Carnbrea & Co Ltd v Ryan & Anor

[2008] VSC 133

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 5351 of 2008

CARNBREA & CO LTD	Plaintiff
V
RYAN and ANOR	Defendants

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JUDGE:	HANSEN J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 and 18 April 2008
DATE OF JUDGMENT:	18 April 2008
CASE MAY BE CITED AS:	Carnbrea & Co Ltd v Ryan
MEDIUM NEUTRAL CITATION:	[2008] VSC 133

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Practice and Procedure – Interlocutory injunction – Restraint of trade – Confidential information.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr C Shaw	Gadens
For the Defendants	Mr N Green SC and Mr G Burns	Mills Oakley

HIS HONOUR:

1. In my view the plaintiff has established a serious question to be tried that the relevant provisions in Clause 8 (and Clause 7 concerning confidential information, although as to that I heard no real argument) were in reasonable restraint of trade, taken at the time when the employment agreements were entered into.  However, I am of the view, as I indicated in the course of argument, that in respect of the period specified in Clause 8(c), only the period of six months is arguable in the relevant sense for this present purpose as being reasonable.  In determining this application, once I decide that on this interlocutory exercise, then that controls the period of time that would be operative in an injunction in enforcing the covenant in Clause 8(c).  In my view, the plaintiff has established a serious question to be tried or a prima facie case, whichever is the right test now, but, whatever it be, for interlocutory purposes, the plaintiff has established to my satisfaction that the defendants have acted in contravention of the restraints in Clause 8(c).  I wish to say as little as possible about the facts because I do not want to say something that would embarrass a trial judge. 

1. I have actually had the benefit of the defendants being cross-examined on their affidavits - not generally, of course, but limited to pertinent matters - and am affected by the conclusions I draw from having heard that cross-examination and having observed them.  It is sufficient for me to say, I think, that the defendants knowingly have acted in contravention of Clause 8(c).

1. I have thus far not said anything about Clause 8(d), as to which, as I observed in the course of argument, one may have arguments as to whether, in the case of a particular client, the facts fall within the expression 'entice away from'.  I say only that my impression of the situation, aided by the benefit of oral evidence, is that the defendants set out to attract clients of the plaintiff, and I tend to the view on the facts that they sought to attract more than their evidence would disclose.  I do not wish to say any more about the matter, for reasons I have already stated.

1. I propose to grant injunctions restraining the defendants from acting for the period of six months from 13 February this year.  In arriving at this conclusion I have considered all of the matters that have been addressed concerning the balance of convenience.  It must be borne in mind, in considering the balance of convenience, that the plaintiff had here a legitimate commercial interest in itself to protect.  It is a small enterprise in terms of numbers employed.  It does not have huge numbers of clients.  There is clearly a critical relationship with the clients of the business.  It is a business which turns very much, I find, on the relationship of trust and confidence between the adviser and the client.  The defendants, clearly competent in their work, have had a close relationship with the clients.  The commercial interest to be protected by the restraint is evident.  So also has been the immediate loss of clients of the plaintiff to the defendants in the period since they left the plaintiff's employ. 

1. It is clear in my view that damages would be extremely difficult to assess in lieu of an injunction.  The extent of financial harm can be difficult to isolate and quantify in circumstances such as the present, and there is, of course, a reason why covenants in restraint of trade have been taken, and doubtless this one was, too.  I do not accept that, if the injunction was not granted, the plaintiff's business must necessarily be contemplated as being likely to come to an end.  There are, after all, rigours in the marketplace and employees come and employees go, and any business such as that conducted by the plaintiff has to be on its mettle at all times to prove itself.  I regard the Mitchell observation as to the business likely ending with some circumspection.  Nevertheless, I do not think that it can simply be passed off that damages would be an adequate remedy in lieu of an injunction.  I consider also the effect on those clients who have transferred their allegiance to the defendants.  It is unfortunate if they suffer disturbance in the person from whom they receive professional advice, but if the restraint had been observed at the outset that disturbance would not now be in question.  As I observed to counsel who appeared for the defendants when I granted an interim injunction last week, the fact that I did not grant an injunction that would have restrained the defendants from acting for those clients until this application was heard could not be taken as in any way establishing some sort of status quo that the defendants could take advantage of in their submissions.  That was merely holding the position lest the conclusion that I arrived at was that no injunction should go.  I take account of the clients’ position;  it is unfortunate.  But the primary position here was that there existed covenants in restraint of trade that were known to the defendants and which I find they knowingly chanced their arm in relation to.  I will grant injunctions.  The injunction should follow the terms of the clause in question.

1. As to the confidential information, Mr Shaw said that he wanted an order that the defendants deliver up written documents which they took away with them which contain confidential information.  As I recall it, that was client lists including information as to revenues and portfolio information.  An order to that effect cannot be resisted, as I would apprehend it, and I would make it.

1. In the first instance, I ask counsel to confer and come back when it is convenient as to the terms of orders to be granted.  Costs will, of course, be reserved and I will require an undertaking for damages from the plaintiff.