KPW Law Pty Ltd v Patel

[2023] NSWSC 617

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

KPW Law Pty Ltd v Patel [2023] NSWSC 617

Hearing dates:

25 May 2023

Date of orders:

9 June 2023

Decision date:

09 June 2023

Jurisdiction:

Equity - Duty List

Before:

Richmond J

Decision:

Orders made for expedition of the proceedings. Decline to grant interlocutory relief.

Catchwords:

COMMERCE — restraint of trade — interlocutory relief — whether orders should be made for an interlocutory injunction — whether there is a serious question to be tried — whether the balance of convenience favours the granting of interlocutory relief

Legislation Cited:

Legal Aid Act 1978 (Vic), s 4

Restraints of Trade Act 1976 (NSW), s 4

Cases Cited:

Artcraft Pty Ltd v Chandler [2003] QSC 102

Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1

Clarke v Newland [1991] 1 All ER 397

Emeco International Pty Ltd v O’Shea [2012] WASC 282; 64 AILR 400-212

Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267; 202 IR 420

HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212

Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111

Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343; [2018] NSWCA 163

Jardin v Metcash Ltd [2011] NSWCA 409; 285 ALR 677

John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995; 58 AILR 200-270

Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533

Lindner v Murdock’s Garage (1950) 83 CLR 628; [1950] HCA 48

O’Grady v Northern Queensland Co Ltd (1990) 169 CLR 356; [1990] HCA 16

Office Angels Ltd v Rainer-Thomas and O’Connor [1991] IRLR 214

SAI Global Property Division Pty Ltd v Jones [2018] NSWSC 438; 277 IR 335

Smith v Ryngiel [1988] 1 Qd R 179

Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 41 VR 1; [2012] VSCA 175

Stacks Taree v Marshall (No 2) [2010] NSWSC 77

TullettPrebon(Australia) Pty Ltd v Purcell [2008] NSWSC 852; 175 IR 414

Warren v Mendy [1989] 1 WLR 853

Wright v GasweldPty Ltd (1991) 22 NSWLR 317

Texts Cited:

JD Heydon, The Restraint of Trade Doctrine (4th ed, 2018, LexisNexis Australia)

Category:

Principal judgment

Parties:

KPW Law Pty Ltd (Plaintiff)
Chirag Patel (Defendant)

Representation:

Counsel:
Mr J Darams (Plaintiff)
Mr M Minucci with Ms S McCarthy (Defendant)

Solicitors:
Emerson Lewis Lawyers (Plaintiff)
Sasphire Legal (Defendant)

File Number(s):

2023/00163233

JUDGMENT

1. The plaintiff (KPW) is an incorporated legal practice which provides legal services to clients in regional New South Wales, Victoria and the Australian Capital Territory. The defendant (Mr Patel) is a solicitor who was employed by KPW from 4 January 2021 until 4 May 2023 in its Albury and Wodonga offices. On 8 May 2023 he opened his own practice as a sole practitioner under the name “CP Law” in Wodonga with his first day of actually practising being 10 May 2023. On 22 May 2023, KPW commenced these proceedings to restrain him from doing so relying on a restraint in cl 7.3 of his contract of employment (Contract). Before the Court is an application for an interlocutory injunction to enforce the restraint until final hearing.

2. The interlocutory injunction sought by KPW is as follows:

Upon the plaintiff giving the usual undertaking as to damages, an order until further order of the court, that the defendant be restrained throughout a radius of 50 kilometres of the plaintiff’s offices in Albury and Wodonga from conducting the criminal law practice CP Law or establishing or purchasing any other criminal law practice.

3. For the reasons which follow, in my opinion the interlocutory injunction should not be granted.

Evidence

4. The evidence on this application comprises an affidavit of Ms Kathryn Hall, who is the sole director and shareholder of KPW, and an affidavit of Mr Patel. Neither was cross-examined.

Background

5. KPW was incorporated on 2 March 2018. Ms Hall is the principal solicitor of the firm and has been practising in the Albury-Wodonga region since 2015. The firm now has offices in both Albury and Wodonga (which are about 6 kilometres apart) as well as in Wagga Wagga, Howlong, Griffith and Sydney. KPW has nine employees who are practising lawyers of which two are criminal lawyers who practise from KPW’s Wodonga office, but perform work in New South Wales, Victoria and the ACT.

