FEDERAL COURT OF AUSTRALIA

Baker & McAuliffe Holdings Pty Ltd t/as JSB Lighting v Carey [2018] FCA 1972

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application filed on 16 October 2018 be dismissed.

2.    The applicant pay the first and second respondent’s costs of the interlocutory application.

3.    The proceeding be listed for case management hearing on 19 December 2018 at 10.15 am.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MARKOVIC J:

1    By originating application and statement of claim Baker & McAuliffe Holdings Pty Ltd trading as JSB Lighting (JSB) commenced proceedings against Mathew Carey and BFD Lighting Pty Limited trading as Modular Lighting & Partners (BFD) as first and second respondents respectively. Mr Carey is a former employee of JSB and the sole director and secretary of BFD.

2    By leave granted on 21 August 2018 Dudley Hewitt, an employee of JSB who is currently serving out his notice period, and Andrew Whittles, a former director of JSB and former secretary of JSB’s parent company, HGL Limited (HGL), were joined to the proceeding as third and fourth respondents respectively.

3    In its amended statement of claim filed on 9 October 2018, in summary, JSB alleges that from December 2017 Mr Carey and Mr Hewitt, then employees of JSB, with the assistance of Mr Whittles, devised a scheme to form a new company, BFD, in breach of the terms of their contracts of employment and their statutory and/or fiduciary duties owed to JSB, and to use BFD as a vehicle to take away the business of one of JSB’s major suppliers, Modular Lighting Instruments NV (Modular).

4    By way of interlocutory application filed on 16 October 2018 (Interlocutory Application) JSB seeks orders, until further order, restraining Mr Carey and BFD, from:

(1)    making direct or indirect contact with the following clients of JSB:

(a)    Wood & Grieve Engineers Ltd (Wood & Grieve);

(b)    Everett-Smith & Co Pty Ltd (Everett-Smith); and

(c)    Studio Collective Pty Ltd trading as Design Theory (Design Theory); and

(2)    directly or indirectly participating, assisting or otherwise being involved in any way in the supply of lighting products for the following projects (as defined in the affidavit of Justin Penhall affirmed 15 October 2018):

(a)    the New Museum Project;

(b)    the Department of Education Project; and

(c)    the IGA South Perth Project.

5    For the reasons that follow the Interlocutory Application should be dismissed.

BACKGROUND FACTS 

JSB and its business

6    JSB was incorporated on 13 April 1993. It operates across Australia and New Zealand and has offices in New South Wales, Victoria, Queensland, South Australia, Western Australia and Auckland. JSB is a supplier of indoor and outdoor lighting products, providing services to a broad commercial and residential customer base. Its core business is the procurement and supply of lighting products to builders to match specifications on project designs.

7    JSB supplies a number of different brands of lighting including, relevantly, Modular. As at 18 April 2018 it had distribution arrangements with the manufacturers of ten brands, including Modular (Suppliers).

8    JSB’s turnover for the fiscal year ending 31 October 2017 was in excess of $23m and, for the 2018 financial year as at 8 August 2018, its turnover exceeded $20m. Suppliers accounted for approximately 80% of JSB’s current financial year revenue and historically have represented approximately 90% of its total lighting supply business. JSB’s Western Australian business operation accounts for approximately 26% of its total revenue. In the 2018 financial year to March 2018, sales in Western Australia generated revenue of over $3.2m.

9    Modular, which is owned by Phillips Lighting, is a Belgium based lighting manufacturer specialising in high end commercial and residential lighting products. JSB has been a distributor of Modular products in Australia and New Zealand since about 1993. According to Mr Penhall, JSB’s chief executive officer, JSB has worked closely with Modular over the last 25 years to establish the brand. The sale of Modular products represents approximately 45% of JSB’s total sales and generates annual gross turnover of approximately $9m with a gross annual margin of about $4.7m.

10    According to Mr Penhall, JSB’s business is generated through its relationships with the decision makers responsible for incorporating its products into design specifications for construction projects. Those decision makers comprise a range of building and construction industry partners including architects, designers, engineers and developers (Specifiers). The purchase orders for lighting products are usually placed with JSB by the builders, electricians and wholesalers contracted to build or supply to developments designed by the Specifiers (Referred Customers). That is, JSB does not supply lighting products directly to Specifiers. In some cases, a Referred Customer will invite lighting suppliers, such as JSB, to tender for lighting supply contracts to supply specified brands in accordance with directions given by the Specifier responsible for the building design specification. Suppliers also refer work to JSB if they are contacted directly by an Australian or New Zealand Specifier or building contractor.

11    Mr Penhall described the usual steps in securing and delivering a lighting products sale to include:

(1)    a salesperson meets with a Specifier and receives a design specification;

(2)    relevant information received from the Specifier is entered by the salesperson into JSB’s database including:

(a)    the Specifier and the names of its contact people for the particular project;

(b)    the lighting specification information including the specified brands and quantities;

(c)    project site information including the address and names of contractors engaged on the project, such as engineers, consultants, builders and electrical contractors (if known); and

(d)    the estimated completion dates for stages of construction;

(3)    JSB produces a purchase order from the design specification and sends it to the manufacturer of the specified brand;

(4)    in some cases it is necessary to request a quote from the manufacturer for the purchase order. However, in most cases, JSB prepares a quote from price lists recorded in its management database;

(5)    on the basis of the quote received from the brand manufacturer, the salesperson responsible for the project or a member of the internal sales support team prepares and provides a quote for supply to the Referred Customer. Any negotiation on price will occur at this stage of the sale process; and

(6)    if the Referred Customer accepts JSB’s quote, it will issue a purchase order to JSB. JSB then confirms its purchase order with the relevant brand manufacturer and the manufacturer assembles and ships the order to JSB’s warehouse in Sydney.

12    The steps set out in the preceding paragraph are ultimately managed by the sales representative responsible for the relevant project who is the key contact and liaison between the Specifier, brand manufacturer and Referred Customer.

Mr Carey

13    Mr Carey has had significant experience in the electrical and lighting industry, initially as a licensed electrician and from July 2011, when he commenced employment with JSB, as a technical salesman.

14    In his employment contract with JSB dated 1 July 2011 (Carey Contract), Mr Carey’s role was described as business development manager – Sydney, reporting to the sales director and included but was not limited to:

Active Sales promotion and marketing of JSB Lighting to New national markets,

Retail, Business to Business and End user

Ensuring JSB Lighting Turnover Sales Budget is achieved.

Ensuring JSB Lighting Customer Service Levels exceed our client’s expectations.

Management of all pre and post sales activity as appropriate.

Ensuring JSB Lighting overhead expenditure is within agreed budgets.

15    The Carey Contract included the following clauses:

Confidential Information

Any information (the “information”) acquired by you in the course of your employment with the company regarding the company, its business, personnel, suppliers and clients and future products, plans and opportunities is confidential to the company. Any products, processes, methods or templates (the “property” developed by the company (including any such property developed by you during your employment) shall remain the property of the company. You agree to:

a)    Keep all such information and property confidential; and

b)    Not disclose or use that information or property otherwise than for the purpose of your employment with the company.

