De Poi Consulting Pty Ltd v Dutton - [2015] SADC 67

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DE POI CONSULTING PTY LTD v DUTTON
[2015] SADC 67
Judgment of His Honour Judge Tilmouth
30 April 2015
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - PARTIES - GENERAL PRINCIPLES
Held in an action for injunctive relief and damages against the defendant for the alleged breaches of restraint of employment and non-solicitation provisions in contract of employment entered into between the parties:
1. The plainitff has demonstrated legitimate interests by way of its extant customer connections it was entitled to protect;
2. Clause 17.2.1 of the subject agreement which prevented the defendant from taking employment with a competitor for six months, went further in point of time and geographically than was reasonably necessary to protect those interests. That clause should however be read down as confined to this State for a period of two months.
3. In light of this conclusion, the non-solicitation provision contained in clause 17.2.2 for a period of six months is a reasonable one, once confined to the State of South Australia.
4. The several claims for damages fail for the lack of evidence and proof of causation.
Workers Rehabilitation and Compensation Act 1986 (SA) s 27(2), s 28; Return to Work Act 2014 (SA); WorkCover Corporation Act 1994 (SA); Vanderwell Products Ltd v McLeod [1957] RPC 185; Tank Living Corporation v Dunlop Industrial Pty Ltd (1983) 140 DLR (3d) 659; Jardin & Jardim Investments Pty Ltd v Metcash Pty Ltd (2011) 285 ALR 677; Peters American Delicacy Co Ltd v Patricia's Chocolates & Candies Pty Ltd (1947) 77 CLR 574; Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269; Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535; Bacchus Marsh Concentrated Milk Co Ltd (in Liq) v Joseph Nathan & Co Ltd (1919) 26 CLR 410; Buckley v Tutty (1971) 125 CLR 353; McHugh v Australian Jockey Club Ltd (2014) 314 ALR 20; NE Perry Pty Ltd v Judge (2002) 84 SASR 86; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 628; SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516; Queensland Co-operative Milling Association v Pamag Pty Ltd (1973) 133 CLR 260; Putsman v Taylor [1927] 1 KB 637; Ausdale Enterprises Pty Ltd (as trustee for Lovett Family Trust) v Sandford [2006] WASCA 191; Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449; IF Asia Pacific Pty Ltd v Galbally [2003] VSC 192; Herbert Morris Ltd v Saxelby [1916] 1 AC 688; C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd (2012) 114 SASR 299; Mason v Provident Clothing and Supply Co Ltd [1913] AC 724; Geraghty v Minter (1979) 142 CLR 177; Woolworths Ltd v Olson [2004] NSWCA 372; Wallis Nominees (Computing) Pty Ltd v Pickett [2013] VSCA 24; Cactus Imaging Pty Limited v Peters [2006] NSWSC 717; Integrated Group Ltd v Dillon [2009] VSC 361; Brilliant Lighting (Aust) Pty Ltd v Baillieu [2004] VSC 248; Maggbury Pty Ltd v Hafele Australia Pty LTd (2001) 210 CLR 181; OAMPS Gault Armstrong Pty Ltd v Glover [2012] NSWSC 1175; Sweeney v Astle [1923] NSLR 1198; Hellmann Insurance Brokers v Peterson [2003] NSWSC 242; Austin Knight (UK) Limited v Hinds [1994] FSR 52; Threlfall v ECD Insight Ltd & Anor [2012] EWHC 3543 (QB); Messrs J and E SHepherd v Paul David Letley [2012] ScotSC 43; Back Office Ltd v Percival & Ors [2013] EWHC 1385 (QB); Baldwins (Ashby) Ltd v Maidstone [2011] EWHC B12 (Mercantile); QBE Management Services (UK) Ltd v Dymoke & Ors [2012] EWHC 80; Ecco Personnel Pty Ltd v Barrett [1996] NSWSC 475; Barrett v Ecco Personnel Pty Ltd [1998] NSWCA 30; Harlow Property Consultants Pty Ltd v Byford [2005] NSWSC 658; Attwood v Lamont [1920] 3 KB 571; SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516; Humphries v Proprietors Surfers Palms North Group Titles Plan 1955 (1994) 179 CLR 597; Whitlock v Brew (1968) 118 CLR 445; Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332, referred to.
Lindner v Murdock's Garage (1950) 83 CLR 628; Equico Equipment Finance Ltd v Enright [2009] NZERA 411; Blatch v Archer (1774) 98 ER 969, applied.
IRAF Pty Ltd v Graham [1982] 1 NSWLR 419; Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187; AGA Assistance Australia Pty Ltd v Tokody (2012) 224 IR 219; Marlov Pty Ltd v Murat Col. [2009] NSWSC 501; Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449, distinguished.
Rentokil Pty Ltd v Lee (1995) 66 SASR 301; NE Perry Pty Ltd v Judge (2002) 84 SASR 86, discussed.

DE POI CONSULTING PTY LTD v DUTTON
[2015] SADC 67
Table of Contents
Litigation history
The parties
Workplace rehabilitation in South Australia
Termination of the contract of employment
The current contract of employment
Restraint of trade – general principles
Protectable interests?
Restraint of trade – employment constraint
Restraint of trade – case analogies
Restraint of trade - analysis
Anti-solicitation - construction
Severance – duration in point of time and geographic extent
Damages – general considerations
Damages – loss of chance
Specific breaches of covenant
Solicitation of Kate De Garis from Gallagher Bassett
Solicitation of Laura Bradley from Gallagher Bassett
Solicitation of Emma Goodwin from Gallagher Bassett
Solicitation of Mr Pirosis and Ms Kerslake from EML
EML Christmas Drinks
Dealings with Mr Carpenter of Gallagher Bassett
Dealings with Ms Schmidtke of Gallagher Bassett
Dealings with Ms Parker of Gallagher Bassett
Dealings with Ms Bailey of Gallagher Bassett
Issues of credit
Conclusion and orders
Litigation history

