Webster Signs Pty Ltd v Nicolaou (No 2)

[2007] NSWSC 705

CITATION:	Webster Signs Pty Ltd v Nicolaou & Ors (No 2) [2007] NSWSC 705
HEARING DATE(S):	28 June 2007
JUDGMENT DATE :	28 June 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	28 June 2007
DECISION:	Interlocutory injunctions dissolved.
CATCHWORDS:	INTERLOCUTORY INJUNCTION – Whether evidence demonstrates serious question to be tried – balance of convenience.
PARTIES:	Webster Signs Pty Ltd – Plaintiff Anthony Nicolaou – First Defendant Van International Pty Ltd – Second Defendant Tanvic Group Pty Ltd – Third Defendant
FILE NUMBER(S):	SC 3307/07
COUNSEL:	Ms L. McCallum SC, Ms K. Richardson – Plaintiff J.P. Mrsic – Defendants
SOLICITORS:	Henry Davis York – Plaintiff E.H. Tebbutt & Sons – Defendants

3307/07 Webster Signs Pty Ltd v Nicolaou & Ors (No 2)

JUDGMENT – Ex tempore
28 June, 2007

1    On 22 June 2007, the Plaintiff obtained an order for short service of a Summons in these proceedings, seeking various orders against Mr Nicolaou and two companies controlled by him. The matter was brought back to Court on 25 and 27 June and, by consent, interlocutory orders were made restraining the Defendants from doing certain things until further order. 2    However, it was the intention of the parties that there should be a contested interlocutory hearing as soon as practicable. That hearing has come on before me this afternoon. 3    The Plaintiff says, and it is not in dispute, that for some three years or so, Mr Nicolaou's company, Van International Pty Ltd, has been providing Mr Nicolaou’s services to it pursuant to a consultancy agreement. The Plaintiff says that, in the course of performing those consultancy services on behalf of Van International Pty Ltd, Mr Nicolaou has become aware of confidential information of the Plaintiff as to its pricing for various customers and the pricing policies generally. 4    The consultancy agreement was terminated on 16 March 2007. A relatively short time after that date, Mr Nicolaou went to work for a competitor of the Plaintiff. The Plaintiff now seeks to continue injunctions restraining Mr Nicolaou and two companies controlled by him, namely, Van International Pty Ltd and Tanvic Group Pty Ltd, from continuing to provide any services to the competitor until final resolution of the proceedings. 5    The basis of the application, shortly stated, is that Mr Nicolaou has in his head confidential information concerning pricing of the Plaintiff which he will, or must inevitably use, in providing services to the Plaintiff's competitor, so that the only effective way of preventing abuse of that confidential information is to restrain Mr Nicolaou and his companies from working for the competitor. 6    There are a number of difficulties in the Plaintiff's case. In summary, I am not satisfied that there is a sufficiently strong arguable case demonstrated to sustain an injunction, as the evidence presently stands. If there is such an arguable case, then it is of such weakness as to cause grave pause when it comes to deciding that the balance of convenience requires an order restraining Mr Nicolaou from being employed in an industry in which he has been engaged for some years. 7    I may briefly refer to the difficulties in the Plaintiff's path. They are discussed in some length in my interchanges with Ms McCallum SC, who appears with Ms Richardson of Counsel for the Plaintiff. They will appear in the transcript, so that I do not think I need to elaborate on them in any great detail. 8    The first difficulty is that there is no contractual non competition clause as between the Plaintiff and Mr Nicolaou or as between the Plaintiff and Tanvic. There is a consultancy agreement between the Plaintiff and Van International Pty Ltd dated 3 July 2006. In that agreement there is a clause in the following terms:
“ NON-COMPETITION: Van International understands that during the period of this Agreement, and two years subsequent to this Agreement, it shall not be permitted to engage in any activity of a private nature that may be in conflict – directly or indirectly – with Webster Signs Pty Ltd, Grass Signage Group Pty Ltd and/or Out & About Marketing & Media Pty Ltd.”

In that agreement, also, there is the following clause:

“ CONFIDENTIALITY: During your period of consultancy with the Company you will be exposed to certain confidential information and it is a condition of this consultancy agreement that this information is kept confidential by you both during and after (for a period of two years following the consultancy) your period of consultancy with the Company at all times. This also includes your Employment Agreement, which should not be discussed with your colleagues.

