K R Peters Real Estate Pty Ltd v Hickey
[2020] VSC 531
•24 August 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST
S ECI 2020 03173
| K R PETERS REAL ESTATE PTY LTD (ACN 621 418 684) | Plaintiff |
| v | |
| LIZA HICKEY | Defendant |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 August 2020 |
DATE OF RULING: | 24 August 2020 |
CASE MAY BE CITED AS: | K R Peters Real Estate Pty Ltd v Hickey |
MEDIUM NEUTRAL CITATION: | [2020] VSC 531 |
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PRACTICE AND PROCEDURE – Application for an interlocutory injunction – Alleged breach of contract of employment – Serious question to be tried – Confidential information – Restraint of trade – Non-solicitation – Delivery up – Wallis Nominees (Computing) Pty Ltd v Pickett (2013) 45 VR 657 applied – Birdanco Nominees Pty Ltd v Money (2012) 36 VR 341 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R E T Wodak | Dandanis & Associates |
| For the Defendant | Mr L Stanistreet | White Cleland Pty Ltd |
TABLE OF CONTENTS
Summary.............................................................................................................................................. 1
Evidence............................................................................................................................................... 1
Background......................................................................................................................................... 1
Is there a serious question to be tried?.......................................................................................... 8
Confidential Information............................................................................................................. 8
Plaintiff’s submissions...................................................................................................... 10
Defendant’s submissions.................................................................................................. 12
Analysis............................................................................................................................... 13
Restraint of Trade........................................................................................................................ 15
Plaintiff’s submissions...................................................................................................... 16
Defendant’s submissions.................................................................................................. 18
Analysis............................................................................................................................... 19
Non-solicitation........................................................................................................................... 22
Plaintiff’s submissions...................................................................................................... 22
Defendant’s submissions.................................................................................................. 22
Analysis............................................................................................................................... 23
Does the balance of convenience weigh for or against granting an injunction?................ 24
Plaintiff’s submissions................................................................................................................ 24
Defendant’s submissions........................................................................................................... 25
Analysis........................................................................................................................................ 26
Conclusion......................................................................................................................................... 30
HER HONOUR:
The plaintiff operates a real estate agency. Until recently, it employed the defendant as a full-time sales agent representative (property consultant). She worked at the plaintiff’s premises in Officer, a suburb in the outer south-east of Melbourne. Pakenham is an adjacent suburb. On 20 July 2020, the defendant resigned and commenced employment with a rival real estate agency, Barry Plant Pakenham. This ruling concerns an application by the plaintiff for interlocutory relief, including an injunction to enforce restraint of trade and non-solicitation clauses in its contract of employment with the defendant, orders for delivery up of confidential information and an affidavit concerning such information and any disclosure of it, and an order for delivery up of the electronic devices held by the defendant for the preservation of evidence.
Summary
I will make orders enforcing the non-solicitation clause, but not the restraint of trade clause. I will make orders for delivery up of confidential information, and for an affidavit of disclosure. At this stage, I decline to make orders for delivery up of electronic devices.
Evidence
The plaintiff relies on the affidavits of Peter Nicolls, a director of the plaintiff, sworn 4 August 2020 (‘first Nicolls affidavit’), 14 August 2020 (‘second Nicolls affidavit’) and 17 August 2020 (‘third Nicolls affidavit’). The plaintiff filed written submissions and a chronology on 17 August 2020.
The defendant relies on her affidavits sworn 10 August 2020 (‘first Hickey affidavit’) and 18 August 2020 (‘second Hickey affidavit’). The defendant filed written submissions on 19 August 2020.
Background
The following facts are not in dispute unless indicated otherwise.
The plaintiff company was registered on 31 August 2017.[1] It was founded by its directors, Mr Peter Nicolls and Mr Ian Harris. The plaintiff’s business focuses mainly on the marketing and selling of residential real estate and new residential developments, principally in the eastern suburbs of Melbourne.
[1]Exhibit ‘PN-1’ to the first Nicolls affidavit.
The plaintiff uses customer relationship management software. The software is known as ‘Zenu’. The Zenu database stores information regarding the plaintiff’s business activities and clients. This includes detailed information regarding current and prospective buyers and vendors such as their name, telephone number, email address, preferences and requirements. After a weekly Monday morning sales meeting, the information provided by staff is uploaded to the Zenu database. The database is also updated when the plaintiff receives an enquiry by telephone, auction or at a property inspection.
The defendant commences employment with the plaintiff in 2017 as a receptionist. She is later promoted to the position of sales agent representative (property consultant). There is divergence between the parties as to the date of commencement of employment and the date of promotion. That is unnecessary to resolve here. Both parties agree that the parties executed a contract of employment in June 2018 (‘employment contract’).[2] The salary details for the position in the Schedule are dated 24 May 2018.
[2]Exhibit ‘PN-2’ to the first Nicolls affidavit.
During her employment, the defendant accesses and uses the Zenu software and database. From time to time, she uses the software to print the plaintiff’s client contacts. There is a dispute about whether or not that was permissible under the employment contract (and applicable policy) which is not necessary to resolve here.
On 12 December 2019, the defendant conducts an appraisal of a property at Annecy Lane, Pakenham on behalf of the plaintiff (‘the Annecy Lane property’).
In June 2020, a prospective vendor contacts the plaintiff seeking an appraisal of a property in Rosina Drive, Officer (‘the Rosina Drive property’). The defendant attends the property. There is a dispute about whether or not she conducted an appraisal of it. On 23 June 2020, the Rosina Drive property is listed for sale with the plaintiff.
In mid-June 2020, the defendant has discussions with another real estate agency, Harcourts Pakenham, about taking up employment there. She tells a colleague that she is considering leaving her employment to take up a position at Harcourts Pakenham. There is a dispute about whether or not she invites her colleague to join her at Harcourts Pakenham. The defendant does not take up employment at Harcourts Pakenham.
The plaintiff’s records show that on 24 June 2020 the defendant downloads and exports 2,109 contacts from the Zenu database.[3]
[3]Exhibit ‘PN-3’ to the first Nicolls affidavit.
On 25 June 2020, the defendant uses the Zenu software to print a list of 500 contacts, being the maximum number which could be printed in one request, and takes the printout home (‘the list of 500’).
In the period between 1 and 15 July 2020, the defendant exchanges emails with the prospective vendor of the Annecy Lane property.
On 14 July 2020, the defendant takes a promotional video for the plaintiff that includes a testimonial from a client of the plaintiff.
On 15 July 2020, the defendant emails the potential vendor of the Annecy Lane property that she is preparing paperwork [to proceed with the listing for sale].
