Supreme Court New South Wales Medium Neutral Citation: Skillsearch Contracting Pty Ltd v Geoffrey Drury [2012] NSWSC 1035 Hearing dates: 21 August 2012 Decision date: 21 August 2012 Jurisdiction: Equity Division Before: Lindsay J Decision: Interlocutory injunction granted and supported by undertakings as to damages. Costs of the motion be the plaintiff's costs in the proceedings. Catchwords: RESTRAINT OF TRADE - Covenant Post Employment Restrictions Non-Competition Restraint Interlocutory Injunction Category: Interlocutory applications Parties: Skillsearch Contracting Pty Ltd (Plaintiff) Geoffrey Drury (Defendant) Representation: Counsel: A Marcus-Chee (Plaintiff) G Carolan (Defendant) Solicitors: Rubicor Group Limited (Plaintiff) Miller Noyce (Defendant) File Number(s): 2012 / 163141 Judgment EX TEMPORE 1By notice of motion filed on 6 July 2012 in proceedings commenced by statement of claim filed on 22 May 2012 the plaintiff applies for an interlocutory injunction to enforce a "non-competition" restraint clause in a contract between itself and the defendant, relevantly a former employee. 2The notice of motion, as filed, also sought an interlocutory injunction to enforce a "non-solicitation" restraint clause in the same contract. However, on the hearing of the motion counsel for the plaintiff conceded that the evidence presently available to the plaintiff was insufficient to ground an injunction referable to that clause. Accordingly, the claim made in paragraph 1 of the notice of motion was not pressed. In due course it will be dismissed. 3The focus for attention, today, is paragraph 2 of the notice of motion. It seeks an order expressed in the following terms: "Order that the defendant be restrained within Australia and until further order from (directly or indirectly ) undertaking, carrying on or being engaged in any business which is competitive with or provides services which are competitive with Skillsearch, being a company that trades a business of providing recruitment services, human resource consulting services and labour hire services, including BK IT Consulting." 4That claim for relief is directed to enforcement of the first limb of clause 13.1(a) of the parties' contract, a document entitled "Executive Service Agreement", and dated 4 April 2006. Clause 13.1(a) is in the following terms, with emphasis supplied to highlight the words upon which debate focused on the hearing of the motion: "13 Post-Employment Restrictions 13.1 Restraint Covenants Subject to clause 13.3 [which the parties agree is not presently relevant], the Executive [the defendant] must not, directly or indirectly, whether solely or jointly with any other person, and whether as principal, agent, director, executive officer, employee, shareholder, partner, joint venturer, adviser, consultant or otherwise, without the written consent of the Company [the plaintiff]: (a) during the Restraint Period within the Restraint Area, undertake, carry on or be engaged in any business which is competitive with the Protected Company [the plaintiff], or be engaged in any employment with, or consultancy or other provision of services for or with a supplier or customer of the Protected Company which involves the provision of services that are competitive with the services offered by the Protected Company, in respect of any type of business activity engaged in, or planned (with the knowledge of the Executive), by the Protected Company at any time in the 12 months prior to the Termination Date;" 5The defendant does not seek to impugn the validity of clause 13.1, either generally or with particular reference to clause 13.1(a). 6The contest between the parties on the hearing of the motion focused, largely, on: (1) the meaning of the word "engaged" in the context of which it appears in the first limb of clause 13.1(a); and (2) whether the conduct of the defendant described in paragraphs 15-20 of an affidavit sworn by him (on 31 July 2012) in opposition to the motion can reasonably be characterised, at the level of establishment of a serious question to be tried, as falling within the first limb. 7Paragraphs 15-20 of the defendant's affidavit are in the following terms: "15 After Ms Kyle's services were terminated by the plaintiff, she formed her own consultancy, BK.IT Consulting. In May 2011 she contacted me and said words to the following effect: 'Geoff, I want to have a go at running my own business. You know I'm not very good with administration work. Can you help me with back office activities such as invoicing, paying contractors and proof-reading contract documentation, that sort of thing?' 16 Since July 2011 I have provided Ms Kyle with some office assistance which has grown in line with her business up to four or five hours per week. She has provided me with an email address and I receive time sheets from consultants she has placed in her clients' businesses. I pay the consultants and send invoices to the clients. I also gave her some financial assistance in relation to the business. 17 I complete Business Activity Statements for her and ensure that her bookkeeping is maintained for taxation and superannuation purposes. 