Think Global Recruitment Ltd v Moultrie [2008] NSWSC 869 | Case summary

3951/08 THINK GLOBAL RECRUITMENT LTD V KEVIN MOULTRIE & ORS JUDGMENT (Revised for typographical errors 27 August 2008) 1 HIS HONOUR: By a summons filed on 29 July 2008, the plaintiff seeks declarations of breaches of fiduciary and statutory duties and breaches of contract by each of the four defendants, and damages or an account of profits. The plaintiff also seeks injunctions of various kinds against each defendant, both on a final and an interlocutory basis. In summary, the summons seeks orders: (a) to restrain each defendant from misusing the plaintiff's confidential information (summons, paras 9-12); (b) to restrain each defendant from: (i) divulging confidential information of the plaintiff in contravention of clause 16 of the contract of employment; (ii) revealing certain information provided for the purposes of the plaintiff's business, in contravention of clause 18.1 of the contract of employment; (iii) revealing information about the plaintiff's business methods in contravention of clause 18.1; (iv) inducing clients or candidates to cease dealing with the plaintiff or to vary the terms upon which they would otherwise deal with the plaintiff (summons, paras 17-20); (c) to require each defendant to deliver up certain documents received in the course of employment with the plaintiff (summons, paras 21-24); (d) to enforce a contractual undertaking by each of them in clause 18 of the contract of employment not to engage in certain competing conduct for 6 months following termination of their employment (summons, paras 25-28); (e) to require the defendants to make affidavits disclosing documents in their possession received or made by them during the course of their employment with the plaintiff (summons, para 29). 2 This judgment relates to the plaintiff's application for interlocutory injunctions, which was vigorously contested. The plaintiff's business 3 The plaintiff was incorporated in Scotland in 2000 and was registered in Australia as a foreign company in April 2006. It carries on business as a specialist consultant in international financial recruitment, recruiting qualified accounting personnel to work in various countries around the world, in return for recruitment fees paid by employers. On average, it earns about 25% of the first-year salary of the accounting personnel placed by it. Its principal office is in Edinburgh. The plaintiff operates through the internet, telephone conversations and face-to-face contact. 4 The plaintiff obtains assignments from potential employers in two principal ways, namely by receiving a specific brief from an employer in relation to a nominated position, or by submitting employee resumes to potential employers. When potential employers enquire, the company opens a computer account for the employer, recording relevant details of the position to be filled. Potential recruitment candidates contact the plaintiff, usually, through the e-mail link on its website, and the company then opens a computer account in the name of the potential employee, recording relevant details of qualifications and interests. 5 Recruitment consultants seek to establish personal relationships with key personnel of the employer firms. There is evidence that the employer representatives feel more comfortable dealing with recruitment agency staff with whom they have dealt before and with whom they have established a personal relationship. Consequently if a consultant employed by a recruitment company starts to work for another company in the same line of business, there is a degree of likelihood that the client employees with whom that consultant has dealt will follow the consultant to the new recruitment firm. 6 On a typical placement assignment, several employees were likely to be involved in different aspects of the task: receiving and processing instructions from employer or employee; updating and inputting additional information; and reviewing the computer data recorded in the plaintiff's computer system. 7 The plaintiff opened an office in Sydney in April 2006. The first defendant, Mr Moultrie, started to work there on 23 January 2007, replacing the previous manager. Mr Moultrie was engaged as the Asia/Pacific regional associate director, responsible for managing the business and overseeing the company's recruitment consultants in Sydney and Wellington. When Mr Moultrie arrived, the Sydney business was conducted from the ABN Amro Tower in a serviced office environment, but about five months later, the company relocated to an office in the Citygroup Centre. Mr Moultrie reported to Ms Stevens, the managing director, in Edinburgh. Mr Moultrie's contract of employment 8 Mr Moultrie's contract of employment with the plaintiff took the form of a letter from the Company to him dated 22 January 2007, endorsed with his acceptance on the same date. After making provisions for such matters as remuneration, hours of work and holidays, the contract in clause 7 provided for termination, after the first three months of employment, by either side on four weeks' notice, or by the Company without notice in the event of gross misconduct. Clause 7 provided that during the notice period the Company was not obliged to provide work for the employee but the employee was not permitted to work for anyone else without permission. The clause also said that the Company reserved the right to retain from the employee its training costs and the cost of overseas visits, on the ground that the Company invests time and money in training and financing those visits to build personal relationships, and when the employment is terminated it receives no benefit for that expenditure. 