DC Payments Pty Ltd v Lester
[2013] VSC 469
•29 August 2013
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted |
COMMERCIAL AND EQUITY DIVISION
No. 4242 of 2013
| DC PAYMENTS PTY LTD (ACN 009 582 781) | Plaintiff |
| v | |
| TYSON JAY LESTER | Defendant |
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JUDGE: | DIGBY J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 and 28 August 2013 | |
DATE OF JUDGMENT: | 29 August 2013 | |
CASE MAY BE CITED AS: | DC Payments Pty Ltd v Lester | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 469 | |
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CONTRACT – restraint of trade – employer and employee – application for interlocutory injunction preventing employee from working for a competitor to the employer – whether balance of convenience favours granting injunction
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Forbes | Ashurst Australia |
| For the Defendant | Mr J C Simpson | Balfe & Webb |
HIS HONOUR:
Relief sought
By Summons dated 16 August 2013 the Plaintiff, DC Payments Pty Ltd, seeks interlocutory injunctions restraining the Defendant, Tyson Jay Lester (whether by himself, employees, agents or howsoever otherwise) from:
(a)working as an employee, consultant, agent or in any other capacity for Next Payments Pty Ltd (ACN 160 985 106) (‘Next Payments’) or any related entity or being otherwise involved directly or indirectly, in the business of Next Payments;
(b)directly or indirectly canvassing or soliciting the business of any person who at any time during the 12 months prior to 19 July 2013 was a client, customer or identified prospective customer of the Plaintiff or its subsidiary DC Payments Australasia Pty Ltd;
(c)counselling, procuring or otherwise assisting any person to do any of the acts referred to in paragraphs (a) or (b) above;
(d)using, disclosing or making known to any other person, any Confidential Information, of the Plaintiff concerning the business, dealings, transactions and affairs of the Plaintiff and its related entities (including DC Payments Australasia Pty Ltd) including how they conduct business, their trade secrets, financial, marketing, personnel and technical information, information relating to pricing, customer lists and customer information, sales information and other information not known to the public at large to which the Defendant had access, or which he acquired, during the course of his employment with the Plaintiff.
The relief sought is urgent
The Plaintiff claims that there is an urgent need for the Court to deal with the above applications so as to do what can be done to obviate the immediate risks to the Plaintiff’s business. These risks were deposed to by Andrew Wingrove, Vice-President Sales and Customer Service of the Plaintiff, in his affidavit.[1] The Plaintiff submits this as evidence of the risk that the Defendant may act to the advantage of his now employer Next Payments and to the disadvantage and harm of his past employer the Plaintiff by conduct including the utilisation of highly confidential information in relation to DC Payment’s planned changes to its transaction surcharge, and associated planned client agreement renewal campaign. In addition, the Plaintiff may be harmed by the Defendant divulging the confidential information referred to by Mr Wingrove.[2] The Defendant obtained this highly confidential information while in the employ of the Plaintiff. Mr Wingrove’s evidence also explains the unique advantages to Next Payments which would result from the Defendant and Next Payments deploying the confidential information gleaned by the Defendant whilst he was employed by the Plaintiff.[3] Mr Wingrove also deposes to the difficulty which would be experienced by the Plaintiff in winning back its corporate clients were they to terminate their agreements with the Plaintiff as a result of Next Payments’ actions, assisted by the Defendant.[4]
[1]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [102]–[105] and [109]–[110].
[2]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [46]–[53] and [87].
[3]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [46]–[49] and [108–110].
[4]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraph [107].
I am satisfied on the materials before the Court in this interlocutory application, including the bases referred to in the last preceding paragraph and the materials filed by the Plaintiff as to the undertaking sought by the Plaintiff prior to these applications and not satisfied by the Defendant, that there is a need for the Court to deal very expeditiously with the Plaintiff’s application.
Further, I am satisfied as to the need for such urgency notwithstanding the Defendant’s denials[5] to the effect that the Defendant does not have the detailed confidential knowledge attributed to him by the Plaintiff and that his new position does not “require “ him to utilise confidential information from his past employer.[6]
[5]Second Affidavit of Tyson Jay Lester (sworn 21 August 2013).
[6]Second Affidavit of Tyson Jay Lester (sworn 21 August 2013), paragraphs [5(e)],[ 75], [76] ,[ 86] and [96].
In my view the balance of the evidence at this time supports the fact that the Defendant is in possession of confidential and sensitive commercial information which if utilised by the Plaintiff’s competitor Next Payments will probably harm the Plaintiff in a substantial way, and which has the potential to cause long term commercial prejudice to the Plaintiff.
Nature of the underlying breaches – potential serious issues to be tried
In essence, the Plaintiff alleges that the Defendant has breached, and unless restrained will further breach:
(a)the post-employment restraint set out at clause 11 of the written Contract of Employment dated 1 July 2009[7];
(b)the confidentiality clause (clause 10) of the written contract[8];
(c)the “employee duties” which are alleged at paragraph 7 of the Statement of Claim; and
(d)the “statutory duties” owed by him to the Plaintiff pursuant to sections 182 and 183 of the Corporations Act 2001 (Cth), as alleged at paragraph 8 of the Statement of Claim.