The plaintiff prosecutes these proceedings for injunctive relief and damages against the defendant for the alleged breaches of restraint of employment and non-solicitation covenants contained in a contract of employment entered into between them.
An application for an interlocutory injunction filed on 19 December 2014, first came before another Judge of the court in the Short Notice List, just before Christmas 2014. The Judge declined to issue an injunction, instead referring the matter for urgent trial. Set for two days on the estimation of counsel on both sides, the trial commenced on Monday 19 January 2015 and extended over nine sitting days before concluding on 11 February 2015. In the meantime, Ms Dutton gave undertakings through her counsel to ‘remain on leave’ as and from 24 December 2014 in her present employment with IPAR Rehabilitation Pty Ltd (IPAR) and not to ‘solicit any of the clients’ of the plaintiff.[1]
[1] T11.30-.37, T15.1-.5, T17.21-.24, 22 December 2014, Judge Brebner.
These reasons deal with the applications for injunctions on a permanent basis and the several claims for damages. An interlocutory judgment was given on 19 February 2015 declining to make an order enforcing an entire employment restraint, whilst at the same time affirming a non-solicitation constraint. The brief reasons then given, are ‘Annexure A’ to this judgment. The basis of so ruling is explained throughout.
Claims for alleged breaches of the Corporations Act 2001 (Cth) and of fiduciary duty were not pursued. Nor was the allegation that Ms Dutton had actually taken or used confidential information belonging to the plaintiff, an allegation denied by her.[2] Rather, the trial was focused on breaches of non-competition and non-solicitation clauses in the employment contract and consequential damage.
[2] T260.27-.30, Exhibit D9 para 20.
The parties
De Poi Consulting Pty Ltd (De Poi), is in the business of providing services for the rehabilitation and the return to work of workers injured in the workplace, under the legislative schemes provided for in the Workers Rehabilitation and Compensation Act 1986 (SA), and its successor the Return to Work Act 2014 (SA). The latter came into effect on 1 July 2014. The workers compensation scheme operating in this State covers some 50,000 employers and upwards of 430,000 employees.[3] De Poi has provided such services in South Australia since 1995. It has branch offices in Victoria and New South Wales. De Poi has employed as many as 50 to 60 staff at the peak of its operations in 2010. Presently it retains around 30 employees on its payroll. Its sole Director, the witness Sandra De Poi, was coincidentally a Director of the WorkCover Corporation from 2002 until early 2014.
[3] Exhibit P8, para 10.
Carissa Dutton (Ms Dutton) first commenced full time work with De Poi on 15 February 2010 as a rehabilitation consultant. She holds a number of qualifications, including a Bachelor of Behavioural Science conferred by Flinders University in 2008. After a period of six months probation, she was placed on a second contract of employment dated 3 June 2010. In February 2012 she was promoted to the role of ‘Leader in Strategy and Development’ and thereby became responsible for the supervision of between 12 to 15 return to work consultants in De Poi. In this capacity her responsibilities included the management of a portfolio of injured workers, sourcing new employment for them, as well as assuming leadership responsibilities over a ‘team of … consultants to mentor …’.[4]
[4] Exhibit P4, para 29.
She was promoted to this vacant leadership position effective from 15 February 2012, on a gross salary of $77,500 per annum. Her salary base had in fact ‘incrementally increased from $50,000 gross … in recognition of her good performance.’[5] In late 2013 she voluntarily relinquished this higher position, preferring instead to resume in the role of rehabilitation consultant, for personal reasons. The contract of employment was re-written to reflect the change to the lesser position and reduced responsibilities.
[5] Exhibit P4, para 29.
Workplace rehabilitation in South Australia
Most of De Poi’s business derives from referrals by the two sole agents retained by the WorkCover Corporation of South Australia (the Corporation), namely Gallagher Bassett Services Pty Ltd (Gallagher Bassett) and Employers Mutual Limited (EML). Such agents are appointed by the Corporation pursuant to the WorkCover Corporation Act 1994 (SA), the former having approximately 51 per cent of its business and the latter 49 per cent, in South Australia. EML was appointed originally as sole agent in 2006, whereas Gallagher Bassett was appointed in 2012.
Referrals from a claims agent cannot occur unless the consultant is placed on the panel of consultants of the agent, and they cannot be made other than by the agent. De Poi is on the consultant panels for both agents. It is the claims agent who selects rehabilitation providers for inclusion on such panels, on which there are according to the evidence of Ms De Poi, 10 or 14, each competing ‘with one another for referrals …’.[6] Mr Knapp, currently a manager with De Poi, estimated there are about 10 case managers currently working at Gallagher Bassett and approximately 100 at EML.[7]
[6] T143.4-.11, Exhibit P4, para 7.
[7] Exhibit P8, paras 22 and 30.
Referrals from the claims agents were described in evidence as either ‘generic’ – that is by referral to the consultancy firm at large – or as ‘direct’ – that is referral to a specified person – in the employ of the consultant or service provider.[8] A small proportion of De Poi’s work also derives from ‘self-insured’ employers. This occurs outside the claims agent referral system as such. At relevant times to these proceedings there were 68 such self-insurers in South Australia, not to mention numerous State and Federal Government Agencies, Local Government Councils and Comcare.[9]
[8] Exhibit P4, para 9, T318.21-.30.
[9] Exhibit P5, Annexure SD-1, Exhibit P8, para 8, T141.16-.20.
Based on her experience and understanding of matters, Ms De Poi estimates 40 per cent of the WorkCover scheme is covered by self-insurers, so that the balance of 60 per cent is managed exclusively by Gallagher Bassett and EML, thus erecting a virtual duopoly in that arena. Of this she estimates about one-fifth to one-sixth constituted referrals to De Poi.[10] Ms De Poi’s evidence was that work acquired from EML and performed by Ms Dutton, was ‘negligible’.[11] This is consistent with Ms Dutton’s estimate that ‘I performed very little work for EML over the years’.[12] IPAR conducts its business in South Australia and in a number of the other Australian States and Territories. It is on the WorkCover panels for referrals from Gallagher Bassett and EML, thereby directly competing with De Poi for work of that nature. It had received many referrals from the two claims agents during the period of time Ms Dutton was working for De Poi.
[10] T141.23-.33.
[11] Exhibit P5, para 32.
[12] Exhibit D10, para 11.
A good deal of evidence was devoted to the singular importance of the nature of professional relationships between the rehabilitation consultants and the claims agents. In the first place, the quality of service delivery was considered critical in securing further referrals. In the words of Ms Johnson IPAR’s Regional Manager for South Australia, Western Australia and the Northern Territory, what is ‘important is their ability to deliver a service that they have been asked to deliver … if they can get the job done, then that’s what’s going to get the work through’ and ‘the best business development is by doing a good job’.[13] Under cross-examination she acknowledged the significance of ‘fostering of the relationships with the claims agents themselves, in order that they understand that you are good at your job’.[14] She further acknowledged growth targets were an essential part of the ‘core competencies and position’ at IPAR.[15] Ms Dutton herself emphasised the need for demonstrating to case managers ‘that you can do a good job on their files,’ to ‘demonstrate good and reliable performance’ and that ‘work will follow good performance’.[16] She had in fact emphasised the importance of such relationships during her job interviews with IPAR.[17]
[13] T515.35-516.6, T531.24-.27.
[14] T817.14-.17.
[15] T319.15-.24.
[16] T320.24-.31, T316.27-317.23.
[17] T320.1-.19.
In his affidavit evidence, Mr Knapp described the relationship between the consultants and the case managers at Gallagher Bassett and EML as a ‘close and personal one’, and of De Poi’s expectation ‘that consultants will generate direct referrals as a result of those relationships’.[18] Ms Dutton stated that she was encouraged by De Poi to increase her level of referrals, that this was ‘one of our targets’.[19] She conceded having ‘established strong business relationships with the claims agents’.[20]
[18] Exhibit P8, paras [4]-[5].
[19] T316.15-.20.
[20] T310.7-.10.
A second critical attribute of the referral relationship was what might be described as an unwritten taboo on touting. The nature of this sensitivity to overt marketing was explained initially by Ms De Poi:[21]
[21] T203.2-.10.
Referrals are never obtained through asking for work. No.1 you have to be on the panel approved by the agent. No.2, you could only get referrals - and I'm sure Carissa can support this - through relationships with the case manager and how well you do your job, you get work. You never say 'Can I have work?', because the relationship is critical to (A) getting the referral (B) managing the claim and (C) the outcome. Relationships are critical in this industry.
And a little later under cross-examination:[22]
QEspecially when you say ‘extremely frowned upon in the industry to approach case managers or request referrals'; what is your basis for saying that.
AAgain, I'm happy to say it again; I think I answered that, that it's frowned upon. The agents are very clear who is on their panel. It's a shrinking market and quite a competitive market and relationships again are important. When a provider is not getting work the agents are quite rigid about rehab companies throwing drinks, dinner parties, approaching their staff for work, so how the hierarchy works is that the agents pick a panel of rehab providers, the agents have managers and even rehab managers to manage, provide, interface then the staff of those companies interface with the individual case managers, build relationships for the purpose of resolving claims. No-one can - it's inappropriate to ring up and say 'Can I have work?', and it's extremely inappropriate for a consultant to ring up a case manager and ask for work.
And still later:[23]
… as a normal practice within the rehab industry ringing up and specifically asking for work is frowned upon.
[22] T207.32-208.12.
[23] T209.18-.19 and refer T211.23-.29.
Ms Dutton entirely accepted this state of affairs:[24]
[24] T402.5-.13.
QYou agree that in dealings with the claims managers any marketing needs to be subtle.
AYes.
QThe claims agents, I suggest, prefer direct requests for work for consultants on their panel.
AI'd agree with that.
QThey don't like you ringing up and saying 'Can I have some more work?'
AThat's correct.
And:[25]
QBecause you can’t have your individual consultants out there marketing directly to claims agents, because that is frowned upon.
AYes. It’s not frowned upon. I don’t think it’s allowed.
[25] T518.30-.34.
Much the same understanding was apparent in the evidence of Ms Johnson:[26]
QI understood your evidence yesterday to be to the effect that you can't have your individual consultants out there marketing directly to claims agents because that's frowned upon or otherwise prohibited.
AYep.
QWhen you said yesterday 'there was no need for her to go out and meet with people or sell herself or IPAR' that would be something frowned upon anyway.
ANot as a branch manager. As an individual consultant you can't be organising to meet with case managers and take them out for lunch and that sort of thing but in a management position then it's considered more appropriate.
[26] T568.32-569.6.
Termination of the contract of employment
The current contract of employment effective from 15 January 2014, was counter-signed by Ms Dutton on 3 February 2014. This provided in clause 18.1, for unilateral termination by either party upon four weeks’ notice to the other. It is accepted on both sides that the requisite four weeks notice was duly given by Ms Dutton. In early October 2014, Ms Dutton indicated to Ms Hutchings the Operations Manager of De Poi, that she intended to resign in order to study a Masters in 2015 and possibly travel in the meantime. De Poi agreed, on that understanding of matters, to truncate the notice requirement from four to two weeks.[27] Ms Dutton had resolved in her own mind as early as 30 July 2014, that she wanted to leave De Poi. She had in fact begun looking for alternative employment by then.[28] Her last day with De Poi was 10 October 2014.
[27]T219.24-220.13, 221.3-.5.
[28] Exhibit D9, para 30.
Although by all accounts Ms Dutton was well regarded, her self-professed reasons for leaving were that by mid-2014 she had grown unhappy at De Poi due to work pressures and stress.[29] Indeed Ms De Poi regarded her as ‘one of De Poi’s best performers … usually achieved or exceeded the budgets … set for her …’.[30] Ms Dutton was additionally unhappy that an employee incentive scheme was unilaterally withdrawn and because the work environment had deteriorated due to ‘dramatic staff turnover’.[31]
[29] T333.1-349.9.11.
[30] Exhibit P4, para 41.
[31] Exhibit D9, paras 26-30.
On 8 October 2014 she completed an online ‘employee exit survey’. In this she stated the reason for leaving De Poi was ‘further study’, that her degree of job satisfaction as ‘fairly satisfied’, that De Poi had ‘good people to work with’ and her time there ‘has been mainly positive … minus the last 3-4 months.’[32] Under cross-examination by Mr Roberts SC, counsel for the plaintiff, Ms Dutton admitted lying on this occasion, explaining that she wanted the period of notice reduced to enable her to commence employment with IPAR ‘as early as possible’.[33] In her first affidavit she elaborated on the reasons for giving those false answers:[34]
In the course of that conversation, Ms Hutchings asked “what are you going to do?” I was very nervous about being asked this – I had been with the Plaintiff for four and a half years, and I did not want a negative send off. I was fearful that if I told them where I was going then they would walk me out and make a big scene. I said I wasn’t sure – that I think I might apply for a masters, do some travel, maybe return to student life and get a job in a café. As I saw it, it ultimately shouldn’t have been their concern where I was going, and I just wanted to keep the peace and leave in an orderly manner. I was scared about how Ms De Poi would react.
[32] Exhibit P4, SD-7 para 33.
[33] T337.38- 338.17.
[34] Exhibit D9, para 33.

She further accepted under cross-examination that a ‘significant part’ of what she said about her departure was ‘to avoid the operation of the restraint’, but that ‘there were also other reasons … I was scared, that’s why I didn’t say anything’, and she appeared to accept that De Poi might have a legitimate concern as to where she was going, as proved to be the case.[35] It emerged that for the greater portion of the notice period, Ms Dutton took annual leave, in addition to two days sick leave on 30 September and 1 October 2014.[36] Ms Dutton might have acted somewhat brazenly in taking employment so soon with a competitor objectively viewed, and yet in these matters she presents as somewhat naïve but sincere in what she has said and in what she has done.
[35] T340.33-341.3.
[36] T341.6-.19, T275.16-.24.
The fears expressed by Ms Dutton were genuine enough given that she had informed IPAR in general terms of the restraints before executing her contract of employment with it.[37] That fear could only have been compounded by her expectation that De Poi would seek to enforce them, as has also proven to be the case.[38] By the same token, there can be no denying the force behind Ms De Poi’s stance that had she known the resignation was submitted to enable Ms Dutton to take a new position with a competitor, she would have managed the exit strategy quite differently.[39] Without going into the finer detail, it would clearly have otherwise made sound business sense to aim at shoring up relationships with the claims agents on existing referrals, whilst at the same time insulating Ms Dutton from contact with existing clients, as well as restricting further access to confidential or sensitive information, within the four weeks of the resignation period.
[37] T349.25-350.8.
[38] T354.2-.3.
[39] Exhibit P5, paras 16-24, T186.13-18, T205.15-.28, T230.31-231.8.
Ms Dutton commenced employment with IPAR as Branch Manager of its Adelaide office on 13 October 2014. She continues to be employed in that position to the present time, although as mentioned, she has remained effectively on leave since 24 December last year, at least until the interim orders took effect on 19 February 2015.
The current contract of employment
The precise terms of the restraint provisions within the subject contract of employment are contained within clauses 17.1-17.5:[40]
[40] Exhibit P1, pp 82-83.
17    RESTRAINT
17.1   Definitions
In this clause 17:
17.1.1       Engage in means to carry on, participate in, provide finance or services, or otherwise be directly or indirectly involved as a shareholder, unit holder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier.
17.1.2       Business means the business of the Group in relation to providing workplace rehabilitation or allied health services.
17.2   Covenants
The Employee undertakes to the Employer that the Employee will not:
17.2.1       engage in any business or activity providing the same or similar services to that of the Business;
17.2.2       solicit, canvass or approach any person who was at any time during the six month period ending on the cessation of the Employee’s employment a Client of the Business with a view to obtaining the custom of that person in a business that is the same or similar to the Business and is in competition with the Business;
17.2.3       interfere with the relationship between the Business and its Clients, customers, employees or suppliers; or
17.2.4       induce or assist in the inducement of any employee of the Business to leave that employment.
17.3   Duration of covenants
The undertakings in clause 17.2 end on:
17.3.1       the date six Months after the date on which the Employment ends;
17.3.2 the date three Months after the date on which the Employment ends;
17.3.3       the date two Months after the date on which the Employment ends;
17.4   Geographic application of covenants
The undertakings in clause 17.2 apply within:
(a)    any State or Territory in which the Business operates;
(b)   South Australia;
(c)    Victoria;
(d)   New South Wales;
(e) 20 kilometres of any premises from which the Business operates.
17.5   Interpretation
Clauses 17.2, 17.3 and 17.4 have effect together as if they consisted of separate provisions, each being severable from the other. Each separate provision results from combining each undertaking in clause 17.2 with each period in clause 17.3 and combining each of those combinations with each area referred to in clause 17.4. If any of those separate provisions is invalid or otherwise unenforceable for any reason, the invalidity or unenforceability does not affect the validity or enforceability of any of the other separate provisions or other combinations of those separate provisions of clauses 17.2, 17.3 and 17.4.
The covenants provided for in clause 17.2.1 may be conveniently described as ‘employment’ constraints, those in 17.2.2, 17.2.3 and 17.2.4 as ‘solicitation’ constraints, those in 17.3 as ‘time’ constraints and those in clause 17.4 as ‘geographic’ constraints, and together generically as ‘restraint of trade provisions’. Clause 17.5 was described by counsel as a ‘ladder’ provision affecting severance.
It is the case for the plaintiff that taking employment with IPAR as a competitor of De Poi, breaches the restrictive covenants contained in clause 17.2.1. It is further alleged that following the cessation of employment on 10 October 2014, Ms Dutton actively solicited or canvassed referrals to IPAR, with a view to obtaining their custom in breach of the non-solicitation covenants, particularly clause 17.2.2. As a consequence, De Poi alleges it has lost referrals it otherwise would have obtained, thus resulting in a significant reduction in revenue. The particulars of those breaches are dealt with later, as are the various heads of damage claimed.
Restraint of trade – general principles
The books abound with decisions pertaining to restraint of trade provisions, including those in the context of contracts of employment. The High Court acknowledged in Lindner v Murdock’s Garage,[41] that employers holding a relevant protectable interest, can attain effective protection against an employee engaging in a competitive business, when the employee makes use of the knowledge and influence gained over customers of the former employer. In Rentokil Pty Ltd v Lee,[42] Doyle CJ summarised the applicable principles in the following terms:
It is well established by the cases that an employer who has a protectable interest is not limited to a restraint which prevents the specific conduct which would infringe that protectable interest. In other words, the employer is not restricted to a restraint which prohibits solicitation of former customers or making use of confidential information. It is well established that an employer may restrain a former employee from engaging in a business when to do so is likely to present an opportunity to behave in a manner which would infringe upon or damage the employer's protectable interest. That is what the employer has done here, and in principle that is permissible.
His Honour added:[43]
In my opinion the principle underlying the cases is that an employer with a relevant protectable interest can restrain an employee from accepting a position the nature of which is such that the employee would be likely to utilise confidential information or trade connections which have been acquired in the course of the employment. A restraint against accepting such a position will be read in a sensible fashion and, ordinarily, as not intended to apply to such a position in name but in which there is no risk of anything happening against which the employer could reasonably require protection. But if the employer identifies positions as subject to the restraint, being positions which do not give rise to the relevant risk, then it seems to me that on its face the restraint has gone too far.
[41] (1950) 83 CLR 628, 653-654, 636.
[42] (1995) 66 SASR 301, 304.
[43] Ibid, 305.
It follows that an employer is not limited to protection against mere competition, since the fortification provided by the law extends to the legitimate interests of an employer in the nature of proprietary interests, including the employer’s trade secrets, confidential information and goodwill comprising customer connection: Vanderwell Products Ltd v McLeod,[44] Tank Lining Corporation v Dunlop Industrial Pty Ltd,[45] Koops Martin Financial Services Pty Ltd v Reeves.[46] The protection against unfair competition is engaged when an ex-employee makes use of customer connections established through personal contact, when an employee makes use of the knowledge and influence over customers acquired in the former employ, or when it is demonstrably likely to ‘present an opportunity’ to infringe the protectable interest: Rentokil Pty Ltd v Lee,[47] NE Perry Pty Ltd v Judge.[48] The latter kind of anticipatory protection was described in Jardin and Jardim Investments Pty Ltd v Metcash Ltd,[49] as extending to the ‘possibility’ of ‘business connection’ being adversely affected by the use of that ‘personal knowledge and influence’.
[44] [1957] RPC 185, 193.
[45] (1982) 140 DLR (3d) 659, 664.
[46] [2006] NSWSC 449, [28].
[47] (1995) 66 SASR 304.
[48] (2002) 84 SASR 86, [22], [61], [101].
[49] (2011) 285 ALR 677 [97].
The general common law principles referred to by Doyle CJ derive from what Sir Owen Dixon described in Peters American Delicacy Co Ltd v Patricia’s Chocolates & Candies Pty Ltd,[50] as a mechanism for resolving the tension between freedom of contract and freedom of trade:
… by the adoption of a clear rule making it necessary to justify all contracts in restraint of trade as reasonable in the interests of both parties and by applying the test of reasonableness according to the situation the parties occupy and so recognising the different considerations which affect employer and employee …
The line to be drawn between the regulation of acceptable commercial relations and those in restraint of trade, is not however always an easy one to draw: Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd.[51]
[50] (1947) 77 CLR 574, 590.
[51] [1968] AC 269, 327
Moving from the generic to more specific principles, an examination of the authorities establish the following propositions of relevance to this action:
·restrictive trade covenants are unenforceable as a general rule because they impede freedom of trade and the individual liberty of action in trading: Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd,[52] Bacchus Marsh Concentrated Milk Co Ltd (in Liq) v Joseph Nathan & Co Ltd,[53] Buckley v Tutty,[54] McHugh v Australian Jockey Club Ltd;[55]
[52] [1894] AC 535, 565.
[53] (1919) 26 CLR 410.
[54] (1971) 125 CLR 353, 376.
[55] (2014) 314 ALR 20.
·this position is displaced when the restraint is reasonable according to the interests of the parties in the circumstances of a particular case: Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd,[56] Esso Petroleum v Harpers Garage (Stourport) Ltd;[57]
[56] [1894] AC 535
[57] [1968] AC 269, 300.
·it is a question of law for the court to determine whether the circumstances do or not justify the particular restraint: Lindner v Murdock’s Garage,[58] Buckley v Tutty;[59]
·the test of reasonableness for the duration of a non-competition covenant, is the period of time required to break the customer connection with the employee, or the time it would take for a replacement to build up or create the necessary connections or relationships: NE Perry Pty Ltd v Judge,[60] IRAF Pty Ltd v Graham;[61]
·the restraint must impose no more than adequate protection for the party it favours, so that if the court is satisfied the restraint confers greater protection than can be justified, the restraint is unreasonable and invalid: Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd;[62]
·a restraint of trade can be validated when the offending clauses can be properly read down or severed: SST Consulting Services Pty Ltd v Rieson;[63]
·whether the parties have bargained from a position of equality or inequality is one circumstance to consider in determining whether the covenant is reasonable, but it does not save from invalidity a covenant found to be unreasonable or contrary to the public interest: Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd,[64] Queensland Co-operative Milling Association v Pamag Pty Ltd;[65]
·an assessment of the reasonableness of a restraint is to be made as at the time the contract was entered into: Lindner v Murdock’s Garage,[66] Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd,[67]
·subsequent developments may be considered, making due allowance for potential developments in the role of the employee or the developing nature of the business: Putsman v Taylor,[68] Ausdale Enterprises Pty Ltd (as trustee for Lovett Family Trust) v Sandford,[69] Koops Martin Financial Services Pty Ltd v Reeves;[70]
·the reasonableness or otherwise of a restrictive covenant is to be assessed having regard to all the surrounding circumstances, including the documentary context, however the mutual intentions of the parties are not conclusive of that question: Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty,[71] IF Asia Pacific Pty Ltd v Galbally;[72]
·the onus of establishing a restraint is no wider than is reasonably necessary to protect lawful interests, rests on the party seeking to enforce it, whereas the onus of establishing the restraint is injurious to the public rests on the party alleging it to be so: Herbert Morris Ltd v Saxelby,[73] Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd,[74] C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd;[75]
·a stricter or more rigorous (i.e. less favourable) view to the employer is taken of covenants in restraint of trade contained in employment contracts, than it is in commercial contracts: Mason v Provident Clothing and Supply Co Ltd,[76] Herbert Morris Ltd v Saxelby,[77] Geraghty v Minter,[78] Woolworths Ltd v Olson,[79] Wallis Nominees (Computing) Pty Ltd v Pickett.[80]
[58] (1950) 83 CLR 628, 645, 653.
[59] (1971) 125 CLR 353, 376.
[60] (2002) 84 SASR 86, [28]-[31], [64], [101].
[61] [1982] 1 NSWLR 419, 429.
[62] (1973) 133 CLR 288, 306.
[63] (2006) 225 CLR 516, [48].
[64] (1973) 133 CLR 288, 317.
[65] (1973) 133 CLR 260, 268.
[66] (1950) 83 CLR 628.
[67] (1973) 133 CLR 288, 318.
[68] [1927] 1 KB 637, 643.
[69] [2006] WASCA 191, [9].
[70] [2006] NSWSC 449, [53].
[71] (1973) 133 CLR 288, 308.
[72] [2003] VSC 192, [103].
[73] [1916] 1 AC 688, 715.
[74] (1973) 133 CLR 288, 308, 317.
[75] (2012) 114 SASR 299, [55].
[76] [1913] AC 724, 731, 738-739, 746.
[77] [1916] 1 AC 688, 706- 707.
[78] (1979) 142 CLR 177, 185.
[79] [2004] NSWCA 372, [38].
[80] [2013] VSCA 24, [14].
Given the case for De Poi of actual and anticipated breaches of confidence, leading it to seek enforcement of the restraint on Ms Dutton engaging in any business providing similar services, or soliciting work from clients of De Poi, the validity of the above restraint provision(s) therefore depends upon an application of the these principles to the particular facts of the case.
Protectable interests?
There can be no doubting De Poi retains relevant legitimate protectable interests based on its confidential information, trade secrets, client connections and customer relationships, particularly in the WorkCover rehabilitation service provider sector of the industry. Gallagher Bassett and to a lesser extent EML are De Poi’s main clients by far. There is not much evidence quantifying what amount of work De Poi undertook for self-insurers.
No doubt Ms Dutton gained wide access to the information systems of De Poi upon promotion to the position of Manager in 2012. That access was not restricted or curtailed when she reverted to her previous consultant role. The 21,500 or so files handled by De Poi contain personal details of the workers concerned, the charges billed, consultant and outcome reports, referral details, employee details, management reports (including fees generated, and performance and referral trends) and referring service details.[81] She also had access to in-house confidential templates,[82] developed in 2010. These were revised to adapt to changes in the South Australian market, WorkCover and WorkCover agent requirements and to reflect recent legislative changes.[83] Ms Dutton was not however involved in revising the templates as these were really ‘something beyond [her] knowledge’.[84]
[81] Exhibit P8, paras 95-97; T177.9-.31, T303.19-304.12, T307.12-.38.
[82] Ibid, paras [98]–[100].
[83] T147.10-.22, T153.24-.37, T300.27-302.33, Exhibit P8, paras 98-99.
[84] T301.22-.30.
In the capacities as Leader in Strategy and Development, she assumed significant additional responsibilities. These included liaison for a limited time with upper level management regarding the strategic development of the company,[85] the performance management of a team of 10 consultants, mentoring and coaching new staff, undertaking weekly file reviews, monitoring adherence to action plans, supervising monthly file closures and performance reports, and mentoring individual rosters to work plans.[86] Although the information as to closure outcome rates was already out of date by the time she left De Poi, that information still remained of some use.[87]
[85] T290.3-.23.
[86] T298.10-.28, Exhibit P8, para 70.
[87] T181.14-31.
Ms Dutton claimed in her second affidavit that such information as she had gleaned from her previous employ was ‘of limited significance’, not of ‘any particular value to competitors’, and ‘no longer having currency’. She later conceded to be in no position to comment on its significance, adding that she was not actually aware of the extent of the access she was given.[88] The potential for IPAR benefiting from these sources of information was heightened when one considers IPAR’s internal core competency indicators for the position of Manager, included meeting productivity and billing targets.[89]
[88] T304.13-307.37.
[89] Exhibit P1, pp 4, 6 and 21, T319.15-.34.
Despite her access to much of De Poi’s trade secrets, in reality she had little need to access the more sensitive material in her downgraded position, which normally entailed the retrieval of relatively low level information of a clerical or file nature, rather than of a management nature. She was not, importantly, in that last capacity at De Poi, engaged in sales or marketing. Even so the position remained as Brereton J expressed it in Cactus Imaging Pty Limited v Peters:[90]
…the employee may have acquired influence over or special knowledge of the clientele as a result of the seniority of his or her position, or where the employee’s role includes obtaining and extending custom for the employer’s business.
[90] [2006] NSWSC 717, [32] and [33].
Restraint of trade – employment constraint
Beginning first with Clause 17.2.1, the restraint against employment provided for therein is certainly expressed widely in terms of subject matter, time span and geographic reach. As to subject matter it binds Ms Dutton not to ‘engage in’ any business ‘providing the same or similar services to that of the Business’ of the plaintiff’. The ‘Business’ is defined in paragraph 17.1.2 to mean ‘…the business of the Group in relation to providing workplace rehabilitation or allied health services’, and the ‘Group’ is defined in Clause 17.1 as meaning De Poi ‘and any related body corporate Employer as that expression is defined in the Corporations Law’. Even though clause 17.1 does not come directly into play, the expressions ‘workplace rehabilitation’ and ‘allied health services’ in clauses 17.1.2 are significant. It can be seen that the ambit of Clause 17.2.1 is not contingent upon accepting a position in a business in competition with De Poi. The prohibition is broader than that, as it extends to the business of workplace rehabilitation or allied health services through clause 17.1.2.

It was submitted by the defendant that clause 17.2.1 effectively prevents employment in all wider fields, to the extent that Ms Dutton was effectively limited to working in areas totally unrelated to workplace rehabilitation and allied health services. It was on the other hand submitted on behalf of the plaintiff that clause 17.2.1 only extends to the delivery of workplace injury fee for service rehabilitation consulting services. It is accepted that IPAR is another provider of the very same services on either construction.
The evidence of Ms De Poi was that De Poi: [91]
… provides services that involve rehabilitation and return to work, job placements and allied health and labour market services to workers who have been injured at work and have lodged a claim for workers compensation.
[91] Exhibit P1, para 5.
She expanded on this during her evidence-in-chief:[92]
QWhat is the purpose of the services for the purpose of the WorkCover Act.
AThe purpose of the services are to assess the needs of the individual claim, the circumstances surrounding claim, and to make recommendations if appropriate to effect a speedy return to work and those recommendations can vary in nature.
[92] T143.13-.19.
It is clear enough that the relevant business is workplace rehabilitation and allied health services. For practical purposes this translates to rehabilitation services supplied to injured workers on referral from either Gallagher Bassett or EML pursuant to the existing workers compensation scheme administered by WorkCover, operating in South Australia. On that footing the prohibition, properly construed, bans Ms Dutton from working with any service provider on the Gallagher Bassett and EML panels. On the further footing that it extended to allied health services, it therefore serves also to prevent her from providing workplace rehabilitation or allied services to self-insured employers with respect to workplace injured employers, for a fee.
The alternative construction would not prevent her from accepting employment with self-insured employers, as she would then be providing such services for a wage as an employee, as distinct from providing like services on a fee for service basis as an independent consultant or self employed rehabilitation service provider. It might be mentioned that both Ms De Poi and Ms Dutton considered taking rehabilitation employment with self-insurers would not breach the restraints in clause 17.2.1,[93] but that of course is not conclusive of the matter. Ms De Poi explained the difference between the two by reference to a list of the self-insured employers:[94]
QIs there any distinction relevantly between the services that De Poi Consulting provides as distinct from the organisations that are advertising for employment at Exhibit 2.
AThe distinction is that we're a consulting company delivering a consulting fee for services in the area of rehabilitation and return to work. So it's quite different to using the same skills in a different context and a different environment.
[93] T332.33-333.01, T143.31-144.12160.1-.8.
[94] T144.4-.12.
Restraint of trade – case analogies
Having considered the authorities at large, it is opportune to review the cases in terms of specific restraint clauses as they may bear on the appropriate resolution of this particular case. First reference is again to Lindner v Murdock's Garage.[95] That case involved this clause in a written service agreement contract:
The workman will not during his employment or within one year from the determination thereof in any way carry on or be engaged concerned or interested … in the business of garage proprietors … or in any other similar business now and hereafter carried on by the employers within the same area.
A schedule to the agreement applied the sales territory for ‘motor cars, trucks and tractors etc’, to two areas, one surrounding Crystal Brook and the other around Wirrabara, towns about 30 miles apart in the mid-North of this State. Mr Lindner came into contact with a large number of his employer's clients in that time. A few weeks after leaving Murdock's employ, Mr Lindner obtained employment at another firm carrying on a similar business, just some two or three hundred yards distance. In an action to prevent Lindner from engaging in any similar business, Napier CJ upheld the validity of the contract and issued a restraining order.
[95] (1950) 83 CLR 628.
It was held on appeal to the High Court of Australia,[96] that the restrictive provision was void on the ground that the area encompassed was wider than reasonably necessary for the protection of Murdock’s business, and could not be upheld as forming two distinct and severable restrictions, one in respect of Crystal Brook and one in respect of Wirrabara. The case seems to have turned upon admissions made in the course of evidence that the firm would have ‘a good deal of protection’ by an injunction enforcing the restraint within a radius of five miles from Crystal Brook. McTiernan J considered that concession ‘tends to prove that the covenant … encompassed an area that was wider than was reasonably necessary for the plaintiff’s protection’.[97]
[96] McTiernan, Webb and Kitto JJ, Latham CJ and Fullagar J dissenting.
[97] (1950) 83 CLR 628, 646-647.
Much reliance is placed by De Poi on Rentokil Pty Ltd v Lee.[98] The circumstances were that the respondent's employment as a sales consultant providing sanitary hygiene services, was governed for relevant purposes by a ‘Non -Competition Deed’ providing that after termination, Ms Lee was to be restrained from a range of activities, in these terms:
2.2 After Termination of Employment
The employee will not, after the termination of the Employment, either directly or indirectly in any Capacity:
carry on, be associated with or engaged or interested in:…
(ii) … the stream of business [of the appellant], for the period [namely, one year] and within the area specified …
[98] (1995) 66 SASR 301.
Upon resigning her employment with Rentokil, she joined the business of a major competitor in a similar position. She admitted that in her new position she approached clients of Rentokil in an effort to induce them to contract with her new employer. Injunctive relief was declined by the District Court on the grounds that the restraint, although reasonable as to area and duration, was unreasonable as to the range of activities restricted. The trial Judge held the respondent was restrained from engaging in any of the appellant's various streams of business.
An appeal was allowed, granting declaratory relief, on the basis that the restraint was valid and enforceable as to duration and area, but also as to the extent of the restraint imposed. Clause 2.2 quoted above, was confined to the sanitary hygiene area, rather than extending to the employer's other ‘streams of business’ in which the respondent was most likely to come into contact with Rentokil clients. Doyle CJ, whom for the most part agreed with his colleagues, considered that:[99]
A restraint against accepting such a position will be read in a sensible fashion and, ordinarily, as not intended to apply to such a position in name but in which there is no risk of anything happening against which the employer could reasonably require protection. But if the employer identifies positions as subject to the restraint, being positions which do not give rise to the relevant risk, then it seems to me that on its face the restraint has gone too far.
[99] (1995) 66 SASR 301, 305.
Much the same view was taken by Debelle J,[100] and Matheson J.[101]
[100] (1995) 66 SASR 301, 343.
[101] (1995) 66 SASR 301, 326.
Next in NE Perry Pty Ltd v Judge,[102] the Full Court invalidated a restraint against a chiropractor from practising in the country City of Whyalla. The contract of services contained a clause restricting him, for two years after termination, from practising in Whyalla, or from inducing any client of the plaintiff to become a client of his. The court considered the period stipulated was more than the minimum required to furnish adequate protection to the former employer. The focus of the inquiry was the period of time required to break the connection between the defendant and the patients he treated, applying IRAF Pty Ltd v Graham.[103]The restraint on inducing a client of the former Clinic to become a client of the second employer, was held to be reasonable because it was narrower in scope on its impact on the defendant's ability to practise as a chiropractor.
[102] (2002) 84 SASR 86.
[103] [1982] 1 NSWLR 419, 429, per Doyle CJ at [28]-30], per Bleby J at [103], per Besanko J at [117].
A question of validity fell for consideration by the Full Court of the Federal Court in Pearson v HRX Holdings Pty Ltd.[104] An appeal was dismissed from a judgment determining a provision in the appellant's service agreement restraining him from working in a business or operation ‘similar to or competitive with’ the business of HRX for a period of two years after the termination, was reasonably necessary for the protection of its interests. In a joint judgment Keane CJ, Foster and Griffiths JJ, considered HRX held an evident interest in preserving the customer connections constraining the source of its income and which justified a reasonable restraint of trade, particularly since the employee in question controlled the employer's customer connections.[105]
[104] (2012) 205 FCR 187.
[105] (2012) 205 FCR 187, [46].
The facts in Pearson v HRX Holdings Pty Ltd were quite different than they are here. The benefits secured to Mr Pearson under his contract of employment, included an entitlement to shares given as a ‘quid pro quo for the protection of HRX against the risks involved in its dependence on his faithful and diligent performance of a crucial role in the business of HRX’, together with the provision for payment of income over 21 of the 24 months of the restraint period. These considerations under-pinned in the Court’s view, the conclusion that the restraint constituted a reasonable commercial arrangement as between the parties,[106] and that the two-year restraint therefore reasonably accommodated the contractual cycle on which HRX operated in a competitive industry.[107]
[106] (2012) 205 FCR 187, [63].
[107] (2012) 205 FCR 187, [65].
A further decision relied upon by counsel for the plaintiff was AGA Assistance Australia Pty Ltd v Tokody.[108]Ms Tokody, a senior salesperson, committed to a twelve-month post-employment restraint preventing her from working within Australia in a business substantially similar to, or in competition with AGA. She clearly had developed strong relationships with AGA's key clients, such that there was the potential for those clients to reconsider the source of their insurance upon her leaving AGA’s employ. The court considered twelve months to be reasonable by reference to the perceived risk of losing business to a competitor on account of the degree of personal connection developed with the clients and the extent of information held about those clients.
[108] (2012) 224 IR 219.
Counsel for the defendant on the other hand relied on Marlov Pty Ltd v Murat Col.[109] The restrictive clause under scrutiny in that case provided the employee would not ‘carry on or be engaged or interested in any business which competes with the Company’. It was held this restriction amounted to a covenant against mere competition and so failed to protect any legitimate interest the plaintiff had in its business connections, or goodwill. As the provision could not be read down, it was held to be contrary to public policy and therefore unenforceable. Defence counsel also referred anecdotally to Integrated Group Ltd v Dillon,[110] in which the employer abandoned reliance on a clause providing the employee would not ‘provide or be involved with the provision of any service competitive with any service provided by the Company’, seeking only to enforce a non-solicitation restraint.
[109] [2009] NSWSC 501, [32] Debelle AJ.
[110] [2009] VSC 361, [41].
These cases, and many others beside, are simply illustrations of the application of well-established principles to the particular factual circumstances. The above discussion serves to demonstrate how fact sensitive the assessment of reasonableness can become in a given industry, or in particular commercial contexts. So much depends on the unique circumstances of each individual case. It is sufficient to observe that for one reason or another, each of the above cases is distinguishable on its facts; Lindner on account of geographic broadness; Rentokil by reading down the streams of business covered; Judge because of the sheer length of the employment restraint in a narrow geographic area; Tokody owing to the seniority of the position held and the considerable extent of the established customer relations, and Marlov because of the lack of any protectable interest. This case contains few of these several features, at least features that are of central importance to the resolution of the case at law.
Restraint of trade - analysis
There are of course no closed or exhaustive list of considerations applying an assessment of what is reasonable. A number of factors do however consistently emerge in the authorities on point. A convenient summary of these can be found in Brilliant Lighting (Aust) Pty Ltd v Baillieu:[111]
[11] A party who seeks to enforce a restraint of trade provision bears the onus of proving that the provision goes no further than is reasonable to protect its legitimate interests. Relevant considerations include:
(1) The scope of the restraint in terms of both the geographic area and duration; (2) The activities covered by the restraint; (3) The relative bargaining power of the parties; (4) The consideration paid in exchange for the restraint; and (5) The context of the contract.
[111] [2004] VSC 248, [11].
It may be accepted as a general proposition that where (as here), a negative covenant is sought to be enforced by way of a permanent injunction, damages will rarely serve as an adequate alternative remedy: Maggbury Pty Ltd v Hafele Australia Pty Ltd.[112] In many instances, the employee’s interests at the interim interlocutory stage are sufficiently protected by an employer’s undertakings as to damages, or as here, by giving wider undertakings: OAMPS Gault Armstrong Pty Ltd v Glover.[113]
[112] (2001) 210 CLR 181, [102].
[113] [2012] NSWSC 1175, [43].
De Poi contends that as the non-solicitation covenant in clause 17.2.2 is insufficient to protect its interests, the non-employment covenant contained in clause 17.2.1 should be seen as reasonable. It should be borne in mind in this context that the greater the connection an employee develops with customers, the more likely it is those customers will follow the employee to the new employer unsolicited, in which event an anti-solicitation covenant might prove insufficient to protect the employer’s established customer connections: Pearson v HRX Holdings Pty Ltd,[114] Koops Martin Financial Services Pty Ltd v Reeves.[115] In that context a covenant against competition may be seen as the more reasonable or more effective form of protection: Lindner v Murdock’s Garage.[116]
[114] (2012) 205 FCR 187, [51].
[115] [2006] NSWSC 449, [84].
[116] (1950) 83 CLR 628, 636-637.
Ms Dutton’s evidence was that when she entered into this last contract of service, she was contemplating moving to New South Wales. She expressed her concern in an email of 21 January 2014 with respect to the interstate component of the restraint as ‘my main issue’.[117] De Poi was insistent upon the restraint remaining, effectively adopting a ‘take it or leave it’ stance.[118] This is quite apparent in an internal note of 11 December 2013:[119]
…if she doesn’t sign the contract she doesn’t have a contract of employment with DPC and therefore would not have a job…
[117] Exhibit D9, para 15 and Exhibit P4, CD-1.
[118] Exhibit D9, para16.
[119] Exhibit P4, SD-5.
Clearly in this situation there was no room for bargaining and a clear imbalance of bargaining position thereby emerges. Notwithstanding this situation, this is a rather minor consideration. Ms Dutton was not generally fussed about the restraint, rather it became episodically acute in unique circumstances that generated her concern.[120] Moreover, as she entered into further restrictive covenants with IPAR, albeit on less far-reaching terms, and as such constraints are common in the industry to the knowledge of Ms Dutton, little turns on this particular consideration.[121] The constraint imposed by IPAR, was limited to solicitation.[122] Still further, the subject contract was struck in the context of earlier agreements containing various partly analogous or parallel restraint provisions.[123]
[120] T283.25-.32.
[121] T286.11-.15, T288.1-.23.
[122] Exhibit P1, tab 6 pp 61-63, T523.9-.21
[123] Clauses 24 contracts of 21 February and 3 June 2010, clause 25 in the contract of 20 February 2014; Exhibit P4, pp 31, 47 and 64.
It is apparent that Ms Dutton was modestly remunerated for the non-managerial role she ended up in at De Poi. Her financial circumstances were such that she would find herself in rather financially straightened circumstance if she could not obtain work, certainly for as long as six months.[124] After relinquishing her role as team leader, she reverted to the lowest tier of employment as a rehabilitation consultant according to the organisational structure of De Poi (Adelaide Division).[125] Importantly, she was not in a sales, executive or management position of the business,[126] nor was she any longer, privy to the strategic direction of the company, as such decisions were made by Ms De Poi and other senior executives.[127]
[124] Exhibit D9, Affidavit of Ms Dutton dated 22 December 2014, para 38.
[125] Exhibit P8, para 16, T245.29-.29.
[126] T234.12.
[127] Exhibit D9, para 11, T180.12-.23.
The construction of the non-employment clause undertaken earlier, leads to the conclusion that it encompasses engaging in fee for service work for other rehabilitation consultants on the claims agent panels and self-insurers in the field of workplace and rehabilitation allied services. The attempts by Ms Dutton to find alternative work before the IPAR opportunity arose, serve to illustrate the potential reach of clause 17.2.1. They also serve to demonstrate her later employ with IPAR was not instigated by it.
Ms De Poi suggested in her second affidavit there were a number of positions available in the market place at the time of resignation. She supported this assertion by annexing a list of self-insurers, and a number of contemporary advertisements of employment opportunities ‘within the rehabilitation industry but do not compete with De Poi’.[128] These advertisements were placed by mainly self-insurers. Ms Dutton unsuccessfully applied for five of those positions and was interviewed for three.[129] There can be no legitimate criticism for Ms Dutton refusing to apply for the temporary contract position with the United Health Care Group because in her tight financial situation, it was reasonable not ‘to leave a permanent job for a contract job’.[130] In light of these limited opportunities, the statement in her first affidavit that there were only ‘limited possibilities’ for alternative employment, was a reasonably accurate one.[131]
[128] Exhibit P5, para 9, SD-1 and SD-2.
[129] T324.2-.10, T235.10-329.7.
[130] T328.17-.26, T487.4-.31.
[131] Exhibit D9, para 30, T325.2-.15.
Had she succeeded in gaining employment with a self-insurer, she would not have engaged in an activity ‘providing workplace rehabilitation or allied health services’. And yet had she gained employment with a workcover service provider in those fields, she would have fallen into breach of the covenant. These work opportunities serve to underscore the conclusion that she was effectively confined to alternative employment with self-insurers in the workplace rehabilitation and allied health services sector for six months. Although self-insurers account for 40 per cent of the industry, they do not account for 40 per cent of the positions available. These are salaried positions rather than fee for service consulting positions.

In the combined circumstances, particularly bearing in mind the rehabilitation industry was a ‘shrinking and quite a competitive market’,[132] considered in conjunction with the central importance of a consultant developing close relations with the managers at Gallagher Bassett and EML, some period of exclusion from taking employment with a competitor in the defined business was necessary and reasonable.
[132] T207.37.38.
Nevertheless, the term of six months was more than reasonably necessary to allow for breaking the established communications between Ms Dutton and those in Gallagher Bassett and EML with whom she dealt and had forged close relationships. Expressing the same conclusion in another way, six months was more than reasonably necessary to allow sufficient time to install replacement staff and re-establish the necessary customer connections. It is, after all, as demonstrated earlier, not the relationship that is so important, it is the performance that matters most.
Although Mr Knapp expressed the subjective view that ‘it usually takes a consultant up to 12 months before they develop enough relationship to generate enough direct referrals to sustain their own portfolio’,[133] this estimate was aspirational rather than based on any emperical measure. As he conceded, the ‘strength of those relationships depends on the performance in interpersonal skills’, as distinct from replacement times.[134] The fact that De Poi itself put forward a maximum of six months with respect to the two restrictive covenants, tends in part, to support that view.
[133] Exhibit P8, para 66.
[134] Exhibit P8, para 61.
The non-employment covenant once extended by the geographic application of clause 17.4 is geographically unreasonable, given that the business it embraces is almost entirely confined to workplace injury and rehabilitation services provided in South Australia. For reasons appearing later, this aspect of the clause can be validly confined to South Australia, as contingently provided for in clause 17.4(b). Equally, for reasons also given earlier, the period of six months provided for in clause 17.3.3 should be read down to two months, bearing in mind that one month prior notice of resignation was additionally required.
Anti-solicitation - construction
The gist of clause 17.2.2 is to prohibit Ms Dutton from soliciting and canvassing any client of De Poi with a view to obtaining the custom of that person, in the same or similar line of business. In ordinary parlance, to ‘solicit’ is to ‘ask’, ‘to call for’, ‘to make a request’, ‘to entreat’ or ‘to persuade’: Sweeney v Astle.[135]
[135] [1923] NZLR 1198, 1202.
It was submitted on behalf of De Poi that the application of this clause was not necessarily confined solely to positive action on the part of a former employee, so that it is capable of capturing clients of De Poi who themselves initiate such contact. In support of this proposition counsel cited Koops Martin Financial Services Pty Ltd v Reeves,[136] and Hellmann Insurance Brokers Pty Ltd v Peterson.[137]
[136] [2006] NSWSC 449.
[137] [2003] NSWSC 242, [12].
In Koops the active restraints were ‘approached or enticed’ and ‘accepted instructions … for persons who were clients of Koops Martin in the 12 month period before the termination’. Brereton J found breaches of the latter.[138] However, his Honour did not accept the proposition that ‘responding to initial approaches and following them up by interviewing clients and obtaining authorities to act for them’ fell within the ambit of ‘solicitation’ or ‘enticement’. His Honour drew a distinction between ‘action initiated by the former employees, as distinct from responses to approaches from former customers’.[139] After quoting a statement of Vinelott J from Austin Knight (UK) Limited v Hinds,[140] Brereton J observed ‘on that construction the covenant would amount in substance to a contract without territorial limit not to take employment in the field …’. Brereton J further pointed out that ‘the mere fact that the employee has friends … amongst … customers of his employer, is not a sufficient connection to support a restraint’.[141]
[138] At [15].
[139] At [12].
[140] [1994] FSR 52, [59].
[141] [2006] NSWSC 449, [43].
Conversely in Hellman, there was very little evidence of client solicitation. There was evidence a former client was anxious to continue placing business with the defendant. Campbell J observed in that situation:[142]
[12] Whether an employee is soliciting a former client is not something which depends upon whether it is the employee who telephones or arranges to meet the former client, or the other way around. Rather, whether solicitation occurs depends upon the substance of what passes between them once they are in contact with each other. There is solicitation of a client by a former employee if the former employee in substance conveys the message that the former employee is willing to deal with the client and, by whatever means, encourages the client to do so.
[142] [2003] NSWSC 242, [12].
Counsel for Ms Dutton points out that the subject clause is not limited to clients with whom Ms Dutton had dealings at De Poi, as strongly telling against the validity. He cited Harlow Property Consultants Pty Ltd v Byford:[143]
…where a restraint is to be justified on the ground of protecting the employer’s customer connection, it must apply to those customers with whom the employee has been brought into personal contact. If the employee has not had personal dealings with a customer, a restraint against future dealings after termination of the employment is, at least prima facie, a restraint on mere competition. I leave aside a case where a covenant against soliciting any customer of the employer might be justified on the ground of the employee’s knowledge of his employer’s trade secrets.
[143] [2005] NSWSC 658, [28].
In my respectful opinion, the current position is that expressed in Hellman and Equico Equipment Finance Ltd v Enright,[144] a decision of the New Zealand Employment Relations Authority:
It matters not who initiates the contact. The question of whether solicitation occurs depends upon the substance of what passes between the parties once they are in contact with each other. There is solicitation of a client by a former employee if the former employee in substance conveys the message that the former employee is willing to deal with the client and, by whatever means, encourages the client to do so…. [A] degree of “influence” is required. There must be an active component and a positive intention.
[144] [2009] NZERA 411, [31]-[32].
This proposition is consistent with the approach taken by Young J in Ecco Personnel Pty Ltd v Barrett.[145] Soon after establishing his own business, a former employee received a telephone call from a client of the previous employer, and acted on it. Young J considered the express words of the restraint not to 'canvass, solicit, interfere with or entice away' contained ‘within it the conception of a person being the mover for the action happening.’ This conclusion was upheld on appeal: Barrett v Ecco Personnel Pty Ltd.[146]
[145] [1996] NSWSC 475.
[146] [1998] NSWCA 30.
The above statement of principle was quoted or cited with approval in Threlfall v ECD Insight Ltd & Anor,[147] Messrs. J and E Shepherd v. Paul David Letley,[148] Back Office Ltd v Percival & Ors,[149] Baldwins (Ashby) Ltd v Maidstone,[150] and QBE Management Services (UK) Ltd v Dymoke & Ors,[151] and was in substance applied in Hellman.
[147] [2012] EWHC 3543 (QB), [122].
[148] [2012] ScotSC 43, [31], [41], [46].
[149] [2013] EWHC 1385 (QB), [13].
[150] [2011] EWHC B12 (Mercantile) [21].
[151] [2012] EWHC 80, [184], [185].
The plaintiff reads the covenant not to ‘solicit, canvass or approach’ any person who was a ‘Client of the Business’, contained in clause 17.2.2, as referrable to a client to whom the services are provided for fee, that is the claims agents engaged by WorkCover. Part 3 of the Workers Rehabilitation and Compensation Act 1986 (SA), governed the implementation of rehabilitation and accident prevention programs for injured workers. Section 27(2) thereof encourages the provision of rehabilitation services in the private sector. Section 28 enables the WorkCover Corporation to ‘appoint such rehabilitation advisers as are necessary for the purposes of this Act. These provisions remain intact despite the passage of the Return to Work Act. Accordingly, while an injured worker is the subject of the services provided by the likes of De Poi and IPAR by means of workcover injury entitlements, the client remains the claims agents appointed on behalf of WorkCover.
A narrower construction of 17.2.2 propounded by the defendant, identified the ‘client’ as to the injured worker as the beneficiary of the rehabilitation services, must therefore be rejected. A moment’s reflection on the nature of the relevant relationships, demonstrates this position is illogical and untenable. The relevant ‘clients’ can only be Gallagher Bassett and EML. The fundamental structure of the workers compensation scheme in South Australia is that the WorkCover Corporation carries the primary responsibility for the implementation of the legislation and for approving rehabilitation programmes and services provided to injured workers. Such programs must be approved by the claims agents on behalf of WorkCover.[152] The claims agents in turn engage rehabilitation consultants to perform those functions, effectively on behalf of the Corporation.[153] Significantly, the injured worker does not pay for any of the rehabilitation service fees. These are invoiced by the consultants direct to the claims agents who pay them.[154]
[152] T545.28-.546.2.
[153] T142.29-.143.26, T545.28-546.11.
[154] T143.20-.26, T157.38-158.21, T247.19-.32.
Severance – duration in point of time and geographic extent
As to the geographic reach of clause 17.3, De Poi contends to the extent that protection of the plaintiff’s activities in New South Wales and Victoria are considered excessive, all but clause 17.4(b) could be severed, although the submission fell short of conceding as much.
The duration of the respective covenants of six months found in clause 17.3, provide for successive cascading periods, regulating what was regarded by mutual agreement to be alternatively reasonable, thus leaving the remainder intact. This clause was no doubt inserted as an estimate of the perceived successive periods of time required to break the nexus with De Poi’s clients: NE Perry Pty Ltd v Judge,[155] IRAF Pty Ltd v Graham.[156] In this instance, given the rather close nature of the workplace rehabilitation consulting industry in South Australia, no more than two months as provided for in clause 17.3.3 was reasonable so far as the non-competition covenant is concerned, to achieve the necessary protections and to allow for the necessary replacement personnel and relationship establishment.
[155] (2002) 84 SASR 86, [28]-[31], [64], [101].
[156] [1982] 1 NSWLR 419, 429.
For the reasons already advanced, the geographic limitation upon clause 17.2.1 is too wide, so it must be read as limited to this State, as anticipated by clause 17.4(b). Likewise (and for the same reasons) the geographic width of the non-solicitation clause is too wide, so that it too should be read down to apply only within the State of South Australia. On the other hand, given the preferred construction of clause 17.2.1 rendered earlier in this judgment and the nature of the industry and the relationships formed within it, the six month limitation on solicitation is reasonable in the circumstances. As so construed, neither run contrary to or are injurious to the public interest.
These conclusions are not rendered from a desire, as Doyle CJ emphasised in Rentokil Pty Ltd v Lee,[157] to create valid restraints in order to save the unenforceable, or what Redlich JA described in Wallis Nominees (Computing) Pty Ltd v Pickett as unjustifiably impinging the ‘sanction of invalidity by curial disentanglement of unreasonably wide clauses.[158] They are conclusions giving appropriate attention to the intentions of the parties. For the same reasons as the Chief Justice considered in Rentokil, the cascading options contemplated here by the parties should be read as intending separate restraints, in light of clause 17.5 and 20.3 of the subject agreement. These permit severance to the extent that it does not alter the scope and intention of the agreement. I read Matheson and Debelle JJ as being of a similar view on the point of principle.[159]
[157] (1995) 66 SASR 304, 306-307.
[158] (2012) 219 IR 244; [2013] VSCA 24, [110].
[159] Above 327 and 341 respectively. Doyle CJ did arguably propound (at 305) a slightly different test with respect to the extent of protectable interests, see Jardin and Jardim Investments Pty Ltd v Metcash Ltd, (2011) 285 ALR 677, [103].
The upshot of the above process of reasoning means that the restrictions upon taking employment with any business ‘providing the same or similar services’ to that of De Poi (effectively with other consultants on the Gallagher Bassett and EML panels), and from taking employ with an ‘allied health service’ (effectively self-insures), either taken alone or in conjunction with the considerable geographic limitations, go beyond what is reasonable for protection of De Poi’s legitimate interests, and goes further in point of time than is necessary to sever Ms Dutton’s customer connections with clients of De Poi.
However the respective provisions are not wholly unenforceable, because in the words of the Victorian Court of Appeal in Wallis Nominees (Computing) Pty Ltd v Pickett:[160]
[94] Thus there are two clear parts to the test. The first is that the impugned part must be capable of simply being removed — as if simply crossed out with a blue pen; a court can remove words from a restraint clause but not rewrite it. Secondly, the part to be severed must be an independent covenant and capable of being removed without affecting the meaning of the remaining part. The only change should be to the sphere of operations of the clause.
[160] [2013] VSCA 24 (footnotes omitted).
These conclusions, which lie outside the principles of severance at common law, give effect to the fundamental intention of the parties when expressly declared, as to the effect of the invalidation of a particular term.
As mentioned, clauses 17.5 and 20 of the subject contract provided for the severance of any provision found void or unenforceable, only to the extent required. These clauses apply to the whole or any part of a provision in the contract, according to accepted principles: Rentokil v Lee,[161] a case in which the clauses were reasonably analogous.
[161] Ibid, 306.
On this view of matters there is no call to apply the so-called ‘blue panel test’ developed by Lord Sterndale MR in Attwood v Lamont,[162] to the effect that severance can be effected when the part severed can be removed by figuratively running a blue pencil through it. This test was discussed at length in SST Consulting Services Pty Ltd v Rieson.[163]
[162] [1920] 3 KB 571, 578.
[163] (2006) 225 CLR 516, Gleeson CJ, Cummow, Hayne, Heydon and Crennan JJ.
Even if the common law were applied to the questions of severance that arise here, the results would be the same. Restraints are capable of enforcement to the extent that they remain valid, when the provision is for the exclusive benefit of the party seeking to enforce it, when the defendant is not prejudiced by its severance, and where to do so does not alter the nature of the contract: Humphries v Proprietors Surfers Palms North Group Titles Plan 1955,[164] Whitlock v Brew.[165]
[164] (1994) 179 CLR 597, 620-621.
[165] (1968) 118 CLR 445, 461.
Damages – general considerations
Before examining the multiple heads of damage claimed, it is opportune to examine various considerations that might bear upon the subject. First De Poi’s business was already in decline and had been so for an extended period. The reduction in the number of staff referred to earlier gives some clue as to the extent thereof.[166] Factors influencing this state of affairs appear to include changes in claims management arrangements under the ‘new services regime’ requiring a three month transition,[167] and that Gallagher Bassett and EML were taking on ‘internally a considerable amount of work … previously performed by rehabilitation consultants’.[168] The ‘new services regime’ is a reference to the change in WorkCover requirements under the Return to Work Act.[169]
[166] Exhibit P8, paras 119, 120, 125, T194.11-.35, T241.2-.8, T266.18-.23.
[167] Exhibit P4, para 11.
[168] Exhibit P8, para 116.
[169] T223.18-.20, T339.22-.27.
It can be accepted, as Ms Dutton readily acknowledged, that it was ‘virtually impossible’ to work in the provision of rehabilitation services for an external consultant without dealing with the claims managers of Gallagher Bassett and EML.[170]
[170] T334.2-.10
It is as well to recognise that in her short time at IPAR, Ms Dutton had not assumed her managerial role as yet. She was effectively still within an ‘induction’ phase, in addition to a three month probation period,[171] which envisaged ‘a general introduction into the [management] role’.[172] In that period of time the conduct of rehabilitation services requiring her to be in touch with the claims agents was relatively minor.[173] Questions of growing the business once assuming the full managerial functions, had not commenced.[174] In any case, approaching clients to procure work formed no part of Ms Dutton’s role as manager, rather it was Ms Johnson’s responsibility.[175] There was no occasion or need for Ms Dutton to go out and meet people or sell herself, or IPAR for that matter.[176]
[171] T569.37-571.17.
[172] T569.27-.31.
[173] T476.12-.18.
[174] T531.4-.7, T532.27-533.17, T570.19-.26, T571.19-.26.
[175] T520.10, T531.35
[176] T528.19.
Another relevant consideration is that Ms Dutton was keenly aware of the restraints and was wary of breaching them.[177] Furthermore Gallagher Bassett were existing clients of IPAR well before Ms Dutton commenced working with it. The undeniable evidence was that there were referrals on 29 September 2014, 13 August 2014, 10 July 2014 and 7 October 2014, quite independently of Ms Dutton.[178]
[177] T332.16-.36, T342.6-343.2.
[178] Exhibit D15, affidavit of Ms Johnson paras 13a, (n), (o), and (p).
There is an inherent difficulty in identifying the influence Ms Dutton’s established relationships upon the so called ‘influx’ of the referrals to IPAR. As Doyle CJ pointed out in NE Perry Pty Ltd v Judge,[179] proof of damage does not follow as a matter of course from a proven breach of restraint. A portion, perhaps a significant portion of the relationships built up by Ms Dutton, must have been established because of good performance, as well as innate interpersonal skills and force of personality. These capacities in Ms Dutton are evident from Ms De Garis’ interview by the employment consultant on 6 September 2014, when she expressed the opinions that Gallaghar Bassett would absolutely refer work to her at IPAR because she was ‘definitely one of the best, her services are quick and useful … she often does once-off stuff for us as she is so good at getting the outcome.’[180]
[179] Ibid.
[180] Exhibit P1, p 87.
There was some inconclusive evidence suggesting IPAR may have assumed responsibility for Ms Dutton’s legal fees involved in this litigation. De Poi claims this kind of support is indicative of IPAR’s belief in Ms Dutton’s ability to secure referrals for it. Ms Dutton advised Ms Johnson of a letter of demand delivered by De Poi’s solicitors dated 27 November 2014. She was instructed that Ms Johnson would ‘look after it’.[181] Ms Dutton admitted her lawyers were selected ‘for her by IPAR’.[182] She further admitted not having signed a fees agreement, had not as yet paid any legal fees, and that if ‘I had to pay for it myself I wouldn’t be able to’.[183]
[181] T262.9-.13, T372.35.
[182] T373.7.
[183] T377.14-.13, T425.3-.14.

Based on this material the court is asked to infer that IPAR is assuming responsibility for her legal fees. De Poi in addition, points to the suggestion that Ms Dutton is still paid by IPAR, despite her voluntary absence as and from 24 December 2014. The evidence was certainly that she continued to be paid.[184] This is however, quite unremarkable given IPAR’s contractual obligations to her. Otherwise the evidence is inconclusive as to the nature or extent of the remuneration arrangements between Ms Dutton and IPAR – for example whether she was taking some form of leave - except perhaps that whatever they may be, the arrangements might possibly continue until these proceedings are resolved.[185]
[184] T377.30-.9.
[185] T378.10-.31, T543.10-.30, T580.11-.13.
It is perfectly understandable in an uncertain legal context, that IPAR would honour its contractual salary obligations to Ms Dutton, or that they would defer final decisions with respect thereto, until judgment. Its attitude might well depend on the conclusions of law and the facts as the court finds them to be. The uncertain nature of the payments presently made only serves to reinforce this conclusion.
So far as the suggestion that IPAR is ‘bankrolling’ the litigation on behalf of Ms Dutton, the evidence simply does not go that far. The fact that she has not as yet assumed an obligation for legal fees, does not prove the converse of that proposition, or that IPAR has. In the second place, the correspondence taken at its highest, suggests IPAR was contemplating the extent of a potential adverse costs order against Ms Dutton in the order of $150,000-$200,000, in deciding how it should remunerate her in the meantime. Nothing was conclusive or binding as to that.[186] This evidence – so far as it goes - does no more than demonstrate a willingness to support an employee who may be seen as unjustly wedded to unreasonable contractual constraints, too vigorously pursued in this litigation, or unjustly accused of soliciting IPAR’s clients. It is not at all surprising that discussions of this kind occurred given De Poi’s emphatic demand of 27 November 2014 that Ms Dutton cease employment with IPAR for six months effective from 1 December.[187]
[186] T543.7-544.12.
[187] Exhibit P4, p 101.
The plaintiff’s case builds from the position that following Ms Dutton’s departure, there was a marked increase in referrals from Gallagher Bassett to IPAR. The particulars supporting this conclusion are that in the period up to and inclusive of August 2014, IPAR had not previously received more than 14 referrals from Gallagher Bassett in any one month based on figures provided by IPAR under subpoena.[188] The actual number of such referrals in the 18 months between July 2013 and December 2014, tabulate as follows:
[188] Exhibit P3, p 273.

