Scyne Advisory Business Services Pty Ltd v Heaney

Before the Court is an application for an interlocutory injunction by the plaintiff against the defendant, who is one of its former employees. The injunction is sought to enforce restraints in the defendant's employment contract which restrict her freedom to accept employment in competing businesses.

The defendant, Ms Connie Heaney, is a management consultant specialising in public sector management consultancy. She lives in Canberra where she has worked as a consultant for the Commonwealth Department of Defence ("Defence") for about 20 years. In her affidavit Ms Heaney gave evidence of her experience in the following terms:

Ms Heaney stated:

In October 2020 Ms Heaney left KPMG and joined the public sector consulting division of another accountancy firm, PwC Australia ("PwC"). On 1 July 2022 or thereabouts, she became a partner of the firm. For internal purposes she was classified as a junior partner. The terms on which she became a partner included a two-year post-retirement non-compete restraint.

In her affidavit Ms Heaney described her responsibilities as a junior partner of PwC in the following terms:

Early last year PwC became embroiled in a scandal as a result of misconduct by partners in its tax division. The misconduct involved misuse of confidential information received through undertaking consultancy work for the Commonwealth Government on taxation policy. The information was used for the benefit of private tax clients of PwC. This led, ultimately, in the resignation or removal of the chief executive officer of PwC, among others.

As a result of this debacle, PwC decided to separate its public sector advisory business from the rest of the PwC practice. The business was transferred for a nominal sum of $1 to a group of companies established for that purpose by an investment management firm called Allegro Funds. The new corporate group operates under the name "Scyne Advisory". Its holding company is named Scyne Advisory Holdings Pty Limited. Trading seems to be conducted through a company named Scyne Advisory Pty Limited, but this is not clear on the evidence.

Over 100 PwC partners and over 1,000 PwC employees were offered employment with Scyne Advisory. Ms Heaney was one of the partners who accepted. She was employed (as well, I assume, as the others who accepted employment) by Scyne Advisory Business Services Pty Ltd, which is the plaintiff in these proceedings. For simplicity, except where it is necessary to distinguish between them, I will refer to the plaintiff and the other Scyne Advisory group companies as "Scyne".

Ms Heaney's contract with Scyne was signed by her on 7 September last year, but the contract only became effective upon completion of the purchase of the Scyne Advisory business by Allegro Funds from PwC. I was told that this occurred on 9 November.

Under her contract Ms Heaney was entitled to base remuneration of $317,000. She was also to receive a bonus for the first year, at least, of up to 20% of her remuneration. Of this bonus amount, 8% was guaranteed. Her minimum income on an annual basis when she signed on with Scyne was, therefore, $342,000. Under her contract she was also entitled to other benefits in the form of entitlements to participate in share and equity schemes, and additional annual leave.

The contract provided for a notice period of three months. It also provided that after notice of termination had been given, it would be open to Scyne to direct Ms Heaney not to attend Scyne's offices and not to undertake other duties, but to remain available to assist as required. This arrangement was referred to in the proceedings as "garden leave" or "gardening leave."

The contract provided for restraints operating both during employment and afterwards. The relevant post-employment restraint for the purposes of this judgment is set out in clause 14.1(a):

Definitions of the terms "Competitive Business" and "Business" in the contract are:

Other provisions of the contract defined the temporal and geographical scope of the restraints. They took the familiar cascading form (necessary, in particular, in the present case because the contract is governed by the laws of the Australian Capital Territory, which has not adopted the statutory reforms to the restraint of trade doctrine reflected in the Restraints of Trade Act 1976 in this state). The maximum period for the restraint was 12 months, but alternative lesser periods were specified with the minimum being one month. Similarly, the widest geographical scope of the restraint specified covered the whole of Australia, but alternatives were provided for the ACT and for Canberra.

On 29 November Ms Heaney resigned her employment with Scyne. According to the evidence of Mr Jansen (see [76] below), the resignation was both oral and confirmed by email. In her oral remarks Ms Heaney disclosed that she intended to take up a position with another firm known as "Downer". Downer, likewise, operates a public sector management consultancy business and Defence is one of its clients for the purposes of that business.

