DST Bluedoor Pty Ltd v AMP Services Ltd
[2020] VSC 254
•11 May 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2019 03205
| DST BLUEDOOR PTY LTD (ACN 110 853 377) | Plaintiff/defendant by counterclaim |
| v | |
| AMP SERVICES LTD (ACN 081 143 786) | Defendant/plaintiff by counterclaim |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
WRITTEN SUBMISSIONS: | 2, 14 and 17 April 2020 |
DATE OF JUDGMENT: | 11 May 2020 |
CASE MAY BE CITED AS: | DST BLUEDOOR PTY LTD v AMP SERVICES LTD |
MEDIUM NEUTRAL CITATION: | [2020] VSC 254 |
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PRACTICE AND PROCEDURE - Defendant’s application for separate trial of questions -Plaintiff’s claim dismissed if questions answered favourably for defendant but substantial counterclaim still to be heard and determined - fairness, utility and economy of separate trial of questions not beyond question - application dismissed Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 47.04.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S W Stuckey QC with Mr A Sykes | Gilbert + Tobin |
| For the Defendant | Mr M I Borsky QC with Mr L A Merrick | Minter Ellison |
HIS HONOUR:
On 30 June 2008 the plaintiff (“DST”) and NM Computer Services Pty Ltd (“AXA”) entered into a Master Licence and Service Agreement (“MLSA”). Under the MLSA, DST granted a licence to AXA to use software known as ‘Wealth.Net’ and subsequently renamed ‘Bluedoor’, designed for businesses providing wealth management, superannuation and investment services to the public.
On 19 November 2014 DST and the defendant (“AMP”) executed a deed of novation whereby AMP was substituted for AXA in respect of all its rights and obligations under the MLSA as varied.
Clause 30.6 of the MLSA provided:
Except as provided for in clause 30.7, during the term of the MLSA, and for a period of one year thereafter, each party must not directly solicit for employment any person who is employed by, or has a contract to supply services to, the other party.
DST claims that from at least January 2019 until May 2019, AMP solicited employees of DST in breach of clause 30.6.[1] DST claims that as a result of AMP’s solicitation, 11 employees (“the ex-employees”) resigned from their employment with DST and accepted employment with AMP.[2] DST alleges that it has suffered loss and damage as a result.
[1]Para [19]-[20] of the statement of claim.
[2]Ibid [21].
Each of the employment contracts of the ex-employees contained a clause to the effect that:
(a)after the employee's employment with the Company ends, that employee would not, during the Restraint Period within the Restraint Area, for him or her-self or for any other person, without the written consent of DST, directly or indirectly do any of the following:
(i) canvas, solicit, or accept any approach from any client or customer of DST, with a view to obtaining the custom of that client or customer, for a business that competes with DST or provides the same or similar services;
(ii)canvas, solicit, induce or encourage any person who was an employee of DST at any time during their employment to leave DST's employ;
(iii)provide services or accept any request to provide services (being services that are similar to those provided by DST) to a client or customer of DST;
(iv) counsel, procure or assist any person or company to do any of the acts referred to in the restraint clause;
(“the Restraint”)
(b) the "Restraint Period" was defined as:
(i) 12 months; or alternatively
(ii)if a Court finds that the restraint period of 12 months is unenforceable, a restraint period of 6 months; or alternatively
(iii)if a Court finds that the restraint period of 6 months is unenforceable, a restraint period of 3 months.
(c)the "Restraint Area" is defined under the employment contract of each of the Former DST Employees as:
(i) Australia; or alternatively
(ii)if a Court finds that the restraint area of Australia is unenforceable, the area of the State or Territory in which the employee was based during their employment: or alternatively
(iii)if a Court finds that the restraint area of the State of Territory is unenforceable, an area with a radius of 30 km of 469 La Trobe Street Melbourne in the State of Victoria.[3]
[3]Ibid [23].
DST alleges that AMP, with knowledge of the restraint, induced the ex-employees to resign from their employment with DST and commence employment with AMP.[4] DST alleges that in so doing AMP wrongfully interfered with DST’s contractual relations with each of the ex-employees.[5] DST alleges that by reason of AMP’s wrongful interference DST has suffered loss and damage.[6]
[4]Ibid [25]–[28].
[5]Ibid [29].
[6]Ibid [30].
AMP contends that:
(a) the MLSA restraint in clause 30.6 is void and unenforceable;[7]
[7][22A] of the defence and counterclaim.
(b) the employment contract restraints are:
(i) void for uncertainty; and
(ii) void as unlawful restraints of trade; and
(iii) do not as a matter of construction apply to the conduct complained of in the statement of claim.[8]
[8]Paras [33] and [34] of the defence and counterclaim.
AMP has applied, pursuant to rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) for a separate trial of the following questions:[9]
[9]Summons filed 25 February 2020.
(iv) Whether clause 30.6 of the MLSA dated 30 June 2008 is a valid and enforceable restraint of trade contrary to the matters pleaded in paragraph 22A of the Defence?
(v) Whether the restraints (as pleaded in paragraph 23 of the statement of claim) applying to the ex-employees (as defined in paragraph 21 of the statement of claim) are void for uncertainty as pleaded in paragraph 33(a) of the Defence?
(vi) Whether the restraints applying to the ex-employees are valid and enforceable restraints of trade contrary to the matters pleaded in paragraph 33(b) of the Defence?
(vii) Whether the restraints prevent the ex-employees being employed by the defendant as a matter of construction contrary to the matters pleaded in paragraph 34 of the Defence?
AMP submits that the separate questions concern issues that are readily demarcated from other issues in the proceeding. AMP submits that the preparation for and hearing of the separate questions can be conducted quickly and cost effectively, based on a confined body of evidence.[10] It submits that if answered favourable to it, the separate questions would dispose of DST’s claim entirely.[11] This is not challenged by AMP. However, If the application is granted and the questions are answered favourably for AMP, this will not bring the proceeding to an end. AMP has brought a counterclaim against DST. In its claim AMP claims damages for numerous alleged breaches of the MLSA by DST. The quantum of damages claimed is $7,550,064.76.[12]
[10]Ibid at [5].
[11]Paragraph [4] of AMP’s outline of submission dated 2 April 2020.
[12]See para [16](d) of the affidavit of Kaushalya Mataraaratchi affirmed 20 March 2020.
AMP submits that the hearing of the separate questions can be conducted with limited discovery. In respect of the employment contract restraints it submits that as the relevant contracts are between DST and the ex-employees, DST will hold all relevant documents, whereas AMP is unlikely to have any relevant documents. In respect of the MLSA restraint, it submits that the parties ought to be in a position to put on the relevant evidence without discovery. Thereafter ‘targeted discovery’ or some other regime for production could be administered by specific reference to the issues raised on the evidence.[13]
[13]Paragraph [23] of AMP’s outline of submission dated 2 April 2020.
DST challenges nearly all of the contentions advanced by AMP. It submits that if AMP’s application is granted this will result in:
(a) separate hearings considering overlapping areas of evidence relevant to questions of reasonableness (in the claim) and to breach of contract (in the cross claim) leading to duplication of witnesses and areas of cross-examination;
(b) a denial of discovery in circumstances when such discovery is necessary to allow for the broad analysis of facts required to resolve the questions posed by the defendant, many of which are known only to the defendant; and
(c) unfairness and prejudice to the plaintiff by truncating discovery and evidence on issues where it carries the onus so as to hand the defendant an unfair tactical advantage.[14]
[14]Plaintiff’s written submission dated 14 April 2020 at [2].
DST submits that the determination of the proposed separate questions requires the development of evidence on a wide set of topics that bear on the reasonableness of the restraints, including of the facts and circumstances relating to the employer’s business, the nature of the employer’s interest to be protected, and the effect of that evidence on the solicitation. It submits that any attempt to resolve these questions without affording adequate discovery to DST invites unfairness and errors about which appellate decisions have warned and it is particularly inappropriate because the resolution of the preliminary questions would not resolve the entire action, leaving many of the same witnesses and other evidence to be submitted anew at a separate hearing.[15]
[15]Ibid at [6].
DST submits that the matters which are relevant to an assessment of the reasonableness of the restraints which underpin the separate questions ‘will in many cases amount to surrounding circumstances relevant to the construction of the agreements underpinning the claim and counterclaim’.[16] DST submits that the questions to be answered require a full and detailed evidentiary investigation.[17]
[16]Ibid at [15].
[17]Ibid at [16].
The principles governing the exercise of the Court’s power to order the trial of a separate question are well established. The power conferred by rule 47.04 should only be exercised with great caution and only in a clear case. Separate trials should only be embarked upon where their utility, economy and fairness to the parties are beyond question.[18]
[18]Murphy v Victoria & Anor (2014) 45 VR 119, 126 at [28].
The written submissions and supporting affidavit filed by DST in opposition to AMP’s application put squarely in issue the utility, economy and fairness of the Court determining by way of separate trial the enforceability of clause 30.6 of the MLSA and the ex-employees’ restraints. DST submits that the evidence which it will be required to lead in reply to AMP’s counterclaim will have substantial overlap with the evidence to be led in respect of the separate questions. It submits that in relation to more recent events relevant to the counterclaim, the witnesses giving evidence on behalf of DST will be the same persons giving evidence in relation to the breaches alleged in DST’s statement of claim.[19]
[19]Ibid at [28].
In an affidavit affirmed 20 March 2020 Kaushalya Mataraaratchi deposes that preparation of lay witness statements required to address the four proposed questions ‘will require substantial work and could take anywhere between 4 to 6 weeks.’[20] Further, Ms Mataraaratchi deposes that addressing the proposed questions is likely to require DST to lead expert evidence:
[20]Affidavit of Kaushalya Mataraaratchi affirmed 20 March 2020 at [41].
(a) evidence pertaining to the software industry and market;
(b) AMP’s market and DST’s market (if AMP raises an issue about whether the two companies are competitors); and
(c) expert evidence in relation to the software and its value to DST (and to AMP).[21]
[21]Ibid at [39].
AMP submits that the hearing of the proposed questions could be completed in two days. This submission is based, in part, on the evidence of Mr Gareth Jolly, a partner of Minter Ellison.[22] Ms Mataraaratchi’s evidence is that the trial of the proposed questions is more likely to take 5 to 6 days and preparation for the trial will take in excess of four months.[23]
[22]Affidavit of Gareth Jolly sworn 19 February 2020 at para [11](d); and affidavit sworn 6 March 2020 at [15] and [16].
[23]Affidavit of Kaushalya Mataraaratchi affirmed 20 March 2020 at [49].
Prima facie, DST bears the onus of establishing that clause 30.6 of the MLSA and the ex-employee restraints are reasonable as between the parties and not unreasonable in the public interest.[24] A restraint clause in favour of an employer will be reasonable as between the parties, if at the date of the contract the restraint clause is imposed to protect a legitimate interest of the employer and does no more than is reasonably necessary to protect that legitimate interests in its duration or extent.[25]
[24]Just Group Ltd (ACN 096 911 410) v Peck (2016) 344 ALR 162, 174 [31].
[25]Ibid 174 [33].
I accept that in order to discharge the onus of establishing the reasonableness of clause 30.6 and the ex-employee restraints DST will need to lead evidence addressing the legitimate interest it sought to protect via those restraints. I also accept that any overlap between the evidence relevant to the determination of the proposed separate questions and the counterclaim is a factor weighing against the making of an order under rule 47.04. However, equally, I accept that there is force in AMP’s submission that such overlap may be unlikely given the fact that the events which underpin the counterclaim occurred some ten years after the MLSA was entered into.
In the absence of any witness evidence having been filed, it is difficult to reconcile the competing contentions of the parties. AMP submits that DST’s submissions and evidence regarding the amount and nature of evidence required to determine the proposed questions is exaggerated and ought not to be accepted. AMP challenges DST’s contention that there will be substantial overlap in the evidence and witnesses required for the separate questions and the defendant’s counterclaim. In the abstract, it is not possible to reach a concluded view as to whether DST has exaggerated the amount and nature of the evidence it would need to lead to address the separate questions.
I am not satisfied that the utility, economy and fairness to the parties of ordering a separate trial is beyond question. Accordingly, the defendant’s summons is dismissed.
In opposing the application for a separate trial, DST’s legal representatives have comprehensively identified and articulated grounds which call into question the utility, economy and fairness of a separate trial. However, there is force in AMP’s submission that DST advances its submissions in the abstract. Arguably, this is justified as the parties have not yet been required to file any evidence. Nevertheless, when the parties file their evidence, the submissions advanced for and against the application for a separate trial will be able to be assessed in light of that evidence.
I shall provide the parties with an opportunity to make submissions on costs. However, in light of the matters set above, I consider the appropriate course may well be to reserve costs. The question of whether there should be a departure from the usual practice of costs following the event can be considered in light of the evidence which the parties file.
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