Willis Australia Group Services Pty Ltd v Griggs

Judgment 1HER HONOUR: In this matter, which came before me in the duty judge list on 8 June 2012, interlocutory injunctive relief is sought by the plaintiffs, Willis Australia Group Services Pty Limited (WAGS) and Willis Australia Limited (WAL), against two former employees of WAGS (Mr Michael Griggs and Mr Peter Matthews) to restrain them, until further order, from breaching various restrictive covenants contained in contracts entered into in connection with their employment with WAGS (in particular, in the case of two of the agreements, in the context of agreements to acquire shares or share options). (WAGS and WAL are part of a group of companies to which I will refer as the Willis Group.) 2Both Mr Griggs and Mr Matthews have considerable experience in the area of construction industry insurance. They ceased employment as senior managers within the Willis group of companies in March this year and have since then each been employed by another insurance broker, Elkington Bishop and Molineaux Insurance Brokers (EBM). It does not appear to be disputed that EBM is in competition with the plaintiffs generally within the insurance industry. The plaintiffs maintain that EBM, which had not previously operated in the construction risk sector of the insurance broking industry, is now seeking to establish itself as a major competitor to the Willis Group in that sector by using the client connections and information available to the defendants. 3It was not until 4 June 2012 (when I gave leave in the duty list for the filing of the plaintiffs' Summons and abridged the time for service of the Summons) that the plaintiffs commenced proceedings to restrain the defendants from, inter alia, continuing in their current employment. Perhaps not surprisingly, therefore, one of the factors raised in opposition to the present application for interlocutory injunctive relief is the delay in so doing. The urgency of the present application for interlocutory relief is that 30 June is the most common renewal date for insurance policies within this area of the Willis Group's insurance broking practice. Background 4The plaintiffs are part of a global group of companies, the ultimate holding company of which is now Willis Group Holdings plc (WGH). Mr Pieter Lindhout (the Chief Executive Officer of the Willis Group in Australia, with management responsibility for both WAL and WAGS) has deposed that WGH is a leading global insurance broker with more than 400 offices in approximately 120 countries. At [1] of his 4 June 2012 affidavit, he has deposed that each of WAL and WAGS is a wholly owned subsidiary of Willis Australia Group Holdings Limited (WAGH) and that WAGH is in turn owned by WGH. 5WAL is the principal general insurance broking arm of the Willis Group in Australia. WAGS operates principally as a service company, employing associates who perform services for other Willis Group entities. 6The precise structure of the Willis Group (relevant insofar as the Options Agreement covenants require consideration of whether particular entities are subsidiaries of Willis Group Holdings Limited (WGHL), another entity in the global group whose principal office is in Bermuda) was the subject of evidence from the Legal Counsel of the Willis Group in Australia, Ms Marigold Magnaye. 7Annexed to Ms Magnaye's affidavit are company searches of the relevant Australian entities. Ms Magnaye has further deposed, on information and belief derived from the company secretary of the Willis Group, Mr Alistair Peel, as to the corporate structure through which (by way of a chain or succession of wholly owned subsidiaries) WGH is now the ultimate holding company of each of WAL and WAGS. Objection was made to the reading of that evidence - para [5] of Ms Magnaye's affidavit, on the basis that it was not simply hearsay but that it involved an opinion as to the operation of the law of Bermuda, that Ms Magnaye was not in a position to give. I admitted this evidence on the interlocutory application before me as going to the overall group company secretary's understanding, as conveyed to Ms Magnaye, of the overall group structure and not as expert evidence as to the operation of the law of Bermuda. 8One of the areas of special expertise of the Willis Group in Australia is insurance for the construction industry, comprising what is known as construction risk insurance (namely, accidental loss or damage insurance) and liability insurance (namely, third party property damage and bodily injury insurance). Mr Lindhout says that this area of insurance accounts for over 14% of the Willis Group's revenue in Australia. 9Mr Griggs (the first defendant) was employed by WAGS (then known as Willis Coroon International Pty Ltd) pursuant to an engagement letter dated 1 September 1998. He was employed by the company (with a variation to his employment agreement that for present purposes is not material) from September 1998 to late February 2012. Mr Griggs occupied the position of National Manager of the Construction Practice Group (National Manager). That role, as described by Mr Lindhout, is a senior position within the Willis Group with management responsibility for financial performance (profit and loss, revenue and costs), client acquisition and client relationships, strategic planning, and staffing across the country. (It is now occupied by Mr Andrew Nicholl.) 