HiTech Group Australia Ltd v Riachi

Supreme Court of NSW|2021-09-21|Before: Ward CJ

Background

The background to the present application is largely not in dispute. I summarise it below (as gleaned from the affidavit evidence and material tendered on the present application) but make clear that I am not making any findings as to any disputed issues of fact that would need ultimately to be determined at a final hearing.
The plaintiff is a company that has been established since 1993, which carries on a recruitment and consulting business in the IT area. Its business involves the recruitment, for clients, of appropriately skilled IT workers (potential IT recruits apparently being referred to in the lexicon of this industry as "candidates"). The majority of the plaintiff's business is through government clients. The plaintiff maintains an extensive proprietary system and database, known as the "HiBase System", which is treated as highly confidential and is password protected.
The defendant, an account manager who had not previously worked in the recruitment agency industry (previously having worked only as a sales consultant or manager for two motor vehicle sales companies) and who has no tertiary qualifications, entered into a contract of employment with the plaintiff on 4 February 2019. In the defendant's role (he being appointed as a Recruitment Account Manager), it is not disputed that the defendant had access to the plaintiff's HiBase System (and other electronic databases such as the "TimePro System").

Relevant principles

It is convenient at this stage to set out the relevant principles in this area, about which there is no dispute between the parties.
The present application being for interlocutory relief, the issues for determination are: (i) whether there is a serious question to be tried that the negative covenant contained in the defendant's contract (cl 5.1(b)) is a valid restraint (whether for 12 months or the cascading periods of six months or three months respectively or as read down by the operation of s 4 of the Restraint of Trade Act 1976 (NSW) (Restraint of Trade Act)) and that there has been a breach or there is an apprehended breach of the covenant; (ii) whether the balance of convenience lies in favour of the interlocutory injunction; and (iii) whether there are any discretionary factors which tend against the grant of relief.
In circumstances where the grant of interlocutory relief is likely effectively to determine the substance of the matter in issue and provide the final relief (because of the duration of the term of the restraint), the grant of any interlocutory injunction is generally approached on the basis set out by McLelland J, as his Honour then was, in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 (Kolback) at 535. His Honour, considering the proper approach to applications in those circumstances said as follows (at 535-536): As I see it, the position is as follows. Where a plaintiff's entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled: see, eg, Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; 56 ALR 73 at 79. Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question: see, eg, A v Hayden (No 1) (at 4; 78); Cohen v Peko-Wallsend (1986) 61 ALJR 57 at 59; 68 ALR 394 at 397. If the Court does decide the question of law the uncertainty is to that extent removed. Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused: Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; 52 ALR 651; A v Hayden (No 1); Castlemaine-Tooheys Ltd v South Australia (1986) 60 ALJR 679; 67 ALR 553 and Cohen v Peko-Wallsend Ltd. Apart from this, although normally the Court "does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case" (Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622), there are some kinds of case in which for the purpose of seeing where lies the balance of convenience (or more specifically "the balance of the risk of doing an injustice" - see per May LJ in Cayne v Global Natural Resources plc [1984] 1 All ER 225 at 237, cf per Brennan J in Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1983) 57 ALJR 288 at 292; 46 ALR 279 at 285), it is desirable for the Court to evaluate the strength of the plaintiff's case for final relief: see, eg, Brayson Motors Pty Ltd v Federal Commissioner of Taxation (at 292; 285); Castlemaine-Tooheys Ltd v South Australia at 682; 559. One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: see, eg, NWL Ltd v Woods [1979] 1 WLR 1294 at 1306-1307; [1979] 3 All ER 614 at 625-626 per Lord Diplock; Cayne v Global Natural Resources plc. The present is such a case… [my emphasis]
In other words, where the determination of the interlocutory application will in a practical sense irrevocably (to use his Honour's words) or finally determine the matter in issue, what is required on the above approach is an evaluation of the strength of the plaintiff's case for final relief in the context of the interlocutory application. The so-called Kolback approach was applied in Romeg Holdings Pty Ltd v Kelly [2010] WASC 404. Allanson J there accepted that where, in a practical sense, the relief there sought would prevent the defendant from seeking work from a large part of the market for its services or else would require it to cease work for two significant clients and hence could determine the substance of the dispute, that potential consequence warranted "a careful consideration of the merits of the claim" (concluding, however, that the case made by the plaintiff for the drawing of particular inferences on which its case depended was weak and that consequently the balance of convenience was against the grant of relief) (at [66]-[67]).
Here there is to my mind a query whether the practical effect of injunctive relief in this case would be to determine the substance of the dispute (so as to require a closer evaluation of the merits of the claim than would otherwise be warranted in a case on an interlocutory application which does not have that practical consequence). Under the terms of the contractual restraint, the minimum period for its operation is three months from the date of cessation of employment and the maximum is 12 months (i.e., 13 August 2022). On the maximum scenario, I would have expected that a final hearing could have taken place before then. However, I accept that that would be less likely if the restraint were to be upheld for only the minimum period (and ultimately nothing turns on this given the view I have formed in any event on the balance of convenience).
As to the validity of restraint clauses, they will be valid to the extent to which they are not against public policy (see s 4(1) of the Restraint of Trade Act and the discussion in cases such as Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 (Koops Martin) at [26]-[27]; Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 (Cactus Imaging) at [10] in each case per Brereton J, as his Honour then was).
The circumstances in which there will be enforcement of negative covenants by injunction were considered in cases such as Seven Network (Operations) Ltd v Warburton (No 2) (2011) 206 IR 450; [2011] NSWSC 386 (Seven Network v Warburton) at [4] per Pembroke J and Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 346-348. A negative covenant restraining a former employee from competing against his or her former employer will be enforced only to the extent that it is necessary for the reasonable protection of the business interests of the employer (see also Buckley v Tutty (1971) 125 CLR 353; [1971] HCA 71 at 376 per Barwick CJ, McTiernan, Windeyer, Owen and Gibbs JJ); and even then there remains a discretion to withhold or limit injunctive relief if a proper basis is established at the hearing (see Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852 (Tullett Prebon v Purcell) at [88]; [91] per Brereton J).
It has been recognised that negative covenants of this kind (commonly referred to as non-compete covenants) protect a legitimate business interest in circumstances where, for example, they prevent the misuse of confidential information for the benefit of a competitor (see Woolworths Ltd v Olson [2004] NSWCA 372 (Woolworths Ltd v Olson)).
In AT Kearney Australia Pty Ltd v Crepaldi [2006] NSWSC 23 (AT Kearney v Crepaldi), McDougall J set out (at [47]-[54]) the principles relevant to the enforcement of restraints of trade. It is not necessary here to set out that passage of his Honour's reasons. Suffice it to note that his Honour there affirmed that: a person seeking to enforce a restraint of trade must show that the restraint is no wider than is reasonably necessary to protect its legitimate interests - the test directing attention to the nature of the interest that is sought to be protected (referring to Gillard J in Hartleys Ltd v Martin [2002] VSC 301 at [91]ff, where his Honour in turn referred to Lindner v Murdock's Garage (1950) 83 CLR 628; [1950] HCA 48 including the recognition in that case to the legitimate interest in an employer protecting their business connection against the possibility of it being affected by the personal knowledge and influence over customers which might be acquired in the course of an employee's employment - see Kitto J at 654). McDougall J there summarised the position as being that (at [53]): … In summary, then, restraints of trade (including both restraints against competition and restraints on solicitation of customers) may be valid where they are reasonably necessary to prevent disclosure of confidential information garnered by the former employee in the course of his or her former employment, or the exploitation of a connection built up by that employee with the former employer's customers in the course of that employment.
