Martin v I C Frith and Assoc. (SA) Pty Ltd

[2013] FCCA 1745

FEDERAL CIRCUIT COURT OF AUSTRALIA

MARTIN v I C FRITH & ASSOC. (SA) PTY LTD & ANOR [2013] FCCA 1745

Catchwords:
INDUSTRIAL LAW – Fair Work Act 2009 (Cth) – alleged contraventions of s.340(1) – injunction sought restraining respondents from pursuing legal proceedings in Supreme Court – application by respondents seeking summary dismissal of the proceedings – application dismissed.

Legislation:

Banking, Finance and Insurance Award 2010

Fair Work Act 2009 (Cth), ss.340(1), 342, 361

Federal Circuit Court of Australia Act 1999 (Cth), ss.17A, 17A(2), (3)
Federal Circuit Court Rules 2001 (Cth), r.13.10
Federal Court of Australia Act 1976 (Cth), s.31A

Dey v Victorian Railways Commissioners (1949) 78 CLR 62
General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125
ASIC v Cassimatis & Anor (2013) 94 ACSR 623
Dandaven Harbeth Holdings Pty Ltd [2008] FCA 955

Applicant: GEMMA MARIE MARTIN

First Respondent: I C FRITH & ASSOCIATES (SA) PTY LTD ACN 108 791 144

Second Respondent: GIOVANNI MARINI

File Number: ADG 285 of 2013

Judgment of: Judge Simpson

Hearing date: 23 October 2013

Date of Last Submission: 23 October 2013

Delivered at: Adelaide

Delivered on: 29 November 2013

REPRESENTATION

Counsel for the Applicant: Ms G Walker

Solicitors for the Applicant: Doherty's Barristers & Solicitors

Counsel for the Respondents: Mr Y Shariff

Solicitors for the Respondents: Gillis Delaney Lawyers

ORDERS

1. The Application in a Case filed 17 October 2013 is dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT ADELAIDE

ADG 285 of 2013

GEMMA MARIE MARTIN

Applicant

And

I C FRITH & ASSOCIATES (SA) PTY LTD ACN 108 791 144

First Respondent

GIOVANNI MARINI

Second Respondent

REASONS FOR JUDGMENT

1. I have before me an Application in a Case brought by the respondents seeking summary dismissal of these proceedings. 

2. The proceedings seek the following orders: that there be declarations that the respondents contravened s.340(1) of the Fair Work Act 2009 (Cth) (“the FW Act”); that the first respondent be restrained from seeking to enforce a restraint clause in the employment contract between the applicant and the first respondent; that the respondents pay the applicant damages for losses suffered as a result of the first respondent bringing proceedings in the Supreme Court of South Australia; and, that the respondents pay such pecuniary penalties to the applicant as the Court considers appropriate.

3. Section 17A(2) of the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCC Act”) and r.13.10 of the Federal Circuit Court Rules 2001 (Cth) (“the FCC Rules”) empowers the Court to give judgment in favour of the respondents if it is satisfied that the applicant has “no reasonable prospects of successfully prosecuting the proceedings”. Section 17A(3) of the FCC Act makes it plain that the proceedings need not be hopeless or bound to fail in order for it to have no reasonable prospects of success. Section 17A of the FCC Act is in similar terms to s.31A of the Federal Court of Australia Act 1976 (Cth) (“the FC Act”).

4. The test of ‘no reasonable prospect of successfully prosecuting the proceedings’, as is to be found in each of the sections, is a significant departure from the earlier tests for summary disposal of proceedings that had been established in cases such as Dey v Victorian Railways Commissioners[1] and General Steel Industries Inc. v Commissioner for Railways (NSW)[2].

   [1] (1949) 78 CLR 62.

   [2] (1964) 112 CLR 125.