[7]Exhibit AW-6, of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
[8]Ibid.
There are also, as explained below, related additional serious issues to be tried including the proper construction and effect of Clause 4.8 of the Contract of Employment[9] and the resignation letter delivered by the Defendant, dated 19 April 2013[10] together with issues as to the proper construction of the cascading “Restraint Periods” in Clause 11.1(e). The further additional issues also include whether Clause 11 of “AW-6” is void as unreasonable and whether the Plaintiff repudiated its employment contract with the Defendant, and if so whether the Defendant, by his conduct, accepted that repudiation so as to bring to an end the operation of that contract, including Clause 11.
[9]Ibid.
[10]Exhibit AW-11 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
Materials relied on by the parties
The Parties rely on the following affidavits in relation to the present applications for interlocutory relief:
(a)Affidavit of Mr Andrew Wingrove affirmed on 15 August 2013 (‘Wingrove’s First Affidavit’);
(b)Second affidavit of Mr Wingrove affirmed 23 August 2013 (‘Wingrove’s Second Affidavit’); and
(c)Affidavit of Mr Justin Geri sworn on 23 August 2013 (‘the Geri Affidavit’).
The Defendant relies on the following Affidavits :
(a)Affidavit of Tyson Jay Lester, sworn 19 August 2013 (‘the First Lester Affidavit’);
(b)Further Affidavit of Tyson Jay Lester sworn 21 August 2013 (‘the Second Lester Affidavit’);
(c)Affidavit of Timothy John Wildash sworn 21 August 2013 (‘the Wildash Affidavit’);
(d)Third Affidavit of Tyson Jay Lester, sworn 27 August 2013.
Identification of serious issues to be tried
The Plaintiff alleges that by reason of the Defendant’s conduct as described in the affidavits filed, the Plaintiff will suffer and, unless the Defendant is restrained, will continue to suffer, irreparable loss and damage.[11] I consider this evidence gives rise to serious questions to be tried as to the Defendant’s conduct in relation to a number of instances in which he arguably breached the said Contract of Employment and in particular Clauses 10 and 11 of that Contract. In addition, he has also arguably breached the other alleged obligations referred to in paragraph 6 above.
[11]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [94]–[101] and Exhibits AW-19, AW-20, AW-21, AW-22 and AW-23.
Further, I consider there are similarly serious questions to be tried as to the Defendant’s conduct in relation to arguable breaches of Clause 11 of the Contract of Employment, and the other alleged obligations imposed on the Defendant. These arguable breaches arise from the matters deposed to in the First Wingrove Affidavit[12] in relation to the Defendant’s employment by Next Payments, including his conduct in relation to the Sydney Australasian Gambling Expo in 2013, which took place within the arguable “Restraint Period” fixed in Clause 11.1(e) of the Contract of Employment.
[12]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [89]-[93].
The evidence filed by the Plaintiff, and indeed the evidence filed by the Defendant (summarised more extensively below) also supports the conclusion that there are a number of serious questions to be tried in relation to the breaches referred to in paragraph 6. These relate to whether the Defendant breached his Contract of Employment, Clauses 10.1 and 11.1, as to both breaches of confidentiality and also acting in breach of the arguable “Post-employment restrictions“. The conduct is further detailed in the Geri Affidavit[13] read together with the Second Wingrove Affidavit.[14]
[13]Affidavit of Justin Geri (sworn 23 August 2013), paragraphs [15]–[19].
[14]Second Affidavit of Andrew Wingrove (affirmed 23 August 2013).
The Plaintiff
The Defendant has argued that the relevant contracts in relation to which the Defendant is alleged to have breached his Contract of Employment, and other obligations, are contracts with ATM Solutions, not the Plaintiff or its predecessor.[15] The Defendant also argued that the terms “Company” and the members of “the Customer Group of companies” as referred to in Clause 1.5 of the Contract of Employment are undefined and unclear leading to the ineffectiveness and unenforceability of the terms of Clause 11.1.
[15]Affidavit of Tyson Jay Lester (sworn 19 August 2013), paragraphs [11(a)–(e)] and Second Affidavit of Tyson Jay Lester (sworn 21 August 2013), paragraphs [13]–[17].
It appears that the Plaintiff carries on business through its operating subsidiary DC Payments Australasia Pty Ltd (DC Payments Australasia). It is a supplier of ATM and self-service payment technologies and services to retail, convenience and hospitality venues, including to financial institutions and large companies in Australia and also in New Zealand.
The Plaintiff submitted that DC Payments Pty Ltd is the current name of a company which commenced business as ATM Solutions Pty Ltd in about 2001.[16] ATM Solutions Pty Ltd has over time changed ownership and name on several occasions. That company was at one stage publicly listed and known as Customers Limited and was thereafter, via a scheme of arrangement, returned to a proprietary limited company known as Customers Pty Ltd.[17]
[16]Plaintiff’s Written Submissions, [7].