9 Clause 16 of the contract was in the following terms: "16. Confidentiality During the course of your employment you will have access to and will be entrusted with information with respect to the business of the Company and its dealings, transactions and affairs, all of which information is or may be confidential. You will not (except in the proper course of your duties) during or after the period of your employment divulge to any person whatsoever, or otherwise make use of, any confidential information concerning the business of the Company and its or their dealings, transactions and affairs. All notes and memoranda or confidential information concerning the business of the Company which you have acquired, received or made during the course of your employment shall be the property of the Company and will be surrendered (together with any other Company property) to the Company on termination of your employment or at the request of the Company, at any time during the course of your employment. This obligation shall extend to any copies of any such documents or information stored electronically. The restrictions shall apply without limit of time, but shall cease to apply to information or knowledge within the public domain." 10 Clause 17 provided that intellectual property attributable to the employee's work with the Company was deemed to belong to the Company. 11 Clause 18 provided as follows: "18. Confidentiality and Conditions to be observed during your employment and after you cease to be employed. 18.1 The Company exists (and invests resources) principally to find individuals ('Candidates') suitable to be introduced to employers ('Clients') who will pay the Company a fee for their recruitment. You are employed to find Candidates who will become overseas accountancy personnel (ie working outwith their home country) for the purpose of placing those Candidates with Clients (the 'Restricted Business'). Candidates therefore represent a commercial value to the Company, and your knowledge, resulting from your employment with the Company, of their availability or potential availability for employment or that a particular Client is seeking staff or might be seeking staff is confidential and may not be revealed by you to anyone to whom you are not authorised to do so by the Company during your employment or after you cease to be employed by the Company nor may it be used in competition with the Company. Additionally in the course of your employment with the Company you will acquire knowledge of the Company's pricing policy, proprietary business methods, detailed knowledge of the Clients' business and Candidates' backgrounds and other information which the Company regards as confidential and it would be detrimental to the Company if such knowledge were passed to a competitor. This information may not be revealed by you to anyone during or after your employment with the Company nor may be used by you in competition with the Company without your being expressly authorised to do so by the Company. All notes and memoranda, files or documents, whether stored electronically or otherwise, which you have acquired, received or made during the course of your employment shall be the property of the Company and will be surrendered (together with any other Company property) to the Company on termination of employment or at the request of the Company at any time during the course of your employment. These restriction [sic] shall apply without limit of time. You will not apply for any permanent or temporary vacancies notified by the Company's clients without prior written consent of the Company. 18.2 Accordingly, for the period of six months after the termination of your employment under this Agreement you will not directly or indirectly: (a) be engaged or concerned or interested in any business carried on within Australia or other country in which the Company has an office (the 'Restricted Area') wholly or partly in connection with the Restricted Business (save for the holding as a passive investor only of no more than 5% of the issued ordinary shares of any company of a class which are listed or traded on any recognised stock exchange). For the avoidance of doubt the foregoing restriction shall not prevent you from working for a competitor or in competition with the Company in any activity other than the Restricted Business; (b) seek or accept, in any capacity whatsoever, any business, orders or custom which is in connection with or in competition with the Restricted Business or any aspect of it from any Clients or Candidates; (c) induce or attempt to persuade any Employee to leave employment or engagement by the Company or any Group Company or offer or cause to be offered employment or engagement to any Employee. 18.3 You will not at any time during your employment or after the termination of your employment under this Agreement, directly or indirectly: (a) induce or seek to induce, by any means involving the disclosure or use of confidential information, any Client or Candidate to cease dealing or refrain from dealing with the Company or any Group Company or to restrict or vary the terms upon which it deals or would otherwise have dealt with the Company or any Group Company; (b) following termination represent yourself or permit yourself to be held out as having any connection with or interest in the Company or any Group Company. 18.4 Each restriction in this clause (whether drafted separately or together with another) is independent and severable from the other restrictions and enforceable accordingly. If any restriction is unenforceable for any reason but would be enforceable if part of the wording were amended or deleted it will apply with such amendments or deletions as may be necessary to make it valid and enforceable. You accept that the restrictions set out in this clause are in the interests of the parties and afford reasonable protection to the legitimate business interests of the Company. If, during your employment or the period in which this clause operates after the termination of your employment any third party makes you an offer of employment or a contract for services or any other contract which would or might involve you being in breach of any said restriction you shall promptly and before accepting such offer bring the terms of this agreement to that third party's intention. This restrictive covenant remains valid after termination however so arising. The Company may transfer or assign its rights under this clause to its successors in title. You may not transfer or assign any rights or obligations under this clause." 