Ex Worker Accused Of Setting Up Rival Company
July 13, 2015 | Business Crime
A coffee retailer has accused a former worker of setting up a rival coffee roasting business, stealing confidential information and coffee recipes, and trying to poach its clients.
Sune Farrimond stood down from his role as general manager at Caffe Coffee -- part of the Retail Food Group, which owns Gloria Jeans and Esquires coffee shops -- in June 2014, to set up his own boutique coffee roaster.
But four months later, Caffe Coffee's lawyers sent him a letter asking him to "immediately cease and desist", accusing him of contacting its customers and suppliers.
They also asked him to comply with confidentiality obligations and return its records, including customer and supply lists, roasting recipes, technical specifications, plans, designs and research.
The company accused him of setting up in direct competition and approaching major clients to offer "significant discounts".
Mr Farrimond denied the allegations, and the matter was taken to the Employment Relations Authority (ERA).
It emerged Mr Farrimond had incorporated a company, The Village Roaster Ltd, in March 2013 -- while he was still employed by Caffe Coffee -- and had also purchased a Chinook Air Flow coffee roaster that same month.
He leased premises for his new venture eight days after he left the company.
Caffe Coffee said this showed he was taking steps during his employment to set up a competing business, and accused him of racking up a more than $3000 entertainment expenses bill on his company credit card by wining and dining clients "with the intention to divert them to his business".
It took issue with the "large amounts of alcohol" on the expenses claim. But the ERA said this was "speculative", and that a manager who was present during the majority of the client meetings did not complain at the time of excessive spending or suspicious conduct by Mr Farrimond.
It also said the company had accepted the receipts at the time, and only raised them during litigation some months later.
The ERA also found that Mr Farrimond had been open about wanting to set up his own company, saying his resignation letter "plainly states" his plans, and that there was "no obligation for an employee to disclose" that information.
His resignation letter said: "I intend on staying in the same industry, but return to a smaller boutique style of coffee roasting business."
"The email [resignation letter] should have given the applicant sufficient warning the respondent may be leaving to compete with it," the authority said.
"I am surprised no risk assessment was undertaken about the respondent's departure given the email and the imminent departure of a senior employee. There appeared to be little in the way of any formal handover between the applicant and respondent inferring there was little or no objection to the proposed competition."
It also ruled he had not breached his duty of fidelity by buying the coffee roaster in March, because it did not arrive until September, as it needed to be assembled from scratch and then freighted from Australia.
The ERA heard evidence that a client had told the company Mr Farrimond claimed he would match Caffe Coffee's blend of coffee. However the client said this was not the case.
Mr Farrimond denied saying he would try to match the blend, or even trying to do so, and the ERA agreed with him, saying it was "illogical" to think he would when he lacked the resources to meet the demands of such clients.
"The applicant's clients required higher volumes than the respondent appeared able to produce."
It also slated accusations he had stolen coffee blending recipes, branding it "mere speculation".
"There is no evidence Mr Farrimond physically removed the recipes. It is inferred he copied or memorised them given his alleged statements to clients about matching blends.
"I see nothing in the evidence produced ... inferring he memorised the applicant's recipes."
He also denied deliberately undercutting Caffe Coffee, but accepted he gave a client "sharp" pricing. He denied having inside information of Caffe Coffee's pricing structure saying it would have been out of date by the time he negotiated with that client, due to market fluctuations.
The ERA ruled any undercutting was "luck as opposed to actual knowledge".
In its decision, the ERA determined Mr Farrimond did not act unlawfully but said he had breached one element of his employment agreement by setting up his company while still working for Caffe Coffee.
"The clause requires that he seek written consent, which he did not," the authority said.
However, it said this was "inadvertent".
"His action appears to have been a one-off incident and was not repeated during his employment. The impact of the incorporation of the company upon the respondent appears negligible. There is no evidence this breach exposed any vulnerability for the employer," it said.
The ERA ruled the publication of the decision "should be sufficient penalty to mark any breach".
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