Federal Court of Australia

Wilson Pateras Accounting Pty Ltd v Farmer [2020] FCA 1763

REASONS FOR JUDGMENT

WHEELAHAN J:

Background

1    The applicants seek an interlocutory injunction until judgment following trial directed to the enforcement of restraint clauses in two deeds. The applicants allege that, if not restrained by the Court, there is a real risk that the first and second respondents will breach the restraint clauses, and that the third to seventh respondents will seek to induce the breaches. In addition, the applicants seek interlocutory relief to enjoin the use of confidential information, and the reproduction of documents in which they allege copyright inheres. The respondents have provided interim undertakings pending judgment on the interlocutory application, but oppose the interlocutory relief sought.

Wilson Pateras

2    The three applicants are proprietary companies associated with an accounting practice under the firm name Wilson Pateras (WP Business). The directors of the applicants are Mr Nick Pateras and Mr Chris Wilson. The first applicant conducts the WP Business as the trustee of the Wilson Pateras Accounting Trust (WP Trust). The first, third, and sixth respondents are former employees of the WP business.

Mr Farmer

3    From 1 August 2015, the first respondent (Mr Farmer) ceased to be an employee in the WP Business, and the second respondent (BSCT), a related entity of Mr Farmer, took up a unit in the WP Trust and provided the services of Mr Farmer to the WP Business. Mr Farmer continued to work in the business until his resignation on 28 August 2020. Thereafter, the unit held by BSCT in the WP Trust was redeemed, effective 9 October 2020.

4    Mr Farmer remains subject to restraints under a subscription and unitholders’ trust deed dated 1 August 2015 (the Unitholders’ Deed), which were confirmed by the parties in a further deed dated 31 August 2020 (the Redemption Deed) pursuant to which BSCT’s unit in the trust was redeemed. The operation of the restraints are central to this application, and they commenced on 9 October 2020. This proceeding was commenced one week later, by originating application filed on 16 October 2020.

Mr Cuff

5    The third respondent (Mr Cuff) was employed in the WP Business as a supervisor, and then as a manager. He resigned on 26 August 2019, and then worked out a period of notice until 20 September 2019. Mr Cuff’s employment contract contained a restraint clause with concurrent restraint periods, the longest of which operated for a period of 12 months, such that it extended to 20 September 2020. The restraints included that Mr Cuff would not induce any person to leave the employment of the WP Business, and that he would not solicit clients for whom he had performed services in the final 12 months of his employment.

6    Mr Cuff stated in his affidavit evidence that after he ceased employment in the WP Business, he commenced providing accounting services to his clients through his own business, Beehive Accounting. He also stated that he worked at another accounting practice, Rose Partners, from October 2019 to October 2020.

7    In January 2019, Mr Cuff and Mr Farmer considered purchasing an accounting practice together, but did not proceed with the proposal at that time.

8    Mr Cuff’s obligations during his restraint period, and whether he complied with them, are circumstances that are relevant to this application. However, the interlocutory application against Mr Cuff is not to enforce his contractual restraints, but to seek orders that he not procure Mr Farmer and BSCT to breach their restraints.

9    Mr Cuff is a director of the fourth respondent (Cuff Investments), and of the fifth respondent, (OMW Partners).

Ms Chambers

10    The sixth respondent (Ms Chambers) was employed in the WP business as a practice manager, and then from March 2016 as chief executive officer. Her employment ended in October 2017. Thereafter, she was employed by Rose Partners where she is currently engaged as its chief operating officer. She was a director of Rose Partners until 8 November 2019. Ms Chambers is not a practising accountant.

11    The seventh respondent (Sur Mon Chemin) is a company associated with Ms Chambers of which she and her husband are directors.

OMW Partners Pty Ltd

12    OMW Partners was incorporated on 14 August 2020, and its principal place of business is recorded as the same address as Rose Partners. Its shareholders include the companies associated with Mr Farmer (BSCT) , Mr Cuff (Cuff Investments), and Ms Chambers (Sur Mon Chemin) who are the second, fourth and seventh respondents. Its shareholders also include other persons who are not parties to this proceeding, but who are associated with the accountancy practice Rose Partners. Mr Cuff is one of two directors of OMW Partners. The other director is Mr Glen Orfanidis, who is not a respondent to this proceeding. Ms Chambers stated that she does not have a client facing role with OMW Partners.

13    The applicants claim that Mr Farmer, Mr Cuff, and Ms Chambers have gone into business together providing accountancy, taxation, business advisory and associated services through OMW Partners, or Rose Partners, in direct competition with the WP business.

The Farmer restraints

14    As I have mentioned, Mr Farmer is the subject of restraints under the Unitholders’ Deed. Those restraints were engaged upon BSCT ceasing to hold its unit in the WP Trust. The restraints include that for the restraint period Mr Farmer and BSCT will not, directly or indirectly, in any capacity whatsoever –

(i)    on their own account, or for any other person, solicit or canvass any person who as a client of the Business was provided with any of the Services [as defined in the recitals] by [Mr Farmer] on behalf of the Business at any time during the two years prior to the Exit Date to engage [Mr Farmer] or any other person to provide any of such Services (clause 2.4(a)(i));

(ii)    on their own account, or for any other person, to provide any of the Services to any person who, as a client of the Business, was provided with any of the Services by [Mr Farmer] on behalf of the Business at any time during the 2 years prior to the Exit Date (clause 2.4(a)(ii));

15    The restraint period is four concurrent periods commencing from the “Exit Date”, which was 9 October 2020. The longest of those periods is two years. The respondents did not submit for the purposes of this application that the restraints on Mr Farmer and BSCT were unenforceable, but reserved their right to do so at trial.

16    The restraints were confirmed in the Redemption Deed that gave effect to the redemption of BSCT’s unit. The Redemption Deed includes terms that –

(a)    WP Accounting assigned to BSCT the goodwill in 34 clients that were named in Annexure A to the deed, which were referred to as “sale clients”, in respect of whom the restraints are not to apply, and for which BSCT paid a purchase price;

(b)    subject to the above, by the recitals Mr Farmer confirmed that he had no intention of soliciting Wilson Pateras clients (restrained clients), who were identified in Annexure B to the deed, and by clause 9 the parties agreed that the existing restraints contained in clause 2.4 of the Unitholders’ Deed continued to apply after completion; and

(c)    further, by clause 9 the parties also agreed that the restraints in clause 2.4 of the Unitholders’ Deed applied to the Wilson Pateras clients, being the restrained clients identified in Annexure B to the deed.

17    In relation to clients of the WP Business contacting Mr Farmer, clause 10 of the Redemption Deed provides –

Farmer agrees to provide reasonable assistance to Wilson Pateras to transition the clients. If Farmer receives a phone call from a client on his mobile phone he agrees to let the call go to voicemail and email a copy of that message to Nicholas Pateras

Affidavit evidence

18    There were a number of affidavits read to the Court on the application, some of which included lengthy annexures. The annexures to the affidavits read on behalf of the applicants comprised hundreds of pages of material. All affidavits were received into evidence without objection. There was no application to cross-examine any deponent. The affidavit evidence comprised –

(a)    three affidavits of Mr Pateras, which he verified at the hearing;

(b)    an affidavit of a forensic computer consultant employed by KPMG and engaged by the applicants, Mr Justin Geri, which he verified at the hearing;

(c)    two affidavits of Mr Farmer;

(d)    two affidavits of Mr Cuff;

(e)    three affidavits of Ms Chambers; and

(f)    two affidavits of Mr Orfanidis.

