IF Asia Pacific Pty Ltd v Galbally [2003] VSC 192

[2003] VSC 192

Supreme Court of Victoria|2003-06-10|Before: DODDS-STREETON J.

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At a glance

Source facts

Court

Supreme Court of Victoria

Decision date

2003-06-10

Before

DODDS-STREETON J.

Source

Original judgment source is linked above.

Judgment (372 paragraphs)

[1]

[2003] VSC 192

[2]

CONTRACTS - Construction - Term as to confidential information - Contractual restraint upon using confidential information, trade secrets or documents without express authorisation - Covenants restraining former employees from employment by or solicitation of, employers' clients - Whether restraint of trade covenants uncertain or too wide - Non-solicitation clause extends to employer's former clients, clients with whom first defendant had no contact and clients of employer's related companies - Severance unjustified - Covenant cannot be "read down" and limited to a business "same as or similar to" that of employer - Business of fourth defendant not "same as or similar to" that of employer - Non-Solicitation clause void as an unreasonable restraint of trade. INTELLECTUAL PROPERTY - Confidential information - Whether employer's data bases constituted confidential information - Client lists - Duty of confidence - Whether breached by former employee - Information obtained during course of employment - Whether part of employee's own skill and knowledge - Whether former employee appropriate employer's floppy discs containing client information and used them to approach clients - No breach of covenants prohibiting unauthorised use of plaintiff's trade secrets and confidential information - Information regarding client contact details was part of former employee's general knowledge, skill and experience - Failure to establish that floppy discs containing client information removed from employment premises.

[143]

Lindley LJ's rejection of the view that restraints are prima facie bad, casting the onus on the covenantee, has been overtaken by the subsequent judicial development of relevant principles. The rejected proposition now constitutes orthodoxy. The defendants submit that the approach in Mills v Dunham should not be followed, as the decision is based on outdated principles. While Mills v Dunham no longer represents an accurate statement of relevant principles, the application of the approach endorsed by Dixon CJ in Butt v Long does not exclude the possibility that in some contexts, general words might properly be held to have a narrower meaning. Dixon CJ's approach requires the agreement to be interpreted for its real meaning. The result in Mills v Dunham is not necessarily inconsistent with that approach. In Mills v Dunham, the nature of the plaintiff's business of manufacturing antiseptic substances was expressly set out in another clause of the agreement. There was apparently no factual dispute concerning the nature of the plaintiff's business or difficulty in defining it at trial. Similarly, in Business Seating (Renovations) Ltd v Broad,[37] Millet J declined to hold a restraint covenant void despite the absence of a definition of the plaintiff's business in the covenant, because the preceding clause in the contract described the plaintiff's business, and the description was borne out by the evidence at trial.[38] Further, in G.W. Plowman & Sons Ltd v Ash,[39] on which the plaintiff also relies, the Court of Appeal confined the application of a clause restraining a past employee from soliciting "any farmer or market gardener" who had been a customer of the employer, (but which failed to specify the type of goods), to the type of goods dealt with by the employer. Harman LJ stated that "you must regard the contract (as you always must) as a whole, and this is a contract for a sales representative ... serving a firm which, as appears from the very clause in question, clause 8, is a corn and agricultural merchant and animal feeding stuffs manufacturer."[40]

[156]

"MR SCHLICHT: Is there an office of I.F. Central in London?---No. Can you go to your witness statement and explain to the court why you say in paragraph 6, `I.F. Central Pty Ltd has offices in London and Boston'?---They're owned by I.F. Central, I.F. Central holds the shares in the business but they don't trade as I.F. Central. Who owns those offices?---What, the buildings? How does I.F. Central have an interest in the offices in London and Boston?---Through a shareholding. Of what company?---I.F. Central Pty Ltd owns 98.85 per cent of IF Consulting Limited and 90 per cent of I.F. Consulting Incorporated. And it's those companies that have offices in Boston and London, is that correct?---Yes. I put it to you that you only ever had in Brazil an association with another company?---No. It was with a Mr Groopo Cierto?---No, that is not his name. What's his name then?---Marcello Cierto. That was cancelled after one year, that association?---Please define association. What was the arrangement you had with Mr Cierto?---IF Consulting Limitada was 50 per cent owned by I.F. Central and 50 per cent owned by Cierto Networking Limitada. What is the company's name again?---Which company. The company you had the 50 per cent shareholding in in Brazil?---I.F. Consulting Limitada. Is that still operating in Brazil?---I don't know. You're a 50 per cent shareholder Mr Bellin, how do you not know?---Because I sold my shares to Mr Cierto and I don't know what he did with the company. So I.F. Central now no longer has any interest in Brazil, correct?----How do you define interest? Interest by reason of shareholding?---In Brazil? In the country or - - - Yes, in Brazil Mr Bellin, don't avoid the questions?---It would be easier if I could understand the questions, would you mind asking me again please. I.F. Central or any of the I.F. companies no longer has any interest in the Brazilian company?---Do you mean financial interests. Yes a financial interest?---No it does not. HER HONOUR: Can I just ascertain that I've got the witness's evidence correct. Is that that I.F. Central has interests in offices in the United Kingdom and Boston through its subsidiaries which are I.F. Central Pty Ltd and I.F. Consulting incorporated respectively?---Your Honour perhaps, the company in Boston - we use two terminology. We call the company in Boston I.F.A., I.F. Americas. The official registered name is I.F. Consulting Incorporated and I.F. Central owns 90 per cent of the shares in I.F. Consulting Incorporated and the English entity is I.F. Consulting Limited, again which I.F. Central owns 98.85 and we refer to that as I.F. EMEA, just Europe, Middle East, Africa. HER HONOUR: Thank you. MR SCHLICHT: How many people work in the UK, at I.F. Central Pty Ltd?---I.F. Central Pty Ltd is not in the UK. What company is in the UK then Mr Bellin?---I.F. Consulting Ltd. How many work for I.F. Consulting Ltd in the UK?---Two. In Boston?---One. Do you have any other offices with other persons?---No. In the I.F. group?---No. So I'm putting it to you that there's no offices indeed in the Middle East or Africa?---No. And apart from the office in the UK, nothing in Europe either?---No. And nothing to do with anything in Italy?---No. Sorry, what do yo mean by nothing to do? You don't have an office in Italy do you?---No. You don't have any association with any company in Italy at this moment?---That is incorrect. What do you mean by association? You said it was incorrect, you tell me why it's incorrect?---We talk to Italian companies from time to time. So apart from talking to Italian companies from time to time, no doubt to try and get work, is that right?---We have some friends there as well. And social matters?---M'mm. You don't have any other involvement in Italy?---No."

