Slevin & Brown v Associated Insurance Brokers of Australia

Court of Appeal (Qld)|1996-02-16|Before: Pincus J, Davies J, Thomas J, MacKenzie J

JOINT REASONS FOR JUDGMENT - PINCUS AND DAVIES JJ.A.

Judgment delivered the 16th day of February 1996

This is an appeal from an order made in the Supreme Court that until the trial of the action or earlier order the defendants by themselves, their servants or agents be restrained from:

(b) using or communicating to any third party any information contained in the plaintiff's landlords' property protection insurance client list or any information concerning the holders of AIBA Landlord Property Protection Insurance policies, their premiums or renewal dates.

The respondent/plaintiff is an insurance broker which, at 16 October 1995 had a client list containing the names and addresses of about 470 real estate agents, all of whom had clients who were landlords on whose behalf they took out, through the respondent as broker, landlord property protection insurance policies on behalf of their landlord clients. That list also, in most cases, contained the Christian and surname of the property manager of the agent. Those policies were designed to indemnify a landlord for loss of rent in a variety of circumstances. The agents included a number of well-known agents such as Ray White, Raine & Horne, L. J. Hooker and The Professionals.

The appellants/defendants were employees of the respondent. The appellant Miss Slevin was, for about four years until 16 October 1995, manager of the relevant section of the respondent's business. On that date she gave notice of her resignation and ceased being in the respondent's employment. The appellant Miss Brown was an employee for approximately eleven years until August 1994. From about 16 October 1995 the appellants began to operate an insurance broking business in competition with the respondent. The respondent alleges that in doing so, the appellants were using the respondent's client list in breach of the appellants' duty of confidence to it. The respondent therefore brought an application to restrain the appellants from making use of the customer list until the matter is resolved at trial.

The chamber Judge determined that there was a serious question to be tried on each of the questions of whether the respondent's client list was confidential and whether the appellants took the respondent's client list for the purpose of forming the basis of their own client list. He further determined that the balance of convenience favoured granting the injunctions.

Several factors pointed to the confidentiality of the list. The most important of these, in our view, was that, though it might reasonably be expected that larger agents such as those referred to above would take out insurance of that or a similar kind, the complete list of all those who took out insurance of that kind through the respondent and the names of property managers, in each case, who handled the agent's business would be known only to the respondent and would plainly be of value to a prospective competitor. Moreover its compilation is likely to have involved considerable effort, it was not generally available to employees of the respondent and each such employee was required to enter into a confidentiality agreement. As to the indicia of confidential information see Wright v. Gasweld Pty. Ltd. (1991) 22 N.S.W.L.R. 317 at 334 and Schindler Lifts v. Debelak [1989] FCA 311; (1989) 15 I.P.R. 129 at 170-1. There was therefore adequate evidence on which the learned primary Judge could conclude, as he did, that there was a serious question as to the confidentiality of the list.

As to the second question, the learned Judge formed the opinion that there was "substantial evidence to support the view that the plaintiff's list of clients was taken for the purpose of forming the basis of the defendants' lists". In forming that opinion, the chamber Judge relied on the facts that the appellants' list bore "remarkable similarities" to that of the respondent's, including an identical spelling mistake which he considered was not explained satisfactorily. He also had the benefit of seeing the cross-examination of the appellants, from which he concluded that their explanation regarding the manner of compilation of their list from memory and supplementation from publicly available telephone directories not to be "very convincing". Counsel for the appellants gave no compelling reason for us to form a different conclusion.

There is no doubt that it is a misuse of an employee's duty of good faith to take a client list for intended use after termination of the employment relationship: Robb v. Green [1895] 2 Q.B. 315 at 317 and 319; Wessex Dairies Limited v. Smith [1935] 2 K.B. 80 at 85 and 89; Schindler Lifts v. Debelak supra at 170.

As to the balance of convenience, it was submitted for the respondent that it was at risk of losing a substantial proportion of its business which it had taken four to five years to establish if the injunctions were not granted. It was further submitted that damages would not be an adequate remedy for the respondent because of a real doubt that the appellants would be able to meet a judgment. On the other hand, it was submitted for the appellants that they would be at real risk of going out of business entirely if the injunctions were granted and that the respondent would be protected sufficiently by an order requiring the appellants to keep records of all accounts.

