Satellite Terrestrial Distributors Pty Ltd v JONSA Ellies (Aust) Pty Ltd - [2005] WASC 3

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: SATELLITE TERRESTRIAL DISTRIBUTORS PTY LTD -v- JONSA ELLIES (AUST) PTY LTD & ORS [2005] WASC 3

CORAM: LE MIERE J

HEARD: 7 JANUARY 2005

DELIVERED : 14 JANUARY 2005

FILE NO/S: CIV 2600 of 2004

BETWEEN: SATELLITE TERRESTRIAL DISTRIBUTORS PTY LTD
Plaintiff
AND
JONSA ELLIES (AUST) PTY LTD
First Defendant
ANTHONY JOHN CROUCAMP
Second Defendant
ANGELO D'OVIDIO
Third Defendant

Catchwords:

Application for interlocutory injunction - Employment - Deed of confidentiality - Serious question to be tried that defendants have breached deed of confidentiality - Confidential information - Soliciting customers - Restraint of trade - Construction of restraint of trade - Reasonableness of restraint of trade - Whether there is a serious question to be tried - Balance of convenience

Legislation:

Nil

Result:

Undertakings accepted, applications otherwise refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr M D Cuerden
First Defendant             :     Mr R J Price
Second Defendant         :     Mr R J Price
Third Defendant           :     Mr R J Price

Solicitors:

Plaintiff:     Griffiths Godecke
First Defendant             :     Allens Arthur Robinson
Second Defendant         :     Allens Arthur Robinson
Third Defendant           :     Allens Arthur Robinson

Case(s) referred to in judgment(s):

D C Thomson & Co Ltd v Deakin [1952] 1 Ch 646
Johns v Australian Securities Commission (1993) 178 CLR 408
Two Lands Services Pty Ltd v Cave [2000] NSWSC 14

Case(s) also cited:

AIM Maintenance Ltd v Brunt (2004) 28 WAR 357
Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26
American Cyanamid Co v Ethicon Ltd [1975] AC 396
Attwood v Lamont [1920] 3 KB 571
Austin Knight (UK) Ltd v Hinds [1994] FSR 52
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Brilliant Lighting (Aust) Pty Ltd v Baillieu [2004] VSC 248
Butt v Long (1953) 88 CLR 476
Faccenda Chicken Ltd v Fowler [1987] Ch 117
Flocast Australia Pty Ltd v Purcell (No 3) (2000) 52 IPR 147; (2000) 176 ALR 354
H C Sleigh Ltd v Blight [1969] VR 931
Herbert Morris Ltd v Saxelby [1916] 1 AC 688
I F Asia Pacific Pty Ltd v Galbally (2003) 59 IPR 43; [2003] VSC 192
J Lyons & Sons v Wilkins [1896] 1 Ch 811
Jones Brothers (Hunstanton) Ltd v Stevens [1955] 1 QB 275
Lansing Linde Ltd v Kerr [1991] 1 WLR 251
Lindner v Murdock's Garage (1950) 83 CLR 628
Littlewoods Organisation Ltd v Harris [1978] 1 All ER 1026
Lloyd's Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 72 ALR 643; (1987) 17 FCR 505
Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181
Magna Alloys and Research Pty Ltd v TenHaaf [1978] Tas SR 136
Mason v Provident Clothing and Supply Co Ltd [1913] AC 724
Mills v Dunham [1891] 1 Ch 576
NP Generations Pty Ltd v Feneley (2001) 80 SASR 151
Plowman & Son Ltd v Ash [1964] 1 WLR 568
Roberts v L Quay Future Brokers Pty Ltd [2004] NSWSC 572
Spafax (1965) Ltd v Dommett (1972) 116 Sol Jo 117
Talk of the Town Pty Ltd v Hagstrom (1990) 19 IPR 649; (1990) 99 ALR 130
Willhart v Samini (2000) 49 IPR 593; [2000] WASC 239
Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317

