UP Australia Pty Ltd v McDonald & Anor

Clean Health Kent Street - 2015 to 2018

1. UP Australia is a subsidiary of UP Global Pty Limited ("UP Global"), an international fitness services provider. In October 2016 Ms Alexandra Lamb, then the operations manager of a Hong Kong subsidiary of UP Global, UP Fitness Limited, commenced to plan with the CEO of UP Global, Mr Nick Mitchell, the expansion of UP Global into the Australian fitness industry. Their aim was to acquire an already established personal training business in Australia. They turned their attention to Sydney.
2. By October 2016 UP Global had commenced discussions with Mr McDonald, the manager of the Clean Health Fitness Institute. Companies associated with that Institute then operated Clean Health Kent Street.
3. UP Global's interest in Clean Health Kent Street is said in the evidence to be triggered in part because "Mr McDonald had a reputation for building successful teams of personal trainers". Ms Lamb says that she and Mr Mitchell judged that Mr Carroll "had an impressive reputation within the Sydney fitness industry and was known for his ability to bring in new clients".
4. Ms Lamb says that "UP Global was willing to pay considerably more than market value to acquire Clean Health Kent Street and its employees, including Mr Carroll". At this interlocutory stage, the Court cannot assess whether UP Global's subsidiary, UP Australia, ultimately paid "considerably more than market value" for the Clean Health Kent Street business. But it can be observed that the consideration for the acquisition of the business and assets under the December 2016 contract was not insubstantial: being $800,000, minus certain adjustments for pre-paid client balances, and minus compensation for events causing depreciation to the value of assets and certain warranty claims. The purchase price was apportioned substantially as to the goodwill associated with the business: goodwill being some $792,747 of the $800,000 total consideration.
5. UP Australia acquired the business of Clean Health Kent Street from a number of sellers under the December 2016 contract. These vendors were CHFI Sydney CBD Pty Limited, CHFI IP Holdings Pty Limited, CHFI Sydney CBD Lease Pty Limited, CHFI Contractors Pty Limited and Lauren Guignon (referred to collectively in these reasons as "the sellers").
6. UP Australia acquired from the sellers under the December 2016 contract the gymnasium and personal training business of Clean Health Kent Street and all the sellers' business assets including the sellers' clients, employees and goodwill used for and connected with that business.
7. Most of the terms of the December 2016 contract have no relevance to the current interlocutory dispute. But the agreement contains restrictive covenants that applied to the sellers (clause 11).
8. The clause 11 restraints were comprehensive. A non-competition restraint (clause 11.1) prevented the sellers and Guignon during the "restraint period" as defined and in the "restraint area", as defined, from engaging in similar or competitive businesses, from operating any personal training business, from soliciting business from any persons who were customers of the business during a period of 12 months before the date of completion, and from interfering with relations between the business of Clean Health Kent Street and its customers, contractors or suppliers.
9. The clause 11 "restraint period" and "restraint area" were defined in a way to facilitate severance in the event the various time and geographic restraints were found contrary to the public interest. The defined restraint periods were periods of five years, four years, three years, two years, and one year from completion of the December 2016 contract. The defined restraint area was expressed severally as various areas covering the city of Sydney and then ranging from a radius of 100 kilometres, 75 kilometres, 50 kilometres, 25 kilometres, 10 kilometres and 5 kilometres of the Kent Street premises. And where a personal training business of any kind was being conducted but one not the same or similar to the part of the business being sold, the area of the restraints were much narrower, being respectively 5, 4, 3, 2, and 1 kilometre radii from the Kent Street premises.
10. The clause 11 restraints excluded a number of activities not of present relevance (clause 11.2), provided for the severability of restraints (clause 11.3), and were agreed by the parties to be reasonable (clause 11.4). And the sellers consented to possible future injunctive relief on the basis that damages for breach of the restraints would not be a sufficient remedy (clause 11.5).
