Burton & Eising v Wright Trading Pty Ltd [2007] QSC 17

SUPREME COURT OF QUEENSLAND CITATION: Burton & Eising v Wright Trading [2007] QSC 017 PARTIES: GEOFFREY CHARLES BURTON AND DARREN EISING (Applicants) v WRIGHT TRADING PTY LTD (Respondent) FILE NO: S392 of 2006 DIVISION: Trial Division DELIVERED ON: 19 January 2007 DELIVERED AT: Rockhampton HEARING DATES: 29, 30 November and 1 December 2006 JUDGE: Dutney J ORDERS: Declare that: 1. The memorandum from the respondent to the applicants dated 16 August 2006 did not constitute a repudiation of the applicants’ employment contracts dated 1 April 2005. 2. The restraint of trade clause in the employment contracts dated 1 April 2005 is a valid restraint only insofar as it prohibits the making use of the information described in paragraph 1(b) of the clause for a period of six months from 26 September 2006. Order that: 1. The respondent , its solicitors and counsel deliver up to the applicants’ solicitors, and be restrained from making any use of, any document or other written record within any of their possession containing or relating to information derived from any correspondence contained in exhibit “PGF-7” to the affidavit of Peter Frederick Gray filed 9 November 2006. -- 1 of 14 -- 2 2. The respondent, its solicitors and counsel delete, and be restrained from making any use of, any electronic copy and any record whatsoever of any document or information described in 1. CATCHWORDS: CONTRACT – REPUDIATION – Where a significant portion of the applicants’ income was conditional on an agreement between the employer and a third party – Where contract between employer and third party was terminated – Whether term guaranteeing ongoing arrangement could be implied into the contract - Whether fundamental breach. CONTRACT – REPUDIATION – Where applicants had made leave arrangements prior to termination of agreement between employer and third party – Where employer had cancelled all leave arrangements at the same time as notifying staff that the third party arrangement would no longer continue – Whether repudiation of employment contract. CONTRACT – RESTRAINT OF TRADE – Where ‘step’ clause inserted into employment contract by employer – Where clause widely drafted both as to duration and geography – Whether clause valid. EVIDENCE – PRIVILEGE – LEGAL PROFESSIONAL – Where emails inadvertently sent to other side – where emails contained legal advice in relation to the proceedings – Whether privilege waived. CASES: Associated Newspapers v Bancks (1951) 83 CLR 322, applied. Butt v Long (1953) 88 CLR 476, applied. Hartleys Limited v Martin [2002] VSC 301 referred to Koops Martin v Reeves [2006] NSWSC 449 considered Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989)166 CLR 633, considered. Lindner v Murdock’s Garage (1950) 83 CLR 628, applied. Lloyd’s Ships Holdings Pty Ltd v Davross Pty Ltd (1987) FCR 505, considered. COUNSEL: Mr P Tucker for the applicants Mr S Fisher for the respondent SOLICITORS: Hollingworth & Spencer for the applicants. Gadens Lawyers for the respondent. -- 2 of 14 -- 3 Background [1] The applicants, Mr Burton and Mr Eising were employees of the defendant Wright Trading Pty Ltd (“WT”). At the time to which these proceedings relate their employment was governed by identical written contracts, each dated 1 April 2005. [2] For present purposes, the relevant terms of the employment agreement are as follows: “EMPLOYER You are employed by Wright Trading Pty Ltd. PERIOD OF EMPLOYMENT Subject to the terms of this agreement, you will be employed for a period of five (5) years from the commencement date. COMMENCEMENT DATE Your employment will commence upon 1 April 2005. LOCATION You will be based at Gladstone, but you may be required to travel within Queensland or interstate for the purpose of discharging your duties under this agreement. Further, although your employment is to commence at our Gladstone office, you may be asked to relocate to work in another office within Central Queensland, should future workflow make that necessary. REMUNERATION Your remuneration for this position is based solely on commission which is to be calculated in accordance with the formula set out in schedule B. You will be paid monthly in arrears on 15th day of each calendar month … LEAVE ENTITLEMENTS 1. Annual leave You are entitled to four weeks recreation leave for every twelve months of completed service, for which you will be paid in advance calculated at the rate of your commission advance described in schedule B. Leave will accrue from year to year but must be taken within a reasonable time of that leave accruing. Whilst leave should usually be taken at times which are mutually agreeable, we may direct you to take leave from time to time. CONFIDENTIALITY You acknowledge that in the ordinary course of your employment with us, you will be exposed to and learn information about our business and