Similarly you agree that all property of the Company will remain with the Company. All computer software, patents, new clients or contracts, commercial processes developed by you or under your control in the period of your consultancy shall remain the property of the Company. Any clients or work introduced by you to the Company at any time shall become the property of the Company.”
9    Ms McCallum submits that it is arguable that the consultancy agreement is tripartite in that it binds not only Van International Pty Ltd, but Mr Nicolaou personally. It is very difficult, in my respectful opinion, to regard that argument as a strong one. The letter is certainly addressed to Mr Nicolaou at his address, but it commences, "The following details the terms and conditions in respect of your company’s (Van International Pty Ltd)" , consultancy services with the Plaintiff. The document also provides that the consultancy is for marketing and development services offered by Van International Pty Ltd. The attached document specifying the services to be provided is specified as Van International Pty Ltd as the entity providing the services and so on. 10    I find it very difficult to imply an additional party to this agreement, given the terms in which it is couched, and I find it equally difficult to imply into the agreement a term that Mr Nicolaou, personally, will be bound by the covenants. 11    Ms McCallum's primary submissions are directed to the obligations of confidentiality and fidelity which equity imposes upon somebody who was in Mr Nicolaou's position in relationship to the Plaintiff, that is, somebody who, even though through the medium of a company, was directly performing work for the Plaintiff and was privy to information which the Plaintiff says is confidential to the business. 12    However, there is a further and, in my view, considerable difficulty in the Plaintiff's case, as founded upon the equitable obligations said to be owed by Mr Nicolaou to the Plaintiff. It has not been identified with any particularity what, if any, particular confidential information as to pricing Mr Nicolaou has which he is capable of using in the interests of the Plaintiff's competitor. 13    The assertion of the Plaintiff comes down to this: that because Mr Nicolaou was aware of various prices fixed by the Plaintiff for its customers ­– and I interpose here to add that the Plaintiff seems to accept that it was not Mr Nicolaou himself who worked out these prices, but that he was aware, or must have been aware, of prices worked out by other persons in the Plaintiff's employ – as I say, because Mr Nicolaou must have been aware of prices at which the Plaintiff had contracted with various customers, then he must be able now to use that confidential information to the detriment of the Plaintiff. 14    I sought some further elucidation as to what sort of prices in particular the Plaintiff said that Mr Nicolaou might know, or did know, or might be able to use in his dealings with present customers of the Plaintiff. Ms McCallum frankly conceded that there was presently no evidence which showed that Mr Nicolaou had said to any customer that he approached, after his termination with the Plaintiff, anything to the effect, "I know that your price from the Plaintiff is $x for this particular service and I am prepared to provide you with a price lower than that" . 15    Ms McCallum says that I should infer that Mr Nicolaou has this sort of knowledge and will use it, but I am not able to make such an inference in the absence of any particular evidence concerning confidential information. For example, to use an instance that I quoted to Ms McCallum in the course of argument, for all I know, it may be the case that Mr Nicolaou became aware of contractual prices which had been fixed by the Plaintiff in its dealings with customers five or six years ago, which now have no commercial currency or value in present market conditions. 16    I should emphasise, at this point, that this is not a case in which there is any suggestion in the evidence, nor in any submissions, that Mr Nicolaou covertly set up some business operation prior to the termination of the services of his company as consultant with the Plaintiff. There is no suggestion in the evidence, or in submissions, that Mr Nicolaou has directly or indirectly acted dishonestly while still in any sort of fiduciary relationship with the Plaintiff to divert business from the Plaintiff for his own benefit. 17    There is a suggestion that Mr Nicolaou improperly, or dishonestly, or by sharp practice, lulled the Plaintiff into a false sense of security by proffering an undertaking on behalf of Van International Pty Ltd, dated 25 April 2007, that is, after Van International Pty Ltd had ceased its consultancy with the Plaintiff. That undertaking, which is in evidence, assures the Plaintiff on behalf of Van International that Van International Pty Ltd will observe all continuing obligations to the Plaintiff with respect to confidential information and maintain the secrecy and confidentiality of confidential information. The undertaking also contains paragraphs beginning with, "I have not used" , or, "I will not use" , et cetera, which are capable, in one way, of referring to Mr Nicolaou, personally, rather than to his company, despite the other terms in the document. 18    However, there is no evidence that Mr Nicolaou has, in fact, breached this undertaking by the use of any particular information, or by the retention or copying or distribution of any particular information in tangible form. 19    Further, I cannot infer dishonesty on the part of Mr Nicolaou in proffering this undertaking in the way suggested by the Plaintiff in the absence of any evidence at all as to the context in which the undertaking was sought and was given. It may be, for all the Court presently knows, that Mr Nicolaou was simply asked to sign a document placed in front of him by the Plaintiff, with no further enquiry from Mr Nicolaou as to any activities other than those covered expressly in the document. If all Mr Nicolaou did was to sign the document, as requested, there could be no suggestion of failure to disclose something that he ought to have disclosed, or misleading conduct. On the other hand, if Mr Nicolaou himself proffered the document to forestall any investigation, the opposite conclusion may well be drawn. 