On 15 July 2020, the prospective vendor (or their son) contacts the plaintiff requesting an appraisal of a property at Dodson Road, Officer (‘the Dodson Road property’). This ‘lead’ is assigned to the defendant. There is a dispute between the parties as to whether the defendant appraises the property while employed by the plaintiff. The defendant deposes that she did not do so and conducted the appraisal on 21 July 2020 (the day after her employment concluded).
On the same day, namely 15 July 2020, another prospective client contacts the plaintiff requesting an appraisal of a property at Westringia Way, Officer (‘the Westringia Way property’). It is assigned to the defendant.
On 17 July 2020, the defendant informs the prospective vendor of the Annecy Lane property by email that she has the weekend off and will prepare paperwork and send it on Monday [20 July].[4]
[4]Exhibit ‘PN-22’ to the second Nicolls affidavit.
On Saturday 18 July 2020, the defendant attends the Westringia Way property to provide an appraisal of it. She does not report the outcome to the plaintiff. The defendant deposes that on the same day Barry Plant Pakenham appraises the property.
On 20 July 2020, the defendant resigns from her employment with the plaintiff. Her resignation is accepted with immediate effect. On the same day, she commences employment with Barry Plant Pakenham. Its premises are approximately 12 km from the plaintiff’s premises in Officer.
On the day of her resignation, the defendant tells the prospective vendor of the Westringia Way property that she is no longer employed by the plaintiff.
On 21 July 2020, the defendant shares a new testimonial on Facebook ‘for marketing purposes’ (‘the Facebook testimonial’).[5] The testimonial is given by the same person who had previously given the 14 July 2020 testimonial (referred to above).
[5]Exhibit ‘PN-5’ to the first Nicolls affidavit.
The plaintiff acts promptly. On 23 July 2020, the plaintiff’s solicitors write to the defendant (’23 July letter’) referring to the employment contract and her obligations.[6] They specifically refer to the downloading of information from the Zenu database on 24 June and photocopying of pages of client details on 25 June. The letter demands the defendant cease and desist from using the plaintiff’s confidential information, deliver it up and provide a statutory declaration confirming she no longer has any such information. On the same date, the plaintiff’s solicitors also write to Barry Plant Pakenham regarding the matter.[7]
[6]Exhibit ‘PN-8’ to the first Nicolls affidavit.
[7]Exhibit ‘PN-9’ to the first Nicolls affidavit.
On 24 July 2020, the defendant’s solicitors respond to the letter requesting a copy of the employment contract (‘the 24 July letter’).[8] (The plaintiff’s solicitors appear to have received this letter on 29 July.) The letter states, amongst other things, that the defendant denies photocopying client details. The letter states that on 24 June the defendant “printed out extracts of the client database because it was easier for her to contact clients from a hard copy record” to assist in performing duties while working from home. The letter states the defendant overlooked returning the extracts, and would do so by 4pm that day. It states that the defendant does not intend to solicit clients from the plaintiff. The defendant declines to provide the plaintiff with a statutory declaration. The 24 July letter states:
Upon return of hard copy contact records, we are instructed our client will no longer hold any confidential information, property or records belonging to your client. Our client will not provide a statutory declaration to that effect, but is happy to respond to any further queries if your client has reasonable grounds to support the allegation that she continues to hold or use information improperly.
Our client will not provide copies of communications undertaken in the course of her current employment as this would be a breach of her current employment obligations.
[8]Exhibit ‘PN-12’ to the first Nicolls affidavit.
On 25 July 2020, the defendant delivers up the list of 500. Along with the details of the contacts, it includes the type of contact (e.g. prospective buyer) and the last note, and last task (e.g. ‘recently had an appraisal’ and ‘would like a call early next year to see if the market has changed’). The defendant also delivers up a hard copy list of 268 property appraisals undertaken by the plaintiff and sorted by suburb (‘the 268 property appraisals’.[9] Along with the details of contacts, it includes ‘last notes’ (eg. ‘spoke with him will go overseas and should be ready to sell his property in March’). Both documents refer to the defendant as ‘team leader’. Both contain personal information regarding the persons listed, such as names of partners.
[9]Exhibit ‘PN-10’ to the first Nicolls affidavit.
On or before 26 July 2020, the Annecy Lane property is listed with Barry Plant Pakenham.
On 29 July 2020, the plaintiff’s solicitors write again to the defendant.[10] The letter attaches a statutory declaration for the defendant to execute, failing which, the plaintiff will issue legal proceedings. On the same date, the defendant’s solicitors write to the plaintiff’s solicitors attaching their letter dated 24 July.[11]
[10]Exhibit ‘PN-11’ to the first Nicolls affidavit.
[11]Exhibit ‘PN-12’ to the first Nicolls affidavit.
On 30 July 2020, the plaintiff’s solicitors write to the defendant’s solicitors and attach the employment contract.[12] The letter states that the defendant did not work from home in June 2020. The letter refers to the hard copies of the list of 500 and the 268 property appraisals that the defendant returned to the plaintiff on 25 July. The letter states that the defendant continues to hold the plaintiff’s confidential information and refers to the Facebook testimonial and other matters. The letter demands that the defendant execute an attached statutory declaration in respect of confidential information by 31 July.
[12]Exhibit ‘PN-13’ to the first Nicolls affidavit.
On 31 July 2020, the defendant’s solicitors write to the plaintiff’s solicitors.[13] The letter states that the plaintiff instructed the defendant to work from home in June 2020 during their coronavirus period. Amongst other things, the letter states:
Our client repeats that all of your client’s information which was in our client’s position has now been delivered to your client’s office Our client does not continue to hold any information either in hard copy or electronic format which falls within the definition of your client’s confidential information.
[13]Exhibit ‘PN-14’ to the first Nicolls affidavit.
On 31 July 2020, the Westringia property is listed for sale with Barry Plant and the defendant is noted as one of two selling agents.
On 2 August 2020, the plaintiff is informed by the prospective vendor of the Dodson Road property that he had been contacted by the defendant advising him that she was no longer employed by the plaintiff and that he had signed an exclusive sale authority with Barry Plant Pakenham after the defendant requested he do so.
On 3 August 2020, the solicitors for Barry Plant Pakenham respond to the 23 July letter.[14] They state that Barry Plant Pakenham has not been provided with the plaintiff’s confidential information and is not aware of the defendant disclosing it.
[14]Exhibit ‘PN-9’ to the first Nicolls affidavit.
The proceeding is commenced on 5 August 2020.
In her first affidavit, the defendant deposes that after proceedings commence, she identifies an electronic PDF file containing the list of 500 and the 268 property appraisals on her personal laptop computer. On or about 7 August 2020, she copies the PDF electronic file onto a USB and deposes that she deletes copies from her laptop computer.[15] The plaintiff challenges this evidence.