The features of the applicants’ case

19    The applicants rely on a circumstantial case to allege that, unless restrained by the Court, there is a real risk that Mr Farmer and BSCT will solicit and canvass the restrained clients and provide accountancy services to them during the restraint period. The applicants also allege that Mr Cuff, Ms Chambers, their associated corporate entities, and OMW Partners will seek to induce Mr Farmer or BSCT to breach their restraint obligations. Separately, the applicants seek to enjoin the respondents from reproducing and using confidential information within the applicants’ procedure manual and certain client working papers.

20    The respondents deny the core allegations. Mr Farmer specifically denies that he or his associated company have been induced by anyone to breach their restraint obligations. Mr Farmer stated in his affidavit evidence that the business of OMW Partners was purchased so that he and Mr Cuff could service the existing client base of OMW Partners clients, and that to his knowledge there was no OMW Partners client that had ever been serviced by the WP Business.

21    Ms Chambers specifically denies that she has induced Mr Farmer to breach his obligations to the applicants, and stated that until she received the affidavit material in this proceeding, she was not aware of any terms of the Redemption Deed. She also stated that her husband, who is a co-director of her company Sur Mon Chemin, did not have any knowledge of the terms of any contract between Mr Farmer and BSCT and the applicants.

22    Mr Cuff stated that to the best of his knowledge, Mr Farmer had not caused clients of the WP Business to move, or concealed such plans from staff and principals of the WP Business, or obtained confidential information and documents which are the property of the WP Business to assist in those objectives, and denied inducing or requesting Mr Farmer to do any of these things.

23    I shall address the principal components of the applicants’ circumstantial case in the following sections of these reasons. Given the volume of the material, I have not dealt with every detail, but I have sought to capture the main points. Some of the evidence adduced on behalf of the applicants was directed to supporting inferences that Mr Farmer and Mr Cuff had gone into business together, and that at least Mr Cuff was acting for former clients of the WP Business. Much of that evidence was overtaken by direct evidence of Mr Cuff and Mr Farmer that confirmed Mr Cuff’s and Mr Farmer’s interests in OMW Partners, and Mr Cuff’s confirmation of the identity of a number of former clients of the WP Business to whom he is now providing services.

Mr Farmer’s work in the WP Business

24    Mr Farmer was engaged in a division of the WP Business, in which he had responsibility for providing services to some of the firm’s clients. Mr Pateras referred to this division in his affidavit evidence as the “Farmer Division”. Some of the clients in the Farmer Division had come to the WP Business through its acquisition of other practices. Mr Cuff worked within the same division until his employment ended on 20 September 2019.

Mr Farmer’s reasons for leaving the WP Business

25    Mr Pateras stated that on 28 August 2020, and upon Mr Farmer giving notice of his intention to leave the WP Business, he and Mr Wilson met with Mr Farmer. Mr Pateras stated that during that meeting Mr Wilson asked Mr Farmer whether he was leaving to join Mr Cuff in business, which Mr Farmer denied, stating that he was joining a business where a practitioner had suffered a heart attack, and that he had met the business through his accounting network group. Mr Pateras stated that Mr Farmer declined to identify who was in the business, and stated that Mr Wilson was not known to them.

26    The recitals to the Redemption Deed dated 31 August 2020, and which Mr Farmer executed, provided in the first two paragraphs –

A.    Farmer gave verbal notice on 28 August 2020 that he intended to exit Wilson Pateras as a unitholder and principal, as he was buying into a suburban accounting practice due to the retirement of an older practitioner who had a heart attack

B.    Farmer has confirmed he has no intention of soliciting Wilson Pateras clients, however he will be available to assist Wilson Pateras to transition clients up to and post the exit date

27    An ASIC extract for OMW Partners records that the company was registered on 14 August 2020, and that Mr Cuff and Mr Orfanidis were appointed as directors on that date. BSCT is recorded as one of the shareholders, with the relevant change to the register of members dated 14 October 2020.

28    The applicants rely on the variance between Mr Farmer’s accounts of his reasons for leaving and what it alleges to be the true position, namely that Mr Farmer has gone into business with Mr Cuff.

29    For his part, Mr Farmer disputes some aspects of Mr Pateras’s recollection of the conversation between him and Mr Wilson. In particular, Mr Farmer disputes that he was asked anything about Mr Cuff.

Beehive Accounting

30    Mr Cuff registered the business name “Beehive Accounting” on 24 September 2019, and registered the domain name “beehiveaccounting.com.au” on 29 September 2019. Mr Cuff gave his address in his affidavits filed in this application as 33 William Street, Ringwood. An ASIC search of OMW Partners records Mr Cuff’s address as 33 William Street, Ringwood. An ASIC search of Mr Farmer’s associated corporate entity, BSCT, shows that its address for ASIC communications, from the start date of 31 January 2020, is also 33 William Street, Ringwood.

31    Mr Geri of KPMG reviewed on behalf of the applicants a Surface Pro computer used by Mr Farmer. Artefacts found on the computer included two files opened on an external D:/ drive on 7 November 2018 and 8 November 2018, respectively, named “Beehive.xlsx”, and “Beehive V2.xlsx”. Mr Pateras then located four spreadsheets on the applicants’ computer system, stating that the document properties indicated that the documents were created on 19 April 2018. Mr Pateras did not identify the filenames of the spreadsheets, and there is nothing in the text of the spreadsheets that refers to “Beehive”. The spreadsheets contain lists of clients under three headings: “certain”; “hopefully”; and “try”. Mr Pateras stated that each of the clients listed in the spreadsheets was in the Farmer Division of the WP Business, nine of whom had subsequently moved their business to Beehive Accounting. Mr Pateras stated that a search of the record of Mr Farmer’s Google searches on the computer revealed that he had searched “Beehive” on 30 November 2018.

32    In response, Mr Farmer stated that he believed that he created the spreadsheets at a time when he was looking at leaving the WP Business and going out on his own, and that the list was of clients that he proposed to negotiate taking with him, depending upon how open they were to moving.

33    On 30 October 2019, solicitors acting on behalf of the WP Business wrote to Mr Cuff expressing concerns that Mr Cuff would not comply with his continuing obligations relating to confidential information and under the restraint provisions of his employment contract. On 15 November 2019, solicitors acting for Mr Cuff responded and, inter alia, confirmed that Mr Cuff would comply with the post-employment restraints on the terms set out in his employment contract.

34    Mr Cuff stated the following in his first affidavit dated 30 October 2020 in relation to contacting former clients –

26    It is my understanding that to the extent there was ever any enforceable restraint in my employment contract with the applicants, that restraint came to an end at the very latest on 20 September 2020.

27    As a result, I fully intend to contact clients with whom I had a good rapport to inform them I am available to provide accounting services via my business, Beehive Accounting, if they would like to have me as their accountant moving forward. I have already started doing so.

28    As noted above, my personal clients are entirely separate and distinct from the OMW client base. My clients are not serviced by OMW and the shareholders of OMW derive no benefit from my personal clients.

35    It is at least arguable that these paragraphs convey the impression that Mr Cuff’s intention to contact clients is largely prospective, commencing from the end of his restraint period on 20 September 2020. Mr Cuff confirmed in his affidavit evidence that a number of former clients of the WP Business were now clients of his through his Beehive Accounting practice –

(a)    Tetris Group;

(b)    Melinda Waters/Five Siblings Pty Ltd;

(c)    Expression Furniture;

(d)    Attawar Consulting;

(e)    Virtual Spectator; and

(f)    Dalton Builders.

