Reed Business Information v Seymour - [2010] NSWSC 790 - NSWSC 2010 case summary — Zoe

NSWNSWSC

Reed Business Information v Seymour

[2010] NSWSC 790

Supreme Court of NSW|2010-07-15|Before: Ball J, Young J

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2010-07-15

Before

Ball J, Young J

Source

Original judgment source is linked above.

Judgment (30 paragraphs)

[1]

CITATION : Reed Business Information v Seymour [2010] NSWSC 790

[2]

Upon the defendant giving the usual undertaking as to damages, the court orders that: 1. Until further order the defendant be restrained from disclosing to any person or using for her own personal gain or benefit any of the following information: (a) Any advertising rates for the plaintiff's publications known as 6minutes, Pharmacy News and Australian Doctor (the Publications")"; (b) Any statistics relating to circulation or readership of any of the Publications; (c) The plaintiff's business strategies for the Publications; (d) Information contained in sales sheets, brand plans or client proposals or presentations prepared by the plaintiff; (e) Any market research data acquired by the plaintiff; and/or (f) Training and educational material prepared by the plaintiff, except to the extent that that information is available in the public domain or is obtained by the defendant other than in the course of, or as a result of, her employment with the plaintiff. DECISION : 2. Until further order or 7 May 2011, whichever is the earlier, the defendant be restrained from performing any services for the publication of UBM Medica Australia Limited known as Medical Observer, such restraint to include, but not be limited to, the following: (a) Approaching any advertiser (including S4 and non-S4 advertisers) on behalf of, or ostensibly on behalf of, Medical Observer; and, (b) Attending any meeting (either alone or on behalf of UBM Medica Australia Limited or in company with any other employee or agent of that company) at which advertising in Medical Observer is discussed. 3. Until further order of the Court: (a) The USB stick upon which the defendant has copied confidential information belonging to the plaintiff be retained by the solicitor for the defendant; and (b) The defendant be restrained from accessing the information contained on the subject USB stick. 4. Matter listed before the Registrar in Equity at 9.00 am on 29 July 2010 for further directions. 5. Order that the costs of the Plaintiff's application for interlocutory relief be reserved. 6. Liberty to apply on three (3) days notice limited to the question of any application that the proceedings, in their entirety, be referred to mediation. 7. Direct that the above orders be entered forthwith.

[11]

2010/214035 REED BUSINESS INFORMATION PTY LIMITED v VICTORIA SEYMOUR JUDGMENT 1 This is an application for interlocutory orders restraining the defendant, who is a former employee of the plaintiff (RBI), from (a) continuing her employment with UBM Medica Australia Pty Limited (UBM) until 7 May 2011 or until further order of the court (whichever is the earlier); (b) disclosing any confidential information of RBI. The plaintiff also seeks a number of ancillary interlocutory orders. 2 Before dealing with the substance of RBI's claim, I should say something about the history of the proceedings. History of proceedings 3 The matter first came before Rein J on 2 July 2010. At that time, his Honour refused ex parte relief but gave RBI leave to serve the proceedings on short notice and stood the matter over until 8 July 2010 before the Duty Judge in Equity. The matter came before Pembroke J on that day. At that time, the defendant undertook (a) not to perform any work for UBM; (b) not to contact any clients or former clients of RBI; and (c) not to divulge any confidential or proprietary information belonging to RBI. These undertakings were given until 5.00 pm on 9 July 2010. The matter was then listed before me at 2.00 pm on 9 July 2010. At that time, I indicated to the parties that I thought it would be preferable to hear the matter on a final basis the following week. The defendant accepted that proposal and RBI did so reluctantly. The matter was then listed for final hearing on 13 and 15 July 2010. In the meantime, the undertakings given by the defendant were extended until final determination of the proceedings and were broadened to be undertakings: (a) not to use or to disclose any confidential information acquired during the defendant's employment with the plaintiff to UBM and its employees and agents; (b) not to attend the workplace of UBM. 4 I gave a direction that any further evidence relied on by the parties should be served by 12.00 pm on 12 July 2010. At the request of Mr Lawson, who appeared for RBI, I also indicated that if either party believed, in view of any additional evidence filed, that they could not proceed on a final basis, I would consider an application that the hearing fixed for 13 and 15 July 2010 proceed on an interlocutory basis. 5 The defendant served two additional affidavits on 12 July 2010, at approximately 1.45 pm. One of those affidavits was a further affidavit from the defendant. Another was an affidavit of Mr Wills who is a former Chief Executive Officer of UBM. I will say more about Mr Wills' evidence later. Essentially, however, he gave evidence concerning the nature of pharmaceutical advertising. Mr Lawson submitted that, in view of that additional evidence, RBI was not in a position to proceed with the hearing on a final basis. Having regard to the very short time that parties had to prepare, I was not willing to proceed with a final hearing in the absence of the agreement of both parties. As a result, the hearing proceeded on an interlocutory basis and I permitted the defendant to substitute for the undertakings she had given on 9 July 2010 undertakings in similar terms that are to expire on delivery of this judgment. Subsequently, Mr Lawson confirmed that the plaintiff gave the usual undertaking as to damages. Nature of interlocutory hearing 6 The outcome of this interlocutory hearing may well dispose of the matter on a final basis, at least insofar as RBI seeks equitable relief. Mr Lawson informed me that the court had available dates later this year to hear the case on a final basis. However, whether any of that time will be allocated to this case depends on other cases to be listed for hearing and whether this case should be given priority. In any event, at best, the case is unlikely to be determined on a final basis until the end of this year. Given that the principal relief sought by RBI both on an interlocutory and final basis is an order preventing the defendant from working for UBM until 7 May 2011, an interlocutory determination of that issue in favour of the plaintiff, at least, is still likely to amount to a final determination of that issue. 7 In those circumstances, it is appropriate that I examine the merits of RBI's claim in more detail than would be the case in a normal application for an interlocutory injunction: Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 at 536 (McLelland J); Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 631 at [26] (White J); John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [4] (Brereton J). For that reason, I permitted cross-examination, notwithstanding that this was an interlocutory application. Like Brereton J in John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995, I have also reached some conclusions in more categorical terms that might normally be appropriate on an application for an interlocutory injunction. Those conclusions, however, are not, subject to one qualification, intended to be final ones. 8 The qualification relates to the correct construction of the contract between the parties. In Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535, McLelland J said this in relation to interlocutory applications: "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 … 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 … If the Court does decide the question of law the uncertainty is to that extent removed."

