Allied Mills Pty Limited v Miners

[2013] NSWSC 1117

Supreme Court

New South Wales

Medium Neutral Citation:	Allied Mills Pty Limited v Miners [2013] NSWSC 1117
Hearing dates:	13 August 2013
Decision date:	16 August 2013
Before:	Pembroke J
Decision:	Summons dismissed
Catchwords:	CONTRACT - post employment restraints - no factual basis to support a finding of actual or threatened breach of restraints
Category:	Principal judgment
Parties:	Allied Mills Pty Limited - plaintiff Cameron Miners - defendant
Representation:	Counsel: B Cross - for the plaintiff J Darams - for the defendant Solicitors: Fisher Cartwright Berriman Pty Ltd - for the plaintiff Eakin McCaffery Cox Lawyers - for the defendant
File Number(s):	2013/112960

Judgment

Introduction

1. These unfortunate proceedings are brought by the defendant's former employer in an attempt to enforce certain post employment restraints in his employment contract dated 10 March 2010. The defendant's employment with the plaintiff ceased on 27 June 2013. He now resides in Auckland, New Zealand and works, for the time being, for George Weston Foods (NZ) Limited. The restraint period is six months from the date of cessation of employment.

1. The relevant clause of the defendant's employment contract with the plaintiff is Clause 17.1. It restrains the defendant, without the plaintiff's prior written consent, from engaging in specified competitive activities. The restraint is limited to the defendant's conduct, whether direct or indirect, 'within the Specified Area'. It prevents him being employed in any Restricted Business in the Specified Area during the Restricted Period. The Specified Area is defined to mean the state or territory in which the defendant's 'employment is based'. That means, in my view, the place where he performed his duties, where he was located for the purpose of carrying out his role and where he undertook his responsibilities. The place where the defendant's employment was based was New South Wales, even though the plaintiff's business may have operated more generally throughout Australia and elsewhere.

1. The fact that the Clause 17.1 restraint is limited to conduct, direct or indirect, within the Specified Area, and only prevents the defendant being employed in a Restricted Business in the Specified Area, may explain why the plaintiff does not seek to restrain the defendant from continuing to engage in his employment with George Weston Foods (NZ) Limited. It seeks other more opaque orders and declarations. In fact, one of the unsatisfactory features of this case is the lack of clarity about what relief the plaintiff really does seek, and what utility will be served by making any of the orders or declarations set out in the summons.

The Defendant

1. The defendant is the only witness who was cross-examined. I formed a favourable impression of him. He was honest, direct and forthcoming. He endeavoured to assist the court and did not shirk from any question. The contemporaneous evidence indicates that he behaved in the same way in his earlier dealings towards the plaintiff.

1. On 27 March 2013 he gave written notice of his intention to resign from his employment with the plaintiff, effective from 27 June. On that day, he made the following statements to Ms Robertson, the Group Human Resources Manager:

I've been headhunted a number of times in the past by both Manildra and Westons but I've rejected their attempts to have discussions with me as I thought it was unethical. I see Allied Mills as family and do not want to do anything to hurt the company. I'm taking a procurement role with Weston's and I've told them I can have no customer contact as part of this role and they're aware of the wording in my contract with Allied Mills. I've taken legal advice and I'm happy to sign off on whatever the business wants, within reason...

I have no intention of going near Allied Mills customers or employees. I haven't even told my team as I'm happy to let Andy handle this as he sees best for the business. I know Allied Mills has to protect its rights but I've been around long enough for the company to know my level of integrity.

All I'm asking for is the opportunity to stay in the same industry I've been working in for 27 years. I haven't had any exposure in other industries. I'll respect Allied Mills' intellectual property and I even made Weston's put a clause in my contract saying that they can't ask me to breach any of my contractual obligations to Allied Mills. I'd be happy to give you a copy provided Weston's are ok with it.

Like I said, I'm happy to sign whatever is necessary, I'm just asking that you release me from the non-compete clause. There won't be any impact on Allied Mills' customers, so I'm just asking that Allied Mills be reasonable.

(emphasis added)

1. On the same day he said to Mr Baldwin, the General Manager Milling:

I'm not going to a sales role. I'm going to be General Manager of Grain Procurement. Its not customer facing, there's even a clause in my contract to say it won't be customer facing so my knowledge and IP around customers is not going to be used and I think I can maintain confidentialities.