[17]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs[8]-[18], Second Affidavit of Andrew Wingrove (affirmed 23 August 2013), paragraphs [3-10], and exhibits AW-1, AW-2, AW-3 and AW-4
It appears from the evidence filed that the business operated by the Plaintiff is as described in detail in Mr Wingrove’s First Affidavit.[18] It is submitted by the Plaintiff[19], and unchallenged by the Defendant, that the Plaintiff:
(a)is the largest independent operator of ATMs in Australia, supplying about 20% of ATMs around the country;
(b)provides a complete service to its customers including supplying, installing and connecting the ATM terminal, and providing ongoing technical assistance and preventative and remedial maintenance support;
(c)currently has approximately 128 employees in Australia and New Zealand; and
(d)has been established for ten years and over that time has invested heavily in building strong relationships with customers in the retail, convenience and hospitality sectors.
[18]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [19]–[28].
[19]Plaintiff’s Written Submissions, [8].
The Plaintiff submits, and I accept, the following matters as strongly arguable on the evidence that DC Payments Australasia Pty Ltd is the corporate entity which pays employees and agents of the operating business because the parent company, DC Payments Pty Ltd, does not hold the assets of the business, or generate any revenue itself. Further, under the Plaintiff’s standard business model, each of its merchant customers enters an ATM Site Location and Placement Agreement which gives the Plaintiff the exclusive right to supply the merchant with an ATM for 72 months. Further, the Plaintiff derives its income from the contracts made between its subsidiary and clients of the business, and those contracts are the principal asset of the business and are likely to constitute a protectable interest.
Finally, I also accept as strongly arguable on the basis of Mr Wingrove’s affidavits[20] that the Plaintiff and DC Payments Australasia are companies which are associated by common and/or interlocking shareholdings and are companies which are allied to a unified control and/or capacity to control, and are therefore members of the same corporate “group” as per Premier Building & Consulting Pty Ltd v Spotless Group Ltd (No 12).[21]
[20]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [8]-[28] and Second Affidavit of Andrew Wingrove (affirmed 23 August 2013), paragraphs [3]-[10].
[21][2007] VSC 377, [322] (Byrne J).
Accordingly, I am not persuaded by the Defendant’s submission that there is a clear disconnect between the employer company under the said Contract of Employment[22] and the relevant ATM agreements with the merchants. Furthermore, I am not convinced that the Defendant is not a party to an employment contract concerning the delivery of services by way of the relevant ATM agreements and that therefore, as the Defendant appeared to argue, there can be no breaches of the type claimed by the Plaintiff in this proceeding. In any event, in my view these issues cannot be decided or simply relegated at this stage of the proceedings and therefore also constitute serious questions to be tried.
[22]Exhibit AW-6, Affidavit of Andrew Wingrove (affirmed 15 August 2013)
I am not persuaded that the Contract of Employment is clearly ineffective and unenforceable. Likewise, I am not persuaded by the Defendant’s arguments that Clause 11.1 is clearly, on its terms, unreasonable and void, such as to render the Plaintiff’s contractual complaints so weak that no injunction of the type sought should be ordered. Likewise, I consider that the Defendant’s argument that this letter of resignation dated 19 April 2013[23] was effective to terminate his contact of employment from that date and thereby trigger the commencement of the 3 month “Restrain Period” referred to in Clause 11.1(e)(d) to be no more than arguable. Therefore, it is appropriate to regard these further issues as ones which cannot be decided or simply relegated at this stage of the proceedings. Rather, they are issues which should properly form part of a number of questions to be tried.
[23]Exhibit AW-11 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
The Defendant’s involvement with the Plaintiff
In my view the affidavit evidence filed and submissions appear to establish the following, at this stage of the proceeding:
(a)On 20 September 2006, the Defendant commenced employment with Customers Limited (the predecessor of the Plaintiff) in the role of Customer Service Representative.
(b)On 20 November 2009, the Defendant signed a contract of employment appointing him to the role of National Sales Manager at Customers Limited.[24] The appointment and the terms and conditions set out in the contract were offered to the Defendant by Timothy Wildash, the then CEO and Managing Director of Customers Limited. The terms and conditions of the Defendant’s contract include the post-employment restraint set out in Clause 11.1.[25]
(c)The same terms and conditions also included obligations of confidentiality as set out in clause 10.
(d)The obligations in both Clause 10 and Clause 11 are expressed to continue after the cessation or termination of employment with the Plaintiff.
[24]Exhibit AW-6 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
[25]Clause 11 of Exhibit AW-6, Affidavit of Andrew Wingrove (affirmed 15 August 2013). Also see Affidavit of Andrew Wingrove (affirmed 15 August 2013) [33]-[34].
