FEDERAL COURT OF AUSTRALIA
National Surgical Pty Ltd v McPhee [2010] FCA 972
Citation: National Surgical Pty Ltd v McPhee [2010] FCA 972 Parties: NATIONAL SURGICAL PTY LTD (ACN 078 902 217) v ROBERT BRUCE MCPHEE File number: QUD 329 of 2010 Judge: COLLIER J Date of judgment: 3 September 2010 Corrigendum: 6 September 2010 Catchwords: PRACTICE AND PROCEDURE – interlocutory application for an order restraining former employee from performing work for competitor – earlier consent order restraining former employee from disclosing or making use of confidential information – principles in Australian Broadcasting Corporation v O'Neill [2006] 227 CLR 57 – question whether serious question to be tried that additional interlocutory relief necessary to protect interests of applicant – “springboard” principle in Terrapin Limited v Builders’ Supply Company (Hayes) Limited [1967] RPC 375 – no clear evidence that former employee has confidential information – not sufficient likelihood that former employee would disregard existing injunctive restraints – not sufficient likelihood that Court would order employment restraint in relation to former employee based on springboard principles – balance of convenience favours former employee Legislation: Copyright Act 1968 (Cth)
Corporations Act 2001 (Cth) ss 182, 183, 1324Cases cited: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 cited
Australian Insurance Holdings Pty Ltd v Chan [2010] FCA 781 cited
Lindner v Murdoch’s Garage (1950) 83 CLR 628 cited
Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535 cited
Terrapin Limited v Builders’ Supply Company (Hayes) Limited [1967] RPC 375 cited
Wilson Parking Australia 1992 Pty Ltd v Rush [2008] FCA 1601 citedThe Laws of Australia (looseleaf) Thomson, “Restraint of Trade” Date of hearing: 2 September 2010 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 63 Counsel for the Applicant: Mr M Spry Solicitor for the Applicant: Cooper Grace Ward Counsel for the Respondent: Mr ADB Fox Solicitor for the Respondent: Gilbert + Tobin FEDERAL COURT OF AUSTRALIA
National Surgical Pty Ltd v McPhee [2010] FCA 972
CORRIGENDUM
1.In the Order, delete “and paragraph B 4”.
I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Collier. Associate:
Dated: 6 September 2010
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 329 of 2010
BETWEEN: NATIONAL SURGICAL PTY LTD (ACN 078 902 217)
ApplicantAND: ROBERT BRUCE MCPHEE
Respondent
JUDGE:
COLLIER J
DATE OF ORDER:
3 SEPTEMBER 2010
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
The applicant’s claim for relief in paragraph B 3 and paragraph B 4 of the application filed 12 August 2010 be dismissed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 329 of 2010
BETWEEN: NATIONAL SURGICAL PTY LTD (ACN 078 902 217)
ApplicantAND: ROBERT BRUCE MCPHEE
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Details
- Case
- [2010] FCA 972
- Decision Date
CaseChat Overview and Summary
National Surgical Pty Ltd, a distributor of specialist surgical equipment, brought proceedings against Mr McPhee, a former employee and Business Unit Manager of their Spine Unit, who tendered his resignation on 26 July 2010 and intended to join a competitor, Life Healthcare. The dispute centres on Mr McPhee's access to and potential use of confidential information, including trade secrets and confidential spreadsheets, which he either possessed or had knowledge of during his employment. National Surgical sought interlocutory relief, including restraining Mr McPhee from disclosing or using the confidential information, and for him to deliver up any copies. The case was heard in the Federal Court of Australia.
The central legal issues were whether Mr McPhee was bound by the obligations of confidentiality in the Confidentiality Contract he signed on 30 November 2009, and if so, whether these obligations extended beyond the contract to include any duty of confidence arising in equity or otherwise. Additionally, the court had to consider whether Mr McPhee's intended employment with a direct competitor justified the granting of interlocutory relief to protect National Surgical's confidential information.
The court noted that, despite the absence of a formal written employment contract, Mr McPhee had signed a Confidentiality Contract that required him to hold all trade secrets in confidence. However, the contract did not intend to limit the broader duties of confidentiality that Mr McPhee would otherwise owe. The court considered the reasoning in O'Neill, where it was held that post-employment confidentiality obligations could be implied in law or equity, independent of any contractual term. Given Mr McPhee's access to significant confidential information and his imminent employment with a direct competitor, the court found that there were serious questions to be tried regarding his potential misuse of this information. Nevertheless, the court was not prepared to grant the additional interlocutory relief sought by National Surgical, as it found that the applicant had not demonstrated an immediate and irreparable harm that warranted such measures.
The court concluded that, while there were serious issues to be tried regarding Mr McPhee's obligations and potential misuse of confidential information, the application for interlocutory relief was not sufficiently compelling to warrant the granting of the orders sought. The court made no order as to costs pending the respondent being heard.
The central legal issues were whether Mr McPhee was bound by the obligations of confidentiality in the Confidentiality Contract he signed on 30 November 2009, and if so, whether these obligations extended beyond the contract to include any duty of confidence arising in equity or otherwise. Additionally, the court had to consider whether Mr McPhee's intended employment with a direct competitor justified the granting of interlocutory relief to protect National Surgical's confidential information.
The court noted that, despite the absence of a formal written employment contract, Mr McPhee had signed a Confidentiality Contract that required him to hold all trade secrets in confidence. However, the contract did not intend to limit the broader duties of confidentiality that Mr McPhee would otherwise owe. The court considered the reasoning in O'Neill, where it was held that post-employment confidentiality obligations could be implied in law or equity, independent of any contractual term. Given Mr McPhee's access to significant confidential information and his imminent employment with a direct competitor, the court found that there were serious questions to be tried regarding his potential misuse of this information. Nevertheless, the court was not prepared to grant the additional interlocutory relief sought by National Surgical, as it found that the applicant had not demonstrated an immediate and irreparable harm that warranted such measures.
The court concluded that, while there were serious issues to be tried regarding Mr McPhee's obligations and potential misuse of confidential information, the application for interlocutory relief was not sufficiently compelling to warrant the granting of the orders sought. The court made no order as to costs pending the respondent being heard.
Orders
Orders of the court
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Background
Background to the litigation
Before turning to this question in light of the reasoning in O’Neill (2006) 227 CLR 57 it is useful to describe the background to the current proceedings.Background The applicant is engaged in the distribution of specialist surgical equipment to hospitals and other medical and health organisations, and holds exclusive agencies in Queensland and northern New South Wales with a number of suppliers. Mr McPhee, was the Business Unit Manager of the applicant’s Spine Unit but tendered his resignation on 26 July 2010. Mr McPhee commenced employment with the applicant in 2004 as a sales representative. Prior to then he worked as a sales representative with another medical devices company for two years, and as an orthotist (a designer and maker of bone bracings and scoliosis bracings) for the thirteen years prior to that. It is not in dispute that Mr McPhee’s father is a prominent orthopaedic spinal surgeon in Brisbane, and that Mr McPhee knows many of the spinal surgeons in Queensland through that family connection. Mr McPhee tendered a letter of resignation to the applicant on 26 July 2010, substantially concurrently with four other employees of the applicant. Of those four other employees who also resigned, three were, like Mr McPhee, staff in the applicant’s Spine Unit which Mr McPhee led. It is common ground that Mr McPhee, like the other former employees of the applicant, intends to take up employment with Life Healthcare, which is a direct competitor of the applicant. At no time during Mr McPhee’s employment did he and the applicant enter a written contract of employment. On 30 November 2009 however Mr McPhee signed a Confidentiality Contract with the applicant. This contract required Mr McPhee to, inter alia, hold all trade secrets in confidence and not discuss, communicate or make unauthorised copies of or use the trade secrets in any capacity unrelated to the applicant (cl 1.2). It appears, however, that the parties did not intend the obligations of confidentiality in the agreement to be in substitution for, or to in any way limit the duties of confidentiality which would rest with Mr McPhee (whether in equity or otherwise) if such specific obligations were not otherwise provided (cl 1.5). It also appears that, at some time prior to the cessation of his employment with the applicant, Mr McPhee either possessed or had knowledge of an extensive volume of confidential information described as “RC confidential information” and “confidential spreadsheets”. This confidential information is exhibited to the second affidavit of the managing director of the applicant, Mr Jon Mills, sworn 13 August 2010, as JHM-15 and JHM 16. The basis upon which I draw this preliminary inference is that the terms of the consent order I made yesterday related to this confidential information, and was in the following terms:Definitions:In this Minute of Order, the following term has the meaning set out below: I note for completeness that, following this order, the applicant no longer pressed (for the purposes of the interlocutory proceedings) for orders of the Court, inter alia, restraining Mr McPhee from disclosing or making use of confidential information (including the information in the annexures JHM-15 and JMH-16), or for delivery up to the applicant of any copies of that confidential information.The applicant’s case
Evidence
Evidence Before The Court
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Decision
Reasons for decision
In these circumstances, even if there were a serious question to be tried, I would not be prepared to make the additional interlocutory order sought by the applicant in para B 3 of its application.Conclusion At the hearing yesterday Mr Fox submitted that he would like to be heard as to costs. The applicant has sought an order that costs be reserved, which is a usual order in respect of interlocutory proceedings. In the circumstances however I will make no order as to costs pending the respondent being provided an opportunity to be heard.
Ratio Decidendi
Legal Principle Established
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