JMB (NSW) Pty Ltd v West

[2020] NSWSC 1380

Supreme Court

New South Wales

Medium Neutral Citation:

JMB (NSW) Pty Limited trading as McGrath Central Coast v West [2020] NSWSC 1380

Hearing dates:

17, 18 and 22 September 2020

Date of orders:

22 September 2020

Decision date:

22 September 2020

Jurisdiction:

Equity - Duty List

Before:

Parker J

Decision:

See [109]-[110]

Catchwords:

EMPLOYMENT LAW — contract — interlocutory restraint of trade — enforcement and remedies — restraint against employment with competing business — junior level employee — no entitlement to payment — whether to protect the legitimate interest of plaintiff — defendant provided undertaking to record dealings with customers — delay in plaintiff’s application

EMPLOYMENT LAW — contract — interlocutory restraint of trade — enforcement and remedies — restraint on solicitation — defendant provided undertaking not to solicit former customers — relief sought extended to any vendors, buyers and counter-parties whom defendant had no dealings — delay in plaintiff’s application

CIVIL PROCEDURE — preliminary discovery — to identify potential cause of action — whether defendant should be required to submit his electronic devices to allow plaintiff to search for confidential information — defendant provided affidavit evidence that no confidential information was on devices – no evidence to challenge reliability of evidence

Legislation Cited:

Corporations Act2001 (Cth), ss 182, 183

Cases Cited:

Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9

Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187

The Littlewoods Organisations Limited v Harris [1978] 1 AII ER 1026

Woolworths Limited v Olson [2004] NSWCA 372

Category:

Procedural and other rulings

Parties:

JMB (NSW) Pty Ltd t/as McGrath Central Coast (Plaintiff)
Nicholas James West (First Defendant)
Whiteman Investments Holdings Pty Ltd (Second Defendant)

Representation:

Counsel:
P Moorhouse (Plaintiff)
P Reynolds (Defendants)

Solicitors:
Jemmeson Fisher (Plaintiff)
Shanahan Tudhope (Defendants)

File Number(s):

2020/255493

Publication restriction:

Nil

Judgment – EX TEMPORE

Revised from transcript; issued 9 October 2020

1. Before the Court is an application for interlocutory injunctions in proceedings arising out of an employment dispute. A former employer seeks orders preventing its former employee from working for his new employer or limiting work he can perform at his new employment.

2. JMB (NSW) Pty Ltd (“JMB”), the plaintiff, is the holding company for a group of companies which conduct a real estate agency business on the New South Wales Central Coast. The business has six offices, some operated by JMB itself and some by companies in which it is a shareholder. The business currently trades under the name McGrath Central Coast.

3. Nicholas James West, the first defendant, was employed by JMB from October 2013 until early July 2020 apart from a break of a month or so between August and October 2015. He worked at the Terrigal office. When he left, he was working as a sales agent dealing with customers and listing properties on his own. He concentrated on properties in Terrigal and the nearby suburb of Wamberal.

4. Whiteman Investment Holdings Pty Ltd ("WIH"), the second defendant, has been Mr West's employer since he left JMB in July. An associated company of WIH operates another real estate agency business on the Central Coast. That business trades under the name The Agency Central Coast.

5. WIH has employed Mr West to work for The Agency Central Coast. His position is as a sales agent. As with his work with JMB, it appears that he will be focussing in particular on the sale of properties in Terrigal and Wamberal.

Claims, procedural history and evidence on motions

6. The main claims by JMB in the proceedings are for final injunctions against Mr West and derivatively against WIH. The restraints which JMB seeks to have the Court impose may be summarised as restraints against: first, employment in a competing business; second, self-promotion using social media; third, soliciting JMB's employees; fourth, soliciting JMB's customers; and fifth, using JMB's confidential information. The first to fourth restraints are sought for a maximum period of nine months (that is, ending in April 2021). The fifth restraint is sought perpetually (and there is no dispute about that).

7. All of the restraints reflect provisions in a written employment contract which JMB contends is binding on Mr West. For the confidential information restraint, JMB also relies on its rights against Mr West in equity with respect to information provided to him in confidence.

8. JMB also seeks damages for breach which, on its case, have already occurred (or which may occur in the event that interlocutory relief is refused). JMB alleges that Mr West has already solicited two of its customers. JMB also alleges breach of confidence in connection with a printed list of transactions undertaken by the JMB sales team of which Mr West was part. Mr West obtained the list from JMB's records in May this year. He initially retained it after leaving JMB's employment. It has now been returned.

