Verint Systems (Australia) Pty Ltd v Sutherland

The plaintiff, Verint Systems (Australia) Pty Ltd (“Verint”), sells and supports its proprietary software products for customer engagement management, and business intelligence. Verint’s software products are mainly used by large corporations to manage call centres, call recording, work force management, speech analytics and automation. The software also allows companies to manage their contacts with customers, and manage their workforce to better serve their customers’ needs.

Verint employed the defendant, Mr Levi Sutherland, between December 2010 and June 2019. Mr Sutherland’s employment agreement with Verint was executed on 7 December 2010 (“the employment agreement”). It contained a restraint against misuse of Verint’s confidential information, a non-solicitation restraint and a 12 month non-compete clause.

Mr Sutherland chiefly served in the role of a channel manager for Verint. Channel managers promote sales directly to end user customers of Verint and indirectly through other associated entitles known as “channel partners”.

On 22 May 2019, Mr Sutherland resigned from his employment with Verint. He gave the 30 days’ notice required under the employment agreement. That same day he informed Verint’s Vice President of Australia and New Zealand, Mr Andrew Stelzer, that he was leaving Verint to take up employment with NICE Systems Australia Pty Ltd (“NSA”).

NSA is the Australian subsidiary of a multi-national group that trades under the “NICE” brand. NSA offers products and services in Australia that substantially fulfil the same functions to those of Verint. Neither party disputes in these proceedings that NSA and Verint compete in the same market in Australia.

As soon as Mr Sutherland gave notice, Verint placed him on “garden leave”, from 22 May 2019. Mr Sutherland’s employment with Verint ended on 21 June 2019, with the expiry of the notice period.

Mr Sutherland proposed to commence employment with NSA on 1 July 2019. Verint commenced these proceedings in the Equity Duty List on 26 June 2019 seeking orders restraining Mr Sutherland from starting that new employment. But by the time this matter came into the Duty List, Mr Sutherland had given undertakings to the Court not to commence employment with NSA before 8 July 2019.

The proceedings were heard in the Duty List on 4 and 5 July. Verint contended that if Mr Sutherland were to commence employment with NSA that breaches of the confidentiality restraint, the non-solicitation restraint, and the 12 month non-compete clause in the employment agreement were likely and that, on the balance of convenience, an interim restraint was warranted until the Court could arrange a final hearing. In response, after offering undertakings to the Court in terms of the confidentiality and non-solicitation clauses, Mr Sutherland argued that the 12 month non-compete clause should not be enforced against him on an interlocutory basis.

Without prejudice to its right to contend for enforcement of the full 12 months of the non-compete restraint, Verint made an open offer that it would not argue on an interlocutory basis to enforce the non-compete restraint beyond a period of three months after Mr Sutherland left Verint’s employ, namely 22 September 2019. Mr Sutherland sought to start with NSA on 8 July. The difference between these two dates for non-compete enforcement was the only issue in contest at this interlocutory hearing.

The Court made orders on 15 July enforcing the non-compete restraint on an interim basis, but only up to and including 4 August and on terms that Mr Sutherland give undertakings in terms of the confidentiality and non-solicitation restraints. The Court referred the matter into the Expedition List for an early final hearing. The Court said it would provide its reasons for this decision later. These are the Court’s reasons.

At this interlocutory hearing Ms V. Bulut of counsel, instructed by Hall & Wilcox Lawyers, appeared for the plaintiff. Mr B. Ilkovski of counsel, instructed by Tom Howard Legal, appeared for the defendant.

The Court has power to grant interlocutory injunctions under Supreme Court Act 1970, s 66(4), on terms if necessary, in any case where “it appears to the Court to be just or convenient”. The Court must consider whether the plaintiff’s case presents a serious question to be tried and whether the balance of convenience, hardship and related factors warrant the grant of an interlocutory injunction. The applicable principles in relation to the grant of interlocutory relief are discussed in more detail later in these reasons.

This is an interlocutory hearing, not a final hearing. The Court has sought to expedite the fixing of an early final hearing by referring it to the Expedition List. In the meantime, the Court’s task is not to undertake a preliminary trial and to give or withhold interlocutory relief upon some forecast as to the ultimate result of the factual dispute between the parties, although the relative strengths of the parties’ cases are not irrelevant to the exercise of the Court’s discretion.