12 By clause 21 the Agreement was expressed to be governed by the law of the Commonwealth of Australia, and disputes were said to be subject to the non-exclusive jurisdiction of the New South Wales Courts, to which the parties irrevocably submitted. The employment of Ms Bain, Mr van Biljon and Mr Russell 13 The second, third and fourth defendants, Ms Bain, Mr van Biljon and Mr Russell, worked for the plaintiff as recruitment consultants. They were responsible for recording, maintaining and updating the employer and employee information in the computer accounts. Ms Bain's contract was dated 11 September 2007, Mr van Biljon's was 11 April 2007 and Mr Russell's was 8 May 2007. In fact Ms Bain commenced on about 29 October 2007 and Mr van Biljon commenced on 30 July 2007. Their contracts were generally in the same terms as Mr Moultrie's contract, except for different positions and remuneration. In particular, clauses 16 and 18 were the same. 14 Ms Bain and Mr van Biljon held an Australian temporary resident work visa (a "457 SubClass Visa"), sponsored by the plaintiff. Mr Russell has Australian permanent residency. Mr Moultrie gave evidence that Ms Bain's visa was not approved until 16 January 2008 and until that time she was paid by the plaintiff's UK office as a secondment employee on assignment. Termination of the defendants' employment and closure of the Sydney office 15 Mr Moultrie gave evidence that he had some disagreements with the directors of the plaintiff about the company's business model, and that he had serious doubts about Ms Stevens' abilities as a manager. He said he resigned on 29 February 2008. Other evidence indicates that he gave notice of resignation on 8 March 2008. His last working day was 14 March 2008. 16 There was an employee exit interview with him conducted by Cramond Perry on 18 March 2008. As I read them, the notes of the exit interview confirm Mr Moultrie's evidence, especially in that his decision was brought about by not being able to do what he wanted to do in the Sydney office and by the imminent arrival in Sydney of Ms Stevens for an extended time. He acknowledged during the exit interview that he was aware of the restrictive covenants in his employment contract and said he did not intend to breach them, and that he had not printed or copied any files, though he said he had sent some documents home that he had created. 17 A letter from the plaintiff to Mr Moultrie dated 14 March 2008, dealing with final salary and holiday entitlements, was cordial and wished Mr Moultrie the best for his future. The parties arranged that Mr Moultrie would provide consultancy services for the period from 17 March to 11 April 2008. In his evidence Mr Moultrie described this as "gardening leave". 18 According to Mr Moultrie, there were subsequently five other resignations. The company decided to make four other employees redundant, including Ms Bain and Mr van Biljon. On 16 April 2008 Ms Stevens called each of them into the boardroom and read a letter headed "Company Restructure". According to the evidence, they were not given any prior warning. The letters, which were substantially identical, recorded that the current business year had been a very difficult time in the company's history, and that the Sydney office was trading unprofitably. The letters advised that on 9 April 2008 the board had decided to restructure the company and that the positions of Ms Bain and Mr van Biljon, respectively, had been made redundant. Under the heading "Confidentiality" the letters said: "You will be required to abide by the confidentiality clause in your contract of employment. However for the avoidance of any doubt you should not contact candidates, clients or any other stakeholder or other third party during the consultation process or until further notice unless otherwise confirmed in writing. Your candidates and clients will be distributed to others to manage." 19 Ms Bain and Mr van Biljon were retrenched with effect from 15 May 2008. Mr Russell received a similar letter on 13 May 2008, terminating his employment by reason of redundancy on 10 June 2008. When he left he was the last employee in the Sydney office. The paragraph about confidentiality in the letter to Mr Russell was the same as in the other letters. 20 The company's Wellington office was closed in August 2007 because it had been performing poorly, and all staff were made redundant, except for one employee who was transferred to Sydney. 21 The evidence shows that the real Sydney office was closed on 13 May 2008 and there are no employees in Sydney. It is the plaintiff's contention that although the physical office was closed it continued to conduct a "virtual office" at the place of its registered office in Sydney. But that virtual office is, in substance, merely a serviced office address. On 5 August 2008 a clerk employed by the defendants' solicitors presented himself at that address. He could see no signage or directory entry in the foyer referring to the plaintiff. The receptionist in the building foyer referred him to level 31 where, again, there was no signage or directory entry for the plaintiff. However, the receptionist on that level confirmed that the plaintiff had an office there, and when the clerk asked to speak to a representative of the company, the receptionist went away for five minutes and then reported that no one was there at the moment. She said that the plaintiff uses the office "when they are in Sydney". Employment of the defendants by Ambition 22 After they left the plaintiff's employment, all the defendants went to work for Ambition Group Ltd ("Ambition"). Ambition is an Australian public company formed in 1999. One of its founders is Paul Lyons. He gave evidence that the company was created with the vision that it would become a leading international recruitment company. Ambition now employs 300 staff in 10 offices in the United Kingdom, Australia and Asia. Mr Lyons said that Global Ambition is an operating division within the recruitment trading subsidiary of the Ambition group, created in January 2007. He explained that there are two components of Global Ambition, one generating candidate traffic between London, Australia, Hong Kong and Singapore, and the other placing candidates from the UK, Ireland, Australia, New Zealand and South Africa into countries without Ambition offices. 