Think: Education Services Pty Ltd & ors v Lynch

Judgment 1HER HONOUR: Before me in the duty judge list on 25 August 2011 was an application brought by four companies within the Think: Education Group of companies (to which I will refer as the Think group), seeking an interlocutory injunction to restrain the former Group Marketing Manager of Think: Education Services Pty Ltd (Mr Kevin Lynch) until further order from performing work for a company identified as a direct competitor in the business of providing online tertiary educational services to the public (Open Colleges Australia Pty Ltd) or any related entity (including a company for which Mr Lynch has previously worked, Cengage Education Pty Ltd). (Of the three plaintiff companies with the word 'Think' in their company name, I will refer to the first plaintiff simply as Think.) 2Mr Lynch's employment with Think commenced in April 2008 and ceased on 16 August 2011 following the tender by Mr Lynch of his resignation on 16 May 2011. He commenced employment with Open Colleges Australia (formerly known as Nexus Education Group Pty Ltd) on 17 August 2011 (having foreshadowed an intention to do so at the time of his resignation and having been put on notice that if he did so prior to the expiry of a six month restraint period for which provision was made in his contract of employment Think would take interlocutory action to prevent him from so doing). The Summons was filed in Court on 22 August 2011 (at which time an order for short service was obtained). 3The basis on which the interlocutory injunctive relief is sought is that the performance of work by Mr Lynch for his new employer would amount to a breach of the negative covenant contained in Mr Lynch's contract of employment with Think (that contract comprised by his acceptance of the terms of a Letter of Appointment dated 18 April 2008), this being a valid restraint in order to protect Think's legitimate business interest in the protection of its confidential information. That negative covenant, relevantly, is in the following terms: During the period of your employment and for six months (or in the event that this period is found to be unreasonable, three months) following the cessation of your employment for any reason you will not: (a) engage in any business or activity that is the same or substantially similar to the business carried on by the Company [Think] or its related bodies corporate; ... 4The Letter of Appointment also imposed an obligation to maintain the confidentiality of information relating to Think and its clients and the term "Confidential Information" was defined as meaning "all information, including but not limited to the proprietary information or the intellectual property of [Think] and its Related Bodies Corporate, regarding [Think]'s commercial interests, records, computer files, customers, employees, product or service information, marketing and sales information, financial information, strategic and business issues, client lists and computer software owned or used by [Think]". (Perhaps ironically, the Letter of Appointment was signed by the Chief Executive Officer of Think: Education Group (the second plaintiff), Mr Anthony Bohm, who is now the Joint Chief Executive Officer and a director of Open Colleges Australia (and has affirmed an affidavit in these proceedings.) 5Mr Lynch is described as having been the most senior member of Think's marketing team between April 2008 and 16 August 2011 (first as Strategic Marketing Manager and then as Group Marketing Manager. Before that, he had been employed for a period in 2007 to 2008 as Head of Marketing by Cengage. He is now employed as General Manager of Marketing & Communications with Open Colleges Australia. The terms of his current employment contract were not before the Court. Issues 6The present application being for interlocutory relief, the issues for determination are whether there is a serious question to be tried that the negative covenant contained in Mr Lynch's contract is a valid restraint (whether for 6 months or the lesser period of 3 months or as read down by the operation of s 4 of the Restraint of Trade Act 1976 (NSW)) and that there has been a breach or a threatened breach of the covenant; whether the balance of convenience lies in favour of the interlocutory injunction; and whether there are any discretionary factors which tend against the grant of relief. 7Senior Counsel for Mr Lynch (Mr Goot SC) submits that the grant of interlocutory relief in this matter is likely effectively to provide final relief given the duration of the term of the restraint (whether that be 6 months or, if the lesser period applies, 3 months) and the time that it is said it would take Mr Lynch to find other employment in the education industry at his level of qualification and remuneration. Thus it is submitted that the grant of any interlocutory injunction of the kind sought needs to be approached on a ' Kolback basis '. 8The reference to a determination of the issues on a Kolback basis is a reference to what was said by McLelland J (as his Honour then was) in Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 at p3, as to the proper approach of the Court to an application for interlocutory relief in circumstances where the decision to grant or refuse an interlocutory application will in a practical sense determine the substance of the matter in issue. His Honour said: As I see it, the position is as follows. 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, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled: see, eg, Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; 56 ALR 73 at 79. 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: see, eg, A v Hayden (No 1) (at 4; 78); Cohen v Peko-Wallsend (1986) 61 ALJR 57 at 59; 68 ALR 394 at 397. If the Court does decide the question of law the uncertainty is to that extent removed. Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused : Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; 52 ALR 651; A v Hayden (No 1) ; Castlemaine-Tooheys Ltd v South Australia (1986) 60 ALJR 679; 67 ALR 553 and Cohen v Peko-Wallsend Ltd. Apart from this, although normally the Court "does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case" (Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622), there are some kinds of case in which for the purpose of seeing where lies the balance of convenience (or more specifically "the balance of the risk of doing an injustice" - see per May LJ in Cayne v Global Natural Resources plc [1984] 1 All ER 225 at 237, cf per Brennan J in Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1983) 57 ALJR 288 at 292; 46 ALR 279 at 285), it is desirable for the Court to evaluate the strength of the plaintiff's case for final relief: see, eg, Brayson Motors Pty Ltd v Federal Commissioner of Taxation (at 292; 285); Castlemaine-Tooheys Ltd v South Australia at 682; 559. One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: see, eg, NWL Ltd v Woods [1979] 1 WLR 1294 at 1306-1307; [1979] 3 All ER 614 at 625-626 per Lord Diplock; Cayne v Global Natural Resources plc. The present is such a case... (my emphasis) 9What his Honour indicated was desirable in such a case, therefore, was an evaluation of the strength of the plaintiff's case for final relief in the context of the interlocutory application. Whether that is appropriate in this case turns on whether (as was the case in Kolback) the determination of the interlocutory application will in a practical sense irrevocably (to use his Honour's words) or finally determine the matter in issue. That will be the case in the present instance only if it is assumed that a final hearing cannot take place and be determined within the lesser restraint period of 3 months or if it is likely that on a final determination the 3 month so-called 'gardening leave' (being the period from 16 May 2011 when Mr Lynch says he mainly worked from home and had not had access to Think's intranet (which is not accessible remotely) will be treated as making any further restraint unreasonable. 10Mr Goot notes that the Kolback approach was applied in Romeg Holdings Pty Ltd v Kelly where Allanson J accepted that where, in a practical sense, the relief there sought would prevent the defendant from seeking work from a large part of the market for its services or else would require it to cease work for two significant clients and hence could determine the substance of the dispute, that potential consequence warranted "a careful consideration of the merits of the claim". There, where the case was found to be largely based on the inferences the plaintiff said should be drawn from the various events and circumstances, and except in relation to particular allegations the view taken by Allanson J was that the case made for the drawing of those inferences was weak, the balance of convenience "on that finding" was against the grant of relief. 11I accept that if the practical effect of injunctive relief in this case would be to determine the substance of the dispute then a closer evaluation of the merits of the claim would be warranted than is the case on an interlocutory application which does not have that practical consequence. However, I am not satisfied that this is necessarily such a case. 12Under the terms of the contractual restraint, the minimum period for its operation is three months from the date of cessation of employment (i.e. 17 November 2011). Counsel for the plaintiffs (Mr McDonald) informed me that his clients would submit to an order for an expedited hearing of the final application for relief and it seems to me probable that a 3 day expedited hearing could be concluded well within that time frame (that being what was ultimately agreed would be a reasonable estimate for an expedited final hearing). 13Although I note that there is an argument that any restraint at all would not be reasonable, having regard to what Mr Lynch says were the activities in which he was engaged on behalf of Think during his 3 month notice period, even on Mr Lynch's evidence (see paragraphs 32-33 of his affidavit of 24 August 2011) he was performing work (including attending meetings) for Think during the relevant period. 14In Tullett Prebon (Australia) Pty Ltd v Simon Purcell [2008] NSWSC 852, Brereton J appeared to consider that a period of 'gardening leave' would be relevant to the question of reasonableness of a post-contractual restraint in an employment context. His Honour said at [52]: The next question is whether the restraints are no more than reasonable for the legitimate protection of the relevant interests. There is no difficulty in concluding that the relevant contractual prohibitions are reasonable in the interests of the parties during the continuation of actual employment. However, although TPAust does not seek to enforce the post-employment restraint - accepting that it is offset by credit for the period of "gardening leave" under cl 12.4 - in the view I take it is necessary to decide what period after actual employment comes to an end is reasonable for a restraint. Conventionally, this involves a period sufficient to permit the employer to replace the employee and allow the replacement a reasonable opportunity to prove his or her competence to customers. 