Month July-13 Aug-13 Sept-13 Oct-13 Nov-13 Dec-13

Referral 0 0 0 5 7 6

Month Jan-14 Feb-14 Mar-14 Apr-14 May-14 June-14

Referral 7 7 6 6 14 10

Month July-14 Aug-14 Sept-14 Oct-14 Nov-14 Dec-14

Referral 14 14 19 28 22 24

It can be seen from these figures that in September 2014, there was an increase in referrals from 14 to 19 in September, to 28 in October, 22 in November and 24 in December 2014. These coincided with Ms Dutton’s first months at IPAR. It can be seen that the referrals had steadied at 14 in May, July and August, an average at 13 over the earlier four months involved. Corresponding referrals formerly directed to Ms Dutton by Gallagher Bassett at De Poi, dropped to 8 in November and 3 in December, whereas the average of such referrals between April and August 2014 was 27.5, and the figures for September (23) and October (24) were just below or at par.[189]
[189] Exhibit P8, [131] and ‘PK10’.
The plaintiff infers that the additional referrals above the average of 14 coming to IPAR, and the significant pattern of decline in De Poi’s business, are attributable to the influence of Ms Dutton. There is however, no demonstrable link or nexus between the two respective events, particularly in light of the facts that Ms Dutton was still in the probationary stages of her employ with IPAR, had not yet at these stages commenced her managerial functions or communicating with the claims agents.
A bold attempt was made by Mr Roberts SC, by means of a linear calculation, to put a dollar estimate on the loss said to have arisen because of the corresponding fall and increase in the respective businesses. The argument ran thus. Assuming an average income generated of $5,000-$6,000 per file, and assuming the direct loss of 37 files, the combined loss is quantified by a simple multiplication of the two, namely $185,000.
There are a number of serious flaws in this submission. In the first place this process of reasoning entails no more than a simplistic and speculative assumption of cause and effect. The analysis pays no regard to the fact that IPAR had steadily increased its business in the period before Ms Dutton’s arrival, or the other contrary indicators. This theory further ignores the fact that for six weeks before the commencement of employment with IPAR on 13 October, Ms Dutton was relatively inactive at De Poi. The ‘same’ calculations are in any event based on revenue rather than profit.[190]
[190] Exhibit P8, para 133, T264.25-266.2.
As De Poi’s business was in decline, as already demonstrated,[191] the case for De Poi on this topic bears the hallmarks of a flawed process of reasoning ‘after this, therefore because of this’, that is uncritically drawing conclusions solely from the sequence of events, whilst overlooking other factors that may sever or serve to exclude causal connection.
[191] T147.19-.22.
Finally it is opportune to take account of the fact that questions of seeking work was one particularly frowned upon by the claims agents. Had work been so solicited by Ms Dutton, the effort was very likely to have been counterproductive, for that very reason. Furthermore, it was internal IPAR policy that employees such as Ms Dutton – and Ms Johnson for that matter – act ‘with professionalism and integrity in all business undertakings and personal presentation is appropriate and professional’.[192]
[192] Exhibit P1, p 6.
Damages – loss of chance
Damages claimed for the loss of chance are based on Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL.[193] The case stands for the principle that damages for deprivation of a commercial opportunity are ascertained by reference to an assessment of the prospects of success of that opportunity, if pursued. In that case the High Court determined that unless such chances can be predicated on a hypothesis of causation that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has proven conduct that causes the claimed loss.
[193] (1994) 179 CLR 332.
Where a loss is alleged to be a lost opportunity to acquire a benefit, the plaintiff bears the onus of proving the loss was caused by the conduct of the defendant, an onus discharged by establishing a chain of causation that continues to the point where there is a substantial prospect of acquiring the benefit sought. Clearly the plaintiff must establish both the historical facts underpinning the supposition and any necessary supportive hypothesis, on the balance of probabilities. However hypothesis and possibilities the fulfilment of which cannot be so proved, must be evaluated so as to allow for an informed determination of the value of the loss suffered. To quote from the joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ in Sellars:[194]
Damages in tort have also been assessed by reference to the probabilities or possibilities of what will happen or what would have happened. That approach has been frequently adopted in the assessment of damages for personal injuries where a court has been called upon to assess future possibilities and past hypothetical situations. In Malec v. J. C. Hutton Pty. Ltd., this Court drew a distinction between, on the one hand, proof of historical facts what has happened - and, on the other hand, proof of future possibilities and past hypothetical situations. The civil standard of proof applies to the first category but not to the second, particularly when it is necessary to determine future possibilities and past hypothetical situations for the purpose of assessing damages.
[194] (1994) 179 CLR 332, 349-350, footnotes omitted.
The submission for the plaintiff focuses on the question, ‘what would have happened if Ms Dutton was not working at IPAR, but instead, for example, at a self-insurer’. It was conjectured that De Poi had six months available to it in order to break the connection between the referral sources and Ms Dutton’s personal connections with them. The submission was, on that contingency, demonstrable loss of the opportunity to secure permanent referral relationships favourably to De Poi had occurred over the course of that six months. Accordingly, if the court considered that course was, for instance a 20 per cent chance, the calculation or assessment of loss in that six month period would be in multiples of 20 per cent, divided by 5.[195] The difficulty here is that the underlying historical facts on which these suppositions depend, do not exist – or are not proven to exist. The submission further assumes loss occurred, simply because of consequences, consequences that are not demonstrated to be causally connected, illogically redirecting the analysis from the original propositions (causation) to the consequences (fall in business).
[195] T646.11-.38.
Specific breaches of covenant
Based on a number of communications essentially conducted via email and procured on subpoena from IPAR, the plaintiff maintains there are a number of occasions of demonstrable breaches of the non-solicitation covenant in Clause 17.2.2 of the contract of employment. Necessarily the following evidence stands to be ‘weighed according to the proof which it was in the power of one side to produce, and in the power of the other to have contracted’: Blatch v Archer.[196] As these occasions were addressed individually by both counsel, they are dealt with in that way now.
[196] (1774) 98 ER 969, 970.
Solicitation of Kate De Garis from Gallagher Bassett
It is to be recalled that the increase in referrals to 19 occurred in September 2014, but of course Ms Dutton had not departed De Poi until October 10. There is no reason to suppose she engineered any such referrals whilst she was still at De Poi. Any coincidence with the communication between the recruitment consultant and Kate De Garis on 16 September 2014, Ms Dutton’s agreement to move to IPAR and her resignation on 24 September 2014, is purely speculative.[197]
[197] Exhibit P1, pp 2 and 86.
It is clear that Ms Johnson asked Ms Dutton in her first week at IPAR, if Ms De Garis would like to meet her at some stage, so they could be introduced, not knowing each other previously.[198] Ms Johnson had met ‘quite a few of their case managers previously’.[199] Their respective offices were in the near vicinity of Victoria Square.[200] On 16 October Ms Dutton emailed Ms De Garis ‘great to run into you yesterday - … let me know if you are free sometime in the next week or so to have lunch .’[201]
[198] Exhibit P2 p 27, T 427.34- 428.32.
[199] T573.18-.25.
[200] T381.8-.15.
[201] Exhibit P2 p 13.
In the exchange of 16 October, Ms De Garis emailed Ms Dutton at IPAR, acknowledging the chance encounter, adding ‘It was really lovely to see you – if only quickly’. She then enquired ‘do you have your own portfolio as branch manager or simply overseeing your IPAR kingdom? ’ and ‘if you don’t handle claims yourself who could you recommend to handle pre-injury rehab on a psych claim who needs a firm hand …’.[202] Ms Dutton responded:[203]
Oh thanks so much, I’m so glad it’s over!! It feels so good to have some free time after work … Yeah awesome next Tuesday works for me. Should we lock in 12pm? Where is good to go? I’m so excited about discovering all these little city lunch spots which I had no idea about before!
Yep so I’ll have my own caseload in addition to managing IPAR Kingdom so more than happy to help out on files if you need …
Would you be looking at a level 1 or 2 for that one? As I am only a Class B I can’t do the level 1’s, but happy to come board if it’s a level 2?
Sounds like this lady needs some more stringent monitoring and a gentle shove in the right direction …
Otherwise we have Sarah our psych or Julia who are both great Class A’s.
Awesome, can’t wait for a proper catch up next week!
[202] Exhibit P2, p 13.
[203] Exhibit P2, p 14.
An hour later Ms De Garis again communicated with Ms Dutton. After discussing the luncheon arrangements she added ‘I will talk to Ronesh and get a suitable referral out’.[204]
[204] Exhibit P2, p 21.
The lunch appears to have taken place on Tuesday 21 October 2014. She mentioned the prospect to Ms Johnson, simply as a courtesy, just before going to the lunch.[205] During lunch itself, the conversation between Ms Dutton and Ms De Garis was generally small talk ‘about how work was going’. Ms Dutton was correctly conscious of the non-solicitation clause, so she was ‘careful … not (to) talk about work when I met with her’, thinking ‘she is a friend of mine and there is no harm in me catching up with her for lunch.[206]
[205] T427.12-.17.
[206] T381.1-382.14, T385.15-.19, T387.34-388.1, T425.24-427.25.
These exchanges are instructive in a number of respects. First, they illustrate the underlying personal relationship between the two, independently of the work place, so no harm is to be inferred from making an arrangement to lunch, taken in isolation. Second, they demonstrate that Ms De Garis initiated the contact so far as work was concerned and that Ms Dutton was willing to deal, but stopped short of actively courting or encouraging her to do so.
There was only one generic referral to IPAR by Ms De Garis afterwards on 31 October 2014, which although initially referred to Ms Dutton, was managed by another employee.[207] As it turned out she was not qualified to undertake the referral at that level of engagement, and so she did not receive a direct referral as a result.[208]
[207] Exhibit D15, paras 13(f) and (g).
[208] T386.11-387.15.
Solicitation of Laura Bradley from Gallagher Bassett
On 21 October 2014, Ms De Garis emailed Ms Dutton the day after the lunch meeting, stating:[209]
Re meeting with Kate, if it’s in relation to a particular claim I’m more than happy to come down and have a chat. If it’s more a chat about services I will have to direct you to Laura Bradley who is our new Provider liaison.
[209] Exhibit P2, p 35.
This note suggests there was a discussion over lunch about meeting Kate Johnson, a prospect flagged by Ms Dutton in the earlier email. The suggestion was initiated by Ms Johnson, the purpose of which Ms Dutton understood to be ‘general discussion about services between IPAR and Gallagher Bassett’ and to ‘clarify what was needed for the particular services as there had been a change to the fee schedule’.[210] At all events Ms Dutton and Ms Johnson arranged a meeting of all three. Ms Dutton understood she was to be introduced to Ms Bradley as the new branch manager of IPAR for South Australia.[211]
[210] T393.27-394.11.
[211] T401.11-.23.
Her evidence was that there were discussions about ‘how IPAR had been performing to date and what things we might be able to improve upon’,[212] what services were not presently being provided in that form by IPAR,[213] but that she played a passive observer role in it ‘as part of my job to help improve services’.[214]
[212] T431.16-.33.
[213] T432.20-.24.
[214] T433.21-434.2.
The plain fact of the matter is that this meeting of 3 November 2014, was scheduled as a standard aspect of established relations between IPAR and Gallagher Bassett. In point of fact, on 23 October 2014 a global email was sent by Ms Bradley to all service providers, advising that she was ‘currently acting in the claims practices manager’ role with Gallagher Bassett.[215] In her response the following day Ms Johnson pointed out that IPAR had ‘a few additions to the team of late, including the commencement of our new branch manager Carissa Dutton’ and she attached an updated copy of the staff profile, adding ‘do you have time over the coming weeks to meet with myself and Carissa?’[216] There is simply no evidence of Laura Bradley being encouraged to initiate referrals to IPAR.[217]
[215] Exhibit D15, affidavit of Ms Johnson Exhibit KJ-23.
[216] Exhibit D15 affidavit of Ms Johnson, Exhibit KJU24.
[217] Exhibit D 15, para 13.
Solicitation of Emma Goodwin from Gallagher Bassett
It appears clear enough that Ms Dutton organised drinks on 24 October after work on a Friday night with Emma Goodwin, another ‘old friend’ with whom she had gone out socially on occasion.[218] Ms Karise Paraskeva, another consultant of IPAR, came along as well, however she was a former work colleague of Ms Goodwin’s.[219] Then on 25 November 2014 Ms Goodwin sent an email to Ms Dutton which read in part:[220]
I need a WSA done at Holco Meats in Cavan for a meat process worker. Would Karice want to do it for me or can you suggest someone? … also I need it done asap.’
[218] Exhibit D10 second affidavit of Ms Dutton, para 28.
[219] T434.36-435.7.
[220] Exhibit P2 p 66. ('WSA’ refers to a worksite assessment)
Ms Dutton saw this as indicating a preference for Karice and so ‘agreed to allocate it to her’ at the request of Ms Goodwin. She did not undertake any work on the referral herself.[221] No question of solicitation could possibly arise from this material.
[221] T435.28-437.14.
Solicitation of Mr Pirosis and Ms Kerslake from EML
It emerged during the course of her evidence that Ms Dutton may have attended at least two quarterly meetings with these two persons, employees of EML at a senior level. She was invited by Ms Johnson and introduced as the branch manager.[222] Described during the evidence as ‘get to know you’ meetings, Ms Dutton conceded under cross-examination that it was important for her ‘to have a personal relationship with senior representatives of EML’ as an essential aspect of receiving referrals from them.[223] Even so, the evidence was that these occasions had nothing to do with soliciting or marketing. They were about service delivery on files and changes to the industry, in light of the new legislation and what would be happening in the future.’[224]
[222] T437.15-.33.
[223] T438.25-.36.
[224] T438.6-.18.
Once again the fact of the matter is that the two events were a part of IPAR’s regular, previously established arrangements and would have taken place irrespective of the employ of Ms Dutton.[225] EML was an existing client of IPAR’s well before Ms Dutton commenced working with it and the meetings were unproductive in producing EML referrals to Ms Dutton or IPAR.[226] No solicitation is proven to have occurred on these occasions.
[225] T553.5-.554.26.
[226] Exhibit D15, para 18, T500.1-.2.
EML Christmas Drinks
It is clear that IPAR held a Christmas drinks function for employees of EML on 18 December 2014. It appears IPAR sought to host a similar function for Gallagher Bassett, who declined the invitation. The function was considered by Ms Dutton to be an occasion for ‘relaxing, getting ready for Christmas rather than talking about work’.[227] Her evidence was that ‘all the staff were involved in inviting people.’[228] At one point she was asked in an email of 12 November 2014 sent by an employee of EML ‘Hey … what date are the IPAR Christmas drinks again …’ to which she replied: ‘drinks are on Thursday 18 December at 4.00pm at The Treasury. Come! And tell everyone to come’.[229] Ms Dutton readily accepted the purpose of the function was to foster relationships with EML with a view to ‘winning future work’,[230] was conducted ‘on a social level’ and in the hope it would ‘enhance the relationships and therefore the referrals’.[231]
[227] T439.6-.440.2.
[228] T439.6-.11.
[229] Exhibit P2 p 178, T439.6-.11.
[230] T439.31-.440.3.
[231] T582.34-583.20.