[12]

In my opinion, it is possible to make findings concerning the correct construction of the contract in this case. That is susceptible of resolution on the current state of the evidence. I received extensive written submissions from the parties in relation to that question. I do not think that it raises any difficult or novel questions of law. Moreover, the correct construction of the contract is a major area of uncertainty which affects the nature of the interlocutory relief that it would be appropriate to give in this case. Background 9 RBI is a hardcopy and online publisher. It publishes a number of publications concerned with healthcare. It also publishes publications concerned with other areas, such as the finance industry. Three publications are relevant in this case. 10 The first of those is known as "Australian Doctor". That publication is directed at medical practitioners, particularly general practitioners. It is published in hardcopy and online forms. The hardcopy is sent weekly by post to medical practitioners for free. It is in the form of a tabloid newspaper covering the latest news and opinions in the healthcare area, including clinical updates, medico-political news, profiles and articles concerning practice management. It is prepared in a language that assumes a certain degree of medical knowledge. Its primary source of revenue is advertising. That advertising falls into three broad categories. First, there is advertising of prescription only medicines. Those medicines fall within schedule 4 of the Therapeutic Goods Administration Regulation (TGA). Those medicines cannot be advertised by name to the general public, although, on occasions, drug companies who manufacture those medicines may place non-branded advertisements drawing to the attention of members of the public particular medical conditions in the hope that some of them will consult a medical practitioner and be prescribed a drug which is manufactured by the drug company placing the advertisement and which is designed to treat the advertised condition. Advertising of S4 medicines is referred to in the industry as "S4 advertising"; and advertising in relation to medicines falling within other schedules of the TGA is referred to in a corresponding way. The second category of advertising placed in Australian Doctor is advertising of over-the-counter medicines. Those medicines fall into two categories. First, there are those that are generally available. They fall within schedule 2 of the TGA. Generally, there are no specific restrictions on S2 advertising. Second, there are medicines that are only available through pharmacies. They fall within schedule 3 of the TGA. There are some restrictions on S3 advertising. The third category of advertisements placed in Australian Doctor is classified advertisements for such things as conferences, jobs and a certain number of other products. Australian Doctor earns approximately 70% to 80% of its revenue from S4 advertising. The majority of that is branded advertising. Approximately 20% of revenue is earned from S2 and S3 advertising. The balance is earned from classified advertisements. 11 The online version of Australian Doctor is only available to subscribers. A person must provide a medical provider number in order to subscribe. The online version is sent to subscribers daily (Monday to Friday) in the form of an email that contains links to articles on a website. Its content is similar to that of the hardcopy version (although the content may be published at different times). Like the hardcopy version, a majority of its revenue is derived from S4 advertising. 12 The second of RBI's publications that is relevant to these proceedings is "6minutes". 6minutes is an online publication. It is free and is sent daily (Monday to Friday) by email to medical practitioners who subscribe to it. It contains daily breaking news about medical and clinical developments and assumes some knowledge about medical and health related activities. It is not directed to a consumer market. Its primary source of revenue is advertising. It chiefly contains S4 advertising. A version of 6minutes is available on the internet. S4 advertising is removed from that version. 13 The third of RBI's publications that is relevant is Pharmacy News. There is a hardcopy version and an electronic version of that publication. The hardcopy version is published monthly. It is sent to the principal decision-makers in Australian pharmacies and is free. It contains information principally of interest to pharmacists. Again, its primary source of revenue is advertising. Only about 15% of its revenue is derived from S4 advertising. The electronic version (known as Pharmacy eNews) is published daily (Monday to Friday) and is sent to pharmacists who subscribe to it. Like the hardcopy version, it is free, contains information principally of interest to pharmacists and is funded by advertising. 14 The defendant commenced employment with RBI on 19 October 2005 as a coordinator in the medical division. In January 2006, she moved to the healthcare group as a classified sales executive on Australian Doctor. 6minutes was launched in October 2006 and, following its launch, the defendant was responsible for managing advertising in that publication. In January 2009, the defendant's role expanded to include advertising sales for Pharmacy eNews and, on 1 September 2009, the defendant was appointed Sales Manager, healthcare online division. In that capacity, she was responsible for advertising sales for the on-line versions of Australian Doctor, 6minutes and Pharmacy eNews. 15 Up until that time, there was no written contract in relation to the defendant's employment with RBI. However, following the defendant's appointment to the position of Sales Manager, healthcare online division, RBI wrote to her on 10 September 2009 setting out the terms of her employment. Those terms were accepted by the defendant on 14 September 2009. 16 Relevantly, the letter agreement contains the following terms: " Commission You will continue to earn commission according to your 2009 commission structure. The details of your commission scheme, budget and targets will be discussed with you by your manager. Management reserves the right to amend the commission and client base at any time and for any reason, with prior notice to you. The clients remain the property of Reed Business Information. …

[14]