On termination of your employment with the company, you agree to:

a)    Return to the company all copies of materials containing such information and property in your possession.

b)    Permanently erase any such information or property from any computer memory device belonging to you; and

c)    Certify to the company that all such materials have been returned and any such information and property has been permanently erased.

Covenant not to compete

During your employment with the company and for a period of two years thereafter you agree not to make direct or indirect contact with any client of the company in an attempt to attract that client away from the company.

The “Covenant not to compete” will hereinafter be referred to as the Restraint Clause.

16    Mr Carey initially worked from Sydney but in August 2012 he was transferred to Perth to assist with establishing JSB’s presence in the Western Australian market where he remained until his resignation (see [20]-[21] below). Mr Carey was responsible for the supervision and management of two employees: James Baxter, an internal sales support employee; and Wylie Woodburn, a salesperson.

17    Mr Carey’s responsibilities as business development manager included:

(1)    sales and marketing of JSB’s products;

(2)    managing JSB’s relationships with suppliers, customers, Referred Customers, Specifiers and clients;

(3)    day to day management of each stage of the sales process set out at [11] above; and

(4)    maintaining and updating JSB’s Referred Customer and Specifier relationship management and live project databases.

18    According to Mr Penhall, Mr Carey, as a senior employee of JSB, had access to information that would not otherwise be available to competitors and is not and would not be in the public domain. Such information included:

(1)    the identity of JSB’s customers, clients and Suppliers, including Modular;

(2)    business information, including pricing, discounts, order histories and contact details relating to JSB’s Suppliers, customers, Referred Customers, Specifiers and clients;

(3)    live project information for JSB’s Suppliers, customers, Referred Customers, Specifiers and clients;

(4)    JSB’s policy and procedure manuals;

(5)    product specifications and pricing information;

(6)    financial information including sales reports, profit margins and forecasting; and

(7)    management information, including strategic planning documentation.

19    Mr Carey’s position also enabled him to develop business relationships with Suppliers and key clients of JSB. JSB maintained a “People Visit Report” which recorded the number of client visits made by JSB employees each month. The report for Mr Carey printed on 24 May 2018 for the period from October 2017 to September 2018 relevantly records that in the nine month period up to and including May 2018 Mr Carey made 22 visits to Design Theory, visiting three different people, and 27 visits to Wood & Grieve, visiting four different people, with the majority of his visits being with Daniel Wojcik.

20    By letter dated 18 April 2018 Mr Carey informed JSB that he was resigning from his position as “Sales Professional/BDM” effective immediately and that the last day of his employment would be Friday, 18 May “as per [his] obligation under the terms of [his] employment contract”. Among other things, Mr Carey noted that the decision to resign had not been easy but that the “timing coincides with [his] need for a long needed break”.

21    Despite the date indicated in Mr Carey’s letter notifying JSB of his resignation, it is clear from the PAYG Payment Summary for Mr Carey issued by JSB for the financial year ended 30 June 2018 that Mr Carey’s last day of employment with JSB was on 16 May 2018, being the date which is four weeks from the date Mr Carey provided his notice.

Wood & Grieve, Everett-Smith and Design Theory

22    Wood & Grieve is a firm of engineers with whom JSB has maintained a relationship since May 2001. A report generated by Mr Penhall from JSB’s record management database of Wood & Grieve’s client profile and the projects completed by JSB since 2011 show that, where Wood & Grieve was the “consultant”, with one exception, in the period from January 2014 to February 2018 Mr Carey was the named sales representative for each of the projects.

23    Everett-Smith is an electrical contracting firm and, according to Mr Penhall, is a Referred Customer. The majority of JSB’s dealings with Everett-Smith have been as a result of it being specified on projects as the provider of electrical services.

24    Design Theory is an interior design and architecture practice. JSB developed its relationship with Design Theory in about September 2013. A report generated by Mr Penhall from JSB’s record management database shows that from April 2015 to September 2017 Mr Carey was the JSB sales representative for the sale of products where Design Theory was the architect.

The projects

New Museum Project

25    The New Museum Project is a multi-stage development at the Perth cultural centre which is being undertaken by the Western Australian Museum. The construction stage for the New Museum Project is scheduled for completion in 2019 with the exhibition installation to be completed throughout 2019 and 2020.

26    Wood & Grieve has been engaged to provide engineering services for the New Museum Project, including preparation of the project’s lighting design, and Everett-Smith has been engaged to provide electrical services for the project, including the installation of lighting products.

27    On 14 December 2017 at 1.40 pm Martin Armstrong of Everett-Smith sent an email in relation to the New Museum Project attaching a “luminaires schedule” in which he informed recipients, which I infer included Mr Carey, that they had been asked to urgently reprice the project by 10.00 am on 20 December 2017; that they were in the process “of compiling and takeoff”; and asked the recipients to “please price your component of it with either a unit rate or best guess by Monday, 18th December”.

28    Of the five quotes prepared by JSB between 15 December 2017 and 6 June 2018 for the New Museum Project three named Mr Carey as the JSB contact. They were the quotes dated:

    9 February 2018 addressed to Richard Williams at Willy Meyer + Sohn GmbH Hemer, one of the Suppliers;

    27 February 2018 marked “draft only” addressed to Shaun Cross at Everett-Smith; and

    2 March 2018 addressed to Mr Cross at Everett-Smith.

29    Following Mr Carey’s resignation, JSB employed Danny Hartman in the sales role in Western Australia and Messrs Hartman and Penhall became the main JSB contacts for the New Museum Project. Between about mid-May and mid-June 2018 Mr Penhall negotiated with Mr Cross from Everett-Smith to reach an agreed final price for JSB to supply the lighting products required for the New Museum Project. However, in a telephone conversation on 26 June 2018 Mr Cross informed Mr Penhall that he had “received an offer for the project from Carey.”

30    On 26 June 2018 JSB generated a further and final quote addressed to Mr Cross at Everett-Smith for the supply of lighting products for the New Museum Project for $578,070.59 inclusive of GST. Just prior to sending the quote Mr Penhall had a conversation with Mr Cross to the following effect

Mr Penhall:    What stage are you at with this project? I expect you to be placing orders soon.

 Mr Cross:    We are having budgetary issues.

 Mr Penhall:    Are you open to receiving a quote with a reduced price from JSB.

 Mr Cross:    Yes I am.

 Mr Penhall:    Are Everett Smith open to working with JSB on this project.

 Mr Cross    Yes they are.

IGA South Perth Project

31    Design Theory is the head designer for the IGA South Perth Project and a Specifier. Blue Point Electrical Pty Limited (Blue Point) is the successful electrical contractor in relation to the IGA South Perth Project.

32    On 9 August 2018 JSB generated a quote marked “draft only” addressed to Dan at Blue Point to supply lighting products for the IGA South Perth Project for $90,724.83 plus GST.

