and
Bruce McCluskey, the OAMPS Manager at Wollongong has encouraged me to go for my life and sign up as many SGP clients as possible. I have not been given a book of the clients by OAMPS so I'm totally dependent on poaching clients.
13 From about 24 January 2006, it became apparent to SGP that some of its Bowral clients were, at the instance of Ms Rockett, engaging OAMPS as their brokers in place of SGP. This became apparent in particular from eight letters of engagement, on which the client's name and address were filled out in handwriting which has been identified as that of Ms Rockett, notifying the addressee that the client had engaged the firm of OAMPS to act as their brokers. Those letters of engagement were typically forwarded to an insurer, under a facsimile cover sheet on OAMPS letterhead, signed by Ms Rockett, who described herself as an account executive and employee adviser.
14 On 2 February 2006, SGP approached the Court for ex parte relief, and obtained leave to file a summons returnable on 6 February 2006. It seems that the summons was served on 2 February.
15 When the matter was called on 6 February, Mr Gruzman, of Counsel, initially appeared only for the second defendant, and there was no appearance for Ms Rockett, but ultimately Mr Gruzman announced his appearance for Ms Rockett also, but limited to the proceedings that day. No evidence has been put before the Court by Ms Rockett. OAMPS has indicated that if an injunction is granted against Ms Rockett, then it will consent to certain relief against it on terms which have been agreed between the parties.
16 The evidence to which I have referred establishes, particularly in the absence of any to the contrary, that there is a seriously arguable case that Ms Rockett is soliciting or attempting to solicit existing customers of SGP in its Bowral portfolio. Although Mr Gruzman has submitted that there is no evidence that the customers solicited are customers with whom Ms Rockett has dealt with in the 18 months before her employment came to an end, I take into account the cyclical annual nature of insurance business and the circumstance that it is, I think, inevitable that any current client would have renewed insurance within the last 12 months. It is at least seriously arguable that the customers whom Ms Rockett has attempted to solicit are customers with whom she had dealings within the last 18 months. The circumstance that she has been able to provide the names and addresses of customers in the new Letters of Engagement, and also to identify the insurers with whom they have policies, raises a case that she has in her possession information relating to those customers and their insurances which enables her to do that. On an application such as the present I am all the readier to infer that she has retained information in her possession, notwithstanding her earlier statutory declaration, when no evidence to the contrary has been adduced.
17 I am, therefore, satisfied that there is a seriously arguable case that Ms Rockett has and, unless restrained, will continue to, solicit or endeavour to solicit away from SGP clients with whom she has had business dealings in the 18 months before her employment was terminated, in contravention of the restraint to which I have referred; and also that she has retained, in her possession, information in some form relating to the names and details of clients, customers and suppliers in contravention of her obligations under the confidentiality provision to which I have referred.
18 A question arises, however, as to whether the restraint would survive the test of reasonableness in the light of the public policy against restraint of trade. Because of the Restraints of Trade Act 1976 (NSW), in this State one starts, not from the position of considering at the outset the validity of the restraint upon its proper construction in the abstract, but by asking whether the restraint in its application to the particular breach sought to be restrained is excessive.
19 During a contract of employment, an employee is not entitled to solicit the employer's customers. After termination of employment, however, in the absence of a covenant, an employee is at liberty to solicit the customers of his or her former employer. But the law recognises that an employer has a legitimate interest in preserving customer connection, which it is entitled to protect by taking a covenant so long as that covenant is not more than is reasonably necessary to protect the employer's interests. In particular, the employer is entitled to take a covenant sufficient to enable it to find a replacement employee and to provide that replacement employee a reasonable opportunity to establish a position, reputation and connection with customers in place of that which the departing employee occupied.
20 It is relevant in this case that so far as the evidence goes, Ms Rockett appears to have been, in respect of the Bowral portfolio, the human face of the employer: it was she who represented the employer in its dealings with the Bowral portfolio clients. It is also relevant that while there are many aspects of the Restraint Agreement which might ultimately be found to be excessive, that part which is sought to be enforced at this stage is limited to dealings with persons with whom Ms Rockett dealt in the last 18 months. In other words, it prevents only dealings with those customers of SGP with whom the employee was a point of contact in the last 18 months. The evidence suggests that she dealt with all the Bowral portfolio. As Campbell J said in Hellmann Insurance Brokers v Peterson [2003] NSWSC 242, at [22]:
The very fact that insurance broking is an industry where there is a relationship of trust and confidence between the Broker who handles an account and the client is something which means an employer who seeks to buy the goodwill of the business has a particular vulnerability to employees who depart.
21 Similarly, an employer who sells the business upon terms that the price will be dependent upon future business is vulnerable to employees who depart.
22 I have already referred to the annual cyclical nature of insurance business. Typically, a customer will deal with an insurance broker once a year when it is time to renew insurances. It suffices to say, for present purposes, on that basis that I think it distinctly arguable that, in its application to the breaches presently sought to be restrained, a covenant would be reasonable for a period of up to 12 months, against solicitation of customers with whom she dealt in the last 18 months following departure.
23 Mr Gruzman has argued that damages would, in any event, be a sufficient remedy, particularly as SGP is no longer conducting a business at Bowral. Although it is true, as Mr Gruzman points out, that at this stage the damages are relatively small and quantifiable, the mere fact that damages might be quantifiable does not mean that they are a sufficient remedy, and the mere fact at this stage that they are small does not mean that they will remain so if Ms Rockett continues to solicit clients of SGP indefinitely. Indeed, if she succeeds in soliciting as many clients as she can, the selling price for the portfolio might well be reduced to practically nothing, and there is nothing to show that Ms Rockett would have the capacity to pay the potentially large damages which might then eventuate.
24 As SGP has sold an ongoing business so far as the Bowral portfolio is concerned, preservation of that business is consistent with its obligations to convey to the purchaser a viable business and not to derogate from what has been conveyed, and that is a further reason which suggests that damages are not a sufficient remedy. But more important than all of these is that what is sought is an injunction to restrain a breach of a negative contractual stipulation, and the policy of the Court in that context is generally to hold parties to their bargain, where it is valid and enforceable.
25 I am therefore not satisfied that damages would be a sufficient remedy, at least on an application of this type, whatever might be the outcome of the final hearing.
26 So far as the balance of convenience is concerned, on the serious question to be tried which I have found, at least so far as the contravention of the restraint is concerned, the plaintiff's case is, at first sight, a relatively strong one. Ms Rockett has adduced no evidence of hardship. There is - indirectly, by secondhand hearsay - a suggestion that she has not been provided a portfolio of clients by her new employer, but there is no evidence that she would not retain her job, and she remains free to solicit customers from anywhere she likes, save for the 370 from the Bowral portfolio list of SGP. On the other hand, if an injunction is not granted, there is a realistic prospect that the price payable to SGP on the sale will be further eroded and, indeed, potentially to a point that the loss would exceed Ms Rockett's capacity to satisfy an award of damages.
27 Upon the plaintiff by its counsel giving the usual undertaking as to damages, I order: