Lifestyle Developments Victoria Pty Ltd v GFL Developments Pty Ltd
[2020] VSC 269
•14 May 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST
S ECI 2020 02047
| LIFESTYLE DEVELOPMENTS VICTORIA PTY LTD (ACN 159 566 458) | Plaintiff |
| v | |
| GFL DEVELOPMENTS PTY LTD (ACN 637 346 493) & ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 13 May 2020 |
DATE OF RULING: | 14 May 2020 |
CASE MAY BE CITED AS: | Lifestyle Developments Victoria Pty Ltd v GFL Developments Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2020] VSC 269 |
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PRACTICE AND PROCEDURE – Application for an interlocutory injunction – Injunction not granted – Confidential information – Unexplained delay in bringing the application – Serious question to be tried – Balance of convenience – Interlocutory injunctions ought be framed with precision.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Noonan | Waterson Legal |
| For the First, Second, Fourth, Fifth and Sixth Defendants | Mr M Hoyne | Pointer Partners Pty Ltd |
| For the Third and Seventh Defendants | Mr T Donaghey | Welner Lawyers |
TABLE OF CONTENTS
Summary.............................................................................................................................................. 1
Employment Contracts...................................................................................................................... 1
Application.......................................................................................................................................... 3
Submissions of the plaintiff............................................................................................................ 4
Submissions of the first, second, fourth – sixth defendants (‘the defendants’).................... 5
Submissions of the third and seventh defendants...................................................................... 6
Analysis................................................................................................................................................ 7
Conclusion......................................................................................................................................... 11
HER HONOUR:
The corporate parties operate rival real estate agencies. The individual defendants are former employees of the plaintiff. They now work as real estate agents and agent representatives for the first defendant. The plaintiff seeks an interlocutory injunction. The application is opposed.
Summary
I will not make orders for an interlocutory injunction. Orders will be made for an expedited trial.
Employment Contracts
The plaintiff and the individual defendants entered into written employment contracts. The employment contracts follow a similar form and include the following provisions.
7. Confidentiality
7.1 Your obligations
You must:
7.1.1keep any Confidential Information which you have received (whether before the date of this Agreement and in whatever capacity) secret and confidential, except to the extent that you are required by law to disclose it;
7.1.2take all reasonable and necessary precautions to maintain the secrecy and prevent the disclosure of any Confidential Information;
7.1.3refrain from using or attempting to use Confidential Information in any manner which will or may cause or be calculated to cause injury or loss to us or our customers or clients; and
7.1.4not, except in the ordinary and proper course of your employment with us, use or disclose or allow to be used or disclosed any Confidential Information to any person without our prior written consent.
7.2 Acknowledgments
You acknowledge and agree that:
7.2.1Confidential Information will be disclosed to you;
7.2.2disclosure of such Confidential Information by you in breach of your obligations may diminish the value of the Confidential Information and could materially harm us; and
7.2.3the obligations in clause 7.1 are reasonable in all the circumstances and necessary to protect our goodwill.
7.3 Additional client requirements
You acknowledge and agree that you will enter into and comply with any additional confidentiality agreements and requirements regarding Confidential Information when reasonably required to do so by us, including when a request to do so is made by one of our clients.
7.4 Return of Confidential Information
On our request or upon termination of your employment for any reason (whichever occurs earlier), you must, at our option, destroy or deliver to us all Confidential Information in your possession or control.
7.5Injunctive Relief
You acknowledge and agree that the Confidential Information is valuable to us, and that any infringement or misuse by you of that Confidential Information will result in substantial harm and irreparable injury to us, for which damages would be an insufficient remedy.
You agree to the entry of an injunction against you in the event of your actual or threatened infringement or misuse of the Confidential Information, and acknowledge and agree that such relief shall be in addition to such other and further relief as may be available to us at law or in equity.
7.6 Survival of obligations
The obligations imposed upon you by this clause survive the termination of your employment, for any reason,
7.7 Confidential Information
In this Agreement, “Confidential Information” means all information and materials in any form concerning us, and includes (but is not limited to) trade secrets, financial information (including billing details), business plans and methods, client and customer lists, lists of suppliers and contractors, marketing strategies, commercially sensitive information and other business intelligence and/or any other information which we indicate to be confidential information or that a reasonable person would expect from its nature to be confidential but does not include information and materials which are in the public domain other than by way of unauthorized disclosure.
...
10.3 Return of Property
At the end of your employment for whatever reason, or earlier on demand, you must return to us or our authorized representative, in good condition, all documents, records, keys, passes, mobile phone, credit cards, computers or any other property of belonging to us or our clients that is in your possession or control, including any copies in your possession or control.
10.4 Continuation of terms
This clause (10.4) and clauses 7, 8, 11 and 12 will survive the termination of your employment and remain in full force and effect and binding on the party concerned.
Application
The plaintiff’s application has narrowed since filing its summons on 6 May 2020. At this stage, the plaintiff does not press for orders in respect of a restraint of trade provision in its employment contracts.
The plaintiff’s proposed orders state that ‘confidential information’:
a.includes the customer and client contact details, including names, telephone numbers, email addresses or addresses (‘contact details’), contained in the documents (and attachments thereto) described in paragraph 15 of the affidavit of Manpreet Singh Dandiwal [director of the plaintiff] affirmed on 5 May 2020; and
b.includes contact details which the second to seventh defendants otherwise obtained through their employment with the plaintiff; but
c.does not include contact details if such information was obtained other than through the second to seventh defendants’ employment with the plaintiff.
(emphasis added)
The plaintiff’s proposed orders seek to restrain the defendants from disclosing or making use of the confidential information, delivery up of it and deletion of any copies of it.
Submissions of the plaintiff
The plaintiff business is in direct competition with the first defendant. The plaintiff and first defendant are competing in the same real estate market on the fringe of the Western suburbs of Melbourne. The second – seventh defendants work for the first defendant.
The Singh Dandiwal affidavit identifies eleven properties advertised for sale by the first defendant that are owned by customers or clients of the plaintiff and have been marketed for sale by the first defendant.
The Singh Dandiwal affidavit describes information taken by individual defendants while they were in the employ of the plaintiff. The defendants emailed the information to their external email address and, in the case of the seventh defendant, downloaded the full database. The defendants’ position seems to be that they have our confidential information but in terms of the orders sought, they do not agree to them. There is a contest about the intention of the parties in obtaining the confidential information. There is no explanation by the seventh defendant for downloading the full database.
On 16 March 2020, the plaintiff’s solicitor sent a letter to each of the defendants demanding they cease and desist all continuing and ongoing breaches of the confidentiality and restraint obligations in their employment contracts.[1] The defendants refused and/or failed to comply with the demands.
[1]Exhibit ‘MSD-6’ to the Singh Dandiwal affidavit (‘the 16 March 2020 letter of demand’).
As deposed in the Singh Dandiwal affidavit, there is now a risk of irreparable harm to the plaintiff’s client base and business by the defendants targeting its clients and customers.
There is a serious question to be tried. Indeed, the plaintiff has a strong case. The defendants contractually agreed not to take the plaintiff’s confidential information. They have a statutory obligation not to misuse or take advantage of confidential information: s 183 of the Corporations Act 2001 (Cth). On being asked to return or destroy the confidential information, they refused. There is therefore a clear inference it will be misused.
The balance of convenience favours the plaintiff and damages will not be an adequate remedy. It will not impede the defendants from going about their business in the usual way. It will prevent them from taking a short cut at the plaintiff’s expense.
On the scope of the order, the definition of ‘confidential information’ is for information the defendants obtained themselves. It is fairly measured and entirely reasonable. The defendants should have no difficulty in complying with it.
Counsel is instructed to give the usual undertaking as to damages.
Submissions of the first, second, fourth – sixth defendants (‘the defendants’)
Firstly, the form of the proposed orders is far too broad. The definition of ‘confidential information’ is problematic because it is an inclusive definition. The definition is not limited to the material in paragraph [15] of the Singh Dandiwal affidavit. It picks up information that is not confidential. The way it is drafted would require the defendants to hand over the PIN for their bank accounts.
When narrowed down to what they are entitled, the proposed orders go no further than the undertakings offered by the defendants. The defendants proffer an undertaking not to access, distribute or otherwise use the information referred to in the Singh Dandiwal affidavit at [15]. There is no need for an injunction.
Secondly, there is no serious question to be tried. There is no evidence whatsoever of any misuse of confidential information. There is evidence that the defendants have in their possession part of a database that they produced for the purpose of contacting customers, but there is no evidence of any breach of their confidential information obligations. The information was sent by the defendants to themselves while in the employ of the plaintiff for the purpose of doing their work. Those emails were sent many months, and in some cases more than a year, before the termination of employment. There is nothing said by the plaintiff that there was anything improper about doing so or even that there is anything implausible about the defendants’ explanation for doing so. There is no evidence that at the time those emails were sent there was any intent to use the emails for any purpose not permitted under their employment contracts.
Thirdly, the balance of convenience weighs against granting the orders. The plaintiff has produced no evidence of any harm in the event the injunction is not granted.
Fourthly, there has been a substantial delay in seeking the orders. In January 2020, the first defendant obtained an estate agent’s licence and started trading in February 2020. Many authorities [by clients for the first defendant to act for them] were signed in mid-February 2020. The plaintiff must have known these clients were going elsewhere from then. It took over a month for it to send the 16 March 2020 letter of demand.
On 27 March 2020, the defendants’ solicitors wrote to the plaintiff’s solicitors with a detailed letter of response to the 16 March 2020 letter of demand.[2] They sought particulars of the alleged copying of the plaintiff’s confidential information including who copied it, what was copied, and when. There was no response until this application some five weeks’ later. That is a substantial delay.
[2]Exhibit ‘HSH-4’ to the affidavit of the sixth defendant affirmed on 13 May 2020 (‘the 27 March 2020 response letter’).
Submissions of the third and seventh defendants
The third and seventh defendants say that unlike the other defendants who resigned from the employ of the plaintiff, they were constructively dismissed on 14 November 2019. They accepted the repudiation and have initiated proceedings against the plaintiff in the Fair Work Commission.
Firstly, there is no serious issue to be tried. As the third and seventh defendants accepted the plaintiff’s repudiation of the employment contracts, the contractual obligations in those contracts do not arise to be enforced.[3]
[3]Crowe Horwath (Aust) Pty Ltd v Loone (2017) 54 VR 517 (Ashley, Priest and Beach JJA); [2017] 266 IR 290 (McDonald J).
Further, the plaintiff has not identified the confidential information. The confidential information is the subject of assertion, not evidence. There is no way for the Court to assess whether it is ‘confidential information’ within the meaning of the contract. It is not exhibited. It could have been exhibited in a closed exhibit. No serious issue arises where the Court cannot assess what information is confidential. Contact information is not confidential in the age of the internet. The plaintiff mistakenly regards it has a proprietary interest in the contact information gathered. No injunction should be permitted that goes to restraining mere knowledge or know-how.
Secondly, the balance of convenience is against the injunction being granted. There is no evidence as to the detriment to the plaintiff in not granting the injunction. The value of the injunction cannot be assessed as there is no evidence as to whether all the matters set out in the plaintiff’s affidavit would amount to a loss of 1% of turnover or greater. Damages would be an adequate remedy.
It is unclear how the proposed orders preserve the status quo. The proposed orders would grant a form of final relief, which is not justified.
Analysis
The legal principles are well-established and not in dispute.[4]
[4]Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57.
The first issue is whether there is a serious question to be tried. There is in respect of the defendants’ obligations of confidentiality to the plaintiff and whether or not those confidentiality obligations have been breached. There is however a significant lapse of time between the alleged emails and downloading in paragraph 15 below and the cessation of the employment of the defendants. This is more than three months and in some cases more than 12 months prior to the termination of employment. Given that, I cannot accept the plaintiff’s submission that they have a strongly arguable case.
Turning now to the evidence revealing a serious question to be tried.
The individual defendants ceased employment with the plaintiff during October – November 2019, save for the second defendant who ceased employment on 9 December 2019.
The plaintiff and first defendant are competitors. The first defendant obtained an estate agent’s licence on 9 January 2020, and commenced full-time trading in early February 2020.
Paragraph 15 of Mr Singh Dandiwal’s affidavit affirmed on 5 May (‘the Singh Dandiwal affidavit’) is as follows:
We have found that, before concluding their employment with Lifestyle Developments, the defendants took unauthorised copies of Lifestyle Developments’ Confidential Information, including in particular Lifestyle Developments’ client and customer lists:
(a) on 2 August 2019 Harvir [sixth defendant] took a copy of a list of Lifestyle Developments’ clients and customers by emailing the list from his work email address to an external email address ‘[email protected]’;
(b) on 30 July 2019 Rajbir [seventh defendant] took a copy of a list of Lifestyle Developments’ clients and customers by emailing the list from his work email address to an external email address in his own name;
(c) on 6 April 2019 Sukhdeep [fifth defendant] took a copy of a list of Lifestyle Developments’ clients and customers by emailing the list from his work email address to an external email address, ‘[email protected]’;
(d) on 23 March 2019 Harvir [sixth defendant] took a copy of a list of Lifestyle Developments’ clients and customers by emailing the list from his work email address to an external email address ‘[email protected]’ and to Rajbir;
(e) on 2 March 2019 Harvir [sixth defendant] took a copy of a list of Lifestyle Developments’ clients and customers by emailing the list from his work email address to an external email address ‘[email protected]’ and to Rajbir;
(f) on 5 December 2018, Rajbir [seventh defendant] took a copy of the list of Lifestyle Developments’ clients and customers, by downloading and exporting 1,015 contacts from Lifestyle Developments’ IT system; and
(g) on 21 June 2018, Rajwinder [fourth defendant] took a copy of a list of Lifestyle Developments’ clients and customers by emailing the list from his work email address to an external email address ‘[email protected]’.
(emphasis added)
In paragraph 15(f) above, and in the statement of claim [30], it is alleged that on 5 December 2018 the seventh defendant downloaded and exported 1,015 contacts from the plaintiff’s IT system. An automatic email generated to ‘office manager’ with an ‘export alert’ dated 5 December 2018 is included in Exhibit ‘MSD-5’ to the Singh Dandiwal affidavit. There is no explanation as to when this email came to the plaintiff’s attention.
In his affidavits affirmed on 11 May 2020, the seventh defendant responds to a number of specific allegations against him, but not the downloading allegation. Nor does the seventh defendant specifically respond to the allegation in paragraph 15(b) above (an allegation particularised in paragraphs 6 and 30 of the statement of claim). He broadly denies retaining any information (confidential or otherwise) about clients from the plaintiff and deposes that he has not used any such information in his work for the first defendant.[5] The seventh defendant deposes that the plaintiff cut off his email access “since October 2019” and accordingly he has not been able to view any email material of the plaintiff since then. However, the seventh defendant does not provide an explanation on oath in respect of the allegations particularised in paragraphs 15(f) and (b) above. The alleged downloading in paragraph 15(f) is alleged to have occurred almost one year before his employment ceased.
[5]First affidavit of the seventh defendant affirmed on 11 May 2020 [16].
There are no specific allegations against the third defendant that are referred to in paragraph 15 above. As to the allegations against the other individual defendants, the sixth defendant affirmed an affidavit on 13 May 2020. The sending of the emails in paragraph 15 is admitted and the explanation given is for the purposes of their work with the plaintiff. The sixth defendant says, other than for ascertaining their existence, he has not access the emails since the termination of his employment.
Paragraphs 12 and 13 of the Singh Dandiwal affidavit contain a list of eleven properties which the first defendant is offering for sale and which the plaintiff says are owned by its customers or clients. The sixth defendant denies using confidential information of the plaintiff to obtain the listing of the properties and deposes that there is an explanation for how the first defendant came to market these properties (or in several cases says it has no authority to do so). The explanation includes for example, ownership of some properties by friends of the defendants. Whether or not the defendants used any confidential information of the plaintiff to obtain the property listings is a factual dispute to be resolved at trial.
I make no finding about the extent of the confidentiality obligations. That is an issue for trial. In response to the third and seventh defendants’ submissions that such obligations may not be enforceable contractually, there remains a serious question to be tried as to whether or not there is, as pleaded in the statement of claim, a breach of ss 182 and 183 of the Corporations Act 2001.
The second issue is 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 against granting the injunction, primarily because of the unexplained delay by the plaintiff in making this application.
The evidence is that the first defendant began operating as a real estate agency in January 2020, and by early February 2020 it was trading full-time and listing properties. The plaintiff does not explain when it decided to undertake a forensic investigation of its IT system to determine whether the individual defendants had taken confidential information. Nor does the plaintiff explain the timing of its 16 March 2020 letter of demand. The plaintiff’s material did not exhibit the 27 March 2020 response letter and should have. There is no explanation for why the plaintiff did not answer the 27 March 2020 response letter before making the application. There is no explanation as to the delay of another five and a half weeks before making this application.
The plaintiff’s delay is inconsistent with its submissions as to the necessity of the interlocutory injunction. Further, there is no evidence to support the assertion in the Singh Dandiwal affidavit that the defendants’ targeting of the plaintiff’s clients and customers “risks irreparable harm”. There is no evidence that damages would not be an adequate remedy.
Thirdly, interlocutory injunctions ought be framed with precision.[6] The proposed orders are not. The definition of ‘confidential information’ is inclusive and accordingly nebulous. Sub-paragraph (b) of the definition is too wide. If made, the definition of ‘confidential information’ in the proposed orders may prejudice the defendants in the conduct of legitimate business activities and adversely impact third parties who have engaged the first defendant to sell their properties.[7]
[6]One Dream Enterprises Pty Ltd v Simmonds [2019] VSC 304.
[7]Affidavit of the sixth defendant affirmed on 13 May 2020 [56]–[60].
Conclusion
I will make orders dismissing the application, and listing the proceeding for an expedited trial. I will hear the parties on costs.
SCHEDULE OF PARTIES
| S ECI 2020 02047 | |
| BETWEEN: | |
| LIFESTYLE DEVELOPMENTS VICTORIA PTY LTD (ACN 159 566 748) | Plaintiff |
| - v - | |
| GFL DEVELOPMENT PTY LTD (ACN 637 346 493) | First Defendant |
| TALWINDER SINGH DAHIYA | Second Defendant |
| HARMANDEEP SINGH DHILLON | Third Defendant |
| RAJWINDER SINGH | Fourth Defendant |
| SUKHDEEP SINGH GILL | Fifth Defendant |
| HARVINDER SINGH HANS | Sixth Defendant |
| RAJBIR SINGH BRAICH | Seventh Defendant |
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