Dundoen Pty Limited v Richard Wills (Real Estate) Pty Limited

[2020] NSWSC 15

Supreme Court

New South Wales

Medium Neutral Citation:	Dundoen Pty Limited v Richard Wills (Real Estate) Pty Limited [2020] NSWSC 15
Hearing dates:	20 January 2020
Date of orders:	28 January 2020
Decision date:	28 January 2020
Before:	Henry J
Decision:	Interlocutory relief granted. See [146].
Catchwords:	EQUITY — RESTRAINT OF TRADE — Employment – interlocutory injunction application against former Senior Property Manager at real estate agency - where former employee seeks to commence employment in competitor real estate agent - where employment agreement included post-employment restraints on solicitation and dealing with clients of employer and from working with competitor - where employment agreement entered two and a half years into employee’s tenure – where some undertakings given by employee – whether serious question to be tried as to the validity and reasonableness of the non-compete restraint and duration of non-solicitation restraint – serious question to be tried found – balance of convenience – adequacy of damages – discretionary factors.
Legislation Cited:	Corporations Act 2001 (Cth), ss 182 and 183 Restraints of Trade Act 1976 (NSW), s 4
Cases Cited:	Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 Cactus Imaging (2006) 71 NSWLR 9; [2006] NSWSC 717 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148; [1986] HCA 58 Curro v Beyond Productions Pty Limited (1993) 30 NSWLR 337 Devine Real Estate Concord Pty Ltd & Ors v Wajih Agha (aka Roger Agha) & Anor [2019] NSWSC 786 Ecolab Pty Limited v Stephen Garland [2011] NSWSC 1095 Genesys Wealth Advisers Ltd v Miles [2008] NSWSC 802 Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267 Harlow Property Consultants Pty Ltd v Byford [2005] NSWSC 658 Hitech Contracting Limited v Lynn (Supreme Court (NSW), Austin J, 5 June 2001, unrep) John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Kone Elevators Pty Limited v McNay (1997) ATPR ¶41-564; (1997) Aust Contract R 90-080 Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 Lindner v Murdock’s Garage (1950) 83 CLR 628 Littlewoods Organisation Limited v Harris [1978] 1 All ER 1026; [1977] 1 WLR 1472 Miles v Genesys Wealth Advisers Ltd [2009] NSWCA 25 Mobileworld Operating Pty Ltd v Telstra Corporation Ltd [2005] FCA 1365 Orton v Melman [1981] 1 NSWLR 583 Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187; [2012] FCAFC 111 Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1179 Raine & Horne Pty Limited v Adacolk Pty Limited & Ors [2006] NSWSC 36 Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 Stenhouse Australia Ltd v Phillips [1973] 2 NSWLR 691; [1974] AC 391 Woolworths Ltd v Olson [2004] NSWCA 372 Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317
Texts Cited:	JD Heydon, The Restraint of Trade Doctrine (4th ed, 2018, LexisNexis Butterworths) at 189–190
Category:	Procedural and other rulings
Parties:	Dundoen Pty Limited ACN 082700285 (Plaintiff) Richard Wills (Real Estate) Pty Limited ACN 003488382 (First Defendant) Jillian Gai Wills (Second Defendant)
Representation:	Counsel: M Seck (Plaintiff) A White, Solicitor (First Defendant) R S Warren (Second Defendant)   Solicitors: Jemmeson & Fisher (Plaintiff) Sparke Helmore Solicitors (First Defendant) Haywards Solicitors (Second Defendant)
File Number(s):	2019/403237
Publication restriction:	Nil

Judgment

1. The plaintiff, Dundoen Pty Limited trading as Charlotte Peterswald, is a real estate agency in Waverley (CP).

2. In August 2016, CP entered into an agreement to purchase the management rights to the rent roll asset of Wills Bros (Estate Agents) Pty Limited, a real estate agency in Waverley owned and operated by David and Douglas Wills (Will Bros).

3. The second defendant, Jillian Wills, is the daughter of David Wills. After the sale of the Will Bros rent roll, Ms Wills commenced employment with CP as a Senior Property Manager. Ms Wills had previously worked as a property manager at Will Bros.

4. On 12 November 2019, CP terminated Ms Wills’ employment on the ground of redundancy. Shortly after, Ms Wills accepted an offer to work as a Senior Property Manager at the real estate agency operated by the first defendant, Richard Wills (Real Estate) Pty Limited in Bondi Junction (Richard Wills Agency). Ms Wills’ cousin, John Wills, is the sole director of the first defendant and the principal of the Richard Wills Agency.

5. Ms Wills is due to commence employment with the Richard Wills Agency on 28 January 2020. By these proceedings, CP seeks to restrain Ms Wills from taking up that employment and to enforce other restraints contained in Ms Wills’ employment agreement with CP.

The proceedings

6. These proceedings were commenced by summons filed by CP on 23 December 2019.

7. In the summons, CP claims that during and after her employment with CP, Ms Wills breached the express terms of her employment agreement with CP, including the terms relating to confidential information and restrictions on her post-employment activities. CP also claims that Ms Wills is in breach of implied duties of fidelity and obligations of loyalty owed to CP, in breach of equitable obligations owed in respect of CP’s confidential information and in breach of ss 182 and 183 of the Corporations Act 2001 (Cth). The summons seeks final declaratory and injunctive relief, delivery up orders, damages and/or an account of profits and equitable compensation.

8. The summons also seeks interlocutory relief restraining Ms Wills from breaching the terms of her employment agreement relating to confidential information and restrictions on her post-employment activities, and further interlocutory relief restraining the Richard Wills Agency from taking any action to induce Ms Wills to breach any interlocutory orders made by the Court.

9. On 24 December 2019, Lindsay J made consent orders in accordance with the interlocutory relief sought at paragraphs 27, 28, 29, 30, 31, 32, 33 and 35 of the summons until 20 January 2020. His Honour’s orders note that Ms Wills and the Richard Wills Agency informed the Court they do not have in their custody, control or possession, any of CP’s confidential information, as defined in the orders.

10. On 20 January 2019, I heard CP’s application for interlocutory relief while sitting as duty Judge. With the consent of the parties, Lindsay J’s orders have been extended to 10am on 28 January 2020.

11. At the start of the hearing, I was informed that the matter had settled at an interlocutory level between CP and the Richard Wills Agency. I made consent orders on a non-admissions basis reflecting that settlement.

Issues in dispute on interlocutory application

12. During the course of the hearing, CP’s counsel confirmed that it only presses four of its eight claims for interlocutory relief against Ms Wills, being paragraphs 27, 28, 29 and 33 of the summons. The interlocutory relief CP seeks is in the following terms:

27.   Until further order of the court or hearing and determination by the court of the Plaintiff’s application for interlocutory relief or consent of the Plaintiff is given in writing, an order that the Second Defendant be restrained from carrying on or being engaged, concerned, or interested directly or indirectly with the First Defendant in providing real estate agency services within a radius of 5 kilometres from 326 Bronte Rd, Waverley in the State of New South Wales NSW.

28.   Until further order of the court or hearing and determination by the court of the Plaintiff’s application for interlocutory relief or consent of the Plaintiff is given in writing, an order that the Second Defendant be restrained from soliciting, attempting to solicit, or accepting, any instructions to provide real estate agency services from any person or entity with whom the Second Defendant had direct dealings in the course of or in connection with her employment with the Plaintiff.

29.   Until further order of the court or hearing and determination by the court of the Plaintiff’s application for interlocutory relief or consent of the Plaintiff is given in writing, an Order that the Second Defendant be restrained from soliciting, attempting to solicit, or accepting, any instructions to provide real estate services in respect of any managed properties the subject of an Agency Agreement as defined in the Property, Stock and Business Agents Act 2002 and The Property, Stock and Business Agents Regulation 2014 contract with the plaintiff at 12 November 2019, being the date of the Defendants redundancy with the Plaintiff, which forms Exhibit “CP-2” at Tab 2 at pages 13-59 to the Affidavit of Charlotte Antonia Peterswald of 22 December 2019.

…

33.   An Order that the Second Defendant is restrained from encouraging, condoning or enticing any other person or entity, including but not limited to one in which she is interested in or engaged, to engage in conduct which would cause any of these orders to be breached.

13. Relevantly, Ms Wills’ employment agreement with CP includes three post-employment restraints, each with a duration of three years from termination of her employment, being:

1. a restraint on the solicitation of and taking instructions from Clients (as defined) (non-solicitation and dealing restraint); 

2. a restraint on working for a Competitor (as defined) (non-compete restraint); and

3. a restraint on encouraging any other person from engaging in conduct which would cause Ms Wills to breach the above restraints (non-encouragement restraint).

14. During oral argument, Ms Wills’ counsel proffered undertakings from Ms Wills to the Court which he submits should deal with CP’s interlocutory application. They were proffered on the basis that the validity of the post-employment restraints will be strongly contested at a final hearing.

15. One of the undertakings proffered is in the same terms as the relief sought in paragraph 33 of the summons and is equivalent to the non-encouragement restraint. This undertaking deals with that part of CP’s claim for interlocutory relief.

16. Two of the undertakings are in similar terms to the relief sought in paragraphs 28 and 29 of the summons (and reflect, but are more limited than, the non-solicitation and dealing restraint) but are limited in time until further order of the Court or 13 March 2020, whichever is the earlier. Ms Wills’ counsel submits that the four month duration of the proffered undertakings is reasonable as it adequately protects the legitimate business interests of CP.

17. No undertaking was proffered by Ms Wills in relation to the non-compete restraint.

18. There is no dispute that Ms Wills would be in breach of the non-compete restraint if she commences employment at the Richard Wills Agency. But Ms Wills’ counsel submits that the non-compete restraint in Ms Wills’ employment agreement is unreasonable, unenforceable and the balance of convenience favours against the grant of interlocutory relief in those terms.

19. CP presses for the interlocutory relief sought in paragraph 27 of the summons (which reflects the non-compete restraint). It submits that such relief is necessary to protect against the risk of Ms Wills’ using CP’s confidential information or using her connections with CP’s landlord clients.

20. CP also argues that the undertakings proffered by Ms Wills in respect of the non-solicitation restraints are inadequate as they expire on 13 March 2020. At a final hearing, CP will contend that injunctive relief should be granted for three years. Even if the proceedings are referred to the expedition list, which CP supports, there is a risk that a final hearing may not be heard and determined by 13 March 2020.

21. The issues in dispute at the interlocutory hearing are, therefore,

1. whether CP has established there is a serious question to be tried that the duration of the non-solicitation and dealing restraint of more than four months is reasonable and whether, in addition, protection of CP’s legitimate interests requires the non-compete restraint; and

2. whether the balance of convenience and any other discretionary factors favour the grant of any interlocutory relief.

22. At the hearing, there was also some discussion regarding Ms Wills’ continuing access to certain information on her mobile phone which is claimed by CP to be confidential to it. CP’s counsel accepts that this is a matter which should be able to be resolved between the parties (T20:34-39). I have, therefore, proceeded on the basis that it is not an issue that needs to be determined by the Court on this application.

Evidence

23. In support of its application for interlocutory relief, CP relies on affidavits of Charlotte Peterswald, Director of CP, sworn 22 December 2019, and of Veronick Lutchmee Dry, a Senior Property and Business Development Manager, CP, sworn 15 January 2020.

24. CP also relies on an affidavit of John Athol Wills, the sole director and secretary of the Richard Wills Agency, sworn 16 January 2020. This affidavit was admitted into evidence without objection. CP also relies on documents produced by Richard Wills Agency evidencing Managing Agency Agreements entered into between Richard Wills Agency and former landlord clients of CP.

25. Ms Wills relies on her affidavit sworn 16 January 2020.

26. As it was an interlocutory hearing, there was no cross-examination.

Factual matters

Ms Wills’ employment with Will Bros and CP

27. Prior to her employment with CP, Ms Wills had spent around 25 years working in property management in the real estate industry in the Eastern Suburbs of Sydney. For most of that time, she had been employed as a property manager by Wills Bros. In that role, Ms Wills was involved in the negotiation and signing up of new Managing Agency Agreements for landlord clients and the continued management of properties on the rental roll.

28. Will Bros sold the managements rights of its rent roll to CP for $1.3 million. The rent roll comprised approximately 291 property rights and 118 landlords. As part of the sale contract, Wills Bros, David and Douglas Wills agreed to certain restraints, the details of which are subject to a claim of confidentiality and so I will not detail them here. Ms Wills was not a party to the rent roll sale agreement. Her evidence is that she was not aware of the details of any of the restraints prior to the commencement of these proceedings.

29. Ms Wills was offered, and she accepted, employment by CP to take effect on the settlement of the sale of the rent roll from Will Bros. At that time, Ms Wills did not sign an employment agreement with CP, but signed an “employee set up” form by which she acknowledged her starting date and that she would be paid in the form of a salary. Presumably at this time her salary figure (which was in evidence) was also agreed.

30. On or about 31 October 2016, Ms Wills commenced employment with CP as the Senior Property Manager responsible for managing properties on CP’s rent roll. Her duties and responsibilities included negotiating and signing up new Managing Agency Agreements for new landlord clients or new rental properties coming under management and managing existing properties on the rent roll.

31. Many of the landlord clients to be managed by Ms Wills at CP were landlords whose property managements were sold as part of the Wills Bros rent roll. Ms Wills had known those landlord clients and managed their properties for many years prior to her employment with CP from when she was employed at Wills Bros. Those landlord clients included family members, relatives and close friends.

32. In April 2019, Ms Peterswald prepared a draft employment agreement between Ms Wills and CP based on a contract she sourced from the Real Estate Employees Federation.

33. Ms Peterswald’s evidence is that she prepared the draft employment agreement after being told by Ms Wills that she had been offered a job at a real estate agency in Bondi Junction operated by her cousin and that, if she left, her “owners would follow me”. Ms Peterswald was concerned by this and decided that CP should have protection on an ongoing basis if CP was to continue Ms Wills’ employment.