[162]

"MR SCHLICHT: Are you able to give an explanation as to why the plaintiff hasn't provided a final version rather than giving a draft version?---No idea. Yes, this thing was printed after these documents were discovered. The brochure was probably printed, I don't know, March or April of this year. I don't really know, but this is certainly not anywhere near the document we currently have. Can you provide to us about this document Mr Bellin - is that a document that - - - ?---Yes, that document is ten years old. Ten years old is it?---Yes. Are you able to explain why the plaintiff discovered this document then?---I don't know. I'll provide you another document you discovered Mr Bellin and maybe you can explain whether you use this document at all or explains your company's business?---Yes, we use this. However, it - whatever document you have, particularly this one, is right at the time of publication, but it's not printed because it's changed for the specific people with whom we're speaking at any time. That accurately reflects what your company does doesn't it?---I haven't read this particular document, but the prospective document is intended to and depending upon when this was printed it would reflect what we did at the particular time it was printed. Yes?---But this is a run off. We don't have a stock. We run these off for every meeting and we change them - we use it all over the world, so obviously we're trying to appeal to different people, different industries. It wouldn't contain anything there though that wasn't reflective of your business, would it?---Probably not. No it looks generally like what we do, yes. Can I just have that document back for a second please Mr Bellin. What you describe yourself there, as international marketing channel strategy consultants, isn't that correct?---Correct. What you say is "We help organisations that work through the channel partner relationships?---Yes. And that is from - that's through the resellers network?---Are you asking me to speak from memory? Yes?---I'd like to see it. Well it says, "Background the REF reseller spectrum"?---Yes. What you're saying here is, you list independent resellers, dealers, agents, stockists, distributors, joint ventures?---Yes. And what you do is you look at the relationship between these resellers and the manufacturer/supplier?---Well that's part of what we do. That's what this document says doesn't it?---I don't know. If you'll show me the document, I'll be happy to comment. Is that correct?---Is what correct? I asked you - you wanted to look at the document before you answered my question?---What was the question again? I'm looking at Your Honour for some help. HER HONOUR: I think that you were asking Mr Bellin whether it was an accurate summation of - - - MR SCHLICHT: Of what you did - than you Your Honour?---Right, we help organisations that work through the channel plan relationship displayed above, and those that work through - is that what we do, is that question? Yes?---That's part of what we do yes. Maybe I'll give you a look at this document Mr Bellin. This is a document that's headed, `Outline of Services' and it's dated September 2001. I'm putting it to you that in this document you say, "We help organisations restructure marketing channels or create new channels. We focus on increasing our clients' return on their investment and distribution by reducing distribution costs and enhancing marketing channel performance". That I'm putting to you, is an accurate summation of what IFAP did in September 2001. Correct or not?---I want to see the document before I say anything. I have asked you a question. Tell me whether you can answer it yes or no?---I can't answer it unless I see the document. I have asked you whether this statement of what IFAP does - if you don't remember, you are the chairman of this company, aren't you, Mr Bellin?---I am the chairman and sole shareholder - - - So in other words you are the person who would know what IFAP does if anyone did, correct?---Yes. And I am asking you whether this is what IFAP does?---Well, I'd like to see it because - - - I am asking you, Mr - you listen to the question, Mr Bellin?---Well, then I'll write it down so I can be precise. Mr Bellin, it is a very short question, you don't need to write it down?---I have a very short attention span so if you read it, I will write it down. Mr Bellin, you help organisations restructure marketing channels or create new channels?---Yes, we do. That's part of what we do. "We focus on increasing our clients' return on their investments in distribution by reducing distribution costs and enhancing marketing channel performance?---That's part of what we do. And you promote yourself or you promote - IFAP is promoted as being a niche company specialising in channel marketing?---No - you've got the words wrong, it's marketing channel strategy. All right then. And that is what you promote yourself as being?---No, that's what we are. Do you do any work for retailers, Mr Bellin?---Rarely but at present we are working with a retailer in another office - in an office other than IFAP."