Non-Compete During your employment with RBI and for 12 months following the termination of this agreement, you (either alone or jointly with another person or as an incorporated entity), may not work in any capacity for or accept any offers of employment from any person, company, business, publication or joint venture which in the opinion of RBI, is in direct competition with 6minutes, Australian Doctor and Pharmacy News." 17 The job description attached to the letter described the defendant's job essentially as being to "work with sales team to achieve sales revenue budgets and profit" and to "maintain and develop existing and new customers" for 6minutes, Australian Doctor and Pharmacy News. 18 In November or December 2009, RBI restructured the healthcare group. That restructure had three important consequences for the defendant. First, prior to the restructure two employees reported to the defendant. Following it, they no longer did so. Instead, the defendant together with other sales representatives reported directly to Mr McGeever, who had recently started as the sales director for the healthcare and financial services division of RBI. Secondly, as part of the changes, the defendant became responsible for managing the accounts for specific customers rather than for overseeing all the accounts for the publications for which she was responsible and became responsible for selling advertising space in the online and hardcopy versions of the those publications to the customers for whom she was responsible. Thirdly, the structure for the payment of commission changed with the result that the defendant was likely to earn substantially less commission than she had previously. At the time that these changes were announced, the defendant understood that her commission would be capped. It appears, however, that that understanding was incorrect. 19 The defendant was dissatisfied with these changes. She started looking around for alternative employment. She was offered a job with Fox Interactive Media and, on the basis of that offer, on 8 April 2010, tendered her resignation to RBI. Subsequently, on 16 April 2010, she learned that the offer of new employment that had been made to her was withdrawn. Naturally, that caused the defendant considerable concern. She had recently married and bought a house with her husband. They have a substantial mortgage. She is the principal income earner in their relationship. 20 As a result, the defendant says that she sought to withdraw her resignation. There is a dispute about that and precisely what happened. However, two things seem reasonably clear. The first is that, on 25 May 2010, RBI offered the defendant a temporary job as an external sales agent in one of its subdivisions known as "Catch". The defendant turned that job down because it was temporary and the remuneration was wholly commission based with no guaranteed salary. The second is that it is unlikely that RBI was prepared to give the defendant her old position back. It did not do so - preferring instead to offer her a position as an external sales agent. In addition, Ms Coutinho, who is the Publishing Director of RBI and who was cross-examined on the issue, whilst reluctant to concede that RBI would not reinstate the defendant, was not prepared to say that it would. Ms Coutinho's attitude is not surprising. The defendant had resigned from her position with RBI because she was dissatisfied with the changes that had been made to it. It is hard to believe that, in those circumstances, RBI would have been happy for her to return to that position. 21 Ultimately, on 7 June 2010, the defendant commenced employment with UBM as a business development manager. 22 Like RBI, UBM publishes both in hardcopy and online form a number of publications concerned with healthcare. RBI regards UBM as its principal competitor. Three of UBM's publications are particularly relevant in this context. 23 The first is Medical Observer. There is no dispute that that publication is a direct competitor of Australian Doctor. Like Australian Doctor, it is published in hard copy form weekly and in an electronic version that is sent to general practitioners each weekday. In fact, UBM uses the same database as RBI to identify those to whom Medical Observer is sent. The content of Medical Observer is very similar to that of Australian Doctor. It is provided free and its principal source of revenue is advertising. A majority of that is S4 advertising. 24 The second relevant publication of UBM is known as "MIMS". It is a reference tool for healthcare professionals, including doctors and pharmacists. It provides prescribing information based on Therapeutic Goods Administration approved information. It is available in hardcopy form and is published annually with bi-monthly updates. There are also online and CD-rom versions. Its main sources of revenue are subscription fees and advertising. Virtually all advertising in MIMS is S4 advertising. 25 The third relevant publication is known as myDr.com.au (MyDr). It is a consumer health information website. The website is widely accessible to the public and targets consumers in the general population providing general health information about health related matters, although its content is also of interest to medical practitioners. It derives its major source of revenue from licence fees obtained for use of its content. It also obtains revenue from advertising. It does not carry S4 branded advertising, although it does carry S2, S3 and non-branded S4 advertising. 26 When the defendant was originally approached to join UBM, the role was described as "working with the Group Advertising Sales Manager and the Country Manager to establish a digital projects business and to accelerate the growth in revenues from our current digital advertising products available through Medical Observer and myDr.com.au." The defendant said, and I accept, that she raised with both the recruiter who first approached her and Mr Frazer, the Group Advertising Manager of UBM, the fact that she was bound by a non-compete clause in her contract with RBI. She interpreted that non-compete clause as preventing her from doing any work for Medical Observer, but not from working for UBM in other capacities. The defendant says that she was told that she was not needed to work on Medical Observer. She accepted the position with UBM on that basis.

[15]