6. KPW provides legal services in a wide range of areas including commercial law, property conveyancing, wills and deceased estates, civil litigation, family law, criminal law, and employment law.

7. In early 2020, Wodonga had two primary criminal law legal aid lawyers, being Mr Mario Vaccaro and Ms Sally Wilson, who were the two solicitors most often on duty on the duty lawyer schedule at the Wodonga Magistrates’ Court.

8. In around August 2020, KPW purchased Mr Vaccaro’s business and Mr Vaccaro became a consultant to KPW. KPW took over the lease of Mr Vaccaro’s office in Wodonga (which is now the Wodonga office of KPW). After purchasing Mr Vaccaro’s practice, KPW began a process of recruiting a new senior criminal lawyer to effectively take over from Mr Vaccaro’s criminal law practice as he transitioned into retirement. In late 2020, KPW identified Mr Patel as the person to fill this position within KPW.

9. Mr Patel was admitted to practise as a solicitor in England and Wales in 2003 and practised as a solicitor in the United Kingdom primarily in the area of criminal law for around 17 years before he migrated to Australia. He was admitted to practice in Victoria in March 2021 and obtained an unrestricted practising certificate in November 2021.

10. During November 2020, in discussions leading up to the execution of the Contract, Ms Hayley Rake, director of litigation of KPW sent an email to Mr Patel stating that it was willing to offer employment to Mr Patel on a number of conditions, including that he agree to a restraint of trade clause in his contract of employment for a period of three years for the purpose of mitigating the risk of “KPW supervising you for a two year period after which time you may leave and commence competitive trade”. Ultimately, it was agreed that the restraint would be for a period for two rather than three years.

11. On around 21 December 2020 Mr Patel entered into an employment contract with KPW. The restraint is contained in cl 7.3(d) which provides as follows:

“You must not … at any time during the term of this agreement and for a period two years after the termination of employment with the Employer establish, purchase or obtain an interest in, either directly or indirectly, any business in relation in any way to the Employer within a radius of 50 kilometres, without the express written consent of the Employer provided that such consent shall not be unreasonably withheld.”

12. The word “Employer” is defined to mean KPW Lawyers, the plaintiff.

13. Clause 7.3(d) does not indicate the point from which the radius of 50 kilometres is to be measured, but cl 9.1 provides that Mr Patel’s place of work is to be Albury-Wodonga.

14. Clause 24.11 of the Contract provides that it is governed by “the law of Australia-NSW”. Hence, the proper law of the Contract is the laws of New South Wales and, where applicable, the Commonwealth of Australia. It was not in dispute that as the proper law of the Contract is the law of New South Wales, the Restraints of Trade Act 1976 (NSW) (the Act) applies to cl 7.3(d): JD Heydon, The Restraint of Trade Doctrine (4^th ed, 2018, LexisNexis Australia) at 319.

15. Clause 22 of the Contract requires Mr Patel to maintain the confidentiality of “Confidential Information” both during and after termination of his employment. “Confidential information” is defined to mean all information obtained in the course of his employment with KPW that is by its nature confidential and includes “information about … clients or customers such as their specific requirements, arrangements and past dealings”.

16. During his employment with KPW, Mr Patel applied for and was given accreditation as a Victoria Legal Aid duty lawyer for the roster scheme at Wodonga Magistrates’ Court. On the basis of the contract entered into by KPW with Victoria Legal Aid for this service, Mr Patel is the nominated representative of KPW to carry out the duty lawyer services. Under the Legal Aid Act 1978 (Vic), Victoria Legal Aid co-ordinates the provision of legal assistance to persons in need of it, including by paying private solicitors and barristers for the services they provide to those persons: see s 4. While KPW has a contractual relationship with Victoria Legal Aid for the provision of duty lawyer services, Mr Patel submits and I accept, that the true client when KPW performs duty lawyer services is the person to whom those services are provided, rather than Victoria Legal Aid.

17. By around January 2023, Mr Patel had become dissatisfied with his employment with KPW and began to think about the steps required to start his own business, including registering a domain name and an Australian Business Number. In March 2023 he had some discussions with Ms Hall, and Ms Rake, about his promotion to the position of a salaried director of the practice. Ultimately, no agreement was reached and on 18 April 2023 Mr Patel advised Ms Hall of his resignation.