In our view the risk that, unless an injunction were granted, the respondent would be left without an effective remedy having regard to the matters referred to above, outweighed the risk that an injunction might put the appellants out of business. However the latter risk required consideration of whether injunctions sufficient to protect the respondent's interests could be framed in more limited terms than those in fact granted and the appellants were invited by this Court to suggest such terms.

In view of the concession made by Mr. Couper Q.C. referred to in the reasons of Thomas J., which concession we think to be proper, we are in favour of varying the order of Mackenzie J. in the way proposed by Thomas J. The order will therefore be set out in the reasons of Thomas J.

The facts have been stated in the joint reasons of Davies and Pincus JJA.

The restraint on the appellants until trial places them at a greater disadvantage than would have been the case had they simply parted company from their former employer and set themselves up in business without taking or using any customer list or confidential property of the respondent. For example they would have been in a position to make contact with at least the well-known real estate agents in Queensland by using the Yellow Pages and other points of contact. The present injunction restrains them from dealing with any clients of the respondent who appeared on the respondent's client list, and that substantially covers all relevant real estate agents in Queensland from whom property protection insurance business might reasonably be expected to eventuate.

It might therefore seem at first glance that the ambit of the restraint is too wide. However, counsel for the appellant was unable to articulate any practical way in which an alternative restraint could be formulated so that the appellants would be prevented from obtaining an advantage from use of the confidential information which the respondent's case suggests they have misused. We are concerned here with the form of an interlocutory injunction which is intended to preserve a situation affecting the parties so that the least inconvenience will occur before the matter can be authoritatively resolved. In these circumstances it is sometimes necessary that the Court make a robust order to restrain an apparent wrong rather than make no order at all on the ground that a perfect order cannot be formulated.

In Roger Bullivant Ltd v. Ellis [1987] ICR 464, a similar point was raised before the Court of Appeal concerning a restraint on dealing with persons whose names appeared on a card index. Nourse L.J. said:

"While I recognise that it would have been possible for the first defendant to contact some, perhaps many, of the people concerned without using the card index, I am far from convinced that he would have been able to contact anywhere near all of those whom he did contact . . . Having made deliberate and unlawful use of the plaintiffs' property, he cannot complain if he finds that the eye of the law is unable to distinguish between those whom, had he so chosen, he could have contacted lawfully and those whom he could not."

As it is not possible to frame a more limited from of restraint, it is appropriate that the wide restraint should remain, notwithstanding that it prevents some activities that they could have undertaken lawfully without using the confidential information. In this respect the respondent will obtain a rather greater level of protection from competition than it would otherwise have been entitled to.

It is therefore important that the restraint should not be permitted to operate for a period greater than that during which the respondent's customer list would remain a valuable tool in the hands of the appellants. In Bullivant (above) the Court recognised this, observing that it was necessary to consider how long the advantage might reasonably be expected to have lasted, and to limit the duration of the order to that period. In that instance the Court limited the interlocutory injunction to a maximum period of twelve months after the termination of the former employee's employment.

In the present case Mr Couper QC, for the respondent, resisted the imposition of a time limit, but indicated that if the Court were prepared to order a speedy trial and limit the duration of the injunction to a maximum of twelve months, his client would have very little complaint. That seems to be a reasonable concession given the fact that the customer list has a limited life-span and is constantly changing. It may well be that the present litigation will be concluded within twelve months, but that is far from certain, and it is better that both parties have an incentive to expedite the litigation rather than only one of them. I therefore think that a twelve-month limit should be placed upon this interlocutory injunction. When, as here, the Court is forced to give one party a wider protection than that party is strictly entitled to it is extremely important that the Court should do all it can to ensure that the wide restraint does not continue any longer than is reasonable.

I would therefore allow the appeal only to the extent of varying the order of Mackenzie J by adding the words, "or 9 November 1996, whichever is the earlier" after the words, "until the trial of this action or earlier order" in paragraph 1, and by adding a direction that the matter be tried speedily.

Neither of these points were raised for the consideration of the learned primary Judge and the appeal has in substance failed. I would therefore order that the appellants pay the respondent's costs of the appeal to be taxed.

At a glance

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Judgment (24 paragraphs)

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