36    Mr Cuff characterised these clients as his clients with whom Mr Farmer had no close relationship, with the exception of Virtual Spectator. Mr Pateras’s evidence in his affidavit of 6 November 2020 was that Mr Cuff had performed services for the majority of these clients whilst working in the WP Business. Mr Cuff did not address this evidence in his affidavit of 16 November 2020. Nor did Mr Cuff address in his affidavit of 16 November 2020 the time at which he commenced acting for the former clients of the WP Business. In an outline of written submissions filed on behalf of the respondents dated 30 October 2020, although not filed until 13 November 2020, it was submitted on the respondents’ behalf at page 4 that –

… It seems likely that Mr Cuff served his period of restraint faithfully, and then those clients felt sufficiently satisfied with his abilities (or dissatisfied with Wilson Pateras) that they chose to follow him once he was able to service them.

37    However, annexed to Mr Pateras’s affidavit dated 6 November 2020 are ASIC records which show that companies associated with what are now former clients of the WP Business filed a change of registered address to Mr Cuff’s Beehive Accounting address at 33 William Street, Ringwood, on the following dates –

(a)    22 January 2020 – Interface Exhibition Services Pty Ltd;

(b)    31 January 2020 – Panada Boutiques Pty Ltd;

(c)    31 January 2020 – McMahon Entertainment Group Pty Ltd;

(d)    31 January 2020 – C J Stephens Constructions Pty Ltd;

(e)    31 January 2020 – Stephens Property Development Pty Ltd;

(f)    13 April 2020 – Milburn Quest Pty Ltd, a company associated with Dalton Builders;

(g)    24 April 2020 – Expression Furniture Pty Ltd;

(h)    14 September 2020 – Tulcany Pty Ltd and Plutonius Pty Ltd;

(i)    20 September 2020 – Kayya Holdings Pty Ltd, which is associated with the Attawa Consulting Group;

(j)    20 September 2020 – Cloud Alliance Pty Ltd, which is a company associated with Ms Melinda Waters and Five Siblings Pty Ltd; and

(k)    11 October 2020 – Willisa No 2 Pty Ltd, being a company associated with the Tetris Group.

38    Most of these dates precede the end of Mr Cuff’s restraint period, with which his solicitors said he would comply, and in the case of the two notices filed on 20 September 2020, there is a prima facie inference that contact by Mr Cuff with the clients must have preceded that date.

39    Mr Farmer stated in his affidavit evidence that he has no interest, directly or indirectly, in Beehive Accounting. Correspondingly, Mr Cuff stated that Beehive Accounting is his business, and is not a partnership with anyone else. At trial, this evidence would have to be reconciled with the fact that Mr Farmer claims that the McMahon Entertainment and Stephens Constructions clients are his clients.

Downloading of client work papers by Mr Farmer

40    Mr Pateras stated that while Mr Farmer was still working in the WP Business, Mr Farmer downloaded client work papers for the following clients in circumstances where there were no records of Mr Farmer performing work for those clients at about the time of the downloads in the nature of time records, emails to or from the clients, or alterations to the documents and subsequent uploading –

(a)    17 September 2019 – Tetris Group;

(b)    12 November 2019 – Tulcany Pty Ltd;

(c)    11 February 2020 – Tulcany Pty Ltd;

(d)    31 March 2020 – Cameron Stephens;

(e)    7 April 2020 – Attawar Consulting Group;

(f)    7 April 2020 – Melinda Waters/ Five Siblings Pty Ltd;

(g)    17 April 2020 – Dalton Builders;

(h)    17 April 2020 – Cameron Stephens;

(i)    6 May 2020 – Tulcany Pty Ltd;

(j)    28 May 2020 – C J Stephens Constructions Pty Ltd;

(k)    4 June 2020 – Panada Boutiques Pty Ltd;

(l)    9 July 2020 – McMahon Entertainment;

(m)    21 July 2020 – Seven Styles Pty Ltd;

(n)    23 July 2020 – Panada Holdings Pty Ltd and Panada Boutique Pty Ltd; and

(o)    4 August 2020 – Virtual Spectator.

41    The significance of the identity of the clients in the above list is that most appear now to be clients of Mr Cuff, and in relation to some of them, there is an available prima facie inference that Mr Cuff commenced acting for them while he was still subject to the 12 month restraint in his employment contract, compliance with which his solicitors had confirmed. This is subject to the qualification that the McMahon Entertainment and Stephens Constructions groups of clients were on the sale client list in Annexure A to the Redemption Deed, being clients in respect of whom the restraints on Mr Farmer do not apply, and that Mr Farmer stated that Mr Cameron Stephens was his brother-in-law.

42    Further, Mr Pateras stated that Mr Farmer sent client papers to his own personal email addresses at times in respect of which there was no record of work undertaken for the client –

(a)    23 April and 17 July 2020 – Stephens Constructions;

(b)    23 May and 3 December 2019, and 12 June 2020 – Extendahand;

(c)    11 May 2020, 16 July 2020 – AFD Australia Group.

43    Mr Farmer denied that he downloaded and forwarded to Mr Cuff any of the documents referred to in Mr Pateras’s affidavit evidence. He stated that it was his practice only to access documents that he needed for legitimate work purposes at any given time.

44    Mr Farmer specifically denied being in possession of the Tetris Group work papers, and denied providing them to Mr Cuff.

45    In relation to Dalton Builders, Mr Farmer specifically denied that he downloaded the papers and forwarded them to Mr Cuff. He stated that he had never met or spoken to Dalton Builders before, and could not recall why he downloaded the documents. He suggested that at the time, the focus was on assisting clients with JobKeeper payments, and stated that there were many clients for whom he downloaded files to assess their eligibility for JobKeeper payments when he was otherwise not servicing the client. Mr Farmer denied that he or OMW Partners was servicing Dalton Builders. Mr Pateras responded by stating that Mr Farmer had downloaded the 2018 papers for Dalton Builders, which would not have been of assistance in determining JobKeeper eligibility in 2020, which would have depended upon downturn in turnover, and that the relevant papers would be the client’s live accounts on Xero, and its BAS statements. Mr Pateras further stated that Mr Farmer had not recorded any time for Dalton Builders, and that Dalton Builders had not been charged for any accounting work for the 2020 year. Further, Mr Pateras produced a document that had been retrieved from Mr Farmer’s computer records which he described as a COVID 19 list. The document is in the form of a spreadsheet, and its contents support an inference that it is a list of clients prepared for the purpose of considering JobKeeper and JobSeeker eligibility. Mr Pateras stated that the last modification made to the document by Mr Farmer was on 22 April 2020, and that Dalton Builders was not listed.

46    The same points were made by Mr Pateras in relation to the papers for Virtual Spectator that were downloaded on 4 August 2020, being 2018 documents in circumstances where Virtual Spectator was not listed on Mr Farmer’s CODID 19 list.

