Talent Konnects Pty Ltd v Marvelli - [2022] WASC 128

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   TALENT KONNECTS PTY LTD -v- MARVELLI [2022] WASC 128
CORAM:   TOTTLE J
HEARD:   25 MARCH 2022
DELIVERED          :   25 MARCH 2022
PUBLISHED           :   12 APRIL 2022
FILE NO/S:   CIV 1202 of 2022
BETWEEN:   TALENT KONNECTS PTY LTD
Plaintiff
AND
TANYA MARVELLI
First Defendant
TYNELL GLAS
Second Defendant
DANIELLE RANDALL
Third Defendant

Catchwords:

Civil procedure - Interlocutory injunction - Application for an injunction restraining former employees of the plaintiff from continuing to be employed by a competitor of the plaintiff - Restraint of trade - Whether plaintiff has established a serious question to be tried - Whether balance of convenience favours grant of injunction - Turns on own facts

Legislation:

Nil

Result:

Limited injunction granted

Category: B

Representation:

Counsel:

Plaintiff	:	K de Kerloy
First Defendant	:	D Howlett
Second Defendant	:	D Howlett
Third Defendant	:	D Howlett

Solicitors:

Plaintiff	:	DLA Piper Australia - Perth
First Defendant	:	Westmont Legal
Second Defendant	:	Westmont Legal
Third Defendant	:	Westmont Legal

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

Australian Broadcasting Corporation v O'Neil [2006] HCA 46; (2006) 227 CLR 57
Habitat 1 Pty Ltd v Formby [No 2] [2017] WASC 331
Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105
Portal Software International Pty Ltd v Bodworth [2005] NSWSC 1179
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76; (2017) 55 WAR 36
Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169
Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110

TOTTLE J:

(This decision was delivered extemporaneously on 25 March 2022 and has been edited from the transcript.)

Introduction

The plaintiff applied for interlocutory injunctions restraining the defendants, who are former employees of the plaintiff, from breaching provisions of their employment contracts.[1] Limited injunctive relief was granted to the plaintiff on an interim basis on 9 March 2022.
[1] The application was brought by a chamber summons issued on 4 March 2022.
I delivered oral reasons at the conclusion of the hearing explaining why the primary relief sought by the plaintiff would be refused and only limited relief granted. I said that the oral reasons would be supplemented by written reasons. These are those reasons.