18. On 19 April 2023, Mr Patel sent an email to KPW confirming his resignation and on 24 April 2023 Ms Hall responded by email stating that KPW accepted his resignation and that the last day of his employment would be 4 May 2023. Ms Hall also stated that KPW did not propose to waive the restraint of trade clause in cl 7.3(d) of the Contract and that it would be pressed. Mr Patel responded by a letter dated 3 May 2023 stating that he did not intend soliciting any clients of KPW, setting out his view that cl 7.3(d) is unenforceable as an unreasonable restraint of trade and contending that it was unreasonable for KPW to withhold its consent to the establishment of his new practice. The solicitors for KPW responded on 11 May 2023 essentially rejecting the position put in Mr Patel’s letter.

19. Since Mr Patel resigned, KPW has employed two senior criminal lawyers to work in its Wodonga office.

20. Mr Patel commenced work as a sole practitioner on 8 May 2023, practising exclusively in criminal law, family intervention and family violence cases. He has continued to provide duty lawyer services at Wodonga Magistrates’ Court but in his own name rather than on behalf of KPW, having received a new personal accreditation from Victoria Legal Aid for this purpose. In the three weeks leading up to the hearing he had taken on approximately 20 new clients of whom one is resident in Wangaratta and the remainder are resident in Wodonga. He did not have any clients resident in Albury. The 20 clients are charged with a range of serious criminal offences, three involve clients currently in custody, and several involve serious charges which are likely to attract custody. None of the 20 clients is a client of KPW.

21. Mr Patel has offered an undertaking to KPW and the Court in the following terms:

a.   that for a period of six months, the defendant will not approach, induce, solicit, or persuade, or accept any approach from any Client of the plaintiff, with a view to (i) obtaining the custom or supply of that Client to the detriment of the plaintiff, or (ii) the Client ceasing or reducing its engagement with the plaintiff; and

b.   of his continued compliance with his obligations pertaining to Confidential Information pursuant to the Employment Contract, and

For this purpose, “Client” means any person that was a client of the plaintiff during the course of the defendant’s employment with the plaintiff but excluded (i) any person for whom the plaintiff is unable to act, due to a conflict of interest or for any other reason, or the matter is more than 50km from Wodonga, and (ii) Victoria Legal Aid.

22. Mr Patel stated in his affidavit that he had been telephoned by the Victoria Police Custody Officer on 10 and 13 May 2023 seeking his assistance in respect of former clients of KPW and that on each occasion he identified that he had previously had carriage of matters for those clients whilst an employee of KPW, and so he declined to act and referred the matter back to KPW.

23. Mr Patel gave evidence in his affidavit (which was not contested) that Wodonga suffers from a shortage of criminal defence lawyers due in part to the loss of a senior practitioner, Ms Sally Wilson, on her appointment as Judicial Registrar of the Wodonga Magistrate’s Court. This was confirmed by letters tendered in evidence by him which included the following:

1. A letter dated 19 May 2023 from Mr Brendan Tyrrell, A/Senior Sergeant of Victoria Police who is responsible for the management of prosecution units across north-east Victoria. He states that the Wodonga region has a shortage of legal representative resources available to Court Services Victoria, specifically solicitors appointed to appear on behalf of Legal Aid Victoria. He states that a local sole practitioner, Ms Sally Wilson, had recently been appointed as Judicial Registrar leaving a significant amount of charged persons without proper access to the justice system. He states that “it will be beneficial to all stakeholders of the Wodonga and surrounding law courts to have Mr Patel practising law in our region.”

2. A letter dated 19 May 2023 from Shannon Nyhan who is employed as the Children’s Court Youth Diversion Co-ordinator who states that the need for local criminal solicitors has increased recently due to a local legal practice closing and that this justifies a need for additional solicitors to practice within the Hume region.

3. A letter dated 19 May 2023 from Luke Chapman, an Advanced Case Manager with the Youth Justice Unit of the Department of Justice and Community Safety, who states that criminal law solicitors are in high demand in the Wodonga area and that this is increasingly evident due to a long term and respected solicitor recently retiring and closing her practice.

4. A letter from Ms Nancy Battiato dated 22 May 2023, a solicitor at Battiato & Associates Lawyers, who has practised in north-east Victoria since 1995 and states that there is a current shortage of criminal lawyers practising in the Wodonga area due to a lawyer in the Wodonga area having ceased to practise recently, there are now only two duty lawyers servicing the Wodonga area which is inadequate. She notes that the Wodonga Court is considered one of the busiest courts in the region.

