Bend-Tech Group (A Firm) v Beek

[2015] WASC 491

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   BEND-TECH GROUP (A FIRM) -v- BEEK [2015] WASC 491

CORAM:   PRITCHARD J

HEARD:   8 DECEMBER 2015

DELIVERED          :   22 DECEMBER 2015

FILE NO/S:   CIV 2819 of 2015

BETWEEN:   BEND-TECH GROUP (A FIRM)

Plaintiff

AND

ANDREW DAVID BEEK
Defendant

Catchwords:

Injunction - Interlocutory injunction - Restraint of trade - No serious question to be tried - Balance of convenience does not favour injunction

Legislation:

Nil

Result:

Application for interlocutory injunction dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr C J Graham

Defendant:     Mr M D Cox

Solicitors:

Plaintiff:     Borrello Graham Lawyers

Defendant:     MDC Legal

Cases referred to in judgment:

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

Attwood v Lamont [1920] 3 KB 571

BDO Group Investments (NSW-Vic) Pty Ltd v Ngo [2010] VSC 206

Brightman vLamson Paragon Ltd [1914] HCA 90; (1914) 18 CLR 331

Buckley v Tutty [1971] HCA 71; (1971) 125 CLR 353

IF Asia Pacific Pty Ltd v Galbally [2003] VSC 192

Integrated Group Ltd v Dillon [2009] VSC 361

Jardin and Jardim Investments Pty Ltd v Metcash Ltd [2011] NSWCA 409; (2011) 285 ALR 677

Mason v Provident Clothing & Supply Co Ltd [1913] AC 724

Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375

Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535

Putsman v Taylor [1927] 1 KB 637

Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169

Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1

Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110

Workplace Access and Safety Pty Ltd v Mackie [2014] WASC 62

1. PRITCHARD J:  Bend-Tech Group is a partnership which operates a metal fabrication business for the resources and industrial sectors.  One aspect of its business involves the rolling, bending and curving of metal pipes and other metal components, and the provision of other bespoke pipe-bending services to meet the needs of its customers. 

2. Mr Beek commenced working for Bend-Tech in 2005 when he was 21 years old.  He was employed by Bend-Tech until 1 April 2015, apart from a 12‑month period between August 2011 and July 2012, when Mr Beek went to work in his father's air conditioning business.  His employment with Bend-Tech ceased on 1 April 2015. 

3. Bend-Tech says that Mr Beek was employed pursuant to a written contract of employment which contained a restraint clause.  The restraint clause is set out at [20] of these reasons.  In summary, the restraint clause has two components of present relevance:  a 'non-solicitation clause' in cl 18.1.5.2, which purports to prohibit Mr Beek from endeavouring to solicit or entice customers from Bend‑Tech, and a 'non-competition clause' in cl 18.1.6, which purports to prohibit Mr Beek from working (whether as a principal, or as an employee or agent of another entity) in any business of a similar kind to that of Bend-Tech, within Western Australia.  In each case, the period of prohibition is for 12 months from the date on which Mr Beek's employment terminated (the restraint period).

4. Bend-Tech has brought an application for an urgent interlocutory injunction seeking to restrain Mr Beek from breaching the non-solicitation clause and the non-competition clause for the balance of the restraint period.

5. For the reasons set out below, I am not persuaded that the interlocutory injunction should be granted.

6. In these reasons for decision I deal with the following matters:

   1.Factual background;

   2.Principles in relation to the grant of an interlocutory injunction;

   3.Whether Bend-Tech has established that there exists a serious question to be tried; and

   4.The balance of convenience, including whether damages would be an adequate alternative remedy.

1. Factual background

1. Bend-Tech read an affidavit of James Arthur Fawkes sworn 6 November 2015 and an affidavit of Alan Philip Bryant sworn 6 November 2015.  Mr Beek relied on an affidavit he swore on 4 December 2015.

2. It is apparent that a large number of factual matters are in dispute.  In the narrative that follows, I have endeavoured to set out the essential background facts in terms as neutral as possible, acknowledging the factual disputes where they apparently exist.

Overview of Mr Beek's employment at Bend-Tech

1. When Mr Beek commenced work for Bend-Tech he initially worked as a pipe bending operator.  He did so until August 2011.  That role involved setting up machines and carrying out the bending work orders that Bend-Tech received.  Mr Fawkes deposed that while he worked at Bend‑Tech, Mr Beek was trained in every aspect of metal bending and rolling to carry out Bend-Tech's bending work, and 'would have' learned some novel methods and designs which were generated to work on particular projects.

2. When he returned to Bend-Tech in July 2012, Mr Beek worked as a Bending Supervisor, managing one or two employees engaged in what is known as mandrel bending work.  Mr Fawkes deposed that in this role, Mr Beek learned 'the tooling set ups that we use, and the way that we bend certain metal for certain clients'.[1]  Similarly, Mr Bryant deposed that Mr Beek knew nothing about bending and fabricating metal when he started working at Bend-Tech and that Mr Bryant believed that Mr Beek 'learnt everything he knows about bending and fabricating metal from working at Bend‑Tech'.[2]

   [1] Affidavit of James Arthur Fawkes [42].

   [2] Affidavit of Alan Philip Bryant [15] - [16].

3. Mr Bryant also deposed that while Mr Beek worked in the role of a Bending Supervisor, Mr Bryant introduced him to Bend-Tech's suppliers in Malaysia and Taiwan.  Mr Bryant deposed that the machinery used for mandrel bending and for curving pipes was not made in Australia.  Mr Bryant deposed that over the years he has learnt which overseas suppliers 'produce the most reliable machines at the best prices'.[3]

   [3] Affidavit of Alan Philip Bryant [26].

4. Between June 2013 and October 2014, Mr Beek worked in the role of Production Manager to replace Mr Bryant while Mr Bryant was on leave.  When Mr Bryant returned from leave, Mr Beek resumed his role as a Bending Supervisor. 

5. There is also a dispute about Mr Beek's role in the Production Manager's position.  Mr Fawkes claimed the role involved a high level of responsibility which involved more management and less hands-on work than that of a Bending Supervisor.  Mr Bryant deposed that in the role of Production Manager his job involved overseeing Bend-Tech's workshop and all of the projects which were going on. 

6. Mr Fawkes deposed that in the role of Production Manager, Mr Beek was responsible for managing the firm's projects and was in contact with Bend‑Tech's customers on a day to day basis, and saw what was purchased from suppliers.  Mr Fawkes also claimed that in this role, Mr Beek had access to Bend-Tech's 'Customer Relationship Management System' which recorded the details of all of Bend-Tech's customers, including their customer order histories and invoices.  Mr Fawkes also deposed that as the Production Manager Mr Beek was entitled to access information about any projects being undertaken by Bend-Tech, including the costing of jobs.

7. Mr Bryant also deposed that as a Bending Supervisor, and as the Production Manager, Mr Beek had 'a great deal of exposure to Bend‑Tech's customers'.[4]  Mr Bryant claimed that Mr Beek was 'introduced to the directors and owners of our customers and he developed a relationship with them on a first name basis'.[5]  Mr Bryant deposed that 'building relationships with customers was part of [Mr Beek's] job and the services that Bend-Tech offers to its customers'.[6]  He also deposed that Mr Beek learned about the design and layout of Bend-Tech's marketing emails while performing these roles.

   [4] Affidavit of Alan Philip Bryant [31].

   [5] Affidavit of Alan Philip Bryant [33].

   [6] Affidavit of Alan Philip Bryant [34].

8. Mr Beek disputes the evidence of Mr Fawkes and Mr Bryant as to what his roles as Production Manager and Bending Supervisor actually entailed.  Mr Beek deposed that as the Production Manager he was not involved in the pricing of Bend-Tech's work other than occasional small domestic jobs, and as a Bending Supervisor, says he did not do any pricing at all, but rather this was organised by a sales team.  Mr Beek also denied having day to day contact with Bend‑Tech's customers, or that he was on first name terms with them, and claimed that his job did not involve looking after clients.  He acknowledged having limited day to day contact with Bend-Tech's suppliers.

9. Mr Beek deposed that although he had access to the Customer Record Management System, he was not taught how to use it, and he did not in fact use it.

