control;

(c) any affidavit by each of the first and second respondents and by a deponent on behalf of the third respondent stating:

(i) whether he or it has caused or permitted any of the applicant's confidential information to be passed to any other person, and if so, the description of that information, the identity of the person to whom it has been passed, and how and when it was so passed, and

(ii) he or it has not retained any copy of any confidential information or other property of the applicant, including in any electronic form.

Such affidavit to be filed by 4 pm on 1 November 2010.

8 Orders were made for the filing and serving of affidavits by the defendants and further affidavits by the plaintiff. At the request of the defendants I made an order that any party wishing to cross-examine the deponent of an affidavit give notice by 4 pm on 5 November 2010. The defendants gave notice that they wished to cross examine the plaintiff's witnesses.

9 On 26 October the defendants applied for the early return of a subpoena to the plaintiff to produce documents. The defendants said the documents were required on an urgent basis in order to prepare their defence to the application.

10 The defendants complied with the orders for the filing of affidavits regarding confidential information. They also filed extensive affidavits in response to the application for an injunction.

11 On 18 November 2010 I heard the application for an injunction. Although the defendants had given notice that they required the witnesses to attend the cross-examination, they did not persist with that requirement and the matter was dealt with solely on the affidavits without cross-examination. Detailed orders were made by consent setting out the conditions under which an independent computer expert would be given access to electronic storage devices in the possession of the defendants. The orders provided a framework for inspection, copying of data, and the resolution of any disputes regarding the use of data copied.

12 The defendants gave undertakings regarding restraints on the use or disclosure of any confidential information, and regarding the deleting or destroying of any such information. On the basis of those undertakings the existing orders restraining the defendants were discharged.

13 Three matters remained in dispute: whether the defendants should be restrained from canvassing or soliciting specified clients of the plaintiff; whether the defendants should be restrained from providing services to two named clients, Weatherford and Tasman Oil Tools; and whether the defendants should be restrained from soliciting, enticing or inducing any employee of the plaintiff to leave its employment.

14 The last of these was dismissed at the hearing on 18 November. I reserved my decision with regard to the two restraints still in issue. On 22 December 2010, I dismissed the application to the extent it had not otherwise been disposed of.

15 Section 37(1) of the Supreme Court Act 1935 (WA) provides:

Subject to the provisions of this Act and to the rules of court and to the express provisions of the Magistrates Court (Civil Proceedings) Act 2004, or any other Act, the costs of and incidental to all proceedings in the Supreme Court, including the administration of estates and trusts, shall be in the discretion of the Court or judge, and the Court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent such costs are to be paid.

16 The ordinary principle reflected in Rules of the Supreme Court 1971 (WA) O 66 r 1, is that the court will generally order that the successful party recovers its costs: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [66] (McHugh J), [134] (Kirby J). See also Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 562 - 563, 566 - 567. There is, however, no automatic rule that costs always follow the event: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 [26] - [27], [34]; Oshlack [40].

17 In Oshlack, Gaudron and Gummow JJ said of the similar discretion in s 69(2) of the Land and Environment Court Act 1979 (NSW):

The provisions of s 69 of the Court Act which confer upon the Court the discretion exercised by the primary judge attract the application of the general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used. The necessity for the exercise of the jurisdiction or power by a court favours a liberal construction. Considerations which might limit the construction of such a grant to some different body do not apply.

The terms of s 69(2) contain no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as 'the subject matter and the scope and purpose' of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be 'definitely extraneous to any objects the legislature could have had in view' [21] - [22]. (citations omitted)

18 While the discretion to award costs is, in the sense referred to, unconfined, the authorities offer guidance on the proper exercise of the discretion. Where the defendants seek a special order for costs, I must also have regard to the requirements of the Legal Profession Act 2008 (WA).

Costs on an application for an interlocutory injunction

19 The defendant submits that it has been successful on the application, to the extent of the issues that were disputed, and the plaintiff should pay its costs.

20 The plaintiff submits that an order that the applicant pay costs may be appropriate where an application is dismissed for failure to establish a prima facie case, but not where it is dismissed on the balance of convenience or other discretionary grounds: referring to the judgment of Beech J in Topseal Concrete Services Pty Ltd v Sika Australia Pty Ltd [2008] WASC 57 (S) [6] - [7]. This prompted a response in the defendant's submissions in reply that, properly interpreted, my decision on the injunction dismissed the application because of the weakness of the plaintiff's case and not merely on the balance of convenience.

21 The distinction referred to in the submissions is not particularly helpful. The requirements relating to the existence of a serious question to be tried are not independent of those relating to whether the balance of convenience favours the granting of an injunction. I do not read the decision of Beech J as purporting to state any rule as to when costs will be ordered. Nor do I read his Honour as proposing a clear distinction between cases where the applicant has not demonstrated a prima facie case for relief, and cases determined on the balance of convenience. Indeed his Honour cites Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, where the majority affirmed that 'the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought': [19] (Gleeson CJ and Crennan J); [65], [71] (Gummow and Hayne JJ).

22 That is the approach which I took in deciding the application. Specifically, at [28], I said:

I will deal first with the allegations of breaches of duty while employed by Romeg. I have not made any final findings on contested issues of fact. The affidavit evidence was extensive, but the parties were limited by tight time schedules, there has been no discovery, and (although it was foreshadowed) no party applied to cross-examine any of the deponents. It is, however, necessary to make a judgment about the apparent strength of Romeg's case. Romeg and Scotia are now competitors in the same market. Whether the court grants the orders sought may affect the ability of each of them to compete in that market. In particular, if the first order is made, Scotia will be largely prevented from soliciting work. The grant of an injunction involves balancing the injustice which might be suffered by Scotia if the injunction is granted and Romeg later fails at trial, against the injustice which might be suffered by Romeg if the injunction is not granted and it later succeeds at trial: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670; Madaffari v Labenai Nominees Pty Ltd [2002] WASC 67 [14]. As the apparent strength of Romeg's case diminishes, the balance of convenience moves against the making of an order: Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49, 54 - 55; Todd v Novotny [2001] WASC 171.

