Shantex Pty Ltd v Luckman[2010] QSC 96

SUPREME COURT OF QUEENSLAND

1. MARGARET WILSON J:  The plaintiff, which is a supplier of automotive parts and equipment, claimed an injunction to restrain breach of a covenant by the defendant, a former joint proprietor of two companies which sold their automotive parts business to the plaintiff for $3,000,000 in December 2007.  The proceeding was dismissed on the second day of trial when the plaintiff accepted an undertaking proffered by the defendant.  Each side has asked for its costs, the plaintiff on the indemnity basis and the defendant on the standard basis.

2. The defendant covenanted:–

"not in any manner either directly or indirectly [to] be concerned or interested either alone or in partnership with or as manager, servant or agent for any person, company or corporation in the business of automotive spare parts dealers for the … period [of three years] or area … [within a 100km radius of the plaintiff’s business premises in Brisbane and Sydney] ..."

3. The defendant took employment with Automotive Imports Pty Ltd trading as "CoolDrive Distribution" as sales manager of a division which dealt in competition with the plaintiff. He was the head of the sales team, which included three other former employees of the plaintiff and which reported directly to the CEO of CoolDrive interstate.

4. The plaintiff claimed –

1. to restrain the defendant’s employment with CoolDrive because, the plaintiff alleged, it was a company that dealt in automotive spare parts; and

2. damages.

5. The plaintiff made an application for an interlocutory injunction which came before the Chief Justice on 23 June 2009. In that application the plaintiff targeted the defendant’s employment with CoolDrive, which had an office in Brisbane.  On 26 June 2009 the Chief Justice made an order restraining the defendant from dealing with five suppliers of the plaintiff within 100kms of the plaintiff’s Brisbane office, and restraining him from continuing in employment in circumstances where he carried out that employment as a servant of Cooldrive Distribution Pty Ltd or Automotive Imports Pty Ltd within 100kms of the plaintiff’s Brisbane office.  His Honour reserved costs.

6. On 29 June 2009 the defendant filed a defence which included the following:-

"7.   As to paragraph 7 of the Statement of Claim, the Defendant:

(a)denies that he commenced employment with a firm known as ‘Cooldrive Brisbane’ for the reason that no such firm exists;

(b)says that he commenced employment on or about 23 March 2009 with Automotive Parts Pty Ltd trading as ‘CoolDrive Distribution’ of 22-28 Lexton Road, Box Hill, Victoria; and

(c)admits that his employment requires him to attend from time to time at 60 Eagleview Place, Eagle Farm QLD 4009, and that that location is within 100 kilometres of Unit 1A 836 Boundary Road Coopers Plains (‘the Plaintiff’s business’) but denies that his employment is within a 100 kilometre radius of the Plaintiff’s business for the reasons that:

(i)he is in fact employed by a company with its principal place of business in Melbourne and that business is more than 100 kilometres from the Plaintiff’s business;

(ii)he is required to work at different locations and is required to travel as and when the duties and responsibilities of his position dictate;

(iii)he in fact carries out work at various locations around South East Queensland, both within and outside a 100 kilometre radius of the Plaintiff’s business; and

(iv)his employment often involves dealing with customers by telephone in circumstances where the customers are within and outside a 100 kilometre radius of the Plaintiff’s business and such telephone calls are made from locations from within and outside a 100 kilometre radius of the Plaintiff’s business. "

7. On 29 July 2009 the defendant made two offers to settle the proceeding – one pursuant to the UCPR and the other an open offer.

8. The offer pursuant to the UCPR was that the proceeding be discontinued with each party bearing its own costs on the defendant’s written undertaking that until 3 December 2010 he would not:–

"(a)as servant of Automotive Imports Pty Ltd ACN 005 378 727 (and/or Cooldrive Distribution Pty Ltd ACN 094 232 845) or any other business within the automotive spare parts industry, approach, solicit or in any way deal with the suppliers of [the plaintiff] located within 100km of .. [the plaintiff’s] place of business located at Unit 1A, 836 Boundary Road, Coopers Plains in the State of Queensland and .. [the plaintiff’s] place of business located at 9 Melissa Place, Kings Park in the State of New South Wales;

(b)continue in employment with Automotive Imports Pty Ltd ACN 005 378 727 (and/or Cooldrive Distribution Pty Ltd 094 232 845) or any other employer in the automotive spare parts industry in circumstances where he carries out that employment within 100km of .. [the plaintiff’s] place of business located at Unit 1A, 836 Boundary Road, Coopers Plains in the State of Queensland and .. [the plaintiff’s] place of business located at 9 Melissa Place, Kings Park in the State of New South Wales; and