27 The defendant says that she has two broad roles with UBM. The first is to work as a sales representative for MyDr. The second is to be involved in business development of a special project with UBM. That project is confidential to UBM. However, some evidence was given of the nature of that project in a closed session of the court and in a confidential exhibit. I accept that that project is different from anything the defendant worked on while at RBI, although it certainly involves the defendant approaching customers of RBI. 28 When the defendant left RBI, she took a number of RBI documents with her. Those documents took two forms. 29 First, the defendant took a USB stick which contained a copy of personal information held on her computer at work together with work related documents including documents such as sales run sheets, brand plans, market research data, notes taken during general sales training sessions and proposals and presentations to clients. She gave evidence that she used the USB stick to allow her to do work when she was out of the office and to update personal information held on her home computer. She also gave evidence that, since leaving her employment with RBI, she had access to two work-related documents contained on it. She accepted that there was no reason for her to do so. Since that time, arrangements have been made between the solicitors for the parties for the return of the information on the USB stick and no relief is sought by the plaintiff in that regard. The plaintiff does, however, maintain that the defendant's conduct is relevant to the exercise of the court's discretion in determining what interlocutory relief, if any, should be given. 30 Second, on 12 April 2010, the defendant emailed to her home email address training material belonging to the plaintiff. It is relevant to observe that that was at a time when the defendant still expected to work for Fox Interactive Media. 31 During the short period of time that the defendant actually worked for UBM she approached a substantial number of customers and potential customers both to attract advertising to MyDr and in connection with the new project that she was working on. Many of those customers are customers of RBI. That in itself is not surprising. Many of the customers of RBI also place advertising in the publications published by UBM and, subject to any enforceable restraint, it is to be expected that the defendant would follow up on existing relationships of UBM and the relationships she had developed while working for RBI. However, in a number of approaches that the defendant made, she indicated that she would be interested in talking about UBM's portfolio of products including Medical Observer online, or about the customer's brand objectives and educational goals for healthcare professionals and consumers, or about the customer's proposals for particular S4 medications. The defendant explained these references in a number of ways. Essentially, though, she made two points. The first was that, if there was going to be a discussion of Medical Observer, she always planned to take someone else to the meeting and that that person would be responsible for that part of the discussion and she would not actively participate in it. The second was that matters such as educational goals for healthcare professionals and plans for S4 medications were relevant to the special project she was working on or to MyDr - if only as talking points to give her an opportunity to steer the conversation to the virtues of MyDr. 32 The plaintiff submits that this evidence establishes three propositions. The first is that, on any view, the defendant has breached the non-compete clause. The second is that the defendant is not to be trusted to comply with any order directed at the defendant's conduct (as opposed to an order preventing her from working for UBM). The third is the practical difficulties associated with policing compliance of orders directed at the defendant's conduct as an employee of UBM. 33 I will deal with the first and third issues later. I should, however, say something about the second, which is clearly relevant to the exercise of the court's discretion. I do not accept that the plaintiff's submission that the defendant cannot be trusted to comply conscientiously with an order of the court. The defendant was cross-examined for several hours. There are two features of her evidence that stand out in this context. The first is that she gave honest and frank answers to the questions asked of her, even if the answers were against her interest. The second is that she was clearly upset through much of her cross-examination and the impression I formed was that that, in part at least, was because she was genuinely distressed by the suggestion that she had done something wrong. It is true, of course, that the defendant took the USB stick with her and emailed the training material to herself. But I do not think that these matters are sufficient to undermine the conclusion that I have reached. Faced with a court order, I am satisfied that the defendant would conscientiously seek to comply with it. That, of course, still leaves open the question whether the court can be satisfied that there is no or little risk of accidental non-compliance. As I have said, I will return to that issue below. 34 The issues that need to be addressed fall into four broad categories. First, there is a question whether the defendant remains bound by the agreement signed by her on 14 September 2009 following changes in the nature of her employment. Second, there are issues concerning the scope and enforceability of the confidentiality provision of the agreement. Third, there are issues concerning the scope and enforceability of the non-compete clause. Finally, there are issues concerning the exercise of the court's discretion, including issues relating to the balance of convenience. Did RBI's restructure result in the defendant changing jobs? 35 Mr Seck, who appeared for the defendant, submitted that the nature of the defendant's position changed so fundamentally in November or December 2009 that her position should be treated as a new job that was no longer governed by the terms of the written contract: see Whittaker v Unisys Australia Pty Ltd [2010] VSC 9. In my opinion, as the evidence stands, the defendant is likely to fail on this point. Notwithstanding the changes, the defendant continued to work with the sales team responsible for sales of advertising space in 6minutes, Australian Doctor and Pharmacy News. She was no longer directly responsible for supervising two staff, but it appears that she was still treated as a senior member of the team and her salary did not change. The terms of the contract specifically contemplated that the commission structure could change and that her duties could change. On that basis, in my opinion, the plaintiff has a strongly arguable case that the written contract continued to govern the parties' relationship.

[16]

Obligation of confidentiality 36 There is no doubt that an obligation can be imposed by contract to keep information confidential and that that obligation can extend to cover subject matter which is not protected by an equitable duty of confidence: see Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317; John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995. Contractual obligations of that type are treated as restraints of trade. Consequently, they are unenforceable unless they are reasonable. The reasonableness of a restraint is to be judged at the time the restraint is imposed: Woolworths v Olson [2004] NSWCA 372. It is to be judged having regard to the interests of the parties and the interests of the public. The party who asserts a restraint bears the onus of proving that it does no more than provide adequate protection to that party's legitimate business interests: Buckley v Tutty (1971) 125 CLR 353 at 376; Linwar Securities Pty Ltd v Christopher Savage [2006] NSWSC 786 at [25]-[26] per Nicolas J; Harlow Property Consultants Pty Ltd v Byford [2005] NSWSC 658 at [24]-[25] per White J. However, the onus is on the party who asserts that the restraint is not in the interests of the public to prove that fact: Attorney General of Australia v Adelaide Steamship Co Ltd [1913] AC 781 at 797; Stacks Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 at [43] per McDougall J. In determining whether a restraint is reasonable the court should consider what is necessary to protect the legitimate interests of the person asserting the restraint in the circumstances of the case. In the case of a restraint on the disclosure of information, those circumstances include (a) the extent to which the information is known outside the business; (b) the skill and effort expired to collect the information; (c) the extent to which the information is treated as confidential by the employer; (d) the value of the information to competitors; (e) the ease or difficulty with which the information can be duplicated by others; (f) whether it was made known to the employee that the information was confidential; and (g) whether the usages and practices in the industry support the claim of confidentiality: see Wright v Gaswell Pty Ltd (1991) 22 NSWLR 317 at 334 per Kirby P; Del Casale v Artedomus (Aust) Pty Limited [2007] NSWCA 172 at [40] per Hodgson JA referring to R Dean, The Law of Trade Secrets and Personal Secrets, (2002) 2nd ed at 190. A court should not too readily substitute its own view of what is confidential for the one that the parties have defined and agreed: Woolworths Limited v Olson [2004] NSWCA 372 at [39]; John Fairfax Publications Pty Limited v Birt [2006] NSWSC 955 at [21] per Brereton J. 37 Subsection 4(1) of the Restraints of Trade Act 1976 (NSW) provides: "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."