The plaintiff's case

The plaintiff is a labour hire and personal recruitment business focusing on the hospitality and mining sectors. Ms Lezly D'Limi is the plaintiff's founding director. The plaintiff's operations started in October 2021 when it took over the business and assets of another company Tailored Resources Pty Ltd (Tailored Resources) established by Ms D'Limi in August 2020.
Essentially the business acts as an intermediary between those seeking labour (the clients) and those seeking work (the candidates). The business is conducted with at least one related company TKS1 Pty Ltd (TKS1). The business is structured so that all contracts with candidates are held by the plaintiff and 'its related parties' - these related parties were identified in the plaintiff's evidence. TKS1 is the party on the recruitment panel for each of the plaintiff's three largest clients. Inferentially, it is TKS1 that is the party that contracts with clients.
Ms D'Limi's evidence about the plaintiff's business was to the following effect:
(a)The plaintiff's business is focussed on clients in the mining and hospitality sectors and is based on personal relationships established by Ms D'Limi over the nine years she has been involved in the Western Australian recruitment market.
(b)The plaintiff provides services to clients operating in the mining and hospitality sectors by finding and putting forward suitable candidates for specific roles required by its clients.
(c)Strong relationships with clients are important as clients usually first contact recruitment agencies with which they have existing relationships.
(d)A recruitment process typically involves:
(i)a recruitment agency advertising roles that potential candidates can apply for through the recruitment agency's website or job websites such as Seek.com.
(ii)when a candidate applies for an advertised role, the recruitment agency will contact that candidate.
(iii)on contacting a candidate the plaintiff arranges for the candidate to sign a privacy agreement and thereafter, includes the candidate's information in its confidential database and elicits confidential information from the candidate, with a view to assessing the candidate's suitability for roles and then putting the candidate forward to the plaintiff's clients for suitable roles.
(e)The plaintiff's employees are able to access information about candidates, job opportunities, clients, client contact details and rates. That information is kept in Excel spreadsheet format.
(f)The plaintiff currently employs about 20 'full-time equivalent' employees and has more than 100 casual workers on placement with its clients.
(g)The plaintiff's main competitors are Collar Talent Group Pty Ltd (Collar Group), Evolve Talent (formerly Building Careers Australia (BCA)), Core Staff, Hays, Randstad, Techforce and IMS.
(h)The plaintiff has approximately 20 clients, who are mainly involved in the mining, mining catering and hospitality industries. Approximately 80% of the clients operate in the hospitality industry.
(i)Compass Group, which delivers hospitality and facilities services to the mining industry in remote locations, is and has been the plaintiff's largest client accounting for:
(i)approximately 80% of the plaintiff's revenue; and
(ii)approximately $9 million in revenue in the period August 2020 to date.
(j)Australian Camp Services (ACS) provides remote site catering, management and support services to the mining sector. ACS is and has been the plaintiff's second largest client, accounting for over $3 million in revenue in the period August 2020 to date.
(k)Cater Care provides contract catering, accommodation and facility management service across Australia and is (and has been) the plaintiff's third largest client.
(l)Although there are more than 50 recruitment agencies in Western Australia, only about eight recruitment agencies provide services to clients for hospitality and facilities management in the mining sector.
(m)The plaintiff will not survive if it loses or suffers a significant decline in revenue from Compass Group and ACS.
Each of the defendants entered into contracts of employment with the plaintiff with each contract containing the following terms:
15RESTRICTIONS POST EMPLOYMENT
15.1You agree that you will not, during the period of six (6) months after termination of your employment (however caused):
• carry on, advise, provide services to, or be associated with any business or activity which is competitive with the Company;
•canvass, solicit, or endeavour to entice away from the company any person who, at any time during your employment with the company, was a client or customer of, or supplier to, the company, or in the habit of dealing with the company and with whom you dealt; and
•solicit, interfere with, or endeavour to entice away any employee of the company.
15.2You agree that during your employment you will:
•acquire significant information about the business of the company including the names of employees, suppliers, and clients.
•could forge personal links with staff, suppliers, and clients of the company; and
•could learn and acquire trade secrets, business connections and other confidential information, the disclosure of which could materially harm the Company.
•the restrictions in this clause are reasonable and necessary of the protection of the company's confidential information and goodwill.
•you intend the restrictions to operate to the maximum extent.
•damages may be inadequate to protect the company's interests and the company is entitled to seek and obtain injunctive relief, or any other remedy, in any court; and
•the restrictions are separate, distinct and several, so that the unenforceability of any restriction does not affect the enforceability of the other restrictions.
15.3If the restrictions in this clause are void as unreasonable for the protection of the Company's interests but would be valid if part of the wording were deleted, the restrictions will apply with the modifications necessary to make them effective.
16 CONFIDENTIAL INFORMATION
16.1'Confidential Information' includes, but is not limited to, any information in respect of the Company or the Company's business (including, but not limited to, any idea, concept, process or know how) which is not in the public domain (other than because of a Breach of the Company's confidence) which.
•comes to your notice in the course of your employment; or
•is generated by you while performing your duties.
16.2 You acknowledge that all Confidential Information is and will be the sole and exclusive property of the Company.
16.3You must not use or disclose Confidential Information unless the use or disclosure is.
•required by law.
•made as part of the proper performance of your duties; or
•agreed by the company.
16.4You must take all reasonable and necessary precautions to maintain the secrecy and prevent disclosure of Confidential Information.
16.5To avoid doubt, this clause is not intended to limit any duty of fidelity implied into your contract of employment. Your obligations under this clause continue after your employment ends.
Ms D'Limi deposed that in the course of their employment with the plaintiff the defendants had access to and were required to use confidential and commercially sensitive information including:
(a)candidate details (including candidates' names, contact details and qualifications);
(b)candidate rates (that is, a pay rate for each candidate which the plaintiff had negotiated with clients);
(c)client charge rates (including the profit margin mark-ups on candidate rates charged to clients). In response to evidence from the first defendant to the effect that the client charge rates had not been disclosed to her, Ms D'Limi produced an email from her to the first defendant dated 4 May 2021 attaching a schedule of the rates charged by Tailored Resources to Cater Care and a chain of emails exchanged on 5 January 2022 and 6 January 2022 in which the rates charged to Compass Group for chefs of varying levels of experience were disclosed to the first and second defendants.[2]
(d)contractual arrangements with clients (being, in essence, the number of hours which a candidate must work for a client before he or she can be transferred to that client as a permanent employee without incurring fees); and
(e)documents Ms D'Limi described as onboarding documents - such as contracts and medical declarations).
[2] Second affidavit of Lezly Kaye Kathleena D'Limi, affirmed on 23 March 2022, Attachments LKK-26 and LKK-27, 14 - 24.
Ms D'Limi's evidence in relation to the responsibilities of the defendants was to the following effect:
(a)the main responsibility of the first defendant and second defendant was to handle the plaintiff's accounts with Compass Group and ACS; and
(b)the third defendant's main responsibility was to handle the plaintiff's account with Cater Care.
She deposed that she recruited, trained and equipped the defendants with the relationships to fulfil these roles and that they were the only points of contact for Compass Group, ACS and (from November 2021) Cater Care.
Ms D'Limi deposed that the first defendant told her she did not have any relationships with Compass Group, ACS or Cater Care before she joined Tailored Resources.
Ms D'Limi deposed that the second defendant told her that she did not have any recruitment experience, nor did she have any relationships with Compass Group, ACS or Cater Care prior to joining Tailored Resources.
Ms D'Limi deposed that the third defendant told her that she had no contact with anyone at Compass Group, ACS or Cater Care before joining the plaintiff.
Ms D'Limi deposed she had recently hired two people to perform the roles previously performed by the first defendant and the second defendant but that the new employees were currently serving their notice periods with their current employers and would not start with the plaintiff for four weeks. She deposed that it usually takes at least eight weeks for new starters to familiarise themselves with and learn the plaintiff's business and to develop relationships with the plaintiff's clients and candidates. As a consequence, it usually took at least three months to 'backfill' a position and re-establish relationships with clients.
Ms D'Limi deposed that she had become aware that two of the plaintiff's candidates were working with Collar Group.
There was no evidence that the defendants had misused the information the plaintiff claimed was confidential falling within the categories of client charge rates, contractual arrangements with clients or 'onboarding documents'. The plaintiff adduced evidence that four of its 'candidates' had been approached by Collar Group to work for its clients and that another candidate was approached by the first defendant who tried to persuade the candidate to work for Cater Care.[3]
[3] ts 8.4.

