Darrow v FreshFood Management Services Pty Ltd

APPLICANT Mr P Ginters of counsel

SOLICITOR Swebeck Legal BONDI. LEGAL REPRESENTATIVES: RESPONDENT Mr B J Gross QC with Mr J Clarke of counsel

SOLICITOR Clayton Utz SYDNEY.

JUDGMENT: - 3 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

JASON DARROW v FRESHFOOD MANAGEMENT SERVICES PTY LIMITED

Application under s.106 of the Industrial Relations Act 1996 JUDGMENT

1 The applicant, Jason Byron Darrow, was employed by the respondent, FreshFood Management Services Pty Limited ('FreshFood'), from 5 January 2002 until 30 May 2003, when his employment ended after he gave two months' notice of termination, as required by his contract of employment. The applicant's intention was to take up a new employment with a competitor of FreshFood, Cantarella Bros Pty Ltd ('Cantarella').

2 The summons in these proceedings, filed on 9 April 2003, originally claimed relief from the two months' notice obligation as relevantly unfair. That issue has disappeared with the passing of time. The other relief claimed and the principal issue for determination is the avoidance (or variation) of a clause in the contract of employment between the parties which would prevent the applicant taking employment in New South Wales with a competitor of FreshFood for a period of 12 months after the termination of service: a restraint of trade clause. The summons seeks relief under s106 of the Industrial Relations Act 1996 ('the Act').

3 The applicant has entered into a contract of employment with Cantarella, from a date yet to be fixed having regard to the result of these proceedings.

4 The applicant holds a Bachelor's degree in Biotechnology and Bioprocess Engineering from Massey University in New Zealand and from 1994-1995 he did a Post-Graduate Diploma in Commerce at Otago University in Dunedin. His principal employment history is that prior to commencing with FreshFood he worked from November 1990 to the end of 2001 with Cerebos Greggs Limited in Auckland. He worked there as a process development technologist; a production supervisor; five years as a production manager and four years as a coffee development manager. In the last two years of that four year period he was described as a Master Coffee Blender. In that latter two years he was responsible to purchase green beans for Moccopan Coffee in Melbourne and he had an input into the quality assurance of fresh coffee made by Moccopan.

5 It is clear enough on the evidence that the applicant's work history over recent years demonstrates a specialisation by him in the production particularly of fresh coffee (also referred to as ground or pure or non-soluble coffee).

6 The evidence establishes that since 1998, the core business of FreshFood in Australia has involved the manufacturing, sale and distribution of branded coffee, coffee products and related equipment, including but not limited to, "Robert Timms" (included "Robert Timms" coffee bags), "Bushells' coffee", "Pablo" and "Cafè Bar" products. Predominantly two types of coffee are manufactured in Australia: soluble coffee, also known as "instant" coffee and non-soluble coffee, being principally roasted whole beans which are then ground.

7 It is convenient to mention that Cantarella, on the evidence, is principally engaged in the marketing and supplying of European foods and non-soluble coffee; its coffee brands include Vittoria and Aurora. Cantarella and FreshFood are direct competitors in the marketing and supply of non-soluble coffee.

8 In the latter part of 2000 the applicant responded to a newspaper advertisement placed by FreshFood for the position described as Operations Planning & Development Manager at FreshFood's Concord premises. The applicant was flown to Sydney on two occasions for interviews but ultimately an offer of employment made to him in December 2000 was found to not be attractive enough, given the need to move from New Zealand and certain domestic concerns.

9 In about July 2001 Mr Paul Donnan, who at the time was Group Development Manager for the FreshFood Group of companies in Australia, contacted the applicant again to inform him that FreshFood was restructuring and to enquire whether the applicant might be interested in re-looking at employment with FreshFood. The applicant's domestic concerns of December 2000 had resolved to no longer prevent his taking up this invitation, which ultimately led to the contract the subject of these proceedings.

10 Again the applicant attended Sydney for an interview and a series of negotiations then ensued, leading to a discussion by telephone on 16 October 2001 which produced an agreement on certain conditions which were described in the written confirmation from Mr Donnan as a "summary of agreed remuneration conditions". The base salary was to be $150,000 per annum plus 10% superannuation and a bonus of up to 20% of base salary subject to achievement of agreed KPIs. Provision was made for a motor vehicle and the payment of airfares and shipping costs to Australia plus rental assistance for up to six months' on the applicant's initial Australian residence (in fact $250.00 per week for five months).

