Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Tipto Pty Limited v Yuen [2016] NSWCA 21 Hearing dates: On the papers Decision date: 26 February 2016 Before: Beazley P; Emmett AJA Decision: Summons seeking leave to appeal dismissed with costs. Catchwords: PRACTICE AND PROCEDURE – leave to appeal – no question of principle Legislation Cited: Restraints of Trade Act 1976 (NSW) Supreme Court Act 1970 (NSW) Cases Cited: Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 Jardin v Metcash Ltd (2011) 285 ALR 677 Lee v New South Wales Crimes Commission [2012] NSWCA 262 Category: Principal judgment Parties: Tipto Pty Limited (First Applicant) SWU Financial Planning Pty Ltd (Second Applicant) Premium China Funds Management Pty Ltd (Third Applicant) Kam Chuen Yuen (First Respondent) CoWealth Partners Pty Ltd (Second Respondent) Representation: Counsel: R C Gration (Applicants) J J Fernon SC; B G Curtin (Respondents) Solicitors: WMD Law (Applicants) Harmers Workplace Lawyers (Respondents) File Number(s): CA 2015/361554 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Division Citation: [2015] NSWSC 1086 Date of Decision: 7 August 2015 Before: Robb J File Number(s): 2014/223988 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. THE COURT: This is an application for leave to appeal from the decision of Robb J in which his Honour dismissed the applicant's claim for injunctive relief: Tipto Pty Ltd v Yuen [2015] NSWSC 1086 at [37]. The parties have consented to the application being dealt with on the papers. 2. The applicants for leave to appeal are three associated companies who engage in the provision of financial services. The first applicant (Tipto) is the trustee of a service trust that provides administrative staff to the other two companies; the second (SWU) provides financial planning services; and the third (PCFM) is a distributor of managed funds. The controlling shareholder of each applicant is Mr Simon Wu. Mr Wu is also a director of SWU and PCFM and the secretary of Tipto. 3. The first respondent, Mr Kam Chuen Yuen, was employed by Tipto under an employment agreement dated 1 July 2011 (the employment agreement). He had been employed under a series of agreements with Tipto since 2007. In his employment under these various agreements, Mr Yuen worked for PCFM, as a business development associate and for SWU, assisting with the provision of financial planning reports and other services. He devoted approximately two thirds of his time to SWU and one third to PCFM. 4. Mr Yuen, SWU and PCFM also entered into an employee confidentiality and independence statement (the confidentiality agreement) on 29 July 2013. 5. Mr Yuen gave notice of resignation on about 10 February 2014 and the last day of his employment was 28 March 2014. He subsequently commenced business on his own account through the second respondent (CoWealth Partners), a company he controls. 6. The applicants brought proceedings by which they sought wide-ranging injunctive relief against the respondents alleging that Mr Yuen had breached both the employment agreement and the confidentiality agreement. In summary, they sought orders restraining the respondents from disparaging the applicants' business or encouraging their clients to cease using their services; connecting with the applicants' clients on the social media platform LinkedIn; publishing certain confidential information, as defined in the confidentiality agreement; and entering into competition with the applicants. 7. The initial proceedings included a claim for damages for $2,200, which was later abandoned. 8. On 12 August 2014, shortly after the commencement of proceedings, Mr Yuen undertook, on his own behalf and that of CoWealth Partners, not to act for any new client without first complying with a protocol that would prevent them from providing services to clients of the applicants. Mr Yuen also gave undertakings to the court by which he was prohibited from publishing any further information about SWU and undertook that he did not have in his possession any documents or electronic files from the databases of SWU or PCFM. 9. The applicants' claims were dismissed by orders of Robb J made on 7 August 2015. His Honour was critical of the applicants' conduct of the case, noting at [16] that: "… not all of the allegations of wrongdoing made against [the respondents] are the subject of relief sought by [the applicants], and [the applicants] have abandoned a number of claims that they pleaded in their statement of claim." Outline of the proposed appeal 1. The applicants require leave to appeal as the quantum in dispute is less than $100,000: Supreme Court Act 1970 (NSW), s 101(2)(r). They also seek an extension of time in which to file the summons seeking leave. The respondents do not oppose the extension but submit that leave should not be granted. 2. The proposed appeal is in a narrow compass. The ground raised is that the trial judge, having construed cl 30.1 of the employment contract, failed to consider whether the evidence warranted the granting of injunctive relief sought in par (1)(a) of the statement of claim. By par (1)(a), the applicants sought: "(1) An order restraining the first [respondent], whether personally or via a servant, agent or corporate entity, up to and including 28 March 2016 from: (a) contacting, inducing, encouraging or soliciting any of the clients that used the services of any of the [applicants] during the period from 4 January 2007 to 28 March 2014 inclusive, including without limitation the clients listed in Confidential Exhibit A filed with the summons in this proceeding, to cease using the services provided by the [applicants] …" 1. The respondents have filed a draft notice of contention by which they seek to affirm the judgment below on the additional ground that cl 30.1(c) of the employment agreement creates an invalid restraint of trade pursuant to the Restraints of Trade Act 1976 (NSW). 2. Although the proper construction of the employment agreement was in issue at trial, there is no challenge to the construction given to the agreement by the primary judge. Rather, the challenge is based upon his Honour's alleged failure to consider whether the evidence warranted the grant of injunctive relief having regard to the terms of the employment agreement as properly construed. That involves an understanding of the terms of the employment agreement. 3. The employment agreement defined Tipto as the "Company". Clause 30.1(c) provided: "30.1 In consideration of your remuneration and to protect the Company's goodwill, you will not while employed by the Company or for a period of 2 years within NSW after your employment with the Company ends, do the following: … c. contact, induce, encourage or solicit any of the clients that use the services of the Company and its related entities to cease doing so or in any way disparage the Company or its associated entities or the services they provide; ..." 1. At [119], his Honour held that "related entities" and "associated entities" in cl 30.1(c) referred to SWU. Critically, at [128], his Honour held that the expression "to cease doing so" in cl 30.1(c) qualified "contact" such that mere contact with clients, without more, was not prohibited. 2. In support of the injunction sought, the applicants contended that Mr Yuen committed two breaches of cl 30.1(c). 3. The first alleged breach was in relation to Mr Giang Ngo. However, his Honour found, at [123], that: "… [the respondents] have been able to adduce evidence that CoWealth Partners provided financial planning services to him, but Mr Ngo remains a client of SWU, and SWU does not have evidence that Mr Yuen has encouraged Mr Ngo to cease being a client of SWU." 1. It followed that the claim relating to Mr Ngo could not stand in light of the finding that mere contact was not prohibited pursuant to cl 30.1(c). 2. The second alleged breach of cl 30.1(c) related to Dr Toon Kim Chaim and Dr Wai Lam Emily Yan, a married couple. This allegation had not been subject of the pleaded claim and his Honour was not satisfied on the evidence that there had been a breach. As his Honour observed at [84]: "The allegation … that Dr Chaim and Dr Yan ceased using the services of SWU as a result of the contact … is more problematic, as Dr Chaim and Dr Yan were not called as witnesses. Apart from the fact that [the respondents] have put these persons on a client list, the evidence does not disclose what, if any, services have been provided by [the respondents] to those persons." 1. His Honour refused leave to amend the pleadings to include this allegation, finding, at [93], that such an amendment would not be fair to the respondents. Should leave to appeal be granted? 1. The extent of the applicants' submissions on the substance of the appeal, if leave was granted, was as follows: "Despite the primary judge having construed the meaning of the restraints in clauses 30.1(b) and 30.1(c) of the relevant Employment Agreement, his Honour failed to then consider whether the evidence, including the evidence in relation to Mr Ngo and in relation to Dr Chiam and Dr Yan, warranted the granting of the injunctive relief that had been sought in the Statement of Claim." 1. There is no basis for this submission in his Honour's judgment. His Honour clearly considered whether the evidence was sufficient for the granting of the relevant injunctive relief: see judgment at [83]-[90]. 2. We see no error in the conclusions at which his Honour arrived, and subject to a further matter which calls for separate comment, the applicants have failed to satisfy the Court in accordance with principle that leave ought to be granted: see Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69; Lee v New South Wales Crimes Commission [2012] NSWCA 262. 3. The parties appear to agree that the principal relief claimed is now largely moot, as the restraint clause in the employment contract would most likely expire prior to any hearing of the appeal hearing. The applicants contend, however, that "the substantial injustice that arises is in relation to costs" (par (4)). They submitted that had his Honour not erred in the manner for which they contend, they would have been entitled to costs, including costs on an indemnity basis having regard to the terms of an offer of compromise they made to the respondents shortly after the commencement of the proceedings: see Jardin v Metcash Ltd (2011) 285 ALR 677. 4. It is unnecessary on this application to discuss Jardin v Metcash Ltd. It is sufficient to state that having regard to the primary judge's comments as to the manner in which the applicants' conducted the proceedings, in particular, in pleading certain of the allegations without making any claim for relief and their failure to raise any question of principle on appeal, we do not consider that leave ought to be granted on this basis. Order 1. The Court makes the following order: Summons seeking leave to appeal dismissed with costs. ********** 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: 26 February 2016