Lindian Importers Pty Ltd v Pace

[2000] VSC 3

SUPREME COURT OF VICTORIA
PRACTICE COURT	Do not Send for Reporting
Not Restricted

No. 7911 of 1999

LINDIAN IMPORTERS PTY. LTD.	Plaintiff
v.
PIETRO PACE AND ANOTHER	Defendants

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JUDGE:	BEACH, J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	6 JANUARY 2000
DATE OF JUDGMENT:	6 JANUARY 2000
CASE MAY BE CITED AS:	LINDIAN IMPORTS v. PIETRO PACE & ANOR.
MEDIA NEUTRAL CITATION:	[2000] VSC 3

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CATCHWORDS:      Injunction – Former director of company soliciting customers of company -–No serious issue to be tried – Damages adequate in any event – Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	R. Strong	Riordans
For the Defendants	R. Randall	Webb Korfiatis

HIS HONOUR:

1. This is the return of a summons issued by the plaintiff Lindian Importers Pty Ltd against the defendants Pietro Pace and Rodini Nominees Pty Ltd whereby the plaintiff seeks the following orders: 

"1.That until the hearing and determination of this proceeding or until further order the Defendants and each of them be restrained whether by themselves their servants agents or otherwise howsoever from:

(a)       communicating with any person to whom Lindian supplied goods in the course of its business between 1 January 1999 and 21 July 1999 for the purposes of supplying or offering to supply to such person goods of the same kind as the goods ordinarily supplied by Lindian;

(b)      communicating with any person from whom Lindian acquired goods in the course of its business between 1 January 1999 and 21 July 1999 for the purpose of acquiring or offering to acquire from such persons goods of the same kind as the goods ordinarily acquired by Lindian." 

1. The background to the application may be summarized as follows.  The first-named defendant since some time prior to 1995 had been running an import food business which dealt mainly with herbs and spices, under the business name of Lindian Imports.  In about 1995 he met one Emmanuel Kalis.  The two men decided to enter into a partnership importing Greek food products and sell them to various retail outlets in Victoria.  To carry out their venture Lindian Imports was incorporated in Tasmania on 18 July 1996, the name of the corporate body being the plaintiff Lindian Imports Pty. Ltd.  The sole directors of the company were Pace and Kalis.  The Greek food products the parties agreed they would import consisted of olive oil, olives, and other continental food products which would be sold wholesale to delicatessens, supermarkets and similar outlets.  The role that the first defendant was to carry out in relation to the new venture was to organize sources of supply and to locate and secure customers.

1. In due course, the first-named defendant, acting on behalf of the plaintiff, built up the business of the plaintiff in Victoria, although mainly in Melbourne.  The partnership between the two men apparently proceeded smoothly until towards the end of 1998.  At that time and for reasons which are not clear to me from the material filed in the court, the relationship between the two men began to break down.  In mid-1999 the first-named defendant travelled to Greece for the period of approximately a week.  Although the trip was mainly to visit friends and relatives, he also took the opportunity to speak to a Greek supplier of what are called Melissa products, and to urge him to grant more favourable trading terms to the plaintiff in respect of those products.

1. After the first-named defendant returned from Greece, it would appear that the relationship between himself and Kalis deteriorated further and in July 1999 the first-named defendant's solicitors wrote to Kalis' solicitors proposing a dissolution of the partnership between the two men.  After he returned from Greece and went to the premises of the business conducted by the plaintiff, the first defendant found that he had been locked out of the business and since that time has not been involved in it.  On 13 August 1999 the plaintiff's solicitors wrote a letter to the first-named defendant's solicitors concerning the matter.  The letter reads:       

"Re Lindian Importers Pty Ltd. we refer to the above mentioned matter in previous correspondence.  We wish to advise that our client has taken over the management of the business and, accordingly, has changed the locks as a result of your client's actions of departing for overseas without giving notice or advising his fellow director, being Mr Emmanuel Kalis.  Accordingly, he has appointed a manager to continue the running of the business and in order to protect the creditors of the company.  Should you have any further queries please contact [and then a member of the defendant's solicitor's firm is named] of this office.  Yours faithfully."

