Figjam Pty Ltd v Pedrini - [2005] NSWSC 221

No judgment structure available for this case.

Reported Decision:
(2007) Aust Contract Reports 90-259

New South Wales

Supreme Court

CITATION:
Figjam Pty Ltd trading as LJ Hooker Casino v Pedrini [2005] NSWSC 221

HEARING DATE(S): 7 & 9 March 2005

JUDGMENT DATE :

17 March 2005

JUDGMENT OF:
Burchett AJ

DECISION:
Injunction to be granted with costs restraining Defendant for 9 months from engaging in certain activities within a radius of 25 kms from an office at Casino.

CATCHWORDS:
Restraint of trade - contract of employment - whether there was consideration for a restraint clause in a written contract entered into after many months of employment pursuant to an oral contract - discussion of problems of consideration where an oral contract of employment is replaced by a written one introducing a new term - relevance of Award requiring writing - whether consideration was provided by the avoidance of a "practical disbenefit" of possible invalidity of the existing contract.

LEGISLATION CITED:
Property, Stock and Business Agents Act 2002 (NSW) s.10
Real Estate Industry (State) Award 2003

CASES CITED:
Beaches & Bush Properties v Jennings [2003] NSWSC 798
Electroboard Administration Pty Limited v O'Brien (unreported, 13 March 1998)
Wigan v Edwards (1973) 47 ALJR 586 at 594-595
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723

PARTIES:
Figjam Pty Limited trading as L J Hooker Casino v Jennifer Mary Pedrini

FILE NUMBER(S):
SC 1072/05

COUNSEL:
Mr R Walker for the Plaintiff
Mr S Brennan for the Defendant

SOLICITORS:
David M Imlah - Plaintiff
Hannigans - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Burchett AJ

17 March 2005

1072/2005 FIGJAM PTY LTD trading as LJ HOOKER CASINO V JENNIFER MARY PEDRINI

JUDGMENT

1 On 13th January 2005, the Plaintiff obtained an interlocutory injunction to restrain the Defendant (inter alia) from being employed or involved "within an area of 25 kilometres from L J Hooker at Casino" in the provision of the services of a real estate agency. The foundation of the Plaintiffs claim, in respect of which final relief is now sought, is a term contained in a form of contract of employment of the Defendant as a real estate "Salesperson", signed for the Plaintiff and by the Defendant. The document commences:

" L. J. HOOKER CASINO

EMPLOYMENT AGREEMENT

REAL ESTATE SALESPERSON

The Schedule, although it does not bear that description, consists of two of the added pages, signed by the Defendant and dated by her in the manner I have already referred to: "20.11.03", reading as follows:

POST EMPLOYMENT RESTRICTIONS

1.1 Interpretation of Clause
Clause 1.2 shall have the effect [sic] as if it were separate clauses, each being severable from the other, such separate clauses consisting of each of the warranties and undertakings set out in clause 1.2(a) and 1.2(b) combined with each separate period referred to in clause 1.2(c) combined with each separate area referred to in clause 1.2(d). The parties agree that the restrictions are reasonable and are intended to operate to the maximum extent. If any of the said provisions are found to be invalid or unenforceable foranyreason,such-invalidity-or-unenforceability--shall-not affect the validity or enforceability of any of the other separate provisions. Further, if any provision found to be invalid or unenforceable would be valid or enforceable if part of the wording were deleted or modified and/or the period or area in 1.2(c) and 1.2(d) respectively were reduced, the restrictions apply with the modifications required to make them valid and enforceable.