24. The references in the above letters to the closure of a legal practice in the Wodonga area appears to be to Ms Wilson’s appointment.

Relevant principles

25. It was not in dispute that in order to be entitled to the interlocutory relief sought, the plaintiff bears the onus of establishing that: there is a serious question to be tried for final relief; that damages would not be an adequate remedy; and that the balance of convenience favours the grant of an injunction on an interlocutory basis.

26. In a restraint of trade case, whether there is a serious question to be tried for final relief depends on whether there is a prima facie case (in the sense referred to in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622; [1968] HCA 1) that: (1) there is a valid contractual restraint; (2) there is a breach or apprehended breach of it; and, (3) the Court would, as a matter of discretion, grant injunctive relief in respect of that breach: John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [5].

27. The principles relevant to the validity of restraint of trade clauses were not in dispute. The onus is on the plaintiff to show that the restraint goes no further than is reasonably necessary to protect the plaintiff’s legitimate interests. The validity and reasonableness of the restraint is to be determined at the time it is entered into (in this case, 21 December 2020), but when exercising its discretion to grant and fashion relief, the Court considers matters as at the date of the hearing which are relevant to the discretion to withhold relief: Birt at [46].

28. The effect of s 4(1) of the Act is that in New South Wales a restraint is valid to the extent to which it is not against public policy, even if not in severable terms. The Court must determine first, whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed and, second, whether the restraint in its application to that breach is contrary to public policy. A restraint of trade is not contrary to public policy if it is reasonable as between the parties and not unreasonable in the public interest. Whether a restraint is reasonable as between the parties turns on whether the covenantee has a legitimate interest and whether the restraint goes no further than reasonably necessary for the legitimate protection of that interest. If the restraint as it applies to the alleged breach is not contrary to public policy, the restraint is valid in its application to the alleged breach unless the Court makes an order under s 4(3) of the Act: Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343; [2018] NSWCA 163 at 355 at [61]–[64]; Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852; 175 IR 414 at [47]. Section 4(3) enables a reading down of the restraint in the abstract, on the application of the promisor and looking to the future: Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111 at [176].

29. The legitimate interests which are capable of protection by a restraint of trade include the employer’s goodwill (including customer connection) and confidential information, but an employer has no legitimate interest in merely preventing competition from a former employee: Tullett at [47]. In the present case, the only interest relied on by KPW to support cl 7.3(d) is goodwill.

Serious question to be tried

30. At the final hearing KPW will seek injunctive relief and damages. The injunction sought is in the same terms as the interlocutory injunction set out at [2] above except that it will apply until 4 May 2025. It follows that the grant of interlocutory relief will not in a practical sense determine the dispute between the parties and consequently it is not necessary for the Court to evaluate the strength of the plaintiff’s case for final relief. However, an assessment of the strength of the plaintiff’s case will be relevant to the balance of convenience albeit on a preliminary basis reflecting that the arguments are to be weighed at a relatively high level at an interlocutory hearing: SAI Global Property Division Pty Ltd v Jones [2018] NSWSC 438; 277 IR 335 at [103] and [115].

31. The first question which arises is the proper construction of the words in cl 7.3(d) “any business in relation in any way to the Employer within a radius of 50 kilometres”. These words are, at the very least, unclear. First, it is unclear what is the relevant connection which must exist between the business which Mr Patel establishes, purchases or obtains an interest in, on the one hand, and KPW, on the other. The connecting words “in relation in any way” are potentially very broad, but generally require a relevant connection between the identified subject matters the nature of which is determined by the context: O’Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356 at 367, 374 and 376. In determining the nature of that connection here, it is relevant that covenants in restraint of trade are required to be construed in a business fashion and in light of their subject, which is to protect the employer from rivalry in trade: Clarke v Newland [1991] 1 All ER 397 at 401–402, JD Heydon, The Restraint of Trade Doctrine at 148.

32. The better view, applying these principles of construction, is that the phrase should be construed as if the word “competitive” was inserted after “in any way”. Both parties accepted for the purposes of this interlocutory application that this was the correct construction of the clause. KPW relied for this purpose on the email sent by KPW to Mr Patel before the Contract was signed referred to at [10] above. However, I note that it is doubtful that regard can be had to that email for this purpose given that it is the objective intention of the parties which is relevant: State Rail Authority of New South Wales v Codelfa Constructions Pty Ltd (1982) 149 CLR 337 at 352.

