Avant Group Pty Ltd v Kiddle

Case [2023] FCA 685

FEDERAL COURT OF AUSTRALIA

Avant Group Pty Ltd v Kiddle [2023] FCA 685

File number: VID 236 of 2023
Judgment of: WHEELAHAN J
Date of judgment: 23 June 2023
Catchwords:

CONTRACTS — interlocutory application by the plaintiff seeking injunctive relief against the defendant, a former employee — where defendant had established her own business and admitted to soliciting the plaintiff’s clients — where the defendant’s employment agreement included post-employment restraint of trade clauses — whether contractual obligations survived the termination of the employment agreement in circumstances where the defendant alleged that the plaintiff had repudiated the agreement — enforceability of restraint of trade clauses — balance of convenience — insufficiently strong prima facie case to justify interlocutory relief beyond undertakings offered by the defendant — orders sought by the plaintiff imprecise and uncertain — subject to undertakings to the Court by the defendant, interlocutory application refused

EQUITY — confidential information — where plaintiff alleged that defendant had retained and made use of confidential information gained during the course of her employment — where plaintiff sought injunction to enforce equitable, statutory and contractual obligations of confidence — insufficiently strong prima facie case to justify interlocutory relief beyond undertakings offered by the defendant — orders sought by the plaintiff were imprecise and uncertain — injunction refused

EQUITY — whether plaintiff should be denied relief due to unclean hands — equitable principle does not apply

TORTS — where plaintiff sought orders to prevent defendant from inducing clients to breach their contracts of engagement of the plaintiff — insufficiently strong prima facie case to justify interlocutory relief — injunction refused
Legislation:

Australian Trade and Investment Commission Act 1985 (Cth)

Corporations Act, s 183(1)

Fair Work Act 2009 (Cth), s 44, s 117, s 323, s 570

Restraints of Trade Act 1976 (NSW)

Heydon, Leeming and Turner, Meagher, Gummow and Lehane’s Equity Doctrine and Remedies (5th edition)
Cases cited:

Allan Janes LLP v Johal [2006] 1 ICR 742

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] FCA 481; 58 FCR 26

Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; 133 CLR 288

Attwood v Lamont [1920] 3 KB 571

Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 227 CLR 57

Automatic Fire Sprinklers Pty Ltd v Watson [1946] HCA 25; 72 CLR 435

Birdanco Nominees Pty Ltd v Money [2012] VSCA 64; 36 VR 341

Brand Developers Ltd v Ezibuy Ltd [2011] NZHC 50; 93 IPR 143

Business Seating (Renovations) Pty Ltd v Broad [1989] ICR 729

Butt v Long [1953] HCA 76; 88 CLR 476

Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717; 71 NSWLR 9

Caterpillar Tractor Co v Caterpillar Loader Hire (Holdings) Pty Limited[1981] FCA 196; 56 FLR 175

Cerilian Pty Ltd v Fraser [2008] NSWSC 1016

Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; 14 FCR 434

Cream v Bushcolt…

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AGLC
Avant Group Pty Ltd v Kiddle [2023] FCA 685
Case
[2023] FCA 685
Decision Date

CaseChat Overview and Summary

In Avant Group Pty Ltd v Kiddle, the plaintiff sought interlocutory relief against the defendant, a former employee, alleging that she had solicited the plaintiff's clients and retained and used confidential information during her employment. The defendant had established her own business and admitted to soliciting the plaintiff's clients. The defendant's employment agreement included post-employment restraint of trade clauses. The court was required to determine the enforceability of these clauses, the balance of convenience, and whether the plaintiff had established a prima facie case justifying interlocutory relief.

The court found that the plaintiff's affidavit evidence made out a prima facie case that the defendant had solicited some of its clients, but the extent of the solicitation was not clarified by the defendant's evidence. The plaintiff's evidence also suggested that the defendant had retained and used confidential information during her employment. However, the court found that the plaintiff had not established a sufficiently strong prima facie case to justify interlocutory relief beyond the undertakings offered by the defendant. The court also found that the plaintiff's orders were imprecise and uncertain.

The court concluded that upon the defendant giving the undertakings to which the court had referred, the plaintiff's interlocutory application should be dismissed. The court referred the matter for further mediation and set out a timetable for the filing of concise statements and discovery of documents. The court reserved the question of costs for a later date.

