Supreme Court New South Wales Medium Neutral Citation: Kellyville Properties v Asovale [2014] NSWSC 18 Hearing dates: 24/01/2014 Decision date: 24 January 2014 Jurisdiction: Equity Division Before: McDougall J Decision: Summons dismissed with costs. Costs to be assessed on indemnity basis. Catchwords: PROCEDURE - Interlocutory orders -Injunctions - whether to grant interlocutory injunctive relief to restrain alleged misuse of confidential information - whether information confidential EMPLOYMENT LAW - the relationship of employer and employee - whether employee after termination of employment may solicit customers of former employer PROCEDURE - costs - interlocutory proceedings - indemnity costs Cases Cited: Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979 Southern Cross Financial Group (Newcastle) Pty Ltd v Rodrigues [2005] NSWSC 621 Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272 Category: Procedural and other rulings Parties: Kellyville Properties Pty Ltd (Plaintiff) Sara Asovale (Defendant) Representation: Counsel: J F Heazlewood (Plaintiff) D R Pritchard SC (Defendant) Solicitors: P J Ellis Solicitors & Attorneys (Plaintiff) Gavel & Page Lawyers (Defendant) File Number(s): 2014/0979 Judgment (ex tempore - revised 24 january 2014) 1HIS HONOUR: The plaintiff, a real estate agent, employed the defendant to handle the plaintiff's letting business. The employment terminated on about 6 December 2013. The plaintiff says that, following termination, the defendant (who has gone to work for another real estate agent) has misused the plaintiff's confidential information. It seeks interlocutory injunctive relief to restrain that misuse. For the reasons that follow, that claim fails. 2The confidential information in question is said to be a "rent roll" maintained by the plaintiff. This appears to be a list of owners of property who wish to have their properties leased out, details of the properties, and of course contact and other details for the owners. The plaintiff's case is that the information contained in that rent roll, which it says it purchased from another real estate agent for whom the defendant had worked, is confidential. 3There was no written contract of employment. There is no restraint of trade binding the defendant following termination of her employment with the plaintiff. It is common ground that, so long as she does not use confidential information of the plaintiff, the defendant is at liberty to solicit customers of the plaintiff with a view to obtaining their custom for her new employer. The concessions to that effect made by Mr Heazlewood of counsel, for the plaintiff, were properly made. 4There are a number of fundamental problems in the plaintiff's case. One, in my view, is its failure to identify with any specificity the information said to be confidential and the reasons why that information is said to be confidential. The "rent roll" which lies at the heart of the complaint has not been proved. It is not even a confidential exhibit in the proceedings. 5Another problem is that on what in my view is the proper state of the law, an employee, at least in the absence of any enforceable restrictive covenant, is free to solicit customers of the employee's former employer after termination provided that the employee, in doing so, does not actively use confidential information that he or she has recorded or memorised in the course of his or her employment. 6That is a slightly different proposition to the point that was conceded. What I am looking at now is the entitlement of an employee, after termination of employment and absent any binding restraint of trade, to use his or her general knowledge of the identity of customers of the employer and the likely need of those customers for further work. In the context of an employee of an accounting firm, Bryson J expressed the position as follows in Weldon & Co v Harbinson [2000] NSWSC 272 at [71]. 71 It should not be found that there was misuse of any confidential information relating to the identity of clients and the nature of the business for which they retained the plaintiff. For the purpose under consideration there was no confidentiality to be protected; that is to say, the plaintiff was entitled to use her general knowledge of the identity of clients and their likely need for future accounting work for her own advantage after leaving employment. There is no basis for any finding that the defendant's conduct was misleading or deceptive. There were no circumstances and there was no legal duty which required her to notify him of her intentions. 7Young J made a similar point in Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979 at [20]: 20 Bryson J, in the Weldon case at [72], dealt with a distinction between a written list of customers and an employee remembering who the customers were. There is some doubt in the authorities as to how far an employee can make use of his or her memory of customers as distinct from a list. I consider that the proposition in Heydon, The Restraint of Trade Doctrine 2nd ed (Butterworths, Sydney, 1999) p 80, correctly states the law, namely, "The employee cannot remove, whether by using paper or using memory, a material part of the former employer's business records; but the employee can approach a particular customer or client whom that employee can recall without a list or deliberate memorisation". That proposition is, I believe, supported by the decision of Peninsular Real Estate Ltd v Harris [1992] 2 NZLR 216 at 221. 8His Honour, by then Chief Judge in Equity, repeated the point in Southern Cross Financial Group (Newcastle) Pty Ltd v Rodrigues [2005] NSWSC 621 at [63]: 63 As the textbooks say, the employer has rights in confidential customer lists and connections and it is quite clear that employees cannot take or copy a list of customers with the intention of using the list later for their own benefit. But in the absence of a valid legally enforceable restrictive covenant, an employee is entitled to rely upon any retained knowledge of the customers, their identity, requirements and so on, and this is especially the case where the ex-employee has personally dealt with the customer for some time and could reasonably be expected to recall their details in his mind. I have paraphrased what is in Hull's: Commercial Secrecy: Law and Practice (Sweet & Maxwell, London, 1998) paras 7.48 and 7.49. Again, I have been referred to previous cases which show that this sort of material is in a borderline position such as Coco v AN Clark (Engineers) Ltd [1969] RPC 41; (1968) 1A IPR 587 and my own decision in Forkserve Pty Ltd v Pacchiarotta (2000) 50 IPR 74. 