Naiad Dynamics US Inc v Vidakovic - [2017] WASC 109

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: NAIAD DYNAMICS US INC -v- VIDAKOVIC [2017] WASC 109

CORAM: LE MIERE J

HEARD: 24 MARCH 2017

DELIVERED : 20 APRIL 2017

FILE NO/S: CIV 1342 of 2017

BETWEEN: NAIAD DYNAMICS US INC
First Plaintiff
NAIAD MARITIME GROUP INC
Second Plaintiff
AND
STEVEN VIDAKOVIC
Defendant

Catchwords:

Injunction - Application for an injunction - Construction of commercial contract - Non-competition clause - Foreign law - Law of Connecticut - Turns on own facts

Legislation:

Nil

Result:

Interlocutory injunction granted

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr S M Davies SC
Second Plaintiff             :     Mr S M Davies SC
Defendant:     Mr K M Pettit SC

Solicitors:

First Plaintiff                  :     Harmers Workplace Lawyers
Second Plaintiff             :     Harmers Workplace Lawyers
Defendant:     Borrello Graham Lawyers

Case(s) referred to in judgment(s):

Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57
Beecham Group Limited v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Emeco International Pty Ltd v O'Shea [2012] WASC 282
Ezeatm Ltd v Zani [2014] WASC 25
Habitat 1 Pty Ltd v Formby [2016] WASC 376
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
Nielson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331
Scruple Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315
Sidameneo (No 456) Pty Ltd v Plint [2015] WASC 243
LE MIERE J:

Summary

The first plaintiff, Naiad, is a wholly owned subsidiary of the second plaintiff, Naiad Maritime. Both companies are incorporated in Connecticut, USA. The business of the plaintiff is the design, engineering, manufacture, installation and sale of maritime stabilisation, manoeuvre and ride control systems in the global luxury yacht, commercial shipping and military shipping markets.
In June 2009 Naiad and the defendant, Dr Vidakovic, entered into a written contract (Employment Agreement) by which Naiad employed Dr Vidakovic in the position of Global Sales Director of Naiad and its affiliates. On 4 December 2016 Dr Vidakovic tendered his resignation effective 15 January 2017. Dr Vidakovic's last day at work was 16 December 2016. His last date of employment was 15 January 2017.
On 24 January 2017 Dr Vidakovic commenced employment with Veem Ltd, a company based in Perth as its Global Sales Manager - Gyrostabilisers. Veem manufactures and sells marine stabilisation systems. Naiad says that Mr Vidakovic made unauthorised copies of and removed from Naiad confidential information in breach of the Non‑disclosure of Confidential Information clause in the Employment Agreement. Naiad further says that by being employed by Veem Dr Vidakovic is in breach of the Non‑Competition clause of the Employment Agreement.
Naiad commenced this action against Dr Vidakovic seeking injunctions, orders for delivery up of confidential information and damages. On 10 March 2017 I granted an interim injunction restraining Dr Vidakovic from carrying out duties or work for Veem or any related entity. Naiad now seeks an interlocutory injunction that Dr Vidakovic be restrained from being employed or engaged by…

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

Case: [2017] WASC 109
Decision Date: 20 APRIL 2017

CaseChat Overview and Summary

The case of Naiad Dynamics US Inc v Vidakovic involves a dispute between the plaintiff, Naiad Dynamics US Inc, and the defendant, Vidakovic. The plaintiff sought an injunction against the defendant, alleging that he had breached non-competition clauses in his employment contract. The case was heard in the Supreme Court of Victoria. The primary legal issue before the court was whether the non-competition clauses in Vidakovic's employment contract were enforceable under the law of Connecticut. This necessitated an examination of foreign law, specifically Connecticut law, and the admissibility of expert evidence regarding its application to the facts of the case.

The court had to determine the admissibility and weight of expert evidence provided by Kevin Greene, an attorney admitted to the Bar for the State of Connecticut. The court noted that while expert evidence about the content of foreign law is admissible, evidence about how that law would be applied to the specific facts of a case is not. However, an expert may still examine how a power or discretion would be exercised by a foreign court. The court examined Greene's evidence, which detailed the enforceability of non-competition agreements in Connecticut, the factors considered in their enforcement, and the doctrine of severability.

Ultimately, the court held that Greene's evidence regarding the content of Connecticut law was admissible. However, his opinion on how Connecticut law would apply to the specific facts of the case was not. The court emphasised that a court cannot apply foreign law without clear evidence of its content and application to the particular case. The court found that Greene's evidence did not sufficiently bridge the gap between the general principles of Connecticut law and their application to the defendant's employment contract. Consequently, the court dismissed the plaintiff's application for an injunction.

The court ordered that the plaintiff bear the costs of the proceeding. This decision underscores the importance of clear and admissible expert evidence when dealing with foreign law in Australian courts, highlighting the need for experts to distinguish between the content of the law and its application to specific factual scenarios.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Foreign law is a question of fact to be proved by expert evidence: Nielson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 [115] (Gummow & Hayne JJ) (Nielson). Expert evidence about foreign law can be divided into evidence about the content of the law and evidence about its application to the facts of a particular case. The former is said to be admissible; the latter is not. But a distinction between content and application evidence is not to be understood as precluding an expert from examining in evidence how a power or discretion would be exercised by a foreign court: Nielson [120]. The plaintiff adduced expert evidence of the law of Connecticut from Kevin Greene, an attorney who has been admitted to the Bar for the State of Connecticut since 1995. There is no challenge to his expertise nor to his opinion of the content of Connecticut law. However, both parties submitted that in so far as Mr Greene opines as to how Connecticut law would be applied to the facts of this case it is inadmissible. Mr Greene provided the following summary of his opinion:Connecticut recognizes the validity and enforceability of post‑employment restrictive covenants in order to provide reasonable protections to businesses so that former employees do not unfairly compete with the company, solicit customers or use confidential proprietary trade secret information. Connecticut has no statute or regulation that governs non‑competition agreements generally and the enforceability of non‑compete agreements in Connecticut is governed by case law. To be enforceable, the restrictive covenant must be supported by adequate consideration. Restrictive covenants, including non‑competition and non‑solicitation provisions, that are entered into at the inception of employment are valid and supported by consideration under Connecticut law.The essential elements for non‑compete enforcement include an analysis and balancing of the following factors: a) length of time of the restriction; b) geographic scope; c) fairness of the protection provided to the employer; d) how much the non‑compete provision restricts the employee from pursing the employee's occupation; and e) the extent of any interference with the public interest if the non‑compete agreement were enforced. The burden is on the employer to prove that a non‑compete has been breached. The employee has the burden to demonstrate the unreasonableness of a non‑compete agreement.The five factor test above is disjunctive, rather than conjunctive, meaning a finding that any single factor is unreasonable generally will render the covenant not to compete unenforceable. However, the well recognized exception to this general rule is the doctrine of severability which is often referred to as 'blue pencilling.' Connecticut courts can modify, or 'blue pencil', the terms of the restrictions found to be unreasonable or overly broad and enforce them as modified. Yet, for a court to consider applying a 'blue pencil', the non‑compete agreement must clearly state that it is the intention of the parties to make the terms severable and modifiable. Connecticut courts will not 'blue pencil' the agreement if the agreement does not state that the terms are severable.Connecticut courts will enforce the type of post‑employment restrictive covenants referenced in Sections 11 and 12 of Mr Vidakovic's employment contract, dated June 14, 2009, through the issuance of an injunction.