(emphasis added)

1. The defendant exhibited the same frank and open approach when he prepared an initial draft resignation letter earlier in March. He showed it to Mr Wilson from George Weston Foods. The draft letter said in part:

I can assure you that I will continue to exhibit the professional courtesy witnessed in the past in protecting the interests of Allied Mills and the Intellectual Property generated through my time spent in the Company's employ.

This commitment is made with the utmost of sincerity and respect for Allied Mills. I take my obligations to this commitment very seriously, as does my future employer who has included within my future employment agreement a joint commitment by the parties to honour the Continuing Obligations to Previous Employers. This provision acknowledges, as they do, an acceptance that their competitors have expectations that their past employees will honour the confidentiality of commercially sensitive information and they have also stated that they have no interest in acquiring this information. These undertakings are also supported through a personal commitment, from me, to honour the Confidentiality and Non-Solicitation Obligations I have as a result of my past employ with Allied Mills...

I request that Allied Mills provide a written consent from the Company to release me from the unreasonable Restricted Period of 6 months as detailed in Clause 17.4...

(emphasis added)

1. Although this precise letter was not delivered to the plaintiff, it is clear that the defendant was genuinely seeking to comply with his contractual obligations. There was nothing flagrant about his conduct; nothing from which I could infer any intention by him to act in a way that might be inimicable to the plaintiff's interests and contrary to the terms of his employment contract. He was acknowledging his obligations and seeking to perform his contract by obtaining the plaintiff's consent pursuant to Clause 17.

The GWF Job

1. At the time the defendant tendered his resignation on 27 March 2013, he was proposing to accept a job with George Weston Foods Limited (GWF). He did so on 2 April. His role with the plaintiff had been as National Sales Manager. His proposed role with GWF was as Grain Procurement Manager. It was to be based at North Ryde. There were material differences in both roles. Further, there was no certainty about when the defendant's employment would commence with GWF. The GWF contract stated that it would commence on a date to be mutually agreed. Both parties were cognisant of the potential difficulties with the plaintiff.

1. As the defendant had made clear in his conversations with Ms Robertson and Mr Baldwin, Clause 19 of the GWF contract provided:

19. CONTINUING OBLIGATIONS TO PREVIOUS EMPLOYERS

You agree to provide GWF with a copy of any written undertaking executed by you in favour of your current employer regarding your compliance with the terms and conditions of your current contract of employment which survive termination. You further agree to take all necessary steps to comply with any such undertaking.

You represent and agree that you will not knowingly use or otherwise disclose any confidential, business or proprietary information or trade secret obtained as a result of any prior employment in connection with the performance of your job duties for GWF, unless specifically authorised to do so by someone with the appropriate authority from the applicable place of former employment, and that this provision should be regarded as GWF's instruction for you not do so.

You must not, under any circumstances, use or disclose to any GWF representative any confidential information belonging to any entity for which you have been employed. A breach of this clause will result in the termination of your employment on the grounds of gross misconduct.

(emphasis added)

1. Unfortunately for the defendant, the plaintiff was unwilling to provide the requested consent. On 3 April 2013, the defendant's solicitor wrote to the plaintiff's solicitor proffering the following undertakings:

With respect to clause 14, [dealing with confidentiality], rest assured that our client understands his obligations and intends on complying with them.

With respect to clause 17, for the length of the purported restraint period our client will undertake not to work in any area that is in any way related to flour in Australia. GWF will place him in one of their other separate and distinct divisions.

Our client would also undertake not to poach or solicit clients or employees or contractors for the purported restraint period or obtain details of customer lists.

(emphasis added)

1. The letter went on to say that, in any event, by undertaking work in a separate division of GWF, the defendant would not be in breach of Clause 17 because he would not be working in a 'Restricted Business'. The writer added that he would, if necessary, tender the letter on the question of costs.

1. Regrettably, the plaintiff launched promptly into action, commencing proceedings on 12 April 2013 without responding in writing to the defendant's undertakings. On 7 May the parties agreed on an interlocutory regime, without admissions, and upon the plaintiff giving the usual undertaking as to damages. Among other things, the defendant agreed not to be employed or engaged by GWF until further order. An early hearing date was set.