On 7 December Scyne sent a formal letter to Ms Heaney in response to the notice which she had given. The letter contained a gardening leave direction and noted that Ms Heaney would be employed up until 29 February 2024. The letter reminded Ms Heaney of various employment obligations contained in her contract, including her post employment restraints. It included a request for undertakings which included an undertaking in the following terms:

The letter went on:

Ms Heaney responded on 13 December. She accepted Scyne's entitlement to place her on gardening leave and undertook to comply with her obligations in that regard. But she refused to provide the undertakings. She said in response:

Mr Wesley Rogers of Marque Lawyers then became involved on behalf of Scyne. On 21 December he wrote to Ms Heaney. He repeated the demand for undertakings in the same form as had been sought in the letter of 7 December. These undertakings were sought by 5pm on 28 December. Mr Rogers went on:

On 28 December Mr James Simpson of the firm Hamilton Locke responded on Ms Heaney's behalf. He stated:

Almost a month passed before Mr Rogers replied. On 25 January he wrote repeating the demand for an undertaking (in the same terms as had previously been demanded) by 1 February. On that date, Mr Simpson responded. He stated that Ms Heaney's position was unchanged and repeated that his firm had instructions to accept service.

Four weeks passed before Mr Rogers wrote again, on 28 February, one day before the expiry of Ms Heaney's period of employment. In his letter, Mr Rogers asked Mr Simpson to “confirm as a matter of urgency” that Ms Heaney would not be commencing work with Downer.

On the following day, 29 February, Mr Simpson wrote back repeating Ms Heaney's position. Following a further letter sent on 1 March by Mr Rogers, proceedings were commenced urgently in the Duty List on Monday this week, 4 March. I was asked, as Duty Judge, to grant an ex parte injunction, but refused. I fixed the hearing of the application for an injunction to take place on 7 March.

Evidence was given in support of the application by Mr Mark David Jansen. He, like Ms Heaney, is a former partner of PwC now with Scyne. At PwC he held the internal management positions of Lead Partner, Management Consulting in Canberra and Consulting Lead Partner, Defence. Ms Heaney made an affidavit in response to the application. As is usual in applications of the present type, neither witness was cross-examined.

The initial position taken by Scyne, as reflected by the orders sought in its summons, both interlocutory and final, was that Ms Heaney should be restrained from working for Downer at all. But, in the course of proceedings, counsel for Scyne recognised that the terms of the restraint do not justify an injunction in such broad terms. The application was narrowed and reformulated in the following way:

As a matter of language, there are three key elements to the restraint in clause 14.1(a). The first is a requirement that Ms Heaney be employed by a "Competitive Business" of Scyne. This appears in the chapeau. There are then two alternative limbs of the clause which are conditioned on the performance of duties, or the provision of services, for that competing business. The limbs are alternatives. Only one, therefore, needs to be satisfied.

Limb (1) requires that the duties or services be "the same or similar" as those provided by Ms Heaney to Scyne. Limb (2) requires that Ms Heaney be employed to perform duties or provide services in a position in which she "can" make use of Scyne's confidential information (as defined in the contract).

In order to obtain an injunction, Scyne must also overcome the operation of the restraint of trade doctrine. This involves demonstrating that it has a "legitimate commercial interest" in enforcing the restraint (Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343 at [65]) and that the restraint sought goes no further than is necessary to protect that interest.

As to the competitive business requirement, there is no dispute that Downer conducts a management consultancy business in Canberra and that Defence is one of its clients. Counsel for Ms Heaney accepted that, subject perhaps to an argument which I will address later in the judgment, that Downer operated in "the same field" as Scyne.

