Supreme Court New South Wales Medium Neutral Citation: NOVA Employment Ltd v Michelle Hira & Ors [2021] NSWSC 1337 Hearing dates: 12 October 2021 Date of orders: 15 October 2021 Decision date: 15 October 2021 Jurisdiction: Equity - Duty List Before: Rein J Decision: Decline to grant the interim injunction sought Catchwords: EMPLOYMENT AND INDUSTRIAL LAW — Contract — Restraint of trade — Injunction sought restraining former employees from engaging in employment with competitors of the former employer — Undertakings proffered by all three Defendants, yet only those undertakings proffered by the First Defendant accepted by the Plaintiff — Former and new employers engage in the provision of assistance to persons with disabilities who are seeking employment — Weak prima facie case for the injunctions sought — Balance of convenience favours the Defendants — Held: interim injunction not granted Legislation Cited: Nil Cases Cited: Amway Corporation v Eurway International Ltd [1974] RPC 82 AT Kearney Australia Pty Ltd v Crepaldi [2006] NSWSC 23 Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523 HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212 Jardin Investments Pty Ltd v Metcash Ltd [2011] NSWCA 409 JMB (NSW) Pty Limited trading as McGrath Central Coast v West [2020] NSWSC 1380 Koops Martin v Dean Reeves [2006] NSWSC 449 O'Brien v Komesaroff (1982) 150 CLR 310 Portal Software v Bodsworth [2005] NSWSC 1179 Quantum Service and Logistics Pty Ltd v Schenker Australia Pty Ltd [2019] NSWSC 2 Raine & Horne Pty Limited v Adacol Pty Limited & Ors [2006] NSWSC 36 Stacks Taree v Marshall (No 2) [2010] NSWSC 77 Texts Cited: G E Dal Pont, Law of Confidentiality (2nd ed, 2020, LexisNexis Butterworths) Category: Principal judgment Parties: NOVA Employment Limited (Plaintiff) Michelle Hira (First Defendant) Antonia Randell (Second Defendant) Jordan Kurtbatoff-Hira (Third Defendant) Representation: Counsel: Mr Alkadamani (Plaintiff) Mr Mackay (Defendants) Solicitors: Haywards Solicitors (Plaintiff) Harmers Workplace Lawyers (Defendants) File Number(s): 2021/268469 Publication restriction: Nil Judgment 1. The Plaintiff ("Nova") is an organisation that provides assistance to persons with disabilities who are seeking employment. It also endeavours to assist such persons retain the position that they have obtained. Funding for these activities comes through the Department of Social Services ("DSS"), the National Disability Insurance Scheme ("NDIS") and a program called the School Leavers Employment Support ("SLES"). 2. The three Defendants all worked for the Plaintiff for a period of time and two of them – Ms Hira and Ms Randell – now work for Ostara Australia Limited ("Ostara") and the third – Mr Kurbatoff-Hira – works for Inspire Enterprises Australia Pty Ltd t/as Ability Connex ("Connex") contracted through People & Work Recruitment Pty Ltd. Connex has some connection with Ostara in that, at the very least, the Chief Executive Officer of Ostara is also the Chief Executive Officer of Connex and Ostara and Connex operate out of the same offices: see paragraph 18 of the affidavit of Ms Goyer of 8 October 2021. 3. Ms Hira has been working for Ostara since February 2021 and Ms Randell has been working there since August 2021. Mr Kurbatoff-Hira has been working at Connex since 21 August 2021. 4. Ostara is a not-for-profit organisation that assists persons with mental health issues to find employment. Connex is a for-profit organisation and is a registered NDIS provider. 5. In connection with their employment, each of the Defendants signed contracts which contained restraints. The clauses in each contract were identical save for the period of restraint. In the contract signed by Ms Hira, the period of restraint is 24 months. In the contract signed by Ms Randell, the period is 18 months and in the contract signed by Mr Kurbatoff-Hira the period of restraint is 12 months. I set out the clause from Ms Randell's contract: "32.1 From the date your employment ends, you agree not to solicit or attempt to solicit business from any client for the duration of the Restraint Period. 32.2 From the date your employment ends, you agree not to engage or prepare to engage in a business that competes with the business of the Employer or any Associated Entities for the duration of the Restraint Period within the Restraint Area. 32.3 From the date your employment ends, you agree not to solicit, attempt to solicit, entice or encourage any employee of the Client or the Employer or any Associated Entities to leave their engagement with the Employer for the duration of the Restraint Period within the Restraint Area. 32.4 From the date your employment ends, you agree not to interfere or attempt to interfere with the relationship between the Employer or any Associated Entities and its Clients, employees or suppliers for the duration of the Restraint Period. 32.5 In this provision: (a) Client means any person, firm or company who at any time during the period of 12 months prior to the termination of your employment was a Client of the Employer or any Associated Entities, in respect of the part or parts of the business in which you were employed. (b) Restraint Period means: (i) 18 months (c) Restraint Area means: (i) In any of NOVA's Employment Services areas, or ESA's bordering NOVA's. 32.6 The restrictions in this clause apply to conduct which is either direct or indirect (eg done through an agent of any kind) and regardless of whether the conduct is engaged in for your own benefit or for the benefit of any other person or entity. 32.7 Each of the covenants in this clause will have effect as if it were the number of separate covenants resulting from combining each covenant with each subsection of the defining terms, referred to in the covenant. Each of the above obligations are separate and independent obligations. In the event that one or more of the obligations are found to be unenforceable, the remaining obligations will continue to apply. 32.8 You acknowledge that each of the above restrictions are reasonable and necessary to protect the Employer's legitimate interest. 32.9 You acknowledge that you will be liable in damages (including punitive or special damages) arising out of the breach of any of the terms in this provision." 1. Ms Hira was most recently employed by Nova in the position of Business Development Manager. 2. Ms Randell was most recently employed by Nova in the position of Business Development Job Coach. 3. Mr Kurbatoff-Hira was most recently employed by Nova as a Transition SLES Job Placement Consultant. 4. Nova sought injunctive relief on an interim basis against all three Defendants but at the hearing on Tuesday, it accepted the undertakings given by Ms Hira as obviating the need for an interlocutory hearing as against her. Undertakings were also proffered by Ms Randell and Mr Kurbatoff-Hira, but the Plaintiff did not regard those as satisfactory and it pressed on with the application for interim relief as against those Defendants but seeking that the orders extend only to 31 December 2021, a period of approximately 11 weeks from 12 October 2021. Nova has indicated that it is willing to pay, up until 31 December 2021, Ms Randell's and Mr Kurbatoff-Hira's wages at the rate they were on with Nova but with the proviso that they must pay back those wages if Nova is successful on the final hearing. 5. The undertaking proffered by Ms Randell (which was identical to that proffered by Mr Kurbatoff-Hira save as to personal information) was in the following terms: "I, Antonia Randell, of [REDACTED], Defendant in proceeding number 2021/268469 in the Supreme Court of New South Wales, undertake to the Court, without admission and upon the Plaintiff providing the usual undertaking as to damages, that: 1 I will not, until the determination of these proceedings or further order of the Court: (a) solicit or attempt to solicit business from any Client (as defined below); (b) solicit, or attempt to solicit, entice or encourage any employee of the Plaintiff to leave their engagement with the Plaintiff within the Restraint Area (as defined below) or such other order as the Court deems fit; (c) interfere or attempt to interfere with the relationship between the Plaintiff and its Clients (as defined below), employees or suppliers; (d) use and/or disclose the Confidential Information in paragraphs 1 to 15 of Annexure A to the Summons (save that, for the purpose of this order, paragraph 1 of Annexure A to the Summons is taken to have the words "in the course of their employment" inserted after the words "Plaintiff's employees" in line 2 and the words "used or" be added after the words "not been" in the first line). In this Deed: Client means any person, firm or company who at any time during the period of 12 months prior to the termination of the employment was a client of the Plaintiff, in respect of the part of parts of the business in which I was employed and with whom I had dealings. Restraint Area has the meaning in the Summons filed 20 September 2021." with a further undertaking not to: "directly or indirectly [solicit] or [attempt] to solicit business from any Employer (as that term is defined below) For the purposes of these orders, 'Employers' means, in respect of each Defendant, any person, firm or company with which the First, Second or Third Defendant respectively, in the course of their employment with NOVA, had any dealings for the purpose of securing or retaining employment for jobseekers or participants during the period of 12 months prior to the termination of the respective Defendant's employment with NOVA." 1. In support of its application, Nova reads the affidavits of: 1. Anne Goyer sworn on 19 September 2021; 2. Kathryn Therese Hayward sworn on 20 September 2021; 3. Anne Goyer sworn on 22 September 2021; 4. Anne Goyer sworn on 8 October 2021; and 5. Kathryn Therese Hayward sworn on 9 October 2021. 1. The Defendants rely on the affidavits of: 1. Antonia Randell affirmed on 5 October 2021; 2. Michelle Hira affirmed on 5 October 2021; 3. Jordan Kurbatoff-Hira affirmed on 5 October 2021; and 4. Pavel (Paul) Franc affirmed on 5 October 2021. 1. The Defendants also rely on Exhibit 2, which is styled "Disability Employment Services Grant Agreement between The Commonwealth of Australia as represented by the Department of Social Services and NOVA Employment Limited ABN 94 253 356 513". 2. Mr Alkadamani of Counsel appears for Nova and Mr Mackay of Counsel appears for all three Defendants. 3. The matter was in the Duty List on Tuesday and, conscious of the need for a speedy determination, I shall endeavour to keep these reasons brief. 4. There is much in terms of the principles surrounding restraints of trade and the requirements for obtaining interim relief that was not in dispute: see Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 at [12]-[13], [25] and [30] per Brereton J (as his Honour then was) ("Cactus"); Jardin Investments Pty Ltd v Metcash Ltd [2011] NSWCA 409 at [95] and [97] per Meagher JA (with whom Campbell and Young JJA agreed); Portal Software v Bodsworth [2005] NSWSC 1179 at [63]-[65] per Brereton J (as his Honour then was); Koops Martin v Dean Reeves [2006] NSWSC 449 at [28] per Brereton J (as his Honour then was); AT Kearney Australia Pty Ltd v Crepaldi [2006] NSWSC 23 at [53] per McDougall J; Stacks Taree v Marshall (No 2) [2010] NSWSC 77 at [120] per McDougall J and the requirements for injunctive relief that must be satisfied: see Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at 81-2 per Gummow and Hayne JJ (with whom Gleeson CJ and Crennan J agreed). Employers are entitled to seek to prevent poaching of their current employees by former employees: see Quantum Service and Logistics Pty Ltd v Schenker Australia Pty Ltd [2019] NSWSC 2 at [55] per Robb J. 5. Much of the material to which Ms Goyer refers in her affidavits relates to Ms Hira and is therefore not relevant to the claim against the Second and Third Defendants. Some of the material which remains is relevant only to the Second Defendant and not the Third Defendant. I proceed on the basis that the roles of the Second and Third Defendants in their new employment are very similar to their roles at Nova. 6. I should make clear that Nova does not claim that any of the Defendants have copied material or removed any documentary or digital material from Nova. 7. The Defendants challenge Nova's right to injunctive relief on a number of grounds and also assert that the balance of convenience does not favour Nova. There are advanced a number of reasons for the contention that there is no serious question to be tried which include matters which I do not think are persuasive such as the Defendants' assertions that they did not read the contractual documents that they had signed and that there is no binding contract because the Plaintiff has not produced a copy of the contracts signed by it. As Mr Alkadamani pointed out, binding contracts can be created even when neither side has signed a document: see Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523 at 534-6 per McHugh JA (as his Honour then was). There is a public interest in parties being held to their contractual obligations: see Raine & Horne Pty Limited v Adacol Pty Limited & Ors [2006] NSWSC 36 at [55] per McDougall J and the cases there cited. I should also note that the fact that Ostara only deals with persons with mental health issues, whereas Nova deals with persons with all kinds of disabilities, does not, in my view, detract from Nova's case. 8. There is, however, also an issue concerning the terms of the restraint – there being no definition of "Nova's ESA" or "bordering a Nova Employment Service area". I might add that there may also be a question as to what precisely is meant by "engage" in cl 32.2 which could be read as something quite different to "be employed in". 9. In broad terms, Nova contends that each of these employees were given access to information confidential to it and should be restrained from dealing with clients of Nova and employers with whom Nova has placements, but also that the Second and Third Defendants should be precluded from working for Ostara and Connex (subject to the geographical limits contained within the contractual restraints), because of their acquisition of confidential information. In light of the undertakings proffered by the Defendants to which I have earlier referred, it is only whether the Second and Third Defendants should be restrained from their current employment that remains in contest. Nova asserts, in relation to the material to which the Second and Third Defendants have had access, that "[t]he value of such forms includes the methodical approach to service delivery that they underpin" and that "[t]he forms and processes provide Nova employees with the framework to undertake their duties, engage with employers, develop Clients skills, secure work for Clients, assist Clients maintain their jobs and generate information to support funding claims": see paragraph 30 of Nova's written submissions and see T13.40-45, T22.48-50, T26.39-T27.7, T29.30-40, T31.27-35. 10. I asked Mr Alkadamani to give me concrete examples from the evidence of material of this kind, and, at T21.40-T22.38, T23.10-T24.9 and T25.22-T27.7, he did so. He referred to pages 18-23 of Exhibit B as examples of "the knowledge of our processes and how we prescribe and the methodologies for undertaking tasks": T22.48-49 and see p.165 of exhibit AG-2 to the affidavit of Ms Goyer sworn on 19 September 2021, although Mr Alkadamani accepted that "was something" undertaken by Ms Hira "but it reflects the Nova approach": see T26.8-10. At T26.40-T27.8, Mr Alkadamani referred to the fact that Nova encourages the use of short, rather than long, CVs. There is also evidence given by Ms Goyer of matters such as "scripts" and videos which are used to educate staff and references to training of staff: see paragraphs 4-6 of Ms Goyer's affidavit of 22 September 2021 and paragraphs 12 and 25 of Ms Goyer's affidavit of 8 October 2021. 11. I accept that the material which Nova has on its server includes material to which the Defendants have had from time to time access as part of their duties and which to Nova is confidential such as the employment history of an employer: see paragraph 26(a)-(n) of the Plaintiff's written submissions for further details. What I am not convinced of is that because the Defendants have, during the course of their employment with Nova, compiled or read documents which record confidential information concerning the clients of Nova or concerning what has been provided to employers who Nova contact and work with to make placements for clients, that the Defendants have acquired "confidential" information as opposed to "know-how", a distinction drawn in the cases: see, for example, Amway Corporation v Eurway International Ltd [1974] RPC 82, 85-6 per Brightman J; O'Brien v Komesaroff (1982) 150 CLR 310 at 328 per Mason J, with whom Murphy, Aickin, Wilson and Brennan JJ concurred; and see G E Dal Pont, Law of Confidentiality (2nd ed, 2020, LexisNexis Butterworths) at [5.30]. 12. In my view, learning how Nova works in, for example, providing short CVs rather than long CVs to prospective employers, or creating more detailed lists of questions for clients, would appear to be part of know-how not confidential information which the Plaintiff can protect. Although I do not purport to determine the matter on a final basis, it does lead me to doubt the validity of the claim of confidential information and hence, the appropriateness of injunctive relief. As Dal Pont puts it in his text at [5.30]: "The law distinguishes 'know-how' from confidential information. In a relationship within which confidential information is (likely to be) communicated — here typically one between employer and employee — it can safely be assumed that the employee has accumulated knowledge, skill and experience in the particular field derived, whether partly or otherwise, by reason of that relationship. But this accumulation, merely as a result of being under the auspices of a (partly) confidential relationship, is not equatable with confidential information. Accumulated knowledge, skill, talent and experience derived, whether wholly or partly, from an employment relationship is qualitatively distinct from confidential information or trade secrets. The same is necessarily so regarding information brought by an employee from sources other than the employer, even if useful and valuable to the latter's business. Accordingly, the general law does not protect know-how even if imparted under a confidential badge." (citations omitted) (emphasis in original) and at [5.35]: "But what it may not legitimately do is restrain the ex-employee from using for his or her own benefit, or that of a new employer, information that has become part of his or her general skill, knowledge and experience. Otherwise the compelling policies underscoring free use of employee know-how, noted earlier, could easily be circumvented. Again, there remains the issue, albeit here one of construction of the relevant terms, of distinguishing know-how from confidential information, and thus reasonable from unreasonable confidentiality restraints." (citations omitted) 1. I note too that at paragraph 25 of her affidavit of 8 October 2021, Ms Goyer states that the restraint was included in the contracts "to ensure that Nova took all available steps to protect its workforce and protect the investment it had made in securing, training and supporting its valued employees". I think that only underscores the fact that the restraint is intended to provide protection for Nova that does not fall within the rubric of confidential information as generally understood. I note too that to the extent that Nova seeks to assert a contractual right to prevent the Defendants using confidential information, the contract defines "confidential information" in clause 1 (see p. 28 of Exhibit A) and it is not clear which of the categories enumerated encompasses what Nova seeks to protect in this application. At paragraph 31 of the Plaintiff's written submissions, Mr Alkadamani submitted that "NOVA's processes, and its forms giving effect to them, represent years of accumulated experience and refinement", a submission based on Ms Goyer's evidence. He then elevates this (at paragraph 33 of his submissions) to "proprietary information systems". 2. I accept that the restraint may be legitimate insofar as it seeks to prevent these employees from contacting employers who are employers that Nova has worked with in the last 12 months (or 18 months in the case of Mr Kurbatoff-Hira) but the undertakings proffered to the Court deal sufficiently with that aspect. They also undertake not to contact existing clients of Nova. 3. It has long been recognised that the remedy of damages may not be a sufficient antidote to the harm caused by a breach of the restraint (see, for example, Cactus at [13]) and that is why the Courts are willing to injunct former employees on an interlocutory basis rather than leaving the employer to its claim for damages. On the other hand, to prevent a person from earning his or her livelihood at a particular institution is a significant step, and whilst the injuncted employee will be able to recover lost wages and any other consequential damage arising from an injunction which at a final hearing is one to which the Plaintiff was not entitled, there is considerable disruption to an employee who has taken up new employment. There is often at play a fine balance between the competing interests in determining whether an injunction should be granted, and the strength or otherwise of the Plaintiff's claims is a relevant matter in determining whether the balance of convenience favours a grant of an injunction. 