11 The summary of agreed remuneration conditions also identified under the heading "Other" the following: Termination to be six (6) months remuneration - including notice payment. Remuneration is defined as base salary & company superannuation contribution only.

12 This latter term responded to a discussion held previously between Messrs Darrow and Donnan which was deposed to by Mr Donnan as follows: Mr Darrow: "What is the situation if I was to leave in the first 12 months? I think I'd like to have a clause that gave me 12 months' cover."

Mr Darrow: "I mean so I'm guaranteed 12 months' pay. I will get you some words and send it over."

13 The applicant disputed that version of the conversation and deposed: Mr Darrow: "What is the situation if I was told to leave in the first 12 months. I think I'd like to have a clause that gave me 12 months' cover."

I have a particular recollection of this conversation because it was my understanding at the time that the Respondent had terminated the employment of a number of people and I was concerned about what would happen to me if I was to relocate to Australia and then be terminated within the first 12 months of my employment.

14 This version of events is problematical in that an e-mail from the applicant to Mr Donnan sent on 15 October 2001 put the matter this way:

As discussed, this is an outline of the type termination clause I would like included in the contract. I certainly doubt will be needed, but as there will be a major change in my living arrangements by moving to Australia, I would like to have some type of insurance if things don't go well.

Contract termination clause If the contract is terminated within the first 12 months, then there would be a payment equivalent to 12 months remuneration.

If the contract is terminated between 12 months and 18 months from the start of the contract, then the payment would be the equivalent of 6 months remuneration.

Once I get your letter and copy of the contract, there may be a few other things I will need clarifying, but we can worry about that later.

I would also just like to say, thank you very much for the offer, and I am looking forward to finalising things so I can get into the factory and start getting my hands dirty.

15 Mr Ginters submitted this should be read as referring only to termination by FreshFood. The applicant and Mr Donnan are agreed that up to this point no discussion had occurred between them concerning a number of clauses, including the non-competition clause, which were then included in a draft contract of employment later sent by Mr Donnan to the applicant.

16 The draft contract included a number of additional clauses not mentioned in the summary of agreed remuneration conditions. Of present relevance are the following two clauses: Confidentiality During the employment you will be exposed to Confidential Information. 'Confidential Information' includes matters relating to FreshFood Group's current and future business discussed during meetings and contained in "documents" as described above.

You represent and warrant that you will not either during the employment or at any time thereafter, except in the proper course of your duties under the employment or as required by law or by the Company, use or disclose to any person any Confidential Information, and will use your best endeavours to prevent the unauthorised use or disclosure of any such information by third parties. Non-Competition After the Employment You represent and warrant that you will not, without the written consent of the Company, during the period of 12 months after termination of the employment, however that termination occurs: (a) anywhere within NSW, directly or indirectly in any capacity whatsoever carry on, advise, provide services to or be engaged, concerned or interested in or associated with any business or activity which is competitive with any business carried on by the Company or any of its related bodies corporate at the date of termination of the employment, this however, does not prohibit you from holding not more than 5% of the shares of any company listed on a recognised stock exchange, whether directly or indirectly or through nominees; or

(b) canvass, solicit or endeavour to entice away from the Company any person who or which at any time during the employment or at the date of termination of the employment was or is a client or customer of or supplier to the Company or any subsidiary of the Company or in the habit of dealing with the Company or any such subsidiary; or

(c) solicit, interfere with or endeavour to entice away any employee of the Company or any of its related bodies corporate; or

(d) counsel, procure or otherwise assist any person to do any of the acts referred to in sub-paragraphs (b) and (c) of this paragraph.

17 The termination clause provided for six months' payment in lieu of notice for termination by FreshFood and two months written notice by the applicant to terminate the employment. The applicant's evidence is that having received the offer of employment letter he was concerned with the restraint provisions and had a conversation with Mr Donnan prior to his accepting the terms of the written offer by the application of his signature to them on 9 November 2001. The conversation he recollected was as follows: Darrow: "I am concerned about the restraint clause. It is too restrictive".

Donnan: "Do not worry about it. It is a technical requirement out of head office that's all."

18 The applicant deposed that he believed, as a result, that the restraint clause in the offer of employment letter would not be enforced by the respondent.

19 This alleged conversation was disputed by Mr Donnan who could not recall any conversation about the subject matter in November, but recalled one only after the applicant commenced employment on 5 January 2002. The applicant recalled no such conversation. Mr Donnan expressed the view in evidence that had he been asked by the applicant the question identified in the applicant's version of the conversation he would not have answered the way the applicant alleges for the reason that he knew the subject matter to be one of importance in the view of FreshFood. He had negotiated the clause with a number of other more senior executives.

