N8453
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS (COMM) NO. 196 OF 2020

BETWEEN
PACIFIC PROJECT LOGISTICS LIMITED
Plaintiff

AND
NATHAN HERBERT
First Defendant

AND
KEVIN HOLDEN
Second Defendant

AND
WELGRIS FUEL DISTRIBUTORS LIMITED
Third Defendant

Waigani: Anis J
2020: 17th July & 17th August

NOTICE OF MOTIONS – first notice of motion – default judgment – Order 12 Rule 25(a) and Order 12 Rule 32(1) – National Court Rules – want of notice of intention to defend and defence by third defendant– exercise of discretion – second notice of motion – interim injunctions – Order 12 Rule 1 – National Court Rules – enforcement of clauses in employment contracts – whether injunctive relief sought were substantive – merits of claim considered – principles for grant of interim injunction considered - whether all, some, one or no relief should be granted – whether variation to the relief necessary – exercise of discretion

Cases Cited:

Roderick Glen Brookes v. Magdalen Brookes (2014) N5751
Chief Collector of Taxes v. Bougainville Copper Limited [2007] SC 853

Counsel:

Ms M Tusais, for the Plaintiff
Ms E Parua, for the First Defendant

RULING

17th August 2020

1.	ANIS J:  Three (3) motions returned before me for hearing on 17 July 2020.  Two (2) were contested so after hearing, I reserved my ruling to a date to be advised.

2.	Parties have been notified so I will rule on them now.

BACKGROUND

3.	The claims appear to be for breach of contract and the tort of inducement.  The plaintiff is suing 2 of its former employees (the 2 defendants) as well as a competitor (the third defendant).  The plaintiff’s business includes providing logistic services such as freight forwarding, project management and aviation refueling services to remote areas, in the mining or energy sectors in Papua New Guinea.  It claims that the 2 defendants, in their dealings or employment with the third defendant, breached their employment terms and conditions (confidentiality clauses) which they had signed in their respective employment contracts whilst working with the plaintiff.  The clauses include provisions that the 2 defendants are not to engage themselves in similar type work with a competitor(s) of the plaintiff for a duration of 6 months after they cease employment.  Also, the clauses, according to the plaintiff, include provisions that says, according to the plaintiff, that the 2 defendants are not to divulge to third parties the plaintiff’s intellectual properties or confidential information that they may have acquired during the tenure of their employment with the plaintiff.  As for the third defendant, the plaintiff claims, amongst others, that it has procured or induced the 2 defendants to breaching their confidentiality clauses in their employment contracts.  It also claims that the third defendant has and continues to benefit from the actions of the 2 defendants, that is and according to the plaintiff, by the actions of the 2 defendants in misusing its intellectual properties in breach of the confidential clauses in their employment contracts.  

4.	The plaintiff therefore seeks injunctive relief as well as damages for losses which it says it suffered and continues to suffer by the actions or inactions of the defendants.

MOTIONS

5.	The applications I reserved on are, (i), the notice of motion for default judgment against the third defendant filed on 17 June 2020, and (ii), the notice of motion for interim injunctions filed on 10 March 2020.

ISSUES

6.	In my view, the issues are as follows, (i), whether the plaintiff has established default against the third defendant, (ii), if so, whether I should exercise my discretion and grant default judgment against the third defendant in favour of the plaintiff, and (iii), whether the plaintiff has met the pre-requisites for granting interim injunctions, and if so, whether I should exercise my discretion and grant all, some or none of the relief sought in the notice of motion.

DEFAULT

7.	The writ of summons and statement of claim (SoC) including other court documents, were served on the third defendant on 16 March 2020.  The third defendant did not file its notice of intention to defend within 30 days, and its defence with 14 days thereafter, as required under the National Court Rules (NCR).  See Orders 4 Rule 11(b) and Order 8 Rule 4(1) of the NCR.  Evidence adduced shows that to date the 2 documents remain outstanding.