about our clients, customers and suppliers which is confidential and commercially sensitive; information which is not readily available to -- 3 of 14 -- 4 others who are in competition with us and, which if disclosed, may result in damage being done to our business. You must therefore keep secret and not at any time either during your employment or after its termination, for whatever reason, use, communicate or reveal to any other person for your own for (sic) anyone else’s benefit any information which is confidential to our business and/or the business of our clients, customers and suppliers which may have come to your knowledge during the course of your employment. You will use your best endeavours to prevent the publication or disclosure of this information. For the purposes of this agreement and by way of illustration, information which we regard as confidential is any information which concerns and/or relates to: 1. Our clients and customers and details of their particular requirements and their business; 2. Our suppliers and the particulars of their business and the nature of our relationship with those suppliers; 3. Costings profit margins, discounts, rebates and any other financial information relating to our business; 4. Marketing strategies and tactics; 5. Current activities and our current or future business plans including the timing of those plans; 6. Any restrictions contained in this clause will not apply: (a) To any information which is not confidential because it is in the public domain otherwise than as a result of the breach of this clause; and (b) Any disclosure which may be authorised by us or which in the ordinary and proper course of your employment, you are required to disclose by law. RESTRAINT OF TRADE To protect our interests in relation to the intellectual property and goodwill of our business, you agree that during the periods after the termination of this agreement specified in clause 2 below and in the areas stipulated in clause 3 below: 1. You will not do any of the following: (a) undertake, carry on or be engaged in or concerned with, in any capacity whatsoever, any business which is in competition with our business without having first obtained our written consent, such consent will not be unreasonably withheld (sic); (b) make use of any of our confidential information for your own benefit or for the benefit of any third party without first having obtained our written consent, such consent will not be unreasonably withheld (sic); -- 4 of 14 -- 5 (c) canvass, solicit or accept work either for yourself or on behalf of any other person or entity, from any person or entity who is or who has at any time during the 12 months immediately preceding the termination of your employment, been a client of our business; (d) solicit or attempt to entice away or interfere or attempt to interfere in any way with the contractual relationship between us and any person who, at the time of the termination of your employment or during a period of 3 months prior to that termination, was employed by us. 2. The period of time referred to above is a period of: (a) 3 years; (b) 2 years; (c) 12 months; (d) 6 months; and (e) 3 months. 3. The areas referred to above are: (a) Queensland; (b) Central and Southern Queensland; (c) An area within 200 kilometres of GPO Gladstone QLD. TERMINATION …. 2. At any time from the commencement date for a period of twelve months, we may terminate this agreement by giving you one month’s notice or by paying you 1/12 th of the amount of the commission advance set out in schedule B. … 3. This agreement may be terminated at any time by agreement between you and us. However, if you give us notice of your intention to terminate this agreement other than in circumstances described in paragraph 2, you agree to pay us by way of damages the amount which represents the difference between your gross earnings from the commencement date to the date of termination under your previous employment agreement dated 14/04/03 and this agreement. Further, you agree that this amount represents a reasonable estimate of the cost to us represented by losing your services and the need to locate and re- train someone to replace you.” [3] At all material times, WT carried on business as financial planners and stock brokers in Gladstone under the banner of ABN Amro Morgans. For reasons which follow, that may no longer be the case and will certainly not be the case after 31 January, 2007. [4] The applicants worked together in the sense that pursuant to schedule B of their employment contracts, their gross revenues for WT were pooled and they were paid -- 5 of 14 -- 6 a specified commission rate depending on the product or service from which the revenue was earned. [5] The applicants’ employment with WT commenced in April 2003. Prior to that Mr Burton had managed an office for Wilson HTM (“WHTM”) in Gladstone. Mr