20 From 5 January 2002 the applicant took up the position of Manager, Manufacturing Business Services at FreshFood's Concord premises. He was responsible to the Chairman of the Operating Committee, FreshFood Australia, Graham Kelly. His responsibilities were set out in the letter of offer as follows: Responsibilities:

Your initial responsibilities will include the review of existing manufacturing operations and associated business processes. Your initial responsibilities will include: · Review and refinement of current manufacturing processes, including: · Coffee processing procedures and standards; · Materials management; · Rostering and usage of management and staff across manufacturing areas. · Review and refinement of systems, including SAP, to monitor and control costs and quality of manufactured goods; · Ensure best manufacturing and quality processes are implemented and monitored; · Participate in the development and management of improved systems and standards for the development of new coffee and the improvement of current coffee products; · Participation in the development and implementation of improved Green Beans Sourcing, procurement, processing and quality management systems; and · Development and implementation of appropriate systems and initiatives to ensure all OH&S requirements are met.

21 The applicant described his responsibilities, aside from the general responsibilities identified in the employment letter, as:

a. The purchasing of all the imported and locally purchased green coffee beans. In this respect my responsibilities were focused predominately on the production of instant coffee (as opposed to roast and ground coffee) as instant coffee comprises approximately 65% of the respondent's business.

b. Managing and overseeing employees involved in the purchasing of materials used in the manufacture and packaging of coffee at the respondent's Concord premises.

c. Managing and overseeing employees involved in the manufacture and packaging of coffee produced at the respondent's Concord premises.

d. Managing and overseeing the Quality Assurance of products produced at the respondent's Concord premises.

e. Managing and overseeing employees involved in the engineering department at the respondent's Concord premises. These employees are responsible for maintaining the manufacturing and packaging equipment at the respondent's Concord premises.

f. Managing and overseeing employees involved in the upkeep and maintenance of the respondent's Concord premises.

g. Managing and overseeing warehousing employees who distribute the coffee produced at the respondent's Concord premises to retail supermarket chains.

22 The applicant participated in two group meetings of FreshFood management: the Business Operating Committee ("BOC") and the Concord Communications Group.

23 The BOC was said by Mr Donnan to comprise "the senior management structure of the FreshFood business in Australia, including the heads of all areas of the FreshFood business operating in Australia". It is established in the evidence that five sectional heads employed by FreshFood would prepare monthly management reports which would then be incorporated in a monthly management report circulated to each of the members of the BOC. Those members had at all times either electronic or hard copy access to the combined monthly management reports. Mr Darrow prepared the contribution from the manufacturing area. The Sales Report outlined the performance of the sales area, budget and profit figures and, although only in general, pricing information. Between September 2001 and 31 March 2003 the BOC did not formally sit. This was the result of a dictate from Mr Kelly and over that period a less formal approach appears to have been taken. The monthly reports were nevertheless prepared, consolidated and circulated to the BOC members.

24 It appears that in early 2003 the applicant formed the view that things were not going well. On Thursday, 27 March 2003 he attended, on invitation, a meeting with the Chief Executive of Cantarella at his home. He was offered employment and left to consider the position.

25 On 31 March 2003 a BOC meeting was called, principally for the purpose of announcing the withdrawal of Mr Kelly as Chairman of the BOC and the termination by Mr Donnan of his services with FreshFood. The applicant attended that meeting in the city, returned to Concord and then determined to give two months' notice of termination of employment to enable him to take up the offer from Cantarella.

26 Mr Donnan deposed that Mr Kelly had informed him on about 31 March that he had been told the applicant intended to commence work at Cantarella. Mr Kelly telephoned Mr Darrow in Mr Donnan's company and informed the latter at the conclusion of the telephone call that Mr Darrow had confirmed that intention. Mr Kelly then sent an urgent facsimile to Mr Darrow in the following terms: SUBJECT: RESIGNATION - 31 MARCH 2003

I have been given to understand that you may be considering accepting employment with a competitor of FreshFood.

I draw attention to your obligation not to engage in any such employment during the period of 12 months after termination of employment with FreshFood.

Graham Kelly Director, FreshFood Australia Holdings Pty Ltd

27 Subsequently, on 31 March 2003 two senior employees of FreshFood approached the applicant and he was then logged off the FreshFood computer system and required to provide them with any of FreshFood's information that he had in his possession. They advised me that FreshFood expected him to continue to come to work as usual. He attended for work on 1 April 2003 but because of having been logged off the computer system, he was unable to perform his duties. He continued to attend for work until 17 April 2003 from which date the respondent did not require him to attend for work and he went on "garden leave".

