Willis Australia Group Services Pty Ltd v Griggs

[2012] NSWSC 659

Supreme Court

New South Wales

Medium Neutral Citation:	Willis Australia Group Services Pty Ltd v Griggs [2012] NSWSC 659
Hearing dates:	8 June 2012
Decision date:	14 June 2012
Jurisdiction:	Equity Division - Duty List
Before:	Ward J
Decision:	Interlocutory application granted
Catchwords:	CIVIL PROCEDURE - interlocutory injunctions - application for injunction to restrain the defendants from breaching various restrictive covenants in agreements entered in connection with their employment - HELD - limited injunctive relief granted on an interlocutory basis
Legislation Cited:	Accident Compensation Act 1985 (Vic) Companies Act 1981 (Bermuda) Companies Act 2006 (UK) Corporations Act 2001 (Cth) Migration Act 1958 (Cth) Restraints of Trade Act 1976 (NSW) Victims Support and Rehabilitation Act 1996 (NSW)
Cases Cited:	ACP Magazines Pty Ltd v Southdown Publications Pty Ltd [2002] NSWSC 715 Attorney-General of Australia v Adelaide Steamship Co [1913] AC 781 Aussie Home Loans v XInc Services [2005] NSWSC 285 Australian Broadcasting Corporation O'Neill (2006) 229 ALR 457 Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 Capgemini US v Case [2004] NSWSC 674 Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016 Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552 Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 Dawnay Day & Co Ltd v De Braconier d'Alphen [1998] ICR 1068 Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267 Hannamax Hi-Tech Pry Ltd v O'Donnell [2001] NSWSC 634 Herbert Morris Ltd v Saxelby [1916] 1 AC 688 Huhtamaki Australia Ltd v Botha [2004] NSWSC 386 IceTV v Duncan Ross and Ors [2007] NSWSC 635 Idameneo (No 123) Pty Ltd v Dr Teresa Angel-Honnibal [2002] NSWSC 1214 John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 KA & C Smith Pty Ltd v Ward (1998) 45 NSWLR 702 Kearney v Crepaldi [2006] NSWSC 23 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Kone Elevators Pty Ltd v McNay (1997) ATPR 41-564; (1997) Aust Contract R 90-080 Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 Minister for Immigration and Ethnic Affairs v Baker (1997) 45 ALD 136 Network Ten Ltd v Fullwood (1995) 62 IR 43 North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 Orleans Investments Pty Ltd v MindShare Communications Ltd (2009) 254 ALR 81 Otis Elevator Company Pty Ltd v Nolan [2007] NSWSC 593 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Pickering v Stephenson (1872) LR 14 Eq 322 Professional Advantage Pty Ltd v Smart [2008] NSWSC 873 Putsman v Taylor [1927] 1 KB 637 Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10, (2002) 210 CLR 491 Rouen; Rentokil Pty Ltd v Lee (1995) 183 LSJS 444 Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418 Seven Network (Operations) Ltd v James Warburton (No 2) [2011] NSWSC 386 State of Victoria v Leck [2010] VSCA 76 Tullett Prebon (Australia) Pty Ltd v Simon Purcell [2008] NSWSC 852 Two Lands Services Pty Ltd v Cave [2000] NSWSC 14 Victims Compensation Fund Corp v Brown [2003] HCA 54 Walker v W A Pickles Pty Ltd [1980] 2 NSWLR 281 Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 Woolworths Ltd v Olson [2004] NSWCA 372 Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 Zuellig v Pulver [2000] NSWSC 7
Texts Cited:	Collins (ed) Dicey & Morris on the Conflict of Laws (11th ed, 1987) Collins (ed), Dicey and Morris on The Conflict of Laws (13th ed, 2000) M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia (8th ed, 2010) P Davies, Principles of Modern Company Law (8th ed, 2008) Meagher, Gummow and Lehane, Equity Doctrines and Remedies (2nd edn)
Category:	Interlocutory applications
Parties:	Willis Australia Group Services Pty Ltd (First Plaintiff) Willis Australia Ltd (Second Plaintiff) Michael Griggs (First Defendant) Peter Matthews (Second Defendant)
Representation:	Counsel: J K Kirk SC with S Fitzpatrick (Plaintiffs) A Moses SC with Y Shariff (Defendants) Solicitors Allens Linklaters (Plaintiffs) Holding Redlich (Defendants)
File Number(s):	12/176823

Judgment

1. HER HONOUR: In this matter, which came before me in the duty judge list on 8 June 2012, interlocutory injunctive relief is sought by the plaintiffs, Willis Australia Group Services Pty Limited (WAGS) and Willis Australia Limited (WAL), against two former employees of WAGS (Mr Michael Griggs and Mr Peter Matthews) to restrain them, until further order, from breaching various restrictive covenants contained in contracts entered into in connection with their employment with WAGS (in particular, in the case of two of the agreements, in the context of agreements to acquire shares or share options). (WAGS and WAL are part of a group of companies to which I will refer as the Willis Group.)

1. Both Mr Griggs and Mr Matthews have considerable experience in the area of construction industry insurance. They ceased employment as senior managers within the Willis group of companies in March this year and have since then each been employed by another insurance broker, Elkington Bishop and Molineaux Insurance Brokers (EBM). It does not appear to be disputed that EBM is in competition with the plaintiffs generally within the insurance industry. The plaintiffs maintain that EBM, which had not previously operated in the construction risk sector of the insurance broking industry, is now seeking to establish itself as a major competitor to the Willis Group in that sector by using the client connections and information available to the defendants.

1. It was not until 4 June 2012 (when I gave leave in the duty list for the filing of the plaintiffs' Summons and abridged the time for service of the Summons) that the plaintiffs commenced proceedings to restrain the defendants from, inter alia, continuing in their current employment. Perhaps not surprisingly, therefore, one of the factors raised in opposition to the present application for interlocutory injunctive relief is the delay in so doing. The urgency of the present application for interlocutory relief is that 30 June is the most common renewal date for insurance policies within this area of the Willis Group's insurance broking practice.

Background

1. The plaintiffs are part of a global group of companies, the ultimate holding company of which is now Willis Group Holdings plc (WGH). Mr Pieter Lindhout (the Chief Executive Officer of the Willis Group in Australia, with management responsibility for both WAL and WAGS) has deposed that WGH is a leading global insurance broker with more than 400 offices in approximately 120 countries. At [1] of his 4 June 2012 affidavit, he has deposed that each of WAL and WAGS is a wholly owned subsidiary of Willis Australia Group Holdings Limited (WAGH) and that WAGH is in turn owned by WGH.

1. WAL is the principal general insurance broking arm of the Willis Group in Australia. WAGS operates principally as a service company, employing associates who perform services for other Willis Group entities.

1. The precise structure of the Willis Group (relevant insofar as the Options Agreement covenants require consideration of whether particular entities are subsidiaries of Willis Group Holdings Limited (WGHL), another entity in the global group whose principal office is in Bermuda) was the subject of evidence from the Legal Counsel of the Willis Group in Australia, Ms Marigold Magnaye.

1. Annexed to Ms Magnaye's affidavit are company searches of the relevant Australian entities. Ms Magnaye has further deposed, on information and belief derived from the company secretary of the Willis Group, Mr Alistair Peel, as to the corporate structure through which (by way of a chain or succession of wholly owned subsidiaries) WGH is now the ultimate holding company of each of WAL and WAGS. Objection was made to the reading of that evidence - para [5] of Ms Magnaye's affidavit, on the basis that it was not simply hearsay but that it involved an opinion as to the operation of the law of Bermuda, that Ms Magnaye was not in a position to give. I admitted this evidence on the interlocutory application before me as going to the overall group company secretary's understanding, as conveyed to Ms Magnaye, of the overall group structure and not as expert evidence as to the operation of the law of Bermuda.

1. One of the areas of special expertise of the Willis Group in Australia is insurance for the construction industry, comprising what is known as construction risk insurance (namely, accidental loss or damage insurance) and liability insurance (namely, third party property damage and bodily injury insurance). Mr Lindhout says that this area of insurance accounts for over 14% of the Willis Group's revenue in Australia.

1. Mr Griggs (the first defendant) was employed by WAGS (then known as Willis Coroon International Pty Ltd) pursuant to an engagement letter dated 1 September 1998. He was employed by the company (with a variation to his employment agreement that for present purposes is not material) from September 1998 to late February 2012. Mr Griggs occupied the position of National Manager of the Construction Practice Group (National Manager). That role, as described by Mr Lindhout, is a senior position within the Willis Group with management responsibility for financial performance (profit and loss, revenue and costs), client acquisition and client relationships, strategic planning, and staffing across the country. (It is now occupied by Mr Andrew Nicholl.)

1. At around the time he commenced his employment, Mr Griggs also signed a Confidentiality and Restraint Deed dated 5 September 1998 (to which I will refer as the 1998 Deed). Mr Griggs' initial engagement letter provided that his employment was governed by the law of Victoria. The 1998 Deed did not specify a governing law. (For the purposes of this application, Senior Counsel for the plaintiffs, Mr Kirk SC, has proceeded on the assumption that the 1998 Deed is also governed by the law of Victoria.)

1. On or about 19 March 2004, Mr Griggs and WGHL entered into a Willis Partners Portfolio Plan Option Agreement (referred to as the Griggs Options Agreement) pursuant to which Mr Griggs was granted 750 options in WGHL and in consideration for which Mr Griggs agreed to certain post-employment restraints. (There were already some post-employment restraints contained in the 1998 Deed but they do not appear to extend beyond the protection of the employer company. It is conceded that the restraints in the Options Agreement are more extensive and it is the latter that the plaintiffs now seek to enforce by way of a negative injunction against breach.) The Griggs Options Agreement provided, relevantly, that it was to be governed by, and construed in accordance with, the laws of Bermuda (section 6.8).

1. The second defendant, Mr Matthews, was employed by WAGS from July 1996 to March 2012. (At the time his employment commenced, WAGS was known as Richard Oliver International Pty Ltd.) At the time of his resignation, Mr Matthews' position (again, as described by Mr Lindhout) was that of Construction Manager NSW, with management responsibility for financial performance (revenue and cost budgets), staffing, business strategy (in conjunction with Mr Griggs), client acquisition and client relationships, and regulatory compliance.

1. On or about 14 July 2003, Mr Matthews entered into a Matched Option Program-Option Agreement (on similar terms to the Willis Partners Portfolio Plan Option Agreement) for the acquisition of options or shares in WGHL. Subsequently (on 3 July 2006 and 2 July 2007 respectively) he entered into further such agreements for the purchase of shares in WGHL. The Matthews Options Agreement contains restraints in materially the same terms as those in the Griggs Options Agreement (the restrictive covenants being found in Article VI sections 6.1- 6.3, those corresponding to sections 5.1-5.3 of the Griggs Options Agreement, and the governing law again being that of Bermuda as specified in section 7.9).

1. Subsequently, Mr Matthews entered into a further agreement in which he has given additional covenants as to his conduct post-termination of his employment. On or about 28 October 2008, Mr Matthews signed a new letter of appointment containing those additional restraint clauses. The plaintiffs principally rely on the Matthews Options Agreement but, as a fallback, also on the provisions of the 2008 appointment letter for the injunctive relief sought against Mr Matthews. (The appointment letter does not specify its governing law but it is submitted by Mr Kirk that it may be taken to be governed by the law of NSW as it was sent by mail to Mr Matthews at an address in NSW, related to his employment in NSW, and the stationery on which it was printed provides contact information in both NSW and Victoria.) The appointment letter notes that Mr Matthews' employer (WAGS) is a wholly owned subsidiary of WAL.

1. By Deed Poll of Assumption dated 31 December 2009, WGHL assigned to WGH all rights under its equity compensation plans, including the plan pursuant to which the Griggs Options Agreement and Matthews Options Agreement were signed. Senior Counsel for the defendants, Mr Moses SC, notes that the preamble to that Deed Poll records that on 18 December 2009 WGHL received approval from the Supreme Court of Bermuda for a scheme of arrangement under Bermuda law that effected a transaction resulting in the common shareholders of WGHL becoming ordinary shareholders of Willis Group Holdings Public Limited Company in Ireland (WGH) and WGHL becoming a wholly owned subsidiary of that company, effective 31 December 2009. (Thus it would appear that an inference might safely be drawn that the assignment was valid under the law of Bermuda if it was part of a scheme of arrangement approved under that law.)

1. Mr Matthews resigned from his employment with WAGS on 16 December 2011. By letter dated 23 January 2011, WAL wrote to Mr Matthews, referring to his letter of employment dated 28 October 2008 and reminding him of his continuing obligations to "Willis" despite his employment ending. Mr Moses notes that this letter referred to the non-solicitation and restraint provisions of that appointment letter (as I note it did also to other provisions of that letter, as well as to certain statutory provisions), but not to any non-competition restraint. The letter demanded that Mr Matthews not solicit clients of "Willis" for the full 13 month period referred to in his appointment letter, that period to conclude in April 2013. (From the context I would read "Willis" as intended to refer to WAL or, perhaps more broadly, the Willis Group in Australia.)

1. (Mr Matthews has deposed at [7] of his affidavit that at no stage prior to his employment with EBM was any representation made that he could not commence employment with an entity such as EBM and (at [16]) as to his belief that if he were now to be restrained from working for EBM it is unlikely that he would retain his position at EBM.)

1. A short time later, on 21 February 2012, Mr Griggs wrote to Mr Wilkinson (the Chairman and CEO, Asia Pacific, Middle East and Africa of the Willis Group) asserting that changes had been made without his approval and that his contract of employment had thereby been repudiated. Mr Griggs advised that he was accepting that repudiation as bringing his employment with WAGS to an end with immediate effect. In response, by letter dated 22 February 2012, Mr Wilkinson invited Mr Griggs to reconsider that decision, confirming that there was a notice period of 3 months and referring to the 1998 Deed. Reference was made in that letter to a restriction on non-solicitation or acceptance of any business from any client of the company for up to 12 months as well as non-solicitation of any employee of the company and non-interference with the company's relationships with clients for the same period. (As I understand it, Mr Griggs does not accept that the 1998 Deed imposes any such obligations.)

1. On 14 March 2012, Mr Wilkinson again wrote to Mr Griggs this time confirming that Willis regarded his employment as having been summarily terminated by Mr Griggs on 21 February 2012, that the notice period was therefore inapplicable, and stating that the post-termination obligations as set out in the 1998 Deed were of force and effect.

1. On 19 March 2012, Mr Matthews commenced employment with EBM. According to the EBM website, his position is that of New South Wales Manager - Construction, Marine & Specialty Risks. Mr Griggs also commenced employment with EBM in March 2012 - as the National Manager - Construction, Marine & Specialty Risks. (The statement as to Mr Griggs' experience that appears on the EBM website refers to his 15 year experience with "the business he founded", namely Willis Construction Risks, and his board membership of WAL.)

1. In the period from late March 2012 through to April 2012 (as I consider in more detail below), certain of the clients of the Willis Group transferred their business from that group to EBM. At least by the end of March 2012, in at least one or two instances, Mr Lindhout was on notice that Mr Matthews was or might have been the reason for the transfer of business by Willis Group clients to EBM (and there seems to have been a suspicion by then that one or other of the defendants was (or was to be) involved in the provision of services by EBM to former Willis Group clients).

1. On 20 April 2012, the solicitors acting for the plaintiffs wrote to each of the defendants. In their letter to Mr Griggs, reference was made to the obligations contained in the 1998 Deed and to there being continuing obligations for a period of 12 months relating to non-solicitation and 'non-poaching'; the letter to Mr Matthews referred to the restrictions contained in his 2008 letter of appointment and sought undertakings as to conduct that was alleged to be in breach of the continued obligations owed by him under that agreement.

1. The letter to Mr Griggs noted that of particular concern was that he appeared to be acting in concert with two other former employees of the Willis Group (Mr Matthews and a Mr Healy, the latter not a party to these proceedings) with the purpose of poaching clients of "Willis" with whom they had dealt during his employment by "Willis". In the case of Mr Matthews, specific instances of the provision by Mr Matthews of services to Willis' clients in alleged breach of his contractual obligations were identified. (Thus, at least by 20 April 2012, the concern as to alleged breaches of non-solicitation restraints had been squarely raised with both Mr Griggs and Mr Matthews, though nothing was said as to any non-competition covenant per se.)

1. On 26 April 2012, solicitors for Mr Griggs responded to the 20 April correspondence, expressing their view as to the construction of the 1998 Deed and doubt as to the validity of the 1998 Deed. They advised that Mr Griggs would be prepared to give the undertaking that he not disclose WAGS' confidential information (as that information be considered under the general law) and indicated his preparedness "to consider" any undertaking that Willis might propose "that was reasonable in its terms".

1. Their response on the same date to the letter in relation to Mr Matthews was to express the view that the restraint covenant contained in the letter of appointment was unreasonably wide and unnecessary to protect Willis' interests. Without admission as to the enforceability or validity of the restraint and Mr Matthews' denial of breach, the letter indicated that Mr Matthews was prepared to undertake to comply with the restraint covenant set out at pages 6-7 of the letter of appointment to the extent that the restraint pertained to (c) and (d) of the Restraint Areas (namely, Sydney and NSW). (Mr Kirk points to the proffering of this undertaking as gainsaying any prejudice to Mr Matthews if he now were to be restrained along similar lines. I am not, however, satisfied that I should draw such an inference in circumstances where there may have been any number of motivations for the preparedness to give an undertaking at that stage, unrelated to the question whether this would be to his prejudice.)

1. By letter dated 4 May 2012, the plaintiffs' solicitors responded that their client was prepared to agree to an undertaking along the lines proffered on behalf of Mr Matthews, provided that the terms of the undertaking also made clear that Mr Matthews would not contact, solicit or provide services to his former NSW based Willis clients "while he is physically located outside that State". The terms of the undertakings required from Mr Matthews were set out in that letter. Legal proceedings to seek injunctive relief along those terms if there were to be a breach of the undertakings were foreshadowed. (Ultimately, after discussions with a view to reaching a negotiated outcome to the dispute, Mr Matthews has declined to provide the expanded undertakings set out in that correspondence.)

1. By letter dated 16 May 2012 (marked without prejudice but admitted without objection), Mr Matthews' solicitors wrote to the plaintiffs' solicitors, referring to settlement discussions in relation to the position of each of Mr Matthews and another former WAGS employee (Mr Healy) and stating:

For that reason, our clients [Matthews and Healy] have deferred any decision re the giving of undertakings as requested in your 4 May letter.

1. The outcome of those discussions seems to have been (in the case of Mr Matthews), and remains, that the undertakings initially proffered by Mr Matthews (without admissions) were not accepted by the plaintiffs; the amended undertakings sought by the plaintiffs were not given by Mr Matthews; and the earlier undertakings have not been reinstated by Mr Matthews, so that there are presently no undertakings in place by Mr Matthews in relation to the conduct the subject of the non-competition/non-solicitation restraints. At least in relation to Mr Matthews, Mr Moses made clear during the course of argument that his position is that the Court can assume that unless restrained he will be "in a position of soliciting or endeavouring to pass away clients or customers of [WAL] with whom he had dealings on behalf of [WAL]", albeit that this may involve a client approaching Mr Matthews to request that he put forward a tender for the client rather than a direct approach by Mr Matthews.

1. On or about 30 May 2012, WGH assigned to WAL the right to enforce the restraint provisions of the Griggs Options Agreement and the Matthews Options Agreement respectively. On that date the plaintiffs' solicitors wrote to the defendants' solicitors (separately in relation to each defendant) asserting the application of the restrictive covenants pursuant to the terms of the respective Options Agreements.

1. Relevantly, the letters of 30 May 2012 stated:

We have been recently informed that during the course of [Mr Griggs/Mr Matthews'] employment by [WAGS], your client agreed to additional post-employment restraints by entering into [the respective Options Agreements].

and sought undertakings by 1 June 2012 in respect of compliance with the restrictive covenants contained in the respective Options Agreements. No such undertakings were provided and these proceedings were commenced shortly thereafter.

1. I refer later to the evidence that has now been put forward as to what steps were being taken in the period from 2 May 2012 to investigate whether and on what terms restraints might have been imposed on the defendants under any options agreements entered into by them (this being relevant to the question of the delay in commencement of the proceedings). The above broadly sets out the chronology as it emerged on the evidence that was initially before me on this application.

Relevant Agreements

1. The respective Options Agreements, relevantly, contain the following restrictive covenants (the text and numbering in the extract below is taken from the Griggs Options Agreement):

Section 5.1 - Restrictive Covenants

... the Optionee shall not (unless the Optionee and the Company [WGHL] or any of its subsidiaries are already party to a valid and enforceable agreement as stated in section 5.3 hereof in which case such agreement will prevail) (i) [disclose any Confidential Information as defined]... (ii) at any time during the Optionee's employment with the Company or Subsidiary thereof and for twelve months thereafter, directly or indirectly (A) be engaged in or have financial interest (other than an ownership position of less than 5% in any company whose shares are publicly traded or any non-voting non-convertible debt securities in any company) in any business in Competition (as defined below) with the Restricted Group (as defined below) ... or (B) solicit, accept or perform, other than on the Restricted Group's behalf, insurance or bond brokerage, reinsurance or bond brokerage, agency, risk management, claims administration, self-insurance, consulting or other business performed by the Restricted Group for any client with whom the Optionee has had business dealings, or any prospective client from whom the Optionee has participated in soliciting business, in either case with the last 12 months of the Optionee's employment with the Company or a Subsidiary of the Company or (C) solicit for employment by the Optionee or by any third party, any employee of the Restricted group [sic] with whom the Optionee has had contact while employed by the Company or a subsidiary of the Company ... .

1. The clause contained provision for WGHL at its option to require the Optionee (if subject to (ii)) to be on paid leave for the entire or any portion of the period in which the restrictive covenants applied. (No such course was taken in the present case.)

1. The relevant prohibitions, for present purposes, are those contained in (ii)(A), to which I will refer as the non-competition covenant (which on its face would preclude the defendants from being engaged in a competing business world-wide); (ii)(B), the non-solicitation covenant in respect of solicitation or acceptance of, and performance of services for, clients with whom the respective defendant has had business dealings or for whom he has participated in the solicitation of business over the past 12 months; and (ii)(C), the covenant against solicitation of employees (to which I will refer as the non-recruitment covenant).

1. Relevant terms used in section 5.1, as defined in section 5.2, are as follows:

• Restricted Group is defined as "the Company or any of its Subsidiaries"; and

• a business is defined as being in "Competition" if "it is principally engaged in any business active in the insurance, reinsurance or surety or fidelity bond brokerage, agency, risk management, claims administration, self-insurance, risk management consulting or other business performed by the Company or its subsidiaries or if it is a business in which the Company or its Subsidiaries has taken steps toward engaging".

1. Mr Kirk points out that section 5.2/6.2 is an operative clause of the Options Agreements (the definition of Restricted Business forming part of the definition of Confidential Information in section 5.2/6.2).

1. The term "Subsidiary" is defined in the general definitions section (in Article 1) (see section 1.12) as meaning a "subsidiary" of the Company, as that term is defined in s 86 of the Bermudan Companies Act 1981.

1. Section 5.3 (and likewise 6.3), headed "Application", provides, relevantly, that the obligations under sections 5.1 and 5.2 (sections 6.1 and 6.2) do not apply to:

... an Optionee if the Optionee has prior to the Grant Date entered into a confidentiality and post employment restraint agreement with the Company or any of its subsidiaries which binds the Optionee and applies to the business activities of the Restricted Group during or subsequent to his or her period of employment with the Company or any of its subsidiaries.

1. The term Grant Date is defined in section 1.4 of the Griggs Options Agreement to mean 19 March 2004.

1. In the present proceedings, the plaintiffs seek to enforce until 22 February 2013 the covenants contained in section 5.1(ii) (A) and (B) against Mr Griggs (it being accepted that there is no evidence of solicitation by him of any employees of the Willis Group and hence no application for relief in respect of (ii)(C) at this stage) and as against Mr Matthews until 16 March 2013 the covenants contained in section 6.1(ii) (A), (B) and (C). The application against Mr Matthews is also based in the alternative on the restraints contained in paragraphs (a), (b), (d) and (f) of the non-solicitation restraint in his 2008 appointment letter.

1. Under the 2008 appointment letter, Mr Matthews agreed to be bound by post-employment restraints as follows:

Non-solicitation and restraint

You agree that you will not for yourself or for any other person, during the Restraint Periods in the Restraint Areas, without the written consent of Willis or the Willis Group, directly or indirectly do any of the following:

(a) solicit, interfere with or endeavour to entice away from Willis or the Willis Group any person, firm or company who was, during your employment, a client or customer of Willis or the Willis Group and with whom you had business dealings on behalf of Willis or the Willis Group;

(b) provide services, accept any request to provide services to or accepting employment with a person, firm or company who was a client or customer of Willis or the Willis Group during your employment and with whom you had business dealings on behalf of Willis or the Willis Group;

(c) solicit, interfere with or endeavour to entice away from Willis or the Willis Group any person, firm or company to whom Willis or the Willis Group is in the process of tendering or making a formal proposal to provide services and in which tender or proposal you were involved prior to the termination of your employment;

(d) solicit, interfere with or endeavour to entice away from Willis or the Willis Group any of its employees;

(f) counsel, procure or assist any person or company to do any of the acts referred to in the clauses (a)-(e).

1. In that appointment letter, relevantly, the Willis Group was defined as comprising a number companies (and any holding or subsidiary of such companies) including WAL, Willis Australia Holdings Limited, Richard Oliver International Pty Ltd (now WAGS) and WGHL. The Restraint Periods were defined as a succession of periods from the date of termination of Mr Matthews' employment (namely, for periods of 13 months, 6 months and 3 months, respectively). The Restraint Areas were defined as each of the Australian States and capital city thereof (with the exceptions of Perth/Western Australia) and Australia.

1. As to the restraints in question, the plaintiffs maintain that (a) and (b) are applicable (having regard to the evidence of solicitation of or provision of services to Willis Group clients or customers) and (d) (having regard to evidence of an attempt to recruit an employee of WAGS for a position at EBM). (The restraint in (f) reinforces each of the preceding restraints.) The plaintiffs seek to enforce the covenants in this agreement only if their claim under the Matthews Options Agreement does not succeed, and then only for a 12 month period (slightly less than the longest of the cascading restraint periods in the appointment letter).

Summons

1. Accordingly, the injunctive relief now sought is to enforce the following restraints in the Options Agreements (and the corresponding restraints in Mr Matthews' appointment letter), as against the defendants as follows:

(a)   the non-competition covenants ((ii)(A) of the Options Agreements); and

(b)   the non-solicitation covenant (ie non solicitation of, and non-acceptance of, and non-performance of services for, the business of clients with whom the defendants have had business dealings or whose business the defendants have participate in soliciting in the last 12 months of employment) ((ii)(B) of the Options Agreements); and Mr Matthews the corresponding provisions (a) and (b) in Mr Matthews' appointment letter);

and in the case of Mr Matthews only, the non-recruitment restraint (ie, non- solicitation for employment by the optionee or any third party of employees of the Restricted Group with whom the optionee has had contact during his employment ((ii)(C) of the Options Agreement and (c) of the appointment letter).

Issues

1. The present application being for interlocutory relief, the issues for determination are whether there is a serious question to be tried that the restrictive covenants contained in the respective Options Agreements (and, in the case of Mr Matthews, whether the additional post-employment restraints in his 2008 appointment letter) are valid and enforceable and that there has been a breach or a threatened breach of the said covenants; whether damages would be an adequate remedy; and whether the balance of convenience lies in favour of an interlocutory injunction (having regard, inter alia, to any delay in commencement of these proceedings).

1. Mr Moses submits that in this context an evaluation of the strength of the plaintiffs' case is of particular relevance to see where the balance of convenience lies (citing Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 536 per McLelland J, as his Honour then was, and Australian Broadcasting Corporation O'Neill (2006) 229 ALR 457 at 479-480, [72] per Gummow and Hayne JJ). In Kolback, his Honour said:

...although normally the Court "does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case" (Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622), there are some kinds of case in which for the purpose of seeing where lies the balance of convenience (or more specifically "the balance of the risk of doing an injustice" - see per May LJ in Cayne v Global Natural Resources plc [1984] 1 All ER 225 at 237, cf per Brennan J in Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1983) 57 ALJR 288 at 292; 46 ALR 279 at 285), it is desirable for the Court to evaluate the strength of the plaintiff's case for final relief: see, eg, Brayson Motors Pty Ltd v Federal Commissioner of Taxation (at 292; 285); Castlemaine-Tooheys Ltd v South Australia at 682; 559. One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: see, eg, NWL Ltd v Woods [1979] 1 WLR 1294 at 1306-1307; [1979] 3 All ER 614 at 625-626 per Lord Diplock; Cayne v Global Natural Resources plc.

1. Such an approach is recognised as appropriate in a case where the effect of the interlocutory decision will in a practical sense determine the substance of the matter in issue. (In this regard, it is by no means clear to me that a grant of interlocutory relief in this matter, whether as sought or one that is more limited in compass, would be likely effectively to provide final relief. There is ample time between now and February/March 2013 for the determination of the final hearing. In that regard, if injunctive relief were granted on an interlocutory basis then the plaintiffs accepted that it would be incumbent on them to co-operate in the matter proceeding to an expedited hearing; the defendants seek an urgent final hearing in any event.)

1. I turn then to the issues to be determined on the application for interlocutory relief against each of the defendants.

Is there a serious question to be tried?

1. At the outset, the defendants contend that relief should be refused because the plaintiffs are relying upon agreements to which the plaintiffs are not a party and that are governed by the law of Bermuda. (That submission does not, of course, address the position of Mr Matthews in relation to the 2008 appointment letter, which was entered into by one of the present plaintiffs and is not expressed to be subject law).

1. It is submitted by Mr Moses that the law of Bermuda has not been proved to establish the following: that rights under the relevant agreements have been validly assigned to the plaintiffs; that the employment of the defendants with WAGS was employment with a "subsidiary" within the meaning of s 86 of the Bermudan Companies Act 1981; and that the relevant restraints are valid and enforceable in the terms in which they are expressed (noting that the Restraints of Trade Act1976 (NSW) is not part of the law of Bermuda and referring in this regard to what was said as to the non-applicability of that legislation to contracts governed by a foreign law in KA & C Smith Pty Ltd v Ward (1998) 45 NSWLR 702; Professional Advantage Pty Ltd v Smart [2008] NSWSC 873 at [23]). Hence, it is submitted that it has not been established that the restrictive covenants contained in the relevant agreements are, in fact, binding upon the defendants.