[15]First Hickey affidavit [51].
On 12 August 2020, the plaintiff’s solicitors write to the defendant’s solicitors, referring to the defendant’s affidavit and retention of electronic records, and requiring that the defendant deliver up her personal laptop and mobile telephone for forensic review and delete electronic copies of its confidential information.[16] The letter states that the plaintiff requires a statutory declaration from the defendant that, amongst other things, confirms that she has none of its confidential information.
[16]Exhibit ‘PN-15’ to the second Nicolls affidavit.
On 13 August 2020, the defendant’s solicitors reply to the plaintiff’s solicitors.[17] The letter states that the defendant is under no obligation to deliver up her personal laptop for forensic examination. The letter states that the defendant:
…is presently unable to deliver up anything to your office, including the PDF file removed from her laptop, because your office is more than 5km from our client’s residence and, as such, would not be permitted under current Victorian government Stage 4 restrictions due to the coronavirus pandemic.
[17]Exhibit ‘PN-16’ to the second Nicolls affidavit. Exhibit ‘PN-17’ contains other correspondence exchanged between solicitors on 13 August 2020.
On 14 August 2020, the defendant texts the vendor of the Rosina Drive property and offers to conduct an appraisal of it.[18] The defendant deposes the person was a contact in the Barry Plant database and received the text as part of a bulk text sent to contacts in the database that day.[19] The circumstances of the defendant’s contact with the Rosina Drive property vendor are not agreed between the parties.
[18]Exhibit ‘PN-25’ to the third Nicolls affidavit.
[19]Second Hickey affidavit [19].
Is there a serious question to be tried?
The legal principles applicable to interlocutory injunctions are well-established and not in dispute.[20] The first issue is whether there is a serious question to be tried. This issue shall be examined in respect of the plaintiff’s allegations that there is a prima facie case that the defendant has breached her contractual obligations in respect of confidential information, restraint of trade and non-solicitation. It is unnecessary, at this stage, to consider whether or not the defendant has breached equitable and statutory obligations.
[20]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57.
Confidential Information
Clause 24.1 of the employment contract places obligations upon the defendant in respect of the plaintiff’s confidential information.
24.1In this EMPLOYMENT AGREEMENT the term “confidential information” shall include but is not limited to:
(a)All information relating to clients of K R Peters Real Estate Pty Ltd, and their practices, business dealings, marketing details, trade secrets and affairs;
(b)The practices, business dealings, pricing and costing policies, trade secrets and affairs of K R Peters Real Estate Pty Ltd or any of its associated entities;
(c)All electronic and documented databases or client lists, K R Peters Real Estate Pty Ltd computer programmes, multi-media presentations and computer disks, and
(d)The techniques and methods of marketing, budgeting and market analysis used by K R Peters Real Estate Pty Ltd or any of its associated entities.
24.2You may use confidential information for the sole purpose of providing services to K R Peters Real Estate Pty Ltd in the course of your employment.
24.3You shall not disclose, at any time after the date of this EMPLOYMENT AGREEMENT including after the termination of your employment with K R Peters Real Estate Pty Ltd for any reason, to any person any confidential information which is acquired or of which you become aware by reason of your employment for any other purpose than that stated in Clause 26.2.
24.4You must not, other than in the proper performance of your duties, appropriate, copy, memorise, disclose, communicate or make available in any way to any person any confidential information and must not at any time for your own benefit or for the benefit of any other person, directly or indirectly, take advantage of, use or in any way exploit confidential information.
...
24.6You acknowledge that confidential information is of considerable commercial value to KR Peters Real Estate Ply Ltd. Any disclosure of confidential information will cause K R Peters Real Estate Pty Ltd damage that cannot adequately be compensated by any award of damages. K R Peters Real Estate Pty Ltd shall be entitled to an injunction to restrain you from disclosure of this confidential information and this remedy shall be in addition to any award of damages that may be made in favour of K R Peters Real Estate Pty Ltd.
The plaintiff also relies on cl 5.3(g). It concerns policies. The plaintiff says there is a policy prohibiting printouts from the Zenu database. The defendant says it was permissible and there is a practice of printing out from the Zenu database. The plaintiff’s policy was not in evidence and this issue need not be considered further at this interlocutory stage.
Clause 13 of the employment contract concerns return of property.
13.1When your employment is terminated, you must return to K R Peters Real Estate Pty Ltd all property of K R Peters Real Estate Pty Ltd which is in your possession, custody or control. This includes, without limitation, company vehicles, mobile phones, credit cards, equipment, documents, policies, manuals, keys, computer hardware and software, or other information whether in electronic, written or other form.
13.2You undertake not to retain any copies of any such property and further undertake to delete all computer software and data belonging to K R Peters Real Estate Pty Ltd from your computer, including any laptop. Prior to such deletion, you must ensure that K R Peters Real Estate Pty Ltd has up to date copies of the software and data.
13.3To assist K R Peters Real Estate Pty Ltd in ensuring that you fulfil your obligations under this Clause, you shall agree to provide for inspection all laptop computers, notebooks and other electronic devices that store electronic data.
(emphasis added)
Plaintiff’s submissions
The evidence discloses a prima facie case that the defendant breached contractual, statutory and equitable duties by retaining the plaintiff’s confidential information. The defendant has refused to deliver up her electronic devices for forensic analysis.
On 24 June 2020 at 1.37pm, the defendant exported 2,109 contacts to her laptop and downloaded and printed the 268 property appraisals. On 25 June 2020, she printed out the list of 500 and took them home. Mr Nicolls gives evidence that it would be very unusual for a sales representative to work through 500 contacts in several months. There was no need for her to print out 2,000 plus contacts for her employment with the plaintiff.
The plaintiff produced a letter of demand for its confidential information to be returned. The defendant acknowledges that she had confidential information. She instructed her solicitors to say that once the hard copies of the documents were returned she would not hold any confidential information. The defendant asserted she had nothing more. She declined to provide a statutory declaration to that effect. The defendant now concedes she possesses electronic files with the plaintiff’s confidential documents. The defendant does not depose as to why she gave her solicitors instructions to state that she would have nothing more on the return of documents. She has not revealed some of the documents in her possession. She deposes to having a PDF file on a USB stick containing the plaintiff’s confidential information. This is not the same as the CSV file which Mr Nicolls deposes that the defendant downloaded. There is no basis for a finding they are the same file. The evidence, being Exhibit ‘PN-3’ to the first Nicholls affidavit, does not show whether the file is CSV or PDF or anything else. There is no serious opposition to the orders that she return the plaintiff’s confidential information.
