Analysis: non-competition
59 The claim for relief in respect of competition was pursued only against Mr Crepaldi (prayer 2 of the Amended Notice of Motion). It was based on clause 3.a of the Equity Related Agreement made applicable between Kearney Australia and Mr Crespaldi by cl 4.6 of the Termination Deed.
60 Mr Goot submitted that the relevant provision was void for uncertainty, or alternatively, too wide to be enforceable.
61 The submission as to uncertainty was based on the references to performing "duties as or for a direct competitor of EDS" and "the duties performed by the Employee at any time during the twelve month period preceding Employee's termination" in cl 3.a. The submission as to excessive width was based on both the duration of the covenant (six months) and its geographic area ("the geographic region in which [Mr Crepaldi] provided services to [the Kearney Group]").
62 As to the first point: I think that there was sufficient evidence to show that there is a serious question to be tried as to the nature of the services provided by Mr Crepaldi to Kearney Australia in the course of employment, and, accordingly, there is a serious question to be tried as to whether the relevant covenant is sufficiently certain to be enforceable.
63 As to the second point: the Employment Related Agreement itself provides for the reading down of the expression "geographic region" (although it does not seem to do so for the six month period of the restraint, because its only reading down provision relating to temporal restraints is for the restraints of twelve months referred to in clauses 3 and 4). Further, the width of the restraint (as to either or both of duration and geographical extent) could be read down under s 4 of the Restraints of Trade Act 1976. I therefore conclude that there is a serious question to be tried as to the enforceability (in duration and geographical extent) of the restraint having regard both to other provisions of the Employment Related Agreement and to s 4.
64 These conclusions, coupled with what I have said in para [27] above as to the serious question to be tried on the factual issue, mean that Kearney Australia has demonstrated a basis for the grant of interlocutory relief. It is therefore necessary to consider whether, as a matter of discretion, relief ought to be granted. I have concluded that, for a number of reasons, it should not.
65 Mr Crepaldi gave notice of resignation on 26 September 2005. That notice was effective, in accordance with his contract, to terminate his employment on 26 October 2005. On this latter date, Kearney Australia and Crescendo entered into the Independent Contractor Agreement. The purpose of that agreement was to enable Mr Crepaldi, through Crescendo, to perform work for Kearney Australia in relation to a current project. I infer that the work performed by Mr Crepaldi on that project, both prior to 26 October 2005 (for Kearney Australia, as an employee) and thereafter (for Crescendo, as a contractor to Kearney Australia) was essentially similar in nature to that performed by Mr Crepaldi for Kearney Australia during the twelve month period from 26 October 2004 to 26 October 2005.
66 In any event, by 26 October 2005, Kearney Australia knew that:
(1) Mr Crepaldi was not going to participate in the MBO or remain in the employ of Kearney Australia;
(2) Mr Crepaldi had set up Crescendo to perform management consulting services; and
(3) Mr Crepaldi was going to perform such services for clients through Crescendo.
67 It must have been apparent to Kearney Australia that Mr Crepaldi, or Crescendo, would be a competitor to it, in the business of providing management consulting services, on and from 26 October 2005. Nonetheless, with that understanding, based on the knowledge to which I have referred, Kearney Australia chose to take no step against Mr Crepaldi, in relation to his activities, until 7 December 2005 - by which date, I infer, the project on which Mr Crepaldi through Crescendo had been working for Kearney Australia had been completed.
68 In those circumstances, I think, it would be a travesty of justice to grant Kearney Australia the relief that it now seeks against Mr Crepaldi under cl 3.a of the Equity Related Agreement. Whether it is put as a matter of delay, or unconscionability, or approbation and reprobation, does not seem to me to matter. The simple truth is that Kearney Australia, for its own purposes, availed itself of the services of Mr Crepaldi through Crescendo and only thereafter, having got what it wanted, did it take steps to tell him that he could not perform similar services for other clients.
69 For that reason alone I would refuse this claim for interlocutory relief. There are, however, five other matters that I take into account as fortifying this conclusion.
70 The first is based on Mr Crepaldi's unchallenged evidence as to the relationship between management consultants and their clients, and the basis on which clients procure management consulting services (see para [6] above. That evidence suggests strongly that Mr Crepaldi has no such relationship with, or has no personal knowledge of or influence over (to borrow the words of Fullagar J in Lindner), the clients of Kearney Australia, built up in the course of his employment by Kearney Australia, as would enable him to lure those clients away.
71 The second is that there is no evidence to suggest that Kearney Australia had some secret or confidential manner of performing its business, or providing its services, that gave it some competitive edge over other management consultants, and to which Mr Crepaldi became privy in the course of his employment.
72 The third is based on Mr Crepaldi's evidence that, in respect of one alleged diverted opportunity (relating to a client called Uecomm Operations) Mr Crepaldi offered the work to Kearney Australia whilst he was still employed by them; Kearney Australia informed him (through a Ms Blinman) that it would not pursue the opportunity; and Kearney Australia (through Ms Blinman again) recommended to Uecomm that it contact Mr Crepaldi (by then, at Crescendo) to carry out the assignment. This evidence was not denied. (I interpolate that, despite the relatively brief time within which the interlocutory application was prepared for hearing, the defendants filed detailed affidavits responding to Kearney Australia's claim, and Kearney Australia in turn filed an affidavit (sworn by Ms Bennett) responding to the defendants' affidavits. In a number of cases, Ms Bennett, either through her own knowledge or on information and belief from sources that she named, challenged particular statements made in affidavits relied upon by the defendants. Where I have said that something was not challenged or denied, I mean that Ms Bennett did not, either directly or on information and belief, respond to it, and did not give any reason - eg, relating to unavailability of the relevant person - why she did not do so.)