Entry into a written contract of employment

1. There is no dispute that, although Mr Beek commenced as the Production Manager in July 2013, he did not sign a written employment agreement until January 2014.  That was the first occasion on which the terms of Mr Beek's employment with Bend-Tech had been set out in a written contract. 

2. There is a dispute as to whether Mr Beek received any consideration for entering into the written contract on January 2014.  Mr Beek says he was not given a choice about signing the contract, and did not receive any bonus (by which I understand him to mean anything extra) for doing so.  Counsel for Bend‑Tech submitted that consideration was provided, although there was no direct evidence of that fact in the affidavits filed in support of the injunction application.  

3. That written contract contained the restraint clause, which was in the following terms:

   18.RESTRAINT

   18.1.Acknowledgement

   18.1.1.The parties intend that the restraints contained in the Employment Agreement operate to the maximum extent;

   18.1.2.The Employee acknowledges that the extent, duration and application of the respective restrictions contained in the Employment Agreement are not greater than is reasonably necessary for the protection of the interests of the Employer and its goodwill but that, if such restriction is reduced by any Court of competent jurisdiction or found to be void or unenforceable but would be valid if part of the working of this agreement was deleted and/or the period was reduced, those restrictions apply with such modifications as may be necessary to make the restraints valid and effective.

   18.1.3.In the event of any breach by the Employee of the Employees obligations under the Employment Agreement then, in addition and without prejudice to any remedy which the Employer may have, the Employer is entitled to seek and obtain injunctive relief in any Court of competent jurisdiction.

   18.1.4.The 'Employee acknowledges and agrees that;

   18.1.4.1.the Employer has bargained for the covenants set out in the Employment Agreement in consideration for the experience, knowledge and information which the Employee will gain and the compensation for which the Employee with earn under the Employment Agreement; and

   18.1.4.2.the only effective, fair and reasonable manner in which the interests of the Employer can be protected is by the restrains imposed on the Employee by this document.

   18.1.5.The Employee shall not, during the Restraint Period, either on the Employees own account or for any person or other legal entity, solicit or entice or endeavour to solicit or entice from the Employer;

   18.1.5.1.any director, manager, officer, employee, servant or contactor of or to the Employer or any related entity of the Employer; and/or

   18.1.5.2.the custom of any person who has during the Restraint Period or any time during the 12 months prior to the date of termination of the Employment Agreement been a customer, supplier, client, operator, distributor or licensee of the Employer or related entity of the Employer.

   18.1.6.The Employee shall not, without prior written consent of the Employer, from the date of termination be a principal interested or engaged or act as an adviser or consultant in or be an employee, agent or officer of or an adviser or consultant to any entity which carries on a business of a similar kind to that of the Employer or any related entity or any entity which competes (whether directly or indirectly) with the business of the Employer or any related entity of the Employer for the Restraint Period in the Restraint Area.

   18.1.7.'Restraint Period' means twelve months.

   18.1.8.'Restraint Area' means Western Australia.

4. There is a dispute between the parties about the terms on which Mr Beek worked in the role of Production Manager and the terms on which he resumed work as a Bending Supervisor, namely whether he was promoted and then demoted, or whether he worked in Mr Bryant's position during the period he was away, on the understanding that once Mr Bryant returned he would resume working in his former position on the same terms and conditions as before.  There is thus a dispute about the terms on which Mr Beek recommenced working as a Bending Supervisor once Mr Bryant returned to work.  Mr Beek says there was no written agreement, and the terms of the employment relationship must be implied from all the circumstances. In any event, he says the restraint clause no longer applied after he ceased to work as the Production Manager.  In contrast, Bend-Tech says some of the terms, or at least the restraint clause, set out in the Production Manager contract continued to apply. 

5. There is also a dispute as to whether Mr Beek resigned from Bend‑Tech, or whether his employment was terminated, although that is of no present moment.

The alleged breach of the restraint clause

1. Mr Fawkes deposed that prior to Mr Beek leaving Bend-Tech, he learned of rumours that Mr Beek was planning to leave and set up his own business, providing the same services as Bend-Tech.  At that point, Mr Fawkes pointed out to Mr Beek what Mr Fawkes regarded as the restraint clause in Mr Beek's contract of employment.  Mr Beek disputed the applicability of any such restraint clause.

2. Mr Fawkes deposed that in May 2015 he became aware that Mr Beek had commenced a metal bending business operated by a company called Tarian Pty Ltd under the name WA Bending.  Mr Fawkes deposed that he has become aware that Mr Beek is the director of Tarian Pty Ltd, the principal place of business for which is Wildfire Road Maddington, about 1.1 kilometres away from Bend-Tech's premises.  Mr Beek became a director of Tarian Pty Ltd on 1 February 2015.  Mr Beek acknowledged that he registered WA Bending's business name on 20 March 2015, but claimed that he did not engage in any work for WA Bending until after 16 March 2015.  He deposed that he 'spent the first 3 months after leaving Bend‑Tech setting up a workshop, getting machinery and doing market research.  During this time I did not contact clients because I wanted to have the operation up and running before securing work.  To date WA Bending has only earned a modest amount of revenue'.[7]

   [7] Affidavit of Andrew David Beek [21].

3. In May 2015, Mr Fawkes became aware that Mr Beek had contacted Mr Barry Bloomfield, who Mr Fawkes says is a director of one of Bend‑Tech's customers.  Mr Fawkes learned that Mr Beek informed Mr Bloomfield that he had set up his own business, called WA Bending.  Mr Bloomfield provided Mr Fawkes with a copy of an email sent to him by Mr Beek.  That email enclosed a copy of a brochure from WA Bending, which set out the services WA Bending offered, and invited Mr Bloomfield to visit WA Bending's website.[8] 

   [8] Affidavit of James Arthur Fawkes, annexure JAF-4.

4. Mr Beek deposed that he did not know Mr Bloomfield was a customer of Bend‑Tech.  He claims that Mr Bloomfield is in fact one of Bend‑Tech's competitor.

5. Mr Fawkes deposed that he has seen the website for WA Bending which indicated that WA Bending offers the same kind of work as Bend‑Tech offers its customers, including mandrel bending and section rolling work.  Mr Fawkes deposed that Mr Beek advertises the same type of services on his social media pages.

6. In November 2015, Mr Fawkes was informed by Mr Chester Sprigg, a manager of Steeldale Industries, that Mr Beek had contacted him also.  (It appears that Steeldale is a customer of Bend-Tech's also.)  Mr Beek contacted Mr Sprigg by email on 14 September 2015 to advise him that 'if you would like to try us for any mandrel bending or section rolling please send me an email.  [W]e would be happy to help in any way.'[9]

   [9] Affidavit of James Arthur Fawkes, annexure FAF-10.

7. Mr Beek says Mr Bloomfield encouraged him to approach other companies, including Mr Sprigg of Steel Dale Industries.  Mr Beek denies any contact with Mr Sprigg apart from the one email referred to by Mr Fawkes.

8. Mr Bryant deposed that in May 2015 he spoke with a supplier from Taiwan, Mr Wu, to whom he had introduced Mr Beek.  Mr Wu advised that he had been contacted by Mr Beek about getting some tools made up by the supplier.

9. Mr Beek admits he contacted Mr Wu, but said that he did not buy any of WA Bending's machinery from him.[10]

   [10] Affidavit of Andrew David Beek [75].

10. Mr Beek also deposed that bending machines were not scarce or difficult to locate in Western Australia, Australia or overseas, and there was no special art or knowledge to locating suppliers. His evidence was that 'new machines come with instructions on how to use the machine to bend, and suppliers are usually willing to provide training'.[11]  Mr Beek deposed that WA Bending has purchased machines from domestic suppliers.

    [11] Affidavit of Andrew David Beek [41].

11. Further, in about August 2015, Mr Bryant learned from the owner of another of Bend‑Tech's suppliers, K‑Craft, that Mr Beek had contacted that owner.

12. In August 2015, Mr Bryant visited one of Bend-Tech's customers, Allstruct Engineering, and saw WA Bending stationery on the owner's desk. 