8.	I find that the third defendant has defaulted as alleged, that is and in particular, that it has failed to file its defence.  The next issue is this, whether I should exercise my discretion and grant default judgment.  I prefer to reserve on that until after I have had the opportunity to consider the other issues raised herein.

MOTION OF 10 MARCH 2020

9.	The main relief sought therein are, and I quote in part:

2.	…..the First Defendant be restrained from performing or undertaking any work or services for the Third Defendant or any other person or company, in breach of the non-competition clause in his employment contract with the Plaintiff dated 1 March 2019, for a period of 6 months from the date of this order or the determination of the substantive proceedings herein, whichever happens first.

3.	Alternatively,……the First Defendant be restrained from performing or undertaking any work or services for the Third Defendant or any other person or company, in breach of the non-competition clause in his employment contract with the Plaintiff date 1 March 2019, up until 17 April 2020 or the determination of the substantive proceedings herein, whichever happens first.

4.	……the First Defendant be restrained from directly or indirectly approaching and soliciting the Plaintiff’s staff with the intention to poach them to join the Fourth (sic) Defendant, in breach of the non-competition clause in his employment contract with the Plaintiff dated 1 March 2019, for a period of 6 months from the date of this order or the determination of the substantive proceedings herein, whichever happens first.

5.	Alternatively,…… the First Defendant be restrained from directly or indirectly approaching and soliciting the Plaintiff’s staff with the intention to poach them to join the Fourth (sic) Defendant, in breach of the non-competition clause in his employment contract with the Plaintiff date 1 March 2019, up until 17 April 2020, or the determination of the substantive proceedings herein . whichever happens first.

6.	…… the Defendants be restrained from any and all conducts breaching or inducing the breach of the ‘confidentiality’ clauses in the First and Second Defendants’ employment contracts with the Plaintiff, including but not limited to:

a.	further unauthorized disclosure and use of the Plaintiff’s confidential information and intellectual property copied on to the Second Defendant’s personal external hard-drive;
b.	further unauthorized disclosure and use of the Plaintiff’s confidential information and intellectual property howsoever obtained by the First and Second Defendants in the course of their employment with the Plaintiff.

7……. all the Defendants immediately deliver up any and all confidential information and intellectual property belonging to the Plaintiff, including copies of the Plaintiff’s confidential information and intellectual property on the Second Defendant’s personal external hard-drive and further copies made therefrom, to the Registrar of the National Court pending trial.
……

10.	I note the submissions of the parties.  I see 2 difficulties in granting these relief.  Firstly, I note that except for relief 6, relief 2, 3, 4, 5 and 7 appear substantive in nature.  I say this in view of the relief that are sought in the SoC.  Order 4 Rule 49(6) of the NCR states, and I read in part, Except otherwise expressly provided in the National Court Rules, Motions shall be for relief on interlocutory matters only and not for the substantive relief claimed in the originating process.  These substantive relief must be proven in a proper trial.  I cannot grant them in the interim in this manner with evidence that have not been properly examined or without considering the evidence of all the parties, and I also note the fact that pleadings have not yet closed.  The second reason is this.  Again, except for relief 6, relief 2, 3, 4, 5 and 7 relate to enforcement of the confidentiality clauses of the employment contracts of the 2 defendants, which apply and are enforceable for the duration of the 6 months period which commences from the date of termination or resignation.  In this case, the 2 defendants resigned in October of 2019.  The 6 months period therefore would have expired in April of this year, 2020.  In my view, the events appeared to have overtaken the purpose of these relief as sought in the notice of motion, and perhaps also in SoC.  I also note that the plaintiff is requesting this Court to exercise its powers to extend the 6 months period beyond what is stated in the contracts.  With respect, to do so may amount to abuse of the Court’s power.  The agreement between the parties, and in this case, the employment contracts, are private contractual relationships.  My role would simply be to interpret or make orders to enforce, their terms and conditions, or award damages where there is a breach.  It never has and I would think that it must never be the Court’s role to vary or construct new terms into an existing contract(s).  Justice Lenalia in Roderick Glen Brookes v. Magdalen Brookes (2014) N5751, stated and I read at paragraph 48 of his judgment:

Contents of a contract depend on the words used by the parties. Where a contract is in writing, there is a general rule that, the court will not look beyond what is contained in the writing to determine what its expressed terms are, unless there is extrinsic evidence to show otherwise. (See G.H. Treitel on “The Law of Contract” Fifth Edition at 134 and see also Fly River Provincial Government v Pioneer Health Services Limited (2003) SC705).  

11.	It is for these reasons that I decline to grant relief 2, 3, 4, 5, and 7.

12.	Let me address relief 6.  The plaintiff, in my view, has provided prima facie evidence of possible instances or claims where its intellectual property may have been downloaded or obtained without its consent.  The allegations are serious, and I cannot simply ignore the evidence at this juncture whilst the matter is before the Court pending trial.  An interim order whose effect will be to prevent further possible abuse or use of the plaintiff’s intellectual property, in my view and based on the evidence, may be warranted pending determination of the proceeding, or until further orders of the Court.  I will make variation to relief 6 to exclude the part which seeks to restrain the defendants regarding events that have occurred past the 6 months period after the termination or resignation of the 2 defendants in October of 2019.  I propose to and will grant relief 6 as follows,

6.	Pursuant to Order 12 Rule 1 of the National Court Rules, the Defendants are restrained from any and all conducts breaching or inducing the breach of the ‘confidentiality’ clauses in the First and Second Defendants’ employment contracts with the Plaintiff, including but not limited to:

(i)	further unauthorized disclosure and use of the Plaintiff’s confidential information and intellectual property copied on to the Second Defendant’s personal external hard-drive; and

(ii)	further unauthorized disclosure and use of the Plaintiff’s confidential information and intellectual property howsoever obtained by the First and Second Defendants in the course of their employment with the Plaintiff.

13.	But before I do so, I ask myself this.  Has the plaintiff met the requirements for this Court to grant the interim injunction?  In summary, the requirements for granting interim injunctions are, (i), the applicant must have an arguable case, (ii), the balance of convenience must favour the applicant, and (iii) whether an undertaking as to damages has been filed.  See case:  Chief Collector of Taxes v. Bougainville Copper Limited [2007] SC 853.

14.	In so far as arguable case is concerned, I note that the plaintiff is also planning, by its pleading, to, amongst others, seek injunctions against the defendants for the use of its intellectual property or properties and for their return.  The plaintiff also seeks damages for alleged inducement by the third defendant.  These allegations, in my view, appear to be valid, that is, based on the evidence that have been disclosed herein.  That said, I do not think the part of the claim where the plaintiff is seeking to enforce the confidentiality clauses, particularly against the first defendant where he is required not to be employed by a competitor of the plaintiff within 6 months after leaving employment, may have merit.  The 6 months period appeared to have lapsed in or about April of 2020.  But that said, I also note that the plaintiff is seeking damages for such alleged breaches, which in my view, also appear valid as a cause of action.  Prima facie evidence shows that the first and second defendant may be employed or engaged by the plaintiff’s competitor(s) including the third defendant, within 6 months after they had resigned from the plaintiff.  But let me make it clear that this is not an absolute finding; the second defendant has not yet been served; the pleadings have not been fully exhausted, and also, not all the evidence have been called in at this point in time.

15.	These said and in summary, I find that the pleadings and the evidence of the plaintiff demonstrates that it has an arguable case. 

16.	Regarding balance of convenience, I find that to favour the plaintiff.  Damages may not be an adequate remedy if I refuse to grant the interim injunction.  If these information, technology, or properties are still being used by the defendants, they must be stopped to avoid further possible irreparable damage from today till the date when this matter is resolved or determined by this Court.  I also note that the plaintiff has given an Undertaking as to Damages.  It was filed on 17 July 2020.  I find the undertaking valid.  There appears to be in place a valid guarantee which is provided by the plaintiff where the defendants may rely on in the event that the claim is dismissed and the defendants have suffered damages because of the grant of the interim orders.