His Honour went on to note three other matters: first, that the onus of showing that a contract in restraint of trade is reasonable as between the parties lies on the party alleging this (citing North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 at 470 per Viscount Haldane LC); second, that the onus of showing that a contract in restraint of trade is injurious to the public interest likewise lies on the party alleging that (citing Attorney-General of Australia v Adelaide Steamship Co [1913] AC 781 at 797 per Parker of Waddington LJ); and, third, that the question of the validity of a covenant in restraint of trade depends on the terms of the particular covenant and the factual circumstances (citing Dawnay, Day & Co Ltd v d'Alphen [1998] ICR 1068 at 1111-1112 per Evans LJ (with whom Nourse and Ward LJJ agreed)).
In Woolworths Ltd v Banks [2007] NSWSC 45 at [9] McDougall J, having repeated the above observations, referred to Woolworths v Olson, a case in which there was strong evidence of misuse of confidential information, where Mason P (with whom McColl and Bryson JJA agreed) said (at [38]-[39]): 38. The courts in general take a stricter and less favourable view of covenants in restraint of trade entered into between employer and employee than of similar covenants in commercial agreements (Geraghty v Minter (1979) 142 CLR 177 at 185). The reasons are explained in J D Heydon, The Restraint of Trade Doctrine 2nd ed, 1999 at pp 68-9. It is nevertheless well established that an employer may have interests capable of protection by a restraint covenant. These interests go beyond protection of goodwill and retention of customers and extend to trade secrets (Heydon, op cit, pp 87-8, Knogo Corporation v Halligan (1984) ATPR 40-460, Kone Elevators Pty Ltd v McNay & Anor (1997) ATPR 41-564). This was the trigger for the Service Agreement (see the covering letter of 7 February 2003). Merely because the law offers a degree of protection against the unauthorised use or dissemination of trade secrets by former employees does not mean that contractual protection is necessarily unreasonable or unavailable. 39. The court gives considerable weight to what parties have negotiated and embodied in their contracts, but a contractual consensus cannot be regarded as conclusive (see eg Queensland Co-operative Milling Association v Pamag Pty Ltd (1973) 133 CLR 260 at 268), even where (as in the present case) there is a contractual admission as to reasonableness.
The emphasis on the policy that contracts should be honoured was emphasised in cases such as Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9 per Gleeson CJ (and see Pembroke J in Seven Network v Warburton at [3], though noting his Honour's qualification at [4]).
McDougall J again set out the relevant authorities in this area in Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 (Stacks v Marshall) at [44], which was adopted by Slattery J in Verint Systems (Australia ) Pty Ltd v Sutherland [2019] NSWSC 882 (Verint) at [38]. See also Isaac v Dargan Financial Pty Ltd atf The Dargan Financial Discretionary Trust (2018) 98 NSWLR 343; [2018] NSWCA 163 at [59]-[68] per Gleeson JA (with whom Bathurst CJ and Beazley P, as Her Excellency then was, agreed); and more recently Dundoen Pty Ltd v Richard Wills (Real Estate) Pty Ltd [2020] NSWSC 15 at [72]-[74] per Henry J).
Where there is an issue as to the extent to which general knowledge or information has become part of the employee's stock in trade or general expertise (or he now holds such information only in his head), then questions may arise as to the extent to which this can properly be the subject of restraint (see, for example, the distinctions suggested in Robb v Green [1895] 2 QB 1 and Mid-City Skin Cancer and Laser Centre Pty Ltd v Zahedi-Anarak (2006) 67 NSWLR 569; [2006] NSWSC 844 between, for example, client contact details, which may well be public knowledge, and the compilation of contact details in a client contact or prospects list). See also Halliday & Nicholas Insurance Brokers Pty Limited v Corsiatto (2001) 11 ANZ Ins Cas 61-505; [2001] NSWCA 188 at [16]-[17] per Handley JA (with whom Spigelman CJ and Heydon JA agreed).
In Tullett Prebon, Brereton J said at [55] that "[t]he mere circumstance that the parties have agreed to it cannot of itself provide the requisite justification, else every contractual restraint would be justified; the question must be whether the restraints are more extensive in scope, area or duration than necessary for the reasonable protection of the employer's legitimate interests". His Honour went on at [70] to say that: … Nor will equity lend its aid to achieving indirectly what it will not permit directly. In my view, there is no "legitimate interest" in preventing a particular employee from leaving employment that will support a restraint of trade. As Barrett J has observed (in Tradition Australia Pty Ltd v Gunson [2006] NSWSC 298; [2006] 152 IR 395, [30]), with reference to the judgment of Fry LJ in De Francesco v Barnum (1890) 45 Ch D 430 at 438, in this field courts "are bound to be jealous, lest they should turn contracts of service into contracts of slavery". (my emphasis) noting that beyond the period reasonably required for the protection of the employer's legitimate interests, a restraint "serves only to sterilise the employee … and prevent competition".
The validity of a restraint clause is to be tested at the time of entering into the contract and by reference to what the restraint entitled or required the parties to do rather than what they intend to do or have actually done (Woolworths Ltd v Olson at [40]).
At [91] in Tullett Prebon, Brereton J noted (in a passage cited with approval by Pembroke J in Seven Network v Warburton) that a court still has discretion to withhold injunctive relief even if a restraint, assessed at the date of the contract, is reasonable and valid. His Honour considered this may be necessary where "despite contemplation at the date of contract that the employee would have access to confidential information, that did not eventuate" or where, in the events which have happened (as distinct from those foreseeable at the date of contract), the restraint is wider than necessary for the reasonable protection of the covenantee's legitimate interests.
In Woolworths Ltd v Olson at [67], Mason P (with whom McColl and Bryson JJA agreed) noted that: A recognised method of such protection is the procurement of a restraint upon the employee given access to such information taking up employment with a competitor whom he might be willing to provide with such information. A reasonable employment restraint is easier to enforce than a breach of confidence or breach of copyright claim; it removes the temptation for the former employee to offer and for the new employer to solicit confidential information; and it provides certainty of definition as regards the area of confidential information to be protected. These interests have been judicially recognised.
A restraint preventing an ex-employee with confidential information working for a competitor for a reasonable period may be appropriate even where the employee is otherwise under an obligation not to disclose confidential information (see Cactus Imaging per Brereton J at [13]-[14]).
As to the balance of convenience, one must balance the hardship that would be suffered by the respective parties if the injunction were, or were not, to be granted (see, for example, ACP Magazines Pty Ltd v Southdown Publications Pty Ltd (2002) 56 IPR 503; [2002] NSWSC 715 at [49] per Einstein J). Some of the factors relevant to the assessment of the balance of convenience are: inadequacy of damages; the right to a livelihood; delay; impact on third parties; whether the employee was warned and went into the position with "eyes wide open"; whether any hardship that would be visited on the defendant has come about because he or she is the author of his or her own misfortune; the strength of the case; and any undertakings that have been given.
In cases where a negative covenant is being sought to be enforced, it has been said that damages will rarely be considered an adequate alternative remedy (see Cerilian Pty Ltd t/as Raine & Horne Gosford v Graham Fraser [2008] NSWSC 1016 at [10] per Brereton J; John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [45] per Brereton J; Otis Elevator Company Pty Ltd v Nolan [2007] NSWSC 593 at [17]-[30] per Brereton J; IceTV v Ross [2007] NSWSC 635 at [65] (IceTV v Ross) per Brereton J; and Huhtamaki Australia Ltd v Botha [2004] NSWSC 386 at [17] per Hamilton J). Damages are not likely to be an adequate alternative remedy where it is likely that there will be substantial difficulty in establishing causation between any loss of business and any actions of the employee; and a further difficulty in calculating the quantum of any damage arising from any loss of business.
As to any relevant discretionary factors, apart from delay (and there is no such complaint in the present case), these are recognised as including hardship and unclean hands. The proffering of an undertaking is also to be taken into account as relevant to the exercise of discretion. As to hardship, an issue was raised in the present case as to the effect of an injunction on the defendant's employment with Secure Agility (see below).