1. The defendant's view was that his proposed role with GWF would not cause any damage to the plaintiff's business because his new responsibilities were concerned with grain procurement rather than sales. He believed that he would not be required to use his contacts with the plaintiff's customers to perform his role or to use the plaintiff's confidential information. To put it another way, he would be working in the 'back end' of the business, managing the procurement of grain, rather than at the 'front end' in the sale of milled products.

The GWF (NZ) Job

1. In the meantime however, a different opportunity emerged for the defendant in June. On 14 June 2013, George Weston Foods (NZ) Ltd (GWF(NZ)) offered him a position based in Auckland as Grain Procurement Manager for its Weston Milling New Zealand division. It was no doubt thought that this position would enable the defendant to see out his restraint period with the plaintiff without there being any risk of contravention of his obligations pursuant to Clause 17 of his employment contract with the plaintiff. It seems clear that the plaintiff recognised that this position substantially altered the prospect of a threatened breach.

1. That is because, when the plaintiff became aware that the defendant was taking the GWF(NZ) position, it did not return to court; did not seek to expand the orders made on 7 May; did not seek to amend the summons; and did not seek to restrain the defendant from commencing in the position. The defendant has now been performing his role with GWF(NZ) since 1 July. At the hearing, counsel for the plaintiff confirmed that the plaintiff did not seek to prevent the defendant from continuing in his employment with GWF(NZ).

1. The defendant's role with GWF(NZ) includes responsibility for the strategic procurement of grain in New Zealand; the acquisition and delivery of raw materials for its Weston Milling New Zealand division; the management of procurement risks and logistics; the overseeing of suppy relationships in New Zealand; and the achievement of the best cost solution for grain procurement.

1. There was no equivalent of Clause 19 in the GWF contract. It was apparently not considered to be necessary, presumably because it was thought that there was no likelihood of the use or disclosure of any confidential, business or proprietary information acquired during the defendant's prior employment with the plaintiff. Not only was his new job to be undertaken in New Zealand (and therefore outside the Specified Area), but the defendant's job description statement emphasised that his responsibilities were limited to procurement strategy and planning and raw materials procurement.

The Plaintiff's Case

1. In the light of these changed circumstances, the plaintiff's case is logically challenging. This is especially so having regard to the view that I have formed of the evidence, including the credibility and honesty of the defendant. The starting point for the plaintiff's claim to relief was that the defendant should be regarded as a person who is not prepared to honour the restraints to which he agreed in his employment contract with the plaintiff; and that his conduct in entering into the GWF contract on 2 April 2013 is a clear indication of this attitude.

1. I have reached the opposite conclusion. I have rarely seen an employee so concerned to ensure that he does the right thing by his former employer. As far as his legal obligations to the plaintiff are concerned, the defendant has a sound moral compass. Few persons in his position, or that of GWF, would have gone so far as to include Clause 19 in the new employment contract. Nor would they have been as frank or as open as he was in informing his employer of his intentions.

1. In any event, the defendant's employment pursuant to that contract was not to commence until a 'date to be mutually agreed'. The defendant and GWF were acutely conscious of the restraints to which he was subject pursuant to Clause 17 of the plaintiff's contract. They hoped that the plaintiff would provide its written consent. When it ignored the defendant's request; did not respond to the undertakings proffered on his behalf; and commenced these proceedings; the defendant readily agreed to consent orders that would enable an early final resolution.

1. However, all of that became past history when in June the defendant accepted the offer of employment with GWF(NZ) - a different legal entity, in a different country. Although the plaintiff does not seek to prevent the defendant performing that role, it says, somewhat confusingly, that the defendant's role causes 'serious concerns'. That may be, but the only legal question is whether the evidence is sufficiently probative to satisfy me that (1) there is an actual or threatened breach of the defendant's employment contract with the plaintiff, and (2) whether, as a matter of discretion, I should grant any of the declaratory or injunctive relief sought. I should add that counsel for the plaintiff made clear that there was no provable loss or damage suffered by the plaintiff.

Actual or Threatened Breach

1. I have already explained the geographical limitations of Clause 17 in the defendant's employment contract with the plaintiff. The restrictions in that clause only apply to conduct of the defendant in the Specified Area. New Zealand is not within the Specified Area. The words of Clause 17.1, 'whether directly or indirectly' refer to the manner in which the actions prohibited by paragraphs (a), (b) and (c) might be performed by the defendant. The defendant may not directly or indirectly do any of those things in the Specified Area.