1.2 You warrant and undertake severally to the Employer that:
(a) You shall not:
on your own account; or
jointly with or on behalf of any other person or corporation as an officer, employee, independent contractor, adviser, partner, joint venturer or agent; or .
through any agent, independent contractor, or employee employed or engaged by them or by any firm or corporation in which they alone or together have a substantial interest whether such interest is legally enforceable or not;
encourage or condone any firm or corporation, in which they may be interested as an employee, director, shareholder, beneficial owner or controller (whether such control can be legally enforced or not) of shares, lender or adviser or otherwise, to
(b)(i) solicit, attempt to solicit or entice away from the Employer any. director, manager, employee, agent or independent contractor of the Employer whether or not such person would commit any breach of his/her contract of employment or engagement by reason of leaving the service of the Employer;
(ii) be employed or engaged in any company, firm or business which is or is about to be engaged in any activity or business of providing the services of a real estate agency;
(iii) solicit or attempt to solicit any business from any person, firm, company or organisation which at any time during the period of your employment has dealt with the Employer or, as at the date of the termination of the contract of employment with the Employer, is in discussion with the Employer regarding the conducting of business;

(c)(i) within a period of 9 months from the termination of the Employment Agreement;

(d) in any of the following areas:
(i) within a radius of 25 kilometres from the offices of the Employer in which you were employed;
Signed ……..J Pedrini

Jennifer Pedrini
(Employee Name) (Date.) 20.11.03

2 The evidence called for the Plaintiff shows, in my opinion, quite clearly that the restraint, the area in which it is expressed to operate and its period of operation are entirely reasonable, providing no .more than adequate protection to the Plaintiff, having regard to the nature of the Defendant's employment by the Plaintiff and the relevant circumstances of the Plaintiffs business. See Beaches & Bush Properties v Jennings [2003] NSWSC 798. But the issue raised by the Defendant is whether the restraint is enforceable as a term of the contract, or whether the instrument signed as the contract was wholly lacking in consideration. It is the Defendant's case that all the terms of the employment had been agreed orally, and the employment on those terms had persisted for a number of months, before the instrument, for the first time and without any further consideration, introduced the restraint clause. On this basis, the Defendant says the situation is governed by the decision of Cohen J in Electroboard Administration Pty Limited v O'Brien (unreported, 13 March 1998), where an employee was held to have received no consideration for signing an_addendum_ to an_existing contractby which arestraint clause was purportedly inserted into it, her signature having been obtained by a threat to terminate her services unless she did agree to the restraint.

3 The claim and defence arise out of circumstances which originated in the establishment of the Plaintiffs business of a real estate agency at Casino and the employment of the Defendant to perform duties of property management, and as a receptionist, under the supervision of Mr Harvey as from 2 April 2002. Throughout the year 2002, the Defendant continued in these roles. However, early in 2003, Mr Harvey encouraged the Defendant to learn the selling side of the business. There was dispute at the hearing as to the extent of her involvement, which she claimed included actually handling sales from December 2002 onwards. Mr Harvey pointed out that she did not receive an appropriate-licence until 27 February 2003, when she was given a Provisional Certificate of registration "under the supervision" of a licensed real estate agent at the Plaintiff's business pursuant to the then practice. Prior to that date, her involvement was limited to attending with the person having conduct of a transaction in order to learn that side of the business, and it would have been illegal for her to "act as or exercise any of the functions of a real estate salesperson": Property, Stock and Business Agents Act 2002 (NSW), s.10. There were difficulties for the Defendant in obtaining the certificate so as to be, as she herself put it, "eligible to sell real estate", because she was then an undischarged bankrupt.

4 Whether "[o]n or about December 2002", as the Defendant claimed, or at the end of February 2003, as the Plaintiff asserted, it is not in dispute that there was an initial oral agreement reached between Mr Harvey, on behalf of the Plaintiff, and the Defendant that she would work selling real estate for the Plaintiff and would receive a 5% commission for listing plus a 5% commission for selling subject to other terms which it is unnecessary to go into for the purposes of this case. There was no mention at that time of a restraint clause; I think it is clear the parties trusted each other, and indeed they probably contemplated, Mr Harvey having assisted in overcoming the ban kruptcy problem, that the Plaintiff would also assist the Defendant, as it did in the event, with the significant cost of training.

