Springboard Consulting Group Pty Ltd v Cunningham & Ors
[2007] VSC 447
•10 October 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 8711 of 2007
| SPRINGBOARD CONSULTING GROUP PTY LTD | Plaintiff |
| v | |
| IAN CUNNINGHAM & ORS | Defendants |
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JUDGE: | KAYE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 October 2007 | |
DATE OF JUDGMENT: | 10 October 2007 | |
CASE MAY BE CITED AS: | Springboard Consulting Group Pty Ltd v Cunningham & Ors | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 447 | |
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PRACTICE COURT – Interlocutory injunction – Employment agreement – Restraint of trade clause – Restraint very wide – Evidence that restraint reasonably weak – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Taylor | Trueman Dawson |
| For the Defendants | Mr Friend | Holding Redlich |
HIS HONOUR:
The plaintiff is a company which carries on business as a recruitment services provider. It specialises in the placement of sales staff.
The first defendant, Ian Cunningham, was employed by the plaintiff between August 2006 and May 2007 as a consultant, and later as a senior consultant. The second defendant, James Neil, was employed as a consultant by the plaintiff between September 2006 and May 2007, and the third defendant, Emma Turner, was employed by the plaintiff between May 2006 and April 2007. Each of them are now employed by or associated with Pursuit Recruitment Australia Pty Limited, and it is accepted that that company is engaged in a similar business to that conducted by the plaintiff.
The plaintiff in these proceedings seeks: to enjoin the defendants each from engaging in business in competition with the plaintiff for a period of 12 months; to enjoin the defendants from using confidential information of the plaintiff, including the Staff Training Manual of the plaintiff, its client information and details and hit lists; thirdly, to enjoin the defendants from soliciting or attempting to solicit the business or custom of any client of the plaintiff; and fourthly, to enjoin the defendants from soliciting or attempting to solicit employees of the plaintiff. It now seeks relief by way of interlocutory injunction in those terms until the trial of this proceeding.
The principles upon which I should approach this application were stated in summary form by me in a previous decision in Monash Real Estate Pty Limited vRoss[1], and I am prepared to act on those principles. This is an interlocutory application and as such the plaintiff must first show a serious issue to be tried. However, it is well established that in cases where a plaintiff is seeking interlocutory relief to restrain a defendant from working, there is a higher onus on the plaintiff to persuade the Court to grant an interlocutory injunction.
[1][2005] VSC 116.
That higher onus and the justification for it is, as I stated in the Monash Real Estate case, justified by what occurred in Drake Personnel Limited v Beddison[2]. In that case ultimately the claim for an injunction failed at trial and it was noted by the trial judge, Anderson J, that the judge who heard the interlocutory injunction had commendably made only a limited order enjoining the defendants.
[2][1979] VR 13.
The principles relating to restraints of trade, such as those which are contained in the agreement entered into by each of the defendants with the plaintiff, are well established and are not, in my view, relevantly affected by the New South Wales legislation which pertains to the contracts. Prima facie, any restraint of a person to work or to be employed is contrary to public policy and thus void. That presumption can be rebutted if it can be shown that the restraint is no more than what is reasonably necessary to protect the plaintiff against the infringement of a legitimate interest recognised by the law, such as confidential information, trade secrets and the like.
The question of what is confidential information was considered by Gowans J in Ansell Rubber Co Pty Limited v Allied Rubber Industries[3], where His Honour stated:
“The information which an employee may not use is that which a man of ordinary intelligence and honesty would regard as a property of his former employer.”
[3](1967) VR 37, 40
It is recognised that an employer is entitled to restrain an employee from taking customers from it to a business in competition with the former employer.
Those then are the principles. The first restraint, which is sought in this case by the plaintiff, is a restraint pursuant to Clause 9.3 of the terms of its agreement with each of the defendants. Paraphrasing that clause, under it each defendant agreed, not without the prior written consent of the plaintiff, at any time during 12 months after the termination of his or her employment, to be directly or indirectly engaged, concerned or interested in any capacity, in any business undertaking or venture which carries on such business in competition to the plaintiff in the provision of recruitment services. It can be seen that on its terms that clause is extraordinarily wide. On its face it purports to restrain an employee from competing with his former employer, and it is without any geographic limit.
It was argued by Mr Taylor, who appears for the plaintiff, that the breadth of that injunction is necessary in order to protect the legitimate interests of the plaintiff in its confidential information, which consists primarily of information imparted by it to each of its employees, the defendants, in its Staff Training Manual. It was submitted that the defendants necessarily carried with them, when they left the employment of the plaintiff, the trade secrets and confidential information contained in the Staff Training Manual. It was argued that that information could only be properly protected by a restraint of the type which is to be found in Clause 9.3 of the agreement.
In his affidavit, Mr McKenna, the director of the plaintiff, has proposed that the Training Manual includes sales methodologies, advertising methods and pro-forma advertisements, company templates, company systems, sales processes, interview techniques and all other systems in relation to the operation of the plaintiff. It is that information which is said to be particularly sensitive to the operations of the plaintiff.
In his submissions before me, Mr Taylor, however, placed particular emphasis on three matters which were not referred to by Mr McKenna, namely the terms and conditions of trade which are set out in the Staff Training Manual, the plaintiff’s company profile, and its methodology in recruiting the sales staff. It is that information in particular which the plaintiff claims the defendants have utilised in the course of their employment with Pursuit.
In my view, the evidence is not particularly strong that any of that material is of such confidential nature that it would justify a restraint at this preliminary stage, of the type that is sought in respect of Clause 9.3. The terms of trade and the company profile are necessarily documents which are in the public domain. Indeed, Clause 10.5 of the agreement excludes, from the prohibition against the use of confidential information, information which is in the public domain. But on any view, it is hard to see how such information could be aptly described as such confidential information as to be the property of the plaintiff.
In my view, much more would be required of the plaintiff than the assertion made by Mr McKenna in his affidavit to which I have referred, to justify a restraint of extraordinary breadth which is set out in Clause 9.3. That is not to say that such a restraint would not be able to be proven at trial. However, on the materials before me, the evidence which would justify a finding that such a restraint was reasonable in restraint of trade, is, I consider, quite weak.
That proposition is reinforced by the evidence of the three defendants as to the limited amount of training they received from the plaintiff, and as to the nature of that training, which seems to me to indicate that the information imparted to them did not partake of any particularly sensitive confidentiality.
The plaintiff also seeks to restrain the defendant from using client information and details and from soliciting or attempting to solicit the business of customers of the plaintiff. The evidence in relation to whether the defendants have in fact been attempting to solicit customers of the plaintiff, is I consider, particularly weak. It is contained in the affidavit of Mr Meek. Mr Meek refers to meeting with a candidate of Ms Borg who apparently had applied to be interviewed in relation to a position with Laminex, which was a client of Springboard. In response, Mr Cunningham, the first defendant, has sworn that whilst he has had dealings with Laminex since he left the plaintiff, those dealings arose out of a direct contact made with him by the sales manager of Laminex. In his affidavit, the first defendant on his oath has stated that when the sales manager of Laminex contacted him, he, Mr Cunningham, pointed out that Laminex was a client of the plaintiff, but the sales manager of Laminex wished to deal with Pursuit.
Mr Meek’s affidavit also refers to a discussion which he had with the sales manager of Speed Panel, who was also a client of the plaintiff. That sales manager stated that he had had contact with a recruiter from Pursuit Recruitment seeking the business of Speed Panel. Mr Neil in his affidavit has sworn that whilst he did contact Speed Panel, he was not aware that Speed Panel was a customer of the plaintiff.
Finally, the third defendant, Ms Turner, has sworn an affidavit that in fact when she was approached by a company which is a client of the plaintiff, when she became aware of that, she told that client she could not deal with it, and it is in my view significant that she did so before the issue of these proceedings. In those circumstances, the evidence that the defendants have been consciously attempting to solicit the custom of the plaintiff is not convincing Indeed, it is quite weak.
The next restraint which the plaintiffs seek in this case is to restrain the defendants from soliciting or attempting to solicit for the services of Pursuit any person who is an employee of the plaintiff. I also consider that the evidence in relation to that aspect is not strong. It appears that any approach to the third defendant occurred after she ceased her employment with the plaintiff. Mr Samlal deposes to a conversation which he had in a social setting with the first defendant shortly before the first defendant left his employment with the plaintiff. However, Mr Cunningham in his affidavit, whilst accepting that the topic of Mr Samlal working with Pursuit was discussed, denies that it was he who broached the topic or sought to solicit Mr Samlal from the employment of the plaintiff. The plaintiff relies on an inference that Mr Cunningham attempted to or did induce Mr Neil, the second defendant, to leave the employment to enter the employment of Pursuit. Mr Neil in his affidavit has sworn that in fact he left the employment of the plaintiff because he was dissatisfied with it, and that having done so, he then contacted the first defendant Mr Cunningham in order to work with Pursuit.
In short, in my view, the evidence in relation to each of the alleged infractions of the employment agreement entered into by the defendants with the plaintiff is weak. I consider that at this preliminary stage, the restraint which is sought to be imposed under Clause 9.3 is too wide, and there is no evidence that it is reasonably necessary in order to protect the legitimate interests of the plaintiff.
I also consider that it has not been shown the balance of convenience supports the grant of an injunction. Indeed, in the affidavit of Mr Cunningham, Pursuit, which is a much smaller enterprise than Springboard, would suffer significant damage if the type of restraint sought by the plaintiff were granted in this interlocutory application. By contrast, the plaintiff has put forward little material to show any irreparable harm to it should I refuse the injunction.
Finally, I agree with Mr Friend, who appeared for the defendants, that there has been a measure of delay on behalf of the plaintiff in approaching this Court. Such delay is important in a case such as this, because during it the defendants have each established their positions, which may be adversely affected should I now grant an injunction which should later be found to have been not justified.
In the recent decision in Tymbook Pty Limited v State of Victoria[4], Maxwell P and Charles JA stated that the appropriate test to be applied in respect of both prohibitory and mandatory injunctions is that:
“the Court should take whichever course appears to carry the lower risk of injustice if the decision made by it at this stage should turn out to be wrong in the sense of granting an injunction to a party that fails to establish its right of trial, or in failing to grant an injunction to a party who succeeds at trial.”
[4][2006] VSCA 89.
In my view, for the reasons which I have set out, the lower risk of justice as thus described by their Honours is carried were I to refuse to grant the injunction. For those reasons, I do not consider that I should grant any of the injunctive relief sought by the plaintiff. Accordingly I dismiss the summons of the plaintiff dated 4 October 2007.
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