Robert Half Australia Pty Limited v Cross
[2013] WASC 137
ROBERT HALF AUSTRALIA PTY LIMITED -v- CROSS [2013] WASC 137
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 137 | |
| Case No: | CIV:1556/13 | 11 APRIL, 2013 | |
| Coram: | PRITCHARD J | 11/04/13 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Interim interlocutory injunction granted | ||
| B | |||
| PDF Version |
| Parties: | ROBERT HALF AUSTRALIA PTY LIMITED Edward CROSS John COLBOURNE PROFESSIONAL SEARCH GROUP PTY LTD |
Catchwords: | Interlocutory injunction application Restraint of trade clause Balance of convenience |
Legislation: | Nil |
Case References: | AGMA Chemical Company Ltd v Hart (1984) SLT 246 - 248 Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 Emeco International Pty Ltd v O'Shea [2012] WASC 282 Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 Wellard Rural Exports Pty Ltd v Robinson III [2013] WASC 89 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
Edward CROSS
First Defendant
John COLBOURNE
Second Defendant
PROFESSIONAL SEARCH GROUP PTY LTD
Third Defendant
Catchwords:
Interlocutory injunction application - Restraint of trade clause - Balance of convenience
Legislation:
Nil
(Page 2)
Result:
Interim interlocutory injunction granted
Category: B
Representation:
Counsel:
Plaintiff : Mr M F Holler
First Defendant : No appearance
Second Defendant : Mr M G Pendlebury
Third Defendant : No appearance
Solicitors:
Plaintiff : Baker & McKenzie
First Defendant : Griffins Lawyers
Second Defendant : Griffins Lawyers
Third Defendant : Griffins Lawyers
Case(s) referred to in judgment(s):
AGMA Chemical Company Ltd v Hart (1984) SLT 246 - 248
Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57
Emeco International Pty Ltd v O'Shea [2012] WASC 282
Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679
Wellard Rural Exports Pty Ltd v Robinson III [2013] WASC 89
(Page 3)
- PRITCHARD J:
(This judgment was delivered extemporaneously on 11 April 2013 and has been edited from the transcript.)
1 This is an application by the plaintiff for an interim interlocutory injunction, the proposed terms of which are set out in an amended chamber summons dated 9 April 2013.
Factual background
2 In brief, the background is that the second defendant worked for the plaintiff until 26 February 2013 as a recruitment consultant. The plaintiff operates a recruitment business primarily (or perhaps only) in the areas of accounting and finance.
3 The employment relationship between the second defendant and the plaintiff was governed by a contract dated 26 March 2010 and par 18 of the contract contained a restraint of trade clause (the restraint clause). I will not refer to the specifics of the restraint clause at this stage but it suffices to say that it was in quite extensive terms.
4 Subsequent to leaving his employment, the evidence before me suggests that the second defendant has become a director of the third defendant, which operates a recruitment business. I will refer to the evidence a little further in a moment, but in short the evidence suggests that the second defendant may have been involved in contacting former employee clients, or placing individuals with former employer clients, of the plaintiff. The plaintiff seeks an injunction to restrain this alleged conduct on the part of the second defendant.
The injunction sought by the plaintiff
5 The injunction initially sought by the plaintiff was in very wide terms. The second defendant has asked for the opportunity to put on evidence challenging the reasonableness of the restraint clause and says that will take a little while to obtain. The second defendant has offered an undertaking which is partially reflective of par 2 of the injunction which is sought, but is not entirely reflective of the terms of that clause. In these circumstances, the plaintiff seeks an interim interlocutory injunction today pending a further hearing in relation to its more substantive interlocutory injunction application. Counsel for the plaintiff was content to proceed on the basis that today's application can be confined to an application for an injunction in terms of par 2 of the chamber summons and says that the
(Page 4)- plaintiff is willing to hold off pressing for an injunction in relation to par 1 until the second defendant has had time to prepare for a hearing.
6 I note that the order which is sought today exceeds the terms of the undertaking proffered by the second defendant in two primary respects. First, it would prohibit the second defendant from canvassing or inducing 'placement employees' of the plaintiff, who, as I understand it, are employees or potential employees who are able to be placed in employment. Secondly, it would prohibit the second defendant from canvassing or inducing a wider class of 'clients' of the plaintiff whereas the undertaking names specific former clients of the plaintiff.
Principles in relation to the grant of an injunction
7 Counsel for the second defendant indicated that, notwithstanding the short notice he had had of the application, he was in a position to deal with the interim injunction application on the confined basis outlined by counsel for the plaintiff today. In dealing with the application I bear in mind that the ordinary principles in relation to the grant of an interlocutory injunction apply, albeit perhaps modified slightly in the context of restraint of trade cases, but with the observation that in circumstances where the defendant has had only a very short time to review the material, the court ought to be particularly careful to do the minimum to preserve the status quo pending the opportunity for further hearing of the interlocutory injunction application.1
8 The principles in relation to the grant of an injunction in this context are well established. They were referred to by Edelman J in Emeco International Pty Ltd v O'Shea [2012] WASC 282, and also by Allanson J in Wellard Rural Exports Pty Ltd v Robinson III [2013] WASC 89. The cases establish that, as is the usual course in relation to injunctions, the plaintiff needs to establish that there is a serious question to be tried, that damages would not be an adequate remedy and that the balance of convenience favours the grant of an injunction.
9 As the High Court pointed out in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57, however, these considerations are inextricably connected in that how strong the likelihood of success needs to be depends upon the nature of the plaintiff's asserted rights and the practical consequences likely to flow from the order sought. Accordingly, while I consider all of these factors together, it is convenient
(Page 5)- for present purposes to start by considering whether there is a serious question to be tried.
Whether there exists a serious question to be tried
10 In the context of restraint of trade clauses, two considerations arise. First, it needs to be shown that the restraint clause itself is valid and the onus is on the plaintiff to do that. Secondly, the court needs to consider whether there is any evidence suggesting a breach of that clause.
11 As to the restraint clause itself, the plaintiff says that there are effectively two interests which are protected by the restraint clause in the contract. The first is its customer connections or relationships with its clients, and the second is the protection of confidential information. The question is whether one or more of those interests are reasonable, having regard to the interests of the parties to the contract and the interests of the public: see Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 (McLure, Pullin & Buss JJA). There are at first blush some possible areas of argument in relation to the reasonableness of the clause in various respects. There has been little argument from the second defendant today in relation to the reasonableness of the clause given the short notice his counsel has had of the application. However, in the absence of argument and perhaps further evidence, it is not possible to say that the clause is so clearly unreasonable as to be void and not able to found a serious question to be tried.
12 The second question concerns the evidence of breach. The plaintiff relied on a number of affidavits which indicate that it has information to suggest that the first defendant, second defendant and third defendant have been involved in placing clients of the plaintiff with employers, or placing employees with clients of the plaintiff, since the second defendant ceased his employment with the plaintiff. The evidence directly connecting the second defendant is twofold. There is at least one instance of a placement of an employee with a former client of the plaintiff. There is also the fact that by becoming a director of the third defendant it appears that the second defendant arguably acted in breach of the restraint clause in the contract. Although the latter conduct is not directly relevant to the kind of restraint which is sought for the purposes of the injunction in the present hearing, it is nevertheless relevant in a more general sense as evidence of the breach of the restraint clause. Having regard to the very limited information before me and the limited ability of counsel for the defendant in the circumstances to put a contrary argument, I am left in the position where I am persuaded that there is a serious question to be
(Page 6)- tried, that the restraint clause is valid and that the second defendant arguably has breached that restraint clause.
Whether damages would be an adequate remedy
13 The authorities suggest that the assessment of damages can be difficult in the present context. These authorities were referred to at length by Edelman J in Emeco and I am indebted to his Honour's discussion of those cases. As I observed in the course of the hearing this morning, in this case perhaps those considerations are not so weighty, given that the plaintiff's case is effectively that by virtue of establishing the third defendant, and the operation of the third defendant in a very short space of time, there has been a breach of the restraint clause. The assessment of damages, having regard to those factors, may not be as complicated as it sometimes is in these sort of restraint of trade cases. However, I do not have sufficient information at this stage to make any informed conclusion in relation to that matter.
14 At the same time, somewhat, the observation often made in relation to the grant of an injunction is that a plaintiff's undertaking will provide the means for a defendant to recover, if necessary, in the event that the action by the plaintiff is unsuccessful. However, I note that the same difficulty in assessment may well arise in relation to the sort of compensation that might be granted in respect of an undertaking. Perhaps an even greater complication might arise because in cases of this kind the question might well be what loss of chance or loss of opportunity to obtain business has been occasioned by the grant of an injunction if one is granted. However, I leave those considerations to one side because I do not have information which would assist me to make an informed assessment of the adequacy of damages other than to observe that the position ordinarily is that in the employment context (in these kinds of cases in particular) the assessment of damages can be a very difficult task and damages may therefore not represent an adequate remedy.
Balance of convenience
15 I turn then to the balance of convenience which is clearly the most important consideration for present purposes, given the limited scope of argument otherwise. On the one hand to deny relief will potentially deprive the plaintiff of the benefit of its contractual entitlement, albeit perhaps for only a few days until the hearing of the substantive interlocutory injunction, and the plaintiff is entitled to the benefit of the enforcement of its rights. I say that having regard to the detriment or loss that might be caused to the plaintiff if the injunction is not granted, if the
(Page 7)- alleged activity by the second defendant which arguably is in contravention of the restraint clause continues. I also bear in mind the very small recruitment market which the evidence suggests applies in the Perth context. On the other hand, there is likely to be only a very small period of time between now and when the matter may next come before the court. In other words, the plaintiff's potential loss cannot be overstated. However, I think there is nevertheless the potential for damage to the interests that the plaintiff seeks to protect by the restraint clause.
16 On the other hand, there will clearly be an impact on the second defendant if an injunction is granted in the terms sought. There is an obvious likely impact on the ability of the second defendant to earn a living. There was nothing in the evidence before me to suggest that he has any alternative source of income. However, I bear in mind that what is sought is not an injunction reflecting the entirety of the breadth of the restraint clause, at least at this stage, but only an injunction effectively preventing the second defendant from procuring clients of the plaintiff. The plaintiff says that would thereby prevent a risk of misuse of confidential information that the second defendant holds.
17 In considering the balance of convenience, I note that the second defendant had proffered an undertaking not to deal with certain clients, which were named clients of the plaintiff. Beyond the undertaking the injunction sought would preclude the second defendant from procuring clients who fall within the broader definition of clients set out in the restraint clause and in order 2 of the chamber summons. The breadth of that clause, on its face, and the terms of order 2 as initially drafted, initially caused me concern about the impact on the second defendant's ability to earn a living. However, those concerns have been alleviated by two things. First par 2 of the chamber summons (as amended) is now set out in much more confined and, with respect, clearer terms. Secondly, the prospect of an unwitting breach of that order can be averted by the second defendant asking any persons whom he may contact whether they were, within the relevant period of his employment (that is, one year under the restraint clause) customers of the plaintiff: see AGMA Chemical Company Ltd v Hart (1984) SLT 246 - 248.
18 That still leaves the question as to what will be the practical impact of the grant of the injunction as sought. The answer is that at this stage that is largely unknown. It may have a very significant impact on the second defendant or it may have none at all. The point remains that if the injunction is granted, the second defendant would be free to seek to
(Page 8)- pursue recruitment opportunities both outside the finance and accounting industry, and other than with clients of the plaintiff. There is no evidence before me at this stage as to the impact of the injunction otherwise.
19 I have taken into account that the injunction is sought on an interim basis only, so as to permit the second defendant the opportunity to have further time to respond to the plaintiff's material.
20 Taking all of these considerations into account I have formed the view that the balance of convenience favours the grant of the injunction in terms of order 2 of the chamber summons (as amended).
21 Taking that balance of convenience consideration into account, together with the conclusion in relation to the validity of the restraint
clause at this stage, and the evidence (albeit the limited evidence) of the breaches of the restraint clause that may have occurred, I am persuaded that this is an appropriate case for the grant of interim interlocutory relief in terms of par 2 of the chambers summons (as amended).
1 Compare Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 [681] (Isaacs J).
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