Mr Jansen gave evidence about the requirements in limbs (1) and (2). As to limb (1), he gave the following evidence:

On limb (2), he gave evidence, admittedly in generic terms, that in her work for Scyne, Ms Heaney had been privy to:

Counsel submitted that this evidence was sufficient to establish, at least on a prima facie basis, that Ms Heaney's employment with Downer contravened the restraint. As to the requirement of a legitimate commercial interest, counsel cited well-known passages in the case law which establish that a competition restraint may be supported by the employer's interest in the customer connection developed or maintained by former employees, or by the interest in maintaining the confidentiality of information imparted to them in the course of their employment.

Counsel for Ms Heaney submitted that no prima facie case had been established. This was because of a point concerning the interest of the plaintiff company in enforcing their restraint. It is convenient to deal with this threshold point first.

Counsel for Ms Heaney noted that Scyne had established a separate company (the plaintiff) as the employer of Ms Heaney and, presumably, others who work for the group. Counsel submitted that on the evidence there was no reason to think that this company was, itself, a trading company which operated Scyne's business or any part of it. In counsel's submission, therefore, the plaintiff company did not have any legitimate interest which it could protect by enforcing the restraint.

I do not accept this argument, at least to the extent of finding that it deprives the plaintiff company of a prima facie case for the grant of an injunction. Whether an interest is a "legitimate commercial interest" may ultimately be a question of law, but it is inseparably bound up with the facts. Neither counsel suggested that on this application I could make any determinations of law. These will have to be left for trial.

I think it is clear on the authorities that what constitutes a "legitimate commercial interest" has not been exhaustively defined and the categories of interest are not necessarily closed. I also accept, at least on a prima facie level, the submission by counsel for Scyne that a "legitimate interest" may extend to protecting the interests of a related company in a corporate group. As counsel for Ms Heaney conceded, arrangements where one company in a corporate group employs all of the staff who work in the group are not uncommon.

Furthermore, one of the interests which has been recognised in this area of the law is an interest in preventing former employees from using the contacts built up in the course of their employment to recruit remaining members of the employer's workforce. If that is a legitimate interest for relevant purposes, then, even if attention is confined to the plaintiff company, such an interest might support a restraint, at least to some extent, on employment with a competing business.

Counsel for Ms Heaney also addressed some of the other requirements of the restraint clause. Counsel did not suggest that these arguments, even if accepted, would lead to the conclusion that there was no prima facie case at all. Counsel contended however that any such prima facie case was weak.

As to the competitive business requirement, counsel submitted that on the evidence there was no relevant business of any substance being carried on by Scyne. At least, that is how I understood counsel's submission. Counsel referred me to evidence from Ms Heaney, the thrust of which was that the tax scandal had ruined the business "beyond repair." It was also suggested that, in substance, the business of Scyne was a newly established business. Counsel for Ms Heaney pointed out the purely nominal consideration which had been paid by Allegro Funds as purchaser.

In response to this, counsel for Scyne referred me to evidence given in reply by Mr Jansen. Mr Jansen explained that 17 PwC Defence contracts had been novated to Scyne. He also asserted that there had been a "significant continuity of business strategy" between the PwC business and the Scyne business. Counsel for Scyne also pointed out that, although the amount paid for the purchase of the business was nominal, Allegro Funds had stated that it was proposing to contribute $100 million to establishing the business.

These competing submissions, in my view, are clearly a matter for trial. They are factual and will need to be resolved in the context of a trial where there will be further evidence, cross‑examination and the like. I do not think that the arguments advanced on Ms Heaney's behalf, under this heading, are so clearly correct that they cast a shadow over the prima facie case put forward by Scyne.

Next, counsel addressed the requirement that Ms Heaney's duties or services must be the same or similar to those performed or provided at Scyne. Although I was told that Ms Heaney had started work on 4 March, no contract between her and Downer was in evidence. There is therefore no position statement which would define, with precision, Ms Heaney's duties in her employment with Downer.

In her affidavit Ms Heaney addressed this issue. She said:

The evidence in the case (which, to be fair, was put on as a matter of urgency) is bedevilled by management jargon. It is difficult to discern just exactly what the work roles described in the evidence actually involved in practice. So far as I can tell Ms Heaney seems, in the paragraphs to which I have referred, to be drawing a distinction between work involving direct contact with Defence personnel on the one hand ("client‑facing") and work associated with managing the formulation and delivery of advice.