33    On 16 August 2018 Mr Penhall had a discussion with Mr Hartman in which Mr Hartman informed him that he had spoken to Daniel Wake who, in turn, had told him that JSB’s quote on the IGA South Perth Project would not be accepted and that an order would not be placed with JSB. Mr Hartman told Mr Penhall that Mr Wake had said “there wasn’t much in it between our quote and MLP’s quote and that Mat had done the work on the project”.

34    Mr Penhall’s evidence is that historically the IGA projects have contributed approximately $100,000 per annum in revenue to JSB.

Department of Education Project

35    In early April or May 2016 JSB, through Mr Carey, contacted Daniel Wojcik at Wood & Grieve in relation to a project for the Western Australian Department of Education involving the renovation and construction of several school classrooms with a new lighting system utilising “Modular Drupl”. The new lighting system was to be trialled at Wellard Primary School (Trial Project) and if the Trial Project was successful the system was to be implemented in up to 15 schools to be opened between 2018 and 2020.

36    Wood & Grieve was engaged to provide engineering services for the Department of Education Project and between about 20 May and July 2016 Yuri Golod, a JSB employee, prepared a lighting design to be used in the Trial Project. On 2 June 2016 JSB generated a quote marked “draft only” addressed to Mr Wojcik at Wood & Grieve in relation to the Trial Project for a total of $204,105 inclusive of GST.

37    Between 28 October 2016 and 26 June 2017 JSB generated a number of quotes to provide the lighting products required for the Trial Project. A report extracted from JSB’s database on 8 October 2018 shows that eight quotes were issued in that period to several different companies. Each of those quotes was for $43,904, with the exception of one which was issued to Modular for $0. On 27 June 2017 Advanced Electrical Equipment Pty Ltd (AEE) confirmed that it accepted quote no. 364497 and JSB generated an order acknowledgment. Mr Carey is relevantly noted as the person who made the sale to AEE.

BFD

38    On 7 December 2017 Mr Whittles sent an email to Bart Maeyens and Frederik Danneels of Modular, copied to Mr Hewitt with the subject line “Newco in Australia” to which he attached a document titled “Modular in Australia and NZ – Implementation strategy and risks”. That document identified five key points to resolve as follows:

1.    Philips Legal do not want 25% equity in Newco – Newco is too small for this complexity

2.    At this stage Philips Legal do not want Newco to be called Modular

3.    No discussion as yet on terms of distribution agreement with Newco

4.    Philips Legal want a 6 to 9 month notice period to JSB

5.    Bart is keen to know approach to retaining and securing staff

39    In relation to the second point the document included:

This point is agreed by all parties. Newco could be called BFD Pty Limited (Bart, Fred and Dudley). The name of the company will not overall affect sales, this will be driven by the people, processes and product. Newco and its employees will communicate with the market that it is the new Modular distributor this will be sufficient, however putting Modular into the trading name of Newco was to reflect the partnership, we understand your difficulties about Newco using the Modular name.

40    In relation to the fifth point a “sheet” was attached which was titled “Employees JSB compared to MLIA” and included Mr Carey as a shareholder under the sub-heading “Perth sales”, noting that he “[w]ill lose a long term bonus pool of $100k” and that “Newco has verbally agreed to pay it when it has surplus cash”.

41    On 10 May 2018 Mr Whittles sent an email to Mr Carey, among others, which included a “suggested timetable”. Insofar as the timetable concerned Mr Carey it included the following items:

•    The Company will be incorporated on Thursday 17 May with Mat as the sole director, secretary and shareholder. 17 May is the first day after Mat’s notice expires being 4 weeks from 18 April (the date he resigned)

•    From incorporation the registered office and principal place of business will be will be 16 Richmond Street, North Perth (Mat’s home address), these are ASIC addresses. These will change to new Perth warehouse when Mat moves there.

•    I will manage the process and legal side to inject the share capital into MLP: A rough suggested timetable is

•    By Friday 25 May bank account opened – Rose to advise Mat on which bank and what type of account. Initially only signatory being Mat, when Rose and AV are working for MLP this is will (sic) change to include Rose and AV as signatories and then two signatories must sign at all times.

•    By Friday 25 May – Mat to have put $250,000 into MLP bank account and confirm the same to AW and Rose

…

42    On 12 May 2018 Mr Danneels sent an email to Mr Penhall in which he set out the steps Modular was taking to “implement the augmentation of [its] dealer network”. Attached to Mr Danneels’ email was a letter dated 11 May 2018 addressed to JSB, in which Modular informed JSB that it was implementing its commercial strategy worldwide and that:

As shared before, this strategy enables our partners globally to register their projects.

With this registration, Modular and the partner form a front with one mutual ambition: win the project together.

Consequently, the expansion of our network has no further geographical boundaries.

…

To maximize our growth in Australia and New Zealand, we are taking the next steps to implement the augmentation of our dealer network.

We herewith want to give notice on our plans to expand the network beyond JSB Lighting.

We are convinced that this decision will be mutual (sic) beneficial.

The Modular brand and product will have more reach to the market.

Combined with our commercial policy, we believe that we can go for growth, well beyond what we have achieved today.

…

43    On 16 May 2018, among other things, the following emails were exchanged:

(1)    an email from Mr Carey to Mr Danneels requesting that he approve the website, Instagram and email signature;

(2)    an email from Mr Danneels to Messrs Carey and Whittles which included:

Bart is a bit confused about the speed as during our last telco (Bart, Fred, Dud and Andrew) that newco was not ready yet.

Timing was beginning June or July…

As understood from Mat, things speed up as a new sales person for Perth is hired by JSB.

Can you make a basic but clear timeline to show the following things?

1.    Hire which person when

2.    Start in Perth, but who else in which city when?

3.    Plan of activation? Steps

4.    Connection with out marcom is important, who?

5.    Operation plan newco

6.    Business plan newco (like mentioned in the contract)

Dud made a clear business plan in the past for us, but since then we did not see the updated version yet.

(3)    an email from Mr Whittles to Mr Danneels, copied to Mr Carey, providing an update on “Project Newco” together with financial information and a digital marketing strategy proposal; and

(4)    an email from Mr Danneels to Mr Whittles, copied to Mr Carey, which included:

I’ll have a call later on today with Mat to build up my story to call Justin to make that announcement. I don’t want to make lot’s (sic) of dust or noise around this start as I want to safeguard the funnel with JSB!

What will I point out:

1.    Mat has prepared his part very well and only informed me today AFTER he has finished his time @ JSB.

a.    As I had a long call with Justin yesterday and did not tell me anything about Mat yet.

b.    I’ve communicated that the document was forced by Philips and exclusivity on areas does not exist anymore, but more project-exclusivity in a certain level

c.    Before Mat starts tomorrow, I want to inform Justin personally

2.    Mat will start smoothly as he is the man which can do all things by himself.

  3.    He’ll start very basically and see where this brings him and us.

  4.    He will register all his projects very transparent

  5.    JSB will also need to register all their projects

6.    From the Modular customer service team we will be open & transparent in who is ‘driving’ the projects and who has most winning chances

Let us inform each other regularly on what is moving or happening and drive it hard to avoid loss in sales.