15(His Honour held that the contractual post-employment restraints for a period of three months were there reasonable in a relatively small industry such as this, in which the various players were well known to each other (so that clients might well seek out the former employee in his new employment even in the absence of active solicitation), having regard to the period of earlier contractual restraints between the parties and other matters.) 16However, the 'gardening leave' in Tullett Prebon was what one might describe as a complete break from the business and operations of the company, which is not what Mr Lynch has described in his affidavit and he concedes (although he says that he did not make use of the facilities) that he had the ability remotely to access emails sent to him over the period and that his computer privileges and access to the company's offices and information were not denied him over his notice period. To the extent that a determination of the level of his connection to the office (and his access to any confidential information of Think) over that period depends on Mr Lynch's evidence, that has not yet been able to be tested. There was, for example, a confidential exhibit tendered of an email sent to Mr Lynch over that period, although Mr Lynch says that he did not access it. 17Therefore, while I consider it appropriate to approach with careful consideration the evaluation of the evidence going to the questions to be tried in this case and the balance of convenience (having regard to the possibility that this will in a practical sense determine at least the claim for injunctive relief on a final basis, I am not persuaded that the Kolback approach is enlivened. 18Before turning to the issues to be determined, I set out briefly the relevant facts as they emerged from the affidavit material relied upon by the parties (noting that while the evidence given by the persons involved in the respective companies has not been tested in cross-examination there are various matters that have not yet been challenged or put in issue in reply by the plaintiffs). Background Facts 19As noted earlier, Mr Lynch's employment contract (as per his Letter of Appointment) was with Think. Although the Letter of Appointment was signed by the then Chief Executive Officer of Think: Education Group Pty Ltd, it is not suggested by Mr Bohm that he did not have authority to commit Think to the contractual arrangements set out therein. (Nor is it suggested, although a copy of the Letter of Appointment bearing Mr Lynch's signature was not in evidence, that the Letter does not set out the contractual terms of his employment with Think. 20Relevantly, however, there is no suggestion that the other plaintiffs were party to any contractual arrangements with Mr Lynch and it is therefore difficult to see how they would have any contractual right to observance of the negative covenant in question. (There might be a basis on which an equitable duty of confidence could be enforced by one or more of them in relation to specific confidential information provided to Mr Lynch, such as the information of Seek Learning Pty Ltd, the fourth plaintiff, contained in a particular email sent to him (but which he says he did not access) during the notice period, but that has not been claimed, as I understand it.) It does not seem to be disputed that the plaintiffs are related entities. The three "Think" companies offer accredited tertiary courses for a fee to students who either attend one of the Think group's colleges (identified in paragraph 12(b) of the affidavit affirmed 22 August 2011 of Mr Everingham, the Managing Director of SEEK Ltd and, during 2010, the Acting Chief Executive Officer of Think: Education Group, the second plaintiff) or complete courses online. Seek Learning markets and sells tertiary education courses supplied by the other plaintiffs (and also by third parties) for which it is paid fees referable to the number of students enrolled in courses with those education providers. The plaintiffs are all subsidiaries of SEEK Ltd. 21Mr Everingham deposes (paragraph 15) to the fact that marketing is a central and critical activity for the viability of the education businesses and that the Think group marketing strategy is focussed primarily on specific online methodology "including strategic use of banner advertising, key word searching and other online advertising tools" that he says were researched and developed during Mr Lynch's employment. It is said that Mr Lynch was "intimately involved" during his employment in the development of the marketing and activity plans for the education businesses. Mr Everingham describes in his affidavit the methodologies and marketing processes that he says were developed and I do not repeat that here. They include, as I understand it, the promotion and advertisement of courses through Google and marketing activity through what is referred to as "banner advertising and pop-ups". 22Paragraph 27 of Mr Everingham's affidavit lists what he says is the confidential information to which Mr Lynch has had access throughout his employment (including online marketing and activity plans, strategic growth plans, future new product and course development pipelines, student retention strategies, budgets and expenditure and brand differentiation strategies). 23Mr Lynch addresses in some detail those areas in his affidavit, deposing that he has not viewed or accessed any information in relation to sub-paragraphs 27(a)-(c) and (e)-(f) since he tendered his resignation and does not know anything about (d) - student retention strategies - other than as set out in his affidavit at [62]. He says that he does not understand what specific confidential information Mr Everingham is referring to in para [27] of the latter's affidavit. Pausing there, I accept that there is a level of generality in the description by Mr Everingham of the confidential information. Nevertheless, what is highlighted by Mr Lynch's response is that there is a hotly contested factual issue on the identification of any confidential information within Mr Lynch's possession as at the cessation of his employment - a matter for determination at a final hearing and not on an interlocutory basis. 24On 16 May 2011, Mr Lynch gave three months' notice of his intention to resign. At the time that he told the person to whom he reported (Mr Chapman) of his resignation, he says that he told him that he was going to Cengage and that he would prefer not to work on anything confidential for the remainder of the notice period (to which Mr Chapman is said to have agreed). This paragraph [26] of Mr Lynch's affidavit was the focus of much attention during the submissions before me. Mr McDonald relies on this as an admission by Mr Lynch that he has confidential information in his possession. Mr Goot denies that it is any such admission but says, in any event, that it is not denied that Mr Lynch had access to confidential information during the course of his employment but that it was no longer current when he ceased his employment and is not now in his possession. I do not read paragraph 26 as an admission that he had or has confidential information; but, rather, as an awareness by Mr Lynch that he might over the notice period receive confidential information and a request, in effect, that he be quarantined from any such information. That, to me, (and accepting for present purposes that this conversation is not disputed by Mr Chapman) is inconsistent with any intention on the part of Mr Lynch to have access to confidential information in the period leading up to his departure from the company (but is consistent with an intention to honour his obligations in relation to confidentiality). 25On 26 May 2011, Mr Lynch sent an email to the chief executive of Think (Ms Phillipa Blakey) in which he confirmed his resignation (attempts having apparently been made to persuade him to stay with the company) and his awareness of an obligation not to take with him or use any confidential information of Think or its related bodies corporate and, relevantly, seeking (not unreasonably in my view) information from Ms Blakey as to whether there was any particular information about which the company had concerns in relation to confidentiality: I would prefer not to end up in an argument over this and expose myself to being sued, so if there are specific concerns about information or protecting the business interests of Think I would like Think to let me know so we can manage the next few months and I can support my family after I leave Think. 26The response to this was not to identify any particular confidential information as to the use of which the company was concerned but, rather, by email of 30 May 2011 to assert that "..it is reasonable for us to require that you do not join a competitor of ours, including Nexus Education, for at least the 6 month period after your employment ends. This is because of, amongst other things, your level of seniority, your knowledge of our sensitive business and marketing information and the valuable consideration we have paid in return for the restraint". From this, it would seem, the concern of Think was as to information that might be described as being in Mr Lynch's head (perhaps as to strategic direction or growth plans in general or the like) rather than particularly sensitive detailed information of a kind that it might not be expected a marketing manager, as opposed say to an accountant or financial manager, would keep at the forefront of his or her mind (or other detailed information such as the keyword 'clicks' or student 'leads'). What conceivably might be retained in one's memory could be knowledge of matters such as the 'key search terms' described in paragraph [39] of Mr Everingham's affidavit at least if those were limited in compass (though Mr Lynch's response is that there were around 40,000 keywords at any given time and that he could not recall the specific combinations and permutations of keywords bid for by Think - [50]) or the amounts bid for them (though Mr Lynch says that he did not get involved in the detail of matters such as this and that those matters were handled by brand managers in conjunction with external advertising agencies - [49]). Mr Lynch also points to his knowledge of marketing methods derived from the time that he was employed at Cengage ([48]). 27On 8 June 2011, the then solicitors for Mr Lynch wrote to Think asserting that the restraint was unenforceable as written but communicating Mr Lynch's willingness to confirm that he would take steps to ensure that there was no breach of any other part of the restraint; asserting that the business of Cengage was not competitive with that of Think "as they are on different ends of the business spectrum"; and asserting that Think needed to point to some information that Mr Lynch had received during the course of his employment that as confidential in the legal sense such that it was capable of legal protection. Identification of the alleged "sensitive business and marketing information" to which reference had been made by Ms Blakey was requested. The response to this was simply to identify "information relating to our client's marketing strategy and activity plans, marketing processes, creative strategy and brand strategy" without any more specific detail (again giving the impression that what the plaintiffs were concerned about was whatever information was in Mr Lynch's head). 