30. Second, the area of the restraint appears to be unclear because the point from which the radius of 50 kilometres should be measured is not stated. While the Contract states the location of Mr Patel’s employment to be “Albury-Wodonga”, cl 7.3(d) does not refer to any particular place. Albury-Wodonga is an urban area comprising Albury in New South Wales and Wodonga in Victoria which are separated by the Murray River and have a combined population of around 98,608 (as at June 2022). KPW has (and had at the date of the Contract) offices in each of Albury and Wodonga (as well as in other places in NSW). Adopting a business-like construction, the radius would be taken from each of those offices.

31. Construed in this way, Mr Patel is in breach of cl 7.3(d) by reason of the commencement of a criminal law practice as sole practitioner in Wodonga even though he has not acted, and does not propose to act for a period of 6 months, for any client of KPW.

32. Next, it will be necessary to determine at the final hearing whether a restraint on Mr Patel conducting a practice in Wodonga for two years is reasonable as between the parties and is not unreasonable in the public interest. Whether the restraint is reasonable as between the parties depends on whether KPW has a legitimate protectable interest and whether the restraint is no more than reasonably necessary for the legitimate protection of that interest.

33. Here the only interest for which KPW claims protection is its goodwill, the essence of which is the connection with customers. It is recognised that an employer is entitled to protect itself against the possibility of loss which may otherwise arise from the mere existence of personal relations between its customers and its former employee, on the basis that the customer connection achieved by the employee during his or her employment is an advantage accruing to the employer: Lindner v Murdock’s Garage (1950) 83 CLR 628 at 636 per Latham CJ and 655 per Kitto J; [1950] HCA 48.

34. It is not necessary to show that the employee has become “the human face” of the business, in the sense of being in a position to control whether the customers remain with or leave the business, and it is sufficient if the employee, as one member of a team, has a strong connection with customers with whom he or she dealt which gives rise to the possibility of their custom following the employee when he or she leaves: Jardin v Metcash Ltd [2011] NSWCA 409; 285 ALR 677 at [94]-[97]; Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267; 202 IR 420 at [38]-[39]. I accept the submission for KPW that Mr Patel has a strong connection with the clients of KPW with whom he dealt in the period of his employment, which is an aspect of KPW’s goodwill which is a legitimate protectable interest.

35. However, there is a real issue as to whether an area restraint of this kind, extending to a population of over 100,000 only a small fraction of which would be existing clients of KPW, goes further than reasonably necessary for the legitimate protection of that interest. It was submitted for Mr Patel that cl 7.3(d) is invalid because it purports to protect KPW against mere competition, and is otherwise contrary to public policy. It is certainly correct that KPW is not entitled to protection merely from competition from Mr Patel. In so far as cl 7.3(d) goes beyond the protection of KPW’s goodwill, being the only protectable interest put forward in support of it, it does appear to protect KPW against mere competition. Had there been a non-solicitation clause in addition to cl 7.3(d) in the Contract restraining Mr Patel for a period of two years after termination of the Contract from acting for any person who had been a client of KPW during the period of his employment, cl 7.3(d) would likely be unenforceable: see Stacks Taree v Marshall (No 2) [2010] NSWSC 77 at [120]–[124]; Smith v Ryngiel [1988] 1 Qd R 179 at 185, 186. The position is likely to be the same in circumstances where, as here, there is no such non-solicitation restraint but had there been one it would provide adequate protection for KPW’s goodwill: Office Angels Ltd v Rainer-Thomas and O’Connor [1991] IRLR 214 at [49]-[50], [54]-[62]; Artcraft Pty Ltd v Chandler [2003] QSC 102 at [47]. It follows that there is an arguable case to be determined at final hearing that cl 7.3(d) will be held to be void or, alternatively, read down under s 4 of the Act, so as to only restrain Mr Patel from establishing, purchasing or obtaining an interest in a business to the extent that he acts for a person who was a client of KPW during the period of his employment with KPW.

36. There will also be an issue at final hearing as to whether the period of the restraint of two years is longer than reasonably necessary to protect KPW’s goodwill. There is a respectable argument that a reasonable period for the restraint is only six months on the basis that this is a sufficient period for KPW to find a criminal lawyer to replace Mr Patel and form the necessary connection with clients. I note that KPW already has replaced him with two new criminal lawyers.

