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Nexgen Sydney Pty Ltd v Barakat

Nexgen Sydney Pty Ltd v Barakat

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Case Copied 24 March 2022 82 min read

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Supreme Court

New South Wales

Summary available

Medium Neutral Citation: Nexgen Sydney Pty Ltd v Barakat [2022] NSWSC 312
Hearing dates: 7 – 8, 14 September, 19 November, 18 December 2020; Final Submissions September 2021
Date of orders: 24 March 2022
Decision date: 24 March 2022
Jurisdiction: Equity
Before: Ward CJ in Eq
Decision:
(1)   Order that the first and third defendants pay the plaintiffs nominal damages in the amount of $1 for breach of her or his respective employment contracts.
(2)   Dismiss the remainder of the plaintiff’s amended statement of claim.
(3)   Discharge the undertaking proffered by Ms Barakat and Mr Youssef on 29 November 2019.
(4)   Direct that any brief written submissions on costs be filed and served within 14 days with a view to being determined on the papers.

Catchwords:
EQUITY — Breach of confidence — Where plaintiffs and defendants provide telecommunications hardware solutions and services — Where plaintiffs and defendants procure new customers by way of telemarketing — Where both plaintiffs and defendants purchase databases of potential “leads” from the same suppliers — Where first, second and third defendants left the employ of the plaintiffs and commenced employment with the fourth and fifth defendants — Where first and third defendants alleged to have taken confidential information of the plaintiffs with them in the form of spreadsheets and emails — Where first, second and third defendants alleged to have used confidential information in the business of the fourth and fifth defendants to solicit, approach, or entice away customers of the plaintiffs — Where plaintiffs suffered no loss — Where concurrent confidentiality obligation in employment contract — Where first, second and third defendants admit to owing fiduciary duties to the plaintiffs — Whether breach of fiduciary duties — Whether breach of duty of confidence
CONTRACTS — Breach of contract — Where confidentiality obligation concurrent with equitable duty of confidence and fiduciary duties — Whether transfer and use of spreadsheets and emails breached obligation of confidence
CONTRACTS — Illegality — Restraint of trade
CORPORATIONS — Employees — Improper use of position — Improper use of information
EQUITY — Equitable remedies — Permanent injunctions

Legislation Cited:
Competition and Consumer Act 2010 (Cth), ss 46, 47
Corporations Act 2001 (Cth), ss 79, 182, 183, 1324
Crimes Act 1900 (NSW), ss 308B, 308C
Uniform Civil Procedure Rules 2005 (NSW), r 29.7

Cases Cited:
Advanced Fuels Technology Pty Ltd v Blythe [2018] VSC 286
AIIB Pty Ltd v Beard [2009] NSWSC 1001
Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288; [1973] HCA 40
Anderson v Canaccord Genuity Financial Ltd [2022] NSWSC 58
Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664
Bayley Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341
Belflora Pty Ltd v Vinflora Pty Ltd [2021] NSWCA 178
Berkeley Administration Inc v McClelland [1990] FSR 505
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
Cactus Imaging Pty Ltd v Peters (2006)…

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: [2022] NSWSC 312
Decision Date: 24 March 2022

CaseChat Overview and Summary

Nexgen Sydney Pty Ltd, a provider of telecommunications hardware solutions and services, initiated legal proceedings against several former employees and their new employer, Barakat, alleging breach of confidence and breach of contract. The plaintiffs claimed that the defendants, who had previously worked for the plaintiffs and subsequently joined a competing business, took confidential information from the plaintiffs, including spreadsheets and emails, and used it to solicit and entice away the plaintiffs' customers. The plaintiffs argued that the defendants' actions constituted a breach of fiduciary duties, duty of confidence, and contract. The defendants admitted to owing fiduciary duties to the plaintiffs but denied any wrongdoing in taking the information or using it in their new business.

The court needed to determine whether the defendants breached their fiduciary duties and duty of confidence by taking and using the plaintiffs' confidential information. It was also necessary to consider whether the transfer and use of the spreadsheets and emails breached the confidentiality obligations in the employment contracts. Additionally, the court had to assess the legality of any restraint of trade clauses and whether the defendants improperly used their position and information.

The court found that the defendants had breached their fiduciary duties and duty of confidence by taking and using the plaintiffs' confidential information. The defendants admitted to owing fiduciary duties to the plaintiffs, which included not using confidential information for their own benefit. The court held that the transfer and use of the spreadsheets and emails constituted a breach of the confidentiality obligations in the employment contracts. The court also determined that any restraint of trade clauses were unenforceable as they were unreasonable and not necessary to protect the plaintiffs' legitimate business interests. The defendants were found to have improperly used their position and information by soliciting and enticing away the plaintiffs' customers using the confidential information.

The court granted the plaintiffs a permanent injunction to prevent the defendants from using the confidential information in their business. The court also awarded the plaintiffs nominal damages for the breach of confidence and breach of contract. The defendants were ordered to return any copies of the confidential information in their possession and to refrain from using the information in any way. The court did not award any additional damages as the plaintiffs had not suffered any loss as a result of the breach.

Orders