28On 13 July 2011, Mr Lynch's lawyers again wrote emphasising the need for identification with specificity of the confidential information and asserting that the businesses of Cengage and Think did not compete in the same market. It was said that Mr Lynch's employment at Cengage was relevant in that his knowledge of both businesses and skill and experience gained in each were part of his stock in trade. 29In response, by letter of 21 July 2011 the solicitors for the plaintiffs identified (for the first time with some specificity) the sensitive business and marketing information that Mr Lynch was said to have (along similar lines to that contained in paragraph [27] of Mr Everingham's first affidavit in these proceedings) and to the asserted inevitability that this would be used (or referred to) in the performance by Mr Lynch of a senior marketing role with Open Colleges Australia. They sought advice by return as to whether Mr Lynch intended to commence employment with that company or any related entity prior to 17 February 2012. 30On 16 August 2011 the solicitors for the plaintiffs again wrote seeking such confirmation (not having by then received a response thereto). From the content of the correspondence it would seem that this letter crossed with a letter also of that date from Mr Lynch's solicitors in its terms responding to the 21 July letter and advising, among other things, that Mr Lynch would commence employment with Open Colleges Australia on 17 August 2011. In that letter, it was asserted that Mr Lynch "does not have and therefore cannot and will not use" any confidential information regarding Think's "commercial interests, records, computer files, customers, employees, product or service information, marketing and sales information, financial information, strategic and business issues, client lists and computer software owned or used by [Think]" (thus mirroring the words of the definition contained in the Letter of Appointment). The letter proffered an undertaking to maintain the confidentiality of that information (noting that Mr Lynch did not have any such information and asserting that none of it would assist him in his role at Cengage). Information was sought from Mr Lynch's solicitors as to the basis of the conclusions stated in that letter (the response being a broad reference back to earlier correspondence). 31On 18 August 2011, the solicitors for the plaintiffs sought an undertaking that Mr Lynch would not work or attend at the premises of Open Colleges Australia, or any related entity including Cengage, prior to the hearing determination of an interlocutory injunction application to be made by the plaintiff companies and that he would not use or disclose any confidential information belonging to them and obtained during the course of his employment with Think (including, without limitation, information relating to the five areas of information later specified in paragraph [27] of Mr Everingham's affidavit). 32On 19 August 2011 an inter partes written undertaking (prior to the hearing determination of an interlocutory injunction application to be made by the plaintiff companies) as to maintenance of the confidentiality if the confidential information as defined in the contract and as to the five specified areas of information was given (coupled with a disclaimer that Mr Lynch had any such confidential information) but no undertaking was given that Mr Lynch not attend and perform work with Open Colleges Australia was proffered. After a query raised by the solicitors for the plaintiffs, it was confirmed by a further letter of that date. These proceedings were then commenced. 33It is submitted by Mr Goot, in essence, that relief should be refused for four reasons. 34First, because the plaintiffs do not have sufficiently strong evidence (on a Kolback approach) to demonstrate an anticipated breach by establishing that Open Colleges Australia has the same or substantially similar business to Think or its related bodies corporate such that the employment of Mr Lynch by Open Colleges Australia would fall within the restraint clause. 35Second, because the plaintiffs do not have evidence that the restraint is necessary for the reasonable protection of a legitimate business interest, namely the possession by Mr Lynch of relevant confidential information (particularly since the definition of confidential information with which the contract is concerned is very narrow; there is no evidence in the present case similar to the critical evidence referred to in Woolworths v Olson [2004] NSWCA 372 that there may be a misuse of confidential information - or that the information may be of use to Open Colleges Australia; Mr Lynch was effectively placed on 'gardening leave' with Think from May 2011 (a period equal to the shorter iteration of the restraint term); Mr Lynch requested (and Think agreed) that he not be exposed to confidential information during the notice period (namely from 16 May to 16 August 2011) and it is said that there is no evidence that Think failed to comply with this request; and it is said that there is no suggestion, let alone any evidence, that Mr Lynch had used any of Think's (or any other of the plaintiffs') confidential information. 36Third, it is said that Mr Lynch's evidence goes against the grant of an injunction (again, on a Kolback approach) particularly because Mr Lynch has offered undertakings (without admissions) to maintain any confidential information which he may have arising from his employment by Think; his new employer Open Colleges Australia, by its officer, has given evidence that it did not hire Mr Lynch because of any insight gained while at Think; it does not want any confidential information belonging to the plaintiffs; no confidential information belonging to the plaintiffs would be of any use to it; and Open Colleges Australia will respect the undertakings offered by Mr Lynch; and there is substantial evidence that the business of Open Colleges Australia is such that it is not the same as, or substantially similar to, the business of Think or its related bodies corporate. 37Finally, it is said that there has been substantial delay on the part of the plaintiffs in seeking injunctive relief from the Court since coming to know, on 16 May 2011, of the facts and matters it now relies upon (that is the identity of the new employer - Open Colleges Australia). The delay of three months (or half the maximum restraint) is a very substantial impediment to the grant of interlocutory relief, particularly where a much shorter delay may be fatal to such an application. 38It is submitted that the balance of convenience is all in favour of Mr Lynch because the status quo is that he is employed by Open Colleges Australia (though I find this unpersuasive because, if so, this would mean that any party breaching a restraint covenant of this kind could call in aid the fact of his or her new employment as a factor against restraint); the status quo has been permitted to develop by the plaintiffs (presumably this rests on the failure to bring an application at an earlier time); the consequences of the order sought would effectively be to deprive Mr Lynch of employment and he would need to recommence the task of finding new employment; Mr Lynch is married and has substantial financial commitments; and there is no evidence of any actual prejudice or damages being suffered or likely to be suffered by Think (or the other plaintiffs) let alone loss of a nature that cannot be dealt with by damages. 39I turn then to the issues to be determined on the present application. Issues (i) Is there a serious question to be tried? 40In Seven Network (Operations) Ltd & Ors v James Warburton (No 2) [2011] NSWSC 386, Pembroke J considered the circumstances in which a negative covenant restraining an employee from competing against an employer will be enforced, noting that such a restraint is only enforced to the extent that it is necessary for the reasonable protection of the business interests of the employer. At [4], his Honour said: Courts will generally not order specific performance of employment contracts. In principle however, they will enforce negative covenants that restrain an employee from competing against an employer: Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 346348. But no matter what the parties have agreed, negative covenants imposing a restraint on an employee's trade will not be enforced if the restraint is not necessary for the reasonable protection of the legitimate interests of the employer or those for whose benefit it was agreed: Buckley v Tutty (1971) 125 CLR 353 at 376; Curro v Beyond Productions Pty Ltd (supra) at 344. Further still, even if the restraint is reasonable when considered as at the date of contract, the court always retains a discretion to withhold or limit injunctive relief if a proper basis is established at the hearing: Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852 at [88] and [91] (Brereton J). And Section 4(1) of the Restraints of Trade Act, 1976 (NSW) arguably provides additional flexibility. 41Mr McDonald submits that there is a serious question to be tried in the present case that the negative covenant contained in Mr Lynch's Letter of Appointment is valid, in that it protects a legitimate business interest held by Think for the benefit of itself and its related corporations, including the other plaintiffs, namely its interest in preventing the misuse of confidential information. It is submitted that this is a legitimate interest that can and should be protected by restraining Mr Lynch from taking up employment with a competitor to whom he might be willing to provide such information (reference being made in this regard to Woolworths Ltd v Olson ). 