Sportsbet Pty Ltd v Carpanini
[2014] VSC 166
•31 March 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
No. S CI 2014 1265
| SPORTSBET PTY LTD (ACN 088 326 612) | Plaintiff |
| v | |
| KELLI CARPANINI and BETEASY PTY LTD (ACN 162 554 707) | First Defendant Second Defendant |
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JUDGE: | EMERTON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28 March 2014 | |
DATE OF JUDGMENT: | 31 March 2014 | |
CASE MAY BE CITED AS: | Sportsbet Pty Ltd v Carpanini & Anor | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 166 | |
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RESTRAINT OF TRADE – Application for interlocutory injunction – Interpretation of restraint clause – Whether restraint clause affords fair protection to party seeking to rely on clause yet not so broad as to interfere with public interest – Nature of defendant’s former role with plaintiff – Whether defendant privy to commercially sensitive information– Whether defendant’s employment with plaintiff’s competitor potentially provided competitor with unfair commercial advantage – Plaintiff’s summons dismissed subject to defendant’s undertakings.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G McEwen | Baker & McKenzie |
| For the Defendants | Mr C Shaw | DLA Piper Australia |
DELIVERED EX TEMPORE AND REVISED
HER HONOUR:
The first defendant, Ms Kelli Carpanini, was an employee of the plaintiff, Sportsbet, from 2009 until yesterday, 30 March 2014. Since 2012, Ms Carpanini has worked as Sportsbet’s customer services manager. She handed in her resignation on 30 December 2013 and has been on ‘gardening leave’ since that date, having been required to give three months’ notice pursuant to her contract of employment.
Ms Carpanini has organised to commence work soon after 1 April 2014 with the second defendant, Beteasy, also in a customer services role.
Sportsbet and Beteasy are both online bookmakers. A Mr Matthew Tripp, a director and shareholder of Beteasy, is a former owner of Sportsbet, and was subject to a non-compete restraint that expired on 1 March 2014.
Ms Carpanini commenced working for Sportsbet’s predecessor, IASbet, in 2009 as a customer services officer on a salary of about $50,000 per annum. She was twice promoted: first to customer service team lead in June 2010 (on a salary of $61,585), and then to acting customer services manager in September 2011 (on a salary of $72,000 per annum, which was subsequently increased to $77,000 per annum). She took on the role permanently in 2012, and her salary was raised to $100,000 per annum.
As Customer Services Manager, Ms Carpanini was responsible for managing and overseeing the Customer Service Team. She was the only customer service manager in Melbourne, and had five ‘team leads’ and anywhere between twenty to fifty customer service officers reporting to her. They take inbound calls from customers and respond to emails and online live chat in relation to account related matters including account updates, processing withdrawals, inquiries about use of the website and complaints.
The Employment Agreement
On 30 March 2012, Ms Carpanini entered into a contract of employment for the position of Customer Services Manager. The contract of employment is Exhibit RS5 to the affidavit of Rupert Shaw sworn on 20 March 2014.
The contract of employment is in the form of a letter dated 30 March 2012 from Sportsbet, expressed to constitute an agreement, with a schedule titled ‘Deed Poll’. The agreement itself:
·requires Ms Carpanini to keep confidential all Confidential Information (as defined) and take all reasonable steps to prevent and protect the unauthorised use or disclosure of Confidential Information;[1]
·provides that the obligations in respect of Confidential Information continue after the termination of Ms Carpanini’s employment;
·provides that post-employment restrictions set out in the Deed Poll apply and that Ms Carpanini agrees that they are reasonable and necessary for the protection of the business of Sportsbet.
[1]‘Confidential Information’ is described as the information of Sportsbet or the group of companies that is of a confidential nature. It contains a number of express inclusions;
The Deed Poll contains, among other things, an agreement not to divulge Confidential Information, defined this time as all information of the ‘Beneficiaries’ - Sportsbet and its related bodies corporate - that is of a confidential nature.
The Deed Poll contains what I will call the restraint clause. Clause 1.2 provides as follows:
The Employee will not, in any capacity and at any time within the Non-Compete Restraint Period directly or indirectly, including on the Employee’s own account or as a member, shareholder, unit holder, director, partner, joint venturer, employee, trustee, beneficiary, principal, agent, adviser, contractor, consultant, management associate, representative or financier or in any other way or by any other means engage in, be employed by, provide services to, participate in, be interested in, assist with or otherwise be directly or indirectly involved, engaged, concerned or interested in a Restricted Business in the Geographical Area.