The defendants' case

The first defendant

The first defendant has worked in recruitment for 18 years mainly in the fields of 'blue collar' and medical recruitment.
The first defendant and Ms D'Limi worked together for another recruitment agency (BCA) for approximately five months in 2019. Whilst employed at BCA the first defendant worked mainly in the hospitality sector and had dealings with Cater Care, Compass Group and ACS. The first defendant disputed that she had told Ms D'Limi that she did not have a relationship with Compass Group, ACS or Cater Care before joining Tailored Resources. She deposed she had relationships with those clients from working at BCA and Ms D'Limi knew of those relationships because they had worked together at BCA.
The first defendant commenced employment with Tailored Resources in October 2020 and dealt with the same clients as she had dealt with at BCA, being ACS (though she only worked on placements on the east coast) and to a lesser extent Cater Care and Compass Group.[4] The first defendant deposed that she spoke to 'the people at ACS daily'.[5]
[4] Affidavit of Tanya Marvelli, sworn on 18 March 2022, 3.
[5] Affidavit of Tanya Marvelli, sworn on 18 March 2022, 6.
In October 2021 the first defendant entered into an employment contract with the plaintiff.
The first defendant deposed that while she was employed by the plaintiff she worked on the Compass Group account in the eastern states and not in Western Australia.[6] She deposed that she only worked on Cater Care on two days in December 2021.
[6] Affidavit of Tanya Marvelli, sworn on 18 March 2022, 4.
The first defendant resigned from her employment with the plaintiff on 10 January 2022 and her last day of work was 14 January 2022. The first defendant's explanation for her resignation was to the effect that she did not like the hours she was expected to work and had concerns that she was not being paid the commissions to which she was entitled.
The first defendant deposed that three weeks after she had left her employment with the plaintiff she responded to a LinkedIn post by Mr Ephram Stephenson in which he had stated that he was looking for people to join Collar Group. The first defendant had worked with Mr Stephenson at BCA and at Tailored Resources. After speaking to him, the first defendant was offered a job at Collar Group commencing on 14 February 2022.
The first defendant contested Ms D'Limi's claims in relation to confidential information. In that respect the first defendant's evidence was to the following effect:
(a)Candidate details: it is impossible to remember all the candidates as there are thousands of candidates. To attract candidates, the first defendant would place advertisements on various websites.
(b)Candidate rates: the rates candidates are paid is not confidential. Candidates discussed their rates with the first defendant and with other candidates. Candidates know the rates offered by the plaintiff. The first defendant denies that she has disclosed any information about candidate rates she learned while working for the plaintiff to Collar Group. She deposed that candidates tell her the rates they are expecting because of the current demand for workers.
(c)Client charge rates: the first defendant deposed that she did not know or have access to the rates at which the plaintiff or TKS1 would charge their clients for candidates that were employed with their clients.[7]
(d)Contractual arrangements with clients: the first defendant accepted that the contractual arrangements with clients are confidential but deposed that she did not copy or take any such information.
(e)Onboarding documents: the first defendant disputed that these documents are confidential and maintains that they are template documents used in the recruitment industry. She denies taking or copying any such documents from the plaintiff.
[7] Affidavit of Tanya Marvelli, sworn on 18 March 2022, 5.
The first defendant deposed that when she joined Collar Group, ACS and Compass Group were clients and Cater Care was 'approved' as a client the day after she started her employment.[8] The first defendant deposed that she learnt nothing that she did not already know regarding ACS while working for Tailored Resources or the plaintiff and that she is not working for ACS at Collar Group.
[8] Affidavit of Tanya Marvelli, sworn on 18 March 2022, 5.
The first defendant deposed that if she was restrained from working for six months she would lose approximately $45,000 in wages and $30,000 in commission. She deposed that she is a single mother with a mortgage, has monthly finance payments on a car loan and is her family's only source of income.[9]