There is a strong inference that the defendant used the plaintiff’s information post her employment. The defendant obtained the Facebook testimonial from a client of the plaintiff post her employment with it and put it on her Facebook page. She does not suggest that the client of the plaintiff is also a client of Barry Plant Pakenham. The Facebook testimonial is relied upon in support of the allegation of breach of confidence.
There is a strong prima facie case that the defendant has used the plaintiff’s confidential information to cause the Annecy Lane, Dodson Street and Westringia Way properties to become listed by Barry Plant Pakenham. This is to the detriment of the plaintiff and to the benefit of Barry Plant Pakenham.
Clause 13.1 of the employment contract contains the core obligation to return property. Clause 13.3 is ancillary to that. Clause 13.3 relates to devices other than those owned by the plaintiff because it anticipates the plaintiff’s devices have already been returned pursuant to cl 13.1. In breach of cl 13.1 of the employment contract, the defendant has not returned the plaintiff’s physical property and information on the termination of her employment. In breach of cl 13.3, the defendant has not made her electronic devices available for inspection.
The plaintiff’s proposed orders envisage that the defendant deliver up her electronic devices and that a forensic information technology specialist, engaged by the plaintiff, make a mirror image of the devices to preserve evidence. The devices would only be accessed by the specialist, and then the defendant’s lawyers would have the opportunity to first inspect the material copied to determine if any of it is privileged. The defendant’s evidence is she has no further confidential information in her possession. The plaintiff is not obliged to accept that without verification.
Defendant’s submissions
In respect of the photocopying and downloading allegations, the defendant deposes that on or about 19 September 2019, she attended a training session organised by the plaintiff and that the trainer suggested that sales representatives print out a listing of potential clients and use it to make marketing calls. She deposes that each of the sales representatives made a printout of potential client listings for the training session.
The evidence in the second Nicolls affidavit that it is extremely unlikely for a real estate agent to work through 500 contacts in one month is challenged. Mr Nicolls is not qualified to give opinion evidence. There is not one shred of evidence before the Court to justify it. No inference should be drawn about the defendant printing out contacts from the Zenu database.
In her affidavit, the defendant deposes to the following.[21]
Since this commencement of this proceeding, I have checked my personal laptop computer to verify whether any copy of K R Peters’ contacts or any electronic files which contain K R Peters’ confidential documents remain on that computer.
I have identified that when I requested that the Hardcopy Documents be printed, the database extracted the contact records onto a “PDF” file which remained in electronic form on my computer. I was not aware at the time that I printed the documents that an extract was stored on my computer and was not aware of that fact that the time that I instructed White Cleland to respond to K R Peters’ lawyers.
I have not been able to locate or identify any other electronic files which contain K R Peters’ confidential information contained on my personal computer.
On or about 7 August 2020, I copied the PDF file containing K R Peters’ contacts onto a blank USB drive and have placed it in a sealed envelope. I have deleted all copies of the file from my personal laptop computer. I am unable to currently deliver the USB drive to K R Peters because its office is more than 5km from my resident and I would be in breach my obligations under current Stage Four emergency directives issued by Victorian State Government. I am prepared to deliver up the USB drive to K R Peters or its representatives in whatever manner it requires.
Apart from the Hardcopy Documents, and the PDF file referred to above, I do not have, and have not held since the date of my resignation from K R Peters, in my possession, custody or control any documents or files whether in hard copy or electronic format which contain K R Peters’ confidential information.
At no time have I disclosed K R Peters confidential information or provided copies of either the Hardcopy Documents or the PDF file to Barry Plant Pakenham, or to any other person.
[21]First Hickey affidavit [48]–[52].
The defendant is prepared to deliver up the PDF file on the USB stick identified in her affidavit. There is no danger of any destruction of evidence.
The defendant has very real concerns about the extent of the orders sought. That is plain from the evidence given in her second affidavit. The vendor of the Rosina Drive property was already in the database of Barry Plant Pakenham. The defendant’s text message to the vendor does not establish that the defendant retains and is misusing confidential information.
Clause 13.3 does not identify the devices to which it applies. The earlier clause, namely cl 13.1, refers to devices that are the property of the employer.
Further, cl 13.3 does not say the length of time for which it is valid. It could enable the employer to ask for inspection at any time if construed on its terms. The Court should be concerned about giving effect to that. By the delivery up orders, the plaintiff is trying to obtain an Anton Piller order. To obtain those orders, there would need to be evidence that there is a real and imminent danger of destruction of evidence.
Moreover, the orders sought for delivery up to make a mirror image of the defendant’s electronic devices are unnecessary. The plaintiff has conceded that if the proceeding progresses they will get discovery anyway.
Analysis
There is a strong prima facie case that the defendant has breached the obligations of confidentiality in cl 24 of her contract for the following reasons.
The Zenu database falls within the definition of ‘confidential information’ in cl 24.1. I am reinforced in this conclusion by reading the extracts contained in Exhibit ‘PN-10’ to the first Nicolls affidavit. Along with client information, the database contains notes which contain information on the business details and affairs of the plaintiff, together with techniques and methods of marketing.
Pursuant to cl 24.2, the defendant was to use confidential information for the sole purpose of providing services to her employer, the plaintiff, in the course of her employment with it. Pursuant to cl 24.4, she was not to use that information for her own benefit or that of any other person, directly or indirectly. Clause 24.3 expressly imposes post-employment confidentiality obligations.
Post-employment, the defendant retained hard copies of confidential information of the plaintiff, being the list of 500 and the 268 property appraisals. They were only returned after demand. As she deposes above, the defendant continues to retain the plaintiff’s electronic copies of these files. There is no satisfactory explanation of why the defendant did not undertake a proper search of her laptop computer before instructing her solicitors to write, repeatedly, that she retained no confidential information.
The defendant’s retention of the electronic files which she deposes to having downloaded onto a USB stick is, prima facie, a continuing breach of her obligation not to retain confidential information. The reference to the COVID-19 restrictions is an excuse, not a plausible explanation. Postage and courier services continue to operate during the restrictions.
Upon termination of her employment, the defendant was obliged to return the list of 500, and the 268 property appraisals, together with the electronic copies on her USB stick. The failure to do so was (and is) a prima facie breach of cl 13.1 of the employment contract, which obliges her to return the plaintiff’s property.