37. A further issue at final hearing will be whether cl 7.3(d) is unreasonable in the public interest. This is suggested by the evidence on this interlocutory application of a shortage of criminal defence lawyers willing and able to undertake matters funded by legal aid in the Albury-Wodonga area, which can be regarded as an essential service to that community: see Heydon, The Restraint of Trade Doctrine at 199–202; Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 41 VR 1; [2012] VSCA 175 at [76]; Stacks Taree at [113].

38. I accept that there is a serious question to be tried but consider that there are a number of issues regarding cl 7.3(d) which the plaintiff will need to deal with at the final hearing in order to succeed and that, based on the evidence on this interlocutory application, its case for an injunction in the form sought (rather than the narrower form referred to at [38] above) is not strong.

Balance of convenience

42. In relation to the balance of convenience, it is necessary to consider what course is best calculated to achieve justice between the parties, bearing in mind the consequences to the defendant of the grant of the injunction in support of relief which the plaintiff might not ultimately obtain and the consequences to the plaintiff of refusing the injunction in support of relief which it might ultimately be held to be entitled: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535. Relevant matters to be taken into account include whether damages are an adequate remedy; the defendant’s right to a livelihood, delay, the impact on third parties; whether the employee was warned and went into the position with “eyes wide open”; whether any hardship that would be visited on the defendant has come about because he or she is the author of his or her own misfortune; the strength of the case; and any undertakings that have been given: HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212.

43. In relation to the adequacy of damages, it is often said that damages are rarely an adequate remedy for breach of a negative contractual stipulation: Birt at [45]. In Emeco International Pty Ltd v O’Shea [2012] WASC 282, Edelman J (as his Honour then was) explained that the reason why this is so includes the difficulty of the detection of breaches of the obligation, the difficulty of establishing causation between any loss of business with customers and any actions of the ex-employee and the difficulty of the calculation of the quantum of any damage arising from loss of business. However, his Honour noted at [22] that these concerns would not always apply. An example of where, despite difficulty of calculation, damages for breach of a restraint on trade were held to be an adequate remedy is Smith v Ryngiel [1988] 1 Qd R 179 at 187–190.

44. For Mr Patel it was submitted that damages will be adequate remedy if a breach of cl 7.3(d) is established at final hearing because such damages would be readily quantifiable, being the amount of the income earned by the defendant’s legal practice in the period prior to trial. That is particularly so in circumstances where the evidence does not suggest the defendant has been involved in the dissemination of confidential information, the poaching of clients or any other breaches of his fiduciary obligations to the plaintiff. I accept this submission, and will make an order requiring Mr Patel to keep records up to the final hearing of the revenue of his practice and the persons from whom that revenue is received: see Warren v Mendy [1989] 1 WLR 853 at 868. The purpose of this order is to enable quantification of damages should that be necessary.

45. In relation to the defendant’s right to a livelihood and potential hardship, Mr Patel gave evidence that he and his wife have lived in the Albury-Wodonga region for two and a half years after migrating from the United Kingdom. They lease a rental property in Albury which expires in September 2024. They have living expenses of $5,075 per month and in addition he has significant business expenses (of around $8,905 per month). Mr Patel has spent his entire professional career practising in criminal law and consequently does not anticipate obtaining alternative work in Wodonga during the two year term of the restraint. The only other alternatives he can identify are operating a criminal practice in a town at least 50 kilometres from Albury-Wodonga, which would have a small population and therefore less work, which would involve a commute of at least one hour each way, or operating a practice in a town with a population equivalent to Albury-Wodonga which would need to be Bendigo, which is almost 300 kilometres away, where he has no professional or personal connections, which would either require relocating his family to Bendigo or commuting three hours each way from his current residence to Bendigo. Each alternative would give rise to significant hardship both financial and personal.

46. In relation to delay, the final day Mr Patel’s employment with the plaintiff was 4 May 2023 and these proceedings were not commenced until 22 May 2023. Mr Patel made it clear in his letter dated 3 May 2023 that he did not accept that cl 7.3(d) was enforceable. Hence, there has been a delay of about two and a half weeks in the plaintiff commencing these proceedings which weighs against the grant of interlocutory relief as it has contributed to the next matter.