EXERCISE OF DISCRETION FOR DEFAULT JUDGMENT

17.	Having considered the other issues and evidence filed to date by the parties and also after considering the pleading, I will consider and rule now on whether I should exercise my discretion and grant default judgment, that is, having already found that the third defendant has defaulted in filing its notice of intention to defend and defence.  

18.	I note that pleadings concerning the third defendant commences at paragraphs 28 to 33 of the SoC.  The plaintiff claims, amongst other things, the tort of inducement against the third defendant.  The plaintiff claims that the third defendant knew of the contractual relationships that existed between the plaintiff and the 2 defendants yet proceeded to induce or procure the 2 defendants to breach their contractual relationships with the plaintiff.  Consequently, the plaintiff claims, it led to the actions of the 2 defendants where they breached the confidentiality terms and conditions of their employment contracts.

19.	I find the alleged actions or accusations labelled against the third defendant to be deeply connected to or with the allegations in the pleadings that are labelled against the 2 defendants.  Therefore, it is my view that if default judgment is granted against the third defendant, it would prejudice the interest or defence of the 2 defendants.  This is not a straight-forward case like for example a debt recovery claim where default judgment can easily be obtained against individual defendants.  The relief that are sought against the third defendant are also dependent upon the facts, the relationships, and the contracts that the 2 defendants have or had with the plaintiff.  It would not make sense that for example, without establishing liability under steps A and B, that this Court will go on straight to assume liability by default under step C when step C’s liability is or may be dependent upon establishing liabilities under steps A and B.  Steps A and B of course may be referenced at the 2 defendants and step C may be referenced at the third defendant.  In my view and in the interest of justice and fairness, I believe that the plaintiff should be tasked to establish liabilities against the first, second and third defendants given their connections as alleged or pleaded in the SoC; that liability for the three defendants should be determined together and not on a piece meal basis.  

20.	I am therefore not convinced that I should exercise my discretion and grant default judgment in favour of the plaintiff against the third defendant.  I do so based on potential prejudice that may be caused to the 2 defendants in light of the pleadings, and I also do so in the interest of justice.

SUMMARY

21.	In summary, I, (i), refuse the plaintiff’s application for default judgment against the third defendant filed on 17 June 2020 and (ii), grant relief 6 with variation, to the plaintiff’s notice of motion filed on 10 March 2020.

COST

22.	Ordering cost is discretionary.  In this case, I will order costs for both motions to be, to the proceedings.  The plaintiff did not entirely succeed, and I note that only one party appeared to defend against the matter.  I also consider the fact that the matter is fresh and not all the evidence has been adduced including the pleadings which are yet to be finalized.

THE ORDERS OF THE COURT

23.	I will make the following orders:

1.	The plaintiff’s notice of motion for default judgment against the third defendant is refused.

2.	Relief 6 of the plaintiff’s notice of motion for injunctive relief is granted in that pursuant to Order 12 Rule 1 of the National Court Rules, the Defendants are restrained from:

(i)	further unauthorized disclosure and use of the Plaintiff’s confidential information and intellectual property copied on to the Second Defendant’s personal external hard-drive; and

(ii)	further unauthorized disclosure and use of the Plaintiff’s confidential information and intellectual property howsoever obtained by the First and Second Defendants in the course of their employment with the Plaintiff.

3.	Costs of the applications shall be to the proceedings.

4.	Time for entry of these orders is abridged to the date of settlement by the Registrar which shall take place forthwith.

The Court orders accordingly.
________________________________________________________________
Dentons PNG: Lawyers for the Plaintiff
Leahy Lewin Lowing Sullivan Lawyers:  Lawyers for the First Defendant