5. In the recent case delivered by Reeves J in ASIC v Cassimatis & Anor[3] his Honour said in relation to s.31A of the FC Act:

   “(Section 31A) has lowered the bar, or softened the test, for summary judgment, or summary dismissal, as compared to that set by earlier summary judgment or summary dismissal regimes.  At the same time, it sets a different enquiry from that required under those regimes.  The critical question under s.31A in a summary dismissal application such as the present one, is whether ASIC, the applicant, has “reasonable” prospects of successfully prosecuting these proceedings.  As the moving party in this summary dismissal application, the Cassimatises bear the onus of persuading the Court of this criterion.  These authorities reveal that the determination of a summary dismissal application therefore does not require a mini trial based upon incomplete evidence to decide whether the proceedings are likely to succeed or fail at trial.  Instead, it requires a critical examination of the available material to determine whether there is a real question of law or fact that should be decided at trial.  Each application for summary judgment or summary dismissal has to be determined according to its particular circumstances.  What is required is a practical judgment of the case at hand.  The relevant circumstances will partly depend upon the stage which the proceedings have reached.  Among other things, this will affect the material available to the Court considering the application, for example, whether pleadings have been exchanged, or discovery of documents has occurred.” (emphasis added)

   Later in his reasons, His Honour also stressed the need for the Court to approach summary judgment applications with caution.

   [3] (2013) 94 ACSR 623 at [46].

6. Both parties agree that the decision in ASIC v Cassimatis usefully sets out the relevant principles for consideration of a summary judgment application pursuant to s.17A(3) of the FCC Act. 

7. I have also been assisted by a helpful summary of the principles relevant to an application for summary judgment provided by Gilmour J in Dandaven Harbeth Holdings Pty Ltd[4]. His summary commences with the observation that, by subs.31A(3) of the FC Act a proceeding need not be hopeless or bound to fail in order to have no reasonable prospect of success.  It continued:

   [4] [2008] FCA 955 at [6].

   “(a)the Court must be very cautious not to do a party an injustice by dismissing proceedings summarily;

   (b)the Court ought not dismiss a claim based on a predictive assessment of prospects, when it is possible that, if the claim goes to trial, it may succeed;

   (c)in cases in which the evidence may give colour and content to allegations, and in which questions of fact and degree are important, the Court should be more reluctant to dismiss a proceeding on the face of a pleading;

   (d)it is not Parliament’s intention to require the Court to engage in lengthy and elaborate trials on an interlocutory basis for the purposes of determining whether or not a proceeding has no reasonable prospect of success.  It may be necessary for the opposing party to provide no more than an outline of evidence, sufficient to show that there is a genuine dispute, to prevent the summary application becoming a trial;

   (e)if there is a real issue of fact or law to be decided, and the rights of the parties depend on it, it is obviously appropriate that the matter go to trial.  It cannot be said, when there is a real factual dispute and that factual dispute must be resolved to determine whether the claim succeeds, that there is “no reasonable prospect of success”;

   (f)s 31A should not be used to shut out proceedings if, on a proposition of law, there may be room for doubt. On questions of law, an inquiry as to their merit should not be for the purpose of resolving them and also not simply to determine the argument is hopeless, but in order to decide if it is sufficiently strong to warrant a trial;

   (g)evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects;

   (h)in determining whether there are real issues of fact which preclude summary judgment, the Court should draw all reasonable inferences in favour of the non-moving party.”

   With these matters in mind, I turn to the applicant’s pleaded claims against the respondents.

8. In determining this summary judgment application, I have taken into account the applicant’s Amended Statement of Claim filed on 15 October 2013, an affidavit of David Eric Collinge, solicitor for the respondents, sworn and filed on 9 October 2013 and an affidavit of John Robert Doherty, solicitor for the applicant, filed on 10 October 2013.  Consideration of these three documents is necessary to understand the pleaded case brought against the respondents.

9. The Collinge affidavit identifies and annexes various key documents.  These are: a summons filed on 19 August 2013 on behalf of the respondents being the originating process for the Supreme Court of South Australia proceedings numbered 1092/2013; a sale of business agreement dated 1 January 2008 between the applicant and respondent; an employment agreement dated 8 August 2008 between the applicant and the first respondent; and, an employment agreement dated 25 March 2013 between the applicant and the first respondent.  The affidavit also identifies and annexes various items of correspondence exchanged by solicitors for the parties in this action.

10. The Doherty affidavit simply confirms that the factual allegations contained in the pleadings correspond to his instructions. 

11. There is no material before me that contradicts the factual allegations made in the Amended Statement of Claim.

The pleaded claims against the respondents

1. From 2005, the applicant had been the owner of a mortgage broking business which she operated through the vehicle of a company, Gemma Martin and Associates Pty Ltd (“GMA”). 

