Magenta (WA) Pty Ltd v Moredount
[2010] WASC 286
•19 OCTOBER 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MAGENTA (WA) PTY LTD -v- MOREDOUNT [2010] WASC 286
CORAM: ALLANSON J
HEARD: 15 OCTOBER 2010
DELIVERED : 19 OCTOBER 2010
FILE NO/S: CIV 2542 of 2010
BETWEEN: MAGENTA (WA) PTY LTD t/as PALASSIS ARCHITECTS
Plaintiff
AND
NERIDA MOREDOUNT
Defendant
Catchwords:
Practice and procedure - Interlocutory injunction - Turns on own facts
Legislation:
Nil
Result:
Interlocutory injunction granted in favour of applicant except in terms of par 1(a) of the proposed amended notice of motion
Category: B
Representation:
Counsel:
Plaintiff: Mr M G Pendlebury
Defendant: Mr P R MacMillan
Solicitors:
Plaintiff: Jackson McDonald
Defendant: Gibson Lyons
Case(s) referred to in judgment(s):
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618
Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533
Landmark Underwriting Agency Pty Ltd v Kilborn [2006] NSWSC 1108
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Workpac Pty Ltd v Steelcap Recruitment Pty Ltd [2008] WASC 238
ALLANSON J: The applicant, Magenta (WA) Pty Ltd (Magenta), is an architecture firm, and trades as Palassis Architects. The respondent was a senior employee of Magenta.
The respondent had been employed with the applicant from November 1999. Her employment was subject to a written contract of employment. On 13 September 2010 the respondent gave two weeks' notice of her resignation, in accordance with her contract, with a completion date on Friday 24 September 2010.
On leaving her employment with Magenta, the respondent entered employment with The Planning Group WA Pty Ltd (TPG). On 27 August 2010, TPG wrote to the respondent offering her employment. The respondent was originally to commence at TPG on 11 October 2010, although this later was brought forward and she began on 28 September 2010.
On Saturday 28 August 2010, that is the day after the offer of employment by TPG, but two weeks before she had handed in her notice with Magenta, the respondent attended Magenta's premises and connected an external hard drive to her work computer. The respondent says her purpose was to copy her 'in progress' folder to the external hard drive to 'take home to sort out over the coming weeks before leaving the plaintiff'. There is evidence before the court that the 'in progress' folder contained a large amount of information (approximately 90 gigabytes) relating to various projects and matters on which the respondent was then working, or had worked in the course of her employment with Magenta.
Between 25 August 2010 and 30 August 2010, the respondent also sent five emails from her work computer to her home email address attaching documents relating to her work.
Around 20 and 21 September 2010, the respondent sent emails to one or more clients of Magenta advising them that she was leaving, taking up a principal heritage planning role with TPG and, in at least one email, concluding:
I will continue to provide specialist heritage advice in my role at TPG and hope to be able to continue our productive collaborations well into the future.
On the basis of evidence of those matters, on 30 September 2010 I made interlocutory injunctions restraining the respondent until further order from, in effect:
(a)deleting any information from any computer or electronic storage device in her possession or under her control;
(b)destroying or passing to any third party material obtained from the applicant;
(c)using or disclosing specified confidential information of the applicant;
(d)reproducing or publishing the applicant's original literary works; and
(e)canvassing or soliciting or by any other means seeking to conduct any heritage planning or conservation work in relation to a heritage property with any person who was a customer or client of the applicant in the period 27 September 2009 to 27 September 2010, including TPG.
The injunction was returned before the court on 8 October 2010, when restraints were continued, although without the express reference to TPG in par (e). It was listed for hearing again on 15 October.
At a hearing on 15 October 2010, Magenta sought orders restraining the respondent until trial. But for one matter, the orders were agreed. By consent, the respondent is restrained until 27 March 2011 or until judgment from:
1.(a) canvassing or soliciting or by any other means seeking to conduct any heritage planning or conservation work in relation to a heritage property with any person who was a customer or client of the applicant in the period 27 September 2009 to 27 September 2010 and for whom in the same period the respondent had carried out any architectural, heritage, planning or conservation work or otherwise had material dealings in the course of her employment with the applicant;
(b)conducting any heritage planning or conservation work in relation to a heritage property with any person who was a customer or client of the applicant;
(c)soliciting, enticing or inducing whether directly or indirectly any director, manager or employee of the applicant to leave the employ of the applicant.
