Federal Court of Australia

Avant Group Pty Ltd v Kiddle [2023] FCA 685

ORDERS

THE COURT ORDERS THAT:

1.    Upon the defendant by her counsel giving to the Court the undertakings set out in the schedule to this order, the plaintiff’s application for interlocutory relief indorsed on the amended originating process is dismissed.

2.    The matter be referred for further mediation, to take place before Senior National Judicial Registrar Legge on 7 July 2023 at a time to be advised.

3.    By 4.00 pm on 10 July 2023, the plaintiff file and serve a concise statement.

4.    By 4.00 pm on 24 July 2023, the defendant file and serve a concise statement in response, and any cross claim.

5.    By 4.00 pm on 3 August 2023, the plaintiff file and serve any concise statement in reply, and a concise statement in response to any cross-claim.

6.    By 4.00 pm on 10 August 2023, the parties are to confer and exchange any proposals for discovery of documents.

7.    By 4.00 pm on 17 August 2023, the parties file and serve any applications for discovery.

8.    The proceeding is listed for a case management hearing at 9.30 am on 25 August 2023.

9.    Save for the order for costs made on 7 June 2023, the costs of the application for interlocutory orders be reserved to 25 August 2023 for mention only.

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

SCHEDULE

The following undertakings have been provided by the defendant to the plaintiff and to the Court:

(a)    Ms Kiddle will keep confidential and will not use, make a record of or disclose to any person or entity any Confidential Information without the prior consent of Avant Group or as otherwise required by law;

(b)    Ms Kiddle has not transmitted any Confidential Information to any third party other than in the proper performance of her duties whilst engaged or employed by Avant Group;

(c)    Ms Kiddle has conducted searches of her electronic devices and physical property. As far as Ms Kiddle is aware, based on those searches, Ms Kiddle does not have any Confidential Information or other property of Avant Group stored on any computer, tablet, telephone, USB, external hard drive or other electronic or storage device in the possession, power or control of Ms Kiddle; and

(d)    if Ms Kiddle does locate any Confidential Information or other property of Avant Group in future, Ms Kiddle will promptly notify Avant Group in writing so as to enable such material to be returned to Avant Group and otherwise permanently deleted (including all copies and records thereof).

For the purpose of the above undertakings:

(a)    Avant Group means Avant Group Pty Ltd;

(b)    Confidential Information means any Avant Group information that must be kept confidential by reason of Ms Kiddle’s employment with Avant Group including as a consequence of clause 13 of the Employment Agreement, s 183 of the Corporations Act 2001 (Cth), common law and/or equity; and

(c)    Employment Agreement means the written contract of employment between Ms Kiddle and Avant Group dated 1 July 2021.

REASONS FOR JUDGMENT

WHEELAHAN J:

Introduction

1    The plaintiff engages in a specialised business that involves the provision of consultancy services to clients seeking benefits under government schemes, including the Commonwealth’s Export Market Development Grant (EMDG) scheme. The plaintiff’s business was established by Ms Katherine Whitehead in 2012, and the plaintiff was incorporated on 21 November 2013.

2    The defendant is a former employee of the plaintiff whose employment was terminated by the plaintiff without notice on 16 September 2022. The plaintiff terminated the defendant’s employment on the ground that her position had become redundant, and paid her the equivalent of three weeks’ pay in lieu of notice. In a letter that was given to the defendant upon the termination of her employment, the plaintiff stated that the decision to terminate was not a reflection of her performance.

3    In this proceeding, the plaintiff claims, among other things, that since the termination of the defendant’s employment, the defendant has been soliciting the plaintiff’s clients in breach of contractual restraints, and has been using confidential information that she retained from her employment in order to identify the clients and their contact details, and that the defendant threatens to induce its clients to breach terms of their retainer of the plaintiff. The confidential information is alleged to include data contained in a document that was referred to in the evidence as the WIP spreadsheet, and data stored on the plaintiff’s cloud-based client management system database, which the plaintiff alleges the defendant downloaded or copied to a private device prior to the termination of her employment. The plaintiff seeks interlocutory injunctive relief against the defendant pending trial or further order.

4    For her part, the defendant admits soliciting some of the plaintiff’s clients, but denies that the contractual restraints are enforceable. The defendant stated in her affidavit that she waited six months before soliciting the plaintiff’s clients, thinking that six months was a fair period. The defendant also denies downloading, retaining, or using any confidential information of the plaintiff. The defendant contends that the plaintiff’s case is not sufficiently strong to justify interlocutory orders.

General principles

5    The organising principles for considering whether to grant an interlocutory injunction 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 (O’Neill) at [19] (Gleeson CJ and Crennan J). The two limbs are inter-related such that the strength of the plaintiff’s case may be relevant to the balance of convenience, and may tip the balance one way or the other.

6    Where, as here, the reasonableness of a restraint of trade covenant is put in issue, it will usually be necessary for the Court to form a view about the prospects of the plaintiff establishing at trial that the restraint will be upheld. A post-termination restraint on an employee is prima facie invalid at common law unless the employer demonstrates that at the time of entering into the contract there were circumstances justifying the restraint and that the restraint is reasonable: Lindner v Murdock’s Garage [1950] HCA 48; 83 CLR 628 at 653 (Kitto J). Restraints in employment contracts are viewed more strictly and less favourably than those in commercial agreements, such as sale of business contracts: Geraghty v Minter [1979] HCA 42; 142 CLR 177 at 185 (Gibbs J).

7    In assessing the balance of convenience on an interlocutory application, a court looks to the practical consequences of making or refusing the order, including whether the grant or refusal of an injunction would have the effect of finally disposing of the proceeding: O’Neill at [72] (Gummow and Hayne JJ). This is an issue that frequently arises in applications for interlocutory injunctions to enforce restraint of trade clauses and requires that particular attention be given to the strength of the claim for final relief. That is because in such cases an interlocutory injunction does not necessarily maintain the status quo pending trial because often the correct view of the status quo is the very matter that is in dispute. While the grant of an interlocutory injunction to enforce a restraint clause might have the effect that the restraint is enforced for much of its duration before there is an opportunity for a final hearing, the refusal of an interlocutory injunction may have the consequence that a plaintiff is denied the primary remedy to which it claims to be entitled in order to enforce a negative contractual covenant: Cerilian Pty Ltd v Fraser [2008] NSWSC 1016 at [10] (Brereton J); Emeco International Pty Ltd v O’Shea [2012] WASC 282 at [19]-[22] (Edelman J); Wilson Pateras Accounting Pty Ltd v Farmer [2020] FCA 1763 at [115] (Wheelahan J). The inadequacy of damages as a final remedy therefore informs the balance of convenience: Liberty Financial Pty Ltd v Jugovic [2021] FCA 607 at [283] (Beach J). Damages may be inadequate because once client relationships are severed, they may be difficult to repair, and an award of damages, although possible, may not be the most suitable remedy: see, John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [45] (Brereton J). Moreover, in this application the defendant has deposed to her financial circumstances which cast doubt on whether any award of damages could ever be a practical remedy.

8    For these reasons this judgment is longer than might usually be justified in relation to an application for an interlocutory injunction. That is due to the large number of inter-related issues raised by the parties, not all of which could be fully argued on this application, and the practical consequences of granting or refusing interlocutory relief, which give rise to the need to evaluate the case for final relief carefully: see, Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 at 536 (McLelland J).

9    The questions in this application are therefore whether the plaintiff has established a sufficiently strong arguable case for final injunctions to justify the grant of interlocutory relief, having regard to the balance of convenience, and whether in the exercise of its discretion the Court should make orders in the terms sought. That involves considering both the strength of the claims and the defences and, in simple terms, to decide what is best to be done: see, Hubbard v Vosper [1972] QB 84 at 96 (Lord Denning MR), cited in Caterpillar Tractor Co v Caterpillar Loader Hire (Holdings) Pty Limited [1981] FCA 196; 56 FLR 175 (Evatt, Fisher and Ellicott JJ), and Heydon, Leeming and Turner, Meagher, Gummow and Lehane’s Equity Doctrine and Remedies (5th edition) at [21-345]. There is the risk that the Court might be wrong, in the sense that in granting or refusing an application for interlocutory relief, the Court’s appraisal of the strength of the case of one party or the other might be shown to be incorrect following a full examination of all the facts and circumstances at trial. But this risk does not excuse the Court from doing its best on the material before it to afford the parties justice in accordance with the established principles referred to in O’Neill. This risk directs attention to identifying the course that would carry the lower risk of injustice.

The interlocutory orders sought by the plaintiff

10    The interlocutory orders sought by the plaintiff took different forms. At the hearing, counsel for the plaintiff initially moved on orders in terms that were annexed to the plaintiff’s revised written submissions dated 1 June 2023. A re-formulated set of proposed orders was provided to the Court after the luncheon adjournment on 1 June 2023 after the Court had made a number of observations about the certainty of the terms of some of the orders that had been sought by the plaintiff.

11    A material consideration in determining whether to grant injunctive relief is the clarity with which the orders sought are expressed, because the defendant would be entitled to know what she is prevented from doing, “and this means not as a matter of law but as a matter of fact”: Redland Bricks Ltd v Morris [1970] AC 652 at 666 (Lord Upjohn). See also, ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 707; 38 FCR 248 at 259 (Lockhart J). These considerations were particularly apposite to some of the orders originally sought by the plaintiff, but abandoned, including “restraining [the defendant] from contravening s 183(1) of the Corporations Act”, and “restraining [the defendant] from using or disclosing confidential information in contravention of her equitable duty of confidence”.

12    Different considerations may apply to an application for an injunction to enforce compliance with a negative covenant in a contract where any uncertainty of expression in an injunction may be a reflection of the terms of the contractual covenant. In that instance, uncertainty may be taken into account as a discretionary matter going to relief, but there are limits to the precision and clarity that can be attained: see, Orleans Investments Pty Ltd v MindShare Communications Ltd [2009] NSWCA 40; 254 ALR 81 at [93]-[98], [105] (Giles JA, Spigelman CJ and Allsop P agreeing). It is sometimes necessary for a court to take a robust approach in the formulation of an interlocutory injunction rather than to decline to make an order because a perfect form cannot be devised: Slevin v Associated Insurance Brokers of Australia (Qld) Pty Ltd [1996] QCA 18; 40 AILR 9-049 (Thomas J), cited in Wilson Parking Australia 1992 Pty Ltd v Rush [2008] FCA 1601 at [53] (Jessup J). It will be necessary to return to the question of certainty in the orders sought by the plaintiff later in these reasons.

13    The plaintiff’s proposed interlocutory orders, as finally revised, sought interlocutory injunctions directed to: (1) enforcing restraint of trade clauses in the employment agreement that are in the nature of non-solicitation and non-interference obligations; (2) enforcing an obligation as to confidentiality under the employment agreement; (3) enforcing an equitable obligation not to use or disclose specified information claimed to be confidential; (4) enforcing the statutory obligation under s 183(1) of the Corporations Act by enjoining the defendant from using or disclosing specified information alleged to be confidential; and (5) enjoining the defendant from inducing breaches of contract.

14    For her part, the defendant offered undertakings to the Court in relation to her use of confidential information which I will set out later in these reasons.

The affidavit evidence

15    Subject to rulings on admissibility, the plaintiff relied on eight affidavits. Seven of those affidavits were made by Ms Whitehead, the managing director of the plaintiff. The eighth affidavit was made by Diwakar Raju Devaraj. Mr Devaraj is employed by the plaintiff as its IT manager and software engineer. Mr Devaraj’s affidavit was foreshadowed to the defendant by the plaintiff’s solicitors in mid-April 2023, and evidently took some weeks to prepare. The defendant relied on two affidavits. The first was an affidavit of the defendant herself. The second was a short affidavit of the defendant’s solicitor, which addressed a particular web search.

16    The seventh affidavit of Ms Whitehead was filed on 2 June 2023 pursuant to leave that I gave during the hearing on 1 June 2023 to file an affidavit in reply to the short affidavit of the defendant’s solicitor, for which I also gave leave. The contents of Ms Whitehead’s seventh affidavit travelled well beyond the leave that was given, which was to reply to the affidavit of the defendant’s solicitor. The contents of the affidavit raised new issues, contained passages that were otherwise not admissible, and ventured into submissions and commentary. The submissions and commentary in the affidavit were tantamount to an impermissible communication with the Court after the decision had been reserved and to which the defendant had no opportunity to respond. As a result, I relisted the application for further hearing on 7 June 2023. On that occasion I received into evidence the affidavit of the defendant’s solicitor, and received into evidence [1] to [9] of Ms Whitehead’s seventh affidavit. The plaintiff’s solicitor, who appeared on the further hearing, did not seek to read into evidence the balance of the affidavit, comprising [10] to [33] and two annexures. I have paid no regard to these paragraphs of Ms Whitehead’s seventh affidavit or the annexures to that affidavit.