The Court’s task on an interlocutory hearing such as this one was well expressed by the English Court of Appeal in Francome v Mirror Group Newspapers Ltd [1984] 1 WLR 892 (at 894H – 895A); [1984] 2 All ER 408; (1984) 81 LSG 2225; (1984) 128 SJ 484 when Sir John Donaldson MR said:

Later in the same judgment, his Lordship further explained the Court’s duty in following terms (at 898E-898G):

In the discussion below, these reasons narrate some of the fundamental facts relevant to the interlocutory issues. In a quick interlocutory hearing such as this, the Court’s reasons cannot encompass all the relevant facts and do not attempt to do so. Except where the facts are uncontentious, the Court’s narrative of any facts should only be understood, and is mostly expressed, as a forecast of the kind of evidence that each party proposes to adduce at a final hearing. But the terms of the employment agreement are uncontentious and are set out first.

The only parts of the employment agreement of present relevance relate to the post-employment restraints imposed on Mr Sutherland. Clause 13 of the employment agreement provides:

Schedule 1, clause 1 of the employment agreement provides for restraints against the misuse of Varint’s confidential information by Mr Sutherland. Confidential information is defined in clause 1.1 in broadly conventional terms. In Schedule 1, clause 1.2 Mr Sutherland acknowledges that the disclosure of Varint’s confidential information could materially harm Verint (clause 1.2) and he agrees not to divulge Varint’s confidential information (clause 1.3).

Schedule 1 of the employment agreement also provides for a non-competition restraint in the following terms:

Schedule 1 of the employment agreement provides for a non-solicitation restraint during employment in clause 3.1, and for non-solicitation restraint following the termination of the employment agreement in clause 3.2, as follows:

Mr Sutherland acknowledged in Schedule 1, clause 4.2 that the broadest scope of certain restraints are “necessary and reasonable” and a breach of them will result in “irreparable harm” to Verint and that Verint may seek to enforce its restraints by injunction. But the employment agreement is poorly drafted and it is not entirely clear to which restraints clause 4.2 refers.

Following Mr Sutherland’s resignation, he quickly acknowledged he would comply with his confidentiality and non-solicitation obligations to Verint. On 23 May 2019, the Associate General Counsel of Verint wrote to Mr Sutherland in the following terms:

The obligations being referred to in (c) of Verint’s letter were the confidentiality obligation and the non-solicitation restraint in the employment agreement. Verint reserved its rights.

Mr Sutherland replied on 28 May 2019, confirming the detail of (a) and (b) as requested. In relation to (c), Mr Sutherland stated in reply:

In his principal affidavit in this hearing, Mr Sutherland went further. He indicated his willingness to comply with the full effect of the non-solicitation restraints in the employment agreement. He said:

Issues about the precise form in which these restraints will be given resolved in correspondence between the parties before and during the interlocutory hearing. Various undertakings were given inter partes. By the time the Court made interlocutory orders, the Court indicated it would only do so on terms that included the confidentiality and non-solicitation undertakings that Mr Sutherland had offered that he was prepared to give in conformity with the terms of the employment agreement.

The Court recorded those undertakings in summary form when making interlocutory orders on 15 July 2019, and in full form on 18 July 2019. On that date the court received undertakings from Mr Sutherland, by his counsel as follows:

Thus, from an early stage in this interlocutory contest the only issue for determination was the length of the non-compete restraint. Facts relevant to that issue are outlined in the discussion below about. But first, it is appropriate to discuss the principles applicable to this application.

In deciding whether or not to grant an interlocutory injunction, the Court must consider whether there is a serious question to be tried and then whether the balance of convenience, questions of hardship and related factors warrant the grant of an interlocutory injunction. First, the plaintiff must prove a serious, not a speculative, case which has a real possibility of ultimate success and that property or other interests might be jeopardised if no interlocutory relief is granted: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths), (at [21–350]), (“Equity Doctrines and Remedies”), discussing the requirements of the Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 prima facie case test. Put another way, the plaintiff must show a sufficient likelihood of success to justify the preservation of the status quo pending the trial: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; (2006) 229 ALR 457; [2006] HCA 46, (at [70] – [71]) (“O’Neill”).

