Just Better Care Australia Pty Ltd v Just Better Care Canberra Pty Ltd

Federal Court of Australia|2018-02-09|Before: Mr J, Burley J

THE COURT NOTES THAT: The following undertakings that have been proffered to the Court: By the First Respondent: Without admissions and pending further order, the First Respondent gives the following undertakings: (1) The First Respondent will, to the extent it has not already done so, return the following material: (a) details of the Applicant's yearly marketing strategy, marketing budget and utilisation of its marketing fund; (b) details of the Applicant's business improvement strategies generated from various documents in the BNG portal to enhance service delivery; and (c) the Applicant's financial records (together the Confidential Information). (2) Within 5 business days of the date of this order, the First Respondent will deliver up to the Applicant, all books and records and Confidential Information of the Applicant (if any) that are in its possession or control. (3) The First Respondent will not divert or attempt to divert any business or customer of the Applicant, its associated companies or any Just Better Care System franchisee to any competitor, by direct or indirect inducement or otherwise do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the intellectual property and the Just Better Care System. (4) The First Respondent will not employ or seek to employ any person who is at the time or has within one (1) year been employed by the Franchisor or its associated companies or by any Just Better Care System franchisee or otherwise directly or indirectly or induce such person to leave his employment. (5) Subject to [5A] below, the First Respondent will not own, maintain, operate, engage in or have any ownership or beneficial interest (including any right to share in the revenues or profits) in any business offering the same or similar products and services as offered by the Just Better Care System, which business is, or is intended to be, located within a city in Australia in which the Franchisor operates. (5A) The First Respondent will continue to provide such services as it is required to provide pursuant to home care agreements (within the meaning of the Aged Care Act 1997 (Cth)) until such time as it is able to secure the consent of the relevant clients to the termination of those home agreements. (6) The First Respondent will take those steps which it is able to take to facilitate the transfer of the use of telephone numbers (02) 6280 4070 and (02) 4472 6960 and the fax number (02) 6280 6654 to the Applicant. By the Second Respondent: (7) The Second Respondent will, to the extent he has not already done so, return the Confidential Information. (8) Within 5 business days of the date of this order, the Second Respondent will deliver up to the Applicant, all books and records and Confidential Information of the Applicant (if any) that are in his possession or control. (9) The Second Respondent will not divert or attempt to divert any business or customer of the Applicant or its associated companies to any competitor, by direct or indirect inducement or otherwise do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the intellectual property and the Just Better Care System. (10) The Second Respondent will not employ or seek to employ any person who was in the one (1) year prior to 18 January 2018 employed by the Applicant or its associated companies or by any Just Better Care System franchisee or otherwise directly or indirectly or induce such person to leave his employment. By the Third and Fourth Respondents: (11) The Fifth Respondent undertakes in his capacity as director of the Third and Fourth Respondents, to continue to take, keep and maintain full financial records of all revenue and expenditure by those companies necessary to enable the Court to assess any profit or loss and to provide a summary report on a monthly basis to the solicitors for the Applicant until further order. By the Fifth Respondent: (12) In the case of the Fifth Respondent's residential property located at 183 Wheeler Crescent, Wanniassa, in the Australian Capital Territory, in which he owns an interest as a tenant in common with his wife, Emma Capely, not to dispose of his interest in that property or otherwise to facilitate any sale from or transfer or other dealing in that property. THE COURT ORDERS THAT:

Introduction 1 Before the court is an interlocutory application brought by the applicant, JBCA, seeking orders to restrain the respondents from using, disclosing or dealing with certain information that it characterises as confidential and delivery up of the confidential information together with affidavits. The interlocutory application also seeks orders that the respondents be restrained from using information defined by JBCA to be its intellectual property and from diverting or attempting to divert any business or customer of JBCA elsewhere. JBCA also seeks an order restraining the respondents from carrying on the business of the first respondent (JBCC) or any similar business, from employing or seeking to employ any person who is presently or was within the last year employed by either JBCA, JBCC or any other franchisee of JBCA and from owning, maintaining, operating or engaging in any business offering the same or similar services as offered by JBCA. JBCA also seeks an order that JBCC and the second respondent, Fergus Nelson, transfer to JBCA certain telephone accounts. Finally, JBCA seeks costs of the interlocutory application.

