Rosewood Advertising Pty Ltd v Hannah Marketing Pty Ltd

[2000] NSWSC 1034

CITATION:	Rosewood Advertising Pty Ltd v Hannah Marketing Pty Ltd [2000] NSWSC 1034
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4064/00
HEARING DATE(S):	12, 13 & 16 October 2000
JUDGMENT DATE:	16 October 2000
PARTIES :	Rosewood Advertising Pty Limited (P) Hannah Marketing Pty Limited (D1) Harvey Pogrund (D2)
JUDGMENT OF:	Hamilton J

COUNSEL :	M J Cohen (P) R A Dick (D1 & 2)
SOLICITORS:	K A Garling (P) Phillips Fox (D1 & 2)
CATCHWORDS:	EMPLOYMENT LAW [42] - The contract of service and rights, duties and liabilities as between employer and employee - Miscellaneous matters - Trade secrets - Information acquired during engagement - Whether information confidential - Whether information part of employee's stock of general knowledge.
CASES CITED:	Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 Jones v Dunkel (1959) 101 CLR 298 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Metrans Pty Ltd v Courtney-Smith & Ors (1983) 1 IPR 185 Re Minister for Immigration and Multicultural Affairs; Ex parte Fejzullahu (2000) 74 ALJR 830 United Sterling Corporation Limited v Felton and Mannion [1974] RPC 162 Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
DECISION:	Interlocutory injunction refused.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

MONDAY, 16 OCTOBER 2000

4064/00 ROSEWOOD ADVERTISING PTY LIMITED v HANNAH MARKETING PTY LIMITED & ORS.

JUDGMENT

HIS HONOUR:

1    This is an interlocutory injunction application in the following circumstances. The plaintiff conducts a business of selling discount cards. That is a business whereby the vendor sells cards to the public which entitle the bearer to a discount on the product of the customer to whose goods or services the card relates. The vendor keeps the price of the card as its reward; the benefit to the customer is the increased trade (albeit at discount prices) which it receives.

2    The first defendant is a company controlled by the second defendant. The first defendant has existed for some time and conducted some business, as I understand it, of the same nature as the plaintiff's. The volume of that business has recently greatly increased in the circumstances to which I shall come. Either the first defendant or the second defendant, it is not entirely clear on the evidence which, was engaged by the plaintiff as a manager of its business. Furthermore, the third defendant and fourth defendant were engaged by the plaintiff as under managers. I use the word "engaged" because, again, it is not entirely clear on the evidence whether the contract of engagement was a contract of service under which the second, third and fourth defendants entered into a master and servant relationship with the plaintiff, or whether the services of the first or second defendant and the third and fourth defendants were retained on the basis that they were independent contractors. That possible difference is of no consequence in the present proceedings, since the matter has been conducted by both parties on the basis that if there were a duty of confidentiality imposed upon the defendants, its content would in the circumstances be much the same as the general law duty of confidentiality which is imposed on a servant.

3    In the proceedings generally there is a considerable controversy as to whether or not the defendants or any of them entered into a written contract with the plaintiff containing clauses in restraint of trade after the termination of the agreement. The degree of controversy varies with the parties. On the present body of evidence, in the case of the third and fourth defendants, there is a denial on each of their parts that they entered into such an agreement, and there is not really any convincing evidence on the plaintiff's part that written agreements with these persons ever existed. However, there is a much greater degree of controversy in the case of the first and second defendants, because there is evidence from Mr Ross, the controller of the plaintiff, which on a fair reading could be taken to mean that he had actually seen such an agreement signed by the second defendant on behalf of either himself or the first defendant company. This is squarely denied by the second defendant, and there are other arguments which countervail the execution of such an agreement. On the other hand, there is a suggestion in evidence that some agreements were taken and shredded by the second defendant at the time of the departure of him and others from their engagement with the plaintiff. Again, none of that is of any great materiality to the present application, since the plaintiff avowedly does not make a claim for interlocutory relief based upon the existence of an agreement, but solely upon breaches or apprehended breaches of the general law duty of confidentiality said to be imposed upon the defendants.

4    The short facts of the matter are that last month the defendants, together with a number of the plaintiff's sales staff, departed from the plaintiff's service. The second, third and fourth defendants and, I gather, some other sales persons as well, are now engaged in the service of the first defendant in carrying on the same business as the plaintiff carries on. There is probably some evidence that they have actually approached customers of the plaintiff, but, again, that matters little, because their stance avowedly is that they are perfectly entitled so to do, and to use any of the information concerning which the plaintiff brings this application as they please, on the basis that they are not in any breach of any duty in so doing. The information in relation to which the plaintiff has made application is the information contained in a schedule to the summons. That information includes the identity and location of a large number of customers of the plaintiff, the name of the contact person with each customer, the number of discount cards printed, the date of the contract which the plaintiff had with the customers, the print run of the cards to be issued and the income received in the case of contracts which have been completed, or projected in the case of contracts not yet complete. The plaintiff seeks relief by way of a restraint in terms of “confidential information of the plaintiff in the defendant's possession” but, as I have already said, the actual information in respect of which the application is brought is that set out in the schedule. If I am to grant relief I shall grant it in terms more specific than by reference simply to unspecified “confidential information”.

5    The real controversy in this matter is whether any of the information the subject of the application is in truth confidential. The argument proceeds by reference to the nature of the information, to the fact that certain of it has clearly been placed in the public domain by the plaintiff, to whether some more of it has been placed in the public domain by the plaintiff and to whether the plaintiff has so conducted itself and the circumstances in general are such that confidentiality attaches to the information.

6 The principles upon which interlocutory injunction applications are determined are well known. They have recently been stated by Gleeson CJ in the High Court in Re Minister for Immigration and Multicultural Affairs; Ex parte Fejzullahu (2000) 74 ALJR 830 at [7]:

“The applicants must show that there is a serious question to be tried in the principal proceedings, and that the balance of convenience favours the granting of an injunction.”

At greater length, the exercise which a Judge hearing such an application must carry out was stated by McLelland J in this Division in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535 - 6:

“As I see it, the position is as follows. Where a plaintiff’s entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled: see, eg, Appleton Papers Inc v Tomasetti Paper Pty Ltd [1981] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; 56 ALR 73 at 79. Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, A v Hayden (No 1) (at 4; 78); Cohen v Peko-Wallsend (1986) 61 ALJR 57 at 59; 68 ALR 394 at 397. If the Court does decide the question of law the uncertainty is to that extent removed.
Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused: Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; 52 ALR 651; A v Hayden (No 1); Castlemaine-Tooheys Ltd v South Australia (1986) 60 ALJR 679; 67 ALR 533 and Cohen v Peko-Wallsend Ltd .
Apart from this, although normally the Court ‘does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case’ ( Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622), there are some kinds of case in which for the purpose of seeing where lies the balance of convenience (or more specifically ‘the balance of the risk of doing an injustice’ - see per May LJ in Cayne v Global Natural Resources plc [1984] 1 All ER 225 at 237, cf per Brennan J in Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1983) 57 ALJR 288 at 292; 46 ALR 279 at 285), it is desirable for the Court to evaluate the strength of the plaintiff's case for final relief: see, eg, Brayson Motors Pty Ltd v Federal Commissioner of Taxation (at 292; 285); Castlemaine-Tooheys Ltd v South Australia at 682; 559. One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: see, eg, NWL Ltd v Woods [1979] 1 WLR 1294 at 1306-1307; [1979] 3 All ER 614 at 625-626 per Lord Diplock; Cayne v Global Natural Resources plc .”

7    It was argued in this case that this was one of the cases referred to by McLelland J where a full or fuller assessment needed to be made of the plaintiff's prospects of success because the decision of the interlocutory application would in effect decide the litigation. I do not agree with this submission. The only basis on which such a submission might have been made out in this case was if an interlocutory injunction application had been made in respect of a very stringent 30 day restraint of trade provision in the agreement to which I have referred above, but as no application is made based upon that provision, this is hardly material. The restraint of use of information, either under other terms of the agreement or in relation to the usual obligations that arise from possession of confidential material in the general law, will in fact be relevant for many months or longer, so that the decision of this application will not foreclose the subject matter of the proceedings, particularly bearing in mind that this matter is to be placed immediately in the list of one of the Division's Expedition Judges.

8 I turn to the principles upon which the use of confidential material is restrained under the general law, particularly on an interlocutory basis. In Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 443, Gummow J said:

“It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question; and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information: Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203 at 215; [1963] 3 All ER 413n, at 415; The Commonwealth v John Fairfax and Sons Ltd (1980) 147 CLR 39 at 50 - 51; O'Brien v Komesaroff (1982) 150 CLR 310 at 326 - 328. It may also be necessary, as Megarry J thought probably was the case ( Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 48), and as Mason J (as he then was) accepted in the Fairfax decision was the case (at least for confidences reposed within government), that unauthorised use would be to the detriment of the plaintiff.”

The existence and content of duties of obligation of employees was referred to in this Division by Kearney J in Metrans Pty Ltd v Courtney-Smith & Ors (1983) 1 IPR 185. His Honour said at 187:
“I was referred to the leading authorities in the field, and I take the principle to be applied as stated in the judgment of Gowans J in Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 where at 40 his Honour points to the distinction to be maintained between information and knowledge acquired in confidence by an employee during his employment and which he seeks to use or disclose for his own advantage after his employment is finished; and the further distinction to be drawn: 'Between information which forms part of the employee's stock of general knowledge, skill and experience, and that which should fairly be regarded as a separate part of the employee's stock of knowledge (whether it be identifiable as "particular" or "detailed" or "special") which a man of ordinary intelligence and honesty would regard as the property of the former employer.' This formulation of the principle accords with the oft-quoted passage in the judgment of Cross J in Printers and Finishers Ltd v Holloway [1965] RPC 239 at 255."

His Honour continued to refer to the judgment of Brightman J in United Sterling Corporation Limited v Felton and Mannion [1974] RPC 162 at 172. The principles enunciated by Kearney J and his Honour's decision in the Metrans case are of some importance because it is a case of considerable similarity to the present, being the decision of an interlocutory injunction application in circumstances where employees had left an employer, taking with them customer lists.

9 One must also have in mind that the courts have habitually approached applications of the present sort with caution, bearing in mind that the grant of interlocutory relief may deprive people (whether parties to the proceedings or not) of their ordinary mode of livelihood, or impinge severely upon it, and that there is a public interest against the unnecessary restraint of competition: as to the latter see what was said by Gleeson CJ in Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 329.

10    As I have said, it is not really contested for the purposes of this application that the persons who left the plaintiff's service in September would, in appropriate circumstances, be bound in relation to confidential information obtained by them in generally the same way as an employee would, whether or not they were employees. The plaintiff contends that all the information in the schedule was in fact confidential or, if any of it was not, the use of such as was, in conjunction with the use of any that was not, would be a breach of obligations to the plaintiff. The defendants, however, point to a number of considerations that appear from the evidence relating to the way in which the information was at different times treated by the plaintiff, and the nature of the information itself, as tending strongly to negative the confidentiality in the requisite sense of any of the information.

11    There may be circumstances in which the identity of customers, prices and contract details are of high confidentiality. However, one important piece of evidence in this case was that of the content of a website of the plaintiff, on to which it had placed the identity and location of a very large number of relevant customers. The price of the cards was also upon the website. That appears to be quite clear since the website was accessed by somebody at the defendant's solicitor's firm. There is also evidence which suggests that lists such as the lists of information which are the subject of proceedings, were openly posted up in offices of the plaintiff. Although the evidence is not at this stage of any great specificity, there is the suggestion in evidence that the content of sales made by the plaintiff was posted up in public places as promotional material. There is certainly evidence that suggests that prospective customers who were approached were given considerable information about contracts that the plaintiff had with other persons in their industry, again for promotional purposes. There does not seem really to have been any culture or atmosphere of confidentiality in the plaintiff's operation concerning any of the information in the schedule.

12 I should add that it must be borne clearly in mind that this is an interlocutory application. No cross examination took place on the evidence, and the evidence is clearly not complete. At one stage Mr Mark Cohen, of counsel for the plaintiff, expressed some fear of the presumption in Jones v Dunkel (1959) 101 CLR 298 or other presumptions being used against the plaintiff because of the lack of answer to some of the evidence. That was never going to occur, and it has not occurred. What I have done is simply to review the written evidence available, both the plaintiff’s and the defendants’, and to make a judgment upon the state of their evidence as it stands.

13    So far as the balance of convenience is concerned there are considerations each way. However, the evidence going to the detriment to either side by the refusal or grant of an injunction is not particularly strong or compelling. The plaintiff complained of a fear of losing $10,000 revenue per day, but that was at a time shortly after the defection of members of its staff, and on the basis that they had not then been able to be replaced. There is no evidence from which I could infer that any such loss is occurring at the present time, much less that it is occurring by reason of the misuse of any confidential information. Equally, the first and second defendants have complained that the first defendant's business in its early days would be crippled if it could not use information which they say is in the circumstances simply part of the stock in trade of the people who are now working for the first defendant. But I cannot see any convincing evidence that the business would be crippled if there were a restraint of use of any of the information the subject of the application.

14    The conclusion that I have come to, carrying out the exercise which the law directs me to carry out, is as follows. I do not come to any conclusion that the plaintiff has no arguable case that there is some confidential information among the material the subject of the application. However, bearing in mind considerations which I have adverted to above, I am of the view that it has not established a sufficiently strong case in all the circumstances to justify the granting of any interlocutory restraint. The plaintiff's application for interlocutory relief will therefore be dismissed. I think the usual result as to costs must follow, that is, in the case of a dismissal of an application for interlocutory injunction, simply that the plaintiff pay the defendants' costs of the application.

15    The orders of the Court on the application therefore are:

(1) I dismiss the plaintiff's application for interlocutory relief.

(2) I order that the plaintiff pay the defendants’ costs of that application.

…oOo…

Last Modified: 12/01/2000