Infinity Gym Sports & Health Pty Limited v Ageev [2019] NSWSC 1505 | Case summary

Introduction

By a summons filed on 29 October 2019, the plaintiff, Infinity Gym Sports & Health Pty Limited (Infinity), seeks relevantly an interlocutory injunction restraining the defendant, Mr Andrey Ageev, from working for REC Industries Pty Ltd trading as Icon Gymsports (Icon) in breach of post-contractual restraints contained in a contract of employment between Infinity and Mr Ageev.
On 29 October 2019, I gave leave to Infinity to serve the summons on short notice and make it returnable at 11.00am on 31 October 2019. There was no appearance by the defendant at that time, although Ms DeLosa, a solicitor acting for Icon, did appear. She submitted that if the Court did grant an injunction ex parte it should give Mr Ageev time in which to apply to have the injunction set aside.
For the reasons which follow, I have concluded that I should grant an ex parte injunction, although in narrower terms than those sought by Infinity.

Consideration

Two questions arise. The first is whether Infinity has a prima facie case that it is entitled to an injunction on a final basis in the terms that it seeks. The second is whether the balance of convenience favours granting an interlocutory injunction.
In my opinion, Infinity has a strong prima facie case for some form of injunctive relief.
The Court will generally grant an injunction to give effect to a post contractual restraint on an employee, including a post-contractual restraint on employment with a competitor, if and to the extent that the restraint is reasonably necessary to prevent disclosure of confidential information obtained by the employee in the course of their former employment, or where it is reasonably necessary to prevent the exploitation of connections built up by that employee with the customers of the previous employer: Kearney v Crepaldi & Ors [2006] NSWSC 23 at [53] per McDougall J. The restraint will not normally infringe the public policy against unreasonable restraints of trade if it does no more than that. And the principle that a court will not grant specific performance of a contract for personal services is not infringed if all that is sought is an injunction to enforce an express negative stipulation in the employment contract which places specific limits on the types of activity that the former employee may undertake: Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 346-348; Seven Network (Operations) Limited v James Warburton (No 2) [2011] NSWSC 386 at [4].
There may be question whether the restraint in the current case goes beyond what is reasonably necessary to achieve the permitted purposes. However, if it does, s 4 of the Restraints of Trade Act 1976 (NSW) states that the restraint is still valid to the extent that it is not against public policy. That section relevantly provides: 4 Extent to which restraint of trade valid (1) 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. (2) Subsection (1) does not affect the invalidity of a restraint of trade by reason of any matter other than public policy. (3) Where, on application by a person subject to the restraint, it appears to the Supreme Court that a restraint of trade is, as regards its application to the applicant, against public policy to any extent by reason of, or partly by reason of, a manifest failure by a person who created or joined in creating the restraint to attempt to make the restraint a reasonable restraint, the Court, having regard to the circumstances in which the restraint was created, may, on such terms as the Court thinks fit, order that the restraint be, as regards its application to the applicant, altogether invalid or valid to such extent only (not exceeding the extent to which the restraint is not against public policy) as the Court thinks fit and any such order shall, notwithstanding sub-section (1), have effect on and from such date (not being a date earlier than the date on which the order was made) as is specified in the order. …
There appears to be a strong argument that the restraint in the present case, insofar as it prevents Mr Ageev from working for Icon for a period of time, would not be against public policy and would provide Infinity with no more than reasonable protection to prevent Mr Ageev from exploiting the connections he established at, and confidential information he obtained from, Infinity. Icon's premises are in close proximity to those of Infinity. It is clearly a competitor. The evidence is that Mr Ageev built up a following at Infinity. It is not against public policy that Infinity should have a reasonable time to convince athletes who might otherwise follow Mr Ageev that they will still be able to obtain similar services from Infinity. One factor that is relevant in considering the length of a restraint that would be reasonable is the time that it would take Infinity to find a suitable replacement for Mr Ageev. Having regard to the limited number of available alternatives, there is at least a prima facie case that a restraint for a period of 12 months is reasonable.