2. In 2008 the respondents negotiated with the applicant to purchase the mortgage broking business.  On or about 4 July 2008, GMA and the applicant entered into a written agreement with the first respondent in which the first respondent purchased GMA’s business.  Annexed to the agreement was a list of GMA’s current clients.  Also annexed to the agreement was an unsigned employment contract identifying the terms of the applicant’s employment with the first respondent should the applicant decide to sign the contract.

3. It was a term of the written agreement that the first respondent would offer the applicant employment upon completion of sale and purchase of the business.

4. The employment contract was signed by the applicant on 8 August 2008 (“the 2008 employment agreement”).  The contract was said to have a commencement date of 1 April 2008.  The applicant had commenced her employment with the first respondent on or about 1 April 2008. 

5. The 2008 employment agreement contained a restraint clause to be applied in the event that the applicant’s employment with the first respondent ceased.  The terms of the restraint in the 2008 employment agreement are to be found later in these reasons.

6. From 1 January 2010, the applicant’s employment with the first respondent was covered by the Banking, Finance and Insurance Award 2010 (“the Award”).  The Award provided inter alia that the applicant would have an annual leave loading of 17.5%. 

7. Prior to 2012, the first respondent paid the applicant her annual leave loading entitlements whenever she took annual leave which she did on a number of occasions prior to January 2012.

8. When the applicant took annual leave over the Christmas/New Year period in December 2011 and January 2012 she received her wages but was not paid her annual leave loading entitlements.  She received her wages on 15 January 2012.

9. Soon after 15 February 2012, the applicant raised her concern about not being paid her annual leave loading entitlements with the second respondent.  The second respondent said that he would look into it.

10. Approximately two months later, the applicant again raised her concern with the second respondent.  The second respondent again said that he would look into it.

11. The applicant took further holidays in October 2012.  Again, she was not paid an annual leave loading entitlements.

12. In mid-November 2012, the applicant again raised with the second respondent her concern that she had not received her annual leave loading entitlements for the holidays taken by her during 2012.  The second respondent suggested to the applicant that she contact the first respondent’s head office in Sydney.

13. The applicant contacted head office in mid-November 2012 and raised her concerns.  Approximately a week later she was incorrectly advised by a person from head office that she was not entitled to a loading on her annual leave pay.

14. In December 2012 or January 2013 the applicant again raised the question of the payment of annual leave loading with a person in head office. 

15. In April 2013, the human resources manager of the first respondent informed the applicant that the first respondent would pay the applicant her outstanding annual leave entitlements but only if she signed a new employment contract.  She was provided with a document titled, “Employment Agreement” and informed that she must sign and return the document.  She did not immediately sign and send back the contract.

16. The applicant was not advised by anyone that there were restraint provisions in the new contract that were more onerous than the restraint provisions contained in the 2008 employment agreement nor that the contract included a restraint provisions that purported to restrain the applicant from working in the insurance broking industry for 12 months should she cease working for the first respondent.  The terms of the restraint in the 2013 employment agreement are to be found later in these reasons.

17. On or about 12 April 2013, the first respondent paid the applicant all of her outstanding annual leave entitlements. 

18. On 6 May 2013, the applicant signed and returned the document (“the 2013 employment agreement”) to the respondents.  At the time of signing, the applicant still had not been informed by the respondents that there were restraint provisions in the document which were more onerous to the applicant than those contained in the 2008 employment agreement. 

19. On 10 May 2013, the applicant resigned her employment with the first respondent.

The restraint clauses

1. The restraint clause in the 2008 employment agreement was in the following terms:

   “Restraint

   … in entering into this agreement for your employment you covenant and agree that for a period of two years from the date of termination of your employment with the Company for any reason whatsoever:

   ·You will not approach or solicit the business of any person company or entity who or which has been a client of the Company at any time during the last 2 years of your employment for any purpose whatsoever which competes with the business of the Company;

   ·You will not solicit or entice any employee, officer, contractor or consultant of the Company to leave the Company or to undertake work for any competitor of the Company;

   ·You will not divulge the identity of the clients to any person outside the Company; and

   ·You will not divulge any information about the business affairs of the Company, which is not generally known or available to the public.”

2. The restraint clause in the 2013 employment agreement was in the following terms:

   “5.5 Restrictive Covenant

   5.5.1The Employee must not during the Restricted Period[5] and within the Restricted Area[6] be employed by or engaged in any business that:

   [5]     The contract defines “Restricted Period” (incorrectly referred to as “Restraint Period”) to mean 12 months after the end of the Employee’s employment or, if that is not enforceable, 6 months after the end of the Employee’s employment.

   [6]     “Restricted Area” is not defined.

   (a)provides Insurance Broking, Agency or Consulting services. Risk Management, Loss Prevention or other related insurance services; and

   (b)competes with the business of the Employer.

   5.5.2Inducing employees to leave the Employer

   The Employee must not during the Restricted Period and within the Restrain Area, without the prior written consent of the Employer, directly or indirectly entice or solicit, or assist another person to entice or solicit, an employee, contractor, officer, agent or supplier of the Employer with whom the Employee had work related dealings prior to the Employee’s employment ending to cease to provide services to the Employer.

   5.5.3Persuading the Employer’s clients to cease or reduce business

   The Employee must not during the Restricted Period and within the Restricted Area, without the prior written consent of the Employer, directly or indirectly, canvass, solicit, deal with, counsel, procure or assist another person to canvass, solicit or deal with any client of the Employer with whom the Employee had dealings during the 12 months prior to the Employee’s employment ending.

   5.5.4Acknowledgement

   The Employee acknowledges each of the following:

   (a)the restrictions in the previous clauses are reasonable in their extent and duration; and

   (b)they are no more than are necessary to protect the business interests of the Employer; and

   (c)they do not unreasonably restrict the Employee’s right to practice in the Employee’s profession.

   5.5.5Restrictions reasonable and independent

   The Employee agrees that:

   (a)the Employee will obtain Confidential Information during their employment, the disclosure of which could materially harm the Employer;

   (b)the above restrictions are reasonable and necessary for the protection of the Employer’s Confidential Information and goodwill;

   (c)the Employee intends the restrictions to operate to the maximum extent;

   (d)damages may be inadequate to protect the Employer’s business interests and the Employer is entitled to seek and obtain injunctive relief, or any other remedy, in any court; and

   (e)the restrictions contained in this Agreement are separate, distinct and severable, so that if a court of competent jurisdiction decides any such restraint to be unenforceable or whole or in part, the enforceability of the remainder of that restraint and any other restraint will not be affected.

   5.5.6Modification or restrictions

   If these restrictions:

   (a)are void as unreasonable for the protection of the Employer’s interests; and

   (b)would be valid if part of the wording was deleted or the period or area was reduced,

   (c)then the restrictions will apply with the modifications necessary to make them effective.

   5.5.7Longest and widest is applicable

   5.5.8If there is any inconsistency or contradiction between several prohibitions or restrictions which are not invalid or unenforceable, the prohibition or restraint with the longest Restraint Period and the widest Restraint Area, to the exclusion of any other prohibition or restraint, constitutes the prohibition or restraint agreed by the Parties.

   5.5.9Definitions

   “End Date” means the date that the Employee ceases to be an employee of the Employer.

   “Restraint Period” means the period of time set out in Item G of Schedule.

   5.6 Confidential Information

   5.6.1The Employee shall not either during or after the employment use, divulge or communicate any Confidential Information or any person without the consent of the Employer, except for the benefit of the Employer and as required in the ordinary performance of the Employee’s duties.

   5.6.2The Employer shall be entitled to an injunction to restrain the Employee or former Employee from disclosure of Confidential Information and this remedy shall be in addition to any award of damages that may be made in favour of the Employer.

   5.6.3The Employee agrees that:

   (a)the Employee will obtain Confidential Information during their employment, the disclosure of which could materially harm the Employer;

   (b)the above restrictions in clauses 5.5.1, 5.5.2 and 5.5.3 are reasonable and necessary for the protection of the Employer’s Confidential information and goodwill;

   (c)the Employee intends the restrictions to operate to the maximum extent;

   (d)damages may be inadequate to protect the Employer’s interests and the Employer is entitled to seek and obtain injunctive relief, or any other remedy, in any court.”