All the same, the evidence only establishes that this Christmas function was an IPAR instigated arrangement, which did not involve Ms Dutton herself in soliciting EML business, as a question of fact. Given the findings already made that Ms Dutton had not stepped into the full managerial role as yet, there is no evidence of referrals flowing from this Christmas function, so no question of solicitation emerges from it.
Dealings with Mr Carpenter of Gallagher Bassett
Mr Carpenter, a case manager with Gallagher Bassett, no doubt had dealings with Ms Dutton in her time at De Poi, from whom she had received a number of direct referrals.[232] She admitted having dealings with him subsequently at IPAR, not in his capacity as case manager, rather as ‘a case manager on my consultants’ files.[233] Otherwise there is no evidence suggestive of solicitation in the requisite sense. It turned out that she ‘looked after some files for [a consultant at IPAR] when the consultant was off work for two weeks, by ‘providing ‘a few current updates’,[234] so that her description of the extent of the work entailed as involving ‘minimal contact’, was perfectly accurate.[235] The evidence is that otherwise she did not receive any work from him, such work was already in progress and there is no corresponding evidence of solicitation either.
[232] T440.34-441.10.
[233] T441.8-.14.
[234] Exhibit D10, second affidavit of Ms Dutton para 19(a), T500.1-.26.
[235] T441.27-442.27, T500.7-.19.
Dealings with Ms Schmidtke of Gallagher Bassett
Ms Schmidtke was another employee of Gallagher Bassett with whom Ms Dutton had dealings whilst still at De Poi.[236] The evidence emerged that she here again, performed minimal work over a period of two or three weeks on an existing file.[237] Here, there was no evidence of soliciting any work. She did not receive any new work from Ms Schmidtke in any event.[238]
[236] T443.13-.444.2.
[237] Exhibit D10 second affidavit of Ms Dutton para 19(b), T443.13-444.26, T444.33-447.9.
[238] T501.5-.9.
Dealings with Ms Parker of Gallagher Bassett
Ms Parker was a case manager at Gallagher Bassett with whom Ms Dutton had dealings whilst at De Poi and subsequently at IPAR.[239] There was just one such dealing with Ms Parker.[240] Ms Dutton had no recollection of dealing with her whilst at IPAR except for one injured worker, Mr Ogden, while a consultant Ms Walkden, was absent from work.[241] No question of solicitation emerges from these benign facts.
[239] T450.26-451.3.
[240] T450.31-.37.
[241] T451.10-.30.
Dealings with Ms Bailey of Gallagher Bassett
During the course of cross-examination, Ms Dutton was confronted with a document suggesting a referral to her as a ‘return to work consultant’, with respect to an injured worker, Ms Nagel. This she ‘re-referred to Lelia Farmer’ in IPAR.[242] It happens that this occurred in circumstances in which Ms Dutton attended a single internal meeting for the purposes of assisting Ms Farmer, a junior employee, for training purposes.[243] She later reviewed the work of Ms Farmer after the file was closed.[244] In these limited circumstances any question of solicitation does not arise.
[242] T457.22-.38.
[243] T458.1-.459.24.
[244] T459.25-.33.
Issues of credit
In making the above findings, the substantial criticisms mounted of Ms Dutton’s evidence on account of the failure to mention these various case assignments, or to mention them sufficiently, in either or both of her affidavits, has not been overlooked. It is understandable enough that they were not dealt with in her first affidavit in the light of the tight time constraints then imposed by the flurry of urgent interlocutory activity. She did, in her second affidavit of 19 January 2015, respond to various accusations relating to assignments nominated in paragraph 109 of Mr Knapps affidavit of 16 January 2015, on which she was extensively pressed under cross-examination. As to this second affidavit, there were no doubt continuing time pressures as well given that the trial was set for urgent hearing, as she ‘had to put it together very quickly’.[245]
[245] T445.2.
All the same I accept her explanations for not dealing in detail with some of the issues in light of the above findings, namely that:
·she didn’t consider the meeting with Laura Bradley ‘to be soliciting’,[246]
·she saw the Goodwin referral to be directed to her,[247]
·she did not consider the two EML meetings attended at the request of Ms Johnson ‘was soliciting or marketing anyway’,[248]
·she misunderstood the impact of her second affidavit with respect to the EML Christmas drinks,[249]
·the contact with Mr Carpenter was ‘that minimal that I’d forgotten about it’,[250]
·dealings on referrals from Cassandra Schmidtke were ‘very minimal’, the claim was ‘closed really quickly’ and she did not recall the details when putting the first affidavit together,[251]
·at that time the Casey Campbell file had closed, the involvement with it was so minimal that she had failed to recall it,[252]
·she had forgotten about the Ogden file in her minimal dealings with Ms Parker, and[253]
·she had failed to recall the Bronte Nagel file on which she had not done any work.[254]
As considered earlier, Ms Dutton may have acted naively at times, but she was sincere enough in giving these explanations.
[246] T433.34-434.2.
[247] T435.28-437.14.
[248] T437.15-489.5.
[249] T439.6-440.33.
[250] T440.34-443.12.
[251] T443.13-446.6.
[252] T446.22-450.18.
[253] T450.26-457.28.
[254] T457.29-460.2.
It follows from the above analysis, each item taken alone or considered cumulatively, that no soliciting of a relevant kind contrary to clause 17.2.2 occurred. It must follow, that no damage to the plaintiff was thereby sustained.
Conclusion and orders
To sum up, De Poi has demonstrated it held legitimate interests it was entitled to protect, especially its extant customer connections in such a niche market. Nevertheless, clause 17.2.1 of the subject agreement went further in point of time and geographically than was reasonably necessary to protect those interests. That clause should be read down as confined to this State for a period of two months, consistent with the parties contingency intentions expressed in clause 17.3.3. The same result is achieved applying the ‘blue pencil’ test at common law, had it applied. Even so, Ms Dutton remained in breach of the covenant contained in clause 17.2.1 for a period of two months.
In light of this conclusion, the non-solicitation provision contained in clause 17.2.2 is a reasonable one, once confined in operation to the State of South Australia for the period of six months, so as to protect De Poi’s legitimate interests in this unique market.
The claim for damages expressed in paragraph 33.1.1 of the Statement of Claim for ‘the loss of the known files’ fails for the lack of evidence and proof of causation. The claim for damages made in paragraph 33.1.2 of the Statement of Claim ‘for the loss of revenue from the work that is likely to be lost in the future until 11 April 2015’, equally fails for the same reasons. Finally the claim for the loss of ‘Functional Job Description’ work claimed in paragraph 33.3 fails as there is no proof that either Ms Dutton or IPAR undertook any such work.
The defendant is directed to bring in formal draft minutes of order giving effect to these conclusions. The parties are of course entitled to be heard as to any consequences flowing from the above conclusions and as to costs of both the interlocutory and trial stages of the proceedings.
Annexure A
DE POI CONSULTING PTY LTD v DUTTON
Judgment on interlocutory application
(Thursday 19 February 2015)
For the purpose of interlocutory relief pending judgment, there can be no doubting the presence of a number of serious issues to be tried. It is also demonstrated that the plaintiff holds legitimate protectable interests, such as its confidential information, client connections and customer relationships.
So far as the application for a permanent injunction is concerned as sought in terms of paragraph 2 of the plaintiff’s written submissions, much depends on the proper construction of clause 17.2.1 of the contract of employment dated 15 January 2014. Read in conjunction with clause 17.1.2, the ‘business or activity’ to which that clause refers, means the business of providing workplace rehabilitation or allied health services for fee. On this interpretation the defendant is certainly prevented from working with no less than any of the WorkCover rehabilitation service providers on the Gallagher Bassett and EML panels for six months from 13 October 2014.
As so construed, clause 17.2.1 is wide in terms of subject matter, duration and geographic limitations, to such an extent that in combination they go further than is reasonable in order to break the defendant’s connection with customers of De Poi. Putting aside questions of severance, on any view of the proper construction of clause 17.2.1, the four months or thereabouts elapsing since Ms Dutton’s employment began with IPAR, is more than sufficient to protect De Pois legitimate interests.
Despite various undertakings given by Ms Dutton, it is necessary to deal on an interlocutory basis with the non-solicitation covenant contained in clause 17.2.2 of the subject contract of employment, in light of the uncertainty as to the meaning of ‘a client’ of the plaintiff referred to therein. In my opinion that term applies to the claims managers and self-insured employers for whom De Poi undertook workplace rehabilitation or allied health services for a fee. As so construed, the terms of clause 17.2.2 are geographically too wide, going beyond what is necessary to protect De Poi’s legitimate business interests, but it can be read down or severed so that it should taken only to apply in South Australia, in terms of clause 17.4(b).
On the basis of these conclusions, the balance of convenience lies heavily in favour of the defendant in respect of the employment restraint. Since Ms Dutton is now effectively discharged for that restraint, it is inappropriate to make any order for further restraint.
The balance of convenience is however in favour of the plaintiff so far as the non-solicitation constraint is concerned, bearing in mind the conclusion reached with respect to clause 17.2.1. Accordingly there will be an order in terms of clause 17.2.2 of the contract of employment dated 15 January 2014, to the effect that the defendant will not solicit, canvass or approach any person who was at any time during the six month period ending on the cessation of the Employee’s employment a Client of the Business with a view to obtaining the custom of that person in a business that is the same or similar to the Business and is in competition with the Business. This restraint should however be understood and applied according to the definition of ‘client’ indicated earlier.
The question of costs is reserved.

Month	July-13	Aug-13	Sept-13	Oct-13	Nov-13	Dec-13
Referral	0	0	0	5	7	6
Month	Jan-14	Feb-14	Mar-14	Apr-14	May-14	June-14
Referral	7	7	6	6	14	10
Month	July-14	Aug-14	Sept-14	Oct-14	Nov-14	Dec-14
Referral	14	14	19	28	22	24