New South Wales Supreme Court CITATION : Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016 HEARING DATE(S) : 29 August 2008 JURISDICTION : Equity Division Duty List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 29 August 2008 DECISION : Interlocutory injunction granted to restrain defendant from soliciting business from plaintiff's clients. CATCHWORDS : INTERLOCUTORY INJUNCTION – EMPLOYMENT CONTRACT – RESTRAINT OF TRADE – whether seriously arguable case – balance of convenience – where plaintiff sought relief a week after becoming aware of purported breach of contract. CATEGORY : Procedural and other rulings PARTIES : Cerilian Pty Limited (t/as Raine & Horne Gosford) (plaintiff) Graham Fraser (defendant) FILE NUMBER(S) : SC 4478/08 COUNSEL : Ms S K Hill (plaintiff) Mr J A Trebeck (defendant) SOLICITORS : CBD Law (plaintiff) Ferrys Law Firm (defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST BRERETON J Friday, 29 August 2008 4478/08 Cerilian Pty Ltd t/as Raine & Horne Gosford v Graham Fraser JUDGMENT (ex tempore) 1 HIS HONOUR: The defendant Graham Fraser was employed by the plaintiff Cerilian Pty Limited as a sales executive in the plaintiff's real estate agency at Gosford under a contract of employment dated 16 May 2008, made soon after Cerilian became the proprietor of that business, although Mr Fraser had been employed in the business by the previous proprietor, before it was acquired by Cerilian, for a period in excess of a year. The contract contains a restraint on Mr Fraser's activities after termination of the employment, in Schedule "B": POST EMPLOYMENT RESTRICTIONS 1.1 Interpretation of Clause Clause 1.2 shall have the effect as if it were separate clauses, each being severable from the other, such separate clauses consisting of each of the warranties and undertakings set out in clause 1.2 (a) and 1.2 (b) combined with each separate period referred to in clause 1.2 (c) combined with each separate area referred to in clause 1.2 (d). The parties agree that the restrictions are reasonable and are intended to operate to the maximum extent. If any of the said provisions are found to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of any of the other separate provisions. Further, if any provision found to be invalid or unenforceable would be valid or enforceable if part of the wording were deleted or modified and/or for the period of area in 1.2 (c) and 1.2 (d) respectively were reduced, the restrictions apply with the modifications required to make them valid and enforceable. 1.2 You warrant and undertake severally to the Employer that: (a) you shall not; (i) on your own account; or (ii) jointly with or on behalf of any other person or corporation as an officer, employee, independent contractor, adviser, partner, joint venturer or agent; or (i) through any agent, independent contractor, or employee employed or engaged by them or by any firm or corporation in which they alone or together have a substantial interest whether such interest is legally enforceable or not; or (ii) encourage or condone any firm or corporation, in which they may be interested as an employee, director, shareholder, beneficial owner or controller (whether such control can be legally enforced or not) of shares, lender or adviser or otherwise, to (b) solicit, attempt to solicit or entice away from the Employer any director, manager, employee, agent or independent contractor of the Employer whether or not such person would commit any breach of his/her contract of employment or engagement by reason of leaving the service of the Employer: (i) be employed or engaged in any company, firm or business which is or is about to be engaged in any activity or business of providing the services of real estate agency; (ii) solicit or attempt to solicit any business from any person, firm, company or organisation which at any time during the period of your employment has dealt with the Employer, or as at the date of the termination of the contract of employment with the Employer, is in discussion with the Employer regarding the conducting of business; within a period of 3 months from the termination of the Employment Agreement; (iii) in any of the following areas: within a radius of 15 kilometres from the offices of the Employer in which you were employed. 2 Although the defendant has argued that the terms of clause 1.2 are vague and uncertain or at least ambiguous, I think it is at least strongly arguable that its effect is that Mr Fraser undertakes inter alia not to be employed or engaged in any company, firm or business which is or is about to be engaged in any activity or business of providing the services of real estate agency within a period of three months after termination of his employment and within a radius of 15 kilometres from the office in which he was employed. Mr Fraser's employment was terminated on 17 July 2008; the parties are in dispute as to how, but not as to the fact of termination. Accordingly, the three month period referred to in Schedule B extends to 17 October 2008. 3 Following his departure, Cerilian wrote to Mr Fraser, reminding him inter alia of the post-employment restrictions contained in the contract. That letter was sent on 28 July 2008; by that time Mr Barnes of Cerilian was aware that Mr Fraser was attempting to source employment from real estate offices in the restricted area, and indicated that he intended to enforce the restrictions and, if necessary, to take legal action. 4 On 6 August 2008, solicitors acting for Mr Fraser wrote to the solicitors acting for Cerilian contending that "clause 1.2 placed no restrictions whatsoever on our client" and indicating that he intended to continue to seek and obtain employment within the real estate industry whether or not it was within the 15 kilometre radius. Cerilian's solicitors responded on 12 August 2008, asserting that – as was the case – Mr Fraser had taken up employment with Richardson & Wrench Gosford as a real estate agent, and had contacted clients with whom he had dealt whilst employed by Cerilian, and that he was therefore in breach of clause 1.2 of the Agreement. The letter threatened that, unless appropriate undertakings were given by 5:00pm that day, Cerilian would, without further notice, seek an injunction from this Court by approaching the Duty Judge on Friday, 15 August 2008. 5 There was some further correspondence, but nothing which indicated that Mr Fraser would do anything other than persist in his current employment. 6 Proceedings have not yet been instituted and the application comes before the Court today on an application for interim relief before instituting proceedings. However, notice of the application was given and the proposed defendant has appeared by counsel, furnished some documentary evidence and made submissions. The exigencies of the duty list do not permit a detailed recitation of the submissions, issues and argument. 7 As to whether there is a serious question to be tried for a final injunction, in my view it is clear that there is. On the question of construction of clause 1.2, as I have indicated, at first sight, although it is somewhat clumsily drafted, I do not think the objective reader of it could have much doubt that its intent was to prohibit the employee from being employed in a competing real estate agency within the 15 kilometre radius. 8 So far as breach is concerned, the evidence plainly establishes, and it is effectively admitted, that Mr Fraser is engaged in a competing real estate agency within the radius, and also that there is at least a basis for supposing that he has solicited or attempted to solicit business from persons who have in the past done business with Cerilian. 9 In the application of the restraints to those breaches – and indeed in their application for a period of three months and a radius of 15 kilometres – on the evidence before me at this stage, it is at least seriously arguable that the restraint is not unreasonable for the protection of the legitimate interests of the employer in customer connection. Although injunctive relief was also sought in respect of the misuse of the confidential information, the evidence wholly fails to show that there was any confidential information, or that Mr Fraser was in possession of it, or that there is any threat that he will misuse it. 10 Generally speaking, where what is involved is the enforcement by injunction of a contractual negative stipulation, it is a rare case in which relief will be declined on the basis that damages are a sufficient remedy. In any case, the evidence at this stage establishes that Mr Fraser is apparently a bankrupt. 11 As to the balance of convenience, if the injunction is wrongly declined, Mr Fraser will be able to engage in conduct in contravention of the contractual prohibitions, in circumstances where Cerilian will practically be left without remedy due to the impossibility of enforcing a claim for damages against him. If an injunction is wrongly granted, then – depending on the scope of the injunction – Mr Fraser may be put out of employment for the period of the injunction. 12 To my mind, the circumstance that Cerilian has not taken action from the time on which it was on notice of Mr Fraser's proposal to take up competing employment and his having actually taken that up, until today, is a telling discretionary consideration, at least on an application for an interim injunction such as this. It is well established that equity assists the vigilant but not those who sleep on their rights, and that particular vigilance is required when seeking interim relief. Since at least about 12 August 2008, Cerilian has been aware of approaches made by Mr Fraser to various clients who had properties listed with Cerilian. No approach to the Court was made until today. The explanation offered is that although Cerilian was aware that Mr Fraser had taken up competing employment – as Cerilian believed in breach of clause 1.2 – Cerilian was not inclined to take action until it became apparent that he was approaching clients of Cerilian. Thus it conveys that Cerilian was not unduly troubled about his taking up employment with a competing agency, but only once it became aware that he was contravening not only that part of his undertaking, but also, at least as Cerilian suspects, that part which prevents him from soliciting business from clients of Cerilian. In those circumstances, the balance of justice on an interim basis is best served by not granting an injunction in respect of that part of the covenant which prohibits Mr Fraser taking up competing employment, but granting an injunction in respect of that part which prevents him from soliciting Cerilian's clients. 13 Mr Fraser has proffered some undertakings without admission. The first proffered undertaking is not to approach, solicit or entice any principal of Cerilian who has a current agency agreement with Cerilian. In my view that is too narrow, and Cerilian is entitled, under paragraph (b)(ii) of clause 1.2, to wider protection, though not quite so wide as the clause itself encompasses. He also offers an undertaking not to contact any employee of Cerilian other than in respect of joint business between his employer and Raine & Horne Gosford. That undertaking seems to me to go beyond what the contract requires and I do not think it significantly bears on the issues which I have to decide, there being no suggestion of any attempt by him to solicit or entice any employee of Cerilian. 14 My orders are: (1) Upon the undertaking of the plaintiff's solicitor Giles Finney to pay the appropriate filing fees, grant leave to the plaintiff to file a Summons in the form initialled by me, dated this day and placed with the papers. (2) Direct that the summons be returnable before the Expedition Judge on Friday, 5 September 2008 at 10:00am. (3) Dispense with further service of the summons. (4) Note the undertaking of the defendant by its counsel to file a Notice of appearance by 1 September 08. (5) Upon the plaintiff by its counsel giving to the Court the usual undertaking as to damages, order that until 17 October 2008, or further order, the defendant be restrained from by himself, his servants and agents, on his own account or jointly with or on behalf of Richardson & Wrench Gosford or any other person or entity, whether as an officer, employee, independent contractor, adviser, partner, joint venturer or agent, within a radius of 15 kilometres from 178 Mann Street, Gosford NSW, soliciting or attempting to solicit any business from any person, firm, company or organisation, which at any time during the period of his employment with Raine & Horne Gosford had an agency agreement with Raine & Horne Gosford, or as at 17 July 2008 was in discussion with Raine & Horne Gosford with a view to retaining it as an agent. (6) Direct that plaintiff serve any further affidavit evidence on which it proposes to rely for final relief by 1 September 2008. (7) Direct that defendant serve any affidavit evidence on which it proposes to rely at the final hearing by 5 September 2008. (8) Adjourn the proceeding to 5 September 2008, at 10:00am before the Expedition Judge. (9) Costs of the interlocutory application be costs in the proceedings. (10) Direct that these orders 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.