13. Mr Bryant also deposed that in the two to three months prior to November 2015, he heard from other customers (Artex, ETMS and Steeldale Industries) that they had been receiving marketing emails from WA Bending.

14. Not surprisingly correspondence has ensued between Bend-Tech's solicitors and Mr Beek and his solicitors asserting, and disputing, Mr Beek's obligation to comply with the restraint clause.

Evidence of impact on Bend‑Tech's business

1. Mr Fawkes deposed that bending and rolling services generate just under 20% of Bend-Tech's revenue.  He says that since WA Bending started trading, Bend-Tech's sales have decreased by about 17%, compared with the previous six month period.  He deposed that if Bend‑Tech's monthly sales continued to decline, that part of the business will be in jeopardy, and in turn that could impact on the wider metal fabrication services that Bend-Tech provides.  Mr Fawkes deposed that he believed that Bend-Tech was losing custom to WA Bending.  However, he did not advance any evidence of a connection between the decrease in business, and loss of customers.

Bend‑Tech's services and its customers

1. Mr Fawkes deposed that Bend‑Tech uses particular methods to bend and curve pipes, and that there was novelty in the way that Bend‑Tech performs its rolling and bending services, arising from the way in which the pipes were bent and the combination of machines used.  However, he accepted that Bend-Tech's 'competitors could probably work out how to do the work by reverse engineering our processes if they had details of what those internal processes were'.[12]

   [12] Affidavit of Andrew David Beek [29].

2. Mr Beek disputes that the methods used by Bend-Tech involve novel processes.  He says he was never informed that their methods were confidential or involved specialist knowledge, and to the best of his knowledge, none of them were patented.  Mr Beek's view was that none of Bend-Tech's methods were unique, that they were widely used in the bending industry, and that they could easily be found on the internet.  He pointed to a number of other companies which also carry out work using the mandrel bending or section rolling methods.

1. Mr Fawkes also deposed that Bend-Tech had few competitors, and its rolling and bending services were quite specialised even among its competitors, because of the specialised machinery and knowledge required in the operation of the machinery.

2. Mr Fawkes deposed that about 80% of Bend-Tech's work is produced for its Perth clients, while the balance was for clients in the rest of Western Australia.  He further deposed that Bend-Tech has around 250 customers, and historically has had a high level of customer loyalty, and that most of Bend-Tech's business is generated by repeat customers.  The most profitable of its work is its special bending services, which are undertaken for about 10 customers, but the demand for these services is unpredictable and varies over time.  Mr Fawkes' belief was that Bend‑Tech's competitors (apart from WA Bending) were 'probably not geared up to do that work'[13] (that is, the special bending work).  Mr Fawkes deposed that because of the nature of Bend-Tech's services, it was critical for Bend-Tech 'to maintain long term relationships with its customers so that it is in a position to capture work from customers and generate revenue when demand is high, to financially carry its operations when demand is low'.[14] 

   [13] Affidavit of James Arthur Fawkes [21].

   [14] Affidavit of James Arthur Fawkes [23].

Effect of proceedings on Mr Beek

1. Mr Beek deposed that he has done nothing more than use the skills and knowledge he has acquired to earn a living, and does not have any other skills, trade or qualifications to earn a living.  He says he is the sole income earner for his young family, and cannot afford not to work.

1. Principles in relation to the grant of an interlocutory injunction

1. The principles in relation to interlocutory injunctions were set out by Beech J in Twinside Pty Ltd v Venetian Nominees Pty Ltd.[15]  They are:

   [15] Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] - [11].

   (i)whether there is a serious question to be tried or a prima facie case;

   (ii)whether the plaintiff will suffer irreparable injury for which damages will not be an adequate compensation for the plaintiff, and

   (iii)whether the balance of convenience favours the grant of the interlocutory injunction.

2. The requirement that damages be an inadequate remedy is not an essential precondition that an applicant must satisfy.  Instead, the adequacy of damages is treated as a matter relating to the balance of convenience.[16] 

   [16] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 [20] (Edelman J).

3. Furthermore, the consideration of a prima facie case and the balance of convenience are not independent.[17] 

   [17] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 [22] (Edelman J).

1. Whether Bend-Tech has established that there exists a serious question to be tried

1. Counsel for Mr Beek did not dispute that if the restraint clause was valid and enforceable, Mr Beek's conduct had breached it.  However, Mr Beek's case was that Bend‑Tech had not established a serious question be tried because the restraint clause was neither valid nor enforceable. 

2. The principles in relation to the validity of restraint clauses in employment contracts were set out by the Court of Appeal in Smith v Nomad Modular Building Pty Ltd.[18]  McLure JA (as her Honour was then) quoted from Lord Macnaghten in Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd[19] who observed that for a restraint of trade to be justified, the restriction must be reasonable:

   [18] Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 [6].

   [19] Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535, 565.

   reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.

3. A restraint may be justified as protecting more than one legitimate interest.[20]

   [20] Jardin and Jardim Investments Pty Ltd v Metcash Ltd [2011] NSWCA 409; (2011) 285 ALR 677 [91] (Meagher JA, Campbell & Young JJA agreeing).

4. A restraint will be reasonable in relation to the restraining party if it is necessary for the adequate protection of that party and reasonable in relation to the party restrained if it preserves the fullest liberty of action consistent with that protection.[21]  Although the question of reasonableness is determined at the date of the contract, subsequent developments can be considered to determine whether the agreement was reasonable at the date of contract, having in mind the best estimate that the parties could make for the future.[22]

   [21] Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 [8] (McLure JA), citing Brightman v Lamson Paragon Ltd [1914] HCA 90; (1914) 18 CLR 331, 337 (Isaacs J); Buckley v Tutty [1971] HCA 71; (1971) 125 CLR 353, 376 (the Court).

   [22] Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 [7]; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288, 318 (Walsh J); Putsman v Taylor [1927] 1 KB 637, 643 (Salter J).

5. In the present case, the interests on which Bend-Tech sought to rely as the justification for the restraints imposed were not entirely clearly identified, but they appeared to be its customer connections and confidential information.[23] 

   [23] Cf Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628, 633 - 634 (Latham CJ), 650 (Fullagar J), 654 (Kitto J).

6. As is apparent from the outline of the factual background above, there are clearly factual disputes in respect of a number of key matters relevant to establishing that the restraint clause is valid and enforceable.  There is clearly a factual dispute in relation to whether consideration was given when Mr Beek entered into the contract governing the Production Manager position.  Similarly, there is also clearly a factual dispute as to whether the methods of bending used by Bend-Tech involve novelty, whether Mr Beek had access to confidential information in the course of his employment as a Production Manager or otherwise, and the extent to which Mr Beek developed relationships with clients of Bend-Tech.  These factual disputes will need to be resolved at trial, and I have not relied upon them for the purpose of determining whether a prima facie case exists.

7. Having said that, I have nevertheless reached the conclusion that Bend-Tech has not made out a prima facie case that the restraint clause is valid and enforceable.  (I would emphasise that I have reached that conclusion solely on the basis of the evidence relied on for the purpose of the interlocutory injunction application.  Needless to say, the question of the validity and enforceability of the restraint clause will fall for determination at the trial on the basis of whatever evidence is advanced at the trial.)  I have reached the view that Bend-Tech has failed to establish a prima facie case that the restraint clause is valid and enforceable for two reasons.

8. First, counsel for Mr Beek submitted that the restraint clause was a term of Mr Beek's employment only while he occupied the position of Production Manager, and that the term did not apply once Mr Beek ceased working in that position and resumed working in the position of a Bending Supervisor.  The contract of employment specifically refers to the position of Production Manager.  No separate written contract was entered into by the parties when Mr Beek resumed his position as a Bending Supervisor, and no written contract applied to the position of Bending Supervisor when he previously held it.  Furthermore, there was no evidence as to what was said, or agreed orally, between the parties as to the terms of Mr Beek's employment once he resumed the Bending Supervisor position.  These matters will all no doubt fall to be explored at the trial in more fulsome evidence.  For now, however, the evidence leaves me with a real doubt that the restraint clause continued to form part of the terms of Mr Beek's contract of employment even after he ceased in the position of Production Manager. 