Then, it becomes a matter of analysing if, in all the circumstances of the case, considering the balance of convenience and issues of hardship, the Court should nonetheless exercise its discretion by declining to issue an interlocutory injunction: Equity Doctrines and Remedies, (at [21–350]); and see also Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; (2001) 185 ALR 1; [2001] HCA 63 and Beese v Woodhouse [1970] 1 All ER 769; [1970] 1 WLR 586. Other factors to which the Court will have regard include: the adequacy of damages; the possibilities of alternative remedies; whether there has been any laches or delay; the strength of the grounds of defence suggested by the defendant; and what, if any, undertakings the defendant is prepared to give. But hardship and the balance of convenience are very important: Equity Doctrines and Remedies [21 – 375]. If any infringement of a plaintiff’s right between writ and hearing would be properly compensated in damages, that fact alone can, but not must, be a ground for declining an injunction: McCarty v North Sydney Municipal Council (1918) 18 SR (NSW) 210; (1918) 35 WN (NSW) 85.

Here, given the practicalities of preparing for and holding a final hearing in this case probably in some six weeks to two months’ time, the interlocutory restraint that the plaintiff seeks to have continued will, if granted, have the practical effect of giving something close to final relief against Mr Sutherland in the form of a restraint for several more months of a possible total of three months, which seems to be the maximum practical restraint for which the plaintiff now contends. At least on a without admissions basis, that is the restraint that the plaintiff says it is willing to accept at this interlocutory hearing. On the other hand, if the restraint sought is refused, that refusal will have the practical effect of giving something close to final relief in favour of Mr Sutherland. For that reason, the present decision is a most important one for the parties.

This interlocutory dilemma raises special considerations that are not uncommon in cases involving interlocutory enforcement of post-employment interlocutory restraints. I dealt with the same dilemma in SAI Global Property Division Pty Ltd (ACN 089 586 872) v Jones & Ors [2018] NSWSC 438.

How the Court should proceed in such a situation is the subject of authority. In Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, at p 535 – 536; (1987) 11 ACLR 630 (“Kolback”), McLelland J (as His Honour then was), when considering what must be established to obtain an interlocutory injunction, including when the restraint in question may have implications for the disposition of the proceedings at final hearing, said:

And on the same subject in O’Neill, the High Court (per Gummow and Hayne JJ, at [71]) said that consideration of “the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory sought”. In cases of the present type, the consequences flowing from the grant or refusal of the interim injunction can dispose of the action at a practical level: the employer either loses the enforceability of bargained for restraints or the employee likely loses a new employment opportunity.

These principles give guidance as to what course should be followed at this interlocutory hearing. But in order to apply these principles at this interlocutory stage, it is also necessary briefly to examine what principles will relevantly govern the Court’s determination of the case between these parties at final hearing.

Once this interlocutory decision is made, it will ordinarily not be able to be varied unless circumstances change: Collier v Howard (unreported, McLelland CJ in Eq., NSWSC, 23 April 1996), at p 6:

The relevant law may be shortly stated. The validity of the 12-month post-employment restraints based on the employment agreement will be in issue and will be determined at any final hearing. A contractual restraint, such as that in issue here, will be operative subject to the operation of the common law and the Restraints of Trade Act 1976, s 4. In this State, general law doctrines of the avoidance of restraints of trade on grounds of public policy are modified by the Restraints of Trade Act, s 4, which relevantly provides as follows:

I am indebted to McDougall J’s useful summary of the relevant principles that arise both at general law and under the Restraints of Trade Act as set out by his Honour in Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77, (at [44]). There his Honour stated as follows:

Similar statements, to which I have had regard, are set out in Isaac v Dargan Financial Pty Ltd ATF The Dargan Financial Discretionary Trust (ABN 68 702 047 521) (trading under the name of Home Loan Experts) [2018] NSWCA 163 (“Dargan”), Gleeson JA (with whom Bathurst CJ and Beazley P agreed) concerning the general principles governing enforcement of restraint of trade provisions, especially at [59] to [68].

