Specialist Computer Supplies v Barraclough and Others No. DCCIV-03-634

Specialist Computer Supplies Pty Ltd (t/as SCS Office National)
v Gregory Barraclough and others
[2003] SADC 78
Judge Smith
Civil

This is an application for an interlocutory injunction.
The plaintiff is a national company whose business is focused upon the sales of office, computer and stationery supplies. Its national headquarters are at 581A Grand Junction Road, Gepps Cross. The first and third to sixth defendants are former employees of the plaintiff. The first defendant, Gregory Barraclough was retrenched by the plaintiff in February 2003 and then joined the second defendant whom I will refer to as Black Forest Office National. The defendants Callaghan, Visentin and Wolters resigned from the employ of the plaintiff on 13 March 2003. Singleton resigned on 14 March 2003. They all then joined Black Forest Office National.
The plaintiff seeks to enjoin all of the defendants from seeking business from its customers for a period of 3 months from their departure, namely, until the 13 June 2003.
During their employment with the plaintiff Callaghan, Visentin and Wolters entered into an agreement with the plaintiff called a “Confidentiality and Restraint Agreement” which provided by clause 10 inter alia, that they would not for 3 months following the termination of their employment:
“Solicit
Assist in soliciting
Accept
Facilitate the acceptance of
Deal with
In competition with SCS the custom or business of any customer or prospective customer”
The defendant, Melanie Singleton entered into a “Confidentiality Undertaking” with the plaintiff. The first defendant, Gregory Barraclough, entered into an employment agreement with the plaintiff which provided restrictions upon him disclosing, inter alia, secret or confidential dealings or information. He refused to sign the “Confidentiality and Restraint Agreement” which was entered into by Callaghan, Vinsentin and Wolters.
The plaintiff has established in evidence before me that some “contact”, to use a neutral word, of its customers by the defendants has occurred since the departure of the defendants. The plaintiff voiced its concern to the defendants and some negotiations took place – to no avail. So notwithstanding the short time to run on the restraint it seeks, namely, to 13 June 2003, the plaintiff now seeks this interlocutory injunction against all defendants.
The plaintiff has given an undertaking as to damages.
I have before me and have considered 18 affidavits and numerous exhibits and have had the benefit of two lengthy and helpful submissions.
I direct myself to the guiding principles set out by Acting Chief Justice Mason in Castlemaine Tooheys Ltd & Ors v The State of South Australia (1986) 161 CLR 148 at 153. In order to secure an interlocutory injunction a plaintiff must show:
·that there is a serious question to be tried or that the plaintiff has made out a prima facie case in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be entitled to relief;
·that the plaintiff will suffer irreparable injury for which damages will not be adequate compensation unless the injunction is granted; and
·that the balance of convenience favours the granting of an injunction.
I have had regard also to the other authorities to which I have been referred and in particular to American Cyanamid Co v Ethicon Limited [1975] AC 396; GKR Karate Australia Pty Ltd v P & M Thomas Pty Ltd and Others [2000] SASC 122 and Burwood Night Patrol Pty Ltd v Lagarde (1993) 51 IR 118.
I am of the view that there is a serious question to be tried. Primarily it is whether the restraint of trade provision in the agreements entered into by the third, fifth and sixth defendants is reasonable and whether there has been a breach thereof abetted by all defendants. Less compelling are issues of whether there have been breaches of implied contractual warranties and equitable duties of confidence.
As to the question of irreparable damage occurring to the plaintiff and the allied question of whether damages will be an adequate remedy I indicate that the overall weight of the material before me convinces me that even in the short period there is to run, there is a real potential of the loss of some customers of the plaintiff particularly those previously served by the third to sixth defendants. There is the real prospect of, not only consequential loss of sales, but also a diminution of goodwill of the plaintiff’s business overall. Valuing such losses particularly that of the loss of ongoing goodwill is difficult. This question to some extent merges with the third consideration namely that of where the balance of convenience lies.
It is my view that the balance of convenience favours the granting of the injunction but only in its alternative formulation. That is I am disinclined to enjoin the defendants from soliciting the business of the 400 or so clients of the plaintiff as set out in exhibit KP15 to the first affidavit of Kaaren Payne. I consider it unreasonable to impose on the defendants such a wide restraint, bearing in mind the prospect of some overlapping of the pre-February 2003 customer base of both the plaintiff and the second defendant. Rather, I restrict the injunctive relief to those customers of the plaintiff named in exhibit KP16 of the second affidavit of Kaaren Payne, which are the customers served by the third, fourth, fifth and sixth defendant whilst they worked for the plaintiff. As in the Birdwood Night Patrol case I consider it legitimate to provide this short-term protection for the plaintiff in respect of those of its customers with whom the third to sixth defendants had personal contact during the time they worked for the plaintiff. These customers are in a sense an asset of the plaintiff and as such can be the subject of some reasonable restraint.
In this exercise of deciding where the balance of convenience lies I have had regard to the fact that the second defendant is seeking to expand its business and for that purpose employed the third, fourth, fifth and sixth defendants and perhaps also the first defendant. Therefore the hardship on it of a restraining order will be less than upon the business of the plaintiff which has been established in this area for some time.
I held a tentative view, in the early stages of argument of this case, that because of the short duration of any injunctive relief, the better course would be to decline the order and instead require the defendants to keep strict accounts of their trading. However, after short reflection I have come to the view that the plaintiff is entitled to three months to shore up that part of its customer base previously served by the third to sixth defendants before having to withstand the legitimate competition likely to be provided by the defendants.
In case I have not made it abundantly clear, I apply the order for injunction which I am about to make to all defendants on the basis that there is an arguable case that all defendants, including the first and second, have directly or indirectly participated in breaches by Callaghan, Visentin and Wolters of the Confidentiality and Restraint Agreement. I accept that there is an unresolved contest about this but I proceed on the basis that if the plaintiff’s evidence remains as it is “there is a probability that at the trial of the action the plaintiff will be held entitled to relief” (see Castlemaine Tooheys per Mason ACJ at 153).
Finally, I am of the view that there has not been any disentitling delay on the part of the plaintiff. The affidavits of Kaaren Payne satisfy me that the plaintiff has promptly pursued this remedy after endeavouring to resolve the matter.
In all, it is my view that an injunctive order is necessary if only for the short period sought.
In the result the following order was made:
1.Until midnight on 13 June 2003, the defendants (whether by themselves or their agents or employees) be restrained from either directly or indirectly
a.      Soliciting
b.      Assisting in the Soliciting
c.      Accepting
d.      Facilitating the Acceptance of
e.      Dealing with
the client’s listed in Exhibit 16 to the Second Affidavit of Kaaren Payne (“the clients”).
2.     That these orders are NOT
a.      to prevent the fulfilment of orders by the supply of computer or stationery products to the clients if the second defendant entered into a commercial transaction for the supply of computer or stationery products to the clients prior to 12 pm on 27 May 2003 and such product is yet to be supplied
b.     to apply in relation to the clients in so far as the clients entered or will enter into commercial transactions with the second defendant for the sale and supply of computer or stationery products between 13 March 2003 and midnight on 13 June 2003 for reasons other than the third to sixth defendants engaging in direct or indirect
i.Soliciting
ii.Assisting in the Soliciting
iii.Accepting
iv.Facilitating the Acceptance of
v.Dealing with
the clients between 13 March 2003 and midnight on 13 June 2003.
3.The parties be at liberty to apply upon reasonable notice to dissolve or vary this injunction.
4.The question of costs reserved.
5.Further consideration of the application be adjourned to the Master’s list.

[2003] SADC 78

27 May 2003