9. Secondly, the restraint clause is very widely drawn, so much so that having regard to the evidence at present, I am left with real doubt that it can be said to be necessary for the adequate protection of Bend-Tech's interests, or reasonable in relation to its operation on Mr Beek.

10. Turning first to the non-solicitation clause, that clause prohibits Mr Beek from seeking to solicit or entice persons who, during the 12 months prior to, or after, the termination of his employment on 1 April 2015, were customers of Bend-Tech.  The clause not only seeks to prevent him from making use of information about the customers of Bend-Tech, or of relationships with customers that he may have formed, but also purports to prevent him from soliciting customers of whom Mr Beek will have no knowledge (that is, persons who became customers of Bend-Tech after he ceased employment with Bend-Tech).  It was not disputed by counsel for Bend-Tech that Mr Beek would not know the identity of customers who had brought their business to Bend-Tech after Mr Beek ceased his employment.  (Bend-Tech has not been willing to provide Mr Beek with a list of customers referred to in the non-solicitation clause, and Mr Beek has declined to provide an undertaking that he will comply with the non‑solicitation and the non-competition clauses.)  In so far as the non‑solicitation clause seeks to prevent Mr Beek from contacting clients whose identity he cannot know, a real question arises as to whether the clause is void for uncertainty, but that question need not be determined for present purposes.  It suffices to say that it is difficult to see how the non‑solicitation clause can be considered necessary for the protection of Bend-Tech's interests or how its operation could be said to preserve the fullest liberty for Mr Beek consistent with preserving Bend-Tech's interests, so as to be 'reasonable' in the relevant sense. 

11. As for the non-competition clause, this clause effectively prohibits Mr Beek not only from acting as a director of Tarian Pty Ltd, but also of using the skills he has accumulated over the course of virtually the whole of his working life to earn a living in the employ of any business similar to that operated by Bend-Tech.  Counsel for Bend-Tech conceded that the non‑competition clause was too wide in so far as it sought to prevent Mr Beek from working in a business of a similar kind to Bend-Tech, or which was indirectly in competition with Bend-Tech.[24] 

    [24] ts 103.

12. Furthermore, an employer is not entitled to seek to stop a former employee competing against it unless a narrower restraint in respect of the interests involved (here Bend-Tech's customer relationships and its confidential information) would be inadequate to protect those legitimate interests.  Here it is far from clear that the non‑competition clause protects Bend-Tech's interests in a manner materially different from the protection of those interests advanced by the non‑solicitation clause.

13. Counsel for Bend-Tech submitted that any over-reach of the non‑solicitation clause and the non-competition clause could be resolved by severing those parts of the clauses which were unreasonably wide.  The role of severance in the context of restraint clauses in employment contracts is strictly circumscribed.[25]  Severance is not permissible simply because a blue pencil can be used to remove the offending clause without changing the meaning of the remainder.  The principle was summarised by Younger LJ in the following passage from Attwood v Lamont:[26]

    [25] IF Asia Pacific Pty Ltd v Galbally [2003] VSC 192 (Dodds-Streeton J), citing Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1, 66 (Hill J).

    [26] Attwood v Lamont [1920] 3 KB 571, 593; see IF Asia Pacific Pty Ltd v Galbally [2003] VSC 192 [174] (Dodds-Streeton J); Integrated Group Ltd v Dillon [2009] VSC 361 [35] (Hargrave J); Allison & Anor v BDO (NSW-Vic) Pty Ltd [2010] VSC 35 [20] (Judd J).

    The doctrine of severance has not, I think, gone further than to make it permissible in a case where the covenant is not really a single covenant but is in effect a combination of several distinct covenants. In that case and where the severance can be carried out without the addition or alteration of a word, it is permissible. But in that case only.

14. It is well accepted that courts should exercise great caution in engaging in the process of severance because the effect of doing so is for the court to come to the assistance of an employer when 'the real sanction at the back of these covenants is the terror and expense of litigation, in which the servant is usually at a great disadvantage, in view of the longer purse of his master.'[27] 

    [27] Attwood v Lamont [1920] 3 KB 571, 594; see Mason v Provident Clothing & Supply Co Ltd [1913] AC 724, 745 (Lord Moulton); BDO Group Investments (NSW-Vic) Pty Ltd v Ngo [2010] VSC 206 [41] (Croft J), cited in Workplace Access and Safety Pty Ltd v Mackie [2014] WASC 62 [51] (Edelman J).

15. In my view, it is not appropriate to consider whether portions of the restraint clause should be severed for the purposes of this interlocutory injunction, and in the absence of a final determination about the validity and enforceability of the restraint clause as a whole.  That is all the more so when the application before the Court is for an interlocutory injunction in terms which reflect the restraint clause to its full extent.

1. The balance of convenience

1. Given my conclusion that I am not satisfied that a serious question to be tried has been established in relation to the application of the restraint clause, it is, strictly speaking, unnecessary to go on to consider the question of balance of convenience, but for completeness I do so nevertheless.  In my view, the balance of convenience does not favour the grant of an interlocutory injunction in this case for three reasons.

2. First, the application for injunctive relief has been made after a considerable delay from the first occasion on which it came to the attention of Bend-Tech that Mr Beek may have breached the restraint clause.  No explanation was offered for the delay.  The correspondence attached to the affidavits suggests that intermittently over the past seven months there has been correspondence between the parties in relation to the restraint clause.  Nevertheless, the result of the delay in bringing the present application is that there remains less than four months of the restraint period under the restraint clause.  This ameliorates to a considerable extent the fact that if an interlocutory injunction is not granted Bend-Tech will be deprived of the benefit of the restraint clause itself (to the extent that it is valid and enforceable).

3. Secondly, even if it is assumed that the restraint clause is valid and enforceable, and that Mr Beek's conduct was in breach of his obligations under the restraint clause, there was no evidence to suggest that that conduct had had any adverse impact on Bend-Tech's interests.  Although Mr Fawkes deposed to a downturn in Bend-Tech's revenue, that may simply be explicable by a decline in the business of existing customers (particularly in the current economic climate), rather than by the loss of customers.  I do not overlook the difficulty for an employer in demonstrating that a customer or customers have stopped bringing business to the employer.  But in a case of this kind where Mr Fawkes' evidence was that Bend‑Tech relies on repeat business from a core group of customers, I would have expected some attempt to establish a link between Mr Beek's conduct and the downturn in Bend‑Tech's business.

4. Thirdly, if an injunction were granted in the terms sought, Mr Beek would be left in a position where he was unable to act as a director of Tarian Pty Ltd, or to seek employment for any employer in a similar business.  I do not accept the submission made by counsel for Bend‑Tech that because Mr Beek took 12 months off while he worked in his family's air conditioning business, he has alternative means of earning income apart from working in the pipe bending and metal fabrication industry.  There was no evidence that there was any realistic alternative employment open to Mr Beek if he were precluded from working for Tarian Pty Ltd or for any other employer in the industry.  That is a significant outcome for anyone, much less for one who supports a young family. 

5. Finally, I have taken into account the fact that damages are ordinarily an inadequate remedy in cases of this kind, and that it will be a rare case in which an injunction will be declined on the basis that damages are a sufficient remedy.  But that difficulty in assessing damages seems to me to apply equally to an employee who, if an interlocutory injunction is granted, but the employer fails at trial, may want to pursue compensation or damages through the undertaking offered by the employer. 

6. In all of the circumstances, I am not persuaded that an interlocutory injunction should be granted in this case. The application should therefore be dismissed.

