Leafbusters Pty Ltd v Nicholls

[2012] VCC 349

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST
GENERAL DIVISION

Case No. CI-12-01093

LEAFBUSTERS PTY LTD	Plaintiff
v.
JOHN EDWARD NICHOLLS	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	30 March 2012
DATE OF JUDGMENT:	30 March 2012 (revised 2 April 2012)
CASE MAY BE CITED AS:	Leafbusters Pty Ltd v. Nicholls
MEDIUM NEUTRAL CITATION:	[2012] VCC 349

REASONS FOR JUDGMENT

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Catchwords:            Interlocutory injunction – Restraint of trade clause – Employee leaving employment as a salesman – No evidence that restraint reasonable – Undefined as to locality; broad in scope – No evidence of any likely losses to employer – Summons dismissed

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. Kotsifas	J. Kotsifas & Associates
For the Defendant	Mr C. Cody	Mason Sier Turnbull

HIS HONOUR:

1The plaintiff, Leafbusters Pty Ltd, is engaged in the gutter protection industry, apparently throughout Australia and New Zealand. The defendant, Mr Nicholls, was employed as a sales person for Leafbusters in the Gold Coast/South Brisbane region between 17 October 2011 and about 20 February 2012. His employment was apparently terminated by mutual arrangement between Mr Nicholls and his employer. Mr Nicholls has taken up employment as the Queensland General Manager of Four Seasons Gutter Protection Pty Ltd.

2Four Seasons is a competitor of Leafbusters. They have been in litigation in the Federal Court of Australia since 2004. On 16 August 2006, Heerey J granted an interlocutory injunction restraining Four Seasons and other parties associated with it from using various documents in a “franchise opportunity folder”, which documents appeared to have been substantially copied from Leafbusters documents.

3In the present litigation, Leafbusters seeks an interlocutory injunction until the determination of the proceeding “restraining the defendant, its agents, servants, employment or any relative of the defendant from continuing to engage in the gutter protection industry in Australia, or alternatively, in the state of Queensland and Victoria”. The cause of action relies upon the terms of a confidentiality agreement executed by the parties on 17 October 2011. Clause 8 of the agreement is headed “Non compete” and reads as follows:

“Signator agrees not to engage in any activity that is competitive with any activity of Company during the course of their relationship and for a period of 2 YEARS after the termination of this Agreement or any other Agreement that has been jointly signed. For purposes of this paragraph, competitive activity encompasses forming or making plans to form a business entity that may be deemed to be competitive with any business of Company. This does not prevent Signator from seeking or obtaining employment or other forms of business relationships with businesses outside the gutter protection industry.“

4The clause is a restraint of trade clause. It is to operate for a period of “two years after termination of this agreement”, presumably by Mr Nicholls’s employment with Leafbusters coming to an end.

5There is no geographical limitation in the clause and the activity which Mr Nicholls agreed not to engage in for a period of two years after termination was “any activity that is competitive with any activity of [Leafbusters]…Competitive activity encompasses forming or making plans to form a business entity that may be deemed to be competitive with any business of [Leafbusters]”.

6The clause is prima facie void and cannot be enforced unless the protection offered by the clause is reasonable in the circumstances. No evidence has been put forward to seek to establish the reasonableness of the protection offered by the clause.  In submissions, plaintiff’s counsel Mr Kotsifas, asserted that the gutter protection industry was a “niche” market and, accordingly, required protection of the sort set out in the clause. He further submitted that insofar as the protection offered by the clause may, for example by the absence of a geographical limitation, be considered to be too broad to protect the reasonable interests of Leafbusters, that the Court should imply into the clause appropriate reasonable restrictions and that any injunction granted should reflect these restrictions.

7In my view, there is no basis for either seeking to imply into this agreement, specifically Clause 8, restrictions which might offer more reasonable protection for an employer or which might lead the Court to make interlocutory orders which are more limited than the protection offered by Clause 8. I am not satisfied in this case that there is a serious issue to be tried as the case is presently pleaded, where reliance is solely placed upon Clause 8 of the agreement. I note, in this respect, that Clause 13 headed “Injunctive relief” suggests that Mr Nicholls acknowledged the appropriateness of injunctive relief if he were to breach the agreement. I do not consider that Clause 13 assists the plaintiff’s position where the critical requirements for interlocutory relief cannot be satisfied.

8In his submissions, Mr Kotsifas indicated that the purpose of Clause 8 was to protect Leafbusters’s confidential information, which he asserted Mr Nicholls must inevitably use in his new employment. There is not, however, any evidence to support this assertion. It is clear from the limited material that has been filed in support of the application, in this case most of it relating to the system employed by Four Seasons, that gutter protection is not a particularly sophisticated process. I do not consider that, in the absence of specific evidence of the types of confidential information which Mr Nicholls is said to have acquired during the four months of employment, he should be restrained from continuing in employment with Four Seasons.

9In the absence of any evidence relating to the losses which Leafbusters may suffer as a result of Mr Nicholls’s continued employment with Four Seasons, the balance of convenience clearly favours the court not granting the injunction. The effect of the injunction would mean that Mr Nicholls’s employment with Four Seasons must terminate until the proceeding can be completed. In the circumstances, it is therefore inappropriate to grant relief even if I were to be persuaded that there was a serious issue to be tried in this case.

10The plaintiff’s summons, filed 8 March 2012, is dismissed.

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Certificate

I certify that these 3 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 30 March 2012 (and revised on 2 April 2012).

Dated: 2 April 2012

Caroline Dawes

Associate to His Honour Judge Anderson