1. According to the affidavit sworn by the first-named defendant on 22 December last, he later spoke with Kalis who told him that he, the first-named defendant, was not allowed to enter the premises of the plaintiff and that he was finished.  In 1996 the first-named defendant had incorporated a company, Rodini Nominees Pty Ltd, which is now the second-named defendant to this proceeding.  After the first-named defendant severed his relationship with the plaintiff (and he did that by resigning as a director in I think September 1999), the first-named defendant has, through Rodini nominees Pty Ltd, resumed the conduct of his own import business.  What is complained of by the plaintiff is that since he ceased to be a director of the plaintiff, the first-named defendant has been approaching customers of the plaintiff seeking to solicit their business.  It is said that the information that the first-named defendant acquired as to the customer base of the plaintiff whilst a director of the plaintiff is confidential information and that in the circumstances he should be restrained from making use of the information in the manner sought in the plaintiff's summons.

1. I am not satisfied that it is appropriate in the circumstances of this case to grant any injunctive relief to the plaintiff in the matter and I say that for these reasons.  In my opinion, there was no obligation on the part of the defendants not to compete with the plaintiff once the first-named defendant had severed his connection or association with the plaintiff.  I am not satisfied that there is any evidence to suggest that the defendants have misused any confidential information obtained by the first-named defendant whilst he was associated with the plaintiff.  I consider that any information he has been using can properly be described as know-how acquired by him whilst working with the plaintiff.  It must be remembered that there is a clear distinction to be made between customer information acquired by the first-named defendant whilst working with the plaintiff and any trade secrets that the plaintiff may have possessed.

1. In Dean on The Law of Trade Secrets the author says at p.213:

"An ex-employee is entitled to approach the ex-employer's customers so long as:

(i)     those customers' names are not trade secret;

(ii)     the employee is not in breach of a valid restraint of trade clause;

(iii)the employee does not do so by using lists dishonestly removed from the ex-employer or as a consequence of deliberately and dishonestly memorizing the ex-employer's clients' names."

1. In Ormonoid Roofing & Asphalts Ltd v. Bitumenoids Ltd 1930 31 S.R. (N.S.W.) 347 at p.354 Harvey, C.J. said:

"Where an employee in the course of his employment and for the purposes of his employment has obtained ... particulars of customers which have become stored up in his mind as a necessary consequence of the way in which his master employed him, there is no justification in the absence of an express contract, for preventing him making use of that knowledge."  

See also the decision of Young, J. in Rosetex Company Pty Ltd v. Licata (1994) 12 ACSR 779.

1. In my opinion, those principles are equally applicable to the case of a director of a company who resigns and sets up his own business in opposition to that of the company with which he was previously associated.  In that regard I think it is important to note what the first defendant has sworn in relation to his knowledge of the customers he has approached.  At para.16 of his affidavit sworn 22 December 1999 the first-named defendant has said:

"I take samples to all the continental food retailers that I know of.  I know about such retailers as I had built up contacts prior to the commencement of the plaintiff's business when I was trading as Lindian Imports, during the time I managed the plaintiff's business, and after being locked out of the plaintiff's business." 

1. It is strongly arguable that knowledge of those customers cannot be said to be confidential information of the plaintiff.  In any event, if that view of the matter ultimately proves to be erroneous, it is my view that the plaintiff would be adequately compensated by an appropriate award of damages.  On the other hand, to restrain the defendants in the way sought would, in my view, have the practical effect of depriving the first-named defendant of his ability to conduct his importing business thereby causing him great financial hardship which may be a somewhat more difficult loss to quantify.  So I really content myself by saying in conclusion that I am not satisfied that it is appropriate to grant the injunctive relief sought in this case and the plaintiff's application in that regard must be dismissed.

1. I order that the plaintiff's summons filed in the court on 14 December last be dismissed with costs to be taxed and paid by the defendant.

1. In my view, having regard to the fact that there are proceedings on foot in relation to the plaintiff company in the Corporations List, it is appropriate that this proceeding be now referred to the judge in charge of the Corporations List.

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