9. Mr West's first defence to JMB's contractual claims is to deny that the written employment contracts upon which JMB relies are binding on him. Two of them are unsigned. A third is signed, but Mr West denies that the signature purporting to be his is his in fact.

10. If any of the employment terms (apart from the term concerning confidential information) are binding on him as a matter of contract, Mr West contends that they are unenforceable as unreasonable restraints of trade.

11. Mr West acknowledges an obligation to protect JMB's confidential information. He accepts that even if there is no obligation in contract, there is one in equity; but he denies that he retained any confidential information apart from the May 2020 sales list which he has since returned.

12. The proceedings were commenced on 2 September. Interim orders were made on 8 September. JMB's application for interlocutory injunctions came before me in the Duty List on 17 September. The argument took place on that day and on 18 September.

13. Shortly before the hearing of the application, the defendants appointed new solicitors. On 16 September the solicitors offered on the defendants’ behalf an extensive list of undertakings.

14. These undertakings are acceptable to JMB so far as they go. Counsel for JMB has incorporated them in a minute which sets out the orders which JMB seeks (whether I should make orders rather than accepting undertakings I will consider in due course if that becomes important). Those orders, however, go beyond the undertakings offered by Mr West (there is no issue about the undertakings offered by WIH).

15. JMB's minute of order has been amended on several occasions to meet points raised in the course of the argument. There are now four areas of dispute. These concern orders sought by JMB:

1. restraining Mr West's employment by WIH in a competing business, namely The Agency Central Coast;

2. restraining Mr West's promotion of his new employment using social media;

3. restraining Mr West from soliciting certain classes of JMB's customers; and

4. requiring Mr West to provide access to his electronic devices to allow them to be searched by a computer expert on behalf of JMB.

   16. Apart from the plaintiff’s solicitors, four witnesses provided affidavits for the purposes of the application. As is usual there was no cross-examination.

   17. Jaimie Mark Woodcock was the first deponent for JMB. He is a director of the company and one of the founders of its business. He gave general evidence about the operation of the business and about the work done by Mr West. He also gave evidence of a conversation with Mr West to which I will refer in more detail below.

   18. Kristy Lavers was JMB's other witness. She is an employee responsible for support and training of JMB staff. She was the employee of JMB who printed out the May 2020 sales list and gave it to Mr West. She gave evidence about this, including evidence of conversations with Mr West.

   19. For WIH, evidence was given by Mr Brian Whiteman. Mr Whiteman is a director of WIH and the founder or one of the founders of The Agency business. Mr Whiteman denied having received the May 2020 sales list or any information in it from Mr West.

   20. The other deponent for the defendants was Mr West himself. He gave a lengthy affidavit responding to most but not all of the details of the allegations against him. In particular, he gave evidence about the contracts relied upon by JMB, denying that his signature was the one on the signed version of the contract on which JMB relies. He also gave evidence about the circumstances in which he obtained the May 2020 sales list, including conversations with Ms Lavers.

   21. Mr West began his employment with JMB on 8 October 2013. At the time he was a very junior employee who started as a trainee. His employment contract was in writing but contained no relevant post-employment restraints.

   22. Mr West resigned from his employment with JMB at the end of August 2015. Initially it appears that he had no plans to come back to JMB, but as it happens he was rehired about six weeks or so later. A written contract was prepared at the time. The contract itself is undated but is said to have been executed on or about 30 September 2015.

   23. There are later written forms of contract between JMB and Mr West dated 30 June 2016 and 31 December 2018. It appears that these coincided with changes in the way in which Mr West was remunerated. Neither, however, is signed.

   24. The September 2015 contract does bear a signature purporting to be that of Mr West. As already noted, however, Mr West denies that the signature is his.

   25. This evidence from Mr West gives rise to very serious issues. In effect Mr West is alleging that his signature was forged, presumably by the employee of JMB who was responsible for maintaining its employment records. On the other hand, if his allegation is not sustained, it is likely to have a serious adverse effect on Mr West's credibility.

   26. Counsel for Mr West invited me to compare the challenged signature on Mr West's employment contract with other signatures of Mr West which are not in dispute. Counsel submitted that the challenged signature is recognisably different. On the other hand, counsel for JMB submitted that the signatures appear quite similar. This dispute is obviously not something which can be resolved on an interlocutory application such as the present.

   27. Similarly, it is not possible to resolve the dispute about whether the later contracts from 2016 and 2018 are binding on Mr West. The fact that they are unsigned does not necessarily prevent a finding that he agreed to the terms in question. Ultimately, the resolution of that issue is likely to depend upon evidence as to JMB's procedures and a careful comparison of Mr West's position with that of other employees.

