Woolworths v Banks

[2007] NSWSC 45

CITATION:	Woolworths v Banks [2007] NSWSC 45
HEARING DATE(S):	22 and 23 January 2007
JUDGMENT DATE :	24 January 2007
JUDGMENT OF:	McDougall J at [1]
DECISION:	See paras [54]-[56] of judgment
CATCHWORDS:	RESTRAINT OF TRADE - employment contract - access to and use of confidential information - application for interlocutory injunction - contractual definition of "competitive business" - grant of interim relief - strength of employer's case - whether grant of relief would cause severe or irremediable prejudice - whether evidence inconsistent, unchallenged or controverted - validity of restraint of trade - whether enforcement of restraint necessary to protect legitimate interests of employer in its confidential information
CASES CITED:	Kearney v Crepaldi [2006] NSWSC 23 Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 Woolworths Limited v Mark Konrad Olsen [2004] NSWCA 372
PARTIES:	Woolworths Limited (Plaintiff) Paul Banks (Defendant)
FILE NUMBER(S):	SC 1173/07
COUNSEL:	S D Robb QC/M A Jones (Plaintiff) R Goot AM SC (Defendant)
SOLICITORS:	Henry Davis York (Plaintiff) Freehills (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

McDOUGALL J

24 January 2007 Extempore (revised 31 January 2007)

1173/07 WOOLWORTHS LIMITED v PAUL BANKS

JUDGMENT

1 HIS HONOUR: This is an application for an interlocutory injunction to enforce a restraint of trade in a contract of employment. The case for the plaintiff (Woolworths) is that enforcement of the restraint is necessary to protect its confidential information said to be known to the defendant (Mr Banks), and that the terms of the restraint are no more than is reasonably required to effect that purpose.

Background

2 Mr Banks worked for Woolworths in a variety of positions for fourteen years from 1993. He gave notice of resignation on 17 November 2006, and ceased employment on 12 January 2007.

3 From 1 July 2002 until 18 August 2006, Mr Banks was employed pursuant to a written service agreement signed in September 2002 but expressed to have retrospective effect. On 28 August 2006, Woolworths and Mr Banks entered into a further written service agreement (the service agreement) setting out the terms of his employment as a senior regional property manager (a position to which he had been appointed some 6 months earlier).

4 Clauses 5 and 10 of that agreement are relevant for present purposes. The former deals with confidential information. The latter deals with restraint on employment on termination of employment. They read:

“ 5. CONFIDENTIALITY AND ACCESS
5.1 Confidentiality during Agreement
The Executive during the term of this Agreement must:
(a) not disclose to any third party any Confidential Information or trade secrets or intellectual property relating to the Company or a Related Body Corporate.
(b) not use or attempt to use any such Confidential Information or trade secrets or intellectual property in any manner which is not in the proper course of his/her duties and for the sole benefit of the Company or a Related Body Corporate; and
(c) use his/her best endeavours to maintain the secrecy of and prevent the disclosure of any such Confidential Information or trade secrets or intellectual property to third parties.
5.2 Confidentiality after Termination of Agreement

The Executive’s obligations referred to in clause 5.1 will continue to apply after the termination of this Agreement but will cease to apply to information which and only to the extent it is required by law to be disclosed or comes into the public domain, otherwise than as a result of a breach by the Executive of the provisions of clause 5.1.
5.3 Confidential Information Defined
In this Agreement, “Confidential Information” means any of the trade secrets or confidential information, relating to the operations, processes, strategies or dealings of the Company or any of its Related Bodies Corporate or any other information concerning the organisation, business, finances, transactions or affairs of the Company or any of its Related Bodies Corporate which the Executive knows, or which a reasonable person ought to know, is confidential. Information ceases to be Confidential Information if and only to the extent, it becomes information in the public domain, other than as a result of a breach of this Agreement or is required by law to be disclosed.
...
10. RESTRAINT
(a) (i) Within 14 Business Days of the termination (whether by breach of this Agreement or not) or expiry of this Agreement the Company may, in its sole and absolute discretion, by written notice to the Executive, elect that the restraint provided for by this clause shall apply to the Executive.
(ii) The Executive acknowledges that these restraints are reasonable in terms of their geographic scope, duration and the activities restricted and having regard to the duties performed. The Executive also acknowledges that:
1. These restraints go no further than is necessary to protect the legitimate business interests of the Company;
2. These restraints do not unreasonably restrict the Executive’s rights or otherwise work harshly; and
(b) The written notice referred to in paragraph (a) must be followed by a cheque drawn in favour of the Executive for the month of the Restraint Period, for the amount as determined in accordance with paragraph (d).
(c) Where written notice incorporating reference to the Restraint Payment in accordance with paragraphs (a) and (b) are given to the Executive, the Executive agrees to be bound by the Restraint.
(d) For the purposes of this clause 9:
(i) Restraint means during the Restraint Period and in the Geographical Area not carrying on or being engaged, involved or otherwise interested in, or concerned with (whether directly or indirectly or alone or in partnership or joint venture and whether as trustee, principal, agent, shareholder, director, unitholder, consultant to or in any other capacity), a Competitive Business (other than as the holder of less than a 5% legal, beneficial or economic interest in shares or other securities which are issued in the capital of a public company whose shares are quoted on a stock exchange).
(ii) “Competitive Business” means any business with which the Company competes in the Geographic Area.
(iii) “Restraint Period” means the number of months, as determined by the Board or CEO, at their/his absolute discretion and notified to the Executive, not exceeding 12 months, commencing from the date this Agreement terminates or expires, as determined by the following formula after rounding down fractions to the nearest whole number:
A x 12
B
where:
A means the amount of the Restraint Payment net of income tax; and
B means the aggregate of the amounts paid or payable to the Executive under clauses 3.1(a), 3.2(a), 3.4 and 3.5 in respect of the 12 month period immediately preceding the date of termination or expiry of this Agreement, net of income tax.
In the event that the formula produces a number in excess of 12 then the Restraint Period is 12 months.
(iv) “Geographical Area” means Australia and New Zealand or such location as the Company operates or has competitors.
(v) “Restraint Payment” means such amount determined by the Board of the Company or the CEO in its/his absolute discretion.
(e) For the avoidance of doubt, a payment of the Restraint Payment is in addition to any other payment which the Company is required to pay the Executive in accordance with this agreement.”

5 On 21 December 2006, Woolworths gave Mr Banks a letter (signed by the chief executive officer of Woolworths, Mr Michael Luscombe). Enclosed with the letter was a cheque for $71,002.76. It is common ground that this equates to six months of Mr Banks' net entitlements as referred to in cl 10(d)(iii)(B). The letter stated among other things that Woolworths had elected that the restraint provided by cl 10 should apply to Mr Banks for a period of six months.

6 Mr Banks commenced employment with Myer Limited (Myer) on 15 January 2007 in the role of general manager, property.

7 Woolworths' case in this Court is that Myer's business is a "Competitive Business", as that expression is defined in cl 10(d)(ii) of the service agreement.

The applicable principles

8 In Kearney v Crepaldi [2006] NSWSC 23 I set out at paras [47] to [54] the principles relevant to enforcement of restraints of trade. For convenience I set those paragraphs out:

“47 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. This issue was considered by Gillard J in Hartleys Ltd v Martin [2002] VSC 301. At para [91], his Honour stated (in my respectful opinion correctly) that “[i]t is well-recognised that an employer is entitled to impose a restrictive covenant to reasonably protect his business against ex-employees taking customers with them to a business in competition with their former employer.”
48 At para [92] and following, his Honour discussed the decision of the High Court in Lindner v Murdoch’s Garage (1950) 83 CLR 628. In that case Latham CJ who dissented, but whose statement of the principles was endorsed by Webb J (at 647), said at 634:
“ … the covenant in restraint of trade is not a covenant against mere competition but is a covenant directed to securing a reasonable protection of the business interest of the employer, and in the circumstances is not unjust to the employee. The interest which can validly be protected is the trade connection, the goodwill of the business of the employer.”
49 In the same case, Fullagar J at 649 focused on the need to characterise the interest that the employer claimed to have and claimed legitimately to protect. Kitto J at 654 characterised the interest as being:
“… protection for their business connection against the possibility of its being affected by the personal knowledge of and influence over the customers which the appellant might acquire in their employment.”
50 His Honour continued by saying that:
“The knowledge which, because its use may deprive the employer of the business connection which he is entitled to preserve as his own, he may require his employee to abstain from using, is objective knowledge of customers, their peculiarities, their credit and so forth … .”
51 This reflects the approach taken in earlier English cases. Thus, in Herbert Morris Ltd v Saxelby [1916] 1 AC 688, the covenant was against the employee being engaged either as principal, agent or servant or otherwise in the same kind of business as that in which he had been employed. It was in that context that Lord Atkinson, speaking of a case of employer and employee, said that:-
“In all such cases as this, one has to ask oneself what are the interests of the employer that are to be protected, and against what is he entitled to have them protected.
He is undoubtedly entitled to have his interest in his trade secrets protected, such as secret processes of manufacture which may be of vast value. And that protection may be secured by restraining the employee from divulging these secrets or putting them to his own use. He is also entitled not to have his old customers by solicitation or some other means enticed away from him. But freedom from all competition per se apart from both these things, however lucrative it might be to him, he is not entitled to be protected against. He must be prepared to encounter that even at the hands of a former employee.”
52 In a similar vein, Lord Parker said (at 710):-
“… The reason, and the only reason, for upholding such a restraint on the part of an employee is that the employer has some proprietary right, whether in the nature of trade connection or in the nature of trade secrets, for the protection of which such a restraint is – having regard to the duties of the employee – reasonably necessary. Such a restraint has, so far as I know, never been upheld, if directed only to the prevention of competition or against the use of the personal skill and knowledge acquired by the employee in his employer’s business.”
53 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.
54 There are three other matters to note. The first is that the onus of showing that a contract in restraint of trade is reasonable as between the parties lies on the party alleging that this is so: North Western Salt Co. Ltd v Electrolytic Alkali Co Ltd [1914] AC 461, 470 (Viscount Haldane LC). Secondly, the onus of showing that a contract in restraint of trade is injurious to the public interest likewise lies on the party alleging that this is so: Attorney-General of Australia v Adelaide Steamship Co [1913] AC 781, 797. The third is that the question of the validity of a covenant in restraint of trade (or, for that matter, a covenant against solicitation of employees) is not really a question of law. The principles (at least in the former case) are relatively clear. The application of the principles depends on the terms of the particular covenant and the factual circumstances: see Dawnay Day & Co Ltd v De Braconier d’Alphen [1998] ICR 1068 at 1111-1112 (Evans LJ, with whom Nourse and Ward LJJ agreed).”

9 In its submissions in this Court, Woolworths relied heavily on the decision of the Court of Appeal in Woolworths Limited v Mark Konrad Olson [2004] NSWCA 372 (Olson). That case concerned a service agreement that, at least so far as clauses 5 and 10 are concerned, was either identical to, or not materially distinguishable from, the service agreement between Woolworths and Mr Banks. Mason P (with whom McColl and Bryson JJA agreed) set out the common law position at paras [37] to [40]:

“37 The restraint operates within a classical area, namely a fixed period after termination of employment. A restraint of trade is justifiable only if the restriction is reasonable in reference to the interests of the parties and of the public ( Nordenfelt v Maxim Nordefelt Guns & Ammunition Co Ltd [1894] AC 535 at 565). If it is not, the restraint will be contrary to public policy and invalid ( Buckley v Tutty (1971) 125 CLR 353 at 376).
38 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 pp68-9. 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 , pp87-8, Knogo Corporation v Halligan (1984) ATPR ¶40-460, Kone Elevators Pty Ltd v McNay & Anor (1997) ATPR ¶41-564). This was the trigger for the Service Agreement (see the covering letter of 7 February 2003). Merely because the law offers a degree of protection against the unauthorised use or dissemination of trade secrets by former employees does not mean that contractual protection is necessarily unreasonable or unavailable.
39 The court gives considerable weight to what parties have negotiated and embodied in their contracts, but a contractual consensus cannot be regarded as conclusive (see eg Queensland Co-operative Milling Association v Pamag Pty Ltd (1973) 133 CLR 260 at 268), even where (as in the present case) there is a contractual admission as to reasonableness.
40 The validity of the restraint 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 ( Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 344).”

10 Olson was a case where (to put it neutrally) there was a very strong basis for believing that the respondent had misused, and unless restrained might continue to misuse, confidential information of Woolworths. Mason P made it plain that a restraint of trade could be enforced to protect Woolworths' interests in its confidential information, notwithstanding the availability of clause 5. His Honour said at paras [57] and [58]:

“57 In a case involving a threatened breach, it is legitimate to ask what injunction should go in the particular circumstances to enforce the contract. In light of the respondent’s recent past conduct as found by Einstein J, and recognising that these findings may be the subject of challenge in a later stage in these appellate proceedings, it is in my view reasonable to enforce cl 10 (if valid) by injunction framed as sought by the appellant.
58 I would reject the respondent’s submission that an injunction is unnecessary or inappropriate in light of cl 5.2 of the Service Agreement or the appellant’s rights to protect its confidential information directly, as vindicated by Einstein J’s order 7. I would draw attention to his Honour’s finding at J44 that the process models which were forwarded by email to Mrs Olson’s computer were but a small portion of a vast amount of information which Mr Olson had available to him on 2 July 2004 concerning Project Mercury.”

Approach to grant of interim relief

11 The reality is that, if interlocutory relief is granted, Woolworths will in substance obtain what it seeks (and all that it is entitled to receive) without a final hearing. That is because, in reality, it is unlikely that the suit would be heard and determined before the six months' restraint expires on 11 January 2007. Mr S D Robb QC, who appeared with Mr M A Jones of counsel for Woolworths, did not submit otherwise.

12 This consideration calls up the principle explained by McClelland J in Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 at 535-536 (omitting citations):

“… Where a plaintiff’s entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled:… Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question:…

Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused:…

Apart from this, 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”…, 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”…it is desirable for the Court to evaluate the strength of the plaintiff’s case for final relief:…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:…”.”

13 It is also necessary to bear in mind his Honour's concluding observations at 539:

“In conclusion, although I think that Kolback has shown itself to have an arguable case for final relief, it appears to me that it is more likely than not that that case would ultimately fail. I consider that if an injunction is granted, Epoch would be likely to suffer serious prejudice and quite possibly irremediable injury arising from the delay which would inevitably ensue in its attempt to raise fresh share capital, should Kolback not be entitled to final relief. I do not regard the undertaking proffered by Kolback in the terms set out in exhibit “O” as sufficient to avoid such prejudice and injury. It is quite possible also that Kolback would suffer some irreparable prejudice from the refusal of an injunction, to an extent which cannot be determined, should it be entitled to final relief. I consider however that the potential prejudice to Epoch outweighs that to Kolback, and when one considers the prospects of Kolback’s entitlement to final relief, the interests of justice as between the parties require that an injunction be refused.”

The issues

14 On this application, the essential issues were:

(1) Whether Woolworths had made out a serious question to be tried that Myer was a "Competitive Business" as defined.

(2) Whether Mr Banks is now carrying on, or is engaged etc in, any competitive business as to the existence of which there is a serious question to be tried.

(3) Whether the protection offered by cl 10 is reasonable having regard to the alleged danger of misuse of confidential information, and to the provisions of cl 5.

(4) Whether, if there be a serious question to be tried as to "Competitive Business", the balance of convenience favours the grant of an interlocutory injunction.

(5) Discretionary issues, including principally alleged delay in seeking the relief.

Competitive business

15 Woolworths put this aspect of its case in two ways:

(1) It submitted that its discount department store (or, in the jargon of the trade, “DDS”) division, Big W, competed with Myer in that goods sold by it, and to some extent the areas and the market in which each operated, overlapped.

(2) Each was a competitor with the other (and with others) for what was said to be a limited stock of retail space from which to carry on operations.

16 The evidence as to the first aspect was vague and unconvincing. It may be accepted for present purposes that some brands and goods sold by Big W stores are also sold by Myer stores; and that both stores operate in competition in at least some geographical areas.

17 The most detailed evidence on this point comes from Mr Gregory James Travers, Myer’s Director, Strategic Branch and Human Resources. He said, in paragraph 15 of his affidavit sworn 19 January 2007, that Myer’s "direct competitors in the non-food retail industry" were other retail department stores such as David Jones and Harris Scarfe. He acknowledged in paragraph 16 that Myer had other competitors (presumably not "direct") including discount department stores such as Target, K-Mart and Big W. However, he said in paragraph 20:

“20. Myer and Woolworths do not compete as ‘department stores’. On one hand, Myer is a ‘department store’, with offerings for the middle to upper market with a general range of merchandise. Woolworths does not operate this type of department store. Rather, its DDS, Big W is a discount department store.”

18 He expanded on this in paragraphs 25 and 26:

“25. Some categories of products offered in some DDSs may be similar to Myer’s. However, the brands, quality and pricing invariably differs. Myer is a multi formatted business, meaning it has a mix of: national or international brands (brands developed and designed by external parties on a non-exclusive basis); private brands (brands developed and designed exclusively for Myer); and Concessions. This ensures customers are offered a broad range of choice in each product category. I have been that informed that Woolworths operates a less complex model, focused more on local and private brands.

26. Possibly the greatest overlap between Myer and a Woolworths subsidiary is in the electrical range where Dick Smith Power House stocks similar products to Myer. However, the focus of Myer and Dick Smith Power House is different. Myer is more lifestyle based, with less of an emphasis on particular items or categories of products. I am informed that Woolworths group entities or subsidiaries such as Big W, Dick Smith, Dick Smith Powerhouse and Tandy are commodity based, stand alone destinations. An individual will shop there for a particular product – ‘item selling’. Accordingly, whilst Myer stocks electrical goods this is not the focus of their store. Rather, it is one of a number of components of Myer’s complete home offering – ‘solution selling’.”

19 That evidence was not inconsistent with, let alone challenged or controverted by, any evidence led for Woolworths.

20 I do not think that there is a serious question to be tried as to the first way in which Woolworths put its case on "Competitive Business". Indeed, the real thrust of Woolworths' evidence, and of its submissions, went to the second way.

21 It was to a reasonable extent common ground that, at least historically and at a level of considerable generality, department stores, discount department stores, supermarkets and other retailers competed for space, although their requirements were different. Mr Ralph Robert Kemmler, Woolworths’ General Manager - Property Operations, explained it thus in his affidavit, affirmed 18 January 2007:

“14. The retail property market in Australia is highly competitive. In broad terms, the main types of retailers operating in the Australian market are as follows:
(a) Department Stores, which are outlets stocking a wide range of goods including clothing and footwear, cosmetics, home products, toys, CDs, DVDs, electrical goods, and furniture and whitegoods. These types of outlets are operated by Myer Limited and David Jones Limited. They compete for sales across a wide range of categories. Department Stores are located in major regional shopping centres, in either metropolitan or CBD areas, or larger country towns.
(b) Discount Department Stores (DDS), such as Woolworths' Big W stores, or those operated by DDS outlets (ie Target or K-Mart). These types of outlets stock goods across many of the same categories as Department Stores, but generally have a smaller range. DDS outlets compete with Department Stores in relation to the sale of some types of products (such as underwear, less expensive clothing, toys and CDs and DVDs). However, the key to sales in a DDS operation is price. In comparison, many goods in a Department Store would be priced at higher price points. Department Stores place a greater emphasis on the value proposition of these goods relative to their quality.
(c) Supermarkets, such as Woolworths, Coles, Bi-Lo, Franklins, IGA and Aldi, which sell mainly food and small household products.
(d) "Category killers", which are chain operations specialising in particular retail commodities (such as electronics, sporting goods or women's clothes). In the consumer electronics area, examples would be Woolworths' PowerHouse stores, Bing Lee, RetraVision and Harvey Norman. These types of outlets compete for sales against both Department Stores and DDS outlets.
(e) Smaller specialty retail stores, commonly marketing only a limited range of products in a particular category. These types of outlets cover the full range of price and quality points.
15. In broad terms, all retailers are in competition for suitable retail space. This is because there is a limit to the total amount of appropriately zoned retail space available in Australia at any particular time.

…
17. That said, the type of retail space which is required by any particular retailer will depend on the type of retail operations conducted. In broad terms, the following types of retailers commonly require the following types of property spaces:

(a) Department Stores traditionally occupy the largest floor areas. Metropolitan outlets generally occupy in excess of 10,000 square metres of floor space. However, in smaller rural or country areas, it would be more common for Department Stores to occupy smaller retail spaces.
(b) DDS outlets commonly occupy floor areas between 5,500 and 8,000 square metres in size. Larger metropolitan DDS stores will usually occupy a space towards the higher end of this range, while smaller metropolitan, country and rural DDS stores will often occupy a space towards the lower end of this range.
(c) Supermarkets will commonly occupy floor areas between 1,000 to 4,000 square metres;
(d) "Category killers" and smaller specialty retail stores will occupy a range of different floor areas depending on the nature of their operations, and the type and range of product being sold.”

22 However, as he acknowledged:

“19. In the past, there has not been a great deal of competition between Department Stores and DDS outlets for the different floor space boxes in metropolitan shopping centres. For instance, Big W would not generally be interested in seeking to secure a floor space box of 10,000 square metres or more. Also, the Department Stores have not been aggressively expanding their network.
20. However, even although different types of retailers may be attracted to different types of retail spaces, competition between different types of retailers for certain property spaces can still be strong. This is primarily caused by lack of physical retail space being available or the limit to the amount of feasible retail due to the size of the catchment.
21. In order to proceed with any such development, a property owner obviously desires to have certain large tenants to "anchor" the centre. However, it remains possible for the owner to configure the development in a number of ways. For instance, an owner may have a site of 30,000 square metres of retail. This could be configured with a Department Store, a DDS outlet, one supermarket, plus specialty retailer. Alternatively, it could be configured with two DDS stores, two supermarkets plus specialty retailers. There could also be a range of other combinations of differing store formats and sizes.
22. In such a case, it is obviously possible for a DDS outlet, such as Big W, to be competing against a Department Store for space in the same development.
23. To date, there has only been limited competition between Myer and Big W for potential floor space. This is because Myer has been consolidating, rather than expanding, their retail outlets, with a number of stores such as Bairnsdale and Bathurst converting to other DDS formats in recent years (ie target and Kmart).”

23 Notwithstanding this, Mr Kemmler expressed a belief that Myer would in the future compete directly with Woolworths for retail space, including the smaller "box" size required for discount department stores as opposed to traditional department stores.

24 To the extent that the evidence reveals (apart from a vague reference to Mr Kemmler's "experience"), this belief seems to have been based on conversations that Mr Kemmler had had with representatives of major landlords. Mr Anthony Michael Grainger Mellowes, Woolworths’ National Property Manager, records similar conversations in his affidavit affirmed 22 January 2007. It should be noted that none of these conversations were said to emanate directly from representatives of Myer.

25 Myer did not dispute those conversations or their effect. However, Mr Travers, who might be expected to know, said:

“44. I refer to the affidavit of Ralph Robert Kemmler affirmed on 18 January 2007 and in particular to paragraphs 27 and 28. I object to the form of each of those paragraphs, but on the assumption that they are admitted, I say that although Myer has not excluded any particular method of growing its business in the future, as Director of Strategic Planning I am unaware of any Myer decision to:


secure smaller retail property spaces for its Department Stores than it has previously sought; or

to move towards opening “small-format” Department Stores in retail spaces which were previously regarded as being more suitable for either supermarkets or DDS outlets.

…

46. I refer to paragraph 32 of Mr Kemmler’s Affidavit and say that I am unaware that Myer is considering significant changes to its marketing position and property strategy or that it will pursue a “small-format” strategy in the future.”

26 Mr Banks gave evidence to similar effect in his affidavit affirmed 19 January 2007:

“79. In answer to paragraph 27 of Mr Kemmler’s affidavit, I say that I am not aware of any plans that Myer has to secure smaller retail property spaces than it has previously sought. On the contrary, I am aware that in the last 6 months a generic specification has been created which defines the standard space for Myer stores as 14,000 square metres.
80. In answer to paragraph 28 of Mr Kemmler’s affidavit, I say that I am not aware of any plan or strategy for Myer to move towards opening “small-format” department stores in retail spaces which were previously regarded as being more suitable for DDS outlets.”

27 Indeed, Mr Banks said that in the last six months Myer had created what he called a "generic specification for retail space" which defined the standard "box" size as 14,000 square metres.

28 Mr Banks also said, in relation to competition for retail space:

“77. In answer to paragraph 21 of Mr Kemmler’s affidavit, I refer to paragraph 73 above. The tenant mix in a shopping centre is a matter for the owner or developer. In my experience, department stores do not compete for space with supermarkets or DDS outlets. That is because the owner or operator of the centre will have determined whether it wants a department store in the centre or not. If the owner or operator decides they do want a department store, the competition will be between different department stores (Myer, David Jones or, in some cases, Harris Scarf). In this respect I refer to paragraph 18(a) of Mr Kemmler’s affidavit.
78. I refer to paragraph 22 of Mr Kemmler’s affidavit. For the reasons referred to in paragraph 73 and elsewhere in this affidavit, it is highly unlikely in my experience that a DDS outlet would compete against a department store for space in the same development and I am unaware of that having occurred.”

29 Although Woolworths read affidavits in reply, it did not seek to controvert what Messrs Travers and Banks had said, either in principle (as to what Mr Banks said in paragraph 77) or in detail.

30 Thus, as a matter of fact, whilst I cannot say that there is no question to be tried as to competition for specific retail sites, I do not think that Woolworths' case on this point is strong.

31 Further, as I have noted above, the validity of the restraint is to be considered at the time it was made. Woolworths' evidence as to competition for retail space is prospective; and the conversations to which I have referred occurred between November 2006 and January 2007. There is no evidence that, as at August 2006, the traditional model to which Mr Kemmler referred in paragraph 17 of his affidavit (with which, although with greater elaboration, Mr Banks in substance agreed) was perceived as likely to change. On the contrary, I think, Mr Banks' evidence as to the "generic specification" would suggest that there was no immediate likelihood of change.

32 Thus, there is no evidence that, as at August 2006, Woolworths and Myer were, or were perceived as likely to be, in competition for the same “boxes” of retail space. To the contrary, the evidence suggests that as at that time their needs were quite distinct. To the extent that there might be competition for tenancy space in particular developments, Mr Banks' unchallenged evidence was, as I have said, that this was a matter for the landlord or developer to decide.

33 There is one other matter that is relevant on this point. It was common ground that the current Chief Executive Officer of Myer, Mr Bernie Brooks, had been employed by Woolworths prior to taking up his role at Myer. His positions at Woolworths had included those of Chief General Manager - Supermarket Buying and Marketing and Director of Corporate Marketing. Mr Travers said, without refutation, that Mr Brooks had been subject to a similar restraint to that contained in cl 10 of the service agreement; but that Woolworths had not sought to enforce it upon Mr Brooks' departure. Mr Travers said that he (and others at Myer) regarded this as an indication that Woolworths did not consider Myer to be a “Competitive Business”. In my view, that was a reasonable inference to draw in the absence of any explanation.

34 Thus, I conclude that Woolworths' case on the principal way in which it said that Myer was a competitive business is not strong; although I would not go so far as to say that there is no serious question to be tried.

35 On that basis alone and approaching the question whether to grant interlocutory relief on the basis that to do so would effectively decide the dispute without a final hearing, I would refuse to grant the relief sought. In approaching the matter thus, on the "Kolback" basis, I acknowledge that there is a significant distinction between this case and that. In Kolback, as McClelland J pointed out at 539, the grant of interlocutory relief would cause severe and likely irremediable prejudice to the defendant. There was no submission, let alone evidence, that to do so would cause severe or irremediable prejudice to Mr Banks; and in circumstances where he has available to him six months' entitlements, it is unlikely that (at least in the monetary sense) there would be any such prejudice. Nonetheless, balancing the factors (including what I perceive as the weakness of the case) I would, as I have said, refuse to grant the relief sought.

36 On that basis, the other issues do not require determination. However, I will address (as briefly as possible) the third issue.

Confidential information

37 As I have noted, the Court of Appeal in Olson made it plain that a restraint of trade may be enforced (if otherwise reasonable as between the parties) to protect the employer's legitimate interest in its confidential information; and may be so enforced notwithstanding that there are other protections - such as cl 5 – for that information.

38 In this case, it is plain that - at least, there is a serious question to be tried as to whether - Mr Banks is in possession of confidential information of Woolworths. There was some bickering as to the extent and confidentiality of that information, but I do not need to deal with that dispute.

39 In general, the confidential information of Woolworths that came into Mr Banks' possession related to Woolworths' supermarket business. However, there was evidence from Mr Ross Anthony Finlay, Woolworths’ Regional Property Manager, that the confidential information is, to some extent, relevant also to the Big W business. Thus, to the extent - on the evidence before me, limited - that Big W and Myer are in competition to sell similar goods to similar customers, the confidential information may be of some theoretical interest to Myer.

40 However, given the disparities between the two businesses - including as to their differing natures and target markets as well as to their space requirements - the likelihood that the information would be of real interest to Myer might be thought to be limited.

41 Mr Banks said that this was so:

“75. However, I do not believe that I am in possession of any confidential information from my employment with Woolworths that would assist me in my role as General Manager – Property for Myer. Although Craigieburn or Pakenham [two locations referred to in Woolworths’ evidence] may be suitable sites for a Myer store, this would not be at the expense of any Big W stores. This is because of the different space requirements of Myer and Big W respectively. Furthermore, my knowledge of the property market is limited to that in Victoria and Tasmania. My role at Myer is a national role and I have very little property knowledge in relation to the other states and territories.”

42 That evidence was not challenged or controverted.

43 Mr Travers gave evidence to similar effect (although, on the hypothesis that he does not know anything of Woolworths' confidential information, his evidence is more general):

“39. Mr Banks was not engaged for any insight he might have into Woolworths’ business, development plans or any confidential information he may have been privy to regarding Woolworths’ strategy or proposed locations.
40. Myer has no intention of accessing or utilising confidential information about Woolworths that Mr Banks may have had access to as an employee of Woolworths. Nor is there any purpose in Myer doing so. Myer’s ‘big box’ approach and style to department store retailing is significantly different to Woolworths. A Myer store uses considerably more space than a Big W, and uses significantly more space again than any Woolworths’ supermarket.”

44 Again, that evidence was not challenged or controverted.

45 Further, Mr Banks swore:

“76. I have caused to be given to the Court an undertaking in terms of my post employment obligations set out in clause 5 of my Woolworths’ Service Agreement. I have every intention of honouring those obligations and have never sought to depart from them let alone breached them. I have informed Myer accordingly.”

46 Thus, on the evidence before me, there is no real likelihood that such of Woolworths' confidential information as Mr Banks possesses would be of benefit to Myer. When that is coupled with Mr Banks' undertaking to the Court (Woolworths did not suggest that Mr Banks had breached or knowingly would breach it), I do not think that Woolworths has made good a case that a restraint in terms of cl 10 is reasonably necessary to protect its confidential information.

47 Some support for this conclusion may be found in the events following 15 November 2006, when Mr Banks advised his superiors that he intended to resign for the purpose (as he told them) of taking up the position with Myer.

48 Mr Banks remained at work, and was requested by Mr Kemmler to continue to work in his usual duties and to "commence a handover process". There was some discussion as to the effective date of his termination; Mr Banks wished to finish on 15 December, but Mr Kemmler pointed out that the service agreement required some eight weeks' notice. Eventually, it was agreed that, after the handover process had been completed, Mr Banks would serve out the remainder of his notice by taking annual leave; and this was done.

49 During the time that Mr Banks continued to work, there was no attempt made to restrict his access to confidential information. He said in paragraph 52 of his affidavit:

“52. I continued to work at Woolworths throughout this period and to handover my responsibilities as required. At no stage did any person in Woolworths indicate to me that they had any concerns about my access to confidential information before or during my notice period. I thought it would be appropriate after tendering my resignation for me to hand in the remote access token that gave me access to Woolworths’ computer systems from home, and I did so voluntarily, without being asked or prompted to do so. During my notice period, I had access to Woolworths systems, including e-mail and intranet from my office only. In mid-December 2006, I also received via e-mail the regular monthly ‘Network Plan’.”

50 It may be thought that Woolworths took this approach because it knew that it could enforce the restraint in cl 10. However, its case, as put in submissions before me, was that I should not infer that it had decided, when Mr Banks gave notice or shortly thereafter, to enforce cl 10. (I interpose that, if the evidence were to the contrary, then there would be considerable force to submissions put by Mr Goot SC, who appeared for Mr Banks, on discretionary issues.) On that basis it is not open to me to infer that Woolworths permitted Mr Banks to remain in possession of, and to continue to have access to, confidential information because it intended to enforce cl 10. Thus, it is open to infer from the history to which I have briefly referred that Woolworths did not at the time regard the prospect of Mr Banks taking up employment with Myer as involving any threat to its confidential information.

51 In this context, I should make it plain there was no suggestion, let alone evidence, that Mr Banks had used any of Woolworths' confidential information in his possession. The case is thus factually quite unlike Olson, where as I have said there was evidence, accepted by the trial judge, that the respondent had acted in a way that suggested strongly that he might misuse confidential information. See Mason P at paras [11] and [57].

52 Further, in Olson there was a finding that the confidential information was likely to be very useful to the respondent's new employer: another important ground of factual distinction.

“Challenged or controverted”

53 I have referred from time to time to the fact that evidence was not challenged or controverted. I accept that this was an interlocutory hearing brought on in circumstances of urgency and conducted with admirable economy by counsel on both sides. Of course, there was no application to cross-examine any witness. Nonetheless, as I have said, Woolworths had an opportunity, of which it availed itself, to read affidavits in reply. When I say that there was no challenge or controversy, I am referring to the failure of Woolworths to take issue in any affidavit in reply with the matter to which I have referred.

Conclusion and orders

54 For these reasons - which, I repeat, do not canvas all the points argued - Woolworths' claim for an interlocutory injunction fails.

55 I make the following orders:

(1) Order that the notice of motion filed on 18 January 2007 be dismissed.

(2) Direct the parties to bring in by 10 am tomorrow draft short minutes of order proposing orders and directions for the further conduct of the proceedings.

56 I will in due course hear the parties on costs.

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