Paragraphs [67] and [68] of the reasons in Dargan emphasise the logic justifying the difference in the common law’s approach to enforcement of non-competition covenants between employer and employee and those in commercial agreements:

In this case, there is both a non-solicitation covenant and a covenant not to compete. McDougall’s J reasons in Stacks Taree v Marshall (No. 2) [2010] NSWSC 77, (at [63]-[65]), are particularly relevant when the Court faces such situations:

The courts have recognised that an employer has a legitimate interest in maintaining a stable and trained workforce, but an employer has no legitimate interest in preventing a former employee from taking employment with a competitor: AT Kearney Australia Pty Ltd v Crepaldi & Ors [2006] NSWSC 23, (at [55] – [58]) and Buckley v Tutty (1971) 125 CLR 353; [1972] ALR 370; [1971] HCA 71. And a non-compete restraint would not be enforceable if it were to seek to prevent a former employee dealing with customers with whom the employee had no personal contact, on the ground that there has been no capacity for personal influence: John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995.

Maintaining the confidentiality of the employer’s information is a legitimate interest of the employer that is protectable by a non-compete covenant. A restraint of trade that seeks to protect confidential information is different from a contractual or equitable obligation of confidence: Miles v Genesys Wealth Advisers Limited (2009) 201 IR 1, (at [22]-[27]); [2009] NSWCA 25 (“Miles”). That the employee also has a contractual or equitable obligation of confidence does not deprive the validity of a restraint of trade that seeks to protect confidential information: see Miles, (at [22]-[27]) citing Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472; [1978] 1 All ER 1026.

Customer connection is another legitimate interest of the employer that is protectable by a non-compete covenant. Thus, use by the employee of the customer connection which the employee has built up during the employment can be the subject of a valid restrictive covenant, especially where the employee has in effect represented the employer from the customer’s perspective during the employment: Koops Martin v Reeves [2006] NSWSC 449 (“Koops”), (at [30]), per Brereton J. That is, where the employee has become the “human face” of the employer’s business: Koops, (at [34]), per Brereton J. And a more robust view is taken where the employee’s role includes obtaining and extending custom for the employer’s business: Koops Martin, (at [44]), per Brereton J. When an employee’s duty includes to build up the employer’s clientele as well as to deal with existing clients, a wide restraint is more likely to be upheld, because in such circumstances the employer is entitled to protection against the employee: Koops, (at [44]), per Brereton J. In such a case, the establishment of a customer connection is not merely incidental to the employment, but its purpose, for which the employee was directly remunerated: Koops, (at [44]), per Brereton J.

Mr Sutherland submitted that the plaintiff’s non-compete restraint was unreasonable and would be struck out at trial. Verint claimed that the restraint would be upheld.

These reasons deal first with whether there is a serious question to be tried and then the balance of convenience.

Verint can satisfy the requirement that there is a serious question to be tried. At trial, Verint will be in a position to advance a prima facie case that the non-compete restraint clause is valid and enforceable to protect the legitimate interests of Verint, namely Verint’s interests in its confidential information and in its customer connections through Mr Sutherland.

Verint can lead evidence at trial that Mr Sutherland was aware of:

There is no real issue that this was Verint’s confidential information. The evidence available to Verint at trial will be that, not only did Mr Sutherland have access to the above confidential information, but also that he accessed that information twice in the four-week period prior to his resignation, namely on 28 April and 13 May 2019 at a time when he was committed to commencing with NSA.

The above information is confidential to Verint. In the circumstances, Verint will be able to argue that it has a legitimate interest in the protection of such confidential information to which Mr Sutherland had recent access to support the validity of the non-compete restraint. The validity of the non-solicitation restraint is not in issue: Mr Sutherland has given an undertaking to that effect.

Verint will also be in a position to adduce evidence that Mr Sutherland built up some customer connection by reason of his employment with Verint. The available evidence tends to show that Mr Sutherland, as part of his role as channel manager, attended some meetings with clients and corresponded directly with some clients and potential clients of Verint. On occasions he was able to cut out the intermediary channel partner and secure contracts for Verint directly with some end user clients.

Verint also contends that the customer connection Mr Sutherland built up during his employment is a legitimate protectable interest, and the non-compete restraint is reasonably necessary to protect that interest.