Eising worked for WHTM at the Gladstone office. [6] In March 2003 WHTM decided to close its Gladstone office. Mr Burton was offered the management of WHTM’s Hervey Bay branch but ultimately decided to move to WT. WT was operating under the banner ABN Amro Morgans (“AAM”). WT was in fact an independent company operating pursuant to a management agreement with AAM. Both Mr Burton and Mr Eising knew that WT operated under some form of agreement with AAM because the employment contracts they signed were with WT. [7] While working for WHTM, Mr Burton and Mr Eising had marketed a product known as Investment Partner. Investment Partner was a product that provided tax reporting while allowing clients to trade shares or invest in other forms of investment. It was not a managed fund in the ordinary sense because the client maintained control of the investments into which the client’s money was placed. [8] AAM offered a similar product which it called Managed Portfolio Service (“MPS”) [9] The applicants say that they wished to remain in Gladstone after the WHTM office closed and wished to be able to offer their clients a product similar to Investment Partner. They could do this through WT. This was the reason the applicants say they were persuaded to work for WT. [10] MPS has become the most important product with which the applicants deal, not only in terms of the revenue directly generated, but in the flow on work from the MPS clients in stock broking and other services. [11] On 16 August 2006, staff at WT, including Mr Burton and Mr Eising, were notified via a memo that AAM would not renew the management agreement after it terminated by effluxion of time in January 2007. The result is that WT would not be able to offer MPS to its clients after that time. [12] The memo also advised that staff leave was cancelled until further notice. [13] At the time he received the notice, Mr Burton had leave approved for September and October 2006 during which he was proposing to take his family overseas. The holiday had been largely paid for. [14] The applicants allege that the loss of the AAM contract and the consequential loss of MPS constituted a fundamental breach of the contract of employment for which they were entitled to rescind. They also relied on the cancellation of previously approved leave to similar effect. By letter from their solicitors dated 20 September 2006, the applicants purported to accept WT’s repudiation of the employment contracts and end their employment. [15] By letter from its solicitors dated 27 September 2006, WT denied any repudiation of the employment contracts but accepted the applicants’ solicitor’s letter as itself amounting to a repudiation which WT accepted. -- 6 of 14 -- 7 [16] The applicants wish to set up an agency or office of AAM under their own control. Their ability to do so is affected by the restraint of trade clause in their employment contracts. The applicants submit that the repudiation of the employment contracts by WT has relieved them from the burden of the restraint clause or alternatively that the restraint clause constitutes an unlawful restraint of trade and should be struck down. [17] These two issues were heard as separate issues from the balance of the issues in the case. The case has proceeded without pleadings and it is not possible to define what other issues, if any, the parties wish to pursue. The purpose of identifying and separating the two issues was to enable the applicants to have some certainty when or if they may commence a competing business in Gladstone and to avoid the risk of any estoppel arising that might prevent the future litigation of issues not raised before me. [18] Although some of the affidavit material for this hearing is concerned with other issues, I do not propose to deal with them at this time and, unless I expressly do so where necessary to decide the present issues, I make no findings in relation to them. [19] Neither side seemed prepared to explore with the directors of WT the company’s future after the agreement with AAM terminates on 31 January 2007. Mr Lewis Fellowes, however, said that negotiations to replace the services and products provided by AAM with equivalent services and products (including an equivalent to MPS) had reached the point where an offer of an agreement had been received from one company and an offer was expected from a second within a few days.1 Since this evidence was not challenged, I accept, on the balance of probabilities that after 1 February 2007 the business of WT will continue very much in the way it has in the past save that the banner under which the business trades and the names of some of its products will have changed. [20] Mr Burton gave evidence as to how he would have gone about preserving the business after the loss of the AAM contract.2 The steps he described seem very much the same as those Mr Lewis Fellowes actually took. Fundamental Breach [21] MPS is specifically referred to in Schedule B to the employment contracts. Schedule B generally specifies commission rates payable on various products and services including MPS. [22] On its face, it seems that MPS is one of a number of products and services from which the applicants were able to earn income while employed by WT. Ordinarily when an employer for whom a commission agent works, without any fault on its part, loses a particular product, the employee can choose to remain with the employer and earn income from other available products or resign and seek more remunerative work elsewhere. [23] Is there any reason to take a different approach in this case? 1 Transcript page 271. 2 Transcript page 107. -- 7 of 14 -- 8 [24] Counsel for the applicants submitted that the provisions of clause 4 of the employment agreement under the heading “Termination” set out above may arguably be such a reason. [25] The applicants were originally employed by WT under employment agreements dated 10 April 2003. During the early part of 2005, the applicants entered into negotiations with Mr W. Fellowes from WT with a view to taking equity in the company. Mr Fellowes resisted these approaches and eventually the matter was resolved by WT agreeing to pay a higher rate of commission on the products and services sold by the plaintiffs. This was included within the new employment agreements dated 1 April 2005. [26] The effect of clause 4 of the termination provision of the 2005 agreements was that there was a significant financial disincentive for the applicants to terminate their employment during the currency of the agreement. For reasons I explore below, however, it does not seem to me that the restrictions on terminating the contract are relevant to a determination of this dispute. It is thus not necessary to determine whether the clause operated as a bar to the applicants resigning from their employment with WT. [27] For this contract to be repudiated, two things are required. First, the term breached must be such that, without assurance of its strict performance, the applicants would not have entered into the contract.3 Second, it requires conduct that, viewed objectively, is such as to convey disavowal of that fundamental term.4 The term, of course, is the continued existence of the management agreement with AAM. [28] Although there are references to AAM in the employment agreements and there is a specific reference to MPS in the schedule of commissions payable to the applicants, the employment agreements are not expressed to be subject to the continuation of the AAM management agreement. A clause to that effect would, therefore, have to be implied. [29] The implication of terms into a written contract is not something to be undertaken lightly. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales5 the five conditions identified by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council6 were approved.7 [30] In this case it was pointed out by counsel for the applicants that if the contract with AAM ended, there was no entitlement to commission for selling any product in substitution for MPS. The commission entitlement was fixed by reference to that specific product. [31] It was conceded by Mr W. Fellowes that, at the time he was negotiating the employment contracts with the applicants, he had never contemplated the possibility that the agreement with AAM might eventually end. In response to a question in cross-examination as to what would happen if another company’s product was 3 Associated Newspapers v Bancks (1951) 83 CLR 322. 4 Laurinda Park Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 633 at 647 (per Brennan J); 658 (per Deane & Dawson JJ). 5 (1981-1982) 149 CLR 335. 6 (1977) 52 ALJR 20 at 26. 7 Ibid at 347 (per Gibbs CJ); 351 (per Mason J); 404 (per Brennan J) -- 8 of 14 -- 9 substituted for MPS, Mr Fellowes said that he assumed that the commission would be paid on that product. 8 [32] For my part, to imply a term that if a product was substituted for MPS the same commission rate would apply to that product seems more logical than to imply that the whole contract would be defeated. AAM itself might well substitute an alternative product in the fullness of time. If an alternative AAM product could be interposed why should it be any different merely because the product was provided by another investment house? [33] I do not accept that in order to give business efficacy to the contracts of employment it is necessary to construe them so narrowly that an arrangement specifically with MPS is seen to be a fundamental term. Rather, in my opinion, any fundamental term would be the continued availability of an equivalent investment product. [34] I am not prepared to imply the existence of the term the applicants require to satisfy the first requirement for repudiation because I do not consider it is