9In this case, the defendant's evidence, which is unchallenged and which in important respects is corroborated by other evidence coming from former customers of the plaintiff, is that she has only dealt with former customers of the plaintiff who, following termination of her employment, approached her to take over their letting business; and she has not even dealt with all those who so approached her. 10But even if I were to regard that as a point which should not be decided on an interlocutory application, and to take the view that somehow the plaintiff may be able to prove that in some way the defendant has approached its former customers herself, there is no evidence whatsoever that the defendant has made notes or lists of the allegedly confidential information, or has committed it to memory, in either case for the purpose of misusing it following termination of the employment. 11For those reasons, as I have said, the basis of the plaintiff's claim to interlocutory injunctive relief has not been made out. 12It is thus not necessary to turn to other matters such as the balance of convenience or the related question of the adequacy of damages as a remedy. Were it necessary to do so, I would conclude that those matters too tell against the grant of interlocutory injunctive relief. 13In a real sense, the plaintiff brought the present situation upon its own head. Once the defendant's employment had been terminated the plaintiff sent an email to all the customers on its rent roll. That email contained two misleading and incorrect statements, and one meaningless statement. It said that the defendant was on extended leave. That was wrong. Her employment had been terminated. It said that her mobile number will not be effective. That, too, was wrong. The mobile telephone used by the defendant, during her employment by the plaintiff, was her own. It was not open to the plaintiff to render it ineffective and the plaintiff did not do so. Finally, the email gave a contact number for customers. That contact number was incorrect. It did not contain the correct number of digits. 14In those circumstances, as the defendant says happened, and as is to some extent corroborated, it is hardly surprising that former customers of the plaintiff, with whom she had dealt in the course of her employment and who had retained her mobile telephone number, sought to contact her in relation to their letting business. 15The weakness of the case, and the real difficulties involved in establishing any breach of any obligation of confidence, or any misuse of confidential information, would tell very strongly against granting injunctive relief of the kind sought, the effect of which would be to impose significant restrictions on the defendant in her new employment, probably made more significant by the concern that actions not in fact prohibited, but possibly approaching the borderline of what is prohibited, might not be undertaken for fear of attracting the consequences of breach. 16Further, to the extent that it may be shown that the defendant has misused confidential information in a way that attracts legal redress, there can be little doubt that her current employers will maintain, for their own purposes, adequate records of any leasing transactions in which the defendant was involved as an employee. Accordingly, if it ever gets to the stage of assessment of damages, (and on my view of the strength of the plaintiff's case, this is highly unlikely), there will be adequate records to show what business the plaintiff might have lost by any proven wrongdoing. 17For all those reasons, as I have now said twice already, the application for interlocutory injunctive relief must be dismissed. I will hear the parties on costs. ON COSTS 18Counsel have addressed the question of costs. For the plaintiff, Mr Heazlewood has indicated (among other things) that, the application for interlocutory relief having failed, his client does not wish to pursue the action and that the summons may be dismissed. I will do that in a moment. 19Mr Pritchard of Senior Counsel, for the defendant, sought costs, and on the indemnity basis. As to the latter aspect of the application (the former not being opposed), Mr Pritchard pointed to a number of matters. One was a detailed letter written by the defendant's solicitor to the plaintiff's solicitor on 9 January 2014, some four days before the proceedings were commenced. That letter set out clearly the defendant's position: that she had not retained any confidential information; that she had not "reproduced any media or supplied any such media to third parties" (whatever that may mean); and that she would "not wilfully and purposefully seek to affect" the plaintiff's business or reputation. The defendant said further that, although she would not actively seek out the plaintiff's customers, she would consider undertaking their business if they should approach her. 20The defendant's offer not actively to seek out the plaintiff's customers seems to me, for the reasons I have indicated, to go beyond what the law required her to do. Certainly, as is common ground, her entitlement to undertake work for those customers should they approach her cannot be doubted. 21In my view, the application for indemnity costs should succeed. I have pointed out already the manifest deficiencies and shortcomings in the plaintiff's case, starting with its failure to identify in any way the relevant information or the reason why it requires protection, and finishing (after looking at a number of legal hurdles along the way) with the proposition that the plaintiff had utterly failed to prove misuse of any information. 22In those circumstances, where the defendant's position had been set out carefully and clearly and where the plaintiff had been put on notice expressly that any application, should it be made and fail, would result in an application for indemnity costs, I do think that the Court is justified in concluding that the defendant should not be left out of pocket, to the extent that an ordinary costs order might do, as a result of the plaintiff's wilful and in my view entirely misconceived pursuit of injunctive relief. 23I make the following orders: 1. Order that the summons filed in court on 23 January 2014 be dismissed; 2. Order the plaintiff to pay the defendant's costs; 3. Order that those costs be assessed on the indemnity basis. ********** 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: 07 February 2014