Summer Co Rural Pty Ltd v Gibbon

[2023] NSWSC 1643

Supreme Court

New South Wales

Medium Neutral Citation:	Summer Co Rural Pty Ltd v Gibbon [2023] NSWSC 1643
Hearing dates:	19 & 20 December 2023
Date of orders:	20 December 2023
Decision date:	12 February 2024
Jurisdiction:	Equity - Duty List
Before:	Slattery J
Decision:	Interlocutory orders made for the preservation of electronic business communications in digital storage accessible only on the order of court, pending final hearing. Costs reserved.
Catchwords:	CIVIL PROCEDURE — Interlocutory applications — contract of employment – defendant leaves the plaintiff’s employ – contested interlocutory application to enforce a noncompetition covenant and restraints on solicitation of the plaintiff’s clients and employees and misuse of its confidential information – plaintiff concerned about the effectiveness of the interlocutory restraints against the defendant – application resolved on the basis of certain interlocutory restraints but supported by an ancillary regime for the preservation of the defendant’s electronic business communications.
Legislation Cited:	Civil Procedure Act 2005, Part 6.
Texts Cited:	J.D. Heydon, The Restraint of Trade Doctrine (4th Ed, 2018, LexisNexis).
Category:	Procedural rulings
Parties:	Plaintiff: Summer Co Rural Pty Ltd ACN 615 917 309 Defendant: Alex Gibbon
Representation:	Counsel: Plaintiff: A. Campbell Defendant: M. McGirr Solicitors: Plaintiff: Monique Hannigan, Hannigans Solicitors Defendant: Sean Radburn, Somerville Laundry Lomax Solicitors
File Number(s):	2023/460122
Publication restriction:	No

Judgment

1. These proceedings were commenced in the Court’s Vacation Equity Duty List on 19 December 2023. They were made returnable the following day when submissions were made about the formulation of an appropriate interlocutory regime before an accelerated final hearing. The Court suggested a regime of orders that it was likely to impose to better protect the parties’ interests. Those orders were made on 20 December 2023 ultimately by consent and without admissions.

2. The Court indicated at the time that it would give short reasons for imposing the regime of orders for the resolution of evidence. These are those reasons.

3. Ms A. Campbell, instructed by Hannigans Solicitors, represented the plaintiff in these proceedings. Mr M. McGirr, instructed by Somerville Laundry Lomax Solicitors, represented the defendant in these proceedings.

4. In January 2021, plaintiff, Summer Co Rural Pty Ltd (“Summer”) employed the defendant, Mr Alex Gibbon, as a real estate agent. That employment ended on Monday, 18 December 2023. This was Mr Gibbon’s first job in real estate. Summer and Mr Gibbon signed an employment agreement. Mr Gibbon says that he thought it was a standard employment agreement in the real estate industry.

5. Summer conducts its real estate business from the township of Casino on the north coast of New South Wales. The plaintiff’s business is primarily in cattle and stock sales with other business in real estate sales and property management.

6. Mr Gibbon says he wanted to buy into and become a co-owner of Summer but by September 2023 it was apparent to him that this was not possible. So he decided to leave in December 2023 to set up his own business. The principal of Summer, Mr Andrew Summerville arranged for another employee of Summer, Mr Jeremy Millar, to take over progressively the transactions Mr Gibbon was managing on behalf of Summer.

7. Mr Gibbon says he plans to set up his own real estate business, a new Ray White franchise out of his hometown in Campeen Creek, which is about 50 km in a direct line from Casino and about 97 km by road.

8. The employment agreement signed between Summer and Mr Gibbon provided for post–employment restraints on Mr Gibbon from competing with Summer for a period of 12 months over a restraint area with a radius of 125 km. Mr Gibbon challenges the reasonableness of this restraint term and its area. He submits that given the rural locality of Summer’s business that a restraint area with a radius of 25 km, for a period of no more than three months would be reasonable, expiring in late March 2024. Mr Gibbon says that a restraint period with a radius of 125 km extends all the way to the suburbs of Brisbane to the North, to Tenterfield in the West and to Red Rock, near Coffs Harbour.

9. The employment agreement also contains provisions preventing Mr Gibbon from soliciting the customers or clients of Summer or enticing employees of Summer to leave its employ or misusing Summer’s confidential information.

10. The Court indicated that the matter could be placed in the Court’s expedition list. But the parties were not initially able to reach any form of agreement and began negotiations. The affidavit evidence and the submissions put on behalf of Mr Gibbon were insistent that he would not be soliciting any of Summer’s clients within a radius of 125 km of Casino. But Summer was reluctant to accept any undertaking to this effect on the basis that it would be difficult for it to know whether Mr Gibbon had breached such an undertaking.