18 On only three occasions I checked the standard terms of the clients' contracts to ensure they did not contain clauses which were detrimental to her business. This happened in relation to the employment contract between and BK.IT Consulting which was entered into in January 2012 and which is exhibited to the affidavit of Mr Bouris. The other standard contracts were those required by Lucas Operations Pty Limited and CSG Solutions Pty Limited. As part of the administration of recording details of the placement of certain people with those clients, I saw the schedules of terms but was not involved in any way in discussions or the negotiations of the particular terms for such placements. 19 What little contact I have with other clients of BK IT Consulting (of which there is only two, as far as I am aware) is limited to emails to do with invoices, timesheets or contract extensions. 20 I have not been paid for any of the assistance that I have provided to Ms Kyle. My assistance has been provided in my capacity as a friend and long-term colleague. At no time have I spoken to her clients in relation to contracts or dealt with employment candidates." 8In my opinion, there is a sufficient evidentiary foundation for an interlocutory finding that the business of Ms Kyle (whether conducted by her personally or through a corporate vehicle) is a "business which is competitive with" the plaintiff. There is an overlap in their customer base, at least to the extent that they have both dealt with Asparora Pty Ltd in the conduct of their respective businesses. 9The focus for attention is the availability of debate about the meaning, and application, of the word "engaged" in the first limb of clause 13.1(a). 10The defendant contends that his admitted activities do not fall within that provision because: (a) in the context of the first limb, the word "engage" imports a requirement that the defendant must exercise some control of, or have some financial interest in, the business. (b) the activities in which he has been involved are in the nature of backroom activities, in the provision of administrative services and the like, rather than in dealing with customers up front. (c) in so far as he may have dealt with clients of Ms Kyle's business it could not be said that he has dealt with them on a regular basis or even as part of a deliberate pattern. (d) the services he has provided to Ms Kyle's business have been entirely gratuitous, consistent with his own perception of himself as substantially retired. 11The defendant relies, heavily, on the analysis of different contractual provisions found in, first, WPS Enterprises Pty Ltd v Radford [2009] v BSCA 22; 253 ALR 596, with particular reference to paragraphs 4, 48 and 74; and secondly, C & S Constructions Pty Ltd v Dawson (Waddell CJ in Eq, unreported, 31 October 1991); BC 9101465, in particular at pages 1 and 24 of the Butterworths' print out. 12The fact that the provisions considered in these cases differ from those under consideration in the present case counsel's caution. Each contractual provision must be considered in its own context and according to its own terms. 13The plaintiff's contentions emphasise: (a) observations made in WPS Enterprises Pty Ltd v Radford at paragraphs 31, 44 and 78. (b) in its context in the first limb of clause 13.1(a), the word "engage" does not necessarily import any element of control or financial interest. (c) what is said to be the systematic nature of the defendant's activities, not limited to isolated events. (d) the harm that the plaintiff submits could flow to it from the defendant's provision of assistance to a competitor. 14The plaintiff contends, in particular, that the following features of the conduct of the defendant are significant (and in advancing that contention it refers to both the defendant's affidavit and a supporting affidavit of Brenda Kyle sworn 31 July 2012): (a) Activities of the defendant are of commercial assistance to a competitor of the plaintiff (in the character of a competitor of the plaintiff), whether or not characterised as "back office", and there is no distinction in clause 13.1(a) between "back end" and "front end" activities. (b) the defendant's activities have included the provision of financial assistance to a competitor of the plaintiff. (c) an inference to be drawn from the defendant's affidavit, the affidavit of Ms Kyle and an ASIC search tendered in evidence is that the defendant has provided to Ms Kyle's business, rent free, office accommodation at North Sydney, coupled with a telephone answering system. (d) the defendant's assistance to Ms Kyle's business includes the provision of business advice, as well as administrative assistance, which must be of commercial benefit to her business, particularly having regard to the defendant's experience and reputation. 15In my opinion, the defendant's contentions (even if ultimately accepted at a trial of the proceedings) do not detract from the existence, today, of a serious question to be tried. 