LE MIERE J: The plaintiff has applied for an interlocutory injunction restraining the defendants from disclosing or using certain confidential information, canvassing or soliciting business from customers or former customers of the plaintiff and having any communications with or entering into any agreements with or performing any agreements with customers of the plaintiff. The plaintiff also seeks an order that the defendants deliver up to the plaintiff all confidential information in their possession.
The application is supported by affidavits sworn by Steven Meyer on 20 December 2004 and 5 January 2005 and affidavits sworn by Nava Meyer sworn 20 December 2004 and two affidavits sworn on 5 January 2005 and an affidavit sworn by Elliot Daniel Golubchik on 23 December 2004.
Mr Meyer deposes as follows. He is a director of the plaintiff. From about June 2003 the plaintiff was appointed by the first defendant to be its sole distributor in Western Australia of a range of satellite and terrestrial equipment for free to air and pay TV reception.
Conduct Electrical Pty Ltd, a company related to the plaintiff, employed the third defendant but he worked under the direction and control of the plaintiff as a sales representative. The third defendant's employment involved contact with the plaintiff's customers.
In August 2004, the second defendant was employed as manager of the plaintiff at the instigation of Mr Miller, a director of the first defendant. The second defendant was paid by Conduct Electrical Pty Ltd, but worked under the direction and control of the plaintiff.
In November 2004, Mr Miller requested that Mr and Mrs Meyer call upon him in Sydney. Mr and Mrs Meyer met with Mr Miller in Sydney on 17 November 2004. Mr Miller informed the Meyers that he was terminating the distribution agreement and the first defendant would be starting a branch in Western Australia.
On 18 November, Mr Meyer told the third defendant that the distributorship had been terminated, retrenched him and paid him one week's wages in lieu of notice. Mr Meyer informed the second defendant of what had happened. Mr Meyer suggested to the second defendant that he accompany Mr Meyer on a trip to Alcoa the following day. The second defendant declined, saying that he had to undertake a stock take the following day. At 4 pm the following day, 19 November, the second defendant handed to Mr Meyer a letter of resignation effective immediately. The second defendant stated that he hoped to be doing consulting work and would definitely not work for the first defendant.
On 2 December 2004, the third defendant informed Mr Meyer that he had signed an employment contract with the first defendant and that he would be a sales representative in Western Australia for the first defendant. On the same day, the second defendant informed Mr Meyer that he had taken up a position with the first defendant, that he was looking for premises in Perth, that he was working for the Western Australian branch and that the third defendant would be working in the branch and report to him.
Each of the second and third defendants entered a written employment contract with the plaintiff or Conduct Electrical and executed a deed of confidentiality. Each deed of confidentiality was in the same terms. The deed is made between the employee and the Conduct group of companies described as "the Companies". The coversheet of each deed describes the Conduct group of companies or the Companies as being Conduct Electrical, Antennas Australia Pty Ltd and the plaintiff. Clause 1 defines the term confidential information. Clause 2 places restrictions on the employee in relation to the disclosure and use of the confidential information for two years after the termination of the employment relationship. Clause 3 places restrictions on the employee in relation to canvassing or soliciting business from customers or former customers of the Companies for one year after ceasing to be an employee. Clause 4 provides that, upon termination as an employee, the employee will promptly return to the Companies all confidential information.
The plaintiff claims that each of the second and third defendant have wrongfully taken confidential information of the plaintiff and are likely to disclose or use that confidential information for the benefit of the first defendant and to the disadvantage of the plaintiff if not restrained by injunction from doing so.
Mr and Mrs Meyer have each sworn to facts and circumstances from which counsel for the plaintiff submits it is open to infer that each of the second and third defendants have retained confidential information of the plaintiff relating to customers of the plaintiff for the purpose of using the information for the benefit of the first defendant. Counsel for the plaintiff submits it is open to infer that the third defendant has retained copies of daily customer sheets that contain confidential information relating to the plaintiffs customers. Counsel for the plaintiff submits it is open to infer that the second defendant has retained on computer disk or in electronic form confidential information relating to the plaintiff's customers in a document or electronic file created by the second defendant under the file name Customer Sheet 2 and has disclosed to the first defendant a price list of the plaintiff's products.
The plaintiff has led evidence that the second and third defendants, as employees of the first defendant, have approached customers of the plaintiff for the purpose of soliciting business for the first defendant.
Prior to the termination of the plaintiff's distributorship, the distribution of the products of the first defendant was the sole business carried on by the plaintiff. However, the plaintiff has now sourced alternative products and expects to be able to continue its business with stock from an alternative supplier. Mr Meyer is concerned that if the defendants are able to use the plaintiff's confidential information concerning its customers and their product requirements, and the second and third defendants are able to solicit business from the plaintiff's customers, that will have a serious effect upon the business of the plaintiff. The plaintiff's customers are used to the products supplied by the first defendant and they are used to dealing with the second and third defendants. Mr Meyer deposes that it is almost inevitable that, unless the defendants are restrained in the terms sought, the plaintiff will have to close down.
The defendants rely on affidavits sworn by the second defendant on 23 December 2004 and 7 January 2005, affidavits sworn by the third defendant on 23 December 2004 and 7 January 2005, two affidavits sworn by Frank Miller, a director of the first defendant, on 23 December 2004, an affidavit sworn by Marcell Novella, the first defendant's sales manager, and affidavits sworn by Jane Thomas, a solicitor, on 23 December 2004 and 7 January 2005. The latter affidavit annexes an affidavit sworn by Marcell Novella in New South Wales on 7 January 2005.
The second and third defendants each deny that they have wilfully retained, disclosed or used any confidential information of the plaintiff. The first defendant denies that it has wilfully obtained or used any confidential information of the plaintiff and denies that, at any material time, it knew of the terms of the deeds of confidentiality. The defendants admit that the second and third defendants have approached customers of the plaintiff and canvassed or solicited business from them. The defendants contend that they are entitled to do so because the covenants in the deeds of confidentiality purporting to prevent the second and third defendants from doing so are unenforceable as an unlawful restraint of trade. The defendants oppose all relief claimed by the plaintiff.

Case against second and third defendants - confidential information

The plaintiff says that the second defendant retained and gave to the first defendant the plaintiff's price list. In his affidavit of 23 December 2004, the second defendant swore that he had a copy of a price list of the first defendant issued to the plaintiff by the first defendant and that he returned it to the first defendant in Sydney on 2 December 2004. A copy of the document is annexure A to his affidavit. In his affidavit of 5 January 2005, Mr Meyer deposes that the document is the plaintiff's internal price list for reflecting the plaintiff's landed cost for the purchase of products from the first defendant, which was the buying cost from the first defendant, plus freight and handling, the plaintiff's usual asking price for the sale of products to installers, the plaintiff's minimum price for the sale of products to installers, the plaintiff's mark‑up and the plaintiff's gross profit. Mr Meyer swears that, when the second defendant started employment with the plaintiff, he gave the second defendant a copy of the price list and explained the document to him. Mr Meyer says that, at the same time, he gave to the second defendant copies of two other price lists. Mr Meyer says that he believes the second defendant is also in possession of the other two price lists because he failed to return any of the price lists to the plaintiff. Mr Meyer says that the price list supplied by the second defendant to the first defendant provided the most sensitive confidential information which could possibly be provided.
In his affidavit sworn on 7 January 2005, the second defendant says that he has no recollection of being told by Mr Meyer that Mr Meyer, together with Mr Golubchik and the third defendant, had developed the price list. He says that, whilst he used the list on a day‑to‑day basis, he was not aware that the price list was confidential to the plaintiff or contained information confidential to the plaintiff. He understood from a notation at the top left‑hand corner of the first page on the list that it was prepared by the first defendant. The second defendant says that, in the beginning of December 2004, when he discovered he was in possession of the price list he was in the presence of Mr Novella and other personnel of the first defendant. He found the list in his suitcase, pulled it out and showed it to them. Whilst he knew that the document must have come from the plaintiff's office, he was under the impression that it had actually been prepared by the first defendant. Accordingly, he gave the document to Mr Novella. The second defendant says that Mr Novella looked at the document and commented that it was the same list that he had prepared.
In his affidavit of 7 January 2005, Mr Novella refers to the second defendant handing him the price list. He says that the document appeared to him to be a document prepared by the first defendant, he looked at it and made a comment to the effect that the cost and sell price should not have been included in the same list if it was a list generally used by the plaintiff. He kept the list, but did not refer to it again. Mr Novella says that the information contained on the list is of little value to the first defendant, as the first defendant is well aware of the plaintiff's cost prices and in relation to the selling prices contained on the list, the plaintiff had often requested assistance and guidance from the first defendant regarding what the plaintiff's selling prices should be in order for those prices to be realistic and competitive, having regard to the current market.
There is a conflict between the evidence of Mr Meyer and the inferences that the plaintiff says may be drawn from the evidence on the one hand and the evidence and contentions of the defendants on the other hand. The defendants say, in effect, that the delivery of the price list by the second defendant to the first defendant was an innocent mistake. The plaintiff submits that it may be inferred that the second defendant well knew that the list contained confidential information of the plaintiff when he gave it to the first defendant.
Nava Meyer gave evidence in her affidavit of 20 December 2004 that a file named "Customer Sheet 2" had been accessed on a laptop computer belonging to the plaintiff and used by the second defendant and that the file had been created or modified on 19 November 2004 at 12.45 pm. Customer Sheet 2 is a file containing information relating to customers of the plaintiff. Ms Meyer deposes that she observed the second defendant spend most of the morning of 19 November 2004 in his office and whenever she saw him, he seemed to be using the laptop computer. She alleges that there was no legitimate reason for the second defendant to be accessing the Companies' customer database on the day he resigned.
In his affidavit of 23 December 2004, the second defendant deposed that he did not remember using the laptop, but he probably checked e‑mails. He said that he did not access any databases.
In his affidavit of 23 December 2004, the third defendant deposed that, on 19 November 2004, he worked on his sales database called Customer Sheet 2.
In her affidavit of 7 January 2005, Ms Meyer says that Customer Sheet 3 was the current version of the database kept by the third defendant as at 18 November 2004 and that there was no reason for him to have been working on an outdated database such as Customer Sheet 2.
The plaintiff alleges that, on the termination of their employment, neither the second nor third defendant returned to the plaintiff the documents belonging to and containing confidential information of the plaintiff. In their affidavits of 23 December 2004, each of the second and third defendant deposed that, on 19 November 2004, he returned to the plaintiff all of the plaintiff's documents and confidential information. In their affidavits of 5 January 2005, each of Steven and Nava Meyer depose that neither the second nor third defendant returned the documents to them. They further depose to having made inquiries of staff of the plaintiff and to have searched the plaintiff's premises and as a result of those inquiries and searches say that neither the second nor third defendant returned the documents on 19 November 2004.
Counsel for the plaintiff submits that it is common ground that each of the second and third defendant had in his possession documents belonging to and containing confidential information of the plaintiff at or immediately prior to the termination of his employment and that the issue is whether or not each of them returned those documents to the plaintiff. There is a conflict of evidence on that point.
There is a conflict in the evidence relating to each of the matters I have discussed. Those conflicts cannot be resolved at this interlocutory hearing. I find that there is a serious question to be tried that each of the second and third defendant has retained documents belonging to and containing confidential information, as defined in the deed of confidentiality, and has failed to return the documents to the plaintiff in breach of the provisions of the deed.
The defendants submit that insofar as the plaintiff's claim in confidentiality is made in reliance upon cl 2 of the deed of confidentiality, that clause contains a significant limiting factor in that confidential information is defined to embrace only information passing from the Companies to the restrained party obtained pursuant to discussions with the directors, management and employees of the Companies and/or its financial or legal advisers. In my view, the price list and some at least of the documents allegedly retained by the second and third defendants fall within the definition of "confidential information" in the deed. In any event, there is a serious question to be tried that all of the documents of the plaintiff allegedly obtained or retained by the defendants would be protected by the equitable duty of confidence or by the implied term of confidentiality in their contracts of employment.
The defendants further submit that cl 2 of the deed of confidentiality is so wide as to be unenforceable. It is submitted that the definition of "confidential information" cannot be read down or severed to salvage the clause.
Each deed contains a severance clause that arguably may render cl 2 of the deed reasonable and enforceable by deleting the offending parts.
In my view, there is a serious question to be tried that the second and third defendants have each breached the provisions of the deed of confidentiality, or alternatively the equitable duty of confidence, or the implied term of confidentiality in their contracts of employment.

Case against first defendant - confidential information

A third person who comes by information innocently may be restrained from making use of it once he learns that it was obtained in circumstances involving a breach of confidence: see Johns v Australian Securities Commission (1993) 178 CLR 408 at 459 ‑ 460.

There is no, or no sufficient, evidence to raise a serious question to be tried that the first defendant has disclosed or made any use of any confidential information of the plaintiff.

Case against the second and third defendants - soliciting customers

It is common ground that the second and third defendants have, as employees of the first defendant, canvassed or solicited business from persons who were customers of the plaintiff. The plaintiff submits that the second and third defendants have thereby breached cl 3(a) of each deed of confidentiality that provides:
"3.RESTRICTIVE COVENANTS BY THE RESTRAINED PARTY
(a)The Restrained Party will not without the prior written permission of the Companies either directly or indirectly at any time while remaining an employee, contractor or subcontractor of 'the Companies' and for a period of one year after ceasing to be an employee, contractor or subcontractor of 'the Companies' as the case may be ('the Termination Date');
(ii)canvas [sic] or solicit business in the same as or similar to the Business of 'the Companies' from any person who is or has been in the 6 months prior to the Termination Date a client or customer of 'the Companies'; or
(ii)accept business the same or similar to the business of 'the Companies' by any person or entity who is or has been in the 6 months prior to the Termination Date a client or customer of 'the Companies'."
The defendants submit that the restrictive covenant is unenforceable because it is an unlawful restraint of trade.
Every restraint of trade is presumed to be void, in the sense of being unenforceable, but this presumption can be rebutted. The applicable test is that the presumption will be rebutted if the restraint is judged to be reasonable by reference to the interests of the parties concerned and reasonable in reference to the interests of the public. The onus of proof of establishing that a restraint of trade is reasonable as between the parties is upon the party seeking to enforce the restraint, and the onus of showing that a restraint of trade is not reasonable by reference to the interests of the public is upon the party burdened by the restraint of trade.
The construction of a restraint of trade is crucial to its validity because the more widely it is construed, the more likely it is to be unreasonable and therefore invalid. The correct approach is to construe the restraint by reference to the subject matter of the agreement as a whole and to distinguish the issue of construction from the quite separate question of reasonableness and unenforceability.
The reasonableness of a restraint depends on whether the restraint affords any more than adequate protection of the interests of the party receiving the benefit of the restraint. The defendants submit that the restraint imposed by cl 3(a) of the deed of confidentiality affords more than adequate protection of the legitimate interests of the plaintiff in a number of respects.
First, the restrictive covenant, in essence, restrains the employee from canvassing or soliciting business from any person who is or has been a customer of the Companies. The defendants submit that, assuming that the plaintiff had a legitimate interest in protecting confidential information or customer connections, nevertheless the second and third defendants would only have had access to confidential information and only developed personal relationships with customers of the Companies in relation to the activities of the plaintiff and not of the Companies generally. Restraints on a former employee becoming involved in wider fields unrelated to the area of the former employee's concern will be invalid.
The plaintiff submits that, as a matter of construction, the Companies in cl 3(a) of the deed should be read as referring to the plaintiff only. However, there are a number of matters against that construction. The text of cl 3(a) and other provisions of the deed refers to the Companies. Each of the deeds was executed by Conduct Electrical and not by the plaintiff. The third defendant's contract of employment was made with Conduct Electrical. Each of the second and third defendant was paid by Conduct Electrical. The recitals refer to each of the Companies and the business they carry on or carried on. The business of each of the Companies is not wholly unrelated to the others.
Alternatively, the plaintiff submits that the covenant properly construed consists of a series of separate promises in favour of each of the companies rather than a single promise in favour of the three companies that constitute the Conduct group of companies.
Clause 3(b) and cl 3(c) provide as follows:
"(b)While the restrictions contained in this clause 3(a) are considered by the parties to be reasonable in all the circumstances, it is agrees [sic] that if any such restrictions, by themselves or taken together shall be adjudged to go beyond what is reasonable in the circumstances for the protection of the legitimate interests of 'the Companies' but would be adjudged reasonably is part or parts of the wording thereof were deleted or amended or qualified or the periods thereof were reduced it is agreed that the relevant restriction or restrictions shall apply with such modification or modifications as may be necessary to make it or them valid and effective.
(c)The restraints contained in clause 3(a) shall be regarded as separate, distinct and several, each one from the other as regards each covenant so that the unenforceability of any restraint in respect of any one or more of such covenants shall in no way affect the enforceability of the restraints in respect of the other covenants."
There are difficulties confronting the plaintiff's severance argument. The covenants do not readily present as a series of independent covenants rather that one covenant in favour of all three companies.
There is an arguable case that the restrictive covenant is not void by reason of the covenant being for the benefit of and referring to the Companies rather than the plaintiff. It is not appropriate to attempt to resolve the issue at this interlocutory stage. However, the defendants have a strong argument that the covenant is wider than is reasonably necessary to protect the legitimate interests of the plaintiff and, hence, is unenforceable.
Secondly, the defendants submit that the restraint for one year after the termination of employment is wider than is reasonable. In cases of restraints upon solicitation, it will be relevant to consider the length of time it would take a new employee to put himself or herself in a position to make sure that the customers would resort to the plaintiff rather than to the first defendant, see, for example, Two Lands Services Pty Ltd v Cave [2000] NSWSC 14 at [78] and [81]. At this stage of the proceedings, it is arguable that a restraint for 12 months is not unreasonable. However, there is little evidence before me to justify a non‑solicitation period of one year and consequently the plaintiff's case on that point is not strong.
Thirdly, the defendants submit that the restraint purports to preclude the employee from canvassing or soliciting business or accepting business the same or similar to the business of the Companies. At this stage of the proceedings, I accept that it is arguable that the restraint may be read down or parts of it severed so as to render the restraint reasonable and enforceable but the plaintiff's case is not strong.
Fourthly, the defendants submit that the restraint extends to a prohibition on canvassing or soliciting or accepting business from any person who is or has been in the six months prior to the Termination Date a customer of the Companies. Again, at this stage of the proceedings, it is arguable that the restraint may be read down or parts of it severed so as to render it enforceable, but the plaintiff's case is not strong.
In conclusion, I find that there is a serious question to be tried that the restrictive covenant or covenants contained in cl 3(a) of the deed of confidentiality may be read down or parts of it severed so as to render the remaining restraints reasonable and enforceable. However, I have formed the view that the plaintiff does not have a strong case that the covenants are enforceable.

Case against first defendant - soliciting customers

The plaintiff submits that the first defendant has induced the second and third defendants to breach the deeds of confidentiality entered into by each of them respectively.
The plaintiff submits that wilful blindness, or reckless indifference that the defendant is interfering with the contractual rights in question is sufficient to constitute the tort of interference with contractual relations. Furthermore, the plaintiff submits that, from 13 December 2004 at the latest, the first defendant has had actual knowledge of the terms of the deeds of confidentiality. The plaintiff submits that that is sufficient for the purpose of the application and relies upon D C Thomson & Co Ltd v Deakin [1952] 1 Ch 646 at 694 and the text Balkin & Davis, Law of Torts, 3rd ed, 2004 at [21.6].
I am not satisfied that there is sufficient evidence that the first defendant knew, or wilfully refrained from learning, the terms of the deeds of confidentiality at the time it employed the second and third defendants. The defendants submit that, to the extent that the plaintiff relies on the fact that the first defendant knew of the restraint of trade clauses at the latest in December 2004 when the present claims were raised against it, this is not sufficient to establish (or to raise a serious question to be tried as to) the critical element of liability - namely, intention to interfere with contractual rights.
I find that there is a serious question to be tried on this issue, but once again the plaintiff's case is not strong.

Serious question to be tried – conclusion

There is sufficient evidence to raise a serious question to be tried that each of the second and third defendant has breached the express and implied terms of their contract of employment and deed of confidentiality and the equitable duty of confidentiality owed to the plaintiff by retaining and disclosing and using confidential information.
There is sufficient evidence to raise a serious question to be tried that each of the second and third defendant has breached the express terms of their deed of confidentiality by soliciting or approaching customers of the plaintiff.
There is insufficient evidence raising a serious question to be tried that the plaintiff is entitled to the relief claimed against the first defendant. There is insufficient evidence raising a serious question to be tried that the first defendant has induced the second and third defendants to breach their contracts with the plaintiff or has made use of confidential information of the plaintiff in circumstances where it knew that the information had been disclosed by the second and third defendants in breach of the deeds of confidentiality.

Balance of convenience

If there is a serious question to be tried, the Court must consider whether the balance of convenience is for or against the grant of the relief. The balance of convenience is probably better described as the balance of the risk of doing an injustice.
The balance of convenience favours the grant of an interlocutory injunction restraining the second and third defendants from disclosing or using any confidential information of the plaintiff. The second and third defendants each deny that they are in possession of any such information and that they have any intention of disclosing or using such information.
The balance of convenience does not favour the grant of an interlocutory injunction to restrain the defendants from soliciting clients of the plaintiff. I have reached that conclusion for the following reasons.
The degree of likelihood of success is a factor related to the balance of convenience. The degree of likelihood that the plaintiff will succeed is a particularly significant factor when the practical impact of the grant of an interlocutory injunction is that the litigation is effectively determined. The grant of an interlocutory injunction would grant the plaintiff substantially the final relief it seeks. That is because it is unlikely that the action would be tried and judgment rendered before the expiry of the anti‑solicitation covenant on 19 November 2005. In those circumstances, particular attention should be given to the strength of the respective cases. The plaintiff's case is not sufficiently strong to justify the grant of an interlocutory injunction.
The injunctions sought by the plaintiff would severely impede the second and third defendants in their employment with the first defendant and jeopardise that employment. There is no evidence from the first defendant that the first defendant will, or is likely to, terminate the employment of the second and third defendants if they are restrained by injunction from canvassing and soliciting business from customers of the plaintiff. However, the objective facts give rise to the inference that that is a serious possibility in this case. Restraints of trade on employment are interpreted more strictly than restraints imposed in the sale of a business. The Court should be hesitant to grant any injunction restricting a person in his employment where there is a real issue as to the enforceability of the restrictive covenant relied upon by the plaintiff. In this case, the strength of the defendants' case is a strong reason not to grant an interlocutory injunction.
The injunctions sought by the plaintiff would prevent the second and third defendants, and impede the first defendant, from competing with the plaintiff for an extended period. The impact of the injunction upon the interests of the public and of third parties is relevant. The Court should not quickly grant an interlocutory injunction that has the effect of restricting competition on the basis of a restrictive covenant the validity of which is seriously in question.
If the relevant injunction is not granted, the plaintiff will still have the remedy of damages available to it.

Relief

For the reasons stated, I would have granted injunctions restraining the second and third defendants from disclosing or using any data or information in the plaintiff's customer database, the plaintiff's daily customer sheets, or the plaintiff's price lists or the third defendant's diary. However, since the hearing of the application for interlocutory injunctions, each of the second and third defendants have given an undertaking not to disclose or allow or permit to be disclosed or used any data or information derived from the plaintiff's customer database, daily customer sheets, price lists or the third defendant's Hagemeyer diary and other ancillary undertakings. Where a defendant offers an undertaking to the Court in lieu of an injunction going against him which the Court considers sufficient to protect the plaintiff, then the Court should accept the undertaking unless there is very good reason to the contrary. I will hear from the parties whether the Court should accept the undertakings given by the second and third defendants in lieu of an injunction.
For the reasons stated, I will not grant an injunction restraining the defendants, or any of them, from soliciting or canvassing customers of the plaintiff.