4. I regard the following matters, some of which go to the substantive claim and some to the balance of convenience, as matters that support the Defendants' position: 1. Nova seeks an injunction until 31 December 2021. Given that the Second and Third Defendants have been employed since August 2021, and it is now October 2021, I am inclined to see the injunctive relief as having very little impact as a practical matter. 2. Added to [28(1)] is the fact that the more senior Defendant, Ms Hira, has been with Ostara since February 2021. If there were confidential matters to be protected, I doubt that injunctive relief against Ms Randell is of much utility. 3. The undertakings proffered by all Defendants to the Court are, in my view, significant. The Defendants undertake to the Court that they will not attempt to solicit business from any client of Nova, not to interfere or attempt to interfere with the relationship between the Plaintiff and its clients, employees or supplies, not directly or indirectly solicit or attempt to solicit business from any employer and not to use any confidential information as defined in the Summons until the determination of these proceedings or further order of the Court. The extent of the undertakings which the Defendants are willing to give is an important matter as is demonstrated by the approach by Ward CJ in Eq in HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212 at [114]-[117]. 4. Neither of the Second and Third Defendants are high level managers but are persons employed at low levels of pay (see paragraph 20 of Ms Randell's affidavit and paragraph 23 of Mr Kurbatoff-Hira's affidavit), a matter of some relevance in considering whether the restraint sought to be enforced is reasonable: see JMB (NSW) Pty Limited trading as McGrath Central Coast v West [2020] NSWSC 1380 at [70] per Parker J. 5. Nova, Ostara and Connex are all engaged in trying to help place people with disabilities in employment and preferably in long-term positions. This is a very positive thing and obviously viewed by the DSS as such, since the Department is prepared to grant funding to these organisations (or remunerate, in the case of Connex). Whatever the position in a commercial environment, where profit is largely the legitimate motive, it seems to me, regard needs to be had to the clients' interests (i.e. the persons with disabilities in need of assistance) and not just the interests of the employer and the employee. This has dual significance here because first, I am inclined to think that if the Defendants have learnt skills that help improve the prospects of persons with disabilities of obtaining paid work, there is a social benefit beyond the normal benefit to society of having people gainfully employed in those skills being utilised, rather than them not being permitted to use those acquired skills. The second is that preventing the Defendants from working for Ostara and Connex for any period of time is likely to impact on the clients for whose benefit overall the scheme devised by the Government is intended, as Mr Franc attests at paragraphs 75-76 of his affidavit. 6. In the case of Mr Kurbatoff-Hira, none of the school programs on which he is working are in an ESA in which Nova operates and one of the areas (Port Macquarie) does not even border an ESA in which Nova operates. Mr Alkadamani did point out that the SLES and NDIS programs are not ESA based but this rather highlights another problem which is that the restraint is clearly based on ESAs and it may well be that using ESAs to preclude the Defendants working in activities that have no ESA connection, such as SLES and NDIS, undermines the validity of the restraint (if otherwise effective). Even if the restraint were effective and otherwise reasonable, I think it unlikely that it would be regarded as a legitimate protection of Nova's interests to stop the Defendants from working in an area bordering Nova's ESAs. As I have noted, none of the schools which the Third Defendant is seeking to draw into the SLES program are located in Nova's ESAs. 7. In connection with the use of ESAs as a geographical restraint area, regard needs to be had to the size of those areas: see the documents annexed at pages 37-42 of the affidavit of Ms Goyer dated 8 October 2021. For example, the Southern Ranges ESA extends from Tuena in the north to Gourock National Park in the south and that ESA borders Patterson, Chifley, South Eastern, ACT/Queanbeyan, Lower South Coast and Eurobodalla. The area comprised in this is very extensive; just looking at the eastern side on the coast from Helensburgh in the north to Central Tilba in the south, by way of example, is a distance of 311kms. 1. Even accepting that the Plaintiff has a seriously arguable case based on infringement of the contractual restraints, the matters to which I have referred combine to lead me to decline to grant the interim injunction sought by Nova. 2. I will hear the parties on the issue of costs in the event that agreement is not reached on that topic. I will list the matter on Friday, 22 October 2021 for directions. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 October 2021