The second defendant

[9] Affidavit of Tanya Marvelli, sworn on 18 March 2022, 6.

The second defendant has primarily worked in recruitment over the last seven years except for a period in 2020 and 2021 when she worked as a fly‑in fly‑out worker. She denied that she told Ms D'Limi that she had no experience in recruitment - she said Ms D'Limi's evidence in that respect was 'totally untrue'.[10] She deposed that:[11]
D'Limi emailed me and said she had reviewed my application and resume, which outlined my previous experience, and she offered me an interview. I was interviewed by Summer Penton, Talentko team leader at the time. The role I applied for was a mobilisation [role]. D'Limi said I would be better suited for an account management role based on my experience and I agreed to give it [a go].
The first time I met D'Limi in the office, after I started working at Tailored Resources she referred to me as 'you're the one with the recruitment background' and then shook my hand. I told D'Limi that I had a working relationship with Compass and my sister has been employed with Compass for over 10 years.
[10] Affidavit of Tynell Glas, sworn on 18 March 2022, 2.
[11] Affidavit of Tynell Glas, sworn on 18 March 2022, 2 - 3.
She started work for Tailored Resources in June 2021 and entered into an employment contract with the plaintiff in about September 2021.

The second defendant deposed that throughout her time with the plaintiff she 'worked as an account manager with the key client Compass Group working within the hospitality industry recruiting and mobilising utility workers, chefs and security guards'.[12]
[12] Affidavit of Tynell Glas, sworn on 18 March 2022, 2.
The second defendant resigned from her employment with the plaintiff on 11 February 2022.
The second defendant deposed that when she left the plaintiff's employment she did not copy or take any confidential information nor details of client charge rates.
The second defendant deposed that she resigned from the plaintiff because her 'values did not align with D'Limi or [the plaintiff]'.[13] The second defendant deposed also that she had workload issues and was not being paid the correct commission.
[13] Affidavit of Tynell Glas, sworn on 18 March 2022, 3.
The second defendant deposed that she has no idea of the plaintiff's candidates because there were too many and the plaintiff's database of candidates was 'too old'.[14] She preferred to work with new candidates or redeploy candidates. The second defendant deposed that she was not provided with any details of client charge rates and she had no idea how much the plaintiff was billing Compass Group for each client she placed. She deposed that she had no access to client charge rates.
[14] Affidavit of Tynell Glas, sworn on 18 March 2022, 3.
The second defendant deposed that she had no idea of the contractual arrangements between the plaintiff and its clients. She deposed that the 'onboarding documents' were 'fairly similar to other places [she] had worked at'.[15]
[15] Affidavit of Tynell Glas, sworn on 18 March 2022, 4.
The second defendant deposed that she did not resign from the plaintiff to take up a position at Collar Group but almost a week after she had finished work with the plaintiff she saw a LinkedIn post by Mr Stephenson advertising an account manager position in oil and gas recruitment. She deposed that when she started work at Collar Group, Compass Group was already a client. She deposed that she does 'different work' at Collar Group from what she did when working for the plaintiff.[16]
[16] Affidavit of Tynell Glas, sworn on 18 March 2022, 4.
The second defendant denied using any information she used when working at the plaintiff and denies trying to take any of the plaintiff's clients or employees.
The second defendant deposed that if she is restrained from working she will lose approximately $45,000 in wages and $17,500 in commission. She deposed that she has rent and car repayment commitments.

