IceTV v Ross

[2007] NSWSC 635

CITATION:	IceTV v Duncan Ross & Ors [2007] NSWSC 635
HEARING DATE(S):	28 May 2007
JUDGMENT DATE :	3 July 2007
JURISDICTION:	Equity Division Duty List
JUDGMENT OF:	Brereton J
DECISION:	(1) Upon usual undertaking as to damages, Order that until hearing or further order defendants be restrained from: (i) until 4 October 2007, carrying on or otherwise being engaged or involved in any business similar to or competitive with business of plaintiff carried on during twelve month period prior to 4 October 2006; (ii) until 4 October 2007, canvassing or soliciting custom of any person who had entered into discussions or negotiations with plaintiff during twelve month period prior to 4 October 2006; (iii) divulging or permitting to be divulged to any person by any means confidential information, in any form, relating to the plaintiff. (2) Order that costs of motion be plaintiff’s costs in proceedings.
CATCHWORDS:	RESTRAINT OF TRADE – Employer and employee – Chief Executive Officer and Chief Technical Officer of media technology company – Construction – whether “business” of employer as carried on in twelve months prior to termination of employment included a line of business which employer intended and was exploring opportunities to pursue but had not yet commercialised – whether restraint on “soliciting” contravened when initial approach made by customer but former employee then encourages customer – Validity – customer connection – where CEO was responsible for employer’s contacts with customers and CTO was responsible for its technology – confidential information – where employer acquired its assets and undertaking including intellectual property from insolvent administration of company of which employees were shareholder and CEO – Reasonableness – where restraint operated in event of termination by employer otherwise than for cause – Area – Duration. INJUNCTIONS – Interlocutory injunctions – Laches – where no prejudice from delay – Balance of convenience – relative strengths of case where interlocutory determination would practically determine the case.
CASES CITED:	Aussie Home Loans v X Inc Services [2005] NSWSC 285 Australian Broadcasting Corporation v O’Neill [2006] HCA 46 Barrett v Ecco Personnel Pty Ltd (NSWCA, 24 November 1998, unreported, BC 9806197) Cactus Imaging Pty Limited v Peters [2006] NSWSC 717 Hellmann Insurance Brokers v Peterson [2003] NSWSC 242 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Koops Martin v Reeves [2006] NSWSC 449 Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1179 Reeves v Koops Martin Financial Services Pty Ltd [2006] NSWCA 221 Woolworths Ltd v Olson [2004] NSWCA 372
PARTIES:	IceTV Pty Limited (plaintiff) Duncan Ross (first defendant) Peter Vogel (second defendant) Vogel Ross Pty Limited (third defendant)
FILE NUMBER(S):	SC 2577/07
COUNSEL:	Mr S Habib Mr P R Stockley
SOLICITORS:	The Argyle Partnership (plaintiff) Goldie Corporate Counsel (defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY LIST

BRERETON J

Tuesday, 3 July 2007

2577/07 IceTV Pty Ltd v Duncan Ross & 2 Ors

JUDGMENT

1 HIS HONOUR: The second defendant Mr Peter Vogel has been developing and patenting media-related technology since 1988, and is a recognised expert in the field. A key innovation in patents that he filed in 1988 was the use of an electronic on-screen TV guide, called an electronic programme guide (EPG), that permits viewers to select in advance the shows they wish to record. The first defendant Mr Duncan Ross has a wide range of experience in the electronics, communications and media industry. In 1994, he worked jointly with Mr Vogel on a project to develop a product that simplified television recording, and they developed a prototype set-top-box called “TV Week On-screen”, that interacted with consumers’ video cassette recorders to allow them to use a remote control to select what they wanted to record from an on-screen list. At that stage the project did not proceed. In 2000, Mr Vogel founded Video Zap Pty Ltd to commercialise his technology. In late 2003, Mr Ross was appointed Chief Executive Officer of Mr Vogel’s company, by then named ZapTV Pty Ltd, at a time when work on a project similar to “TV Week On-screen” resumed. From then until late 2004, both worked on raising funds, employing staff and preparing the business for commercialisation, during which period they conceived the name “IceTV” for the business, and hired a design firm to create a new logo. However, in February 2005, having failed to gain sufficient funding, ZapTV went into voluntary administration and entered a deed of company arrangement. Although ZapTV had not yet commercialised its products, it had intellectual property and know-how, which was perceived as having value, because, with funding, it could be brought to the market.

2 The plaintiff, then a shelf company and subsequently renamed IceTV Pty Ltd, in which the shares were held by Mr Colin O’Brien and Mr Roderick Sutherland, ultimately acquired ZapTV’s assets and undertaking, including all its intellectual property. In March 2005, Mr Ross accepted a contract management position with IceTV, designated Chief Executive Officer, in which his role was to establish and operate IceTV’s business. At the same time, Mr Vogel was employed by IceTV as its Chief Technical Officer under a written contract of employment that contained confidentiality undertakings but no restraint on competition. He also became a Director of IceTV. He was responsible for the technical development and deployment of the IceTV Electronic Program Guide, including making it compatible with a range of manufacturers’ products.

3 IceTV first offered its product commercially in April 2005, but, despite positive press and market research, sales were much slower than expected and the company continued to require regular funding by its two major shareholders, Mr O’Brien and Mr Sutherland; Mr Ross and Mr Vogel had small shareholdings. In late 2005, the Directors determined to attempt a public float, in order to raise additional capital. At the request of the directors, who said that it would help the float if he were bound by an employment contract containing restraints on competition, Mr Ross agreed to the termination of his management contract and became a salaried employee from 24 March 2006; he was appointed a Director at about the same time. His employment contract dated 24 March 2006 contained the following relevant terms:

Confidentiality

The maintenance of confidentiality is fundamental to the operation and success of the company, and accordingly you will not, except in the proper course of your duties, either during or after your employment, divulge, or permit to be divulged, to any person by any means any information in any form (written, recorded or stored in documentary or electronic form or in any other manner, including copies of or extracts from it) relating to the company, or
(a) any trade secrets, specialised know-how or practices, performance reports, operations reports, profitability forecasts or business plans;
(b) customer lists and any information regarding customer requirements of the company;
(c) profit and loss statements, aged trial balances, contract lists, development reports and marketing reports prepared or maintained by the company;
(d) information regarding the profitability of contracts and any financial information in relation to the company’s activities which may be of commercial value to a competitor;
(e) any information relating to terms of contract including the price for which any work is being carried out or has been carried out by the company;
(f) information regarding the trade connections of the company;
(g) any plans or strategies relating to the marketing of product and services developed by the company;
(h) any information or data that you are given or which comes to your knowledge during the course of your employment that:
(i) you are told is confidential; or
(ii) a reasonable person would expect to be confidential from its nature and content
(“Confidential Information”)
…

Non-soliciting of customers or employees

You must not, either during your employment with the company and for a period of twelve (12) months thereafter, or such other lesser period as may be judged by a court of competent jurisdiction as being reasonable in the circumstances and are necessary to protect the company’s goodwill and confidential information:
(a) carry on or otherwise be engaged or involved in any business similar to or competitive with the business of the company and any related bodies corporate carried on during the twelve (12) months prior to the termination of your employment;
(b) bid for, canvass or solicit the custom of any person who is a customer of the company or a related body corporate at any time during the twelve (12) months prior to the termination of your employment in respect of goods or services which are competitive with goods or services supplied by any business of the company or a related body corporate;
(c) canvass or solicit the custom of any person who had entered into discussions or negotiations with the company or a related body corporate during the twelve (12) months prior to the termination of your employment with a view to becoming a customer of the company or a related body corporate;
(d) entice away or endeavour to entice away from the company or a related body corporate any person who at any time during the six (6) months prior to the termination of your employment was an employee, Director or officer of the company or a related body corporate.