5 As I have said, there is dispute about the date of the oral agreement. Much more important, however, is a dispute about the next event alleged by the Defendant. According to her initial affidavit of 10 February 2005, para. 11:

"On 1 May 2003 my employment conditions were amended by further verbal agreement to increase my net commission on sale for listing and selling from 5% per sale to 10% per sale. I was also given a further base wage increase of approximately $100 per week. These were the only variations to the employment relationship. Again there was no mention of a restraint of trade condition being part of the agreement."

6 Mr Harvey denies that any discussion at all or agreement occurred on 1 May 2003 or at about that time concerning either the Defendant's wages or commission. As to the wages, he says (and he is supported by the wages book in which the Defendant signed for each payment of her wages) that an increase was agreed at the end of June for the new financial year. As to the 5% plus 5% commission, he says this remained the Defendant's entitlement until 19 November 2003, when it was changed as part of the written agreement he signed on that day. Neither side can produce, in respect of the commissions, a contemporary record comparable to the wages book, for it is common ground that the Defendant, for private reasons, asked Mr Harvey not to pay her commissions until she asked for them; and in fact she did not before December 2004 present calculated statements showing commission rates, but simply asked from time to time for lump sums, or for the payment of particular bills.

7 The Real Estate Industry (State) Award 2003 applied to the Defendant's employment to sell real estate. Clause 11(b) of this award provides:

By para. (c), it is required that the employer also sign the agreement and, within 14 days of it "being signed", send two copies either to The Real Estate Employers' Federation of NSW or the Auctioneers and Agents Guild with registration fees.

8 The Plaintiff and the Defendant having neglected to ensure they complied with the Award, which was in force from the first pay period after 1 January 2003, at the time she became a real estate salesperson, Mr Harvey subsequently obtained a form of model agreement from the Real Estate Employers' Federation of NSW and, using this as a draft, prepared what he considered an appropriate agreement. It is not suggested the terms he so produced in any way failed to comply with the Award. Towards the end of July 2003, he gave a copy to the Defendant to sign. At the time, he told her it was "an industry standard document", but he added:

"I'm no lawyer so if you have any questions you might like to get someone to vet it".

Over the next few months, Mr Harvey repeatedly reminded the Defendant, but although she made no complaint about the terms of the document, she did not return it to him signed by her. By November, the Plaintiff was being threatened with prosecution unless it registered on or before 21 November a signed agreement with the Defendant; all other staff had completed their agreements. On 19 November 2003, a discussion took place between the Defendant and Mr Harvey when, for the first time, she raised a question about the terms of the document. As given to her in July, it had reflected his understanding of the then oral agreement, that the applicable percentages of commission were 5% on listing and 5% on selling. That had remained unquestioned during the following months, although one would have expected the term as to commission to be virtually the first term an employee would have looked at. Now she said, according to Mr Harvey:

"I'm happy with the agreement but would like to have my commission payment increased from 5% list - 5% sell to 10% list - 10% sell."

Mr Harvey agreed to the increase and the relevant page of the agreement was reprinted from the computer with the changed percentages. The document was then signed and dated by Mr Harvey, and the Defendant signed and dated it the following day.

9 Although the Defendant did not, at the hearing, dispute that she had not previously complained about the percentages of commission shown in the printout she accepts was given her in July, she asserts that in November she "asked that the written agreement be amended to accommodate our earlier verbal agreement... that is, payment of my commissions at a rate of 10%." Strangely, she alleges that "it all seemed like a bit of a rush" and she "was not given any further opportunity to discuss the agreement in detail", although she also says she read and thought about the restraint clause.

10 Both Mr Harvey and Mrs Pedrini were cross-examined. Generally, I prefer the evidence of Mr Harvey. On the specific question of the date and circumstances of the agreement to increase the commission rates to 10%, I also think the probabilities favour his version. Mrs Pedrini admitted she had had no previous experience in selling real estate, or indeed "in any sales related occupations", and I consider it unlikely her commission rates would have been doubled within little more than two months from the obtaining of her Provisional Licence. Further, the alleged conversation in which this happened is inconsistent, on the related subject of wages, with the wages book. Next, the Defendant's version offers. no reason why Mr Harvey, at a time, in July, when he had just raised her wage from 1 July, should without saying anything to Mrs Pedrini have arbitrarily reduced her rate of commission by half in the form of agreement he produced. They were at that time on good terms, and continued so; he paid a substantial amount subsequently to meet the cost of her acquiring a further qualification, and in November he showed, even on her account, no reluctance in altering the agreement to allow her the 10% rate of commission. Perhaps most important of all is the consideration that she had had the form of agreement since July without previously suggesting there was any mistake in it. Having regard to all of these matters, as well as my impression of the witnesses, I have no hesitation in accepting Mr Harvey's evidence on the matters of the change of the percentage of commission and the circumstances in which the agreement was signed.

11 As regards the suggestion of pressure to sign the document, the Award required it to be signed as a condition of the employment, and I conclude that both parties knew this by July, and certainly by November 2003. They must, I infer, have regarded the validity of the mutual obligations of the Plaintiff and the Defendant as at least in doubt until the agreement should be signed. The imminent ,threat of prosecution made her continued employment impossible unless an agreement was signed, and the form of agreement proffered was the only one in contemplation by the parties once the rate of commission was determined. There was nothing improper about Mr Harvey's request that the Defendant sign it without further delay. Even so, she left it for another gray until the last day before the final prosecution deadline, of which she had been made aware on about 9 November, promptly upon Mr Harvey himself being notified of it.

12 Following the making of the agreement in writing, the employment continued to the end of 2003 and throughout 2004, but late in the latter year the Defendant became dissatisfied. Her brother was a principal in another agency in Casino, and I infer she was interested in the possibility of joining that agency, having obtained (with substantial financial assistance from the Plaintiff) "her full Licence in late 2004". Just before Christmas 2004, on 17 December, the Defendant went on leave. Prior to her departure, she handed Mr Harvey a hand written set of figures comprising a claim for outstanding commissions. This document claimed for work as a real estate salesperson prior to her obtaining of her Provisional Licence and at the rate of 10% for listing and 10% for selling prior to 19 November 2003 and even prior to 1 May 2003. When these matters were challenged at the. hearing, Mrs Pedrini made no attempt to justify the rate claimed in respect of a number of transactions. There were other errors in the claims made. Also in December, and before going on holidays, the Defendant said to Mr Harvey:

"I am considering my position and will think things over while I am on holidays and will let you know when I return."

She did not let him know, and did not return on 17 January 2005. The day before she left, she did say she had been offered a job by a competing firm of real estate agents in Casino, the firm in which her brother was a partner, "but [she said] I haven't made my mind up." As a result of this, and of other information, the Plaintiff instructed its solicitor to seek confirmation from the Defendant that she would "abide by all the terms of the agreement", particularly the restraint clause, and a letter was written to her accordingly on 22 December 2004. Her solicitors' reply of 23 December 2004 was combative in tone, but pointedly evaded any direct response to the Plaintiffs request. Therefore, on 24 December 2004, the Plaintiff's solicitor made it clear that a continued failure to respond would lead to proceedings for injunctive relief.

13 My conclusion accepting Mr Harvey's evidence that the increased rate of commission was not provided for on 1 May 2003, or otherwise than by the written agreement signed by the Defendant on 20 November 2003, disposes of the defence of lack of consideration. The additional commission plainly provided consideration for any additional promise by the Defendant, including the restraint clause.

14 Even apart from the new term increasing the commission, it seems to me the case is distinguishable from Electroboard Administration Pty Limited v O'Brien. There, no suggestion arose of a replacement of a defective contract by an undeniably valid one; rather, the position was the employer required the employee to add one fresh term to the only contract between them, which was to continue with that variation. Nothing at all was provided as consideration for the added term. By contrast, here persistence with the oral contract was known to be in contravention of an award provision which made it "a condition of employment that the employee shall sign an Employment Agreement on or before the day employment commences". Therefore, a written contract was required to regularize the position. Furthermore, it was at least strongly arguable that the employee, if she refused to sign when asked to do so, would raise against herself a defence to any claim by her under the contract of employment. The Award said the signing was a condition.