The third defendant

The third defendant commenced employment with the plaintiff on 16 December 2021 and resigned on 13 February 2022. She said she contacted Mr Stephenson before resigning from the plaintiff on 11 February 2022. Mr Stephenson told her to contact him when she had resigned and she did so shortly after her resignation.
The third defendant denied that her main responsibility was to manage the Cater Care account. She worked on several accounts and her responsibilities were divided equally between them. The third defendant denied that she was ever provided with a 'position description' (being a document which sets out the employee's purpose of their role and areas of responsibility) as deposed to by Ms D'Limi.
The third defendant did not leave Melbourne to come to Perth to work for the plaintiff (as Ms D'Limi had deposed). Rather she continued to work for her employer in Victoria from Perth. She deposed that she had worked with Cater Care in her previous recruitment employment in Victoria and had made placements of candidates for them. She denied that she had told Ms D'Limi that she had no contact with Cater Care before joining the plaintiff.
The third defendant denied that she had access to client charge rates. She denied that she had access to any 'client relationship information' and that all she had access to was a spreadsheet containing candidate information.[17]
[17] Affidavit of Danielle Louisa Randall, sworn on 18 March 2022, 3.
The third defendant described her role with Collar Group as a 'principal recruitment consultant' that is, her responsibilities are to recruit rather than to manage an account.[18] She deposed that she does not use and has no need to use any information which she used when working for the plaintiff in her role at Collar Group.
[18] Affidavit of Danielle Louisa Randall, sworn on 18 March 2022, 3.
The third defendant deposed that Collar Group already has the same clients as the plaintiff, being Compass Group, ACS and Cater Care. She said she has not tried to entice employees away from the plaintiff because she does not know any of them and has not tried to entice clients away from the plaintiff.
The third defendant deposed that if she was restrained from working in the field of recruitment she would lose approximately $45,000 in wages and $25,000 in commission. She deposed that she would not meet her mortgage and car loan repayments.
The defendants' basic salaries equated to an hourly rate of approximately $40 per hour.

Mr Stephenson's evidence

Relevantly, Mr Stephenson deposed that he is the sole director of Collar Group which started trading in September 2021. Mr Stephenson had been involved with Ms D'Limi in various capacities, as colleagues at BCA and as a shareholder and Executive Director of Tailored Resources until mid‑2021. He has extensive experience in the field of recruitment and labour hire. He described Collar Group's activities as providing: [19]
[T]alent management solutions for large volume clients throughout Australia. I work with some of the largest clients in Australia to assist them with their talent selection and mobilisation throughout the country. Our main area of focus is the Building Construction, Mining, Oil and Gas, Insurance, Fin-Tech, Finance, Property, Engineering & Facilities Management ("Hospitality") sectors throughout Australia.
[19] Affidavit of Ephram Stephenson, sworn on 18 March 2022, 4.
Mr Stephenson deposed that a recruitment agency must be on a client's recruitment panel and that clients have multiple agencies on their panels.
Mr Stephenson deposed that in January 2022 he employed Ms Abigail Ryan with whom he had worked with at BCA and Tailored Resources. He asked her to approach ACS, Compass Group and Cater Care to see whether Collar Group could be added to their respective panels. Mr Stephenson deposed that Collar Group first approached Cater Care in Queensland on 13 January 2022 and was invited to provide it with a business proposal which it did. The proposal was accepted and from 15 February 2022 Collar Group has been providing candidates to Cater Care.
Mr Stephenson deposed that Collar Group was approached by Compass Group on 31 January 2022 and this approach led to Collar Group being asked to fulfil 180 roles as a matter of urgency.

Principles for injunctive relief

The general principles applicable to the exercise of the power to grant an interlocutory injunction were not in dispute. They were summarised by Newnes JA (with whom Corboy J and McLure P agreed) in Mineralogy Pty Ltd v Sino Iron Pty Ltd,[20] as follows:[21]
The principles to be applied on an application for an interlocutory injunction are well‑known and were not in dispute. The two main enquiries that arise are whether the plaintiff has made out a prima facie case and whether the balance of convenience favours the grant of the injunction. The first inquiry as to a 'prima facie case' does not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient that the plaintiff show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks. The second inquiry is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury which the defendant would suffer if an injunction was granted. Whether an applicant for an interlocutory injunction has made out a sufficient prima facie case and whether the balance of convenience favours the grant of such relief are related, not independent, questions. (citations omitted)
[20] Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105.
[21] Mineralogy Pty Ltd v Sino Iron Pty Ltd [87] (Newnes JA), [1] (McLure P), [117] (Corboy J). See also Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76; (2017) 55 WAR 36 [131] (Buss P, Murphy JA & Beech J).
In practice the notion that a plaintiff must show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo is expressed compendiously by asking the question: is there a serious question to be tried?[22]
[22] Australian Broadcasting Corporation v O'Neil [2006] HCA 46; (2006) 227 CLR 57 [70] (Gummow & Hayne JJ); Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] - [13] (Beech J).
In assessing whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury which the defendant would suffer if an injunction was granted (in other words assessing where the risk of an injustice lies), the court will consider whether the grant or refusal of an injunction will have the practical effect of determining the claim either for or against the plaintiff.[23]
[23] Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533.