   28. What I can say at this point is that there is clearly a prima facie case that Mr West is bound by at least one of the contracts in question. As it happens, the terms upon which JMB relies in support of the restraints which it claims are the same in each of the contracts. I will deal with the rest of the application on the basis that JMB has established a prima facie case that Mr West is contractually bound by the relevant provisions of the contract.    

   29. The May 2020 sales list is in evidence as a confidential exhibit. The list was printed out from a database maintained by JMB of transactions on which JMB acted, whether for the vendor or for the buyer. The database contains details of the property, the listing, the settlement date, the price and a set of contacts.

   30. The contact details include names, email addresses, telephone numbers and postal addresses for the vendor, the buyer, the vendor's solicitor and the buyer's solicitor. The list was described at some points in the evidence and the submissions as a "client list". But that is not an accurate description of it. It contains contact details not only for JMB's customer but for the other party to the transaction. It is correctly described in its heading as a "listings report".

   31. The report goes back to 2013. JMB's business was organised into different sales teams each under the leadership of a senior agent. The report in question contains details of all of the sales for the team of which Mr West formed part. It is not confined to transactions upon which Mr West was the agent, or even to transactions on which he worked. It consists of approximately 1000 entries covering over 300 pages.

   32. In evidence is an exchange of emails between Mr West and Ms Lavers on 22 May in connection with the preparation of the list. The emails begin with a request by Mr West for a list of his sales. Mr West said that he wanted to "build a past client plan" but did not know how to get a list together.

   33. Ms Lavers responded that she was unable to produce a list of sales confined to Mr West. Instead she indicated that the list would cover all of the sales carried out by the team and Mr West would have to go through it and work out which ones were his. Ms Lavers also asked Mr West how long he had been working at JMB so she knew how many years the list should cover. He told her seven years which, of course, ignored the short period of time in 2015 when he ceased employment.

   34. It is clear from the correspondence that Mr West was only seeking a list of transactions on which he had worked. The fact that the list was more extensive than that was a result of the way in which JMB's reporting system worked.

   35. In his affidavit, Mr West said that he first asked Ms Lavers for such a list following a training session he had with her about two months earlier in March. In her affidavit, Ms Lavers confirmed that Mr West had in March mentioned the idea of preparing a prospecting plan for customers, but on her affidavit account he did not actually ask her to prepare a list at that stage. Of course, that does not mean that he did not do so.

   36. Mr West ceased employment with JMB on 4 July this year. He had a couple of days earlier given notice that he wished to terminate his employment. At about the time he left, he had a conversation with Mr Woodcock in which he told Mr Woodcock that he intended to take an extended break from the real estate industry for three to six months and had no specific plans for the future. In fact, however, it appears that Mr West had already begun negotiations with WIH.

   37. In evidence is a draft employment contract sent to Mr West on behalf of WIH on 30 June. There is no earlier correspondence in evidence and so it is not possible to determine when his negotiations with WIH began. Nor does the evidence fix exactly when it was that Mr West started working with The Agency. But it was by 14 July at the latest.

   38. Text messages starting on that date show Mr West approaching the owners of a property in Dorset Avenue Wamberal on behalf of The Agency to negotiate a sale. That property appeared on the May 2020 sales list. There is also evidence, in the form of text messages, of contacts between Mr West and the owners of another property on the list, this time at Gerda Road MacMasters Beach. Mr West had himself been the agent responsible at JMB for the prior listing of one of these properties. It is not clear from the evidence whether he was the agent on the other property.

   39. Records produced on subpoena show that the contract between The Agency and the proprietors of the two properties was entered into by Mr Whiteman or another licensee employed by The Agency. Promotional material for the sales does not mention Mr West, but the text messages show him dealing with the proprietors of the Dorset Avenue property at least from 14 July to 19 August and with the owners of the MacMasters Beach property at least from 28 July to 4 September.

   40. In his affidavit, Mr West addressed the circumstance that the two properties were on the May 2020 sales list, which he retained with him when he left JMB's employment. He said that this was a coincidence. He said that he had the list with him because he was working from home during the Covid-19 emergency.

   41. Counsel for the defendants submitted that I should infer that Mr West had retained the list by oversight but Mr West himself did not actually say that. Mr West did, however, squarely deny that he had made a copy of the list or provided information from it to anyone else at The Agency before it was returned.