11. This structure as between UP Australia and the sellers provides the backdrop for the restraints applicable to the first and second defendants.
12. Neither the first defendant, Mr McDonald, nor the second defendant, Mr Carroll, was a party to the December 2016 contract. But UP Australia now seeks to enforce restraints against them through other instruments: in Mr McDonald's case, through a deed he executed contemporaneously with the December 2016 contract, and in Mr Carroll's case, through his contract of employment with UP Australia.
13. Mr McDonald signed a restraint deed on 16 December 2016 ("the McDonald restraint deed") in consideration for UP Australia entering into the December 2016 contract. The McDonald restraint deed uses the same definitions of "restraint period" and "restraint area" as the December 2016 contract, clause 11. Mr McDonald's acknowledgements and the restraints he accepted in the McDonald restraint deed (clause 2.1 and 2.2) were as follows: "2.1 Acknowledgements The parties acknowledge that: (a) While McDonald has no legal or beneficial interest in any of the Assets or the Business, McDonald has consulted to management in respect of the Business since its establishment; and (b) McDonald has acquired: (i) commercially sensitive and confidential business information about the Business; and (ii) significant confidential details about, the clients of the Business. In light of the above, and in order to protect the goodwill and confidential and trade secret information of the Business and to give full effect to clause 11 of the Business Sale Agreement, McDonald acknowledges that it is necessary for him to enter into and agree to be bound by the restraints set out in this document. 2.2 Restraints Subject to completion of the Business Sale Agreement, and in consideration of UP entering into the Business Sale Agreement and the receipt of the Restraint Consideration, McDonald undertakes to UP that he will not, and he will ensure that his Associates (which includes, for the avoidance of doubt, CHFI) do not, during each Restraint Period within each Restraint Area' (a) Engage in or prepare to engage in any business or activity which (i) is the same or similar to the whole or any part of the Business; or (ii) is in competition with the Business or any material part of it; (b) where clause 2.2(a) does not apply, engage in or prepare to engage in any business or activity which involves opening any personal training business of any kind, (c) induce, solicit or canvass, approach or accept any approach from, any person who was at any time during the 12 month period ending on Completion, a client of the Business to obtain the custom of that person in a business or activity that: (i) is the same or similar to the whole or any part of the Business (ii) is in competition with the Business or any material part of it; (d) do or say anything harmful to the reputation of the Business or which may lead a person to stop, curtail or alter the terms of its dealings with the Business; (e) interfere with the relationship between the Business and its customers, Contractors, distributors or suppliers; (f) represent himself as being in any way connected with or interested in the Business; or (g) seek to engage or engage the services of any contractor, employee or agent of the Business other than the Excluded Contractors."
14. But the McDonald restraint deed made clear that Mr McDonald could continue to operate the "Chatswood business" as defined, which he and companies associated with the sellers had long conducted. This "Chatswood business" had been defined in the December 2016 contract as "the private gymnasium and personal training business conducted by associates of the sellers at 13-15 Smith Street, Chatswood" (clause 2.3). The McDonald restraint deed also provided: for each restraint to be separable and severable (clause 2.4); that each of the clause 11.2 restraints was acknowledged by Mr McDonald to be reasonably necessary to protect UP Australia's goodwill in the business (clause 2.5); and that money damages alone were acknowledged not to be a sufficient remedy for breach of the agreed restraints, such that UP Australia would be entitled to injunctive relief to compel performance of clause 2 (clause 2.6).