42In Kearney v Crepaldi [2006] NSWSC 23, McDougall J set out at [47] to [54] the principles relevant to enforcement of restraints of trade: The primary position is that a restraint of trade is void. That applies not just to the classical restraint of trade purporting to prevent a person from working for a particular employer, but also to a restraint of the kind presently sought to be enforced. That is because of the public interest in competition. It follows that a person seeking to enforce a restraint of trade must show that the restraint is no wider than is reasonably necessary to protect its legitimate interests. The test immediately directs attention to the nature of the interest that is sought to be protected. This issue was considered by Gillard J in Hartleys Ltd v Martin [2002] VSC 301. At para [91], his Honour stated (in my respectful opinion correctly) that "[i]t is well-recognised that an employer is entitled to impose a restrictive covenant to reasonably protect his business against ex-employees taking customers with them to a business in competition with their former employer. At para [92] and following, his Honour discussed the decision of the High Court in Lindner v Murdoch's Garage (1950) 83 CLR 628. In that case Latham CJ who dissented, but whose statement of the principles was endorsed by Webb J (at 647), said at 634: ... the covenant in restraint of trade is not a covenant against mere competition but is a covenant directed to securing a reasonable protection of the business interest of the employer, and in the circumstances is not unjust to the employee. The interest which can validly be protected is the trade connection, the goodwill of the business of the employer. In the same case, Fullagar J at 649 focused on the need to characterise the interest that the employer claimed to have and claimed legitimately to protect. Kitto J at 654 characterised the interest as being: ... protection for their business connection against the possibility of its being affected by the personal knowledge of and influence over the customers which the appellant might acquire in their employment. His Honour continued by saying that: The knowledge which, because its use may deprive the employer of the business connection which he is entitled to preserve as his own, he may require his employee to abstain from using, is objective knowledge of customers, their peculiarities, their credit and so forth ... This reflects the approach taken in earlier English cases. Thus, in Herbert Morris Ltd v Saxelby [1916] 1 AC 688, the covenant was against the employee being engaged either as principal, agent or servant or otherwise in the same kind of business as that in which he had been employed. It was in that context that Lord Atkinson, speaking of a case of employer and employee, said that: In all such cases as this, one has to ask oneself what are the interests of the employer that are to be protected, and against what is he entitled to have them protected. He is undoubtedly entitled to have his interest in his trade secrets protected, such as secret processes of manufacture which may be of vast value. And that protection may be secured by restraining the employee from divulging these secrets or putting them to his own use. He is also entitled not to have his old customers by solicitation or some other means enticed away from him. But freedom from all competition per se apart from both these things, however lucrative it might be to him, he is not entitled to be protected against. He must be prepared to encounter that even at the hands of a former employee . (my emphasis) In a similar vein, Lord Parker said (at 710): ... The reason, and the only reason, for upholding such a restraint on the part of an employee is that the employer has some proprietary right, whether in the nature of trade connection or in the nature of trade secrets, for the protection of which such a restraint is - having regard to the duties of the employee - reasonably necessary. Such a restraint has, so far as I know, never been upheld, if directed only to the prevention of competition or against the use of the personal skill and knowledge acquired by the employee in his employer's business. In summary, then, restraints of trade (including both restraints against competition and restraints on solicitation of customers) may be valid where they are reasonably necessary to prevent disclosure of confidential information garnered by the former employee in the course of his or her former employment, or the exploitation of a connection built up by that employee with the former employer's customers in the course of that employment. There are three other matters to note. The first is that the onus of showing that a contract in restraint of trade is reasonable as between the parties lies on the party alleging that this is so: North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 at 470 (Viscount Haldane LC). Secondly, the onus of showing that a contract in restraint of trade is injurious to the public interest likewise lies on the party alleging that this is so: Attorney-General of Australia v Adelaide Steamship Co [1913] AC 781 at 797. The third is that the question of the validity of a covenant in restraint of trade (or, for that matter, a covenant against solicitation of employees) is not really a question of law. The principles (at least in the former case) are relatively clear. The application of the principles depends on the terms of the particular covenant and the factual circumstances: see Dawnay Day & Co Ltd v De Braconier d'Alphen [1998] ICR 1068 at 1111-1112 (Evans LJ, with whom Nourse and Ward LJJ agreed). 43In Woolworths v Banks [2007] NSWSC 45 McDougall J, having repeated the observations above, referred to the decision of the Court of Appeal in Woolworths v Olson , noting that that was a case in which there was strong evidence of misuse of confidential information and where Mason P (with whom McColl and Bryson JJA agreed) said at [38]-[39]: The courts in general take a stricter and less favourable view of covenants in restraint of trade entered into between employer and employee than of similar covenants in commercial agreements (Geraghty v Minter (1979) 142 CLR 177 at 185). The reasons are explained in J D Heydon, The Restraint of Trade Doctrine 2nd ed, 1999 at pp 68-9. It is nevertheless well established that an employer may have interests capable of protection by a restraint covenant. These interests go beyond protection of goodwill and retention of customers and extend to trade secrets (Heydon, op cit, pp 87-8, Knogo Corporation v Halligan (1984) ATPR 40-460, Kone Elevators Pty Ltd v McNay & Anor (1997) ATPR 41-564). This was the trigger for the Service Agreement (see the covering letter of 7 February 2003). Merely because the law offers a degree of protection against the unauthorised use or dissemination of trade secrets by former employees does not mean that contractual protection is necessarily unreasonable or unavailable. The court gives considerable weight to what parties have negotiated and embodied in their contracts, but a contractual consensus cannot be regarded as conclusive (see eg Queensland Co-operative Milling Association v Pamag Pty Ltd (1973) 133 CLR 260 at 268), even where (as in the present case) there is a contractual admission as to reasonableness. 44It is submitted by Mr McDonald that there is a serious question to be tried that Mr Lynch has confidential information of Think and its related bodies corporate in his possession. Mr McDonald points to the evidence of Mr Everingham to the effect that Mr Lynch held a senior management position in marketing, with key responsibilities, including identifying key selling messages; identifying target market segments; identifying cost effective and proven marketing channels; identifying the resources required to explore each marketing channel; developing an annual Australian Marketing Strategy and Budget; undertaking systematic reviews of the Australian Marketing Strategy; and implementation of the Australian Marketing Strategy, including media buying in both print, radio and online. 45It is submitted that in this role he had access to "high level management information as to future strategic direction" of the plaintiffs' business and access to confidential information as to strategy and marketing at a senior level. The knowledge identified was of the plaintiffs' 3 year growth strategy as well as individual marketing and business plans (including, it is said, information as to the focus of the business and aspects of the business in which plaintiffs are vulnerable and how they plan to address such issues) as well as knowledge of the budget for the Think business and in particular the marketing spend, including the products on which the plaintiffs intended to focus on, the channels to be utilised and the phasing of campaigns. 46As noted above, it is said by Mr Everingham that marketing strategies (particularly online strategies) are central to the business of the plaintiffs, since the plaintiffs make money from students who enrol in courses and marketing attracts potential students (referred to as 'leads') to access the plaintiffs' sites. 47The particular confidential marketing information to which it is said Mr Lynch had access, developed and used in his role with the Think group is identified as including online marketing and activity plans, including marketing and search engine methodology, results and information relating to the source and value of new leads; strategic growth plans; future new product and course development pipelines; student retention strategies; budgets and expenditure; and brand differentiation strategies. 48Mr Everingham asserts that in respect of online marketing and activity Mr Lynch has the benefit of knowledge gained by the plaintiffs through more than 12 months' research, including by way of provision of regular reports, at considerable cost as to matters including: first, which search terms result in the most searches being returned (impressions), of those impressions, how many are clicked on by user; of those that are clicked on how many are converted to an actual student lead, and what amounts are bid in relation to those search terms; second, as between banner and Google advertisements, which is the most effective and how much is paid by the plaintiffs for such advertisements. 49The first of those matters is said to have the potential to assist a competitor readily to create a campaign that directly competes with the plaintiffs on the preferred spaces, words and times; and would permit the competitor "to focus bidding on the most effective terms", which it is said would both result in the competitor getting increased priority for their search terms and increase the cost for the plaintiffs in respect of those same key search terms. 50As to the second it is said that such information that would greatly assist a competitor to focus on buying the most effective space (and avoid space shown to be less effective) both increasing the effectiveness of the competitor's marketing and increasing the price for the plaintiffs in continuing to access those same advertisement sites; 51Mr McDonald submits that when employed in any senior marketing role for any similar business Mr Lynch would inevitably (consciously or unconsciously) draw upon and utilise that confidential information (even if he does not have complete recall of the precise key terms, the precise amounts paid or the precise effectiveness of the advertisements). 52Hence, it is submitted that it is reasonable for there to be a restraint preventing such a person from working for a direct competitor, namely a business that is the same or substantially similar. 53I am satisfied that there is a serious question to be tried as to the validity of the restraint contained in Mr Lynch's affidavit and as to whether he is in possession of confidential information that can be made the subject of such a restraint. Although described in rather broad or general terms in paragraph [27] of Mr Everingham's affidavit, it is not denied by Mr Lynch that in the course of his employment he had access to confidential information and at least some of that information would seem to go beyond a knowledge of general marketing methods of the kind that he may already have gained from his time at Cengage. 54There seems to me to be an issue as to whether, to the extent that general knowledge or information has become part of Mr Lynch's stock in trade or general expertise (or he now holds such information only in his head), that could properly be the subject of restraint (having regard to the distinctions suggested in Robb v Green [1895] 2 QB 1 and Mid-City Skin Centre and Laser Clinic v Zahedi-Anarak (2006) 67 NSWLR 569). (There has been a distinction drawn, for example, with knowledge of matters such as client contact details (which may well be public knowledge) and, say, the compilation of contact details in a client contact or prospects list is something which has been recognised as capable of carrying with it the necessary quality of confidentiality (as confirmed in Robb v Green and Mid-City. ) In Robb v Green it was the compilation of the client information contained in the order book which it was said made the list so valuable.) Similarly, in Halliday & Nicholas Insurance Brokers Pty Limited v Corsiatto [2001] NSWCA 188 at [16]-[17] , where the submission was made that client lists were not confidential as that information was publicly available, Handley JA noted that, "In business time is worth money" and considered that the fact that in that case the broker had gone to the trouble of surreptitiously obtaining the lists, established both their importance to the broker and their confidential nature. There might well be a distinction to be drawn between knowledge of the marketing options on Google and the like and knowledge of particular bid amounts for keyword searches. 55An issue of this kind is suggested by the evidence of Mr Lynch that he has not had access to any confidential material since he tendered his resignation and the submission that any confidential information he once had would have has lost its currency (since it related to the previous academic enrolments). Further, the concern by Mr Everingham as to the 'inevitability' of reference to such knowledge or information in a senior marketing role (and the submissions that encompass an unconscious use of the confidential information) indicates the scope for argument as to whether, if Mr Lynch holds no more than general information as to strategies or growth plans, enforcement of the restraint would amount to a prohibition on him obtaining employment in his field of expertise and would therefore be an unreasonable restraint of trade. Those, however, are matters that would fall more appropriately to be addressed in a final hearing. 56As to the period of the restraint, Mr Goot pointed to evidence that senior executives of Seek, including Mr Everingham, are bound by contractual restraints of lesser periods (generally three months), to suggest that the restraint imposed on Mr Lynch is excessive. In Tullett Prebon , Brereton J, had regard (when considering the reasonableness of the time period of the restraint) to the fact that the term of the restraint in that case had been agreed by the parties in a contract apparently negotiated at arms length and was supported by the fact that a similar restraint period had been contained not only in the defendant's previous contract with the plaintiff but also in his new contract with the competitor company. At [55] his Honour said: In my opinion, such a prohibition, to the extent that it exceeds what is necessary for the reasonable protection of the employer's legitimate interests, is void (consistently with the effect of (NSW) Restraints of Trade Act, s 4(1)). In principle, once it is accepted that the doctrine of restraint of trade applies during the term of a contract (including any period of notice or of "gardening leave") as well as afterwards, that conclusion is inevitable: a prohibition on being employed by third parties is a restraint [Petrofina (Great Britain) Ltd v Martin [1966] Ch 146 at 180]; it is therefore valid to the extent that it is not contrary to public policy, but no further. The mere circumstance that the parties have agreed to it cannot of itself provide the requisite justification, else every contractual restraint would be justified; the question must be whether the restraints are more extensive in scope, area or duration than necessary for the reasonable protection of the employer's legitimate interests . ... (my emphasis) 57At [70], Brereton J noted that: ... Nor will equity lend its aid to achieving indirectly what it will not permit directly. In my view, there is no "legitimate interest" in preventing a particular employee from leaving employment that will support a restraint of trade . As Barrett J has observed (in Tradition Australia Pty Ltd v Gunson [2006] NSWSC 298 ; [2006] 152 IR 395, [30]), with reference to the judgment of Fry LJ in De Francesco v Barnum (1890) 45 Ch D 430 at 438, in this field courts "are bound to be jealous, lest they should turn contracts of service into contracts of slavery". (my emphasis) noting that beyond the period reasonably required for the protection of the employer's legitimate interests, a restraint "serves only to sterilise the employee ... and prevent competition". 58While the validity of a restraint clause is to be tested at the time of entering into the contract and by reference to what the restraint entitled or required the parties to do rather than what they intend to do or have actually done, it being said in Woolworths Ltd v Olson at [40] that: The question is whether the covenant was a reasonable one for the parties to agree to at the outset of the service on the best estimate which they could then make of the future.": Putsman v Taylor [1927] 1 KB 637 at 643 at [91] in Tullett Prebon , Brereton J noted (in a passage cited with approval by Pembroke J in the Warburton case ) that even where, judged as at the date of the contract, a restraint is reasonable and valid, the court may on discretionary grounds withhold injunctive relief if at the date of the hearing there is no protectable interest, giving as examples the situation where "despite contemplation at the date of contract that the employee would have access to confidential information, that did not eventuate ( John Fairfax v Birt at [46]) or where, in the events which have happened (as distinct from those foreseeable at the date of contract), the restraint is wider than necessary for the reasonable protection of the covenantee's legitimate interests. Thus if, as Mr Lynch contends, the information identified as confidential and hat he may retain in his head is no longer current, this would provide a basis on which to find that the period of restraint (even if reasonable at the date of contract ) was no longer reasonable. 59It was suggested, as I understood it, by Mr Goot, that the plaintiffs would have only themselves to blame if Mr Lynch had confidential information in his possession, since he had asked (and Mr Chapman seemed to have agreed) that the company restrict his access to such information during his notice period. In response, it is submitted by Mr McDonald that, while steps were taken progressively to reduce the amount of confidential information to which Mr Lynch had access after he tendered his resignation, as the most senior marketing manager he continued to have access to important confidential material and that much of this would remain relevant for many months. (Mr Everingham says that the period between October and February is traditionally the peak period for education enrolments and marketing, with March being the usual start to the academic year.) Nevertheless, the significance I place on the conversation in [26] is not that there is any blame to be attached to the plaintiffs if, in the notice period, confidential information was provided to Mr Lynch, nor that he should not be restrained from using any such information, but rather that it is consistent with Mr Lynch's intention to honour his obligations in relation to the maintenance of confidentiality of information that is properly confidential. 60Mr Everingham has deposed (at [118]) to his belief that if Mr Lynch were to commence employment with Cengage prior to the conclusion of his restraint period, this would have a significant impact on the effectiveness of "our" marketing activities in the lead up to and during the peak enrolment period for the first intake of 2012 and to his concerns as to the use of the confidential information he has identified in his affidavit. From [119ff] he says: Of primary concern is the fact that the confidential information obtained by Mr Lynch during his employment with Think Education Services can be converted very quickly into immediate costs in the online advertising space (due to increased and targeted competition), as well as a reduction in leads and enrolments. In short, Cengage would be able to implement practices which give them a strategic advantage by directly replicating or circumventing our strategies, thereby immediately taking market share from us. Further, much of our information could be taken and replicated very quickly within Cengage, giving them the benefit of over 12 months of research, analysis, systems development and implementation and results monitoring. The confidential information in Mr Lynch's possession would be incredibly damaging in the hands of a competitor such as Cengage, as it would enable them to pre-empt our strategic moves, replicate our strategies and run interference with both our strategy and proposed acquisitions. 61In Woolworths Ltd v Olson at [67], Mason P noted that: A recognised method of such protection is the procurement of a restraint upon the employee given access to such information taking up employment with a competitor whom he might be willing to provide with such information. A reasonable employment restraint is easier to enforce than a breach of confidence or breach of copyright claim; it removes the temptation for the former employee to offer and for the new employer to solicit confidential information; and it provides certainty of definition as regards the area of confidential information to be protected. These interests have been judicially recognised." 62Further, Mr McDonald notes that a restraint preventing an ex-employee with confidential information working for a competitor for a reasonable period may be appropriate even where the employee is otherwise under an obligation not to disclose confidential information, referring to Cactus Imaging Pty Ltd v Glenn Peters [2006] NSWSC 717; (2006) NSWLR 9, where Brereton J held at [13] and [14]: And as Lord Denning said in Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 at 1479, experience has shown that it is unsatisfactory simply to have a covenant against disclosing confidential information, because it is difficult to draw the line between information which is confidential and information which is not, and very difficult to prove a breach when the information is of such a character that an employee can carry it away in his or her head, so that the only practicable solution is to take a covenant from the employee by which he or she undertakes not to work for a trade rival. The permissibility of such restraints for that purpose is well established /Kone Elevators Pty Ltd v McNay (1997) ATPR 41-564, 43,834; Woolworths Ltd v OlsonLindner v Murdock's Garage, 650 (FullagarJ); Portal Software Pty Ltd v Bodsworth [2005] NSWSC 1179, [83]]. Cactus relies on Mr Peters' alleged possession of its confidential information to support not only the covenant in cl 7 against disclosure of confidential information, but also the covenant in cl 9 against soliciting customers. A plaintiff who seeks to restrain a former employee from using confidential information must be able to identify with specificity, and not merely in global terms, the relevant information /Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203 at 215; Corrs Pavey Whiting and Byrne v Collector of Customs (Vic) (1987) 14 FOR 434 at 443 (Gummow J); Rosewood Advertising Pty Ltd v Hannah Marketing Pty Ltd [2000] NSWSC 1034, [8]]. Although those cases were concerned with the circumstances in which, even in the absence of a contract, equity imposes an obligation of confidence, the requirement for specificity is no less where a contractual obligation is sought to be enforced. One reason for this is that an injunction in general terms restraining a former employee from using the employer's "confidential information", would inappropriately leave, to an application for contempt, determination of whether particular information was or was not confidential. 63I accept that there is a serious question to be tried as to the period for which the restraint in this contract could be said to be reasonable having regard to the legitimate business interests of the employer. Were I to apply the Kolback approach, I would be inclined to the view that there was not a strong case for the proposition that in all the circumstances a 6 month restraint was reasonable (particularly having regard to the lesser restraint periods applicable to executives in the Think group, if not Think itself, including Mr Everingham who performed a more senior role at Think during the course of Mr Lynch's employment with that company) but that there was an arguable case for the 3 month period. (That said, I also think that there is an arguable case that the reasonableness of the restraint should be determined having regard to the activities in which Mr Lynch was engaged during his notice period.) 64As to whether there is a serious question to be tried that the commencement of Mr Lynch's employment within the restraint period (as that may be determined) by Open Colleges Australia amounts to a breach of clause (a) of the restraint clause, this turns on the question whether the 'business or activity' of the two organisations is the same or substantially similar. Mr McDonald submits that the intention of the clause was clearly to prevent Mr Lynch from working for a "direct competitor" for a period of time after the cessation of employment (and that it is not against public policy for Mr Lynch to be restrained from working for a competitor in a role that will require him, consciously or unconsciously, to use the confidential information of the plaintiffs that he gained over his three years' employment with the plaintiffs). 65Is Mr Lynch's new employer a direct competitor (or engaged in the same or substantially similar business or activity, to use the words of the contract) for the purposes of the restraint? Mr McDonald submits that it is. The first three plaintiffs are 'for-profit' tertiary education providers providing for a fee for tertiary education services. Almost half (44%) of the students purchase courses, which are offered online rather than at the premises of the eight Colleges. The marketing method adopted to attract potential students is said to be overwhelmingly an online approach adopting methods including banner advertisements on websites and paid search engine results by which potential customers can 'click' to obtain further information and are then invited to lodge an inquiry (becoming a 'lead'). 66It is said that in respect of that part of the business of the first three plaintiffs, Cengage operates a similar competing business: it provides online tertiary education and Mr Everingham asserts that the courses it offers are overwhelmingly the same or essentially the same as those offered by the first three plaintiffs. Both of those matters are to some extent contested by Mr Lynch - it is said that there is a distinction between the business of Think (which offers both online and face to face courses and which offers academic courses at a higher fee cost) and the business of Open Colleges Australia (which offers online courses only and more vocational courses at a lower fee cost). The marketing approach of Open Colleges Australia is said to be essentially the same as the that of the first three plaintiffs, namely reliance on online marketing to obtain leads which lead to student enrolment. 67(The business of Seek is, in effect, to be an agent selling tertiary courses on behalf of a range of providers and its business is marketed primarily online. Mr McDonald submits that Cengage also sells tertiary courses provided by other persons, again marketed using online strategies. That said, the relevant comparison is between Think, the employer, and Open Colleges Australia with whom Mr Lynch is now employed.) 68It is submitted that there is a serious question to be tried that the businesses in question are the same or substantially similar (and hence that Mr Lynch is subject to a valid and enforceable negative contractual covenant (the effect of which is, at least, that he is not to work for a similar competitive business for 6, or perhaps 3, months after his employment ceases), such a restraint being reasonably necessary to protect valuable confidential information of the plaintiffs. It is further submitted that there is a serious question to be tried that Mr Lynch, in taking up employment with Open Colleges, has acted in breach of that covenant. 69Mr Goot, to the contrary, submits that the evidence does not support the conclusion that Open Colleges Australia is in fact a business which is the same or substantially similar to the business of the first or second plaintiffs and that, on a Kolback basis , there is insufficient evidence by which the validity of the restraint can be established since it relies on the need for the protection of confidential information and it is said that there is not a sufficiently strong case to establish that there is any need for injunctive relief to protect any identifiable trade secrets. 70It is submitted by Mr Goot that, to the extent that Mr Everingham in his affidavit in reply does not take issue with the evidence of Mr Lynch and Mr Bohm, it may be accepted that such evidence is not challenged or controverted consistently with the approach taken by McDougall J in Woolworths v Banks [2007] NSWSC 45 at [53]. There, his Honour considered the characteristics of the two stores and formed the view that the evidence that they were substantially similar was not strong enough to weigh in favour of an interlocutory injunction. (Here the comparison made was to the respective businesses as Think being a Porsche and Open Colleges Australia likened to a Ford Falcon.) In Woolworths v Banks , McDougall J concluded at [35] that although the evidence was that some brands and goods sold by Big W stores were also sold by Myer stores and that both stores operated in competition in at least some geographical areas, the case that Myer was a competitive business was not strong. His Honour was not prepared to go so far as to say that there was no serious question to be tried but considered that on the basis of his conclusion that the case was not strong, and approaching the question whether to grant interlocutory relief on the basis that to do so would effectively decide the dispute without a final hearing, he should refuse to grant the relief sought. 71His Honour did so even though acknowledging that there was a significant distinction between the case before him and that in Kolback . 72His Honour also referred to the evidence before him that had not been challenged or contradicted in the affidavit evidence, saying at [53]: I have referred from time to time to the fact that evidence was not challenged or controverted. I accept that this was an interlocutory hearing brought on in circumstances of urgency and conducted with admirable economy by counsel on both sides. Of course, there was no application to cross-examine any witness. Nonetheless, as I have said, Woolworths had an opportunity, of which it availed itself, to read affidavits in reply. When I say that there was no challenge or controversy, I am referring to the failure of Woolworths to take issue in any affidavit in reply with the matter to which I have referred. 73The unchallenged evidence that it is said by Mr Goot should be accepted on this basis is a large portion of Mr Lynch's evidence as to the allegation that he was in possession at the relevant time of information confidential to Think group (paragraphs 13, 17-19, 27-29, 33, 36-37, 42, 49-53, the last sentence of 54, 55-65) and as to the similarity (or lack thereof) of the businesses (paragraphs 14, 43-44, 46-47) and paragraphs 30-32 of Mr Bohm's evidence again as to the disparity between the businesses. 74It is submitted that the evidence of Messrs Lynch and Bohm, establishes that there are significant differences between the Think group and Open Colleges Australia (including, the courses each offers; the price points at which those courses are offered; the intake times for students; the target markets for students; the way in which the courses are offered and the method of learning involved; and the substantial differences in ostensibly similar courses); that a substantial amount of marketing strategies and methodologies, information and analysis are in the public domain; that marketing strategies are different; that Think had no specific or secret methodology for the generation of leads, or systems, methodologies, marketing processes and strategies; that Mr Lynch does not possess any of Think's confidential Information as defined in the contract; and that Mr Lynch is not in possession of any confidential information that would assist him in his role at Open Colleges Australia. 75It is submitted by Mr Goot that the approach adopted by McDougall J in Woolworths v Banks would lead to a finding (at its highest) that the plaintiffs' case that the business of Open Colleges Australia was the same as, or substantially similar to, that of the plaintiffs, is not strong (even if it could not be said that there is no serious question to be tried). 76I note that Mr McDonald pointed to the matters to which Mr Everingham deposed in reply and to the little time available for the reply evidence to be served. I accept that the urgency of the application means that the reply evidence was of necessity required to be prepared in a short period and that Think may on a final hearing seek to challenge a number of the matters raised in relation to the vocational versus academic nature of the courses or their target market (to name but a few of the matters the subject of Mr Bohm's evidence). I do not place weight on the hitherto unchallenged nature of the evidence in this regard. The evidence satisfies me that there is a live dispute as to the similarity or otherwise of the two businesses (particularly when almost half of the volume of business of Think, although not its value is online, and the concern is with use of confidential information in relation to online marketing). 77On this issue, I have concluded that there is a serious question to be tried as to the validity of the restraint clause (and the period over which it is reasonable) and as to whether the performance of work for Open Colleges Australia would amount to a breach of the clause because it was the same or substantially similar to that of Think. (ii) Balance of convenience 78As to the balance of convenience, Mr McDonald notes the test as set out in Meagher, Gummow and Lehane, Equity Doctrines and Remedies (2 nd edn) at [2168], and applied in ACP Magazines Pty Ltd v Southdown Publications Pty Ltd [2002] NSWSC 715, by Einstein J at [48] as one requiring the court to balance the hardship that would be suffered by the respective parties if the injunction were or were not to be granted. It is noted that some of the factors relevant to the assessment of the balance of convenience are: inadequacy of damages; the right to a livelihood; delay; impact on third parties; whether the employee was warned and went into the position with "eyes wide open"; whether any hardship that would be visited on the defendant has come about because he or she is the author of his or her own misfortune; the strength of the case; and any undertakings that have been given. 79Mr McDonald submits that the balance of convenience lies in favour of the grant of an injunction (noting that the plaintiffs give the usual undertaking as to damages and that they will submit to an order for the expedition of the final hearing). Damages an adequate remedy? 80It is noted by Mr McDonald that, in cases where a negative covenant is being sought to be enforced, damages will rarely be considered an adequate alternative remedy (referring to Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016, where Brereton J at [10] said that "Generally speaking, where what is involved is the enforcement by injunction of a contractual negative stipulation, it is a rare case in which relief will be declined on the basis that damages are a sufficient remedy"). A similar approach can be seen in John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [45]; Otis Elevator Company Pty Ltd v Nolan [2007] NSWSC 593 at [17]-[30]; IceTV v Duncan Ross and Ors [2007] NSWSC 635, to which Brereton J referred at [65] and in Huhtamaki Australia Ltd v Botha [2004] NSWSC 386, per Hamilton J at [17]. 81It is submitted that damages will not be an adequate alternative remedy for the plaintiffs in this case because of the likelihood that there will be substantial difficulty in establishing causation between any loss of business and any actions of Mr Lynch and a further difficulty in calculating the quantum of any damage arising from any loss of business. I accept that injunctive relief should not be refused on that ground. Deliberateness of conduct? 82It is further submitted that Mr Lynch went into the matter with his "eyes wide open" since the plaintiffs had put him on notice that they would seek to restrain him if he acted in breach of the negative covenant. Thus it is said that any hardship that might be suffered by Mr Lynch is of his own making. I do not place weight on this factor because it seems to me that Mr Lynch made I clear from the outset that he was intending to join Open Colleges Australia or perhaps its related entity Cengage and that once the issue of the restraint was raised he or his solicitors made concerted attempts to ascertain (with only limited success) precisely what confidential information it was said that he had and that should be the subject of any restraint. Further, he has proffered an undertaking in relation to the use of confidential information of the kind identified by the plaintiffs. If it cannot be identified more precisely (and it is only what general information now remains in Mr Lynch's head) then that casts doubt on the need for protection from its use or disclosure. Form of relief sought 83Mr Goot also took issue with the submission by Mr McDonald that what the plaintiffs are seeking is not an order that would cause Mr Lynch's contract to be terminated but simply an order that he be restrained from work for a period. (The final relief also includes a claim for a non-solicitation order mirroring the language of the negative covenant.) There was some disconnect between the claim for interlocutory relief in the summons and that in the orders handed up as being the orders sought by the plaintiffs. The former claims interlocutory relief restraining Mr Lynch "from engaging in employment with Open Colleges ... and [from engaging in] any business or activity that is the same or substantially the same..." as that of the plaintiffs. That might be thought to refer to the termination of the employment perhaps. However, it seems to me that this was clarified in the orders handed up which seek simply to restrain Mr Lynch form performing work for Open Colleges Australia or any related entity. Such an order would not be breached by the ongoing subsistence of the employment contract - rather, Mr Lynch would simply be enjoined from performing work under that contract. Therefore, I do not see this as tending against the relief sought. 84Mr Goot further submitted that the orders sought by the plaintiffs are too wide in that they would not only prevent the current employment enjoyed by Mr Lynch with Open Colleges Australia (or any related entity) and prevent him from engaging in any unspecified business or activity which is "the same or substantially similar to the business carried on by the plaintiffs or any of them" until further order. It is submitted that there is no identified basis for an order preventing engaging in an unspecified business. While there may be some force to a submission that there should not be an order granted where there would be doubt as to what it precluded, given the conclusion I have come to as to the exercise of discretion in this matter, I do not need to consider this point further. Delay 85Mr Goot submits that the delay by the plaintiffs in seeking urgent interlocutory orders is a very substantial factor against the making of the interlocutory orders sought, pointing to the knowledge of the plaintiffs since the time of Mr Lynch's resignation (16 May 2011) that he intended to commence employment with Open Colleges Australia or Cengage and noting that the summons was filed in this Court only on 22 August 2011, five days after Mr Lynch had commenced his new employment. 86Mr Goot points to the comment by Young J (as his Honour then was) in Network Ten v Fulwood [1995] NSWCA 311 at [46] that: As I sit here in the duty list, if a person has let a week go by it is only in a very strong case that I can be persuaded to grant an injunction or grant short service because if a person is to seek an injunction it should be sought promptly. 87The import of that delay is said to be particularly relevant given the "very serious prejudice" it is said will be occasioned to Mr Lynch in changing the status quo which he has entered into good faith (by accepting employment with Open Colleges Australia) and having given very early notice to his former employer of his intentions. 88As to delay, it is submitted by Mr McDonald that the submission made by Mr Goot (that the plaintiffs have been on notice for three months that Mr Lynch would take up employment with Open Colleges Australia) is not accurate (insofar as the date on which Mr Lynch intended to commence that employment was not made known). It is submitted that the plaintiffs repeatedly sought assurances that Mr Lynch would not commence employment with Open Colleges Australia until the expiry of the restraint period and that it was only at about 4pm on 16 August 2011 that they were informed that Mr Lynch would commence employment with Open Colleges Australia the following day, whereupon steps were taken to prepare the present application. While I consider that there was an inference open to be drawn from the communications that what Mr Lynch was intending was to cease work with Think and then almost immediately or as soon as practicable to commence work with Open Colleges Australia, I accept that the timing was sought to be clarified on 21 July 2011 (suggesting that there was some doubt as to the position) and not clarified until 16 August 2011. Therefore, I do not consider that there is a relevant delay such as to preclude interlocutory relief at this stage. Preservation of status quo 89Mr Goot submits that the consequence of the orders sought would be to change the status quo between the parties, by making Mr Lynch unemployed. I do not accept, the premise on which this submission is based. The interlocutory relief sought by the plaintiff thus would (it is said) reverse the status quo between the parties pending the determination of the proceedings (since Mr Lynch is and has been since 17 August 2011, employed by Open Colleges Australia. It seems to me difficult to argue that if (as I have found) any such delay as there has been in the commencement of the proceedings does not preclude relief, then the fact that the former employee has commenced the (allegedly competitive) employment would be sufficient to weigh in favour of the refusal of injunctive relief. Were that to be the case, relief would only be available for threatened breaches (and that does not seem to be supported by the authorities). 90I consider that the balance of convenience lies (principally having regard to the effect of the undertaking that has been given by Mr Lynch, which I consider below) on the refusal of the interlocutory relief sought. I do so taking into account that there is a reasonable argument that these businesses are not sufficiently similar that at a final hearing there might well be found to be no breach and because I think it likely that the risk of immediate financial hardship to Mr Lynch (having proffered an undertaking to maintain the confidentiality of any information he now retains in his head as to matters such as the strategic plans and retention strategies of the company and the like) will outweigh any damage likely to be caused to the Think group by his employment until such time as the final hearing takes place. (iii) Discretionary factors 91As to any relevant discretionary factors, and apart from delay which I have considered above, these are recognised as including hardship and 'unclean hands' (though there was no suggestion of the latter in the present case). I consider that the proffering of the undertaking is also to be taken into account as relevant to the exercise of discretion in this matter. 