16I leave to one side, for present purposes, exculpatory statements that can be found in the defendant's affidavit. They cannot change the character of his conduct, whether that conduct is or is not permissible within the framework of clause 13.1(a). 17The defendant's conduct, as presently disclosed by the evidence, cannot in my opinion be characterised as casual. It is, by its nature, systematic and directed to the provision of material assistance to a competitor of the plaintiff. Nor can his conduct be discounted as de minimus, or disregarded, because it has been undertaken from the vantage point of retirement or for no material reward. 18In my opinion, further, it cannot be said that damages would be an adequate remedy to which the plaintiff should be left. The nature of a non-competition restraint is such that it is generally (and, in my opinion, in this case) amenable to a grant of interlocutory relief because proof of a claim to damages may be difficult. 19In my opinion, the balance of convenience favours the grant of an interlocutory injunction. The defendant says that his activities are no more than those of a friend, without any financial return, or any prospect of a financial return, to him. The plaintiff, on the other hand, has a commercial imperative to preserve its business from competition. 20Accordingly, I propose to grant an order substantially in the terms set out in paragraph 2 of the plaintiff's motion. I will, however, insert the words "by himself, his servants or agents" after the word "defendant" and I will substitute the words "the plaintiff" for the reference to "Skillsearch". 21Although it is, I think, appropriate to make the order operate "until further order", it should be specifically limited by reference to the date upon which any obligation that the defendant might have under clause 13.1(a) might expire. That date is 30 June 2013. 22The grant of this injunction will come at a price for the plaintiff. It must give the usual undertaking as to damages, as set out in rule 25.8 of the Uniform Civil Procedure Rules 2005 (NSW). I mention this, expressly, because at the outset of the hearing of the motion the plaintiff was minded to submit that it should not be required to give any such undertaking. The facts of this case do not appear, to me, to fall with any exception that could conceivably apply to the standard requirement of the Court that an interlocutory injunction be supported by an undertaking as to damages. 23If there was ever any doubt about the need for an undertaking as to damages to be given as the price of any form of restraining order, that doubt might generally be thought to have been laid to rest in National Australia Bank v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277 (a case involving the appointment a receiver and manager). 24For the assistance of the plaintiff, and to make sure there can be no misunderstanding, I note that the form of the "usual undertaking as to damages" is set out in rule 25.8, the terms of which are as follows: "25.8 Meaning of "usual undertaking as to damages" The "usual undertaking as to damages", if given to the court in connection with any interlocutory order or undertaking, is an undertaking to the court to submit to such order (if any) as the court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the interlocutory order or undertaking or of any interlocutory continuation (with or without variation) of the interlocutory order or undertaking." 25In the course of the hearing of the motion I drew to the attention of counsel for the plaintiff the possibility that, if the undertaking as to damages were ever to be called upon, following the final determination of the proceedings, the terms of the undertaking may be sufficient to permit Brenda Kyle or her corporate vehicle to make a claim for compensation. I am not to be taken as identifying that as anything other than a risk to which the plaintiff must be exposed by success on its motion, but it is a risk that should be brought home to the plaintiff sooner rather than later. 26The plaintiff was undeterred by any such risk. By its counsel, it did give the usual undertaking as to damages. I propose, therefore, and subject to any refinements suggested by counsel to make an order in terms of paragraph 2 of the plaintiff's motion as I have proposed it be amended. 27Subject to hearing from the parties, and the defendant in particular, I am inclined to the view that the plaintiff must have its costs of the motion. [DISCUSSION ENSUED] 28What I propose to do, having heard from counsel, is to order that the costs of the motion be the plaintiff's costs in the proceedings, so that if the plaintiff succeeds at trial it will get its costs. 29I formally dismiss paragraph 1 of the motion and (upon the plaintiff giving the usual undertaking as to damages) I make an order in terms of paragraph 2 of the motion with the amendments I have earlier identified. 30I make the order for costs that I have just resolved to make. 31I direct that the proceedings be listed before the registrar for directions at 9 am on Tuesday, 4 September 2012. ********** 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: 06 September 2012