47. In so far as third parties are concerned, there is a risk that if Mr Patel is restrained by the interlocutory injunction sought that the clients for whom he has been acting since 4 May 2023 will be unable to find a replacement criminal lawyers of equal standing. He states in his affidavit that if he is restrained, he is not certain that he will be able to find a replacement criminal lawyer of sufficient or equal experience to assist, and this is supported by the evidence referred to at [23] above.

48. Mr Patel did go into the position he is now in with his eyes wide open, and is the author of his own misfortune, in the sense that KPW made clear it would enforce the restraint at the time he resigned. However, this needs to be considered in light of the position he maintained in his letter of 3 May 2023, that the restraint is not enforceable and that he does not intend to solicit clients of KPW.

49. In relation to the strength of the case, I do not regard KPW’s case as strong because cl 7.3(d) is poorly drafted, giving rise to uncertainty as to its meaning and even if it is construed as if the word “competitive” appears after the words “in relation in any way”, there is still a question whether cl 7.3(d) goes further than reasonably necessary to protect the legitimate interest on which KPW relies, which is its goodwill. There is a prospect that cl 7.3(d) will be held to be enforceable only to the extent that it restrains Mr Patel for a period of 6 months after termination of his employment from acting as a solicitor for persons who were customers of KPW while he was employed by it, which is the effect of the undertaking he has proffered to KPW and the Court.

50. In my view, the most important factor relating to the balance of convenience is the undertaking which Mr Patel has offered both to KPW and to the Court not to solicit clients of KPW for six months from the date of termination of his employment. This in my view provides a reasonable protection for the only legitimate interest of KPW on which it relies which is its goodwill. To provide, in addition, an injunction in the terms sought appears to serve only to prevent legitimate competition, which is inconsistent with the policy of the Act: HiTech at [114]–[117]; Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 337. Given that Mr Patel is an officer of the Supreme Court of Victoria, there is no reason to think that he will not abide by the undertaking.

51. When all these matters are weighed, I conclude that the prejudice suffered by KPW if it is ultimately determined that an interlocutory injunction should have been granted is outweighed by the prejudice which Mr Patel will suffer if an interlocutory injunction is wrongly granted.

Conclusion

52. For these reasons, I am not satisfied that KPW has established that interlocutory injunction should be granted.

53. I will make the necessary orders recording Mr Patel’s undertaking to the Court referred to at [21] above, an order for him to maintain records of his revenue referred to at [44] above and for the matter to be placed in the expedition list.

54. I consider that the appropriate order in relation to the costs of the interlocutory application is that they be costs in the cause.

55. I therefore make the following orders:

1. The court notes the undertaking of the defendant given to the Court on 25 May 2023:

1. that for a period of six months, the defendant will not approach, induce, solicit, or persuade, or accept any approach from any Client of the plaintiff, with a view to (i) obtaining the custom or supply of that Client to the detriment of the plaintiff, or (ii) the Client ceasing or reducing its engagement with the plaintiff; and

2. of his continued compliance with his obligations pertaining to Confidential Information pursuant to the Employment Contract, and

For this purpose, “Client” means any person that was a client of the plaintiff during the course of the defendant’s employment with the plaintiff but excludes (i) any person for whom the plaintiff is unable to act, due to a conflict of interest or for any other reason, or the matter is more than 50km from Wodonga, and (ii) Victoria Legal Aid.

2. Order that the defendant keep up-to-date financial records of the revenue received by his practice known as “CP Law” for the period from 8 May 2023 until further order of this Court. Those records must specify all amounts of revenue received by his practice, the date of their receipt and the persons/entities from whom that revenue is received.

3. The plaintiff’s claim for interlocutory relief set out in paragraphs 8 and 9 of the Summons is otherwise dismissed.

4. Costs of the application for interlocutory relief are costs in the cause.

5. The plaintiff is to file and serve any notice of motion and supporting affidavit evidence seeking expedition of its claim for final relief in these proceedings by 5:00pm on 16 June 2023 (Expedition Application).

6. The defendant is to file and serve any affidavit evidence in relation to the Expedition Application by 5:00pm on 20 June 2023.

7. By 5:00pm on 21 June 2023, the parties’ legal representatives to confer and attempt to agree on a timetable for the preparation of the matter to trial and an accurate estimate of the necessary hearing time, on the assumption that the Expedition Application is successful.

8. The Expedition Application be listed before the Expedition List Judge on 23 June 2023.

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Amendments

14 June 2023 - Amendment to [50].

Decision last updated: 14 June 2023