28 On 1 April 2003 Clayton Utz, acting on behalf of FreshFood, wrote to the applicant at the Concord offices of FreshFood referring to the employment in accordance with the terms of the offer dated 5 November 2001 and the applicant's having given notice. The letter set out the non-competition after employment clause. It then identified the termination date as 31 May 2003, being two months' after the giving of written notice on 31 March. The letter then continued:

You have informed representatives of our client that you have accepted employment with Cantarella Brothers. Cantarella Brothers is a direct competitor of our client based in NSW. This is a matter our client takes most seriously. Such employment would be in direct contravention of the Non-Competition After the Employment clause of the Employment Agreement which would provide our client with a cause of action against you. This cause of action would entitle our client to bring proceedings against you in the Equity Division of the Supreme Court of NSW seeking injunctions against you requiring you to comply with your post-termination obligations.

As such, we are instructed to demand that by the close of business this Thursday you provide us with your written assurances that:

(a) you have not accepted employment with Cantarella Brothers or any business or activity which is competitive with any business carried on by the Company or any (sic - of) its related bodies corporate which is to commence either during your 2 months notice period or in the period 31 May 2003 - 30 May 2004; and

b) you will not engage in any conduct that is in breach of the Non-Competition After the Employment clause, for a period of 12 months after the date of the termination of your employment, being 31 May 2003.

Failure (sic - of) your attendance to these matters, we will seek our client's instructions to commence the proceedings above without further notice to you.

Clayton Utz JJ Catanzariti, Partner

29 On 9 April, 2003 the summons for relief was filed.

Issues for Resolution 30 The parties filed a document recording certain agreed facts and issues for resolution, the latter of which were as follows:

(1) Whether the contract or the arrangement ("the Contract") whereby the applicant performed work in industry for the respondent, to the extent that it contains (and the respondent seeks to rely upon) the clauses headed "Non-Competition After the Employment" is:

(2) If the answer to question (1) is yes, whether in the exercise of its discretion the Commission ought declare the Contract (and in particular the clause headed "Non-Competition After the Employment") wholly or partly void or varied, either from its commencement or from some other time.

31 In the course of argument, I questioned whether it was appropriate that this court should determine the first question, namely, whether the non-competition clause was against public policy. The Commission's jurisdiction is contained within and confined by s106 and the related sections which express the relevant questions for this court in terms of the last four of the questions in paragraph (1)(b)-(e) of the issues for resolution. However, there is room for the view that the issues identified in paragraphs (1)(a) and (1)(e) are capable of being the same issue.

32 On 19 September 1995 Hungerford J gave judgment in Daley; Stuart; Clyde; Walters; Mullins v New South Wales Rugby League Limited and Ors (1995) 78 IR 247. This was an action for relief under s275 of the Industrial Relations Act 1991, a predecessor of s106, brought by five prominent rugby league footballers because of a ban excluding them from selection in representative sides, effectively because they had entered into contracts with a newly formed competition organised by Star League Pty Limited. A significant issue in the proceedings was whether the circumstances involved a restraint of trade and whether any restraint so found was reasonable or unreasonable. Hungerford J posed that question at 283.3 and at 287.5 concluded that the: "retrospective ban imposed on them (the applicants) by the respondents as to their non-selection in representative matches by reason of having signed the contracts with Star League is an unreasonable restraint of trade against the public interest.

That finding makes it strictly unnecessary to consider the ground of unfairness as relied upon by the applicants. . . . " 33 After dealing with the approach of the court to the unfairness with which the section was concerned, his Honour concluded: "I think it follows in this case that the reasons leading to my conclusion that the restraint of trade was unreasonable lead also to the conclusion that the ground of unfairness has been made out. I so find."

34 In the course of his Honour's reasons reference was made to the judgment of the New Zealand Court of Appeal (North P and McCarthy J, Turner J dissenting) in Blackler v New Zealand Rugby Football League (Inc) [1968] NZLR 547, another football case where the New Zealand Rugby Football League refused a clearance to a player to allow him to play rugby league football professionally in Australia. McCarthy J said in the context of consideration of a restraint of trade provision and its reasonableness: ". . . . the public interest is now concerned to ensure that (players) will, as far as is reasonable, be unrestrained in their right to develop and exploit their skills elsewhere. "

35 That observation shows an approach, which would seem to equate public interest with public policy at least in the context of cases of this type. The respondent submitted, in relation to the judgment of Hungerford J in Daley where, after finding the restraint of trade in that matter unreasonable, the view was taken it was strictly unnecessary to consider the ground of unfairness relied on by the applicants, that this conclusion ". . . was because, logically, if the restraint is unreasonable, it is void at common law and not part of the terms of the contract in any event". The applicant's position was entirely consistent, arguing that the clause was contrary to public policy and thus by definition unfair because it would be against the public interest.