(original emphasis)

44    On 21 May 2018 BFD was incorporated with Mr Carey as its sole director and company secretary and Richmond Holdings (WA) Pty Ltd (Richmond Holdings) as its sole shareholder. According to the amended statement of claim Richmond Holdings was incorporated on 7 May 2018 with Mr Carey as its sole director, company secretary and shareholder, a matter which I did not understand to be in contention.

45    On 22 May 2018 Mr Carey sent an email to Mr Whittles to provide a “quick update” on tasks that Mr Whittles had previously requested Mr Carey to attend to as the “first peer to be free from JSB”. In responding Mr Carey annotated Mr Whittles’ email including (for ease of reference his annotations are set out below in bold):

1.    Can you speak to Andrew V, and establish if Andrew D and Michael D can resign next week – the sooner the better I have spoken to Andrew D today and he is happy to resign by the middle of next week (he is just waiting for a loan to buy a investment property to be approved), I phoned Michael D this morning and left him a message to call me, he has not yet. Likewise you or Andrew V to speak to Sasha as soon as possible (please get home address and remuneration for offer letter). Before I forget Fred is calling Justin to tell him about you and MLP when he wakes up today.

•    andrew D resigned today

•    james baxter resigned today

•    Paul Warehouse resigning tomorrow

•    Ben has told justin he is leaving but will resign when justin returns from perth

1.    Please ring James today or tomorrow and get his home address and salary for me so I can do an offer letter for him. So he can resign on Monday. If he wants his offer letter to refer to his prebooked holiday that is fine, we can say “thank you for informing me of your holiday from XXXX to XXXX, we confirm this is approved and you will be allowed to go into negative holiday accrual meaning you will be paid for the time while you are away”. I need to know if he is on 4 week or 2 week notice so I can give him a start date in letter

•    Refer above. James will be starting in two weeks. he was walked from the office by Justin (very foolish) as is the only person who knows FM and the perth market. The two new guys are basically now useless especially when villa leaves.

…

3.    Sell lights – have already done so, and will continue to do so until the lord grants me the winning powerball.

4.    The following is the “B” list who need to be called along the lines of, I am working with Modular and other brands to create a JSB like business, we want to employ you but we need to get our systems right first please hang on, you have not been forgotten you will be offered a job with MLP in the near future if you want one. These calls can be made on Sunday if you want.

…

7.    When you have the ABN or ACN please get Lachlan to put on letterhead and send to me, I will use to finalise the letters of offer for you to send out from your modular.partners e mail (sic) on Monday. Letters will be sent to

a.    James Baxter -done

b.    Andrew V - done

c.    Mat - done

d.    Ben - done

e.    Rose - done

f.    Dud - done

g.    Andrew W - done

h.    Andrew D - done

i.    Michael D - done

…

46    On 23 May 2018 the business name “Modular Lighting and Partners” was registered with BFD as the holder.

47    On about 23 May 2018 JSB received a proposed non-exclusive distribution agreement from Modular.

BFD’s involvement in the projects

48    On 18 May 2018 Mr Wojcik of Wood & Grieve sent an email to Mr Carey which included:

Need some help on:

- Byford East (whole school) lighting. Due next month.

- IGA south Perth, due Friday next week. Could you please send me model codes for the isle (sic) lights and will deploy tracks in the main store. Track lights will need different spectrum to make the produce pop please. Could I catch up next week with you to go through it.

- did you swing a deal a keep museum under you???? Can I help with an email if it’s an issue?

Few more projects on their way, just not as pressing for time. I’ve developed a report for Byford which is with BMW/DOE for a formal green light.

Can’t wait to work with you again.

49    On 22 May 2018, Harley de Lucia, an electrical designer at Wood & Grieve, sent an email to Mr Carey which included:

I am trying to close out the preliminary design schemes for IGA by wed/Thursday this week - did you want to pop into the office either this arvo/tomorrow morning to give some creative design input - I’m keen to maintain the design as per Sheton Park IGA, however the layout it quite a bit different so I think there is an opportunity for us to add in some cool features.

50    On the same day Mr Carey responded to Mr De Lucia’s email agreeing to meet and the two proceeded to arrange a time.

51    Between 23 and 24 May 2018 there were email exchanges between Messrs Carey, De Lucia and Wojcik and Jordan Brindle of Brindle Group in relation to the subject “IGA”.

52    On 29 May 2018 Messrs Danneels and Carey exchanged emails with subject line “Department of education”. In his initial email Mr Danneels asked Mr Carey if he had “an update on this One (sic)” and whether it was “still alive” and “If Yes, in the funnel of JSB or not?”. In response Mr Carey informed Mr Danneels that the “trial was approved 2 weeks ago. So we now have a complete school” and that “this won’t be in the funnel” but that he would “register ASAP”. Mr Penhall believes that the “trial” referred to by Mr Carey in his email to Mr Danneels was the Trial Project.

53    On 5 June 2018 Mr Carey sent an email to Mr Wojcik in the following terms:

May I suggest you send the following email or similar to Justin so you don’t have to get involved. I understand ts (sic) tricky for you but the quicker JSB realise it’s over the better and we can all move on. Leave it ambiguous and don’t mention anyone other than team. He cant (sic) hate you or get angry with you, its your buying decision and ultimately you want the support and back up of people who know the project. You’re the customer and you can choose who you want to use...this is not personal and Justin using the word “attack” is something his HR people told him so people get emotional and feel sorry for them. At the end of the day its business...he’s flying to europe this week to try and get Floss and/or Delta which was planned well before I resigned. I wonder how the current agents feel about that! GREED

Email should be along the lines of.

Hi Justin,

Thanks for the call earlier.

I don’t want to get involved in relationships between local agents and the product, its none of my business. The current team has worked on this project long before I was involved and due to its significance and level of detail I do not want to make any wholesale changes at such a late stage.

For the Perth Museum we will be using Modular Lighting & Partners.

I hope you understand and lets catch up for a beer the next time you’re in town.

Best Regards

(original emphasis)

54    On 12 June 2018 Mr Wojcik sent an email to Mr Carey marked confidential which requested Mr Carey to assist “with a render and calculation for the city room omitting the pole and moving the fittings onto the building facades”. The email included a link to a dropbox file and a series of lighting reports. On 14 June 2018 that email was forwarded by Mr Carey to Aaditya Kasliwal.

55    On 14 June 2018 Mr Wojcik sent an email to Mr Carey with the subject “File Transfer: Confidential - Museum Lighting Calculations - New Perth Museum” in which he transferred a file to Mr Carey and requested that Mr Carey not distribute the model which he said was confidential.

56    On 14 June 2018 Mr Danneels sent a further email to Mr Carey with the subject “Department of education” asking if he had “already register (sic) this one to us” and that he do so to avoid “any misunderstandings + [they] can support you”. Mr Carey forwarded Mr Danneels’ email to Mr Wojcik querying how the project was coming along and whether he had a set of drawings he could send. Mr Wojcik informed Mr Carey that a report had been issued and he was waiting approval. Mr Carey responded thanking Mr Wojcik and asking him about timing as he needed to register with Modular.