In my opinion, the balance of convenience favours granting an injunction in this case.
Obviously, the injunction will cause Mr Ageev considerable hardship because he will not be able to work for Icon while the injunction remains on foot. But that is a risk that Mr Ageev took when he accepted a position with Icon.
On the other hand, if an injunction is not granted, Infinity's business is likely to be damaged substantially because of the risk that it will lose a number of high performance gymnasts who choose to follow Mr Ageev. Damages are not an adequate remedy. It would be difficult for Infinity to prove that it lost individual athletes as a consequence of Mr Ageev's move to Icon and to quantify the loss it suffers as a consequence of the loss of those athletes. The loss of high performance athletes may damage Icon's reputation, which in turn will have additional effects on its business.
Mr Ageev has said in correspondence that he has no intention of poaching any gymnasts from Infinity. However, that point is no answer to Infinity's claim. It can be assumed that the gymnastics community is relatively small and that it is likely to become well-known, if it is not already, that Mr Ageev is now working for Icon. That fact alone is likely to attract at least some athletes away from Infinity.
There is a question whether Infinity has been guilty of delay in bringing this application. Although there has been some delay on Infinity's part, I do not accept that it is sufficiently serious to justify withholding relief. From the time that Mr Ageev handed in his resignation, Ms Howitt made it clear that Infinity would insist on its contractual rights. Originally, Mr Ageev told Ms Howitt that he intended to take a break from coaching gymnastics for a period. On 13 September 2019, Ms Howitt was told by Icon's solicitor that Mr Ageev was not working for Icon. With the benefit of hindsight, that email at best seems disingenuous. However, in the context in which it was written, Ms Howitt might reasonably have concluded that Mr Ageev and Icon had had second thoughts and decided not to pursue the original plan for Mr Ageev to start coaching at Icon shortly after his departure from Infinity. Infinity acted reasonably promptly once Ms Howitt discovered on or about 15 October 2019 that Mr Ageev had commenced coaching at Icon.
Also relevant to the balance of convenience is the strength of Infinity's case. On the material currently before the Court, it appears that Infinity has a strong case that it is entitled to a final injunction. That fact favours the granting of an interlocutory injunction. The interim relief sought by Infinity in its summons reflects the contractual term of the restraint. There is a question whether the Court would in any circumstances give an injunction in such broad and somewhat vague terms. In any event, in the present circumstances, in my opinion it would be sufficient to protect Infinity's position if an injunction were given in the terms sought in paragraph 1(i) and (iv) of the Summons.
Ms DeLosa, who, as I have said, appeared for Icon, submitted to the Court that if the Court did grant an interlocutory injunction it should give Mr Ageev an opportunity to contest the injunction and produce evidence before the Court relevant to the question of whether the injunction should continue. In making that submission, Ms DeLosa submitted that Mr Ageev was an individual who was not an Australian citizen and who was unfamiliar with legal procedure in Australia. It seems to me that the question of what should happen in the future is a matter best dealt with by transferring this matter to the expedition list and giving the parties liberty to apply, so that if Mr Ageev wishes to make an application that the injunction be dissolved, he can do so by exercising that liberty. It will, of course, be a matter for the expedition judge whether the matter remains in that list.
Consequently, the orders of the Court are: 1. An order in terms of paragraph 1(i) and (iv) of the summons: "Until further order of the Court an injunction restraining the Defendant from: (i) Engaging in any employment, business, financial relationship or activity with REC Industries Pty Ltd (ABN 93 156 071 340) trading as Icon Gymsports … (iv) Encouraging or persuading club stakeholders, including customers, suppliers, sponsors or partners to terminate their business or custom with the Plaintiff." 1. The matter is stood over before the Expedition Judge on 8 November 2019. 2. Direct that the plaintiff notify the defendant of that listing. 3. Reserve the question of costs. 4. Give liberty to apply on three days' notice.

Infinity Gym Sports & Health Pty Limited v Ageev

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