15. After UP Australia acquired Clean Health Kent Street, it signed on Mr Carroll on 15 February 2017 as its "head mentor" with effect from 1 February 2017. His employment agreement provided: that he would work from the Clean Health Kent Street premises; that his employment was covered by the Fitness Industry Award 2010; that his ordinary working hours were 38 hours a week; that his salary was $156,000 per annum, exclusive of superannuation; that UP Australia would pay his superannuation; and that in certain circumstances he was also entitled to a commission in accordance with UP Australia's commission structure. His period of notice for termination of employment, within one year of commencing with UP Australia, was one week. Mr Carroll's employment agreement also provided for the following employment and post-employment restraints: "You must not, in any capacity, directly or indirectly (a) do any of the following: (i) induce, encourage or solicit any of our employees or contractors to terminate their engagement with us, (ii) induce, encourage or solicit any of our customers, clients or suppliers with whom you have had contact in the 12 months preceding the termination of your employment, to end or restrict their trade relationship with us; (iii) become an employee of any customer or client of ours in order to perform work which we might reasonably expect to otherwise perform; (iv) be associated with or engaged or interested in a business which competes with our business where the purpose of your engagement or interest is to compete with us, (b) for the following periods after your employment with us ends: (i) 6 months (ii) 6 months (iii) 6 months (c) in relation to the activity in sub-clause (a)(iv) only, within the following areas: (i) a 15km radius from any workplace where you have performed work for us. This clause will have a cumulative effect as several separate restraints for each activity listed in sub-clause (a) combined with each period listed in sub-clause (b) and, in relation to the activity in clause (a)(iv) only, within each area listed in clause (c). You must comply with all possible combinations. The validity of each separate restraint in this clause will not be affected by the invalidity of any other restraint. You may seek our consent in writing to be released from any restraint. Your obligations under this clause continue after termination of your employment"
16. The December 2016 contract was completed on 20 December 2016.

After the Sale to UP Australia

1. Mr Carroll became disenchanted with UP Australia. His role as head mentor at UP Australia involved him in educating only UP Australia personal trainers. There were only about 10 to 15 UP Australia-engaged trainers for him to mentor. He perceived this to be a rather limited pool. He could not mentor personal trainers who were not UP Australia personal trainers, as UP Australia did not provide mentorship or coaching to external personal trainers. Mr Carroll's role as head mentor at UP Australia did not require him to perform any online training to UP Australia clients. But he did provide some face to face personal training to UP Australia clients. Otherwise he was mentoring UP Australia trainers. In relation to the discharge of his duties as head mentor, Mr Carroll reported directly to Mr Jon Bond, his immediate manager.
2. But by November 2017 Mr Carroll was pushing Mr Bond to expand Mr Carroll's mentoring role at UP Australia from mentoring only UP Australia personal trainers to mentoring non-UP Australia personal trainers. Mr Carroll thought that pursuing that opportunity could "create more value both for Mr Carroll and for UP Australia's business". But the evidence suggests that Mr Bond could perhaps not readily persuade Mr Mitchell from UP Global to expand UP Australia's business model so that he could undertake such broad education of personal trainers.
3. According to Mr Carroll, this created two issues for him. First, before UP Australia's acquisition of the Clean Health Kent Street business, Mr Carroll says that he had already commenced large scale private mentoring. Indeed Mr Carroll says that he had a significant social media presence whilst he was working for Clean Health Kent Street before December 2016. He says that he had been marketed widely to the general public in this role by the sellers when they operated Clean Health Kent Street. Mr Carroll felt that the new owner, UP Australia, was restricting his career development and not taking advantage of his skills to bring in customers, personal training clients, for UP Australia. And second, Mr Carroll's clear preference was now only to mentor other trainers and, given his skills, there were not enough UP Australia trainers for him to mentor.
4. By 21 December 2017 these issues meant that Mr Carroll no longer wanted to work for UP Australia. He spoke to Mr Bond on the day of his decision to leave and said "I don't feel like this is the best place for me anymore. I want to do my mentoring but UP Australia does not help with this. I want to go to Clean Health".
5. Mr Carroll's employment with UP Australia ended the following day. According to Mr Carroll, it ended at Mr Mitchell's initiative, in part because of Mr Carroll's mentoring work. Mr Carroll claims that his dismissal without notice on 22 December 2017 was a breach of his employment agreement. UP Australia disputes this.