The Geographical Area is Australia, and the Restricted Business is any business that competes with or is likely to compete with the business of the Beneficiaries within the Geographical Area in respect of the business or businesses that the employee has worked in for a Beneficiary.
The Non-Compete Restraint Period is defined as six months following termination date, or three months if the clause is held to be unenforceable by a court of competent jurisdiction.
Sportsbet seeks to enforce the restraint clause by preventing Ms Carpanini from taking up her job with Beteasy until 30 September 2014.
By summons dated 20 March 2014, Sportsbet seeks interlocutory injunctions against Ms Carpanini and Beteasy, relevantly, as follows:
(a)that until the trial of the proceeding or further order, Ms Carpanini be restrained from performing work in or rendering services to or engaging in any activity for Beteasy in its business; and
(b)that until the trial of the proceeding or further order, Beteasy, whether itself, its servants and agents or howsoever otherwise, be restrained from engaging or continuing to engage Ms Carpanini to perform work in or render services to its business or permitting her to engage in any activity for its business.
Other orders are sought in relation to the soliciting of Sportsbet employees and customers and in respect of information taken by Ms Carpanini when she went on gardening leave. Steps have been taken and undertakings given in relation to these and other matters. Ms Carpanini continues to offer these undertakings and Beteasy has given and offers to give undertakings that it will not assist or encourage Ms Carpanini to undertake activities in breach of her obligations.
The relief sought in the plaintiff’s amended statement of claim is in similar form to the relief sought by the summons, except that the restraint on Ms Carpanini’s employment with Beteasy is expressed to be until 30 September 2014 and the restraint on soliciting employees extends until 30 March 2015.
The relief sought at this stage is interlocutory. The Court must decide whether there is a serious issue to be tried (or a prima facie case) and, if so, whether the balance of convenience favours the making of the orders sought.
The first question is therefore whether there is a serious question to be tried that Sportsbet is entitled to orders restraining Ms Carpanini from performing work, rendering services or engaging in any activity for Beteasy until 30 September 2014 based on the restraint clause. There must be a sufficient likelihood of success to justify the imposition of the restraint until trial.
The prima facie position is that an express restraint of trade clause in an employment agreement is void, as contrary to public policy. However, a restraint of trade clause will be enforceable if it is reasonable in all the circumstances. The classic test is ‘whether the restraint is such only as to afford a fair protection to the interests of the party in favour of whom it is given, and not so large as to interfere with the interests of the public’.[2]
[2]Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company [1894] AC 535, 549.
Ms Carpanini submits that the restraint clause is unenforceable as going far beyond what is necessary to protect Sportsbet’s legitimate interests. This is based on two contentions:
(a)first, the restraint clause is way too broad and cannot be upheld in view of its breadth;
(b)secondly, even if the restraint were drafted in a way that enabled it to be enforced, Sportsbet has no legitimate interest in confidential information that requires Ms Carpanini to be restrained from working for a competitor for six whole months.
By contrast, Sportsbet submits that the restraint clause is valid and can be enforced. It says that it is reasonable and legitimate for it to seek to maintain and protect the confidentiality of its confidential information by the restraint clause. It relies to support the validity of the restraint clause generally on Littlewoods v Harris, in which Lord Denning MR stated that the practical solution to the difficulties associated with covenants against disclosing confidential information was to take a covenant from the servant by which he is not to go to work for a rival in trade.
Sportsbet contends that it is no more than reasonable to enforce a clause preventing Ms Carpanini, who is a senior manager, from going to work for a direct competitor in circumstances where she has a great deal of knowledge about the way in which Sportsbet runs its business and who its clients are. Sportsbet points, in particular, to statements made by Mr Tripp about the central importance of customer services operations in online betting businesses and contends that Beteasy is attempting to obtain a springboard commercial advantage in its customer service department by employing the personnel of Sportsbet in circumstances where they have had access to its commercially sensitive and confidential information.
It is necessary to briefly consider the nature of the confidential information in question. In the first affidavit of Rupert Shaw sworn on 20 March 2014, reference is made to a variety of matters:
·confidential customer lists
·details of customer accounts
·the identity of VIP customers
·customer service protocols and processes
·forecasting and budget information
·strategic promotional and marketing plans
·internal promotional and marketing materials
·product development plans
Mr Shaw makes reference to the confidentiality of promotions and marketing campaigns, in particular those for the remainder of 2014. Otherwise, the confidential information is described in general terms.
In his supplementary confidential affidavit sworn on 25 March 2014, Mr Shaw goes into more detail about the nature of the confidential information to which Ms Carpanini was exposed related to five areas of Sportsbet’s business: in respect of customers, operations, commercial, marketing and regulatory. Mr Shaw says that Ms Carpanini was privy to information about the customer service team’s performance, that she was given copies of budgets, plans and strategies, that she worked closely with the marketing department and was the first point of contact with the Northern Territory Racing Commission and had knowledge of complaints that could harm Sportsbet’s reputation. Mr Shaw exhibits to this affidavit a number of documents as examples of the type of sensitive information to which Ms Carpanini had access. These include minutes from a customer services team meeting, a Powerpoint presentation presented at the operations leadership retreat and an operations board report.
The operations board report contains material that, even to an untrained eye, might well be regarded as commercially sensitive because it concerns such matters as actual turnover, turnover forecasts, average amounts of bets and bet frequency, consolidated gross wins and so forth. However, Ms Carpanini deposes that she has no recollection of opening the board paper or of its contents. She says she had little interest in the financial, budget or performance information of Sportsbet because it was not relevant to her role as Customer Services Manager. She deposes further, and this is not contested by Mr Shaw, that the powerpoint presentation from the operations leadership retreat was subsequently circulated to all staff. As to the customer service team meeting and minutes, Ms Carpanini deposes that team meetings were attended by a large number of people, principally team leads and representatives of different teams who all were privy to the information shared by Mr Shaw. Mr Shaw responds by stating the attendees were all employees at ‘team lead’ level and above and that the minutes of these meetings were not provided to the customer service team as a whole.
Although Ms Carpanini’s credit was called into question based on her assurance that she was observing the terms of her contract of employment when she was apparently already doing some work for Beteasy during her period of ‘gardening leave’, I accept her evidence about these matters. It is largely consistent with the evidence of Mr Shaw.
Is there, then, a serious issue to be tried?
The mere fact that Ms Carpanini had access to confidential information is not, in and of itself, sufficient to justify the restraint. The enforceability of the restraint clause falls for consideration having regard to the nature of Confidential Information, the duties performed by Ms Carpanini for Sportsbet and her position overall in the organisation. The restraint must be reasonable in all the circumstances. Reasonableness is to be assessed as at the time the employment agreement was entered into.
In my view, it is strongly arguable that the restraint clause is too wide to be enforceable. It provides that, for a period of six months after the termination of her employment, Ms Carpanini shall not, in any capacity, do anything at all in relation to any business that competes with or is likely to compete with Sportsbet in Australia. As the defendant pointed out, it would prevent Ms Carpanini from taking any job whatsoever in a competing business, whether or not the duties involved the knowhow acquired in her job as Customer Services Manager for Sportsbet. She could not take a job as a cleaner with a competitor, for instance. Likewise, she would be prevented from even buying shares in a competitor such as Tabcorp.
In TV Shopping v Scutt (1998) 43 IPE 451, the New South Wales Supreme Court held that the words ‘in any capacity’ must destroy a restraint covenant as being unreasonable. The court observed that under the general law, apart from cases where the blue pencil rule could be applied, the fact that a covenant was expressed too widely would destroy the whole covenant, even though what the defendant was doing was clearly something which could have been prohibited had the right words been used.
In IF Asia Pacific Pty Ltd v Galbally,[3] Dodds-Streeton J confirmed that there was a strictly circumscribed role for severance in the context of employee restraint clauses and that the approach to severance was a narrow one. Her Honour, referring to the decision of Younger LJ in Attwood v Lamont,[4] cautioned against curial disentanglement of unreasonably wide clauses, recognising that they may act in terrorem by exposing employees to the threat of litigation. Undue readiness to save such clauses by severance reduces the sanction of invalidity otherwise applicable to employers who attempt to impose unjustifiably wide restraints.
[3][2003] VSC 192.
[4][1920] 3 KB 571.
Although Sportsbet argued that as a matter of construction the restraint clause should be read as relating only to the services or products that that Sportsbet offered and as limited to business of the kind carried out by Sportsbet, and that a construction should be avoided that would result in extravagant and improbable contingencies falling within the covenant, there is a real question as to whether the restraint clause can be read down and whether it fails as being quite simply too wide.
Moreover, insofar as the restraint clause could be read down, it would still be necessary to consider whether it offered only reasonable and fair protection for Sportsbet, having regard to the nature of the information and the position of Ms Carpanini.
In Integrated Group Limited v Dillon,[5] Hargrave J pointed to a number of factors to be taken into account in determining whether a restraint of trade clause offers reasonable and fair protection to an employer. These include the nature of the employer’s business; the nature of the employee’s position, whether the employee has had access to confidential information of the employer; the relationship of the employee with clients and other employees of the business; the duration of the employment; the extent of the consideration provided by the employer for the restraint; and the likely duration of the former employee’s personal relationship with customers of the employer.
[5][2009] VSC 361.
Although Sportsbet contended to the contrary, I am not persuaded that Ms Carpanini was a senior employee of the business. She ran a call centre. She had started out four years earlier in the customer services team on a salary of $50,000 per annum and had worked her way up to being the manager on a salary of approximately twice what she had started on. She had done well, but she had not scaled the heights. She belonged to what would generally be described as middle management and, with the exception of the operations board report to which I have referred, the information to which she was privy was of a fairly general nature.
Importantly, Sportsbet has not pointed to any particular confidential information known to Ms Carpanini and explained how, if that information were disclosed to Beteasy, Sportsbet’s business would suffer. In submissions to the Court, counsel for Sportsbet referred to the information identified by Mr Shaw and to consequent ‘insights’ that Ms Carpanini would have about Sportbet’s business. He said that this information and these insights would be valuable to Sportsbet’s competitors. When asked whether there was anything specific, counsel referred to strategies around the soccer World Cup and the spring racing carnival, but again, did not point to anything in Ms Carpanini’s possession or knowledge that, if disclosed to Beteasy, would allow Beteasy to take the run on Sportsbet and/or render its World Cup or spring racing carnival campaigns less effective. In this context, it is difficult to see how a prohibition on Ms Carpanini working for Sportsbet would be necessary for the protection of its information and business strategies.
In my view, the restraint clause is too wide and it goes further than only to afford fair protection to the interests of Sportsbet. The prospects of the restraint clause being held to be enforceable at trial are poor. I consider that there is no serious issue to be tried.
In any event, I am well satisfied, having regard to the matters to which I have referred, that the balance of convenience does not favour the grant of the injunctions that have been sought.
Sportsbet has not provided the Court with evidence of the irreparable loss that it might suffer if the injunction is refused. It asserts the possibility of damage to its business as a result of Ms Carpanini being employed with Beteasy, but does so in such general terms that little can be made of it. In his first affidavit, Mr Shaw asserts baldly that the confidential information referred to is ‘highly commercially sensitive and very valuable to the plaintiff and, if disclosed to its competitors, would be damaging to the plaintiff’s interests. He says that such disclosure would give competitors substantial advantages in countering the plaintiff’s strategies, pre-empting its marketing and promotional campaigns and targeting its customers’. Mr Shaw concedes that as time passes through 2014, some of this information will pass into the public domain, but asserts that some of it will remain confidential, sensitive and valuable. For example, the operations department’s strategies and objectives for 2014, the content of board reports, and the plaintiff’s medium and long-term corporate strategies, promotional and marketing campaigns, budgets and financial information.
I agree with the submissions made by counsel for Ms Carpanini that there is much imprecision, and a use of managerial language, that makes it difficult to see how there could be real harm to Sportsbet as a result of Ms Carpanini working for Beteasy. The mere assertion that if disclosed to its competitors the information would be damaging to Sportsbet’s interests and give competitors advantages in countering Sportbet’s strategies, pre-empting its marketing and promotional campaigns and targeting its customers, is pitched at a level generality that does not justify an injunction that would have serious consequences for Ms Carpanini.
Ms Carpanini has given evidence of her financial position and her need to work in a well-paid position in order to assist to meet her family’s financial obligations. While Sportsbet has filed an affidavit by its acting human resources director, Ms Astruc, expressing the view that Ms Carpanini, given her experience and skills, could obtain alternative employment in customer service management in numerous other industries, this would inevitably take time and there must be some doubt as to whether Ms Carpanini could attract the same level of salary in an industry in which she had no experience whatsoever. I consider Sportsbet’s assertion that Ms Carpanini can simply go out and find another job to be, at best, glib. I accept that Ms Carpanini will suffer significant detriment if she is not able to commence employment with Beteasy in early April as anticipated.
Accordingly, I do not propose to make the orders sought by Sportsbet. The plaintiff’s summons dated 20 March 2014 will be dismissed, subject to the undertakings that the defendants have said that they will give.
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