Pinnacle Hospitality People Pty Ltd v Ramasamy & Ors
[2007] VSC 433
•8 November 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2065 of 2007
| PINNACLE HOSPITALITY PEOPLE PTY LTD (ACN 006 532 796) | Plaintiff |
| v | |
| VINODHINI RAMASAMY | First Defendant |
| and | |
| MINT TRAINING PTY LTD (ACN 111 168 640) | Second Defendant |
| and | |
| MINT PERSONNEL PTY LTD (ACN 089 884 444) | Third Defendant |
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JUDGE: | OSBORN J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 25 October 2007 | |
DATE OF JUDGMENT: | 8 November 2007 | |
CASE MAY BE CITED AS: | Pinnacle Hospitality People Pty Ltd v Ramasamy & Ors | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 433 | |
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Application for interlocutory injunction to restrain defendants - first defendant former employee of plaintiff and proposed employee of second defendant – confidential information – restraint of trade – soliciting customers - undertakings as to use of confidential information given – not persuaded strength of plaintiff’s case and the balance of convenience favour the grant of an interlocutory injunction – application dismissed with liberty to apply.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Dean | Rotstein & Associates |
| For the First Defendant | Mr W Friend | Holding Redlich |
| For the Second and Third Defendants | Mr J Bourke | GSM Lawyers Pty Ltd |
HIS HONOUR:
The plaintiff (Pinnacle) is the former employer of the first defendant (Ramasamy) who left Pinnacle’s employment on 18 September 2007. Ramasamy wishes to commence fresh employment with the secondnamed defendant (Mint Training). Mint Training and the third defendant (Mint Personnel) are related companies and carry on related businesses in respect of the training and recruiting of personnel respectively.
Pinnacle seeks orders by way of interlocutory injunction:
(a)restraining Ramasamy from involvement in the business of either Mint Training or Mint Personnel;
(b)restraining Ramasamy from utilising certain confidential information;
(c)requiring the defendants to state the whereabouts of any such information in their control and possession;
(d)restraining Ramasamy from soliciting the custom of any person who was a customer after 12 January 2006 with whom she had contact for the purposes of her employment with the plaintiff.
Confidential Information
I respectfully accept the general principles summarised by Gillard J in Hartleys Limited v Paul Martin & Anor:[1]
In the absence of any restrictive provision, when employees leave an employment, they are free to set up a directly competing business and, indeed, in the immediate locality. Further, employees are entitled to approach the former employer’s customers and seek orders from them. Further, they are entitled to use for their own purposes any information which they carried in their heads regarding the identity of the employer’s customers or contacts, or indeed the nature of the employer’s product requirements. In addition, they are entitled to use the information concerning pricing policies provided the information was acquired honestly in the ordinary course of their employment and they did not, for example, deliberately seek to memorise lists of names for the purpose of their own business.
What employees are not entitled to do is to steal any documents belonging to the employer, or to use, for their own purposes, information which is in fact confidential and which was ascertained in the course of the employment. Further, they are not entitled to copy any information onto scraps of paper and take them away for their own business.
[1][2002] VSC 301 at [78] and [79].
I further accept that it is arguable Ramasamy is subject to specific contractual obligations with respect to confidential information of the plaintiff, which I will set out further below.
In the present case, however, there is a threshold conflict between the parties as to possession of the relevant information. Ramasamy and officers of the defendants have deposed that they do not have any of the information for which the plaintiff seeks protection.
It is further submitted by the defendants that the position in which Ramasamy is intended to work with Mint Training, is a training position with a specific client (Crown Casino) in respect of which the information in issue would be of no utility.
The information comprises:
(a) the Pinnacle in-house manual;
(b)lists of Pinnacle client information and client revenue allegedly saved in PDF format on the plaintiff’s work computer on or about 4 July 2007;
(c)the Mirvac performance management kit (the Mirvac Hotel and Resort Group being the client for whom Ramasamy performed work in the period leading up to her departure from Pinnacle).