But I am not sure that the distinction is as watertight as that. It is possible to imagine circumstances in which Ms Heaney's experience and knowledge could be exploited by others acting on behalf of Downer in bidding for work, even if she herself did not attend those meetings or participate in formulating the "pitch" to Defence. I also agree with the submission made by counsel for Scyne that even on Ms Heaney's evidence, it was obscure as to the degree of direct communication which she might have with Defence personnel when working for Downer.

I think there is another overarching point. The argument presented on behalf of Ms Heaney assumes that what is required under the contract is a highly specific and individualised comparison of the nature of the work undertaken at Scyne with the work to be undertaken at Dower. That is not necessarily so. It may be that, on the proper construction of the contract, the duties and services should be defined in a more generalised way, such as “the provision of management services to Defence” or “the management of teams of management consultants providing management consultancy services to Defence”.

What exactly the clause requires is, of course, a question of construction which, as I have said, is a matter for trial. Again, I do not think that the arguments presented on Ms Heaney's behalf are so clearly correct as to raise a question, at this stage, as to whether Scyne can possibly succeed at trial on the issue.

Counsel next referred to the confidential information requirement. He emphasised that there was no suggestion that Ms Heaney had appropriated any such information. But, as counsel for Scyne pointed out, at least at a prima facie level, the contract is concerned with the possession of information which could potentially be used rather than the actuality of misuse. This is quite understandable because the interest being protected in this area may extend to strategic advice which, once learned, cannot for practical purposes be put out of the mind of the former employee.

As I have said, Mr Jansen's evidence is generic but, in my view, it is sufficient at this stage of the proceedings to establish a prima facie case. Confidential information that Ms Heaney has, as a result of her work with Scyne, could be deployed in the ways to which the clause refers. Whether that case is sustained at trial is, of course, another matter and will depend upon the evidence.

Finally, counsel for Ms Heaney referred to the temporal and geographical scope of the restraints. Counsel pointed out that there was no evidence which directly addressed why the periods and areas specified were really necessary to protect Scyne's interests. No doubt such evidence would be desirable at trial, but even at trial it is not essential. The Court can, to some degree, apply its common sense and general knowledge.

In this regard I am particularly influenced by the fact that, as part of her partnership with PwC, Ms Heaney appears to have accepted a two-year restraint. I infer from this that restraints, even for lengthy periods, are not uncommon in the industry at the level which Ms Heaney works.

In conclusion, I am satisfied that there is a serious question to be tried. Characterising the strength of the case is an impressionistic matter. It involves a prediction, depending on incomplete information, which is of doubtful value. But I think it is sufficient to say that I do not regard Scyne’s case, on the evidence before me, as weak or tenuous. Rather, it seems to me, at this point, that Scyne has reasonable prospects of obtaining restraints which would have some commercial value.

Counsel for Scyne submitted that in a case such as the present, damages are rarely an adequate remedy. On the other hand, in counsel's submission, all that was involved from Ms Heaney's point of view was a prevention of her working for Downer (at least in connection to consultancy with Defence) for a sufficient period of time to allow the case to proceed to final hearing. It was suggested that this period would be two to three months at most.

Counsel for Ms Heaney, however, submitted that there was evidence which established that the grant of an interlocutory injunction would cause her real hardship. In this regard counsel referred to Ms Heaney's evidence as to her personal and financial circumstances. She is a single mother with a child at school. In her affidavit she gave a list of monthly expenses which amounted to between $5,000 and $10,000. She has tax debts which need to be settled in the future. She also stated that management consultancy was the only business in which she has relevant experience. The implication was that if the injunction was granted she would be deprived of the opportunity to earn income in her chosen profession and that this would create unwarranted financial pressure.

