PRACTICE AND PROCEDURE - interlocutory application for urgent injunctive relief - enforceability of restraint of trade provisions contained in unsigned employment contract - whether acceptance implied - whether prima facie case established - whether balance of convenience favours grant of injunction - injunction granted
UPON THE FILING IN COURT OF AN UNDERTAKING GIVEN BY THE APPLICANT:
a.to submit to such order…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Lamson Concepts Pty Ltd v Schmidt [2025] FCA 677
Case
[2025] FCA 677
Decision Date
CaseChat Overview and Summary
In the Federal Court of Australia, Lamson Concepts Pty Ltd brought an interlocutory application for urgent injunctive relief against Schmidt, seeking to enforce restraint of trade provisions contained in an unsigned employment contract. The central dispute revolves around whether these provisions are enforceable, and if there was an implied acceptance of the contract terms by Schmidt. The application was brought under the auspices of ensuring that Schmidt does not breach specific restraint of trade clauses, which would be detrimental to Lamson's business interests.
The legal issues before the court included whether Lamson had established a prima facie case for the enforceability of the restraint of trade provisions, and whether the balance of convenience favoured the grant of injunctive relief. The court also needed to determine if there was sufficient apprehension of breach of these clauses, considering the potential harm to Lamson's business and its confidential information. The court examined the relevance of evidence regarding Schmidt's access to sensitive information and actions taken by a former employee, Mr Oscuro, which suggested potential breaches of confidentiality.
The court reasoned that Lamson had demonstrated a strong prima facie case for the enforceability of the restraint of trade provisions, particularly given the niche nature of Lamson's business and the potential harm from the misuse of confidential information. The court also found that the balance of convenience strongly favoured granting the injunctive relief, especially considering the undertakings as to damages and other factors. The evidence concerning Mr Oscuro's activities and the forensic review conducted by FTI Consulting was deemed relevant and supported Lamson's case. Ultimately, the court concluded that there was a sufficient likelihood that Lamson would succeed in obtaining final orders restraining Schmidt from acting contrary to specific clauses of the employment contract.
The final orders included a restraint on Schmidt from engaging in competitive work, soliciting clients, or inducing clients to terminate business relationships with Lamson until December 13, 2025, within specified states in Australia. The court also noted that it would address the issue of suppression orders and costs separately.
Orders
Orders of the court
1. Until further order of this Court the First Respondent be restrained until 13 December 2025 within the States of New South Wales, Victoria, Queensland, South Australia and Western Australia from:
(a) engaging in or performing any work in competition with the part of the business of the Applicant in which the First Respondent worked during the 12 months preceding 13 December 2024;
(b) canvassing, soliciting, or enticing away (or attempt to do any of the foregoing), the business or custom of any Client with whom the First Respondent performed work for or had dealings with during the 12 months preceding 13 December 2024;
(c) inducing or encouraging any Client with whom the First Respondent performed work for or had dealings with during the 12 months preceding 13 December 2024, to terminate or to not renew or maintain or alter, any business relationship, contract or arrangement, that Client has with the Applicant,
where Client means any person who, as at 13 December 2024:
(d) was a person to whom the Applicant provided products or services at any time during the 12 months prior to 13 December 2024; or
(e) has entered into discussions or negotiations with the Applicant at either the person's own initiative or at the initiative of the Applicant at any time during the 12 months prior to 13 December 2024 with a view to receiving products or services provided by the Applicant and who had not notified the Applicant at least 3 months prior to 13 December 2024 that they did not wish to receive such products or services.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
At the hearing of Lamson's application for an interlocutory injunction, I advised the parties that given the volume of affidavit material that had been filed, if the parties did not refer to an affidavit in their written or oral submissions, then I would not take that affidavit into account.Objections to evidence Mr Schmidt raised objections to various paragraphs in the many affidavits on which Lamson sought to rely. Those objections were set out in a table that was filed with the Court and raised questions of relevance or asserted that certain evidence amounted to inadmissible opinion evidence. It is unnecessary for me to make any rulings on the objections that were made on the basis that the evidence amounted to inadmissible opinion evidence. That is because I have not taken any of that evidence into account in deciding whether the interlocutory injunction sought by Lamson should be granted, in any event. Mr Schmidt's objections to aspects of the evidence relied on by Lamson on the basis that it is irrelevant fall into two categories: firstly, evidence about Mr Schmidt's access to computer equipment, including evidence said to constitute expert evidence, which Lamson relies on to demonstrate the potential for Mr Schmidt to have retained its confidential information; and secondly, evidence relating to Mr Oscuro's alleged activities in the days leading up to his departure from Lamson. Insofar as the first category of Mr Schmidt's objections are concerned, it is also unnecessary for me to rule on those objections, as I have not taken that evidence into account. I have, however, taken the evidence within the second category of Mr Schmidt's objections into account. In order to explain why I am of the view that this evidence is relevant, it is necessary to provide a brief description of the nature of that evidence. In her affidavit of 7 April 2025 at para 104, Ms Kershaw says that on 6 March 2025, Lamson engaged FTI Consulting (FTI) to carry out a forensic review of some electronic devices that were returned to Lamson by both Mr Schmidt and Mr Oscuro on their respective final working days. The report of that review that was prepared by FTI suggested that on 18 November 2024, Mr Oscuro downloaded and/or previewed several electronic folders containing information that is confidential to Lamson, including information about Lamson's products, documents relating to tenders, drawings, schematics and quotes developed by Lamson, and information about Lamson's prospective and current clients: confidential affidavit of Ms Kershaw of 7 April 2025 at paras 13-24. According to paras 25-26 of Ms Kershaw's confidential affidavit:The process to design an efficient, cost-effective and low-risk PTS system is a niche area, and requires extensive knowledge and experience that is not readily available in the market.If a competitor were to have that knowledge, as well as the [information apparently downloaded by Mr Oscuro] and access to [a pricing spreadsheet that both Mr Schmidt and Mr Oscuro had access to as Business Development Managers], in my view, this would be extremely detrimental to Lamson Concepts. Using that information, a competitor could contact Lamson Concepts' clients and use the Company's designs and pricing structure to offer effectively the same product at a reduced rate. This is particularly concerning in the case of both Mr Oscuro and Mr Schmidt, who … directly held a large number of Lamson Concepts' key relationships over an extended period of time, including immediately prior to their departure from the Company.
Decision
Reasons for decision
As I have said, I am of the view that Lamson has a strong prima facie case that Mr Schmidt breached a valid restraint of trade clause, and that there is sufficient apprehension of breach of other valid restraint of trade clauses, in the 25 March letter. Taking into account the undertaking as to damages proffered by Lamson, the separate undertaking that Lamson has indicated it would make to the Court, and all of the other factors to which I have referred, I am of the view that the balance of convenience is strongly in favour of the injunctive relief sought by Lamson.Conclusion Making the interlocutory orders sought by Lamson will practically determine the substance of that part of Lamson's claim that relates to the enforcement of the restraint of trade clauses in the 25 March letter. In that regard, it is highly unlikely that this aspect of Lamson's claim will be finally heard and determined before 13 December 2025, although the interlocutory orders will not practically determine the entirety of Lamson's claim as it also seeks other and substantive relief. Nevertheless, having considered the strength of Lamson's case in more detail than might otherwise have been necessary in the context of an application for an interlocutory injunction, and having regard to where I think the balance of convenience lies, I reached the view that there was a sufficient likelihood that Lamson will succeed in obtaining final orders restraining Mr Schmidt from acting contrary to cl 29.3(b), (c) and (d) of the 25 March letter, to justify the making of the interlocutory orders sought. Accordingly, I concluded that it was appropriate to make the interlocutory orders that Lamson sought. I will now hear the parties on the question of whether any parts of my reasons for decision should be the subject of a suppression order, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), and on the issue of costs.