36 I have considerable difficulty with this approach. If the non-competition clause is void as an unreasonable restraint of trade and thus not part of the contract, s106 is not available to provide any remedy. A conclusion concerning the effect at common law of the clause, without a full consideration of s106 aspects, would not be binding upon the parties. This court is not a court of general jurisdiction but is limited by its statute. It seems to me, then, that any consideration of the common law effect upon this clause may only be, if at all, a tool in the consideration of the primary jurisdiction provided by s106. Thus, on my view, it is strictly necessary that the court consider whether the contract, in its non-competition aspects, is unfair in the statutory sense.

37 In Carter v New South Wales Rugby League Limited and Anor (1997) 78 IR 368 (and six other like cases) Hill J was presented with different issues raising restraint of trade questions similar to those arising before Hungerford J in Daley. The first question addressed by Hill J was whether the agreement was a restraint of trade, expressing the view that the agreement was a prima facie restraint of trade (at 400). His Honour proceeded to consider the relevant factual matters and the authorities with respect to restraints of trade, but also observed that unfairness remained a relevant feature, for example "by virtue of supervening circumstances" (at 407) and by post-contract experience, the effect of which may have been to preclude a player from obtaining a playing contract (at 409).

38 These questions of unfairness post-contract run counter to the principle that the validity of a restraint is to be assessed at the date the contract was entered into (Amoco Australia Pty Limited v Rocca Bros. Motor Engineering Co. Pty Ltd (1973) 133 CLR 288 at 318). The approach of Hill J seems to me to be quite consistent with the approach I intend to adopt, namely that whilst I will consider the clause in the context of a restraint of trade, ultimately the resolution of the matter must be determined consistently with the provisions of s106 of the Act.

39 It is also appropriate to refer to the judgment of Glynn J in Harper v Candle Australia Limited [2001] NSWIRComm 77 where her Honour dealt with the wider jurisdiction conferred by s106 when questions involving restraints of trade arose. In that matter her Honour observed: 211 The power of the Commission to vary a contract under s 106 arises only after the Commission has found the contract in question unfair. It is not uncommon for questions as to whether certain restraints are unfair in terms of s 105(a) or against the public interest in terms of s 105(b) to arise for consideration in applications made under s 105 and s 106 in the 1996 Act, a situation that occurred also under the predecessor sections in the Industrial Relations Act 1991 and the Industrial Arbitration Act 1940.

212 In Carter v New South Wales Rugby League Limited ( Carter ) (one of seven applications dealt with in those proceedings) [(1997) 78 IR 368 at 400] Hill J first found that the agreement was a prima facie restraint of trade and then stated that "the next question is whether the restraint is justified as being reasonable for the protection of the Leagues' business enterprise".

213 In Carter , the primary point at issue was whether, in proceedings seeking orders that certain "loyalty" agreements (restraints) were unfair and contrary to the public interest as being in restraint of trade, those agreements should be declared void as being unfair contracts in terms of s 105 and s 106 of the 1996 Act.

214 The findings that Hill J made in Carter were that provisions in the various contracts being examined were either fair or unfair. He said, for instance, that the unreasonableness of the options provisions arose mainly out of what he described as unconscionably long period/s of the option restraints (at 412). Unfairness in some cases could be cured by deletion, in others the agreement, having been found to be substantially unfair, was avoided.

215 Later at p 414, Hill J noted that no reference was made to the Restraints of Trade Act in the proceedings before him. His reference to s 4(1), after considering the decision by Windeyer J in ARL v Cross and Elsegood [(1997) 39 IPR 111], was in relation to the severability aspects of s 4(1).