(c)as owner of any business in the automotive spare parts industry, operate that business within 100km of .. [the plaintiff’s] place of business located at Unit 1A, 836 Boundary Road, Coopers Plains in the State of Queensland and .. [the plaintiff’s] place of business at 9 Melissa Place, Kings Park in the State of New South Wales. "

9. The open offer was in the same terms except in relation to costs. The solicitors for the defendant wrote:-

"Given the undertaking offered by our client, your client will not be successful in obtaining any formal injunctive relief at trial.  In the circumstances, we invite your client to discontinue the injunction component of its Claim.  So far as the balance of your client’s Claim is concerned, being the damages aspect, we are instructed that our client will consent to a discontinuance of that part of your client’s Claim on the basis that your client pays our client’s costs of and incidental to the damages (only) component. "

10. In submissions on costs, Counsel for the plaintiff pointed to paragraph 7 of the defence, and argued that it was reasonable for his client not to accept either of these offers as there was likely to be ongoing dispute about where the defendant was carrying out his employment. Be that as it may, both offers expired.

11. On 11 September 2009 Justice Mullins gave directions for trial, and set the matter down for trial over two days in November 2009. Her Honour adjourned an application to discharge the interlocutory injunction. She reserved costs.

12. The plaintiff filed an amended statement of claim on 15 September 2009, and the defendant filed an amended defence on 29 October 2009. Paragraph 7 of the amended defence was in these terms:-

"7. As to paragraph 7 of the Amended Statement of Claim, the Defendant:

(a)denies that he commenced employment with a firm known as ‘Cooldrive Brisbane Distribution’ for the reasons that no such firm exists set out in paragraph 7(b);

(b)says that he commenced employment on or about 23 March 2009 with Automotive Imports Pty Ltd trading as ‘CoolDrive Distribution’ of 22-28 Lexton Road, Box Hill, Victoria; and

(c)admits that his employment requires him to attend from time to time at 60 Eagleview Place, Eagle Farm QLD 4009, and that the location is within 100 kilometres of Unit 1A 836 Boundary Road Coopers Plains (‘the Plaintiff’s business’) but denies that his employment is within a 100 kilometre radius of the Plaintiff’s business for the reasons that:

(i)he is in fact employed by a company with its principal place of business in Melbourne and that business is more than 100 kilometres from the Plaintiff’s business;

(ii)he is required to work at different locations and is required to travel as and when the duties and responsibilities of his position dictate; and

(iii)he in fact carries out his work at various locations around South East Queensland, both within and outside a 100 kilometre radius of the Plaintiff’s business.

PARTICULARS

A.The work the Defendant is required to carry out pursuant to the terms of his employment includes:-

i.Accepting and responding to technical or other customer inquiries on product;

ii.Accepting customer telephone orders, and transmitting orders to warehouse for action;

iii.Providing customers with pricing and availability details on products and services as required;

B.Prior to 26 June 2009, the Defendant carried out his work primarily in the areas of the Gold Coast and the Sunshine Coasts, and not in the Brisbane area; and

C.After 26 June 2009 the Defendant only carries out his work outside a 100 kilometre radius of the Plaintiff’s business and, to the extent that his work requires him to deal with customers, he only deals with customers situated outside a 100 kilometre radius of the Plaintiff’s business.

(iv)  his employment often involves dealing with customers by telephone in circumstances where the customers are within and outside a 100 kilometre radius of the Plaintiff’s business and such telephone calls are made from locations from within and outside a 100 kilometre radius of the Plaintiff’s business."

13. The defendant gave particulars of paragraph 7 on 10 November 2009. These included a list of 11 customers within a 100 km radius of the plaintiff’s Brisbane office with whom he had dealt (all prior to 26 June 2009).

14. The proceeding came on for trial in November. The claim for damages was pressed. After lengthy argument, the trial was adjourned to February 2010, directions about further disclosure were given, and the interlocutory injunction was discharged. Costs thrown away by the adjournment were reserved, but they were subsequently dealt with. Costs of a hearing on 24 November 2009 were reserved.

15. On 2 December 2009 the Court gave further directions about disclosure, and an order in relation to the costs of that hearing was made.

16. In December 2009 the solicitors for the plaintiff wrote to the solicitors for the defendant advising that their client would not be pursuing the damages claim. Nevertheless, the plaintiff maintained that facts relevant to the apprehension of damage were relevant to the claim for injunctive relief.