   42. Returning to the chronology of the dispute, it was on about 20 July that Mr Woodcock learned that Mr West was working for The Agency. On 21 July, solicitors acting for JMB wrote to Mr West. The letter set out contentions on behalf of JMB as to Mr West's obligations under the contract under statute (Corporations Act2001 (Cth), ss 182, 183) and in equity, with respect to confidential information. It did not formally demand any undertaking but ended with a list of what were described as “requirements” for Mr West to abide by. These included the delivery up of any confidential information, including, but not limited to, the listing report of May 2020. The letter referred to the possibility of Court action if Mr West solicited or accepted any of JMB's "customers", or accepted any appointment to sell any property in the listing report.

   43. In response, Mr West retained Mr Torquil Murray as his solicitor. It seems that Mr Murray was not retained on behalf of WIH. The evidence does not indicate precisely when Mr Murray was retained, but it was before 31 July because on that date the solicitors for JMB provided Mr Murray with copies of the employment agreements with Mr West in accordance with a prior request.

   44. On 7 August, Mr Murray emailed JMB's solicitor. He said he was instructed that the signature on the 2015 agreement was not Mr West's signature. He added that Mr West "remains willing" to return the list. There is no evidence before me of any earlier offer, but it may be that such an offer was made before 31 July.

   45. On the same day, JMB's solicitors responded. They pointed out that Mr West's confidentiality obligations applied whether or not he was bound by the contract, and made it clear that the allegation that Mr West did not sign the 2015 agreement would be vigorously disputed. The email stated that if Mr West approached or accepted any appointments from the sales list an application would be made for an injunction.

   46. Mr Murray responded on 13 August. He said that Mr West had not used any of JMB’s confidential information and had no intention of doing so. He offered to return the list and asked where he should do so. He repeated that Mr West had not executed any of the contracts of employment on which JMB relied.

   47. On the evidence before me the offer to return the listings report was not taken up. Instead, on 26 August, JMB solicitors wrote to Mr Murray, seeking compliance with a written list of undertakings, which covered three pages. The list covered all of Mr West's alleged obligations under the employment contracts, and even went beyond that. In particular, an undertaking was sought that Mr West not engage in any activity "which is in competition with JMB” or was “otherwise than in the interests of” JMB.

   48. There was no substantive response to this demand from Mr Murray; as I have mentioned, proceedings were commenced the following week, on 2 September.

   49. Counsel for JMB drew attention to what he characterised as “subterfuge” on the part of Mr West, revealed by the evidence. Counsel described this “subterfuge” as involving both the obtaining, and the use, of the listings report, and also steps taken by Mr West to conceal what he was doing as an employee of The Agency.

   50. Counsel argued that I should infer that Mr West obtained the listings report in anticipation of leaving JMB's employment. That has been denied by Mr West. It is agreed between Mr West and Ms Lavers that the possibility of obtaining such a report was mentioned as early as 27 March. The emails in evidence show that there was nothing apparently underhand about the way in which Mr West obtained the report on 22 May. I could not conclude on that evidence that Mr West had been planning all along to leave JMB and take the report with him.

   51. Nor can I find on the evidence that Mr West in fact used the report to contact the proprietors of the Dorset Avenue and Gerder Road properties. The furthest that the evidence goes is that Mr West does not explain why he did not return the report immediately on leaving JMB's employment. Nor is it necessary to go into the allegations of concealment of Mr West’s actions with The Agency in any detail.

   52. In my view, “subterfuge” is too strong a word. Still it appears clear enough on the evidence before me that Mr West misrepresented his intentions to Mr Woodcock. He also apparently did his best to try to ensure that his involvement in dealing with the proprietor of the Dorset Avenue and Gerder Road properties was concealed from public view, and this continued after 20 July when JMB became aware of his employment with The Agency.

Restraint against employment with a competing business

53. The relevant clause in the September 2015 contract is clause 18.2(b). The numbering is different in the later contracts but the wording is the same. The clause provides that Mr West will not:

carry on or be engaged, concerned, interested directly or indirectly whether as a shareholder, director, employee, partner joint venture participant, principal, agent, trustee, unitholder or otherwise, in carrying on any business for a Competitor for the Restraint Period

54. The contract is drafted in the style typical for employment restraints, so as to allow for the application of the “blue pencil”. Definitions are set out as alternatives with descending levels of generality, and the contract provides that each alternative is to be interpreted as a separate covenant.

55. This style is used in defining the Restraint Period. Four different periods of time are specified. The longest is nine months after the termination of the employment in question. This gives a restraint period ending on 3 April 2021.

56. A similar approach is taken in the definition of "Competitor". That provides:

Competitor means any business engaged in providing real estate agency services with a radius of:

(1)   25 kilometres from the office of the Employer in which You were employed;

(2)   15 kilometres from the office of the Employer in which You were employed;

(3)   7.5 kilometres from the office of the Employer in which You were employed;

(4)   3 kilometres from the office of the Employer in which You were employed.