Background 2 JBCA is a franchisor that in broad terms provides a system whereby franchisees can engage in the business of supplying community home support, nursing agency and other goods and services. In the 10 years prior to 18 January 2018 JBCC was a franchisee of JBCA and a party to a franchise agreement which commenced on 18 January 2013 (Agreement). JBCC apparently ceased to trade on or about 18 January 2018. The second respondent, Mr Nelson, is the former director of JBCC and is apparently a manager of the third respondent, Vivere. 3 Vivere is a company that was incorporated on 23 October 2017. It has, apparently since about 10 January 2018, supplied community home support and nursing services in competition with JBCA. Its sole director and secretary is Robert William Edward Wooley. 4 The fourth respondent, The Forward Road (TFR) is a company that since about mid-December has apparently employed the community support providers and nurses that assist the patients formerly of JBCC, now Vivere. Mr Nelson contends that JBCA was aware of and approved of TFR being the vehicle for employing these workers. 5 The fifth respondent is Mr Woolley, who was formerly a manager in JBCC and is now the sole director of Vivere and TFR. 6 The evidence in this application consists of two affidavits from Alison Chandler, the Chief Operating Officer of JBCA, two affidavits from Mr Woolley and an affidavit from Mr Nelson. There was no cross examination. In light of the nature of the present application it is not necessary or appropriate to make findings of fact. The summary set out below does not purport to do so. 7 It is necessary to say something of the former business of JBCC. 8 According to Mr Nelson, since 2008 JBCC has provided a range of aged care and disability services to people in the ACT and a part of NSW which broadly comprises the territory of JBCC. These services include meal preparation, personal care, transport to and from medical appointments, facilitation of social activities, monitoring and administrating critical medication such as insulin for people with diabetes, emptying catheter bags, care following major surgery, support to autistic and intellectually disabled children and their families and people who are at risk of self-harm and respite for carers. About 75% of JBCC's work was carried out in the ACT and 25% in NSW. 9 There is no dispute that JBCC provided care to a little over 300 patients using the services of about 70 carers. Nor is there any dispute that the persons to whom this care is supplied are members of one of the most vulnerable classes of people in society. 10 The terms of the Agreement governed the relationship between JBCA and JBCC until its termination through the effluxion of time on 18 January 2018.

JBCA's claim 11 JBCA alleges that JBCC has acted in breach of the terms of the Agreement as has Mr Nelson. In broad terms the Agreement provides that in return for the provision by JBCA of certain training, marketing, administration assistance, intellectual property (as defined), confidential information, access to certain software and on-going support for the conduct of its affairs, JBCC agreed to certain terms and conditions. Two of those material conditions, relevant to the present proceeding, are set out in clauses 21.6 and clause 22.33 of the Agreement. 12 Another is that set out in clause 23.1 under which it is contended that JBCC agreed not to engage in a business that is in competition with JBCA or any of its associate businesses. 13 Another is that JBCC agreed to pay $20,000 for initial promotion and training fees and thereafter levies amounting to 7.5% of Gross Revenue (paid weekly in arrears). 14 Mr Nelson, as the sole director of JBCC, provided a guarantee of the performance by JBCC of its obligations and also agreed to a restraint that for a period of 2 years following the end of the Agreement he would not directly or indirectly divert or attempt to divert any business or customer of JBCA or its associated companies to any competitor, or employ or seek to employ any person who has within 1 year been employed by JBCA or any Just Better Care System franchisee. 15 JBCA alleges (again, put very broadly) that in the course of conduct briefly summarised below, JBCC and Mr Nelson engaged in conduct in breach of the Agreement and that Vivere, TFR and Mr Woolley were aware of and cooperated in those breaches such that they too are liable to JBCA in respect of several causes of action, including breach of equitable obligations of confidence, contraventions of the Australian Consumer Law, being Schedule 2 of the Competition and Consumer Act 2010 (Cth) and unlawful interference with contractual rights. 16 The evidence of Ms Chandler reveals that in July 2017 she asked Mr Nelson whether JBCC intended to renew the Agreement. The Agreement provides that a franchisee who wishes to renew must notify JBCA at least 3 months but not more than 6 months before the expiry date. Accordingly, by 18 October 2017 JBCC must have provided notice. The evidence indicates that Mr Nelson at best equivocated, and at worst dissembled, about whether JBCC would renew the Agreement. On 1 November 2017 in answer to a direct request, Mr Nelson indicated that his intention was to renew subject to mutually satisfactory terms being agreed. On 14 December 2017 a draft agreement was supplied to Mr Nelson. In his evidence, Mr Nelson indicates that shortly after that date, having reviewed its terms, he decided that JBCC should not renew. Despite this decision, it was not until 17 January 2018 that Mr Nelson informed JBCA of his decision. 17 JBCA alleges that the conduct of Mr Nelson in relation to the renewal amounts to misleading or deceptive conduct in that it led JBCA to believe that a renewal would be forthcoming. 18 As it transpires, it appears that JBCC had taken a number of steps to transfer its operations to Vivere and TFR prior to the termination of the Agreement. These arguably included the transfer of employees' contracts to TFR, which took place in mid-December 2017, the transfer of lists of brokers and patients to Vivere on 11 January 2018 and the provision to Vivere of access to the personal information stored in a database maintained by JBCC that included the personal information and other relevant information about its patients and brokers. 19 JBCA alleges that this transfer of information amounted to the appropriation of intellectual property and confidential information, in breach of the Agreement, and, also, to breaches of clause 21.6 and clause 22.3 of that Agreement. It also alleges that by continuing to be involved in the business of Vivere, Mr Nelson acted in breach of the restraint clause, and that Vivere, TFR and Mr Woolley are each in breach of obligations owed to JBCA. As a consequence, JBCA contends that it is entitled to step in and conduct the former business of JBCC, which it alleges is now being conducted by Vivere, TFR, Mr Woolley and Mr Nelson.