It is not in issue that Mr Sutherland will, unless restrained, from 15 July 2019 engage in conduct which is in breach of the non-compete restraints of the employment agreement.

On the issue of whether there is a serious question to be tried, some of the more important issues that will arise at final hearing and discussed below are:

These issues are discussed in summary below after an additional brief survey of each party’s prospective case at final hearing.

Nothing which is said here should be taken as a prediction of what will happen at final hearing. It is merely the weighing arguments at a fairly general level at an interlocutory hearing. Nothing said here is a reflection on the legal representatives of either side, who thoroughly and efficiently presented their respective cases and put their respective interlocutory cases to their best advantage. But reflecting on all the circumstances, the Court has reached the view that the existing injunction should only continue for a short further period.

Verint’s Case. Apart from what is said above, Verint argues if it does not obtain interlocutory relief then it would be at real risk of losing existing and potential clients to NSA. Verint also points to a real risk that confidential information regarding Verint’s pricing, discounting and comparative analyses would be disclosed consciously or subconsciously to NSA by Mr Sutherland and used by NSA.

Verint points to Mr Sutherland’s existing evidence that at NSA he will deal directly with potential new clients; NSA and Verint compete for the sale of similar products and functionality to the same class of customers; and, competition between NSA and Verint tends to be over potential new clients.

Verint’s evidence for final hearing is that Mr Sutherland had access on 28 April 2019 to Verint’s internal competitive product analyses, comparing the qualities of Verint and NSA products, noting the relative strengths and weaknesses of Verint’s products. Its evidence also is that he accessed Verint’s internal sales campaign documents, including the internal confidential scripts Verint staff were to use when in contact with potential (new) customers.

Verint submits that Mr Sutherland resigned and accepted employment with a direct competitor and did not attempt to use his skills to obtain alternate employment with a non-competitor. To the extent that he has suffered or will suffer financial hardship, Verint submits he is the author of that hardship: see John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995 per Brereton J (at [49]); Lyreco Pty Ltd v Schoolworks Australia Pty Ltd [2006] NSWSC 1184 per Hamilton J, ( at [28]).

It is well recognised that it can be difficult for a Court to assess the damage which might be suffered by a plaintiff whose employee deliberately breaches a non-compete restraint by taking employment with a competitor: that is a recognised disadvantage to Verint here if interlocutory relief is not granted.

Mr Sutherland’s Case. Mr Sutherland contends that Verint’s legitimate interests are adequately protected by the combination of the confidentiality restraint and non-solicitation restraint in the employment agreement, and because of this the non-compete restraint will not be enforced on public policy grounds.

The Court can assume that Mr Sutherland’s confidentiality undertaking is solemnly given and will be honoured. And in the modern digital age there are many ways of testing whether or not confidential information has been used or misused.

But importantly, Mr Sutherland submits there is no contention that Mr Sutherland is now in physical possession of any confidential information belonging to Verint. Nor is there any evidence that he has downloaded confidential information for his own purposes. In the performance of his work for Verint, he was entitled to access this information on his work laptop. That laptop was handed back to Verint on 22 May 2019.

Mr Sutherland’s case at final hearing will be that the only confidential information belonging to Verint, that he is aware that he ever possessed, was stored in the Verint laptop that he handed back to Verint on 22 May 2019, when he resigned. He says that he never used confidential information belonging to Verint, other than in the proper discharge of his duties for Verint. He says he no longer possesses any confidential information of Verint in any form: data or physical.

Verint has had Mr Sutherland’s laptop since 22 May 2019. It can be expected as a matter of common experience that any unauthorised downloading or export of confidential information from that laptop could be readily detected on testing since then. No such evidence is advanced by Verint.

Mr Sutherland’s case at final hearing will offer a direct challenge to the inference that, if employed by NSA, he can immediately disadvantage Verint. Mr Sutherland criticises the generality of Mr Stelzer’s affidavit evidence and he submits it does not address key practical considerations relevant to the enforceability of the non-compete covenant.