Clause 13.3 of the employment contract requires the plaintiff provide electronic devices for inspection to assist the plaintiff “in ensuring that you fulfil your obligations under this Clause”. This is a clause that applies to return of property. The issue is whether or not it applies to electronic devices not owned by the plaintiff. And if so, whether the clause is valid given that, as the defendant submits, it has no expiry date. If the clause does apply to devices not owned by the plaintiff, and is valid, then prima facie the defendant is in breach of it given her refusal to provide such devices for inspection. This issue need not be determined now. As will be discussed below, the balance of convenience does not favour making orders pursuant to cl 13.3.
Restraint of Trade
Turning next to the restraint of trade provision.
25.1.This clause shall only apply to employees in classifications as Sales Managers, Sales Representatives or Office Managers.
25.2.In this EMPLOYMENT AGREEMENT, unless the contrary intention appears the following expressions shall have the following meanings:-
(a)“Business” - the business of K R Peters Real Estate Pty Ltd including the provision of commercial or residential real estate services by K R Peters Real Estate Pty Ltd (including selling or purchasing real estate, property management and property valuation);
(b)“Restraint Area” - Within a radius of 5 kilometres of any K R Peters Real Estate Pty Ltd office from which you worked within the twelve months prior to the termination of your employment;
(c)“Restraint Period” - 4 months from the date of termination of your employment.
25.3.On termination of employment for any reason whatsoever (other than when you have been terminated by K R Peters Real Estate Pty Ltd under Clause 13 and you have accepted employment with the purchaser, assignee or successor of K R Peters Real Estate Pty Ltd), you promise that you shall not, during the Restraint Period as described in Subclause (c) above within the Restraint Area as described in Subclause (b) above, conduct, be concerned or interested in, whether directly or indirectly, and whether as an employee, principal, agent, independent contractor, consultant, adviser or in any other capacity whatsoever, any business in competition with the Business and performing any function or kind of work in a competitive capacity to the Business.
… [cl 25.4 concerns non-solicitation and is extracted further below]
25.5.From the date of termination of employment, you shall not represent yourself as being in any way connected with or interested in the Business or any business carried on from time to time by K R Peters Real Estate Pty Ltd.
25.6.You acknowledge, agree and declare:
25.6.1.That the only effective and reasonable manner in which K R Peters Real Estate Pty Ltd’ rights in respect of its business secrets and lists of clients and suppliers, contracts and business affairs can be protected is by the imposition of the restraints undertaken by you in terms of this clause; and
25.6.2.Not to do, or omit to do, anything, which would have the purpose of frustrating the provisions of this clause.
25.7.It is recorded that the restraints contained in this clause are given by you in recognition, inter alia, of the facts that you:
25.7.1.Have acquired and will retain know-how and access to the trade secrets and confidential information of K R Peters Real Estate Pty Ltd;
25.7.2.Have had access to the lists of clients with whom K R Peters Real Estate Pty Ltd does business and a detailed knowledge of all the contacts and business affairs of the Business; and
25.7.3.The benefits set out in this EMPLOYMENT AGREEMENT, in particular the commissions and bonuses payable to you take into account the fact that you have agreed to abide by the various restraints set out in this clause.
25.8.You acknowledge, agree and declare that each of the restraints contained in this clause is reasonable in its scope and duration having regard to the interests of each party to this EMPLOYMENT AGREEMENT and go no further than is reasonably necessary to protect K R Peters Real Estate Pty Ltd’ interests. In particular, you acknowledge that without the restraints contained in this clause it would be necessary for K R Peters Real Estate Pty Ltd to restrict your access to confidential information which would create practical difficulties and inefficiencies in the carrying out of your duties.
(emphasis added)
Plaintiff’s submissions
The Annecy Lane property is now listed for sale by Barry Plant. The defendant does not refute the evidence that she caused it to become listed. She does not say how the prospective vendor of the property became a client of Barry Plant. The defendant produces records regarding the Rosina Drive property but does not produce them for the Annecy Lane property. The inference is that those records would not assist her.
The defendant gives false evidence in her first affidavit. She deposes that to the best of her knowledge, the only contact that the prospective vendor of the Annecy Lane property had with the plaintiff was a request for a free appraisal in December 2019. However, the evidence is that the defendant had extensive contact with the prospective vendor in July 2020 on behalf of the plaintiff. She knew he was waiting for paperwork to sign the property. The inevitable conclusion is that she used the confidential information and relationship developed with him to get business for her new employer.
The defendant did not report the outcome of her appraisal of the Westringia Way property. Nothing prevented her from doing so or from logging in at home and updating the Zenu database. It is ludicrous to suggest that she was entitled to keep the information to herself. She undertook the appraisal on behalf of the plaintiff. She says the prospective vendor of that property contacted her after she left the employ of the plaintiff. The defendant does not depose to referring the potential vendor back to the plaintiff. The strong inference is that she obtained the listing for Barry Plant Pakenham.
The defendant’s evidence is that she appraised the Dodson Road property after her employment with the plaintiff ended on 21 July 2020. She does not identify how she came to appraise the property. There is no suggestion that she had any basis for obtaining the appraisal on behalf of Barry Plant Pakenham. She does not suggest the owner of the property was known to Barry Plant Pakenham. It is now listed by them for sale.
By the defendant’s conduct, the plaintiff has lost the opportunity to sell the Annecy Lane, Westringia Way and Dodson Road properties.
The defendant is working in the suburb of Officer. Her 14 August 2020 text to the prospective vendor of the Rosina Drive property demonstrates that. The defendant is listed as the agent in respect of the Westringia Way property, also in Officer. She deposes that she is conducting business within the restraint area, namely within 5 km of the office of the plaintiff.
Client relationships are the lifeblood of a real estate business. Clients may feel a connection with an individual agent. However, once that agent is no longer employed at the agency, it is reasonable for the agency to have an opportunity to transition clients to an agent in their employ. The restraints do no more than is reasonably necessary to protect the employer’s legitimate interests. In this case, the restraint is confined to a 5 km radius and is confined to a period of 4 months. The 5 km radius is a modest restraint. It leaves a large amount of Melbourne available to the defendant. The period of 4 months is a short period. Further, the restraint only relates to clients with whom the defendant has had contact in the past 12 months of employment.
The location of the defendant’s new employer, being an office more than 10 km away from the plaintiff’s office, is not relevant. The evidence discloses that she is conducting business within the restraint area, as discussed above.
Defendant’s submissions
Clause 25.3 is very broad and basically applies to the defendant acting in any capacity. It stretches far further than any reasonable protection that the plaintiff might need. It is not enforceable.
In respect of the Westringia Way property, the defendant deposes that Barry Plant appraised it on the same day as she did. The defendant is said not to have entered the details on the plaintiff’s Zenu database. She appraised the property late on Saturday and her resignation occurred on Monday, after which she left the office for good. There was no proper opportunity to enter the details, and the plaintiff had ample opportunity to ask her questions about the property and did not. The plaintiff has no legitimate business interest capable of protection with respect to this property.
