Robert Half Australia Pty Ltd v Cross
[2013] WASC 182
•15 MAY 2013
ROBERT HALF AUSTRALIA PTY LTD -v- CROSS [2013] WASC 182
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 182 | |
| Case No: | CIV:1556/2013 | 23 APRIL 2013 | |
| Coram: | LE MIERE J | 15/05/13 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Interlocutory injunction granted | ||
| B | |||
| PDF Version |
| Parties: | ROBERT HALF AUSTRALIA PTY LTD EDWARD CROSS JOHN COLBORNE PROFESSIONAL SEARCH GROUP PTY LTD |
Catchwords: | Interlocutory injunction application Restraint of trade Prima facie case for final relief Balance of convenience |
Legislation: | Nil |
Case References: | Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199 Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 Emeco International Pty Ltd v O'Shea [2012] WASC 282 Emeco International Pty Ltd v O'Shea [No 2] [2012] WASC 348 John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 Koops Martin v Reeves [2006] NSWSC 449 Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25 Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
EDWARD CROSS
First Defendant
JOHN COLBORNE
Second Defendant
PROFESSIONAL SEARCH GROUP PTY LTD
Third Defendant
Catchwords:
Interlocutory injunction application - Restraint of trade - Prima facie case for final relief - Balance of convenience
Legislation:
Nil
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Result:
Interlocutory injunction granted
Category: B
Representation:
Counsel:
Plaintiff : Mr M F Holler
First Defendant : Mr M G Pendlebury
Second Defendant : Mr M G Pendlebury
Third Defendant : Mr M G Pendlebury
Solicitors:
Plaintiff : Baker & McKenzie
First Defendant : Griffins Lawyers
Second Defendant : Griffins Lawyers
Third Defendant : Griffins Lawyers
Case(s) referred to in judgment(s):
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Emeco International Pty Ltd v O'Shea [2012] WASC 282
Emeco International Pty Ltd v O'Shea [No 2] [2012] WASC 348
John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995
Koops Martin v Reeves [2006] NSWSC 449
Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25
Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169
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1 LE MIERE J: The plaintiff, which I will sometimes refer to as Robert Half or the Company, is in the business of providing recruitment services. The second defendant, Mr Colborne, was employed by Robert Half as a recruitment consultant from 14 December 2009 to 26 February 2013. Mr Colborne became a director and shareholder of the third defendant, Professional Search Group Pty Ltd (PSG), on 28 February 2013 and commenced employment with PSG as a recruitment consultant on 5 March 2013. PSG is in the business of providing recruitment services.
2 On 9 April 2013 Robert Half commenced this action against Mr Colborne, PSG and the first defendant, Mr Cross. Mr Cross was employed by Robert Half in the positions of senior manager and associate director from 9 June 2008 to 11 October 2012. Mr Cross and Mr Colborne are the sole directors and share holders of PSG. At the same time it commenced these proceedings, Robert Half brought an application for an injunction to restrain Mr Colborne from being employed by, or providing services to, PSG and restraining Mr Colborne from canvassing or soliciting any client of Robert Half. Robert Half claims that by engaging in those activities Mr Colborne is in breach of restraints in his employment contract with Robert Half.
3 Robert Half's application for an interim injunction came before Pritchard J on 11 April 2013. Mr Colborne had recently been served with the application and asked for an opportunity to put on evidence challenging the reasonableness of the restraints relied upon by Robert Half. Mr Colborne offered an undertaking which related to not canvassing or soliciting clients of Robert Half. Pritchard J granted an injunction restraining Mr Colborne until further order from canvassing or soliciting clients of Robert Half in specified terms more onerous than those in the undertaking offered by Mr Colborne.
4 The plaintiff now seeks an interlocutory injunction restraining Mr Colborne from being employed by, or providing services to, a business competing with Robert Half and canvassing or soliciting clients of Robert Half. Mr Colborne has offered an undertaking, without an admission of liability or wrongdoing, that he will not knowingly canvas or solicit the custom or business of any client of Robert Half in specified terms. Robert Half says that the undertaking is inadequate and presses for an interlocutory injunction.
The restraint clauses
5 The contract of employment is a written agreement made on 26 March 2010. It provides that Mr Colborne is employed by the
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- Company in the position of recruitment consultant or in such other position as may be agreed from time to time. Mr Colborne's specified duties include carrying out all lawful orders of the Company and discharging such duties and functions as may be delegated or assigned to him including work for any related, associated or subsidiary companies of the Company (Related Bodies Corporate). The Company reserved the right to vary Mr Colborne's duties from time to time within his skills, training and experience. The contract provides that Mr Colborne will initially be located in the Perth office but may be required to relocate to another office of the Company upon being provided with reasonable notice of such relocation with no additional compensation. Robert Half has offices in Sydney, Melbourne and Brisbane as well as Perth.
6 The two critical provisions of the employment contract are cl 17 and cl 18 which are as follows:
17. Confidentiality
(a) You must not, during your employment or thereafter, without the Company's prior written consent or as otherwise required by law, disclose directly or indirectly to any person for any reason (other than in the conduct of the Company's business) any record, computer file, consumer or product information (including prices and commissions) data or confidential information of or relating to the Company or the Company's customers or Clients or trade secrets of the Company or any Related Bodies Corporate, including, without limitation, information with respect to the name, address, contact persons or requirements of any customer, Client, address, contact person or requirements of any customer, Client, applicant, candidate or employee of the Company or any Related Bodies Corporate (whether having to do with temporary or permanent employment) and
(b) information with respect to the procedures, advertising, finances, organisation, personnel, plans, objectives or strategies of the Company or its Related Bodies Corporate and
(c) information of or relating to the Company or the Company's customer or Clients ('collectively referred to as the Confidential Information')
(d) You must not, during your employment or thereafter, without the Company's prior written consent or as otherwise required by law, use, copy, transmit or remove or attempt to use, copy, transmit or remove any part of the
- Company's Confidential Information for any purpose other than the Company's business or in any manner which may cause or be calculated to cause injury or loss to the Company or any Related Bodies Corporate.
- 18. Protection of Interests of the Company
During employment with the Company, you will acquire experience and have access to the Confidential Information, trade secrets, know-how and particular skills in the affairs, practices, Client requirements and trade connections of the Company and its Related Bodies Corporate. In particular, you will establish close business relationships with key Clients and other persons involved in important trade connections with the Company.
Due to the commercial importance to the Company and its Related Bodies Corporate of the knowledge, information and other matters referred to in clause 17 (Confidentiality) above the Company wishes to ensure that during and after the termination of your employment with the Company, you do not use the Confidential Information, knowledge and other matters for your benefit or the benefit of others to the detriment of the Company and its Related Bodies Corporate and their businesses and in violation of their rights.
You must not, without the fully informed and written consent of the Company, directly or indirectly do any of the following either on your own account or for any other person or entity:
(a) at any time within the Restraint Period canvass or solicit the custom or business of any Client in connection with any Competing Business activity in the Protected Zone; or
(b) at any time within the Restraint Period accept a request from a Client to provide services relating to a Competing Business Activity in the Protected Zone; or
(c) at any time within the Restraint Period solicit, entice, persuade, encourage or otherwise induce any employee of the Company to terminate employment with the Company or to become employed by any person or entity other than the Company; or
(d) at any time within the Restraint Period hire or otherwise engage the services of any employee of the Company who works in the Protected Zone; or
(e) at any time within the Restraint Period canvass, or solicit, entice, persuade, encourage or otherwise induce any
- individual or entity that is a Client or a placement employee of the Company:
(i) not to use the services of the Company; or
(ii) to engage the services of any person or entity (other than the Company) engaged in the same business as the Company in the Protected Zone; or
- (f) at any time within the Restraint Period participate, become employed by, provide services to or be involved in a Competing Business Activity within the Protected Zone; or
(g) at any time within the Restraint Period within the Protected Zone engage in, in the capacity of employee, agent consultant, director, shareholder or any other capacity whatsoever, or directly or indirectly assist any other person, firm or corporation other than the Company and any Related Bodies Corporate to engage in, any Competing Business Activity.
You must not, after termination of your employment, represent yourself as being in any way connected with or interested in the business of the Company or any Related Body Corporate.
The restrictions in this clause shall be regarded as separate, distinct and severable so that the unenforceability of any restriction shall in no way affect the enforceability of any other restriction.
You acknowledge that:
(1) the restrictions in this clause are reasonable in all the circumstances and necessary to protect the goodwill of the Company; and
(2) the remedy of damages may be inadequate to protect the interests of the Company and the Company is entitled to seek and obtain injunctive relief, or any other relief.
'Competing Business Activity' means any executive recruiting firm, employment agency, temporary personnel service business or other staffing services business engaged in whole or in part in any business of the nature of that conducted by the Company or its Related Bodies Corporate, regardless of whether such entity conducts its business as a sole proprietorship, partnership, corporation or in any other form.
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- 'Protected Zone' means the area within a radius of eighty kilometres from any Company or Related Bodies Corporate office in which you have worked, or over which you have exercised any form of direct or indirect supervisory authority, during the one year period preceding the termination of your employment provided that you have worked in that office for a period of at least three months.
'Restraint Period' means a period of six (6) months from the date on which the employment terminates for any reason.
'Related Bodies Corporate' is given the meaning described in the Corporations Act 2001.
'Client' means any person or entity:
(a) to which the Company or any Related Bodies Corporate at any time within the last twelve (12) months of the employment has supplied goods or services; or
(b) with which the Company or any Related Bodies Corporate was having negotiations or discussions within the last three (3) months of your employment regarding the possible supply by the Company or a Related Body Corporate of goods or services; or
Who in the last twelve (12) months of your employment was an officer, employee, agent or consultant of any of the persons described in sub-clauses (a) or (b) above and was materially involved in the supply of the said goods or services or the negotiations or discussions.
7 Counsel for Robert Half referred to the restraints in cl 18(f) and (g) as the 'non-compete restraints' and the restraints in cl 18(a) to (e) as the 'non-solicitation restraints'. I will adopt the same terminology.
The issues
8 Mr Colborne agrees that if the non-compete restraints are enforceable then he is breach of the employment contract by being employed by, or providing services to, PSG. Mr Colborne says that the non-compete and non-solicitation restraints are unenforceable restraints of trade. Counsel for the parties agreed that this application gives rise to five issues. The first is whether Robert Half has made out a prima facie case that the non-compete restraints are enforceable. The second is whether Robert Half has made out a prima facie case that the non-solicitation restraints are enforceable. The third is whether Robert Half has made out
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- a prima facie case that Mr Colborne has breached, or is likely unless restrained, to breach the non-solicitation restraints. The fourth is whether the inconvenience or injury which Robert Half would be likely to suffer if an injunction restraining Mr Colborne from being employed by or providing services to PSG were refused outweighs or is outweighed by the injury which Mr Colborne would suffer if such an injunction were granted. The fifth is whether the inconvenience or injury which Robert Half would be likely to suffer if an injunction restraining Mr Colborne from soliciting or canvassing clients of Robert Half were refused outweighs or is outweighed by the injury which Mr Colborne would suffer if such an injunction were granted.
9 I have decided that Mr Colborne should be restrained by an interlocutory injunction from working for, or providing any services to, PSG. These are my reasons for that decision.
Legal principles
10 There is little difference between the parties concerning the relevant legal principles. An employer can only restrict the freedom of an employee to engage in business or employment after his employment with the employer has ceased if the restraint is not wider than is reasonably necessary to protect the employer's legitimate interests. In Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 McLure JA, with whom Buss JA agreed, stated:
The test to be applied in determining the validity of a restraint of trade was stated by Lord Macnaghten in Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565 in a passage that has been cited with approval in many cases. Lord Macnaghten said:
'All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public' [6].
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- McLure JA further stated:
The validity of the restraint must be decided as at the date of the contract. However, subsequent developments may be looked at, not to determine whether the agreement was reasonable as between the parties but to determine whether it was a reasonable one to make at the relevant time, having in mind the best estimate they could make for the future.
A restraint is reasonable in relation to the restraining party if it is necessary for the adequate protection of that party and reasonable in relation to the party restrained if it preserves the fullest liberty of action consistent with that protection [7] - [8]. (cited authorities omitted)
12 The effect of a 'without consent' qualification in a restraint clause was considered by Edelman J in Emeco International Pty Ltd v O'Shea [No 2] [2012] WASC 348:
During the trial I raised with the parties the question of the effect upon the enforceability of the restraint clauses of the opening words 'You agree not to engage … without the prior written consent of Emeco' (emphasis added).
It was common ground that these words included an implication that prior written consent would not be unreasonably withheld. The consent condition upon the restraint clause 'must be construed in the light of the circumstances surrounding the contract, and the purpose the condition was intended to serve'. In written submissions, counsel for Mr O'Shea said, and I accept, that in deciding whether to grant consent Emeco must act reasonably, having regard to its legitimate interests and conformably with the purposes of the contract.
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- On one view, the effect of these words in a restraint clause might mean that very few restraint clauses would be invalid. If consent to be released from the restraint cannot be unreasonably withheld, and if 'unreasonable' bears the same meaning as it does in construction of the restraint, then the legal effect of the words is that an employer could only withhold consent in circumstances in which the restraint was necessary to protect the legitimate interests of the employer taking into account the need to preserve the fullest liberty of action of the employee.
In other words, on this approach, in circumstances in which the restraint would otherwise be unenforceable the employer could not withhold consent to the activity.
Although there are Australian cases involving restraint of trade clauses with similar provision for release from restraint with the prior consent of the employer, both my research and that of counsel could find no Australian case in which this issue was considered. However, there is a line of English cases which considers the point.
In J W Chafer Ltd v Lilley, Roxburgh J held that a requirement that consent of the employer be given reasonably could not make enforceable a clause which was otherwise unenforceable. His Lordship considered that it would be reasonable for an employer to withhold consent purely on the grounds that a rival firm was in competition with the employer because 'by the terms of the [employer consent] clause itself the test of reasonableness has to be applied, not to a lawful subject matter, that is to say, protection against misuse of knowledge of customers, but to an unlawful subject matter, namely, direct competition'. This is not a legitimate interest for the purposes of the enforceability of the restraint of trade clause.
On the other hand, a different approach was taken in Kerchiss v Colora Printing Inks Ltd, by Danckwerts J. The requirement that the employer not withhold consent unreasonably was one reason in that case why the clause was found to be enforceable. His Lordship rejected the submission that the clause involved merely the subjective consideration of the employer since 'there is always the sanction hanging over [the employer] that the matter can be taken further and the decision of an independent person obtained'.
These conflicting cases are discussed extrajudicially by Heydon J in The Restraint of Trade Doctrine.His Honour preferred the approach of Roxburgh J for two reasons. First, the contrary approach would mean that the expedient of employer consent would validate potentially very wide restraint clauses which could be exacted against employees who could not afford the terror and expense of litigation. Secondly, it is for the parties to make the agreement not the court, as instanced by the unenforceability for reasons of uncertainty of a clause which prohibits an employee from engaging in competition 'so far as the law allows'.
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- The arguments made by Heydon J are powerful reasons why an employer consent clause could not operate to make enforceable a wide restraint clause which otherwise extends considerably further than the protection of the employer's legitimate interests.
Further, in the absence of submissions to the contrary, I proceed on the basis that, as Mr Neil suggested, the 'reasonableness' qualification upon the employer's consent is not co-extensive with reasonableness required in assessing the enforceability of the restraint. In other words, consistently with the decision of Roxburgh J it might be reasonable for an employer to withhold consent purely on the grounds that a rival firm was in competition with the employer. This assumption seems to have been made by Danckwerts J in a decision six years earlier than Kerchiss. This means that since the withholding of consent based on the mere existence of competition might be reasonable in some cases, the consent provision cannot be sufficient to justify the enforceability of the restraint.
Nevertheless, it may still be that the employee consent clause could affect the scope of the restraint. For this reason it is strongly arguable that it should be considered as part of that assessment. The requirement that Emeco must have regard to its legitimate interests in light of the purposes of the contract before refusing consent to Mr O'Shea may be a real limitation upon the scope of the restraint.
If this limitation is taken into account, its effect upon the Competitor Restraint may be different from its effect on the Non-Solicitation or Client Restraints. It is one matter to require an employee to seek employer consent before going to work for a rival in circumstances where the employee has been privy to confidential information and has built up customer connections. It is another matter, and a greater infringement upon liberty, to require the employee, in a new occupation, to seek employer consent every time contact occurs which might infringe a wide solicitation restraint or client restraint.
Ultimately, however, it is not necessary to decide the extent to which this employer consent clause should weigh in favour of the enforceability of the restraints. No significant reliance was placed on the clause by Emeco and I have reached the conclusion below that the Competitor Restraint is, in any event, enforceable and the Non-Solicitation and Client Restraints are, in any event, unenforceable [71] - [83].
13 The court may grant an interlocutory injunction restraining Mr Colborne from being employed by, or providing services to, PSG, or from soliciting or canvassing former clients of Robert Half, if it is satisfied that Robert Half has made out a prima facie case for final relief and the balance of convenience favours the grant of an injunction. The plaintiff should identify the legal or equitable rights which are to be determined at trial and in respect of which there is sought final relief: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd
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- [2001] HCA 63; (2001) 208 CLR 199 [91] (Gummow & Hayne JJ). The plaintiff must establish a prima facie case for final relief. The governing consideration is that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [71] (Gummow & Hayne JJ).
The non-compete restraints
14 The plaintiff says that its interest in protecting Confidential Information, as defined in cl 17(c) of the contract, is the foundation for the restraints in cl 18. I have set out the definition of Confidential Information earlier in these reasons.
15 The first two paragraphs of cl 18 disclose that the interests of the Company which cl 18 seeks to protect are the Confidential Information and 'trade secrets, know-how and particular skills in the affairs, practices, Client requirements and trade connections of the Company and its Related Bodies Corporate' and 'close business relationships with key Clients and other persons involved in important trade connections with the Company'.
16 Mr Morris is the Director, Queensland and Western Australia, of Robert Half. He explains that the Company uses the terms client and candidate. The client is the company which seeks the assistance of Robert Half to provide suitably qualified and experienced candidates for a short or long term role. The candidate is the individual who generally approaches Robert Half to have their name and details put forward to clients who may be seeking a person with suitable skills and experience for a temporary or permanent job opportunity. Robert Half's consultants must attend to both client development and the collection of a list of candidates. The consultant must store the client and candidate information in a way that allows for the quick and easy matching of candidate and their availability with a particular opportunity that may arise with a client. That information is kept confidential. The Company requires its consultants to keep in regular contact with both clients and candidates each 60 days. Robert Half in Perth has accumulated a number of clients who have regular and repeat needs for permanent and temporary placement of staff. Mr Morris says the consultants are encouraged to concentrate their activities on establishing formal and informal business relationships with clients with a view to obtaining a level of trust so as to generate a steady flow of assignments from the clients. The Company often nominates a specific recruitment consultant for a particular client or
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- candidate who then deals exclusively with that client or candidate on behalf of the Company. Mr Morris says that during Mr Colborne's employment with Robert Half in Perth, Mr Colborne had frequent dealings with its clients and was directly responsible for the maintenance of client relationships. Mr Morris says that Mr Colborne was actively involved, and trained, in the collection and storage of client and candidate information. Mr Colborne had access to this information by use of a database referred to as Bondadapt. Access to Bondadapt is restricted in that the employee must use both a user name and a password for the system. Each consultant is issued with a separate user name and password. Bondadapt is a confidential database of the plaintiff's candidates and clients and includes information about client names, telephone numbers, contact details, current salaries of candidates, key positions within client companies, employment history of candidates and roles within companies. The system enables access to information such as which clients are the most active and are generating the most revenue, the names and contact details of Robert Half's key contacts within each client, what Robert Half provides clients for the price offered, the pricing and contractual arrangements between Robert Half and its clients, and the terms of engagement between Robert Half and its clients and candidates.
17 It is not necessary at the interlocutory stage to examine these matters further. It is sufficient that there is plausible evidence that, at the time Mr Colborne entered into the contract, it was foreseeable that he would have access to confidential information of the Company and would develop connections with its customers, that is, clients and candidates.
18 An employer has a legitimate interest in preventing an employee appropriating aspects of the employer's goodwill such as confidential information or knowledge of, and influence over, the employer's customers. Robert Half has made out a prima facie case, that it has a legitimate interest in preventing Mr Colborne appropriating its confidential information or customer connections.
19 An employer's interest in protecting its confidential information may justify a trade restraint, particularly when it is combined with an interest in protecting exploitation of the employee's customer connection: Smith v Nomad Modular Building Pty Ltd [19]; Emeco [97]; Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25.
20 Mr Colborne submits that the non-compete restraints are unenforceable because they go beyond what is necessary for the adequate protection of Robert Half - they overreach. Clause 18(f) prohibits
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- Mr Colborne for six months from the date of termination of employment from being in any way involved in a Competing Business Activity within the Protected Zone. Competing Business Activity means 'any executive recruiting firm, employment agency, temporary personnel service business or other staffing service business engaged in whole or in part in any business of the nature of that conducted by the Company or its Related Bodies Corporate'. Protected Zone means the area within a radius of 80 km from any office of Robert Half in which Mr Colborne has worked during the 12 months preceding termination of his employment, provided that he worked in that office for at least three months.
21 Mr Colborne says that the non-compete restraints are more than is reasonable because they restrain him from engaging in activities, or being employed by, or providing services to, a business engaged in activities beyond those which Mr Colborne engaged in in his employment with Robert Half. Mr Colborne was employed in the 'Accountemps' subdivision of the financing and accounting division of the Company's Perth office. The financing and accounting division placed candidates with finance and accounting skills. The other divisions of the Company's Perth office are management resources, which places executive level employees with finance and accounting skills, engineering, technology and office administration. Mr Colborne submits that when he was employed it was not objectively reasonable to expect that he would be exposed to any significant degree, if at all, to the clients and candidates with whom the various other divisions of the Company's Perth office had dealings, clients and candidates with whom the various divisions of the Company's various interstate recruitment agency offices had dealings, clients and candidates of the Company's Related Bodies Corporate recruitment agencies elsewhere in the world and to the important and truly commercial valuable information or knowhow held by the Company and its Related Bodies Corporate pertaining to those matters.
22 Robert Half disputes that the non-compete restraints go beyond what is reasonable on those grounds. Robert Half says that whilst Mr Colborne was employed at the Perth office and in the Accountemps subdivision, the terms of his contract provided, in effect, that Mr Colborne might work in any division of the Company or its Related Bodies Corporate and that whilst he was initially located in the Perth office, the contract provided that he might be relocated to another office. Further, counsel for Robert Half submitted that if the non-compete restraint is too wide by reason of extending to Related Bodies Corporate, then that part of the restraint which refers to Related Bodies Corporate may be severed.
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23 It is not appropriate to finally determine those matters at an interlocutory hearing. I am satisfied that Robert Half's case that the non-compete restraints are enforceable is sufficiently arguable to amount to a prima facie case for the purposes of this application. The onus of proof of establishing that the restraint of trade is reasonable as between the parties is on the party seeking to enforce the restraint, Robert Half. The evidence led by Robert Half establishes a prima facie case that the non-compete restraints, or the non-compete restraints with the reference to Related Bodies Corporate severed, are not wider than is reasonably necessary to protect Robert Half's legitimate interests.
24 The evidence adduced, and the arguments advanced, by Mr Colborne do not presently satisfy me there is not a prima facie case that the non-compete restraint is not wider than is reasonably necessary to protect Robert Half's legitimate interests insofar as it restrains Mr Colborne from being employed by or providing services to a related body corporate of Robert Half. In relation to the extension of the restraints to Related Bodies Corporate, it is sufficiently arguable that that part of the non-compete restraint which refers to Related Bodies Corporate may be severed to make out a prima facie case that the non-compete restraint is enforceable.
Restraints against solicitation
25 Mr Colborne submits that a covenant that prevents the solicitation of customers of a different part of the employer's business from that in which the employee was engaged is liable to be excessive.
26 The non-solicitation clauses restrain Mr Colborne in various ways in dealings with any Client. Client is defined as any person or entity to which the Company or any Related Body Corporate has supplied services within the last 12 months. The restraint extends to clients within any of the division of the Company and any client of any related company. The definition of Client further extends to any person or entity with which the Company or any Related Body Corporate was having negotiations or discussions within the last three months of Mr Colborne's employment regarding the possible supply by the Company or a Related Body Corporate of services.
27 In Koops Martin v Reeves [2006] NSWSC 449 Brereton J said:
Generally, therefore, a restraint against the solicitation of customers of a company other than the employer is void, even though the companies are related, although there is an exception where the holding company
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- effectively carries on business through the subsidiaries. Ultimately this is an emanation of the underlying principle which depends on special knowledge or influence over customers acquired in the course of employment: ordinarily, the employee of one subsidiary will not acquire such knowledge or influence in respect of clients of others, though a senior employee of the holding company might [78].
28 It is strongly arguable that insofar as the non-solicitation restraints extend to clients of Related Bodies Corporate they are wider than is reasonably necessary to protect the Company's legitimate interests. Insofar as the restraints apply to prospective clients, that is, persons with whom the Company was having negotiations or discussions about the possible supply of services, the restraints may also be too wide. Counsel for Robert Half submits that those parts of the non-solicitation clauses that refer to Related Bodies Corporate and to prospective clients, that is par (b) of the definition of Client, may be severed. Insofar as the non-solicitation restraints extend to clients of divisions and offices of the Company other than those in which Mr Colborne worked, Robert Half says that, having regard to the express terms of the contract, it was reasonable to foresee that Mr Colborne might have contact with those clients.
29 It is not appropriate to resolve those matters at the interlocutory stage. In any event, I have concluded that Mr Colborne should be restrained by an interlocutory injunction from being employed by, or working for, a competing business and it is not necessary to also restrain him from soliciting or canvassing clients or prospective clients of the Company or its Related Bodies Corporate. For that reason it is not necessary or appropriate to consider the reasonableness of the non-solicitation restraint further.
Breach of non-solicitation restraints
30 I have concluded that if there is a prima facie case that the non-solicitation restraints are enforceable and Mr Colborne has breached those restraints, then it is not necessary or appropriate to restrain him from soliciting or canvassing clients or prospective clients of Robert Half or its Related Bodies Corporate because I have concluded that Mr Colborne should be restrained from working for a competing business. For that reason it is not necessary or appropriate to consider whether or not there is evidence that Mr Colborne has breached the non-solicitation restraints.
Adequacy of damages
31 An injunction to restrain an apprehended breach of a restrictive covenant will not usually be declined on the basis that damages are a
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- sufficient remedy: Emeco International Pty Ltd v O'Shea [2012] WASC 282 [20] (Edelman J). In these sorts of cases damages are usually inadequate due to:
1. the difficulty of detecting breaches of the obligations;
2. the difficulty of establishing causation between any loss of business with customers and any actions of the ex-employee;
3. the difficulty of the calculation of the quantum of any damage arising from loss of business; and
4. the difficulty in assessing damages for loss of opportunity.
Injunctive relief should not be refused on the ground that damages are a sufficient remedy.
Prospective inconvenience or injury to Robert Half
32 Robert Half submits that a number of matters favour the grant of an injunction. First, the inadequacy of damages. Secondly, Robert Half says that to deny relief will deprive it, probably permanently, of the benefit of contractual restraints which are not obviously invalid in protection of its confidential information, and to which Mr Colborne agreed. The parties have agreed that the enforceability of the non-compete and non-solicitation restraints should be tried separately from, and before, the other issues in this action. I have listed the trial of those separate issues to commence on 6 June 2013. It is possible judgment might be delivered within a relatively short time of the conclusion of the trial. However, that would still result in Robert Half being substantially deprived of the protection of the restraint clauses if an interlocutory injunction is not granted.
33 Thirdly, Robert Half submits that any hardship to Mr Colborne has come about because he is the author of his own misfortune in going to work for a competitor set up by his former boss and co-employee, Mr Cross. Mr Colborne was warned by Mr Morris in a face-to-face conversation on 30 January 2013 in which Mr Morris reminded Mr Colborne of his obligations and that if he breached them action would be taken. Counsel for Robert Half referred to the statement of Brereton J in John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 that the enforcement of contractual restraints frequently occasions hardship to employees who, in defiance of them, accept employment with
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- competitors. An employee who pursues such employment despite the terms of a known restraint runs a risk of enforcement of the restraint.
34 Fourthly, Robert Half submits that if an injunction is granted, any loss to Mr Colborne will be recoverable on the undertaking as to damages given by Robert Half. If Mr Colborne is restrained from being employed by, or providing services to, PSG then he would suffer a loss of salary or wages. That loss may more readily be assessed than any loss which might be suffered by Robert Half if the injunction is not granted and it is later found that the restraints are enforceable and have been breached by Mr Colborne. Apart from matters related to his visa, to which I will refer shortly, there is no evidence that PSG would not continue to employ Mr Colborne at the expiration of the restraints on 26 August 2013.
35 The factors favouring the grant of an injunction, to which I have referred, are compelling reasons to grant the injunction unless there are some countervailing factors in favour of refusing an injunction. Mr Colborne submits that he has no other source of income and has good reason to be concerned about his ability to earn an income between now and judgment following trial. Further, by virtue of him only being entitled to work in Australia while he continues to be employed in the area stipulated in his current 457 visa, he says there is an appreciable risk that, by the time of trial, he may not be residing in Australia.
36 Mr Colborne has not produced any adequate evidence to establish that he will suffer any substantial financial hardship if he is not able to be employed by, or provide services to, PSG between now and judgment after trial of the issue of the enforceability of the restraints. Mr Colborne has provided little evidence of his financial circumstances. In his affidavit of 19 April 2013 Mr Colborne says that he has certain financial commitments each day, week and month including mortgage repayments, mobile phone bill, gas, electricity, council rates and water rates, foxtel and home internet in addition to paying for food and social activities. Mr Colborne says that he has a debt with the National Australia Bank for a home loan of just under $450,000. He currently has savings of approximately $5,800 which leaves him with a current net debit position of about $444,000. Mr Colborne has not condescended to particularise his assets and liabilities. The evidence discloses that in the 12 months prior to ceasing employment with Robert Half Mr Colborne received over $380,000 in bonus payments in addition to his base annual salary of $90,000. The evidence adduced by Mr Colborne does not establish that he will suffer any undue financial hardship if the injunction is granted. In effect, he will be restrained from being employed by PSG between now
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- and 26 August or delivery of judgment following the trial of the separate questions.
37 There is some evidence concerning Mr Colborne's entitlement to work and remain in Australia if he ceases to be employed by PSG. When he commenced employment with Robert Half Mr Colborne had a '417 Working Holiday Visa' which allowed him to work in Australia for six months. On 15 June 2010 Mr Colborne was granted a Temporary Business Entry (Class UC) Business (Long Stay) (Subclass 457) visa, popularly referred to as a 457 visa. The visa permitted Mr Colborne to remain and work in Australia until 15 June 2014. It was a condition of the visa that Mr Colborne remain employed by Robert Half. On 20 February 2013 Mr Colborne applied for a new 457 visa with a new employer sponsor, PSG. Mr Colborne was granted a new 457 visa on 6 March 2013 which allows him to remain and work in Australia until 5 March 2017. It is a condition of the visa that if Mr Colborne ceases employment the period during which he ceases employment must not exceed 28 consecutive days. Mr Colborne has led no evidence, and his counsel has not referred to any statutory provisions or administrative provisions or requirements concerning Mr Colborne's right to remain in Australia if he is restrained from being employed by, or providing services to, PSG temporarily but for a period exceeding 28 days. Counsel for Mr Colborne submitted only that if the injunction is granted then there is a risk that Mr Colborne may not be residing in Australia by the time of the trial.
38 The balance of convenience, or injustice, favours the grant of an injunction to restrain Mr Colborne from working for PSG pending judgment following the trial of the separate issues. It might be possible for the order to be crafted so that it restrains Mr Colborne from working for, or providing any services to, PSG without terminating his employment. However, it is for the parties, not the court, to draft the terms of such an injunction. The parties should confer on the terms of an order to give effect to these reasons. The order should restrain Mr Colborne from working for, or providing any services to, PSG. It is not necessary to restrain Mr Colborne from soliciting or canvassing clients of Robert Half. Mr Colborne will be prevented from doing so on behalf of PSG by the injunction restraining him from working for PSG. There is no evidence that Mr Colborne has threatened to, or is likely to, solicit or canvas clients of Robert Half on behalf of any other person.
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