15 The governing principle seems to me to be that stated in Carter and Harland, Contract Law in Australia, 4 ed. (2002) at para. 347:

Termination of the Contract. The principle that a promise to perform a contractual obligation already owed to the other party is no consideration for' a return promise by the latter has no application where the earlier obligation is, as part of the agreement, terminated or discharged. In other words, if the existing duty is discharged by a contract which includes a promise with the same content as the original promise, the promise will be regarded as binding because consideration is present in the parties' agreement that the original duty is to be discharged.

16 The principle is also to be seen in the statement of Mason J in Wigan v Edwards (1973) 47 ALJR 586 at 594 -595:

17 In my opinion, it should be inferred in the circumstances that the Defendant understood the Plaintiff was telling her (and it was so telling her bona fide) that it would be unable to continue her employment under the Award unless she signed the agreement in writing, and the intention of the parties was to terminate the verbal agreement and replace it with the agreement in writing, which was to govern their relations from 19 November, or at latest 20 November, 2003.

18 Finally, it seems to me that, the situation is relevantly analogous to that which was found to exist in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, where Santow J regarded (at 746-747) the "avoidance of a very substantial practical disbenefit" as sufficient consideration. Plainly, to be a party depending on an invalid agreement for an entitlement to commission amounted to such a "disbenefit", so far as the Defendant was concerned.

19 It follows that the defence fails. There is no other reason why the Plaintiff should be denied the relief it seeks. It has made out its case, and an injunction should be granted with costs. There was some discussion as to the correct date from which to compute the period of 9 months. In my opinion, on the evidence, that date is 17 January 2005 when, for the first time, it became quite clear that the Defendant was not going to return to her employment.

20 The order that I make at this stage is that the Plaintiff bring in, on a date to be fixed, short minutes of orders appropriate to be made pursuant to these reasons. In the formulation of the short minutes, attention should be given to the question whether any correction is required in respect of the company name of the Plaintiff. The Defendant must pay the Plaintiff's costs.

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Citations

Figjam Pty Ltd trading as LJ Hooker Casino v Pedrini [2005] NSWSC 221

Most Recent Citation

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Statutory Material Cited

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Beaches and Bush Properties v Jennings [2003] NSWSC 798

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CITATION:	Figjam Pty Ltd trading as LJ Hooker Casino v Pedrini [2005] NSWSC 221
HEARING DATE(S):	7 & 9 March 2005
JUDGMENT DATE :	17 March 2005
JUDGMENT OF:	Burchett AJ
DECISION:	Injunction to be granted with costs restraining Defendant for 9 months from engaging in certain activities within a radius of 25 kms from an office at Casino.

CATCHWORDS:	Restraint of trade - contract of employment - whether there was consideration for a restraint clause in a written contract entered into after many months of employment pursuant to an oral contract - discussion of problems of consideration where an oral contract of employment is replaced by a written one introducing a new term - relevance of Award requiring writing - whether consideration was provided by the avoidance of a "practical disbenefit" of possible invalidity of the existing contract.
LEGISLATION CITED:	Property, Stock and Business Agents Act 2002 (NSW) s.10 Real Estate Industry (State) Award 2003
CASES CITED:	Beaches & Bush Properties v Jennings [2003] NSWSC 798 Electroboard Administration Pty Limited v O'Brien (unreported, 13 March 1998) Wigan v Edwards (1973) 47 ALJR 586 at 594-595 Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723
PARTIES:	Figjam Pty Limited trading as L J Hooker Casino v Jennifer Mary Pedrini
FILE NUMBER(S):	SC 1072/05
COUNSEL:	Mr R Walker for the Plaintiff Mr S Brennan for the Defendant
SOLICITORS:	David M Imlah - Plaintiff Hannigans - Defendant