57. In this application (and in the proceedings itself) JMB seeks only to enforce the definition up to a radius of 7.5 kilometres.

58. The relevant order sought by JMB is order 1, which seeks:

An Order that until further order or 3 April 2021, the First Defendant be restrained from carrying on or being engaged, concerned or interested directly or indirectly whether as a shareholder, director, employee, partner joint venture participant, principal, agent, trustee, unitholder or otherwise, in carrying on any business for the Second Defendant or any other business (including his own), operating from a place of business within, and providing real estate agency services within, 7.5 km of Shop 1 & 2, Pine Tree Lane, Terrigal in the State of New South Wales.

59. There is a lack of clarity in the concept of “providing real estate agency services” within a particular area. Clause 18 does not identify whether the provision of services is constituted by: (1) having an office in the area; or (2) dealing with customers who live in the area (whether or not those customers own properties in the area); or (3) dealing with customers (wherever they live) with respect to properties in the area. Counsel for JMB proceeded on the assumption that (3) is the correct interpretation, and I have assumed that that is so for the purposes of dealing with this application.

60. In the course of argument it was pointed out that the effect of the definition was that Mr West could be prevented from dealing with potential customers in Sydney who own holiday houses in the relevant area. JMB’s response was to insert a reference to the competitor operating from a place of business within the relevant area, although it does not appear in the clause itself. Counsel informed me that JMB only sought to enforce the restraint to that extent, both in this application and in any final proceedings.

61. This step narrows the theoretical reach of the restraint. But The Agency indeed has a place of business within the 7.5 kilometre radius. It deals with properties within that radius. Thus the order would prevent Mr West from being employed with The Agency, even if he worked solely on properties outside the area in question.

62. The arguments for the parties centred on three factors. These were: (1) the strength of JMB's prima facie case for enforcement of the restraint (and in particular the strength of its contention that the restraint was no more than reasonable); (2) the balance of convenience; and (3) delay.

Strength of prima facie case

63. The restraint sought directly restricts Mr West's ability to compete against JMB. This squarely brings the restraint of trade doctrine into play. But a restraint on employment may be permissible if it is necessary indirectly to protect a legitimate interest of the former employer.

64. According to counsel for JMB, two possible interests were in issue. The first was JMB's interest in protecting the goodwill associated with Mr West's dealings with customers. Despite what the customer may think, this goodwill is an asset of the employer, and it is not unfair for the employer to prevent the employee from trading on it, at least for a reasonable period: Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 at [25].

65. But in the present case the interest may be protected by a non-solicitation restriction which applies not only to solicitation of, but also to acceptance of instructions from, the former employer’s customers. As will be seen, Mr West is prepared to accept such a non-solicitation restriction. The restraint which JMB seeks extends well beyond Mr West's dealing with customers of JMB with whom he formerly dealt.

66. The effect of the restraint would be to prevent Mr West from working for The Agency at all. He would not be able to deal with customers of McGrath with whom he never dealt, or even with owners of property within the relevant area who had never dealt with McGrath. Nor, as I have pointed out, would he even be entitled to deal with customers outside the relevant area if (as would presumably be the case) colleagues at The Agency dealt or attempted to deal with owners of property within the relevant area.

67. An alternative basis for indirectly supporting a restraint against being employed by a competing business is to protect the confidential information of the former employer. This was explained by Lord Denning MR in The Littlewoods Organisations Ltd v Harris [1978] 1 AII ER 1026 at 1033:

It is … established that an employer can stipulate for protection against having his confidential information passed on to a rival in trade. But experience has shown that it is not satisfactory to have simply a covenant against disclosing confidential information. The reason is because it is so difficult to draw the line between information which is confidential and information which is not; and it is very difficult to prove a breach when the information is of such a character that a servant can carry it away in his head. The difficulties are such that the only practicable solution is to take a covenant from the servant by which he is not to go to work for a rival in trade. Such a covenant may well be held to be reasonable if limited to a short period.

68. Clearly the application of this principle must depend upon the nature of the confidential information in question. It must also depend upon the seniority of the employee. For example, suppose a senior employee knows of the employer's future business strategy, and in particular a plan for the timing of future new product launches. If “poached” by a trade rival to occupy a similar position, such an employee is placed in a virtually impossible position. He or she would be unable to put the information out of his or her mind.

69. But if a junior employee who happened to be aware of the business strategy were to accept an equivalent position with a rival firm the same problem would not arise. If the employee is not employed in a decision-making position the former employer's interests may be protected by the usual constraint on disclosure of the confidential information to the new employer.