47    As to Attawar Consulting, Mr Farmer stated that he prepared a JobKeeper application for Attawar Consulting, and stated that he believed that the WP Business had charged for this work. Mr Farmer also stated that he believed that the WP Business was undertaking 2019 compliance work for Attawar Consulting at the time, which would have required him to download the papers for review. Mr Farmer specifically denied that he was in possession of the papers, or that he forwarded them to Mr Cuff. Mr Pateras responded by stating that Mr Farmer had downloaded the entire work papers for the Attawar Consulting Group on 7 April 2020, and stated that these papers did not contain information relevant to the assessment of eligibility for JobKeeper payments. Further, although Attawar Consulting appeared on Mr Farmer’s COVID 19 list, no information had been entered for it. Mr Pateras stated that Mr Farmer did not record any billable time for any such work for Attawar Consulting.

48    Mr Farmer stated that Ms Melinda Waters is the spouse of the owner of Attawar Consulting, and that he believed that he had met her only once. Mr Farmer deposed to a belief that his purpose in downloading the papers was to review the file as he believed, but was not entirely certain, that he was finalising their 2019 tax returns at that time. Mr Pateras responded by stating that on 7 April 2020, Mr Farmer had downloaded the entire work papers for “Melinda Waters” in which he included associated corporations, Five Siblings Pty Ltd and Cloud Alliance Pty Ltd.

49    Mr Farmer stated that he could not recall why he downloaded Virtual Spectator working papers, but denied being in possession of them, and denied providing them to Mr Cuff. He also denied that Virtual Spectator was a client of his, or of OMW Partners.

50    Mr Farmer replied to Mr Pateras’s responses, maintaining that on most of the occasions on which he accessed various client files, he did so for JobKeeper purposes. He also stated that on a number of occasions the downloads were as a result of inquiries by other accountants acting on behalf of former clients, and that those accountants included Mr Cuff.

51    Mr Cuff denied that Mr Farmer provided him with documents relating to any of the clients of Beehive Accounting that he identified, being those to which I have referred at [35] above. Ms Chambers denied that she or Sur Mon Chemin was in possession of the client working papers described in Mr Pateras’s affidavit.

Xero cloud-based accounting

52    Mr Pateras stated that the WP Business licensed Xero accounting software to its clients, and that the vast majority of clients of the WP Business operated their ledgers under this system.

53    Mr Pateras stated that since July 2019, approximately 15 to 20 clients from within the Farmer Division had removed the ability of the WP Business to access their Xero accounting software, or had requested cessation of a recurring invoice or direct debit for the service. Mr Pateras stated that these clients included –

(a)    Virtual Spectator;

(b)    Attawar Consulting;

(c)    Expression Furniture;

(d)    Melinda Waters/Five Siblings Pty Ltd; and

(e)    Tetris Group.

54    Mr Pateras stated that Mr Farmer had primary responsibility for servicing Virtual Spectator, and that following a request by the client on 22 January 2020, Mr Farmer made requests to have the Xero subscription transferred to the client. The client’s email to Mr Farmer referred to “bringing our accounts back in house in order to lower our admin costs”. On 8 May 2020, the client emailed Mr Farmer referring to difficulties in Xero transferring data “between 2 different accountants when you change accountants”. On 4 August 2020, Mr Farmer downloaded the entire work papers for Virtual Spectator. Mr Cuff has given direct evidence that Virtual Spectator is now a client of Beehive Accounting.

55    In relation to the Attawar Consulting Group, Mr Pateras stated that Mr Farmer was the responsible principal for the client, and that Mr Farmer and Mr Cuff worked on the client’s files and had contact with the client. Mr Pateras stated that on 19 August 2020 Mr Farmer directed an employee of the WP Business to transfer ownership of the Xero file for the Attawar Consulting Trust to the client, Mr Attawar. Mr Farmer had previously downloaded the entire client work papers on 7 April 2020. On 20 September 2020, Kayya Holdings Pty Ltd, which is associated with the Attawar Consulting Group, changed its registered office to Beehive Accounting. Mr Cuff has given direct evidence that the Attawar Consulting Group is now a client of Beehive Accounting.

56    In relation to Ms Melinda Waters and Five Siblings Pty Ltd, Mr Pateras stated that the request to stop the Xero subscription occurred in April 2020. This period coincided with Mr Farmer downloading the entire work papers for this client on 7 April 2020. Mr Cuff has given direct evidence that this client is now serviced by Beehive Accounting.

57    In relation to the Tetris Group, Mr Pateras stated that in about November 2019, Mr Farmer asked an employee of the business to transfer the Xero ledger subscriptions from the WP Business to the Tetris Group, which Mr Wilson questioned at the time, and it was not pursued. Later, in May 2020 Mr Farmer directed an employee of the WP Business to transfer the Xero subscription to the client without Mr Wilson’s knowledge. Mr Farmer downloaded the Tetris Group work papers in September 2019. Mr Cuff has given direct evidence that the Tetris Group is now a client of Beehive Accounting.

58    Mr Pateras stated that Expression Furniture ceased its direct debit payment arrangement for its Xero software with the WP Business in October 2019. Mr Cuff has given direct evidence that Expression Furniture is now a client of Beehive Accounting. Expression Furniture Pty Ltd changed its registered office to Beehive Accounting on 24 April 2020.

Other clients

59    Mr Pateras identified a number of other clients for whom Mr Farmer had been the responsible principal where access by the WP Business to the client’s ATO portal had been removed –

(a)    Extendahand;

(b)    AFD Australia Pty Ltd;

(c)    Seven Styles Pty Ltd;

(d)    Shaun Shannon;

(e)    Price Group;

(f)    Clifford Burtt Group;

(g)    Allan Curtis;

(h)    SLL Chestnutt Pty Ltd;

(i)    Terry Hilton; and

(j)    Flahavin Group.

60    Mr Farmer stated that he could not recall hearing of four of them: Shaun Shannon, Clifford Burtt Group, Allan Curtis and Terry Hilton. He stated that at least two of the clients had ceased trading pending liquidation of the company, and referred to AFD Australia Pty Ltd, which Mr Pateras had listed twice in his affidavit. For his part, Mr Cuff denied that he, or Beehive Accounting, or OMW Partners, was servicing any of the above clients.

Jaunt Motors

61    Mr Pateras stated that Mr Farmer had responsibility for servicing Jaunt Motors, which Mr Pateras had introduced to the business in August 2019. The applicants relied on an email dated 17 September 2020 which Jaunt Motors sent to Mr Farmer’s WP Business email address, which suggested that the writer was on a Google Meet call, and was awaiting Mr Farmer, and suggested that the call be rescheduled. The applicants also relied on LinkedIn activity of Mr Farmer on 3 October 2020 in which he “liked” posts from this client.

62    Mr Farmer responded that he had not spoken to the client since his departure, and that the Google Meet call had likely been organised but not cancelled before he left. He stated that his work calendar, to which he did not have access, would be capable of confirming this.

TJK Capital

63    Mr Pateras stated that he introduced this client to the business in February 2020, and that Mr Farmer had responsibility for servicing the client. Mr Pateras stated that Mr Farmer’s wife was appointed a director of TJK Capital Pty Ltd in April 2020, and that Mr Farmer did not disclose this, claiming that the non-disclosure was in contravention of a written conflict of interest policy. Mr Farmer stated that when asked by the client, he introduced his wife as a potential director for a dormant company, and that they had been working together since.