216 In Daley v New South Wales Rugby League Limited (and applications by four other footballers) [(1995) 78 IR 247], Hungerford J, having satisfied himself that the alleged arrangements (exclusion from representative selection) were within the scope of s 275 of the Industrial Relations Act 1991 (the predecessor of the present ss 105 and 106), attended to whether the applicants had satisfied the grounds for relief contained in s 275. He first dealt with the public interest ground as to restraint of trade. His Honour adopted a number of propositions distilled from other cases as to that issue, but I refer, for the purposes of this decision, to one only (at p 281): (e) If a restraint of trade is shown it is a question of law whether the circumstances justify the restraint. 217 Having found that the exclusion imposed on the applicants by the respondents was a restraint of trade, Hungerford J then said (at 283) that the question then to be asked is whether the restraint so found is reasonable or unreasonable. His Honour found (at 287) that the ban imposed on the players was an unreasonable restraint of trade against the public interest (ie. the equivalent sub-section to s 105(b)). Although that finding made it strictly unnecessary for him to consider the ground of unfairness as relied upon and fully argued by the applicants, he did so for completeness and concluded that the ground of unfairness had also been made out.

218 Although Hungerford J discussed the restraint of trade at common law, he did not refer to the Restraints of Trade Act 1976.

219 My consideration of Carter and of Daley is both in relation to the methodology adopted in this jurisdiction as to the consideration of restraint of trade issues in the context of applications made under s 275 (or its predecessor) and to principle.

40 Again, I would consider the approach I intend to take in this matter is consistent with that taken by her Honour.

41 The starting point for a consideration of the common law with respect to restraints of trade may be found in the speech of Lord Macnaghten in Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company, Limited [1894] AC 535 at 565: "The true view at the present time I think, is this: The public have an interest in every person's carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public. That I think, is the fair result of all the authorities."

42 So it is that the general rule is that a restraint of trade provision of the type identified in this case as the non-competition clause is at common law void as being contrary to public policy unless it can be demonstrated that the clause is justified by the special circumstances of a particular case such that the restriction is "reasonable". The consequence of that approach, as I would interpret it and as the parties accepted, is that FreshFood would be required to demonstrate the reasonableness of the provision which it seeks to impose on the applicant. However, s4(1) of the Restraints of Trade Act 1976 (NSW) provides: A restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not.

43 As might be expected the evidence called by each side on the issue of the applicant's knowledge and understanding of confidential information gained in employment with FreshFood was maximised on FreshFood's side and minimised on the applicant's part. I am prepared to so find despite the applicant's denial in cross-examination of that proposition. I find it impossible to accept that the applicant, as the head of manufacturing in FreshFood's fresh coffee operations in Australia, is without knowledge of FreshFood's business including its blends, processes and its business circumstances, which it is appropriate that FreshFood protect. I can imagine that some attendees at a BOC meeting and who have access to business information might confine their attention to their own area of activity by adopting a disinterested approach to other areas. However, I found the applicant in his evidence to be intelligent, articulate, enthusiastic and not the sort of person whom I would expect to have a disinterest in the wider aspects of the business. This would seem to me to be particularly so in the light of his commerce training which he obviously undertook with a view to advancing himself in management roles in his chosen field.

44 That chosen field is in fresh coffee production. I am not prepared to treat the applicant as a person who by dint of his earlier training is freely mobile outside that field. His one attendance upon an employer outside the field did not achieve a second interview and he testified to the effect that they thought he was, for them, too specialised in coffee. While it is unquestionably correct that he possesses qualifications and experience which, at least in theory, befits him for employment in a different field, I consider it appropriate that the issues in this matter ought be determined not on the basis that he should readily accept the limitation in his contract because of that theoretical mobility, but rather in the context of his speciality and the proposition of employment with Cantarella.

45 A further matter easy of disposition is the proposition that the applicant has had access to clients of FreshFood in Queensland and Western Australia. These involve once only visits to the premises of those clients by the applicant. This does not support, to my mind, the non-competition after employment clause by virtue of its limitation to employment in New South Wales. The clause would not prevent the applicant from obtaining employment in the two states in which he visited those clients.

46 The confidentiality clause, which the applicant does not seek by his summons for relief to interfere with, would operate in respect of any relevant information obtained by the applicant in his employment with FreshFood. Indeed, the applicant adopted the position in the proceedings that the confidentiality clause itself is a sufficient protection for FreshFood in relation to any relevant knowledge he has acquired in the course of employment with FreshFood. However, a restriction upon the provision of information to another does not provide the same sort of protection as would the non-competition clause. Were the applicant to undertake employment with a competitor of FreshFood, the utilisation of relevant information obtained in the course of employment with FreshFood would not require to be conveyed by the applicant to another but from FreshFood's perspective could be utilised whether consciously or subconsciously by the applicant in the context and course of his new employment.

47 I next move to the subject of the pre-employment discussions between the applicant and Mr Donnan concerning the non-competition clause. The applicant's evidence on this matter I found unsatisfactory and ultimately unconvincing. The possible versions of the conversation, from the applicant's evidence, is such that it is impossible to conclude with any confidence that the conversation took a particular form. The non-competition clause was said by the applicant to have been described by Mr Donnan as: - A "technical requirement out of head office" - A "requirement from Singapore head office"

48 He accepted in cross-examination that the requirement may have been described as "standard" rather than "technical". These were expressions which he saw as interchangeable. He also said "as I understand it, yes, he (Mr Donnan) was just saying it was a normal thing".

49 In cross-examination he was asked: Q. Do you agree that at no stage did Mr Donnan say to you that it is a requirement of head office, which is not going to be relied upon in any circumstances. He never said that to you did he? A. Yes he did.

50 In re-examination that question and answer were read to him, immediately after which he said: A. Yes, he did, yeah.

Q. When is it you say - perhaps if I can interpolate. You say, "Yes, he did" what did he say to you? A. That it was a technical requirement of head office and to not worry about it.

Q. When did he say that to you? A. Before I signed the contract on or about 7 November. 51 It may be seen from these exchanges that the evidence went full circle during the course of which the applicant accepted the possibility that a different language was employed by Mr Donnan which could have a materially different effect, despite the applicant's view of it.

52 I also take into account the fact that while the applicant in evidence viewed this alleged conversation with Mr Donnan as a "vital part of this case" no reference was made to that matter at the point where Mr Kelly spoke to him about the non-competition clause or in response to the letter from Clayton Utz. In addition, Exhibit 14, a document prepared by the applicant on 2 April 2003 entitled "Points of Note", which constituted a marshalling of the arguments perceived then by the applicant to be of possible utility, made no reference to any concession by Mr Donnan.

53 Further, the applicant's position was that he had intended to seek written approval, consistent with the non-competition clause, for his proposed employment from Cantarella but did not do so because Mr Kelly deprived him of the opportunity by ending their telephone conversation on 31 March 2003 in hanging up on the applicant. If this be correct, there is a significant conflict between the two positions adopted by the applicant.

54 I have found it unnecessary, in coming to this view about the contract, to come to a final conclusion about the applicant's general credibility, having regard particularly to the matters raised by the respondent concerning his evidence of coffee plunger bags being supplied by a number of "major coffee companies" around the world. I observe that there are two elements of that issue which raise some concern, namely the identification of a Canadian corporation called Harvest FoodWorks as a major coffee company and the contention that the Maxwell House coffee bags, which was identified as containing ground coffee and "concentrated" coffee did not involve instant coffee. I confess to not being able to understand the explanation given for the view that concentrated coffee did not refer to soluble or instant coffee.

55 In all of these circumstances I find myself unable to conclude with any real satisfaction that Mr Donnan made observations to the applicant, the effect of which was to encourage him to think that the non-competition clause would not be relied upon by FreshFood or was merely a technical matter of no concern, presumably in the future.

56 It remains, therefore, to consider, absent a finding that the respondent, through Mr Donnan, made any concession having the effect or intention of waiving the non-competition clause, the clause itself is unfair in the circumstances of the case according to the unreasonable or other statutory tests identified as the issues for resolution.

57 The first aspect of potential "unreasonableness" arising in the argument was developed out of the applicant's suggestion that he was taken by surprise by the draft contract's inclusion of the non-competition clause. This argument seems to me to come to amount to little when it is recognised that the non-competition during employment clause and the confidentiality clause, the latter of which is relied on by the applicant in these proceedings, all came without prior mention in the draft contract from Mr Donnan. It is the ultimate acceptance of the draft contract by the applicant which is of greater significance.

58 There are three other matters which require comment in this context. The first is the limitation of the restraint to New South Wales. This is not an aspect which was contended for the applicant was unreasonable. Indeed, the respondent submitted that the limitation manifested an element of fairness. I find no difficulty with that aspect of the provision.

59 The second is the applicant's proposition that the clause sought to protect FreshFood against mere competition by the applicant, which was submitted to be contrary to public policy (Kone Elevators Pty Limited v McNay & Anor (1997) ATPR 41-564 per Sheller JA (Meagher and Cole JJA agreeing). In that matter an employee of Kone (McNay) entered a contract which contained a clause not dissimilar to the non-competition clause in the present matter. It imposed a restriction for one year after termination of employment upon engaging in any business which could make use of confidential information or confidential property to the material detriment of the business of Kone. McNay left Kone intending to take up employment as the Queensland Branch Manager of Schindler Lifts, a competitor of Kone.

60 The Court of Appeal stated: "In the public interest an employer is not entitled to protect itself against mere competition by a former employee . . . Young J (at first instance) held that the confidential information which the drafter chose to protect in the letter of appointment was too widely stated, so that the convenant failed under the general law. His Honour also held that the area of restraint, "Australia", was too wide and the period of restraint, "one year", too long."

61 The undisputed evidence in that matter was that Kone was about to launch three new products onto the market, which would be well established within six to 12 months but the launch was a matter of great commercial secrecy.

62 The Court of Appeal upheld the covenant and took issue with Young J's conclusion that the area of restraint was too wide. However, the appellant sought only to enforce the restriction for a period of six months and not 12 months, a matter about which the Court of Appeal expressed no view. The Court held that the relevant clause was a provision of the type referred to by Lord Denning MR in Littlewood's Organisation Limited v Harris [1977] 1 WLR 1472 where at 1479 Lord Denning said: "It is thus established that an employer can stipulate for protection against having his confidential information passed on to a rival in trade. But experience has shown that it is not satisfactory to have simply a convenant against disclosing confidential information. The reason is because it is so difficult to draw the line between information which is confidential and information which is not; and it is very difficult to prove a breach when the information is of such a character that a servant can carry it away in his head. The difficulties are such that the only practicable solution is to take a covenant from the servant by which he is not to go to work for a rival in trade. Such a covenant may well be held to be reasonable if limited to a short period."

63 In the present case the factual circumstances at the time of the termination included the applicant's participation as a member of the project team developing a new product for proposed marketing by FreshFood, namely, coffee plunger bags. In that respect, a similarity of circumstance exists between this matter and Kone Elevators. However, that product has now been released to the market and, according to the evidence from both sides, is most likely to have been tested and analysed by any competitors with an interest in the product within days of its release.

64 Further, the evidence of both the applicant and Mr Donnan is consistent in demonstrating that the particular coffee blends utilised by FreshFood in producing their brands and the technical processes undertaken to produce them, would be incapable of reproduction by the applicant without continuing access to FreshFood's Master Blend Sheet and its Technical Procedures Manuals, the latter of which are voluminous.

65 In these circumstances, the evidence does not establish that there is any particular knowledge which the respondent is eager to protect. It seems to me that whether or not the non-competition clause would be viewed at the time of its making as reasonable, the effect in the light of the applicant's experience and resignation is that he has been out of direct contact with FreshFood's "information" since 31 March; has been on garden leave since 17 April; and has been out of employment since 30 May 2003. While I recognise the interest of FreshFood in protecting itself in the way referred to by Lord Denning, I consider that 12 months is a period which would not, in the circumstances, conform to the notion of a "short period".

66 I consider that the applicant has established that the 12 months bar by the non-competition clause on employment with, effectively Cantarella, is unfair in the sense that it is contrary to the public interest to deprive the community of his services in this context; is unfair in that it would seek to protect for an extended period FreshFood in circumstances where no apparent threat is demonstrable; and is harsh in that it would impose a serious financial burden upon the applicant for no demonstrably good reason.

67 In coming to that conclusion I have considered the proposition advanced by FreshFood that the New South Wales restriction would grant him freedom to seek employment elsewhere. While that is unquestionably so, I am satisfied the applicant's desires to remain in Sydney in the context of his domestic arrangements are not unreasonable.

68 In all of the circumstances, I would consider that the respondent has demonstrated that the non-competition clause is one not relevantly unfair, nor an unreasonable restraint of trade, except insofar as its operation for a period of 12 months is concerned. It seems to me that a reasonable restraint in this case would operate for a period of six months from the date which the applicant has been disconnected from access to relevant material in FreshFood's business. That date is 31 March 2003. I appreciate that the applicant attended work for approximately 17 days thereafter before being sent on garden leave, but the uncontested evidence is that he was unable to perform his role in that period.

69 I declare that the contract of employment of the applicant with FreshFood was an unfair contract in providing for the operation of the non-competition clause for a period of 12 months;

70 I order that the said contract be varied by substituting in the non-competition clause for the words "during the period of 12 months after termination of employment" the words "after termination of employment until 30 September 2003".

71 I reserve costs. I direct the parties to confer on costs. In the absence of agreement on that issue I will hear any argument the parties might wish to put on the matter.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.