In respect of the Dodson Road property, the defendant appraised the property on 21 July 2020. There is no evidence that she had any contact with the prospective vendors [while in the employ of the plaintiff] beyond the initial telephone call.
In respect of the Annecy Lane property, this is outside the restraint area. The prospective vendor was not, on any view a client. There is no legitimate interest to protect.
Even if the restraint is enforceable, it has not been breached as the office of the defendant’s new employer is outside the restraint area. The ‘restraint area’ of 5 km should be from where business is conducted, the office.
Analysis
In Wallis Nominees (Computing) Pty Ltd v Pickett, the Court of Appeal stated the following principles, which I adopt.[22]
[22](2013) 45 VR 657 [21]–[26], [50], [52]–[54] (Warren CJ and Davies AJA, Redlich JA agreeing) (citations omitted).
The test for whether an employer has a legitimate interest in protecting its customer connection through restraint clauses has been put in various ways.
One variation is that a legitimate interest will arise:
[w]here an employee is in a position which brings him into close and personal contact with the customers of a business in such a way that he may establish personal relations with them of such a character that if he leaves his employment he may be able to take away from his former employer some of his customers and thereby substantially affect the proprietary interest of that employer in the goodwill of his business …
Another variation is where there is some element in the employee-customer relationship which causes customers to rely on the employee and to regard the employee as the business to the exclusion of the employer.
A third variation is where the personal relation between the employee and the customer be such as to enable the employee to control the customer’s business as a personal asset. This describes “the ability of the employee to use the relation of influence, which can properly be regarded as the employer’s property, for the employee’s purposes as distinct from those of the business”.
A fourth variation is where the employee is described as having become the “human face” of the business. This is understood to mean that the employee has become the person who represents the business to the customer or has such a personal relation with the customer as to enable them to control the customer’s business, or as a way of emphasising “that the source of influence must be the personal relationship which is likely to develop, or has developed, between the employee and customer as a result of dealings between them on behalf of the employer and its business”.
Two key points emerge from these formulations. First, that an employee must be in a position to gain trust and confidence so as to be relied on in a client’s affairs. Secondly, that the relationship between employee and client is such that there is a possibility that if the employee leaves the business of the employer he or she may carry away the client’s business with them.
…
Whether a restraint of trade clause is reasonable is a question of law. The relevant principles in this regard are not in dispute. The test is whether the restraint does more than what is reasonably necessary to protect the employer’s legitimate interest.
...
Secondly, in principle, a restraint clause that goes beyond solicitation, such as accepting a customer’s offer, may be reasonable where there is a strong customer connection and solicitation might not be necessary (for example, the customer might approach them).
Thirdly, the more significant the personal relationship between the employee and customers is to the finding of legitimate interest, the less likely it is that a restraint will be found reasonable if it relates to customers whom the employee did not deal with.
The principles as to how to determine a reasonable duration for a restraint clause are uncontroversial and not in dispute. The matter is not one that is capable of being settled by direct evidence. An opinion “can only be formed on a broad and common sense view” after informing oneself fully of “the facts and circumstances relating to the employer’s business, the nature of the employer's interest to be protected, and the likely effect on this of solicitation”.
In Birdanco Nominees Pty Ltd v Money, the Court of Appeal stated the following principles, which I adopt:[23]
…In the context of a restraint of trade in an employment contract, the onus rests upon the employer to establish that the restraint is necessary to protect the employer’s legitimate interests. A restraint clause in an employment agreement will be enforceable only if the restrictions imposed are reasonable having regard to the interests of the parties that are to be protected, as well as to the public interest.
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A covenant in restraint of trade should be construed in a business fashion. In Southland Frozen Meat & Produce Export Co Ltd v Nelson Brothers Ltd, a decision of the Privy Council, their Lordships said that the words of a covenant in restraint of trade should be given their business meaning and not their wider possible dictionary meaning. They said having regard to the agreement, that it must be construed in a business fashion and:
… that the words must not be applied to everything that might be said to come within a possible dictionary use of them, but must be interpreted in the way in which businessmen would interpret them, when used in relation to a business matter of this description.
[23](2012) 36 VR 341 [36], [39] (Robson AJA) (citations omitted).
Clause 25.3 of the employment contract contains a restraint of trade. The clause is unclear. A literal interpretation of cl 25.3 is that upon termination of employment, the plaintiff must not, in any capacity whatsoever (including as an employee), during the restraint period (4 months) within the restraint area (5 km from the plaintiff’s office from which she worked) do the following: “conduct, be concerned or interested in, whether directly or indirectly… any business in competition with the Business and performing any function or kind of work in a competitive capacity to the Business.” Both parties construe this clause as giving rise to two potential restraint orders applying in the restraint period within the restraint area. One that is directed at the defendant being concerned or interested in a business in competition, and the other that restrains the defendant from performing any function or kind of work in a competitive capacity. The parties’ interpretation ignores the words ‘and performing’. If the clause were directed at the defendant’s work (rather than the business) one would expect to see the word ‘or perform’. Yet the alternative, and literal interpretation I have outlined above, is odd when considered contextually. That is because the first part of the clause prohibits conduct, which would include work, in “any competition with the Business” and then the next part of the clause appears to do the same by prohibiting “performing any function or kind of work in a competitive capacity”. The unclear nature of the clause weighs against enforcement of it.
For completeness, even if cl 25.3 is valid, on any reading of it, there is a prohibition on the defendant having any interest, including in her capacity as an employee, in a business in competition with the plaintiff’s business, for a period of 4 months from the date of termination of employment and within a radius of 5 km from the plaintiff’s office in which the defendant worked in the 12 months prior to the termination of her employment. The defendant’s new employer carries on business within 5 km of the office of the plaintiff from which the defendant worked notwithstanding that their office is 12 km from the plaintiff’s office. Consequently, the effect of the clause is that the defendant would not be able to continue employment with the plaintiff until the end of the restraint period. This is not a case where the clause is simply restricted to the defendant performing work in competition with the plaintiff for a period of 4 months within the restraint area. Clause 25.3 goes further than necessary to protect the plaintiff’s legitimate interests. I am not satisfied that the clause is reasonable.
Non-solicitation
Turning next to the non-solicitation provision in the employment contract. The terms ‘Restraint Period’ and ‘Business’ are defined in cl 25.2 above.
25.4.From the date of termination of employment, you shall not for the Restraint Period as described in Subclause (c) above in competition with the Business solicit, canvass or secure the custom of any person who is at the date of termination of your employment or was during the twelve months prior to termination of your employment, a client of K R Peters Real Estate Pty Ltd with whom you had contact.