17    In order to evaluate the evidentiary case of the plaintiff, it has been necessary to consider together the large volume of documents comprising all seven of Ms Whitehead’s affidavits and Mr Devaraj’s affidavit, as the plaintiff’s evidence was not in one coherent form, but was dispersed across those documents. Some of the evidence in Ms Whitehead’s affidavits was imprecise, and other aspects of her evidence were conclusory. Some evidence in her earlier affidavits was qualified, corrected, and incrementally supplemented by later affidavits.

18    No deponent was cross-examined. On disputed issues of fact the evidence remains untested. Further, some of the evidence, while admissible on an interlocutory application, would not be admissible at trial.

19    The following summaries incorporate prima facie findings made for the limited purposes of this interlocutory application. It goes without saying that the findings are made without the benefit of a full hearing. Any findings adverse to either party are provisional only and do not bind the Court on the trial where the issues in dispute may be fully contested.

The plaintiff’s business

20    The plaintiff is one of three corporations that operate under what Ms Whitehead described as the “Avant banner”. The other corporations are Avant Capital Pty Ltd and Avant Research Pty Ltd. Ms Whitehead stated that there was limited overlap between the plaintiff and the other corporations in terms of clients, personnel, and operations.

21    Initially, Ms Whitehead deposed in her affidavit of 14 April 2023 that the plaintiff employed 16 people. This was later corrected. In her affidavit of 12 May 2023, Ms Whitehead stated that she had used the term “employ” in a general sense and that the plaintiff actually engaged a mix of employees, contractors, and persons engaged through labour hire arrangements. One such person was Ms Sundae Debil, a worker located offshore, who was engaged through a labour hire company. Ms Whitehead then stated that at the time the plaintiff terminated the defendant’s employment it had 11 employees, who included Ms Whitehead and her husband, Mr Martin Whitehead.

22    The plaintiff’s key services cover three main types or categories of government grants: (1) the EMDG scheme; (2) the Research and Development (R&D) Tax Incentive Program administered by the ATO; and (3) various competitive grants across a range of sectors and locations at the state and federal level. Ms Whitehead stated that there was a high degree of overlap in terms of clients of the plaintiff applying for and receiving multiple grant types. Ms Whitehead gave, as an example, the fact that about 85% of the plaintiff’s active R&D clients had also received grant funding under the EMDG program or other grants. Ms Whitehead stated that in practice, there is a close relationship between the three streams of work. The fact that there were three streams of work was reflected in the terms of the plaintiff’s standard engagement letter which offered three types of services.

23    The EMDG scheme is administered by the Australian Trade and Investment Commission, also known as Austrade, which is a Commonwealth government agency that owes its existence to the Australian Trade and Investment Commission Act 1985 (Cth). Employees of the plaintiff who are engaged in EMDG work act as authorised agents of the clients so as to enable them to transact the client’s business through an Austrade portal which requires that the Austrade services be linked to the employee’s MyGov account.

The plaintiff’s clients

24    The evidence about the number of clients of the plaintiff was complicated. In her first affidavit, which was made 14 April 2023, Ms Whitehead deposed that the plaintiff had 1,200 “active customers” and approximately 6,800 “client leads”. Ms Whitehead deposed that the plaintiff’s active clients included approximately 300 businesses that were beneficiaries of the EMDG scheme. In her second affidavit, which was dated 5 May 2023, Ms Whitehead stated that this evidence was wrong. Ms Whitehead stated that the plaintiff had over 1,500 active clients, including 438 clients who were at that time receiving, or had recently received, an EMDG scheme grant. Ms Whitehead annexed two confidential Excel spreadsheets to her 5 May 2023 affidavit. According to Ms Whitehead, those spreadsheets contained a list of all active clients and details about their grant type. The plaintiff did not adduce any further evidence as to how these spreadsheets were prepared.

25    The first spreadsheet, annexure KEW-3 to Ms Whitehead’s 5 May 2023 affidavit, is titled “Client details spreadsheet.” This spreadsheet is confidential, so I will not detail its features. I have, however, considered its contents carefully, including by applying filters and sorting the information within it. The second spreadsheet, annexure KEW-4 to Ms Whitehead’s 5 May 2023 affidavit, is titled “Recent EMDG spreadsheet.” The recent EMDG spreadsheet is also confidential. I have also considered its contents carefully, and compared it with the information in KEW-3. The tenor of the plaintiff’s evidence is that it has about 800 active clients which are not mere leads or prospects. Having considered the information in the affidavits and the confidential spreadsheets, the number and identity of clients for which the plaintiff has undertaken work in relation to applications under the EMDG scheme is unclear.

26    For her part, the defendant deposed to the plaintiff having over 500 clients on its books, and that she provided services to approximately 200 of those clients in the final 12 months of her employment. The defendant also stated that in the second half of 2022 the plaintiff was pursuing new work with over 100 new clients, but that she did not have a connection with them all, and so therefore could not name all of these clients.

27    The plaintiff’s affidavit evidence has made out a prima facie case that the defendant has solicited some of its clients. This is not disputed by the defendant. The extent of solicitation is open-ended on the plaintiff’s evidence, and has not been clarified by the defendant’s evidence. The direct evidence of solicitation includes three emails from the defendant to the plaintiff’s clients which were in similar terms. In those emails, amongst other things, the defendant offered her services at a 10% flat rate which she stated to the clients compared favourably to a different structure that was specified in the letter that the plaintiff claimed involved use of its confidential information about pricing.

Remuneration for EMDG work

28    The plaintiff’s work in assisting clients to obtain benefits under the EMDG scheme is cyclical, where the workload rises at the time of applications and milestone reporting under the scheme. A time of heavy workload was in about March and April this year during which EMDG scheme applications had to be prepared to meet a filing deadline of 14 April 2023. Other times of heavier workload include the periods around the filing of milestone reports. At times of high workload, the plaintiff has engaged short term contractors to assist. The plaintiff’s remuneration for its work is paid on a commission basis calculated by reference to the monies that are granted to the client if an application is successful. Part of the process for the EMDG scheme is that recipients of grants must lodge milestone reports in order to obtain milestone payments. There is therefore some passage of time between the work undertaken by the plaintiff and the receipt of remuneration for that work.

29    The plaintiff’s practice is to require that its clients sign a letter of engagement. The plaintiff provided extracts of its standard terms of engagement, which seek to protect the plaintiff’s interest in recovering its commission payments by regulating the way in which an engagement may be terminated. Clause 10.4 of the standard terms provides that, if a submission has been prepared by the plaintiff, or is underway with the government, then the client agrees to allow the plaintiff to complete the submission and maintain the commission structure.

The defendant’s employment agreement

30    The defendant commenced working for the plaintiff in October 2015. Whether the defendant commenced as a contractor or as an employee is a question that the defendant has disputed in the context of foreshadowing a claim for additional statutory entitlements. The defendant was responsible for providing EMDG services to the plaintiff’s clients, and reported to Ms Whitehead. On 20 September 2017, the parties entered into a written employment agreement. This was superseded by a later employment agreement dated 1 July 2021 under which the defendant was employed as “Head of Grants and Funding” for 38 hours per week at an annual salary of $93,794 plus superannuation. This later employment agreement is the agreement relevant to the plaintiff’s claims in this proceeding. The employment agreement set out the defendant’s duties in a schedule. Relevant to the present application are the terms of the agreement relating to termination, confidential information, restraint of trade, choice of law, and the defendant’s entitlement to bonus payments.

Termination

31    The employment agreement could be terminated by notice, or pay in lieu of notice, with subclauses 17(b) and (c) providing –

17.    Termination

...

(b)    Termination by Avant or the Employee

Subject to Avant’s rights to dismiss the Employee without notice, Avant or the Employee may terminate this agreement without reason:

(i)    After two years of employment on eightweeks written notice to the other.

(c)    Pay in lieu of notice

At its discretion, Avant may elect to pay to the Employee an amount in lieu of part or all of any notice period.

...

32    In circumstances to which I will refer later, it was accepted on this application that, at the time of the plaintiff’s termination of the defendant’s employment, the defendant was entitled to eight weeks’ notice, or payment in lieu, and that the plaintiff did not give the defendant notice, and paid the defendant only three weeks’ pay in lieu of notice.

33    Clause 17 contained a further provision in the following terms –

(e)    Not to prejudice rights

Termination of the agreement will not prejudice any rights or remedies already accrued to any party under, or in respect of any breach of this agreement including but not limited to any post-employment restraint.

Confidential information

34    The employment agreement precludes the defendant from, inter alia, using the plaintiff’s confidential information in the following terms –

13.    Confidential information

(a)    The Employee acknowledges that by virtue of the employment the Employee will have access to confidential information the disclosure of which could materially harm Avant and the clients of Avant and related entities of either.

(b)    During the course of employment or after termination of employment, the Employee shall not for her own benefit or for the benefit of a third party use, make a record of or disclose to any person any confidential information relating to information, or trade secrets of Avant or Avant’s clients or related entities of either for any reason except so far as may be reasonably necessary to enable the Employee to fulfil her obligations under this agreement. The Employee hereby indemnifies Avant and any related entity against any loss or damage suffered as a result of a breach of confidentiality.

35    The term “Confidential information” is defined by cl 2 of the agreement in the following terms –

(c)    Confidential information means all information in whatever form be it oral in writing or electronic concerning the business of Avant or any related entity likely to damage the business of Avant or related entity if disclosed to a third party but does not include information which is in the public domain or was known to the third party;

Restraint of trade

36    The restraint of trade provisions of the employment agreement have a number of components. I will commence by setting out the principal restraint provisions –

18    Restraint of trade

(a)    Nothing in this agreement will be construed to limit the duty or duties owed by the Employee to Avant, including the duty of loyalty and fidelity to Avant.

(b)    During the Restraint Period the Employee must not within the Restraint Area:

(i)    Prepare to be, or be, involved in any competing business; or

(ii)    Canvass, solicit, induce or encourage any person who was an employee or contractor of Avant to leave Avant and join the competing business; or

(iii)    Canvass, solicit, approach or accept any approach from any person who was at any time an existing or Prospective Client or Customer of Avant; or any person who refers business to Avant on a regular ongoing basis, with a view to obtaining custom or any business introduction from that person in a competing business; or

(iv)    Interfere in any way with the relationship between Avant and its employees, clients and customers (including prospective clients and customers), contractors, or suppliers; or

(v)    Act in any restricted way as defined above.

(c)    The Employee acknowledges that:

(i)    Each agreed restraint specified above is, in the circumstances, reasonable and necessary to protect the genuine business interests of Avant;

(ii)    Damages are not necessarily an adequate remedy if the Employee breaches this restraint clause; and

(iii)    Avant may apply for injunctive relief if:

(1)    The Employee breaches or threatens to breach this restraint clause; or

(2)    Avant believes the Employee is likely to breach this restraint clause.

(d)    Each possible combination of restraint period, restraint area and restrained conduct above are separate and independent provisions and operate simultaneously.

(e)    Each party agrees that each combination of restraint period, restraint area and restrained conduct above is severable from the other combinations, and the other combinations of restraint period, restraint area and restrained conduct will remain operative if another combination is severed.

37    On this application, the plaintiff relied on the restraints in subclauses 18(b)(iii) and (iv), and did not rely on the other restraints. In particular, a claim for interlocutory relief in relation to the competition restraint in subclause 18(b)(i) was abandoned at the hearing.

38    The terms “Restraint Area” and “Restraint Period” are defined in cl 2 of the employment agreement in cascading, concurrent terms –

(m)    Restraint Area means:

(i)    Within a 10 km radius of the business premises; and

(ii)    Within a 50 km radius of the business premises; and

(iii)    Within a 200 km radius of the business premises; and

(iv)    The area in which Avant is located and conducts its business and from which it receives the majority of its custom.

(n)    Restraint Period means the period during employment and from the date of termination of employment for:

(i)    18 Months;

(ii)    12 Months;

(iii)    Nine Months;

(iv)    Six Months; and

(v)    Three Months.

39    The term “Prospective Client or Customer of Avant” that is deployed in subclause 18(b)(iii) is defined by cl 2, using cascading, concurrent components –

(l)    Prospective Client or Customer means a person, entity or company with whom Avant had engaged in negotiations to do business during the:

(i)    24 months preceding the date of termination of the employment; and

(ii)    18 months preceding the date of termination of the employment; and

(iii)    12 months preceding the date of termination of the employment; and

(iv)    Six months preceding the date of termination of the employment.

40    The term “competing business” that is deployed in subclause 18(b)(iii) is defined by cl 2 –

(b)    Competing business means any person or other entity that competes with Avant’s business or the business of any related body corporate of Avant;

41    At the hearing, counsel for the plaintiff submitted that, as the term “competing business” was not capitalised in subclause 18(b)(iii), it did not pick up the defined term “Competing business”. For the purposes of this application I do not accept that submission. The term “competing business” is used on five occasions in the body of the agreement, and on no occasion is it capitalised. The parties would not have included a definition of “Competing business” in the agreement for no purpose, and objectively construed, the term “competing business” where used in the body of the agreement picks up the defined meaning.

Choice of law

42    The employment agreement provided by cl 1 that it was governed by the laws of Victoria. This is relevant to understanding the application to this case of some of the New South Wales authorities in this area, where the effect of unreasonable restraints may be ameliorated by the powers of a court under the Restraints of Trade Act 1976 (NSW). That Act does not apply to the employment agreement in issue here.

Bonus payments

43    Clause 9(b) of the employment agreement referred to an incentive arrangement in the following terms –

You may be eligible to participate in other incentive arrangements offered by the Company from time to time. Details of these arrangements will be provided to you separately, and do not form part of your employment contract.

The identification of the confidential information

44    The plaintiff alleges that, during the term of her employment, the defendant downloaded confidential information belonging to the plaintiff in two tangible forms. The first was a client management system database of information that the plaintiff maintained in its Microsoft cloud-based service, Dynamics. The second was an Excel spreadsheet that the plaintiff prepared herself, referred to as the WIP spreadsheet, and which she had stored on the plaintiff’s SharePoint cloud-based storage service. The WIP spreadsheet was not adduced in evidence, but redacted extracts and a screenshot of the tabs of the spreadsheet were included in the plaintiff’s affidavit material.

45    At least in equity, in order to make out a case for the protection of confidential information a plaintiff must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and that there is an actual or threatened use of that information: Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; 14 FCR 434 at 443 (Gummow J).

46    In oral submissions, counsel for the plaintiff submitted that the defendant’s knowledge of client identities, client contact details that were not publicly available, its pricing structure and grant history information were capable of protection under the contractual obligation of confidentiality. Counsel for the plaintiff submitted that information carried in the defendant’s memory could be the subject of an interlocutory injunction preventing its use. Counsel submitted that the defendant’s knowledge of the identities of the plaintiff’s clients and the grant histories was “confidential information” as defined in the employment agreement (see [35] above) for the purposes of the contractual obligation of confidence which counsel characterised as “the confidential information as a whole”.

The plaintiff’s IT systems

47    The plaintiff supplied the defendant with a laptop computer. Laptop computers supplied by the plaintiff to its employees were managed by the plaintiff through Microsoft Azure. The plaintiff maintained its data on Microsoft cloud-based services that included Dynamics and SharePoint. The plaintiff’s data included its database of client information containing details for its active clients and a further approximately 6,800 leads. It also included folders of files stored on SharePoint such as EMDG client files. Employees of the plaintiff had access to this data on computers supplied by the plaintiff where the data were protected by passwords and two-factor authentication that were required at least for initial authentication. In addition, an authorised user could obtain access to the plaintiff’s corporate IT system via a web browser on any device by using login details and two-factor authentication.

48    Ms Whitehead’s affidavit evidence as to who had authorised access to the plaintiff’s EMDG client files was, at least, unclear. At [43] of her affidavit made 14 April 2023 Ms Whitehead stated that at any given time nine or ten people, including herself and Mr Whitehead, had access to EMDG client files. At [47] of her affidavit made 12 May 2023 Ms Whitehead stated that on the dates on which Ms Whitehead claimed the defendant had downloaded the WIP spreadsheet, the EMDG document library could only be accessed by seven people, being Ms Whitehead, Mr Whitehead, Mr Devaraj, Ms Debil, Mr Hugh Menting, Mr Dominic Gallichio, and the defendant. Ms Whitehead stated that she had spoken to each of the staff members to clarify whether he or she accessed the WIP spreadsheet in the relevant period, and that each had said “No”.

The evidence directed to the defendant’s alleged retention of confidential information

49    Upon the termination of her employment, the defendant’s laptop computer was returned to the plaintiff and its drive was wiped. The laptop was redeployed for use by an employee of an associated company of the plaintiff. As a result, data on the laptop could not be retrieved except any data that were backed up from the laptop onto the plaintiff’s network-attached storage (NAS) device. In relation to data that were stored on the Microsoft cloud-based services, the plaintiff had audit logs that were able to be generated, and was able to restore folders that had been stored on SharePoint.

50    On 29 March 2023, Ms Whitehead became aware that the defendant had solicited one of the plaintiff’s clients by sending an email to the client offering to provide services in relation to EMDG applications. Ms Whitehead then became aware of solicitations by the defendant of other clients of the plaintiff, taking the form of similar emails. Upon becoming aware of this solicitation Ms Whitehead directed Mr Devaraj to investigate the defendant’s activity in relation to the plaintiff’s data. These investigations took several weeks, extending well into May 2023. In summary, the results of the investigations are as follows –

(1)    The defendant’s former laptop computer could not be searched.

(2)    The defendant’s Outlook mailbox data were restored. Mr Devaraj stated that he did not find any “conclusive evidence” that the defendant had emailed the WIP spreadsheet to herself or another personal email address. In fact, the plaintiff did not adduce any evidence that relied on the defendant’s email data.

(3)    A folder on SharePoint that was titled “11. EMDG TEGAN” , which had been archived, was restored. Audit logs showed that the WIP spreadsheet had been saved within that folder.

(4)    Audit logs for the plaintiff’s EMDG document library on SharePoint were searched. These audit logs showed that –

(a)    on 25 April 2022 at 18:26 (UTC) an event described as “DownloadBlock” and an event described as “IsPrimaryClientSubscriptionC...” occurred which were attributed to the defendant’s userID;

(b)    on 4 May 2022 at 17:56 (UTC) a file named “Tegan WIP-TeganSurface.xlsx” was downloaded from the “EMDG/Shared Documents/11. EMDG TEGAN” directory to a device that registered “false” as a managed device, with the userID recorded as “app@sharepoint”;

(c)    on 5 May 2022 at 14:14 (UTC) a file named “Tegan WIP-TeganSurface.xlsx” was downloaded from the same directory to a device that registered “false” as a managed device, with the userID recorded as “app@sharepoint”;

(d)    on 23 May 2022 at 13:01 (UTC) a file named “Tegan WIP-TeganSurface.xlsx” was downloaded from the same directory to a device that registered “false” as a managed device, with the userID recorded as “app@sharepoint”;

(e)    on 4 August 2022 a file named “Tegan WIP-TeganSurface_2.xlsx” which was referred to as the second WIP spreadsheet, was uploaded to the “EMDG/Shared Documents/11. EMDG TEGAN” directory using the defendant’s userID, following which there was a later entry on 4 August 2022, “FileSyncDownloadedFull”;

(f)    the file “Tegan WIP-TeganSurface_2.xlsx” was subsequently accessed and modified before it was recycled on 22 August 2022, all entries being recorded with the defendant’s userID; and

(g)    on 12 September 2022 at 17:22 (UTC) a file named “WIP-TeganSurface.xlsx” was downloaded from the “EMDG/Shared Documents/11. EMDG TEGAN” directory to a device that registered “false” as a managed device, with the userID recorded as “app@sharepoint”.

51    The IP address recorded in the audit log referred to in 50(4)(a) above was 20.37.199.129. The evidence did not identify what files, if any, were downloaded on the occasion of the “DownloadBlock”. Mr Devaraj stated in his affidavit at [98] that the term “block download action” refers to the action of downloading a large “block” of data in one hit. I note that the term “block download action” does not correspond to the term “DownloadBlock” in the log.

52    As to the audit logs referred to in 50(4)(b), (c), (d), and (g), the IP address that was recorded was the same for each event, namely 180.94.117.206. There was no explanation in the evidence of the significance of this, or as to what the term “IsPrimaryClientSubscriptionC...” referred, and there was no explanation of the significance of the userID “app@sharepoint”. Each of these logs referred to the “UserAgent” as Mozilla/5.0, which suggests that the activity may have occurred via a web browser, but there is no direct evidence of this.

53    As to the second WIP spreadsheet that was uploaded on 4 August 2022, although Mr Devaraj stated at [110] of his affidavit that the document was saved onto the defendant’s laptop as opposed to SharePoint, I am not prepared to accept this to be the case on the evidence in its current, limited form. The evidence leaves open a possibility that the document was uploaded from a device to SharePoint using the defendant’s userID, that it was synced to SharePoint, and that it was then deleted from SharePoint. Precisely how that may have occurred is speculative without a more fulsome explanation, especially given the different “UserAgents” that are identified in the supporting log.

54    I referred above to the IP addresses that were recorded for the events that were logged. Ms Whitehead claimed at [49] of her affidavit made 12 May 2023 that the IP address of the unmanaged device showed that the WIP spreadsheet was downloaded in Australia, and that it therefore could not have been downloaded by Ms Debil, who was located offshore. This assertion about the location of the IP address was not supported by any explanation. In any event, as I understand the evidence of the plaintiff, Ms Debil did not commence to work for the plaintiff until July 2022, which was after the claimed downloads in April and May 2022.

55    Mr Deveraj stated that at one point in time he undertook a process to stop the copying of files onto USB devices. He could not say whether this occurred before or after the creation of the second WIP spreadsheet.

56    Mr Deveraj expressed a number of conclusions in his affidavit that appear to overstate things. For instance, Mr Devaraj stated at [116] that “[t]he logs clearly show that Tegan accessed confidential information from an unmanaged device multiple times”. It is not apparent from the logs themselves that this is the case. In addition, in evaluating the evidence of Mr Devaraj I have not placed weight on some other conclusions that he expressed, because his conclusions are only as good as the weight of any established facts or circumstances that support them. Some of his conclusions strike me as speculation, and others as not involving the application of any expertise but of drawing contestable inferences, which is a matter for the Court. Ms Whitehead was also prone to some overstatement and assumptions in her affidavit evidence that were not entirely supported when one examines carefully the underlying records that were later produced by Mr Devaraj.

Other evidence in relation to data access

57    Ms Whitehead stated in one of her affidavits that Mr Devaraj came to her in the first half of 2022 and informed her that there was an “unknown private computer” accessing the plaintiff’s system remotely using the defendant’s login details and username, and that this had been happening regularly for a few months. Ms Whitehead stated that she raised this with the defendant, who denied that it was her, stating that she did not know anything about the login activity. Mr Devaraj referred to this occurrence in his own affidavit, in which he deposed that he had discovered that “an unmanaged device linked to [the defendant’s] user account had been accessing the system.” After he discovered this, Mr Devaraj stated that he “sever[ed] the device so that it could not access Avant Group’s business systems anymore.” Mr Devaraj could not specify exactly when these events occurred, but believed that it was probably in February or March 2022. Mr Devaraj stated that the severance of the device would have taken effect more or less immediately.

58    Mr Devaraj also referred to two instances in June 2022 where alerts were raised in relation to two files associated with the defendant’s userID on account of the fact that they likely contained customer bank details. The records that Mr Devaraj produced in relation to these instances did not on their face record that any documents were downloaded by the defendant to an unregistered device.

The defendant’s evidence

59    In an affidavit made 18 May 2023, the defendant gave evidence of the nature of the work she performed for the plaintiff from October 2015. She stated that she undertook activities that resulted in the development of the plaintiff’s EMDG client base. The defendant stated that she dealt with a large volume of persons and entities while performing work for the plaintiff, and was not able to identify with any degree of precision which persons or entities were clients or customers of the plaintiff.