1. This raises the question as to the proof of foreign law and whether it can be presumed (in the absence of proof thereof) that it is the same as that of the lex fori. Proof of foreign law is not a matter of law but a matter of fact (Damberg v Damberg [2001] NSWCA 87, (2001) 52 NSWLR 492 at [150]). As to the onus of proof in relation to foreign law, Mr Kirk relies on what was said by the High Court in Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10, (2002) 210 CLR 491, in the context of considering the question as to the necessity for a pleading of foreign law in tort actions. Their Honours held, first, that it was not necessary for the plaintiff to plead the foreign law in order to establish its cause of action in tort but that, if the defendant sought to rely upon a foreign lex causae, then it was for the defendant to allege and prove that law as an exculpatory fact (141); and that, whilst not obliged to do so, it is for a plaintiff who sees a forensic advantage in the foreign law (for example, in its provision for strict liability) to plead that law in its statement of claim or other initiating pleading (citing Walker v W A Pickles Pty Ltd [1980] 2 NSWLR 281 at 284-285 and Collins (ed), Dicey and Morris on The Conflict of Laws, 13th ed (2000), vol 2, p 1569). In that case, where the applicant on a stay motion had sought to rely upon a foreign lex causae as providing an advantage, their Honours said that, at a level of specificity, the applicant should advance appropriate evidence as to the foreign law and particular features of that law which provide that advantage to the applicant.

1. Here, the need (or potential need) to resort to Bermuda law arises not only because it is the law governing the respective Options Agreements but also because a relevant term contained in the restrictive covenants sought to be enforced is to be determined by reference to Bermuda law. (Mr Moses contends that Bermudan law will also govern the validity of the assignment of the rights under the Options Agreements although there may be some room for debate on this.)

1. In Damberg, in the Court of Appeal, Heydon JA (as his Honour then was) considered the question when a court will assume that a foreign law (not proved) is the same as the lex fori, his Honour noting (at [119]) that there is ample support for the proposition that where foreign law is not proved it will be presumed to be the same as the lex fori (citing numerous authorities across a range of issues including matters involving the consideration and validity of contracts and the exercise of powers of directors or members of a corporation - for the latter, Pickering v Stephenson (1872) LR 14 Eq 322 at 340). His Honour also noted that there were numerous instances where the courts had refused to assume that foreign law is the same as the lex fori, and observed that it was not easy to classify the exceptions by reference to principle.

1. After an analysis of various cases in which this issue was raised in various common law jurisdictions, and academic commentary, his Honour said at [144]:

The cases in which foreign law has been assumed to be the same as the lex fori are instructive. Many involve merely the repetition in dicta of the general principle. Some involve the application of common law principles unlikely to differ from foreign principles (eg the principles of contractual construction). [His Honour referring to The Parchim [1918] AC 157 as an example of where it was assumed to be reasonable to apply English law because it was unlikely to differ greatly from foreign law]. (my emphasis)

1. There, Heydon JA pointed out (at [161]) that the parties in the litigation had assumed that German law on the subject whether the husband's acts had created "equitable rights" was the same as Australian law and had then contested the question whether the so-called presumption of advancement was rebutted (assuming that Australian law applied). While his Honour considered that there was some reason to accept the validity of the parties' assumption that German and Australian law were in these respects similar, once it became necessary to consider the question whether (as had been alleged) the conduct of the husband in relation to matters of taxation this required that attention be given the precise terms of the relevant prohibition, if any, under German law. The question, therefore, was whether the assumption could legitimately be made that a prohibition likely to be found (if at all) in a federal German law would be to the same effect as Australian enactments in that regard. At [162] his Honour said:

To state exhaustively when a court will not assume that the unproved provisions of foreign law are identical with those of the lex fori would be a difficult task. It is not necessary to perform it in this case. The issue in this case is whether it should be assumed that German law in relation to the avoidance or evasion of capital gains tax is the same as Australian law. In my opinion it should not. ... Taxation law cannot be assumed to be a field resting on great and broad principles likely to be part of any given legal system.

and at [163] found that the decisive factor as to whether foreign law could in that case be assumed to be the same as that of the forum was the need for a close analysis of German statutory provisions:

Beyond those considerations, however, there is a decisive factor. The resistance of the children to the resulting trusts which the trial judge found depends on showing some aspect of German law defeating those resulting trusts. They appeal to Nelson v Nelson. The High Court majority in Nelson v Nelson called for a close analysis of the relevant German statutory provisions. To substitute for an analysis of relevant German statutory provisions an analysis of irrelevant Australian statutory provisions is simply to fail to carry out the mandate of Nelson v Nelson.

1. In the present case, I note that the law of Bermuda is based on the law of England and Wales. Hence if it is the law of that jurisdiction that will determine whether an assignment of the relevant contractual rights is valid, then it may well be that it is able to be presumed as that here applicable insofar as it may be likely to be drawn from the same general principles as inform the law applicable in this jurisdiction.

1. There may be also be room for argument as to whether the law of Bermuda does apply to the question of the validity of one or both of the assignments. Current academic writing suggests that the law of an assignment of contractual rights (being intangible movable property) should be the proper law of the assignment (logically extending the same rule for determining the law which governs the law of a contract).

1. In Nygh's Conflict of Laws in Australia (8th ed, 2010) at [33.62], it is said that:

In relation to voluntary assignments the bulk of authority certainly favours the proposition that the intrinsic validity of such an assignment, both as to form and as to substance, is governed by the lex loci actus. Preferably, as Dicey-Morris urged in previous editions, past reference to the lex loci actus must today be interpreted as referring to the proper law of the assignment rather than the law of the place where the transaction physically took place.

1. In Dicey & Morris on the Conflict of Laws (11th ed, 1987) at 963:

The essential or material validity of a contract is governed by its proper law. The law which governs capacity to contract has not been settled with precision, but is probably the proper law of the contract, which in this case means the system of law with which the contract is most closely connected. A contract is formally valid if it complies with the formalities prescribed by either the lex loci contractus or the proper law. The same rules apply, it is submitted, to the intrinsic validity of assignments. The interpretation of the assignment is also governed by the proper law of the assignment.

It is true that in some cases the judges have said that capacity to make an assignment or to take under an assignment is governed by the lex domicilii of the assignor or assignee. But in those cases the place where the assignment was made coincided with the lex domicilii of the assignor and assignee, and there was no necessity to decide between them. It is also true that in some cases the judges have said that the formal validity of an assignment is governed by the lex loci actus, that is, the law of the place where it was made [citing Republica de Guatemala v Nunez [1927] 1 KB 669]. But here again there can be no doubt that the law of that place was the proper law of the assignment. It is submitted that the language of the judges should be interpreted broadly as meaning the proper law of the assignment. It would be easy to point to dicta in older cases in which judges have said that the validity of a contract is governed by the law of the place where it is made. It is also unfortunate that in the leading case the four judges differed widely in their reasons, though they all agreed in the result. But once it is admitted that an assignment is a contract, the principle here contended for follows logically.

1. As to the manner in which one determines whether a company is a subsidiary of another for the purposes of the Bermudan law, again the interpretation of the relevant legislation in Bermuda may well not be dissimilar from the analysis that would be applied to similar provisions in this jurisdiction (or, for that matter, the UK), particularly when comparison is made to the terms of the corresponding provisions in legislation here and in the United Kingdom, although if it is necessary to be proved for the plaintiffs' claim to relief then I think it likely that there would need to be evidence adduced as to the law of Bermuda at least on that issue.

1. It seems to me that, for present purposes, there is at least a serious question to be tried as to whether WAGS is a subsidiary of WGHL (or WGH), on the assumption that the test applicable under Bermudan law would be not dissimilar from that applied under the law of this jurisdiction (though necessarily having to take into account the differences in the statutory provisions). That said, I accept that on a final hearing it may be necessary for the plaintiffs to adduce evidence as to the law of Bermuda, lest the trial judge find that it is not appropriate to apply a presumption that the company law of Bermuda (if unproved) is to the same effect as that in this jurisdiction on any particular issue.

1. I turn then to the particular issues that have been raised as to whether there is a serious question to be tried in relation to the relief sought.

• Assignment of rights under the relevant Options Agreements

1. As noted, for the Willis Group, the relevant party to the Options Agreements in each case was WGHL, an entity incorporated in Bermuda. The evidence discloses that by Deed Poll in December 2009 there was an assignment of the rights of WGHL to WGH plc under the equity compensation plans and that on 30 May 2012 a further assignment to WAL of the right to enforce the restraint provisions of the Options Agreements.

1. Mr Moses points to the lack of evidence as to the validity of those assignments under Bermudan law. As to the first, it seems likely that the assignment took place as part of the scheme of arrangement approved in Bermuda at that time, from which I would infer that it is likely that the assignment would be regarded as valid under Bermudan law. It certainly seems to me that there is a serious question to be tried as to that issue. Insofar as Bermudan law is the law governing the validity of an assignment of rights under the Options Agreements (which is not necessarily the case), I am prepared at this stage to proceed on the basis that it can be assumed that the general contractual principles applicable to the validity of assignments under the law of Bermuda would be not dissimilar from those in this jurisdiction and that there is also a serious question to be tried on that issue.

• Is WAGS a "subsidiary" for the purposes of Bermuda law?

1. As noted earlier, Mr Moses took issue with the hearsay evidence contained in [5] of the affidavit of Ms Marigold Magnaye (affirmed on 6 June 2012) as being inadmissible to prove that WAGS is a subsidiary for the purposes of the law of Bermuda (on the basis that Ms Magnaye did not purport to be an expert in Bermudan law and did not depose to direct knowledge of the relevant corporate structure of the Willis Group of companies worldwide). (Mr Moses further notes that there is no evidence to suggest that the company secretary of WGH, on whose information Ms Magnaye had relied, is an expert in Bermudan law). Mr Kirk submitted, in response, that it should be supposed that the internal legal Counsel for the Willis Group in Australia would have properly researched the corporate structure of the group and would understand what was meant by a wholly owned subsidiary (though Ms Magnaye did not depose to any such researches).

1. I was provided with an extract of the Companies Act 1981 Bermuda, s 86 of which is as follows:

(1)   For the purposes of this Act, a company is a subsidiary of another company only if-

(a) it is controlled by-

(i) that other company; or

(ii) that other company and one or more companies each of which is controlled by that company; or

(iii) two or more companies each of which is controlled by that other company; or

(b) it is a subsidiary of a subsidiary of that other company

(2)   For the purposes of this Act, a company is the holding company of another company only if that other company is its subsidiary.

(3)   For the purposes of this Act, one company is affiliated with another company only if one of them is a subsidiary of the other or both are subsidiaries of the same company or each of them is controlled by the same person.

(4)   For the purposes of this section, a company is controlled by another company or person or by two or more companies only if-

(a) shares of the first-mentioned company carrying more than fifty per cent of the votes for the election of directors are held, otherwise than by way of security only, by or for the benefit of that other company or person or by or for the benefit of those other companies; and

(b) the votes carried by such shares are sufficient, if exercised, to elect a majority of the board of directors of the first-mentioned company.

1. By way of comparison, a subsidiary company is defined in Australian law under s 46 of the Corporations Act 2001 (Cth) as:

46 What is a subsidiary

A body corporate (in this section called the first body) is a subsidiary of another body corporate if, and only if:

(a) the other body:

(i) controls the composition of the first body's board; or

(ii) is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body; or

(iii) holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or

(b) the first body is subsidiary of a subsidiary of the other body.

1. Subsidiary is also defined under s 1159 of the UK Companies Act 2006 as:

1159 Meaning of subsidiary etc.

(1) A company is a 'subsidiary' of another company, its 'holding company' if that other company

(a) holds a majority of the voting rights in it, or

(b) is a member of it and has the right to appoint or remove a majority of its board of directors, or

(c) is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it.

or if it is a subsidiary of a company which is itself a subsidiary of that other company.

(2) A company is a "wholly-owned" subsidiary of another company if it has no members except that other and that other wholly-owned subsidiary or persons acting on behalf of that other or its wholly-owned subsidiaries.

1. The definition of a holding company is narrower under UK legislation than Australian legislation, (Paul Davies observing in Principles of Modern Company Law (8th ed, 2008) that under the Company Act 2006, the definition of a "holding company" recognises that what counts is "control" and not majority shareholding which, because of non-voting shares or weight voting, will not necessarily afford control). Under Australian law, a majority shareholding without demonstrating control over the company satisfies the definition of a 'subsidiary' (s 46(a)(iii)).

1. On its face, s 86 of the Bermudan law seems to require that there be both a majority shareholding (s 86(4)(a)) and control (s 86(4)(b)). All three definitions recognise that a company is a "subsidiary" of another company if it is a subsidiary of a subsidiary of that other company. This means that the holding/parent-subsidiary relationship logically extends up a chain to the ultimate holding company, linked by a series of other companies which satisfy the relevant statutory definition of a "subsidiary" to a company above it in the chain and which "holds" the company below it in the chain.

1. Three ASIC searches are annexed to Ms Magnaye's affidavit. Annexure A is a copy of an ASIC search for WAL conducted on 25 May 2012. Annexure B is a copy of an ASIC search for WAGS conducted on 25 May 2012. (I note that these two searches were also an exhibited to Mr Lindhout's affidavit.) Annexure C is an ASIC search for WAGH conducted on 5 June 2012. In all three ASIC searches, WGH is shown as the ultimate parent company.

1. For the purposes of s 46 in Australia (or, on the face of the definitions, its counterparts in the UK and Bermuda), identification of a company as the ultimate holding company is not an indicator that the company is in fact the holding company. The constitutions of the various companies concerned have not been adduced into evidence, nor is there evidence of actual control exercised by WGH in relation to its alleged subsidiary companies (nor, for example, of control exercised by WAGH over its alleged Australian subsidiaries WAL and WAGS). The ASIC search for WAGS, which is Annexure B, does however show that all of WAGS' shares are held by WAGH, which would satisfy the test for a holding-subsidiary relationship under Australian law, and may also (inferring that WAGH therefore controls all the voting rights to WAGS) satisfy Bermudan and UK law.

1. Although I note that the evidence before me is not conclusive and (aside from the affidavit evidence of Ms Magnaye to which objection on the basis of hearsay was taken), does not address the precise nature of the corporate relationships between the three Australian companies in the Willis Group (WAL, WAGS and WAGH) and other companies forming part of the chain to the ultimate holding company (WGH), I consider for the purpose of this application, that there is a serious question to be tried as to the subsidiary relationship between the plaintiffs (WAL and WAGS) and WGHL or WGH.

• Construction of sections 5.3/6.3

1. The next basis on which the defendants resist the current application is that it is said that, as a matter of construction (having regard to sections 5.3/6.3), the restraint covenants contained in the respective Options Agreements do not apply at all.

1. The first argument raised by Mr Moses has in effect already been dealt with, namely that the restrictive covenant applies only if the optionee was employed by the "Company" (defined as being WGHL, the Bermudan entity) or by any of its subsidiaries (defined by reference to the meaning of that term in s 86 of the Bermudan Companies Act 1981). It is not disputed that at all material times the defendants were employed by WAGS. As outlined above, I consider that there is a serious question to be tried that, under Bermudan law, WAGS was a subsidiary of WGHL in Bermuda (or of WBH).

1. The second basis on which it is contended that, on their proper construction, the restrictive covenants in the Options Agreements do not apply is one having regard to the meaning of the term "Restricted Group" where used in sections 5.3/6.3 of the respective agreements. I have extracted above the relevant part of those sections. In substance, this argument turns on whether, prior to the Grant Date (19 March 2004 in the case of Mr Griggs and the corresponding 2003 date for Mr Matthews), the defendants were already a party to an agreement that contained both confidentiality and post-employment restraints and applied to the business activities of the whole of the Restricted Group (as Mr Kirks contends the clause should be construed) or any one of the companies within the definition of Restricted Group (as Mr Moses contends the clause should be construed).

1. The plaintiffs accept, at least for the purposes of this application, that each of Mr Griggs and Mr Matthews each had, prior to the Grant Date of the respective agreements, entered into a confidentiality and post employment restraint agreement with a member of the Willis Group of companies in the form of the respective Deeds.

1. The practical import of this is that since Mr Griggs was a party to the 1998 Deed entered into prior to the relevant date (and Mr Matthews was a party to the 1996 Deed), if those Deeds fall within sections 5.3/6.3 (because they apply to the business activities of one of the companies in the definition of the Restricted Group, ie WAGS), then the restraints in sections 5.1/6.1 do not apply (and the plaintiffs are left to enforce the covenants in the earlier deed (in the case of Mr Griggs) or the later 2008 employment agreement (in the case of Mr Matthews)).

1. The question thus raised is one of construction: whether the earlier confidentiality and post employment restraint agreements were agreements falling within the description of an agreement "which binds the Option and applies to the business activities of the Restricted Group during or subsequent to his or her period of employment with the Company or any of its subsidiaries" within the meaning of section 5.3/6.3 as the case may be.

1. The term "Restricted Group", as noted earlier, is defined as meaning "the Company or any of its subsidiaries". The question is whether the word "or" in that definition is to be read disjunctively such that it is sufficient to displace the operation of the restraint covenants in the Options Agreements if there is a previous agreement which applies confidentiality and post-employment restraints to the business activities of any one of the Company (WGHL) or a single member of the Restricted Group. The alternative construction of the clause (for which the plaintiffs contend) is that in order to displace the restraint provisions of the Options Agreements it is necessary that there be an earlier agreement that applies to the business activities of the whole of the Restricted Group.

1. Mr Moses submits that, if WAGS is accepted as being a subsidiary of the Company for the purpose of section 5.1, namely that it is sufficient for the plaintiffs to establish that EBM is a competitor of the Company (WGHL or WGH) or any one of its subsidiaries (and not both the Company and its subsidiaries), then logically it must follow that it is also a subsidiary for the purpose of section 5.3 and the definition of Restricted Group, (such that it is sufficient for the purposes of sections 5.3/6.3 that there be an earlier post-employment restraint agreement with the Company or any one of its subsidiaries (not all of them). He submits that this construction of the term Restricted Group (namely, that "or" in the definition operates disjunctively) is plain on the face of the document and is consistent with the manner in which the restrictive covenants in section 5.1/6.1 were or are intended to operate (namely, that for the purposes of those sections the plaintiffs must establish that EBM is a business in "Competition" with the "Restricted Group"). (Mr Moses notes that if the plaintiffs were required to prove that EBM was a competitor of both the Company and its subsidiaries, the claim would fail in any event because there is no evidence that EBM competes with WGHL or WGH.)

1. The force of this submission is that if the words of the definition are interpolated in place of the defined term then the clause would on its face operate such that it would be sufficient if there were to be a pre-Grant Date restraint agreement operating in relation to any one of the subsidiaries of the company or the company itself.

1. Mr Kirk, however, submits that a contextual reading of the provisions supports the 'whole group' construction of the clause for which the plaintiffs contend (or that, at the very least, this is a seriously arguable construction).

1. Reliance is placed on what was said by the High Court in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22], namely that:

The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Construction Pty Ltd v State Authority of NSW, Mason J set out with evidence approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:

"In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating"

1. However, I note that, more recently, in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45, the High Court (there refusing special leave) emphasised the principles of construction as outlined in Codelfa and said (at [4]-[5]):

The position of Codelfa, as a binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council ...

We do not read anything said in this court in Pacific Carriers Ltd v BNP Paribas; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd; Wilkie v Gordian Runoff Ltd and International Air Transport Association v Ansett Australia Holdings Ltd as operating inconsistently with what was said by Mason J in the passage in Codelfa to which we have referred.

1. It is accepted by Mr Kirk that, in the context of the sections in which the definition is contained (sections 5.2/6.2), (those being part of the operative provisions of the Options Agreement and noting that the definition forms part of the definition in those sections of the term "Confidential Information"), the definition of "Restricted Group" may appropriately be seen to have a disjunctive construction. In that context, it is said that it is appropriate that the word "or" was used so as to encompass a wide range of confidential information across the Willis Group. However, it is submitted that this does not mean that a disjunctive use of the word 'or' was intended in all other contexts (and, in particular, that this does not mean that a disjunctive use was intended in sections 5.3/6.3). Indeed Mr Kirk submits that there are textual, contextual and purposive indications to the contrary.

1. First, it is submitted that there is a textual significance in the fact that the defined term "Restricted Group" involves the word 'group' (defined in the Concise Oxford Dictionary (8th ed, 1990) as meaning, relevantly, "a number of persons or things located close together, or considered or classed together"). It is submitted by Mr Kirk that the very notion of a group is that it involves a collective and hence that what is here intended is to protect the "business activities" of that collective group (for which protection a disjunctive use of "or" would not be sufficient).

1. Further, and it seems to me that there is force to this submission, it is noted that within sections 5.3/6.3 (and, indeed, within that part of those sections that applies to employees outside the UK or Ireland) the phrase "the Company or any of its subsidiaries" (being the very definition of the term "Restricted Group") is twice used in full, whereas in the reference to business activities only the defined term is used. It is submitted that the difference is intended to draw a distinction between the disjunctive and the collective use of the phrase. Mr Kirk submits that it is notable that, where a disjunctive use is (or might be expected to have been) intended the phrase "with the Company or any of its subsidiaries" is used (namely, in identifying with whom an earlier restraint agreement was entered and when identifying the period of restraint by reference to the entity with whom the optionee was employed). It is submitted that if the term "Restricted Group" had been intended to be construed disjunctively in its reference to the business activities (that is, to mean business activities either of the Company or of any one or more of its subsidiaries), then the same usage as elsewhere could and would have been adopted.

1. As indicated above, I consider that there is force in the proposition that, where the phrase "the Company or any of its subsidiaries" is itself a defined term (Restricted Group) and where both the phrase and the defined term appear in different places in the one section, it might be inferred that there was a distinction intended between the use of the phrase in those separate contexts within the one clause. Of itself, that seems to me to make at least seriously arguable the construction for which the plaintiffs now contend.

1. My view in that regard is strengthened by the authorities that have considered that in some contexts the word 'or' may be construed conjunctively albeit that these cases in the main consider the proper construction of particular legislative provisions.

1. In State of Victoria v Leck [2010] VSCA 76, for example, consideration was given as to whether or not the word 'or' should be construed disjunctively or conjunctively in the context of s 82(2A) of the Accident Compensation Act 1985 (Vic). In the Court below, the trial judge (Smith J) had held that the prima facie position was that 'or' meant 'or' and was disjunctive and there needed to be good reason to depart from that construction. Smith J considered the context of the legislation and the consequences of either construction and ultimately held that the disjunctive interpretation should prevail. On appeal, Ashley JA and Emerton AJA (with Mandie JA agreeing) preferred the view that in the context of s 82(2A), 'or' should be read as 'or, or as well as'. Their Honours noted that context could displace the prima facie disjunctive meaning of 'or' and that where the word occurred in a statutory provision, the relevant context was provided by that particular provision. Therefore, even if the word 'or' appeared elsewhere in the Act, its meaning in those other provisions was of limited assistance. It was said that in the context of the provision and the Act, the meaning given to 'or' should also be consistent with the provisions intended aims or at least not "be read so as to create a nonsense" (at [27]).

1. In Minister for Immigration and Ethnic Affairs v Baker (1997) 45 ALD 136, the Full Court of the Federal Court considered a similar question in the context of s 501(2) of the Migration Act 1958 and accepted that 'or' need not be wholly disjunctive, taking into account the context in which it occurred (at 141):

We think the key to the understanding of s 2(a) is to be found in its object - satisfaction on the issue whether a person is not of good character. In deciding whether he is so satisfied, the minister is required, by the phrase "having regard to", to look at the conduct of the person the subject of the enquiry. Of course, an obligation to have regard to certain matters is not the same thing as an obligation to confine consideration to those matters. It is not conceivable that Parliament intended anything so unreasonable as a conclusion whether a person is now not of good character, based exclusively on his past criminal conduct...so the words "having regard to" and the disjunctive "or' must not be given the effect of requiring a blinkered decision to be made on the basis of criminal conduct considered in isolation.

1. I further note that in Victims Compensation Fund Corp v Brown [2003] HCA 54, where Heydon J was considering whether the word 'and' in cl 5 of Sch 1 of the Victims Support and Rehabilitation Act 1996 (NSW) should be read disjunctively, his Honour (indicating that the correct view was that 'and' meant 'and' and should be read conjunctively) had regard not only to the ordinary meaning of the word but also to the lack of a convincing textual reason emerging from the reading of the Act for departing from the ordinary meaning and to the lack of any reason to be found the legislative objective of the Act to read 'and' disjunctively (thus indicating the kinds of matters which are of relevance when considering the exercise of construction in this context. (His Honour went to reject the proposition that it would a decisive argument against the conjunctive construction where its outcomes might be irrational, anomalous or harsh, if the text otherwise required that construction (at [29])).

1. The above authorities point to the need to construe the wording of the particular disabling clause in the Options Agreements in its particular context. As to the contextual and purposive considerations said to support such a construction, reference is made by Mr Kirk to the nature of the restraints contained in sections 5.1/6.1. It is noted that these sections commence with an acknowledgement that the optionee will acquire "Knowledge of Confidential Information (as defined) and trade secrets of the Company and its business". The definition of Confidential Information itself imports information of the Company or its subsidiaries. Interpolating the definition into the opening words of that section, the acknowledgment is thus an acknowledgment as to the acquisition of confidential information of the Company or any of its subsidiaries and as to the acquisition of trade secrets of the Company and its business. Mr Kirk submits that, insofar as the restrictive covenants apply to the benefit of either the Company or any subsidiary, the restraints can be seen to be designed to protect the whole Group (in light of the fact that it is likely the optionee will acquire Confidential Information from any or all of the Company and its subsidiaries, along with trade secrets of the Company itself) and that this suggests that a narrow construction of the dis-entitling clause (5.3/6.3) should be adopted.

1. In other words, it is submitted that having regard to the purpose of the restrictive covenants in sections 5.1/6.1 (that being said to be to protect the whole Group and not just the relevant local subsidiary) and on the basis that the interests of the collective group must be broader than those of a subsidiary, a construction of sections 5.3/6.3 (which operated to displace the application of the restraint covenants if there were an earlier agreement that only protected the business activities of the local subsidiary) would not achieve this purpose. Hence it is submitted that sections 5.3/6.3 should be construed as not applying the restraints only in circumstances where the optionee has entered into an earlier restrain agreement that applies for the protection of the business activities of the whole of the Group.

1. I accept that there is a serious question to be tried as to the construction of sections 5.3/5.6 in this respect.

1. As to the alternative case against Mr Matthews based on the restraints contained in his 2008 letter of employment, no such issue of construction arises (though there may of course be an argument as to whether these restraints are enforceable at common law or as saved by the operation of the Restraints of Trade legislation in this jurisdiction). Those restraints do not include any non-competition restraint.

• Validity of restraints assuming they are otherwise applicable

1. It is submitted by Mr Moses that no evidence has been adduced as to the whether the relevant restraints are valid and enforceable in accordance with the law of Bermuda, noting that the restrictive covenants contained in the Options Agreements are in broad terms. Mr Moses submits that these restraints would ordinarily be regarded as invalid under the common law of Australia and that, as the law of the relevant Options Agreements is the law of Bermuda, the Restraints of Trade Act (NSW) has no application.

1. I accept that, in the absence of any evidence to suggest that there is a statutory equivalent in Bermuda to the statutory restraint of trade provisions in this jurisdiction, the question before me as to the enforceability of the restraints is whether there is a serious question to be tried that the covenants sought to be restrained would be valid and enforceable at common law (though a presumption might be able to be drawn that the common law would be the same as the law of Bermuda in that respect, having regard to the shared common law background to the respective jurisdictions).

1. The validity of a restraint clause is to be tested at the time of entering into the contract and by reference to what the restraint entitled or required the parties to do rather than what they intend to do or have actually done (Woolworths Ltd v Olson [2004] NSWCA 372 at [40]).

1. It was also said in Putsman v Taylor [1927] 1 KB 637 at 643 that:

The question is whether the covenant was a reasonable one for the parties to agree to at the outset of the service on the best estimate which they could then make of the future.

1. Nevertheless, at [91] in Tullett Prebon(Australia) Pty Ltd v Simon Purcell [2008] NSWSC 852, Brereton J noted that even where, judged as at the date of the contract, a restraint is reasonable and valid, the court may on discretionary grounds withhold injunctive relief if at the date of the hearing there is no protectable interest, giving as examples the situation where "despite contemplation at the date of contract that the employee would have access to confidential information, that did not eventuate (John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [46]) or where, in the events which have happened (as distinct from those foreseeable at the date of contract), the restraint is wider than necessary for the reasonable protection of the covenantee's legitimate interests.

1. Mr Kirk emphasised that the plaintiffs accept that, in the context of employment restraints, a covenantee is not entitled to be protected against mere competition (Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 329 Herbert Morris Ltd v Saxelby [1916] 1 AC 688). However, they rely on what was said in Woolworths Ltd v Olson at [38] to the effect that an employer may have business interests capable of being protected by an appropriate restraint of trade. There, Mason P (with whom McColl and Bryson JJA agreed) said at [38]-[39]:

The courts in general take a stricter and less favourable view of covenants in restraint of trade entered into between employer and employee than of similar covenants in commercial agreements (Geraghty v Minter (1979) 142 CLR 177 at 185). The reasons are explained in J D Heydon, The Restraint of Trade Doctrine 2nd ed, 1999 at pp 68-9. It is nevertheless well established that an employer may have interests capable of protection by a restraint covenant. These interests go beyond protection of goodwill and retention of customers and extend to trade secrets (Heydon, op cit, pp 87-8, Knogo Corporation v Halligan (1984) ATPR 40-460, Kone Elevators Pty Ltd v McNay & Anor (1997) ATPR 41-564).

1. In Kearney v Crepaldi [2006] NSWSC 23, McDougall J set out (at [47] to [54]) the principles relevant to enforcement of restraints of trade:

The primary position is that a restraint of trade is void. That applies not just to the classical restraint of trade purporting to prevent a person from working for a particular employer, but also to a restraint of the kind presently sought to be enforced. That is because of the public interest in competition. It follows that a person seeking to enforce a restraint of trade must show that the restraint is no wider than is reasonably necessary to protect its legitimate interests. The test immediately directs attention to the nature of the interest that is sought to be protected.

1. Mr Kirk has identified three business interests (recognised in the authorities as legitimate business interests) to be protected by the present restraints: first, the personal connection which the employee has with suppliers or customers of the employer (Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 at [25]), noting that it is relevant for restraints upon customer solicitation to consider the length of time it would take a new employee to put himself or herself in a position to make sure that the customers would resort to the plaintiff rather than to the defendant (Two Lands Services Pty Ltd v Cave [2000] NSWSC 14 at [78] and [81]); second, the protection of the confidential information of the business (even if not in the nature of a trade secret) (Woolworths Ltd v Olson at [38], [67]; Cactus Imaging Pty Ltd v Peters at [12]); and, third, the employer's interest in preventing a former employee from soliciting current employees to leave the employer (Aussie Home Loans v XInc Services [2005] NSWSC 285 at [24], [26], where it was said that such a restraint may be justified by reference to confidential information which the ex-employee has about the relations between his former employer and its employees; and Kearney at [57]-[58], where it was recognised that such a restraint could be maintained both by an employer's interest in maintaining a stable workforce and where the former employee uses (or may use) confidential knowledge gained in the course of employment to target particular employees and to pitch the terms of offers of employment to them).

1. As to the first, Mr Moses submits that there is no evidence as to any steps taken by the plaintiffs to date to put themselves in the position to rebuild the customer connection lost with the departure of the defendants. (I do not accept that there is no evidence, since Mr Nicholls has taken over the role of Mr Griggs and there is evidence of at least a certain amount of client contact over the last couple of months presumably seeking to shore up the client position. However, I accept that there is little evidence on this issue and no estimate has been proffered as to the time likely to be required for this purpose.)

1. As to the second, it is submitted by Mr Kirk that covenants against the use or disclosure of confidential information or documents can be unsatisfactory when a business' confidential information may easily be carried away in the head of a former employee and used against that business if the former employee commences work for a competitor (as recognised in Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 at 1479). Mr Kirk notes that a restraint preventing an ex-employee with confidential information working for a competitor for a reasonable period may thus be appropriate even where the employee is otherwise under an obligation not to disclose confidential information (citing Cactus Imaging Pty Ltd v Peters at [13]-[14]). In Kearney, McDougall J said that:

In summary, then, restraints of trade (including both restraints against competition and restraints on solicitation of customers) may be valid where they are reasonably necessary to prevent disclosure of confidential information garnered by the former employee in the course of his or her former employment, or the exploitation of a connection built up by that employee with the former employer's customers in the course of that employment.

1. It is also noted by Mr Kirk that, in assessing the reasonableness of a restraint, the duration of the restraint need not correspond precisely with what might ultimately be seen to be the employer's legitimate interest and hence that a covenant might not totally protect the employer, on the one hand, and, on the other hand, might go somewhat further than is necessary for legitimate protection, without ceasing to be reasonable (citing Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 at [53]).

1. Whether or not of their own making, Mr Kirk submits that insofar as the injunctive relief, if granted, will restrain Mr Griggs and Mr Matthews from acting as employees of EBM or another business that acts in competition with WAL in the insurance broking market, until 22 February 2013 (in the case of Mr Griggs) and 16 March 2013 (in the case of Mr Matthews), this will not prevent Messrs Griggs and Matthews from being employed generally in the insurance industry (or in any other industry), nor will it prevent them being employed by EBM after those dates. (I accept that there is no evidence of any imminent threat to their employment with EBM if they were to be restrained from acting for former WAL clients - though the position might well be different if they were to be restrained from providing services to EBM at all). As to the submission that they would not be precluded from employment in the insurance business generally, that would suggest a limitation being placed on the otherwise broad scope of the non-competition restraint.

1. Mr Moses relies on the following factors as weighing the balance of convenience in favour of the defendants: delay; prejudice to the defendants; and lack of hardship to the plaintiffs if the injunctive relief is not granted. He places emphasis on the fact that, on their own evidence, the plaintiffs have known since March 2012 that the defendants were employed by a competitor and have known since late March 2012 that the defendants had approached or were proposing to approach their former clients, but took no action to restrain such conduct until 4 June 2012.

1. I have referred above briefly to the prejudice to the defendants if an injunction were to be granted (when noting the submissions as to financial hardship). I accept that there would be prejudice if their employment were to be terminated (but there is no evidence as to this being likely if a limited injunction were to be granted). As to the question of hardship to the plaintiffs, Mr Moses again submits that there is no reason why damages would not be an adequate remedy. However, as I have concluded above, I am not persuaded that this is the case.

1. The factor that has been most of concern to me has been the question of delay. Mr Moses notes that interlocutory relief must be sought promptly (Zuellig v Pulver [2000] NSWSC 7 at [36]-[37]) and that the speed with which a plaintiff seeks relief has been recognised as an indicator of the seriousness of the alleged infringement of rights (Capgemini US v Case [2004] NSWSC 674 at [40]). Campbell J, as his Honour then was, there said:

If interlocutory relief is to be sought, it should always be sought promptly: Zuellig v Pulver [2000] NSWSC 7 at [36] - [37]. The court is always entitled to use, as a litmus test of the seriousness of the infringement of a plaintiff's rights which is occurring, how fast the plaintiff reacts to the infringement of its rights. It is not only as an example of the equitable doctrine of laches that delay is relevant on an application for an interlocutory injunction; it is also as an admission by conduct about how serious the infringement of the plaintiff's rights is. Thus, it is a matter which goes to the balance of convenience and not merely to the question of whether there is a serious question to be tried, which might be met by a defence of laches at the trial.

1. In that case, his Honour refused the relief sought on three bases: first that the case for final relief was not one which he was present satisfied is strong; second, the fact that the plaintiff would not gain a great advantage if an injunction were to be granted, by comparison with the situation if it were to be left to its remedy in damages (and an innocent third party would be inconvenienced); and, third, the plaintiff's delay. (Thus, it can be seen that delay in isolation was not fatal to the application.)

1. Here, Mr Kirk submits that the delay cannot be seen as an example of circumstances that would give rise to the equitable doctrine of laches nor (having regard to the plaintiffs' lack of awareness of rights under the Option Agreements until more recently) could it be seen as an admission by conduct as to the seriousness of the infringement of the plaintiffs' rights.

1. Thus it is said that delay goes not to whether there is a serious question to be tried that might be met by a defence of laches at the trial but only, in the present case, to the question of balance of convenience. In that regard, it is submitted that there has been no prejudice to which the defendants point (other than financial hardship if their employment is terminated). The plaintiffs point to the prejudice they will suffer from continuing loss of clients (and, as I understand it, the fact that the non-solicitation breaches on the part of both defendants and the non-recruitment breaches on the part of Mr Matthews, were deliberate and likely to continue having regard to the absence of an undertaking in that regard). (Mr Moses did raise, during submissions today, the potential prejudice to third parties who may have transferred their business to EBM on the understanding that Mr Griggs or Mr Matthews would be available to deal with them, but there is no evidence of any particular prejudice that would be sustained in this regard if an interlocutory injunction pending final hearing were to be granted.)

1. Mr Moses emphasised that Young J (as his Honour then was) observed in Network Ten Ltd v Fullwood (1995) 62 IR 43 at 46 that:

Finally, the Court expects in cases of interlocutory injunction that people will act promptly. As I sit here in this duty list, if a person has let a week go by it is only in a very strong case that I can be persuaded to grant an injunction or grant short service because if a person is to seek an injunction it should be sought promptly.

and said, further, at page 47 that:

However, there is a separate principle that on an interlocutory injunction the Court in its discretion will refuse the injunction if there has been delay which is not adequately explained. I do not consider that the delay has been adequately explained in this case.

1. Mr Moses also emphasised (when the matter was before me on 8 June 2012) that the delay in commencement of the proceedings was unexplained (and today he maintains the position that the explanation now proffered is inadequate). In this regard, having reserved my judgment on late Friday last week, I re-listed the matter on Tuesday to indicate my preliminary views. I noted that there had been no explanation proffered on affidavit by the plaintiffs' officers as to the delay. (Rather, it was said that I should infer (from the fact that their lawyers wrote in late May that they had only recently been informed of the covenants contained in the Options Agreements) that it was only at that time (or thereabouts) that the plaintiffs realised that there were additional covenants on which they might be entitled to rely to restrain the conduct in question.) I was not satisfied that I should draw such an inference in the context of this application (particularly where the evidence of the plaintiffs seemed to be that EBM was not previously regarded as a major competitor in this particular area of specialist insurance and that it had been the events since March 2012 that had led the plaintiffs to become concerned that there is a concerted attack on this area of their business). It seemed to me that the delay could also be consistent with the decision having been made to pursue the present relief (some time after the plaintiffs were aware of the conduct sought to be enjoined) because of concern as to the impact of the decision by the defendants to join EBM or the success of their efforts while so employed.

1. I indicated on Tuesday that, in the absence of an explanation from the relevant officers of the plaintiffs as to the reasons for the delay in commencement of these proceedings, my preliminary view was that injunctive relief should not be granted but that if an explanation were to be proffered (to the effect that it had been suggested I should infer) (namely, that there had been a lack of knowledge at the local level of the restraint clauses and only a late realisation that there was a basis for seeking such relief), then that could in my view have weighed the balance in favour of the grant of limited injunctive relief for a short period (in order to restrain solicitation of former Willis Group clients in the period leading up to the renewal date of 30 June 2012).

1. In those circumstances, I considered that the appropriate course to take is not to dismiss the plaintiffs' application outright but, rather, to decline to grant the relief presently sought and to give the plaintiffs liberty to restore the matter to the duty list before me this week in the event that there is further evidence sought to be adduced to address the basis for the delay. I indicated that failing any (or any satisfactory) evidence of that kind, I would make final orders dismissing the application for interlocutory relief with costs.

1. Pursuant to that leave, a further affidavit was affirmed by Ms Magnaye on 13 June 2012, in which Ms Magnaye deposed, first, to the fact that she did not have information regarding efforts by Mr Matthews to solicit Paynter Dixon or Cue Clothing Company at the time she was informed of the transfer of their broking business and that when she learnt of the loss of the Al Toppper Holdings Ltd account because of Mr Matthews' involvement on 20 April 2012 she instructed her lawyers to send a letter to him seeking undertakings pursuant to the 2008 agreement (thus demonstrating that there was no delay between knowledge of the solicitation and the demand).

1. Second, Ms Magnaye has deposed that she did not become aware of the possibility that there were restraints in any share Options Agreements until 2 May 2012 in a discussion with the General Counsel of Willis International to whom she reported, when a question was raised as to whether there were any such agreements. She has explained that the grant and administration of Options Agreements is managed at group level in the United Kingdom and she had not previously been aware of them. Ms Magnaye has deposed to the steps taken to request information as to any options agreements and Ms Magnaye received a copy of the Matthews Options Agreement on or about 8 May 2012 and a copy of the schedule to the Griggs Options Agreement (but not an actual copy of that agreement until about 19 May 2012) and did not receive final confirmation as to the statuts of that agreement until 22 May 2012.

1. Meanwhile, there were discussions taking place with EBM as to the possibility of resolving the issues arising from the activities of, inter alios, Mr Griggs and Mr Matthews (those coming to an end on 17 May 2012).

1. Ms Magnaye deposes that she forwarded the documents to the plaintiffs' solicitors on about 21 May 2012 and, after seeking confirmation as to the actual agreement signed by Mr Griggs, sought instructions between 23 and 29 May 2012 as to the commencement of legal proceedings. She also deposes (in admittedly general terms) to time (approximately 4 or 5 days) taken in liaison with various legal offices as to the proceedings and the decision made on 29 May to assign the right to enforce the restraint provisions to WAL. Undertakings were sought from the defendants on 30 May in accordance with the Options Agreements and they were not provided. These proceedings were then commenced.

1. Mr Moses submits that there is still no adequate evidence of delay on the basis that there has been no account given as to why the party with the benefit of the contractual obligations (WGH) was not aware of the contractual restraints or had not taken steps to enforce them earlier. (The response to this by Mr Kirk is that the size of the organisation makes it understandable that not all contractual documents relating to employees of the international group would be readily at hand.) Moreover, I would infer from the text of the telephone conversation Ms Magnaye had with the Group General Counsel in the UK that the latter was not aware as to the existence of particular restraints as at 2 May 2012 either. I pause there to say that the fact that there may have been some oversight on the part of one or other of the offices might go towards the exercise of discretion but does not mean that there has now been no explanation for the delay in question.

1. Moreover, there is a need to be clear as to the relevant delay. Time taken to demand undertakings and to engage in settlement discussions (rather than commencing proceedings that might be rendered otiose by such a process) is not something that should count against the plaintiffs in this regard. The relevant delay on the part of the commencement of proceedings against Mr Griggs must be from the time that the plaintiffs had a reasonable basis for believing that there was a cause of action against him. That seems to me to limit the relevant delay to a period from about 19 May (since the documents evidencing the agreement were only to hand at that time). The delay in Mr Matthews' case in relation to the Options Agreement claims (including the non-competition covenant) was from about 8 May 2012 (but that overlapped with the settlement discussions). I accept that there was a delay in enforcement of the appointment letter for a considerably longer period (but the plaintiffs point to 18 April as the date on which the first reliable evidence that would support a claim was discovered and thereafter there was the process of seeking undertakings and the like).

1. Criticism is made from the bar table as to the failure to raise the Options Agreements with Mr Matthews prior to 30 May 2012. I cannot comment on that as I am not privy (nor should I be) to the content of whatever discussions took place over that period. Criticism is also made of the suggestion in the 30 May letters that the plaintiffs' solicitors had only recently been informed of the restraints in the Options Agreements. That depends, it seems to me, on what view is taken of the ambit of "recently" and I am not prepared to draw any adverse inference from this.

1. I accept that even on the evidence now before me there was a period of delay between knowledge on the part of the plaintiffs of the rights under the Options Agreements and the decision to commence these proceedings but I am of the view that it is not such a period of delay as is fatal to a limited undertaking to preserve the plaintiffs' position against solicitation of its clients and its staff pending an expedited hearing (particularly where there has now been an explanation that highlights the need for the plaintiffs to ascertain precisely the detail of the agreements under which relief was sought).

1. That said, I do not consider that this meets the concern that the defendants have now been in employment since late March and on one view may have assumed there was no difficulty for them so doing, since no non-competition covenant had been raised with them (and was not until 30 May 2012). (Further, I have doubts as to the strength of the claim based on the non-competition restraint in the Options Agreements having regard to its breadth).

1. In that regard I think that the balance of convenience lies not in restraining their continued employment with EBM (pending a final hearing) but in restraining them, directly or indirectly, from soliciting former WAL clients or accepting or providing services to such clients, or soliciting the recruitment of WAL employees, on an interlocutory basis pending an expedited hearing.

1. I appreciate that this does not protect the plaintiffs' position as fully as it might. Nevertheless, EBM, if put on notice of the injunctive relief I propose to grant, will be on notice of the risk that if it involves Mr Matthews or Mr Griggs in the provision of services to (or tender or solicitation for the client business of) WAL clients in the interim then it may, itself, be exposed to liability for inducement of a breach of contract and presumably any tender for business of WAL clients would need to acknowledge the fact that Mr Matthews and Mr Griggs would not necessarily be in a position to offer their services on the client file (depending on the outcome of the litigation).

Discretionary factors

1. Finally, I have taken into account that (despite the earlier offer of an undertaking from Mr Matthews and the confidential information undertaking from Mr Griggs) there has been no undertaking proffered that would tend against the need for injunctive relief. In relation to the non-solicitation and non-recruitment restraints, it is submitted by Mr Moses that Mr Matthews had already proffered undertakings to the plaintiffs which were consistent with his contractual obligations (having undertaken to comply with the restraints set out on pages 6 and 7 of his letter of appointment for the Restraint Period specified in subclause (c) (being 3 months) and the Restraint Area specific in subclause (d) (being New South Wales). It is noted that this offer was made notwithstanding that the cascading or 'ladder' restraints contained in the appointment letter might be void on the grounds of uncertainty and, therefore, unenforceable (based on the dicta in Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267). There is no relevant undertaking on the table, so to speak. (Even had the earlier Matthews' undertaking remained on offer, his refusal to extend the undertaking to services performed for clients while he was physically outside New South Wales would have limited the effectiveness of the undertaking.)

1. In the Warburton case, Pembroke J noted at [3] that:

One of the abiding principles of a civilised system of law such as ours is that contracts are meant to be observed. Lawyers sometimes use the Latin phrase pacta sunt servanda to describe the principle. We make decisions on the assumption that contractual obligations will generally be performed and solemn commitments will not be ignored. The general policy of the law is that people should honour their contracts: Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9 (Gleeson CJ). ... It matters not, as I have found in this case, that Mr Warburton may have forgotten or overlooked the terms of the MEP Deed to which he is bound. The enforcement of a commercial contract does not depend on a party's knowledge of its terms: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165 at [43]-[44]. (my emphasis)

1. That seems to be equally apt in the present case. The fact that the WAL was not aware of the possibility of the share option restraints until early May and not aware of the precise documents until 8 and 19 May respectively (and that Mr Griggs and Mr Matthews might similarly have overlooked them - although there is no evidence to this effect) does not alter the fact that there seems to have been a commercial basis for the commitments assumed under the Options Agreements and, to the extent that there is a serious question to be tried as to the entitlement to relief for breach thereof (that may be rendered otiose or difficult to quantify if the defendants are not restrained on an interim basis), then so far as those covenants do not go beyond what would at common law be likely to be enforceable, I consider that the plaintiffs have established a basis for interlocutory injunctive relief.

Conclusion

1. I am satisfied that there is a serious question to be tried as to the enforceability and validity of the restraints sought to be enforced by the plaintiffs (and their standing to do so) and as to the alleged breaches of the respective covenants. I am also satisfied that there is a ikelihood that damages will be an inadequate remedy due to the prospect that it will be difficult to quantify the loss suffered as a result of any established breaches.

1. My concern, as previously noted, was as to the delay on the part of the plaintiffs in making this application for interlocutory relief. However, an explanation for that delay has now been proffered. While not as fulsome as Mr Moses suggests should have been provided, I accept that it does provide an explanation to show that steps were being taken in order to confirm the covenants by which both defendants are said to be bound. Unexplained delay of such a time would ordinarily be fatal to an interlocutory injunction application of this kind. However, I consider that the delay has now been the subject of a sufficient explanation in that regard.

1. I note that the defendants do not go so far as to suggest that they took up employment with EBM (or acted as they did while in employment with EBM) in reliance on some form of representation that the only restrictive covenants by which they were bound were as stated in the correspondence they received before 30 May 2012. Nor is it suggested that, had they been aware that it would be alleged that they were bound by such covenants they would have acted any differently. The highest that the evidence is put for Mr Matthews is that it was not represented to him that employment at EBM would be in breach of any covenant owed to the plaintiffs.

1. As to hardship on the part of the defendants that might be caused by a grant of interlocutory relief, that seems to be related to their financial needs (each supporting his respective family and in Mr Griggs' case his extended family). There is no evidence that if an injunction were granted to restrain the provision of services to clients falling within the category the subject of the restraints (and from soliciting business from those clients in the interim leading up to the renewal dates for the policies), this would jeopardise their continued employment with EBM. Nor is it apparent that this would prejudice their ability to continue to perform services for other clients in the construction industry and hence develop the business of EBM in that area.

1. I have listed the matter before the expedition list judge this Friday at 9.45am on the basis that it seems to me that this is a matter that should be referred to that list for expedition.

Orders

1. At the conclusion of the hearing this morning I invited the plaintiffs to prepare short minutes of order to reflect what was then my thinking in terms of relief. Subject to any submissions that the defendants may now make as to the form of the orders, I propose to order as follows:

Upon the First Plaintiff and the Second Plaintiff giving the usual undertaking as to damages and undertaking to pursue expeditiously the claim for final relief:

(1)   The First Defendant be restrained from:

(a)   until further order, directly or indirectly soliciting, accepting or performing insurance or bond brokerage, reinsurance or bond brokerage, agency, risk management, claims administration, self-insurance, consulting or other business performed by the Second Plaintiff for any client with whom the First Defendant has had business dealings, or any prospective client from whom he has participated in soliciting business, in either case within the last 12 months of his employment by the First Plaintiff, ie since 21 February 2011.

(2)   The Second Defendant be restrained from, until further order, directly or indirectly:

(a)   soliciting, accepting or performing insurance or bond brokerage, reinsurance or bond brokerage, agency, risk management, claims administration, self-insurance, consulting or other business performed by the Second Plaintiff for any client with whom the Second Defendant has had business dealings, or any prospective client from whom he has participated in soliciting business, in either case within the last 12 months of the his employment by the First Plaintiff, ie since 15 March 2011;

(b)   soliciting for employment by him or by any third party, any employee of the First Plaintiff or the Second Plaintiff with whom the Second Defendant has had contact while employed by the First Plaintiff;

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Decision last updated: 14 June 2012