23 Mr Moultrie accepted a consulting role with Ambition from 21 April 2008, on the basis that the position had the potential to develop into a longer term consulting contract or full-time employment. He said that during the first four weeks of his consulting contract he learned about Ambition's international business conducted by Global Ambition. He said he was asked by the directors of Ambition to focus on the development of Global Ambition and was told that he would ultimately "spearhead" that division which, at the time of his commencement, was in the early stages of development. He said that after he learned that the plaintiff's Sydney office had been closed and staff had been retrenched, he obtained approval from Ambition to make offers to Ms Bain, Mr van Biljon and Mr Russell to work for Ambition. Ms Bain and Mr van Biljon commenced with Ambition on 26 May and Mr Russell commenced on 16 June 2008. 24 Ms Stevens' affidavit annexes some downloads from the Ambition website, made on 15 and 19 June 2008. The company's website invites the reader to search for a new job or contract overseas, in accounting, financial services, or marketing and technology. Australia, Hong Kong, Singapore and the United Kingdom are mentioned. The "Contact Us" page of the website gives addresses, telephone numbers and fax and e-mail contacts for Ambition at five Australian locations, and in Hong Kong and Singapore. The "Job Search" section of the website enables the user to search in all locations or specified locations, identifying the job type, job function and salary range. The job functions are listed as "accounting - commerce & industry", "accounting - financial services", "banking and finance" and "technology". A job search on the Ambition website identified some 9 jobs in Hong Kong/China including positions as a finance manager, and audit manager and a senior internal auditor. 25 Under the heading "it's a small world, when you have ambition", the website proclaims that Ambition has offices in London and Sydney and is perfectly positioned "to bring your next professional adventure to life", and that Ambition's international recruitment team has more than 70 years in accounting and finance recruitment, and collectively 25 years specialising in international recruitment in these disciplines. The website says, "we are constantly speaking with organisations all over the world about their local human resourcing needs". 26 Ms Stevens has given evidence on behalf of the plaintiff, based on her monitoring the activities of the plaintiff's competitors, that Ambition only recruited and placed personnel in countries in which it had an office, until a separate division of the Ambition group called "Global Ambition" was established by the defendants. It seems that "Global Ambition" is not registered as a business name in Australia, but a search by Ms Stevens on 14 June 2008 of the "Linked in" website revealed biographies of Mr Moultrie, Ms Bain and Mr van Biljon. 27 The website said that Mr Moultrie is the managing director of Global Ambition, a member of the Ambition Group based in Sydney, and had been previously the Asia Pacific Regional Director at the plaintiff. The website noted that as managing director he had "overall responsibility for the growth and profitability of" a business that exists "to provide international career opportunities for professionals across various disciplines". His experience is stated to include that he was the person responsible for overall management, development and growth of the regional offices of the Asia-Pacific region of the plaintiff. The "Linked in" website has similar entries for Ms Bain and Mr van Biljon, identifying them as occupying senior consultant positions at "Global Ambition" and referring to their previous experience with the plaintiff. In Ms Bain's case specific mention is made of her experience in placements with the "big four and mid-tier firms along with financial services and commerce and industry organisations". 28 It seems to me plain from this evidence that the Global Ambition division of Ambition is engaged in business falling within the description of "Restricted Business" in clause 18.1 of the employment contracts. It is the business of finding candidates who will become overseas accountancy personnel (that is, working outside their home country) and placing them with clients who are the employers of such personnel. That conclusion leads to two questions: whether any of the covenants in clause 16 and 18 of the employment contracts with respect to the plaintiff's confidential information and proprietary business information (which I will call, somewhat loosely but for convenience, "the confidentiality covenants") have been breached, or there are reasonable grounds for apprehending breach; and whether the covenant in clause 18.2 with respect to work activities after termination of employment has been breached and its continued breach should be enjoined. The plaintiff's evidence about breaches of the confidentiality covenants 29 There are several strands of evidence upon which the plaintiffs rely in support of their application for interlocutory relief. While it is appropriate to consider the overall effect of the evidence, it seems to me important in the present facts to look closely at each component or strand. 30 Ms Stevens has put into evidence an e-mail sent by Mr Russell, described as a "Senior International Recruitment Consultant" with Global Ambition, to a person called Elena Naumenko on 4 July 2008. It appears from the e-mail that Ms Naumenko is engaged in recruitment for the accounting firm KPMG. Mr Russell gave evidence that she is the first point of contact at KPMG for recruitment agencies. In the e-mail Mr Russell introduced two candidates to KPMG and asked whether KPMG would like to interview them. Mr Russell said both candidates were sourced through internet advertising. 31 The e-mail continued: "As the demand for highly skilled Accounting & Finance professionals continues to increase on a global basis, more and more organisations are searching offshore to maintain their local staffing levels. It has been this continued skills shortage that has driven a group of experienced international recruitment specialists to establish a new business entity - Global Ambition, specifically created to assist bridging the gap between the burgeoning employer skill shortages and individuals who have international career aspirations. I am proud to be a founding member of this team, with offices in Sydney and London. Between our two offices, we boast 100 years of recruitment consulting experience, but more importantly - 25 years of international recruitment experience helping Accounting & Finance professionals make a career and lifestyle change, considering more than 100 locations around the world. Global Ambition has been established with one key thought in mind - time efficiency and cost effectiveness in the recruitment process." 32 The e-mail provides evidence that Mr Russell was at the time of writing it engaged or concerned in a business wholly or partly in connection with the Restricted Business, for the purposes of clause 18.2(a) of his employment contract. But as I understand the evidence, that proposition is not seriously contested. The issue for present purposes is whether the e-mail is evidence of breach of the confidentiality covenants. Clause 16 would prevent Mr Russell, after the period of his employment, from divulging any confidential information concerning the business of the plaintiff and its dealings, transactions and affairs. That covenant is not contravened by the e-mail. 33 Clause 18.1, first para, would prevent Mr Russell from revealing after termination of his employment any confidential information of the company regarding the availability or potential availability of candidates for employment, or that a particular client is seeking or might be seeking staff. But there is strong evidence, which I accept for the present interlocutory purposes, that information about candidates and clients is available from sources other than the plaintiff's information, and (as Mr Russell has said) the information about the particular candidates that were the subject of the e-mail were sourced through internet advertising rather than from any source connected with his former employment. There is also strong evidence, which I accept for the interlocutory purposes, that information about the needs of clients is widely available. In addition to the evidence given by the defendants and Mr Lyons, I refer to a table tendered on behalf of the defendants relating to advertisements on various websites by various recruitment agencies in respect of the nine vacancies in the eFinancialCareers website identified by Ms Stevens as positions listed in the plaintiff's computer records (discussed more fully below). The table indicates that in the case of each of those nine positions, comparable vacancies were advertised by other recruitment firms, either in eFinancialCareers or on other websites. 34 The second paragraph of clause 18.1 prevents the former employee from revealing information which the plaintiff regards as confidential concerning its pricing policy, proprietary business methods, detailed knowledge of clients' business and candidates' backgrounds. That provision is not attracted by the e-mail. 35 Evidence was also tendered of e-mails by Mr van Biljon, similar to Mr Russell's, written in June 2008 to people at KPMG and Deloitte. In my opinion the same analysis applies to these e-mails as applies to Mr Russell's e-mail. 36 Ms Stevens also gave evidence of the results of a job search made on 15 June 2008 on the website, eFinancialCareers.com.au, which displayed 16 entries for Global Ambition, identifying accounting/finance jobs in various parts of the world including Australia, Canada, the United Kingdom, Luxembourg, the Cayman Islands, the Russian Federation, Ireland and Dubai, bearing dates in the second week of June 2008, and in each case recording Global Ambition's assessment of the position (eg "attractive", "competitive", "excellent remuneration package"). In her affidavit Ms Stevens made specific reference to nine of the listed vacancies. She said that these are positions that were listed on the plaintiff's computer records to which the defendants had access, and were positions that were discussed in meetings which the defendants attended. For example, she produced minutes of a meeting attended by the four defendants on 29 January 2008 (redacted to remove commercially confidential information) during which, she said, there was discussion of the Luxembourg vacancy, the Cayman Islands vacancy, the Russian Federation vacancy and the Bermuda vacancy. She also produced minutes of similar meetings on 17 December 2007 and 21 January 2008. 37 Ms Stevens produced some evidence designed to show that the Canadian vacancy, the Cayman Islands vacancy and the Bermuda vacancy shown in the eFinancialCareers website were the same vacancies as had appeared on the computer records of the plaintiff to which the defendants have access. 38 As to the Canadian vacancy, she produced evidence showing that the plaintiff entered into a "search agreement" with PricewaterhouseCoopers Canada in about December 2006 to provide "consulting services" with respect to the review of resumes of candidates, pre-selection and facilitating and scheduling interviews. I note that the agreement is expressly declared to be non-exclusive. A position as a senior associate in the PwC audit group in Toronto was advertised by the plaintiff in May 2007. A screen print from the plaintiff's computer downloaded on 17 July 2008 in relation to PwC Toronto records various contacts between the plaintiff and the client, including work undertaken in March and April 2008 by Ms Bain. Also in evidence is an e-mail from Ms Bain to recruitment consultants of the plaintiff dated 28 March 2008 with respect to a number of jobs available in Canada. It seems to me the e-mail does no more than to show that she was working on Canadian opportunities. Ms Stevens gave evidence that the plaintiff had a relationship with PricewaterhouseCoopers Canada through placing accounting personnel with them for about four years, with an average value of business from that firm of about $500,000 per annum. 39 As to the Cayman Islands vacancy, the plaintiff was engaged by KPMG Cayman Islands in about February 2007, by a contract in which the plaintiff is declared to act as an employment agency for the client. Introductions are said to be confidential but there is nothing in the agreement to suggest that the relationship is exclusive of any other recruitment services. There is a job description of "KPMG Cayman Audit Seniors 2008" which according to Ms Stevens, was saved on the plaintiff's computer, but it bears no more specific date. A screen print from the plaintiff's computer made on 17 July 2008 shows that work was done by Mr Moultrie in relation to KPMG Cayman Islands in March 2008. Ms Stevens gave evidence that the plaintiff had placed accounting personnel with KPMG Cayman Islands for about 8 years and that the average value of business from that firm was about $600,000 per annum. 40 As to the Bermuda vacancy, the retainer contract with KPMG Bermuda, made in November 2007, is very similar to the contract with KPMG Cayman Islands, and again appears to be non-exclusive. A screen print from the plaintiff's computer made on 17 July 2008 shows work undertaken by Mr van Biljon with respect to KPMG Bermuda in March and April 2008. This screen print is more helpful than the others because it identifies the job, namely "Audit Seniors for Sep 2008". Ms Stevens gave evidence that the plaintiff had placed accounting personnel with KPMG Bermuda for about 8 years and that the average value of business from that firm was about $400,000 per annum. 41 Ms Stevens has given evidence that because the details of the vacancies advertised by Global Ambition on the eFinancialCareers website appear to relate to the same vacancies as those listed in the plaintiff's computer system, Ambition could only have gained access to details of those vacancies if one or more of the defendants had divulged such information to it. 42 In my opinion this evidence is unconvincing because it does not specifically connect the job vacancies under consideration when the defendants were working for the plaintiff with the job vacancies advertised on behalf of Global Ambition on the eFinancialCareers website. It seems to me that in an environment where, according to the defendants' evidence, the employers of accounting personnel deal with many recruitment firms on a non-exclusive basis, in what appears to be a relatively fast moving employment market, the linkage between information considered within the plaintiff in March and information available to the defendants in June cannot be assumed or inferred. In reaching this conclusion I rely on the defendants' evidence to which I shall now refer. 43 Each of the defendants has made an affidavit denying that they took any confidential information from the plaintiff when they left, or that they have made use of confidential information of the plaintiff since leaving. Mr Lyons gave evidence to the same effect. Subject to a particular issue about some files Mr Moultrie sent to his home address, that general evidence has not been put into question. 44 That particular issue should be addressed. In his affidavit, Mr Moultrie volunteered the information that, just prior to the closure of the Sydney office, an employee sent the plaintiff's vacancy list to his personal e-mail address. He maintained that this was done without his knowledge or consent. He said that he opened the file on his home computer but he never used, printed, sent or copied the file, and he immediately deleted it. He said no one else dealt with the file prior to its deletion. 45 In her first affidavit, made before Mr Moultrie's affidavit, Ms Stevens did not make any specific allegation against Mr Moultrie about this matter. However, at the hearing of the interlocutory application the plaintiff read an affidavit by Jugnu Sharma, who was employed in the plaintiff's Sydney office until it closed on 13 May 2008. In response to an enquiry made on behalf of the plaintiff, the defendants' solicitor identified Ms Sharma as the employee who had e-mailed information to Mr Moultrie. Ms Sharma's evidence was that at about the beginning of May 2008, she received an e-mail from Mr Moultrie to one of her private e-mail addresses. She said she no longer retained a copy of the e-mail but she recalled that in it, Mr Moultrie asked her to send him a list of current vacancies on the computer. She said she did so, without asking why he wanted the list. She said the list included details of client contacts, names, locations and numbers and types of vacancies. 46 I am not in a position to resolve this conflict of evidence in the interlocutory circumstances, without the benefit of cross-examination. It seems to me, however, that Mr Moultrie's evidence is plausible, especially bearing in mind that he volunteered the information when there was no allegation about it in Ms Stevens' affidavit. Ms Sharma's evidence is not supported by a copy of the e-mail. She may have honestly believed that she was sending information to Mr Moultrie at his request, in circumstances where Mr Moultrie did not ask her to do so. For the present interlocutory purposes, I prefer Mr Moultrie's evidence. 47 Another aspect of the plaintiff's case relates to some material sent by Mr Moultrie from his office computer to his home computer in March 2008. There are some printouts in evidence, tendered by the plaintiff as a result of a notice to produce, indicating that Mr Moultrie sent some documents to himself at another e-mail address at various times. But on proper inspection, they seem to amount to no more than this. First, on Sunday 2 March 2008 Mr Moultrie sent a document from his home e-mail address to what appears to be his work address, entitled "Potential for some quick placement fees (1 week ending 22 Feb 08)". The obvious explanation appears to be that Mr Moultrie was working at his home computer on a Sunday and sent the work product to his work computer. That is also the case with respect to another document headed "Potential for some quick placement fees (2 weeks ending 29 Feb 08)". 48 Second, on 9 March 2008 Mr Moultrie sent various documents to himself at his home e-mail address. The documents were: "End of Year Event - Definitions to Help You Create Vision"; "End of Year Event - SWOT Analysis Worksheet"; "Improving Offer to Acceptance Ratio - July 2007"; "Living Away from Home Allowance Interpretation - February 2008"; "PowerPoint Presentation for Wellington Office Closure - August 2007"; "Client Account Planning Document"; "TGR Client Retention and Growth Strategy" 49 I have perused these documents but I cannot see that they contain any confidential information or other information of the kind and described in the first two paragraphs of clause 16 of the contract, or clause 18.1. In his written submissions in reply, senior counsel for the plaintiff said that senior counsel for the defendants had conceded that some of the information in these e-mails was confidential. I did not understand him to do so, although it is reasonably clear, and I think accepted on behalf of the defendants, that the files sent to the home computer fall within the second para of clause 18.1 (a matter to which I shall return). I should note that the copies tendered by the plaintiff have excised some financial figures but even so, there is no obvious basis for inferring that those figures have any real confidentiality concerning the company's business, dealings transactions and affairs, or that the information would reveal the plaintiff's pricing policy, proprietary business methods, detailed knowledge of the clients' business and candidates' background or other information that the company regards as confidential and it would be detrimental to the company if such knowledge were passed to a competitor. In my view they fall within the general description given by Mr Moultrie in his exit interview, namely documents that he had created, for example "close NZ/act mgt". It is significant that, although the plaintiff was informed on 18 March 2008 that Mr Moultrie had copied these files, nothing was done to recover the information until this proceeding commenced on 29 July 2008. 50 Mr Moultrie said that to his knowledge none of the other three defendants took any confidential information from the plaintiff and, indeed, he had discussed this issue with each of them during the interview process. He said he prepared a business model for Global Ambition and was involved in developing new systems and processes which, he said, were not based on the plaintiff's systems and processes. He was appointed to the full-time position of managing director of Global Ambition on 1 June 2008. 51 According to Mr Moultrie, the former employees of the plaintiff who came to work for Global Ambition began contacting clients on about 9 June 2008. He claimed that this activity was not based on the plaintiff's vacancy list or any other documentation of the plaintiff, but rather it was based on the employees' own knowledge. 52 Ms Bain said that the work she performed at Ambition was largely the same as the work she performed with the plaintiff. Significantly, she said her work uses the internet as a research tool, and that (of course) the internet is available for use by anyone. She said she also called employers directly to ask for their main contacts and contact details. She denied that when she left the plaintiff she was aware of any specific vacancies, until she or one of her colleagues contacted the firms or became aware of their needs through advertisements. She insisted that the procedure of contacting major firms to seek vacancies was not in any way specific to the plaintiff, and was standard procedure used by recruitment firms. In Ms Bain's view the true value of an international recruitment business lies in high quality candidates rather than clients, because of the international accountancy skills shortage. The clients do not use a single recruitment firm but are open to the recruitment firms if they can supply high quality candidates. She said that very few people whom she knew to be candidates or ex-candidates at the plaintiff had contacted her at Global Ambition, and that those who did were exclusively candidates with whom she had developed personal and social relationships, in some cases prior to working with the plaintiff. 53 Mr van Biljon also said that the work he performs at Ambition is very similar to the work he did for the plaintiff. He sources candidates by downloading candidates' details from job sites to which Ambition subscribes, as well as speaking with candidates who respond to advertisements. He said the clients with whom he deals are a small number of large companies who constantly seek qualified accountants, and were known to him before he commenced work with the plaintiff, and the fact that certain firms have a high demand for accountants is well known across the recruitment industry. He denied that the vacancies advertised by Global Ambition were specific vacancies that the plaintiff had been retained to fill. The clients communicated their vacancies to all interested recruitment companies, and the plaintiff was never the exclusive provider of candidates. He said that the larger employer firms would often require 40 or more appropriate candidates at any one time. Mr Russell also said that the work he performed at Ambition was largely similar to his work for the plaintiff. 54 Mr Moultrie said that in his experience, if a recruitment company is "retained" by a client, this means that the client has enlisted the services of the recruitment company exclusively, and in those circumstances the client would pay an "assignment acceptance" fee in advance to commence the project. However, he said, it is common practice for companies seeking suitable employees to engage multiple recruitment agencies, not on any exclusive basis. Mr Lyons gave evidence substantially to the same effect. He said that as a rule, international recruitment agencies work on a contingency basis and clients almost always foster relationships with many different agencies (up to 30 or 40 in most locations). He said his understanding was that the plaintiff had no "retainers" with clients in his sense of the word, and always worked on a "no find, no fee" basis. That seems to be consistent with the evidence of the client contracts used by the plaintiff. 