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION: BEND-TECH GROUP (A FIRM) -v- BEEK [2015] WASC 491 (S)

CORAM:   PRITCHARD J

HEARD:   5 APRIL 2016

DELIVERED          :   11 APRIL 2016

FILE NO/S:   CIV 2819 of 2015

BETWEEN:   BEND-TECH GROUP (A FIRM)

Plaintiff

AND

ANDREW DAVID BEEK
Defendant

Catchwords:

Practice and procedure - Costs - Application for indemnity costs order - Application for special costs order - Legal Profession Act 2008 (WA) s 280(2)(c) - Whether plaintiff’s application for interlocutory injunction was hopeless - Whether plaintiff's conduct in seeking interlocutory injunction or rejecting offers of compromise was improper or unreasonable - Whether court must be satisfied that costs agreement complies with Legal Profession Act 2008 (WA) pt 10 div 6 before it can make special costs order - Turns on own facts

Legislation:

Legal Profession Act 2008 (WA)

Result:

Indemnity costs order refused
Special costs order made

Category:    B

Representation:

Counsel:

Plaintiff:     Mr C J Graham

Defendant:     Mr M D Cox

Solicitors:

Plaintiff:     Borrello Graham Lawyers

Defendant:     MDC Legal

Cases referred to in judgment:

Aristocrat Technologies Australia Pty Ltd v Allam [2016] HCA 3

Bend‑Tech Group (A Firm) v Beek [2015] WASC 491

Buitendag v Ravensthorpe Nickel Operations Pty Ltd [2012] WASC 425 (S)

Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195

EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S)

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397

Frigger v Lean [2012] WASCA 66

Lane v Channel 7 Adelaide Pty Ltd [2004] SASC 47

Re Malley SM; Ex parte Gardner [2001] WASCA 83

Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S)

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S)

Trafalgar West Investments Pty Ltd (as trustee for The Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70

Wainwright v Barrick Gold of Australia Ltd [2014] WASCA 15 (S)

1. PRITCHARD J:  On 22 December 2015, I dismissed Bend‑Tech's application for an urgent interlocutory injunction (Injunction Application).  These reasons should be read in conjunction with the reasons for decision I delivered on that occasion.[28]  I also reserved the question of costs and granted Mr Beek liberty to apply for a special costs order. 

   [28] Bend‑Tech Group (A Firm) v Beek [2015] WASC 491.

2. By chambers summons dated 22 February 2016, Mr Beek now seeks the following orders:

   1.The plaintiff pay the defendant's costs of the plaintiff's chamber summons dated 13 November 2015 [that is, the Injunction Application], those costs to be taxed on an indemnity basis and paid forthwith; and

   2.Alternatively to order 1, the plaintiff pay the defendant's costs of the plaintiff's chamber summons dated 13 November 2015 forthwith, to be taxed if not agreed, without regard to the upper limits of the Supreme Court's Scale of Costs 2014 pursuant to s 280(2) of the Legal Profession Act 2008 (WA).

1. For the reasons which follow, I am not persuaded that an order should be made that Bend‑Tech pay Mr Beek's costs to be taxed on an indemnity basis. However, I am satisfied that a special costs order should be made pursuant to s 280(2)(c) of the Legal Profession Act 2008 (WA) (the LP Act).

2. In support of his application for costs orders, Mr Beek relied on an affidavit of Mark David Cox sworn 22 February 2016, an affidavit of Vishan Kakara Atchamah affirmed 22 February 2016 and a further affidavit of Mr Vishan Kakara Atchamah affirmed 5 April 2016.  By agreement of the parties, Mr Beek relied on copies of Mr Cox's affidavit, and of Mr Kakara Atchamah's first affidavit, from which certain paragraphs (or parts thereof) had been redacted.

3. Bend‑Tech relied on an affidavit of Mr Darryl Siu Chuan Koh sworn 9 February 2016.

The application for indemnity costs

1. The principles in relation to the grant of an order for costs on an indemnity basis are well‑established.  They were set out by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd.[29]  After pointing out that an order for indemnity costs will only be made in exceptional circumstances,[30] the Court summarised the relevant principles as follows:[31]

   [29] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S).

   [30] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [7] referring to Re Malley SM; Ex parte Gardner [2001] WASCA 83.

   [31] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [10] (citations omitted).

   1.[The Court] in its inherent jurisdiction, may make an indemnity costs order.

   2.An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis.

   3.The court's discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially.  In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd, Woodward J said:

   Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where "there is some special or unusual feature in the case to justify the court exercising its discretion in that way". (emphasis added)

   4.To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party.  In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2), French J by reference to the observations of Woodward J in Fountain Selected Meats, said:

   It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.

   5.Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd, French J observed:

   The categories in which the discretion may be exercised are not closed.

   6.Competing principles need to be balanced in assessing the making of a potential award of indemnity costs.  In Quancorp Pty Ltd v MacDonald, Wheeler J observed:

   On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as "hopeless" so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.

   7.An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party's legal advisers.

   8.A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling.

   9.An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance.  In Unioil (No 2), Ipp J observed:

   However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.

   10.Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct.  In Flotilla, Pullin J said:

   A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.

2. An order for costs on an indemnity basis may be made on the basis that an action was 'hopeless' in the sense that 'the action was commenced or continued in circumstances where the plaintiff, properly advised, should have known that the action had no prospect of success'.[32]  An action which appears to have been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success, may be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or the clearly established law.[33]  In assessing whether a party engaged in improper or unreasonable conduct, attention needs to be focused on what the party knew, or ought reasonably to have known, in the circumstances.[34]  The fact that a case is weak or marginal, or unlikely to succeed, does not make it a 'hopeless case' which merits the sanction of an indemnity costs order.[35]

   [32] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [84] (Newnes JA).

   [33] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401.

   [34] Trafalgar West Investments Pty Ltd (as trustee for The Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70 [12] (Kenneth Martin J).

   [35] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [86] (Newnes JA, Murphy JA and Hall J agreeing).

3. Mr Beek seeks that his costs of the Injunction Application be awarded on an indemnity basis for three reasons, namely:

   (a)the Injunction Application was hopeless or misconceived;

   (b)further or alternatively, Bend‑Tech behaved improperly or unreasonably in the making and conduct of the Injunction Application; and

   (c)further or alternatively, Bend‑Tech unreasonably or imprudently rejected Mr Beek's genuine offers of compromise.

Whether the Injunction Application can properly be characterised as one which was 'hopeless' or 'misconceived'

1. Counsel for Mr Beek submitted that the Injunction Application was hopeless because there was no evidence to establish a serious question to be tried. 

2. In my Reasons for Decision, I concluded that Bend‑Tech had not established a prima facie case that the restraint clause was valid and enforceable, for two reasons.  The first was that the evidence did not clearly establish that the restraint clause remained a term of Mr Beek's employment after he ceased occupying the position of Production Manager and resumed working in the position of Bending Supervisor.[36]  (The question whether the restraint clause was supported by consideration was a matter which I left for determination at trial.)  I concluded that the evidence left me with 'a real doubt that the restraint clause continued to form part of the terms of Mr Beek's contract of employment even after he ceased in the position of Production Manager'.[37] 

   [36] Bend‑Tech Group (A Firm) v Beek [2015] WASC 491 [53].

   [37] Bend‑Tech Group (A Firm) v Beek [2015] WASC 491 [53].

3. Secondly, I concluded that the restraint clause was too widely drawn.  The restraint clause included a non‑solicitation clause, and I concluded that it was difficult to see how the non‑solicitation clause could be considered necessary for the protection of Bend‑Tech's interests, or how its operation could be said to preserve the fullest liberty for Mr Beek consistent with preserving Bend‑Tech's interests, so that it could be characterised as a reasonable restraint.  The restraint clause also included a non‑competition clause.  That clause effectively prohibited Mr Beek from acting as the director of the company he established to operate his metal‑bending business, but also from using the skills he had accumulated over the course of virtually the whole of his working life to earn a living in the employ of any business similar to that operated by Bend‑Tech.  Counsel for Bend‑Tech conceded that the non‑competition clause was too widely drawn.  Nevertheless, Bend‑Tech sought an injunction in terms reflecting the operation of the restraint clause to its fullest extent.  I concluded that on the basis of the evidence adduced at the hearing of the Injunction Application, I was left with 'a real doubt that [the restraint clause] can be said to be necessary for the adequate protection of Bend‑Tech's interest, or reasonable in relation to its operation Mr Beek'.[38] 

   [38] Bend‑Tech Group (A Firm) v Beek [2015] WASC 491 [54].