1. It will be seen that the restraint clause in the 2013 employment agreement is far more extensive in its impact on the applicant should her employment with the first respondent cease, than the clause in the 2008 employment agreement.

Submissions and Consideration

1. The applicant’s case in the primary proceedings, in so far as it is relevant to the present application, is that the first respondent, who had been her employer since August 2008, informed her on 5 April 2013 that it would only pay her outstanding annual leave entitlements if she signed a new employment contract.  The terms of the 2013 Contract would, if agreed to by the applicant, result in her being bound by a restraining clause which was more onerous than the 2008 agreement.  

2. The respondents firstly submit that as they had paid the applicant her outstanding annual leave entitlements prior to the applicant signing and returning the 2013 Contract, there was no breach of ss.340 – 342 of the FW Act.  They submit that it cannot be said that the respondents forced the applicant to sign as a condition of her receiving her leave loading entitlements.

3. The applicant submits that it was not necessary for her to have signed the 2013 employment agreement for the ‘adverse action’ contravention to have been committed.  Rather, it was the respondents’ statement to the applicant that the outstanding annual leave entitlements would be paid if she entered into the new employment contract that comprised the contravention.

4. Section 340 of the FW Act makes it illegal for an employer to take adverse action against an employee to prevent the employee exercising a workplace right. Under s.342 of the FW Act, adverse action is taken by an employer against an employee if the employer alters or, threatens to alter,[7] the position of the employee to the employee’s prejudice. Under s.361 of the FW Act adverse action taken against an employee will be presumed to be action taken for a prohibited reason unless the employer responsible for taking the adverse action proves otherwise.

   [7]     Subsection 342(2)(a)

5. The fact that subs.342(2) of the FW Act extends the definition of ‘adverse action’ to include threats to take one or more of the actions described in the table in subs.342(1) indicates that, in the circumstances of this case, it is strongly arguable that the cause of action crystallised at the time that the threat was made. The respondents’ first submission is not sufficient for me to find that the applicant’s proceedings have no reasonable prospects of being successfully presented.

6. The respondents’ second and third submissions can conveniently be dealt with together.

7. The first respondent submits that the applicant’s case rests on the foundation that she was not told that the 2013 employment agreement contained more “onerous” restraints than were contained in the 2008 employment agreement and that, in effect, she did not realise that this was the case.  They infer that it would be most unlikely that a Court would believe that the applicant did not read the agreement before signing and that even if there is a finding that she did not read the agreement, that she should nevertheless be bound by it.  They point out that the applicant had 24 days, if not more, to read, understand and sign the agreement.  They submit further that the applicant voluntarily signed the agreement without first attempting to negotiate its terms.  Signing the agreement was not a pre-condition to the first respondent paying the applicant her annual leave entitlements.

8. The applicant submits in response to the first respondent’s second and third submissions, that the applicant’s characterisation of the claim as detailed in her response to the first respondent’s first submission is a complete answer: the adverse action occurred when the first respondent made it a requirement that the contract be signed as a pre-condition to payment.

9. In my opinion, and on the evidence presently before me, a successful prosecution of the applicant’s case does not hinge on whether or not the applicant knew that the restraint clause in the 2013 employment agreement was different from the restraint clause in the 2008 employment agreement.  This is so whether or not the restraint in the 2013 agreement was more onerous than the 2008 agreement.  The gravamen of the applicant’s case is that the respondents’ actions caused her to believe that she had to sign a contract before she would receive her lawful entitlements.  This is a matter however that in my view needs to be left to be fully considered at the trial of the action.

10. The first respondent’s fourth and final submission is that the restraint provisions in the 2013 employment agreement were not more onerous than those in the 2008 employment agreement.  Whilst I acknowledge that certain aspects of the 2013 agreement may be said to be more favourable to the applicant that in the 2008 agreement, it is not possible in a summary dismissal application such as this to make a finding on the question of which were the more onerous set of provisions.  Again, this is a matter to be dealt with at the trial of the action.

11. For the reasons outlined above, I do not consider this to be a suitable case for summary dismissal.  I would dismiss the respondents’ application.

12. I make the orders to be found at the beginning of these reasons.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Judge Simpson

Associate: 

Date: 29 November 2013