Great Southern E-vents Pty Ltd v Peskops [2007] NSWSC 382

Reported Decision : (2007) ATPR 42-152

New South Wales Supreme Court

CITATION : Great Southern E-vents Pty Ltd v Peskops [2007] NSWSC 382

HEARING DATE(S) : 12 & 13 April 2007

JUDGMENT DATE : 13 April 2007

JURISDICTION : Equity

JUDGMENT OF : Hamilton J

DECISION : Interlocutory injunction forbidding contact by former employee with four clients of former employer.

CATCHWORDS : TRADE AND COMMERCE [28] - Trade and commerce generally - Restraint of trade - Restraint by agreement - Enforcement of agreement - Remedies for breach of agreement - Right to injunction - Interlocutory injunction - Whether injunction may be granted to restrain contact with clients of former employer based solely upon contractual restraint of use of confidential information.

Cactus Imaging Pty Ltd v Glenn Peters [2006] NSWSC 717 CASES CITED : Digital Pulse Pty Ltd v Harris [2007] NSWSC 33 Kolback Securities Ltd v Epoch Mining NL (1988) NSWLR 533 Lo Presti v Karabalios [2000] NSWSC 395

PARTIES : Great Southern E-vents Pty Limited (P) Francesca Peskops (D)

FILE NUMBER(S) : SC 2204/07

COUNSEL : P R Garling SC (P) D P O'Dowd (D)

SOLICITORS : Henry Davis York (P) Truman Hoyle Lawyers (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

FRIDAY, 13 APRIL 2007

2204/07 GREAT SOUTHERN E-VENTS PTY LIMITED v FRANCESCA PESKOPS JUDGMENT 1 HIS HONOUR: This is an application for interlocutory injunctive relief arising out of the departure from her employment with the plaintiff of the defendant. The plaintiff is an events management company. The defendant was until recently employed by the defendant as sales and marketing manager. The plaintiff is a comparatively small company. Jeremy Kim Garling is the managing director of that company and there was a permanent staff of three in addition to Mr Garling and some contractors. The defendant occupied an important place in the company. She was, as I have said, sales and marketing manager and was second in the hierarchy to Mr Garling himself. 2 The defendant's written contract of employment contained a clause restraining the use of confidential information obtained in the course of or in connection with her employment. "Confidential information" was defined in the agreement by categories. The contract specifically provided that the defendant's obligations under the confidential information clause should continue after termination of the agreement, except in respect of information that was part of her general skill and knowledge. There was no further restraint of trade clause in the contract restraining her from engaging in competition or soliciting clients of the plaintiff and the evidence shows that this was not some accidental omission but was as a result of negotiations between the parties at the time the employment agreement was entered into. 3 There was originally no contest that there should be an appropriate restraint of the use of confidential information. There has already been in force an interlocutory restraint of the use of the plaintiff's confidential information and compelling its return to the plaintiff. The defendant now says that any confidential information has been returned and there is no need for any further restraint in this regard, although she acknowledges that she has been and continues to be bound by the clause in the agreement forbidding the use of confidential information. 4 However, the real controversy that has been agitated before me is whether there can be, bearing in mind the absence of any restraint clause beyond the prohibition on the use of confidential information, an injunction restraining the defendant from making contact with five named entities for any purpose relating to the supply by the defendant or any company to which she is related of services of the kind provided by the plaintiff. 5 The injunction is sought on the ground that any dealing with those entities in the circumstances which have been established would inevitably involve the use by the defendant in the dealing of confidential information. Apart from the fact that it is hoped that a final hearing will take place before that time, relief is not sought extending beyond 31 December 2007, on the basis that the confidential information concerned will have become stale by that time. 6 The evidence shows that the defendant was for some time before her dismissal by the plaintiff on 14 March 2007 planning with a proposed partner to enter into a business in the events management field competitive with the plaintiff's business. She has proceeded to set up that business with her proposed partner. It is to the defendant's credit that, although the subject matter was discussed with her proposed partner, there is no suggestion in the evidence at present available that she was contacting existing clients of the plaintiff during her employment in relation to her proposed future business. There is evidence by her as to whether or not there has been contact since she has left the plaintiff's employ between her and the five named clients and what the content of that communication has been, where it has occurred. 7 In relation to the first of those clients, the Australian Chamber Orchestra, there is the suggestion of some substantial dealing between her new business and that entity, but on the basis of the provision in effect of gratuitous services to that client during the 2007 year. There is nothing in the evidence to suggest that there are any advanced negotiations with any of the other four clients toward the provision of services to them this year. I should say that the plaintiff has conceded, for the purposes of this application, that I should treat as factual this portion of the defendant's evidence. 8 There is some novelty, as I understand it in the short time that has been available to me, in the proposition that there should be restraint of client contact in a situation where the sole restraint clause involved is a restraint of the use of confidential information. 9 In Cactus Imaging Pty Ltd v Glenn Peters [2006] NSWSC 717, Brereton J granted an injunction restraining the canvassing of clients. His Honour held that, in the circumstances of that case, the prohibition on the use of confidential information rendered reasonable the granting of such a restraint, but in circumstances where there was in fact a non-solicitation clause, in other words, the restraint on the use of confidential information rendered the restraint imposed on soliciting reasonable and justified the injunction under that clause. That, of course, is different from this case, where there is no non-solicitation clause. Mr Garling, of Senior Counsel for the plaintiff, has not been able to refer me to any case where an injunction against poaching of clients has been founded solely upon a clause forbidding the use of confidential information. 10 I have already set out the evidence concerning the importance of the defendant's position in the plaintiff's organisation. There is no doubt that she was the person principally dealing with the five clients in respect of whom the restraint is sought. What is more, there is evidence of particular information, which, certainly, has been in her possession concerning dealings with those clients on behalf of the plaintiff. She it was who dealt with them last year and she was obviously aware of the financial terms on which the plaintiff dealt with them at that time, including the "budget" for their events, the expenses in relation to those events and the profit and profit margin to the plaintiff in respect of those dealings. Furthermore, she had in her possession a budgeting document (page 6 of Confidential Exhibit A2) in respect of the 2007 year, which dealt under the heading of "real prospects" with those organisations, with the year 2007 divided into quarters and events budgets and anticipated earned profits in respect of those entities specified. She does swear that she did not memorise any documents and it is submitted on the defendant's behalf that there is no evidence that she at present has any of this information. I, of course, do not make any finding as to this matter or other factual matters on an application such as this. 11 The plaintiff's arguable case, as it is put by Mr Garling, is that it is virtually impossible that, assuming the defendant's honesty - which, for present purposes, I do, there is an arguable case that it is impossible that these few but central facts as to the plaintiff's dealings with those five entities are not carried in and present to the defendant's mind and that, if that be so, still assuming her honesty, it is virtually impossible that that small but central body of information, which is undoubtedly within the definition of confidential information in the employment contract, would not be used by her in dealings with those five clients concerning this year's events. It is part of the plaintiff's case that, although there is no non-solicitation clause under which relief may be sought, the confidential information which is entitled to protection can be protected in these circumstances only by forbidding dealing with that small number of clients during the finite period of 2007. 12 This involves determinations of fact which I do not propose to make and it may well involve legal decisions as to the proper ambit of the protection of confidential information and the form of injunctive relief that is appropriate to protect it. Again, whilst there has been some debate over the years as to the degree to which questions of law should be determined on interlocutory injunction applications, may I make it quite plain that I think it inappropriate that those questions of law be determined upon an uncertain factual basis and I do not intend to make any determinations on this application of those legal questions. 13 I have received assistance in coming to my conclusion on the question of whether the plaintiff has raised a serious question to be tried with some particular citations from judgments which the defendant has given to me. The portions that I have emphasised below are different from those emphasised by the defendant. The first of those is from the judgment of Palmer J in Digital Pulse Pty Ltd v Harris [2007] NSWSC 33. What his Honour said in this regard is not affected by the successful appeal on a totally different aspect of his Honour's judgment. His Honour said at [23]: "When the employment ceases, the employee is free to compete with the employer, unless subject to a valid contractual restraint on competition. The employee may take away and utilise the benefit of personal relationships built up with particular customers of the former employer and may solicit any customer who the employee can recall without the aid of a list taken from the former employer and without deliberate memorisation of a customer list. The employee may not, however, use for his or her own commercial benefit confidential information of the former employer, whether to solicit business from the former employer's customers or to carry out work for such customers even if solicited ."