20    It is sufficient to say that, in the absence of any evidence at all as to the context in which this document was obtained, I am not prepared to infer dishonesty on the part of Mr Nicolaou. There is nothing else in the evidence which, to my mind, suggests any dishonesty and it is far too serious an implication to make to draw dishonesty from the simple signature of this document. 21    There is some evidence that Mr Nicolaou has approached a present client of the Plaintiff and has informed the client that there are loopholes in the contract between the Plaintiff and that client, so that the client can and ought to come to do business with the Plaintiff's competitor. However, the mere statement that there are loopholes in the contract is not, in my opinion, the divulging of confidential information. The terms of the contract themselves, obviously, are not confidential as between the Plaintiff and the particular client to whom the statement was made because the client itself is party to the contract. It is not necessarily disclosing confidential information to say to somebody, "There is a loophole in that contract to which you are a party" . Whether or not there is a loophole – in the sense that there is a means of evading some particular promise or covenant in the contract – is a matter of opinion. It depends on the construction of the terms of the document, which are not confidential, as between the parties to the contract. I do not see that this evidence supports an allegation of disclosure of particular confidential information by Mr Nicolaou. It is not shown that the opinion stated by Mr Nicolaou is anything but his own opinion; his own opinion is not information confidential to the Plaintiff. 22    I would have thought that the best evidence in support of an allegation of use of confidential information would have been some instance of Mr Nicolaou quoting a particular price to a client of the Plaintiff which was lower than the current price charged by the Plaintiff to that client. At least, from evidence of that character, inferences may have been drawn, but there is no such evidence in this case. All that is said, in effect, is that, because Mr Nicolaou must have been aware of the Plaintiff’s pricing, he ought to be restrained from competing because it is inevitable that he will use confidential information in breach of his obligations to the Plaintiff. 23    I bear in mind that the injunction sought by the Plaintiff will have a serious impact on the ability of Mr Nicolaou to continue earning his livelihood in an industry in which he has been engaged for some time. I accept that there has been no dispute about Mr Nicolaou's contention that his prospects of continued employment with the competitor will be placed in jeopardy if his services are restrained by the injunction which the Plaintiff seeks. This is a considerable hardship. 24    The Court is reluctant, at an interlocutory stage of proceedings, to restrain a person from carrying on his or her career or profession. Clear evidence of substantial prejudice which may be irremediable to the Plaintiff should be before the Court before the Court will take that step. 25    Sometimes the Court will, at an interlocutory stage, restrain a defendant from competing with a former employer where there is a real risk that the defendant has confidential information and will use it, even though at the time of the interlocutory application the plaintiff cannot point to the precise nature and identity of that confidential information. Each case depends on its particular facts. In my view, this is not such a case. 26    It is possible that Mr Nicolaou has a great deal of information in his head about pricing of the Plaintiff and its dealings with its customers but, at the moment, I do not see that there is any evidence showing any more than that possibility. He may simply have information of the kind that he is entitled to take away with him and use in his career, in the same way as people who have acquired the benefit of experience with an employer are able to use that experience and knowledge generally subsequent to terminating employment with the employer. 27    For those reasons, I regard the first requirement of this application, that is, demonstrating a serious issue to be tried, as presenting a great difficulty to the Plaintiff. I do not see the Plaintiff’s case as a strong one although, by exercise of some generosity, one might call it an arguable one. 28    I have to weigh the strength of the Plaintiff's case in the balance of convenience. Having regard to:


– the weakness of the Plaintiff's case as it appears on the present evidence;

– the evidence of the First Defendant that his employment is in jeopardy if the injunction is granted;

– the fact that if the Plaintiff wishes to prosecute this claim, there is another remedy open to it, namely, the obtaining of an accounting of profits, not only from Mr Nicolaou, but from his present employer, who is, obviously, fully aware of the circumstances of the Plaintiff's claim,

I consider that the balance of convenience weighs against the continuation of the injunctions. In those circumstances, I dissolve the injunctions that were granted by consent until further order.

29    Although the Plaintiff has failed in its application to maintain the continuation of interim injunctions, I am not inclined to order the costs of that application to date to be paid by the Plaintiff. I bear in mind that the case has been brought on in haste. The Plaintiff's investigations are still at an early stage. It may be that when further documents are produced by discovery or on subpœna, the complexion of the evidence may change. 30    I do not think it was unrealistic for the Plaintiff to apprehend that there may be some abuse of confidential information reposing in Mr Nicolaou and his companies. In these circumstances, I think it better to let the costs of the proceedings to date abide the result of the trial, or further order of the Court. 31    Costs of the application to date will, therefore, be reserved.
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