60    The defendant stated that for the period of six months following her termination on 16 September 2022 she did not perform any work. She stated that during this period she was contacted by several clients and prospective clients via telephone calls, LinkedIn messages, WhatsApp messages and the like. The defendant stated that whenever during this period she was contacted by clients of the plaintiff she ignored them and did not have any contact with them of any kind.

61    The defendant stated that around late March 2023 she did solicit work from various businesses, which included some clients and former prospective clients of the plaintiff. The defendant stated that she allowed the period of six months to pass because she thought this was a fair period between the termination of her employment and her completing EMDG work as a sole trader. The defendant stated that for any person or business whom she contacted in or after March 2023, she sourced their contact details from publicly available sources such as LinkedIn, Facebook, and various third party websites, as well as from her own knowledge and recollection. The defendant stated that the only work that she had completed for clients was in relation to an initial grant application. The defendant stated that she had completed six such applications, five of which were for former clients, which I interpret to mean clients for whom she undertook work while employed by the plaintiff.

62    The defendant gave evidence in response to particular instances of email contact by the defendant that were the subject of affidavit evidence of Ms Whitehead. The defendant denied contacting over 40 of the plaintiff’s clients as claimed by Ms Whitehead, but did not give a complete account of the extent of her solicitation.

63    By her affidavit, the defendant squarely denied ever downloading the plaintiff’s data to a private device, and squarely denied retaining the WIP spreadsheet, or a second version of it. The defendant deposed that apart from her supplied laptop, for the relevant period the only other working electronic device that she used for work-related activities was an iPhone. The defendant stated that, apart from an old Mac computer which did not work and an Apple iPhone Pro 11, from around 2017 until around November 2022, she did not own or have access to a personal laptop computer or any other electronic computing device.

64    The defendant also stated that she used her work laptop for private activities, and gave as examples the composition of her late father’s eulogy, and a personal speech that she wrote in 2022, which other evidence shows was a speech for her sister’s wedding.

65    Other features of the defendant’s evidentiary response to the claim that she had downloaded and retained the plaintiff’s confidential data were –

(1)    The plaintiff’s IT network had several issues which made it very difficult to use. The defendant understood that the plaintiff’s IT systems were set up by Mr Martin Whitehead, a director of Avant Capital Pty Ltd and Ms Whitehead’s husband. The defendant did not believe that Mr Whitehead had any IT qualifications.

(2)    The defendant experienced syncing and duplication issues with documents, meaning that some documents would not be saved on the system, or they would be saved multiple times. While working from the plaintiff’s premises, the internet would often drop in and out, which often led to further syncing and duplication issues. Specifically, the defendant stated that the WIP spreadsheet was duplicated.

(3)    From around 2021, the Dynamics database was unable to hold sufficient data regarding the status of the plaintiff’s files to allow the defendant to perform her duties effectively. The inadequacies of the Dynamics database led the defendant to use the WIP spreadsheet.

(4)    The defendant was unaware of how to access the Dynamics database other than from her work laptop. She never accessed the Dynamics database other than from this laptop.

(5)    The process of logging into the Avant Group network, including the Dynamics database, was an inbuilt function in the defendant’s laptop computer. The defendant would gain access to the network by simply turning on her computer at the start of each day and logging into her profile, presumably by entering a username and password. The defendant did not specifically recall ever having to use multi-factor authentication, except when she had lost connection due to issues with the server. While the defendant understood that she may have had to complete multi-factor authentication if she accessed the plaintiff’s network via Microsoft SharePoint on an internet browser, she did not specifically recall ever doing this.

(6)    Aside from Ms Whitehead, Mr Whitehead and Mr Devaraj, there were at least two instances in which another person may have had access to the defendant’s laptop or login credentials –

(a)    Ms Debil – the defendant claimed that she was instructed by Ms Whitehead to provide her login credentials to Ms Debil who, as I have already stated, was located offshore. The defendant stated that Ms Debil did not have independent access to the Dynamics database and she had not been provided with any login credentials by the plaintiff. The defendant understood that, once Ms Debil had accessed the Dynamics database using the defendant’s credentials, she would not need to sign in again and would continue to have access to the Dynamics database. The defendant understood that Ms Debil created her own version of the WIP spreadsheet with respect to clients for whom Ms Debil worked.

(b)    Efficient Lighting Services – the defendant allowed a representative of one of the plaintiff’s clients, Efficient Lighting Services Pty Ltd, to access her work computer remotely to install accounting software that was necessary for the defendant to perform work for the client. The defendant did not say when this occurred. In early 2022, the defendant asked Mr Devaraj to delete the software. The defendant understood that Mr Devaraj did so.

(7)    The defendant created the WIP spreadsheet in around 2018 and used it for several years. She continued to use the WIP spreadsheet after the Dynamics database was created, because it was more user friendly and comprehensive than the Dynamics database. The spreadsheet enabled the defendant to manage active client workloads, business development, claims in progress, and to manage applications. The WIP spreadsheet was essential for her to perform her role. It was the first document that she opened every day and the last document she closed before logging off. Ms Whitehead was aware of the defendant’s reliance on the WIP spreadsheet and did not instruct her to stop using it. Ms Whitehead directed two of the defendant’s colleagues, Mr Hugh Menting and Mr Dominic Gallichio, to use the WIP spreadsheet to assist with EMDG applications in around July to August 2022. The defendant specifically recalled having a meeting in late August 2022 with Ms Whitehead, Mr Menting and Mr Devaraj in which she showed them the WIP spreadsheet and demonstrated what needed to be improved in the Dynamics database so that it could capture all the essential information for the defendant’s EMDG work.

(8)    The defendant did not refer to any discussion with Ms Whitehead about accessing the plaintiff’s IT systems from a private device in response to the plaintiff’s evidence referred to at [57]-[58] above.

(9)    The WIP spreadsheet was saved on the plaintiff’s IT systems on Microsoft SharePoint. The defendant no longer has access to that system.

(10)    Aside from her work laptop, the defendant did not have any laptop or other electronic computing device on which she could have stored the information contained in the WIP spreadsheet. She denied that she had ever accessed and downloaded the WIP spreadsheet from an “unmanaged device”.

(11)    The defendant did not intentionally create multiple versions of the WIP spreadsheet. To the extent that this did occur, it was the product of a duplication error.

(12)    The defendant had no idea, prior to her meeting with Ms Whitehead and Mr Whitehead on 16 September 2022 in which she was informed that her employment had been terminated, that her employment was about to end. The decision to terminate her employment came as a “complete shock.” After the meeting, the defendant was supervised by another employee, Mr Evan Theodorou while she collected her personal belongings and was escorted off the premises. The entire process took about 30 minutes.

(13)    The defendant left her work laptop in her office on 16 September 2022. She was cut off from the plaintiff’s IT systems at this point in time. The last time the defendant used her work laptop was prior to her meeting with Ms Whitehead and Mr Whitehead on 16 September 2022.

(14)    The defendant waited for six months after the termination of her employment before soliciting work from businesses, which included some clients and former prospective clients of the plaintiff. For any person or business that she contacted after March 2023, the defendant stated that she –

…sourced their contact details via publicly available sources such as LinkedIn, Facebook, and various other third-party websites, as well as from my own recollection.

The defendant went on to give specific examples of where the contact details of some of the plaintiff’s clients could be found online.

(15)    In substance, the defendant accepted that, after March 2023, she had solicited some of the plaintiff’s clients, but stated that she had not used any retained confidential information to ascertain their contact details.

(16)    With respect to the download log dated 25 April 2022, which Mr Devaraj asserted showed that a person using Ms Kiddle’s user ID had downloaded some unidentified material on that date, the defendant pointed out that the log showed that an IP address 20.37.199.129 was associated with the download. The defendant stated that that IP address was not associated with her or any of her personal devices, and that a search of the IP address showed that it was owned by the Microsoft Corporation in Sydney. The defendant stated that she was not in Sydney at any point in April 2022. The basis for these assertions in the evidence, and their significance, was not explained.

(17)    With respect to the download logs alleged by the plaintiff to show that the WIP spreadsheet was downloaded to an unmanaged device on four occasions in May and September 2022, the defendant stated that –

(a)    the user ID showed on each of the download logs – “app@sharepoint” – was not her user ID;

(b)    she is not associated with the IP address 180.94.117.206, that was identified on the download logs; and

(c)    while the download logs stated that the User Agent was ‘Mozilla/5.0’, she did not in September 2022 use Mozilla Firefox web browser on any personal device (the defendant did not adduce evidence of the significance of the reference to Mozilla/5.0).

(18)    The defendant, through her solicitors, offered various undertakings to the plaintiff. These included an undertaking that she had conducted searches and did not have in her possession, power or control, any of the plaintiff’s confidential information, which was defined to include information that must be kept confidential by her employment contract, the Corporations Act, the common law or equity. I will refer to the undertakings later in these reasons.

Consideration

66    I will address whether there is a serious question to be tried by reference to the grounds on which the plaintiff seeks interlocutory injunctive relief, namely: (1) the restraint clauses; (2) the contractual obligation of confidence and the protection of confidential information afforded by equity; (3) the Corporations Act, s 183(1), albeit briefly; and (4) the tort of inducing breach of contract. I will also address the balance of convenience, which is related to the strength of the plaintiff’s claim. It will also be necessary to address whether, in the exercise of the Court’s discretion, orders in the terms sought by the plaintiff should be made.

(1)    The restraint clauses

67    Many of the principles relating to the enforceability of a post-contractual restraint upon a former employee were identified by the Victorian Court of Appeal in Just Group Limited v Peck [2016] VSCA 334; 344 ALR 162 (Just Group) at [30]-[36] (Beach and Ferguson JJA and Riordan AJA) –

30    A term in a contract, which is a restraint of trade (‘a restraint clause’), is presumed to be void as contrary to public policy.

31    The presumption may be rebutted if there are special circumstances that demonstrate the covenant to be:

(a)    reasonable as between the parties; and

(b)    not unreasonable in the public interest.

32    The test of reasonableness varies depending on ‘the situation the parties occupy and so recognising different considerations which affect employer and employee and independent traders or business men, particularly vendor and purchaser of the goodwill of a business’. A court takes a ‘stricter view’ of restraint clauses in employment contracts; and will more readily uphold a restraint clause in favour of a purchaser of the goodwill of a business than a restraint clause in favour of an employer. In particular, a purchaser of a business is entitled to protect itself from competition by the vendor; but an employer is not entitled to protect itself from competition per se by an employee.

33    A restraint clause in favour of an employer will be reasonable as between the parties, if at the date of a contract:

(a)    the restraint clause is imposed to protect a legitimate interest of the employer; and

(b)    the restraint clause does no more than is reasonably necessary to protect that legitimate interest in its:

(i)    duration; or

(ii)    extent.

34    It is well established that employers do have a legitimate interest in protecting:

(a)    confidential information and trade secrets; and

(b)    the employer’s customer connections.

35    For the legitimate purpose of protecting the employer’ confidential information, a restraint clause does not need to be limited to a covenant against disclosing confidential information. It may restrain the employee from being involved with a competitive business that could use the confidential information.

36    The onus of proving the special circumstances from which the Court may infer ‘reasonableness between the parties’ is on the person seeking to enforce the covenant. However, if an employee or other covenantor alleges that the restraint clause is against the public interest, the burden of proving that proposition is on the employee/covenantor.

(Citations omitted.)

68    To the above propositions identified in Just Group I add the following –

(1)    A reasonable restraint in the nature of a non-solicitation covenant is capable of protecting customer connections, and also the employer’s confidential information, in circumstances where equity, or a generally-framed contractual provision relating to confidential information would not do so, or would not do so effectively: see, Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717; 71 NSWLR 9 at [12]-[14] (Brereton J); Pearson v HRX Holdings Pty Ltd [2012] FCAFC 111; 205 FCR 187 (Pearson) at [52] (Keane CJ, Foster and Griffiths JJ). The protection of confidential information as a permissible purpose of a reasonable restraint was also referred to by the Court of Appeal in Just Group at [35].

(2)    A restraint clause will be construed for its real meaning in accordance with accepted rules of contractual interpretation, including having regard to the object of the agreement objectively ascertained, before the Court considers whether the clause goes further than what is reasonably necessary to protect the employer’s legitimate interests: Butt v Long [1953] HCA 76; 88 CLR 476 (Dixon CJ, Webb J and Fullagar J agreeing); Just Group at [38(a)].