As earlier highlighted, the Plaintiff also argues that the Defendant is subject to implied contractual and equitable obligations as an employee and also subject to certain statutory duties.[26]
[26]Statement of Claim, paragraphs [7] and [8].
The Plaintiff asserts that as the National Sales Manager, the Defendant was responsible for supervising the National Sales Team of the Plaintiff. The Defendant however argues that his duties and responsibilities are not defined in the contract of employment[27]. Although there is some controversy as to the scope and timing of the Defendant’s responsibilities as raised by the Defendant’s affidavits, I consider that these issues should form part of the overall issues to be tried.
[27]Second Affidavit of Tyson Jay Lester (sworn 21 August 2013), paragraph [5(c)].
The Plaintiff has filed evidence in support of the argument that by virtue of his employment with the Plaintiff, the Defendant possessed and continues to possess intimate knowledge of the Plaintiff’s confidential pricing models and strategies and other confidential information.[28]
[28]First Statement of Andrew Wingrove, paragraphs [37]–[53].
The Plaintiff submitted that the Defendant has been a prominent representative of the Plaintiff in its efforts to build strong relationships with the merchant associations and industry bodies that represent gaming and retail clients in Australia.[29] This is not seriously contested by the Defendant.
[29]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraph [45] and Second Affidavit of Andrew Wingrove (affirmed 23 August 2013), paragraph 47 and Exhibit AW-30
Next Payments Pty Ltd
The Plaintiff submits, and the Defendant does not dispute, that Next Payments is an independent supplier of ATM technologies and services to retail, hospitality and gaming venues. It appears to be common ground that Next Payments is a direct competitor of the Plaintiff and DC Payments Australasia in the Australian retail ATM market.
The affidavit material appears to establish that the products and services offered by Next Payments appear to be very similar to products offered or proposed to be offered by the Plaintiff (ie. retail ATMs, corporate ATMs, SmartServ (called Cash X-Press by Next Payments), pre-paid cards and a 24-hour helpdesk).[30]
[30]Exhibit AW-10 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
The competitiveness between the Plaintiff and Next Payments, I infer, has been heightened by the fact that the senior executive ranks of Next Payments now includes several executives who have formerly held executive positions with the Plaintiff.
The Defendant’s resignation
On 19 April 2013 the Defendant resigned his employment with the Plaintiff. He gave 3 months’ notice which the Plaintiff points out was said by the Defendant to be “In accordance with my employment conditions.”[31] The Plaintiff submits this was an unambiguous reference to the Contract of Employment.
[31]Exhibit AW-11 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
The Defendant argues that his letter of resignation dated 19 April 2013[32] was effective to terminate his contract of employment from that date and thereby trigger the commencement of the 3 month “Restrain Period” referred to in Clause 11.1(e) (d). However, I regard the Defendant’s position in this regard as no stronger than arguable at this stage of the proceedings.
[32]Ibid.
The Defendant was placed on what is called ‘garden leave’ for the balance of his notice period, due to concerns that he might exploit his customer connection and the Plaintiff’s confidential information for the benefit of a future employer.[33]
[33]Second Affidavit of Andrew Wingrove (affirmed 23 August 2013), paragraph [43].
The Defendant argues that ‘garden leave’ is a concept foreign to his employment contract. The Plaintiff points to Clause 1.6(a) of his Contract of Employment which it says empowers such leave to be “directed”.[34] However, the Defendant alleges he was summarily dismissed.[35]
[34]Exhibit AW-6 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
[35]Affidavit of Tyson Jay Lester (sworn 19 August 2013), paragraph [12(a)].
Further, the Defendant argues that his employment contract was repudiated and that he accepted that repudiation, thus bringing the employment contract to an end. Upon that proposition the Defendant argues that there is no longer an enforceable contract upon which the Plaintiff can rely to restrain the Defendant.
However, the Defendant does not identify any communication to the Plaintiff by which he complained that his employment contract had been repudiated nor does the Defendant rely on any communication by which he sought to rely upon the Plaintiff’s repudiation so as to bring his employment contract to an end. In the circumstances, there is also a serious issue to be tried as to the continuing enforceability of the Contract of Employment relied on by the Plaintiff and an additional issue as to whether, at all events, the parties intended Clauses 10.1 and 11.1 to survive any termination of the contract and continue to operate.
The Plaintiff argues that the contract remained on foot throughout the notice period and was terminated as a matter of law at the expiry of that notice. The Plaintiff notes and submits that the Defendant was paid at all times and the Plaintiff also asserts that the Defendant was aware that his last day of employment was 22 July 2013.[36]
[36]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [22]- [28], and Exhibits AW-27 and AW-28
The Defendant accesses confidential information after giving notice
The Plaintiff’s submissions, set out below, summarise the key parts of the evidence put forward in relation to the asserted breaches of contract, and related breaches of other pleaded obligations by the Defendant:
(i)On 19 April 2013 (after he gave notice) and on 22 April 2013 (when he was directed to go on ‘garden leave’), the Defendant accessed the Plaintiff’s computer system and opened many files, including files containing client contact names and other data, company presentation documents, pro-forma contracts and other materials. These files contain confidential information.[37]
(ii)The evidence of Mr Geri, a forensic IT analyst (this evidence was unsuccessfully objected to by the Defendant during the injunction application) indicates that at the time the files were accessed the Defendant was connected to the internet via a private email address, [email protected]. The forensic expert is, however, not able to say at this stage of his investigation whether the files being viewed were copied or emailed.[38]
(iii)The Plaintiff argues the above evidence gives rise to a very strong inference that the Defendant accessed and possibly copied confidential information of the Plaintiff in the last moments before he went on ‘garden leave’. An analysis of the times when files were accessed, the Plaintiff contends, suggests that the Defendant accessed confidential information after he was directed by Mr Wingrove and Mr Allanson to cease performing duties and go on ‘garden leave’.
(iv)The Plaintiff notes that at the time of his resignation the Defendant was reminded of, and acknowledged, that he was subject to a post-employment restraint and had obligations in relation to confidential information.
[37]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraph [50]
[38]Affidavit of Justin Geri (sworn 23 August 2013).
The Defendant is working for or otherwise involved in the business of Next Payments
(i) At the time of his resignation, the Defendant indicated that he did not have any future employment plans, including no intention to join Next Payments. He maintained, as recently as 5 August 2013, that he did not have any plans.[39]
[39]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [64] - [70]
(ii) Other than bare denials about the content of discussions, the Defendant does not respond to Mr Wingrove’s evidence that he has been evasive about his future plans.
(iii) However, it seems more probable than not, on the evidence presently available, that the Defendant has been working for, or has been involved in the business of, or was at least planning to commence work for Next Payments by 5 August 2013. This is open to be inferred from the Defendant’s attendance, apparently on behalf of Next Payments, at the Australasian Gaming Expo a week after 5 August 2013 and from his conduct deposed to by Mr Wingrove.[40]
[40]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs[70] and [89]–[93].
(iv)The Defendant’s involvement in the Next Payments business includes:
(a)acquiring and using an email address, [email protected];
(b)engaging in email correspondence with various Next Payments personnel in relation to the solicitation of customers, including current customers of the Plaintiff; and
(c)attending the Australasian Gaming Expo as a representative of Next Payments during the week commencing 12 August 2013.
(v)Full details of the Defendant’s involvement with Next Payments, as known by the Plaintiff, are set out in Mr Wingrove’s affidavit.[41]
[41]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraphs [88] – [105].
In his First Affidavit the Defendant responds in short form to the above allegations and the evidence of the Plaintiff. In his Further Affidavit, the Defendant specifically contests the circumstances of his departure from the Plaintiff and denies that he has unlawfully or inappropriately used, or will in the future use, the Plaintiff’s confidential information.[42] A sharp conflict of evidence therefore exists as to many potentially significant facts.
[42]Second Affidavit of Tyson Jay Lester (sworn 21 August 2013) paragraphs [5(e)], [25]–[35]–[90].
Test for grant of interlocutory injunction
The test for the grant of an interlocutory injunction is well established. The test is:
(a)whether the Plaintiff has shown that there is a serious question to be tried; and
(b)whether the balance of convenience favours the Plaintiff: Beecham Group Ltd v Bristol Laboratories Pty Ltd,[43] Australian Broadcasting Corporation v O’Neill.[44]
[43](1968) 118 CLR 618.
[44](2006) 227 CLR 57, [65] (Gummow and Hayne JJ). In addition, Gleeson CJ and Crennan J mention at [19] that it is necessary to show that the Plaintiff was likely to suffer injury that could not be remedied adequately by damages.
The Court of Appeal in Victoria has also highlighted in relation to the balance of convenience that the Court should bear in mind that it should take whatever course appears to carry the lowest risk of injustice should it transpire that:
(a) the Court was wrong in that the grant of an injunction is not ultimately justified at trial; or
(b) that there was a failure to grant an injunction to the party which ultimately succeeds at trial: Bradto Pty Ltd v State of Victoria.[45]
[45](2006) 15 VR 65, 35.
The two limbs of the above test are inter-dependant in that the stronger the case for final relief, the lower the weight of the balance of convenience required in favour of the moving party and vice versa:Australian Broadcasting Corporation v O’Neill.[46]
[46](2006) 227 CLR 57, [65]–[72].
Restraint of Trade principles
As cited by the Plaintiff,[47] the principles governing restraint of trade clauses are conveniently set out in the recent Court of Appeal decision in Wallis Nominees (Computing) Pty Ltd v Matthew William Pickett (‘Wallis Nominees’):[48]
[47]Plaintiff’s Written Submissions, paragraphs [62]–[92].
[48][2013] VSCA 24, [14].
The principles applicable to the enforceability of contracts in restraint of trade are not for the most part in dispute. They are well settled:
(a) A contractual provision in restraint of trade is prima facie void.
(b)The presumption can, however, be rebutted and the restraint justified by the special circumstances of a particular case, if the restriction is reasonable by reference to the interests of the parties.
(c)The validity of the covenant in a contract is to be judged as at the date of the Employment Agreement.
(d)A stricter view is taken of covenants in restraint of trade in employment contracts than those contained in contracts for the sale of a business.
(e)The onus of proving the special circumstances justifying the restraint is on the person seeking to enforce the covenant.
(f)So far as the parties’ interests are concerned, the restraint must impose no more than adequate protection to a party in whose favour it is imposed. If the court is satisfied that the restraint confers greater protection than can be justified, there is no further issue of reasonableness.
(g)The meaning of the restraint clause may be construed by reference to the factual matrix, documentary context and surrounding circumstances.
Interpretation of a restraint clause
The Plaintiff also notes in relation to subject Clause 11.1 of the Contract of Employment[49] that cascading restraint clauses are, in certain circumstances, permissible. If the clause contemplates all of the combinations applying, with severance of those found to be an unreasonable restraint of trade, then no uncertainty exists.[50]
[49]Exhibit AW-6 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
[50]Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505, 520; OAMPS Insurance Brokers Ltd v Peter Hanna [2010] NSWSC 781 (Hammerschlag J).
The Plaintiff has a legitimate interest to be protected
The Plaintiff submits, and I accept, that the relevant legitimate interests of the Plaintiff are:
(a)its goodwill in its customer base, the essence of which is its customer connections, which may include knowledge of, and influence over, its customers; and
(b)its confidential information.
The Plaintiff further submits and I also accept that customer relationships are usually a protectable interest.[51]
[51]Lindner v Murdock’s Garage (1950) 83 CLR 628, 633–4 [6]–[8] (Latham CJ); Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449, [29]; Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9, [55]; Pearson v HRX Holdings& Another[2012] FCAFC 111, [46]
Personal relations or connections with customers that employers develop during the course of their employment are:
… an advantage accruing to the employer and properly exercisable for his benefit … [and] would become a source of injury to the employer if the former servant were permitted to accept the custom which might voluntarily flow to him.[52]
[52] Woodmason’s Melrose Dairy Pty Ltd v Kimpton [1924] VLR 475, 480–1, cited with approval in Lindner v Murdock’s Garage (1950) 83 CLR 628, 654 [8] (Kitto J).
In the principal judgment of the Court of Appeal in Wallis Nominees, Warren CJ and Davies AJA explained that an employer’s interest in the customer connection is broad ranging. Their Honours said:
21. The test for whether an employer has a legitimate interest in protecting its customer connection through restraint clauses has been put in various ways.
22. One variation is that a legitimate interest will arise [w]here an employee is in a position which brings him into close and personal contact with the customers of a business in such a way that he may establish personal relations with them of such a character that if he leaves his employment he may be able to take away from his former employer some of his customers and thereby substantially affect the proprietary interest of that employer in the goodwill of his business …
23. Another variation is where there is some element in the employee-customer relationship which causes customers to rely on the employee and to regard the employee as the business to the exclusion of the employer.
24. A third variation is where the personal relation between the employee and the customer be such as to enable the employee to control the customer’s business as a personal asset. This describes ‘the ability of the employee to use the relation of influence, which can properly be regarded as the employer’s property, for the employee’s purposes as distinct from those of the business’.
25. A fourth variation is where the employee is described as having become the ‘human face’ of the business. This is understood to mean that the employee has become the person who represents the business to the customer or has such a personal relation with the customer as to enable them to control the customer’s business, or as a way of emphasising ‘that the source of influence must be the personal relationship which is likely to develop, or has developed, between the employee and customer as a result of dealings between them on behalf of the employer and its business.’
26. Two key points emerge from these formulations. First that an employee must be in a position to gain trust and confidence so as to be relied on in a client’s affairs. Secondly, that the relationship between employee and client is such that there is a possibility that if the employee leaves the business of the employer he or she may carry away the client’s business with them.[53]
[53]Wallis Nominees [2013] VSCA 24, [21]-[26] (citations omitted).
Competing against a former employer
The Plaintiff concedes that a post-employment restraint cannot simply be used to stifle competition.[54] The Plaintiff further submits, however, that in considering the reasonableness of the restraint in the present case, it is material that both the Plaintiff and Next Payments are direct competitors in a very competitive industry. The Plaintiff highlights that a restraint can legitimately be aimed at preventing unfair competition, such as would occur where a competitor obtains a head start or springboard into an industry on the back of information brought to it by another company’s former employee.[55] In this regard, the Plaintiff submits that there is a real and ever-present risk that its information will be used by the Defendant for the benefit of Next Payments and to the detriment of the Plaintiff. The Plaintiff further submits that it is totally unrealistic to expect that the Defendant, when competing against his former employer, will not draw upon or disclose to his new employer, wittingly or otherwise, innocently or deliberately for the purposes of self-advancement, information about the Plaintiff, and its customers, sales and/or marketing strategies.
[54]Plaintiff’s Written Submissions, paragraphs [74]–[78].
[55]Affidavit of Andrew Wingrove (affirmed 15 August 2013), paragraph [110].
The Plaintiff adds that a mere non-solicitation covenant or a covenant not to use confidential information will be insufficient to protect the Plaintiff’s interests, where the Defendant has a strong connection with or a detailed knowledge of the customer base.[56] This is particularly so, it submits, where the employee has not only an intimate knowledge of the customers, but also the techniques and resources used to sell services, the methods used to service customers, and the strategies used to retain them. The Plaintiff refers to cases pointing to the practical difficulties and concerns in customer connection and client relationship situations, and in relation to problems proving breaches by a former employee to support the level of injunctions it claims is necessary: Pearson v HRX Holdings,[57] Koops Martin v Dean Reeves,[58] Red Bull Australia Pty Ltd v Stacey.[59]
[56]Plaintiff’s Written Submissions, paragraphs [79]-[81].
[57][2012] FCAFC 111, [52].
[58][2006] NSWSC 449, [43]-[44].
[59][2011] NSWSC 1212, [35].
Notwithstanding the Plaintiff’s submissions I am of the view that the balance of convenience, whilst supporting several of the injunctive orders sought by the Plaintiff, does not lie in favour of this Court ordering the first injunction sought which would effectively terminate the Defendant’s current engagement. My reasons follow.
Serious question to be tried
In reviewing the evidence submitted by the parties in this application, and in the identification of serious questions to be tried, this Court is not determining the factual or legal matters in dispute. Rather, it is only undertaking an interlocutory assessment of what is presented on the application so as to evaluate the apparent present strengths of the asserted serious issues to be tried.
In my view, however, the Plaintiff’s evidence, including the Expert evidence of Mr Geri, read in conjunction with the Defendant’s affidavit material, establishes that there are several serious issues to be tried in this proceeding and also discloses a prima facie case with sufficient likelihood of success so as to justify interlocutory relief by way of appropriate injunctions, subject to a consideration of the balance of convenience.
In my view the serious issues to be tried in this proceeding include those identified in paragraph 6 above.
At the time the Plaintiff filed its application and filed its affidavit material, it appeared to be arguable that by being involved in the business of Next Payments the Defendant, unless restrained, would be likely to consciously or inadvertently use and rely upon the confidential information of which he possessed in breach of his contractual, equitable and statutory duties to the Plaintiff. I am persuaded, however, that taking into account the considerations I refer to below, the balance of convenience weighs decisively in favour of this Court refusing the first of the injunctive orders sought by the Plaintiff. That is, an order that the Defendant be restrained from working for Next Payments or any related entity. Put another way, this injunction would have had the Court order the Defendant to, in effect, terminate his present employment forthwith.
Balance of convenience
In this matter I consider that the balance of convenience weighs heavily in favour of granting injunctive relief to the extent appropriate.
The practical consequences flowing from the grant or refusal of relief are of critical significance and are identified below.
I have taken into account in relation to the evaluation of the balance of convenience, that, prima facie, the evidence outlined above justifies a conclusion at this early stage of the proceeding that the Plaintiff’s case has a reasonable prospect of success in relation to the above identified serious issues to be tried.
Further, I consider that absent some appropriate measure of immediate injunctive relief, the Plaintiff is likely to suffer substantial commercial damage, including damage from which the Plaintiff may well have great difficulty recovering.
Critically, I consider that the extent of injunctive relief I propose to order will cause little or no detriment to the Defendant and will only place him in a position whereby he does not misuse and unfairly deploy confidential information. In the circumstances, I am satisfied that the likely detriment to the Plaintiff, if appropriate injunctions are not imposed, outweighs the potential damage the Defendant is likely to suffer if the proposed orders are made, save for the first injunctive order sought. Further, I observe there has been no issue raised in relation to the adequacy of the Plaintiff’s undertaking as to damages: Castlemaine Tooheys Ltd v South Australia.[60]
[60](1986) 161 CLR 148, 155.
The proposed injunctions will not unduly or inappropriately impact on the Defendant’s employer Next Payments. Next Payments has no legal basis on which to expect its new employee to benefit it by utilising confidential information derived from the Plaintiff.
I turn to the Defendant’s position. The Defendant is 31 years of age and has substantial debts to service. His only source of income is the $10,833 per month he is presently paid by Next Payments as a Sales and Marketing Manager contractor.[61] His evidence also establishes that were this Court to grant the Plaintiff’s first requested injunction, his present employment would be brought to an end. This would mean that the Defendant would receive no further income from Next Payments. The Defendant also states in his affidavit that were the first requested injunction granted, the effect would be that he would have to seek employment in an unrelated and dissimilar industry to the one he is, and has been, working in for some considerable time. The Defendant states, and I accept, that for the above reasons, were the Court to grant the Plaintiff’s first requested injunction he would be exposed to significant vocational uncertainty and financial hardship.
[61]Third Affidavit of Tyson Jay Lester (sworn 27 August 2013).
In relation to the Defendant’s claim of detriment in respect of potential reputational damage, I view this factor as being of little weight in the circumstances. This is because, as the Plaintiff submits, there is not likely to be reputational damage in being obliged by the Court to observe arguably applicable contractual and other obligations.
However, I am not satisfied that the Court is here justified in granting the first of the injunctions sought by the Plaintiff. This injunction would force the Defendant to leave his employment with Next Payments. In this regard the Plaintiff submits that the damage that the Plaintiff is trying to prevent through enforcement of the covenants is necessarily difficult to quantify, since the Plaintiff will know little if anything of what the Defendant does or will do in the course of his employment by Next Payments. In substance, the Plaintiff submits that unless the first injunction sought is granted, the risks of the Defendant utilising the Plaintiff’s confidential information to its detriment will remain. However, this likelihood is not, in my view, established by the Plaintiff’s evidence which is confined to acts of arguable breaches in the past by the Defendant. In my view, the nature of the Defendant’s past role with the Plaintiff and his present role with Next Payments and the Plaintiff’s past conduct in connection with the confidential information detailed above, do not combine to justify the granting of the employment related injunction sought by the Plaintiff. Such an injunction does not serve the balance of convenience when account is taken of the detriment that the Defendant will suffer. This is particularly so when the terms of the injunctions (defined below) which I intend to grant are also taken into account.
Furthermore, there is no sufficient basis in the material filed in this application to justify the conclusion that the Defendant, in the face of restraining orders made by this Court, will not strictly comply with such orders. The Defendant should be taken to understand that severe penalties may well follow if he breaches such restraining orders as I propose to make. Therefore, it is appropriate for the Court to proceed on the basis that the proposed injunctions will be strictly complied with and in the result there will be a low likelihood that the Plaintiff will hereafter be exposed to the risks and detriment it feared at the time it launched the subject application.
However, if this Court were to impose the first of the Plaintiff’s requested injunctions, effectively terminating the Defendant’s employment with Next Payments, I consider that the detriment to the Defendant would be out of proportion to the relevant additional protection which may be afforded to the Plaintiff. The balance of convenience does not lie in favour of granting the first requested injunction.
Damages are not an adequate remedy
I accept the Plaintiff’s submission that Damages will not be a suitable or adequate alternative remedy in this case because of the great difficulties that may be encountered in establishing causation between any loss of business and the actions of the Defendant. Accordingly, the circumstances of the matter warrant additional and immediate relief for the Plaintiff to the extent the Court regards as appropriate.[62] In all the circumstance, the correct approach therefore is to grant injunctions, in appropriate terms, unless there are good reasons to the contrary.[63] Here, save the injunctive relief sought in relation to the Defendant’s continued employment by Next Payments, it is appropriate to grant the Plaintiff the injunctive relief it seeks.
[62]Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016, [10] (Brereton J).
[63]Willis Australia Group Services Pty Ltd v Griggs [2012] NSWSC 659, [129]-[132] (Ward J); OAMPS Gault Armstrong Pty Ltd v Glover & Another [2012] NSWSC 1174, [26].
Finally, I note that the Plaintiff has by its Counsel proffered the usual undertaking as to damages in support of the interlocutory injunctions sought.
I make the following orders.
Orders
Subject to the usual undertakings from the Plaintiff, until the hearing of this matter or further order of the court the Defendant, Tyson Jay Lester, be restrained (whether by himself, employees, agents or howsoever otherwise) from:
(a)directly or indirectly canvassing or soliciting the business of any person who at any time during the 12 months prior to 19 July 2013 was a client, customer or identified prospective customer of the Plaintiff or its subsidiary DC Payments Australasia Pty Ltd;
(b)counselling, procuring or otherwise assisting any person to do any of the acts referred to in paragraph (a) above;
(c)using, disclosing or making known to any other person, any Confidential Information, as defined in Clause 10.1 of the Contract of Employment[64] of the Plaintiff concerning the business, dealings, transactions and affairs of the Plaintiff and its related entities (including DC Payments Australasia Pty Ltd) including how they conduct business, their trade secrets, financial, marketing, personnel and technical information, information relating to pricing, customer lists and customer information, sales information and other information not known to the public at large to which the Defendant had access, or which he acquired, during the course of his employment with the Plaintiff; and
(d)there be liberty to apply.
[64]Exhibit AW-6 of Affidavit of Andrew Wingrove (affirmed 15 August 2013).
The Defendant shall pay to the Plaintiff, the Plaintiff’s costs of the hearing on 28 August 2013.
The costs of and associated with the Plaintiff’s Summons dated 16 August 2013 be costs in the proceeding.
I shall hear the parties as to a timetable for interlocutory steps to enable this matter to be heard as soon as possible.
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