Evidence

Affidavit evidence was filed in the plaintiff's case by Mr Hazouri (who was not cross-examined on his three affidavits) and in the defendant's case by the defendant (Mr Riachi), who was cross-examined.
As to Mr Hazouri's affidavit evidence, he explained in some detail the type of confidential information to which someone in the defendant's position at HiTech could have access and the significance (and value) to the plaintiff's business of that information; as well as the level of client and candidate connection that an account manager could build up in the course of his or her employment with the company. I have no reason to doubt that evidence.
As to Mr Riachi's evidence in cross-examination, criticism was made by the plaintiff that Mr Riachi was evasive as to particular matters; and that in some respects his oral evidence was inconsistent with his affidavit evidence.
For example, the plaintiff submitted that Mr Riachi was evasive when taken to his evidence as to his contact with the clients and customers after the first three months of his employment (referring to his first affidavit at [8], [30] and [31]; cf his evidence at T 13); evasive about the password that he had emailed himself (in June 2020) to one of the systems maintained by HiTech; and evasive when he was questioned as to what he had deposed to in [37] of his first affidavit (namely that he did not record or make copies of any confidential information of the plaintiff) particularly in light of the signed letter of offer and accompanying documents that had been emailed by him to his personal Gmail address in July 2021.
The plaintiff submits that the defendant's evidence about the Notebook was not credible (pointing to the contents of the previous version of the Notebook and the defendant's evidence in cross-examination that he had since changed his practice and no longer included in it information such as rates, names and telephone numbers). In any event, it is submitted that the defendant had a contractual obligation to return those documents and that it was not inherently believable that the defendant would immediately (on termination of his employment) destroy information that may be valuable to his former employer without at least checking that it had all been entered into the HiBase System to the satisfaction of his employer.
The plaintiff thus submits that the evidence from the defendant creates significant concerns about his retention and use of (and, indeed, understanding of what is comprised by) confidential information; to which the plaintiff points as tending in favour of an interlocutory injunction.
I did not consider Mr Riachi to be an evasive witness. Rather, I considered that he was not always clear as to what he was being asked and he appeared to me at times to be unsure as to the purport of the questioning (which distracted him from simply focussing on answering the questions put to him). So, for example, when questioned as to the nature of his contacts with clients and candidates, the defendant said on a couple of occasions that propositions put to him (drawn from his affidavit evidence) were "not entirely" correct. I considered this to be an instance where the defendant was being careful to be sure that he was answering accurately. See, for example, the exchange at T 13: Q. Tell me if this is right: after you placed a candidate with a client you would have ongoing contact with both the candidate and the client; do you agree with that? A. Not entirely, no. Q. Tell me if you agree with this: you would have contact with the candidate every three to four weeks after you placed them, either by email or by telephone? A. Not entirely would that take place; it depends on the frequency that I'm available to reach out to the candidates. Q. So was it the case that you sometimes had contact with the candidate every three to four weeks? A. From time to time, yes. Q. Is it the case that you sometimes had contact with the client with whom you'd placed them every five to six weeks? A. Yes.
I saw this simply as a reluctance by the defendant to suggest that it was always the case that he had such regularity of contact with clients or candidates (and I note that his affidavit sworn 8 September 2021 at [31] that this evidence was expressed as something he would normally (not invariably) do and "on an infrequent basis").
As to the password that had been emailed in June 2020, again I did not form the impression that the defendant was being evasive. Rather, it seemed to me that he genuinely did not understand that there was a problem with emailing a link for use when he was working at home (as he said he had done). As to the perceived inconsistency with the evidence in his affidavit at [37] (to the effect that he did not record or make copies of any confidential information of the plaintiff) and his answers when confronted with the emailed letter of offer and details of a candidate who had accepted a client offer), again I do not accept that the defendant was being evasive. The defendant was clearly focussed on what he thought to be a suggestion that there was something improper in having emailed the driver's licence details to his personal Gmail (hence the answers that it had been information freely provided by the candidate) (T 22): Q. You knew at the time you emailed this information that rates of pay and the identity of good candidates was information that was confidential and sensitive to HiTech; that's right, isn't it? A. Rates of pay, no. Identity - they're two separate things. I'm not quite sure how they're ‑ how they're linked there ‑ how they would both be sensitive. It depends who I'm speaking to about ‑ I won't disclose their rate to another candidate. That would be more confidential. I mean, their licence was freely emailed across. It's not something that's‑‑
There was no hesitation by the defendant in accepting the proposition that information about candidates would be valuable to a competitor; and no dissent from the proposition that he had not been authorised to forward such information to himself (though he clearly saw this as part of carrying out his ordinary work functions).
I accept that there was some implausibility as to the evidence that the Notebook that the defendant says he had thrown away was not compiled in accordance with what was apparently his previous practice with notebooks of that kind (as to which practice this can be gleaned by the pages of his previous notebook that was in evidence); but as to whether it was implausible that he would throw the Notebook away after a conversation in which his employment had been summarily terminated, I am not so convinced. It is not clear that in the conversations on 12 and 13 August 2021 it was made explained to the defendant that the Notebook was a document that he was required to return to the company; nor that he appreciated that it was. There may be a number of innocent explanations for the defendant simply having thrown away the Notebook, including that Mr Riachi may not have appreciated (or turned his mind at the relevant time to this) that the Notebook was a company document that fell within the category of what had to be returned (assuming for present purposes that it was - though for the defendant it is submitted that this is not established) or that this was simply his reaction to the unfortunate manner in which the conversation had apparently concluded. Either way, there is nothing to cause me to form the view that the defendant (contrary to his evidence) in fact has retained the Notebook (whatever it may have contained).
On the whole, I considered Mr Riachi to be a genuine witness. He readily conceded propositions that might be said to be against his interest (such as his acceptance that some of the information forwarded to his Gmail account was confidential and that part of his current role involved external recruitment). I do not accept the criticisms as to Mr Riachi's credit to be well-founded; nor do I consider that the evidence establishes any intentional breach by Mr Riachi of his confidentiality obligations either during the course of his employment (as was suggested in relation to the small amount of material sent by him during the course of his employment to his personal Gmail address) or after termination of his employment (by throwing away and not returning the Notebook), assuming for present purposes that the Notebook fell within cl 7 of the employment contract.