In response, counsel for Scyne submitted that I would infer from the evidence in the present case that Ms Heaney has been well remunerated in the past. Counsel observed that there was no evidence of her overall asset position, apart from the evidence about the tax debts. Counsel submitted that the only person who could give evidence on this question was Ms Heaney and that a Jones v Dunkel inference should be drawn against her as a result of her failure to do so.

Counsel also observed that Ms Heaney had worked for Scyne for only three weeks after having signed a non-compete clause. She has been represented by lawyers since December. Indeed, counsel submitted that I would infer from the form of her email dated 13 December that she had legal advice at that point, or possibly before. Counsel submitted that in resigning when she did, Ms Heaney "took her chances". She must have been aware that an application could be made to enforce the restraint and she had gone into the dispute with her eyes wide open.

In my view, there is force in these submissions. I think Ms Heaney's level of earnings is also relevant. It would be one thing if she was on the basic wage, but she is not. She is a highly paid professional and the Court should not treat her as if she is obliged to live from hand to mouth.

The tax debts to which Ms Heaney refers reinforce the point. They cannot have been incurred without substantial earnings. If she now lacks the funds to pay (and there is no evidence of this, as I have said) then that can only be because of the way that she has organised her financial affairs. In these circumstances I think counsel's point about the absence of evidence of Ms Heaney's asset position is relevant. Why should I accept the claim that the grant of the injunction would leave her unable to meet her expenses and her other liabilities if she herself has not given evidence which would allow that claim to be scrutinised?

Furthermore, I also accept that, on the evidence, there is a clear inference that Ms Heaney had her eyes wide open when she resigned from Scyne at the end of November. It is true that, although she only worked for Scyne for three weeks, she had signed the contract almost three months before. But she can hardly have been, and counsel does not suggest that she was, unaware of its terms. And, as I have said, she had accepted a restraint, apparently in broader terms, when she was with PwC.

I would infer that at least by the end of December, and probably much earlier, Ms Heaney had received detailed advice which would have alerted her to the risk of proceedings being taken. Indeed, as we have seen, the threat was made at an early stage in correspondence in express terms.

Counsel for Ms Heaney submitted, as I understood it, that the force of her knowledge of the terms of the restraint was diminished because of the cascading nature of the restraint. Counsel refers to a submission put to the Court of Appeal in DXC Eclipse Pty Ltd v Wildsmith [2023] NSWCA 98. The argument was described by the Court as having "considerable force" (see at [156]).

However, I do not think this is relevant for present purposes. The argument being addressed in DXC was an argument about the reasonableness of the restraint. Counsel were responding to a submission that the restraint had been freely agreed to by drawing attention to its cascading nature and raising a question of just what exactly had been agreed to.

For the purposes of the present argument, I do not think the same logic applies. The point is that Ms Heaney knew or ought to have known that she was at risk of an application being made to enforce the restraint, and to do so to its maximum extent. Whether such an application would have succeeded is really not to the point.

In the end, the onus lies on Ms Heaney, as the respondent to the application, to establish hardship as a defence to it. In my view, the evidence of hardship is unimpressive, and the claim has little, if any, weight.

Counsel for Ms Heaney contended that whatever view I might take on the preceding issues, Scyne's delay between her resignation on 29 November and the commencement of proceedings on 4 March disqualified it from obtaining interlocutory relief.

There are many statements of authority to the effect that an application for an interlocutory injunction should be made promptly. In Capgemini US v Case [2004] NSWSC 674, JC Campbell J stated, at [40]:

As this passage makes clear, delay in instituting proceedings may give rise to a substantive defence of laches. But delay in applying for interlocutory relief (whether or not proceedings have been instituted) may separately be an answer to such an application.

His Honour treated delay of this type as going to the balance of convenience. Counsel for Ms Heaney treated it as a separate defence to the application. That doctrinal question does not need to be resolved in the present case. Counsel for Scyne accepted that delay is an important discretionary consideration and may itself be a sufficient reason for declining the grant of an interlocutory injunction.

Counsel for Scyne also acknowledged that there had been "some delay" in the proceedings, but submitted that it was not, in the circumstances, fatal. Counsel's submissions can, I think, be summarised in three points.