(3)    The principles of contractual interpretation will include those that were referred to by the Full Court in Findex Group Limited v McKay [2020] FCAFC 182 (Findex) at [76]-[87] and by the Victorian Court of Appeal in Just Group at [38]. As with all principles of interpretation, there are often principles that pull in different directions that must be reconciled.

(4)    While the principles referred to by the Full Court in Findex were expressed by reference to commercial contracts, they may be appropriately adapted to employment contracts, as illustrated by Liberty Financial Pty Ltd v Jugovic [2021] FCA 607 at [196] (Beach J).

(5)    The principles identified in Findex include that where the drafting of a restraint is not as clear as it might have been, a narrow construction in favour of the employee that will preserve the validity of the restraint is to be preferred to one that will make it void: Pearson at [45], citing Mills v Dunham [1891] 1 Ch 576 at 589-590 (Kay LJ). However, a restrictive interpretation of general words is not to be adopted simply to save a restraint from invalidity: Butt v Long at 487.

(6)    Upon assessing the reasonableness of a restraint at the time the contract is entered into, the restraint will either be valid, or not. The Court will not re-write a restraint, or too readily find implicit limitations, so as to render it reasonable. This is for reasons including that as a matter of policy, the common law does not encourage the vice of employers terrorising former employees with extravagant restraints and the expense of litigation, calculating that the restraints might be read down. An employer should not “achieve by terror what it cannot have by law”: see, Drake Personnel Ltd v Beddison [1979] VR 13 at 24 (Anderson J). See also: Wallis Nominees (Computing) Pty Ltd v Pickett [2013] VSCA 24; 45 VR 657 (Wallis Nominees) at [110] (Redlich JA, dissenting in part); J A Mont (UK) Ltd v Mills [1993] FSR 577 at 584 (Brown LJ), citing Mason v Provident Clothing & Supply Company Ltd [1913] AC 724 at 745 (Lord Moulton).

(7)    On the other hand, a court may, and in some circumstances will, enforce part of a restraint even though taken as a whole the restraint exceeds what is reasonable. That can be done where that part which is unenforceable is clearly severable without altering the nature of the contract and without having to add to, or modify, the wording in any way other than by excision: SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; 225 CLR 516 (SST Consulting) at [46] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ); Wallis Nominees at [92]-[94] (Warren CJ and Davies AJA). This issue often turns on whether there is one covenant, or several distinct covenants: see Wallis Nominees at [94] and Just Group at [39], both citing Attwood v Lamont [1920] 3 KB 571. See also the summary of principles in Findex at [144]-[147].

69    In relation to the application for interlocutory injunctions to enforce the restraints, counsel for the defendant submitted that the plaintiff did not have a sufficiently strong prima facie case, and the balance of convenience did not favour the interlocutory enforcement of the restraints for four reasons –

(1)    the restraints were unreasonably wide in their terms;

(2)    any restraint period beyond six months was unreasonable;

(3)    the plaintiff did not come to the Court with clean hands, because it was in breach of the contract of employment and its obligations under the Fair Work Act 2009 (Cth), which disentitled it to injunctive relief; and

(4)    any order to restrain until trial, or beyond 15 September 2023 (which would be 12 months from termination) would have a crushing effect on the defendant’s ability to earn income in her chosen professional field.

The restraints – submissions for the plaintiff

70    Counsel for the plaintiff submitted that the word “client” was obviously missing from the second line of subclause 18(b)(iii) such that the clause should be construed as if the word were included, citing Fitzgerald v Masters [1956] HCA 53; 95 CLR 420 at 426-7 (Dixon CJ and Fullagar J). The clause would then be construed as if its text were as follows –

(iii)    Canvass, solicit, approach or accept any approach from any person who was at any time an existing client or Prospective Client or Customer of Avant; or any person who refers business to Avant on a regular or ongoing basis, with a view to obtaining custom or any business introduction from that person in a competing business; or

71    On the question whether the restraints were reasonable, counsel for the plaintiff relied on an acknowledgement by the defendant in subclause 18(c)(i) of the employment agreement that the restraints were reasonable and necessary to protect the genuine business interests of the plaintiff. It is convenient to say here that a party’s acknowledgment of the reasonableness of a restraint may be a relevant factor. However, whether the plaintiff has discharged its onus of showing that the restraints are reasonable, which must take account of the public interest, is a question for the Court: see, Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; 133 CLR 288 at 308 (Walsh J); Cream v Bushcolt Pty Ltd [2004] WASCA 82; (2004) ATPR 42-004 at [27] (Malcolm, Miller and McKechnie JJ); Woolworths Limited v Olson [2004] NSWCA 372; 55 AILR 200-13 at [39] (Mason P, McColl JA and Bryson JA agreeing); McHugh v Australian Jockey Club Limited [2014] FCAFC 45; 314 ALR 20 at [4(f)] (Perram J, Griffiths J and White J agreeing).

72    Counsel for the plaintiff submitted that the restraints protected the legitimate business interests of the plaintiff, being its customer connections and contractual relations, and confidential information, and did no more than what was reasonably necessary. Counsel for the plaintiff submitted that at the time of entering into the employment agreement, the defendant had been working for the plaintiff for eight years and was responsible for managing and overseeing the EMDG scheme business for the plaintiff. It was submitted that in order to do this, the defendant needed to have a detailed understanding of the plaintiff’s processes and confidential information, being, in this context, client identities and contact details, pricing information, and grant histories. Counsel submitted that the defendant had relationships with a large proportion of the plaintiff’s clients, indeed all of its EMDG scheme clients, and had frequent (at least within the context of the operation of the EMDG scheme) and direct contact with them. It was submitted that the defendant had significant client exposure, and unfettered access to the plaintiff’s confidential information. Counsel submitted that a restraint of 18 months was reasonable when considered in the context of the cycle of the plaintiff’s EMDG business.

73    Counsel relied on the following features of the plaintiff’s business as giving rise to a legitimate interest that supported the restraints. Counsel referred to the client relationships that the plaintiff had established, which formed the foundation of its business, and that there was a significant overlap of the types of government grants amongst the plaintiff’s client base. Counsel emphasised that not all of the plaintiff’s client base would have a grant application on foot at any one time, because clients could move in and out of eligibility criteria over time. The maintenance of a client relationship over the long term was an important part of the plaintiff’s business. It was submitted that for this reason the reference in subclause 18(b)(iii) to “any person who was at any time an existing [client]” of the plaintiff was not too wide, and that what was engaged were all persons who had signed a letter of engagement, whether or not they had current grant applications on foot. Counsel submitted that the defendant had relationships with a large proportion of the plaintiff’s clients, indeed all of its EMDG scheme clients, and had frequent (at least within the context of the operation of the EMDG scheme) and direct contact with them. It was submitted that the defendant had significant client exposure, and unfettered access to the plaintiff’s confidential information.

74    Counsel for the plaintiff pointed to the fact that the evidence showed that the terms of the employment agreement had been the subject of active negotiation between the defendant and Ms Whitehead before it was executed. Counsel relied on the circumstances that existed at the time the plaintiff and the defendant entered into the employment agreement. The defendant’s position was titled “Head of Grants and Funding”. The objective was stated in schedule 1 of the agreement in the following terms –

To oversee the efficient and correct processing of client documents and data in relation to Export Market Development Grant processing services. To undertake business development activities on behalf of Avant across all divisions. This is an ‘all-rounder’ position that requires autonomy and lateral thinking.

75    Business development was also referred to in schedule 1 of the employment agreement in the following terms –

Grants Business Development Support

a.    Provision of business development support to the general grants management team – specifically for Competitive Programs and R&D programs as required

76    Counsel for the plaintiff relied on the reference to the business development role across all divisions of the plaintiff’s business as informing the legitimate business interest that the plaintiff sought to protect by the restraints. Reference was made to an email from the defendant to Ms Whitehead of 31 May 2021 in the course of negotiations where, in the context of the topic of bonus payments, the defendant referred to bringing in business across the other departments of the business. Counsel submitted that in the course of her employment the defendant had access to confidential and sensitive information about all the plaintiff’s clients together with prospective clients as that term was defined. It was submitted that prospective clients were the subject of a definition, which limited the class of persons within its coverage to entities with which the plaintiff had actually been in negotiations, and did not involve the world at large. It was submitted that in the context of a small business it was not plausible to assert that the defendant would not have had knowledge at any point in time of those with whom the plaintiff was in negotiations to do business.

77    Counsel for the plaintiff submitted that while some non-solicitation or non-interference restraints related to clients with whom a former employee had actual dealings, restraints with these types of limitations were not sufficient to protect the plaintiff’s legitimate interests given the nature of its business, and where the client base was the product of years of investment, and where the defendant had unfettered access to the plaintiff’s client database.

78    Counsel for the plaintiff submitted in the alternative that if the Court was not minded to make orders covering both existing and prospective clients, the Court should sever the reference to prospective clients or customers in subclause 18(b)(iii) of the employment agreement. Counsel submitted that covenants in relation to existing clients and prospective clients could operate independently of each other, and that any severance did not amount to “curial disentanglement”: cf, Just Group at [39(c)].

79    Counsel for the plaintiff addressed the defined term “competing business” (see [40] above), which notably includes “the business of any related body corporate of Avant”. It was accepted for the purposes of this application that this limb of the definition of “competing business” was broad and that the Court might not enforce it. I have referred at [20] above to the evidence of Ms Whitehead that there was little overlap between the plaintiff and the other corporations under the “Avant banner” in terms of clients, personnel, and operations. It was submitted that the blue pencil could be used on the definition of competing business to the extent that it included related bodies corporate.

80    In relation to arguments of the defendant in reliance on the Victorian Court of Appeal’s decision in Crowe Horwath (Aust) Pty Ltd v Loone [2017] VSCA 181; 54 VR 517 (Crowe Horwath) to which I will refer below, counsel for the plaintiff submitted that the present case was distinguishable because participation in an incentive scheme did not form part of the contractual arrangements between the parties and because no failure to assess the defendant’s entitlement to an incentive payment could, or did, amount to repudiatory conduct on which the defendant did or could rely to justify a termination of the employment agreement at her instigation. Rather, the employment agreement was lawfully terminated at the instigation of the employer, albeit there was an honest error as to the amount paid in lieu of notice.

The restraints – submissions for the defendant

81    Counsel for the defendant submitted that the non-solicitation obligation in subclause 18(b)(iii) was a customer connection restraint. For the purposes of this application, I do not accept that its purpose is to be so confined. It is also capable of being regarded as a means of protecting the plaintiff from use of its confidential information as a springboard, which information may include the identities of clients, their grant histories, and the plaintiff’s pricing structures: see the cases cited at [68(1)] above.

82    It was submitted that there were at least two reasons why the non-solicitation covenant was too wide and therefore unreasonable. The first was that the scope of clients or potential clients within the ambit of the clause was too broad. Counsel pointed to Ms Whitehead’s affidavit evidence that the plaintiff’s business had “over 1,500 active clients, 438 of whom currently receive or have recently received EMDG Scheme grants”, as well as “a further approximately 6800 client leads”. Counsel submitted that there was no evidence that the defendant had a connection with all of them. Counsel relied on the affidavit evidence of the defendant in which she estimated that the plaintiff had approximately 500 clients on its books, that she could not identify with any precision which persons or entities were clients of the plaintiff, and that she had provided services to perhaps 200 clients in her final 12 months of employment.

83    It was submitted that the restraints relied on by the plaintiff went beyond what was reasonable to protect the plaintiff’s legitimate interests. It was submitted that the restraints in subclauses 18(b)(iii) and (iv) were not limited to the plaintiff’s clients for whom the defendant had worked, or with whom she had professional or commercial dealings in her employment, relying on the decision of Dodds-Streeton J in IF Asia Pacific Pty Ltd v Galbally [2003] VSC 192; 59 IPR 43 (Galbally). Counsel made a similar submission in relation to the defined term, “Prospective Client or Customer” (see [39] above). It was submitted that the class of persons covered by this defined term was not confined to actual clients of the plaintiff, but extended to potential clients defined only by the fact of a “negotiation” to provide services in cascading periods of up to 24 months preceding dismissal. Counsel for the defendant submitted that there was no clear evidence as to the identity of all these parties with whom any negotiation might have taken place, and that the defendant cannot know who they are. It was submitted that the vice in the defined term was that it was not confined to persons with whom the defendant herself may have been negotiating.