[17]

Subsection 4(3) provides that, if a restraint is unenforceable, the court may 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". The order takes effect from a date specified by the court. That date cannot be earlier than the date of the order. 38 In Orton v Melman [1981] 1 NSWLR 583 at 587, McLelland J described the operation of s 4 in these terms: "In my opinion where the court is to determine, in relation to a restraint to which s 4(1) applies whether (having regard to public policy) the restraint is enforceable in respect of an alleged breach (or threatened breach), it is proper first to determine whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed, and if so, then to determine whether the restraint, so far as it applies to that breach, is contrary to public policy. If the restraint, so far as it applies to that breach, is not contrary to public policy then by force of s 4(1) the restraint is to that extent valid, subject always of course to any order which may be made under s 4(3). " 39 In applying this approach, the court determines the extent to which the restraint is valid having regard to the actual circumstances of the case. The extent of the validity of the restraint is not to be determined by reference to hypothetical possibilities: Orton v Melman [1981] 1 NSWLR 583 at 587-8, quoted with approval in Woolworths Limited v Olson [2004] NSWCA 372 at [43]. Although the operation of section 4 does not depend on concepts of severability, it does not permit the court to rewrite the restraint: Wright v Gaswell Pty Ltd (1991) 22 NSWLR 317 at 329 per Gleeson CJ. 40 In my opinion, the confidentiality obligation in this case is expressed too widely. In effect, it covers all information relating to the businesses of RBI, its customers and employees. However, under s 4(1) of the Restraints of Trade Act the restraint is valid to the extent that it does no more than protect RBI's legitimate interests. In my opinion, RBI has a strongly arguable case that it has a legitimate interest in keeping the following information confidential:

[18]

a The advertising rates that RBI charges individual clients. The evidence suggests that this information is critical to RBI's business and would give UBM a substantial competitive advantage if the information became known to it because it would permit UBM to compete more effectively on the prices that it offered customers; b Website statistics. Some website statistics (for example, total number of hits) are in the public domain. However, the evidence is that RBI collects other types of website statistics which are not publicly available. Although there was little evidence before me of the precise nature of those statistics and why RBI regarded them as confidential, it is noteworthy that UBM made a claim for confidentiality in respect of website statistics it collected in relation to MyDr; c Business strategies concerning RBI's online products. Again, it seems to me knowledge of these business strategies would assist UBM to compete with RBI and for that reason they are likely to be held to be the subject of a legitimate claim of confidentiality; d Sales run sheets, brand plans, market research data, client proposals and presentations. Ms Coutinho gave evidence that sales run sheets include advertising rates for specific clients. For that reason, they are likely to be the subject of a legitimate claim of confidentiality. Brand plans consist of specific plans and information that RBI has gathered on certain pharmaceutical brands that RBI deals with. Again, there seems to me to be a reasonable basis for saying that knowledge of that information would give a competitor a competitive advantage and that they are, therefore, the subject of a legitimate claim of confidentiality. Client proposals and presentations seem to me to fall into the same category. According to Ms Coutinho, market research data are data that RBI buys from a third party supplier. The likelihood is that some duty of confidence is owed to the seller in respect of that information. For that reason, it is reasonable of RBI to seek to protect the confidentiality of that information. It is likely that RBI has incurred substantial costs in developing client proposals and presentations material and that it would assist UBM to compete with RBI to know that information; e Training and education material. It is likely that RBI has incurred significant costs in developing this material and, again, the material would be likely to assist a competitor if the competitor were to have access to it

[19]

