LiveBetter Services Ltd v Quarmby

The plaintiff is LiveBetter Services Ltd (LiveBetter), which is a registered National Disability Insurance Scheme (NDIS) provider of a diverse range of services including disability support services, aged care, respite care, childcare, home and community care and clinical services.

LiveBetter is a not-for-profit company limited by guarantee under the Corporations Act 2001 (Cth) and is also a registered charity with the Australian Charities and Not-for-Profits Commission.

The evidence is that LiveBetter employs approximately 1700 employees in about 60 sites across Australia, predominantly in New South Wales. LiveBetter's head office is located in Orange, New South Wales.

LiveBetter's activities in the southern region of New South Wales commenced in 2016 by way of mergers with other businesses in the disability sector. The head office for LiveBetter's activities in the southern region of New South Wales is located at Wagga Wagga.

LiveBetter controls a number of disability support service houses in the southern region of New South Wales, which it uses for the purpose of providing disability support services to its clients.

The first defendant, Mr Ryan Quarmby, commenced employment with LiveBetter on 16 January 2017 as LiveBetter's Regional Manager Disability in Murrumbidgee. On 27 May 2019, Mr Quarmby was promoted to the position of Head of Disability NSW South.

The second defendant is New Directions Disability Services Ltd (New Directions). Mr Quarmby is one of three directors of New Directions. It appears that one of the other directors is Mr Quarmby's wife. Mr Quarmby and his wife own the shares in New Directions. It appears from the current company extract issued by ASIC for New Directions on 23 December 2019 that the 1,000,000 issued ordinary shares in the company were issued for no consideration.

On 9 May 2019, Mr Quarmby signed an acceptance of a proposal for an audit of New Directions for the purpose of registration with the NDIS.

Apparently in August 2019, New Directions was registered as a disability support provider by the NDIS for the period until 30 August 2022.

These proceedings were commenced by summons filed by LiveBetter in court on 31 December 2019.

No interlocutory relief was expressly sought by LiveBetter in the summons. The seeking of interlocutory relief is, unusually, stated only in order 5 made by Davies J on 31 December 2019. The interlocutory relief sought is as follows:

LiveBetter seeks final relief in its summons that is consistent with the interlocutory relief identified in order 5 made by Davies J.

Prayers 8 and 9 of the summons seek an indefinite restraint against the two defendants from providing any disability services to any person who was a client of LiveBetter between January 2017 and 13 December 2019 or their families, including the individuals listed above in respect of the interlocutory relief.

Prayers 10 to 12 seek injunctions against both defendants from using or disclosing the Confidential Information of LiveBetter.

Prayers 13 and 14 seek injunctions against both defendants restraining them from engaging in conduct which would involve a breach of clause 13 of Mr Quarmby’s contract of employment.

LiveBetter seeks an order that both defendants pay damages to it in prayer 15.

Prayers 6, 7 and 16 to 19 seek relief for alleged contraventions by the defendant of ss 181(1), 182(1) and 183(1) of the Corporations Act.

LiveBetter informed the Court that it did not rely upon contraventions of these statutory provisions to support its application for interlocutory relief.

LiveBetter's application for interlocutory relief was heard in the vacation on 10 January 2020, which was the first return date for the summons.

LiveBetter relied on an affidavit of Ms Janis Redford, the Acting Chief Executive Officer of LiveBetter, affirmed on 30 December 2019. The affidavit was admitted into evidence without objection.

The defendants did not tender any evidence. That is of some significance in this case because, as will be seen, the events that LiveBetter primarily seeks to prevent will not happen until dates in February 2020, as the clients of LiveBetter apparently had to give notice to LiveBetter before they changed their service provider to New Directions. The defendants would have been given time to put on evidence in response to LiveBetter's evidence if they had sought to do so.

The fact that the parties elected to contest LiveBetter's claim for interlocutory relief on the first return date of the summons was not entirely convenient from the perspective of the Court. Not only did the defendants not put any evidence before the Court, but LiveBetter did not obtain any evidence from the defendants by the use of notices to produce, or from LiveBetter's clients or their guardians, or from the two former employees of LiveBetter, who will be mentioned below, by the use of subpoenas. Consequently, the Court has been required to decide the application upon evidence that is not always substantial or conclusive, even accepting that the application is an interlocutory one.

As stated above, Mr Quarmby commenced employment with LiveBetter on 16 January 2017. He signed what is called a “Deed of Confidentiality” on 5 January 2017. He acknowledged that during his employment with what is described as "CareWest" he would have access to information and documentation belonging to CareWest that was Confidential Information, and he agreed "not to communicate, publish or release Confidential Information to a third party unless authorised to do so by CareWest". The evidence does not explain the relationship, if any, between LiveBetter and CareWest. It is possible that CareWest is either a former name of LiveBetter or the name of a business that has emerged with LiveBetter. The definition of "Confidential Information" is substantially the same as in order 5b of the orders made by Davies J on 31 December 2019.

On 7 June 2019, Mr Quarmby signed a letter addressed to him by LiveBetter dated 27 May 2019 which contained the terms of his contract of employment. The employment became effective from 27 May 2019. By clause 3, Mr Quarmby was engaged as Head of Services Disability NSW South on a permanent full-time basis of 76 nominal hours per fortnight plus any reasonable additional hours. Clause 6 of the contract of employment stated: "Normal office hours vary across locations but are generally between 8:30am and 5pm”.

Mr Quarmby's duties, as stated in clause 3, included:

Clause 13 was in the following terms:

Also on 7 June 2019, Mr Quarmby signed a Position Description in respect of his employment. The chapeau to the statement of Mr Quarmby's responsibilities stated:

The 21 "core responsibilities for this position" which are set out in bullet point form paint a picture of Mr Quarmby's role as being one of management and not the personal provision of services to clients of LiveBetter. The responsibilities that touch upon service delivery include: "Ensuring quality in service delivery to customers utilising person-centred approaches", and "Recruiting, motivating and leading a team that supports the culture, values, and business objectives of LiveBetter".

Two important observations may be made about the terms of Mr Quarmby's employment and his role as Head of Disability NSW South. First, the restraint against post-employment inducement, solicitation, canvassing or approaching any customers of LiveBetter in the middle paragraph of clause 13 of the employment agreement is indefinite as to time or location.

Secondly, although that paragraph states that, as a result of his employment, Mr Quarmby would have the opportunity to build professional relationships with LiveBetter's "clients and business' clients", the terms of Mr Quarmby's Position Description suggest that this statement may well have been true in relation to the relationship between Mr Quarmby and LiveBetter's clients at the management level, but it is not clear that Mr Quarmby would have built up a personal connection with LiveBetter's disability service clients or their guardians.

It is necessary to mention the involvement of two other persons who were employees of LiveBetter.

First, Melissa Crowe commenced employment with LiveBetter on 14 November 2016, although that was a result of an amalgamation with another service provider with whom Ms Crowe had started employment on 3 September 2013. Ms Crowe is employed in the position of Disability Program Coordinator. Ms Crowe's employment was suspended on 24 December 2019 because of her involvement in the activities that have led to these proceedings. There is evidence that Ms Crowe’s Facebook page stated as at 27 December 2019 that she was employed as “House Manager at Family Link… former Disability Coordinator at LiveBetter”. There is no evidence of any connection between Family Link and New Directions.

Ms Redford said in her affidavit that during her employment Ms Crowe worked directly under the supervision of Mr Quarmby.

Secondly, Ms Kim Halhead signed a letter of employment on 8 June 2018.

According to Ms Redford, Ms Halhead was employed in the position of "Support Co-ordinator" and "worked closely with Mr Quarmby ".

Ms Halhead ceased to be an employee of LiveBetter on 28 September 2019. According to Ms Redford, Ms Halhead has established her own business called "Supports 2-U", and, that since that time, "a number of clients have transferred from LiveBetter's in-house Support Co-ordinator to Supports 2-U".