Restraint of trade

There was no dispute between the parties as to the principles which govern restraints of trade. A restraint of trade clause is contrary to public policy and prima facie void, unless the restraints are reasonable to protect the legitimate interests of the party seeking to enforce the restraint. The validity of a restraint is to be considered as at the date of the contract.[24]
[24] Habitat 1 Pty Ltd v Formby [No 2] [2017] WASC 331 [36] (Banks-Smith J).
The leading appellate authority in this jurisdiction is Smith v Nomad Modular Building Pty Ltd,[25] in which McLure JA said:[26]
[25] Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169.
[26] Smith v Nomad Modular Building Pty Ltd [6], [8] - [9], [12], [14].
The test to be applied in determining the validity of a restraint of trade was stated by Lord Macnaghten in Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565 in a passage that has been cited with approval in many cases. Lord Macnaghten said:
All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.
…
A restraint is reasonable in relation to the restraining party if it is necessary for the adequate protection of that party and reasonable in relation to the party restrained if it preserves the fullest liberty of action consistent with that protection: Brightman v Lamson Paragon Ltd (1914) 18 CLR 331 at 337 per Isaacs J; Buckley v Tutty (1971) 125 CLR 353 at 376.
…
Whether a restraint of trade is reasonable is a question of law which depends on the true construction and legal effect of the contract: Amoco Australia at 305 per Walsh J; Haynes v Doman [1899] 2 Ch 13 at 24 per Lindley MR.
…
The proper course is to examine the range of interests relied on by the respondent said to require protection and to determine whether one or more of those interests are reasonable by reference to the interests of the parties to the contract and the interests of the public.
…
However, if any actual or potential effect on goodwill, direct or indirect, is a protectable interest of the employer, that would justify a restraint clause preventing a former employee taking employment with a competitor merely because the new employer was a competitor.
Pullin JA (in the same case) said:[27]
Covenants that restrain an ex-employee from competing with the ex-employer are at common law contrary to public policy and void unless it can be justified by the special circumstances of the case. Special circumstances means no more than the facts of the particular case from which reasonableness can be inferred. The Court will judge whether the restriction is reasonable having regard to the interests of the parties concerned and to the interests of the public. If the restraint is not reasonable by reference to the interests of the parties and the public then it is contrary to public policy and void. Buckley v Tutty (1971) 125 CLR 353 at 376; Lindner v Murdock's Garage (1950) 83 CLR 628 at 653 and Portal Software International Pty Ltd v Bodsworth (2005) NSWSC 1179 per Brereton J at [63].
[27] Smith v Nomad Modular Building Pty Ltd [35].
In the widely cited case of Portal Software International Pty Ltd v Bodworth,[28] Brereton J said:[29]
At common law, a restraint of trade is contrary to public policy and void, unless it is justified by the special circumstances of the particular case, for which purpose it is sufficient justification that the restriction is reasonable having regard to the interests of the parties concerned and in reference to the interests of the public, so that while affording adequate protection to the party in whose favour it is imposed, it is not injurious to the public [Nordenfelt v Maxim Nordenfelt Guns & Ammunition [1894] AC 535, 565; Herbert Morris Ltd v Saxelby [1916] 1 AC 688, 706, 707; Lindner v Murdock's Garage (1950) 83 CLR 628, 653]. While the cases refer to 'special circumstances' justifying a restraint, that means no more than facts of a particular case from which reasonableness can be inferred [J D Heydon, The Restraint of Trade Doctrine, 2nd Ed, p29]. If the restraint is not reasonable in reference to the interests of the parties and the public, it is contrary to public policy and void [Buckley v Tutty (1971) 125 CLR 353, 376]. This test reconciles two conflicting policies, first 'that a man should be free to use his skill and experience to the best advantage and should not be put in the position of a slave', and secondly, that covenants should be observed and enforced [Herbert Morris Ltd v Saxelby [1915] 2 Ch 57, 76; [1916] 1 AC 688; Attwood v Lamont [1920] 3 KB 571, 577].
While courts commence from this same general principle in all cases of restraint of trade, a more rigorous approach is applied to restraints in employment contracts than in contracts for the sale of goodwill [Nordenfelt, 566; Mason v Provident Clothing & Supply Co Ltd [1913] AC 724, 731, 738; Herbert Morris Ltd v Saxelby [1915] 2 Ch [77]. A stricter and less favourable view is taken of covenants in restraint of trade between employer and employee, than in commercial agreements [Geraghty v Minter (1979) 142 CLR 177, 185; Heydon, pp 68-69; Woolworths Limited v Olson [38]].
An employer is not entitled to be protected against mere competition; the legitimate interests of an employer which may be the subject of protection by covenant are in the nature of proprietary subject matter [Vandervell Products Ltd v McLeod [1957] RPC 185, 192; Tank Lining Corp v Dunlop Industrial Pty Ltd (1982) 140 DLR (3d) 659, 664], including the employer's trade secrets and confidential information, and goodwill including customer connection.
In order to determine whether a restraint exceeds what is necessary for the protection of the legitimate interests of the employer and therefore void, it is necessary first to construe the restraint. Absent resort to the Restraints of Trade Act, it is then necessary to consider whether, on the particular facts proved, the restraint so construed is reasonable.
[28] Portal Software International Pty Ltd v Bodworth [2005] NSWSC 1179.
[29] Portal Software International Pty Ltd v Bodworth [63] - [66].