84    In particular, it was submitted that: (1) the definition of “competing business” was too wide because it extended to related bodies corporate of the plaintiff; (2) cl 18(b)(iii) should be characterised as a “customer connection” restraint, and that there was no evidence that the defendant had a connection with all the clients or prospective clients of the plaintiff; (3) in relation to the defined term “Prospective Client or Customer”, that it was an overreach to include possible clients, and in addition that the persons covered by this term were uncertain such that the defendant would not know whether she might be in breach of an order expressed to reflect the defined term; and (4) for similar reasons the restraint in subclause 18(b)(iv) was too wide and therefore unreasonable. In relation to severance of the restraints, counsel for the defendant submitted that the blue pencil could be used to strike out one of the restraints in subclauses 18(b)(i) to (v) in toto, but could not be used to strike out words within them. It was submitted that the Court should not engage in “curial disentanglement”, citing Just Group at [39(c)]. It was also submitted that in terms of duration, anything beyond six months was unreasonable, and in terms of area a 200 km radius was too large.

85    Counsel further submitted that the plaintiff had engaged in conduct which had the consequence that the restraints were not enforceable, or alternatively that it was disentitled to equitable relief, relying on the Victorian Court of Appeal’s decision in Crowe Horwath. It was submitted that the defendant was entitled to participate in an incentive scheme as an incident of her employment, and that the plaintiff repudiated the contract of employment by telling the defendant on 16 September 2022, which was the same day that the plaintiff purported to terminate the defendant’s employment, that she would not be paid a bonus. However, counsel accepted that this involved contested factual terrain and was a matter for trial.

86    Counsel also submitted that the plaintiff lacked clean hands in that it had not paid the defendant her entitlement of eight weeks’ pay in lieu of notice upon termination. In this regard, counsel relied on, inter alia, Geraghty v Minter (1979) 142 CLR 177 at 187 (Gibbs J) for the proposition that he who comes to equity must do equity, and that persons who seek to enforce a restraint by injunction must prove that they have performed their part of the bargain. Counsel further submitted that the underpayment of the defendant upon her termination contravened the National Employment Standards under the Fair Work Act, including the provisions relating to payments on account of accrued leave in circumstances where date of the commencement of the defendant’s term of employment was said to be a contested issue as evidenced by correspondence passing between the solicitors where the proper characterisation of the defendant’s engagement by the plaintiff in her earlier periods of work was put in issue. Counsel for the defendant also floated questions about unpaid superannuation contributions, but these issues were not developed to the point of any submission that I should address.

The restraints – consideration

87    On this application, the defendant’s arguments in reliance of Crowe Horwath are not sufficiently strong to have a material bearing on the outcome of this application. Crowe Horwath was a case involving materially different factual circumstances, where the employer was held to have repudiated the contract of employment as a result of its failure to consider the employee’s entitlement to a performance bonus, and where the employee accepted the repudiation. The employee sent a letter to the employer terminating the contract, citing the employer’s failure to fulfil its obligations to him under the employment contract. The Court of Appeal held that because the employment was brought to an end as a result of the employer’s repudiatory conduct, the employer was not entitled to rely on the contractual restraints, citing a line of authority commencing with General Billposting Co Ltd v Atkinson [1909] AC 118 that has held that the wrongful summary dismissal of an employee is a repudiatory breach of contract, the effect of which is to discharge the innocent party, who accepted the breach, from all future obligations under the contract. Here, neither the legal nor any factual basis for the defendant’s claim that she was denied an entitlement to an incentive payment was developed to a sufficient level of persuasion. The relevant terms of the employment agreement do not, on their face, appear to impose any obligation on the plaintiff to consider the defendant for a discretionary bonus. Nor, as discussed below, does the evidence support a sufficiently strong prima facie case that the defendant elected to terminate the employment agreement on the ground of the plaintiff’s breach.

88    In relation to whether the purported termination of the employment agreement on 16 September 2022 amounted to a repudiation by the plaintiff, the evidence points to the plaintiff intending to bring the contract of employment to an end in accordance with its terms by making a payment in lieu of notice. In saying this, I am referring to facts objectively ascertained, rather than the plaintiff’s subjective intention. The evidence is that on 24 April 2023 the defendant’s solicitors made a demand for payment of the outstanding five weeks’ notice of termination payment. The letter did not seek to characterise the underpayment as a repudiation of the employment agreement, or seek to accept the underpayment as a repudiation. On the same day, the plaintiff’s solicitors acknowledged that eight weeks’ notice had been payable, and advised that the deficit would be rectified. A few days later, on 28 April 2023, the plaintiff paid an additional five weeks’ pay to the defendant. The evidence of Ms Whitehead is that the miscalculation of pay in lieu was an honest mistake owing to a misunderstanding on her part that the payment should have been calculated by reference to the whole term of the defendant’s employment, rather than just employment under the employment agreement. This explanation is cogent, and was not challenged on this application. Whether the sum paid on 28 April 2023 was less than, or in excess of, the amount required to discharge the plaintiff’s indebtedness to the defendant remains in dispute.

89    There are a number of other issues that arise that could not be the subject of full argument on this application and which are questions for trial. The first is whether the plaintiff’s purported termination of the employment agreement on 16 September 2022 was ineffective to bring the contract to an end because there was an insufficient payment in lieu of notice. This issue may involve questions of construction of the employment agreement and directs attention to the decision of Besanko J in White v Norman [2012] FCA 33; 199 FCR 488 at [35]-[37] in which his Honour held that an underpayment of pay in lieu of notice might still be effective to bring about a termination of a contract of employment if there was a bona fide error and a willingness to recognise the error, citing DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423 (DTR Nominees) at 431-432 (Stephen, Mason and Jacobs JJ). If the purported termination of the contract was not effective, did the termination of the defendant’s employment amount to a repudiation by the plaintiff of the employment agreement? This issue invites attention to DTR Nominees, which was cited in White v Norman. If the underpayment amounted to a repudiation, did this have the consequence that although the employment relationship was terminated, that the employment agreement remained on foot unless there was an acceptance of the repudiation by the defendant? Did the defendant by words or conduct convey an acceptance of the repudiation? Was the employment agreement brought to an end in some other way, such as the defendant simply accepting the termination? These questions invite attention to the issues that were determined by the majority of Supreme Court of the United Kingdom in Geys v Société Générale, London Branch [2012] UKSC 63; [2013] 1 AC 523 and to Automatic Fire Sprinklers Pty Ltd v Watson [1946] HCA 25; 72 CLR 435. See also: Letizia Building Co Pty Ltd v Redglow Asset Pty Ltd [2013] WASC 171 at [173] (Beech J) and the cases cited therein; Turner v The Australian Coal and Shale Employees’ Federation [1984] FCA 301; 6 FCR 177 at 191-193 (Northrop, Keely and Gray JJ); and Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852; 175 IR 414 at [24]-[30] (Brereton J).

90    For present purposes, it is sufficient to say that both parties appeared to argue this interlocutory application on the assumption that the employment agreement came to an end, by some means, in September 2022. The decision of Besanko J in White v Norman and my acceptance of the cogency of the evidence concerning the underpayment have the result that the plaintiff has a reasonable prima facie case that it did not evince an intention not to be bound by the employment agreement, but that it evinced an intention to terminate the contract lawfully by the payment of a sum in lieu of notice, and that it did so, albeit initially in an insufficient amount.

91    I now turn to the defendant’s argument that the Court should not exercise its discretion to grant an injunction because of unclean hands on the part of the plaintiff. This argument was put in addition and in the alternative to the defendant’s reliance on a claimed repudiation of the employment agreement by the plaintiff. The defendant focussed on the alleged improprieties in the manner in which the plaintiff dismissed her from her employment. As I stated at [32] and [88] above, the plaintiff initially paid the defendant three weeks’ pay in lieu of notice upon her dismissal in September 2022, rather than the eight weeks’ pay as required by clause 17 of the employment agreement, and paid the defendant an additional amount on 28 April 2023. The defendant submitted that this conduct of the plaintiff amounted to a breach of the employment agreement and potential contraventions of the Fair Work Act, including civil remedy provisions: Fair Work Act, s 44, s 117, s 323. The defendant submitted that the Court should not grant the plaintiff the equitable remedy of an injunction to enforce the restraint provisions in the employment agreement in circumstances where the plaintiff has itself not abided by the terms of the agreement. The defendant also briefly referred to her claim that she did not receive superannuation contributions from the plaintiff when she provided services to it as a contractor, prior to her engagement as an employee in 2018, but as I have said, this was undeveloped.

92    In support of the submission in relation to unclean hands, the defendant referred to the following statement of Gibbs J in Geraghty v Minter [1979] HCA 42; 142 CLR 177 at 187 –

The answer to the appellants’ arguments that the respondents may be in default under the deed and yet enforce the restraint lies in the principles of equity. He who comes to equity must do equity, and parties who seek equitable relief by injunction to enforce a covenant in restraint of trade “cannot obtain such relief unless they allege and prove that they have performed their part of the bargain hitherto and are ready and able also to perform their part in the future”,

(citations omitted)

93    The defendant also relied on the first instance decision of McDonald J in Crowe Horvath v Loone [2017] VSC 163; 266 IR 290. At [162]-[165] of that decision, McDonald J referred to his findings that the plaintiff employer had breached a provision of the employment agreement concerning the employee’s entitlement to a bonus payment. McDonald J quoted from the passage of Gibbs J in Geraghty v Minter extracted above and held that, consistently with Gibbs J’s reasoning, if the issue had arisen, his Honour would have refused to grant the employer an injunction to enforce the restraint of trade clauses in the employment agreement. McDonald J reasoned at [163] –

[the employer] failed to assess [the employee]’s bonus entitlement in accordance with the mandatory criteria prescribed by cl 7.5. The new incentive plan which was to be introduced for the 2017 financial year breached cl 7.5 insofar as it provided for the deferral of 20 per cent of [the employee]’s bonus entitlement for a period of three years. Notwithstanding its discretionary character, [the employee]’s right to have a bonus entitlement determined in accordance with the prescribed performance criteria and to have the bonus paid in full constituted an important element of the consideration which underpins the restraints of the Contract. It would be unfair if [the employer] was to receive the benefit of the restraints notwithstanding its failure to comply with significant contractual obligations.

94    In the event, it was unnecessary for McDonald J to have recourse to discretionary equitable principles to deny the employer an injunction. His Honour stated at [165] that the issue did not arise because of an earlier finding that the restraint of trade covenants did not survive the termination of the employment agreement by the employee’s acceptance of the employer’s repudiation.

95    In my view, on the evidence as it currently stands, the equitable principles relating to unclean hands are unlikely to have application to the present case in the way contended by the defendant. It is well established that the existence of some general or freestanding wrong on the part of a plaintiff is an insufficient basis for a court to refuse relief due to unclean hands. The plaintiff’s impropriety “must have an immediate and necessary relation to the equity sued for”: Meyers v Casey [1913] HCA 50; 17 CLR 90 at 123 (Isaacs J, Rich J agreeing); Karas v LK Law Pty Ltd [2023] FCAFC 15 at [96] (O’Callaghan and Colvin JJ). In this way, the unclean hands doctrine really means that a plaintiff should not be permitted to derive an advantage from its own wrong: Meyers v Casey at 124 (Isaacs J).

96    Here, the plaintiff exercised its right to terminate the employment agreement without reason, and to pay the defendant in lieu of her notice period. That right was conferred by the combined effect of subclauses 17(b) and (c) of the employment agreement. Although the plaintiff incorrectly calculated the amount owing to the defendant in lieu of her notice period, as I stated at [90] above, the plaintiff has a reasonable prima facie case that it did not thereby repudiate the employment agreement. In those circumstances, there is not a sufficient connection between the plaintiff’s conduct in underpaying the defendant and the equity sued for. This case may be distinguished from the position in Crowe Horvath, where the employer’s conduct constituted non-performance of a central obligation under the employment agreement, such that it would be unfair to allow the plaintiff to enforce the balance of the agreement. In the present case, the plaintiff’s miscalculation of the defendant’s notice period did not have the same effect.

97    Insofar as the defendant relied on the plaintiff’s alleged non-compliance with provisions in the Fair Work Act and superannuation legislation in support of its clean hands defence, those submissions can be readily disposed of. The plaintiff seeks an injunction to enforce the restraint of trade clauses in the employment agreement. Those negative contractual obligations exist independently of the plaintiff’s statutory obligations under the Fair Work Act and superannuation legislation. Therefore, even if the defendant’s allegations that the plaintiff contravened its statutory obligations were made good, those contraventions would not have the requisite nexus to the relief sought by the plaintiff to engage the clean hands doctrine.