6. By December 2017 Mr Carroll says he had clearly expressed to Mr McDonald his desire to work for Mr McDonald at the Chatswood business. Mr Carroll says, and Mr McDonald confirms in his evidence, that between November and December 2017 they had been meeting once a week in the context of a friendship and mentoring relationship. Mr Carroll's evidence supports the fact of these discussions and that by November 2017, Mr Carroll was proposing a move from Clean Health Kent Street to Mr McDonald's business in Chatswood. Mr Carroll says he put to Mr McDonald that he could mentor other trainers at Chatswood more broadly but that he would not give personal training to clients directly. This is consistent with Mr McDonald's evidence: he says he does not provide personal training directly to clients at Chatswood but only trains personal trainers there.
7. Mr Carroll's and Mr McDonald's late 2017 discussions reached the point that Mr McDonald was prepared to offer him a salary of $200,000 a year to bring all his mentoring clients into Mr McDonald's business, with a commission structure on sales of 5 per cent. Mr McDonald says that he told Mr Carroll that were he to be employed with Mr McDonald, Mr Carroll's job would be "pretty much to fly around the world educating trainers". Mr Carroll is said to have responded saying, "It would be my dream job Daine". But Mr McDonald says he made clear to Mr Carroll that all of this would be subject to getting a release on the restraint from UP Australia. And the email evidence suggests that Mr McDonald was quite open about this with UP Australia.
8. Mr Carroll informed Mr McDonald on 21 December 2017 that he was no longer with UP Australia. Mr McDonald says he had conversations with Mr John Bond. Mr Bond confirms that this and a number of other meetings took place. There is dispute between Mr Bond and Mr McDonald as to what was said. But the defendants rely upon the very fact of these meetings to demonstrate their openness with UP Australia about their intentions and that therefore their undertakings can be relied upon and it is quite unlikely in their future mutual relations that they would breach the restraints imposed upon them.
9. But UP Australia was sufficiently concerned about the possibility that Mr Carroll might go to work for Mr McDonald that on 6 February 2018 UP Australia launched these proceedings by Summons.
10. These reasons now deal with the principles that govern the grant of interlocutory injunctions, before proceeding to apply those principles.

Applicable Legal Principles

1. In deciding whether or not to grant an interlocutory injunction, the Court must consider whether there is a serious question to be tried and then whether the balance of convenience, questions of hardship and related factors warrant the grant of an interlocutory injunction. First, the plaintiff must prove a serious, not a speculative, case which has a real possibility of ultimate success and that property or other interests might be jeopardised if no interlocutory relief is granted: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed 2014, LexisNexis Butterworths) at [21-350] ("Equity Doctrines and Remedies"), discussing the requirements of the Beecham Group Limited v Bristol Laboratories Pty Limited (1968) 118 CLR 618 prima facie case test. Put another way, the plaintiff must show a sufficient likelihood of success to justify the preservation of the status quo pending the trial: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [70] - [71].
2. Then, it becomes a matter of analysing if, in all the circumstances of the case, considering the balance of convenience and issues of hardship, the Court should nonetheless exercise its discretion by declining to issue an interlocutory injunction: Equity Doctrines and Remedies at [21-350]; and see also Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 and Beese v Woodhouse [1970] 1 WLR 586. Other factors to which the Court will have regard include: the adequacy of damages, the possibilities of alternative remedies, whether there has been any laches or delay, the strength of the grounds of defence suggested by the defendant, what, if any, undertakings the defendant is prepared to give. But hardship and the balance of convenience are very important: Equity Doctrines and Remedies [21 - 375]. If any infringement of a plaintiff's right between writ and hearing would be properly compensated in damages, that fact alone can, but not must, be a ground for declining an injunction: McCarty v Council of the Municipality of North Sydney (1918) 18 SR (NSW) 210.
