Harden v Willis Australia Group Services Pty Ltd; Willis Australia Group Services Pty Ltd v Harden

[2021] NSWSC 939

Supreme Court

New South Wales

Medium Neutral Citation:

Harden v Willis Australia Group Services Pty Ltd; Willis Australia Group Services Pty Ltd v Harden [2021] NSWSC 939

Hearing dates:

15, 16, 18 & 19 February and 3 June 2021
Submissions of Mr Harden dated 12 April, 12 & 19 May and 7 June 2021
Submissions of Willis dated 29 April, 12 and 20 May & 23 June 2021

Decision date:

30 July 2021

Jurisdiction:

Equity - Expedition List

Before:

Sackar J

Decision:

See paras [509]-[517]

Catchwords:

CONTRACTS — Termination — Repudiation of contract — Whether a direction to lie to clients during notice period constitutes a breach of implied duty of good faith — Whether this amounts to repudiation — Whether in the event of repudiation the employee had affirmed the contract by continuing to accept their salary and comply with employer directions

CONTRACTS — Implied terms — Good faith — whether there is an implied duty of good faith in employment contracts

EMPLOYMENT AND INDUSTRIAL LAW — Contract — Restraint of trade — Whether restraint unreasonable or against public policy — Whether period of restraint is reasonable where employee is senior and experienced — Whether notice period counts towards period of restraint

COMMERCE — Restraint of trade — Enforcement and remedies — Injunction — Whether employee had solicited or attempted to solicit clients and staff from their employer — Whether employee misused or could misuse confidential information of their employer or clients — Whether employee should be restrained from undertaking these actions

Legislation Cited:

Evidence Act 1995 (NSW)

Restraints of Trade Act 1976 (NSW)

Cases Cited:

Adamson v New South Wales Rugby League Limited (1981) 27 FCR 535

Aircraft Pty Ltd v Chandler [2003] QSC 102

Amoco v Rocca Bros (1973) 133 CLR 233

Australian Executor Trustees (SA) Ltd v Kerr [2021] NSWCA 5

Australian Workers’ Union v Stegbar Australia [2001] FCA 367

BearingPoint Australia Pty Ltd v Hillard [2008] VSC 115

BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367

Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66

Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153

Briginshaw v Briginshaw (1938) 60 CLR 336

Bundanoon Sandstone Pty Limited v Cenric Group Pty Limited [2019] NSWCA 87; 373 ALR 591

Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558

Butt v McDonald (1896) 7 QLJ 68

Byrne v Australian Airlines Limited (1995) 183 CLR 410

Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9

Champtaloup v Thomas [1976] 2 NSWLR 264

Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329

Commonwealth Bank of Australia v Barker (2014) 253 CLR 169

Cook’s Construction Pty Ltd v Brown (2004) 49 ACSR 62

Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184

Crossman v Sheahan [2016] NSWCA 200

Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337

Dainford Ltd v Smith (1985) 155 CLR 342

De Belin v Australian Rugby League Commission Limited [2019] FCA 688

Doherty v Allman (1878) 3 App Cas 709

Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679

Downe v Sydney West Area Health Service (No 2) (2008) 71 NSWLR 633

DP World Sydney Ltd v Guy [2016] NSWSC 1072

Emeco International Pty Ltd v O’Shea (No 2) (2012) 225 IR 423; [2012] WASC 348

Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269

Extraman (NT) Pty Ltd v Blenkinship (2008) 23 NTLR 77

Fabre v Arenales (1992) 27 NSWLR 437

Fitzgerald v Masters (1956) 95 CLR 320

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603

Hitech Contracting Limited v Lynn (unreported, ex tempore, 31 May 2001)

Honner v Ashton [1980] ANZ ConvR 343

HRX Holdings Pty Ltd v Pearson [2012] FCA 161

Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111

Izaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343

Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61

James Cook University v Ridd (2020) 382 ALR 8

Jardin and Jardim Investments Pty Ltd v Metcash Ltd and Metcash Trading Ltd [2011] NSWCA 409

John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995

Jones v Dunkel (1959) 101 CLR 298

Kone Elevators Pty Ltd v McNav (No 2) (1997) ATPR 41-564; (1997) Aust Contract R 90-080

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115

Koops Martin v Dean Reeves [2006] NSWSC 449

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623

Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633

Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336

Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25

Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170

Newton v Australian Postal Corp (No 2) (2019) 292 IR 396

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Limited [1894] AC 535

OAMPS Insurance Brokers Ltd v Hanna [2010] NSWSC 781

Orleans Investments Pty Ltd v Mindshare Communications Ltd [2009] NSWCA 40; (2009) 254 ALR 81

Orton v Melman (1981) 1 NSWLR 583

Otis Elevator Company Pty Ltd v John Nolan [2007] NSWSC 593

Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199

Palmer v Dolman [2005] NSWCA 361

Pearson v HRX Holdings Pty Ltd (2012) 205 FCR 187; [2012] FCAFC 111

Portal Software v Bodsworth [2005] NSWSC 1179

Provida Pty Ltd v Sharpe [2012] NSWSC 1041

R v The Darling Island Stevedoring and Lighterage Co Ltd; Ex parte Halliday; Ex parte Sullivan [1938] HCA 44; 60 CLR 601

Renard Construction (ME) Pty Ltd Minister for Public Works (1992) 26 NSWLR 234

Russell v Trustees of Roman Catholic Church for Archdiocese of Sydney (2007) 69 NSWLR 198

Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603

Sargent v ASL Developments Ltd (1974) 131 CLR 634

Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126

Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) (2019) 99 NSWLR 317

Shevill v The Builders Licensing Board (1982) 149 CLR 620

Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85

Steadfast IRS Pty Ltd v Latchmi Mesuria [2020] NSWSC 947

Streetscapes Projects Pty Ltd v City of Sydney (2013) 85 NSWLR 196

Talacko v Talacko [2021] HCA 15

Trampoline Enterprises Pty Limited v Fresh Retailing Pty Limited [2019] VSCA 74

Two Lands Services Pty Ltd v Cave [2000] NSWSC 14

United Australia Ltd v Barclays Bank Ltd [1941] AC 1

Virk Pty Limited (In Liq) v YUM! Restaurants Australia Pty Limited [2017] FCAFC 190

Wendt v Bruce (1931) 45 CLR 245

Woolworths Ltd v Olson [2004] NSWCA 372

Wormald v Mardaca Pty Ltd [2020] NSWCA 259

Wright v Gasweld (1991) 22 NSWLR 317

X v Commonwealth (1999) 200 CLR 177

Texts Cited:

Meagher, Gummow and Lehane Equity, Doctrines & Remedies (2002, 4th ed, Butterworths)

Robertson and Patterson, Principles of Contract Law (2020, 6th ed, Thomson Reuters)

J D Heydon, Heydon on Contract (2019, Thomson Reuters)

Category:

Principal judgment

Parties:

2020/315224
Michael Harden (plaintiff)
Willis Australia Group Services Pty Ltd (defendant)

2020/277532
Willis Australia Group Services Pty Ltd (first plaintiff)
Willis Reinsurance Limited (second plaintiff)
Michael Harden (defendant)

Representation:

Counsel:
For Harden:
A Sullivan QC, O Jones
For Willis Australia:
A Moses SC, D Mahendra, J Simpkins

Solicitors:
For Harden:
HWL Ebsworths
For Willis Australia:
Gilchrist Connell

File Number(s):

2020/315224; 2020/277532

Publication restriction:

n/a

Judgment

1. These two proceedings were unsurprisingly heard together.

2. In the Harden proceedings, Mr Harden seeks declarations to the effect that on 1 July 2020 Willis Australia Group Services Pty Ltd (“Willis”) repudiated the contract of employment entered into between Harden and Willis dated 23 November 2016 (the “Agreement”) by directing that Mr Harden falsely inform Willis’ clients that he was on leave.