Plaintiff's submissions on injunction

At the outset of the plaintiff's submissions emphasis is placed on the general policy of the law (to which I have referred above) that people should honour their contracts (pacta sunt servanda); the plaintiff's complaint being that the defendant had signed a lucrative employment contract with it which included restraints but has now taken up employment with Secure Agility, a company which the plaintiff regards as a competitor.
The plaintiff maintains that the restraint clause is valid; that it has a legitimate interest to protect; and that the restraint is no more than reasonable for that protection. The plaintiff emphasises in this context the recognition in the authorities as to the difficulties in proving breach of obligations of confidentiality where an employee can carry away information in his or her head and that the recognised practical solution is to take a covenant that the employee not work for a rival. It is noted that in cases where the employee has opportunities to make notes of confidential information, that has been sufficient to restrain breach of a restrictive covenant (citing Nus International Pty Ltd v Edwards (1981) 1A IPR 599 at 608 per Rath J). The plaintiff places emphasis in this context on the evidence that it says shows that the defendant had the means to duplicate the confidential information (such as the emailing to his personal Gmail address of database links and information as to at least one of the candidates who accepted an offer of employment through the plaintiff's recruitment).
The plaintiff says that its interlocutory application is focused on restraining contact with former clients and customers because the defendant has sensitive knowledge and valuable interpersonal relationships that could be deployed to take HiTech's business and revenue; and it is said that the only practical way to achieve that in the present case is to hold the defendant to his contract which prevents him from working for Secure Agility for 12 months.
As to the proposed limitation of the restraint to internal recruiting, the plaintiff submits that if (as the defendant's affidavit evidence suggests) his main role with Secure Agility is in the area of internal recruiting, then this should not prejudice the defendant (but would protect the plaintiff's client/candidate connections). As to the timing of the restraint, it was noted in submissions that most placements would be due for renewal at the end of June next year.