3. In Kolback Securities Ltd v Epoch Mining (1987) 8 NSWLR 533 McLelland J (as His Honour then was) when considering what must be established to obtain an interlocutory injunction, including when the restraint in question may have implications for the disposition of the proceedings at final hearing, 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. The substantial matter in issue is whether Epoch should be permitted to proceed with the issue of non-renounceable rights in accordance with the announcement of 13 March 1987. That will be irrevocably determined in a practical sense by the grant or refusal of an interlocutory injunction."
4. The application of these principles shows what should be done at this interlocutory hearing.

Is There a Serious Question to be Tried?

1. Neither party really contested that there was a serious question to be tried. The defendants acknowledged the existence of the restraints relied upon by UP Australia, in both the McDonald restraint deed and Mr Carroll's employment agreement. It is a clearly available argument to UP Australia at final hearing that those restraints apply to preclude threatened conduct of the defendants unless, after a contest at final hearing, the restraints are held to be contrary to the public interest.
2. The defendants were generally prepared to concede that they should be bound by non-solicitation restraints. But they contested the imposition of wider restraints.

The Balance of Convenience

1. Plaintiff and First Defendant. The first defendant did not dispute that the McDonald restraint deed created a "goodwill" restraint rather than an "employment restraint" and that the Courts are more likely to enforce goodwill restraints, particularly with respect to the clients/customers of a business that has been sold: Trego v Hunt [1896] AC 7.
2. Mr McDonald contends that he and Clean Health Kent Street at Chatswood have entirely different clients and customers from UP Australia. He contends that UP Australia's clients are people of the general public needing personal training from the (at least in the Sydney CBD) but that Mr McDonald's customers are only personal trainers.
3. But UP Australia challenges Mr McDonald's evidence. It will contend at final hearing that it is at least open to Mr McDonald to attract its clients and compete against it in offering personal training services to the general public and that it is more likely to do so if Mr Carroll goes to work for Mr McDonald. Moreover, there is evidence that: Mr Carroll did continue to train a number of personal clients after UP Australia took over Clean Health Kent Street; and that Mr Carroll's extensive online marketing, though primarily directed to training trainers, has in the past and may in the future readily attract not just trainers but personal training clients. It is impossible to resolve this dispute during an interlocutory hearing. But it will be a live contest at final hearing.
4. Mr McDonald resisted a restraint on engaging Mr Carroll. He submits that UP Australia is merely seeking to interfere with the free flow of labour: Kores Manufacturing Co Ltd v Kolok Manufacturing Co Ltd [1959] Ch 108. Instead, he indicated a willingness to undertake to accept a restraint in the following terms: 1. NOTE that, upon counsel for the plaintiff giving the usual undertaking as to damages, without admission, and in reliance upon the plaintiff's undertaking as to damages, the first defendant, Daine McDonald and his Associates as defined in clause 1.1 of the Restraint Deed dated 16 December 2016, including but not limited to CHFI Chatswood Pty Ltd and CHFI Education Pty Ltd (Associates), undertake to the Court through counsel, until further order of the Court, that they will: 1. only seek to engage or engage the services of the second defendant, Mark Carroll, as an educator, mentor and/or trainer of personal trainers; 2. not seek to engage or engage the services of the second defendant, Mark Carroll, as a personal trainer to provide personal training services to: 1. any person who is a client of a personal trainer of the plaintiff as set out in the list to be provided by the plaintiff to the first defendant within three days of the date of these orders and notations; and/or 2. any person who is a client of a personal trainer of the first defendant and his Associates, as set out in the list to be provided by the first defendant to the plaintiff within three days of the date of these orders and notations and such list is not to be used by the plaintiff for any purpose other than these proceedings; 1. not until on or after 22 June 2018, take on any new clients for personal training services save for a new client solicited solely by the current personal trainer contractors of the first defendant and his Associates; 2. not engage or seek to engage any personal trainer currently engaged by the plaintiff; and 3. will if approached by any person in 1(b)(i) above or 1(d) above inform the person that they are not permitted to engage the person and will immediately notify the plaintiff of this in writing.
5. But in my view such a form of restraint is far from workable. The restraint that Mr McDonald here offers to enter into would permit Mr Carroll to work at the premises conducted by Mr McDonald at Chatswood but solely in the role as an "educator, mentor and/or trainer of personal trainers", but in no way to provide personal training services to any client of a personal trainer, either of UP Australia or of Mr McDonald.
6. But this proposed undertaking does not well serve the balance of convenience. Once Mr Carroll is on Mr McDonald's premises at Chatswood in a busy gym environment speaking to personal trainers, there is a not insubstantial likelihood that some incidental contact with the clients of those trainers clients will occur. And in that environment Mr Carroll may use the up-to-date confidential information about Clean Health Kent Street that he has (discussed below in relation to the second defendant) to the advantage of Mr McDonald's Chatswood operations. It is true that those Chatswood operations were excluded from the restraints under the McDonald restraint deed, because they were train-the-trainer operations. But there is enough evidence of Mr Carroll's continuing contact at Kent Street, and online, with some personal training clients that the Court is not confident at an interlocutory hearing that even with their undertakings that Mr Carroll and Mr McDonald can and will maintain a bright line distinction between personal training clients and training trainers.
7. It would be extremely difficult to verify whether Mr Carroll had directly or indirectly assisted Mr McDonald to acquire personal training clients of UP Australia. There is substantial UP Australia evidence that Mr Carroll was a key figure in the plaintiff's business; as Mr Mahendra put it, "a client magnet". This evidence grounds UP Australia's contention that Mr Carroll's mere presence in Chatswood could provide an easy platform for the transfer of personal training clients from the plaintiff to the first defendant.
8. Mr McDonald proposes that the risk of such assisted transfer of personal training clients from the plaintiff to Mr McDonald could be averted by its own undertakings and by the plaintiff providing a list of its clients to Mr McDonald, so that it did not inadvertently take them on through Mr Carroll's presence. But this is impractical. To be effective for Mr Carroll, it would require UP Australia to give a current client list to Mr McDonald. This raises the risk of its misuse as a client list. It is not necessary in these reasons to find that Mr McDonald would misuse such a list. But rather the existence of such a list in Mr McDonald's possession raises the possibility of inadvertent misuse through employees. UP Australia's concern about that is reasonable.
9. Finally, the first defendant says that damages would be an adequate remedy. But the McDonald restraint deed acknowledges that damages are not an adequate remedy.
10. For these reasons it seems that the only practical restraint that is workable against the first defendant is one that prevents the second defendant from working for the first defendant until the final hearing. That final hearing is likely to occur before the plaintiff's restraint under the employment agreement expires in mid-June this year. And in the meantime, Mr McDonald can continue to conduct without any other interference the full train-the-trainer business model at Chatswood that he clearly represented through the McDonald restraint deed had always been his intention.
11. Plaintiff and Second Defendant. Mr Carroll does not dispute, and is prepared to undertake, not to solicit the plaintiff's customers, clients, employees or suppliers with whom he had contact in the 12 months before the termination of his employment from terminating their trade relationship with UP Australia.
12. The courts have recognised that an employer has a legitimate interest in maintaining a stable and trained work force but an employer has no legitimate interest in preventing a former employee from taking employment with a competitor: Kearney v Craepoldi & Ors [2006] NSWSC 23 at [55] - [58] and Buckley & Ors v Tutty (1971) 125 CLR 353.
13. But the second defendant submits that generally a restraint would not be enforceable if it were to seek to prevent a former employee dealing with customers with whom the employee had no personal contact on the ground that there has been no capacity for personal influence: John Fairfax Publications Pty Ltd v Birt & Ors [2006] NSWSC 995. Mr Carroll submits that he was not the human face of the plaintiff's business and that as a result, the restraints sought by the plaintiff are only restraints on competition and a former employer is not entitled to require protection against mere competition: Stacks Taree v Marshall (No. 2) [2010] NSWSC 77.