2.using or disclosing any confidential information of the applicant (described in the schedule to the orders) and any other information concerning the business of the applicant or its clients which is not in the public domain;
3.reproducing or publishing in any way the applicant's original literary works.
The respondent also agreed to a regime whereby she would:
1.deliver any desktop or laptop computer, external hard drive, USB storage device capable of receiving or storing emails, and documents or of storing electronic versions of documents, to an independent computer expert for examination; and
2.provide an affidavit regarding whether she had caused or permitted any use of the applicant's confidential information, and whether she had delivered up all devices and copies of any information.
The respondent had already delivered the external hard drive to Magenta's solicitors.
The restriction on competition
The respondent's employment contract contains express obligations of confidentiality, and a restriction on competition following the termination of employment. The restraints which have been imposed on her until trial are based on those obligations.
In particular, under an appendix to the contract dealing with restriction on competition, the respondent is bound by the following obligations:
In order to protect the goodwill of the Company, you agree without prejudice to any other duty implied by law or equity, that during your employment and thereafter a period of six months after the termination date, that you shall not, without the prior written consent of the Company, in any capacity whether directly or indirectly, through any other firm or Company so as to compete with the Company:
(a)canvass or solicit or by any other means seek to conduct Prohibited Business with any Restricted Customer with whom you shall have had any material dealings in the course of your duties in the Relevant Period;
(b)conduct Prohibited Business with any Restricted Customer with whom you shall have had any material dealings in the course of your duties in the Relevant Period.
The Relevant Period is defined as a 12‑month period ending with the termination date. There are two other important defined terms:
'Restricted Customer' shall mean any person, firm, company or at any time in the Relevant Period a customer or client of the company.
'Prohibited Business' shall mean any business or activity carried on by the company at the termination date or at any time in the Relevant Period in which you shall have been directly concerned in the course of your employment at any time in the relevant period.
The order in dispute
Magenta seeks an order that until 27 March 2011 or until judgment in the action, the respondent be restrained from:
commencing or continuing employment in any role that involves heritage planning or conservation work in relation to a heritage property or otherwise acting as a heritage consultant with TPG.
Magenta alleges that TPG was, during the Relevant Period (in effect, the preceding 12 months), a customer or client of Magenta, and that by providing services in the course of her employment with TPG, the respondent would be conducting Prohibited Business with a Restricted Customer.
The respondent denies that TPG was a client or customer of Magenta during the Relevant Period.
The evidence
The evidence was on affidavit. Neither party sought to cross‑examine.
Kevin Michael Palassis, a director of Magenta and the principal in the business, says the relationship between Magenta and TPG extends over 15 years, and during that time TPG 'usually involved the applicant in its projects to provide heritage consultancy services'. Magenta became involved in projects 'through an introduction made by TPG' and the companies worked in close co-operation.
On the specific question of whether TPG was a client in the previous 12 months, Mr Palassis refers to a project (the Dianella precinct project) in which TPG engaged the applicant directly and was billed by the applicant for that work. The last invoice was sent out more than 12 months ago. The only evidence of activity in relation to the Dianella precinct project in the Relevant Period is a single entry in the respondent's diary. On 6 April 2010, the respondent has recorded 'Dianella precinct.' That time was not entered on the respondent's timesheet, and no invoice was created.
The more significant evidence is that of Janine Marie Symons, an employee of the applicant. She states that she prepared a draft heritage impact statement in respect of the Claremont Medical Centre. Her work was reviewed and approved by the respondent. Ms Symons states that she determined the identity of the client and named the client on the coversheet and in the introduction to the report. The report, attached to her affidavit, is dated July 2010. It states on its cover 'Prepared for TPG'. The introduction begins:
Palassis Architects have been commissioned by the Town Planning Group (TPG) to prepare this heritage impact statement.