Disposition

Serious question to be tried

The first question to be analysed is whether the provision of cl 15.1 of the employment contracts restraining the defendants from being able to 'carry on, advise, provide services to, or be associated with any business or activity which is competitive with the [plaintiff]' for a period of six months is reasonable.
Ignoring for present purposes the consequences that might flow from the fact that the contractual arrangements with clients of the business are made between TKS1 and the clients rather than with the plaintiff, the interest that the provision is intended to protect is the plaintiff's connection with its clients, that is, its goodwill.
It may be accepted that the plaintiff is entitled to some contractual protection of its goodwill, however, the question is whether a six-month restraint unlimited in terms of scope is reasonable.
The plaintiff argued that it is, and that when measured against four criteria, the court should find that there is, in effect, a strong case on whether there is a serious question to be tried on that issue. The four criteria identified as being relevant by the plaintiff were as follows:
First, the existence of the connection with the clients and the importance of the role played by each of the defendants in maintaining that connection. The plaintiff said, in effect, that it entrusted the good will that arises from the connections with the three key clients to the defendants, and the restraint is a proportionate protection for that goodwill.
Second, the time it would take the plaintiff to replace the departing employees and put in place new employees who are capable of re‑establishing and developing that relationship. I have already referred to Ms D'Limi's evidence about the steps taken to replace the three defendants and that it takes at least three months to 'backfill' a position and re-establish relationships with clients.
Third, that each contract of employment contained an acknowledgement by the respective defendants that the restraints in cl 15 were reasonable.
Fourth, which is, perhaps, in truth, just a further development of the first point, that is that each defendant played a critical role as account manager in relation to the key clients.
Whether a restraint of the nature that the plaintiff seeks to enforce, which is, in essence, a restraint against competition, is reasonable is a question of law. It requires an evaluative judgment to be made by the court.
At this interlocutory stage, my judgment is that the restraint goes further than is reasonable, and that the aspect of the restraint that is arguably unreasonable is its duration.
Lest there be any misapprehension about the way in which I express my views on the serious question to be tried, these are views expressed as to the strength of the serious question to be tried. They are not views as to the final merits of the plaintiff's claim, and should not be taken as such.
In other words, I accept that there is a question to be tried as to the reasonableness of the non-competition restraint but my assessment is that the strength of that question, or the strength of the plaintiff's case on that question, is limited. In reaching that view, I take into account that the contracts of employment contain further restraints which are more targeted in their approach to the protection of the plaintiff's goodwill. In that respect, I refer to the other two restraints contained in cl 15.1, that is, the non‑canvassing or non‑solicitation of client provision, and the non‑solicitation of employee provision. In my assessment, the plaintiff has demonstrated a strong serious question to be tried in relation to those restraints.

Turning to the evidence of breach of the restraints against the use of confidential information, there is, as I indicated earlier, no direct evidence of misuse of confidential information by the defendants, nor is there any direct evidence that the defendants have canvassed or solicited clients.
There is some limited evidence that the first defendant may have had dealings with one of the candidates of the plaintiff that might arguably amount to a breach of the non‑solicitation of employees aspect of the restraint. But the evidence of actual infringements or breaches of the restraints is very limited. That is not, however, to say that there is no justification for concern on the part of the plaintiff that the contractual protections or the contractual terms might not be breached by the defendants, might not have been breached by the defendants in a manner of which they are not aware, or might not be breached by the defendants in the future. As stated by counsel for the plaintiff, Mr de Kerloy, the plaintiff is entitled to be protected against the risk of breach.

