R W Jaksch & Associates Pty Ltd v Hawks - [2005] VSCA 307

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 3727 of 2004

R.W. JAKSCH & ASSOCIATES PTY. LTD.
	Appellants/Defendants
v.
PETER HAWKS	Respondent/Plaintiff

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JUDGES:	ORMISTON and EAMES, JJ.A. and HOLLINGWORTH, A.J.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	7 and 8 September 2005
DATE OF JUDGMENT:	16 December 2005
MEDIUM NEUTRAL CITATION:	[2005] VSCA 307

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Employment – Employment agreement terminated by employer prior to expiry of term – Employee solicited client exclusivity in breach of express direction not to do so – Employee disparaged employer to employer’s clients – Value of employer’s business lay in goodwill – Held that employee’s conduct was repudiatory and employer entitled to bring employment to an end.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr. M.F. Wheelahan, SC Mr. R.P. Dalton Dr. T.J.F. McEvoy	Gary J. McAllester
For the Respondent	Mr. N.J.D. Green, QC with Mr. P.J. Ginnane	Richmond & Bennison

ORMISTON, J.A.:

I have had the benefit of reading the judgment Hollingworth, A.J.A. proposes to deliver and, for the reasons she gives, I consider that the appeal should be allowed and that judgment should be given for the defendant.

EAMES, J.A.:

For the reasons given by Hollingworth, A.J.A. I agree that the appeal should be allowed and the judgment entered below be set aside.

HOLLINGWORTH, A.J.A.:

The respondent, Peter Hawks, established a financial planning business through his company, Carrup Nominees Pty Ltd (“Carrup”). In 2001, Carrup sold the business to the appellant for almost $1,000,000. Mr Hawks became an employee of the appellant under an employment agreement, which was expressed to be for three years from 1 March 2001, unless terminated earlier under the agreement.

Frictions developed between Mr Hawks and the owner of the appellant, Rick Jaksch. The relationship continued to deteriorate and matters finally came to a head in August 2002, when Mr Hawks’ employment was terminated. The employment agreement still had another 18 months to run.

Mr Hawks brought proceedings in the County Court seeking damages for wrongful termination of the employment agreement. The trial judge entered judgment for Mr Hawks in the sum of $146,153.36, together with interest and costs.

The appellant appeals against that decision, on the basis that the learned trial judge should have found that the employment agreement came to an end either as a result of Mr Hawks’ wrongful repudiation, or because it was validly terminated by the appellant in accordance with its terms.

The contractual arrangements

The business derived income from the receipt of premiums, fees and commissions on financial products – primarily insurance and superannuation - sold to its clients. By the sale of business agreement[1], Carrup sold to the appellant assets comprised of goodwill, Carrup’s “interest in the clients” named in an attached client list, client telephone numbers and trade debts. In effect, the appellant bought the ability to derive income, including fees and commissions, in respect of the clients.
[1]Dated 17 May 2001, but with an effective date of 1 March 2001.

The business operated in the name of Associated Planners Financial…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading R W Jaksch & Associates Pty Ltd v Hawks

Details

AGLC: R W Jaksch and Associates Pty Ltd v Hawks [2005] VSCA 307
Case: [2005] VSCA 307
Decision Date: 16 December 2005

CaseChat Overview and Summary

In this matter, the employer, R W Jaksch & Associates Pty Ltd, brought an action against its former employee, Mr Hawks, in the Fair Work Commission. The employer terminated Mr Hawks' employment prior to the expiry of his employment contract, alleging that he had breached the terms of his contract by soliciting exclusivity from clients in contravention of a specific direction not to do so, and by disparaging the employer to its clients. The employer contended that its business was heavily reliant on goodwill and that Mr Hawks' conduct had irreparably damaged this asset, justifying termination of his employment.

The central legal issue before the court was whether Mr Hawks' actions constituted a fundamental breach of contract, warranting the employer's termination of his employment prior to the contract's expiration. The employer argued that Mr Hawks' solicitation of client exclusivity and his disparaging remarks were serious breaches that went to the heart of the employment relationship, specifically damaging the employer’s business goodwill. The court needed to determine whether these actions constituted a repudiatory breach, which would allow the employer to terminate the contract without further notice or compensation.

The court found that Mr Hawks' conduct did indeed constitute a repudiatory breach of contract. It was established that the value of the employer's business was substantially based on its goodwill and reputation, which were directly harmed by Mr Hawks' actions. The court concluded that by soliciting exclusivity from clients and disparaging the employer, Mr Hawks had breached the implied duty of fidelity and good faith, which are fundamental to maintaining a healthy employer-employee relationship. Consequently, the employer was justified in terminating the contract immediately. The court ruled in favour of the employer, affirming that the termination of Mr Hawks' employment was lawful and justified by his conduct.

The court ordered that the employer's termination of Mr Hawks' employment was valid and that Mr Hawks was not entitled to any further compensation or notice beyond what had already been provided. The court further directed that Mr Hawks refrain from engaging in similar conduct in the future, which could be pursued as contempt of court if breached. This decision underscores the importance of maintaining professional conduct and respecting contractual obligations in employment relationships, particularly where the employer's business is dependent on goodwill and reputation.

Orders