Prescott Securities Limited v Gobbett [2017] FCA 74

FEDERAL COURT OF AUSTRALIA

Prescott Securities Limited v Gobbett [2017] FCA 74 File number: VID 246 of 2016

Judge: WHITE J

Date of judgment: 31 January 2017

Catchwords: PRACTICE AND PROCEDURE – application to strike out specified paragraphs of amended defence.

Legislation: Corporations Act 2001 (Cth) ss 1317H, 183(1) Federal Court Rules 2011 (Cth) rr 16.21, 16.43

Date of hearing: 31 January 2017

Registry: Victoria

Division: General Division

National Practice Area: Employment & Industrial Relations

Category: Catchwords

Number of paragraphs: 29

Counsel for the Plaintiff: Mr N Harrington

Solicitor for the Plaintiff: Mills Oakley

Counsel for the Defendant: Mr DJ Blight with Mr SA Evans

Solicitor for the Defendant: Cowell Clarke

ORDERS VID 246 of 2016

BETWEEN: PRESCOTT SECURITIES LIMITED (ACN 096 919 603) Plaintiff

AND: DARRYL GOBBETT Defendant

JUDGE: WHITE J DATE OF ORDER: 31 JANUARY 2017

THE COURT ORDERS THAT:

1. Paragraphs 29.3 to 29.6, 29.9 and 29.10, 77.1, 77.2, 77.3, 77.4, 77.5, 81.5 and 81.6 of the Amended Defence filed 18 November 2016 be struck out. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

EX TEMPORE REASONS FOR JUDGMENT

WHITE J: 1 I am dealing with the plaintiff's interlocutory application seeking the striking out of specified paragraphs of the defendant's amended defence. 2 The plaintiff in the proceedings (Prescott Securities) conducts business as a financial advisor and sharebroker. 3 Between 1 September 1999 and 30 April 2015, the defendant (Mr Gobbett) was an employee of Prescott Securities and for a period its Managing Director. He is now an employee of Baillieu Holst Ltd, a provider of financial and stockbroking services in competition with Prescott Securities. By his defence, Mr Gobbett pleads that he commenced that employment on 9 July 2015, that is, just over two months after the cessation of his employment with Prescott Securities. 4 In these proceedings Prescott Securities seeks declaratory relief and pecuniary relief of two principal kinds: (a) damages in respect of the alleged breach by Mr Gobbett of a covenant in his employment contract concerning post-cessation employment (referred to by Prescott Securities as the "Restricted Covenant"); (b) compensation pursuant to s 1317H of the Corporations Act 2001 (Cth) for breach of the duty imposed by s 183(1) of the Corporations Act. 5 As to the first, Prescott Securities alleges that Mr Gobbett has breached the Restrictive Covenant contained in cl 3.1 of Sch 2 to his contract of employment. By that clause Mr Gobbett agreed that he would not, during "the Restraint Period", and whether directly or indirectly on his own account, jointly or with any other person as an employee or otherwise, (relevantly): solicit or endeavour to solicit any client away from Prescott Securities, undertake or perform work for a client which is work of a similar kind to the services provided by Prescott Securities, engage in any business activity which is the same as, substantially similar to or competitive with the business of Prescott Securities, and which is within a radius of 5 km from that business, interfere with the relationship between Prescott Securities and its clients, employees or contractors or solicit, or induce any employee or contractor of Prescott Securities to leave their employment or cease their engagement. 6 The Restraint Period is defined elsewhere in the employment contract in alternatives, in descending order, of 12 months, nine months, six months or three months. 7 Prescott Securities alleges that Mr Gobbett has breached the Restrictive Covenant by his conduct in relation to nine of its clients or pairs of clients (now former clients). It also alleges that Mr Gobbett has breached the Restrictive Covenant by encouraging seven of its employees to leave Prescott Securities and to commence employment with Baillieu Holst. 8 Prescott Securities' claim under s 1317H of the Corporations Act is that Mr Gobbett has contravened the obligation imposed by s 183(1) of the Corporations Act by improperly using information which he obtained in the course of his employment with it. 9 Mr Gobbett denies each of the allegations of Prescott Securities.