10At around the time he commenced his employment, Mr Griggs also signed a Confidentiality and Restraint Deed dated 5 September 1998 (to which I will refer as the 1998 Deed). Mr Griggs' initial engagement letter provided that his employment was governed by the law of Victoria. The 1998 Deed did not specify a governing law. (For the purposes of this application, Senior Counsel for the plaintiffs, Mr Kirk SC, has proceeded on the assumption that the 1998 Deed is also governed by the law of Victoria.) 11On or about 19 March 2004, Mr Griggs and WGHL entered into a Willis Partners Portfolio Plan Option Agreement (referred to as the Griggs Options Agreement) pursuant to which Mr Griggs was granted 750 options in WGHL and in consideration for which Mr Griggs agreed to certain post-employment restraints. (There were already some post-employment restraints contained in the 1998 Deed but they do not appear to extend beyond the protection of the employer company. It is conceded that the restraints in the Options Agreement are more extensive and it is the latter that the plaintiffs now seek to enforce by way of a negative injunction against breach.) The Griggs Options Agreement provided, relevantly, that it was to be governed by, and construed in accordance with, the laws of Bermuda (section 6.8). 12The second defendant, Mr Matthews, was employed by WAGS from July 1996 to March 2012. (At the time his employment commenced, WAGS was known as Richard Oliver International Pty Ltd.) At the time of his resignation, Mr Matthews' position (again, as described by Mr Lindhout) was that of Construction Manager NSW, with management responsibility for financial performance (revenue and cost budgets), staffing, business strategy (in conjunction with Mr Griggs), client acquisition and client relationships, and regulatory compliance. 13On or about 14 July 2003, Mr Matthews entered into a Matched Option Program-Option Agreement (on similar terms to the Willis Partners Portfolio Plan Option Agreement) for the acquisition of options or shares in WGHL. Subsequently (on 3 July 2006 and 2 July 2007 respectively) he entered into further such agreements for the purchase of shares in WGHL. The Matthews Options Agreement contains restraints in materially the same terms as those in the Griggs Options Agreement (the restrictive covenants being found in Article VI sections 6.1- 6.3, those corresponding to sections 5.1-5.3 of the Griggs Options Agreement, and the governing law again being that of Bermuda as specified in section 7.9). 14Subsequently, Mr Matthews entered into a further agreement in which he has given additional covenants as to his conduct post-termination of his employment. On or about 28 October 2008, Mr Matthews signed a new letter of appointment containing those additional restraint clauses. The plaintiffs principally rely on the Matthews Options Agreement but, as a fallback, also on the provisions of the 2008 appointment letter for the injunctive relief sought against Mr Matthews. (The appointment letter does not specify its governing law but it is submitted by Mr Kirk that it may be taken to be governed by the law of NSW as it was sent by mail to Mr Matthews at an address in NSW, related to his employment in NSW, and the stationery on which it was printed provides contact information in both NSW and Victoria.) The appointment letter notes that Mr Matthews' employer (WAGS) is a wholly owned subsidiary of WAL. 15By Deed Poll of Assumption dated 31 December 2009, WGHL assigned to WGH all rights under its equity compensation plans, including the plan pursuant to which the Griggs Options Agreement and Matthews Options Agreement were signed. Senior Counsel for the defendants, Mr Moses SC, notes that the preamble to that Deed Poll records that on 18 December 2009 WGHL received approval from the Supreme Court of Bermuda for a scheme of arrangement under Bermuda law that effected a transaction resulting in the common shareholders of WGHL becoming ordinary shareholders of Willis Group Holdings Public Limited Company in Ireland (WGH) and WGHL becoming a wholly owned subsidiary of that company, effective 31 December 2009. (Thus it would appear that an inference might safely be drawn that the assignment was valid under the law of Bermuda if it was part of a scheme of arrangement approved under that law.) 16Mr Matthews resigned from his employment with WAGS on 16 December 2011. By letter dated 23 January 2011, WAL wrote to Mr Matthews, referring to his letter of employment dated 28 October 2008 and reminding him of his continuing obligations to "Willis" despite his employment ending. Mr Moses notes that this letter referred to the non-solicitation and restraint provisions of that appointment letter (as I note it did also to other provisions of that letter, as well as to certain statutory provisions), but not to any non-competition restraint. The letter demanded that Mr Matthews not solicit clients of "Willis" for the full 13 month period referred to in his appointment letter, that period to conclude in April 2013. (From the context I would read "Willis" as intended to refer to WAL or, perhaps more broadly, the Willis Group in Australia.) 17(Mr Matthews has deposed at [7] of his affidavit that at no stage prior to his employment with EBM was any representation made that he could not commence employment with an entity such as EBM and (at [16]) as to his belief that if he were now to be restrained from working for EBM it is unlikely that he would retain his position at EBM.) 18A short time later, on 21 February 2012, Mr Griggs wrote to Mr Wilkinson (the Chairman and CEO, Asia Pacific, Middle East and Africa of the Willis Group) asserting that changes had been made without his approval and that his contract of employment had thereby been repudiated. Mr Griggs advised that he was accepting that repudiation as bringing his employment with WAGS to an end with immediate effect. In response, by letter dated 22 February 2012, Mr Wilkinson invited Mr Griggs to reconsider that decision, confirming that there was a notice period of 3 months and referring to the 1998 Deed. Reference was made in that letter to a restriction on non-solicitation or acceptance of any business from any client of the company for up to 12 months as well as non-solicitation of any employee of the company and non-interference with the company's relationships with clients for the same period. (As I understand it, Mr Griggs does not accept that the 1998 Deed imposes any such obligations.) 