1. Given the nature of his role at GWF(NZ), and my assessment of his bona fides, there is no sound factual foundation for any reasonable apprehension that within the Specified Area, and during the Restricted Period, the defendant will solicit, divert, obtain or accept any business from the plaintiff's customers or clients; or obtain or attempt to obtain details of any customer lists; or solicit or hire any person employed by the plaintiff. Nor is there a factual basis for any concern that there will be a contravention of Clause 17.1(d). The business of GWF(NZ), more particularly Weston Milling New Zealand division, is not a business that is competitive with the business activities of the plaintiff in the Specified Area.

1. Further still, and in any event, Clause 17.1 is predominantly concerned with the protection of the plaintiff's customers, clients and employees. In contrast, in his role pursuant to the GWF(NZ) contract, the defendant deals with suppliers. In that role there is no reasonable prospect of him interfering inadvertently with the plaintiff's customers, clients and employees. And there is no prospect whatsoever of him doing so intentionally during the Restricted Period - given my assessment of his honesty and character.

1. I emphatically reject the plaintiff's core contentions. In the circumstances that I have outlined, I draw no adverse inference at all from the defendant's conduct in entering into the GWF contract on 2 April 2013. He has not been shown to be someone who is not prepared to honour the restraints to which he agreed - quite the reverse. He is not now engaged in a Restricted Business in the Specified Area. And there is no reasonable likelihood of any threatened breach by him between now and 27 December 2013 in the course of carrying out his responsibilities pursuant to the GWF(NZ) contract.

1. I accept the defendant's evidence that the Weston Milling division of GWF(NZ) does not compete with the plaintiff in the New Zealand market; that in his new role he does not use confidential market and pricing information which he acquired while employed with the plaintiff; and that the differences between his role as National Sales Manager of the plaintiff in Australia, and that of Grain Procurement Manager of GWF(NZ) in New Zealand, do not involve any material similarities, overlap or commonality of personnel and information.

1. On this point, the evidence on which the plaintiff relied was not persuasive. It consisted largely of generalised and unconvincing assertions which, at the end of the day, were said to give rise to 'concerns'. Whatever those concerns may be, they are apparently not sufficient to justify the plaintiff seeking to restrain the defendant from undertaking his role with GWF(NZ). No specific offending conduct was identified. None emerged in the course of the evidence.

1. The defendant's attendance at meetings of the Allied Mills Accumulation Teams (AMAT) was neither sufficiently regular nor sufficiently focussed to warrant the relief sought by the plaintiff. Attendance at those meetings was not a core responsibility. Mr Sabatta suggested that the defendant would have gained 'valuable insights'. But such knowledge as he might have obtained was not sufficiently specific or potent to be as valuable or memorable as the plaintiff contended. I prefer the defendant's account of these meetings and their significance. The real foundation for the plaintiff's concerns was anxiety about the loss of a valuable employee and a misplaced suspicion about his motives. But the defendant stated explicitly, and I accept, that he did not, and does not, intend to contravene his contractual obligations.

1. The defendant's employment with GWF pursuant to the employment contract which he accepted on 2 April 2013 may or may not have amounted to a breach of Clause 17 of his contract with the plaintiff. But that question no longer arises. The defendant will not perform any role pursuant to that contract during the Restricted Period. If the circumstances change again, and the defendant seeks to perform before December the role originally proposed for him, the plaintiff may well be justified in returning to court to have the matter tested. In the meantime, I am satisfied that the defendant's role and responsibilities pursuant to the GWF(NZ) contract do not constitute an actual or threatened breach of Clause 17, or of any other contractual or equitable obligation owed by the defendant to the plaintiff.

Discretion

1. Even if the plaintiff's case were arguable, the facts do not justify the declaratory and injunctive relief which it seeks. In the events that have now occurred, the likelihood of genuine harm to the plaintiff is remote and tangential. The motives of the defendant are beyond criticism. The reality of threat is non-existent. In addition, the formulation in the summons of the declarations and injunctions which the plaintiff seeks, is so broad and general, that no useful purse would be served, on the facts of this case, in making those declarations or granting those injunctions - even if I were satisfied that there is some substance to the plaintiff's case.

Orders

1. I dismiss the summons. I vacate the orders made on 7 May 2013. I order the plaintiff to pay the defendant's costs of the proceedings.

Decision last updated: 20 August 2013