17. On 22 December 2009 the plaintiff made an offer to settle under the UCPR in these terms -

"1.That the Defendant consent to an order in the following terms:-

The defendant be restrained until 3^rd December 2010 from being in any manner (either directly or indirectly) concerned or interested either alone or in partnership with or as manager servant or agent for any person company or corporation in the business of wholesaler and or trade supplier of automotive spare parts in so far as he has any dealing as salesman or sales manager;

(a)with any supplier which supplies automotive spare parts to automotive spare parts wholesalers and or trade suppliers (‘suppliers’);

(b)with customers or prospective customers of any automotive spare parts wholesalers and or trade suppliers (‘customers’)

where such suppliers or customers are located within 100 km of Auto Parts (Aust) Pty Ltd of Unit 1A, 836 Boundary Road, Coopers Plains Qld 4108 and or 100 km of Auto Parts (Aust) Pty Ltd of 9 Melissa Place, Kings Park NSW 2148

2. That the Defendant pay the Plaintiff’s costs and incidental to the action as agreed or assessed. "

18. That offer expired by the effluxion of time.

19. On 8 February 2010 the Court gave further directions for trial, including a direction that the plaintiff provide the defendant with a statement of the material facts and particulars it proposed to establish in relation to the loss (or the risk of loss) suffered by its business. Costs were made costs in the proceeding.

20. On 10 and 12 February 2010 the Court heard argument about the content of the statement of material facts. A number of paragraphs were disallowed. Costs were reserved.

21. On 12 February 2010 the defendant made an open offer to settle on the basis the proceeding be dismissed on an undertaking of the defendant in the terms subsequently accepted on the second day of the trial, and on condition that the plaintiff pay 75 percent of the defendant’s costs including reserved costs and the plaintiff pay the defendant’s costs pursuant to orders already made in his favour.

22. That offer was rejected on 15 February 2010 and a counter-offer in the following terms was made -

"1.Your client gives the undertaking referred to in you[r] letter to the Court;

2. Your client pay our client’s costs (to be assessed on the standard basis) up until and including the first day of the trial on 19^th November 2009 (including any reserved costs) but not any costs associated with any claim for damages;

3. There shall be no other order as to costs and each party shall pay their own costs as and from that date.  The parties agree that any other costs the subject of any order shall be borne by the parties who incurred such costs."

23. The trial proceeded over two days – 17 and 19 February 2010.

24. On the second day, after the conclusion of the evidence, the defendant proffered the undertaking to the Court, without any admission of liability. It became exhibit 19. The proceeding was dismissed, on the undertaking of the plaintiff not to pursue damages under the restraint and not to contend that the restraint was wider than what was contained in exhibit 19, and upon the undertaking of the defendant made without any admission as to liability, contained in exhibit 19. Costs were reserved. Exhibit 19 was in these terms -

"DEFENDANT’S UNDERTAKING

Without any admission as to liability, the Defendant undertakes that until 3 December 2010, he will not:-

1. as servant of Automotive Imports Pty Ltd ACN 005 378 727 (and/or Cooldrive Distribution Pty Ltd ACN 094 232 845) or any other business within the automotive spare parts industry, solicit, canvass or procure supply from the suppliers of the Plaintiff located within a 100km radius of the Plaintiff’s place of business located at Unit 1A, 836 Boundary Road, Coopers Plains in the State of Queensland or the Plaintiff’s place of business located at 9 Melissa Place, Kings Park in the State of New South Wales;

2. as servant of Automotive Imports Pty Ltd ACN 005 378 727 (and/or Cooldrive Distribution Pty Ltd ACN 094 232 845) or any other business within the automotive spare parts industry, solicit, canvass or procure the custom of any of the actual or potential customers of the Plaintiff listed in Schedule A, to the extent that those customers carry on business from premises located within a 100km radius of the Plaintiff’s place of business located at Unit 1A, 836 Boundary Road, Coopers Plains in the State of Queensland or the Plaintiff’s place of business located at 9 Melissa Place, Kings Park in the State of New South Wales;

3. for the avoidance of doubt, nothing in paragraph 2 prevents the Defendant from dealing with any person, business or entity, whether listed in Schedule A or otherwise, that are [sic] physically located outside a 100km radius of the Plaintiff’s place of business located at Unit 1A, 836 Boundary Road, Coopers Plains in the State of Queensland or the Plaintiff’s place of business located at 9 Melissa Place, Kings Park in the State of New South Wales; and

4. as owner of any business in the automotive spare parts industry, operate that business within a 100km radius of the Plaintiff’s place of business located at Unit 1A, 836 Boundary Road, Coopers Plains in the State of Queensland or the Plaintiff’s place of business located at 9 Melissa Place, Kings Park in the State of New South Wales. "

Annexure A listed 42 businesses that were customers or potential customers of the plaintiff.