19On 14 March 2012, Mr Wilkinson again wrote to Mr Griggs this time confirming that Willis regarded his employment as having been summarily terminated by Mr Griggs on 21 February 2012, that the notice period was therefore inapplicable, and stating that the post-termination obligations as set out in the 1998 Deed were of force and effect. 20On 19 March 2012, Mr Matthews commenced employment with EBM. According to the EBM website, his position is that of New South Wales Manager - Construction, Marine & Specialty Risks. Mr Griggs also commenced employment with EBM in March 2012 - as the National Manager - Construction, Marine & Specialty Risks. (The statement as to Mr Griggs' experience that appears on the EBM website refers to his 15 year experience with "the business he founded", namely Willis Construction Risks, and his board membership of WAL.) 21In the period from late March 2012 through to April 2012 (as I consider in more detail below), certain of the clients of the Willis Group transferred their business from that group to EBM. At least by the end of March 2012, in at least one or two instances, Mr Lindhout was on notice that Mr Matthews was or might have been the reason for the transfer of business by Willis Group clients to EBM (and there seems to have been a suspicion by then that one or other of the defendants was (or was to be) involved in the provision of services by EBM to former Willis Group clients). 22On 20 April 2012, the solicitors acting for the plaintiffs wrote to each of the defendants. In their letter to Mr Griggs, reference was made to the obligations contained in the 1998 Deed and to there being continuing obligations for a period of 12 months relating to non-solicitation and 'non-poaching'; the letter to Mr Matthews referred to the restrictions contained in his 2008 letter of appointment and sought undertakings as to conduct that was alleged to be in breach of the continued obligations owed by him under that agreement. 23The letter to Mr Griggs noted that of particular concern was that he appeared to be acting in concert with two other former employees of the Willis Group (Mr Matthews and a Mr Healy, the latter not a party to these proceedings) with the purpose of poaching clients of "Willis" with whom they had dealt during his employment by "Willis". In the case of Mr Matthews, specific instances of the provision by Mr Matthews of services to Willis' clients in alleged breach of his contractual obligations were identified. (Thus, at least by 20 April 2012, the concern as to alleged breaches of non-solicitation restraints had been squarely raised with both Mr Griggs and Mr Matthews, though nothing was said as to any non-competition covenant per se.) 24On 26 April 2012, solicitors for Mr Griggs responded to the 20 April correspondence, expressing their view as to the construction of the 1998 Deed and doubt as to the validity of the 1998 Deed. They advised that Mr Griggs would be prepared to give the undertaking that he not disclose WAGS' confidential information (as that information be considered under the general law) and indicated his preparedness "to consider" any undertaking that Willis might propose "that was reasonable in its terms". 25Their response on the same date to the letter in relation to Mr Matthews was to express the view that the restraint covenant contained in the letter of appointment was unreasonably wide and unnecessary to protect Willis' interests. Without admission as to the enforceability or validity of the restraint and Mr Matthews' denial of breach, the letter indicated that Mr Matthews was prepared to undertake to comply with the restraint covenant set out at pages 6-7 of the letter of appointment to the extent that the restraint pertained to (c) and (d) of the Restraint Areas (namely, Sydney and NSW). (Mr Kirk points to the proffering of this undertaking as gainsaying any prejudice to Mr Matthews if he now were to be restrained along similar lines. I am not, however, satisfied that I should draw such an inference in circumstances where there may have been any number of motivations for the preparedness to give an undertaking at that stage, unrelated to the question whether this would be to his prejudice.) 26By letter dated 4 May 2012, the plaintiffs' solicitors responded that their client was prepared to agree to an undertaking along the lines proffered on behalf of Mr Matthews, provided that the terms of the undertaking also made clear that Mr Matthews would not contact, solicit or provide services to his former NSW based Willis clients "while he is physically located outside that State". The terms of the undertakings required from Mr Matthews were set out in that letter. Legal proceedings to seek injunctive relief along those terms if there were to be a breach of the undertakings were foreshadowed. (Ultimately, after discussions with a view to reaching a negotiated outcome to the dispute, Mr Matthews has declined to provide the expanded undertakings set out in that correspondence.) 