3. Further or in the alternative Mr Harden seeks a declaration that Willis, for the purposes of cl.12.5(d) of the Agreement, suspended Mr Harden from carrying out his duties and required him to work from another place.

4. Further and again in the alternative, Mr Harden seeks a declaration that cl.13.2 of the Agreement is an invalid restraint of trade. An order is sought under s.4(3) of the Restraints of Trade Act 1976 (NSW) (“Restraints Act”) that cl.13.2 is invalid and not enforceable.

5. In the Willis proceedings, Willis seeks injunctive relief (without in any way intending to be exhaustive), restricting Mr Harden in various ways from soliciting, attempting to solicit any business away from Willis or enticing or assisting any person to do such things. In addition a permanent injunction is sought restraining him from using any confidential information.

6. Further a declaration is sought that Mr Harden breached his duty not to make unauthorised use of the Willis information and further an order rectifying cl.13.4 replacing the word “Company” with the words “Willis Group”.

Background Facts

7. Willis, Willis Reinsurance Ltd (“Willis Re”) and Willis Towers Watson Australia Holdings Ltd are part of the Willis Towers Watson Group of Companies (“the Group”), a global professional services group providing advisory, insurance and reinsurance broking and human capital solutions.

8. Willis Re is part of the global reinsurance broking business. It is a reinsurance broker for insurance businesses predominantly in Australia, New Zealand and the Pacific Islands.

9. Willis Re’s staff are employed by Willis, which is a non-operational services company that provides premises, employs staff and carries out payroll functions on behalf of Willis Re.

10. Mr Harden was employed by Willis to work for Willis Re’s business. He had been working with Willis Re or one or other of its related entities for around thirty years.

11. Most recently he was employed as the President of Willis Re Asia-Pacific pursuant to the Agreement.

12. In the period from 11 March 1991 and 30 June 2020 Mr Harden was a director of Willis Re and from sometime after 23 November 2016 until early 2020 Mr Harden was Chairman of the board of directors of Willis Re.

13. He was the Chief Executive Officer of Willis Re for about 7 years until 2013. Before that he was Deputy Managing Director. From about 1 January 2013 to around the end of 2016 Mr Harden was in Bermuda performing the role of Chief Executive Officer of Willis Re Bermuda.

14. Mr Harden executed an employment contract on 23 November 2016 (“the Agreement”).

15. In around 2017 Mr Harden returned to Australia and was given the position President of Willis Re Asia-Pacific. The position was created for him. The role involved leading a country’s team as well as working with various country leaders to assist with new business production and business development.

16. In March 2020 it was announced that AON Plc could buy Willis Towers Watson (and thus assume control of Willis Australia) in an all–stock deal.

17. AON had been a long standing competitor of Willis and Mr Harden asserted he had throughout his career always declined to work for AON on the basis he did not consider that its culture or values aligned with his values.

18. As a result of the announcement on 26 June 2020 Mr Harden resigned from his employment with Willis Re. He proposes to commence employment with Guy Carpenter as soon as he is lawfully able to do so. Guy Carpenter is a subsidiary of the Marsh & McLennan Companies which is a global professional services group providing insurance broking wealth and risk management services. Guy Carpenter is a reinsurance broking and consulting brand within Marsh & McLennan and has a significant presence in the Australian reinsurance broking market. Guy Carpenter is a competitor of Willis Re.

19. On 1 July 2020 Mr Harden received a letter from the solicitors for Willis amongst other things purporting to give him directions on what he should say if contacted by any clients of Willis. Relevantly, it provided:

5.3 If a client of Willis Towers Watson contacts you by any means during your notice period, you are directed to say or reply only the following and nothing else:

‘I’m sorry I cannot assist you because I am on leave. You should contact John Phillipsz on [mobile number]. There’s nothing further I can say at this time.’

5.4 You are not permitted to tell the client that you have resigned or the details of your new employer or anything to this effect.

5.5 You will remain on full pay without loss of entitlements during your notice period.

5.6 Please remain reasonably available by telephone on your personal number during business hours to answer business related questions from Willis Towers Watson.

20. On 13 July he received a further letter from the same solicitors purporting to give him further directions.

The Issues

21. Although not separate questions, the parties identified seven issues to be addressed in the proceedings, giving rise to several sub-issues. These main issues were:

1. whether Willis repudiated the employment contract with Mr Harden (“Issue 1”);

2. whether Willis has suspended Mr Harden during his notice period (“Issue 2”);

3. whether the restraint of trade imposed on Mr Harden beyond his notice period is lawful (“Issue 3”);

4. whether any orders should be made against Mr Harden in relation to Willis’ confidential information (“Issue 4”);

5. whether Mr Harden unlawfully solicited employees of Willis to leave their employment in breach of his duties in his employment contract, in equity and under the Corporations Act 2001 (Cth) to cause Willis loss and damage (“Issue 5”);

6. whether Mr Harden unlawfully solicited clients of Willis in breach of his various duties, such as to cause Willis loss and damage (“Issue 6”); and

7. whether Willis is entitled to rectification of Mr Harden's employment contract (“Issue 7”).

Legal Principles

Construction

22. In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 (“Cordon Investments”), Bathurst CJ (Macfarlan and Meagher JJA in agreement) summarised the principles underlying the construction of written contracts at [52]:

… A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40]; International Air Transport Assn v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 ; (2011) 282 ALR 604.

Implied terms

23. Courts have implied terms in contracts on an ad hoc basis to give business efficacy, by custom in certain classes of cases, in law in some classes of contract, and in law in all classes of cases (Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 (“Barker”) at 185-186 [21]; Bundanoon Sandstone Pty Limited v Cenric Group Pty Limited [2019] NSWCA 87; 373 ALR 591 (“Bundanoon”) at [156]).