73 Again, I think, it is clearly open to infer that the work done by Mr Crepaldi through Crescendo for Uecomm was work of the kind performed by him for clients of Kearney Australia during his employment by the company. The Uecomm incident demonstrates not only that Kearney Australia was well aware that Mr Crepaldi, through Crescendo, was setting up his own business, but further, that the work to be done by that business would be work of the kind hitherto done by Mr Crepaldi for Kearney Australia. In other words, it corroborates what I have said in para [67] above, as to Kearney Australia's understanding that Mr Crepaldi was setting up, through Crescendo, in opposition to it. And Kearney Australia, with that understanding, in effect gave its blessing by passing Uecomm onto Crescendo.
74 The fourth matter relates to some inconsistencies in the relevant provisions of the Equity Related Agreement. As I have said, Kearney Australia relied on cls 3.a and 3.b. I leave, for a final hearing, the difficulty of reconciling those two paragraphs (although it may be that, on close analysis, their content and operation may be found to be distinct). Kearney Australia did not rely on cl 4.b. However, as Mr Goot pointed out in submissions, that restraint on competition relates to clients with whom Mr Kearney had "had involvement on behalf of EDS during the six month period preceding" the termination of his employment. By contrast, cl 3.b would prevent Mr Crepaldi from performing duties "for any current client or Prospective client of EDS with whom [he] interacted during the six month period preceding his ….termination." Leaving aside the problems raised by the words "involvement" and "interacted", and assuming that they have some (if not complete) corresponding denotation, it is plain that what might be permissible under cl 4.b might be prohibited under cl 3.b. In this context, Kearney Australia's position in choosing the longer period can hardly be seen to be meritorious, when it had proffered such a confusing agreement to Mr Crepaldi.
75 I note that Mr Goot submitted that those clauses give rise to another problem insofar as they refer to "Prospective" clients. That expression is defined to mean "any client with which EDS was in active business discussions or negotiations at any time during the 6-month preceding Employee's termination." Even leaving aside the width of the definition of EDS (something that might be read down under s 4 of the Restraints of Trade Act) it is difficult to see how a restraint of such width could be justified. But the matter was not fully argued before me, and it may be something that could be capable of clarification by further evidence on a final hearing. Further, and once again, if the provision relating to prospective clients is too wide, it may be something that could be resolved (in favour of Kearney Australia) by s 4. Accordingly, I do not take this into account as being dispositive of the question of enforceability of the particular covenants.
76 Finally, in this context, I refer to the MBO. Without going into details, the evidence suggests that there was a difference of opinion, between Kearney Inc on the one hand and a group of vice-presidents led by Mr Crepaldi on the other, as to the capital that participating vice-presidents should be expected to contribute. The difference was very substantial (the amount sought by Kearney Inc was five times the amount offered by the group led by Mr Crepaldi). Further, it appears, there were substantial differences as to the way in which the business, after completion of the MBO, should be restructured.
77 The defendants' evidence indicated that, on a number of occasions, senior officers of Kearney Inc or of companies within the Kearney Group had indicated that there would be no place within the restructured group (after the MBO) for vice-presidents who had not participated. Although Kearney Australia disputed some of this evidence, and the dispute is not one that I could resolve on an interlocutory hearing, some support for the defendants' position is to be found in Ms Bennett's affidavit in reply. At para 4 (where she dealt with this topic) she referred to a document on the Kearney Group's network which said the following:-
"What happens if an Officer does not want to invest but does not want to resign? Are they 'severed' as of December 2005?
If an Officer does not purchase Shares in the Offering, he or she will not be a shareholder of ATK Holdings and will not have the associated voting rights (such as electing the Directors and Managing Officer and voting on important corporate transactions). In addition, an Officer who does not purchase Shares in the Offering will not have any formal leadership roles in ATK Holdings, such as serving as a Director, Managing Officer or business unit head or serving on any committees to be established by the Board of Directors. There may be additional implications and limitations depending on the Officer's local jurisdiction."
78 Although that document does not suggest that non-participating vice-presidents would thereby lose their employment, it makes it plain that their role in the restructured group would be very much reduced, in importance (and, no doubt, in corresponding respects) after the restructure. In those circumstances, it is hardly to be wondered that non-participating vice-presidents such as Messrs Crepaldi and Paxton decided to utilise their talents outside the Kearney Group. Whilst I cannot on the present state of the evidence conclude that there is a case of, or suggestive of, constructive dismissal, it is I think plain that Kearney Inc was telling vice-presidents that if they did not participate in the management buy-out on its (rather than their) terms, their role, duties and influence were likely to be reduced significantly after the restructure. In particular, for Mr Crepaldi, the document to which Ms Bennett referred made it plain that he would cease to be managing director of Kearney Australia after the restructure was completed.
79 Taking all those matters into account (except for the "Prospective client" problem referred to in para [75]), and notwithstanding the serious questions to be tried to which I have referred, I do not think that it would best achieve justice between the parties if I were to grant the relief sought by prayer 2 of the Amended Notice of Motion. In this context, I take into account also what I say in para [95] below as to delay.