4 For similar reasons, by letter dated 18 April but executed by him on 15 May 2006, Mr Vogel entered into a new employment agreement with IceTV, which included restraints in terms identical to those in Mr Ross’ contract, set out above.

5 IceTV’s initial public offering opened on 7 April 2006. While it was open, Nine Network Australia commenced proceedings in the Federal Court, alleging that IceTV was infringing Nine’s copyright in its television guide listing information. This litigation did not assist the float, and the public offer closed on 20 June 2006 without having reached the minimum level of subscription. IceTV remained undercapitalised, and the only shareholders willing to continue to fund it were Mr O’Brien and Mr Sutherland. They introduced cost-cutting measures, including the termination of a number of staff and the reduction of advertising. As part of those measures, the employment of Mr Ross and Mr Vogel was terminated, pursuant to three months notice given on or about 4 July 2006, with effect from 4 October 2006.

6 After being given notice, Mr Ross and Mr Vogel discussed their future and decided to offer their services as consultants using their business and technology experience. For that purpose on 29 September 2006 they incorporated the third defendant Vogel Ross Pty Ltd, of which they are the directors and shareholders. Through Vogel Ross, they have undertaken consulting work for Mobilesoft Pty Limited, which IceTV contends is a competitor. In February 2007, Mobilesoft offered to employ Mr Vogel and Mr Ross under contracts of employment. Although at one stage it seemed that that would happen, those negotiations apparently broke down. At present, they are not performing any work for Mobilesoft, although there are ongoing communications between them.

7 IceTV alleges that, by providing consultancy services to Mobilesoft in the field of video on demand services for content provision, the defendants have been involved in a business similar to or competitive with the business of IceTV carried on during the twelve months prior to 4 October 2006, in contravention of par (a) of the non-solicitation restraint; and that they have solicited Mobilesoft – who had entered into discussions or negotiations with IceTV during the twelve months prior to termination of their employment, with a view to becoming a customer of IceTV – for a contract to provide certain consultancy services, in contravention of par (c) of the restraint. By summons filed on 5 May 2006, IceTV claims injunctive relief restraining Mr Ross, Mr Vogel and Vogel Ross until 4 October 2007 from carrying on, being engaged or involved in any business similar to or competitive with the business of IceTV during the period of twelve months prior to 4 October 2006; from canvassing or soliciting the custom of any person who was a customer or potential customer of IceTV during that period; and from disclosing or using any confidential information of IceTV; in contravention of the restraints contained in their employment contracts.

8 This judgment relates to IceTV’s application for an interlocutory injunction, on which the main issues are:

(a) The proper construction of the restraints, and in particular the phrase “business of the company… carried on during the twelve month period prior to the termination of your employment”;

(b) Whether there is a reasonable apprehension that unless restrained the defendants will breach the restraints;

(c) Whether, in their application to any such breach, the restraints are no more than reasonable;

(d) Whether final relief would be declined for discretionary reasons; and

(e) Whether the balance of convenience favours granting or withholding of interlocutory relief.

9 On an application such as this for an interlocutory injunction, the question is whether there is a sufficiently seriously arguable case for a final injunction that, having regard to the balance of convenience, the grant of interlocutory relief is warranted. The two limbs of the test – a sufficiently seriously arguable case for final relief, and the balance of convenience – are inter-related in the sense that, the stronger the case for final relief, the less may be required to tip the balance of convenience, and the greater the preponderance of the balance of convenience, the less strong a case for final relief may be required [Australian Broadcasting Corporation v O’Neill [2006] HCA 46, [65]-[72]].

10 Where the determination of the interlocutory application will substantially determine the action finally in favour of whichever party succeeds on it, then it is necessary to give more careful consideration than otherwise to the relative strength of the cases for final relief [Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 535-536; Australian Broadcasting Corporation v O’Neill, [72]]. Because the restraints will expire in early October 2007, the outcome of this interlocutory application will in a practical sense decide the overall outcome of the case, and accordingly it is appropriate and necessary to have regard to the relative strengths of the cases.

The proper construction of the restraints

11 The defendants do not dispute that the consulting work they have undertaken for Mobilesoft has included work in the field of “video on demand services for content provision”. In this context, “content” means entertainment such as movies, which can be provided through set-top-boxes or personal video recorders to subscribers. IceTV claims, but the defendants deny, that IceTV’s business during the period of twelve months prior to 4 October 2006 included content provision.

12 The principles which I take to apply to construction of a restraint of trade were summarised in Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1179, as follows (at [67]-[68]):

67. A restraint is to be interpreted, for the purposes of ascertaining its real meaning, independently of the rules prescribing tests of reasonableness for the purpose of ascertaining its validity [ Butt v Long (1952) 88 CLR 476, 487; Geraghty v Minter , 180]. Nonetheless, where there is ambiguity, a covenant in restraint of trade in an employment contract will be construed in favour of the employee, so that a narrower construction of the scope of a restraint will be preferred to a broader construction, when both are reasonably available [ Mills v Dunham [1891] 1 Ch 576, 589-90; Vandervell Products Ltd v McLeod, 193 ; Littlewoods, 1486; Butt v Long, 487] - though this does not authorise a restrictive interpretation of general words simply to save a covenant from invalidity [ Butt v Long , 487; Galbally [108]]. In Australia, Butt v Long precludes the more liberal approach to construction of restraints adopted by Lord Denning MR in Littlewoods Organisation Ltd v Harris [1977] 1 WLR 14, 72, by which courts construe wide words narrowly so as to make the clause reasonable and therefore enforceable, interpreting them from the perspective that the parties’ object is legality, and if the words of the restraint are so wide that on a strict construction they cover improbable and unlikely events, declining to enforce it in respect of them. However, Butt v Long is not inconsistent with the view that a covenant in restraint of trade should be construed, in the case of ambiguity, in favour of the employee; that is to say, in favour of giving it a narrower rather than a wider operation [ Butt v Long, 487].
68. Construction of a restraint is informed by the factual matrix, and in particular the nature of the employer’s business, and the employee’s role in it. An agreement in restraint of trade is construed with reference to its subject matter, and descriptive words may be restricted in their operation by reference to the circumstances in which the parties contract. Thus restraints which at first sight are general in form, in prohibiting a former employee from offering to perform services for or soliciting the custom of the former employer’s clients, have often been construed as relating only to those services or products which the employer had offered, and covenants prohibiting a former employee from dealing or transacting business with customers of the former employer have been construed to mean business of the same or a similar kind to that which had been carried on by the former employer [ Lindner v Murdock’s Garage, 635, 649; Mills v Dunham [1891] 1 Ch 576, 581, 586; Business Seating (Renovations) Ltd v Broad [1989] ICR 729, 735, (Millet J); G W Plowman & Sons Ltd v Ash [1964] 1 WLR 568, 572; [1964] 2 All ER 10; McLaughlin Consultants v Boswell [1989] 30 IR 417, 419 (Bryson J); cf I F Asia-Pacific Pty Ltdv Galbally (2003) 59 IPR 43; [2003] VSC 192, [118]-[127]].

13 What was, for the purposes of par (a) of the restraint, “the business of the company … carried on during the twelve months” period prior to October 2006, and what persons had, for the purposes of par (c) of the restraint, entered into discussions or negotiations with IceTV during the twelve months prior to the termination of the employment of Mr Ross and Mr Vogel, with a view to becoming a customer of IceTV, may be gleaned from a range of material.

14 In a ZapTV document dated 15 January 2005 – before the acquisition by IceTV – it was said, “Intelligent Content Engine (ICE) manages access to television content”. The “vision statement” plainly contemplated the provision of “content” and the creation of “virtual channels”, and envisaged, within three months of funding, offer of a “TiVo-like” service “using our proprietary seven-day EPG” to provide digital Personal Video Recorders for the free-to-air services that would soon replace the analogue service chosen by eighty percent of Australian households. Thus the business that IceTV acquired has had content provision, including a “TiVo-like” service, as an objective, although it was not yet doing so.

15 In early December 2005, Mr Vogel began to design new software functions for IceTV, intended to enable users to schedule TV recordings while away from home, using a website. This was called Personal Interactive Media Planner, or PIMP. It was envisaged that the PIMP website might later be adapted to include a library function, allowing downloading of other content, although this function had not been introduced, and no design or development work had been performed on that software, when Mr Vogel’s employment was terminated.

16 Quickflix is an on-line home entertainment company, providing on-line DVD rental subscription services, offering customers a choice of over 16,000 movie and TV series titles to rent or purchase. On 25 January 2006, it announced that it had entered a “non-binding agreement” with IceTV to integrate its on-line consumer service offering with IceTV’s interactive EPG, so that using the IceTV EPG and a personal video recorder or PC media centre, consumers would be able to manage what they watched across free-to-air TV and on-line services such as Quickflix, and that in the next twelve months, the partnership was expected to provide consumers with the ability to buy and rent movies at the touch of a button via their TV screen. The announcement included (emphasis added):

IceTV is Australia’s only independent provider of interactive TV listings for free-to-air TV. The company’s main product is the IceGuide, an EPG that shows subscribers what’s on TV for the coming seven days for the digital free-to-view TV channels (7, 9, 10, ABC, SBS). In addition to the TV guide, IceTV is developing additional value added interactive content for the benefit of its subscribers . …

17 The announcement also attributed to Mr Ross the following (emphasis added):

IceTV CEO, Duncan Ross, said: “This exciting agreement with Quickflix means that IceTV subscribers will soon have the opportunity to buy or rent DVDs through their Electronic Program Guide. We are looking forward to working closely together to enable subscribers to download movies directly to their home entertainment centres in future ”.

18 A memorandum of understanding between IceTV and Quickflix, to which Mr Ross as CEO of IceTV was one of the signatories, contained the following recitals (emphasis added):

A. IceTV is a provider of value added services to set-top-box Digital Video Recorders (DVRs) and PC based media centre products. Services include an interactive Electronic Program Guide (EPG) and content control features which provide users the ability to simply select television shows for recording, and to locate and download video content via the Internet.
B. Quickflix is a wholesaler and retailer of video movie “titles” which are sent to customers by mail, and in the future, sold over the Internet.
C. IceTV wishes to offer its customers the ability to purchase, rent and download the widest possible catalogue of movie titles .
D. Quickflix wishes to include sales of its titles by establishing a marketing partnership with IceTV.
E. IceTV and Quickflix have agreed in principle to work together to market Quickflix movies to IceTV customers under the project referred to as “IcePix” .

19 Mr Ross agrees that he executed this MOU with Quickflix in connection with the proposed provision of a movie download service, but says that no further action was taken following execution of the MOU, and that no infrastructure was ever designed or built or even demonstrated by Quickflix, and that Quickflix today still does not provide an electronic download content service.

20 IceTV’s business and marketing plan for the period July 2005 to June 2006, updated to January 2006, included the following (emphasis added):

3.2 Content Provision

Because IceTV enabled DVRs and Media Centres are connected to the Internet, and are often the primary method of television in the home, they can also be used to deliver program content to IceTV subscribers .
This process is simplified commercially and technically because:
(a) Ice TV already has an existing commercial relationship with the subscriber receiving a recurring fee for IceGuide.
(b) IceTV manages the EPG which can be expanded to a complete “menu” of content available through broadcast or Internet delivery .
(c) IceTV subscribers’ equipment is already connected to the Internet to collect guide data.
(d) A logical progression from IceTV’s EPG is to integrate “virtual” channels from which subscribers can choose content which would be “trickle fed” to customers over the Internet and charged to their existing IceTV account. This technique is sometimes referred to as “downloaded video on demand” and works with standard broadband connections widely available today .
This aspect of the company’s services is not yet ready for commercialisation. However, the expectation of its deployment has been included in protocol development. It is likely to take six to twelve months to complete the integration of content delivery systems into the Ice protocol.

21 The prospectus for the IPO, issued in March 2006, contained the following “business overview” (emphasis added):

IceTV’s objective is to generate recurring revenue by providing its subscribers with choice and control over their television viewing in addition to access to a wide range of entertainment media .
The company does this by providing services that make it simple for the average viewer to access and control a range of home entertainment, primarily being able to schedule television recordings with the touch of a button.
The platform for IceTV services is a new genre of home entertainment equipment referred to as Media Centres or Digital Video Recorders (DVRs) (also called Personal Video Recorders – PVRs). These products can bring together a range of home media on a single device, including free-to-air TV, home video, DVD, digital camera photos and music CDs. This means fewer boxes in the living room, fewer remote controls and more entertainment choices.
…

22 Under “opportunities, objectives and strategy” appeared the following (emphasis added):

The Directors will initially focus on growing revenue from sales of its interactive EPG, IceGuide. Depending on the success of this, the Directors will also consider developing additional revenue streams from the sale of entertainment content, such as movies and music, in addition to advertising and branding within the IceGuide service.

23 In the description of the business of IceTV, appeared the following (emphasis added):

IceTV’s core service is the Electronic Program Guide or “EPG”, called “IceGuide”. IceGuide is the only subscription based EPG available for the majority of the population who watch digital free-to-air TV in Australia. The EPG service IceGuide was launched in April 2005 and has been marketed since July 2005. …
In order to attract additional subscribers and grow the revenue base, IceTV plans to enhance functionality of products compatible with the IceGuide, with a service referred to as the Personal Interactive Media Planner or “PIMP” for short. The objective of enhanced functionality is to allow subscribers to remotely programme home television recordings from a variety of devices . These may include Internet web browsers and 3G mobile phones.

24 Under the heading “Current Initiatives – Personal Interactive Media Planner” appeared the following:

PIMP is in development and currently scheduled for a progressive release from May 2006. There is as yet no fixed date to release the sale of movies and music and IceTV is not certain to provide these services.

25 In June and July 2006, while working for IceTV, Mr Ross and Mr Vogel had contact with executives of Mobilesoft, which was developing a product for VideoEzy called the Home Media Centre (HMC), a box that receives and records television as well as providing electronic rental of movies. A portable memory device can be taken to a VideoEzy store and loaded with selected movies, then taken home and plugged into the HMC. Mobilesoft was interested in integrating an EPG (such as IceTV’s product) into the HMC. This was a very substantial commercial opportunity for IceTV, envisaged to involve an order for 10,000 users initially, with a projected 400,000 over two years, paying $1.10 - $1.40 per month per user for IceTV’s EPG. On 26 July 2006, Mr Vogel was in communication with Mobilesoft about integration of the EPG with Mobilesoft’s HMC, to explore developing a “Community Program Guide”, and how TiVo might be pursued. It was Mr Ross’ aspiration to secure the sale of IceTV’s EPG to VideoEzy customers through Mobilesoft, and Mobilesoft was given access to IceTV’s software and documentation, for evaluation purposes, on 22 September 2006.

26 On 4 August 2006, Mr Vogel sent a letter to Mobilesoft, which on 3 May 2007 was recovered from deleted files on a computer formerly used by Mr Ross at IceTV. It summarised “some of the opportunities we touched on”, at a meeting held the previous Thursday, including (emphasis added):

(a) supplying EPGs for free-to-air TV to Mobilesoft;

(b) undertaking development of proposed Community Program Guide extensions ;

(c) the PIMP technology allowing users to remotely schedule recordings on their PVR using a web browser or mobile phone;

(d) introducing TiVo to Australia through a partnership with VideoEzy, with IceTV as the EPG and technology provider;

(e) possible investment by Mobilesoft in IceTV to create “a strategic alliance”.

27 It quoted a fee of approximately $60,000 for consultancy in respect of the development of the proposed Community Program Guide.

28 On 5 September 2006, Mr Ross sent an e-mail from his private e-mail address to Mr Simms at Mobilesoft, enclosing a paper entitled “New Media Opportunity”, which proposed a merger of IceTV and Mobilesoft. It envisaged that Mobilesoft would obtain an option to acquire a controlling interest in IceTV, and rights for TiVo, and referred to IceTV’s future revenue sources as intended to be from, inter alia, provision of entertainment content.

29 In a letter signed by Mr Ross and dated 11 September 2006 to Two Way TV Australia Ltd, he described “the business” of IceTV as follows (emphasis added):

IceTV is in the home entertainment subscription business. We are primarily a B to C supplier of services and use both web and retail partnerships to market ourselves.
Our “Trojan horse” to the living room is the provision of an Electronic Program Guide (EPG), Digital Video Recorders (DVRs) and PC based Media Centres need an EPG to enable their remarkable “one-touch” recording and time shifting features. …
Our strategy is to leverage off the functionality that the EPG provides by offering new and innovative revenue generating activities on a platform agnostic basis, including:
(1) multi-media content (IPTV) – movies, music, podcasts;
(2) games;
(3) remote (mobile phone) access to content and home recording functionality;
(4) intelligent, targeted interactive advertising;
(5) subscription DVR services – such as TiVo; and
(6) market research data – gathered from IceTV subscribers .

30 This may be contrasted with the rather narrower description in his affidavit, in which Mr Ross describes IceTV’s business in the following words:

The business of IceTV was to provide an Electronic Program Guide which contains a listing of all shows on television for the upcoming week. A new genre of home media devices called Personal Video Recorders and PC based Media Centres use this information to facilitate consumers’ easy selection of shows they want to record using just the remote control. Consumers simply highlight the show they wish to record, and when it is aired the personal video recorder or Media Centre automatically stores it on an internal hard disk for later viewing. This is a very advanced form of the TV week on-screen product that I worked on with Mr Vogel in 1994.

31 In handover notes, prepared by Mr Ross at the time of his departure, he wrote:

Mobilesoft

Have been dealing mainly with Tom Simms, and to a lesser degree Peter Urbanec who now contracts to them. They are looking for EPG data for a PVR they are building for a client. There is an acceptance test due in October which Peter U is working towards, and we‘ve agreed to let them use some of our libraries to quicken the development process. The commercial discussions are not well advanced, still mainly dealing with technical compatibility issues. However, the ballpark figure proposed for the EPG per customer is in the $1 - $1.50 mark. As yet we have not done any technical work ourselves, but should we, there would also be an engineering charge that they would accept.
Action
Follow up with Tom and/or Peter U on the integration of the EPG into their box.

32 In the same notes appear the following (emphasis added):

Beyond TV

Have been dealing with Tim McGee of Beyond. Good guy who likes our pragmatic approach to delivering and pricing of content . … Have had recent contact with Tim and told him that I am leaving, but we were still committed to doing something with content .
…

Broadcast Australia

Been speaking mainly to Grahame Stevens who is GM of Datacasting. … Our interest in them has been threefold. Firstly, to use the datacasting capabilities of DVB-T to distribute the EPG data. Secondly, to use their capacity to distribute content to “ICE enabled” boxes using IP characteristics of the data casting, therefore getting around some of the regulatory issues. Incidentally, the last meeting we had with them included their legal counsel and it was agreed that this was likely to be possible. Lastly, we have suggested a number of potential commercial models around advertising and using their capacity to distribute ads.
…
Media Review International
Been speaking with Brendan on and off for about a year. … Have discussed providing guide data to him, but he also needs Foxtel. Have also discussed using his watermarking technology to mark content that we would sell via PIMP. This technique has been run past Beyond and I believe is likely to be an acceptable level of DRM.
…

TiVo

Have had one phone conversation with Joshua since he returned. … He is appreciative of what we’ve done for them and it's likely that he would support IceTV putting out a TiVo service , initially analogue, followed by digital in the future.
…

My contact at Yahoo!7 is Ricki Mullia. He was the one who started the discussions with us on their use of our guide data for their web site, and who we presented the ADB and TiVo box scenarios to. He is a strong supporter of Ice, but unfortunately now lacks some power in the TiVo project as Seven has taken the lead on that one.

33 An additional handwritten note on the same document records (emphasis added):

Ch 7 Rowan Lund as they are running the TiVo .

34 According to its General Manager Mr Kossatz, IceTV, finalised a deal on 24 April 2007 with Reeltime Media Ltd, and is currently negotiating with two providers of video content and expects to commence delivery of video content shortly. The agreement between IceTV and Reeltime contains the following recitals:

A. IceTV is a provider of value added services to set-top-box Digital Video Recorders (DVRs) and PC based Media Centre products. Services include an interactive Electronic Program Guide (EPG) and Personal Interactive Media Planner (PIMP) which provides users with the ability to simply select television shows for recording via their TV, Internet browser and or Internet enabled mobile phone.
B. Reeltime Australia’s leading ISP independent broadband TV operator of legal movie downloads and a manufacturer of PC based Media Centre products which are sold to customers via retail outlets across Australia and on-line via Reeltime’s website.
C. Reeltime wishes to offer customers of the “Reeltime Box” access to the IceTV EPG and PIMP services. Reeltime has agreed to pay IceTV a wholesale subscription fee for each customer who accepts the offer.

35 A deal struck in April 2007 is of course not probative of what was IceTV’s business during the twelve month period prior to 4 October 2006, but, in the context of the other material to which reference has been made, supports the view that the pursuit of commercial opportunities for content provision has consistently been a part of IceTV’s activities and business strategy, and part of the undertaking that IceTV acquired from ZapTV.

36 The material to which reference has been made shows that from before the acquisition by IceTV of its business from ZapTV, it was part of its business plan to offer content provision to customers. While IceTV’s main effort was the sale of EPGs, it was also pursuing opportunities to deliver “content”, and developing a “TiVo-like service”, although those opportunities had not yet come to fruition.

37 The “business” that an entity “carries on” is not necessarily limited to the actual sale of its product to customers, but can include the “work done” by the entity: such as the manufacture of goods as well as their sale; research, design and development work; and the pursuit of commercial opportunities. In the context that IceTV had acquired the assets and undertaking and proprietary information of ZapTV, of which Mr Vogel and Mr Ross were principals, and that Mr Ross and Mr Vogel had special knowledge of and responsibilities for all aspects of the Ice business, there is no reason to give the word “business” in their restraints a narrow meaning. For the purposes of par (a) of the restraint, during the twelve months prior to 4 October 2006, the business of IceTV included the pursuit of opportunities for media content provision. And, for the purposes of par (c) of the restraint, during the twelve months prior to 4 October 2006, Mobilesoft had entered into discussions or negotiations with IceTV, with a view to Mobilesoft becoming a customer of IceTV, in connection not only with the potential provision of EPGs for the VideoEzy HMC, but also with the provision of consulting services in connection with the development of the server and user interface aspects of Mobilesoft’s proposed Community Program Guide, for a fee of about $60,000.

Reasonable apprehension of breach

38 Most of the evidence relied upon by IceTV as evidencing a breach of the restraints is contained in material obtained on subpoena by Mobilesoft or on Notice to Produce by the defendants.

39 As to par (c) of the restraint, IceTV contends that the defendants canvassed and solicited Mobilesoft to obtain consultancy work for the development of a CPG, and also for the development of “New Media business”. In a letter to IceTV’s solicitors dated 8 March 2007, responding to letters of 26 February 2007 alleging that they had breached their restraints, Mr Ross and Mr Vogel offered assurances that they had not utilised any IceTV secret know-how and processes or confidential information or breached any other obligations, and further:

We did not bid for, canvass or solicit the custom of Mobilesoft or VideoEzy since leaving IceTV.

40 As I have already explained, in the year prior to 4 October 2006 Mobilesoft had entered into negotiations or discussions with IceTV, with a view to becoming a customer, particularly for the provision of consultancy services for the development of a Community Program Guide.

41 The letter sent by Mr Ross from his private e-mail address to Mr Simms at Mobilesoft, enclosing a paper entitled “New Media Opportunity”, on 5 September 2006, appears to have been written from the perspective and in the interests of Mobilesoft rather than IceTV. It suggests that Mr Ross was already envisaging that his future might lie with Mobilesoft in one way or another. On 3 October, Mr Ross informed, inter alia, Mr Simms at Mobilesoft, that he was leaving IceTV to pursue a related opportunity with Mr Vogel. Mr Simms responded immediately, inviting Mr Ross and Mr Vogel “for a chat sometime this week”.

42 On 25 October 2006, Vogel Ross submitted to Mobilesoft a “Proposal to establish Mobilesoft New Media Division”, by which Vogel Ross would help to establish and manage a business unit within Mobilesoft devoted to New Media projects, which bore some similarity to the “New Media Opportunity” document produced on 5 September 2006. The “vision statement” included the acquisition of TiVo, evaluating the acquisition of IceTV, and seeking revenue opportunities through development and deployment of “turnkey PVR solutions”. At least part of the concept involved offering a PVR box and service connected to the Internet and free-to-air TV, described as a “TiVo-like service”. One of the tasks envisaged was “Clever Networks grant applications”.

43 In the same month, October 2006, they were asked by Mobilesoft to prepare an urgent submission for the “Clever Networks” grant scheme, which they accepted, completing the project around mid-December. This project involved several aspects, but included the VideoEzy HMC, a wireless Internet provider, remote medical monitoring, and a community program guide (CPG). On 31 October, Mr Vogel advised Mobilesoft to file a provisional patent application for the CPG concept. On 11 December 2006, Mr Ross drafted an e-mail to Rohan Lund of Yahoo!7, describing the project on which he was working for Mobilesoft in preparing a bid for a grant under the Clever Networks program, as follows:

We propose to bid a system that provides a community guide off the back of a set-top-box DVR that receives digital free-to-view TV and plays VideoEzy movies.

44 Mr Habib submits that a restraint on canvassing or solicitation may be breached even if it is the former client or potential client who initiates contact, such issues being determined not mechanically according to who initiates contact, but substantively according to the substance of what passes between them once they are in contact, so that if the former employee conveys not only a willingness to deal with the client but encouragement, that will be solicitation. In Barrett v Ecco Personnel Pty Ltd (NSWCA, 24 November 1998, unreported, BC 9806197), the Court of Appeal held that it was not appropriate to construe “solicit” in a mechanistic fashion, and that while in most cases the first approach would be made by an ex-employee to the former customer, common sense demanded that that was not the exclusive means by which solicitation might occur. In that case, it was a presentation made by the former employee that was the effective cause of his agency obtaining a contract with Nestle. Young J (as his Honour the Chief Judge then was) at first instance, and the Court of Appeal, concluded that although Nestle may have provided Mr Barrett with the window of opportunity, it was Mr Barrett who solicited and enticed Nestle away from Ecco. Stein JA said:

It seems to me that Young J was saying that the approach by Nestle merely provided the window of opportunity for the first appellant to submit a proposal more attractive to Nestle than its current contract with the respondent. That the approach was the catalyst or trigger for the solicitation by the appellant does not make the appellant any less the mover for the action happening.

45 Mr Habib also referred to the decision of Campbell J (as his Honour then was) in Hellmann Insurance Brokers v Peterson [2003] NSWSC 242, in which his Honour said (at [11]-[12]):

The meaning of “solicitation” is elucidated by a decision of Wood CJ at CL in R v Laws [2000] NSWSC 880 (2000) 50 NSWLR 96, at 98. His Honour, at [8] recorded the remarks of Spigelman CJ and Hidden J in R v Azzopardi , 1 October 1998, unreported, which in turn approved remarks of Stout CJ in Sweeney v Astle [1923] NZLR 1198 at 1202 which I quote:
The word ‘solicit’ is a common English word and it means in a simplified form, ‘to ask’. In various English dictionaries this simple meaning is given, but other simple words are also used to explain other meanings it possesses, such as ‘to call for’, ‘to make a request’, ‘to petition’, ‘to entreat’, ‘to persuade’, ‘to prefer a request’.
Whether an employee is soliciting a former client is not something which depends upon whether it is the employee who telephones or arranges to meet the former client, or the other way around. Rather, whether solicitation occurs depends upon the substance of what passes between them once they are in contact with each other. There is solicitation of a client by a former employee if the former employee in substance conveys the message that the former employee is willing to deal with the client and, by whatever means, encourages the client to do so.

46 In Koops Martin v Reeves [2006] NSWSC 449, I rejected a submission that merely responding to initial approaches from a former client and following them up with interviews and obtaining authorities to act was “enticement” (at [12]):

Accepting instructions to act for former clients who initiate contact with the departed employee is not within the concept of “solicitation” or “enticement” which involves action initiated by the former employee, as distinct from responses to approaches from former customers. In Austen Knight (UK) Ltd v Hinds [1994] FSR 52, Vinelott J (at 59) rejected an argument that submitting an offer or making a presentation to a former customer who had approached the employee’s new employers, or who put out work for tender, amounted to soliciting or endeavouring to entice away the customer:
That is not I think, comprehended in the usual meaning of soliciting, and as regards endeavouring to entice a customer away, if Mr Griffiths’ submission were well founded the covenant would amount to a covenant not to deal with customers of AK (UK), even customers with whom Ms Hinds had never dealt while an employee of AK (UK) and with whose relationship with AK (UK) she was wholly unaware. On that construction the covenant would amount in substance to a contract without territorial limit not to take employment in the field in which she had been previously employed and would plainly be an unreasonable restraint.

47 However, I accept that who makes the initial contact is not decisive. On the other hand, not every positive response to an approach by a former client is solicitation of that client. As Barrett and Hellman show, the line is crossed where the former employee, in response to an approach by a customer, does not merely indicate a willingness to be engaged, but positively encourages the customer to engage him or her.

48 Although Mobilesoft may have initiated a meeting with the defendants following 4 October 2006, that was in a context that Mobilesoft had already been “cultivated” with the “New Media Opportunity” document of 5 September 2006. The letter from Vogel Ross to Mobilesoft of 25 October 2006 sought Mobilesoft’s business, in connection inter alia with the “Clever Network’s grant applications”, involving a Community Program Guide. This was the very work that IceTV (through Mr Ross) had offered to do for Mobilesoft in the letter of 4 August 2006, lately recovered from the computer formerly used by Mr Vogel. As Mr Habib, for IceTV, stresses, the affidavit evidence of Mr Ross and Mr Vogel entirely failed to address this issue, although to some extent the omission might be explained by the circumstance that in the correspondence, which preceded the making of the application, this aspect did not feature.

49 In this context it is at least seriously, and I think strongly, arguable, particularly in respect of the Community Program Guide consultancy, that the defendants solicited the custom of Mobilesoft, who had entered into discussions or negotiations with IceTV during the twelve months prior to termination of their employment, with a view to becoming a customer of IceTV, in contravention of par (c) of the restraint.

50 As to breach of par (a) of the restraint, in a letter dated 13 March 2007, responding to IceTV’s rejection on 12 March 2007 of their previous assurances, Messrs Vogel and Ross wrote:

Meanwhile, we can reaffirm as requested our undertaking that we have and will continue to observe our obligation not to “carry or otherwise be engaged or involved in any business similar to or competitive with the business of the company and any related bodies corporate carried on during the twelve (12) months prior to the termination of your employment”.

51 In addition to the material already mentioned, which reveals that part of the consultancy work performed by the defendants for Mobilesoft involved TiVo and content provision in the form of movies for VideoEzy, in January 2007, Mobilesoft asked Mr Ross and Mr Vogel to carry out a review of the Mobilesoft business, which they undertook. Vogel Ross reviewed the design of the HMC – which had been on trial for several months, but was due to move into commercial production soon – and the system used to deliver and manage the movies. This review included examining the functionality provided in the HMC set-top-box. They reported to Mobilesoft’s management, recommending that they discuss with IceTV incorporation of the IceTV EPG. Mr Simms of Mobilesoft said that discussion with IceTV had stalled since Mr Vogel and Mr Ross had left the company. Mr Ross contacted Mr Kossatz, General Manager of IceTV in February 2006, and obtained his permission to liaise with IceTV’s technical staff to address some problems Mobilesoft engineers were having configuring products for the IceGuide. Once those issues were resolved, Mr Ross initiated the purchase of two paid subscriptions to the IceTV IceGuide service on behalf of Mobilesoft, for demonstrator systems. In due course, Mr Ross and Mr Vogel demonstrated to Mobilesoft how the EPG looked and worked. On 30 April 2007, Mr Ross sent an e-mail to, inter alia, Mr Simms, about a Sage TV demonstration on a Media Centre in the boardroom, in respect of which some difficulties were being encountered with the EPG. It discussed how interactivity with Sage could be achieved and the steps to be taken. However as I understand the evidence, two subscriptions to IceTV had been acquired to facilitate this.

52 The defendants do not dispute that they have been working in the field of video on demand services for content provision with Mobilesoft, but submit that there is a distinction between the business of IceTV (which produces EPGs) and that of Mobilesoft (which produces a set-top-box, in connection with which it aspires to purchase EPGs, for on-sale). Thus it was said that while IceTV was in the business of selling a service, and Mobilesoft was in the business of purchasing the same service, such businesses were not “similar” or “competitive”, but complementary. In his affidavit, Mr Ross expressed the same idea, in the following terms:

The strategic fit between Mobilesoft and IceTV made sense to me as there were no competitive activities between the companies. Mobilesoft had no desire to establish an Electronic Program Guide service and IceTV had no intention of designing and building set-top-boxes, Personal Video Recorders or video on demand services.

53 However, it is not at all clear that Mobilesoft would be a “purchaser” of EPGs; rather, the proposal seems to have been that an EPG (which could have been IceTV’s) would be integrated with Mobilesoft’s set-top-box, and customers would pay a fee to IceTV for use of the EPG. The defendants say that they were simply seeking to incorporate the IceTV EPG product in services to be offered by Mobilesoft. If that were all there were to it, the businesses would not be “similar” or “competitive”. But that is not all there was to it, because the services that Mobilesoft wished to offer included content provision, which IceTV also aspired to offer, and a co-operative venture with the other was only one of the several means by which each might realise that aspiration.

54 As I have already explained, pursuit of opportunities in the field of content provision formed part of IceTV’s business in the year prior to the cessation of the defendants’ employment. Even though IceTV was not then delivering content, it was and is aspiring to do so. Mobilesoft does not yet provide an EPG service, or content, to its customers, but it too aspires to do so. Thus the business of IceTV, as carried on in the year prior to the cessation of the defendants’ employment and presently, and the business of Mobilesoft, both have as a strategy the plan to deliver content to customers and, at least in that respect, are similar and in competition.

55 It follows that it is seriously, and I think strongly, arguable, that by providing consultancy services to Mobilesoft in the field of video on demand services for content provision, the defendants were involved in a business similar to or competitive with the business of IceTV carried on during the twelve months prior to 4 October 2006, in contravention of par (a) of the non-solicitation restraint.

Validity and reasonableness

56 The principles which I take to apply to the validity and reasonableness of a restraint of trade were summarised in Cactus Imaging Pty Limited v Peters [2006] NSWSC 717, as follows:

10. Although at common law a restraint of trade is contrary to public policy and void unless it is justified by the special circumstances of the particular case (for which purpose it is sufficient justification that the restriction is reasonable having regard to the interests of the parties concerned and in reference to the interests of the public, so that while affording adequate protection to the party in whose favour it is imposed, it is not injurious to the public) [ Nordenfelt v Maxim Nordenfelt Guns & Ammunition [1894] AC 535, 565; Herbert Morris Ltd v Saxelby [1916] 1 AC 688, 706, 707; Lindner v Murdock’s Garage (1950) 83 CLR 628, 653], in New South Wales a restraint is valid to the extent to which it is not against public policy, even if not in severable terms [ Restraints of Trade Act , 1976 (NSW) s 4(1); Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449, [26]-[27]]. The effect of the Restraints of Trade Act is that, in New South Wales, one approaches this type of case by determining, first, whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed; secondly, whether the restraint in its application to that breach is against public policy; and thirdly, if it is not, then in its application to the alleged infringing conduct, the restraint is valid unless the court makes an order under Restraints of Trade Act , s 4(3) [ Orton v Melman [1981] 1 NSWLR 583; Woolworths Limited v Olson [2004] NSWCA 372, [42]]. That is because the effect of the Restraints of Trade Act , s 4(1), is to require that, for the purpose of determining the validity of a restraint, attention be focussed on the actual or apprehended breach, rather than on imaginary or potential breaches.

11. While the same general principle applies in all cases of restraint of trade, a stricter and less favourable view is taken in respect of covenants in restraint of trade between employer and employee than in commercial agreements for sale of goodwill [ Nordenfelt , 566; Mason v Provident Clothing & Supply Co Limited [1913] AC 724, 731, 738; Herbert Morris Ltd v Saxelby ; Geraghty v Minter (1979) 142 CLR 177, 185; Woolworths Limited v Olson , [38]; J D Heydon, The Restraint of Trade Doctrine , 2nd Ed, pp68-69]. An employer is not entitled to be protected against mere competition, and the legitimate interests of an employer which may be the subject of protection by covenant are in the nature of proprietary interests [ Vandervell Products Ltd v McLeod [1956] RPC 185, 192; Tank Lining Corp v Dunlop Industrial Pty Ltd (1982) 140 DLR (3d) 659, 664], including the employer’s trade secrets and confidential information, and the employer’s goodwill including customer connection.

57 The reasonableness of a restraint is judged at the time when the relevant contract was made [Cactus Imaging Pty Ltd v Peters, [37]]. The starting point is what the parties have negotiated, although it cannot be determinative [Woolworths Ltd v Olson [2004] NSWCA 372; Aussie Home Loans v X Inc Services [2005] NSWSC 285, [36]; Cactus Imaging Pty Ltd v Peters, [41]]. Although the restraints were procured in connection with a proposed float (the success of which would have given the employees reasonable security of long-term employment) that failed, it was not contended that the reasonableness of the restraints was affected by those circumstances. In Koops Martin v Reeves, it was said:

59. A third general consideration is the circumstances in which the restraint was created, and in particular whether the parties were in an approximately equal bargaining position and whether advice was available to or taken by the employee [ Tank Lining Corporation v Dunlop Industrial Pty Ltd , 666; GFI Group Inc v Eagleston [1994] FSR 535, 542; Dean, [11.170]]. These circumstances go mainly to the weight that might be given to the fact of apparent agreement, in supporting a restraint as reasonable because of the parties’ agreement.

58 There was no suggestion that the bargaining position of the parties was relevantly unequal, or that these circumstances deprived the agreement of the parties of its prima facie significance.

59 The defendants did not dispute that the restraints protected legitimate interests of IceTV. Given their roles and expertise and the history of the acquisition of the business of IceTV from ZapTV, it is plain that both Mr Ross and Mr Vogel had intimate knowledge of IceTV’s business and were in possession of its confidential information and intellectual property. Moreover, they were the commercial face of IceTV. Mr Ross dealt with all IceTV’s contacts, and Mr Vogel was its technical guru. Together they were ideally positioned to divert business opportunities, if so minded, and if they set up in competition, to exploit the intellectual property and commercial opportunities that IceTV had acquired from ZapTV. The restraints are supported both by confidential information and by customer connection.

60 These restraints apply not only where the employees voluntarily resign to take up alternative employment, when they could have remained in employment with IceTV, or where they are terminated for breach, but also, as in this case, where they have been terminated by the employer on notice in accordance with the terms of their contracts, apparently only because the employer can no longer afford to continue to employ them, and notwithstanding that they would happily have continued to work for IceTV on the terms of their contracts. However, it has not been suggested that the effect of the restraint is to prevent them working in any field in which they are qualified. Mr Ross claims “a wide range of experience in the electronics, communications and media industry”, and to be “an experienced practitioner in ‘New Media’’. Mr Vogel describes himself as “a self-taught electronics engineer” who has developed a number of new technologies taking them from concept to market. He claims that his expertise is “sharply specialised in the media technology field”, and to have been developing and patenting media related technology since 1988. He says that, realising that he and Mr Ross were restrained from competing with IceTV, “our experience is particularly strong and unique in the media industry in general and we anticipated there would be call for our services in many areas that do not compete with the business of IceTV”.

61 Given that the agreement of the parties is the starting point; that substantial fields of employment remain open to Mr Ross and Mr Vogel; and, once again, that IceTV’s technology and intellectual property were acquired by it from ZapTV for value as a result of the DOCA in 2005 so that without a restraint the plaintiff’s investment was very precarious were Mr Vogel and Mr Ross to leave its employment in any circumstances; I do not think the restraints are unreasonable by reason of their applying in the event of termination by the employer other than for breach; at least, it is seriously arguable that they are not.

62 Although Mr Stockley momentarily suggested that the restraints were excessive in area, he accepted that they could not be said to be excessive in their application to involvement in the business of Mobilesoft (without conceding that it was similar or competitive), which carried on business in Sydney. On its face the restraint is unlimited in area, but IceTV’s business is Australia-wide, and prima facie the restraint would not be unreasonable in its application to a competitive business anywhere in Australia.

63 Mr Stockley also submitted, albeit without elaboration, that the restraint was excessive in duration. Given the significance of the role of Mr Ross and Mr Vogel in IceTV’s business, the extent of their knowledge of its affairs and information, their prominence as IceTV’s public face, the circumstance that it was from their company ZapTV that IceTV acquired its assets, and the field of employment which remains open to them, it is at least strongly arguable that the twelve-month restraint that the parties negotiated is not excessive.

Discretion

64 The foregoing establishes that there is a seriously if not strongly arguable case of breach and apprehended breach of valid restraints of trade. The next issue is whether final relief would be declined for any discretionary reason.

65 Generally speaking, the Court enforces negative contractual stipulations by injunction, and damages are rarely a sufficient remedy for a threatened breach of a restraint of trade [John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995, [45]; Otis Elevator Company Pty Limited v Nolan [2007] NSWSC 593, [17]-[30]].

66 In this case, the significant potential discretionary factor is laches. IceTV has been aware since at least 23 February 2007 that Mr Vogel and Mr Ross have been consulting for Mobilesoft, and engaged solicitors to write to them as early as 26 February 2007, alleging breaches of the restraints and seeking undertakings. There was further correspondence from IceTV’s solicitors on 12 March, and a meeting, which failed to resolve the matter on 20 March. Thereafter little happened, until a final letter of demand on 1 May, followed by institution of these proceedings on 5 May 2007. IceTV submitted that it instituted proceedings promptly after discovering on 3 May 2007 the recovered deleted letter of 4 August 2006, but having regard to the terms of the final letter of demand of 1 May 2007, I do not accept that this discovery was highly influential, let alone decisive.

67 A party seeking an interlocutory injunction is expected to act promptly. That is particularly important in the field of restraint of trade, where if prompt action is not taken, employees may enter into new employments or enterprises with third parties. The principal issue on the present application was whether content provision was part of IceTV’s business prior to the termination of the defendants. All this, and the contention that Mobilesoft was one of IceTV’s maturing business interests with whom IceTV had had discussions prior to termination of their employment, was known to IceTV at least as at 20 March. Why another six weeks were allowed to elapse before commencing proceedings is unexplained.

68 Had Messrs Vogel and Ross taken up employment with Mobilesoft in the interim, interlocutory relief at least may well have been declined for delay. However, in circumstances where they are not currently performing consulting work for Mobilesoft, so that the issue is one of mere delay without prejudice, the circumstances are not such that a final injunction would be declined for laches.

Balance of convenience

69 The final matter for consideration is the balance of convenience.

70 To a large extent, as any injunctions would follow the form of the contract (save as to clarify the scope of IceTV’s relevant business), an injunction would require no more than the contract already requires. If an injunction is wrongly granted, the defendants will be precluded for a period of up to four months from offering consultancy services in connection with content provision. So far as the evidence goes, they are not currently providing services in that field, although they have done so and wish to continue to be able to do so. To the extent that they are deprived of that opportunity, IceTV’s undertaking as to damages will protect them, albeit that there may be difficulty in proving and quantifying those damages. It was suggested that an interlocutory injunction would jeopardise the defendants’ prospects of employment with Mobilesoft, but negotiations on that front seem already to have broken down.

71 If an injunction is wrongly declined, then IceTV will be deprived for the remaining four months of the term of the restraints of the protection that they afford its business, during which it might lose significant commercial opportunities which otherwise would come its way, and its business might suffer permanent damage. While such losses would be recoverable as damages for breach of covenant on a final hearing, those damages are usually difficult to prove and quantify, and in the context of a negative contractual stipulation exceptional circumstances are required to justify leaving a party to a remedy in damages.

72 The balance of convenience favours, although not very strongly, the granting rather than the withholding of interlocutory injunctive relief.

Conclusion

73 My conclusions may be summarised as follows.

74 It is seriously arguable that the business of IceTV, in the twelve months prior to 4 October 2006 when the employment of Mr Vogel and Mr Ross ceased, included, as well as sale and distribution of EPGs, the pursuit of the commercial opportunity of media content provision; that part of the business of Mobilesoft is the pursuit of opportunities for media content provision; and accordingly, that by providing consultancy services to Mobilesoft in that field, the defendants were involved in a business that is competitive with the business that was carried on by IceTV during the last twelve months of their employment with IceTV, in contravention of par (a) of the restraint.

75 It is seriously arguable that in the twelve months prior to the cessation of the defendants’ employment with IceTV, Mobilesoft had entered into discussions or negotiations with IceTV with a view to Mobilesoft becoming a customer of IceTV, particularly in respect of the supply of consultancy services in connection with the development of a Community Program Guide, and that since 4 October 2006, the defendants have solicited Mobilesoft for a contract to provide those same consultancy services themselves, in contravention of par (c) of the restraint.

76 Especially given the defendants’ protestations that by engaging in such conduct they have not contravened the restraints, there is a reasonable apprehension that, unless restrained, they will do so again.

77 The restraints are supported by legitimate interests of IceTV in its confidential information and customer connection. It is seriously arguable that, notwithstanding that they apply where the employees are terminated by IceTV other than for cause, in their application to the provision of consultancy services to potential suppliers of media content provision in Australia, they are not unreasonable for up to twelve months.

78 Despite unexplained delay in initiating proceedings, no consequential prejudice appears to have been occasioned to the defendants, so that final relief would not likely be declined on discretionary grounds.

79 The balance of convenience favours, albeit not heavily, the grant rather than the withholding of interlocutory injunctive relief, in the context of a negative contractual stipulation, where the defendants are not currently engaged in providing relevant services and will be protected by an undertaking as to damages, whereas the plaintiff would potentially be deprived of the protection of the restraints and might be exposed to loss of significant commercial opportunities.

80 Given that this interlocutory decision will probably have the practical effect of finally determining the matter, the slight preponderance in favour of the plaintiff of the balance of convenience would not justify an injunction if I thought that the plaintiffs’ case, though arguable, was relatively weak. However, on the presently available material, it is my view that IceTV has made out a relatively strong case of breach, particularly in respect of par (c) of the restraint, in that Messrs Ross and Vogel have obtained for themselves the opportunity to provide consultancy services in connection with a Community Program Guide, which prior to cessation of their employment by IceTV was being sought by IceTV through Mr Ross. Accordingly, by reason not only of the slight preponderance of the balance of convenience, but more significantly the relative strength of IceTV’s case, an interlocutory injunction should be granted.

81 The injunction that IceTV seeks in respect of par (c) of the restraint names all the entities referred to in Mr Ross’ departure notes. On examination, it seems to me that some of the entities referred to in those notes were not potential customers, but suppliers or other contacts, and I will grant an injunction only in respect of those which appear to have been potential customers.

82 IceTV also seeks an injunction restraining misuse of its confidential information. The breach of one aspect of a restraint can justify sufficient concern about breach of another aspect to warrant the grant of an injunction, at least in the absence of significant discretionary considerations against it [Reeves v Koops Martin Financial Services Pty Ltd [2006] NSWCA 221, [20]]. Here, the reasonable apprehension that unless restrained the defendants will offer consultancy services in the field of media content provision, which was being pursued by IceTV, carries with it a real risk that they may, in the course of doing so, use IceTV’s confidential information, and justifies the grant an injunction restraining such misuse. However, injunctions restraining misuse of confidential information must be particular, and in the context of this case should be limited to those aspects which the evidence specifically addresses, namely the information specified in par 35 of Mr O’Brien’s affidavit (which was not the subject of dispute), or which is plainly relevant to the issues in the case.

83 My orders are:

1. Upon the plaintiff by its counsel giving to the Court the usual undertaking as to damages, Order that until the hearing or further order the defendants be restrained from, by themselves their servants or agents:


1.1 until 4 October 2007, carrying on or otherwise being engaged or involved in any business similar to or competitive with the business of the plaintiff carried on during the twelve month period prior to 4 October 2006, including the development and/or pursuit of the commercial opportunity of media content provision to set-top-boxes, Personal Video Recorders or similar devices;

1.2 until 4 October 2007, canvassing or soliciting the custom of any person who had entered into discussions or negotiations with the plaintiff during the twelve month period prior to 4 October 2006, including Transact, CEOS, Mobilesoft, Media Review International, and Yahoo!7;

1.3 divulging or permitting to be divulged to any person by any means the following confidential information, in any form (written, recorded or stored in documentary or electronic form or in any other manner, including copies of or extracts from it), relating to the plaintiff:


(a) plans or strategies relating to the marketing of product and services developed by IceTV;

(b) the design of IceTV’s EPG and the method of how it works;

(c) the strategies and methods used to deliver content through the EPG and PIMP;

(d) the state of dealings between IceTV and customers, set-top-box manufacturers, PVR manufacturers, Media Centre software manufacturers, media content providers, TV networks, potential investors and potential joint venture partners;

(e) IceTV’s pricing and costing information, including the price at which IceTV was seeking to be paid for content provision and the price at which it seeks to be paid for EPG provision;

(f) the future strategic direction of IceTV;

(g) the information in the financial records of IceTV.

2. Order that costs of the motion be the plaintiff’s costs in the proceedings.

3. Reserve liberty to apply on two days notice, any such application to specify the relief to be sought.

4. Adjourn the proceedings to 10 July 2007 at 9.30am before the Registrar, for directions.

5. Upon the undertaking of the solicitors for the parties to return them to the court if required to do so, Order that the exhibits be returned.

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