Balance of convenience

Having regard to what I have said about the strength of the plaintiff's case on the serious question of whether the restraint against competition is unreasonable, the balance of convenience is against the making of an order restraining the defendants from working for Collar Group. The strength of the case and the balance of convenience are not factors to be considered independently of each other.
I accept that if restrained from working for Collar Group each of the three defendants would incur financial losses. Whether those losses would be as severe as they fear is another matter. Nevertheless, I accept that there would be disruption to their employment that would endanger their financial positions, and that is a prejudice to them. The potential prejudice to the defendants is a matter that weighs against the granting of an injunction restraining them from working for the Collar Group. An injunction restraining the defendants from working for the Collar Group is likely to have the effect of granting final relief to the plaintiff and this is an additional factor weighing against the grant of an interlocutory injunction.
In making an assessment of the plaintiff's concerns about the losses it may suffer if an injunction restraining the defendants from working for the Collar Group was not made, I take into account the fact that the labour hire market and recruitment market is clearly, on the face of the evidence that has been adduced on this application, a highly competitive market. Irrespective of whether the defendants were restrained from working for Collar Group, Collar Group is servicing the three clients who are identified by the plaintiff as being key clients. There is no order that the court could make that could restrain Collar Group from continuing to compete in that market and potentially eating into the plaintiff's market share.
The position in relation to the balance of convenience is different in relation to the non‑solicitation of clients and employees restraints. As the defendants' counsel rightly acknowledged, given the defendants' evidence that they neither have solicited the business of the three key clients nor intend to, and have not solicited employees of the plaintiff nor intend to, it is difficult to argue that the balance of convenience does not favour the plaintiff in respect of the non-solicitation restraints. In my view, the balance of convenience does favour the making of those restraints.
The defendants contended that the injunctions restraining them from breaching the non-solicitation restraints were unnecessary because there was no evidence that they had breached those restraints. Two points may be made about that contention. First, the plaintiff is entitled to be protected against the risk of a breach. Second, the contention would have more force if the defendants had proffered undertakings at an early stage of this action to the effect that they would abide by the contractual restraints on the use of confidential information and non‑solicitation that they freely accepted when entering into their employment contracts.
Finally, the plaintiff is entitled to a restraint protecting its confidential information in a form that mirrors the obligation as contained in the employment contracts. The only qualification I would make is that I am not persuaded that the rates of pay received by candidates – that is, the rate at which the plaintiff pays candidates – is confidential information of the plaintiff of which a protection should be enforced by an injunction.

Conclusion

The following orders will be made:
1.Upon the Plaintiff's undertaking to the Court that it will pay to any party restrained or affected by the restraints imposed by this interlocutory injunction, or any interim continuation thereof, such compensation as the Court may in its discretion considering in the circumstances to be just, such compensation to be assessed by the Court, or in accordance with such directions as the Court may make and to be paid in such manner as the Court may direct an order that until 13 July 2022 (in the case of the First Defendant), 18 August 2022 (in the case of the Second Defendant) and 15 August 2022 (in the case of the Third Defendant) or until further order, the First Defendant, the Second Defendant and the Third Defendant be restrained and an injunction be granted restraining each of them from:
(a)canvassing or soliciting any of:
(i)Compass Group (Australia) Pty Ltd (ACN 000 683 125);
(ii)Marc Russo trading as Australian Camp Services; or
(iii)Cater Care Services Pty Ltd (ACN 109 553 504);
or endeavouring to entice any of them away from the Plaintiff;
(b)soliciting, interfering with, or endeavouring to entice away any employee of the Plaintiff;
(c)disclosing to Collar Talent Group Pty Ltd (ACN 624 279 009) or any other person any of the following information:
(i)the details of any individual placed by the Plaintiff or registered with the Plaintiff for employment (a candidate) including any candidates' name, contact details and qualifications;
(ii)client charge rates (including the profit margin mark-ups on candidate rates charged to clients);
(iii)contractual arrangements with clients (being, in essence, the number of hours which a candidate must work for a client before he or she can be transferred to that client as a permanent employee without incurring fees); and
(iv)onboarding documents (being contracts themselves, medical declarations, etc).
(v)information in respect of the Plaintiff or the Plaintiff's business (including, but not limited to, any idea, concept, process or know how) which is not in the public domain (other than because of a breach of the Plaintiff's confidence) which:
(A)came to the notice of the First Defendant, the Second Defendant or the Third Defendant in the course of employment for the Plaintiff; or
(B)was generated by the First Defendant, the Second Defendant or the Third Defendant while performing duties in the course of employment for the Plaintiff.
2.The costs of the application heard on 25 March 2022 and the hearing today, 28 March 2022, be reserved.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OK
Associate to the Honourable Justice Tottle
12 APRIL 2022