55 I accept this evidence, which seems to be more precise and plausible than the plaintiff's evidence to the extent that there is divergence. The evidence leads me to the conclusion that the plaintiff has not established a serious question to be tried with respect to breach or threatened or apprehended breach of clauses 16 and 18.1 (and also clause 18.3(a)) of the employment contracts. Clause 18.2 56 However, given my conclusion that when they joined Ambition, the defendants came to be engaged or concerned or interested in a business carried on within Australia that was wholly or partly in connection with the Restricted Business, my view is that there is a serious question to be tried as to contravention of the covenant not to engage in such conduct for a period of six months after termination of employment (clause 18.2(a)). It seems to me clear, as a matter of construction, that Australia is a Restricted Area whether or not the plaintiff has an office here. 57 There is also evidence of a serious question to be tried to the effect that the defendants have sought business in competition with the Restricted Business from clients (the big accounting firms) of the plaintiff, whether or not they dealt with candidates identified by the plaintiff (clause 18.2(b)). In my view there is insufficient evidence of any serious question to be tried with respect to breach of clause 18.2(c), which deals with attempting to persuade an employee to leave the employment of the plaintiff, since it appears that Mr Moultrie approached the other three defendants after their employment had been terminated. 58 However, there is an issue whether clause 18.2(a) and (b) are valid restraints of trade under the Restraints of Trade Act 1976 (NSW) and having regard to the common law; and there is a pressing question as to whether the balance of convenience favours the granting of interlocutory injunctive relief in respect of these breaches even if the covenants are valid. While I have been taken to authorities with respect to the question of validity of such restrictive covenants in employment contracts (notably cases such as John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995), my view is that the evidence concerning balance of convenience is so clearly against intervention by injunction that the appropriate course is to base my decision on that ground. Balance of convenience 59 The plaintiff has given evidence that it has spent considerable time and cost over a period of up to eight years in developing close business relationships with its clients. It says that the defendants are now involved in promoting the business of a competitor, Global Ambition, and that in these circumstances the protection of the plaintiff's business requires that the Court intervene on an interlocutory basis. The plaintiff draws attention to Ms Stevens' evidence about the volume of business that it has with PricewaterhouseCoopers Canada, KPMG Cayman Islands, KPMG Bermuda and also KPMG Russia, and the company's expenditure in travel connected with developing its business. 60 On the other hand, it is relevant that the company has closed down its Australian operation and its "virtual office" appears to represent little or no business activity. That seems to me to qualify the force of observations in the cases to the effect that the difficulty in calculating damages is a factor pointing in favour of interlocutory relief (for example, John Fairfax Publications v Birt at [51]). Further, the proceedings were brought only on 29 July 2008, after a letter from the plaintiff's solicitors to the defendants on 22 July, and yet the conduct about which the plaintiff complains is principally conduct up to about June 2008. Further, interlocutory injunctions to enforce clauses 18.2(a) and (b) would operate only for six months after termination of employment, that is up to a date in October or November this year, less than three months away (the date would vary from defendant to defendant). I should note that in the present state of the evidence it is not appropriate, in my view, to take into account any question about the ability of the plaintiff to meet any liability under its undertaking as to damages. 61 Three of the defendants have given quite persuasive evidence about the effect upon them of such an injunction. In the case of Ms Bain, her employment with Ambition is her sole source of income, and she is currently in Australia on a visa sponsored by Ambition, so that cessation of employment with them could result in significant hardship for her. Mr van Biljon is in a similar position with respect to his visa and in addition, he has two young children and his income is the primary source of income for his family. Mr Russell's sole source of income is with Ambition. 62 There is another matter relevant to the balance of convenience. The defendants by their counsel have offered an undertaking to the Court that from certain specified termination dates until the hearing of the proceedings or further order, they will keep or cause Global Ambition to keep full and complete records including candidate details, dates, placement details, fees generated, costs and profits, in respect of all transactions involving the placement by any of the defendants of candidates for recruitment with PricewaterhouseCoopers Canada and KPMG in the Cayman Islands, Russia and Bermuda. 63 On balance, considering all these matters I have decided that the appropriate course is to deny the plaintiff's application for interlocutory orders, other than in one respect. Conclusions 64 I have decided to reject the plaintiff's application for interlocutory injunctive relief to enforce the "confidentiality covenants" or clause 18.2 of the employment contract. 65 However, as I have said, there is evidence that Mr Moultrie received electronic files made during the course of his employment that are the property of the plaintiff, and therefore he is obliged by clause 18.1 (second para) to surrender them to the company. In the circumstances the plaintiff has made out a case for an order against Mr Moultrie in terms of para 21 of the summons. There does not appear to be any evidentiary foundation for a similar order against the other defendants. 66 The defendants' undertaking, to which I have referred, should be noted and received.

Think Global Recruitment Ltd v Moultrie

At a glance

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Judgment (10 paragraphs)

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