First, Ms Heaney was on gardening leave until 29 February. In counsel's submission, the period of delay was therefore "short”. Second, there were "extensive exchanges", both in writing and orally, during which Scyne attempted to persuade Ms Heaney to return or to give the undertakings. Counsel accepted that this did not completely excuse any delay which had taken place, but it was, in his submission, a mitigating factor. Third, counsel submitted that laches relevantly requires some form of detriment before it will bar a claim. Ms Heaney had not, as a result of Scyne's delay, taken any action that she would not otherwise have taken. Counsel therefore submitted that any delay was immaterial.

As to counsel's first point, there is nothing to suggest that Scyne delayed bringing proceedings because Ms Heaney was on gardening leave. The evidence is actually to the contrary.

Ms Heaney had, on 13 December, acknowledged the validity of Scyne's action in placing her on gardening leave until 29 February. Scyne's later demands failed to acknowledge this and continued to demand undertakings that she cease working for Downer when she had not in fact even begun to do so. If this was an oversight it says little for Scyne's consideration of the actual circumstances of the case. Scyne also continued itself to threaten litigation, without further notice, throughout the gardening leave period.

Nevertheless, I did, for a time, question whether proceedings could be brought while Ms Heaney remained in Scyne's employment, and before she had actually taken up employment with Downer. I wondered whether, until her duties were defined by entering into an employment contract with Downer, the dispute was sufficiently concrete to be resolved by the Court. Further reflection, and the submissions by counsel for Ms Heaney, have, however, dispelled my doubts.

Scyne was not obliged to wait for breach of contract on the part of Ms Heaney. An injunction can be obtained quia timet once there is sufficient evidence of a threatened breach.

In the present case the threat was clear from the outset and Ms Heaney never wavered. And, while in some cases it is appropriate to formulate the injunction sought by reference to specific employment undertaken by the former employee, that is not necessary. The terms of the injunction could have been formulated in the present case, as in fact they have ultimately been, by reference to Ms Heaney's terms of employment and the nature of the work that she undertook with Scyne. The formulation of those terms did not depend upon the terms of the employment contract with Downer or any other prospective employer.

As to counsel's point about the communications between the parties, I have set out the correspondence already in this judgment (see above at [15]-[23]). Mr Jansen gave evidence of the oral communications. That evidence was:

It may be noted that there is no evidence that Scyne delayed bringing the proceedings because of the belief that the litigation could be avoided by negotiations. In any event, I do not think that the dealings between the parties can accurately be described as negotiations. Ms Heaney's position in the correspondence was uncompromising.

Mr Jansen's evidence shows that he was asking Ms Heaney to change her mind, but it contains nothing to suggest that she ever held out the possibility of doing so. In my view, the evidence provides no justification for any belief, even if such a belief was held by Scyne, that there was any proper justification for holding off on the commencement of proceedings.

As to counsel's third point, concerning detriment, it is clear on the evidence that Ms Heaney's mind was made up from the outset. There is nothing to suggest that Scyne's failure to take action promptly made any difference to her decision-making process. There is no evidence either that she made any financial decisions based on that failure. But this does not exhaust the detriment resulting from the delay.

As counsel for Ms Heaney submitted, if the application for an interlocutory injunction had been made promptly it could have been resolved while Ms Heaney was on gardening leave. Indeed there is every reason to think that final issue could have been resolved by now. At least it would be well on its way to resolution. In these circumstances I think that it would be most unreasonable now to restrain Ms Heaney from continuing with her well-signalled intention to join Downer simply because Scyne has now belatedly discovered the urgency of the case.

For the reasons I have given I am satisfied there is a serious question to be tried. If the relevant factors were confined to the issues which I have addressed in this judgment under the heading of “balance of convenience”, I would be inclined to grant relief. But in my view, the delay tips the scale the other way. In the context of an application such as this, the delay is a lengthy one with adverse effects for Ms Heaney, and it has not been adequately explained. I therefore conclude that the application should be refused.

The orders of the Court are: