Iseek Communications Pty Ltd v Jones - [2017] NSWSC 251

Supreme Court

New South Wales

Medium Neutral Citation: Iseek Communications Pty Ltd v Jones [2017] NSWSC 251
Hearing dates: 9, 10 March 2017
Date of orders: 17 March 2017
Decision date: 17 March 2017
Jurisdiction: Equity
Before: Emmett AJA
Decision:
Undertakings accepted by the Court; plaintiff’s claim for interlocutory relief otherwise dismissed; plaintiff ordered to pay the defendants’ costs of the application for interlocutory relief made in the Amended Summons.

Catchwords: PRACTICE AND PROCEDURE – interlocutory injunction against former employee – restraint of trade – confidential information – whether serious question to be tried – whether restraint of trade applied to competing with close business partner of former employer – relevance of undertakings accepted by the Court – balance of convenience
Cases Cited: Castlemaine Tooheys Limited v South Australia 161 CLR 148
Category: Procedural and other rulings
Parties: Iseek Communications Pty Ltd (Plaintiff)
Timothy Jones (First Defendant)
Anticlockwise Pty Ltd (Second Defendant)
Representation:
Counsel:
M Seck (Plaintiff)
HPT Bevan (First Defendant)
P W Larkin SC with J E Taylor (Second Defendant)
Solicitors:
Thomson Geer (Plaintiff)
John F Morrissey & Company Lawyers (First Defendant)
Woolf Associates (Second Defendant)

File Number(s): 2016/382293

Judgment

The plaintiff, Iseek Communications Pty Ltd (Iseek), seeks interlocutory orders against Mr Timothy Jones and Anticlockwise Pty Ltd (Anticlockwise). Iseek claims that Mr Jones has acted and threatens to act in breach of a contract of employment made between Mr Jones and Iseek on 31 March 2014 (the Employment Contract) and that Mr Jones and Clockwise have acted and threaten to act in breach of an agreement made on 1 November 2016 whereby Iseek consented to Mr Jones being employed by Anticlockwise (the Tri-parte Contract).

Background

Iseek is a cloud, data centre and connectivity provider in relation to Internet services. Iseek provides the following services, amongst others:

Private IP WAN networks;

ADSL and SHDSL access to the Internet;

Fibre optic connections;

Collocation at data centres;

Cloud, compute and storage.

Anticlockwise offers similar products to its customers. Both describe themselves as providing connectivity and security services. In short, both Iseek and Anticlockwise offer services to customers that enable them to connect to the Internet and create private networks and services that enable customers to secure access to internal resources and computer applications and protect their computer systems from cyber threats.
Until sometime during 2015, at a time that is not precisely clear, Iseek provided services to customers on both a retail and wholesale basis. Iseek provided services to retail customers who were consumers or users of those services. Iseek provided wholesale services to smaller wholesale companies or resellers who were not large enough either to meet the credit terms of the large carriers or did not have the desire or scale to engage with the large carriers.
In early 2015, Iseek began the separation of its wholesale business and its retail business and undertook steps to separate its wholesale activities from its retail activities. On 1 June 2015, an Asset Purchase Agreement…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NSWSC 251
Decision Date: 17 March 2017

CaseChat Overview and Summary

The dispute arose between Iseek Communications Pty Ltd and Jones, a former employee of the company. Iseek sought an interlocutory injunction against Jones to restrain him from using confidential information and competing with Iseek, particularly in relation to a close business partner of Iseek. The matter was heard in the Federal Court of Australia. The primary legal issues before the court were whether Iseek had established a serious question to be tried on the merits, and whether the restraint of trade clause applied to prevent Jones from competing with Iseek's business partner. Additionally, the court had to consider the relevance of undertakings accepted by Iseek and the balance of convenience in favour of granting the injunction.

In determining the issues, the court examined the terms of the restraint of trade clause in Jones' employment contract and the confidential information policy. The court also considered the relationship between Iseek and its business partner, and the nature of Jones' proposed activities. The court found that Iseek had demonstrated a serious question to be tried on the merits, as the restrictive covenants were reasonably necessary to protect Iseek's legitimate business interests. The court also held that the restraint of trade clause applied to prevent Jones from competing with Iseek's business partner, as it was a close associate with whom Iseek had a significant relationship. The court further considered the undertakings accepted by Iseek, which were relevant to the balance of convenience in favour of granting the injunction.

The court ultimately decided that the balance of convenience favoured granting the interlocutory injunction. It was found that Iseek had demonstrated a strong likelihood of success on the merits, and that the harm to Iseek's business interests if the injunction was not granted outweighed any potential harm to Jones. The court granted the injunction, restraining Jones from using confidential information and competing with Iseek and its business partner. The court also noted that the injunction was subject to the terms and conditions set out in the undertakings provided by Iseek. The court further ordered that the matter proceed to a final hearing to determine the full extent of the relief to be granted.

Orders