Ms Redford asserted in par 47 of her affidavit that in August 2019 Mr Quarmby made arrangements for a house to be upgraded in order to accommodate the provision of disability services, and that the house in question appeared to be owned by Ms Crowe. Ms Redford did not identify the source of this information. She referred to an email from a certain person dated 23 August 2009 to Mr Quarmby's LiveBetter email address that suggested that Mr Quarmby "have a look at the Crowe's house and that block next door at Cootamundra Bvde".

At par 49 of her affidavit, Ms Redford asserted that, in September 2019, Mr Quarmby engaged the services of an architects firm in relation to a proposed residence.

The evidence includes a letter from a firm of architects dated 23 September 2019 addressed to Mr Quarmby at LiveBetter for the provision of services in respect of a "proposed new residence" at a particular address in Wagga Wagga. The letter refers to proposed new requirements of the NDIA. An email from Mr Quarmby to the architect noted that "the property is already at 70% completion phase…"

In an email dated 25 September 2019 sent from Mr Quarmby's LiveBetter email account, in which he discussed with the architect the proposed fee, Mr Quarmby stated that he would "have another 2 for you as well coming up over the next 6 months if interested".

On 9 October 2019, a third party sent to Mr Quarmby at his LiveBetter email address a proposal for a house in Gabbagombalin. Mr Quarmby replied on 10 October 2019:

The terms of this email are significant, in that they suggest that Mr Quarmby was being assisted by a number of other persons who knew the proposed clients and were aware of their needs.

Ms Redford said in par 51 of her affidavit that, in November 2019, Mr Quarmby "appears to have openly recruited employees for New Direction from LiveBetter's workforce". She relied upon an email exchange between Mr Quarmby and Ms Narelle Longfellow. Ms Longfellow referred to learning that Mr Quarmby was leaving LiveBetter and said: "I would definitely be interested if there is a position working with and alongside yourself". Mr Quarmby replied using his LiveBetter email: "Awe thanks Narelle! Likewise with you. Hahaha, I am working on my future plans, so come and have a chat to me".

On 6 December 2019, Ms Crowe sent an email from her LiveBetter account to Ms Kasey Pengilley, to Ms Halhead at her Supports-2U email address, and to Mr Quarmby at his LiveBetter email address, which included the statement:

According to par 31 of Ms Redford's affidavit, the address stated in the email is a property maintained by LiveBetter that currently has two residents, being Ms Burgess and Ms French.

Ms Pengilley and Ms Halhead accepted the invitation by email on the same date. There does not appear to be evidence that Mr Quarmby accepted the invitation.

On 1 December 2019, Ms Alicia Clancy, who is apparently an employee of LiveBetter, sent an email from her LiveBetter email account to Mr Quarmby at his LiveBetter email account, which included:

On 4 December 2019, Ms Crowe sent an email from her LiveBetter email account to Mr Quarmby at his LiveBetter email account which attached a plan from the architect containing comments about the layout of the house referred to in the earlier proposal made by the architect.

A title search appears to show that the property is owned by Ms Crowe and a person who is probably her husband.

On 18 December 2019, Ms Halhead sent an email to Mr Quarmby and Ms Crowe concerning Ann Munro. The email stated:

The attachments to this email in relation to Ms Munro include an NDIS Change of circumstances form which contains the following information concerning the nature of the proposed change:

Ms Redford gave evidence of receiving a series of notices of withdrawal of services in December 2019.

The first notices were received on 19 December 2019 from Ms Halhead on behalf of Supports 2U. Although the first notices were received by LiveBetter on 18 December 2019 they were dated 20 December 2019. Ms Halhead stated in her covering email that she had attached three withdrawal of service letters to give LiveBetter notice of the cancellation of the Supported Independent Living currently being provided by LiveBetter for Ms Munro, Ms Brown and Ms Lucena who were then currently residing at a particular LiveBetter residence in Wagga Wagga.

It is significant that the termination notices were signed by the guardians of the residents. Eight weeks' notice terminating on 14 February 2020 was given. No indication was included concerning the new residence of the clients.