Mr Sutherland’s case at final hearing will be that Verint’s software covers a wide range of sophisticated products used by customers to build bespoke software to meet their specific commercial needs in operating and managing a call centre. It is modular by design, so additional modules can be added on to existing Verint systems and software over time. The Verint platform enables the seamless adoption of additional modules as required.

Mr Sutherland will say at final hearing that a customer who has invested in Verint modules is unlikely to remove the Verint modules and substitute them with a new platform or offering by another supplier: the cost, business disruption and training required to change platforms and suppliers for existing modules is a substantial disincentive against movement across proprietary systems. The most common behaviour for a customer in this market place is to add compatible modules from an existing supplier rather than substitute one supplier’s modules with that from another supplier.

Mr Sutherland’s evidence at final hearing will be that these characteristics of Verint’s products mean Verint’s customers find it difficult to change suppliers so Verint has long relationships with customers, generally exceeding 10 years. This has the result that Verint’s sales efforts are directed to integrating new modules onto existing Verint products, rather than Verint becoming a new supplier of different platform or modules. The reality of this type of sales diminishes, therefore, any legitimate protection sought from a non-compete covenant.

Mr Sutherland’s evidence a final hearing will be that he was employed as a Channel Sales Manager, a sales role in which he was expected to sell Verint software through Channel Partners. Mr Sutherland was responsible for managing the relationship with specific Channel Partners.

Mr Sutherland will say Verint controlled its relationship with Channel Partners through a Master Reseller Agreement, which addressed pricing, standard discount models for products, support and services provided respectively by Verint and the Channel Partner. The relationship with each Channel Partner was non-exclusive. The Channel Partners in turn controlled the relationship with the end customers. Channel Partners had the role of constructing an integrated software package to suit the needs of a customer, which could include a combination of Verint and non-Verint modules. Mr Sutherland’s role as a Channel Sales Manager with Verint, he says, required him to build relationships with Channel Partners and to support them on a day-to-day basis in selling and implementing Verint modules to end customers.

Mr Sutherland’s evidence at final hearing will be that his role as a Channel Sales Manager involved him: dealing exclusively with a Channel Partner in selling and implementing Verint products; working collaboratively with a Channel Partner and one of the Channel Partner’s clients or customers in selling and implementing Verint products; and, at a customer’s request, establishing a direct contact with that customer to adopt or implement a Verint product with the assistance of a Channel Partner.

Mr Sutherland’s evidence at final hearing will be that direct Verint end-customer contact with him was rare. He will say that in the last 15 months of his employment he had direct contact with only one Verint customer, Zurich, and 98 per cent of his time at Verint was either working directly or collaboratively with a Channel Partner, and only about 2 per cent of his time in direct contact with customers.

If this evidence is ultimately accepted, the case for upholding the reasonableness of a lengthy non-solicitation covenant is significantly weakened and a non-solicitation undertaking will be more likely to provide secure protection for Verint on its own.

Finally, the interlocutory contest developed more specificity on both sides on one aspect. Verint sought to argue that Mr Sutherland accessing information on 28 April and 13 May 2019 was unusual as to the volume of data he accessed, as to the timing of the access compared to prior access on other occasions, and as to it overlapping with his commitment to join NSA. But even in this area there will be an unpredictable contest at final hearing on which it cannot be said that Verint’s case is necessarily even likely to succeed.

Mr Sutherland’s filed evidence that explained this additional point. He gave a detailed account in evidence that would be available at final hearing about how he regularly accessed information of this volume and there was nothing unusual in his access to Price Book or other comparative information on 28 April or 13 May but that it was consistent with his prior practice. Verint questioned this saying that he was going on leave for a period and would not have needed the information. But in turn, Mr Sutherland can answer this by saying that it was his well-developed routine at Verint and there is still no evidence that the material he accessed was exported from his laptop in a way that might be able to be misused.

This lengthy final issue does not give strong confidence that Verint would be able to establish that the continuation of the non-compete covenant is a measure necessary to protect its legitimate business interests.

Returning to the main issues identified above, the following can be said in overview.

(a) The Public Face of Verint and Misuse of Confidential Information Issues. It is not in dispute that the non-compete restraint forms part of Mr Sutherland’s employment agreement, and he has offered comprehensive confidentiality and non-solicitation undertakings for a period of 12 months after termination of his employment.