57    Between 19 and 27 June 2018 Messrs Wojcik, Kasliwal and Carey, among others, exchanged emails in relation to the New Museum Project.

LEGAL PRINCIPLES 

58    In order to be successful in its application JSB must establish that:

(1)    there is a serious question to be tried or make out a prima facie case in the sense that, if the evidence remains as it is, there is a probability that at the trial JSB will be held to be entitled to relief;

(2)    it will suffer irreparable harm for which damages will not be an adequate remedy; and

(3)    the balance of convenience favours the granting of an injunction.

See Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153 (Mason ACJ); Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199 at [13] (Gleeson CJ) (Lenah Game Meats).

59    The inquiry into whether the applicant has made out a prima facie case and whether the balance of convenience favours the grant of an injunction are related; the former should not be considered in isolation from the latter: Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 (Samsung) at [67] (Dowsett, Foster and Yates JJ) referring to Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (2009) 81 IPR 339 at [15]. It may also be necessary to consider and evaluate the impact that the grant or refusal of an injunction will have or is likely to have on third parties and the public generally: see Samsung at [68].

60    In determining whether there is a prima facie case it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which final relief is sought. If the party seeking relief cannot show a sufficient entitlement of the kind sought to be vindicated by final relief, the foundation for the claim for interlocutory relief disappears: see Samsung at [52] citing Lenah Game Meats at [15].

61    The exercise of determining where the balance of convenience lies requires the Court to weigh the risk of loss and damage to the applicant’s business if the injunction is not granted against the hardship that may be occasioned to the respondent: see Hannamax Hi-Tech Pty Ltd v O’Donnell [2001] NSWSC 634 at [35] (Palmer J). The question of whether damages would be an adequate remedy is relevant to the determination of the balance of convenience: see Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at 348.

62    Finally, if interlocutory relief is to be sought, it should be sought promptly and any delay in applying for injunctive relief should be adequately explained: see Network Ten Ltd v Fulwood (1995) 62 IR 43 at 46-47.

CONSIDERATION

Serious question to be tried

Common law or Restraints of Trade Act

63    Whether there is a serious question to be tried in this case depends on whether there is a serious case that the Restraint Clause is valid and there has been a breach or apprehended breach of it.

64    At common law, a restraint of trade is contrary to public policy and void unless it can be shown that the restraint is, in the circumstances of the particular case, reasonable: see Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 315. However, where a written contract of employment is subject to the laws of New South Wales, then s 4(1) of the Restraints of Trade Act 1976 (NSW) (ROT Act) may apply. That section provides that a restraint of trade is valid to the extent it is not against public policy, whether it is in severable terms or not.

65    If the ROT Act applies it is necessary to first determine whether the alleged breach does or will infringe the terms of the restraint properly construed and then whether the restraint is, in its application to that breach, against public policy. If it is not then, in its application to restrain the alleged infringing conduct, the restraint is valid unless the court makes an order under s 4(3) of the ROT Act: see John Fairfax Publication Pty Ltd v Birt [2006] NSWSC 995 (Fairfax v Birt) at [6] (per Brereton J).

66    At common law, the onus of showing the restraint goes no further than is reasonably necessary to protect the interests of the person in whose favour it operates lies on the party seeking to argue that the restraint is reasonable: see Adamson v New South Wales Rugby League Limited (1991) 27 FCR 535 at 554 (per Hill J) (Adamson). The validity and reasonableness of a restraint, if the subject of a contract, is to be determined at the time the contract is entered into, although facts occurring after that date are not necessarily irrelevant as they may shed light on the circumstances existing at that time: Adamson at 555. The test of reasonableness of a restraint clause is measured by reference to the interests of the parties concerned and the public. The requirement that the restraint be reasonable in the interests of the parties means that it must afford no more than adequate protection to the party in whose favour it is imposed: Adamson at 554.

67    The question of whether the ROT Act applies is an important one as it affects the approach to a determination of the validity of the Restraint Clause. Whether it applies depends on a determination of the proper law of the contract: Provida Pty Ltd v Sharpe [2012] NSWSC 1041 (Provida) at [21] (per Pembroke J). The term “proper law of the contract” means the system of law to which the contract has the closest and most real connection: Provida at [21].

68    JSB contends that the proper law of the Carey Contract is New South Wales law such that the ROT Act applies to it. Mr Carey and BFD dispute that the ROT Act applies contending that, in circumstances where Mr Carey’s role was based in Western Australia and all of the alleged conduct relied on by JSB occurred in Western Australia, the Court could not safely conclude that the proper law of the contract was New South Wales.

69    I am satisfied that there is a serious question to be tried as to whether New South Wales law applies to the Carey Contract bearing in mind the number of factors that connect it to New South Wales. First, JSB was domiciled and had its head office in New South Wales at the time of formation of the Carey Contract; secondly, at that time Mr Carey was also domiciled in New South Wales; thirdly, the position which JSB offered to Mr Carey and which he accepted was in New South Wales; fourthly, the work to be undertaken by Mr Carey was to be performed throughout Australia, including New South Wales; and fifthly, given that JSB’s head office was in New South Wales, I would infer that the Carey Contract was administered from there.

70    Before turning to the substantive issue, I note that JSB bases its application for interlocutory injunctive relief on the Carey Contract and, notwithstanding that BFD is not a party to the Carey Contract, seeks orders against both Mr Carey and BFD. JSB submitted that it could do so because BFD is the alter ego of Mr Carey and the conduct of BFD is that of Mr Carey. This issue was not fully argued before me. But, in circumstances where JSB claims its entitlement to relief only on the basis of a breach of the Restraint Clause in the Carey Contract, it is unclear how it seeks to establish any entitlement to relief against a non-party to that contract. Notwithstanding that, for the purposes of the present application, I will proceed on the basis that such relief is available.

If Restraints of Trade Act applies

71    Turning to the substantive issue, the validity of the Restraint Clause and whether there has been a breach of it, if New South Wales law, and accordingly the ROT Act, applies then for the following reasons I am satisfied that there is a serious question to be tried.

72    The first issue is whether the alleged breach does or will infringe the Restraint Clause properly construed. I pause here to note that there is a dispute between the parties about the proper construction of the Restraint Clause. But even having regard to the narrower construction contended for by Mr Carey and BFD, requiring a causal nexus between the contact and the purpose of the contact, namely the attempt to attract the client away, I am satisfied that the alleged breach does or will infringe the clause.

73    In relation to the first prayer for relief in the Interlocutory Application, the actual or apprehended breach is an approach by Mr Carey to Wood & Grieve, Everett-Smith and Design Theory with a view to attempting to attract those clients away from JSB.

74    First, I am satisfied that, given the evidence of the way in which JSB operates, it can arguably be established that those organisations are clients. That Wood & Grieve and Design Theory were referrers to third party contractors does not preclude them from being clients. Their relationship with JSB must be viewed in the context in which JSB operates in the industry. Further, Everett-Smith was the electrical contractor on the New Museum Project and until 26 June 2018 JSB provided quotes to it for the supply of lighting. Contrary to Mr Carey and BFD’s submission, I do not accept that simply because there was no current supply to Everett-Smith at the time Mr Carey communicated with its employees it could not be classified as a client.

75    Secondly, I am satisfied that it is arguable that Mr Carey engaged in the conduct in an attempt to attract those clients away from JSB. It is clear that Mr Carey communicated with Wood & Grieve, Everett-Smith and Design Theory about specific projects in which they were involved and in relation to which he had been involved on behalf of JSB. That the contact with Mr Carey may, on the evidence as it stands, have been initiated by the client does not, in my opinion, mean that the Restraint Clause would not have any relevant effect. That is to take too narrow a view of the clause.

76    The second issue is whether the Restraint Clause, in its application to the alleged breach, is against public policy. In Fairfax v Birt at [25] Brereton J observed that, while the same general principles apply in all cases, a stricter and less favourable view is taken in relation to covenants in restraint of trade between employers and employees than in commercial agreements for sale of goodwill. An employer is not entitled to be protected against mere competition. Rather, the legitimate interests of an employer which may be the subject of protection by a restraint of trade clause are in the nature of proprietary interests, including trade secrets, confidential information and an employer’s goodwill including customer connection: Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 at [28]-[29] (Brereton J).

77    In determining this issue, there are two questions which arise: does the employer have a legitimate protectable interest and is the restraint no more than reasonable to protect that interest. The Court considers the validity of the restraint as at the date of the contract, by reference to what the restraint entitled or required the parties to do, rather than what they intended to do or have actually done: Fairfax v Birt at [26].

78    The potential legitimate protectable interests here are customer connection and confidential information.

79    Customer connection is an interest which can support a reasonable restraint of trade and is legitimate if the employee has become, vis-à-vis the client, the “human face” of the business meaning they represent the business to the customer: see Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 (Cactus Imaging) at [25] (Brereton J). I am satisfied that, at the date of the Carey Contract, JSB had a legitimate protectable interest in respect of customer connection. It is clear given Mr Carey’s position as a business development manager and key salesperson that he would come into contact with clients and build relationships with them. That was a necessary part of his role. There is an arguable case that Mr Carey had established sufficient relationships with the three organisations in question such that he was the human face of the JSB business so far as they were concerned and that, because he effectively represented JSB vis-à-vis those organisations, he built up a connection with them, a connection which in fact would have belonged to JSB.

80    While, as Mr Carey and BFD submitted, price may ultimately have been or be a factor driving a decision to purchase, it is arguable that Mr Carey had sufficient connection to be in a position to understand how to deal effectively with and influence those organisations.

81    Mr Carey and BFD accept that for the purposes of this application the protection of confidential information can support a reasonable restraint of trade even if it is not in the nature of a trade secret such as to attract equitable protection in the absence of any contractual agreement: Cactus Imaging at [12].

82    The confidential information sought to be protected here is as set out by Mr Penhall (see [18] above) and is described by reference to broad categories. Further there was evidence that some of the information said to be confidential was in fact publicly available via a search of JSB’s online presence, including its website and Instagram account, and through the Suppliers and other websites which make pricing available. Also relevant is the fact that quotes provided by JSB to Specifiers, Referred Clients or other customers were not, on the evidence, provided on a confidential basis. Given these factors, in my opinion, the Restraint Clause cannot be supported by confidential information. That conclusion is supported by the fact that the Carey Contract includes a confidentiality clause (set out at [15] above) which, as submitted by Mr Carey and BFD, appears on its face to give JSB adequate protection. Any additional protection given by the Restraint Clause is not reasonably necessary.

83    As to whether the Restraint Clause is no more than reasonable to protect JSB’s legitimate protectable interest in its client connection, there is at least an argument that the Restraint Clause goes beyond what is required to protect JSB’s legitimate protectable interest as it extends for two years and has no geographical limit. Those matters of themselves do not affect my opinion that there is a serious issue to be tried in relation to a breach or apprehended breach of the Restraint Clause by Mr Carey but rather affect its strength.

84    The second prayer for relief in the Interlocutory Application is in a different category. In the second prayer for relief JSB seeks to restrain Mr Carey and BFD from participating in the supply of lighting products for the three nominated projects. That proposed order in its terms goes well beyond the ambit of the Restraint Clause by which Mr Carey agreed not to make direct or indirect contact with any JSB client in an attempt to attract that client away from JSB. It is not, as JSB submitted, another way of describing direct and indirect contact within the terms of the Restraint Clause. Accordingly, I am not satisfied that there is a serious question to be tried in relation to it.

If common law applies

85    If, as Mr Carey and BFD contend, the Court was not satisfied that the ROT Act applied, the validity of the Restraint Clause would need to be considered by applying common law principles. On that basis I would similarly be satisfied that there is a serious issue to be tried in relation to the prayer for relief in [1] of the Interlocutory Application. However, I note that in that regard, the period for which the Restraint Clause operates, being two years, and its lack of geographical limitation, are matters which affect the reasonableness of the clause. In those circumstances the strength of the serious question to be tried is significantly affected and is weaker than would be the case if the ROT Act applies.

The nature of the orders sought

86    In its amended originating application filed on 9 October 2018 JSB relevantly seeks the following relief as against Mr Carey and BFD:

(1)    a declaration that Mr Carey breached his fiduciary duty and equitable duty of confidence (as defined in the amended statement of claim) to JSB;

(2)    a declaration that BFD was knowingly involved or a knowing participant in Mr Carey’s breach of his fiduciary duty and equitable duty of confidence to JSB;

(3)    a declaration that Mr Carey and BFD were each knowingly involved or a knowing participant in Mr Hewitt’s breach of his fiduciary duty and equitable duty of confidence to JSB;

(4)    a declaration that Mr Carey and BFD induced Mr Hewitt to breach the executive agreement between Mr Hewitt and JSB dated 18 August 2005;

(5)    a declaration that all profits received by each, some or all of, relevantly, Mr Carey and BFD arising from BFD’s business, or alternatively all such profits attributable to Mr Carey’s breach of his fiduciary duty and equitable duty of confidence to JSB are held on constructive trust for the benefit of JSB;

(6)    an order requiring each of Mr Carey and BFD to give an account of profits to JSB reflecting the order sought in the preceding subpara;

(7)    in the alternative to the relief sought in subparas (5) and (6), an order requiring Mr Carey and BFD to pay equitable compensation to JSB;

(8)    an order that Mr Carey and BFD pay damages, as well as exemplary damages, to JSB for committing the tort of inducing Mr Hewitt’s breach of contract;

(9)    further or in the alternative:

(a)    a declaration pursuant to s 1317E of the Corporations Act 2001 (Cth) (Corporations Act) that Mr Carey contravened either or both of s 182 and s 183 of the Corporations Act;

(b)    a declaration pursuant to s 1317E of the Corporations Act that BFD was knowingly involved in Mr Carey’s contravention;

(c)    a declaration pursuant to s 1317E of the Corporations Act that each of Mr Carey and BFD were knowingly involved in Mr Hewitt’s contravention of either or both of s 182 and s 183 of the Corporations Act;

(d)    an order pursuant to s 1317H of the Corporations Act that Mr Carey and BFD pay compensation to JSB for damages resulting from that contravention, including all profits made by them arising from that contravention; and

(10)    further, or in the alternative, damages.

87    JSB seeks the relief in the Interlocutory Application against Mr Carey and BFD “until further order”. But as is clear from the preceding paragraph no final injunctive relief is sought in the amended originating application in relation to the Carey Contract. A claim for, and the Court’s exercise of its discretion to grant, interlocutory injunctive relief must be a step along the way to or in aid of final relief. That is, the purpose of such relief is to protect the status quo until such time as the issues and related relief can be dealt with and resolved on a final basis. Where no related final relief is sought, as is the case here, the foundation for the claim for interlocutory relief disappears (see [60] above).

88    At the hearing Mr Neil SC, senior counsel for JSB, submitted that, “hand in hand” with the Interlocutory Application, JSB would need to seek leave to amend its amended originating application to claim final relief in the same terms as the interlocutory relief sought against Mr Carey and BFD. But, even if that is to be done, it remains the case that at the time of hearing of the Interlocutory Application no relevant final relief was sought. That state of affairs should have been evident to JSB and rectified prior to the interlocutory hearing. To do so after the hearing does not assist the position it finds itself in. That is a significant, if not fatal, factor which tells against an exercise of the Court’s discretion to grant the relief sought.

Are damages an adequate remedy?

89    JSB submitted that damages are not an adequate remedy. It further submitted that it would be difficult to quantify the damage that Mr Carey and BFD may cause to JSB as a result of Mr Carey’s continued contact with JSB’s clients, particularly where the work on the nominated projects is to be carried out in stages. It said that it was the speculative nature of the lost opportunity that is one of the archetypal reasons why damages are not an adequate remedy.

90    In my opinion, damages are an adequate remedy. As submitted by Mr Carey and BFD, there are two principle reasons why that is so. First, in its amended originating application, putting to one side the declarations of breach, JSB seeks damages from Mr Carey and BFD. It does not seek any final injunctive relief. Secondly, Mr Penhall’s evidence is that, as a result of Mr Carey’s alleged breach, JSB will lose the profit it would make on the supply of lighting products for the projects. Loss of that type can be compensated by damages and, having regard to the evidence before me, appears to be readily quantifiable.

91    JSB relied on three decisions of Brereton J in support of its submission that damages are not an adequate remedy: Fairfax v Birt at [45]; Otis Elevator Co Pty Ltd v Nolan [2007] NSWSC 593 (Otis) and IceTV v Ross [2007] NSWSC 635. In each of those cases Brereton J said that, generally speaking, courts enforce negative contractual stipulations by injunction and that damages are rarely an adequate remedy for a threatened breach of restraint of trade. In each of those cases an employer was urgently seeking to prevent its former employee from joining or working for a competitor in circumstances where that person may, in effect, inadvertently pass on confidential information and influence strategy in breach of his obligations to his former employer.

92    By way of illustration in Fairfax v Birt, Mr Birt had accepted employment with another newspaper publisher. Brereton J at [45] noted that, in the circumstances of that case, it would be very difficult to prove and quantify the damage to Fairfax because confidential information, once lost, cannot usually be recovered. In Otis, Mr Nolan, having worked for the defendant for one day, accepted an offer of employment with a competitor elevator company. There Brereton J declined to grant the interlocutory relief sought. At [30] his Honour observed that the court may, as a matter of discretion, decline to grant an injunction of a negative contractual stipulation “where the jeopardy to the plaintiff from declining an injunction is slight, and the hardship that the grant of an injunction would occasion the defendant is disproportionately great”.

93    This case can be distinguished. It is not a case where JSB says that, because of Mr Carey’s access to confidential information, he will inadvertently breach the Restraint Clause in a way that cannot be identified. Nor is the Restraint Clause one which prohibits Mr Carey from being employed by a competitor. Rather, JSB identifies Wood & Grieve, Everett-Smith and Design Theory and three projects in relation to which it submits it has or may lose the opportunity for future business. Its application does not go beyond those entities or projects. In other words, having identified those projects for which the scope of work is known, it is in a position to identify the business it alleges it has or may lose and quantify any damages it suffers as a result. The intangible damage that JSB refers to is no more than the potential loss of future business which, if proved, could be quantified.

Delay

94    JSB submitted that there had been no delay by it in seeking the relief it now seeks against Mr Carey and BFD. It pointed to the fact that it was not until Mr Carey filed and served his defence that it could confidently sue on the Carey Contract because that defence included an admission that Mr Carey was a party to the Carey Contract. JSB submitted that at the time of commencement of the substantive proceeding it did not have an executed copy of the Carey Contract in its records. Instead it had Mr Carey’s resignation letter in which Mr Carey referred to a contract that provided for four weeks’ notice. JSB submitted that it was on the basis of that reference that the pleading at [11] of the amended statement of claim was made, stating that “[o]n or about 1 July 2011, JSB entered into a contract of employment with Carey”.

95    While the Court records indicate that Mr Carey’s defence to the amended statement of claim was lodged and filed on 3 October 2018, in oral submissions Mr Neil said that on 5 October 2018 “Mr Carey delivered his defence” – whether that was the date JSB was served is not clear. Nonetheless, the present application which relies on that contract was filed on 16 October 2018.

96    JSB contended that it could not bring the present application until it had Mr Carey’s admission about his entry into the Carey Contract. It said that once that admission had been made and it had certainty about the contract between the parties upon which the present application relies, it acted promptly.

97    For the following reasons, it is difficult to accept that there was no delay in JSB bringing its application for the relief it now seeks.

98    First, the amended statement of claim pleads the following at [11]-[12]:

11.    On or about 1 July 2011, JSB entered into a contract of employment with Carey (Carey Employment Contract).

Particulars

The terms of the contract are in writing and contained in an offer letter from JSB to Carey dated 1 July 2011 (Employment Letter). The offer was accepted orally or by conduct or both. The Employment Contract was expressly affirmed by Carey in writing to JSB on 18 April 2018.

12.    Each of the following were express terms of the Carey Employment Contract:

a.    Carey would at the commencement of his employment hold the role of “Business Development Manager – Sydney”.

   b.    Carey’s role would relevantly include:

i.    sales and marketing of JSB’s products;

ii.    managing JSB’s client relationships; and

iii.    day-to-day management of each stage of the sales process.

   c.    Carey would receive remuneration comprising:

i.    a salary package including superannuation;

ii.    sponsorship of Carey’s further education;

iii.    car and mobile phone allowances;

iv.    bonus entitlements;

v.    annual and personal leave entitlements;

 d.    Any information acquired by Carey in the course of his employment with JSB regarding JSB, JSB’s business, JSB’s personnel, JSB’s suppliers, JSB’s clients or JSB’s future products was confidential to JSB (JSB Confidential Information).

   e.    Carey would:

i.    keep all JSB Confidential Information confidential; and

ii.    not disclose or use JSB Confidential Information otherwise than for the purpose of Carey’s employment with JSB (Carey Contractual Duty of Confidence).

 f.    Carey would not for the duration of his employment with JSB or for a period of two years after the cessation of that employment make direct or indirect contact with any client of JSB in an attempt to divert that client’s business away from JSB (Carey Restraint Term).