Ms Redford received a second group of three withdrawal of services letters sent by Ms Halhead on 20 December 2019. The letters related to Ms Hocking, Ms Michael and Ms Parker who resided in one property maintained by LiveBetter in Wagga Wagga and Ms French and Ms Burgess who resided in another property. The notices provide for termination on either 9 or 14 February 2020, and do not state who will replace LiveBetter.

Some of these notices were signed by the clients and others were signed by the clients' guardians.

In par 32 of her affidavit, Ms Redford gave the following evidence concerning the consequence of these events:

In pars 33 to 38 of her affidavit, Ms Redford gave evidence of conversations that she had on 23 and 24 December 2019 with the guardians of Ms Michael, Ms Lucena, Ms Munro, Ms Brown, Ms Parker and Ms Hocking. I will set out the most material parts of the responses of the guardians deposed to by Ms Redford. In each case Ms Redford asked the reason why the services of LiveBetter were being terminated:

Ms Redford gave evidence in par 56 of her affidavit concerning Mr Quarmby's access to LiveBetter's confidential information, that it included but was not limited to:

Finally, Ms Redford gave the following evidence concerning the ongoing damage that LiveBetter claims it will suffer as a result of the defendants' conduct:

LiveBetter tendered its solicitor’s letter of demand to Mr Quarmby dated 24 December 2019 and correspondence between the parties’ solicitors in the period up to 27 December 2019. On 27 December 2019 the defendants offered an undertaking to LiveBetter on certain terms,, including that they would not until 24 January 2020 provide any disability services to any persons known to be a client of LiveBetter in the period 27 May 2019 to 13 December 2019, including in respect of the eight clients listed in order 5a made by Davies J. The stated purpose of the undertaking was to enable the parties to attempt to resolve LiveBetter’s claim, and if the dispute was not resolved LiveBetter would be free to seek relief after 24 January 2020. The defendants’ offer was rejected, and no further undertaking was offered by the defendants at the recent hearing.

I take the principles governing the nature and the strength of the case that LiveBetter must demonstrate in order to be entitled to interlocutory relief to be as stated by Gummow and Hayne JJ in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46, as follows (citations omitted):

The defendants put that LiveBetter had not established “that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief” as set out in the extract quoted by Gummow and Hayne JJ at [65], because at the interlocutory hearing LiveBetter had relied upon hearsay evidence that would not be admissible at the final hearing. I understand that the defendants were referring in particular to the evidence given by Ms Redford of the discussions that she had with the guardians of the clients after the termination of service notices were received, which has been summarised above.

I do not accept the defendants’ submission. If the requirements of s 75 of the Evidence Act 1995 (NSW) are satisfied, hearsay evidence may be led in support of an interlocutory application, and indeed interlocutory relief may be granted when all of the evidence is hearsay. It does not follow from the fact that some of the evidence is hearsay that the question of whether there is a probability that at the trial of the action the plaintiff will be entitled to the relief sought on an interlocutory basis must be decided by ignoring the hearsay evidence. In my view, a proper understanding of the requirement is that there must be a probability that at the trial the plaintiff will succeed in obtaining final relief by being able to prove the facts that have been established on an interlocutory basis, with the less strict rules of evidence that must be satisfied.

I am satisfied that, on the basis of the interlocutory evidence now before the Court, the following interlocutory findings are justified.

Mr Quarmby and his wife caused New Directions to be incorporated for the purpose of establishing a competing business with LiveBetter, and commenced the process of establishing the resources necessary to enable New Directions to carry on that business during the course of Mr Quarmby's employment by LiveBetter.

At least some of the conduct engaged in by Mr Quarmby in establishing New Directions' business used LiveBetter's email account and was undertaken during the normal hours of business in which Mr Quarmby was obliged by his contract of employment to devote himself to LiveBetter's business. The following is a list of the emails sent by Mr Quarmby, and the page references are to the annexure to Ms Redford's affidavit: 26 August 2019 at 10:35 AM (page 73), 23 August 2019 at 2:14 PM (page 74), 23 September 2019 at 3:28 PM (page 85), 23 September 2019 at 3:19 PM (page 86), 27 September 2019 at 10:13 AM (page 98A), 25 September 2019 at 4:42 PM (page 98B), 23 September 2019 at 3:19 PM (page 98C), 10 October 2019 at 11:26 AM (page 99A), and 27 November 2019 at 5:30 PM (page 101).