Letho Group

64    Mr Pateras stated that in 2016 he introduced Letho Group as a client of the WP Business, and that Mr Farmer was responsible for servicing the client. Mr Pateras stated that on 18 September 2020 and 9 October 2020 Mr Farmer accepted calls from Ms Michelle Letho, and that on 16 October 2020 he observed that Mr Farmer had “liked” LinkedIn posts by Mr Rohan Letho on four occasions. On 9 October 2020, Ms Letho sent an email to Mr Farmer’s WP Business email address that referred to the website of OMW Partners, and provided details of a website developer. Mr Pateras spoke to Mr Letho on 2 October 2020 during which Mr Letho stated that he was aware that Mr Farmer had left Wilson Pateras, that Mr Farmer had been active on LinkedIn and had noticed that he had changed his profile, and that he was undecided as to whether he would remain a Wilson Pateras client.

65    Mr Farmer responded that Ms Letho had called him shortly after he left the WP Business, and that he took her call because her number had not been programmed into his iPhone. Ms Letho had asked Mr Farmer where he was going, and after he told her, she laughed about the quality of the website, and asked Mr Farmer if he wanted the name of someone who could help update it, and he asked her to send him the name.

LinkedIn activity

66    Mr Pateras stated that since his resignation on 28 August 2020, Mr Farmer has “liked” posts of three persons who were Wilson Pateras clients, including Jaunt Motors to which I referred earlier, and that he had “liked” posts of the Wilson Pateras marketing manager on five occasions, in circumstances where he had not previously liked that person’s posts.

Ethical clearance letters

67    Mr Pateras stated that there is a practice in the accounting profession that when a client changes accountants, the new accountant sends an ethical clearance letter to the former accountant, and that it was rare not to receive such a letter. Mr Pateras stated that the ethical clearance letter served two purposes. First, it served as a professional courtesy, and second, it enabled the new accountant to discharge ethical obligations by enquiring of the old accountant whether there was any professional or ethical reason why the new accountant should not accept the client engagement. Mr Pateras produced a pro forma sample of such a letter, which enquired whether there was any professional or ethical reason why the new accountant should not accept the appointment, and also requested that the client’s documents be forwarded.

68    Mr Pateras stated that approximately 53 clients from the Farmer Division had left the WP Business in the period of 1 July 2019 to 15 October 2020, and in respect of 16 of those clients, no ethical clearance letter had been received. Mr Pateras stated that revenue for the division had dropped approximately 24 per cent over the period. Mr Farmer disputed this figure, suggesting that Mr Pateras had aggregated groups of clients to reach his figure of 53. Further, both Mr Cuff and Mr Farmer stated that ethical clearance letters were not mandatory, and Mr Farmer disputed that it was rare not to send such letters.

Sundry contacts

69    Mr Pateras referred in his affidavit to evidence that subsequent to the execution of the Redemption Deed, Mr Farmer had accepted telephone calls from four clients.

Access to Wilson Pateras Confidential Information

70    Mr Pateras stated that on 7 August 2020 Mr Farmer accessed the firm’s receptionist procedure manual, which the applicants claim contains confidential information, in circumstances where Mr Farmer had never had any function within the firm’s administration or reception roles. Mr Pateras expressed concern that Mr Farmer may be using the confidential information in the manual improperly within his new business.

71    Mr Pateras stated that on 11 August 2020, Mr Farmer accessed the files of another business that Wilson Pateras had acquired, Trish Anglin & Associates. Mr Pateras expressed concern that there was no legitimate reason for Mr Farmer to have accessed those files, and that he believed that Mr Farmer had done so in order to gain confidential information regarding clients and employees associated with that transaction.

72    Mr Farmer stated that neither he nor his company had copies of the above documents, and stated that they were never provided by him to Mr Cuff or OMW Partners. However, he did not deny accessing the documents, and did not address the circumstances of the access. Mr Cuff denied that he or his company held copies of any of the documents to which Mr Pateras referred in his affidavit as confidential information. For her part, Ms Chambers also denied that she or her company held copies of the documents alleged to comprise the confidential information.

Summary

73    Mr Pateras deposed to a belief that since Mr Cuff left the WP Business, Mr Cuff, Ms Chambers, and Mr Farmer had been acting in concert together to set up an accounting business together, and to cause as many of the Farmer Division clients as possible to move to the new business, to conceal these plans from the WP Business, and to obtain confidential information and documents that are the property of the WP Business to assist them in this objective. These allegations are denied by the respondents.

The applicants’ submissions

74    The applicants submitted that from 2018, Mr Farmer and Mr Cuff had been engaged in a concerted plan wrongfully to divert clients from the Farmer Division of the WP Business, into their own businesses, or a business in which they have an interest. The applicants submitted that it was clear that Mr Cuff did not comply with the restraints in his employment contract, and that by downloading client documents, Mr Farmer had been assisting Mr Cuff by providing him with client documentation and information, and by taking other action to facilitate the movement of clients to Beehive Accounting. The applicants submitted that they do not yet know the extent of Mr Farmer’s and Mr Cuff’s wrongdoing. It was submitted that the conduct of the respondents displayed secretiveness and dishonesty. This last submission over-reached on the available material in relation to Ms Chambers and Sur Mon Chemin.

75    Notwithstanding Mr Farmer’s denials in his affidavit, the applicants submitted that it was likely that some interest in Beehive Accounting was held on trust for Mr Farmer, or that the Beehive Accounting business would be folded into OMW Partners. It was submitted that unless restrained there was a substantial risk that the WP Business would lose more clients, and suffer financial loss for which damages would not be an adequate remedy. In support of this last submission, Mr Pateras stated that it was very difficult to persuade a client to return to a practice once the client had decided to leave.

76    The applicants submitted that the balance of convenience favoured the grant of the injunctions sought. It was submitted that the injunction sought against Mr Farmer and BSCT would require no more than that they comply with their contractual obligations, and that the injunctions sought against the other respondents sought no more than that they be restrained from inducing Mr Farmer and BSCT from breaching those obligations. It was submitted that interlocutory injunctions of this nature would cause no harm to any of the respondents that could not be compensated by an order for damages pursuant to an undertaking by the appellants to pay the same.

The respondents’ submissions

77    The respondents submitted that the applicants’ case was conjecture. They submitted that the evidence relied on by the applicants did not amount to a prima facie case, and absent a prima facie case there was nothing of sufficient substance to justify the Court exercising its injunctive power pending trial.

78    The respondents submitted that there was no direct evidence of any breach by Mr Farmer or BSCT of the restraints to which they were subject, and no inference of the same arose. Instead, the conduct of Mr Farmer in buying into a practice with an existing client list was consistent with wishing to comply with the restraints.

79    The respondents submitted that the reliance on the downloading of work papers by Mr Farmer was selective, and was not given context, being the enormous number of occasions on which Mr Farmer would regularly download work papers.

80    As to miscellaneous matters alleged against Mr Farmer, the respondents submitted that –

(a)    the absence of ethical clearance letters does not carry much weight, particularly in relation to those clients for whom Mr Cuff commenced to act;

(b)    liking LinkedIn posts was not a breach of Mr Farmer’s restraints;

(c)    Mr Farmer had no obligation to prevent clients from moving to other accountants; and

(d)    the allegations of Mr Farmer taking client telephone calls were trivial, with no evidence of intentional breach, and no evidence of any client leaving the WP Business as a result of those calls.

81    In relation to the claims of inducing breach of contract, the respondents submitted that the tort required intention, which involved showing that the tortfeasor had sufficient knowledge of the contract to form an intention to interfere with it. The respondents submitted that this element of the claim was especially thin, and rose no higher than a belief held by Mr Pateras. It was submitted that Mr Orfanidis and Ms Chambers did not have sufficient knowledge of the terms of Mr Farmer’s restraint, and that there was no evidence of any conduct of any respondent that might constitute an intentional and unlawful interference in contractual relations. In particular, there was no evidence that any client or former client of the WP Business was being serviced by OMW Partners.

82    As to the claim for breach of copyright, it was submitted by the respondents there was no evidence that any of the respondents had copies of the procedure manual or any of the work papers, and therefore no factual basis for the relief sought.

83    The respondents submitted that the applicants had not shown that damages would not be an adequate remedy, and in support of that submission advanced a preparedness to undertake in substance that they would keep records of client billings and receipts for the provision of any accounting, taxation, business advisory or associated services to any of the “restrained clients” until the end of the longest of the restraint periods to which Mr Farmer was subject.

Consideration

84    The principles relating to the grant of an interlocutory injunction were not in dispute, and are well known. “[I]n all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff’s entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction”: Australian Broadcasting Corporation v O’Neill [2006] HCA 46; 227 CLR 57 at [19] (Gleeson CJ and Crennan J). See also, Gummow and Hayne JJ at [65]-[72] and [85]. The organising principles are to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed.

85    The injunctions sought in this case are quia timet injunctions. Equity may act quia timet when prevention is better than cure. Those principles inform the exercise of the statutory power to make an interlocutory order under s 23 of the Federal Court of Australia Act 1976 (Cth) because that power may be exercised where there is an appropriate case for injunctive relief under general law or under statute: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [No 3] [1998] HCA 30; 195 CLR 1 at [28] and [35] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ). The question in this application is whether the applicants have established a sufficiently serious arguable case for final quia timet injunctions to justify the grant of interlocutory relief, having regard to the balance of convenience.

Serious question to be tried

86    As I have mentioned, the respondents submitted that the applicants have failed to demonstrate a prima facie case, and that their case is built upon conjecture. In relation to Mr Farmer, Mr Cuff, their associated companies and OMW Partners, for the reasons set out below, I have come to a different view.

87    It is important that I emphasise that the main issues in dispute on this application are whether there is a serious question to be tried, and where the balance of convenience lies. The Court has not heard any witnesses give evidence because no deponent of an affidavit has been cross-examined. Furthermore, the Court has conducted only an interlocutory hearing. It is not generally appropriate for the Court to decide contested questions of fact on such an application. Accordingly, nothing that is said hereafter amounts to a determination of any of the substantive issues between the parties, which may be fully contested if the matter proceeds to trial.

88    The starting point is to recognise that the applicants’ case is largely a circumstantial case, which builds upon an accumulation of detail. Counsel for the respondents made a number of submissions directed to the weakness of various individual parts of the evidence. An example is Mr Farmer’s liking of LinkedIn posts, to which I will return. However, in evaluating the strength of a circumstantial case, a court may commit error if it evaluates its component parts, divorced from the whole.

89    I respectfully adopt the following observations of Tadgell JA in Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 141 in relation to the evaluation of circumstantial evidence —

… it should be said that, to assess the evidence in a case like this by reference to various individually-pleaded particulars, as though running through items on a check list, is apt to mislead. The evidence is to be evaluated as a whole in order fairly to consider whether the party bearing the onus of proof has established what is ultimately sought to be proved. The object of the exercise of evaluation is to discover whether the evidence paints a picture reflecting real life, rather than to place a tick or a cross against paragraph after paragraph of torpid pleading. A true picture is to be derived from an accumulation of detail. The overall effect of the detailed picture can sometimes be best appreciated by standing back and viewing it from a distance, making an informed, considered, qualitative appreciation of the whole. The overall effect of the detail is not necessarily the same as the sum total of the individual details: cf Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944; Shepherd v R (1990) 170 CLR 573 at 579–80; 97 ALR 161 at 165.

In a civil case like this, where there is no direct evidence of a fact that a party bearing the onus of proof seeks to prove, “it is not possible to attain entire satisfaction as to the true state of affairs”: Girlock (Sales) Pty Ltd v Hurrell (1982) 149 CLR 155 at 169; 40 ALR 45 at 55, per Mason J. In such a case, however, the law does not require proof to the “entire satisfaction” of the tribunal of fact.

90    In the present application, the question is whether the applicants have demonstrated that there is a serious question to be tried in relation to ultimate facts where, because of the circumstantial nature of the evidence, there may never be proof to the entire satisfaction of the Court. In my view, the combination of the following circumstances, demonstrated on a prima facie basis by the evidence, lead me to conclude that there is a serious question to be tried as to whether, unless restrained by the Court, there is a real risk that Mr Farmer and BSCT will act in breach of their contractual restraints.

91    First, until Mr Cuff left the WP Business in September 2019, he and Mr Farmer worked together in what Mr Pateras referred to as the Farmer Division, servicing particular clients of the business.

92    Second, there is significance in the fact of the preparation of the spreadsheets by Mr Farmer in April 2018 which listed clients of the WP Business that, on Mr Farmer’s account, he proposed to negotiate to take with him at a time when he was considering leaving the WP Business.

93    Third, there is the evidence that in November 2018, Mr Farmer saved two spreadsheets to an external drive titled “Project Beehive.xlsx” and “Project Beehive V2.xlsx”. By itself, this evidence does not go far. But in combination with the other evidence it attains significance.

94    Fourth, in January 2019, Mr Cuff and Mr Farmer investigated acquiring an accounting practice together.

95    Fifth, in September 2019, Mr Cuff registered a business under the firm name “Beehive Accounting”, and registered a corresponding domain name.

96    Sixth, upon Mr Cuff ending his employment with WP Accounting, he became subject to a restraint clause. By a letter dated 15 November 2019, solicitors acting for Mr Cuff confirmed that he would comply with the post-employment restraints on the terms set out in his employment contract.

97    Seventh, based on the objective evidence in the form of the ASIC records, there is a prima facie inference that Mr Cuff solicited some former clients of the WP Business while his restraint period remained on foot, and as early as January 2020. At [30] of his affidavit of 30 October 2020 filed in this proceeding, Mr Cuff identified some former clients of the WP Business for whom he now provides services, but without stating when they became his clients. Further, it is open to view [26] to [28] of Mr Cuff’s affidavit of 30 October 2020, which I have set out at [34] above, as intending to convey the impression that his solicitation of clients post-dated the expiry of the restraint period on 20 September 2020. To similar effect is the outline of written submissions dated 30 October 2020, and filed on behalf of all respondents on 13 November 2020, to which I have referred at [36] above. Mr Cuff’s affidavit of 30 October 2020 was filed before Mr Pateras’s affidavit of 6 November 2020 which annexed the ASIC searches. Mr Cuff’s second affidavit of 16 November 2020 failed to address the available inferences to which the ASIC searches give rise, thereby supporting the view that there is a serious question to be tried concerning what Mr Cuff was doing in his restraint period in relation to his solicitation of former clients of the WP Business to whom he had provided services, and otherwise as to the reliability of the evidence that Mr Cuff and Mr Farmer have given.

98    Counsel for the respondents submitted that every reference to Mr Cuff’s expired restraints is a distraction and should be ignored. I disagree. Mr Cuff’s conduct, and the dealings between him and Mr Farmer that might be inferred from the totality of the evidence, are relevant circumstances that inform whether the risk that the applicants allege exists, and if so the nature of that risk. Proof of the past conduct of Mr Cuff and Mr Farmer, who have now gone into business together, may give rise to a reasonable apprehension that similar conduct will follow in the future.