Magenta produced no written engagements or contracts between itself and TPG during the Relevant Period, and no financial records showing payment received from TPG for work done during that period. Specifically, there is no evidence of any written engagement, invoicing, or payment, for the work on the Claremont Medical Centre.
The respondent says as to the evidence of Mr Palassis and Ms Symons:
1.The diary entry in April records a phone call 'scouting for potential work' and was not billable.
2.The work at the Claremont Medical Centre was done at the request of Mr Paul Simpson from Freshwater Claremont Pty Ltd and that company was always the client.
The respondent also relies on the affidavit of Janice Hilary Burch, a director of TPG, sworn 7 October 2010. Ms Burch deposes that the commercial relationship between TPG and Magenta over the years has variously been as mutual clients or as collaborators on the same project with the same principal client. From research of TPG's records, she states that TPG has not been a client of the Magenta during the last 12 months.
The extended meaning of 'customer' or 'client'
Magenta relies on an additional argument, that the expression 'customer or client' in the definition of Restricted Customer is not confined to a person in a direct contractual relationship with Magenta. Specifically, the applicant submits that the restriction includes TPG because TPG and Magenta were accustomed to work in close cooperation.
Counsel for Magenta referred the court to dictionary definitions, particularly of the terms 'custom' and 'customer', and the way in which these terms may, in an appropriate context, refer to habituation or patronage over time.
In construing the contract as a commercial agreement, the court must attend to the language used by the parties, the circumstances which the document addresses, and the objects which it is, objectively, intended to secure: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 [22]. The court must also have regard to the circumstances surrounding the making of the contract.
In the present case the contract was entered into in January 2009. The respondent had then been an employee of Magenta since 1999. The respondent was employed as a professional architect, and from January 2009 as a practice director. While she was not a director of Magenta, she was a very senior employee. I accept that in her position, the respondent had dealing with, and access to, significant clients of the business and was involved in important projects.
The aim of the restraint clause is, expressly, to protect the goodwill of Magenta. The case has not yet been pleaded. At this stage, the respondent has not suggested that the extent of the restraint of trade imposed by the contract, for a senior employee in the respondent's position, was unreasonable.
I also take into account, as part of the context and surrounding circumstances, that Magenta is a specialist firm in the sense that there are only a limited number of firms in Western Australia which offer heritage planning services.
Turning to the language used, Magenta submits that if 'customer' and 'client' are given the same meaning, the restraint clause contains a tautology. I should not assume that the parties intended that result.
On the face of the contract, there is perhaps a more significant tautology. The restriction, during the six months after termination of employment, is on conducting Prohibited Business 'with any Restricted Customer with whom you shall have had any material dealings in the course of your duties in the relevant period.' The definition of 'Restricted Customer' is: 'any person, firm, company or at any time in the relevant period a customer or client of the company'. If the definition of 'Restricted Customer' is given its widest possible meaning, all of the words after the first appearance of 'or' are unnecessary. A Restricted Customer is any person, firm or company; and the relevant restriction on competition is against conducting Prohibited Business with any person, firm or company with whom the respondent shall have had material dealings in the course of her duties in the Relevant Period.
The matter was not, however, argued that way. Magenta submitted that the phrase 'customer or client of the Company' caught TPG.
This is not the sort of issue that can be resolved by resort to authority, although I note that Young CJ in Eq confronted just this question in Landmark Underwriting Agency Pty Ltd v Kilborn [2006] NSWSC 1108. The words 'customer' and 'client' are common words. Client is more apt to describe one who employs a professional adviser; customer more generally describes one who purchases goods. In my opinion, looking at the whole of the restraint clause and the object it was intended to achieve, the expression 'customer or client' does not describe, as alternatives, two different classes of person. Rather, it is a composite phrase that includes all those persons who had entered into relationships with Magenta in which they had engaged Magenta to provide architectural or other services for a fee.