Serious question to be tried

The plaintiff notes that the application is put both in reliance on the contract and on the defendant's obligations in relation to confidential information. It is said that the confidential information and unique business practices to which the defendant had access present a real commercial risk for the plaintiff (that risk being the risk of it unfairly losing its clients and contractors to a carefully targeted campaign using insider knowledge). It is said that no aspect of public policy supports such conduct and that it is legitimate for the plaintiff to guard against this risk.
As to whether the information would be of considerable assistance to competitors, the plaintiff's evidence is that the information would be extremely useful to Secure Agility in winning business. Protection against use by rivals in trade of a confidential proprietary system has been held to be a reasonable restriction having regard to that party's legitimate interests, and the interests of the public.
The plaintiff points, in written submissions, to the contractual provisions that preclude the defendant from working in recruitment for a company whose products and services compete with HiTech (cl 5.1(b)) or be interested in such a business (cl 5.1(d)); and preclude the defendant from soliciting or approaching in a business context, any person who was a client or customer of HiTech between February 2019 and August 2021 (cl 5.1(g)). (I note that, by the time of the hearing of the interlocutory application, the undertakings proffered by the defendant would address all but the restraint in cl 5.1(b).)
The plaintiff says that the evidence demonstrates that Secure Agility is a competitor of HiTech and offers the same services and that the defendant was being offered a role that involved recruitment (the plaintiff says that although there is some doubt as to whether that was purely internal recruitment, the distinction is not relevant to the question of breach).
The plaintiff submits that the fact that the defendant was prepared to take a role that is in breach of his contract (in spite of being put on notice of the breach) should lead to circumspection in accepting an assertion that he is only going to be an "internal" recruiter (and, in any event, it is noted that in cross-examination Mr Riachi accepted that there would be some level of external recruitment involved in the role). The plaintiff says that the breach of one aspect of a restraint can justify sufficient concern about the breach of another aspect to warrant the grant of an injunction, at least in the absence of significant discretionary considerations against it (referring to the observations of Hodgson JA in Reeves v Koops Martin Financial Services Pty Ltd [2006] NSWCA 221 at [20]; IceTV v Ross). It is noted that the defendant's role with Secure Agility is on any view as a "recruiter"; that he would need to find contractors to fill internal roles; and that his role may change over time.
The plaintiff identifies the legitimate interest here sought to be protected as lying in the proprietary nature of the HiBase System (see below), and the personal relationships between HiBase and the employers and contractors. It is said that it is unclear how much of the HiBase information the defendant has been able to carry away in his head. (Pausing there, I would suspect, having regard to the defendant's evidence, the answer would be little.)
Relevantly, Mr Hazouri's evidence is that the plaintiff has built up a system (the HiBase System) over 28 years which he believes provides it with an advantage over its competitors (see Mr Hazouri's affidavit sworn 2 September 2021 at [9], [20]). Mr Hazouri says that the HiBase System contains: sensitive information such as candidates' contact information and comments from previous employers (see at [24(b), (f)]); information which is confidential to the plaintiff includes the identity of the key decision makers within client organisations (at [24(i)]); contract and client information in the TimePro System (at [40]); and information about the plaintiff's margins and price structure (see at [24(j)]; [70] and [73]).
The plaintiff says that the information contained in HiBase would be valuable to Secure Agility (and to the defendant if carrying out a similar role at Secure Agility) because the essence of the business is knowing what clients would pay for candidates holding certain skill sets (see [38], [70] and [76] of Mr Hazouri's affidavit sworn 2 September 2021).
The plaintiff's evidence is that the nature of the business is such that the defendant will be able (at Secure Agility) to leverage off relationships he has formed in the course of his employment with HiTech, which will give the defendant the ability to incentivise contractors to move away from employment for which they were placed by the plaintiff (see [42], [44], [81] of Mr Hazouri's affidavit sworn 2 September 2021). The plaintiff points to the job advertisement for the defendant's new position at Secure Agility as including responsibility for building and delivering campaigns to attract clients and candidates (noting that Secure Agility's stated mission is to use its "expanding database" and its relationship with contractors to recruit IT professionals).
The plaintiff says that the defendant's knowledge of the HiBase System, and the way in which the plaintiff goes about its business, enables the defendant (and Secure Agility), to compete in an unfair manner (such as by undercutting); and that it enables Secure Agility to build its own system based on the plaintiff's TimePro and HiBase Systems, and the plaintiff's special way of developing the service (this being said to be particularly relevant where one of the aspects of the defendant's new role is to assist in building templates, processes and procedures for Secure Agility).
The plaintiff submits that public policy considerations favour enforcing the restraints because the competition that the plaintiff seeks to prevent is unfair competition (the use of relationships, key individuals, price structures, and the timing of cessation of employment contracts to make a pitch to win that work). It is submitted that such behaviour would be likely to have a "knock-on" effect on the plaintiff's brand and lead to the loss of further business (and that this would have an adverse impact on the plaintiff's employees).
The plaintiff points to the following as the actual or apprehended breaches by the defendant of his employment contract: taking up employment as a recruiter with Secure Agility; contacting the 33 identified contractors (i.e., candidates) with whom it is said the defendant has a close working relationship; contacting clients of the plaintiff (whose businesses need recruitment services); and disclosing (albeit perhaps inadvertently) details of clients and contractors, their skills, and related pricing information. The plaintiff says that each of those matters would be a breach of the defendant's employment agreement, and would be damaging to the plaintiff's revenue and brand.
Pausing here, I note that the defendant says that, other than taking up employment with Secure Agility, there is no evidence of the defendant having engaged in any of the above matters (which I understood as being the apprehended rather than actual breaches); and maintains that the plaintiff has thus pointed to nothing more than a breach of an unreasonable (and therefore invalid) restraint (cl 5.1(b)).

Balance of convenience

Initially, the position of the plaintiff was that the prejudice to the defendant if he were to be restrained would be purely financial insofar as the defendant was then in effect being asked to "sit on the sidelines" for 12 months, as his employment contract contemplated. It was said that the defendant knew this when he took employment with the plaintiff "and would have been wise to have provisioned for it". However, in light of the narrowed form of restraint now sought, it would seem that the defendant is not even being asked to "sit on the sidelines" anymore; but merely not to engage (directly or indirectly) in external recruitment. Hence the financial prejudice to the defendant having regard to the limited nature of the relief now sought would presumably be said to be even less.
In contrast, the plaintiff identifies the prejudice to it (of the injunction not being granted) as including the risk to its annual revenue of around $8 million (see [84] of Mr Hazouri's affidavit sworn 2 September 2021), in circumstances where the plaintiff says it will be almost impossible to prove the loss from the defendant's breach. It is said that the plaintiff also faces losing its competitive advantage by aspects of the HiBase System, or its margins, being revealed to Secure Agility and that, by use of information to which the defendant had access, either the defendant or another Secure Agility employee would be able to contact contractors whose contracts were coming to an end (and that this could affect other HiTech employees whose commissions and bonuses are calculated on their client base). The spectre was also raised that the plaintiff might need to make employees redundant, in the middle of a pandemic.
The plaintiff says that it faces the loss of market share and existing or potential clients; and that, given its turnover of $42 million per year (of which about $8 million was attributed to the efforts of the defendant during the past two and a half years (see [7]; [84] of Mr Hazouri's affidavit sworn 2 September 2021)), the plaintiff's damages, even if capable of being proved, may be very substantial. It is noted that there is no suggestion that the defendant, who earned less than $200,000 per annum in the 2021 financial year would have the capacity to pay those damages.
Therefore, the plaintiff submits that the balance of convenience favours the grant of the injunction sought. As adverted to above, the plaintiff now seeks a substantially narrowed injunction (effectively limited to external recruitment as opposed to internal recruitment).
Although the defendant suggested that this amounted to an impermissible reconstruction as opposed to permissible "amputation" of the restraint clause - referring to ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 at 674 per Clarke, Handley and Sheller JJA, it seems to me that the revised form of relief here sought is more appropriately to be approached on the basis that while the plaintiff contends that a wider form of relief is available it is not pressing for relief to that extent. So viewed, in my opinion, it is not impermissible. I am not here being asked to re-write (or reconstruct) the restraint clause or to determine its validity on the assumption that it is so reconstructed. I am simply being asked only to enforce the restraint clause on an interlocutory basis to a limited extent. That would be consistent with only granting relief to the extent that it is necessary to protect the plaintiff's interests. In any event, nothing turns on this as I am not proposing to grant the injunction sought for the reasons I set out in due course.

Defendant's submissions

The defendant maintains that his new employer, Secure Agility, does not in any substantial sense compete with the plaintiff but in any event says that the non-compete restraint (cl 5.1(b)) is not enforceable. It is submitted that the potential risk posed by the defendant continuing in his current employment is so small (and is otherwise so well met by each and every other restraint by which he is bound) that the balance of convenience favours him being permitted to keep his job with Secure Agility.
The defendant contends that he was a junior employee at HiTech; that he has not accessed the HiBase System (or other databases) since the termination of his employment (when the relevant password/user access details were changed); and that there is no evidence (or allegation) that he has taken anything from the HiBase System. His evidence is that the information emailed to his personal Gmail address was for the purpose of working at home (and it is said that it contains no information that could be of any use to him in his new employment - the government "SEEK" recruitment details being publicly available; and the candidate letter of offer being one that was already accepted - and hence there being no recruitment opportunity in that regard).
It is noted that there is no allegation, or evidence, that the defendant: has actually solicited, or endeavoured to entice away from employment, any employee of the plaintiff; or solicited, canvassed, approached or accepted any approach from any person who during the defendant's employment with the plaintiff was a client, agent or customer of the plaintiff (and that undertakings have now been proffered which cover the entirety of the conduct in the restraint clause other than cl 5.1(b) - i.e., the mere fact of employment with another employer).

Serious question to be tried

As to whether there is a serious question to be tried, the defendant maintains that it is not seriously arguable that Secure Agility competes with the plaintiff.
In that regard, it is contended that there is a fundamental distinction between the businesses operated by the plaintiff and Secure Agility, respectively. The defendant says that the plaintiff operates solely as a recruitment agency, its business being as defined in the employment contract is to find contractors or employees for its clients, whereas it is said that Secure Agility primarily provides its clients with managed IT services (and, as a complementary business service, it also sources staff for its clients). The defendant submits that this distinction means that there is no actual competition between the plaintiff and Secure Agility.
Further, it is said that it is not seriously arguable that the non-compete clause in the circumstances of this case legitimately protects an interest of the plaintiff (noting that non-compete clauses traditionally seek to protect two objects: confidential information and trade secrets; and customer connection).
The defendant submits that: there is no evidence that he retained any confidential information upon his departure from his employment with the plaintiff (though query here the status of the so-called Notebook); there is no assertion made by the plaintiff that the defendant is in physical possession of any confidential information belonging to the plaintiff (again this does not address the issue as to whether the Notebook remains in existence or had any confidential information in it in the first place); and the defendant's capacity to use confidential information of the plaintiff is objectively limited (pointing to the fallibility of human memory and lack of evidence of any use of artificial means to enhance the defendant's memory of the plaintiff's confidential information). The defendant complains that the plaintiff does not identify with any specificity any precise confidential information that would be of relevance or importance to the defendant (pointing out that the plaintiff's clients are predominantly Government clients, which are bound by procurement guidelines and tender obligations in any event).
The defendant maintains that he has no use for the plaintiff's confidential information in his new role; that he will not be able to replicate or create the HiBase System for his new employer; and that he has already undertaken to the Court to comply with his obligations of confidence to the plaintiff.
As to the protection of customer connections, the defendant notes that cl 5.1(b) is only one of several restraint clauses that were contained in the employment contract between the plaintiff and the defendant; those additional restraint clauses (being cll 5.1(a) and (c)-(i)), operating to prohibit the defendant (during the restraint period) from a variety of conduct. It is said that it is therefore not possible to identify exactly what interest the plaintiff now seeks to protect (given that the plaintiff is not entitled to be protected against mere competition and even assuming that the defendant's new role presents any form of competition).
The defendant emphasises the recognition that an employer has no legitimate interest in preventing a former employee from taking employment with another employer, including a competitor (citing Tullett Prebon at [47]); and that a non-compete restraint would not be enforceable if it were to seek to prevent a former employee dealing with customers with whom the employee had no personal contact, on the ground that there has been no capacity for personal influence (citing AT Kearney v Crepaldi at [55]-[58]; Verint at [42]; SAI Global Property Division Pty Ltd (ACN 089 586572) v Jones [2018] NSWSC 438 at [111] per Slattery J).
The defendant says, referring to McDougall J's reasons in Stacks v Marshall at [63]-[65]), that in circumstances where there is both a non-solicitation restraint and a confidentiality restraint, the following matters are of particular relevance. First, that the reasonableness of the covenant not to compete must be assessed by reference to the adequacy of the protection, for the legitimate interests of the covenantee, offered by the non-solicitation covenant; and that it will only be if the non-solicitation covenant does not provide adequate protection for the legitimate interests of the covenantee that the covenant not to compete may be upheld. Second, that the assessment of the adequacy of the protection requires close scrutiny of the particular facts of the case. Third, that if it is found that the non-solicitation clause does offer sufficient protection, then it is likely that the covenant not to compete would be struck down because it would be a covenant against "all competition per se", and, in the particular circumstances, incapable of justification by reference to the legitimate interests of the covenantee.
The defendant accepts that the plaintiff is entitled to be protected against unfair competition based on the use by a terminated employee of the customer connection which that employee has built up during the employment, but says that there is no actual or apprehended risk to the plaintiff of any such unfair competition in this case. It is said that this is particularly so in circumstances where: the other restraint clauses which bind the defendant (which are not alleged to have been breached), including the non-solicitation clauses, protect the plaintiff from any risks of its relationships with its clients and contractors being adversely affected by the defendant's new employment; the defendant has undertaken to the Court that for the duration of the restraint period, he will not have any dealings with any of the plaintiff's clients, and anyone who he knows to be a candidate placed by HiTech; the defendant was a junior employee of the plaintiff and was not involved in managing the client relationships. It is said that the defendant's role while he was employed by the plaintiff was not to procure the business of new clients and that the defendant was not ever the "human face" of the plaintiff with respect to its clients (using the language of Brereton J in Koops Martin at first instance at [34]); that the customer base of the plaintiff is largely government based and governed by strict procurement legislation and rules (referring by way of example to the Public Governance Performance and Accountability Act 2013 (Cth), the Public Governance, Performance and Accountability Rule 2014 (Cth) and the Commonwealth Procurement Rules (which commenced in December 2020)); and that the defendant is not involved, and will not be involved over the restraint period, in seeking to procure new clients for his new employer.

Balance of convenience

The defendant says that, even to the extent that there is a serious question to be tried as to whether the defendant is in breach of the non-compete clause and that the non-compete clause is valid, the question of discretion arises and that the prejudice to him if the injunction is granted is real and significant. It is said that this will materially disrupt his life at a critical juncture (in which he is seeking to get married and move out of home); and that there is a significant risk that he will be unemployed if the restraint is granted. Reference is made in this context to the current economic climate and the ongoing impacts of the COVID-19 pandemic.
The defendant says that the prejudice to the plaintiff is non-existent. Having regard to the non-solicitation clauses in the employment contract, and the undertakings given by the defendant, it is said that the only effect of the non-compete clause is to prevent the defendant from working for Secure Agility, even where that work could not disturb or impact the plaintiff's business in any way.
The defendant insists that there is no evidence to suggest that the defendant would be capable of causing any harm to the plaintiff, even if it were ultimately held that the defendant was in breach of the non-compete clause (and that the assertions made by the plaintiff in this respect are fanciful), pointing to the defendant's junior status as an employee with no real client relationships and no technical expertise. It is submitted that the notion that the plaintiff could lose any revenue as a result of the defendant's new employment is absurd but that, in any event, the non-solicitation restraints and the proffered undertakings adequately address this.

