Cushman & Wakefield v Patterson [2021] NSWSC 672

Supreme Court New South Wales

Medium Neutral Citation: Cushman & Wakefield v Patterson [2021] NSWSC 672 Hearing dates: 3 June 2021 Date of orders: 3 June 2021 Decision date: 03 June 2021 Jurisdiction: Equity Before: Ward CJ in Eq Decision: Orders as per [36] Catchwords: EMPLOYMENT AND INDUSTRIAL LAW — Contract — Restraint of trade — Application for interlocutory injunction — whether plaintiff has a sufficiently serious arguable case for a final injunction having regard to the balance of convenience Cases Cited: Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 Dundoen Pty Ltd v Richard Wills (Real Estate) Pty Ltd [2020] NSWSC 1534 Ecolab Pty Ltd v Garland [2011] NSWSC 1095 John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187; [2012] FCAFC 111 Category: Procedural rulings Parties: Cushman & Wakefield Agency (Vic) Pty Ltd (Plaintiff) James Patterson (Defendant) Representation: Counsel: M Seck (Plaintiff) M Gillis (Defendant)

Solicitors: Jones & Day (Plaintiff) Hall and Wilcox (Defendant) File Number(s): 2021/00158462 Publication restriction: Nil

EX TEMPORE Judgment 1. HER HONOUR: This is an application in the duty list brought by Cushman & Wakefield Agency (Vic) Pty Ltd (Cushman & Wakefield) by summons filed on 2 June 2021. The time for service of the summons was abridged and the matter was brought back on an urgent basis. What is sought this afternoon is effectively interlocutory relief to restrain the defendant, James Patterson, from conduct falling within what I might refer to as a non-compete clause in the defendant's employment contract with Cushman & Wakefield. 2. By way of background and by reference to the matters to which Mr Matthew Bouw, the Chief Executive Officer for the Asia Pacific region for the Cushman & Wakefield group of companies has deposed, the plaintiff is a global commercial real estate services firm with its headquarters in Chicago, Illinois (Matthew Bouw's affidavit affirmed 2 June 2021 at [7]). Its principal activity is to operate as a multi-service commercial real estate agency providing services to the commercial property market in various areas (at [8]). Mr Patterson was, prior to his redundancy in February this year, employed by the plaintiff as the Chief Executive, Australia and New Zealand (ANZ) Transactions. He had formerly been employed by the plaintiff as the Chief Executive Officer, Australia and New Zealand. His executive service agreement is dated 20 March 2020 (at [14]). It contains within it what I might describe as relatively uncontroversial post-employment restraint clauses and clauses in relation to restraint on use of confidential information, as below (see Ex A at 25-28): 10 CONFIDENTIAL INFORMATION 10.1 The Executive must keep confidential all Confidential Information other than Confidential information: a. the Executive is required to disclose in the proper performance of the Employment Duties; b. which was public knowledge as at the date of this Agreement or became so at a later date (other than as a result of a breach of confidentiality by the Executive); c. or that the Executive is required by law to disclose (but only after first informing the Company). 10.2 The Executive may: a. use Confidential Information solely for the purpose of performing the Executive's duties with the Company; b. and disclose Confidential Information only to persons who: i. are aware of and agree that the Confidential Information must be kept confidential; ii. or have signed any confidentiality agreement required by the Company from time to time; and either: iii. have a need to know (and only to the extent that each has a need to know); iv. or have been approved by the person or persons nominated by the Company from time to time. 10.3 The Executive must not use Confidential Information for a purpose other than for the benefit of the Company or a Group Company and must maintain effective security measures to protect all Confidential Information. 10.4 The Executive must immediately notify the Company of any suspected or actual unauthorised use, copying or disclosure of Confidential Information and take all steps directed by the Company to either remedy or restrict further breach in relation to the material. 10.5 The Executive must provide all assistance reasonably requested by the Company in relation to any proceedings the Company may take against any person for unauthorised use, copying or disclosure of Confidential Information. 10.6 The Executive agrees that the Executive's obligations under this clause will survive the cessation of the employment for any reason whatsoever and will be enforceable at any time at law or in equity and will continue to the benefit of and be enforceable by the Company. 14 RESTRAINT ON THE EXECUTIVE'S CONDUCT 14.1 The Executive must not, without the prior written consent of the Company for the Restraint Period in any Restrained Capacity; a. participate in, carry on, assist or otherwise be directly or indirectly concerned with, as a director, consultant, adviser, contractor, principal, agent, manager, employee or partner, any business or activity that directly competes in the Restraint Area with any part of the business of the Company or the Group with which the Executive was involved at any time during the Relevant Time; b. solicit or encourage any director, contractor or employee of the Group with whom the Executive has worked or had dealings at any time during the Relevant Time to leave his or her employment or engagement with the Company or the Group; c. solicit, canvass, approach or accept any approach from any person or entity who was at any time during the Relevant Time, a customer, supplier, distributor or licensee of or to the Company or the Group with whom the Executive has worked or had dealings with a view to establishing a relationship with or obtaining the custom of that person or entity in a business which is the same as or substantially similar to that part of the Company's or the Group's business in which the Executive was involved at any time during the Relevant Time; d. interfere or seek to interfere, directly or indirectly, with the relationship between the Company or any member of the Group and its customers, suppliers, distributors, licensees, directors, employees, contractors or agents in the conduct of the Company's or Group's business; e. counsel, procure or assist any person to do any of the acts referred to in subclauses 14.1 (a) to (d). 14.2 Relevant Time means the period of 12 months prior to the earlier of; a. the date of termination of the Employment; or b. the date from which a direction under clause 9.2(c) applies. 14.3 Restraint Area means anywhere within; a. Australia, but if that is not enforceable; b. New South Wales, but if that is not enforceable; c. the greater metropolitan area of Sydney. 14.4 Restraint Period means at any time after cession of the Executive's employment with the Company for any reason for a period of; a. 12 months, but if that is not enforceable; b. 9 months, but if that is not enforceable; c. 6 months, but if that is not enforceable; d. 3 months. 14.5 Clauses 14.1(a), 14.1(b), 14.1(c), 14.1(d) and 14.1(e) each have effect as if they consist of separate provisio each resulting from combining each geographic area in the definition of Restraint Area with each time peri in the definition of Restraint Period. If any of those separate provisions is invalid or otherwise unenforceable for any reason, the invalidity or unenforceability shall not affect the validity or enforceability of any of the other separate provisions or other combinations of those separate provisions of 14.1(a), 14.1(b), 14.1(c), 14.1(d) and 14.1(e). 14.6 Each restriction in clause 14.1 is intended to be separate and severable. If any of these are found to be invalid but would be valid if some part was deleted then such parts shall apply with such modifications as maybe necessary to make them valid. 14.7 The Executive acknowledges that each restriction specified in clause 14.1 is in the circumstances reasonable and necessary to protect the Company's and the Group's legitimate interests and that damages are not an adequate remedy for any breach of the restrictions by the Executive. 14.8 The Executive agrees that the Executive's obligations under this clause will survive the cessation of the employment for any reason whatsoever and will be enforceable at any time at law or in equity and will continue to the benefit of and be enforceable by the Company. 1. The term of the employment is not defined in the executive service agreement. It commenced on 1 April 2020 and it was to continue until terminated in accordance with the agreement (see cll 3, 9). Pursuant to cl 9 of the agreement, either party was able to terminate the employment at any time and for any reason by giving to the other party three months' written notice. Relevantly, I set out here cll 9.1 and 9.2: 9 NOTICE OF TERMINATION 9.1 Either party may terminate the Employment at any time and for any reason by giving to the other party 3 months' written notice. 9.2 After either party has given notice pursuant to clause 9.1, the Company in its absolute discretion may: a. terminate the Employment immediately and make a payment to the Executive equal to the Executive's current Total Remuneration; or b. require the Executive to work part of the notice period any pay the current Total Remuneration for the balance of the notice period; or c. direct the Executive for all or part of the notice period not to perform any work, to remain away from its premises and/or not to contact any customers or clients of the Group and/or to perform alternative duties, including less senior or significant duties, which the Executive agrees will not constitute a repudiation of this Agreement. 1. Mr Bouw deposed that the defendant's roles and responsibilities with Cushman &Wakefield included (at [17]): (i) to lead and manage Cushman & Wakefield businesses in ANZ; (ii) to develop and implement strategy; (iii) to build on existing market strengths; (iii) to identify suitable acquisition/merger targets in ANZ; (iv) together with others, to lead the staff in five offices across Australia; (v) to manage the ANZ support group (i.e. Finance, HR, IT) in partnership with various global leaders; (vi) to directly manage the profit and loss for ANZ. The defendant reported directed to the CEO of the Asia Pacific Region, being Mr Bouw since 2017 (at [18]). Mr Bouw says that the defendant: had direct operational and management oversight of all transactional service lines within ANZ with an objective of growing the transactional service lines (at [19]); and was required to maintain critical client relationships and represent the Cushman & Wakefield brand in the industry as it relates to transactional services in ANZ. 2. Mr Bouw has deposed that in his position, the defendant had access to "highly confidential information", including: the strategic plan and strategic priorities for Asia Pacific; annual operating plans for ANZ; merger and acquisition (M&A) targets through to the end of 2021; strategy for M&A targets and implementation; recruitment plans; regular financial data of the ANZ businesses; and forward looking financial data (at [22]-[23]). 