92As to hardship, it is submitted that the effect of an injunction would be that the employment of Mr Lynch would have to terminate and he would be unemployed for an indefinite period until at least the proceedings resolved (which would cause financial difficulty for him in meeting his obligations). On that point, I am not satisfied that there is evidence that the effect of a short term injunction would necessarily lead to the termination of Mr Lynch's contract of employment. There was no evidence to that effect from Mr Bohm. Nor is it apparent that Mr Lynch would not continue to be entitled to some form of salary or wage from Open Colleges Australia even if he were the subject of an injunction for some period - there is nothing, for example, to suggest that the benefits he will receive from the employment contract are referable to particular enrolments procured by him (which would be affected if he were not actually in attendance at the office or performing work during the period of an injunction). However, I am prepared to accept that there is a risk that Mr Lynch's employment or income may be adversely affected in the short term if the injunctive relief is granted. 93As to the undertaking, I have referred above to the inter partes undertaking to the effect that Mr Lynch will maintain the confidentiality of the confidential information the subject of the plaintiffs' concerns. It is submitted by Mr McDonald that the weight of that undertaking is negatively affected by the assertion in his solicitor's letter of 16 August 2011 that he does not have any confidential information and the terms of the undertaking itself (namely the failure of those terms to acknowledge the existence of such confidential information). 94It is also submitted by Mr McDonald that the weight to be attached to the undertaking is affected by the fact that, in circumstances where the nature of the duties that Mr Lynch will perform for Open Colleges Australia are, or can be inferred, to be essentially the same as those performed for the plaintiffs, an inference can be drawn that it will be impossible for Mr Lynch not to draw upon (consciously or unconsciously) that confidential information, such that the proffering of the undertaking does not remove the damage. 95I consider that the undertaking that has been given is a strong factor tending against the grant of interlocutory relief. Mr Lynch's evidence (admittedly not tested by cross-examination) is that he has not had access to, and does not recall, much of the information now identified by Mr Everingham as the confidential information but in any event has given an undertaking to maintain the confidentiality of any information of that kind. 96Having given that undertaking, it will behove Mr Lynch to be very careful in performing work for Open Colleges Australia not to draw upon any experience obtained at Think and to do what he can consciously to put out of his mind any information he does still retain in his mind as to the business plans or methodologies used by Think. I am by no means persuaded that it will be impossible for him to do so (and he will have an incentive to honour that undertaking in order to minimise the prospect of further litigation). The differences to which Mr Bohm has deposed in the businesses cast doubt on the transferability of any general strategy/growth plan information. (If the reason it is submitted that Mr Lynch must be likely inevitable to draw on information gleaned during his time at Think is because this is general marketing information or experience of a kind gained during the course of his employment in the education business industry, then I have doubts as to how it could properly be the subject of restraint assuming, as is Mr Lynch's evidence and which is not challenged, Mr Lynch has not any electronic or hard copy documents in which the sensitive business strategies or growth plans or the like are contained). 97Given the generality of the responses on behalf of Think when asked to identify the confidential information as to the use or disclosure of which it held concerns, and the undertakings that have been given by Mr Lynch, I consider that the effect of an interlocutory injunction of the kind sought (that will seemingly have the effect of holding Mr Lynch out of the education business marketing industry) is one that not primarily directed at the protection of a legitimate business interest in the preservation of confidential information. The differences between the respective target markets (even if those would not be enough to preclude a finding that the businesses were substantially similar in relation to the online educational courses) and the likelihood in my view that any reasonable period of restraint would expire no later than November 2011 (which I consider in evaluating the strength of the claim for final relief in this context), reinforce my conclusion that in the exercise of discretion I should dismiss the application for an interlocutory injunction and that the plaintiffs should be left to their remedy for a final injunction (if that can be heard on an expedited basis) or in damages (even though I accept there may be difficulties in the proof and quantification of that damage if it is ultimately held that the conduct of Mr Lynch was in breach of a valid restraint clause). Conclusions and Orders 98In the Warburton case , Pembroke J noted at [3] that: One of the abiding principles of a civilised system of law such as ours is that contracts are meant to be observed. Lawyers sometimes use the Latin phrase pacta sunt servanda to describe the principle. We make decisions on the assumption that contractual obligations will generally be performed and solemn commitments will not be ignored. The general policy of the law is that people should honour their contracts: Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9 (Gleeson CJ). If there were not adherence to such a principle, the conduct of private and commercial affairs would become an uncertain jumble. And certainty is what the law of contracts strives to achieve. It matters not, as I have found in this case, that Mr Warburton may have forgotten or overlooked the terms of the MEP Deed to which he is bound. The enforcement of a commercial contract does not depend on a party's knowledge of its terms: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165 at [43]-[44]. 99His Honour went on, however, to say at [4]: There are however qualifications to the general principle that contracts are meant to be observed. Courts will generally not order specific performance of employment contracts. In principle however, they will enforce negative covenants that restrain an employee from competing against an employer: Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 346-348. But no matter what the parties have agreed, negative covenants imposing a restraint on an employee's trade will not be enforced if the restraint is not necessary for the reasonable protection of the legitimate interests of the employer or those for whose benefit it was agreed: Buckley v Tutty (1971) 125 CLR 353 at 376; Curro v Beyond Productions Pty Ltd (above) at 344. Further still, even if the restraint is reasonable when considered as at the date of contract, the court always retains a discretion to withhold or limit injunctive relief if a proper basis is established at the hearing: Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852 at [88] and [91] (Brereton J). And Section 4(1) of the Restraints of Trade Act, 1976 (NSW) arguably provides additional flexibility. 100I note that in the present case Mr Lynch entered into a contact providing for the restraint now sought to be enforced and it should be expected that he would honour his obligations in that regard. However, it has not yet been established that the restraint for a 6-month period is reasonable (and hence valid) and there is room for doubt at least as to the period of the restraint. Furthermore, there is a significant issue as to whether the business by which he is now employed and in which he is engaged falls within the terms of the restraint so as to make the performance of work by him under that new contract a breach of his old contract. That, too, is a serious question to be tried but certainly not one (as a matter of impression) about which it could not be said that the prospects are strongly in the plaintiffs' favour. 101There is much to be said for holding Mr Lynch to the terms of the restraint for a short period until the issues identified above can be determined on a final basis. However, there is also a risk that the grant of an interlocutory injunction will in a practical sense determine the issue in a final sense (if the notice period has already, in effect, operated to protect Think against the risk of use of confidential information by ensuring that Mr Lynch has not had access to confidential information and is not now in a position where he could damage the company by use of such information). Mr Lynch's general know-how and expertise in education business marketing, gained not only during his employment by Think but also his time with Cengage, cannot properly be the subject of a restraint on use in the industry. And, significantly, he has offered what seem to be comprehensive undertakings in circumstances where it has not been shown (albeit on an interlocutory basis) that he has taken any hard or soft copy material with him and the plaintiffs have not identified other than in general terms the confidential information that they say could be used to their damage. 102What seems to be feared is the 'inevitable' unconscious use of material in Mr Lynch's head and the effect of the restraint will keep Mr Lynch out of the education business market (with potential loss of income necessary for the support of his family), in circumstances where it seems that he was at pains to ensure that there would be no risk of he being in possession of confidential information when he ceased his employment. 103Therefore, and not without some hesitation, I have concluded that notwithstanding there is a serious question to be tried as to the issues identified above, the balance of convenience and discretionary factors (and in particular the protection conferred on Think by the undertaking as to maintenance of any confidential information Mr Lynch may have in relation to the identified areas of information) leads me to conclude that the application for interlocutory relief should be dismissed. I am inclined to think that the appropriate order as to costs would be for costs to be costs in the cause. 104I therefore order that the application for interlocutory relief be dismissed. I will hear the parties as to costs and as to any further directions that should be made for the conduct of the proceedings, including whether this should be referred to the expedition list judge.