(emphasis added)
Plaintiff’s submissions
The term ‘client’ is not identified in the employment contract. However, it is a term of common usage. If a person seeks an appraisal of property, they are plainly a client. Whether money changes hands is not determinative of the relationship. The definition of client can be argued at trial but for current purposes it does not mean that there is no prima facie case.
Defendant’s submissions
The term ‘client’ is not defined in the employment contract. In restraint of trade cases, words must be given a business meaning and not a broad definition. ‘Client’ has a clear meaning. Here, it is someone who has done business with the plaintiff and where money has changed hands. It does not extend to prospective or potential vendors.
The non-solicitation clause is too broad. There is an overlap between the respective client lists of the plaintiff and Barry Plant Pakenham.
A mere enquiry with the plaintiff, and being in the system [Zenu database] is not an interest capable of protection. Insofar as the plaintiff seeks to implement a restraint where the concept of client is front and centre, there is no issue with people classified as vendors. However contacts of people with nothing more than an address and name, as contained in Exhibit ‘PN-10’ to the first Nicolls affidavit, cannot be protected.
Taken at its highest, there might be matters that extend from the prospective vendor of Annecy Lane but that is a question for trial for damages.
Analysis
The defendant deposes the following.[24]
My employment agreement with [the plaintiff] does not define the word “client”. I am prepared to refrain from soliciting work from clients of [the plaintiff] until 20 November 2020 [end of Restraint Period], but I am concerned that I may inadvertently contact someone who [the plaintiff] considers a client. In the course of my employment with Barry Plant, I will contact people contained in its potential client database, some of whom may also be in [the plaintiff’s] client database.
[24]First Hickey affidavit [54].
The dispute between the parties centres on whether or not the clause is reasonable because it includes any client with whom the defendant had contact. Essentially the plaintiff says that a contact may be a client and the defendant says that there needs to be an exchange of money between the parties for someone to be a client. The employment contract does not define client.
The Macquarie Dictionary defines ‘client’ as:[25]
… someone who employs or seeks advice from a professional adviser.
… a customer.
[25]Macquarie Dictionary (online at 20 August 2020) ‘client’ (def 2–3).
A ‘client’ does not simply mean any contact of the business. It includes someone who seeks advice from a professional advisor. Consequently, there is a prima facie case that, in the real estate business context, a ‘client’ includes someone who requests advice on the valuation of their property, that is, who has requested a property appraisal. A prospective vendor may engage more than one real estate agency to undertake an appraisal. As the evidence discloses, the property appraisal is a step undertaken before a prospective vendor signs an exclusive authority for a real estate agent to sell their property.
There is a prima facie case that cl 25.2 is reasonable and goes no further than necessary to protect the plaintiff’s interests. It is limited to 4 months, and limited to clients with whom the defendant has had contact with in the previous 12 months. As the plaintiff submits, this gives it an opportunity to transition clients to other sales representatives within its employ.
I find that the plaintiff has established a prima facie case that the defendant has breached the non-solicitation clause in respect of the Annecy Lane property. After conducting the property appraisal, the defendant tells him that she will send him the paperwork on Monday [20 July] as she has the weekend off. Her conduct in conducting the appraisal of Westringia Way appears inconsistent with having the weekend off. On Monday 20 July 2020, the defendant resigns from her employment with the plaintiff. The Annecy Lane property is later listed with Barry Plant for sale. There is a strong inference that the defendant has canvassed, secured or solicited the prospective vendor of the Annecy Lane property for her new employer.
Given the finding above of a prima facie case, it is unnecessary to consider whether there is a prima facie case in respect of the other properties. They will be issues for trial.
Does the balance of convenience weigh for or against granting an injunction?
Plaintiff’s submissions
The defendant has caused the plaintiff loss and is concerned that her conduct will cause it further loss. There are real difficulties with identifying and quantifying loss and evaluation issues, as evidenced in paragraphs [54]–[56] of the first Nicolls affidavit. Once the clients are lost, they are unlikely to be regained.
The defendant identifies that she intends to continue to engage in the unlawful conduct: paragraphs [22]–[24] of her second affidavit. She has had the benefit of her employment agreement and is subject to a modest restraint.
The status quo is best preserved by requiring the defendant not to use the confidential information. A further factor in favour of an injunction is the defendant’s refusal to deliver up devices on spurious grounds notwithstanding her obligation to do so.
Damages would not be an adequate remedy. There is no evidence of the plaintiff’s ability to meet an award of damages. Pursuant to cl 24.6 of the employment contract, the defendant acknowledges the employer may obtain an injunction and that damages are not an adequate remedy.
The plaintiff should have no problems in complying with the confidential information injunction. She deposes that she does not have any.
There are clients common to the plaintiff and the defendant’s new employer. This appears to be true in respect of the prospective vendor of the Rosina Drive property. Plainly, if the defendant has information concerning clients that has come to her other than via the plaintiff, then it is not the plaintiff’s confidential information. This should allay her concerns about using the new employer’s information.
There is no evidence that the defendant’s employment with Barry Plant would be adversely affected by the injunction. The orders do not seek to stop her current employment. There is no suggestion that she would earn no income if the restraining orders were made as the evidence is that the offices of Barry Plant Pakenham and the plaintiff are 12 km apart. She offers to refrain from obtaining work in paragraph [54] of her first affidavit but does not provide a form of undertaking. If she is not restrained from using its confidential information or competing in breach of the restraint, the plaintiff will be subject to unfair competition. There is a risk the defendant’s conduct will cause market confusion. The only disadvantage to the defendant if relief is granted is that she will be obliged to comply with her legal obligations. Further, she will be protected by an undertaking as to damages in the usual form.
Defendant’s submissions
The defendant is willing to return the electronic information that she holds on the USB stick and only holds that information due to the Stage 4 COVID-19 restrictions and the plaintiff failing to advise her as to the preferred measure of delivery up. At its highest, the evidence establishes that the defendant will promptly return whatever of the defendant’s confidential information she had in her possession at the end of her employment.
The balance of convenience weighs against granting the injunction. The argument that there is a modest restraint ignores the legitimate concern that the only way the defendant earns monies is by selling houses. In the current climate, where the selling of real estate is more difficult, and in a job inherently difficult, the restraint will diminish the defendant’s ability to earn a decent income. The damage of not being able to ply her trade is of great concern. The defendant deposes that her new employment requires her to regularly market directly to potential clients who may wish to list their property with Barry Plant Pakenham in the area assigned to the defendant. This includes the suburb of Officer. The direct marketing would involve cold calling clients and also letter box drops. She deposes that if she is unable to market directly then it will impact upon her ability to effectively carry on her employment as an agent representative. The defendant would suffer great prejudice if she is unable to earn any income whatsoever as a sales agent by reason of the orders sought.