99    Eighth, there is a prima facie case that several of the companies associated with former clients of the WP Business who changed their registered office to Beehive accounting in 2020 were clients which Mr Farmer serviced. The respondents relied on the fact that the clients McMahon Entertainment Group and C J Stephens Constructions were listed in Annexure A of the Redemption Deed as sale clients, but a question arises as to the circumstances in which the corporate entities associated with those clients changed their registered addresses to that of Beehive Accounting on 31 January 2020 which, as I have mentioned, Mr Cuff does not address in his affidavit of 16 November 2020.

100    Ninth, the relationship between the timing of relevant events, and the prima facie inferences that are capable of arising from that timing are material to whether there is a serious question to be tried. In particular, triable issues arise in relation to the reasons for which Mr Farmer, when engaged in the WP Business, downloaded work papers for former clients of the WP Business who are now clients of Beehive Accounting on the dates he did. I have referred already to the relationships between those events at [40] to [51], and [54] to [58] above. In some instances, the downloading of papers post-dated the change of the registered office of a relevant corporate entity to the office of Beehive Accounting. For present purposes, the significance of the timing diminishes the claim by Mr Farmer that Mr Pateras was selective in his identification of the occasions of the downloads.

101    Tenth, an ASIC search for Mr Farmer’s company, BSCT, shows that since 31 January 2020 its office for ASIC communications has been Mr Cuff’s address at 33 William Street, Ringwood.

102    Eleventh, Mr Farmer has decided to go into business with Mr Cuff, and their associated companies are both shareholders of OMW Partners, of which Mr Cuff is a director. This has occurred in all of the circumstances to which I have referred above.

103    Twelfth, there is a triable issue about whether Mr Farmer was frank with Mr Pateras and Mr Wilson when they met with him following his resignation. Mr Farmer denies that Mr Cuff was discussed in that conversation. However, if Mr Pateras’s evidence is accepted at trial, then Mr Farmer’s denial that he was proposing to go into business with Mr Cuff is capable of being one of the relevant circumstances that falls to be evaluated with the other circumstances.

104    Thirteenth, the evidence about Mr Farmer liking posts of clients of the WP Business on LinkedIn may turn out to be insignificant. The respondents submitted that liking the post of a former client is not a breach of the restraints. However, in combination with the other evidence, the liking of posts of clients of the WP Business on LinkedIn, and the liking of the posts of the marketing manager of the WP Business, are capable of taking on some significance. The effect of liking a post is to remain in the consciousness of the WP Business clients, and in the case of the marketing manager of the WP Business, to be seen to be a part of her professional networks. The liking of such posts may turn out to be a relevant piece of the picture.

105    Fourteenth, there is a prima facie case that on 7 August 2020 Mr Farmer accessed the receptionist procedure manual of the WP Business, and on 11 August 2020, Mr Farmer accessed the files for Trish Anglin and Associates, to which I referred at [70] and [71] above. These events occurred shortly prior to Mr Farmer giving notice. Mr Pateras stated that Mr Farmer had never had any function within the WP Business administration or reception roles, and that there was no legitimate reason for Mr Farmer to access the files for Trish Anglin & Associates. I mentioned earlier at [72] that Mr Farmer did not deny accessing these documents, and did not address the circumstances in which he did so. Counsel for the respondents submitted that as the claim was one for infringement of copyright, Mr Farmer was required to address only whether he possessed copies of the manual, which he had done by denying that claim. There was some force in counsel’s submission, because the claims for interlocutory relief set out in the originating application, and in a proposed amended originating application, were relevantly limited to breach of copyright. However, the position was ambiguous because the applicants’ claim for final relief extends to an injunction restraining the use of confidential information, and a proposed form of order that the applicants served three days before the hearing departed from the interlocutory orders sought in the originating application, so as to bring within them an injunction against use of the information. Further, those paragraphs of Mr Pateras’s affidavit that addressed the downloading of documents were headed, “Improper access and use of WP Business Confidential Information”. I have given careful attention to the submissions of counsel for the respondents, but I have come to the view that against the context of all the circumstances set out in the affidavit evidence of Mr Pateras, the evidence that Mr Farmer gained access to the procedure manual invited a response, and the absence of a response by Mr Farmer that set out the circumstances and the purpose for which access was gained bears upon the weight to be given to the applicants’ claims.

106    Fifteenth, there are some aspects of the applicants’ circumstantial case that carry little weight. The evidence of the email from Jaunt Motors in relation to a Google Meet call is an example. On the other hand, I do not dismiss as insignificant the evidence of Mr Farmer’s telephone contact with Ms Letho. There is an inference capable of arising that the conversation between Mr Farmer and Ms Letho extended to Mr Farmer giving her details of his new employment, and other details such that Ms Letho was able to look at the OMW Partners website. Whether that inference arises is a triable issue. If it does arise, it may be another relevant piece of the picture.

107    For the above reasons, I am satisfied that there is a serious question to be tried on the question whether there is a real risk that Mr Farmer will, unless restrained, breach his contractual restraints, including by servicing former clients of the WP Business through the practice of OMW Partners, including those that appear to have retained Beehive Accounting. Mr Farmer and Mr Cuff deny any such intention. It is unnecessary and inappropriate that I say more than I have said, because these issues will be matters for trial.

108    As to the interlocutory relief sought against the third to seventh respondents, the cause of action that is relied upon is the tort of inducing breach of contract, which is an intentional tort. A respondent must know of the contract and sufficient of its terms to know that what the respondent induced or procured the party to the contract to do would be in breach of the contract: Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; 47 NSWLR 473 at [160] (Sheller, Stein and Giles JJA). For these purposes, knowledge may include constructive knowledge, in the sense of recklessness or wilful blindness: Northern Territory v Mengel [1995] HCA 65; 185 CLR 307 at 342 (Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ), citing Emerald Construction Co Ltd v Lowthian [1966] 1 WLR 691 at 700-701 (Lord Denning MR). The mere act of inducing someone to act inconsistently with a contract does not amount to knowing procurement to break the contract: Short v City Bank of Sydney [1912] HCA 54; 15 CLR 148 at 160 (Isaacs J). What is required is that a respondent have sufficient knowledge of the contract to ground an intention to interfere with contractual rights: Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 58 FCR 26 at 43 (Lindgren J, Lockhart J and Tamberlin J agreeing); Daebo Shipping Co Ltd v Ship Go Star [2012] FCAFC 156; 207 FCR 220 at [88]-[89] (Keane CJ, Rares and Besanko JJ).

109    I am not persuaded that there is a prima facie case against Ms Chambers or her company Sur Mon Chemin that they will seek intentionally to induce Mr Farmer or BSCT to breach their restraints. There is little probative evidence that links them to any threatened wrongdoing other than by Ms Chambers’ employment by Rose Partners, and Sur Mon Chemin’s shareholding in OMW Partners. Towards the end of the first day of the hearing, the applicants applied for leave to reopen their case by adducing evidence of an email dated 28 January 2016 from Ms Maree Pateras to Mr Pateras and Mr Wilson, into which Ms Chambers was copied, which attached a draft pro forma subscription and unitholders deed to support an inference that Ms Chambers had knowledge of the terms of the restraint clause in the deed. I marked the email for identification, and reserved on the question whether to receive it. I have determined to give leave to the applicants to rely on the email. In order to ameliorate any prejudice to the respondents, I gave them leave to file an affidavit of Ms Chambers in response. Unremarkably, Ms Chambers stated that she did not recall the particular email and that she doubted that she would have read the attachments in any detail. The email does not affect my conclusion that the present case against Ms Chambers and her company is weak, and does not rise to a prima facie level.