necessary to do so in order to give business efficacy to the contract or that the implication of such a term is obvious. [35] My conclusion on the implication of the term contended for by the applicants, necessarily concludes the issue of whether there has been repudiation. Without the implied term there is no basis for a finding that WT was insisting on performance of a contract materially different from that which the applicants entered into. WT was insisting only that the contract in the form in which it was written be performed, or perhaps with the implication of a term permitting substitution of one product for an equivalent product. [36] As I have found, there seems to be no commercial reason why, if AAM were no longer available, WT could not enter into an agreement with another investment house and exchange an equivalent product for MPS. Indeed, the applicants did something remarkably like this when they took up employment at WT, substituting AAM’s MPS for WHTM’s Investment Partner. [37] I am satisfied to the required standard that this is the scenario which will prevail from 1 February next at the latest. [38] I am not satisfied that the cancellation of the previously agreed holidays constituted a fundamental breach of the contracts of employment. [39] The withdrawal of previously agreed leave would almost certainly result in an entitlement to damages for expenses incurred in reliance on the earlier consent of WT and then thrown away but that is an entirely different matter from avoidance of the employment contracts as a whole. This is not because there has been a breach of the contracts of employment. The contracts of employment merely provide for holidays to be taken at a time agreed between the parties. Any such agreement would, in my view, give rise to a separate obligation, independent of the main contract, breach of which would sound in damages. [40] In the result I find that the purported termination of the employment contracts by the applicants on 20 September 2006 was ineffective to bring them to an end on that 8 Transcript page 197. -- 9 of 14 -- 10 date. Their employment by WT was terminated by the letter from WT’s solicitors dated 26 September 2006. Restraint of Trade [41] Clauses in restraint of trade are prima facie unlawful and will be struck down unless the party imposing the restraint can demonstrate that the clause is necessary to protect its legitimate interests.9 [42] In this case, WT has imposed a “step” clause under which the Court is invited to delete progressive geographical and chronological restrictions until a reasonable degree of each is achieved.10 [43] What then is a reasonable restraint? [44] Counsel for WT conceded that the description “Central and Southern Queensland” was too vague to be enforceable. Neither is a defined area. This left only Queensland as a whole or the area within 200 kilometres of the Gladstone GPO. [45] It emerged during evidence that the great bulk of WT clients were within a 200km radius of the Gladstone Post Office. Mr Lewis Fellowes provided a statistical breakdown of the applicants’ clientele as contrasted with the broader WT clientele11 . 48.7% of the clients serviced by the applicants were within 10 km of the Gladstone GPO. A further 25.5% are within 200km of the Gladstone GPO, making for a total of 74.1%. Only 17.6% are scattered throughout the area beyond 200 km. Instructively, 47.5% of WT’s total client base falls in the 10km grouping, while 27.5% fall into the 200km category. Once again only 17.5% are outside 200 km. In that sense, the applicants’ client base reflects the breakdown of WT’s clientele more broadly. [46] The applicants and Mr Warren Fellowes generally serviced their own clients with little overlap. The business seems, on the evidence to have been based largely on a personal relationship with a particular adviser. Direct and frequent contact between the adviser and the client appeared to be a key element of the relationship. [47] In this sense the position of the applicants equates to that described by Brereton J in Koops Martin v Reeves.12 As far as the clients with which they dealt were concerned, the applicants were the persona of WT. They had no relationship with the other clients and in relation to them were in no better position to solicit their business than a stranger. [48] Those clients more than 200 km from the Gladstone GPO are scattered across a wide area. On this basis it seems to me that to enforce a restraint over the whole of Queensland would be entirely unreasonable, particularly having regard to the broad scope of the restraints in subclauses 1(a) and 1(c). It would, for example, be improbable that employment by either Mr Burton or Mr Eising with an investment house in Brisbane could have any discernable effect on the business of WT. 9 Butt v Long (1953) 88 CLR 476 at 486 per Dixon CJ. 10 Lloyd’s Ships Holdings Pty Ltd v Davross Pty Ltd (1987) FCR 505 11 Affidavit of Lewis Fellowes, sworn 3 November 2006, pp 41-42. 