Consideration 20 The principles applicable to the grant of interlocutory injunctions are well known. They are conveniently set out in the decision of the Full Court of the Federal Court in Samsung Electronics Co v Apple Inc [2012] FCA 1358; (2011) 217 FCR 238 (Samsung) and recently summarised in Warner-Lambert Co LLC v Apotex [2014] FCA 241; (2014) 106 IPR 218. In broad, it is necessary for the applicant to show a prima facie case in the sense that there is a serious question to be tried and a sufficient likelihood of success to justify the preservation of the status quo pending trial. It is also necessary to consider whether the balance of convenience warrants the grant of the relief, which involves a consideration of whether the likely harm to JBCA if no injunction is granted outweighs an assessment of the prejudice or harm likely to be suffered either by the respondents or third parties if an injunction is granted. Assessment of the question of balance of convenience will involve consideration of whether damages will be an adequate remedy (Samsung at [62] and [66]). 21 In the present case I will assume that there is a prima facie case in the sense required by the authorities, although the submissions made on behalf of the respondents persuade me that whilst there is in some respects a strong arguable case that there have been breaches of the Agreement and possibly some of the other causes of action, it is by no means clear that there is a strong arguable case that breaches warranting the relief sought in the interlocutory application have been established. In this regard, I note that there is an arguable case that the restraint of trade clauses of the Agreement may be set aside and also an arguable case that the breaches in terms of the supply of information by JBCC to Vivere were not of nearly the scope alleged by JBCA. However, it is unnecessary for me to determine these matters. 22 Nevertheless, I am persuaded that the balance of convenience points strongly against the grant of the interlocutory relief sought, for the following reasons. 23 First, the broad claim that harm has been suffered by JBCA lies in the fact that Mr Nelson and JBCC have connived with Vivere, TFR and Mr Woolley to transfer the entirety of the franchised business away from JBCC to Vivere and TFR. Assuming that to be correct, then the primary relief for JBCA lies in damages. The franchise fees and marketing levies charged by JBCA in the year 2016 were about $365,000. It is apparent that this is a loss that can be recompensed by damages. Each of Mr Nelson and Mr Woolley have interests in real estate which combined appear, at least on instructions given to counsel and conveyed to the Court, considerably to exceed the value of this amount. Each is prepared to provide undertakings to the Court not to dispose of that real estate pending the outcome of the proceedings. Furthermore, each of Vivere and TFR have, by Mr Woolley, undertaken to keep accounts. 24 Mr Giles, senior counsel for JBCA, pointed to other intangible losses that might be suffered by JBCA, but in my view the matters that he pointed to are generally matters that the Court is typically asked to take into account in the course of evaluating loss. 25 Secondly, I have earlier outlined the nature of the services supplied by JBCC and which are now supplied by Vivere and TFR. They include the provision of services from 70 or more individual carers to over 300 patients many of whom have critical care needs and who are the beneficiaries of 24 hour care. The territory formerly covered by JBCC covers rural and relatively remote parts of NSW and also the ACT. 26 Ms Chandler deposes in her evidence to being confident that JBCA will be in a position to step in and replace Vivere in the supply of these services. She gives evidence that JBCA has office support staff available in Canberra to assist in the transition and that JBCA has advertised for carer positions in employment websites and other publications. She has ordered 20 Just Better Care uniforms to be provided. Ms Chandler refers to conversations with a handful of carers currently working for TFR and Vivere who indicate that in the event that those organisations cease and the business is operated by JBCA in lieu of JBCC or Vivere, they are prepared to work for that organisation. She also gives hearsay evidence from the owner of the Illawara-Southern Highlands franchisee that she has authorised him to "pick up" customers (whom I understand to mean patients) that are geographically close to that area. 27 Despite this evidence, I am not satisfied that JBCA is in a position to look after the patients currently under the care of Vivere. In making this finding I cast no aspersions on the abilities of JBCA or any of the people to whom I have referred above. However, JBCC has been the source of supply of services to patients within its territory for over ten years and a transition has taken place rightly or wrongly to Vivere and TFR. That is the status quo. The employees of JBCC appear to have been transferred to TFR under the management of Mr Woolley and Mr Nelson. An injunction restraining them, or their companies from continuing to provide services is, in my view, likely to cause considerable disruption for their 70 or so employees and I consider it to be highly likely that such a disruption will adversely affect not only the employees, but also some (it is not possible to say how many) of the patients under their care and also the families of those patients. In this regard, I am conscious that the patients are spread over a large area, including remote and rural areas of New South Wales and the ACT, and that the availability of carers, or alternative carers in these areas, may be scarce. 