25. It is instructive to compare annexure A with the particulars of the defence. Only five businesses appeared on both lists. So the undertaking extended to only five businesses within 100kms of the plaintiff’s Brisbane office with whom the defendant conceded having dealt.  I infer that the rest were, at best, potential customers of the defendant.  While annexure A listed 42 businesses, it is not clear how many were within a 100km radius of the plaintiff’s Brisbane or Sydney office: of course the undertaking extended only to those that were.

26. The extent of the restraint finally accepted differed from the offer made by the defendant under the UCPR.  The offer was not to be employed in circumstances were he carried out the employment within a 100km radius of the plaintiff’s Brisbane or Sydney office.  The undertaking was not to deal with customers in annexure A to the extent the customers carried on business within a 100km radius of the plaintiff’s Brisbane or Sydney office.  But, as Counsel for the defendant submitted, the undertaking contained a defined list of customers the defendant was restrained from dealing with: previously they had been undefined.

27. Rules 360 and 361 of the UCPR provide:-

"360 Costs if offer to settle by plaintiff

(1)If –

(a)the plaintiff makes an offer to settle that is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle; and

(b)the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer;

the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.

(2)If the plaintiff makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule.

361Costs if offer to settle by defendant

(1)This rule applies if –

(a)the defendant makes an offer to settle that is not accepted by the plaintiff and the plaintiff obtains a judgment that is not more favourable to the plaintiff than the offer to settle; and

(b)the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer.

(2)Unless a party shows another order for costs is appropriate in the circumstances, the court must –

(a)order the defendant to pay the plaintiff’s costs, calculated on the standard basis, up to and including the day of service of the offer to settle; and

(b)order the plaintiff to pay the defendant’s costs, calculated on the standard basis, after the day of service of the offer to settle.

(3)However, if the defendant’s offer to settle is served on the first day or a later day of the trial or hearing of the proceeding then, unless the court otherwise orders –

(a)the plaintiff is entitled to costs on the standard basis to the opening of the court on the next day of the trial; and

(b)the defendant is entitled to the defendant’s costs incurred after the opening of the court on that day on the indemnity basis.

(4)If the defendant makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule."

28. Whether the terms of the defendant’s offer under the UCPR or the terms upon which the proceeding was ultimately dismissed were more favourable to the plaintiff would depend upon the practical effect of each scenario.  I cannot resolve this on the present material.

29. I am satisfied that the terms on which the proceeding was ultimately dismissed were less favourable to the plaintiff than the plaintiff’s offer under the UCPR made in December 2009.

30. The offer and counter-offer made in February 2010 differed from the terms on which the proceeding was ultimately dismissed in relation to the disposition of costs, including reserved costs and costs the subject of orders already made.

31. I note that the wording of the undertaking ultimately accepted was supplied by Counsel for the defendant in November 2009. But there is a dispute about the basis on which it was provided at that time – a dispute I cannot resolve on this application.

32. The plaintiff succeeded in obtaining some restraint – restraint within the scope of what it originally sought, but much narrower than it originally sought. It was also narrower than the interlocutory injunction. The claim for damages was not ultimately pursued, although the risk of damages was litigated in the context of the claim for injunctive relief.

33. Having regard to all of these matters, I make the following costs orders –

1. that the defendant pay the plaintiff’s costs of and incidental to the claim for injunctive relief to and including 15 February 2010;

2. that the plaintiff pay the defendant’s costs of and incidental to the claim for damages;

3. with respect to reserved costs –

(i) that the defendant pay the plaintiff’s costs of and incidental to the application for an interlocutory injunction on the basis of a hearing on one day (23 June 2009) only;

2. that the defendant pay the plaintiff’s costs of and incidental to the application before Justice Mullins on 11 September 2009;

3. that the plaintiff pay the defendant’s costs reserved on 24 November 2009, 10 February 2010 and 12 February 2010;

4. that apart from costs orders previously made, there be no other order as to costs;

(e) that all costs be assessed on the standard basis.