12 [2006] NSWSC 449. -- 10 of 14 -- 11 [49] Of the 25.5 % of WT clients more than 10 km but less than 200 km from the Gladstone GPO, the majority are in the immediate environs of Gladstone including the Boyne Island, Tannum Sands and Calliope, areas which share a post code with Gladstone City but are outside the 10 km radius.13 [50] Neither Mr Lewis Fellowes nor Mr Warren Fellowes was able to identify what proportion of WT’s income came from the area outside the Gladstone region. I assume therefore that the proportion of income is roughly the same as the proportion of individual clients. Roughly 70% of the clients between 10 and 200 km were in the Gladstone area. That means that less than 8.5% of WT’s total client base lives in an area between about 20 km and 200 km from Gladstone.14 WT’s clients outside the Gladstone environs are widely scattered. They extend as far away as Victoria. It seems likely that many of them are persons who established a relationship with WT when living in the Gladstone area but subsequently moved and retained WT as their broker or financial planner. Those clients are not grouped in any particular geographical locations. [51] The area between 10 km and 200km includes a number of major regional centres which are serviced by financial houses locally including other offices trading under the name AAM. Such centres include Rockhampton, Bundaberg and the Capricorn Coast. These are areas in which WT has no significant presence or client base to protect. If the client profile of WT is any indication, they are self contained markets which do not overlap in any significant way with the Gladstone market. It seems to me therefore that a geographical restraint which prohibits the applicants conducting business in major markets in which WT has no real presence is unreasonable. [52] WT’s core business is in and around Gladstone. To the extent that it goes beyond Gladstone it is widespread and scattered with no particular concentration I have been able to identify. [53] Having regard to the actual location of WT clients outside the 10 km radius, some larger area would have been supportable but a radius of 20 km would capture the greater part of WT’s client base. 200 km is simply too broad an area. [54] For these reasons, I am satisfied that none of the nominated geographical restraint areas is reasonable. [55] The duration of the restraints provided for range from 3 years to 3 months. Restraints are not meant to be anti-competitive, and courts will strike them down if they are. They are merely meant to allow the erstwhile employer to take adequate protective steps in preparation for competition.15 [56] In this case, counsel for WT did not seriously press for a restraint beyond 6 months duration. In my view this period is reasonable. There is a difference between a business like that of WT in a provincial area and one in a capital city. The market is much smaller and the advantage to the departing employee and corresponding disadvantage to the existing business of the close personal contacts established by 13 See exhibit “LAWF 30” to the affidavit of Lewis Anthony Wright Fellowes filed 27 November 2006, and Transcript pages 204-208. 14 30% of 25.5%. 15 Lindner v Murdock’s Garage (1950) 83 CLR 628 particularly at 636ff where Latham CJ (although in dissent as to the outcome) discusses the relevant principles. -- 11 of 14 -- 12 the departing employee with the employer’s clients is thereby increased. In this respect I note the evidence of Mr Eising that there are no stock brokers in Gladstone apart from WT. [57] I would not have accepted a longer restraint than 6 months. The evidence from Mr Eising was that he spoke to all the clients he serviced at least once a month.16 To the more active clients he might communicate daily. [58] Having regard to the frequency of contact with clients of WT, I consider that 6 months is a sufficient period to enable WT to protect that part of its client base that is not so attached by reason of a personal relationship with Mr Burton or Mr Eising that it would inevitably go to the rival business they intend to establish. [59] The remaining question is whether the matters covered by paragraph 1 of the clause can support a restraint limited by time but not by geography. [60] If the restraint was limited to solicitation of customers serviced by the applicants within the 12 months preceding the termination of their employment, I would accept that it was justified.17 This is because of the nature of the relationship between clients and individual employees of WT described above. The restraints in the applicants’ employment contracts go further. For example, the restraint on solicitation covers anyone who was a customer of WT within the preceding 12 months whether or not they had had any contact with