Ctog Pty Ltd v Turcic
[2018] ACTSC 361
•12 November 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | CTOG Pty Ltd v Turcic |
Citation: | [2018] ACTSC 361 |
Hearing Date: | 12 November 2018 |
DecisionDate: | 12 November 2018 |
Before: | Burns J |
Decision: | See [27] |
Catchwords: | CONTRACT LAW – EMPLOYMENT CONTRACT – Restraint of Trade Clause – Application for an interlocutory injunction – whether the plaintiff could demonstrate a legitimate protectable interest – whether damages would be an adequate remedy |
Parties: | CTOG Pty Ltd (Plaintiff) Frank Turcic (Defendant) |
Representation: | Counsel J Raine (Plaintiff) P Walker SC (Defendant) |
| Solicitors Griffin Legal (Plaintiff) Aulich Law (Defendant) | |
File Number: | SC 505 of 2018 |
BURNS J
The plaintiff, CTOG Pty Limited, has commenced proceedings in this Court in which it, in its substantive claim, seeks an injunction restraining the defendant, Frank Turcic, from working for a specific customer of the plaintiff for a period of 12 months or, in the alternative, for a period of six months.
Before me today, I have an application on an interlocutory basis by the plaintiff, seeking an injunction restraining the defendant from working for the particular customer of the plaintiff until further order of the Court.
The plaintiff’s case against the defendant for injunctive relief is what it describes as a standard post-employment restraint claim on the basis of disintermediation. In other words, that it has provided the services of Mr Turcic to the client, Leidos Australia Pty Limited, which I will refer to as simply Leidos, and was receiving money from Leidos for providing the services of Mr Turcic.
The claim which is to be pursued by the plaintiff is that what has occurred is an attempt by Mr Turcic and Leidos to cut out the middleman, being CTOG Pty Limited, by Leidos simply directly employing Mr Turcic. I have been taken to the affidavit of Kane Richard Fillingham, sworn on 8 November 2018, and in particular, to the conditions of the contract of employment between the plaintiff and the defendant.
By way of background, I note that the plaintiff is a company that supplies IT workers to other businesses, and until very recently, the plaintiff had a contract with Leidos. As I have said, under that contract, it supplied the services of the defendant to Leidos.
The defendant was employed by the plaintiff in about January 2017 and the employment agreement to which I have referred, between the plaintiff and the defendant, effectively restrained the defendant from “having professional dealings” with the clients of the plaintiff for a period of time set out in a cascading clause.
The periods referred to in the cascading provisions were 24, 18, 12 and six months post-employment. I have been advised by counsel for the plaintiff that the plaintiff does not press the periods of 24 and 18 months, so that the plaintiff’s case is based upon an agreement which restrained the defendant from engaging in employment with a client of the plaintiff for a period of either 12 or six months post-employment.
There is evidence that the defendant was deployed by the plaintiff to work on a project at Leidos from about August 2017. That project has not concluded. On 16 October 2018, the defendant tendered his written resignation to the plaintiff and orally advised that he was going to work directly for Leidos. In his resignation, the defendant nominated 12 November 2018 as the last day of his employment with the plaintiff.
I note that attempts have been made to give the defendant an opportunity to reconsider his decision to tender his resignation from the plaintiff, and to take up a position with Leidos. Counsel for the plaintiff addressed me briefly in terms of whether I could be satisfied, for the purposes of the present proceedings, that the defendant is intending to take up a position with Leidos.
10. Counsel for the defendant did not, in the course of his submissions, attempt to suggest that there was any doubt about that proposition. I have no doubt whatsoever, based upon the material before me, that it is the intention of the defendant to take up a position working directly for Leidos as of tomorrow.
11. I am satisfied that there is a legitimate protectable interest of the plaintiff at issue with regard to the present proceedings, and also the decision by the defendant to resign from the plaintiff and take up employment with Leidos. I will return to that issue in a moment.
12. I am satisfied that the defendant signed an employment agreement in which the restraint of trade clause, to which I have referred, was part. In doing so, he agreed that he would not take up employment with a client of the plaintiff for the period, at least, of six or 12 months after he terminated his employment with the plaintiff.
13. Prima facie, I am satisfied that that restraint is not unreasonable. I am satisfied on all of the evidence that there is an anticipatory breach by the defendant of his contractual obligations towards the plaintiff. In my opinion, there is a strong case on the part of the plaintiff for a remedy. The question is whether an injunction prohibiting the defendant from taking up employment with Leidos is appropriate. That turns upon the question of whether damages would not be an adequate remedy with respect to the suggested breach of contract.
14. Mr Walker, on behalf of the defendant, submitted that this was a case in which damages were almost liquidated, in the sense that the material suggested that the profit generated by the defendant’s placement with Leidos was some $134,000 per annum. Mr Walker submitted that this was, effectively, the measure of damages that would be suffered at worst by the plaintiff if injunctive relief was not granted.
15. He went on to further submit that, in fact, there was a strong case for suggesting that such a loss would not be suffered by the plaintiff because Leidos had exercised its entitlement under the contract to terminate the contract with the plaintiff.
16. In my view, there is a strong inference that the termination of the contract is connected with the decision by Leidos to employ the defendant. Just how that will ultimately work out, one cannot know, but there must be an inference to that effect.
17. I accept the submission made by Mr Raine on behalf of the plaintiff, that the measure of damages available to the plaintiff, if it succeeds in its action against the defendant, cannot be limited to the profit generated by the defendant’s placement with Leidos Australia Pty Limited.
18. In that regard, Mr Raine took me to paragraph 43 of the affidavit of Mr Fillingham, which says, “In general, CTO Group’s business”, and I interpolate at that point to note that the plaintiff is part of CTO Group:
depends entirely on its ability to protect the relationships it has with its customers. CTO Group spends significantly on marketing, sales and support staff to generate the contracts under which employees like Frank are deployed. Being cut out of the relationship by having employees go to work directly for the customer will destroy CTO Group’s business.
19. There is very significant weight in the submission made by Mr Raine that if employees of the plaintiff are permitted to leave the employ of the plaintiff, despite their contractual obligations, and to take up work with the clients of the plaintiff, there is every reason to believe that the plaintiff will suffer a very significant loss in terms of its goodwill.
20. One can imagine that, in many cases, it may well lose contracts because of the ability of the client to poach workers from the plaintiff. This may have, as I have said, a very significant impact upon the goodwill of the company and the company’s value generally. I am, therefore, satisfied that one cannot simply describe the loss to be suffered by the plaintiff, if it proves its case against the defendant, as simply the loss of profit from the employment of the defendant with Leidos.
21. In addition, I should note that on behalf of the defendant, an affidavit of Stefan Russell‑Uren, solicitor, affirmed on 12 November 2018, was relied upon. The purpose of reading this affidavit was to establish that the defendant has assets against which the plaintiff could recover if the Court were ultimately to determine that the defendant was liable in damages to the plaintiff.
22. Essentially, that affidavit sets out that the defendant has advised that his estimate of his property’s value is approximately $850,000, but his equity in those premises is approximately $141,000. This material, in my view, is entirely unsatisfactory. It is based upon the defendant’s personal assessment or estimate of his property’s value, without providing any indication as to how he came by that estimate.
23. In addition to which, the estimate of the equity held by the defendant in the premises fails to take into account any likely cost of liquidating those premises, so that one could well expect that significantly less than $141,000 would be available to satisfy any judgment in favour of the plaintiff.
24. I am satisfied that damages are not an adequate remedy with respect to any breach of the employment agreement which may be established against the defendant. I therefore propose to make an interlocutory injunction. It was submitted on behalf of the defendant that as the contract between the plaintiff and Leidos has been terminated by Leidos, the defendant was obliged to find himself employment.
25. However, I do not accept that to be the case. As Mr Raine pointed out, the contractual arrangements between the plaintiff and the defendant appear to have been such that the plaintiff had an ongoing obligation to continue to employ the defendant, and to pay him under the employment agreement, notwithstanding the decision by Leidos to terminate its contract with the plaintiff.
26. To the extent that the defendant may now find himself in a difficult position because he has tendered his resignation to the plaintiff and he will not be able to take up employment tomorrow with Leidos as he anticipated, this is really of his own making.
27. The order that I will make, is upon the plaintiff, by its counsel, giving to the Court the usual undertaking as to damages, and I note that that undertaking has been given, I order that until further order of the Court, the defendant be restrained from directly or indirectly undertaking employment with Leidos Australia Pty Limited.
| I certify that the preceding twenty-seven [27] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: Date: |
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