23 At [66], I referred also to the practical consequences of granting relief:

As set out above, I cannot now resolve contested factual issues. But I must, on the evidence now available, assess whether the probability that the plaintiff will obtain relief at trial is sufficient to justify the consequences that would flow from making the orders sought. Those orders would prevent Scotia from seeking work from a large part of the market for its services, or, if the alternative relief were granted, would require it to cease work for two significant clients. In a practical sense, the relief could determine the substance of the dispute. That consequence warrants a careful consideration of the merits of the claim: see Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 536 (McLelland J) cited in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [72].

24 In my opinion, the following factors are relevant to the exercise of my discretion. First, the orders sought by the plaintiff included orders preserving the position until an independent computer expert could examine the computers and other electronic storage devices in the possession of the defendants. These orders were made by consent on 11 and 18 November 2010. Second, the plaintiff sought orders for the defendants to provide affidavits relating to what they had done with any confidential information. These orders also were made by consent. Third, on about 9 November 2010, the defendants offered an undertaking in relation to the use of confidential information, although it was limited and less than that sought by the plaintiff. Fourth, the defendants issued a subpoena to the plaintiff, with early return, but did not rely on the documents produced and did not seek to cross-examine the deponents of the plaintiff's affidavits in relation to those documents. Fifth, the plaintiff alleged, or at least insinuated, serious misconduct by the first defendant. It was appropriate for the defendants to respond to that material.

25 Finally, and perhaps most importantly, I am still of the view stated in [66] of the primary decision. The orders that were disputed would, if granted, have prevented Scotia from seeking work from a large part of the market for its services, or would have required that it cease work for two significant clients. They have been successful in resisting those orders. This, in my opinion, makes it proper to award costs to the defendants. The other factors bear on the extent to which costs should now be ordered.

26 It is difficult to tease out the work done in relation to the orders which were agreed and those which remained in dispute. It cannot be done simply by reference to date, as the contested matters were in dispute from the outset. The most serious allegations against the defendants were made in the first affidavits filed by the plaintiff. But there are some matters that should be excluded from an order for costs. The defendants should not now have an order for the costs associated with compliance with the orders to which they consented, including the preparation of the affidavits required by those orders. Those costs should be reserved to the trial judge, when the results of the computer inspection are known. Nor, in the circumstances, should I now make an order in relation to the costs associated with the application for the subpoena. Those costs should also be reserved.

27 With those exceptions, I will order that the plaintiff pay the defendants' costs of the interlocutory application to be taxed if not agreed.

28 The defendant seeks a special costs order removing the limits on costs in the legal costs determination. The application is brought pursuant to s 280(2) of the Legal Profession Act 2008, under which:

[I]f a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -

(a) order the payment of costs above those fixed by the determination;

(b) fix higher limits of costs than those fixed in the determination;

(c) remove limits on costs fixed in the determination;

(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.

29 In an application for an order under the identical provision in the Legal Practice Act 2003, the Court of Appeal said in Le Brun v Joseph [No 2] [2010] WASCA 52 (S) [6]:

Such an application involves two questions: first, whether it is fairly arguable that the taxing officer might properly allow costs at an amount greater than the amount allowable under the relevant legal costs determination; and secondly, whether the inadequacy of the amount allowable under the relevant legal costs determination arises because of the unusual difficulty, complexity or importance of the matter: Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254(S) [16].

30 The defendant relies on the importance of the proceedings. I doubt they could be characterised as unusually difficult or complex. Importance, in this context, allows the court to have regard to whether the work done was appropriate to the significance of the issues that arose, including their significance to the parties: Heartlink [19]. For the reasons set out above, I am satisfied that the proceedings were important so that it is, at least, fairly arguable that the taxing master might properly allow costs at an amount greater than the amount allowable under the relevant costs determination: Heartlink [16]. I will make an order under s 280(2)(c) of the Legal Profession Act removing the limit on costs fixed in the determination. The effect of that order was explained by the Chief Justice in Heartlink:

It would be quite consistent ... for a taxing officer to conclude, after considering the bill in detail, that in fact the amount to be allowed on taxation is less than the limit. So it will be entirely for the taxing officer to determine whether or not the work was properly and appropriately done and, if so, the amount properly allowed. The only effect of the order which I propose to make will be to free the taxing officer of the constraint which would otherwise be imposed [26].

31 If it is necessary to make such an order (see Joyce v Palassis [2006] WASC 242) I will also order that the costs should be paid forthwith.

32 As an alternative, the defendants submitted that I might fix costs, in accordance with the principles set out in Brookvista Pty Ltd v Meloni [2009] WASCA 180 [26] - [27]. The purpose of fixing costs is to avoid the expense and delay involved in a taxation.

33 I am not confident that I have the material required to fix an appropriate sum: see Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 [22]. In an earlier matter, 3 Oceans Wine Company Pty Ltd v Heyshott Pty Ltd [2011] WASC 12 (S), I fixed costs after receiving further submissions. I have reservations about whether there was a sufficient saving in time and expense to justify the process in that case. I have even greater reservations in the present case where the defendants say that they have already incurred more than $8,000 in solicitor-client costs in regard to drafting submissions on costs. Further cost to the parties in drafting costs submissions is not consistent with the principle of proportionality under which the court must proceed.