14. Mr Carroll's role at Clean Health Kent Street before his employment with UP Australia terminated will be in contest at final hearing. Although his employment role with UP Australia limited his client contact to a degree, it was not absent. And UP Australia presents him as very much the face of the business. And even on his own evidence he continued to maintain a substantial online public presence, whilst discharging his mentoring role with Clean Health Kent Street. At the interlocutory stage there is no clear distinction that keeps Mr Carroll entirely free of contact with UP Australia's clients.
15. But UP Australia's case against Mr Carroll is complicated by UP Australia's contentions that his online personal training business was a breach of his obligations of employee fidelity to UP Australia and that his conduct of that business also involved misuse of UP Australia's confidential information. Both these contentions can be briefly considered here.
16. But UP Australia's evidence goes further. The affidavit of Emily May Rayner sworn 21 February 2018 and its annexures show that the Chatswood gym conducted by Mr McDonald is arguably being marketed online to individual personal training clients and that the business being conducted from there is arguably not just a train-the-trainer business, but extends to in-person personal training, online personal training and nutritional programming, all areas in which Mr Carroll has a depth of expertise.
17. As to employee fidelity, Ms Lamb's affidavit evidence of 6 January and 19 February 2018 would support the following conclusions at final hearing. Mr Carroll, through his online business, performed work for UP Australia's clients and offered new clients an alternative training program through his online business whilst he was working for UP Australia. In so doing, he received substantial payments ($1,000 per client) for this work through his online business via a PayPal account. The email correspondence shows Mr Carroll developing a direct relationship with these personal training clients, giving them personal training rather than engaging with them as possible trainers. The extent to which Mr Carroll undertook such work has been analysed through his work email. No doubt before final hearing subpoenas and notices to produce will prove whether or not other similar work was performed using other email channels.
18. As to confidential information, UP Australia contends that Mr Carroll, as an employee of UP Australia, had access to UP Australia's client details, photographic database and training plans. There is at least prima facie evidence advanced in UP Australia's case that in conducting his online business, Mr Carroll accessed UP Australia's client details, photographs and training plans and that he used that information for his own online business purposes.
19. Mr Carroll accepts the non-solicitation restraints reflected in orders 2(a) and (b) below. But he contests the remaining restraints, 2(c), (d), and (e). In my view, additional restraints are warranted but some of the points made by Mr Carroll should be taken into account in limiting the scope of these restraints.
20. It should firstly be observed that all the restraints which the Court imposes against Mr Carroll are limited to the six month period provided for in his contract of employment.
21. As to the restraint in 2(c), UP Australia sought an unlimited restraint in respect of dealing with the plaintiff's customers or clients. But in my view that should be limited to clients or customers with whom he had contact in the 12 month period prior to his separation from UP Australia. That more closely accords with the protection of UP Australia's legitimate interest in preventing misuse of its confidential information and Mr Carroll's contact with its clients in his senior role with UP Australia.
22. As to the restraint in 2(d), UP Australia initially proposed a restraint of the radius of five kilometres from Clean Health Kent Street, within which radius Mr Carroll could not be engaged in businesses competing with UP Australia's business. At one level this would appear to be a mere restraint against competition that goes beyond the restraint in 2(c) which is connected to clients with whom Mr Carroll had contact. But in my view a restraint on engaging in business within three kilometres is justified for three main reasons. First, it takes Mr Carroll at his word that he does not wish to compete with UP Australia's business and personal training of clients so it should be very little burden to him. Secondly, there is at least some evidence that Mr Carroll has used UP Australia's business plans and know-how in his online business already and the only clear way to protect UP Australia in the short term is to prevent Mr Carroll using such material in an area close to the CBD from which UP Australia's clients would otherwise be likely to be drawn. Thirdly, the three kilometre radius is not too burdensome as it leaves available a very wide range of online and physical operations to Mr Carroll in Bondi Junction, to the east, Newtown and Erskineville to the south, Leichhardt, Drummoyne and Rozelle to the inner west and North Sydney to the north. The evidence suggests there are many venues in these areas available to Mr Carroll to undertake work to make use of his talents. Fourthly, Mr Carroll is able to provide personal training services outside that radius online to whomsoever he wishes, provided he is not soliciting UP Australia's clients.