In addition, Ms Coutinho gave evidence that she regarded each of these categories of information as confidential; and I think that I should accept that evidence for the purposes of an interlocutory hearing. 41 Two other categories of confidential information were raised during the course of the hearing. The first of those was client addresses and contact details. The second was the structure under which RBI pays commission to its staff. 42 In many cases, customer addresses and contact details may well be confidential. However, in this case, I think they are unlikely to be so. Ms Coutinho conceded in cross-examination that the market for advertisers in the medical publications published by RBI was essentially known to UBM. For that reason, on the evidence before me, I think that RBI claim that it has a legitimate interest in protecting the confidentiality of this information is weak. 43 The position in relation to RBI's commission structure is less clear. Ms Seymour gave evidence of RBI's commission structure in her affidavit evidence. Mr Lawson criticised her for doing so on the basis that the information was confidential. However, RBI did not make any application to me for a confidentiality order concerning that material; and I do not think the defendant can be criticised for placing clearly relevant information before the court and leaving it to the party who asserts that it is confidential to make an appropriate application if that party thought it necessary. Nonetheless, I accept that RBI took steps to protect that information and that the information would assist RBI's competitors to compete for employees and tailor their own commission structures. Consequently, I think that there are reasonable prospects that RBI will establish this information to be confidential to the extent that it is not already in the public domain. Non-compete clause 44 A non-compete clause is a legitimate means by which an employer can prevent an employee from taking unfair advantage of information the employee has gained during the course of his or her employment. It is a means of avoiding the difficulties associated with proving breaches of behavioural restraints - such as an obligation to keep information confidential and not to use it or an obligation not to solicit the clients or customers of the employer for a period of time: Stacks Taree v Marshall (No 2) [2010] NSWSC 77 at [41] per McDougall J; Portal Software v Bodsworth [2005] NSWSC 1179 at [83] per Brereton J. However, a non-compete clause, as in the case of any restraint, is only enforceable if it does no more than is necessary to protect the employer's legitimate interests. In assessing whether a specific clause does so, it is particularly relevant to consider the length of the restraint, its geographic operation and the nature of the competitive activities restrained: see Portal Software v Bodsworth [2005] NSWSC 1179. Again, as in the case of any other restraint, a non-compete clause is valid to the extent that it is not against public policy: Restraints of Trade Act, s 4(1). 45 The principles applicable to the interpretation of a contract are equally applicable to the interpretation of non-compete clauses. The words of a contract are normally to be given their ordinary and natural meaning: L Schuler AG v Wickham Machine Tool Sales Ltd [1974] AC 235 at 264 per Lord Simon. In interpreting the words it is necessary to take into account the contract as a whole, the circumstances in which it was entered into and the commercial object of the contract and the clause in question: Maye v Colonial Mutual Life Assurance Society Ltd (1924) 35 CLR 14; Charter Reinsurance Co Ltd v Fagan [1997] AC 313; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98, [1998] 1 WLR 896. The words should be interpreted bearing in mind that they are often written by people who use language more loosely than lawyers: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98; [1998] 1 WLR 896. Sometimes, these principles mean that words will be given meanings which are not their most obvious ones and sometimes it means that not all words of a contract will be given an effective operation: Fitzgerald v Masters (1956) 95 CLR 420 at 426-7 per Dixon CJ and Fullager J; Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201. If there is an interpretation of a clause which means that the clause is unenforceable or void and an interpretation which means that it is enforceable, then the latter interpretation is to be preferred: Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] AC 133 at 161 per Lord Morton. However, none of these principles permit the court to rewrite the contract: Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] 129 CLR 99; Kooee Communications v Primus Telecommunications Pty Ltd [2008] NSWCA 5. 46 Two other principles are relevant to the interpretation of non-compete clauses in employment contracts. First, "[a] stricter and less favourable view is taken of covenants in restraint of trade between employer and employee, than in commercial agreements": Portal Software v Bodsworth [2005] NSWSC 1179 at [64] per Brereton J, referring to Geraghty v Minter (1979) 142 CLR 177; see also Woolworths Limited v Olson [2004] NSWCA 372 at [38]. Second, absent ambiguity, the clause must be construed independently of the rules prescribing tests of reasonableness for the purpose of ascertaining its validity. As Dixon CJ explained in Butt v Long (1953) 88 CLR 476 at 487: "An agreement in restraint of trade, like every other agreement, is to be construed with reference to a subject matter and descriptive words may be restricted in their operation by reference to the circumstances in which the parties contract. But the agreement should be interpreted for the purpose of ascertaining its real meaning independently of the rules prescribing the tests of reasonableness for the purpose of ascertaining its validity. If an evident ambiguity appears from its text, it may be proper to take into account the law relating to the validity of covenants in restraint of trade in resolving the ambiguity, but a restrictive interpretation of general words is not to be adopted simply to save a covenant or agreement from invalidity."

[20]