Determination

I accept that the determination of this interlocutory application has the potential to determine, from a practical point of view, the outcome of the dispute (since, on the minimum restraint period under cl 5, the restraint would come to an end at the earliest on 13 November 2021). Therefore, I have approached the matter on the basis of the approach outlined in Kolback and have evaluated more closely and given more careful consideration to the merits of the plaintiff's substantive claim than would otherwise have been appropriate on an application for interlocutory relief.
I am of the view that there is a serious question to be tried as to the validity (and breach) of the non-compete covenant in cl 5.1(b) of the employment agreement.
I have considered above the authorities that make clear that a negative covenant restraining an employee from competing against an employer will in appropriate cases be enforced, albeit that this will only be to the extent that it is necessary for the reasonable protection of the business interests of the employer. I have also noted that the reasonableness (and hence validity) of the restraint will be tested as at the date of entry into the contract. I have noted the competing interests as between the public interest in competition and the public interest in holding parties to their contracts; and to the recognition in the authorities that a non-compete covenant may be appropriate to protect the legitimate business interest of an employer in its confidential information, business secrets and goodwill.
As to the submission that Secure Agility is a company that does not compete with the plaintiff, I cannot conclude that the difference between the products and services offered by Secure Agility from those offered by the plaintiff is so fundamental as to make it not seriously arguable (though of course this will need to be determined finally at trial) that commencement of employment with Secure Agility is a breach of cl 5.1(b); indeed, the defendant's candid evidence (which I accept) is that his role involves more than internal recruitment (albeit that external recruitment may be only a minor part of his role). Moreover, there would presumably be a level of competition as between the respective organisations as to the recruitment of candidates whether that be for internal or external purposes (as evident from some of Mr Hazouri's affidavit evidence).
I accept the defendant's submission that the Secure Agility job advertisement does not necessarily imply that the defendant's role in the company will be to "attract clients and candidates" as opposed to building and delivering marketing campaigns to do so. However, it is clear from Secure Agility's own documents that Secure Agility holds itself out as a "provider of Professional Services, Managed Services, Cloud, Talent Management and Procurement to both Public and Enterprise Customers across Australia". There is thus a reasonably arguable case that Secure Agility is a business whose products and services compete with the plaintiff's business from time to time. If so, the defendant's commencement of employment with Secure Agility within the restraint period is on its face a breach of the non-compete covenant.
As to whether there is a serious question that the restraint is reasonable (and, if so, for what period) and hence valid (either in its terms or if read down), I consider, by reference to the authorities which recognise the difficulties in enforcement and establishing loss or damages for breach of a contractual obligation of confidence, that a restraint in terms of cl 5.1(b) cannot be said on its face to be so obviously unreasonable as to warrant a conclusion that there is no prospect that the clause will be found to be a valid restraint. I accept that the access able to be gained by the defendant during the course of his employment to the HiTech System and Time Pro System databases, and the information as to client and candidate lists provides a recognised basis for the legitimate protection of the plaintiff's interests in maintaining its confidential information and protecting its customer and business connections.
That said, the merits of the plaintiff's claim in that regard must surely be weaker the longer the period of such a broad restraint. I have considerable doubt that a 12 month period would be seen to be reasonable in that regard (noting that the renewal date for various of the candidate contracts was June 2022 whereas the restraint at its broadest would not expire until August 2022).
Moreover, and with no disrespect to the defendant, he is a relatively junior employee (with only around two and a half years' experience as an IT recruiter) and there is no evidence to suggest that he retains access to the plaintiff's proprietary databases; nor is it feasible that he would have in his head confidential details of numerous client or candidate contacts. By reference to the previous notebook that was in evidence it appears that the notes consisted of cryptic references to names, mobile telephone numbers and wage details. It does not seem to me plausible that the defendant would have memorised (even if he would have been able to do so) a series of details of that kind for the number of contacts with whom the plaintiff's evidence is that he had a professional relationship. This is not a case, for example, of the kind that is depressingly common in the duty list, where there is evidence of a wholesale downloading of confidential information just prior to an employee's departure from a particular place of employment. The defendant gave an explanation for the material sent to his personal email account (some more than a year in advance of his resignation) and, even if that were not to be accepted at trial, the evidence suggests that this was a relatively isolated instance (and not obviously linked to his subsequent employment).
Nevertheless, on the issue as to whether there is a serious question to be tried that the defendant is in breach of cl 5.1(b) and that it is valid at least for the shortest restraint period there specified, I have concluded that the plaintiff has satisfied this requirement.
As to the balance of convenience, I have noted above the factors that are generally taken into consideration on this issue (including: inadequacy of damages; the right to a livelihood; delay; impact on third parties; whether the employee was warned and went into the position with "eyes wide open"; whether any hardship that would be visited on the defendant has come about because he or she is the author of his or her own misfortune; the strength of the case; and any undertakings that have been given).
As to inadequacy of damages, I accept that in the case of negative covenants of this kind it will usually be considered that damages are an inadequate remedy having regard to difficulties of proof of loss and damage; and I remain of that view in the present case. As to delay, there has been no relevant delay. As to impact on third parties, I accept that there may be an impact on Secure Agility if any injunction is granted but no submissions have been addressed as to that; as to the impact of refusal to grant an injunction on other employees of HiTech, that was put at a broad level and I am unable usefully to assess that.
As to the circumstances in which the defendant took up the position with Secure Agility, it seems clear that at least as at 12 August 2021, when he indicated his intention to resign, he was put on notice of the plaintiff's stance in relation to this being a breach of his employment contract and he went ahead nonetheless (so it might be said that he went into this new employment with his eyes "wide open").
As to hardship to the defendant, there was a letter from Secure Agility (admitted subject to weight) addressed to the duty judge before whom this interlocutory application had first been listed, explaining in effect that, if the defendant were to be restrained from working for it for one to 12 months, then it would regretfully have to terminate his employment. The submission for the defendant was that there was a significant risk that his employment would be terminated (and he pointed to the current pandemic expressing concern as to lack of other employment opportunities were that to occur). I place little weight on this evidence, not least because it is not clear what stance Secure Agility would take in relation to a limitation restricted to external recruitment (as opposed to internal recruitment); and it seems to me that the shorter the period of restraint the less likely that an employer would take such a drastic step. Nevertheless, I accept that it is a risk and I do note, that, unlike in other cases where an applicant for injunctive relief of this kind proffers an undertaking to meet the wages foregone by the former employee during the period of any restraint, this has not been the case here.
In any event, the most critical factor, to my mind, when considering the question of balance of convenience and the ultimate issue as to the exercise of discretion, is that the defendant has proffered extensive undertakings (as set out above) not only to the plaintiff inter partes but also to the Court. The consequences of breach of such undertakings would be serious and I have no doubt that this will have been explained to the defendant. The effect of those undertakings is that the plaintiff is protected against everything the subject of the restraint clause except the mere fact of the defendant's employment with Secure Agility (accepting, for the purpose of the present balancing exercise, that Secure Agility is indeed found to be a competitor of the plaintiff).
That brings to mind what was said by Brereton J in Tullett Prebon at [70] to the effect that there is no legitimate interest in preventing a particular employee from leaving employment that will support a restraint of trade and that, beyond the period reasonably required for the protection of the employer's legitimate interests, a restraint "serves only to sterilise the employee … and prevent competition".
To some extent the narrowed scope of the injunctive relief might be thought to address that concern; in that the plaintiff no longer seeks to restrain the defendant from working from Secure Agility; merely from working in the area of external recruitment. However, the defendant submits that this does not remove the problem and pointed to ambiguity as to what would be comprised by the second part of the injunction sought (i.e., whether it would encompass recruitment for secondments or the like). Issues of that kind could have been dealt with (I would have thought) by amendments to the drafting of the injunction had I been prepared to grant it.
I have ultimately concluded that the prejudice suffered by the plaintiff if it later be found that an interlocutory injunction should have been granted must be substantially outweighed by the prejudice that the defendant will suffer if it later be found that an injunction had wrongly been granted at this stage. I accept that the plaintiff has proffered the usual undertaking as to damages. Nevertheless I am concerned that what is being sought is an interlocutory injunction at least partially to sterilise the defendant's ability to work for a potential competitor, in circumstances where: it does not appear that the defendant has any confidential information of the plaintiff now in his possession; the defendant has given extensive undertakings to protect the plaintiff's legitimate interest in its confidential information and business and client connections; and the asserted competitor (Secure Agility ) has similarly indicated its disavowal of any intention to cause the defendant to breach his confidentiality obligations.
In those circumstances, I do not consider that an interlocutory injunction should be granted; even one narrowed in scope as has (quite reasonably) been put forward by the plaintiff. For completeness, I note that, but for the fact that the undertakings have been proffered (or had I formed a different view as to the scope and adequacy of the undertakings), I would have granted an interlocutory injunction (in its narrowed scope) for 3 months, being the shortest period of the contractual restraint; as I consider that the strength of an argument as to the reasonableness of the restraint beyond that time is weak.
I consider that the appropriate order in relation to costs of the interlocutory application is that they be costs in the cause. I will also make directions for the ongoing conduct of the substantive proceeding.

Orders

For the above reasons I make the following orders. 1. Note the undertaking given to the Court and to the plaintiff by the defendant, through his Counsel, in the following terms: (a) I will not prior to 13 August 2022, without the written consent of HiTech, in the course of any employment or business: (i) knowingly have contact with any clients of HiTech; (ii) draft or assist in the drafting of any tender documents that are intended to acquire new clients in respect of the provision of I.T or recruitment related services; and/or (iii) directly or indirectly contact, solicit, induce, canvas any people I know to be contractors of HiTech. (b) I will abide by my obligations in clauses 5.1(a), 5.1(c), 5.1(d), 5.1(e), 5.1(f), 5.1(g), 5.1(h) and 5.1(i) of the Contract of Employment with HiTech for the period referred to in clause 5.3. (c) I will abide by my confidentiality obligations to HiTech, including clause 6 of the Contract of Employment with HiTech. (d) I will not prior to 13 August 2022: (i) Contact any stakeholder or tender for any work from any HiTech client listed in Annexure A of the letter sent from David Shad to Ricky Raad on 3 September 2021; and/or (ii) Knowingly assist, solicit, induce, consult any other person directly or indirectly to recruit candidates or contractors currently placed at HiTech or to contact any stakeholder or tender for any work from any Hitech client listed in Annexure A of the letter sent from David Shad to Ricky Raad on 3 September 2021. 1. Dismiss the plaintiff's application for interlocutory relief. 2. Order that the costs of the plaintiff's application for interlocutory relief be costs in the cause. 3. Direct that the matter proceed by way of pleadings. 4. List the matter for directions before the Application List judge at 8.30am on Tuesday, 28 September 2021.

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. Decision last updated: 24 September 2021

Public Governance Performance and Accountability Act 2013(Cth)

Restraint of Trade Act 1976(NSW)

(Cth), the Public Governance, Performance and Accountability Rule 2014(Cth)

v Sea Containers Ltd (1995) 39 NSWLR 640 IceTV v Ross [2007] NSWSC 635 Isaac v Dargan Financial Pty Ltd atf The Dargan Financial Discretionary Trust (2018) 98 NSWLR 343; [2018] NSWCA 163 John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 Lindner v Murdock's Garage (1950) 83 CLR 628; [1950] HCA 48 Mid-City Skin Cancer and Laser Centre Pty Ltd v Zahedi-Anarak (2006) 67 NSWLR 569; [2006] NSWSC 844 North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 Nus International Pty Ltd v Edwards (1981) 1A IPR 599 Otis Elevator Company Pty Ltd v Nolan [2007] NSWSC 593 Reeves v Koops Martin Financial Services Pty Ltd [2006] NSWCA 221 Robb v Green [1895] 2 QB 1 Romeg Holdings Pty Ltd v Kelly [2010] WASC 404 SAI Global Property Division Pty Ltd (ACN 089 586572) v Jones [2018] NSWSC 438 Seven Network (Operations) Ltd v Warburton (No 2) (2011) 206 IR 450; [2011] NSWSC 386 Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852 Verint Systems (Australia ) Pty Ltd v Sutherland [2019] NSWSC 882 Woolworths Ltd v Banks [2007] NSWSC 45 Woolworths Ltd v Olson [2004] NSWCA 372 Category: Principal judgment Parties: HiTech Group Australia Pty Ltd (Plaintiff) Anthony Riachi (Defendant) Representation: Counsel: Mr CD Wood SC (Plaintiff) Mr C O'Neill with Mr A Rizk (Defendant)

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