Mr Quarmby utilised the services of Ms Crowe while she was an employee of LiveBetter in taking various steps for the establishment of New Directions' competing business, including in relation to the preparation of a property owned by Ms Crowe and her husband and in inducing a number of the eight clients who have terminated their Supported Independent Living arrangements with LiveBetter to do so.

The role of Ms Halhead, who ceased to be employed by LiveBetter on 28 September 2019, is less clear. Ms Halhead appears to have participated in a meeting with clients and their guardians on 13 December 2019, and was involved in procuring the termination notices and sending them to LiveBetter.

Whether Mr Quarmby approached the eight clients or their guardians directly, or through Ms Crowe or Ms Halhead, the contact could only have been made by the use of names and contact details, particularly in respect of the guardians, which I am prepared to infer was confidential information of LiveBetter.

It is not clear whether Mr Quarmby attended a meeting with LiveBetter's clients and their guardians on 13 December 2019, and if he did, whether the meeting took place before or after Mr Quarmby's resignation from his employment on that date took effect. The evidence concerning the dates and times of contacts made by Mr Quarmby, or Ms Crowe or Ms Halhead on his behalf, with clients and their guardians is unclear, but it can be inferred positively that meetings took place during which the clients or their guardians were persuaded to terminate their Supported Independent Living agreements with LiveBetter.

Although there is little evidence concerning the residential facilities established by New Directions to house the eight clients of LiveBetter, the NDIS forms in relation to Ms Munro state that Ms Munro will move to premises provided by New Directions. It is probable that those premises will be able to houses a number of clients. While it has not been established whether New Directions will be able to houses all eight clients of LiveBetter, it is probable that New Directions has the necessary facilities, as it is unlikely that Mr Quarmby would have procured all eight clients to terminate their arrangements with LiveBetter if New Directions was not able to provide alternative accommodation for those clients.

I consider that the evidence is sufficient at this stage of the proceedings to establish that Mr Quarmby, during the course of his employment by LiveBetter, in devoting some of his time to setting up the competing business of New Directions, in causing some of LiveBetter’s other employees to assist him in acting in his interests and contrary to LiveBetter’s interests, in utilising LiveBetter’s confidential information in relation to contacts with clients and their guardians, and I would infer the special and particular needs of each of the clients, and in acting to persuade the clients or their guardians to terminate the services provided by LiveBetter, in order to enable New Directions to provide equivalent services after the termination of Mr Quarmby’s employment, constituted a breach by Mr Quarmby of his duty of good faith or fidelity to LiveBetter that arose out of the express and implied terms of his employment: see Robb v Green [1895] 2 QB 315; Scruples Imports Pty Ltd v Crabtree & Evelyn Pty Ltd (1983) 1 IPR 315 at 328; X v Commonwealth of Australia (1999) 200 CLR 177; [1999] HCA 63 at [31]; and Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 165 IR 148 at [32], [76]-[77]. As Mr Quarmby was a director of New Directions, and appears from the evidence to have been at least one of the guiding minds of New Directions, a finding is justified that from the time of its incorporation New Directions was a knowing party to Mr Quarmby’s breaches of duty.

The same result follows based upon the application of the second paragraph of clause 13 of Mr Quarmby’s employment contract in relation to his conduct during the course of his employment, as Mr Quarmby was prohibited from inducing, soliciting, canvassing or approaching any customers of LiveBetter on behalf of any other business.

The position is somewhat less clear in relation to any conduct of Mr Quarmby after he ceased employment by LiveBetter, in so far as he continued his conduct in inducing etc LiveBetter’s clients and their guardians to switch their service provider from LiveBetter to New Directions. As the restraint contained in clause 13 of the contract of employment has no time or territorial limitation, it is almost certain that the restraint will be found at a final hearing to be contrary to public policy, as being not reasonable in the interests of the public and not reasonably necessary for the protection of the parties and hence void: Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343; [2018] NSWCA 163 (“Dargan”) at [59]. In circumstances such as the present, it could hardly be reasonable to impose an unconfined restraint on Mr Quarmby both as to territory and as to time.