3. At [24]-[25] of Mr Bouw's affidavit, he deposed to his observation as to the development by the defendant of close relationships with some of Cushman & Wakefield's most significant Australian clients and potential clients. 4. I make it clear that I am making no findings of any disputed questions of fact in these ex tempore reasons. 5. By letter dated 9 February 2021 from Mr Bouw, Mr Patterson was advised that the outcome of a recent review by Cushman & Wakefield of its operational requirements in the ANZ region and a restructure of the ANZ Transactions leadership team, meant that Mr Patterson's position with the company as Chief Executive ANZ Transactions was no longer required and Mr Patterson was made redundant (Ex A at 31-32). 6. The letter continued to state that, as there was no suitable alternative employment for him with the company or its related entities, the company had decided to terminate the employment and the company invoked cl 9.1 of the executive service agreement in that regard. The company also informed Mr Patterson, pursuant to cl 9.2 of the employment contract, that the company had decided to make a payment in lieu of his entire notice period and, accordingly, his employment with the company would come to an end on 9 February 2021, that being the date of the letter. 7. Mr Patterson was paid various sums, including a payment in lieu of three months' notice of termination (which was calculated using his higher prior base salary rather than his current salary - as, it was said, a gesture of goodwill). He was also paid other amounts, including a contractual redundancy pay, accrued, but untaken annual leave and his pro-rata entitlement to long service leave. The letter reminded him of his post-employment obligations in relation to matters such as confidentiality, intellectual property and post-employment non-compete and non-solicit obligations. 8. There has been a dispute not resolved between the parties as to whether the circumstances in which, or the manner in which, the defendant's employment was terminated, are such that in fact (pursuant to cl 9.2 of the executive service agreement), Mr Patterson was entitled to 12 months' salary, as opposed to the three months' salary in lieu of notice that he received. That is an issue that will need to be determined at another date. Suffice it to note that in correspondence between the parties' solicitors, it has been asserted for Mr Patterson that the conduct of the company in this regard amounts to a repudiation of the executive services agreement, and the company does not accept that it does. 9. What has transpired is that the defendant has accepted employment with Knight Frank Australia Pty Ltd (Knight Frank Australia). It is not disputed that Knight Frank Australia Pty Ltd is a competitor of Cushman & Wakefield. The defendant informed Mr Bouw by email on 22 May 2021 that he had accepted the CEO position with Knight Frank Australia, but the plaintiff emphasises that that letter simply said he would commence "sometime soon" and did not specify the date on which he would commence with Knight Frank Australia (Ex A at 52). 10. An announcement that was made by Knight Frank Australia on 27 May 2021 also did not provide a commencement date but merely stated the defendant would commence "shortly" (Mr Bouw's affidavit affirmed 2 June 2021 at [31]). Further, the announcement referred to Mr Patterson's extensive experience and leadership credentials, his role at Cushman & Wakefield, the robust expansion strategy that had increased that company's transactional business over a period of years and stated that Mr Patterson was "one of the most well-connected people in the property sector with an extensive network of clients and contacts" (at [31]). 11. It was not until a letter dated 31 May 2021, that the defendant's lawyers notified the plaintiff's lawyers that the employment would commence on 2 June 2021 and that led to the urgent application in the duty list yesterday, being the first day of Mr Patterson's employment as CEO at Knight Frank Australia. 12. Exhibited to Mr Bouw's affidavit of 2 June 2021 is correspondence both from solicitors for the defendant and solicitors acting for Knight Frank in relation to the current situation (Ex A). In particular, Mr Patterson has in writing confirmed that he is not aware of any confidential information belonging to the Cushman & Wakefield that he could use at Knight Frank Australia, that he does not have any possession of or control any such confidential information and that he will not use any such confidential information (Ex A at 56). Further, Mr Patterson has confirmed in writing that he will provide an undertaking not to solicit any clients or employees of Cushman & Wakefield for a period of 12 months following the termination of his employment with Cushman & Wakefield. (The defendant on this application places reliance on the fact that he has proffered undertakings which would address each of the subclauses of the post-termination obligations, other than – relevantly for the present purposes – cl 14.1(a).) 13. Knight Frank has also, through its solicitors, denied any allegation it has or will induce any breach of Mr Patterson's post-employment obligations and has indicated that it has not requested and does not require him to breach his obligations in any way.