70. This suggests that it will be a rare case where it would be possible to restrain a junior employee from employment with a trade rival on the basis of knowledge of confidential information. I think that this is confirmed by the course of decisions in which post-employment restraints have been upheld.

71. I refer to two appellate decisions in particular. The first is Woolworths Ltd v Olson [2004] NSWCA 372. In that case the employer operated a chain of supermarkets. The former employee was a senior executive who had been responsible for a project for altering and upgrading the employer's computerised stock supply system. The employee accepted employment with a rival supermarket chain as a senior executive with responsibility for logistics. A restraint against accepting that employment (which required the employer to pay the former employee his usual emoluments during the period of restraint) was upheld.

72. A similar case was Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187. The former employer operated a recruitment business. The former employee was a senior executive whose principal function was the retention and development of the customer base. He accepted employment with a rival recruitment business in a senior executive position. Again, under the contract he was to be paid a salary for 21 of the 24 months of the restraint period. The restraint was upheld.

73. These cases should be contrasted with Mr West's position. He is not employed in a managerial or strategic role at The Agency, so far as the evidence goes. JMB wishes to restrain him from acting as an employee, but he is not entitled to any payment from JMB for the period of the restraint. No doubt Mr West, whilst employed by JMB, would have observed the techniques used by other agents for trying to retain customers for repeat business. But nothing suggests that these techniques would have been proprietary in nature. JMB's customer details, as reported in the listings report, were obviously valuable, but Mr West could not have carried those around in his head.

74. In my view, the case for enforceability of the restraint, in the terms sought by JMB, is not strong.

Balance of convenience

75. As I will explain below, the defendants have agreed to give undertakings which will require them not to deal with JMB’s customers and to keep full records of any agency work in which Mr West is involved so that this can be verified. It is not easy to see what additional damage would be suffered by JMB merely from Mr West being permitted to work for a competing agency.

76. On the other hand, the order sought by JMB would directly prevent Mr West from working in his chosen profession as a real estate agent. In his affidavit Mr West said that being unable to work as an agent would impose financial hardship on him and prevent him from providing for his family. There is no reason to doubt this. In my view, the balance of convenience is against JMB.

Delay

77. As I have said, the evidence indicates that Mr West sought to conceal his employment with The Agency from JMB. But it is clear that nonetheless JMB was aware of the fact that Mr West was working for a competing business from 20 July onwards but it made no demand he cease doing so until its letter of 26 August. Indeed, the letter of 21 July implicitly suggested that Mr West's alleged “responsibilities” did not extend to refusing employment with The Agency. There is no explanation for JMB’s delay in seeking the restraint in question.

Conclusion

78. Taking these factors together, it is my view that the interlocutory restraint sought by JMB should be refused. I am particularly influenced by the drastic nature of the restraint sought and the delay in seeking it. In the circumstances, I think the delay is far too long. If an employer is to restrain a former employee from working at all for a competing business then I think that the employer must be expected to make the application within days of the employer becoming aware that the employee is doing so. It was not reasonable to allow Mr West to continue to work for weeks for The Agency under the assumption that there was no contest about his employment as such.

Self-promotion on social media

79. Counsel for JMB accepted that if the restraint against Mr West's employment with The Agency were refused then the order sought by JMB with respect to self-promotion on social media would likewise be refused.

Restraint on solicitation

80. The relevant provision of the contract is clause 18.2(a) which requires Mr West not to:

solicit, attempt to solicit (via Social Media or otherwise), or accept any instructions to performance real estate agent services for any Client for the Restraint Period.

81. For the purposes of this restraint the definition of “Client” is:

any person or entity:

(1)   to which the Employer provided services during your employment;

(2)   with which the Employer had direct dealings during your employment in relation to provision (or proposed provision) services by the Employer to the person or entity;

(3)   which referred business to the Employer during your employment;

(4)    with which You had direct dealings in the course of, or in connection with, your employment with the Employer.

82. The order sought by JMB is:

2.   An Order that until further order or 3 April 2021, the First Defendant be restrained from soliciting, attempting to solicit (via Social Media or otherwise) or accepting any instructions to provide real estate agency services from any person or entity:

(a)   with whom the First Defendant had direct dealings in the course of or in connection with his employment with the Plaintiff; or

(b)   who is listed as a buyer or a vendor in the “Confidential 22 May Client List” referred to in paragraph 79 of the affidavit of Jaimie Mark Woodcock dated 1 September 2020 in relation to a property that settled after 8 October 2013, or alternatively after 30 September 2015.