Mr Sutherland has an arguable case that he is not, or is only to a small degree, the public face of Verint. Mr Sutherland propounds an arguable case, supported already by detail, that the work that he would be doing with NSA will not challenge the legitimate interest that Verint is seeking to secure through the non-compete restraint: maintaining its customer connection. This is because of the nature of NSA’s probable competition with Verint and because of the debatable nature of Mr Sutherland’s customer connection. This will be a demanding contest at final hearing.

But concern that Mr Sutherland’s prior customer contact might be used to Verint’s disadvantage with a competitor is potentially substantially answered by the undertakings that have been offered. The Court can take into account the presence of a non-solicitation clause in assessing the reasonableness of a covenant not to compete. Non-solicitation obligations on Mr Sutherland are, in my view, robust and that is a relevant factor both at final hearing and in the discretion to be exercised at this interlocutory hearing.

(b) The Reasonableness Issue. Another question for final hearing will be whether at common law the non-compete restraint will ultimately be enforced against Mr Sutherland, or whether it goes beyond the protection of the plaintiff’s legitimate business interests. On this issue, the plaintiff has an arguable case but one which it can be already be seen will be strongly contested. These proceedings raise considerations to which McLelland J’s observations in Kolback are relevant. To use McLelland J’s words in Kolback, “there is a serious to be tried, but that is as far as it goes”. There are a series of considerations on the reasonableness issue that will weigh against the plaintiff’s case at final hearing.

Verint’s confidential information case is readily contestable. Verint argued that the non-compete restraints were designed to protect its legitimate business interests rather than being a mere restraint against competition because of Mr Sutherland’s access to confidential information. But the case presented about confidential information is contestable in a number of alternative ways. Although the issue was expressly raised by the Court for consideration, there is no present suggestion Mr Sutherland has taken away from Verint any confidential information, any databases, any client lists or other electronic or paper-based information.

Mr Sutherland’s capacity to use confidential information is objectively limited. On the existing evidence, no realistic case made that he has used any artificial means to enhance his memory of product maintenance renewal, the “Price Book”, internal product analyses and sales campaigns. Absorbing the large numbers of customer names, details and other confidential information is objectively not easy. Verint’s actual and potential customers are many, although there are fewer larger ones. Verint’s case will run up against the fallibility and limits of ordinary human memory. Mr Sutherland left Verint’s operations just over two months ago and its employ over one month ago. Over this time, his memory would be expected to deteriorate. In the absence of artificial memory enhancement (of which there is no evidence here), by now or within a few more weeks, much of this detail is unlikely to be recalled.

(c) The Extent the Restraint Is Enforceable. Even if the restraints go beyond the protection of Verint’s legitimate business interests, Verint can still deploy an argument that the restraints can be enforced to the extent that the Restraints of Trade Act permits them to be enforced in the public interest. But for the same reasons identified in (b) the restraint may not be justifiable for very long.

The balance of convenience, or as it is often better put “the balance of justice”, in the circumstances favours not granting interlocutory relief for very long beyond the existing orders and undertakings offered. Mr Sutherland would suffer considerable hardship if an injunction were granted for too long.

It is quite impracticable for Mr Sutherland to take another job of uncertain duration whilst he is awaiting a final hearing. It is not clear that such jobs are readily available to him. And at his managerial level the kind of uncertainty that he would present to a future employer, already committed to NSA as he is, makes him an even less attractive prospect than he was when he applied for employment before he went to NSA. It is not realistic to consider the possibility of alternative employment for him pending final hearing.

Whilst that hardship could to a degree be alleviated by including a term requiring the plaintiff to pay the equivalent of Mr Sutherland’s proposed salary with NSA during the term of the undertaking it is difficult to justify that course on the basis of the plaintiff’s case, which just qualifies as arguable, and where Mr Sutherland and the family that depends upon him has a strong interest in a stable and reasonably predictable financial future.

The Court indicated to the parties that it would be open to the Court to make it a condition of the grant of interlocutory relief that Mr Sutherland’s proposed salary be paid by Verint and be repaid in the event that the plaintiff were ultimately successful in the proceedings.