Particulars

Each of the above terms is set out in the Employment Letter.

(underlining omitted)

99    At [49] of the amended statement of claim JSB alleges that by reason of the matters set out in [11]-[48] (which includes [12] where the Restraint Clause is pleaded as an express term of the Carey Contract), Mr Carey relevantly breached the Restraint Clause within a two year period following the end of his employment by making direct or indirect contact with a client of JSB in an attempt to divert that client’s business away.

100    Those paragraphs of the amended statement of claim appear in identical terms in the statement of claim at [9]-[10] and [29] which was lodged with the Court on 25 June 2018 and filed on 5 July 2018.

101    That is, since the commencement of the proceeding, it is evident that JSB has been aware of the Carey Contract and its terms, including the Restraint Clause, and alleged that Mr Carey had breached that clause in the Carey Contract.

102    Secondly, on 25 June 2018 the solicitor for JSB certified that “the factual and legal material available to [him] at present provides a proper basis for each allegation in the [statement of claim]”. On 9 October 2018 the same certification was given in relation to the amended statement of claim.

103    JSB submitted that the standard of satisfaction required to certify a pleading differs to that which is required to make good an application for an interlocutory injunction. I reject that submission. The standard of certification of a statement of claim is that there is a proper basis for the claim based on the factual and legal material available at the time. In this case that means that, at the time of filing the statement of claim, the relevant lawyer certified that there was a proper factual and legal basis to allege that Mr Carey was a party to the Carey Contract and that there had been a breach of the Carey Contract because, among other things, Mr Carey had breached the Restraint Clause. That is the very basis upon which JSB now seeks its interlocutory relief.

104    Thirdly, the evidence filed on behalf of JSB demonstrates that:

(1)    on 26 June 2018, Mr Penhall became aware that Mr Carey had been negotiating with Mr Cross of Everett-Smith in relation to the New Museum Project (see [29]) above); and

(2)    on 16 August 2018 Mr Penhall became aware that JSB’s quote on the IGA South Perth Project was not going to be accepted and that “Mat had done the work on the project”. The reference to Mat is a reference to Mr Carey (see [33] above).

105    That evidence demonstrates that, since at least late June 2018 JSB has been aware that Mr Carey was negotiating and providing quotes to obtain the lighting supply business on two of the projects the subject of the Interlocutory Application. Notwithstanding that, JSB waited until 16 October 2018 to file its Interlocutory Application. No evidence has been given by JSB to explain the delay and the explanation that was proffered does not, in light of the matters set out above, adequately explain it.

106    The delay in question is approximately three and a half months, based on the period between the time at which JSB lodged its statement of claim and Mr Penhall first became aware of Mr Carey’s dealings and the filing of the Interlocutory Application. It is necessary to then assess the effect of that delay. First, it is not in issue that interlocutory relief must be sought promptly. The failure to do so influences the Court’s assessment of how seriously the applicant, in this case JSB, takes the infringement of its rights: Capgemini US v Case [2004] NSWSC 674 at [40]; Cerilian Pty Ltd v Graham Fraser [2008] NSWSC 1016 at [12]. I would infer, given the delay on JSB’s part, that it did not consider Mr Carey and BFD’s alleged breach to be that serious.

107    Secondly, in the intervening period (namely, between 26 June 2018 and 16 October 2018), there have been dealings, at least by way of communications and the provision of quotes, between Mr Carey and BFD, on the one hand, and Wood & Grieve, Everett-Smith and Design Theory, on the other. It is apparent that at least two of the three specified projects have commenced. Against that, there is no evidence that any steps have been taken by those third parties to finalise the engagement of either JSB or BFD to provide lighting. Notwithstanding that, there is a possibility, and it can be put no higher than a possibility, that third parties may have made decisions about who will win their lighting supply contract in the intervening period.

Balance of convenience

108    JSB submitted, in effect, that the balance of convenience weighed in favour of granting the interlocutory relief it sought because the evidence established that in relation to each of the three projects JSB had lost profit and/or the opportunity to undertake further work on those projects and that, at least in the case of the New Museum Project, the Court should look at the lost opportunity in the context of the surrounding circumstances. That being that Mr Carey used his position at JSB, where he had been involved in that project for over six months, to divert the business it had to BFD very soon after his departure from JSB.

109    In weighing up the balance of convenience, the Court must weigh up the relative prejudice to each of the parties in granting the relief sought having regard to the strength of the arguable case. Having done so, in my opinion, the balance of convenience does not weigh in favour of the Court exercising its discretion to grant the relief sought. That is so for the following reasons.

110    JSB sought its orders some five months after Mr Carey completed his employment with JSB and the application came on for hearing six months after that date. In exercising its discretion to grant injunctive relief, the Court should have regard to the circumstances at the date of hearing of the Interlocutory Application. In this case, despite being satisfied that there is a serious question to be tried in respect of the first prayer for relief in the Interlocutory Application (see [73]-[83] and [85] above), the strength of the protectable interest has in my view diminished given the passage of time since Mr Carey’s departure from JSB. That in turn affects the strength of the arguable case. In addition, as set out at [87]-[88] above, the orders are sought “until further order” in circumstances where no related final relief is sought by JSB.

111    Delay, discussed at [94]-[107] above, is a relevant factor to take into account on the balance of convenience.

112    Similarly, making the orders sought may well affect third parties. Despite there being no direct evidence of any detriment to third parties, there is evidence that as at 26 June 2018 Everett-Smith had received a quote for the New Museum Project from Mr Carey but that it remained open to receiving a reduced quote from JSB. There was also evidence that JSB’s quote had not been accepted for the IGA South Perth project and that Mr Carey had provided a quote for the IGA South Perth Project and there was some loyalty to him as the person who had done a lot of work on that project. The orders, if made, may disrupt decisions that have already been made or are to be made by third parties in relation to the supply of products and may force those third parties to deal with a particular party on potentially less favourable terms.

113    Against that, there is no evidence that, if the orders sought were made, the business that JSB alleges it has lost or may lose would return to it. JSB alleges that it has lost the opportunity of obtaining the business but it does not go so far as to say that, if the orders it seeks are made, the business would return to it. In those circumstances there seems to be little utility in making the orders sought.

114    Finally, the hardship that may be suffered by JSB as a result of the Court withholding injunctive relief is the alleged loss of business on specified projects. That is a loss that can be quantified and compensated accordingly by an award of damages.

conclusion

115    For those reasons the Interlocutory Application should be dismissed with costs.

116    Given the nature of the allegations, in my opinion, this matter should proceed to hearing as expeditiously as possible. The proceeding will be listed for case management hearing on 19 December 2018 at 10.15 am, when the matter is otherwise listed before me for hearing of other applications.

117    I will make orders accordingly.

Associate:

Dated:    10 December 2018