83. Order 2(a) is based on paragraph 4 of the definition of “client”. That order is not contentious and an undertaking in those terms has been offered. It is order 2(b) which has given rise to the dispute. Again, the relevant factors are the strength of JMB's prima facie case, the balance of convenience and delay.

Strength of prima facie case

84. It should be noted at once that the undertaking which has been offered, and is recorded in order 2(a), includes not only non-solicitation but non-acceptance of instructions. Thus Mr West will not be able to work at The Agency for any customer with whom he had “direct dealings” when working for JMB.

85. According to counsel for JMB, order 2(b) is based on sub-paragraph (2) of the definition of “Client”. But it does not follow the exact terms of that definition. Instead, it uses the listings report as a means of identifying the so-called clients of JMB.

86. One feature of the listings report is that it goes back to 2013. It thus includes transactions which predated the employment period to which the contracts which JMB seeks to enforce relate. Counsel for JMB submitted that the reference to “employment” in Mr West’s contracts should be understood as going back to when he was employed by JMB in October 2013, even though his employment was in fact discontinuous.

87. That seems to me to be an unlikely reading. I would have thought that the natural meaning of “employment” in the context would be the period of continuous employment covered by the relevant contract. It seems to me unlikely that the parties would have contemplated that, by resuming employment with JMB in September or October 2015, Mr West's immunity from post-employment restrictions, so far as his earlier period of employment was concerned, would be lost.

88. It is not however necessary to go into this further for the purpose of this application. There are more fundamental issues.

89. First, it is clear that order 2(b) extends to vendors and buyers with whom Mr West personally never dealt.

90. Furthermore, order 2(b) extends to counter-parties to transactions in which JMB was involved but for whom JMB never acted. Arguably, this in itself is beyond the scope of sub-paragraph (2) of the definition of “Client”.

91. The third issue is a practical one. Order 2(b) seeks to define Mr West’s obligations in terms of persons identified in the listings report while in the very same proceedings JMB contends that the report is confidential and insists on its return.

92. When this point was raised by counsel for the defendants in the course of the argument, counsel for JMB responded with the idea that the list could be provided to a solicitor who could then tell Mr West whether people on the list were embargoed. The formulation of this idea went through a number of iterations and for final purposes was reflected in proposed order 2A:

For the purposes of ensuring that the First Defendant complies with Order 2(b), the plaintiff’s solicitor shall within 3 business days of the date of this Order provide an independent solicitor, engaged at the plaintiff’s cost, with a copy of the “Confidential 22 May Client List” (including an electronic copy), and will inform the First Defendant of that independent solicitor. The First Defendant shall be able to make enquiries of the independent solicitor as to whether a particular person or entity is on that List and comes within Order 2(b), and the independent solicitor shall answer such enquiries promptly by informing the First Defendant whether a particular person or entity is on that List and comes within Order 2(b). No step taken by the First Defendant or the independent solicitor in accordance with this Order 2A shall constitute a breach of any implied undertaking or confidentiality order (including Order 4 made in these proceedings on 2 September 2020) that applies in respect of the “Confidential 22 May Client List”.

93. But the argument which prompted order 2A was not just a clever version of tit for tat. It points up the width of the protection that JMB is seeking. Order 2(b) would prevent Mr West from dealing with people whose relationship with JMB is not even known to him. It is difficult to see what legitimate interest JMB would have to prevent that sort of competition.

94. Overall, I consider that JMB’s prima facie case for a restraint in terms of order 2(b) is a weak one.

Balance of convenience

95. In assessing the balance of convenience it should be noted that the undertakings offered by the defendants include undertaking in terms of order 11:

An Order that up to the final determination of these proceedings, or until further order, the First Defendant keep lists and accounts of all real estate listings and sales, and new property managements, signed to or obtained by either the First Defendant in his personal capacity or any corporate entity of which the First Defendant is a director, or to the Second Defendant or any entity trading as The Agency Central Coast, that were obtained by or with the assistance of the First Defendant.

96. If JMB establishes at trial that the restraint on Mr West validly extends so far as is reflected by order 2(b), then this undertaking would come into play. In such a case the assessment of damages would appear to be straightforward, subject to proof that JMB would otherwise have got the sale. The damages would be the amount of the commission on that sale. It should readily be possible to calculate the damages based on the information which is to be provided.

97. It seems to me that for this restraint the question of balance of convenience may not even strictly arise. Damages may well be an adequate remedy. But there is more.

98. The final version of order 2A removed the problems which existed with earlier versions of the order, which required Mr West to pay for the costs of the solicitor who would hold the listings report and advise Mr West whether names appeared in it. But the procedure would still impose substantial practical impediments on Mr West acting as an agent.