The plaintiff’s allegations of actual loss do not rise above mere assertion, nor does it allege that any loss has been caused by the conduct complained of.
The plaintiff has failed to properly present workable orders. The matters in relation to the allegations concerning Rosina Drive confirm the impermissibly broad and unworkable scope of the restraint and provide ample justification for the defendant’s legitimate concerns about inadvertent breach.
Analysis
Turning now to an analysis of the balance of convenience. That is, whether the inconvenience or injury that the plaintiff would suffer if the injunction were refused is outweighed by the injury the defendant would suffer if the injunction were granted. I find that the balance of convenience weighs in favour of granting the injunction in respect of the return of confidential information and non-solicitation for the following reasons.
I accept the evidence given in paragraph [56] of the first Nicolls affidavit concerning the difficulties of quantifying loss. I conclude that damages may not be an adequate remedy.
If the orders are not made, the defendant is likely to act in breach of the non-solicitation clause. She deposes to having been assigned the geographical area of Officer. Her position has been that persons for whom she conducted property appraisals whilst in the employ of the plaintiff are not clients. The defendant has not offered up any undertaking to truly comply with the non-solicitation clause.
The confidentiality and non-solicitation orders will not prevent the defendant from continuing employment with Barry Plant Pakenham. Nor does she submit that. The proposed orders do not prevent her from plying her trade. The defendant’s evidence is that it will affect her income.[26]
In the course of my employment with Barry Plant, I am expected to regularly market directly to potential future clients who might wish to list their properties for sale with Barry Plant in my assigned territory which includes the geographical area of Officer. …
If I were prevented from being able to direct market to potential clients or list properties in certain areas, this would directly impact upon my ability to effectively carry on my employment as agent representative. It would disadvantage my ability to compete and market to potential clients and remove my ability to undertake common marketing practices…
As an agent employed by Barry Plant I am paid a retainer but this is set off against any commissions that I earn. Therefore, my total remuneration from Barry Plant is derived directly from sales of properties which I am able to secure with Barry Plant. Therefore any restriction on my ability to market to potential clients using these means would limit my ability to earn an income in my profession.
[26]Second Hickey affidavit [22]–[24].
Any disadvantage to the defendant by reason of a reduction in income is outweighed by the potential for injury to the plaintiff of which damages would be an inadequate remedy.
The defendant does not explain why she has been assigned the geographical area of Officer, an area in which he previously undertook work for the plaintiff and in circumstances where she has acknowledged the non-solicitation clause.[27]
[27]First Hickey affidavit [54]. This paragraph is extracted in [90] above.
I reject the defendant’s concerns about inadvertent non-compliance with the proposed orders.[28] If the evidence indicates, as she submits it does with respect to the prospective vendor of Rosina Drive, that she is using the information of Barry Plant Pakenham, not the plaintiff, then the confidentiality provision will not be breached. In respect of the non-solicitation clause, it is limited to persons with whom the defendant has had contact with in the preceding 12 months.
[28]The concerns are also expressed in the second Hickey affidavit [10].
I will make orders enforcing the non-solicitation clause. Those orders will be substantially in the form of paragraph 4(c) of the amended summons.
I will make the confidentiality orders substantially in the form sought by the plaintiff in paragraphs 1 and 3(a),(c) and (e) of its amended summons. Paragraphs 3(a),(c) and (e) restrain the defendant from using or disclosing information extracted from the plaintiff’s Zenu software. I will not make the orders sought in paragraphs 3(b) or (d) that refer to the plaintiff’s client list as there is no evidence to suggest there is any client list other than that contained in the Zenu software.
I will make orders for an affidavit of disclosure substantially in the form of paragraph 5(a) and (c) of the amended summons. Given the finding of a prima facie breach of the defendant’s confidentiality obligations, and that she continues to hold the plaintiff’s confidential information, this is appropriate.
I find that, at this stage, the balance of convenience weighs against granting the orders for delivery up of electronic devices that are not owned by the plaintiff. For that reason, I decline to make the orders sought by the plaintiff in paragraph 2 of its amended summons. They require delivery up to the plaintiff’s forensic IT expert of “all electronic devices in her possession that store electronic data”, including the defendant’s personal mobile phone and the laptop computer provided by her new employer. The plaintiff concedes this is in effect a preservation order as a mirror image of all the data is sought to be taken. The orders would be draconian, requiring delivery up of the defendant’s personal mobile phone and the laptop. There is no evidence that “there is a real possibility that the respondent might destroy such material or cause it to be unavailable for use in evidence”.[29]
[29]This is a requirement for a search order made pursuant to r 37 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’): see r 37B.03(1)(c)(ii). Of course, the Court’s power to make a search or preservation order is not limited by r 37: see r 37B.04. The Rules and Civil Procedure Act 2010 (‘CPA’) also contains provisions for discovery, see for instance pt 4.3 of the of the CPA including s 56.
It is an indictable offence to destroy a document or other thing that is reasonably likely to be required in evidence in a legal proceeding pursuant to s 254 of the Crimes Act 1958. Each party is represented by experienced legal practitioners. It is common ground that disclosure of relevant material will be part of the discovery process. I anticipate that the legal practitioners have informed the parties of their respective and continuing obligations in relation to the preservation of evidence. I expect that the parties will confer, consistently with their Civil Procedure Act 2010 obligations, to discuss a confidentiality regime in respect of discovery and inspection of the defendant’s electronic devices. This will provide for the exchange of relevant documents and of course, non-inspection of documents subject to legal professional privilege.
The plaintiff seeks an order that Exhibit ‘PN-10’ to the first Nicolls affidavit be made confidential. As discussed above, it contains extracts of the Zenu database, and further, the personal information of third parties. I will make the following order pursuant to r 28.05 of the Supreme Court (General Civil Procedure) Rules 2015.
Pursuant to r 28.05 of the Rules, and subject to any further order, the following shall remain confidential to the parties: Exhibit ‘PN-10’ to affidavit of Peter Nicolls sworn 4 August 2020.
Conclusion
The plaintiff is prepared to offer the usual undertaking as to damages. I will make interlocutory injunction orders in respect of the return of confidential information and the non-solicitation clause in the employment contract. I will make orders requiring the defendant to depose to an affidavit as to the use and disclosure of confidential information. I will dismiss the application for delivery up of the defendant’s electronic devices. I will dismiss the restraint of trade interlocutory injunction application.
I will give the parties an opportunity to provide submissions on costs.
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