the applicants. The restraint on employment is even broader. Having regard to the personal relationship between adviser and client, I do not consider a solicitation restraint that goes beyond the persons with whom the adviser actually dealt can be justified on this basis. [61] The restraint on attempting to entice current or former staff is also too broad. Whatever the value of protecting current staff, I cannot see any reason why it is necessary in the interests of WT to prevent the applicants employing people who had previously left WT. No argument was advanced in support of this particular restraint. [62] Finally, there is a restraint on using confidential information. There may be a real issue as to whether or not the information defined as confidential was in fact so. Nonetheless, the parties have agreed that it was. In those circumstances I am prepared to uphold the restraint on use of confidential information on the basis that it is of such a nature as to not be susceptible to geographic limitation. [63] I consider the balance of the restraint clause void as exceeding what was reasonably required for the protection of the respondent. Privileged emails [64] A further matter arose during the interlocutory proceedings in this matter. [65] After the applicants had ceased working for WT a number of e-mails exchanged between the applicants and their solicitors were sent inadvertently to Mr Burton’s old e-mail address at WT. As a result these e-mails came into the respondent’s 16 Transcript page 88. 17 Cf Koops Martin v Reeves [2006] NSWSC 449; Hartleys Limited v Martin [2002] VSC 301. -- 12 of 14 -- 13 possession and the respondent sought to use them in the proceedings against the applicants. [66] It seems to me to be beyond argument that the e-mails would have attracted legal professional privilege if not disclosed. They consisted primarily of advice from the applicants’ solicitor to the applicants concerning the very subject matter of the litigation and their relationship with WT and AAM in the context of the termination of their employment with WT. [67] After leaving WT’s employment, Mr Burton communicated with his solicitor by using his wife’s e-mail account. After a period he set up a separate hotmail account. When Mrs Burton attempted to forward the e-mails on her account to the new hotmail account she inadvertently sent them to her husband’s old account at WT. [68] When the error became known, the applicants’ solicitor immediately wrote to the respondent’s solicitor seeking undertakings concerning the non use of the material and asking for its return. [69] Counsel for the respondent resisted the return of the documents on the basis that they disclosed evidence of a civil wrong not amounting to fraud or breach of fiduciary duty. Counsel was forced to rely on such a limited proposition because the contents of the documents were concerned with how the applicants were entitled to act after termination of their employment contracts. I am not persuaded that any such basis exists for resisting an injunction restraining the use of otherwise privileged documents disclosed in error. [70] In my opinion, the authorities relied on by counsel for the respondent did not support the proposition advanced. [71] The documents do not contain evidence of fraud or breach of fiduciary duty. [72] There is a large body of cases, some of which are helpfully collected in Cross on Evidence,18 which support the proposition that where otherwise privileged documents come into the possession of another inadvertently and without the intention to waive any privilege the Court will restrain use of the documents inconsistent with the privilege. This seems to me to me to be an appropriate case to apply that principle. Result [73] In the result: 1. I declare that: (a) The memorandum from the respondent to the applicants dated 16 August 2006 did not constitute a repudiation of the applicants’ employment contracts dated 1 April 2005. (b) The restraint of trade clause in the employment contracts dated 1 April 2005 is valid restraint only insofar as it prohibits the making use of the information described in paragraph 1(b) of the clause for a period of six months from 26 September 2006. 18 Cross on Evidence, Australian Edition at paragraph [25020], page s 25,021 – 25,022 -- 13 of 14 -- 14 2. I order that: (a) the respondent, its solicitors and counsel deliver up to the applicants’ solicitors, and be restrained from making any use of, any document or other written record within any of their possession containing or relating to information derived from any correspondence contained in exhibit “PGF-7” to the affidavit of Peter Frederick Gray filed 9 November 2006. (b) The respondent, its solicitors and counsel delete, and be restrained from making any use of, any electronic copy and any record whatsoever of any document or information described in a. -- 14 of 14 --