4. Counsel for Mr Beek submitted that Bend‑Tech had been made aware, from as early as 30 January 2015, that the validity and enforceability of the restraint clause was disputed, and thus that the question of the enforceability of the restraint clause would be a threshold question in the Injunction Application, but that Bend-Tech had failed to adduce evidence to address that question.  He submitted that Bend‑Tech had failed to adduce evidence, at the hearing of the Injunction Application, that the restraint clause continued to form part of the terms of Mr Beek's contract of employment after he ceased working in the position of Production Manager, and that Bend‑Tech had also failed to adduce any evidence that the inclusion of the restraint clause in Mr Beek's contract of employment had been supported by any consideration. 

5. I am not persuaded that the Injunction Application should properly be viewed as 'hopeless' (so as to warrant an order for indemnity costs) on this basis.  It cannot be said that Bend-Tech did not lead any evidence regarding the existence and operation of the restraint clause.  Bend‑Tech adduced evidence that while Mr Beek was working as Production Manager, his contract of employment, on its face, included the restraint clause.  Furthermore, counsel for Mr Beek conceded that if the restraint clause was valid and enforceable, Mr Beek's conduct (as disclosed in the affidavits filed by Bend‑Tech) would have breached that restraint clause.  However, having regard to the totality of the evidence, and to the submissions of counsel, I was not persuaded that the evidence was sufficient to establish that there was a serious question to be tried that Mr Beek had acted in breach of a valid and enforceable restraint clause.

6. The fact that one of the factors in that conclusion was the breadth of the restraint clause does not mean that the Injunction Application can properly be characterised as 'hopeless'.  In cases of the present kind, arguments in relation to the permissible breadth of a restraint of trade clause are commonplace.  Where the line should be drawn between a restraint clause which is valid and enforceable and one which is not can involve difficult questions over which reasonable minds may differ.  Failure to succeed on this basis does not mean that the Injunction Application was 'hopeless'.

7. Counsel for Mr Beek also submitted that the Injunction Application was hopeless because Bend‑Tech did not establish that the balance of convenience warranted the grant of an interlocutory injunction.  He pointed to my finding that there had been considerable and unexplained delay by Bend-Tech in bringing the Injunction Application.  That was one of the factors on which I relied in concluding that the balance of convenience did not warrant the grant of an interlocutory injunction.  I am not persuaded that that delay suggests that Bend‑Tech had pursued its application when it should have known that the action had no prospect of success.  There may be many reasons why a party does not rush to commence litigation, not the least of which are the costs and inconvenience involved in doing so.  That is all the more so in cases of this kind where the financial impact of the breach of a restraint of trade clause may be incremental.  Furthermore, notwithstanding Bend-Tech's delay in bringing the Injunction Application, when it finally did so, over three months of the total restraint period still remained.  If the restraint clause was valid and enforceable, then clearly Bend‑Tech was entitled to seek to enforce that clause for the balance of the restraint period.

8. Counsel for Mr Beek also pointed to my finding that there was no evidence to suggest that Mr Beek's conduct, even if in breach of his obligations under the restraint clause, had had any adverse impact on Bend‑Tech's business.  This was not a case where Bend‑Tech failed to produce any evidence as to the balance of convenience.  Rather, the position was that I was not satisfied, having regard to the evidence as a whole, that the balance of convenience favoured the grant of injunctive relief.  There was some evidence that some of Bend‑Tech's customers had been approached by Mr Beek, but no evidence that any of them had taken their business to Mr Beek's company.  And although Bend‑Tech had relied on evidence of a downturn in its revenue, I was not persuaded that that was necessarily explicable by Mr Beek's conduct (as opposed to a downturn in business attributable to the current economic climate). 

9. Finally, it should be noted that my conclusion as to the balance of convenience resulted from weighing up the factors discussed above, together with the likely impact of the grant of an interlocutory injunction on Mr Beek.  In considering whether Bend-Tech's case was 'hopeless', it is not appropriate to focus on deficiencies in particular aspects of its case, and to lose sight of its case overall. 

10. While there were some aspects of Bend-Tech's case which it should properly have regarded as weak, I am not persuaded that Bend-Tech should have viewed its case as a whole as 'hopeless'.  As the authorities to which I have referred make clear, the fact that a case is 'weak' or 'marginal' does not make it 'hopeless', so as to warrant an order for costs on an indemnity basis. 

Whether Bend‑Tech's conduct in bringing the injunction application was improper or unreasonable so as to warrant an order for costs on an indemnity basis

1. Counsel for Mr Beek submitted that, properly advised, Bend‑Tech should have known that it had no chance of success because:

   •it knew that only four months remained of the restraint period at the time of the Injunction Application;

   •it knew or ought to have known that, at law, the restraint clause was at least arguably unenforceable; and

   •it knew or ought to have known that it did not have sufficient evidence to establish that an interlocutory injunction should be granted.

2. Counsel for Mr Beek submitted that by bringing the Injunction Application in those circumstances, Bend‑Tech engaged in unreasonable conduct which unnecessarily increased the costs to the parties of the litigation, and that Bend‑Tech should bear those increased costs.[39]  Furthermore, counsel for Mr Beek submitted that because Bend‑Tech should have known it had no chance of success, it could be presumed that the Injunction Application was commenced or continued for some ulterior motive or because of some wilful disregard of known facts or the clearly established law.  For the reasons discussed above, I am not persuaded that the inference can or should be drawn that the Injunction Application must have been commenced or continued for some ulterior purpose or motive or in wilful disregard of the facts or of the law.

   [39] Defendant's Outline of Submissions on Costs [30].

3. Counsel for Mr Beek also submitted that there was 'some element of improper or unreasonable conduct' at least in the sense that Bend-Tech was 'seriously remiss'[40] in that the affidavits it filed in support of the Injunction Application did not include all of the correspondence passing between Mr Beek and Bend‑Tech, or their representatives, in relation to the dispute over whether the restraint clause was valid and enforceable.  Counsel for Mr Beek refrained from going so far as to suggest that the selective inclusion of correspondence may have misled the Court.  However, he submitted that 'it was suggested [by Bend-Tech] that Mr Beek had acted in disregard of warnings and communications to him ... when, in fact, Mr Beek and his representatives had responded at some length to dispute the restraint'.[41]

   [40] Defendant's Outline of Submissions on Costs [35].

   [41] Defendant's Outline of Submissions on Costs [35].

4. The allegation that an incomplete picture was presented in the affidavits filed by Bend-Tech in support of the Injunction Application, because not all of the relevant correspondence was included in those affidavits, would have been a particular concern if the Injunction Application had been made on an ex parte basis.[42]  However, the Injunction Application was made on notice to Mr Beek, and it was clearly anticipated from the outset that the hearing of that application would be inter partes. 

   [42] See Aristocrat Technologies Australia Pty Ltd v Allam [2016] HCA 3, [15] ‑ [16] and Lane v Channel 7 Adelaide Pty Ltd [2004] SASC 47 [9].

5. In addition, having reviewed the submissions made on Bend‑Tech's behalf, in light of the affidavits it filed, it seems to me that the point being made was that Mr Beek established a company which operated a metal bending business knowing full well that Bend‑Tech considered that that conduct was in breach of the restraint clause.  While Mr Beek disputed that that clause was valid and enforceable (as other correspondence, which he annexed to his affidavit, demonstrated), that did not detract from the point made against him, which was that if the clause was valid and enforceable, Mr Beek had acted in the knowledge of its existence and with notice that Bend‑Tech regarded his conduct as a breach of the clause.

6. Counsel for Mr Beek also submitted that because Bend‑Tech did not include, in the affidavits filed in support of the Injunction Application, the entirety of the parties' correspondence in respect of the validity and enforceability of the restraint clause, it was necessary for Mr Beek's solicitors to ensure that other correspondence was included in Mr Beek's affidavit and to ensure that all material which was relevant to his case was before the Court.  It is difficult to see how less care in preparation would have been required of Mr Beek's solicitors, irrespective of the content of Bend-Tech's affidavits.  I am not persuaded that Bend‑Tech's conduct was improper or unreasonable so as to warrant an indemnity costs order on this basis.

Whether Bend‑Tech unreasonably rejected Mr Beek's settlement offers

1. Counsel for Mr Beek also submitted that Bend‑Tech's conduct was unreasonable because it rejected various offers made by Mr Beek, on a without prejudice basis, to settle the proceedings and that this justified the award of costs on an indemnity basis.