24. The test for whether a term should be implied by law is that of “necessity’. It must be demonstrated that absent the implication the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or the contract would be deprived of its substance, seriously undermined or drastically devalued (Byrne v Australian Airlines Limited (1995) 183 CLR 410 at 450, 453; Barker at [29]). Considerations of justice and policy should be included in a consideration of “necessity” (Barker, per Gageler J at [114].)

25. Courts have recognised that there is an implied duty of cooperation in every contract whereby each party agrees, by implication, to do all such things as are necessary on its part to enable the other party to have the benefit of the contract (Butt v McDonald (1896) 7 QLJ 68 at 70-71; Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 at 607-608.)

Implied term of good faith

26. The implied duty of good faith may arise in different contexts and may apply to one or all parties to a contract.

27. The Full Federal Court in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 (“Paciocco”) described the implied duty of good faith as a concept that has been recognised, though not by all courts in Australia, as a feature of Australian contract law attending the performance of the bargain and its construction and implied content (at 272 [287]). Allsop CJ described the concept as “well-known to the common law” (at 272 [287]).

28. The Court noted (at 273 [288]) that the content of the implied term includes:

…an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.

29. At 273 [289] the Court continued, clarifying that:

None of these obligations requires the interests of a contracting party to be subordinated to those of the other. It is good faith or fair dealing between the parties by reference to the bargain and its terms that is called for, be they both commercial parties or business dealing with consumers. As Posner J said in Market Street Associates Ltd Partnership v Frey 941 F (2d) 588 (1991) the contractual notion of good faith varies in what is required for its satisfaction by reference to the nature of the contract. But the notion is rooted in the bargain and requires behaviour to support it, not undermine it, and not to take advantage of oversight, slips and the like in it…

30. The actual standard of fair dealing or reasonableness that is to be expected in any case will vary depending on the nature of the contract or relationship and interests of the parties. While the implied duty introduces a normative standard it does not call for the same acts from contracting parties in all cases which instead depends on the contractual and factual context in each case (Paciocco at 273 [290]). Good faith does not import fiduciary obligations, but rather promotes commerce by creating a requisite degree of trust (Paciocco at 274 [292]-[293]).

31. His Honour Bathurst CJ in Cordon Investments (with whom Macfarlan and Meagher JJA agreed) summarised the position in NSW in relation to the implied term to act in good faith (at [144]-[145]):

[144] Lesdor did not dispute that it was appropriate to imply into the Agreement an obligation that the parties would act in good faith towards each other. That is consistent with the approach adopted in a number of decisions of this court: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187 ; (2001) 69 NSWLR 558 at [186]; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 369; United Group Rail Services Ltd v Rail Corporation (NSW) [2009] NSWCA 177 ; (2009) 74 NSWLR 618 at [58]–[61]; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [11]–[12], [146]–[147]. However, these decisions have emphasised that the obligation does not require a party to act in the interests of the other party or subordinate its own legitimate interests to those of the other party, although it does require it to have due regard to the rights and interests of the other party. The necessity for the implication of such terms in commercial contracts has not been universally accepted: Service Station Assn Pty Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 at 91–98; Royal Botanic Gardens & Domain Trust v South Sydney City Council [2002] HCA 5 ; (2002) 240 CLR 45 at [88], [155]. However, it is not necessary to discuss the matter further in the present case.

[145] The content of the obligation has commonly been held to embrace three related matters:

1 An obligation on the parties to co-operate to achieve the contractual objectives.

2 Compliance with honest standards of conduct.

3 Compliance with standards of conduct that are reasonable having regard to the interests of the parties.

A F Mason “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66 at 69; Alcatel Australia Ltd v Scarcella supra at 367; Burger King Corporation v Hungry Jacks Pty Ltd supra at [171]; Macquarie International Health Clinic Pty Limited v Sydney South West Area Health Service supra at [12]; [146].

32. There is an implied term in employment contracts that an employee must act in good faith (X v Commonwealth (1999) 200 CLR 177 at 187 [31]). An employee is under a duty not to engage in conduct which “impedes the faithful performance of his obligations, or is destructive of the necessary confidence between the employer and employee” (Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 81 per Dixon and McTiernan JJ).

Repudiation

33. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 (“Koompahtoo”) the Court referred to repudiation in the sense of a breach of contract justifying termination by the other party as “failure of performance” (at 136). It was clarified that there are two relevant circumstances in which breach of contract may justify termination, including the breach of an essential term (at 136) and at sufficiently serious breach of a non-essential term (at 138). The other type of repudiation was termed “renunciation”, the test for which is “whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it” (at 135).

34. In Shevill v The Builders Licensing Board (1982) 149 CLR 620 (“Shevill”) at 625-626 (references omitted), Gibbs CJ stated that:

…a contract may be repudiated if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way…

35. At 626, Gibbs CJ distinguished between the right to terminate for fundamental breach and the right to terminate for repudiation as elaborated on by Mahoney JA in Honner v Ashton [1980] ANZ ConvR 343:

In Honner v. Ashton, Mahoney J.A. said that he thought that the right to terminate for fundamental breach should be seen as, in principle, distinct from the right to terminate for repudiation. For present purposes, it is immaterial whether repudiation and fundamental breach are treated as separate categories, for in either case the innocent party can rescind the contract and recover damages to compensate him for the failure to perform the contractual obligations. Counsel for the respondent, in their alternative argument, sought to bring the case within this principle. A third situation in which a right to rescission arises is where there has been a breach of a fundamental or essential term of the contract.

36. In Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126 (at 140) the Court also commented on the test to determine whether repudiation (in the sense of renunciation) had occurred. The ultimate question is to ask whether it should be concluded that one party acted in such a way as to evince an intention not to carry out the contract. That intention may be inferred from conduct and it is a question of fact, the answering of which may involve consideration of the nature of the contract and all circumstances of the case (see also Dainford Ltd v Smith (1985) 155 CLR 342 at 366).

37. In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 (“Laurinda”) at 634, Mason CJ outlined the requisite intention for repudiation to arise:

There is a difference between evincing an intention to carry out a contract only if and when it suits the party to do so and evincing an intention to carry out a contract as and when it suits the party to do so. In the first case the party intends not to carry out the contract at all in the event that it does not suit him. In the second case the party intends to carry out the contract, but only to carry it out as and when it suits him. It is much easier to say of the first than of the second case that the party has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with his obligations and riot in any other way. But the outcome in the second case will depend upon its particular circumstances, including the terms of the contract. In some situations the intention to carry out the contract as and when it suits the party may be taken to such lengths that it amounts to an intention to fulfil the contract only in a manner substantially inconsistent with the party's obligations and not in any other way.

38. Further, at 658 of Laurinda, Deane and Dawson JJ highlighted that an objective approach must be taken:

An issue of repudiation turns upon objective acts and omissions and not upon uncommunicated intention. The question is what effect the lessor's conduct "would be reasonably calculated to have upon a reasonable person” (per Lord Herschell L.e., Carswell v. Collard; Forslind v. Bechely-Crundall). It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.

Restraint of trade

39. At common law, any restraint of trade is prima facie void. To be lawful, it must be “reasonable…in reference to the interests of the parties concerned, and reasonable in reference to the interests of the public…” (Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Limited [1894] AC 535 (“Nordenfelt”) at 565).

40. The burden of justifying the restraint’s reasonableness lies on the party seeking to impose it (Adamson v New South Wales Rugby League Limited (1981) 27 FCR 535 (“Adamson”) 554 per Hill J).

41. In New South Wales, “a restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not” (s.4(1) Restraints Act). The effect of the Restraints Act 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 offending party, if a restraint to that extent would have been valid (Steadfast IRS Pty Ltd v Latchmi Mesuria [2020] NSWSC 947 (“Steadfast”) at [43] per Sackar J).

42. Therefore the correct approach in New South Wales is to first determine whether the offending conduct comes within the clause as properly construed. Then to determine whether the restraint in its application to that breach is against public policy. If it is not, the restraint is valid, although the Court may make an order under s.4(3) of the Act that the restraint be, as regards to the applicant invalid wholly or to such extent not exceeding the extent to which the restraint is not against public policy (Woolworths Ltd v Olson [2004] NSWCA 372 (“Woolworths”) at [42]).

43. The validity and reasonableness of the restraint is to be determined as at the time it is entered into (Portal Software v Bodsworth [2005] NSWSC 1179 per Brereton J at [83], citing Nordenfelt at 574; Woolworths at [40]). When exercising its discretion to grant relief, the Court must consider matters as at the date of the hearing (Otis Elevator Company Pty Ltd v John Nolan [2007] NSWSC 593 at [17] to [30]), including matters pertaining to the conduct of the defendant.

44. As I noted in Steadfast at [46], these principles were reiterated by Gleeson JA (with whom Bathurst CJ and Beazley P agreed) in Izaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343 (“Dargan”) at [59]-[72]:

[59] At common law a restraint of trade is contrary to public policy and void unless justified by the special circumstances of the particular case. A restraint may be enforced if the restraint is reasonably necessary for the protection of the parties concerned and reasonable in the interests of the public: Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535 at 565 (Lord Macnaghten); Lindner v Murdock’s Garage (1950) 83 CLR 628 at 633 (Latham CJ); [1950] HCA 48; Buckley v Tutty (1971) 125 CLR 353 at 376, 379–380; [1971] HCA 71.

[60] In New South Wales, it is necessary to have regard to the Restraints of Trade Act 1976 (NSW) …

[61] The correct approach to the application of s 4(1) of the Restraints of Trade Act is well settled. In Orton v Melman [1981] 1 NSWLR 583 at 587 McLelland J (as his Honour then was) explained that first, the court determines whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed. Next, the court determines whether the restraint, so far as it applies to that breach, is contrary to public policy. If it is not, the restraint is valid, subject to any order which may be made under s 4(3)…

[62] The effect of s 4(1) of the Restraints of Trade Act is to require, for the purpose of determining the validity of a restraint, that attention be focused on the actual or apprehended breach, rather than on imaginary or potential breaches: Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 at [10] (Brereton J).

[63] The validity of a covenant in restraint of trade is to be judged at the date of its creation: Lindner v Murdock’s Garage at 653 (Kitto J); Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 318 (Gibbs J); [1973] HCA 40; Geraghty v Minter (1979) 142 CLR 177 at 181 (Barwick CJ); [1979] HCA 42. Nonetheless, the court may take into account future events that could have been foreseen: Lindner v Murdock’s Garage at 653. Hence, when exercising its discretion whether or not to grant relief, the court considers matters as at the date of the hearing: Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418 at [70] (Young JA; Beazley and Basten JJA agreeing); Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414 at 440; [2008] NSWSC 852 at [88] (Brereton J).

[64] The nature of the interest meriting protection under a covenant in restraint of trade will differ according to the type of restraint under consideration. In Tullett Prebon (Australia) Pty Ltd v Purcell, a case involving restraints in an employment case, Brereton J said at [47]:

[47] … Whether a restraint is reasonable having regard to the interests of the parties depends on two, albeit related, considerations: first, whether the covenantee has a legitimate protectable interest, and secondly, whether the restraint is no more than reasonable for the legitimate protection of that interest. A covenantee is not entitled to be protected against mere competition; the legitimate interests which may be the subject of protection by covenant are in the nature of proprietary subject matter [Vandervell Products Ltd v McLeod [1957] RPC 185; Tank Lining Corp v Dunlop Industries Ltd (1982) 40 OR (2d) 219; 140 DLR (3d) 659 at 664], including trade secrets and confidential information, and goodwill including customer connection.

[65] However as Young JA explained in Sidameneo (No 456) Pty Ltd v Alexander at [31]–[32], the word “proprietary” is used in a special sense and will include legitimate commercial interests. In this regard, his Honour referred to the view he had expressed in Twenty-First Australia Inc v Shade (Supreme Court (NSW), Young J, 31 July 1998, unrep) and Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607 at 612–613.

[66] “Goodwill” has been described as a rather elusive concept: Sidameneo (No 456) Pty Ltd v Alexander at [54]. Goodwill has been referred to as the product of combining and using the tangible, intangible and human assets of a business for such purposes and in such ways that custom is drawn to it: Commissioner of Taxation of the Commonwealth of Australia v Murry (1998) 193 CLR 605; [1998] HCA 42 at [24]. It has been said that it is more accurate to refer to goodwill as having sources than being composed of elements, given that goodwill is to be seen as adding value to a business “by reason of” situation, name and reputation, and other matters, not because goodwill is composed of such elements: Commissioner of Taxation v Murry at [24], citing Commissioners of Inland Revenue v Muller & Co’s Margarine Ltd [1901] AC 217 at 235 (Lord Lindley). It has also been recognised that many of the sources of goodwill are not themselves property, nor assets for accounting purposes: Commissioner of Taxation v Murry at [25].

[67] Generally, a stricter and less favourable view is taken of covenants in restraint of trade between employer and employee than in commercial agreements. As Mason P explained in Woolworths Ltd v Olson at [38]:

[38] The courts in general take a stricter and less favourable view of covenants in restraint of trade entered into between employer and employee than of similar covenants in commercial agreements (Geraghty v Minter (1979) 142 CLR 177 at 185). The reasons are explained in J D Heydon, The Restraint of Trade Doctrine (2nd ed, 1999) at pp68–9. It is nevertheless well established that an employer may have interests capable of protection by a restraint covenant. These interests go beyond protection of goodwill and retention of customers and extend to trade secrets …

[68] The same point is made by JD Heydon in the most recent edition of The Restraint of Trade Doctrine (4th ed, 2018, Chatswood, LexisNexis Butterworths) at 96–97, where four main reasons are given for the court’s approach in employment cases. First, the inequality of bargaining power between the parties. Second, the employee may be giving up that employee’s only asset, which depends on specialised training and which may not be at all negotiable. Third, when labour is hired it remains valuable whether or not the employee later competes. Fourth, once the employee accepts the post-employment restraints, the employer’s power during the contract is much increased by reason of the inhibition on the employee’s ability to threaten to leave and seek work elsewhere.

…

[71] BB Australia Pty Ltd v Karioi Pty Ltd (2010) 278 ALR 105; [2010] NSWCA 347 concerned restraints in a franchise agreement. Macfarlan JA remarked at [61]:

[61] Franchise agreements commonly have characteristics relevant to both employment and vendor/purchaser categories … As a result, to determine whether the stricter, less favourable view taken in the employment cases should be applied to the present case, it is necessary to look carefully at the features of the particular franchise relationship in question, without presuming in advance that the approach relevant to one rather than the other of the categories is necessarily applicable.

[72] In Bridge v Deacons [1984] 1 AC 705, doubt was expressed as to whether the legitimate interests can be necessarily ascertained by placing the relevant agreement in a particular category and then trying to align that category with existing cases, such as employment cases or sale of business agreements. Bridge v Deacons involved a restraint clause in a partnership agreement. Lord Fraser, delivering judgment of the Privy Council on behalf of the other Lordships, observed at 714 that:

The agreement in the present case, being one between partners, does not conform exactly to either of the types to which reference has just been made, although it had some resemblance to both. Their Lordships are of the opinion that a decision on whether the restrictions in this agreement are enforceable or not cannot be reached by attempting to place the agreement in any particular category, or by seeking for the category to which it is most closely analogous. The proper approach is that adopted by Lord Reid in the Esso Petroleum case [1968] A.C. 269, where he said, at p. 301:

I think it better to ascertain what were the legitimate interests of the appellants which they were entitled to protect and then to see whether these restraints were more than adequate for that purpose.

45. Additionally, it is accepted that an employer’s customer connection is a protectable interest. In Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 (“Cactus Imaging”), Brereton J (as his Honour then was) said (at [25], [36]):

25 It is plain that an employer’s customer connection is an interest which can support a reasonable restraint of trade [Hitchcock v Coker (1837) 6 Ad & El 438, 454; [1835-42] All ER Rep 452, 456-7 (Tindal CJ); Herbert Morris Ltd v Saxelby, 709; Dewes v Fitch [1920] 2 Ch 159, 181; Coote v Sproule (1929) 29 SR (NSW) 578, 580 (Harvey CJ in Eq); Lindner v Murdock’s Garage, 633-634 (Latham CJ, Webb J agreeing), 650 (Fullagar J), 654 (Kitto J); Koops Martin v Reeves, [29]-[33]]. Such a restraint is legitimate if the employee has become, vis-à-vis the client, the “human face” of the business, namely the person who represents the business to the customer - or, as it was put by Hoover J in Arthur Murray Dance Studios of Cleveland Inc v Witter 105 NE (2d) 685, 706 (Ohio, 1951): “The personal relation between the employee and the customer [is] such as to enable the employee to control the customer’s business” [Twenty-First Australia Inc v Shade (NSWSC, Young J, 31 July 1998, unreported), BC9803667, 12; Koops Martin v Reeves, [34]]. While the employer is not entitled to be protected against mere competition by a former employee, the employer is entitled to be protected against unfair competition based on the use by the employee after termination of employment of the customer connection which the employee has built up during the employment – which, because the employee has in effect represented the employer from the customer’s perspective during the employment, might at least temporarily appear attached to the employee, but in truth belongs to the employer [Koops Martin v Reeves, [30]].

…

36 … Generally, the test of reasonableness for the duration of a non-solicitation covenant, when it is supported by customer connection, is what is a reasonable time during which the employer is entitled to be protected against solicitation, which in turn depends on how long it would take a reasonably competent replacement employee to show his or her effectiveness and establish a rapport with customers [Stenhouse v Phillips; Daly Smith Corporation (Australia) Pty Limited v Cray Personnel Pty Limited (NSWSC, Young J, 14 April 1997, unreported)]. A related, albeit subsidiary, consideration is how long might the hold of the former employee over the clientele be expected to last before weakening [Koops Martin v Reeves, [88]]…

Rectification

46. Rectification may be undertaken at law or in equity, both of which are discussed in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) (2019) 99 NSWLR 317 (“Seymour Whyte”) at [6] 322 to [19] 325. The Court at [6] 322) stated that “at common law, if the error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction.” The Court gave examples of linguistic errors such as “inconsistent” being read as “consistent” (at [7] 322). In order to correct the contractual language by construction there are two necessary conditions: firstly, the literal meaning of the contractual words must be an absurdity, and secondly, it must be self-evident what the objective intention is to be taken to have been (at [8] 322, citing Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633 at [117]-[119]). The Court must be satisfied of these to a high level of conviction and it must be “clearly necessary in order to avoid absurdity or inconsistency” (at [10] 322 quoting Dixon CJ and Fullagar J in Fitzgerald v Masters (1956) 95 CLR 320 at 426–427).

46. The Court in Seymour Whyte then contrasted the position in equity where a contract may be rectified “where it is shown that there was at the time the document was executed, a common intention which, through a common mistake, was not reflected in the document” (at [12] 323, citing Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 346 and 350–351). A high standard of proof is required, often expressed as “clear and convincing proof” (at [13] 323).

47. The Court in Seymour Whyte reiterated that “the doctrines at law and in equity remain conceptually distinct” and described this difference (at [15] 324) as follows:

The requirements of ex facie absurdity or inconsistency and clarity as to what the parties must be taken to have intended ensure that rectification by construction remains an aspect of determining the objectively manifested legal meaning of contractual words, and accommodates the truth that sometimes, even in a formal legal document, the parties will make mistakes which are nonetheless readily identified and corrected. On the other hand, rectification in equity turns on the discrepancy between the written instrument and a separately proven contrary common intention, which was intended to have been incorporated into the instrument, such that it is unconscientious for a party to insist on performance in accordance with the written instrument. Rectification in equity is a departure — albeit one which is narrowly circumscribed by the insistence on cogent proof — from the objective theory of contract.

49. In Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 331, Mahoney AP (as his Honour then was) set out the principles concerning rectification in equity as follows:

In my opinion, the principle upon which rectification is granted involves two things: that the party (in the case of a unilateral transaction) or the parties (in the case of a transaction between parties) had at all relevant times an intention which was to be given effect by the document to be rectified; and that that document does not give effect to that transaction. (I put aside the requirements as to proof of such intention and to the other matters peculiar to the equitable nature of the remedy: see generally Joscelyne v Nissen [1970] 2 QB 86; Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3rd ed (1992) par 2610 et seq.)

50. In Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 (“Ryleldar”), his Honour Tobias JA (with whom Mason P agreed) commented (at [122]) on the principles observed in Meagher, Gummow and Lehane Equity, Doctrines & Remedies (2002, 4^th ed, Butterworths) at [26-010] 886 where the authors stressed the importance of recognising that a court merely reforms a contract in which the parties have mistakenly expressed their agreement. At [123], his Honour noted that:

The authors then observed that the need for rectification will thus arrive when the court can discern from the document itself and the surrounding evidence that “something must have gone wrong” which cannot be cured by the process of construction…

51. In Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 (“Simic”), Gageler, Nettle and Gordon JJ (at [103]-[104]) also commented on rectification, noting that it:

[103] … is an equitable remedy, the purpose of which is to make a written instrument “conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately”. For relief by rectification, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was an “agreement” between the parties in the sense that the parties had a “common intention”, and that the written instrument was to conform to that agreement. Critically, it must also be demonstrated that the written instrument does not reflect the “agreement” because of a common mistake. Unless those elements are established, the “hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties” cannot be displaced.

[104] The issue may be approached by asking — what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties’ actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party.

52. The reference to “actual intentions” is a reference to the subjective intentions of the parties (Seymour Whyte at [124]; Ryledar at [182], [269] and [272]).

Circumstantial cases

53. The Court of Appeal in Australian Executor Trustees (SA) Ltd v Kerr [2021] NSWCA 5 has commented on when an inference in a circumstantial case may be accepted (at [204] per Gleeson JA, Leeming JA and Emmett AJA in agreement):

As explained in Jackson v Lithgow City Council [2008] NSWCA 312 at [12] (Allsop P, Basten JA and Grove J agreeing), “[t]he inference must be available and be considered to be more probable than other possibilities”. This does not mean more probable than any other possibility, but more probable than not.

54. The process of determining the likelihood of an inference involves “weighing the competing factors (all ‘links in the chain’)” (Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 (“Jagatramka”) at [87]). It is not, however, sufficient that the links considered as a whole lend support to the ultimate conclusion sought to be reached, rather the circumstances proved must make it reasonable to reach that conclusion on the balance of probabilities (Jagatramka at [45], citing Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5). While these links should be examined as a whole the strength of the individual pieces of evidence should also be scrutinised (Jagatramka at [48]).

Mr Harden’s Submissions

Issue 1: whether Willis repudiated the employment contract with Mr Harden

Instruction to lie

55. Mr Harden submitted that Willis repudiated the employment contract by instructing him to be untruthful to clients during his notice period.

56. It was asserted that this instruction to lie was found in a letter from Gilchrist Connell (Willis’ solicitors) of 1 July 2020 giving Mr Harden directions on behalf of Willis Re that he was required to put into effect during his notice period (“1 July Letter”).

57. The letter stated that Mr Harden “must comply” (para 1.1) with the following direction found at para 5.3:

If a client of Willis Towers Watson contacts you by any means during your notice period, you are directed to say or reply only the following and nothing else:

I’m sorry I cannot assist you because I am on leave. You should contact [name] on [number]. There’s nothing further I can say at this time.

58. Mr Harden rejected Willis’ assertion that he was on “gardening leave” and submitted this instruction was therefore a lie. He had given notice of termination, and was told by Willis that he was “required to attend for work at his current place of work” (para 5.1 of the 1 July Letter). In requiring him to attend work, Mr Harden was demonstrably not on leave. He submitted that contemporaneous documents demonstrate that Willis decided against putting him on “gardening leave” (Harden Tender Bundle, pp.1-5). Mr Harden accepted that Mr Green admitted in cross examination that his tentative belief that Mr Harden was on gardening leave was an assumption (Green XXN, Confidential Transcript, D3/7/17-20). Further, Mr Phillipsz’s affidavit did not contradict the contemporaneous documents.

59. Mr Harden argued that contemporaneous internal documents produced by Willis in the proceedings confirmed in express terms that Mr Harden was not on gardening leave (Mr Harden’s Tender Bundle, pp.1-5). For instance, on 15 December 2020, in response to a query from Carmella Micallef, Mr Philipsz said in relation to Mr Harden: “No decision on last day in office. Not officially put on gardening leave as yet”.

60. Willis relied on evidence from Mr Philipsz but that evidence did not address the question of gardening leave at all, so Mr Harden argued that it should be inferred that this Mr Philipsz’ evidence on the topic would not have assisted Willis (Wormald v Mardaca Pty Ltd [2020] NSWCA 259 at [108]-[110]).

61. Mr Harden noted that Willis defined “garden leave” as a “colloquial or euphemistic term” referring to an exclusion from work direction. He submitted, however, that he was not obviously instructed to tell clients he was subject to an exclusion of work direction, rather to tell them he was “on leave” which was untrue.

62. Mr Harden submitted that paragraph 5.3 of the 1 July Letter was an instruction to lie and was effectively acknowledged in para 5.4 of the Letter which stated that “You are not permitted to tell the client that you have resigned or the details of your new employer or anything to this effect…”

63. That this was an instruction to lie was accepted by Mr Green in cross examination (Green XN, D3/150/22-28, D3/150/49 – 151/2). Furthermore, in cross examination Mr Green accepted that an instruction to lie was a fundamental breach of the contract (Green XXN, D3/155/17-19; D3/156/1-10, 26-31) and admitted that Willis should not have directed Mr Harden in the way it did (Green XXN, Conf Tran, D3/6/3-5). Mr Harden submitted this acknowledgement should carry significant weight.

Implied terms

64. Mr Harden submitted that it should be recognised that the law implies on parties a duty to act in good faith in the performance of contracts of employment at a minimum, or in the performance of all contracts. Further, that the implied duty of cooperation applies.

65. Mr Harden recognised that while the High Court has left open the issue of whether Australian law should recognise a duty of good faith generally in contract performance (see, e.g., Barker at 195-196 [42], 214 [107]), it should be accepted that it was a term, implied by law, of the employment contract that the parties would act in good faith in the performance of the contract (Paciocco at [287]-[293] per Allsop CJ). Further, this implied term is well entrenched in NSW (Cordon Investments at [144]).

66. Mr Harden submitted that the Court should reject Willis’s contention that he was under a duty to act in good faith in relation to it, but it was not bound to do the same. Mr Harden quoted Rothman J in Russell v Trustees of Roman Catholic Church for Archdiocese of Sydney (2007) 69 NSWLR 198 in support of his submission, who stated (at [106]) that “there is no reason to expect that the obligations imposed on an employer are any less likely to require an act of good faith than obligations imposed on an employee.”

67. Mr Harden submitted that in such circumstances the test of “necessity is satisfied” in that it would be absurd and contrary to community values if such an asymmetrical duty were to be implied, and any rights of the employee under the contract would be rendered nugatory, worthless or be seriously undermined.

68. Mr Harden argued that, at the very least, an obligation of good faith would apply when Willis was exercising a discretion contained in the employment contract, such as the discretion to determine what directions it gives to its employees (Bundanoon at [154]-[155] per Gleeson JA with whom Meagher and McCallum JJA agreed).

69. Mr Harden submitted on the facts that each of the conditions precedent to imply a term in a contract on an ad hoc basis as outlined in BP Refinery are satisfied in respect of the implication of a duty to act in good faith in the performance of the contract or, alternatively, in the exercise of powers or discretions conferred under such a contract. It was also submitted that such a duty satisfied the test of “necessity”.

70. Mr Harden submitted that the obligation of good faith embraces at least three related matters. These are first, an obligation on the parties to cooperate to achieve the contractual objectives, second, compliance with honest standards of conduct, and third, compliance with standards of conduct that are reasonable having regard to the interests of the parties (Cordon Investments Pty Limited v Lesdor Properties Pty Limited [2012] NSWCA 184 at [145]). Furthermore, it was argued that dishonest conduct can never be in good faith (Virk Pty Limited (In Liq) v YUM! Restaurants Australia Pty Limited [2017] FCAFC 190 at [164], [173], [174]; Trampoline Enterprises Pty Limited v Fresh Retailing Pty Limited [2019] VSCA 74 at [63]).

71. Mr Harden submitted that it was also an implied term of the employment contract that neither party would, without reasonable cause, conduct itself in a manner likely to damage the relationship of trust and confidence between Mr Harden and Willis Re. Mr Harden noted that while such a term is not implied into all employment contracts, here, it is to be implied as a matter of fact (in contrast to the position in Barker at [1], [36] and [43] per French CJ, Bell and Keane JJ in which there was no “particular feature” of the agreement in that case which would support the implication of the proposed term in fact).

72. Harden argued that for cl.12.2(d) of the Agreement to make sense, there must logically be a pre-existing (contractual) relationship of trust and confidence between the employee and company that might be damaged such as to trigger the company’s rights under cl.12.2. Therefore, this implication is contained in the express words of the contract (see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [28] per Heydon JA). Alternatively, it is necessary to give business efficacy to the contract, and is reasonable, equitable, capable of clear expression and, particularly in light of cl 12.2(d), so obvious as to go without saying.

73. Mr Harden argued that Willis’ reliance on the High Court decision of Barker could not be used to undermine his contention concerning the implied duty of good faith. The passage Willis cited had no application to the question of whether a duty of good faith should be implied, which was expressly reserved by the Court in that case.

74. Mr Harden submitted that Willis’ suggestion that while the duty of good faith is implied into “commercial contracts” the position in employment contracts is different was a false distinction (see, for e.g. Renard Construction (ME) Pty Ltd Minister for Public Works (1992) 26 NSWLR 234 (“Renard”) at 268 per Priestly JA). Moreover, Willis proffered no sensible reason why such a duty should exist in commercial contracts, but not the employment context when the latter is a far more intimate relationship.

75. Furthermore, Willis’ argument that a duty to cooperate “covers the field” is contradicted by Court of Appeal authority finding that both duties existed in the same contract in Burger KingCorporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558 (“Burger King”) at [144], [171] per Sheller, Beazley and Stein JJA.

76. Mr Harden also rejected Willis’ submission that a duty of good faith should not be implied due to legislative intervention in the field of employment contracts. This legislative scheme was in fact cited as one of the reasons in Renard (at 268) for finding an implied duty of good faith to exist (see also Burger King at [151] per Sheller, Beazley and Stein JJA).

77. Mr Harden accepted Willis’ submission that an implied duty of good faith cannot extend to imposing obligations on the parties that are in effect inconsistent with the terms of the agreement (see Cordon Investments at [146] per Bathurst CJ (with whom Macfarlan and Meagher JJA agreed), but asserted that there is no term in his contract which would be contradicted by an implied term of good faith.

78. Willis’ suggestion that any instruction for Mr Harden to lie could not have deprived him of the substance of what he bargained for under the Contract should be rejected as false. By instructing an employee to lie the employer deprives them of the ability to enhance their reputation or standing through employment (see, for e.g., Downe v Sydney West Area Health Service (No 2) (2008) 71 NSWLR 633 (“Downe”) at [425]-[427] per Rothman J).

79. Willis’ submission that the duty of good faith is not reciprocal was not supported with an explanation and should be rejected.

80. Mr Harden also argued that it was an implied term of the Agreement that Willis would not instruct Mr Harden to do any unlawful act and/or to lie and/or to engage in any dishonest conduct. This is because at common law an employer may only give reasonable and lawful directions to its employee (James Cook University v Ridd (2020) 382 ALR 8 (“Ridd”) at [284] per Rangiah J). Mr Harden admitted that while it may be correct that he was not obliged to obey the direction, that does not mean that Willis was not obliged to ensure it only gave lawful and reasonable directions.

Repudiatory breach

81. It was submitted that an instruction to be untruthful to clients is in breach of these implied terms:

1. it does not comply with honest standards of conduct and thus could never be said to be in good faith;

2. it is highly likely to damage the relationship of trust and confidence between Mr Harden and Willis Re; and

3. it is plainly an unreasonable and/or unlawful direction particularly when it involves a breach of contract owed by the employer to a third party.

82. Mr Harden submitted that the instruction to lie given to Mr Harden by Willis was a breach of an essential term and (or in the alternative) a serious breach of the employment contract. In particular, a direction of this nature was said to have a direct and prejudicial effect on Mr Harden as the employee, because clients must then deal with someone prepared to be untruthful towards them, damaging Mr Harden’s reputation, career and good standing.

83. The direction was also said to damage Willis’s own interests in the sense that it was breaching the service level agreements it had with its clients which mandate that the parties must act towards each other in good faith.

84. Therefore, the instruction to lie was a repudiation of the contract entitling Mr Harden to terminate it and preventing Willis from relying on post-employment constraints within the contract. Furthermore, Mr Harden argued that there was, contrary to Willis’ assertion, nothing inappropriate in having the question of whether this conduct was repudiatory answered by the Court.

Affirmation

85. Mr Harden rejected the primary defence to his repudiation case advanced by Willis in opening. It was said that even in the event of repudiation, Mr Harden had affirmed the contract by continuing to accept his salary and continuing to comply with directions made by Willis in relation to his employment.

86. Mr Harden argued firstly that despite this being a matter on which Willis bears the onus and was obliged to put in issue, Willis had no pleaded case of affirmation (see Wendt v Bruce (1931) 45 CLR 245 at 261). In the absence of such a pleading Mr Harden submitted that the affirmation case does not arise for determination.

87. Mr Harden submitted that, regardless, Willis’s approach misunderstands the doctrine of affirmation in several ways. First, Mr Harden does not contend that he has already terminated the contract, rather he seeks a declaration that Willis has repudiated which if granted, will allow him to terminate.

