Koops Martin v Dean Reeves
[2006] NSWSC 445
•4 April 2006
CITATION: Koops Martin v Dean Reeves [2006] NSWSC 445 HEARING DATE(S): 04/04/2006
JUDGMENT DATE :
4 April 2006JURISDICTION: Equity Division JUDGMENT OF: Brereton J EX TEMPORE JUDGMENT DATE: 04/04/2006 DECISION: Leave to amend by adding claim for account of profits refused CATCHWORDS: PROCEDURE – Amendment – proposed late amendment of summons for injunction enforcing restraint of trade and damages for breach to add claim for account of profits – where no prior allegation of fiduciary obligation – where no evidence of any profits – where amendment would necessitate adjournment of trial – where hearing expedition on defendant’s application where defendant subject to interlocutory injunction LEGISLATION CITED: Restraints of Trade Act 1976 (NSW) PARTIES: Koops Martin Financial Services Pty Limited (formerly Koops Martin Financial Services Limited) ABN 23 098 362 246
Dean ReevesFILE NUMBER(S): SC 2005/06336 COUNSEL: J Fernon SC with D Hand (P)
P Russell (D)SOLICITORS: L S Juhasz of Koops Martin Lawyers (P)
W J Langler of MBT Lawyers (D)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
BRERETON J
Tuesday 4 April 2006
6336/05 Koops Martin Financial Services Pty Limited v Dean Reeves
JUDGMENT – Ex tempore (on leave to file amended summons)
1 HIS HONOUR: These proceedings were commenced by summons filed on 16 December 2005 pursuant to leave to do so with an abridgement for time for service granted by Windeyer J that day. The summons claimed an order restraining the defendant from, in substance, approaching, enticing, or endeavouring to entice away from the plaintiff persons who had been clients of the Koops Martin Group, accepting instructions to perform financial planning or advisory work for any person who is or was a client of the plaintiff in the twelve months before 8 November 2005, and accepting any employment which would require the defendant to reveal any confidential information of the Koops Martin Group. The summons also claimed damages. When the summons came before the Court on 22 December 2005 the defendant gave undertakings which have been continued from time to time until 4pm tomorrow. The need for a contested interlocutory hearing was averted when, on the defendant's application for expedition, the matter was on 3 March 2006 expedited by the Chief Judge and fixed for hearing to commence today.
2 The application for expedition was supported by an affidavit of William John Langelaar, the defendant's solicitor, who in paragraph 10 of his affidavit sworn 3 February 2006 identified what he believed to be the issues in the proceedings, which may for present purposes be summarised as:
(1) the true construction of the restraint;
(2) whether the defendant was in breach of the restraint properly construed;
(3) whether there was a sufficient customer connection between the defendant and the plaintiff's customers to support any restraint;
(4) whether the restraint was unreasonable;
(6) if there was a breach of the restraint, what were the plaintiff's damages.(5) whether the defendant was entitled to relief under Restraints of Trade Act 1976 (NSW), s4(3); and
3 Mr Langelaar added that if there were no breach of the restraint, a further issue would be what were the defendant's damages on the plaintiff's undertaking as to damages, and that the defendant contended that the issue of damages could be determined at a later time, once the issue of liability was firstly determined. To that extent, it seems that the defendant may have anticipated that there might be an inquiry as to damages after the determination of liability. Before the hearing today, the parties have exchanged written submissions, which do not go beyond the issues that I have just outlined.
4 This morning, the plaintiff seeks leave to file an amended summons, which claims, in the alternative to the injunction previously sought, a somewhat more limited injunction, and, in addition to the claim for damages, an account of profits. Presumably the claim for damages and the claim for an account of profits are in the alternative. Mr Russell, for the defendant, does not oppose the plaintiff having leave to amend the summons to claim the alternative injunctive relief to which I have referred. However, he opposes the amendment of the summons to claim an account of profits.
5 Mr Fernon SC, for the plaintiff, has articulated the basis on which an account of profits would be claimed as the fiduciary obligation between an employee such as the defendant and an employer such as the plaintiff, and has suggested that the profits would be such commission and bonuses as the defendant might have received from his new employer.
6 This matter has proceeded to this point without pleadings. It is apparent, from the written submissions which have been exchanged between the parties, that it has at all times proceeded on the basis of being a claim to enforce the contractual obligations of the defendant under his employment contract with the plaintiff. There has been no prior allegation of breach of fiduciary duty, and no prior invocation of such a basis for relief. Indeed, there is no reference to any such basis in the plaintiff's written submissions, and none of the evidence filed to this point touches on any profits which the defendant might have derived, of the type to which Mr Fernon has referred.
7 I think, therefore, Mr Russell is quite justified in saying that he is surprised by any allegation that the case is now to be put additionally on the basis of breach of fiduciary duty, and that were an amendment granted for that purpose he would be entitled to the adjournment which he has foreshadowed would be required to meet it.
8 In the context that this case has been expedited on the application of the defendant, though not opposed by the plaintiff, and that the restraint is for a period of twelve months, which will expire in November this year, and indeed maybe a shorter period than that if twelve months were found to be excessive, it seems to me that an adjournment would potentially occasion prejudice to the defendant, who has sought an early hearing of the matter because of the constraints which the interlocutory undertakings impose on him.
9 There has been, save for the slight anticipation in Mr Langelaar's affidavit to which I have referred, no previous suggestion that I can see in the records of proceedings, or the manner in which the case has been conducted, that there would be a separate inquiry as to damages, though that is always a possibility. At some stage, in any event, the plaintiff would have to elect between an account of profits and an inquiry as to damages. As I have said, there is no evidence so far in the proceedings which would establish that there have been any profits which might have to be accounted for. In that regard, it needs to be borne in mind that the defendant is not carrying on business as a principal but as an employee of another firm, and that whatever might be the correct construction of the restraint, it is quite clear that it does not prevent the defendant from being employed in another business competing with the plaintiff, even in Coffs Harbour, so that he is plainly entitled to generate personal remuneration earnings from his financial planning skills in a business in Coffs Harbour.
10 In those circumstances, weighing such injustice as there may be to the plaintiff from excluding a claim for an account of profits from its potential menu of remedies on the one hand, and, on the other, the potential prejudice to the defendant from requiring him to meet an allegation of breach of fiduciary duty - and a claim for an account of profits not previously raised or foreshadowed, with the consequent need for adjournment, and having regard to the due management of litigation in the Court and the proper use of the Court's time, it seems to me that insofar as the amendment sought would add an account of profits to the relief claimed, leave to amend should be refused.
11 Accordingly, I order that the plaintiff have leave to amend the summons by filing in Court an amended summons in the form initialled by me, dated this day, and placed with the papers, subject to the deletion therefrom of paragraph 6 of the relief claimed.
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