Nonetheless, it may be that the restraint concerning the particular apparent breaches established by the evidence on an interlocutory basis, will be preserved by the operation of s 4 of the Restraints of Trade Act 1976 (NSW): see Dargan at [60]-[62]. At least the eight clients who have been identified were clients at the time of the termination of Mr Quarmby’s employment, and the breach of clause 13 was confined to Wagga Wagga or its environs, and occurred in the period immediately after the termination.

The difficulty with this aspect of LiveBetter’s claim is that it did not make any real attempt to prove the nature of the client connection that Mr Quarmby was able to establish with clients and their guardians, given Mr Quarmby’s elevated management role. Further, there was no attempt to establish a time limit to a period which would justify maintaining the restraint of Mr Quarmby’s soliciting LiveBetter’s clients or their guardians by reference to the time necessary for LiveBetter’s other employees to establish a new client connection.

A significant consequence of this lacuna in the evidence is that it would be difficult for the Court to justify issuing an interlocutory injunction against the defendants that restrained them from soliciting LiveBetter’s clients and their guardians for a specified period into the future.

However, a restraint that is based upon the solicitation of clients and their guardians that has taken place during the period of Mr Quarmby’s employment, and which extends to solicitation after the termination of the employment that requires the use of LiveBetter’s confidential information concerning client and guardian contact details (and other matters such as the care needs of the clients) is another matter. In principle, LiveBetter has established a prima facie case or serious question to be tried that would justify the imposition of a restraint on the defendants in continuing such solicitation or in availing themselves of the benefits of such solicitation as has already occurred.

In this regard, I do not find that the evidence has established that the defendants have misused, or are likely to misuse, all of the categories of information that fall within the definition of “Confidential Information” as set out in the Deed of Confidentiality and recorded in order 5b made by Davies J. It is likely that some of the categories are descriptions of information that the law would not necessarily recognise as being confidential. It is not necessary to explore that issue further in these reasons. It is sufficient to record that, at this stage, LiveBetter has only established to the interlocutory standard the misuse of confidential information concerning the contact details for the clients and their guardians and matters connected with the care plans for the clients sufficient to enable the defendants to provide alternative accommodation and other services to those clients.

The defendants submitted that, even if the Court found that LiveBetter had established a prima facie case or serious question to be tried in respect of the making of an interlocutory restraint, such an order should not be made because the balance of convenience favoured that outcome.

One reason given by the defendants in support of that submission was their argument that, in the present case, damages will be an adequate remedy for LiveBetter.

The present case is unusual as the plaintiff is a not-for-profit disability service provider. That suggests that, on an overall basis, LiveBetter’s business operations are not directed towards making a profit. It does not follow that LiveBetter will not attempt to make a profit on some of its operations in order to enable it to subsidise the conduct of other operations. LiveBetter has not given evidence that the defendants’ conduct will cause it to lose any profit that it would otherwise have earned in relation to the provision of services to LiveBetter’s clients as a result of the termination by those clients of the service agreements following from the defendants’ conduct

Enterprises of the nature of LiveBetter perform an important public role and they are capable of suffering loss notwithstanding the fact that their commercial objective is not to make a profit. The viable operation of LiveBetter’s business depends on revenue exceeding expenditure, even if its objective is not to achieve a result where the former exceeds the latter. A not-for-profit business will suffer loss if its expenses exceed its revenue. The viability of the business may be jeopardised where that result occurs.

As LiveBetter’s commercial objective is not-for-profit, and therefore in a sense charitable, it should not matter to LiveBetter in principle as to which enterprise provides the necessary services to disadvantaged or disabled clients, provided those services are delivered to an appropriate standard. If LiveBetter loses revenue as a result of the loss of agreements with its clients to a competitor, that should not matter to LiveBetter provided that it can make, in a timely way, an adjustment to its expenses to accommodate the reduction in revenue. However, for all businesses, including not-for-profit ones, some expenses are fixed and not all other expenses are readily variable to accommodate reductions in revenue in a timely manner.

These rudimentary observations on the nature of losses that may be suffered by not-for-profit enterprises are not comprehensive and may not exhaust the considerations that may be relevant to the determination of any loss that LiveBetter may suffer. They are offered in order to indicate the sort of considerations that may be required to be addressed in order to establish the likelihood that a not-for-profit enterprise will suffer loss and the magnitude of that loss.

Unfortunately, the evidence presented by LiveBetter in this case to establish the likely measure of the damage it will suffer if the defendants’ conduct is not restrained is both general and diffuse, even accepting the urgency with which the interlocutory application has been brought on for hearing. The whole of that evidence has been set out in pars 57 and 60 above.

The evidence at this stage establishes that LiveBetter operates three group houses for disabled people in Wagga Wagga and its environs. While the evidence is not precise, I infer that all of the clients who have been accommodated at the three houses have now given notice of termination of their agreements with LiveBetter.

LiveBetter did not provide evidence as to whether there were any other houses under its control or any other clients who were at risk of being solicited wrongfully by the defendants.

The evidence does not establish whether LiveBetter owns or rents some or all of the three houses. I would infer that the houses have been reconfigured to make them suitable for the needs of disabled people, and they could not readily or immediately be let to ordinary persons or families, at least without some significant expenditure.

Ms Redford asserted that LiveBetter would lose revenue estimated at more than $3M from the loss of the eight clients, and that continuing breaches by the defendants will lead to an estimated loss of revenue of $3M to $4M per annum. Ms Redford did not support these figures with any explanation or any evidence concerning the terms of LiveBetter’s arrangements with the clients or the NDIS in respect of these clients.

Ms Redford did not explain, even in general terms, what steps LiveBetter would be forced to take to attempt to obtain alternative revenue or to reduce its expenses to match the loss in revenue. Lost revenue by itself is not a useful measure of ultimate loss.

I accept that, as a matter of principle, the ability of LiveBetter to justify employing care, management and administrative employees will in broad terms be proportional to the revenue earned, which in turn is likely to be proportional to the number and circumstances of the clients with whom LiveBetter has agreements to provide services. The evidence provided by LiveBetter, thus far, does not afford real confidence in the Court as to the true amount of disruption that will be caused to LiveBetter’s workforce as a result of the continuation of the defendants’ conduct.

It is therefore not possible on the present state of the evidence to make any estimate of the magnitude of the loss that LiveBetter may suffer as a result of the conduct of the defendants that appears to have involved a relatively flagrant breach by Mr Quarmby of his duty of fidelity to LiveBetter, the breach of his contractual obligation not to solicit LiveBetter’s clients during the period of his employment, and the misuse of LiveBetter’s confidential information in order to contact the clients or their guardians for the purpose of solicitation and for the purpose of understanding the needs and service requirements of the clients. The evidence given by Ms Redford concerning the revenue that was likely to be lost was admitted without objection. It is a starting point for the assessment of the loss, although the position that will be reached if LiveBetter properly implements its obligation to mitigate its loss cannot be forecast. The magnitude of the likely loss of revenue suggests that mitigation will require LiveBetter to reduce its workforce, so there is a real likelihood that current employees will lose their jobs. No more can be done than to accept that LiveBetter’s loss and the loss of employment by some of its employees will probably be substantial.

The defendants submitted that even in this case it will be an adequate remedy for LiveBetter that it will be entitled to an award of damages if it succeeds at the final hearing. That will not comfort the employees of LiveBetter who will probably lose their jobs as a result of the loss of revenue. As the magnitude of the damages cannot be estimated reliably, it cannot be known whether the defendants will have the resources to meet any order for damages against them. There was no evidence on this issue but, as New Directions is a newly established company with no paid-up capital, and as Mr Quarmby has not provided any evidence that he has the financial capacity to meet a substantial award of damages, it is unlikely that damages would be an adequate remedy in this case.

In any event, I do not accept that, as a matter of principle, it is sufficiently clear that damages will be an adequate remedy to cause the Court to find that the balance of convenience favours a refusal to grant interlocutory relief to LiveBetter. That is because of the inherent forensic difficulty in proving on the balance of probabilities all of the financial consequences of the defendants’ breaches and what the result would be of reasonable steps in mitigation taken by LiveBetter.

I would therefore grant interlocutory relief to LiveBetter substantially on the terms set out in par 79 above, subject to the considerations that I will now raise.

As the learned editors of Meagher, Gummow & Lehane’s Equity Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) observe at [21–380], citing the decision of the Privy Council in National Commercial Bank Jamaica Ltd v Olint Corp Pty Ltd [2009] 1 WLR 1405 at [16]:

It is unusual for the Court to decide that the interests of third parties may be determinative of whether or not the balance of convenience favours the granting of an interlocutory injunction that would otherwise be granted, but this in my view is such a case.

The third-party interests that give rise to the concern are the interests of LiveBetter’s disabled clients.

Were this a case where the competing services offered by the parties were offered to capable clients who were able to make their own commercial choices from amongst competing offers without any disadvantage, the Court would ordinarily decide the issue of the balance of convenience having regard to the strength of the plaintiff’s claim against the defendant, the nature and consequences of the alleged breach, and issues of hardship as between the parties alone. It would ordinarily be of little concern that the grant of the injunction may oblige the customers to continue to deal with the plaintiff and the refusal of the injunction may in practical terms oblige the customers to deal with the defendant.

However, in the present case the Court has become aware that LiveBetter’s clients, and in particular the eight clients who have been identified, suffer from disabilities which in most cases have the consequence that guardians are required to act on their behalves. There is no evidence concerning the nature or seriousness of the disabilities suffered by any of the clients. There is no evidence about the nature of the services provided by LiveBetter other than accommodation in what appears to be group residences. There is no evidence concerning the importance to the clients of the continuation of the personal relationship between the clients and any employees of LiveBetter who may provide care to the clients. There is not even evidence that specifically establishes that LiveBetter’s remaining employees are able adequately to replace any services provided to clients by any employees of LiveBetter whose employment has now ceased or been suspended. Consequently, the Court is not in a position to know whether, if the interlocutory injunction sought by LiveBetter is granted, LiveBetter will be able seamlessly to continue to provide the services provided to the disabled clients hitherto at the existing properties operated by LiveBetter. As in the eight known cases, notice of termination was given to LiveBetter in mid-December 2019, the clients will have been expecting for the better part of a month that, at dates in February of this year, their accommodation would change from their existing residences to properties operated by New Directions. Experience gained from the exercise of the Court’s various protective jurisdictions shows that there can be considerable psychological risks to emotionally disadvantaged persons that arise from changes in living circumstances and disappointment of expectations. The evidence does not put the Court in a proper position to judge what the consequences of either granting or not granting the interlocutory injunction will be for the clients.

In these circumstances, I will not grant the interlocutory injunction sought by LiveBetter that I would otherwise have granted, at this stage. I will give the parties an opportunity to address this question and to provide any additional evidence that may be relevant to its resolution. The parties should consider the possibility that I may need to be persuaded that I should not require the clients, or their guardians, to be given an opportunity to express their properly informed preferences concerning the appropriate future arrangements for the accommodation of the clients and the provision of any associated services.

I have formulated the interlocutory order that I would otherwise have made in par 79 in somewhat broad terms. As I have mentioned, I have found the evidence to be less than comprehensive at the interlocutory level, and this has impeded my ability to formulate an appropriate interlocutory order with precision.

I will publish these reasons for judgment, and invite the parties to respond in accordance with par 103, and to make submissions as to the terms of the interlocutory order that should be made, if the Court is persuaded to make such an order.

I am inclined to think that the proper order for costs is that the costs of the interlocutory application should be the parties’ costs in the cause, although I will hear the parties on the issue of costs.