28 In the circumstances of the present case this is an extremely powerful factor tending against the grant of the interlocutory injunctive relief sought. Taken together with the other matters to which I have referred, I find it compelling. 29 Thirdly, according to the terms of the Agreement Mr Nelson ought to have notified JBCA by 18 October 2017 of his intention to renew. He did not do so. JBCA could have taken steps from that date to ensure that it was ready to take on the patients of JBCC. It did not do so and had it acted more swiftly then perhaps it may have been in a better position. 30 Fourthly, the elements of the relief sought, including the restraints, are likely to have the effect of granting to JBCA final relief, at a point in time when the issues between the parties are not yet able to be fully ventilated. 31 Accordingly, I decline to grant the relief sought. In this context, I note the following undertakings that have been proffered to the Court: By the First Respondent: Without admissions and pending further order, the First Respondent gives the following undertakings: (1) The First Respondent will, to the extent it has not already done so, return the following material: (a) details of JBCA's yearly marketing strategy, marketing budget and utilisation of its marketing fund; (b) details of JBCA's business improvement strategies generated from various documents in the BNG portal to enhance service delivery; and (c) JBCA's financial records (together the Confidential Information). (2) Within 5 business days of the date of this order, the First Respondent will deliver up to the Applicant, all books and records and Confidential Information of the Applicant (if any) that are in its possession or control. (3) The First Respondent will not divert or attempt to divert any business or customer of the Applicant, its associated companies or any Just Better Care System franchisee to any competitor, by direct or indirect inducement or otherwise do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Intellectual Property and the Just Better Care System. (4) The First Respondent will not employ or seek to employ any person who is at the time or has within one (1) year been employed by the Franchisor or its associated companies or by any Just Better Care System franchisee or otherwise directly or indirectly or induce such person to leave his employment. (5) Subject to [5A] below, the the First Respondent will not own, maintain, operate, engage in or have any ownership or beneficial interest (including any right to share in the revenues or profits) in any business offering the same or similar products and services as offered by the Just Better Care System, which business is, or is intended to be, located within a city in Australia in which the Franchisor operates. (5A) The First Respondent will continue to provide such services as it is required to provide pursuant to home care agreements (within the meaning of the Aged Care Act 1997 (Cth)) until such time as it is able to secure the consent of the relevant clients to the termination of those home agreements. (6) The First Respondent will take those steps which it is able to take to facilitate the transfer of the use of telephone numbers (02) 6280 4070 and (02) 4472 6960 and the fax number (02) 6280 6654 to the Applicant. By the Second Respondent: (7) The Second Respondent will, to the extent he has not already done so, return the following material: (a) details of JBCA's yearly marketing strategy, marketing budget and utilisation of its marketing fund; (b) details of JBCA's business improvement strategies generated from various documents in the BNG portal to enhance service delivery; and (c) JBCA's financial records (together the Confidential Information). (8) Within 5 business days of the date of this order, the Second Respondent will deliver up to the Applicant, all books and records and Confidential Information of the Applicant (if any) that are in his possession or control. (9) The Second Respondent will not divert or attempt to divert any business or customer of the Applicant or its associated companies to any competitor, by direct or indirect inducement or otherwise do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Intellectual Property and the Just Better Care System. (10) The Second Respondent will not employ or seek to employ any person who was in the one (1) year prior to 18 January 2018 employed by the Applicant or its associated companies or by any Just Better Care System franchisee or otherwise directly or indirectly or induce such person to leave his employment. By the Third and Fourth Respondents: (11) Mr Woolley undertakes in his capacity as director of those companies, to continue to take, keep and maintain full financial records of all revenue and expenditure by those companies necessary to enable the Court to assess any profit or loss and to provide a summary report on a monthly basis to the solicitors for the Applicant until further order. By the Fifth Respondent: (12) In the case of Mr Woolley's residential property located at 183 Wheeler Crescent, Wanniassa, in the Australian Capital Territory, in which he owns an interest as a tenant in common with his wife, Emma Capely, not to dispose of his interest in that property or otherwise to facilitate any sale from or transfer or other dealing in that property. 32 I otherwise order that the interlocutory application be dismissed with costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley.

SCHEDULE OF PARTIES NSD 69 of 2018 Respondents Fourth Respondent: THE FORWARD ROAD PTY LTD (ABN 78 614 839 164) Fifth Respondent: ROBERT WILLIAM EDWARD WOOLLEY

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