The plaintiff contends that it can be inferred that Ramasamy has acted dishonestly with respect to the information in issue and in breach of her duty of loyalty and good faith to Pinnacle.
It relies upon the following conduct of which it is submitted there is evidence:
(a)Attending an interview for a job with the plaintiff’s major competitor in her employer’s time and then lying to her supervisor about such interview;
(b)Securing a detailed contract of employment well before resigning from her employment with Pinnacle on 18 September 2007;
(c)Sending confidential information of her employer to her private email address;
(d)For her own purposes in conflict with her employer’s interests removing highly sensitive information from the employer’s server, converting it to PDF format and in breach of policy allegedly running a program to hide the history of emails profile.
It is submitted that these matters should be assessed in the framework adopted by Dixon and McTiernan JJ in Blyth Chemicals Ltd v Bushnell:[2]
But the conduct of the employee must itself involve the incompatibility, conflict, or impediment, or be destructive of confidence. An actual repugnance between his acts and his relationship must be found. It is not enough that ground for uneasiness as to its future conduct arises. In the present case, many circumstances were given in evidence from which it might have been inferred that in all that he did the respondent was actuated by one design, namely, to prepare a position to which he could retreat with a considerable part of his employer's business, if it should become necessary or desirable to vacate the managership of Jaques Proprietary Limited. If any such finding had been made, the learned Judge would clearly have been entitled, if not bound, to hold that the respondent had been guilty of misconduct. But, although there was evidence from which such an inference might have been drawn, the respondent's conduct was capable of an innocent construction. … In the view we take of the circumstances of the case, the motives and intentions of the respondent become all-important; for the significance and sufficiency as a justification of the other items of misconduct relied upon appear to us to depend upon the truth of his explanation or the bona fides of his acts. Further, the effect to be given to all the acts combined, which have been established against the respondent, must in the end be governed by an estimate of his honesty and motives.
[2](1933) 49 CLR 82.
Ramasamy directly denies that she has taken confidential information from Pinnacle which she retains, and disputes a series of aspects of the matters relied upon.
I accept that there is sufficient evidence to give rise to triable issues of fact, both as to individual circumstances contended for by the plaintiff and as to what inferences can be drawn from such circumstances.
This said, however, it may be observed:
(a)There is no necessary nexus between Ramasamy’s conduct in respect of obtaining a new job and the information in issue, at best such conduct is a matter which goes to support a broader picture;
(b)The alleged use of PDF files on or about 4 July 2007 occurred well prior to the contact between Ramasamy and Mint Training upon which the plaintiff relies. The job interview occurred on 25 August 2007;
(c)Ramasamy freely acknowledges she from time to time transmitted work related information to her private email address in order that she could perform work at home;
(d)Ramasamy has returned the laptop computer allegedly used for improper purposes (the information relied on by the plaintiff has been derived from investigation of this laptop after it was returned);
(e)Ramasamy says she has not run a program to hide the history of emails upon the laptop computer and is not aware of a program of the type alleged by the plaintiff. She agrees that she requested an employee of Mirvac to delete her curriculum vitae from the laptop but says she requested no other deletions;
(f)Some of the information in issue is not self-evidently confidential to the plaintiff;
(g)There is no evidence Ramasamy has used any part of the information since she left Pinnacle’s employment nor that the Mint companies have used any part of it;
(h)There is no evidence that either Ramasamy or the Mint companies presently have possession of any of the confidential information.
(i)Despite learning of the job interview on 29 August 2007 Pinnacle was content to retain Ramasamy in its employment for the next three weeks;
(j)Pinnacle has itself obtained access to Ramasamy’s personal email correspondence without her consent.
Having regard to the above matters and to the relative strength of the plaintiff’s case viewed as a whole, including the lack of demonstrable risk of damage to Pinnacle, I have formed the view that although Pinnacle’s case raises triable issues, the balance of convenience favours the withholding of interlocutory injunctive relief upon the giving by the Mint companies of undertakings that they will not copy, use or disclose the confidential information pending the trial of the proceeding (this being information which they depose they do not have).
This said, it will remain open to Pinnacle to return to court if any further evidence emerges that either of the Mint companies has the information for which confidentiality is claimed, or that any of the defendants use or propose to use such information.
Restraint of Trade
Ramasamy was first employed by Pinnacle in August 2005 in the position of Consultant, Extended Permanent Solutions.
Condition 14 of the written employment agreement provided:
14. Restrictions
14.1The Employee will not during a period of three months from the date of termination of their employment under this Agreement be engaged, concerned or interested, either directly or indirectly, in any business which is, or is about to be, in competition with the Business of the Company in the State [of Victoria] …
14.2The Employee will not during a period of six months from the date of termination of their employment under this Agreement, in competition with the Business of the Company, solicit the custom of any person who at any time during the period of 12 months immediately prior to the date of termination of their employment under this Agreement has been a customer or supplier of the Company.
14.3The Employee will not during a period of six months from the date of termination of their employment under this Agreement assist any person engaged, concerned or interested, or about to be engaged, concerned, or interested in any business which is, or is about to be, in competition with the Business with information in relation to the Business.
14.4The restrictions contained in this clause 14 of the Agreement are considered by the parties to be reasonable in all the circumstances. If one or more of the restrictions are adjudged to go beyond what is reasonable in the circumstances for the protection of its interest, or if any particular restriction or part of a restriction were deleted or limited in particular manner, then the restriction will apply with such deletion or limitation.
14.5The Employee agrees that having regard to the facts and matters set out above, the restrictions contained in this clause 14 are reasonable and necessary for the protection of Confidential Information and that the Company and the Employee agree that having regard to these circumstances, those covenants do not work harshly upon him or her.
The meaning of the word “Business” used in these provisions is defined by the agreement to be “the Company’s business of recruitment services”.
Pinnacle seeks to restrain Ramasamy from working for Mint Training in reliance upon condition 14.1.[3]
[3]Conditions 14.2 and 14.3 are relied upon for other purposes.
Ramasamy deposes that there were significant changes in her position with Pinnacle in June 2006 and May 2007. She was first appointed to the position of Manager, Extended Permanent Solutions and then to the position of Recruitment Manager for Mirvac Resorts and Hotel Group. The last position was effectively one of an embedded consultant to this particular client.
The employment agreement expressly provided that it was not to be varied save by agreement in writing between the parties. No written variation occurred with respect to the new positions.
On the face of it the better view is that at the date on which she left Pinnacle, Ramasamy was not in fact employed pursuant to the original written agreement but to a subsequent oral agreement relating to a new and materially different position.
It is a question of fact in all the relevant circumstances whether a change in duties amounts to a termination of a contract of employment, with a new contract supplanting the old contract of employment, or, alternatively, whether it amounts to a variation of the original contract: Quinn v Jack Chia (Australia) Ltd.[4]
[4][1992] 1 VR 567.
For present purposes it is sufficient to record that there is a significant issue as to the ongoing operation of the written contractual provisions relied upon by the plaintiff.
The plaintiff faces the following further difficulties:
(a)Restraint of trade provisions are prima facie void. The relevant principles were stated by Anderson J in Drake Personnel Ltd v Beddison.[5]
[5][1979] VR 13 at 19.
The principles governing this case may be briefly expressed. Any restraint on the right of a person to be employed in any capacity is prima facie void as being contrary to public policy. The presumption against enforceability may be rebutted if the restraint imposed is nothing more than reasonable protection against something which a person is entitled to be protected against, that is, that the restraint is reasonably necessary for the protection of what is sometimes called a proprietary right. Reasonableness is a question of law to be determined by the Court on the special circumstances of the case, and the onus of proving the special circumstances justifying the restriction as reasonable between the parties lies on the person alleging it to be so. "Trade secrets", such as secret processes of manufacture, may be protected, and an employer is entitled not to have his old customers by solicitation or otherwise enticed away from him, but otherwise freedom in his trade or business from all competition per se is not his right; however lucrative such a freedom might be to him he is not entitled to be protected against competition. General skill and knowledge which a person of ability necessarily acquires in his employment is not a trade secret of his employer, and such skill and knowledge are not things in which an employer can claim any proprietary interest. “A man's aptitudes, his skill, his dexterity, his manual or mental ability ... ought not to be relinquished by a servant; they are not his master's property; they are his own property; they are himself.”[6]
(b)As indicated in the above statement the onus of proving that special circumstances justify the relevant restriction as reasonable between the parties lies on the person alleging it to be so.
(c)There is a serious argument that the restraint comprised in condition 14.1 goes beyond reasonable protection in respect of things which a commercial entity is entitled to be protected against. The phrase “engaged, concerned or interested, either directly or indirectly, in any business” is very broad indeed.
(d)There is a serious factual dispute as to whether the business of Mint Training is in fact involved in the business of “recruitment services” being the business defined as relevant by the employment agreement.
(e)There is no suggestion on the evidence that Ramasamy has as yet or is likely to assist either of the Mint companies to compete for the business of the Mirvac group for whom she provided services on behalf of Pinnacle prior to departure from her employment with Pinnacle.
(f)There is no evidence that Ramasamy herself is intended by the defendants to be involved in the provision of recruitment services in competition with Pinnacle.
(g)No damage to the plaintiff as a result of the employment of Ramasamy by Mint Training can at present be said to be probable.
[6](per Lord Shaw, in Herbert Morris Ltd v Saxelby, supra, at (AC) p.714; (All ER Rep) p.313).
If Ramasamy were to be restrained from working for Mint Training until trial of the action, such restraint would amount to final relief in respect of this part of the claim. Conversely, if no restraint is imposed the claim will in all likelihood be rendered nugatory by the effluxion of time.
Looking at the circumstances as a whole, I am not persuaded that the strength of the plaintiff’s case and the balance of convenience favour the grant of an interlocutory injunction restraining Ramasamy from employment with Mint Training.
In my view the plaintiff’s case is attended by serious questions of difficulty both on the facts and the law. It is not of such strength the plaintiff should get what in effect is final relief on a summary basis.
It is not a case analogous to that considered by Gillard J in Hartleys Limited v Paul Martin & Anor.[7] That case concerned a flagrant attempt to pirate customers of the plaintiff on the part of the defendants. There was a far stronger case as to the reasonableness of the restrictive covenant in issue and a real potential that damage would be done to the plaintiff’s business and goodwill if the injunction were not granted.
[7]Cited above.
Soliciting
The plaintiff also seeks an order that Ramasamy not solicit custom “of any person who was a customer of the plaintiff after 12 January 2006 with whom she had contact for the purposes of her employment with the plaintiff.” I put to one side that the date adopted in this application does not appear to fit with the terms of condition 14.2 of the employment agreement.
The terms of the order sought are otherwise narrower than the terms of condition 14.2 set out above. The class of persons embraced by condition 14.2 is that of “any person who at any time during the period of 12 months immediately prior to the date of termination of their employment under this agreement has been a customer or supplier of the company.” The implicit concession in the terms of the application to me is that the terms of the restriction in the agreement are too wide to be reasonable. Self-evidently the question of what would be reasonable is very much in issue.
Likewise, there is a live question as to whether Mint Training is in competition with the business of the company as defined.
Insofar as anticipated damage is concerned, it is not suggested Ramasamy has solicited custom of any such person as yet. Further, the training position in which it is proposed she be employed does not on the face of it lend itself to such solicitation.
In my view the case for an injunction with respect to soliciting custom is so weak both in terms of establishing a triable issue and with respect to the balance of convenience an injunction should not be granted. This said, Pinnacle will of course be at liberty to return to the Court if any evidence emerges of solicitation by Ramasamy with respect to Pinnacle customers.
Conclusion
For the above reasons and subject to the giving of an undertaking on behalf of the Mint companies with respect to the confidential information which Pinnacle seeks to protect, I propose to dismiss the application for injunctive relief at this point in time, but to reserve liberty to apply.
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