2. It was not in dispute that offers of compromise were made by Mr Beek, through his solicitors, to Bend‑Tech, through its solicitors, on 7 December 2015, 15 December 2015, and 19 January 2016, and that an offer was made orally, through Mr Beek's counsel, in the course of a break in the hearing of the Injunction Application on 8 December 2015.  There appears to be a dispute about the nature and content of the latter offer, and as a result of the redaction of the affidavits to which I earlier referred, no details are available in respect of that offer.  It can be put to one side for present purposes.

1. I am not persuaded that Bend‑Tech's failure to accept those offers of compromise can be considered so unreasonable that costs should be awarded against it on an indemnity basis, for the following reasons. 

2. First, the only offer of compromise made prior to the hearing of the Injunction Application was that made on 7 December 2015.  The annexures to Mr Koh's affidavit indicate that that offer was made in a letter sent by email late in the day prior to the hearing, so that the offer was open for approximately 16 hours only, of which less than two hours fell within business hours.  I am not persuaded that that afforded Bend‑Tech a reasonable period to consider the offer.  That is so notwithstanding that the time frame required to permit reasonable consideration of such an offer must necessarily have been truncated in view of the urgency of the Injunction Application.  Notice of the Injunction Application and the basis for it had been given to Mr Beek and his solicitors well in advance of the hearing, and Mr Beek's affidavit material and submissions had been filed and served on 4 December 2015.  It is not apparent why an offer of compromise could not have been made prior to 7 December 2015 in those circumstances. 

3. Secondly, the offer made on 7 December 2015 required Bend‑Tech to pay Mr Beek's costs up to and including the filing of Mr Beek's submissions, those costs to be taxed if not agreed.  No information appears to have been provided in respect of the likely quantum of those costs.  In my view, it would not be reasonable to expect Bend‑Tech to accept such an offer without being informed as to the approximate quantum of those costs and given the opportunity to obtain advice in respect of the offer to compromise in light of that information.

4. Thirdly, refusal of the offers made on 7 December 2015 and 15 December 2015 was said to be unreasonable or improper conduct because it should have been apparent to Bend-Tech at each stage that the Injunction Application was hopeless and doomed to fail.  For the reasons outlined above, that argument cannot be accepted. 

5. Fourthly, in so far as the offer dated 15 December 2015 is concerned, by that date the hearing of the Injunction Application had taken place.  Settling at that stage (rather than waiting for the delivery of judgment) was likely to result in only minimal costs-savings.

6. Finally, rejection of the offer made on 19 January 2016 provides little support for an order for costs on an indemnity basis in respect of the Injunction Application, given that that offer was made after my Reasons for Decision had been delivered on the application by which time virtually all of the costs associated with that application had been incurred.

Conclusion in relation to the application for costs on an indemnity basis

1. None of the matters raised by counsel for Mr Beek, whether considered individually (as above), or collectively, warrant the conclusion that Bend-Tech should be required to pay Mr Beek's costs of the Injunction Application on an indemnity basis. 

The application for a special costs order

1. Ordinarily, the taxation of bills of costs charged by a legal practice is regulated by costs determinations made by the Legal Costs Committee established under the LP Act.[43] However, the applicable limits under the scale of costs set out in such costs determinations are able to be raised or removed by the Court pursuant to the power in s 280(2) of the Act, which provides:

   (2)... if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following ‑

   (a)order the payment of costs above those fixed by the determination;

   (b)fix higher limits of costs than those fixed in the determination;

   (c)remove limits on costs fixed in the determination;

   (d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.

   [43] Legal Profession Act 2008 (WA) s 280(1).

2. The principles concerning special costs orders under s 280(2) of the Act are now well‑established. They were set out by the Court of Appeal in Wainwright v Barrick Gold of Australia Ltd.[44]  In Crawley Investments Pty Ltd v Elman, those principles were summarised by Edelman J[45] as follows:

   [44] Wainwright v Barrick Gold of Australia Ltd [2014] WASCA 15 (S) [7] ‑ [9] (the Court).

   [45] Crawley Investments Pty Ltd v Elman [2014] WASC 233 (S) [5].

   The principles concerning special costs orders under s 280 of the Legal Profession Act were recently set out by the Court of Appeal in Wainwright v Barrick Gold of Australia Ltd.[46] They can be summarised, from that decision unless otherwise indicated, as follows:

   [46] Wainwright v Barrick Gold of Australia Ltd [2014] WASCA 15 (S) [7] ‑ [9] (the Court).

   (i)The court must form an opinion which has two components. First, the court must determine that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate. Second, the court must conclude that the inadequacy arises because of the "unusual difficulty, complexity or importance of the matter".

   (ii)Having heard the matter and being familiar with the way in which the case was conducted and the issues which were litigated, the court is in a position to form the opinions required under the section as matters of impression rather than "detailed evaluation", "precision", "science" or "mathematics".

   (iii)As to the first question (inadequacy) the court must form the view that the maximum amount allowable under the relevant scale item is inadequate in the sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant costs determination. Until that threshold is crossed, the power will not ordinarily be exercised.

   (iv)A conclusion that it is fairly arguable that the taxing officer might properly allow costs at an amount greater than the amount allowable under the Scale does not always require evidence of the costs actually incurred.[47]

   (v)As to the second question (the cause of the inadequacy being unusual difficulty, complexity or importance), the word 'unusual' qualifies only the 'difficulty' of the matter and not its complexity or importance. The word 'unusual' in this context means unusual having regard to what one might describe as the usual run of civil cases determined in the Supreme and District Courts. That essentially involves the making of a value judgment by the court, having regard to the court's experience of the particular case when compared with the usual run of cases. And the word 'importance' in s 280(2) encompasses importance to the parties; it does not require broader importance to the public or a sector of the public.[48]

   (vi)Although replacing the amount of the Scale item with a different ceiling may be appropriate where sufficient information exists to make that assessment, it is not uncommon for an order to be made removing the limit for the Scale item without replacing that limit with a different ceiling.[49]

   (vii)One of the principles that should guide a court in addressing an issue under s 280(2) is that the court should not usurp the role of the taxing officer.[50]

The applicable determination

[47] Frigger v Lean [2012] WASCA 66 [81] (Allanson J, Newnes & Murphy JJA agreeing).

[48] Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S) [7] (Beech J).

[49] EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [8] ‑ [9], [13] (Martin CJ); Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S) [5] (Beech J).

[50] Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323 (S) [6] (Beech J).

1. In his Chamber Summons of 22 February 2016, Mr Beek sought an order that the costs be taxed without regard to the upper limits of 'the Supreme Court's Scale of Costs 2014' pursuant to s 280(2) of the Act. It was not in dispute that the Legal Profession (Supreme Court) (Contentious Business) Determination 2014 (the Determination) applies to the costs incurred by Mr Beek in this matter.  Item 10 of the Scale of Costs set out in Table B of cl 9 of the Determination (the Scale) pertains to proceedings in chambers other than proceedings to which Item 11 of the Scale applies (which are not presently relevant).

2. In the course of the hearing, counsel for Mr Beek confirmed that the application was made in reliance on s 280(2)(c) of the LP Act, and that Mr Beek sought that the Court remove the limits contained in Item 10 of the Scale.

3. The allowance under Item 10 of the Scale is calculated by reference to two days of preparation and one day of hearing and sets a rate for counsel of $385 per hour or $3,850 per day to a total allowance of $11,550.  In addition, Item 10 permits some other modest allowances for matters such as attending on a reserved judgment in chambers.

The evidence relied on by Mr Beek in support of his application for a special costs order

1. Mr Beek relied on the affidavits affirmed by Mr Kakara Atchamah on 22 February 2016 and 5 April 2016 in support of his application for a special costs order.  Annexed to Mr Kakara Atchamah's affidavit of 22 February 2016 was a copy of a tax invoice issued to Mr Beek by his solicitors, MDC Legal, dated 11 January 2016, together with a detailed itemisation of various items of legal work undertaken in respect of these proceedings, the time spent and the amount charged for those items of work, and a table setting out the hourly rates charged by the staff of MDC Legal.  Mr Kakara Atchamah's first affidavit also annexed an edited itemisation of Mr Beek's tax invoice, which appears to include only those matters which it was considered might reasonably be claimed on a taxation.  Mr Kakara Atchamah deposed that the tax invoice, invoice itemisation and edited invoice itemisation annexed to his affidavit would form the basis of a bill to be presented at taxation.  He deposed that the allowable costs under the Scale would cover approximately 38% of the actual costs incurred in the performance of the work itemised in those annexures.