The court found that the plaintiff's affidavit evidence had made out a prima facie case that the defendant had solicited some of its clients. This was not disputed by the defendant. The extent of the solicitation was open-ended on the plaintiff's evidence, and had not been clarified by the defendant's evidence. The direct evidence of solicitation included three emails from the defendant to the plaintiff's clients which were in similar terms. In those emails, amongst other things, the defendant offered her services at a 10% flat rate which she stated to the clients compared favourably to a different structure that was specified in the letter that the plaintiff claimed involved use of its confidential information about pricing.

Orders

Orders of the court

1. Upon the defendant by her counsel giving to the Court the undertakings set out in the schedule to this order, the plaintiff’s application for interlocutory relief indorsed on the amended originating process is dismissed.

2. The matter be referred for further mediation, to take place before Senior National Judicial Registrar Legge on 7 July 2023 at a time to be advised.

3. By 4.00 pm on 10 July 2023, the plaintiff file and serve a concise statement.

4. By 4.00 pm on 24 July 2023, the defendant file and serve a concise statement in response, and any cross claim.

5. By 4.00 pm on 3 August 2023, the plaintiff file and serve any concise statement in reply, and a concise statement in response to any cross-claim.

6. By 4.00 pm on 10 August 2023, the parties are to confer and exchange any proposals for discovery of documents.

7. By 4.00 pm on 17 August 2023, the parties file and serve any applications for discovery.

8. The proceeding is listed for a case management hearing at 9.30 am on 25 August 2023.

9. Save for the order for costs made on 7 June 2023, the costs of the application for interlocutory orders be reserved to 25 August 2023 for mention only.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

SCHEDULE

The following undertakings have been provided by the defendant to the plaintiff and to the Court:

(a) Ms Kiddle will keep confidential and will not use, make a record of or disclose to any person or entity any Confidential Information without the prior consent of Avant Group or as otherwise required by law;

(b) Ms Kiddle has not transmitted any Confidential Information to any third party other than in the proper performance of her duties whilst engaged or employed by Avant Group;

(c) Ms Kiddle has conducted searches of her electronic devices and physical property. As far as Ms Kiddle is aware, based on those searches, Ms Kiddle does not have any Confidential Information or other property of Avant Group stored on any computer, tablet, telephone, USB, external hard drive or other electronic or storage device in the possession, power or control of Ms Kiddle; and

(d) if Ms Kiddle does locate any Confidential Information or other property of Avant Group in future, Ms Kiddle will promptly notify Avant Group in writing so as to enable such material to be returned to Avant Group and otherwise permanently deleted (including all copies and records thereof).

For the purpose of the above undertakings:

(a) Avant Group means Avant Group Pty Ltd;

(b) Confidential Information means any Avant Group information that must be kept confidential by reason of Ms Kiddle’s employment with Avant Group including as a consequence of clause 13 of the Employment Agreement, s 183 of the Corporations Act 2001 (Cth), common law and/or equity; and

(c) Employment Agreement means the written contract of employment between Ms Kiddle and Avant Group dated 1 July 2021.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

For her part, the defendant offered undertakings to the Court in relation to her use of confidential information which I will set out later in these reasons.The affidavit evidence Subject to rulings on admissibility, the plaintiff relied on eight affidavits. Seven of those affidavits were made by Ms Whitehead, the managing director of the plaintiff. The eighth affidavit was made by Diwakar Raju Devaraj. Mr Devaraj is employed by the plaintiff as its IT manager and software engineer. Mr Devaraj’s affidavit was foreshadowed to the defendant by the plaintiff’s solicitors in mid-April 2023, and evidently took some weeks to prepare. The defendant relied on two affidavits. The first was an affidavit of the defendant herself. The second was a short affidavit of the defendant’s solicitor, which addressed a particular web search. The seventh affidavit of Ms Whitehead was filed on 2 June 2023 pursuant to leave that I gave during the hearing on 1 June 2023 to file an affidavit in reply to the short affidavit of the defendant’s solicitor, for which I also gave leave. The contents of Ms Whitehead’s seventh affidavit travelled well beyond the leave that was given, which was to reply to the affidavit of the defendant’s solicitor. The contents of the affidavit raised new issues, contained passages that were otherwise not admissible, and ventured into submissions and commentary. The submissions and commentary in the affidavit were tantamount to an impermissible communication with the Court after the decision had been reserved and to which the defendant had no opportunity to respond. As a result, I relisted the application for further hearing on 7 June 2023. On that occasion I received into evidence the affidavit of the defendant’s solicitor, and received into evidence [1] to [9] of Ms Whitehead’s seventh affidavit. The plaintiff’s solicitor, who appeared on the further hearing, did not seek to read into evidence the balance of the affidavit, comprising [10] to [33] and two annexures. I have paid no regard to these paragraphs of Ms Whitehead’s seventh affidavit or the annexures to that affidavit. In order to evaluate the evidentiary case of the plaintiff, it has been necessary to consider together the large volume of documents comprising all seven of Ms Whitehead’s affidavits and Mr Devaraj’s affidavit, as the plaintiff’s evidence was not in one coherent form, but was dispersed across those documents. Some of the evidence in Ms Whitehead’s affidavits was imprecise, and other aspects of her evidence were conclusory. Some evidence in her earlier affidavits was qualified, corrected, and incrementally supplemented by later affidavits. No deponent was cross-examined. On disputed issues of fact the evidence remains untested. Further, some of the evidence, while admissible on an interlocutory application, would not be admissible at trial. The following summaries incorporate prima facie findings made for the limited purposes of this interlocutory application. It goes without saying that the findings are made without the benefit of a full hearing. Any findings adverse to either party are provisional only and do not bind the Court on the trial where the issues in dispute may be fully contested.The plaintiff’s business