23. Finally, restraint 2(e), the restraint on being engaged or interested in the first defendant's business at Chatswood, is an appropriate restraint against Mr Carroll for reasons similar to those analysed with respect to Mr McDonald and complements those restraints.
24. Mr Carroll has a continuing personal relationship with Mr McDonald. The restraints being imposed do not prevent Mr McDonald and Mr Carroll continuing that personal relationship, which includes mentoring by Mr McDonald beyond a commercial context.

Conclusion and Orders

1. The Court raised with the parties whether or not the matter should be referred to mediation. No party objected. Given the restraints that have now been put in place the parties may have a framework around which they can negotiate an agreed final solution to these proceedings.
2. Accordingly, the Court makes the following orders and directions:

Plaintiff and First Defendant 1. ORDER, upon counsel for the plaintiff giving the usual undertaking as to damages, the first defendant, Daine McDonald and his Associates, as defined in clause 1.1 of the Restraint Deed dated 16 December 2016, including but not limited to CHFI Chatswood Pty Ltd and CHFI Education Pty Ltd, are by themselves, their servants and agents, restrained from seeking to engage or engaging the services of the second defendant, Mark Carroll, until further order of the Court.

Plaintiff and the Second Defendant 1. ORDER, upon counsel for the plaintiff giving the usual undertaking as to damages, that the second defendant, Mark Carroll, is by himself his servants or agents, restrained, subject to further order from doing any of the following, until 18 June 2018: 1. inducing, encouraging or soliciting any of the plaintiff's employees or contractors to terminate their engagement with the plaintiff; 2. inducing, encouraging or soliciting any of the plaintiff's customers, clients or suppliers with whom he had had contact in the 12 months prior to 20 December 2017, to end or restrict their trade relationship with the plaintiff; 3. becoming an employee of, or dealing with any customer or client of the plaintiff with whom he had any contact in the 12 month period prior to 22 December 2017, in order to perform work which the plaintiff might reasonably expect to otherwise perform; or 4. within a three kilometre radius of 499-501 Kent Street, Sydney, NSW, 2000 ("the Kent Street location"), being associated with or engaged or interested in a business which competes with the plaintiff's business where the purpose or effect of the second defendant's engagement or interest is to compete with the plaintiff's business and for the avoidance of doubt the three kilometre radius does not include any part of the suburb of Bondi Junction; 5. being associated with or engaged by or interested in any entity or business owned or operated by the first defendant including, but not limited to, CHFI Chatswood Pty Ltd and CHFI Education Pty Ltd and the business known as Clean Health Chatswood at 13-15 Smith St, Chatswood, NSW, 2067. 1. NOTE that whilst they are operative, the restraints the subject of Order (2) do not prohibit the second defendant providing online mentoring and coaching services and online personal training services to personal trainers or to other persons anywhere outside a three kilometre radius from the Kent Street location. 2. ORDER that the costs of the plaintiff's application for interlocutory relief be reserved. 3. ORDER pursuant to Civil Procedure Act 2005, s 26 that these proceedings be referred to mediation, which mediation is to take place before 29 March 2018. 4. LIST the matter before the Expedition Judge at 9:30 am on 2 March 2018. 5. GRANT the parties liberty to apply on two days' notice.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 February 2018