Supreme Court New South Wales Medium Neutral Citation: Samsung Electronics Australia Pty Ltd v Grenville [2024] NSWSC 608 Hearing dates: 16 May 2024 Date of orders: 17 May 2024 Decision date: 21 May 2024 Jurisdiction: Equity - Duty List Before: Richmond J Decision: See [22] Catchwords: COMMERCE — restraint of trade — enforcement and remedies — injunction CIVIL PROCEDURE — interlocutory applications — interim injunction Legislation Cited: Restraints of Trade Act 1976 (NSW) Cases Cited: Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267 HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212 Jardin v Metcash Ltd [2011] NSWCA 409 John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 Just Group Ltd v Peck [2016] VSCA 334 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Scyne Advisory Business Services Pty Ltd v Heaney [2024] NSWSC 275 Category: Procedural rulings Parties: Samsung Electronics Australia Pty Ltd (Plaintiff) Andrew Grenville (Defendant) Representation: Counsel: D Mahendra and J Smith (Plaintiff) V Bulut (Defendant) Solicitors: Gadens (Plaintiff) Hall and Wilcox (Defendant) File Number(s): 2024/00168698 Publication restriction: Nil JUDGMENT 1. By a Summons filed in Court on 7 May 2024, the plaintiff commenced proceedings against the defendant, Mr Grenville, seeking to enforce post-employment restraints in his contract of employment. On 16 May 2024, I heard the plaintiff's application for interlocutory relief and on 17 May 2024 I made orders granting an interlocutory injunction to the plaintiff up to 9 August 2024 (which is 12 weeks after termination of his employment). 2. The urgency of the injunctive relief arose because Mr Grenville's intention was to commence employment with a direct competitor of the plaintiff, Electrolux Home Products Pty Ltd, on 22 May 2024. Orders were also made with the view to having an expedited final hearing. As the hearing occurred during a busy period in the Duty List, I indicated that I would provide my reasons for granting the interlocutory relief later, which I now do. 3. It was not in dispute that in order to be entitled to the interlocutory injunction sought, the plaintiff bore the onus of establishing that there was a serious question to be tried for final relief; that damages would not be an adequate remedy; and that the balance of convenience favoured the grant of an injunction on an interlocutory basis. 4. In a restraint of trade case, whether there is a serious question to be tried for final relief depends on whether it is seriously arguable that: (1) there is a valid contractual restraint; (2) there is a breach or apprehended breach of it; and, (3) the Court would, as a matter of discretion, grant injunctive relief in respect of that breach: John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [5]. 5. In the present case, the first of these matters is in dispute, but not the second or third. Generally speaking, an injunction will be granted to enforce a negative contractual stipulation, with damages rarely being an adequate remedy: John Fairfax Publications Pty Ltd v Birt at [45]. 6. The principles relevant to the validity of restraint of trade clauses were not in dispute. The onus is on the plaintiff to show that the restraint goes no further than is reasonably necessary to protect the plaintiff's legitimate business interests. The validity and reasonableness of the restraint is to be determined at the time it is entered into (in this case, 23 July 2021), but when exercising its discretion to grant and fashion relief, the Court considers matters as at the date of the hearing which are relevant to the discretion to withhold relief: Birt at [46]. 7. As the contract of employment is governed by the law of Victoria, s 4(1) of the Restraints of Trade Act 1976 (NSW) does not apply. Accordingly, the enforceability of the post-employment restraint depends upon the principles which apply at common law. The defendant drew my attention to Just Group Ltd v Peck [2016] VSCA 334 where it was pointed out at [30]–[36] that under the principles which apply at common law, it is not permissible to read down the operation of a restraint clause to "save" the operation of the restraint if it is otherwise drawn too widely, and the Court must not, in the construction task, remake the clause. 8. There were two issues raised going to whether the post-employment restraint in the present case is valid. First, it was argued that it is unreasonably wide. The relevant provision is in cl 18(e) of the employment contract which provides: You must not … (e) During your employment and the Restraint Period be, or attempt to be, employed or engaged by, or interested in, any entity which provides products and/or services in the Restraint Area which are the same as or similar to those provided by the Company and any Group Company, and in respect of which you were involved in the 12 months immediately preceding the termination of your employment … 1. The Restraint Period is defined as cascading periods from 9 months down to 3 months; and the Restraint Area contains cascading provisions as to area from Australia down to just the Melbourne metropolitan area. 2. It was submitted that this restraint is unreasonably wide because it prevents Mr Grenville from working with an entity which provides products and/or services in Australia (or alternatively specified parts of Australia) which are the same or similar to those provided by the plaintiff, irrespective of his actual role in that entity. For example, it would preclude him from working as a janitor for a direct competitor of the plaintiff. This is an issue of construction to be dealt with at trial, but I note that on the authorities referred to in Just Group Ltd v Peck at [38(b)(ii)] and [38(b)(iii)] it is arguable that the clause should be read as limited to excluding the defendant from working in a role with a competitor in connection with the provision of products or services which are the same or similar to those sold by the plaintiff in respect of which he was involved at the time of termination of his employment. This is on the basis that it was not in the reasonable contemplation of the parties that the clause would apply if he undertook another unrelated role. 3. Second, it was submitted that the restraint goes further than reasonably necessary to protect the legitimate business interests of the plaintiff. The plaintiff relied on two legitimate business interests: its confidential information and its customer connection or goodwill. 4. The defendant's role with the plaintiff was to manage its relationship with The Good Guys and JB HiFi in respect of the home appliances segment of the plaintiff's business. His role at Electrolux will be as National Business Manager, including managing that company's relationship with The Good Guys in the home appliances segment. 5. In relation to confidential information, there is evidence in the confidential exhibit of confidential information of various kinds regarding the plaintiff's business which is both recent and was provided to the defendant in the course of his role with the plaintiff. It is clear that a post-employment restraint for a limited period is a legitimate means to protect confidential information of the employer because of the difficulty of proving a breach of an obligation not to disclose or use such confidential information: John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [45]–[46]. 6. I am satisfied on the evidence that confidential information was provided to the defendant and that evidence is sufficient to establish a prima facie case of a legitimate interest in the protection of confidential information: cf Scyne Advisory Business Services Pty Ltd v Heaney [2024] NSWSC 275 at [48]–[49]. 7. In relation to customer connection, it is not necessary to show that the employee has become the "human face" of the business of the plaintiff, in the sense of being in a position to control whether the customers remain with or leave the business, and it is sufficient if the employee, as one member of a team, has a strong connection with customers with whom he or she dealt, which gives rise to the possibility of their customers following the employee when he or she leaves: Jardin v Metcash Ltd [2011] NSWCA 409 at [94]–[97]; Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267 at [38]–[39]. 8. Based on the affidavit evidence of Mr Sasha Botha, a senior executive of the plaintiff, the plaintiff has established a prima facie case that the defendant has a strong connection with two important customers of the plaintiff, being The Good Guys and JB HiFi, with whom he dealt during his employment with the plaintiff, which is an aspect of the plaintiff's goodwill and a legitimate protectable interest. 9. For these reasons I am satisfied that there is a serious question to be tried. 10. Turning now to the balance of convenience, it is necessary to consider what course is best calculated to achieve justice between the parties, bearing in mind the consequences to the defendant of the grant of the injunction in support of relief which the plaintiff might not ultimately obtain and the consequences to the plaintiff of refusing the injunction in support of relief which it might ultimately be held to be entitled: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535. Relevant matters to be taken into account include whether damages are an adequate remedy; the defendant's right to a livelihood, delay, the impact on third parties; whether the employee was warned and went into the position with "eyes wide open"; whether any hardship that would be visited on the defendant has come about because he or she is the author of his or her own misfortune; the strength of the case; and any undertakings that have been given: HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212. 11. As the plaintiff submitted, damages are rarely an adequate remedy in cases of this kind: Birt at [45]. The plaintiff has provided an undertaking as to damages and has also, on the prompting of the Court, given an undertaking to continue to pay the defendant's current base salary monthly and pro rata for the duration of the interlocutory relief. Based on the defendant's evidence as to his financial position which I regard as sufficient for the purposes of the interlocutory application, I am satisfied that this undertaking was necessary in order for the balance of convenience to favour the grant of the injunction sought. 12. The plaintiff submitted in relation to the other relevant matters that: (a) there was nothing to suggest that the defendant was not aware of the provisions of the contract when he accepted his new position with Electrolux and can be said to be the author of his own misfortune, given that he has chosen to work for a direct competitor in a similar role: Birt at [49]; (b) while the defendant proffered a number of undertakings at the hearing, the plaintiff is still at risk of disclosure of the plaintiff's confidential information and damage to its customer connection for which damages would not be an adequate remedy; and (c) there was no delay in bringing the application for interlocutory relief. I accept each of these submissions. 13. In my opinion, when all the relevant matters are weighed, the balance of convenience favours the grant of interlocutory relief for the minimum period of the restraint in the employment contract which is three months. 14. Accordingly, I made the following orders: 1. Pursuant to rule 2.1 and/or rule 2.3(h) of the Uniform Civil Procedure Rules NSW (2005) access to Tabs 6 to 11 of Confidential Exhibit SB-2 to the affidavit of Sasha Botha sworn 6 May 2024 be limited to the Court and to the defendant's legal representatives in these proceedings (including Counsel briefed by the defendant's legal representatives in these proceedings and persons employed by or working under the supervision of the defendant's legal representatives) (together, Defendant's Legal Representatives) and be treated by the Defendant's Legal Representatives in accordance with the confidentiality undertakings signed by them. 2. Upon the plaintiff providing the usual undertaking as to damages, an interlocutory injunction restraining the Defendant, until 9 August 2024 (unless extended by further order of the Court), from: 1. Being, or attempting to be, employed by or engaged by, or interested in, any entity which provides products and/or services in the Restraint Area which are the same as or similar to those provided by the Plaintiff and any Group Company (including, for the avoidance of doubt, Electrolux Home Products Pty Limited (Electrolux) or any related body corporate of Electrolux), and in respect of which he was involved in the 12 months prior to 17 May 2024, 2. Soliciting, enticing, persuading, encouraging, canvassing, dealing with, approaching or accepting any approach from, or otherwise inducing or attempting to solicit, entice, persuade, encourage, canvass, deal with, approach or accept any approach from, or otherwise inducing any person or entity who is, or was at any time in the 12 months prior to 17 May 2024 a client, supplier, contractor or customer of the Plaintiff or of a Group Company with whom he had dealings during the 12 months prior to 17 May 2024 to: 1. Cease doing business with the Plaintiff or a Group Company; or 2. Reduce the amount of business the person or entity would normally do with the Plaintiff or a Group Company; 1. Providing, offering to provide, soliciting, canvassing, dealing with, approaching or attempting to approach or otherwise procure or attempt to procure the provision of any products or services to any customers of the Plaintiff or any Group Company with whom he had dealings in the 12 months prior to 17 May 2024, where such products or services are the same as or similar to the products or services provided to those customers by the Plaintiff or Group Company; and 2. Directly or indirectly employing, attempting to employ, solicit the employment or otherwise procure or attempt to procure the services of any person (either on his own account or for any other person, company or other entity) who was employed or engaged by the Plaintiff (or a Group Company) and with whom he had dealings in the twelve months prior to 17 May 2024, or otherwise inducing or assisting the inducement of such persons to terminate or not renew their employment or engagement with the Plaintiff or a Group Company; Where the capitalised words in this order are defined as follows: 1. Group Company means: 1. Any related body corporate (as that term is defined in the Corporations Act 2001 (Cth)) to the Plaintiff; 2. Any entity that controls, is controlled by or is under common control with, the Plaintiff; and 3. Any other entity that is connected with the Plaintiff or any other Group Company by a common interest in an economic enterprise, for example, a partner or another member of a joint venture; and 1. Restraint Area means Australia. 1. NOTES the undertaking of the plaintiff through its counsel, to pay to the defendant his current base salary (without any other loading or entitlements), being an amount of $197,496.00 per annum, to be paid monthly and pro rata for the duration of the interlocutory relief granted by the Court. 2. The Plaintiff to file and serve any notice of motion and further supporting affidavit evidence (if any) seeking expedition of the proceedings by 10am on 21 May 2024 (Expedition Application). 3. The defendant to file and serve any affidavit evidence in relation to the Expedition Application by 5:00pm on 22 May 2024. 4. By 5:00pm on 23 May 2024, the parties' legal representatives to confer and attempt to agree on a timetable for the preparation of the matter to trial and an accurate estimate of the necessary hearing time, on the assumption that the Expedition Application is successful. 5. The Expedition Application be listed before the Expedition List Judge on 24 May 2024. 6. Costs are to be reserved. 7. These orders are to be entered forthwith. ********** 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: 22 May 2024