On that basis, while recognising the limits of determining such an issue on affidavit evidence at this stage, I am not satisfied that Magenta has demonstrated that TPG was, during the 12 months before the termination of the respondent's employment, a client or customer of Magenta.
I also have some reservations about whether the prohibition against conducting 'Prohibited Business with any Restricted Customer' would include employment by TPG, even if it had been a client. It is not, however, necessary for me to determine that question.
The grant of an interlocutory injunction
The court has power under s 25(9) of the Supreme Court Act 1935 (WA) to grant an interlocutory injunction in all cases in which it appears to be just or convenient that the order be made. The remedy is discretionary, but the discretion is not at large. It is a basic proposition that it is necessary to identify the legal or equitable rights which are to be determined at trial and in respect of which final relief is sought: see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199. The court may grant the injunction if it is necessary to keep matters in the status quo until the determination of those proceedings.
The considerations to which the court should have regard in an application for the grant of an interlocutory injunction are well established. The court addresses itself to two main inquiries:
1.whether the applicant has made out a prima facie case in the sense that if the evidence remains as it is, there is a probability that at the trial of the action the plaintiff will be held entitled to relief;
2.whether the inconvenience or injury which the applicant would be likely to suffer if an injunction were refused, outweighs or is likely to be outweighed by the injury which the respondent would suffer if an injunction was granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, 622 ‑ 623; Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [65] ‑ [71].
The requirement that the plaintiff show a probability that at the trial of the action it will be entitled to relief does not mean it must show it is more probable than not that it will succeed at trial. It is sufficient if the plaintiff shows a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending trial. The 'governing consideration' is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought: ABC v O'Neill [71].
One of those practical consequences relevant in this case is the effect of an interlocutory injunction at this time in finally disposing of the rights between the parties. Neither party has been in a position to put on as full a case as it might with more time and the benefit of interlocutory processes. The court must make its assessment of the probability that at trial Magenta will be held entitled to relief on the evidence which is now before the court.
In making that assessment, however, I take into account that Magenta is in possession of its client files, and billing files and information. If there were further documents available, such as agreements and invoices identifying TPG as a client, I would have expected Magenta to produce them.
Further, the relief sought in this part of the application, although expressed as interlocutory relief, is in substance likely to be final. The contractual restraint on competition is for six months, expiring in March 2011. This issue of restraint of competition is only one of several claims indorsed on the writ of summons. No statement of claim has been filed. It is likely that the period of restriction of competition will have expired before trial.
The relief sought is also likely to be final in another practical sense. If the respondent is restrained from working for TPG until March, even if TPG is willing to hold open the position, she must seek alternative employment until then, or not work.
These factors should be taken into account in considering the balance of convenience. They also warrant a careful consideration of the merits of the claim: see Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 536 (McLelland J) cited in ABC v O'Neill [72] (Gummow & Hayne JJ); see also Workpac Pty Ltd v Steelcap Recruitment Pty Ltd [2008] WASC 238 (Templeman J).
In my opinion, for the reasons I have expressed above, Magenta has not demonstrated a sufficiently strong case that TPG was its customer or client to justify the restraint it seeks to impose upon the trade of the respondent.
With regard to balance of convenience, Magenta submits, and I accept, that employment of the respondent at TPG could cause damage to its business which would be very difficult to quantify should the question of equitable compensation or damages arise. But the damage and loss which would be suffered by the plaintiff and by TPG, should interim relief be granted and the plaintiff fail at trial, are equally difficult to quantify.
I also take into account the extent of the restrictions imposed upon the respondent, and indirectly on TPG, in the agreed orders which prevent her from canvassing, soliciting, or conducting any heritage planning or conservation work in relation to a heritage property with any person who was a customer or client of the applicant during the Relevant Period. While those restrictions are in place, the balance of convenience, in my opinion, favours the respondent.
For those reasons, while granting an interlocutory injunction in favour of the applicant, I have determined not to grant an injunction in terms of par 1(a) of the proposed amended notice of motion.
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