98    This brings me to the strength of the plaintiff’s case that the restraints in subclauses 18(b)(iii) and (iv) are reasonable. I will deal with cl 18(b)(iii) first.

99    Ms Whitehead stated in her affidavit made 12 May 2023 that she negotiated the employment agreement with the defendant. Subclause 18(b)(iii) of the employment agreement rolls up a number of different concepts and obligations and its language is liable to confuse. To start with, and as I mentioned at [70] above, counsel for the plaintiff submitted that the word “client” was missing from the second line. I am prepared to accept for the purposes of this application that the word “client” should be read into the second line of subclause 18(b)(iii) as a matter of construction, so that the relevant limb refers to “...any person who was at any time an existing client...”.

100    A principal submission advanced on behalf of the defendant was that the restraint in subclause 18(b)(iii) was not confined to clients with whom the defendant had personal contact, thereby making the restraint unreasonable as protection of the plaintiff’s interest in customer connection. If that was the only purpose of the restraint, there may be some force in that argument. For instance, in Office Angels Ltd v Rainer-Thomas [1991] IRLR 214 a restraint of trade clause was premised on the basis that, “in the course of her employment by the company the employee has dealings with the clients of the company and in order to safeguard the company’s goodwill the employee agrees...”. In giving the reasons of the Court of Appeal, Sir Christopher Slade stated –

In a case where the wording of a covenant restricting competition by an employee after leaving his employer’s service does not specifically state the interest of the employer which the covenant is intended to protect, the Court is, in my judgment, entitled to look both at that wording and the surrounding circumstances for the purpose of ascertaining that interest, by reference to what would, objectively, appear to have been the intentions of the parties. However, in a second category of case where the employer, who proffers the covenant for the employee’s acceptance, chooses specifically to state the interest of the employer which the covenant is intended to protect, the employer is not, in my opinion, entitled thereafter to seek to justify the covenant by reference to some separate and additional interest which has not been specified.

101    In this application, there are no express words of the employment agreement that limit the purpose of the restraints in cl 18 to the protection of goodwill arising from actual customer connection by the defendant. Indeed, cl 18(b)(iii), although cast in terms of non-solicitation, might also be characterised as a limited form of non-competition, at least in relation to the plaintiff’s clients and potential clients (as defined). The reasonableness of the restraints must be looked at objectively from the standpoint of the parties at the time the employment agreement was entered into, which include that the parties would likely have had in contemplation that the defendant might, during the term of her employment, have access to information identifying all of the plaintiff’s clients, and would be involved in business development as the terms of the employment agreement indicate. All these activities would expose the defendant to the plaintiff’s confidential information, being the collective body of information that identified the plaintiff’s clients and their contact details, the plaintiff’s pricing structure, and its business strategies. It is arguable that these activities would also have fostered connections between the defendant and persons who referred business to the plaintiff on a regular or ongoing basis. Employers may be entitled to protection, by reasonable post-employment restraints, not only against the unfair use of customer connections, but also against the use of confidential information which it is otherwise difficult to protect: see Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 at 1478-1480 (Lord Denning MR) and 1485 (Megaw LJ); Woolworths Ltd v Olsen at [67].

102    There is a prima facie case that the potential for cross-over of clients between the different divisions of the plaintiff’s business, and the defendant’s role in the business, including business development, support a reasonable non-solicitation clause that covers all existing clients and all potential clients (as defined) as being reasonable: see Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 at [33]-[34] (Brereton J); Business Seating (Renovations) Pty Ltd v Broad [1989] ICR 729 at 733 (Millett J); Allan Janes LLP v Johal [2006] 1 ICR 742 at [62]-[64] (Bernard Livesey QC); Isaac v Dargan Financial Pty Ltd [2018] NSWCA 163; 98 NSWLR 343 at [127] (Gleeson JA, Bathurst CJ and Beazley P agreeing).

103    As to the restraint area, the relevance of geographic limitations depends upon the type of business. A geographic limitation is much more relevant to a business requiring the personal attendance by clients at the business premises. Here, there was little attention given to the reasonableness of the geographic limitations for the likely reason that business communication by internet has no borders, and the business conducted by the plaintiff involved Commonwealth benefits and would likely have a national character to it. There is nothing about the restraint area that is material to the question whether there is a prima facie case that the restraint is enforceable.

104    As to the duration of the restraint, having regard to the interests that are protected, the considerations for evaluating reasonableness will include the time it might take the plaintiff to shore up its client connections following the termination of the defendant’s employment, the currency of information that might be confidential, and the degree to which confidential information might remain in the defendant’s memory before dissipating. The picture painted by the evidence is that the clients of the plaintiff are not like customers of milkmen or travelling salesmen. They will not necessarily return to the plaintiff regularly, or even annually, because their eligibility for government grants may fluctuate. The situation is similar to that described in Allan Janes LLP v Johal at [34] in relation to the practice of a solicitor. I am satisfied that there is a serious question to be tried that a period of 18 months is reasonable, having regard to the cyclical nature of the plaintiff’s business that I described earlier in these reasons together with all the other circumstances. Weighing in the plaintiff’s favour is that, although not decisive, the defendant did agree that concurrent periods including a period of 18 months was reasonable: see, Isaac v Dargan Financial Pty Ltd at [131]. And although each case will turn on its own facts and circumstances, the Victorian Court of Appeal upheld a restraint period of three years in Birdanco Nominees Pty Ltd v Money [2012] VSCA 64; 36 VR 341.

105    Otherwise, there are two reasons, each sufficient in itself, why I am not satisfied that the plaintiff has a sufficiently strong case to justify an interlocutory injunction to enforce subclause 18(b)(iii).

106    The first reason is the combination of the prohibition on an acceptance of an approach from a person, and the reference to “any person who was at any time an existing client”. The reference to an “existing client” is liable to distract. When properly construed, an “existing client” is to be contrasted with a “Prospective Client or Customer”. The scope of “existing client” within the provision is, due to the immediately preceding words: “was at any time …”, unlimited. It would likely extend to any previous client, of any type, back to the time of the plaintiff’s incorporation in 2013. Subclause 18(b)(iii) picks up a prohibition on accepting an approach, which extends beyond solicitation, from any person who at any time was a client of the plaintiff, in any capacity. There is a serious prospect that the breadth of this combination would be viewed at trial as being much more than is reasonable, in the context of the employment of the defendant, for the protection of the plaintiff’s legitimate interests in client connections and its confidential information.

107    The second reason concerns the use of the defined term “competing business” (see [40] above). It was argued by the defendant that the inclusion in the second limb of the definition to competition with the plaintiff’s business “or the business of any related body corporate of Avant” rendered the restraint in subclause 18(b)(iii) too wide because the second limb of the definition has the result that the restraint in subclause 18(b)(iii) goes beyond what is necessary for the protection of the plaintiff’s legitimate interests. I accept that, at trial, there is a serious prospect that the inclusion of the reference to related bodies corporate broadens the scope of the restraint beyond what is reasonable.

108    As I mentioned at [79] above, counsel for the plaintiff accepted that the second limb of the definition of “competing business” was broad, but submitted that it could be severed using the blue pencil. That argument is weak. The employment agreement addressed severance in subclauses 18(d) and (e) (see [36] above). Those provisions indicate that the combinations of restraint period, restraint area, and restraint conduct set out in cl 18 are independent provisions and severable. In the face of the express provision as to severance in subclause 18(e), I am not satisfied that there is a sufficiently strong case that the definition of “competing business” in cl 2 gives rise to distinct obligations that can be severed. The position is therefore akin to that in Attwood v Lamont at 593 (Younger LJ), Galbally at [201]-[202], Just Group at [57], and Findex at [150] where it was held that the impugned obligations did not give rise to distinct covenants.

109    As to subclause 18(b)(iv), this is a non-interference restraint. Restraints on interference such as cl 18(b)(iv) are not uncommon: Griffiths & Beerens Pty Ltd v Duggan [2008] VSC 201; 66 ACSR 472; DP World Sydney Ltd v Guy [2016] NSWSC 1072; 262 IR 156; Isaac v Dargan Financial Pty Ltd [2018] NSWCA 163; 99 NSWLR 343; Your Nurse Australia Pty Ltd v Carpenter [2022] NSWSC 1788. There is a degree of overlap between the coverage of the non-solicitation obligation in subclause 18(b)(iii) (if enforceable), and the restraint on interference in subclause 18(b)(iv). However, subclause 18(b)(iv) does not suffer from some of the problems that attend subclause 18(b)(iii). While subclause 18(b)(iii) refers to “any person who was at any time an existing [client]”, subclause 18(b)(iv) refers (emphasis added) to, “the relationship between Avant and its employees, clients and customers (including prospective clients and customers...”. This suggests that subclause 18(b)(iv) is directed to an existing relationship: see, Isaac v Dargan Financial Pty Ltd at [89]. And subclause 18(b)(iv) does not incorporate the problematic defined term “competing business”.

110    The evidence of the defendant’s admitted approaches to clients is illustrative of the potential interference that the defendant might cause to an ongoing relationship between the plaintiff and a client, or a developing relationship that had been the subject of negotiations with a prospective client. Whether the defendant’s conduct to date in approaching or accepting approaches from clients or prospective clients of the plaintiff interfered with an existing relationship will, in respect of each interaction, be a question of fact for trial.

111    I referred towards the outset of these reasons to the clarity required for injunctive orders and to the consideration that the defendant is entitled to know what she is enjoined from doing. The orders sought by the plaintiff and directed to subclause 18(b)(iv) of the employment agreement were as follows –

7.    Restraint: An order restraining Ms Kiddle, until 16 March 2024, from interfering with the relationship between Avant Group and its customers (including prospective clients and customers (as defined in clause 2(l) of the Employment Agreement) in breach of clause 18(b)(iv) of the Employment Agreement by:

(a)    making, or accepting an approach from, those clients who are listed in the definition of Confidential Information in Item 3 above; and/or

(b)    providing services to those clients who are listed in the Confidential Information.

112    The definition of Confidential Information in proposed order 3 was as follows, although it contains a typographical error in referring only to orders 4-5, and not including order 7 –

3.    For the purpose of orders 4-5, the term ‘Confidential Information’ means the following specific pieces of information insofar as they relate to active clients of Avant Group as detailed in Exhibit KEW-3 to the Second Whitehead Affidavit that are contained in the Excel spreadsheet named ‘Tegan WIP-Tegan Surface’ and/or Avant Group’s Dynamics CRM database:

(a)    Client names

(b)    Client contact details

(c)    Client grant status

(d)    Client grant history

(e)    Avant Group pricing

113    The Excel spreadsheet and the plaintiff’s Dynamics CRM database were not in evidence, and the defendant denied on oath having any confidential information of the plaintiff. I would not make an order in the terms sought by the plaintiff which relies for its content on specified information in documents that the defendant says she does not have, and which the Court does not have.

114    For these reasons, I refuse the application for the interlocutory orders sought in relation the restraint provisions that were relied on by the plaintiff.

(2)    The defendant’s obligations of confidence

115    For the purposes of this application, I accept that the defendant owed equitable and contractual obligations of confidence to the plaintiff. The content of the equitable obligation of confidence following termination of the defendant’s employment is not as extensive as the obligation that existed while the agreement remained on foot. The ability to enforce a contractual obligation of confidence is also subject to limitations post-termination such that the obligation must be reasonable: Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458; 299 ALR 621 at [179(4)] (Gordon J). See also the discussion by the Victorian Full Court (Crockett, Murphy and Ormiston JJ) in Pioneer Concrete Services Ltd v Galli [1985] VR 675 at 710-712. Confidentiality obligations that are governed by the law of New South Wales that are held to be too wide may be held to be valid by the application of the Restraints of Trade Act: see Reed Business Information v Seymour [2010] NSWSC 790 at [40] (Ball J). That Act does not apply to this case.

116    By its revised draft orders, the plaintiff sought the following orders that appear to be premised on enforcement of the contractual obligation of confidence in cl 13 of the employment agreement (see [34]-[35] above) –

1.    For the purposes of order 2, the term ‘Confidential Information’ carries the same meaning as clause 2(c) of the Employment Agreement, namely: all information in whatever form be it oral in writing or electronic concerning the business of Avant or any related entity likely to damage the business of Avant or related entity if disclosed to a third party but does not include information which is in the public domain or was known to the third party.