88. Secondly, an act constituting an election to affirm must be unequivocal: the question is whether, having regard to all the facts, the conduct can only be explained as involving a decision to affirm the contract rather than to terminate it (Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679 at [86] per Bell P (with whom Basten JA agreed)). While consistent with the continuation of the contract, Mr Harden’s acceptance of his salary and compliance with the directions was said not to be an unequivocal act. Instead, it merely reflected a sensible course in which Mr Harden instigated proceedings to determine whether Willis had repudiated without wrongfully repudiating himself.

452. Willis also relies upon its need to protect its confidential information. Willis asserts quite correctly that Mr Harden has obviously had access to a whole range of confidential information during his tenure at Willis.

453. This aspect of the case requires an assessment of the likelihood of Mr Harden retaining confidential information and the risk of disclosure to or for the benefit of a competitor. The evidence supports the fact that Mr Harden has not been shown to have taken any hard copy or electronic documents with him, nor has he had any access to any Willis information since 1 July 2020.

454. The question is what might Mr Harden have retained in his head. Given he has not had access to up to date information since 1 July 2020 whilst he may have a very good memory it would seem unlikely he could any more than speculate about the present day details and needs of clients in relation to their business. He could not be privy for that matter to any of Willis’ current strategic considerations.

455. It may be accepted that some of the material to which Mr Harden was undoubtedly exposed was confidential information of Willis’ clients and not that of Willis. However, it can be inferred that that kind of information would be constantly updated or perhaps refined which only serves to highlight no significance of Mr Harden’s absence from Willis since 1 July 2020.

456. Absent him having actually taken historic information with him, about which there is no evidence I am satisfied that it is highly unlikely Mr Harden or for that matter anyone else could retain such information, especially precise figures given at meetings, algorithms contained in in-house modelling tools, or for that matter precise calculations of any kind.

457. One example relied upon by Willis was said to be knowledge of confidential information obtained during what is described as the meetings of the “Production Board”. However, the actual information was not put before the Court and it is difficult to make any assessment of that.

458. And whilst it goes without saying Mr Harden would have been aware of some clients’ intimate details his knowledge of any particular detail is not before the Court.

459. In all the circumstances even had I found Mr Harden was on gardening leave I would have regarded a two year restraint unreasonable to protect the legitimate interests of Willis.

460. In summary, as to the questions concerning confidential information, solicitation of employees and clients I am of the view that there is no plausible evidentiary basis for concluding he has or is likely to act unlawfully in either regard.

461. At risk of repetition, in so far as he denied any such activity, I accept his denials.

462. In all of the circumstances I do not regard any injunctive relief as appropriate or warranted. I do not consider on the facts there is sufficient risk to bind Mr Harden by an injunction of any sort.

Issue seven

500. This questions for obvious reasons can be shortly dealt with. The question of rectification is I consider open as a matter of construction but, on the basis of my findings, is of no real relevance.

501. Clause 13.4 of the contract prevents the employee from working for the business of any entity that competes with the “Company.”

502. Willis says that the use of the word “Company” was a common mistake and that it should have read “Willis Group” and that the contract should be rectified accordingly.

503. The case pleaded and run does seem to me to be a case of equitable rectification. It was not put by Willis where the alleged obvious mistake could be corrected as a matter of construction at common law.

504. But the authorities require cogent proof in order for rectification be granted. What must be proved is a relevant common intention (Simic at [103]-[104]). As the authorities also make clear this is a reference to the subjective intentions of the parties.

505. The intention must have existed at the time of the execution of the contract. No evidence has been called from Willis to say what the intention was at the time the contract was executed.

506. No documentary or other materials were from which I consider it could reasonably be inferred such an intention existed.

507. As I understood the way Willis argued this issue it was not put on the basis of an obvious mistake or absurdity.

508. In this case were an ongoing restraint relevant the clause would limit competition with a business that competes with Willis Services not Willis Australia or the Willis Group.

Conclusion

509. For convenience I record my views on the various issues as follows.

510. First, in determining whether Willis repudiated the employment contract with Mr Harden I began by determining whether Mr Harden was told to tell a lie. I found that he was directed to lie in telling clients he was on leave when in reality Willis had suspended him from his usual daily activities pursuant to cl.12.5 of the Agreement. The second question was whether the direction disallowing Mr Harden from telling clients he had resigned or who his new employer was to be was another direction to lie. I answered this question in the negative. It was not a lie, rather a direction not to make any comment or discuss the circumstances of Mr Harden’s leaving and there was nothing wrong with doing so while Mr Harden was still in Willis’ employment and on full pay.

511. The next was whether any direction to lie amounted to repudiation. I found, consistent with Cordon Investments that there is an implied duty in the employment context to act in good faith. I therefore find that an implied term to act in good faith exists in the Agreement and that strictly speaking the direction to lie was a breach of this term.

512. This, however, was insufficient to amount to repudiation. There was not evinced an intention by Willis to no longer be bound by the contract or a fundamental obligation under it. Willis indicated its intention for the contract to remain afoot, explicitly stating that Mr Harden was not being terminated. The direction was only to have effect in particular circumstances, namely an approach from a client. Further, the direction required Mr Harden’s cooperation in other matters. Mr Harden did not complain and indeed was never in reality called upon to tell any untruth.

513. On the lawfulness of the restraint I noted that Mr Harden is a very senior employee with strong connections with some of Willis’ key clients, however, I believe the restraint of two years is unreasonable, taking into account Mr Harden’s age, the fact that the second year would be unpaid, and a reasonable period in which to find a replacement, among other factors.

514. Therefore even if I had found Mr Harden was on gardening leave I would have found a two-year restraint unreasonable. As it stands, the finding that Mr Harden was suspended has a significant impact on the period for which he should be subject to restraint. Pursuant to cl.13.8(a) if the two year restraint is reasonable it is effectively exhausted because the twelve month suspension falls by reason of that clause to be deducted from the two years. Therefore it ceased to operate on 1 July 2021.

515. In relation to possible orders regarding confidentiality I found that while Mr Harden was exposed to expansive confidential information I am satisfied he was aware of his own contractual restrictions on misusing that information and aware of the service agreements between Willis and its clients restricting the disclosure of information confidential to the clients.

516. Furthermore, I am not satisfied there was sufficient evidence to establish that Mr Harden disclosed or used any confidential information or otherwise to solicit the nominated employees. Rather, it appears that Guy Carpenter had hired a highly effective recruiter who was able to entice a number of persons away from Willis who were well known within the industry. Similarly, the evidence did not satisfy that Mr Harden was speaking with the clients about anything other than business. Nor was there evidence that the clients he spoke with have left or even thought about leaving.

517. Finally, I found that the issue of rectification is open as a matter of construction, but of no real relevance due to my other findings.

518. I would invite the parties to send to my Associate short minutes of order reflecting my decision. I will reserve the question of costs and will hear the parties on this issue if required.

**********

Decision last updated: 30 July 2021