110    Mr Cuff is in a different position. It is unnecessary that I repeat the serious questions to be tried relating to Mr Cuff’s solicitation of clients of the WP Business, and the arguable inferences that arise in relation to Mr Farmer’s knowledge and involvement, and their decision to go into business together. There is an available inference that Mr Cuff is aware of the restraints to which Mr Farmer and BSCT are subject, at least because the respondents have been served with copies of the deeds: compare Emerald Construction Co Ltd v Lowthian at 700F. There is in my view a serious question to be tried as to whether there is a risk that Mr Cuff would procure Mr Farmer and BSCT to breach their restraints in the combination of circumstances to which I have referred at [91] to [106] above. As Mr Cuff is a director of Cuff Investments, and of OMW Partners, which is the vehicle through which Mr Cuff, Mr Farmer and others have agreed to conduct business, the same conclusion applies to those companies.

111    I would not grant an injunction against Mr Cuff, Cuff Investments, or OMW Partners in the broad terms sought by the applicants, who sought an order that those respondents not “induce Mr Farmer or BSCT to breach the Unitholder’s Deed or the Redemption Deed”. Any order should be directed to the restraint provisions of the deeds, which were the subject of the applicant’s submissions. The orders should have some precision as to the conduct that is to be enjoined.

112    In relation to the documents that Mr Farmer accessed on 7 and 11 August 2020, to which I referred at [105] above, there was no argument that the information in the documents did not have the necessary quality of confidence about it. The respondents deny having the documents, but Mr Farmer did not deny accessing the documents, and the circumstances in which he accessed the documents remain unexplained. There is a serious question to be tried as to whether Mr Farmer and Mr Cuff, and by extension their companies and OMW Partners, might use confidential information contained in the documents or reproduce the documents.

113    As to the client work papers that the applicants allege that Mr Farmer downloaded without an apparent legitimate reason, I am satisfied that there are serious questions to be tried as to whether the papers have the necessary quality of confidence about them, whether one of the applicants has copyright in the papers, whether Mr Farmer, Mr Cuff, their companies or OMW Partners have those papers, and if so whether there is a real risk that unless restrained they will reproduce or otherwise make use of them in the new business.

Balance of convenience

114    The question whether the restraints upon Mr Farmer and BSCT are unenforceable was not put in issue by the respondents on the interlocutory application. This is significant, because the submissions of the applicants did not seek to go beyond orders that would enjoin breach of the restraints.

115    The respondents submitted that damages as final relief would be an adequate remedy. I disagree. I respectfully adopt the observations of Brereton J in Cerilian Pty Ltd v Fraser [2008] NSWSC 1016 at [10] that “[g]enerally speaking, where what is involved is the enforcement by injunction of a contractual negative stipulation, it is a rare case in which relief will be declined on the basis that damages are a sufficient remedy”. See also, the lengthier consideration of this issue in Otis Elevator Company Pty Limited v Nolan [2007] NSWSC 593 at [18]-[30] (Brereton J). In the present case, prevention is likely to be better than cure having regard to the risk that the fracture of a client relationship may be irremediable, and to the possible difficulties that proof of loss may present, including proof of causation: see Huhtamaki Australia Ltd v Botha [2004] NSWSC 386 at [17] (Hamilton J), and Emeco International Pty Ltd v O’Shea [2012] WASC 282 at [21] (Edelman J).

116    If the Court grants to the applicants the interlocutory relief that they seek, then it is likely that a reasonable proportion of the two year restraint period to which Mr Farmer is subject will elapse before the matter proceeds to trial. This is a relevant discretionary consideration, and in some cases, this circumstance directs particular attention to the strength of the case for final relief: see, Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 536 (McLelland J). In the present case, the significance of that consideration is diminished because no challenge was made on this application to the enforceability of the restraints, and accordingly there is a reduced prospect that the respondents will suffer hardship, or loss to which an undertaking as to damages will not respond.

117    In relation to the orders directed to the use and reproduction of documents, the respondents denied that they possessed copies of the documents, and it follows that they do not suggest that they would suffer any detriment if interlocutory orders were made restraining their reproduction, and the use of confidential information derived from them.

118    Counsel for the respondents submitted that the Court should not too readily accede to an application for an interlocutory injunction on the basis there may be little prejudice suffered by the respondents because there is a stigma that attaches to an injunction. I have given attention to that consideration, but I give it little weight. There are references in some authorities to the stigma of an injunction. To be on the wrong side of a freezing order has been said to be a stigma because it suggests that a respondent is unable to pay its debts, and is dissipating its assets: Al-Rawas v Pegasus Energy Ltd [2009] 1 All ER 346 at [35] (Jack J); Booker McConnell plc v Plawscow [1985] RPC 425 at 441 (Dillon LJ). In Brand Developers Ltd v Ezibuy Ltd (2011) 93 IPR 143 at [61], Asher J of the High Court of New Zealand accepted as a relevant consideration an argument that there may be a stigma that attaches to the grant of an injunction which can be damaging in a commercial situation if the existence of the injunction becomes widely known, and that there was no likely equivalent stigma if the application for an injunction fails. However, it appears that the application in that case really turned on the judge’s conclusion that there was no serious question to be tried, and that nevertheless the plaintiff’s case was weak.

119    In the present case, there is a reasonable prima facie case against Mr Farmer, Mr Cuff, and their associated entities. The respondents do not offer any undertakings until trial or judgment. Further, the injunctions sought in the present case are not in the nature of a freezing order, or a search and seizure order. By this proceeding, the applicants seek to enforce restraint of trade clauses in two deeds, and to protect their documents, and the suggested stigma of an injunction is not a reason to deny the applicants interlocutory relief.

Conclusions

120    There will be an order that the applicants have leave to file an amended originating application substantially in the form of Annexure NP-5 to the affidavit of Mr Pateras dated 9 November 2020.

121    There will be an interlocutory injunction restraining Mr Farmer and BSCT from breaching the restraint clauses to which they are subject until judgment or further order, and in any event for a period of no longer than the expiry of the two year restraint period referred to in the Unitholders’ Deed. Subject to hearing from the parties, any such order should be directed to the conduct that is enjoined.

122    There will be an interlocutory injunction restraining Mr Cuff, Cuff Investments, and OMW Partners from inducing Mr Farmer and BSCT to breach their restraints. The terms of the order should reflect what I have said at [111] above. The duration of the order should be until judgment or further order, and in any event for no longer than the expiry of the two year restraint period referred to in the Unitholders’ Deed.

123    In relation to the documents the subject of the applicants’ claims, there will be an interlocutory injunction restraining Mr Farmer, BSCT, Mr Cuff, Cuff Investments, and OMW Partners until judgment or further order from reproducing the applicants’ reception procedure manual without a licence, or using information derived from it. In relation to the client papers which the applicants allege that Mr Farmer downloaded, there will be an injunction in corresponding terms. It appears to me that there may be some typographical errors in the proposed amended originating application in relation to the identification of the documents referred to in Mr Pateras’s first affidavit. The orders will need to identify the documents accurately, and from within the four corners of the orders.

124    I will direct that draft orders to give effect to these reasons be submitted to my Chambers for my consideration. I will hear the parties on the question of the costs of the interlocutory application and concerning the further conduct of the proceeding.

Associate:    

Dated:    9 December 2020