Determination of the application for a special costs order

1. I turn to the matters requiring consideration under s 280(2) of the LP Act.

2. Having regard to the tax invoice, invoice itemisation and edited invoice itemisation annexed to Mr Kakara Atchamah's affidavit of 22 February 2016, I am satisfied that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount greater than the limit that would be imposed under Item 10 of the Scale, and that the amount of costs allowable under Item 10 will therefore be inadequate.  I hasten to add that in reaching this conclusion, I express no opinion as to the size of the bill for Mr Beek's legal costs.  The amount ultimately permitted on a taxation is a matter entirely for the taxing officer and it is not for the Court to usurp the role of the taxing officer.

3. Counsel for Bend-Tech submitted that the Injunction Application was not a matter involving any unusual difficulty, complexity or importance.   I am unable to accept that submission.  I am satisfied that the inadequacy of the costs allowed under Item 10 of the Scale arises in this case because of the complexity of the issues raised by the Injunction Application.  That complexity arose from the terms of the restraint clause (which as I have observed was extremely broad in its scope), from the legal and factual issues raised as to whether the restraint clause applied to Mr Beek's employment (at all, or at the time when he engaged in the conduct complained of), and from other factual disputes arising from the evidence, including as to the nature of the business which Mr Beek had commenced and the nature of Bend-Tech's business. 

4. The complexity of those issues was reflected in the fact that Bend‑Tech relied on two affidavits, one of which was relatively lengthy, and Mr Beek filed a detailed and lengthy affidavit in response.  There were extensive written and oral submissions by counsel as to the facts and the law, and the hearing of the Injunction Application took an entire day. 

5. I am also satisfied that the inadequacy of the costs allowed under Item 10 of the Scale arises because of the importance of the Injunction Application or, more precisely, the successful defence of that application, to Mr Beek.  As I have already explained, the grant of an interlocutory injunction in the terms sought by Bend‑Tech in the Injunction Application would have left Mr Beek in the position where he was unable to act as the director of the company he had established, or to seek employment for any employer engaged in a business similar to that of Bend-Tech, in circumstances where he had no realistic option of alternative employment.  The possibility of that outcome represented a significant financial risk for Mr Beek.  Faced with the risk of an order of that kind being made, it was to be expected that Mr Beek would vigorously defend the Injunction Application, with detailed attention both to the facts and to the law.

6. Counsel for Bend-Tech pointed to the existence of the undertaking as to damages given by his client as undermining the claim that the Injunction Application was a matter of some importance to Mr Beek.  I do not accept that that is so.  If the interlocutory injunction were to have been granted, Mr Beek would been denied the opportunity to work for the company he had established, or for any other employer performing work similar to the metal bending work engaged in by Bend-Tech, without any real alternative employment, for a three‑month period.  Yet if that injunction were subsequently found to have been wrongly granted, any financial recompense pursuant to the undertaking would be likely to take some time to obtain.  In my view, the existence of the undertaking did not in any way detract from the importance of the Injunction Application to Mr Beek.

7. Counsel for Bend-Tech also submitted that there was nothing in the material before the Court on which the Court could be satisfied that the inadequacy of the Scale allowance was actually attributable to the unusual difficulty, complexity or importance of this matter. He submitted that it was necessary that the affidavit material make clear the link between the legal work undertaken, the taxed costs of which would likely exceed the amount permitted under the Scale, and the complexity or difficulty or importance of the matter. That submission must also be rejected. As the principles set out at [35] make clear, the Court forms the opinion required under s 280(2) of the LP Act as a matter of impression, rather than as a result of a detailed evaluation, or some precise mathematical or scientific assessment. Having heard the Injunction Application, and having carefully considered the evidence and the submissions of the parties on that application, I am satisfied that the likely inadequacy of the costs allowed under the Scale is attributable to the complexity and to the importance of the Injunction Application.

8. Bend‑Tech also opposed the special costs order sought in this case on a further basis. Counsel for Bend-Tech submitted that a precondition to the making of a special costs order is that the Court must be satisfied that there was in place between the applicant for the special costs order and his or her solicitors a costs agreement made in accordance with div 6 of pt 10 of the LP Act, and that there was no such evidence before the Court in this case. He submitted that it was necessary for the Court to be positively satisfied that any agreement as to costs which existed was one which met the requirements for a costs agreement under div 6 of pt 10 of the Act, including the matters set out in s 282(3) and (4) of the LP Act. He submitted that it was not sufficient for the Court to rely upon affidavit evidence of a legal practitioner that there was in existence a written retainer with a client, which constituted a costs agreement under the LP Act.

9. This submission should be rejected for three reasons. First, the evidence before the Court establishes that Mr Beek and MDC Legal had a costs agreement of the kind contemplated by div 6 of pt 10 of the Act. The tax invoice annexed to Mr Kakara Atchamah's affidavit of 22 February 2016 indicated that if Mr Beek was dissatisfied with the invoice, he would be entitled to apply to 'set aside our costs agreement'. In addition, in his affidavit of 5 April 2016, Mr Kakara Atchamah deposed that he was aware 'that MDC Legal has a written retainer agreement with Mr Beek, pursuant to which Mr Beek is liable to pay legal costs on agreed terms to MDC Legal at the hourly rate listed' in the annexure to Mr Kakara Atchamah's affidavit of 22 February 2016.[51]  Further, Mr Kakara Atchamah annexed a copy of an email passing between MDC Legal and Bend‑Tech's solicitors in which the latter acknowledged advice from MDC Legal that the firm did have a costs agreement with Mr Beek.

   [51] Affidavit of Vishan Kakara Atchamah, affirmed 5 April 2016 [4].

10. Secondly, nothing in s 280(2) supports the contention that the Court must be satisfied that a costs agreement exists between the client and his or her solicitors which meets the requirements of div 6 of pt 10 of the LP Act. The terms of s 280(2) of the Act clearly set out the matters about which the Court is required to form an opinion for the purpose of determining whether a special costs order should be made. Those matters do not include the existence of a costs agreement which meets the requirements of div 6 of pt 10 of the LP Act.

11. Thirdly, the submission is contrary to authority.  In Walter v Buckeridge [No 5], Le Miere J said:[52]

    Section 280 of the Legal Profession Act 2008 applies to costs between legal practitioners and their own clients, and costs between party and party. Section 280(2) empowers the court, if it is of the requisite opinion, to order the payment of costs above those fixed by the determination or to make one of the other orders specified. The power to make such a "special costs order" is not conditioned upon there being a costs agreement between the legal practitioner and his client. To put it another way, if the court is of the requisite opinion it may order the payment of costs above those fixed by the determination in relation to solicitor and own client costs and in relation to party and party costs. In neither case is it a condition of the power to order the payment of costs above those fixed by the determination that there be a costs agreement made in accordance with Div 6 under which the legal practitioner is entitled to charge costs above those fixed by the determination.

    [52] Walter v Buckeridge [No 5] [2012] WASC 495 [56].

12. His Honour expressed the same view in Buitendag v Ravensthorpe Nickel Operations Pty Ltd.[53]

    [53] Buitendag v Ravensthorpe Nickel Operations Pty Ltd [2012] WASC 425 (S) [5].

Conclusion

1. There will be an order that Bend‑Tech pay Mr Beek's costs of Bend‑Tech's chambers summons dated 13 November 2015 forthwith, to be taxed if not agreed, without regard to the upper limits of Item 10 of the Legal Profession (Supreme Court) (Contentious Business) Determination 2014. 

2. Counsel should confer in respect of the costs of the present application with a view to submitting a minute of consent orders.  In the absence of consent, I will hear from the parties.