34. The draft employment agreement included the following restrictions on Ms Wills’ post-employment activities:

8.    Restriction on Post-Employment Activities

9.    Item 11 of the Reference Schedule will state whether paragraph 18 applies to Your employment.

10.    Without the Employer’s [the Plaintiff’s] prior consent, from the Termination Date, You [the Second Defendant] are not to:

solicit, attempt to solicit (via Social media or otherwise), or accept any instructions to perform real estate agent services for any Client for the Restraint Period (the non-solicitation and dealing restraint);

carry on or be engaged, concerned, interested directly or indirectly whether as a shareholder, director, employee, partner, joint venture participant, principal, agent, trustee, unitholder or otherwise, in carrying on any business for a Competitor for the Restraint period (the non-compete restraint);

….

encourage, condone or entice any other person or entity, in which You are interested or by which You are engaged, to engage in conduct which, if You engaged in such conduct personally, would cause You to breach this paragraph 18 (the non-encouragement restraint).

35. The phrases “Restraint Period”, “Client” and “Competitor” were defined as follows:

In this paragraph 18:

a.   Restraint Period means:

1.   four (4) years;

2.   three (3) years;

3.   two (2) years;

4.   twelve (12) months.

b.   Client means any person or entity:

1.    to which the Employer provided services during Your employment;

2.   with which the Employer had direct dealing during Your employment in relation to the provision (or proposed provision) of services by the Employer to the person or entity.

3.   which referred business to the Employer during Your employment.

4.   with which You had direct dealings in the course of, or in connection with, Your employment with the Employer.

c.   Competitor means any business engaged in providing real estate agency services within a radius of:

1.   15 kilometres from the office of the Employer in which You were employed;

2.   10 kilometres from the office of the Employer in which You were employed;

3.   5 kilometres from the office of the Employer in which you were employed;

4.   1 kilometre from the office of the Employer in which you were employed.

36. The employment agreement also included a number of clauses governing the interpretation, operation and application of the post-employment restraint clauses. The relevant clauses are:

1. It is acknowledged by You that:

a.   each of the covenants in paragraph 18.2 shall be construed and have effect as a number of separate covenants which results from combining each covenant with each sub-section of the definition in paragraph 18.3 for each defined term referred to in the covenant, with each such resulting covenant being severable from each other such resulting covenant. The covenants are cumulative and overlapping. If any such resulting covenant shall be invalid or unenforceable for any reason, such invalidity or unenforceability shall not prejudice or in any way affect the validity or enforceability of any other such resulting covenants;

b.   the restrictions in this paragraph 18 apply to conduct which is either direct or indirect (e.g. done through an agent of any kind) and regardless of whether the conduct is engaged in for Your own benefit or for the benefit or on behalf of any other person or entity;

c.   the Employer’s rights under this paragraph 18 are in addition to, and do not derogate from or affect the Employer’s common law rights;

d.   these restrictions are reasonable and go no further than is necessary to protect the interests and Confidential Information of the Employer;

e.   injunctive relief may be sought by the Employer to enforce those restrictions;

f.   if any of the above restrictions or parts of them are found not to be enforceable then it is agreed that the remainder of the restriction(s) will apply; and

g.   the rights and obligations of the Employer and You in this paragraph 18 survive termination of this Agreement.

…

If any provision of this Agreement is invalid and not enforceable in accordance with its terms, other provisions which are self-sustaining and capable of separate enforcement with regard to the invalid provision, are and continue to be valid and enforceable in accordance with their terms.

37. Pausing here, it is apparent that the paragraph numbering and cross references within the draft and signed employment agreement went awry. No issue was taken by Ms Wills’ counsel at the hearing that the “numbering” issues impacted on the interpretation of the post-employment restraints contained within the signed employment agreement.

38. There are factual disputes about the discussions and events which led to the employment agreement, as amended, being signed by Ms Wills and Ms Peterswald (on behalf of CP) and dated 23 April 2019.

39. Ms Peterswald’s evidence is that, after Ms Wills was given the draft employment agreement, Ms Wills said she was not prepared to sign it because if she left she would be “taking her owners with her” and it “would mean she couldn’t”.

40. Ms Peterswald says that, on 26 April 2019, after Ms Wills had taken the draft employment agreement away to discuss with her father, it was returned to her signed by Ms Wills with changes made by Ms Wills to delete the reference to four (4) years in the definition of Restraint Period and the references to 15 and 10 kilometres in the definition of Competitor.

41. Ms Wills’ evidence is that, when provided with the draft employment agreement, she asked Ms Peterswald why it was needed when she had been employed for two and a half years without one. Ms Wills says she was told by Ms Peterswald that the bank required all CP employees to sign a contract and that it needed to be signed soon. Her evidence is that she discussed the draft agreement with her father and that she had concerns about the restraints preventing her from working in the Eastern Suburbs if she left CP’s employ.

42. Ms Wills evidence is that, at a meeting with Ms Peterswald on 23 April 2019, she told Ms Peterswald that she wanted to be able to work in the Eastern Suburbs if she resigned and asked to cross out the 10 and 15 kilometres area which was agreed to by Ms Peterswald. She also told Ms Peterswald she thought 3 and 4 years was too long but Ms Peterswald agreed to only cross out 4 years.

43. Ms Wills’ evidence is that she found the employment agreement difficult to follow and that, at the time she signed it, she thought the post-employment restraints only applied if she resigned.

44. Those and other factual disputes will be the subject of contest at a final hearing. It is not possible or necessary to resolve them on this application.

45. What is not in contest on the evidence is that Ms Wills requested certain changes to be made to the Restraint Period and Competitor definitions in the restraints clauses and they were agreed to by CP.

46. It is also apparent from the signed employment agreement in evidence that both Ms Wills and Ms Peterswald initialled the changes, signed the agreement and included the date of 23 April 2019.

47. There is also no dispute that the box next to the statement in Item 11 of the Reference Schedule that "This post employment restriction shall not form part of Your contract of employment" is not checked.

48. The signed employment agreement also contains clauses about the collection, misuse and disclosure of CP’s confidential information both during and after the termination of Ms Wills’ employment.

49. Ms Wills received no wage or salary increase in exchange for agreeing to sign the employment agreement. CP’s counsel submits that, in the circumstances, the consideration given to Ms Wills was continued employment by CP. Ms Wills’ counsel contests this, and asserted in his written submissions that no consideration was given at the time for any of the post-employment restraints.

50. Absent cross-examination and further evidence, it is not possible to form any view as to the ultimate outcome on the issue of whether or not CP gave consideration for the restraints.

51. Suffice to say, that contracts in restraint of trade must be supported by consideration, although a restraint of trade covenant does not require an additional premium. Consideration may be proved by admissible extrinsic evidence and has been found in a range of circumstances, including during the course of employment where no additional financial benefit has been received and where the covenants have been accepted and the employer implicitly agrees not to dismiss an employee for a reasonable time: see, JD Heydon, The Restraint of Trade Doctrine (4th ed, 2018, LexisNexis Butterworths) at 189-190 and authorities there cited.

Ms Wills’ redundancy and subsequent events

52. On 12 November 2019, CP terminated Ms Wills’ employment (and that of another property manager at CP) on the ground of redundancy.

53. Ms Peterswald’s evidence is that, prior to terminating Ms Wills, she had concerns about her workplace performance and behaviour. According to Ms Peterswald, Ms Wills had difficulty learning the new technology systems used by CP. Ms Wills had also told other CP employees that she was thinking of leaving to work for the Richard Wills Agency and that she planned to take landlords with her.

54. Parts of Ms Peterswald’s evidence regarding Ms Wills’ performance and conduct in the office are disputed by Ms Wills and will be the subject of a contest at the final hearing.

55. Ms Wills’ termination took effect on 12 November 2019. She was paid three weeks’ salary in lieu of notice and did not receive any severance payment. Ms Peterswald’s evidence is that she reminded Ms Wills of her post-employment obligations to CP upon her termination. There is no evidence that Ms Wills disputed their validity at that time.

56. On 14 November 2019, Ms Wills was offered employment as a Senior Property Manager at the Richard Wills Agency, which she accepted on that day. The Richard Wills Agency needed to recruit a new property manager as the previous one had resigned on 31 October 2019, with effect on 13 November 2019.

57. Ms Wills’ employment agreement with the Richard Wills Agency is dated 21 November 2019 and is in evidence. It includes provisions in respect of the use and disclosure of confidential information similar to those in the CP employment agreement. It does not include any other post-employment restraints, like the non-solicitation and dealing restraint and the non-compete restraint in issue in these proceedings.

58. Ms Wills’ counsel submits that the lack of post-employment restraints in Ms Wills’ employment contract with the Richard Wills Agency indicates that such restraints are not standard for these types of employees. CP’s counsel disputes this, relying on the evidence that Ms Peterswald based Ms Wills’ employment agreement on a Real Estate Employees Federation contract. The standard form contract from the Real Estate Employees Federation is not in evidence.

59. Ms Wills is to be employed by the Richard Wills Agency as a Senior Property Manager responsible for managing and growing the residential and commercial portfolio of properties under management by the Richard Wills Agency. This is the same role she performed at CP.

60. On 15 November 2019, Ms Wills attended CP’s office and surrendered what she said was any confidential information that she held in her possession. There will be a contest at the final hearing as to whether Ms Wills has used CP’s confidential information in breach of the employment agreement and other obligations, both while she was employed by CP and after she was terminated.

CP landlord clients transfer to Richard Wills Agency and contact Ms Wills

61. On 16 September 2019, CP received notice that one of its landlord clients was transferring the management of their properties to the Richard Wills Agency. Ms Peterswald’s evidence is that the notice was received after Ms Wills had been reprimanded about her workplace performance. John Wills’ evidence is that the landlord moved to the Richard Wills Agency because of poor service on the part of CP.

62. On 26 November 2019, CP received notice from the Richard Wills Agency advising that a landlord client was moving the management of two properties to the Richard Wills Agency. John Wills’ evidence is that the landlord had a connection with the “Wills” family for decades and was moving to his agency after being told that Ms Wills had left CP.

63. On 20 December 2019, a landlord client gave notice to CP that they were transferring eight properties to the Richard Wills Agency under management. Ms Peterswald spoke to this landlord and was told they were moving the business because of the longstanding relationship with Ms Wills and the Wills’ family. At the date of the hearing, the landlord had not yet transferred the properties to the Richard Wills Agency. John Wills’ evidence is that the intention of this landlord to move the management of these properties to his agency was unknown to him or the company.

64. There is no dispute that Ms Wills was in contact with current and past CP landlord clients by phone and by SMS after her termination. Ms Wills’ evidence is that they contacted her to enquire as to her well-being as they had been advised by Ms Peterswald that she was no longer employed at CP and that Ms Wills left suddenly of her own accord. She recalls the details of the contacts with six of those landlord clients. Ms Wills told them she was made redundant. She also told some of them that she was going to work for the Richard Wills Agency.

65. Ms Wills accepts that she has long-standing relationships with many of the landlord clients on the CP rent roll but denies soliciting or influencing them to terminate their management services with CP. Other than some material on her phone which she has offered to delete, she also denies having in her possession any of CP’s confidential information.

66. Ms Peterswald’s evidence is that CP had never lost property managements to the Richard Wills Agency prior to 2019 and that Ms Wills rarely lost properties except for “sale or normal circumstances”.

67. CP is concerned that Ms Wills’ long standing relationship with CP’s landlord clients will lead to them terminating CP’s management services and may enable Ms Wills to influence them to and divert their business to the Richard Wills Agency or to other real estate agencies in the Eastern Suburbs area.

Legal principles

Interlocutory relief

68. The Court must consider whether CP’s case for interlocutory relief raises a serious question to be tried and whether the balance of convenience and related factors warrant the grant of interlocutory injunctions: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at 81-82 [65] per Gummow and Hayne JJ (ABC v O’Neil).

69. The relative strengths of the parties’ cases are not irrelevant to the exercise of the Court’s discretion. The stronger the case for final relief, the less may be required to tip the balance of convenience. The greater the balance of convenience, the less strong a case for final relief may be required: ABC v O'Neill at 81-84 [65]-[72]. This is applicable in enforcing a post-employment restraint of trade: Ecolab Pty Limited v Stephen Garland [2011] NSWSC 1095 at [33], [35] per Brereton J.

70. As this is an interlocutory hearing, the Court’s task is not to undertake a preliminary trial and to give or withhold relief upon some forecast as to the ultimate result of the factual disputes between the parties: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622. The Court is only required to reach a provisional conclusion as to particular facts or matters in dispute: Mobileworld Operating Pty Ltd v Telstra Corporation Ltd [2005] FCA 1365 at [23]-[25].

71. In this case, as the Restraint Period sought to be enforced is three years (cascading down to 12 months); the grant of interlocutory relief would not have the practical effect of conclusively determining the dispute between the parties. It is to be expected that an expedited final hearing would be heard and determined well within that time. The Court is, therefore, not required to definitively assess the strength of the plaintiff’s claim for final relief: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 536.

Validity of employment agreement restraints

72. As contractual restraints, the post-employment restraints in the employment agreement are subject to the operation of the common law and the Restraints of Trade Act1976 (NSW), s 4.

73. The parties accept that the relevant principles to be applied, arising both under general law and under the Restraints of Trade Act, are as set out by McDougall J in Stacks/Taree Pty Ltd v Marshall (No 2)[2010] NSWSC 77 at [44] (Stacks). There his Honour stated the principles as follows:

(a)      At common law, a restraint of trade is contrary to public policy and void, unless it can be shown that the restraint is, in the circumstances of the particular case, reasonable: Nordenfeltv MaximNordenfeltGuns and Ammunition Co Ltd [1894] 1 AC 535 at 565; Amoco Australia Pty Ltd vRoccaBros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 315.

(b) In New South Wales, it is not strictly correct that a restraint is prima facie void; a restraint is valid to the extent to which it is not against public policy, even if not in severable terms: Restraints of Trade Act (NSW), section 4(1): see KoopsMartin v Reeves [2006] NSWSC 449 at [27] per Brereton J.

(c) The onus at common law of showing that the restraint goes no further than is reasonably necessary to protect the interests of the person in whose favour the restraint operates, lies on the party seeking to support the restraint as reasonable: Adamson v New South Wales Rugby League Limited (1981) 27 FCR 535 at 554 per Hill J and North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 at 470 per Viscount Haldane LC.

(d) The onus of establishing that a contract in restraint of trade is injurious to the public interest lies on the party alleging that this is so: see for example Attorney General of Australia v Adelaide Steamship Co Ltd [1913] AC 781 at 797.

(e) The Court gives considerable weight to what parties have negotiated and embodied in their contracts, but a contractual consensus cannot be regarded as conclusive, even where there is a contractual admission as to reasonableness: see Woolworths Ltd v Olson [2004] NSWCA 372 at [39].

(f) The validity of the restraint is to be tested at the time of entering into the contract and by reference to what the restraint entitled or required the parties to do rather than what they intend to do or have actually done: see Woolworths Ltd v Olson [2004] NSWCA 372 at [40].

(g)      The test of reasonableness is measured by reference to the interests of the parties concerned and the interests of the public: Nordenfeltv MaximNordenfeltGuns and Ammunition Co Ltd [1894] AC 535. The requirement that the restraint be reasonable in the interests of the parties means that the restraint must afford no more than adequate protection to the party in whose favour it is imposed: Herbert Morris Ltd vSaxelby [1916] 1 AC 688 at 707 ; Buckley v Tutty (1971) 125 CLR 353 at 376; LinwarSecurities Pty Ltd v Christopher Savage [2006] NSWSC 786 at [25] and [26] per Nicholas J; and Koopsv Martin v Reeves [2006] NSWSC 449 at [28] per Brereton J.

(h) An employer is not entitled to require protection against mere competition: Dewes v Fitch (1920) 2 Ch 159 at 181; Wright vGasweldPty Ltd (1991) 22 NSWLR 317 at 329 per Gleeson CJ. Covenants that restrain competition are invalid unless they are reasonably necessary to protect legitimate business interests: see for example Harlow Property Consultants Pty Ltd v Byford [2005] NSWSC 658 at [24] and [25] per White J.

(l)    An employer is entitled to protection against the use by the employee of knowledge obtained by him of his employer's affairs in the ordinary course of trade: Dewesv Fitch (1920) 2 Ch 159 at 181. A restraint clause will be invalid unless it is necessary to prevent disclosure of trade secrets or use of a connexion built up by the employee with customers: JD Heydon, The Restraint of Trade Doctrine (Butterworths, 2 nd edition, 1999) at 66; Aussie Home Loans v XIncServices [2005] NSWSC 285 at [14] per White J.

(j)      The relevant knowledge must be more than simply the skill and knowledge necessary to equip the employee as a possible competitor in the trade, but the obtaining of personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer's trade secrets as would enable him to take advantage of his employer's trade connection or utilise information confidentially obtained: Dewesv Fitch (1920) 2 Ch 159 at 181.

(k) An employer’s customer connection is an interest which can support a reasonable restraint of trade, but only if the employee has become, vis-a-vis the client, the human face of the business, namely the person who represents the business to the customer: see for example Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 at [25] per Brereton J; and Kearney vCrepaldi&Ors [2006] NSWSC 23 at [51] to [53] per McDougall J.

(l) The effect of the Restraints of Trade Act 1976 (NSW) is to allow the restraint to be read down so as to be valid to the extent necessary only to capture the conduct of the defendant, if that extent would have been valid. However, the Act does not allow the Court to remake the contract or a covenant in the contract: Orton vMelman (1981) 1 NSWLR 583; Wright vGasweldPty Ltd (1991) 22 NSWLR 317 at 329;KoneElevators Pty Ltd vMcNay (1997) ATPR 41-564 (NSW Court of Appeal) at 43,833. Whilst the Court is permitted to read down the clause if the clause is so capable, it cannot be re-drafted: KoneElevators Pty Ltd vMcNay (1997) ATPR 41-564 (NSW Court of Appeal) at 43,833; Woolworths v Olson [2004] NSWCA 372.

74. Whether a restraint of trade is valid involves determining three matters:

1. whether the alleged breach (independently of public policy considerations) infringes the terms of the restraint properly construed;

2. whether the restraint in its application to that breach is against public policy. This involves a consideration of whether the restraint is necessary to protect the parties’ legitimate business interests and is not injurious to the public; and

3. that, if it is not, then in its application to the alleged infringing conduct, the restraint is valid unless the Court makes an order under s 4(3) of the Restraints of Trade Act.

Orton v Melman [1981] 1 NSWLR 583 at 587 [F]; Woolworths Ltd v Olson [2004] NSWCA 372 at [42] (Mason P; McColl and Bryson JJA agreeing).

Serious question to be tried

Actual or apprehended breach of restraints?

75. There is no dispute that if Ms Wills commences employment at the Richard Wills Agency she would be in breach of the non-compete restraint in the employment agreement. The Richard Wills Agency provides real estate agency services within 1.8 kilometres of CP’s office.

76. Ms Wills has proffered undertakings to the Court that encompass the non-solicitation and dealing restraint in the employment agreement, but only for a period of four months. I deal with the issue of duration below.

77. Absent the undertakings, I am satisfied the evidence discloses a seriously arguable case that Ms Wills will, during the Restraint Period as defined in the employment agreement, be likely to breach the non-solicitation and dealing restraint. There is evidence that Ms Wills stated to CP employees that she planned to take landlord clients with her both before and after she was terminated. There is also evidence that at least one of CP’s landlord clients, with whom Ms Wills had dealings, proposed to move to the Richard Wills Agency after speaking to Ms Wills and wanted to continue to deal with her.

Validity of restraints

Duration of non-solicitation and dealing restraint

78. The proffered undertakings restrain Ms Wills from soliciting and accepting instructions from persons with whom she had dealings while employed by CP or in respect of any managed properties the subject of a Managing Agency Agreement with CP as at 12 November 2019.

79. Irrespective of the undertakings, I am satisfied that there is a serious question to be tried that the non-solicitation and dealing restraint is necessary for the protection of CP’s customer connection. Reasonableness is judged at the time at which the employment agreement was made. Ms Wills’ connection with landlord clients had been established through her prior employment with Will Bros for many years, as well as during her employment with CP since October 2016, and was expected to continue. A prima facieposition is also established by the agreement of the parties which had been the subject of some negotiation.

80. The issue between the parties is whether the proffered undertakings are sufficient protection for CP’s interests pending a final hearing, which is more than likely to be heard and determined after 13 March 2020. This raises the question of whether CP has established a prima facie case that the duration of the non-solicitation and dealing restraint should be longer than four months.

81. CP submits that there is a serious question to be tried that the Restraint Period, which cascades from three years to 12 months, is reasonable. It submits that, having regard to the circumstances of Ms Wills’ employment, the Restraint Period is unsurprising and typical of those upheld in other cases which have enforced restraints of up to 3 years. The cases relied on by CP involve facts which are significantly different to the position of Ms Wills in this case.

82. In Devine Real Estate Concord Pty Ltd & Ors v Wajih Agha (aka Roger Agha) & Anor [2019] NSWSC 786 at [410], Sackar J upheld a restraint of three years in relation to a real estate agent in circumstances where the person against whom the restraint was enforced had been a shareholder in the relevant business and was found to have engaged in malicious, blatant and extensive breaches of his obligations.

83. Ms Wills had no financial interest in CP other than as an employee. No submission was made (correctly in my view) that there is evidence of any egregious conduct on the part of Ms Wills of the nature that was considered by the Court in Devine.

84. In Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187, the Full Federal Court (Keane CJ, Foster and Griffiths JJ) upheld a two-year restraint against an employee who had extensive knowledge of the former employer's clients and operations to render him the "human face of the business" in circumstances where the employee held shares in his former employer and was remunerated for 21 months of the two-year restraint period (see at [42], [63]).

85. Even if I were to accept that Ms Wills was the “human face” of CP’s rent roll business and has knowledge of the names and contact details of CP’s landlord clients, Ms Wills received no additional financial benefit for agreeing to the restraints at the time of the employment agreement. She has also not received remuneration for any part of the Restraint Period which is being sought to be imposed on her.

86. In Genesys Wealth Advisers Ltd v Miles, the New South Wales Supreme Court ([2008] NSWSC 802) and the Court of Appeal (Miles v Genesys Wealth Advisers Ltd [2009] NSWCA 25) upheld a 30 months restraint but it was in relation to the CEO and Managing Director who had access to significant confidential information relating to the future plans of the company, which was not generally available within the company itself (see [2009] NSWCA 25 at [41], [76]). The 30 month restraint was included in a deed of release negotiated at the time of his departure and for which he received legal advice and obtained the benefit of the release of shares (see [27]-[29]).

87. Ms Wills did not seek legal advice on the employment agreement (she gave evidence that she informally consulted her father). The confidential information which CP asserts Ms Wills had access to and which needs protection for the Restraint Period of up to three years are the names and contact details of landlord clients. Her capacity to use that information long-term may be more limited given the evidence that she has returned CP’s confidential information and does not retain any of CP’s landlord client lists or databases.

88. The relevant question to consider on the duration of a non-solicitation restraint when it is for the protection of customer connection is: what is a reasonable time during which CP was entitled to protection against the solicitation of landlord clients with whom Ms Wills had contact and influence during her employment and who were not bound to CP by contract or by stability of association?: Stenhouse Australia Ltd v Phillips [1973] 2 NSWLR 691 at 699; [1974] AC 391 at 402.

89. That question can be answered by considering, either, the length of time it would take a reasonably competent replacement employee to show their effectiveness and establish a rapport with the landlord clients so as to displace Ms Wills’ influence with them or, as to how long it would take to sever the relationship built up between Ms Will and the landlord clients for which she was responsible: Stenhouse v Phillips at 699; Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 at [88] per Brereton J; Cactus Imaging (2006) 71 NSWLR 9; [2006] NSWSC 717at 20 [36] per Brereton J; Stacks [2010] NSWSC 77 at [66]-[74] per McDougall J. Either approach may be taken: Hanna v OAMPS Insurance Brokers Ltd (ACN 005 543 920) [2010] NSWCA 267 at [41]-[45] per Allsop P (Hodgson JA and Handley AJA agreeing) (Hanna v OAMPS Insurance).

90. The question of how long it will take CP to re-establish connection with its landlord clients or to sever Ms Wills’ relationship is to be evaluated based on the evidence about connection, determined objectively, taking into account the terms of the employment agreement: Hanna v OAMPS Insurance [2010] NSWCA 267 at [43], Stacks at [95].

91. The starting point is what the parties themselves provided. The evidence indicates that Ms Wills negotiated the Restraint Period, which provides for up to three years.

92. As noted above, there are factual disputes relating to the circumstances surrounding the entry into the employment agreement. Ms Wills disputes that the employment agreement was entered into as a result of a consensual arrangement and equal bargaining power, or that she provided any consideration for agreeing to the restraints. These factual matters will be contested at a final hearing and it is not possible, or necessary, to resolve them on the interlocutory application.

93. As to the other evidence of connection, at the time of entry into the employment agreement, Ms Wills was the most senior person on behalf of CP who was responsible for growing and managing CP’s landlord client portfolio. CP’s property management business extended to 291 property rights and 118 landlords at the time of the sale of the rent roll business. There is no evidence as to the number of property rights and landlord clients under management by CP at the time of entry into Ms Wills’ employment agreement.

94. At the time she signed the employment agreement, Ms Wills’ connection with landlord clients had been established through her prior employment with Will Bros for many years, as well as during her employment with CP since October 2016.

95. There is evidence that Ms Wills had personal dealings with some landlord clients, acquired knowledge of and managed their individual needs and knew what they thought of CP and some of its processes. The evidence does not identify how frequently Ms Wills dealt with landlord clients and with what proportion of the landlord clients on CP’s rent roll she dealt with on a regular or other basis. Ms Peterswald refers to regular periodic property inspections and rent reviews, which indicate repeated contact between a Senior Property Manager and landlord clients.

96. CP submits that, as a consequence of her dealings and senior position with responsibility for the whole portfolio, Ms Wills was the “human face” of CP’s business as it related to the management of the rent roll and landlord clients. Ms Wills did not take issue with that submission at the interlocutory hearing, although noted that another employee, Alex, also worked in the property management side of CP’s business.

97. In my view, it is more than arguable that Ms Wills was the human face of the property management side of CP’s business and that it would take multiple satisfactory interactions for CP’s replacement employee to show his effectiveness and establish rapport, so as to become the new “human face” of CP’s rent roll business and sever the relationship with Ms Wills.

98. As to how long it would take and what period is reasonable for the duration of the non-solicitation and dealing restraint, it is difficult to gauge what it should be at an interlocutory level.

99. CP’s counsel submits that CP does not have to prove the Restraint Period is three years, two years or 12 months on this application. He also submits that, even if the Court were to conclude at a final hearing that, by virtue of s 4(1) of the Restraints of Trade Act, the Restraint Period should be read down below 12 months to six months, an injunction would be needed to protect CP’s position. I accept that submission.

100. While there may be questions about the reasonableness of the three year restraint, I am satisfied that there is a serious question to be tried that a period of 12 months is not an unreasonable one to permit Ms Wills’ personal influence to dissipate.

101. I come to that view based on reasonableness needing to be judged at the time the employment agreement was made, that Ms Wills’ customer connection had been established through her employment with CP since October 2016 and Will Bros for many years prior, that multiple interactions with landlord clients may be required to break the relationship with Ms Wills, and the prima facieposition established by the employment agreement of the parties.

102. It follows that I am persuaded that it is seriously arguable that the four-month duration of the non-solicitation and dealing restraint undertaking proffered by Ms Wills does not adequately protects CP’s legitimate business interests in respect of customer connection.

Non-compete restraint

103. The question for the interlocutory hearing is whether CP has established there is a serious question to be tried as to the validity and reasonableness of the non-compete restraint.

104. CP submits that the non-compete restraint is valid and enforceable as it is directed to protecting CP’s legitimate business interests, in particular, Ms Wills’ knowledge of confidential information and her personal contact and dealings with the landlord clients.

105. CP submits that, as a result of her role and responsibilities, Ms Wills has access to and knowledge of the identity and contact details of CP’s landlord clients, which is information that is confidential to CP. Ms Wills did not dispute the confidentiality of that information at the hearing.

106. An employer has an interest in its confidential information, which it may legitimately protect by a restraint of trade, even if the information is not in the nature of a trade secret such as to attract equitable protection in the absence of any contractual agreement: Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 326 [F], 333-334 [G]-[E], 341 [G]. The names, contacts details and other information about CP’s landlords is arguably information of a confidential nature that the non-compete restraint is necessary to protect.

107. Ms Wills submits that the non-compete restraint is unreasonable as it operates as a mere restraint on competition. She contends that CP has no legitimate interest needing to be protected as the proffered undertakings will prevent the use of the connections built up by Ms Wills with CP’s landlord clients and there is no evidence that Ms Wills has used, or will use, any of CP’s confidential information.

108. Ms Wills also submits that CP has not established that the non-compete restraint is reasonable having regard to the circumstances at the time the employment agreement was entered into. I refer to my comments above concerning the factual disputes that arise on that issue and how they will need to be dealt with at a final hearing.

109. Where an employment agreement contains both a non-solicitation clause and a non-compete clause, the reasonableness of the latter must be assessed by reference to the adequacy of the protection for the legitimate interests of the employer, offered by the former. It will only be if the former does not provide adequate protection for the legitimate interests of the employer that the latter may be upheld: Stacks at [63].

110. In my view, the non-solicitation and dealing restraint is the primary mechanism for protecting the connection between Ms Wills and CP’s landlord clients.

111. The non-solicitation and dealing restraint and undertakings proffered about the use of confidential information might also support the protection of confidential information which Ms Wills gained in the course of employment with CP. But the authorities recognise that the protection afforded by non-solicitation and confidentiality provisions is unlikely to be perfect because it is difficult to draw the line between legitimate and non-legitimate conduct and it is often difficult to prove a breach: Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187; [2012] FCAFC 111 at [53]; John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995 at [36] (John Fairfax); Stacks at [62]-[64]; Kone Elevators Pty Limited v McNay (1997) ATPR ¶41-564, 43,834; Woolworths Limited v Olson at [38], [67]; Lindner v Murdock’s Garage (1950) 83 CLR 628 at 650 per Fullagar J; Portal Software Pty Ltd v Bodsworth [2005] NSWSC 1179 at [83].

112. As Lord Denning stated in Littlewoods Organisation Limited v Harris [1978] 1 All ER 1026 at 1033:

Experience has shown that it is not satisfactory to have simply a covenant against disclosing confidential information. The reasons is because it is so difficult to draw the line between information which is confidential and information which is not; and it is very difficult to prove a breach when the information is of such a character that a servant can carry it away in his (or her) head. The difficulties are such that the only practicable solution is to take a covenant from the servant by which he or she undertakes not to work for a trade rival. Such a covenant may well be held to be reasonable if limited to a short period.

113. The non-compete restraint protects not only CP’s legitimate interest in its own landlord clients and confidential information relating to them, but may also prevent competition in respect of those landlords who are not or have never been CP’s clients. But that is the impact of many restraints on competition.

114. The breach in this case is employment in a real estate agency that directly competes for property managements with that part of CP’s business in respect of which Ms Wills was CP’s most senior employee. Ms Wills is to be employed by the Richard Wills Agency as Senior Property Manager, the same role she had at CP with equivalent responsibilities to grow the business. The Richard Wills Agency is an agency that bears the same surname as Ms Wills. There is evidence of the strength of the “Wills” name, as well as Ms Wills’ own personal connections with CP’s landlord clients.

115. Ms Wills has knowledge of CP’s landlord client confidential information obtained during the course of her employment. While she has given back copies of customer lists and databases, such information will be retained in her memory. Even if Ms Wills were entirely well intentioned, there is a risk that she would use such information for the benefit of the Richard Wills Agency and to the detriment of CP’s goodwill, reputation and value. I accept that this risk is likely to diminish over time, but it remains a risk that is arguably reasonable to protect.

116. As to duration, the prima facie position is as set out in the employment agreement. It was the subject of negotiation. That said, in my view, it is very likely that the three year duration applicable to the non-compete restraint under the employment agreement would be found to be not reasonably necessary for the protection of CP’s interests, and read down to less than three years, and possibly less than 12 months.

117. Three years seems to me to be an unreasonable period for CP to insist on keeping Ms Wills out of the Eastern Suburbs market (or the employ of the Richard Wills Agency) to protect against the risk that she might find it impossible to put out of her mind, and not use, CP’s confidential information. Presumably, the quality of the confidentiality of the CP’s information will dissipate over time, particularly as landlord clients come and go from CP’s rent roll. Memories also fade over time.

118. The Court may ultimately conclude that the duration of the non-compete restraint should be read down below 12 months. But, and as noted above, even if the non-compete restraint were to be read down, to perhaps six months, an injunction would be needed to protect CP’s position.

119. For these reasons, I accept CP’s submissions that there is a serious question to be tried that the non-compete restraint is necessary for the protection of CP’s legitimate business interests and is not unreasonable.

Order under s 4(3) Restraints of Trade Act

120. The matters raised by Ms Wills regarding the circumstances in which the employment agreement containing the restraints were entered into suggest that she may make an application for an order under Restraints of Trade Act, s 4(3) if, at final hearing, they are held to be valid. No such application was made or raised for consideration as part of the interlocutory hearing.

Balance of convenience and discretionary factors

121. On the question of the balance of convenience, the Court considers the risks of doing injustice according to whether the injunctions are granted or refused. What would be the loss to CP if the injunctions are not granted, compared to the loss to Ms Wills if they are, and whether damages for that loss would be an adequate remedy: Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 155; [1986] HCA 58; Harlow Property Consultants Pty Ltd v Byford [2005] NSWSC 658 at [16] (Harlow).

122. CP submits that, if Ms Wills is not restrained by injunction from working with the Richard Wills Agency, there is a risk that she will draw upon or disclose confidential information about CP’s landlord clients to CP’s detriment. CP submits that it is unrealistic to think otherwise when Ms Wills would, if the non-compete restraint was not ordered, be working for a real estate agency competing against the business of CP in the very role for which she was employed by CP.

123. Ms Wills submits that granting interlocutory relief will prevent her from working in the only field she knows and in the only geographic area she is familiar with. She contends that the consequence of restraining her from earning an income is more severe and damaging than the potential loss to CP if the injunction is not granted. She submits that damages would be an adequate remedy for CP as an assessment could be made based on those Managing Agency Agreements entered into in breach of the restraints.

124. The inability of Ms Wills to commence her employment with the Richard Wills Agency within 5 kilometres of CP’s office would, no doubt, be of hardship to her. There is evidence to suggest that she may lose the Richard Wills Agency employment opportunity as it needs to employ a property manager.

125. That said, the evidence indicates that the Richard Wills Agency has made more than one offer to Ms Wills over the years. It has also consented to a regime that provides for compliance with whatever injunctions are ordered by the Court. This suggests there may be some question as to whether Ms Wills’ employment opportunity with Richard Wills Agency would be permanently lost if the non-compete restraint is granted.

121. The form of the non-compete restraint also does not prevent Ms Wills seeking employment outside the 5kms radius with another real estate employer, although she would, of course, be subject to the non-solicitation and dealing restraint which she has proffered.

122. As to the issue of the adequacy of damages, I do not accept Ms Wills’ submission that any damages suffered by CP if the non-compete restraint is not granted would be readily ascertainable by assessing the management agreements that have been entered into. There is some force to that submission in relation to the non-solicitation and dealing restraint. The ability to quantify loss in relation to the non-compete restraint is, in my view, different.

123. Non-compete restraints are obtained because it is recognised that it is difficult to prove the possession and use of confidential information by an ex-employee and that such use was the cause of particular loss: John Fairfax v Burt [2006] NSWSC 995 at [46].

124. While the use of CP’s confidential information might lead to the entry into management agreements for which damages could be quantified, such information could also be used by Ms Wills, whether intentionally or not, in other ways to the detriment of CP’s goodwill, reputation and value. Those losses would not be readily quantifiable.

125. As CP submits, the damage that it is seeking to prevent through enforcement of the non-compete restraint is necessarily difficult to quantify since it will know little if anything of what Ms Wills does or will do in the course of her employment with the Richard Wills Agency or another agency within the 5 kilometre radius, and how CP’s confidential information is used.

126. In contrast, if the non-compete and non-solicitation and dealing restraints are enforced by interlocutory relief and Ms Wills is successful at final hearing, any loss she suffers should be easily quantifiable. Ms Wills’ employment agreement with the Richard Will Agency provides for a salary only and not for any commission component: cf Harlow at [20]. Ms Wills would also be in a position to recover those losses on the undertaking as to damages. The risk of ongoing hardship to Ms Wills may also be ameliorated by referring the proceedings to the expedition list to enable an early final hearing.

127. As to discretionary factors, CP relies on the principle that there is a public interest in holding parties to their contractual obligations: Curro v Beyond Productions Pty Limited (1993) 30 NSWLR 337 at 347; Hitech Contracting Limited v Lynn (Supreme Court (NSW), Austin J, 5 June 2001, unrep); Raine & Horne Pty Limited v Adacolk Pty Limited & Ors [2006] NSWSC 36. It submits that the post-employment restraints in the employment agreement were the subject of negotiation by Ms Wills, which should not be lightly dismissed.

128. As there is a factual contest about the circumstances that surround the entry into the employment agreement and Ms Wills contends that it was imposed upon her in an unreasonable way, I consider the above principle relied on by CP to be relevant to the exercise of my discretion but of less significance in this case that it might be in others.

129. I also take into account the principle that, generally speaking, an injunction will be granted to enforce a negative contractual stipulation: John Fairfax v Birt at [45]. 

130. CP also argues that the proceedings are not simply about the enforcement of post-employment restraints between an employee and employer. It contends they have the interplay of a family connection, a sale of an asset for which CP paid $1.3 million and conduct of Ms Wills and the Richard Wills Agency in taking advantage of CP’s confidential information and connections of CP for their own benefit. It also contends that these factors support the grant of interlocutory relief as it is needed to protect CP’s position having it paid a significant sum to purchase the management rights of landlord clients of Wills Bros on the expectation that the two directors were retiring and Ms Wills would continue her employment with CP.

131. I am not persuaded by CP’s submissions that these factors strongly support the grant of the injunction.

132. First, the evidence discloses that CP created the present situation by making Ms Wills redundant, rather than Ms Will resigning and seeking out a new job. In that context, CP’s reliance on the expectation that Ms Wills would continue employment with CP appears to me to be misplaced.

133. Second, Ms Wills was not a party to, or the subject of the restraints contained in, the Will Bros rent roll sale agreement. Nor was evidence adduced which suggests that the directors of Will Bros have not retired.

134. Third, the fact that Ms Wills is related (as a cousin) to the principal of the Richard Wills Agency is not persuasive where the evidence indicates that, prior to the sale of the rent roll to CP, the Richard Wills Agency was independently owned and operated, and competed with Wills Bros for many years, as it does today with CP.

135. Taking into account all of these circumstances, I am of the view that the balance of convenience, while not heavily weighted in CP’s favour, tends toward the grant of interlocutory relief in this case. There are no discretionary reasons which have been raised which, in my view, militate against granting that relief.

Conclusion, costs and orders

141. CP has shown there is a serious question to be tried that the non-compete restraint is valid and there is a threatened breach of the non-compete restraint in the employment agreement.

142. As to the non-solicitation and dealing restraint, CP has shown there is a serious question to be tried that a restraint period of more than four months is reasonable. It will be a question at the final hearing as to whether, if found to be valid, a three year duration or some lesser period, is reasonable.

143. The balance of convenience, supported by the prima facie case of validity, favours the grant of interlocutory relief in relation to the non-compete and non-solicitation and dealing restraints.

144. The undertakings proffered by Ms Wills deal with the non-encouragement restraint.

145. The parties did not address the issue of costs. In my view, the appropriate order is for costs to be in the cause and I will make such an order. If either party considers that another order should be made after considering these reasons, they are to confer with the other party and, within seven days, notify my Associate that some other costs order is sought. They should also provide an agreed timetable so that the issue can be determined on the papers.

146. For these reasons, I make the following orders:

1. Upon the plaintiff by its counsel giving to the Court the usual undertaking as to damages, until further order of the Court or the final determination of the proceedings, the second defendant be restrained from:

1. carrying on or being engaged, concerned, or interested directly or indirectly with the first defendant in providing real estate agency services within a radius of five kilometres from 326 Bronte Rd, Waverley in the State of New South Wales;

2. soliciting, attempting to solicit, or accepting, any instructions to provide real estate agency services from any person or entity with whom the second defendant had direct dealings in the course of or in connection with her employment with the plaintiff;

3. soliciting, attempting to solicit, or accepting, any instructions to provide real estate services in respect of any managed properties the subject of an Agency Agreement as defined in the Property, Stock and Business Agents Act2002 (NSW) and The Property, Stock and Business Agents Regulation2014 (NSW) with the plaintiff as at 12 November 2019.

2. Costs of the application for interlocutory relief be costs in the cause.

3. The proceedings to progress by way of pleadings.

4. List the proceedings in the expedition list for directions at 9.30am, 7 February 2020.

5. The Court notes the undertakings provided by the plaintiff to the Court that, until further order of the Court or the final determination of the proceedings, the second defendant is restrained from encouraging, condoning or enticing any other person or entity, including but not limited to one in which she is interested in or engaged, to engage in conduct which would cause order 1 to be breached.

**********

Decision last updated: 28 January 2020