99. The effect of order 2(b), combined with order 2A, is that Mr West would have to find out whether a person is on the list before dealing with that person. Suppose Mr West decides to engage in a doorknocking campaign to try and drum up business. Will he have to stand on the doorstep of each house he visits, ask the occupants their names and addresses, and then make a call to the solicitor to make sure they are not on the list, before continuing the conversation further?

96. Counsel for the defendants also pointed out that the solicitor would presumably be liable for lost sales if the solicitor gave Mr West an incorrect response or failed to respond promptly as the undertaking requires. The solicitor might even be guilty of contempt. Counsel observed that there may be difficulties in obtaining a solicitor who is prepared to take the task on and noted that no such solicitor has yet been identified.

97. For these reasons, I consider that the balance of convenience on this restraint also favours the defendants.

Delay

102. It is clear from the evidence that whether or not this was his intention, the effect of Mr West’s conduct was to conceal from JMB that he had the May 2020 listings report when he left JMB’s employment. That was not deduced by JMB until his employment with The Agency was revealed on 20 July. But it seems that the list was offered back to JMB after that and there is no explanation for why JMB did not take up that offer until after the proceedings were begun. In any event, debate about the report is not particularly relevant for present purposes. As I have already pointed out, the terms of the relevant restraint do not depend upon its existence.

103. From 7 August, at the latest, Mr West made it clear that he did not consider himself bound by any of the contractual restraints on which JMB relies. Yet it was not until 26 August that undertakings along the lines of order 2(b) were sought. In my view, there has once again been delay by JMB in seeking the relevant restraint.

104. Taking all these factors together, I again conclude that I should refuse JMB’s application for interlocutory restraint in the terms which are sought.

Access to Mr West’s Electronic Devices

105. Mr West has already given two undertakings which have been reflected in the minute of order. One is an undertaking not to use or disclose any confidential information and specifically the listings report. The other is to provide an affidavit describing any confidential information still in Mr West’s possession and provide details of that information including how and when it came into his possession and any disclosure which may have been made of it.

106. Against this background, JMB seeks the additional order 10:

10.   The First Defendant deliver up to the Court or to an independent computer expert, by a date determined by the Court:

(a)   Any electronic copy his possession, custody or control, of the “Confidential 22 May Client List” referred to in paragraph 79 of the affidavit of Jaimie Mark Woodcock dated 1 September 2020, or of any list or document derived from that List.

(b)   Any external storage device used by the First Defendant in connection with his employment with the Plaintiff.

(c)   Any desktop or laptop computer to which any such external storage device has been connected since 22 May 2020.

(d)   Any electronic copy of any documents in his possession, custody or control which contains the Plaintiff’s Confidential Information, and any computer or electronic storage device upon which or through which any such documents or Confidential Information have been accessed or stored.

for the purpose of allowing the Plaintiff’s independent engaged computer expert to:

(a)   make a copy of any such or device referred to in subparagraph (b) to (d) above; and

(b)   undertake non-destructive testing of any such device, for the purpose of investigating the First Defendant’s use or disclosure of the Plaintiff’s Confidential Information.

107. Subparagraph (a) is not controversial because Mr West has already said that there is no such electronic copy of the listings report. The question is whether he should, as the other orders require, submit his electronic devices to a computer expert retained by JMB to allow a search to be undertaken. Of course JMB will be entitled to discovery in these proceedings but if discovery is provided then in accordance with the usual principle, JMB will be bound by the affidavit of documents unless it can show that that affidavit is incomplete or reflects a misunderstanding of the defendants’ discovery obligations.

108. The orders JMB now seeks in effect seek to go behind Mr West’s statement in his affidavit that he has not copied the list and holds no other confidential information. As at present advised, it seems to me that the Court would only ever make such an order if there was evidence which clearly suggested that those affidavit statements were unreliable or potentially so. There is nothing in the evidence that would allow me to reach that conclusion at this stage. In my view, the additional order 10 is not justified at this point.

Conclusions and orders

109. For these reasons I refuse each of the orders sought by JMB which have not been agreed on behalf of the defendants.

(Parties addressed on costs and the form of orders)

110. The orders of the Court I make, apart from the first order which was the notation of the undertakings and acceptance of the undertakings:

1. Note and accept the defendants’ written undertakings dated 16 September 2020.

2. Order that the plaintiff's application for interlocutory relief be otherwise dismissed.

3. Order that the plaintiff pay the defendant's costs of the application from 17 September 2020 onwards and otherwise that the parties' costs of the application be costs in the cause.

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Decision last updated: 09 October 2020