2.    Pending further order, an order that [the defendant] must not for her own benefit or for the benefit of a third party use, make a record of or disclose to any person any Confidential Information relating to information, or trade secrets of Avant Group or Avant Group’s clients or related entities of either for any reason.

117    In addition, the plaintiff sought the following orders that appear to be premised on the plaintiff showing that it had a prima facie case that the defendant had taken, or had in her possession, confidential information stored in a tangible form, because it incorporated the definition of “Confidential Information” in proposed order 3, to which I referred at [112] above –

4.    Pending further order, an order that [the defendant] must not use any Confidential Information to gain an advantage for herself or someone else, or to cause detriment to Avant Group, in any way by:

(a)    making, or accepting an approach from, those clients who are listed in the definition of Confidential Information in Item 3 above; and/or

(b)    providing services to those clients who are listed in the Confidential Information.

5.    Pending further order, an order that Ms Kiddle must not use or disclose any Confidential Information to gain an advantage for herself or someone else, or to cause detriment to Avant Group, in any way by:

(a)    making, or accepting an approach from, those clients who are listed in the definition of Confidential Information in Item 3 above; and/or

(b)    providing services to those clients who are listed in the Confidential Information.

118    For her part, the defendant, through her solicitors, gave the following undertaking to the plaintiff by letter dated 24 April 2023. At the hearing of the application, counsel for the defendant stated that the undertaking was also offered to the Court –

(a)    Ms Kiddle will keep confidential and will not use, make a record of or disclose to any person or entity any Confidential Information without the prior consent of Avant Group or as otherwise required by law;

(b)    Ms Kiddle has not transmitted any Confidential Information to any third party other than in the proper performance of her duties whilst engaged or employed by Avant Group;

(c)    Ms Kiddle has conducted searches of her electronic devices and physical property. As far as Ms Kiddle is aware, based on those searches, Ms Kiddle does not have any Confidential Information or other property of Avant Group stored on any computer, tablet, telephone, USB, external hard drive or other electronic or storage device in the possession, power or control of Ms Kiddle; and

(d)    if Ms Kiddle does locate any Confidential Information or other property of Avant Group in future, Ms Kiddle will promptly notify Avant Group in writing so as to enable such material to be returned to Avant Group and otherwise permanently deleted (including all copies and records thereof).

For the purpose of the above undertaking:

(a)    Avant Group means Avant Group Pty Ltd;

(b)    Confidential Information means any Avant Group information that must be kept confidential by reason of Ms Kiddle’s employment with Avant Group including as a consequence of clause 13 of the Employment Agreement, s 183 of the Corporations Act 2001 (Cth), common law and/or equity; and

(c)    Employment Agreement means the written contract of employment between Ms Kiddle and Avant Group dated 1 July 2021.

119    In light of these undertakings that are to be given to the Court, I am not persuaded to make orders 1 and 2 of the revised draft orders that were sought by the plaintiff.

120    That leaves for consideration the application for orders 4 and 5, which are premised on the plaintiff having made out a prima facie case that the defendant downloaded and retained confidential information in a tangible form, such as the plaintiff’s database, and the WIP spreadsheet and any versions thereof.

121    The defendant has squarely denied that she has downloaded and retained confidential information in a tangible form, and has offered the undertakings to the Court to which I referred above that she is not aware that she is in possession of any confidential information of the plaintiff. This direct evidence and undertaking is to be balanced against the circumstantial evidence on which the plaintiff relied. In evaluating the plaintiff’s circumstantial case I have had regard to the seriousness of the allegation made against the defendant in the face of her sworn denials. I am also of the view that the Court should not make orders 4 and 5 that are sought by the plaintiff simply on the basis that there might be no prejudice to the defendant. That is because this would not be a principled basis on which to make an interlocutory order of the type sought: see, Integrated Group Ltd v Dillon [2009] VSC 361 at [56] (Hargrave J). Further, an unwarranted stigma may attach to a party against whom an interlocutory injunction is granted in these circumstances: see, Brand Developers Ltd v Ezibuy Ltd [2011] NZHC 50; 93 IPR 143 at [61] (Asher J). For these reasons, attention must be given to the strength of the plaintiff’s circumstantial case.

122    I am not persuaded that the plaintiff has made out a sufficiently strong prima facie case that the defendant downloaded and retained the confidential information in a tangible form as alleged. I have considered all of the circumstantial evidence carefully, and assessed its combined weight. It is unnecessary that I set out detailed reasons for my conclusions, because ultimately the question whether the plaintiff will establish its claims is a matter for trial, perhaps based upon more complete evidence, including the opportunity to cross-examine witnesses. For present purposes, the main reasons for not acting on the plaintiff’s claims about the confidential information in tangible form are –

(1)    The defendant’s square denials to which I have referred.

(2)    The undertakings which the defendant has offered to the Court, which address all confidential information of the plaintiff, and which I expect will necessarily pick up information in a tangible form.

(3)    The overstatement of conclusions to be derived from the documentary evidence which I have identified earlier in these reasons.

(4)    The sketchy and ultimately speculative nature of the evidence about the “DownloadBlock” entry on 25 April 2022. The entry does not indicate what, if any, file or files were downloaded. At the hearing of the interlocutory application, counsel for the plaintiff accepted that Mr Devaraj was incorrect to state that the logs showed that the download activities were processed on an unmanaged device. In fact, counsel for the plaintiff accepted that if the logs showed a userID, then the download occurred to a managed device.

(5)    The insufficient explanations of the significance of entries in the plaintiff’s data logs, such as “DownloadBlock”, “app@sharepoint”, and the other entries to which I have referred.

(6)    The reliance on unsworn statements in hearsay form that are attributed to employees or contractors of the plaintiff so as to exclude those persons from the class of persons who might have downloaded relevant documents. I do not place much weight on these unsworn statements over the sworn evidence of the defendant.

(7)    I have noted the defendant’s evidence that some of the download entries might be explicable by reason that she provided her login details to another person engaged on behalf of the plaintiff who was based offshore, Ms Debil, and that this is claimed by the plaintiff to be answered by evidence that Ms Debil did not commence work for the plaintiff until July 2022. This will be a question for trial. I observe that if the use of the defendant’s login details by Ms Debil is eliminated as an explanation for the records on the logs for April and May 2022, it does not follow from that elimination that the defendant downloaded the WIP spreadsheet on those occasions. That would be an error of the type referred to by Lord Brandon in Rhesa Shipping SA Co v Edmunds [1985] 1 WLR 948 by reference to Sherlock Holmes’ unjudicial statement to Dr Watson in The Sign of the Four –

How often I have I said to you that, when you have eliminated the impossible, whatever remains, however improbable, must be the truth?

(8)    As to the log suggesting that the defendant accessed a version of the WIP spreadsheet on 22 August 2022, some three weeks prior to the plaintiff terminating the defendant’s employment, I have already indicated at [53] above the limitations on that evidence.

(9)    The issues raised concerning how the defendant ascertained certain email addresses are contestable, and cannot be resolved on this application. The plaintiff did not tender the WIP spreadsheet into evidence. In those circumstances, the submission that the defendant should be taken to have relied on the WIP spreadsheet to obtain client email addresses cannot be evaluated by the Court. Further, the focus on email addresses does not confront the reality that business communications may occur in several different ways, of which email is only one, and where the defendant deposed that she relied on other online platforms such as Facebook and LinkedIn to approach clients.

(10)    There may be questions at trial in relation to the whether the defendant has contacted some particular clients of the plaintiff, as the plaintiff claims. There is conflicting evidence as to whether the defendant contacted the Australian Cinematographers Society and Fintech Australia Limited. That issue cannot be resolved on this application, and for present purposes does not bear much on the strength or otherwise of the plaintiff’s case that the defendant downloaded and retained possession of the plaintiff’s confidential information.

123    Further, for two reasons I would not, as a matter of discretion, make the orders sought. The first is the undertakings that the defendant offers the Court, to which I referred at [118] above. In my view, these undertakings afford the plaintiff a sufficient remedy on this interlocutory application in relation to any confidential information in a tangible form which the defendant retained or which remains in her possession. The second reason is that the terms of the orders that are sought rely for their content on documents that the defendant denies possessing and which are not before the Court: see [111]-[114] above.

(3)    The Corporations Act, s 183(1)

124    At the hearing of the interlocutory application, counsel for the plaintiff accepted that the obligation in respect of confidential information under s 183(1) of the Corporations Act aligned with the equitable obligation: see Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 2; 81 IPR 1 at [44]-[45] (Tamberlin, Finn and Sundberg JJ). In light of my earlier conclusion that the plaintiff has not made out a sufficiently strong prima face case that the defendant retained and has used confidential information of the plaintiff in a tangible form, I am not satisfied that s 183(1) would be engaged. In any event, this cause of action was not the subject of separate developed submissions by either party and the plaintiff has a sufficient remedy with the undertakings that the defendant has offered to the Court. Further, as I have concluded at [123] above, I would not, in the exercise of my discretion make the interlocutory orders in the terms sought by the plaintiff.

(4)    The tort of inducing breach of contract

125    In relation to the tort of inducing breach of contract, the plaintiff seeks the following interlocutory order –

8.    Pending further order, an order restraining Ms Kiddle from inducing those clients listed in the Confidential Information referred to at Order 3 above to breach any contract for the provision of services they have with Avant Group by terminating such contract when a submission or submissions are already being prepared by Avant and/or underway with the Government.

126    The gravamen of the tort of inducing breach of contract is intention to interfere with contractual rights: see, Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd [1995] FCA 481; 58 FCR 26 at 43 (Lindgren J). The defendant’s solicitation of the plaintiff’s clients would not, without more, amount to inducing breach of contract. That is because the breach that is relied on by the plaintiff is the breach of clause 10.4 of the terms of engagement entered into between the plaintiff and its clients (see [29] above), as the plaintiff’s proposed order recognises.

127    Counsel for the plaintiff argued the case for interlocutory relief in relation to this element of the application succinctly. Counsel for the defendant addressed no specific submissions to this cause of action. Counsel for the defendant did submit in writing that “almost no economic damage has been done” to the plaintiff’s business since September 2022. It is possible that this submission was directed to the tort, which is actionable upon proof of economic loss, but that is far from clear because the submission was made under the heading, “Balance of convenience: breach of confidence”. For the purpose of this application, I do not accept this submission. There is enough evidence to infer on a prima facie basis that substantial economic loss might be suffered by the plaintiff as a result of the defendant’s successful solicitation of some of its clients.

128    In relation to the claim in tort, for the plaintiff to establish a sufficiently strong prima facie case, the plaintiff would need to adduce evidence showing some threatened inducement of a client, by the defendant, to breach cl 10.4 of the client’s terms of engagement with the plaintiff. Picking up the language of cl 10.4, that would involve the defendant inducing a client of the plaintiff to refuse to allow the plaintiff to complete a submission or maintain the plaintiff’s commission structure, in circumstances where a submission was already being prepared by the plaintiff or underway with the government on the client’s behalf. None of the affidavits tendered by the plaintiff pointed to any such conduct on the defendant’s part. Nor did counsel develop any submissions on the point, other than by taking me to the defendant’s admission that she solicited existing clients of the plaintiff, and asserting that the defendant should, due to the nature of her role, be inferred to have knowledge of the terms of clause 10.4. For her part, the defendant deposed in her affidavit that the only work that she had completed was for clients requiring assistance with an initial grant application.

129    In the absence of some cogent evidence and submissions directed to the inducement of a breach of clause 10.4 of the terms of engagement of the plaintiff, I am not persuaded that any prima facie case based on the tort of inducing breach of contract has been demonstrated.

Conclusions

130    Upon the defendant giving the undertakings to which I have referred, the plaintiff’s interlocutory application should be dismissed.

131    I will hear the parties on the question of costs. Upon full argument, this proceeding may be held to be in relation to a matter arising under the Fair Work Act, because the defendant relies on contraventions of the Fair Work Act as being exculpatory, and has foreshadowed a cross claim alleging breaches by the plaintiff of the Fair Work Act: see generally, Tucker v McKee [2022] FCAFC 98; 292 FCR 666. As there is a real possibility that s 570 of the Fair Work Act might be engaged, my tentative view is that costs should be reserved.

Associate:

Dated:    23 June 2023