27By letter dated 16 May 2012 (marked without prejudice but admitted without objection), Mr Matthews' solicitors wrote to the plaintiffs' solicitors, referring to settlement discussions in relation to the position of each of Mr Matthews and another former WAGS employee (Mr Healy) and stating: For that reason, our clients [Matthews and Healy] have deferred any decision re the giving of undertakings as requested in your 4 May letter. 28The outcome of those discussions seems to have been (in the case of Mr Matthews), and remains, that the undertakings initially proffered by Mr Matthews (without admissions) were not accepted by the plaintiffs; the amended undertakings sought by the plaintiffs were not given by Mr Matthews; and the earlier undertakings have not been reinstated by Mr Matthews, so that there are presently no undertakings in place by Mr Matthews in relation to the conduct the subject of the non-competition/non-solicitation restraints. At least in relation to Mr Matthews, Mr Moses made clear during the course of argument that his position is that the Court can assume that unless restrained he will be "in a position of soliciting or endeavouring to pass away clients or customers of [WAL] with whom he had dealings on behalf of [WAL]", albeit that this may involve a client approaching Mr Matthews to request that he put forward a tender for the client rather than a direct approach by Mr Matthews. 29On or about 30 May 2012, WGH assigned to WAL the right to enforce the restraint provisions of the Griggs Options Agreement and the Matthews Options Agreement respectively. On that date the plaintiffs' solicitors wrote to the defendants' solicitors (separately in relation to each defendant) asserting the application of the restrictive covenants pursuant to the terms of the respective Options Agreements. 30Relevantly, the letters of 30 May 2012 stated: We have been recently informed that during the course of [Mr Griggs/Mr Matthews'] employment by [WAGS], your client agreed to additional post-employment restraints by entering into [the respective Options Agreements]. and sought undertakings by 1 June 2012 in respect of compliance with the restrictive covenants contained in the respective Options Agreements. No such undertakings were provided and these proceedings were commenced shortly thereafter. 31I refer later to the evidence that has now been put forward as to what steps were being taken in the period from 2 May 2012 to investigate whether and on what terms restraints might have been imposed on the defendants under any options agreements entered into by them (this being relevant to the question of the delay in commencement of the proceedings). The above broadly sets out the chronology as it emerged on the evidence that was initially before me on this application. Relevant Agreements 32The respective Options Agreements, relevantly, contain the following restrictive covenants (the text and numbering in the extract below is taken from the Griggs Options Agreement): Section 5.1 - Restrictive Covenants ... the Optionee shall not (unless the Optionee and the Company [WGHL] or any of its subsidiaries are already party to a valid and enforceable agreement as stated in section 5.3 hereof in which case such agreement will prevail) (i) [disclose any Confidential Information as defined]... (ii) at any time during the Optionee's employment with the Company or Subsidiary thereof and for twelve months thereafter, directly or indirectly (A) be engaged in or have financial interest (other than an ownership position of less than 5% in any company whose shares are publicly traded or any non-voting non-convertible debt securities in any company) in any business in Competition (as defined below) with the Restricted Group (as defined below) ... or (B) solicit, accept or perform, other than on the Restricted Group's behalf, insurance or bond brokerage, reinsurance or bond brokerage, agency, risk management, claims administration, self-insurance, consulting or other business performed by the Restricted Group for any client with whom the Optionee has had business dealings, or any prospective client from whom the Optionee has participated in soliciting business, in either case with the last 12 months of the Optionee's employment with the Company or a Subsidiary of the Company or (C) solicit for employment by the Optionee or by any third party, any employee of the Restricted group [sic] with whom the Optionee has had contact while employed by the Company or a subsidiary of the Company ... . 33The clause contained provision for WGHL at its option to require the Optionee (if subject to (ii)) to be on paid leave for the entire or any portion of the period in which the restrictive covenants applied. (No such course was taken in the present case.) 34The relevant prohibitions, for present purposes, are those contained in (ii)(A), to which I will refer as the non-competition covenant (which on its face would preclude the defendants from being engaged in a competing business world-wide); (ii)(B), the non-solicitation covenant in respect of solicitation or acceptance of, and performance of services for, clients with whom the respective defendant has had business dealings or for whom he has participated in the solicitation of business over the past 12 months; and (ii)(C), the covenant against solicitation of employees (to which I will refer as the non-recruitment covenant). 35Relevant terms used in section 5.1, as defined in section 5.2, are as follows:

At a glance

Court

Decision date

Before

Source

Judgment (3 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (41)

Cited By (6)