47 The non-compete clause in this case raises several issues. The first is its correct interpretation. The second is whether, on its correct construction, it is an unreasonable restraint of trade. The third is, if it is, whether some part of it can be saved under s 4 of the Restraints of Trade Act. The fourth is whether, if it is enforceable, the defendant is in breach of it. 48 The non-compete clause in this case is not well drafted. The principal difficulty with it is that it seems, in part, to compare different things - "any person, company, business, … or joint venture'" on the one hand and three specific publications on the other - and to ask whether they are in direct competition with one another. 49 In my opinion, the resolution of this difficulty is to interpret the clause as requiring identification of all the activities of the entities that are the subject of the comparison and to ask whether, taking into account those activities, it could be said that they are in direct competition with one another. The extent and the nature of the overlap will determine whether one is in direct competition with the other. On this interpretation, a global media company which publishes a magazine which is in direct competition with, for example, Australian Doctor, would not itself be in direct competition with Australian Doctor because there is not a sufficient overlap between their respective activities, although the two publications would be. On the other hand, if a company only publishes one publication and that publication is in direct competition with Australian Doctor, then the company itself could itself be said to be in direct competition with that publication because the activities of the company and of the publication largely overlap. 50 Mr Lawson seeks to give a broader interpretation of the clause. He says that it prohibits Ms Seymour from working in any position with UBM because UBM publishes publications which are directly competitive with 6minutes, Australian Doctor and PharmacyNews and therefore is itself in direct competition with those publications. The difficulty I have with that interpretation is that the clause itself is not clear and the interpretation that Mr Lawson seeks to give it would render it unenforceable. As Mr Seck points out, the clause has no geographic limit. Nor does it place any limits on the prohibited activities - the prohibition is on working in any capacity: cf Rentokil Pty Ltd v Lee (1995) 66 SASR 301; TV Shopping Network Ltd v Scutt (1998) 43 IPR 451 at 457 per Young J (as he then was). On Mr Lawson's interpretation, the clause would prohibit Ms Seymour from working for UBM overseas (assuming UBM itself carries on activities overseas) in any capacity. A restraint in those terms would, in my opinion, go beyond what is necessary to protect RBI's legitimate interests. In my opinion, the drafter of the clause was conscious of these issues and, for that reason, chose to make the comparator the three publications rather than RBI itself. By doing so, it was unnecessary to identify a geographic limitation to the restraint or the nature of the restrained activities because they were sufficiently identified by the activities and geographic reach of the three publications. 51 Mr Lawson also submitted that it was not necessary to compare all the characteristics of the relevant publications or entities. It was sufficient to identify one area of competition. For example, in his submission, if two publications both carried S4 advertising, they would be directly competitive by virtue of that fact. I do not accept that submission. In my opinion, it places too little weight on the word "direct". For example, a large range of publications carry S2 advertising. I do not think that it could be said that they are in direct competition with Pharmacy News by virtue of that fact alone. 52 Mr Lawson also submitted that the facts of this case are indistinguishable from those of John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995, where Brereton J granted an interlocutory injunction restraining the employee from commencing employment with a competitor of the plaintiff. I do not accept that submission. In that case, the wording of the restraint was very different. The restraint was for a period of three months. It prevented the employee, anywhere in Australia, from carrying on, being engaged or interested in, in any capacity, or otherwise associated with a business that was in competition with the Fairfax Group. The fact that Brereton J found that there was a strongly arguable case that that restraint was valid says nothing about the correct interpretation of the restraint in this case. 53 The wording of the restraint in this case raises three other issues. 54 First, Mr Seck submitted that the use of the word "and" in the expression "6minutes, Australian Doctor and PharmacyNews" meant that the relevant entity must be competitive with all three. I do not accept that submission. In some cases, "and" may mean "or". That is particularly so where, as in this case, the word links a list which can plainly be seen as alternatives: see GPI Leisure Corporation Ltd (in liq) v Yuill, unreported, NSWSC, Young J, 6 March 1998; see also Associated Newspapers Ltd v Wavish (1956) 96 CLR 526 (concerned with the interpretation of "and" in a statutory context). In my opinion, the draftsperson used the word "and" to make it clear that the comparison the clause requires to be made should be made with each of the three publications. Literally, the word "or" would have been more appropriate to achieve that result, but I do not think it follows from that that the word "and" has the effect that Mr Seck says it does. 55 Mr Seck also submitted that the length of the restraint - 12 months - was too long. Again, on the evidence before me, I do not accept that submission. The evidence is that many advertising contracts were negotiated for periods of between 1 and 4 years. Accepting that the restraint has the meaning I have found it to have, I think that it was reasonable for RBI to seek to prevent Ms Seymour from working for a publication which was in direct competition with 6minutes, Australian Doctor or Pharmacy News during the period when many of the contracts for which she was responsible would first come up for renewal after her departure from RBI. 56 Finally, in this case, the operation of the non-compete clause does not depend on whether there is direct competition with one of the three named publications. Rather, it depends on the formation of RBI of an opinion about that question. Mr Seck submits that for that reason it is void for uncertainty or unreasonable and therefore unenforceable. 57 I do not accept either of these submissions. In my opinion, the expression "which in the opinion of RBI" either carries with it the requirement that the opinion be formed reasonably or that a term to that effect should be implied: cf Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Western Metals Resources Ltd v Murrin Murrin East Pty Ltd [1999] WASC 257; Abu Dhabi National Tanker Co v Product Star Shipping Ltd [1992] 2 All ER 20. Mr Seck sought to distinguish cases such as these on the basis that they are concerned with an exercise of a contractual discretion, whereas in this case RBI is required to form an opinion. In my view, however, that makes this case a clearer case in which to import into the requirement that RBI form an opinion that it do so reasonably or, alternatively, for the implication of a term to that effect. The clause requires RBI to form an opinion on what is essentially a question of fact. The parties must have intended that the opinion be reasonably related to the fact which is its subject - in other words, that the opinion be formed reasonably. 58 I do not see how a clause which depends for its operation on the reasonable formation of an opinion is void for uncertainty. Nor do I think that such a clause is unreasonable. Mr Seck submitted that I should find that it was unreasonable having regard to cases such as JW Chafer Ltd v Lilley [1947] LJR 231. However, the point made by authorities such as that is that an otherwise unenforceable clause cannot be made enforceable because its operation will be circumscribed by the exercise of a discretion or the formation of an opinion. Here, however, the clause on its terms has a reasonable operation and the discretion relates to its application. If that discretion simply involves the formation of a reasonable belief concerning its application to particular facts, I do not think that the clause itself could be said to be unreasonable. 59 It is true that one consequence of the interpretation of the non-compete clause that I have adopted is that it permits Ms Seymour to work for a company that could be described as a competitor of RBI provided she does not work in any capacity for a publication that is in direct competition with 6Minutes, Australian Doctor or Pharmacy News. In doing so, it fails to achieve one of the common goals of non-compete clauses - which is to avoid the difficulties of proof where an employee is permitted to work for a competitive organisation but is required not to do particular things while doing so. However, these difficulties arise from the particular way in which the clause is drafted. It is a problem that can only be overcome by rewriting the clause.

[21]