11. To resolve this impasse, the Court suggested that an interlocutory ancillary procedural regime be put in place to preserve the evidence of Mr Gibbon’s electronic communications, pending the conduct of a final hearing. The parties adopted this idea, and the matter was resolved on the basis of orders that Mr Gibbon not misuse Summer’s confidential information, not solicit Summer’s clients and agree to a limited post-employment non-competition restraint over a radius of 25 km.

12. This was all supported by the ancillary regime for the collecting and preserving digital evidence of communications in Mr Gibbon’s new business. This takes advantage of the modern technical capability to collect and preserve comprehensively, reliably, and economically the digital information generated by businesses such as Mr Gibbon’s new business, pending hearing.

13. It has often been stressed by text writers in this area that injunctions against solicitation can be difficult to enforce, because it will be difficult to find out whether the employee solicited the customer or vice versa: J.D. Heydon, The Restraint of Trade Doctrine (4th Ed, 2018, LexisNexis) at p119. Whilst the ancillary information preservation regime set out below is somewhat intrusive, it generates greater confidence in the parties on an interlocutory basis that the non-solicitation injunction can be effectively enforced because breaches of it are more likely to be detected. And not all this ancillary regime needs to be adopted in every case. It can be tailored to the individual case. The regime generally promotes the objects of Civil Procedure Act 2005, Part 6.

14. The ancillary regime involves Mr Gibbon retaining all electronic communications that he uses to conduct any business for reward, identifying the communications which are business-related, excluding personal communications from the business communications and uploading copies of all the business communications to a cloud storage facility to be kept secure, until the final hearing after which they can be destroyed. The regime may be varied in any number of ways, including by requiring that electronic communications not be destroyed without the additional requirement to enforce their storage and access by court order.

Conclusion and Orders

15. Accordingly, the Court makes the following orders and directions:

1. Upon the plaintiff giving the usual undertaking as to damages and until further order of the Court:

1. The defendant is not to use the plaintiff’s confidential information.

2. The defendant is not to canvass, solicitor or entice (or attempt to do the same) any Client (as defined below) or otherwise interfering with the relationship which the plaintiff maintains with any Client in a manner that is likely to damage that relationship or reduce the amount of business, provided by that Client to the plaintiff;

3. At any time and in any capacity, carrying on, being engaged in, concerned in or interested in, assisting or promoting a real estate business within a 25 kilometre radius (as the crow flies) of the plaintiff’s offices in Casino NSW, except by:

1. advertising online;

2. advertising by signs at bus stations present as at the date of this order, until 16 January 2024.

4. causing, encouraging, authorising or assisting any other person or entity to engage in the conduct described in sub-paragraphs (a) to (c), which if the defendant engaged in such conduct personally would cause the defendant to be in breach of this restraint.

16. The Court makes the following further orders and directions:

1. (1)   Order that the defendant shall preserve and retain in an accessible form and shall not delete or destroy any electronic communications that he uses at any time to conduct any remunerative business (“the subject business”) between the date of these orders and the conclusion of these proceedings, including text messages, email messages, Facebook, WhatsApp or other social media or other electronic media (“the electronic media”) by which he sends or receives messages related to the subject business (all of which material shall be described as “the subject material”), until further order.

2. The solicitors for the defendant shall provide to the solicitors for the plaintiff by 12 noon on 21 December 2023 a list of all the email addresses, telephone numbers, or other addresses for all forms of electronic media used by the defendant to conduct the subject business.

3. If the defendant uses any form of electronic media to communicate exclusively for personal or domestic reasons and not for the purposes of the subject business, then he should provide (separately from the list required by order 2) to the solicitors for the plaintiff a list of all the email addresses, telephone numbers, or other addresses for all forms of electronic media used by the defendant for personal or domestic reasons.

4. Order that any additional electronic media that the defendant uses at any time during the period in which order (1) is operative will become subject to these orders, which must be complied with within 5 business days of such additional electronic media first being used by the defendant.

5. Order the defendant until the conclusion of these proceedings to:

1. retain all the subject material on whatever electronic device it may have been first created or later stored, whether it is subject material used by the defendant to conduct the subject business or for personal or domestic reasons,

2. every 48 hours, or such other time as may be agreed between the parties, to upload to an Internet cloud storage facility agreed between the solicitors for the plaintiff and the solicitors for the defendant (“the agreed Internet cloud storage facility”), copies of all the subject material used by the defendant to conduct the subject business not the subject material used by the defendant for personal or domestic reasons.

6. The agreed Internet cloud storage facility shall not be accessed by either party other than jointly by the agreement of the solicitors for the plaintiff and solicitors for the defendant, or by order of the Court but the data on the agreed Internet cloud storage facility will be destroyed or deleted by order of the Court at the conclusion of the proceedings.

7. Costs reserved.

8. Grant liberty to apply.

9. These orders may be entered forthwith.

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Decision last updated: 12 February 2024