Verint did not offer this as a condition of a grant of relief; instead Verint offered to accelerate the commission due to Mr Sutherland so that it was paid on Friday, 12 July. The amount paid on that day was $38,913, representing the gross before tax commissions due to him three months after termination. This acceleration advantaged him by increasing his family cashflow during the period before he could commence with NSA. There is no principle that salary foregone should be paid as a condition of a grant of interlocutory relief in cases such as these. The cases depend upon their facts: see Woolworths Limited v Mark Konrad Olson [2004] NSWCA 372, Metcash Ltd v Joao Lewis Jardin (No. 3) (2010) 273 ALR 407; [2010] NSWSC 1096, and DP World Sydney Limited v Guy (2016) 262 IR 156; [2016] NSWSC 1072.

For 12 years Mr Sutherland has worked in as “a niche market environment” in “workforce optimisation, customer experience and public safety within a call-center or contact center environment”. Mr Sutherland’s evidence at final hearing will be that he is specialised in the “workforce optimisation space”, so that any company in that market will be likely to compete with Verint. If he did not work in that area he says he would have to retrain, reducing his earning potential and opportunities for career development.

Mr Sutherland’s personal circumstances are not in contest. He is married with two young children. He is the sole income earner for a family living in rented accommodation. He has no property or other investments. Family assets are cash in the sum of $10,272.30 and the chattels in their rented accommodation. The family has a 2006 model Mazda. He has debts in the sum of $48,493.00, including credit card debts of $22,593.00, a debt of $10,900.00 to a family member, and a debt of $15,000 to a family friend to fund this litigation. Their family living expenses are about $12,000.00 per month. Mr Sutherland argues if the non-compete covenant is enforced for the full 12 months, it will be ruinous for him and his family.

Mr Sutherland’s role at NSA must be considered too. His evidence at final hearing will be that with NSA he would be operating in a different sales model, not dealing with Channel Partners, but directly with existing NSA clients with a view to getting them to use more software products offered through NSA modules and existing NSA software offerings. He will also deal with potential new NSA clients with a view to getting them to utilise NSA software products. His sales clients at NSA will be end-user clients and not Channel Partners, which is the opposite of his role at Verint.

And Mr Sutherland’s evidence is that he anticipates receiving directions from his proposed supervisor at NSA that for at least 12 months after commencement there he should refrain from contacting any end-user client with whom he had a relationship at Verint. Given the arguably limited numbers of these end-user clients this should not be too difficult to verify.

Verint says, through Mr Stelzer, that it is already taking urgent steps to secure the custom of Channel Partners and end-user clients Mr Sutherland dealt with. Zurich, who Mr Sutherland mainly dealt with at Verint, is one of these. But there are a limited number of these and Verint has had since 22 May to do this and to replace Mr Sutherland with someone else performing his role.

There are many factors covered here that tend to the conclusion that the longer any interlocutory relief is granted, the more that over time the balance of injustice will affect Mr Sutherland more harshly than Verint.

The need for the protection of the plaintiff’s goodwill and customer connection that might justify a restraint against Mr Sutherland joining a competitor is an argument of ever diminishing power, subsiding as it does with Mr Sutherland’s memory of the detail of the plaintiff’s products, internal data and customers. Mr Sutherland has not been shown to have taken soft or hard copy of anything away from his employment with the plaintiff which would aid him in maintaining those connections.

Already, Verint has had not-insignificant reaction time since 22 May. Verint has not over that period obtained any evidence of Mr Sutherland misusing confidential information, as against the mere suspicions articulated in Court, despite having ample opportunity to do so. Mr Sutherland’s memory has been fading for almost two months since he was active at Verint. He offered confidentiality and non-solicitation undertakings. A final hearing may not be until mid-September. In these circumstances, in part because of lack of confidence that the non-compete restraint will be enforced for more than about 10 weeks from 22 May at a final hearing, the Court will not extend the present injunction enforcing the non-compete restraint beyond Sunday, 4 August 2019 and will order accordingly.

For these reasons, Verint’s claim for interlocutory relief against Mr Sutherland should only be granted upon the following terms:

Then, as indicated earlier in these reasons on 18 July 2019, Mr Sutherland gave a more detailed form of undertaking to the Court.