Decision

Reasons for decision

In the absence of some cogent evidence and submissions directed to the inducement of a breach of clause 10.4 of the terms of engagement of the plaintiff, I am not persuaded that any prima facie case based on the tort of inducing breach of contract has been demonstrated.Conclusions Upon the defendant giving the undertakings to which I have referred, the plaintiff’s interlocutory application should be dismissed. I will hear the parties on the question of costs. Upon full argument, this proceeding may be held to be in relation to a matter arising under the Fair Work Act, because the defendant relies on contraventions of the Fair Work Act as being exculpatory, and has foreshadowed a cross claim alleging breaches by the plaintiff of the Fair Work Act: see generally, Tucker v McKee [2022] FCAFC 98; 292 FCR 666. As there is a real possibility that s 570 of the Fair Work Act might be engaged, my tentative view is that costs should be reserved.

Ratio Decidendi

Legal Principle Established

The plaintiff’s affidavit evidence has made out a prima facie case that the defendant has solicited some of its clients. This is not disputed by the defendant. The extent of solicitation is open-ended on the plaintiff’s evidence, and has not been clarified by the defendant’s evidence. The direct evidence of solicitation includes three emails from the defendant to the plaintiff’s clients which were in similar terms. In those emails, amongst other things, the defendant offered her services at a 10% flat rate which she stated to the clients compared favourably to a different structure that was specified in the letter that the plaintiff claimed involved use of its confidential information about pricing.Remuneration for EMDG work The plaintiff’s work in assisting clients to obtain benefits under the EMDG scheme is cyclical, where the workload rises at the time of applications and milestone reporting under the scheme. A time of heavy workload was in about March and April this year during which EMDG scheme applications had to be prepared to meet a filing deadline of 14 April 2023. Other times of heavier workload include the periods around the filing of milestone reports. At times of high workload, the plaintiff has engaged short term contractors to assist. The plaintiff’s remuneration for its work is paid on a commission basis calculated by reference to the monies that are granted to the client if an application is successful. Part of the process for the EMDG scheme is that recipients of grants must lodge milestone reports in order to obtain milestone payments. There is therefore some passage of time between the work undertaken by the plaintiff and the receipt of remuneration for that work. The plaintiff’s practice is to require that its clients sign a letter of engagement. The plaintiff provided extracts of its standard terms of engagement, which seek to protect the plaintiff’s interest in recovering its commission payments by regulating the way in which an engagement may be terminated. Clause 10.4 of the standard terms provides that, if a submission has been prepared by the plaintiff, or is underway with the government, then the client agrees to allow the plaintiff to complete the submission and maintain the commission structure.The defendant’s employment agreement The defendant commenced working for the plaintiff in October 2015. Whether the defendant commenced as a contractor or as an employee is a question that the defendant has disputed in the context of foreshadowing a claim for additional statutory entitlements. The defendant was responsible for providing EMDG services to the plaintiff’s clients, and reported to Ms Whitehead. On 20 September 2017, the parties entered into a written employment agreement. This was superseded by a later employment agreement dated 1 July 2021 under which the defendant was employed as “Head of Grants and Funding” for 38 hours per week at an annual salary of $93,794 plus superannuation. This later employment agreement is the agreement relevant to the plaintiff’s claims in this proceeding. The employment agreement set out the defendant’s duties in a schedule. Relevant to the present application are the terms of the agreement relating to termination, confidential information, restraint of trade, choice of law, and the defendant’s entitlement to bonus payments.Termination