Does the defendant's employment with UBM breach the non-compete clause? 60 On my interpretation of the non-compete clause, it is not an unreasonable restraint of trade. Consequently the application of the Restraint of Trade Act does not arise. However, two factual questions remain. The first is the capacity in which Ms Seymour works - in particular, whether her role is limited to MyDr and the special project on which she works or whether it can be said that her capacity is broader than that. The second is whether, if the only publication for which Ms Seymour works is MyDr, whether RBI could reasonably form the view that that publication is directly competitive with any of 6minutes, Australian Doctor and Pharmacy News. 61 As to the first question, there is some evidence that Ms Seymour has, albeit unintentionally, performed some services for Medical Observer. The fact that she arranged meetings with customers or potential customers to discuss Medical Observer, in my opinion, falls into that category. Similarly, the fact that she participates in a meeting at which Medical Observer is discussed would also fall into that category, even if she did not herself participate in that discussion. However, there is no evidence her role involves working for Medical Observer. Although that is what was originally proposed, the evidence before me suggests that her role was changed to take account of the non-compete clause. 62 As to the second question, in my opinion, RBI's claim that it could reasonably form the view that MyDr is in direct competition with any of 6minutes, Australian Doctor and Pharmacy News is weak on the evidence before me. MyDr is directed at members of the public. The fact that health professionals use it does not alter this fact. It is not a newsletter or periodical. Rather, it operates more like an on-line encyclopaedia concerned with health issues. Most of its revenue is derived from licence fees. It carries no S4 branded advertising. 63 The conclusion of the previous paragraph is supported by evidence of the views of industry participants. RBI publishes a number of "media kits". The primary purpose of those media kits is to publicise the advantages of advertising in RBI's publications. In its media kit for Australian Doctor, RBI publishes circulation figures of Australian Doctor and of competitive publications. RBI does not list MyDr as a competitive publication, but it does identify Medical Observer as a competitor. Similarly, Mr Wills gave evidence of an industry association now known as Medicines Australia which, in order to meet the demands of advertisers, conducts audited comparative readership surveys in order to measure average issue readership, depth of readership, regularity of readership and reader demographics for individual publications of its members. In order to participate in the survey, a publication must meet certain criteria. Australian Doctor and Medical Observer participate in the survey. However, MyDr does not. The conclusion that MyDr does not compete directly with the three named publications of RBI is also supported by the new commission structure introduced by RBI. That structure provides that part of the commission payable to RBI staff is to be calculated by reference to the market share of Australian Doctor. It seems apparent that that market share is calculated by reference to the market defined by the four publications referred to in the Australian Doctor media kit. As I have said, those four publications do not include MyDr. Finally, there is some evidence - particularly from Mr Wills - that the advertising budgets for S4 advertising and other forms of advertising are separate so that there is little competition between publications that carry S4 advertising and those that do not. There was, however, conflicting evidence on this subject, and I do not place any significant weight on it of the purpose of the interlocutory hearing. Discretionary matters 64 The principal question in relation to discretionary matters is whether the defendant should be restrained from working altogether for UBM. The defendant, in her submissions, suggested that no interlocutory relief should be granted. However, it is clear that she has been prepared in the past to give undertakings in relation to confidentiality. For the reasons I have given, I think that RBI has a strongly arguable case that it is entitled to prevent disclosure and use of information that could harm its competitive position, and I think that the balance of convenience is strongly in favour of granting an appropriate interlocutory injunction. 65 I am not, however, prepared to grant an interlocutory injunction restraining the defendant from working for UBM. 66 I do not think that RBI has a strong case for a final injunction in those terms. On the conclusions I have reached, RBI would only be entitled to an injunction on a final basis preventing the defendant from working for UBM if it could establish that it could reasonably form the opinion that MyDr is in direct competition with 6minutes, Australian Doctor or Pharmacy News. If it cannot establish that then, at most, it would only be entitled to obtain an injunction restraining the defendant from working for Medical Observer, which is clearly in direct competition with Australian Doctor. For the reasons I have given, I think that it will be difficult for RBI to establish that it could reasonably form the view that MyDr is in direct competition with any of the three relevant publications. 67 In addition, I think that an injunction restraining the defendant from working for UBM would cause the defendant very substantial hardship. It would effectively mean that she would be unemployed. I accept that, in those circumstances, there is a real risk that she would lose her house. It is unlikely that an undertaking as to damages could fully compensate the defendant for that hardship. 68 Mr Lawson pointed out that Brereton J was prepared to give an interlocutory injunction in similar terms in John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995. However, in that case, the restraint was only for a period of 3 months and the injunction itself only had a period of slightly over two months to operate. It was also clear from the evidence that the defendant's new employer was prepared to keep his new position open for him. In this case, the injunction will operate for a much longer period of time and there is no evidence to suggest that UBM would be willing to employ the defendant on the expiration of an injunction restraining the defendant from working for it. 69 Mr Lawson also submitted that the defendant's position was largely of her own making. However, I do not accept that submission. The situation has come about because RBI decided to make substantial changes to the defendant's position not long after she signed the contract containing the restraint. Although it was entitled to do so, I do not think it can be said that the defendant is wholly to blame for the consequences. The defendant thought that she had a new job when she resigned. She tried to get her old job back when that job fell through. I do not think that it was unreasonable for her to reject the job that was offered to her. In saying that, I do not mean to suggest that RBI acted unreasonably. The point is simply that I do not think that it can be said that the defendant's position is of her own making. Finally, I do not think that the defendant adopted an unreasonable view about the correct construction of the restraint. 70 Mr Lawson also undertook on behalf of the RBI that RBI would pay the defendant's wages for the period of the interlocutory injunction and he submitted that, in view of that undertaking, the defendant would not suffer any significant hardship. Clearly, that undertaking would ameliorate that hardship, but I do not think that it overcomes it. A substantial part of the defendant's income while working for RBI was derived from commissions. Moreover, the result is still likely to be that the defendant would lose her current position and have to look for alternative employment. There is no evidence before me on how easy or difficult that would be. In circumstances where, in my opinion, RBI's claim for final relief preventing the defendant from working for UBM is weak, I do not think that the defendant should be put in that position. 71 In my opinion, having regard to the breaches committed by the defendant, RBI is entitled to an interlocutory injunction restraining the defendant from performing any services for Medical Observer. That injunction would, in effect, require the defendant to say nothing about Medical Observer to customers and to refer any questions asked by customers about Medical Observer to someone else. An injunction in those terms together with an injunction in relation to confidentiality would provide RBI with considerable protection. That is particularly so in circumstances where MyDr's principal source of revenue is not advertising and where it carries no S4 branded advertising. It is true that injunctions in these terms are difficult to police. But injunctions are frequently given restraining a breach of confidence and, as I have said, the position in which RBI finds itself arises largely from the way in which it drafted the non-compete clause. 72 Mr Seck raised the fact that UBM has not been joined as a party as a reason for refusing an injunction restraining the defendant from working for UBM. In my opinion, where an employee has entered into a contract with another employer, it is appropriate for the new employer to be joined as a party. The reason is that any order the court makes will have a direct effect on a contract to which it is a party: see News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 297ff. In this case, however, the orders that I propose to make will not have a direct effect on UBM because the defendant will still be able to perform her contract with it. Consequently, I do not think that its absence as a party is a reason not to make those orders. Orders 73 Having heard the parties on the precise form of orders I should make, the orders I make are these: