W284 Pty Ltd v MRES Pty Ltd
[2023] VCC 181
•17 February 2023
o
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
General List
Case No. CI-21-03798
| W284 Pty Ltd (trading as Woodards Doncaster) (ACN 617 250 709) | Plaintiff |
| v | |
| MRES Pty Ltd (trading as Jellis Craig Doncaster) (ACN 150 692 239) | First Defendant |
| and | |
| Andrew John Keleher | Second Defendant |
| and | |
| Carole Wilson | Third Defendant |
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JUDGE: | Her Honour Judge Brimer | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2-5 August, 8-9 August, 7 September, 24 October 2022 | |
DATE OF JUDGMENT: | 17 February 2023 | |
CASE MAY BE CITED AS: | W284 Pty Ltd v MRES Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 181 | |
REASONS FOR JUDGMENT
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Subject:EMPLOYMENT AGREEMENT
Catchwords: RESTRAINT OF TRADE – post-employment restraint – plaintiff is real estate agency – first defendant is senior property manager – first defendant resigned and later commenced property manager roll with third defendant – some landlords and rental properties moved to third defendant – plaintiff had legitimate interest in protecting its connections with landlords – enforceability of restraint – whether restraint does more than is reasonably necessary in its scope – restraint protected broad range of entities in plaintiff’s network – restraint covered broad range of activities – “Business” defined to include activities outside first defendant’s role – prohibition on “dealings” with “Clients” and “Suppliers” “for Carole Wilson’s benefit, or the benefit of a third party in competition with Woodards” – whether parts of restraint can be severed – no geographic limitation – whether restraint does more than is reasonably necessary in its duration – “Restraint Period” defined as 3, 6, 12 months – notation in employment agreement – first defendant circled and signed “3 months” in definition of “Restraint Period” – effect of notation – whether notation is a counteroffer – whether counteroffer was communicated – notation not brought to plaintiff’s attention – vitiating conduct – unilateral mistake
CONFIDENTIALITY – breach of “Confidential Information” clause in employment agreement – whether landlord names and phone numbers are “Confidential Information” – information not “by its nature confidential” – plaintiff let first defendant use personal mobile phone for work – plaintiff did not jealously guard information – information not “designated as confidential” – information not “ought reasonably be expected to know is confidential” – information not specially enumerated in confidentiality clause – no breach of any equitable duty of confidence
ESTATE AGENTS (PROFESSIONAL CONDUCT) REGULATIONS – whether first defendant was “performing the functions of an… agent’s representative” – regulations do not contemplate first defendant’s conduct – no breach
LOSS AND DAMAGE – loss of management income from rental properties – capital value of lost rental management contracts – loss of a chance to receive commission from sale of rental properties
Legislation Cited: Australian Consumer Law and Fair Trading Act 2012 (Vic); Estate Agents Act 1980 (Vic); Estate Agents (Professional Conduct) Regulations 2018 (Vic)
Cases Cited:Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288; AMP Services Ltd v Manning (No 2) [2007] FCA 82; AMP Services Ltd v Manning [2006] FCA 256; Birdanco Nominees Pty Ltd v Money (2012) 36 VR 341; Bourseguin v Stannard Bros. Holdings Pty Ltd (1994) 1Qd R 231; Brambles Holdings Ltd v Bathurst CC (2001) 53 NSWLR 143; Brilliant Lighting (Aust) Pty Ltd v Baillieu [2004] VSC 248; Buckley v Tutty (1971) 125 CLR 353; Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLS 9; Chaplin v Hicks [1911] 2 KB 786; Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587; Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64; David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 93 ALR 271; DC Payments Pty Ltd & Anor v Next Payments Pty Ltd & Ors (2016) 51 VR 151; Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326; Geju Pry Ltd v Central Highlands Regional Council [2016] WSC 159; Gjergja v Cooper [1987] VR 167; Hadley v Baxendale (1854) 9 Exch 341; Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267; Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307; Helensburgh Property Management Pty Ltd v Brady [2016] NSWSC 253; Howe v Teefy (1927) 27 SR (NSW) 301; I.F. Asia Pacific Pty Ltd v Galbally [2003] VSC 192; Jones v Dunkel (1959) 101 CLR 298; Just Group Ltd v Peck (2016) 344 ALR 162; Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449; L'Estrange v Graucob [1934] 2 KB 394; Lindner v Murdock’s Garage (1950) 83 CLR 628; Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; Mills v Dunham [1891] 1 Ch 576; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; N E Perry Pty Ltd v Judge (2002) 84 SASR 86; N P Generations Pty Ltd v Feneley [2011] SASC 185; Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Co [1894] AC 535; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Stacks Taree v Marshall (No 2) [2010] NSWSC 77; Taylor v Johnson (1983) 151 CLR 422; The Commonwealth of Australia v V.L. Investments Pty. Ltd. (1987) VR 226; Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Wallis Nominees (Computing) Pty Ltd v Pickett [2013] VSCA 24; Westpac Banking Services v Jamieson [2016] 1 Qd R 495; Wright v David John Neale Lemon as executor of the estate of Michael John Maynard Wright (No 2) [2021] WASC 159; Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317; Zomojo Pty Ltd v Hurd(No 2) [2012] FCA 1458
Judgment: For the defendants
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Korman | marshalls+dent+wilmoth lawyers |
| For the Defendant | Mr A Galbraith | Mills Oakley |
HER HONOUR:
INTRODUCTION
1In May 2017, W284 Pty Ltd trading as Woodards Doncaster (W284) and the third defendant, Carole Wilson (Ms Wilson) entered into an employment agreement (employment agreement).[1] The Director of W284 is John Piccolo (Mr Piccolo). The employment agreement contained a restraint clause and confidentiality obligations, the construction and enforceability of which are in dispute.
[1] Dated 1 May 2017 and signed by John Piccolo on behalf of W284: CB 214-231.
2On 1 May 2017, W284 acquired the business (including the rent roll) of Landfield Real Estate Pty Ltd (Landfield). The Landfield office became the Woodards Doncaster office with Francis Van Gulick, Director of Landfield (Mr Van Gulick) remaining the officer in effective control of the business.[2]
[2] Until W284 “found someone to take over the licence”. T 99.10-21 (Piccolo XN).
3Ms Wilson had been employed at Landfield since 20 February 2003.[3] At the time the business was sold, she held the position of Senior Property Manager. As part of the sale of the business, W284 employed approximately six of Landfield’s staff members, including Ms Wilson.[4]
[3] First in accounts and then as a property manager from 2004. T 166.27, T 51.13-17 (Tormey XN).
[4] T 42.17-18, T 43.4-5 (Tormey XN). T 125.18-25 (Piccolo XXN).
4Stephanie Tormey, Corporate Services Manager for Woodards (Ms Tormey), had responsibility for preparing and circulating the employment agreements for staff. It was common ground that Ms Wilson’s employment agreement was a standard form contract that was used with “hundreds” of Woodards employees.[5]
[5] T 48.18-22 (Tormey XN).
5Ms Tormey provided the employment agreements to Mr Van Gulick to pass onto his staff.[6] Ms Wilson received an envelope containing two copies of the employment agreement and other associated employment documents, including a superannuation choice form.[7]
[6] T 43.13-19 (Tormey XN).
[7] T 167.19-23 (Wilson XN).
6On 8 May 2017, Ms Tormey attended the Landfield office. What happened and what was said by Ms Wilson and Ms Tormey was in dispute. In summary:
(a) Ms Wilson said:
(i)she had a discussion with Ms Tormey about her employment agreement;
(ii)in the definition of “Restraint Period” in the “Restricted Activity Agreement” contained at Schedule 3 of the employment agreement (Schedule 3), she drew a circle around “(c) 3 months;” and signed to the right of the circle (the notation);[8]
[8] CB 228.
(iii)she signed the employment agreement; and
(iv)handed one signed copy to Ms Tormey.
(b) Ms Tormey denied:
(i)any discussion with Ms Wilson about her employment agreement;
(ii)that Ms Wilson made the notation and signed a copy of her employment agreement while she was there; and
(iii)that Ms Wilson gave her a copy of her signed employment agreement on 8 May 2017.[9]
[9] T 64.7-8 (Tormey XXN).
7It was not in dispute that:
(a) Schedule 3 contains a standard form restraint clause at clause 2.3 (restraint);
(b) Ms Wilson made the notation before Mr Piccolo signed the employment agreement;[10] and
(c) Ms Wilson and Mr Piccolo both signed the employment agreement and Schedule 3.
[10] T 57.9-12 (Tormey XXN).
8The following matters are in dispute:
(a) the meaning and effect of the notation;
(b) what was said by Ms Wilson and Ms Tormey on 8 May 2017; and
(c) whether Ms Wilson drew Ms Tormey’s attention to the notation on 8 May 2017.
9In November 2017, W284 staff were told that the old Landfield office (now Woodards Doncaster) would be relocating to Doncaster Road, Doncaster East.[11]
[11] T 114.31-115.4 (Piccolo XN).
10Ms Wilson did not move to the Doncaster Road office. Rather, in early January 2018, Ms Wilson moved to Woodards Camberwell and managed the W284 rent roll from there.[12]
[12] T 298.20-21 (Wilson XXN).
11On 28 August 2018, Ms Wilson resigned effective 5 October 2018.[13]
[13] CB 254.
12In or around September 2018, Ms Wilson met with the second defendant, Andrew Keleher (Mr Keleher), the Director of the first defendant, MRES Pty Ltd trading as Jellis Craig Doncaster (Jellis Craig). They discussed potential employment of Ms Wilson at Jellis Craig.
13On 10 December 2018, Ms Wilson signed an employment agreement with Jellis Craig.[14] She commenced employment at Jellis Craig the following day.
[14] CB 258-262.
14Between 14 January 2019 and 19 August 2019, Jellis Craig took over the management of 31 properties from W284’s rent roll.
15By Further Amended Statement of Claim dated 11 March 2020, W284 claimed that Ms Wilson:
(a) canvassed, solicited, approached or accepted approaches from W284 clients during her restraint period with a view to soliciting business for her and/or Jellis Craig’s benefit, in breach of the employment agreement; and
(b) used information which was confidential to W284, in breach of the employment agreement and an equitable duty of confidence.
16W284 also claimed that Ms Wilson breached various regulations contained in the Estate Agents (Professional Conduct) Regulations 2018 (Vic) (Estate Agents Regulations) and Mr Keleher and Jellis Craig breached various provisions of the Estate Agents Act 1980 (Vic) (Estate Agents Act). These breaches caused W284 loss and damage. The Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA), as modified by the Estate Agents Act, entitles W284 to the amount of the loss or damage resulting from the breaches. These claims are set out in detail below.
17By Amended Defence to Further Amended Statement of Claim dated 2 April 2020, the defendants denied there was an enforceable restraint of trade. If there was, the parties agreed it was 3 months, alternatively the maximum enforceable period was 3 months.
18The defendants denied Ms Wilson breached her employment agreement, denied the applicability of the Estate Agents Act and Estate Agents Regulations, and if they were applicable, denied that the defendants breached them.
Conclusion
19For the reasons set out below, I find for the defendants. The plaintiff’s claim is dismissed. I consider the restraint is unenforceable because it does more than is reasonably necessary to protect the legitimate interest of W284 in scope. Had it been necessary to determine, I would have rejected the defendants’ contention that the parties agreed, by Ms Wilson’s notation and Mr Piccolo’s signature on the employment agreement, that the restraint duration was 3 months. I would not have found that 3 months was the maximum enforceable duration. In my view, in the circumstances of this case, 6 months would have been enforceable. I would have found, however, that 12 months is longer than is reasonably necessary to protect W284’s legitimate interest.
20Had it been necessary to determine, I would have found that the landlord contact information relied on by W284 in its breach of confidential information claim, was not confidential information under clause 14.1 of the employment agreement. In any case, I would not have been satisfied that Ms Wilson used confidential information in breach of clause 14.1 of the employment agreement. The claim in equity fails. I would not have been satisfied that the provisions of the Estate Agents Act and Estate Agents Regulations are applicable to the conduct alleged, or if applicable, that they were breached.
EVIDENCE AT TRIAL
21The plaintiff called the following witnesses at trial:
(a) Araf Mojaled, Trust Account Manager and Client Relationships Manager at W284 (Ms Mojaled);
(b) Ms Tormey;
(c) Donald Brindley, Valuer and Licenced Estate Agent (Mr Brindley); and
(d) Mr Piccolo.
22The defendants called the following witnesses at trial:
(a) Ms Wilson; and
(b) Mr Keleher.
ISSUES FOR DETERMINATION
23The parties submitted a Joint Statement of Key issues in Dispute on 8 August 2022 (Joint Statement), which is annexed to this judgment.
ISSUE A — ALLEGED BREACH OF RESTRAINT BY MS WILSON[15]
[15] Part A of the Joint Statement: “Claims for breach of restraint of trade by the Third Defendant”.
Issue
24Issue 1 in the Joint Statement is:
“Did the contract of employment between the Plaintiff and the Third Defendant contain an enforceable restraint of trade in the form of clause 2 of the ‘Restricted Activity Agreement’ at Schedule 3 of the employment agreement signed by the Plaintiff and Third Defendant (Employment Agreement)?”
A1. ENFORCEABILITY OF THE RESTAINT — SCOPE
Conclusion
25In my view, the restraint contained in Schedule 3 is unenforceable. The clause does more than is reasonably necessary to protect W284’s legitimate interest in its scope.
The restraint and related definitions
26Clause 2 of Schedule 3 is titled “Restraints”. It contains the following clause that Ms Wilson is alleged to have breached:
“2.3.To reasonably protect the goodwill of the Business, Carole Wilson agrees that, without the prior written consent of Woodards, they will not, whether directly or indirectly, during the Employment or during the Restraint Period:
…
(b)canvas, solicit, approach or accept an approach from any Client or Supplier, which:
(i)Carole Wilson or Woodards had dealings with in the course of the Employment; or if that definition is too broad; or if that definition is too broad
(ii)during the 12 months prior to the termination of the Employment, Carole Wilson had dealings with in the course of the Employment;
with the view of soliciting for Carole Wilson's benefit, or the benefit of a third party in competition with Woodards, the business of that Client or Supplier.”
27It is necessary to consider only clause 2.3(b)(ii). Mr Korman submitted it makes little difference if the broader restraint is severed.[16] Mr Galbraith conceded that “it may be possible to strike out or sever 2.3(b)(i) because it is obviously too broad”[17] and “the parties… are focusing on 2.3(b)(ii)”.[18]
[16] Plaintiff’s Reply Closing Submissions dated 5 September 2022, [6]-[7] (Plaintiff’s Reply Closing
Submissions). Mr Korman submitted that the evidence demonstrates that Ms Wilson had direct contact with all transferring landlords expect Bruce James during the 12 months prior to termination of her Employment: Plaintiff’s Closing Submission dated 18 August 2018, [58] (Plaintiff’s Closing Submissions). “It is convenient, then, to focus the analysis on the narrower restraint at cl 2.3(b)(ii) in order to determine whether the restraint is enforceable”: [7].
[17] T 606.10-12.
[18] T 726.19-22.
28Clause 1 of Schedule 3 is titled “Definitions” and is relevantly as follows:
“Unless the contrary intention appears, the following expressions shall have the following meanings in this Schedule:
1.1.A reference to Woodards shall include all entities, corporate or otherwise, that are related to or associated with Woodards;
1.2. “Business” means:
(a)the real estate business of Woodards being the provision of services associated with sales, acquisitions, leasing and/or management of residential, commercial, retail, industrial, recreational, hotel, retirement and any other leasehold or real property and/or businesses; and
(b)any other business in which Carole Wilson provides, or provided, services in the course of the Employment;
1.3.“Client” means any person, corporation or other entity to whom Woodards has provided services to in connection with the Business and includes persons, corporations or other entities with whom Carole Wilson has held discussions or provided proposals to regarding the provision of services by Woodards;…
1.5.“Employment” means the employment of Carole Wilson by Woodards;
1.6. “Restraint Period” means:
(a) 12 months;
(b) 6 months;
(c) 3 months;
from the date the Employment ceases;
1.7.“Supplier” means any person which has supplied goods or provided services to Woodards in connection with the Business.” (emphasis in original)
29Part 3 of Schedule 3 is titled “Operation”. It relevantly provides as follows:
“…
3.2.Each of the restraints in this Schedule are to have effect as a separate, severable and independent restraints, each from the other and as regards each Restraint Period so that the invalidity or unenforceability of any restraint in respect of any Restraint Period does not affect the validity or enforceability of any remaining restraint.
3.3.If there is any inconsistency or contradiction between the restraints in this Schedule, the restraint with the longest Restraint Period constitutes the restraint agreed between Woodards and Carole Wilson to the exclusion of any other restraint.”
30Part 5 of Schedule 3 is titled “General”. It relevantly provides as follows:
“…
5.4.In the event that a provision of the agreement contained in this Schedule being ruled by a Court to be invalid or unenforceable, that provision will be read down, or if it cannot be read down so that the provision is valid or enforceable, severed. …”
Legitimate interest
31In The Restraint of Trade Doctrine, J D Heydon (writing extra-judicially) said:[19]
“A post-contractual restraint on an employee is not valid unless there is a ‘legitimate’ or ‘proprietary’ interest meriting protection. Normally, those interests are confidential information and connection with customers.”
[19] J D Heydon, The Restraint of Trade Doctrine (3rd ed, LexisNexis, 2008) 94.
32Mr Korman submitted that the plaintiff’s interest in “… protecting its connection with the landlords with whom Wilson had forged a close bond was a legitimate interest meriting protection by a post-contractual restraint of trade.”[20]
[20] Plaintiffs closing submissions at [46].
33Ultimately, it was accepted by Mr Galbraith and I find that W284 had a legitimate interest in protecting its customer connection with landlords of the properties managed by W284 on its rent roll:
“HER HONOUR: … I take it you accept that customer connections is a legitimate interest which may be protected?
MR GALBRAITH: Yes, customer connection with respect to these property manager clients.”[21]
[21] T 602.7-9.
Enforceability of the restraint — scope
Legal principles
34In Birdanco Nominees Pty Ltd v Money (Birdanco),[22] the Victorian Court of Appeal set out the approach to the interpretation of a restraint and the application of the rule as to reasonableness to see whether the restraint goes too far:
“The principal rule of construction is that when a covenant or agreement is impeached on the ground that it contains an unreasonable restraint of trade, the duty of the Court is, first to interpret the covenant or agreement itself, and to ascertain according to ordinary rules of construction what is the fair meaning of the parties, and then to apply the rule as to reasonableness with reference to the extent of the impeached covenant, and to see whether it goes too far. Like any other contractual clause, ‘a covenant in restraint of trade is in the first place to be construed in accordance with the natural and ordinary meaning of its words.’ The impeached clause should be construed with reference to the object sought to be obtained.
These principles of construction were confirmed by Dixon CJ in Butt v Long where he said:
‘An agreement in restraint of trade, like every other agreement, is to be construed with reference to its subject matter and descriptive words may be restricted in their operation by reference to the circumstances in which the parties contract. But the agreement should be interpreted for the purpose of ascertaining its real meaning independently of the rules prescribing the tests of reasonableness for the purpose of ascertaining its validity. If an evident ambiguity appears from its text it may be proper to take into account the law relating to the validity of covenants in restraint of trade in resolving the ambiguity, but a restrictive interpretation of general words is not to be adopted simply to save a covenant ... from invalidity.’” (citations omitted) (emphasis added)
[22] [2012] VSCA 64, [37]-[38] (Maxwell P, Redlich JA and Robson AJA).
35In Just Group Ltd v Peck,[23] the Victorian Court of Appeal noted the following:
“(a)The meaning of the restraint clause may be construed by reference to the factual matrix, documentary context and surrounding circumstances to ascertain its real meaning—independently of the rules prescribing tests of reasonableness for the purpose of ascertaining its validity.
(b)Where there is ambiguity, a restraint clause in an employment contract will be construed in favour of the employee so that, as between two reasonably available constructions, the one which imposes the lesser obligations on the employee will be preferred…” (citations omitted)
[23] [2016] VSCA 334, [38] (Beach and Ferguson JJA and Riordan AJA).
36As the High Court said in Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (Toll v Alphapharm):[24]
“The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.” (citations omitted) (emphasis added)
[24] (2004) 219 CLR 165, [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
37When considering what a reasonable person would have understood a commercial contract to mean, it is usual to consider the “commercial purpose or objects” underlying the agreement:[25]
“As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” (citations omitted) (emphasis added)
[25] Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640, [35] (French CJ,
Hayne, Crennan and Kiefel JJ), cited more recently in Rinehart v Hanock Prospecting Pty Ltd (2019) 267 CLR 514, [44] (Kiefel CJ, Gageler, Nettle and Gordon JJ).
38It is well settled at common law that post-employment restraints are prima facie void and unenforceable due to being contrary to public policy.[26]
[26] See Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Co [1894] AC 535, 565; Lindner v
Murdock’s Garage (1950) 83 CLR 628, 633 (Latham CJ); Buckley v Tutty (1971) 125 CLR 353; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288, 376.
39The attitude of Victorian courts in relation to post-employment restraints is summarised by Hollingworth J in Brilliant Lighting (Aust) Pty Ltd v Baillieu.[27] Her Honour said that when an employee leaves employment:[28]
“He or she is free to set up a directly competing business ... to approach former employer’s customers and solicit business from them ... [and] to use for their own purposes any information which they carried in their heads ... The presumption of invalidity may be rebutted by showing that the restraint was justified because it is reasonable in the interests of the parties and the public.”
[27] [2004] VSC 248.
[28] at [9]-[10].
40Her Honour said further:[29]
“A party who seeks to enforce a restraint of trade provision bears the onus of proving that the provision goes no further than is reasonable to protect its legitimate interests. Relevant considerations include:
(1)The scope of the restraint in terms of both the geographic area and duration;
(2)The activities covered by the restraint;
(3)The relative bargaining power of the parties;
(4)The consideration paid in exchange for the restraint; and
(5)The context of the contract.”
[29] at [11].
41This test is applied against the circumstances that operated immediately before a defendant signed their employment contract.[30]
[30] See, for example, Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449, [53].
Plaintiff’s submissions
42The plaintiff submitted that the restraint does no more than is reasonably necessary in its scope to protect W284’s legitimate interest.
Definitions of “Woodards” and “Business”
43The reference to “Woodards” in the restraint ought to be construed as a reference to W284 and not a reference to “all entities, corporate or otherwise, that are related to or associated with Woodards” as defined. The definitions apply “[u]nless the contrary intention appears”. A contrary intention appears from the following:
(a) the employment agreement defines W284 Pty Ltd as “Woodards”:
(b) clauses 1.1, 2.5 and 3.2 of the employment agreement refer to “Your employment with Woodards”, which could only be a reference to Ms Wilson’s employment with W284;
(c) the term “Woodards” is used in other clauses of the employment agreement where it could not be a reference to a composite group of entities and could only mean W284, for example:
(i)clause 2.6(a): “… You are required to undertake other duties and responsibilities from time to time, which are within Your reasonable capability, as directed by Woodards”;
(ii)clause 2.8: “You agree to inform Woodards immediately should anything arise that may prevent You from devoting all of Your working time, attention and abilities to the performance of the Position”;
(d) the definition of “Employment” in Schedule 3, being “the employment of Carole Wilson by Woodards”, could only mean the employment of Ms Wilson by W284. Wilson was not to be employed by (and in fact was never employed by) any other entities, corporate or otherwise, related to or associated with Woodards;
(e) reference to “Woodards” in the execution clause in Schedule 3 could only be a reference to W284, because Mr Piccolo signed only on behalf of W284:
Activities caught by the restraint
44The plaintiff submitted that, although the definitions of “Client” and “Supplier” are broad and made broader by the definition of “Business”, on its true construction, the restraint only prohibits contact that is relevant to Ms Wilson’s role as a property manager. The text that falls below clause 2.3(b)(ii) refers to business with a lowercase ‘b’:
“… with the view of soliciting for Carole Wilson's benefit, or the benefit of a third party in competition with Woodards, the business of that Client or Supplier.” (emphasis added)
45Business with a lowercase ‘b’, as opposed to Business with an uppercase ‘B’, should be interpreted to mean the business in which Ms Wilson was employed (i.e. leasing and management of residential properties). This is the objectively apparent intention, since the restraint ought to be construed as intending to protect against Ms Wilson soliciting business from Woodards’ Clients and Suppliers with whom she had dealings in the course of her employment as a property manager with W284. The definitions “merely [delineate] the universe from which the very small group of clients and suppliers with whom Ms Wilson had contact, had dealings is selected”; that is, Clients’ and Suppliers’ business in relation only to leasing and managing of residential property.
46Here, the nature of the business Ms Wilson was involved in is apparent from the surrounding circumstances. The restraint should be construed to restrict post-employment solicitation of similar business only.[31]
“Dealings” with “Clients” and “Suppliers”
[31] Mr Korman relied on Mills v Dunham [1891] 1 Ch 576.
47The plaintiff submitted the issue of what “had dealings with” means is a question of construction for the Court. According to Mr Korman:
“… whether 'dealings' is construed narrowly or broadly makes very little difference to this case, because Ms Wilson had direct contact with, I think, 18 of the 19 landlords, 30 of the 31 properties. She directly was in communication with them.”[32]
[32] T 573.7-14.
48There is no need for the plaintiff to adduce evidence connecting Ms Wilson to all persons caught by the definitions of “Client” and “Supplier”, because the restraint is restricted to Clients and Suppliers with whom Ms Wilson had contact with during the 12 months prior to her resignation.
49With respect to “Suppliers”, the restraint would not prevent Ms Wilson from seeking to purchase products and services from a “Supplier” with whom she had had dealings in the final 12 months of her Employment with W284. It seeks to prevent Ms Wilson from soliciting business from W284’s Clients and Suppliers, which is the opposite to purchasing goods or services. There is no ambiguity about the meaning of the word “solicit” but, if there was, it should be construed narrowly and confined to its relevant dictionary meaning:
“to endeavour to obtain (orders or trade), as for a business house.”[33]
[33] Plaintiff’s Reply Closing Submissions, [17] and footnote 13 citing Macquarie Dictionary.
50The restraint therefore does not affect Ms Wilson’s freedom to contact “Clients” and/or “Suppliers” to acquire goods or services from them.
“For Carole Wilson’s benefit, or the benefit of a third party in competition with Woodards”
51The plaintiff submitted that common-sense principles should be applied when interpreting the phrase “for Carole Wilson’s benefit, or the benefit of a third party in competition with Woodards”.
52The authorities establish that where a literal reading of the restraint includes a restriction on a capacity in which the employee is restrained that is an “improbable or extravagant contingency”, the Court may consider that construction was not intended by the parties.[34]
[34] Just Group Ltd v Peck (2016) 344 ALR 162, [38(b)(ii)].
53The restriction on solicitation “for Carole Wilson’s benefit” should be construed as a restriction on solicitation for Ms Wilson’s benefit in any future capacity as a property manager. It is highly improbable that the parties intended the restraint to apply to benefits derived by Ms Wilson unrelated to a future role as a property manager.
54Further, the restriction on solicitation “for Carole Wilson’s benefit” is a separate covenant to the restraint of solicitation for “the benefit of a third party in competition with Woodards”. Where a restraint comprises several distinct covenants, and severance can be carried out without the addition or alteration of words, excessively broad covenants can be severed. In this case, if necessary, severance could be applied as follows:
“… with the view of soliciting for
Carole Wilson's benefit, orthe benefit of a third party in competition with Woodards, the business of that Client or Supplier.”55The restriction on solicitation for “the benefit of a third party in competition with Woodards” should be construed as a restriction on solicitation for the benefit of a business engaged in similar actives to those Ms Wilson was involved when she was employed by Woodards, namely leasing and management of residential property. The employment agreement identified that Ms Wilson’s involvement in Woodards’ business was to be as a Property Manager, and this was borne out by the evidence at trial.
No geographical limitation
56The plaintiff submitted that there is no need to geographically limit a restraint that is already restricted to persons with whom Ms Wilson had dealings in the course of her employment in the last 12 months. The Clients and Suppliers that Ms Wilson communicated with had properties in and around City of Manningham.
57In response to the defendants’ example that Ms Wilson would be restrained from managing the property of a Woodards’ client in Darwin should she moved there, the plaintiff submitted that this may be the outcome if the restraint was designed to work in a mechanical fashion. The restraint is not absolute and Ms Wilson could seek Woodards’ prior written consent to engage in such conduct. In circumstances where Woodards was not active in Darwin, there would be no reason why consent would be withheld.
58Mr Korman accepted, however that if Woodards were to act unreasonably and refuse consent, clause 2.3(b)(ii) would have the effect contended for by the defendants, because the restraint precludes Ms Wilson from soliciting business for her benefit, not just for the benefit of a third party in competition with Woodards.
59As such, if the Court is of the view that the option to seek consent does not prevent clause 2.3(b)(ii) from unreasonably restricting Ms Wilson’s post-employment activity, the appropriate course is to sever the covenant preventing Ms Wilson soliciting business for her benefit.
Defendants’ submissions
60The defendants submitted that the restraint does more than was reasonably necessary in its scope to protect W284’s legitimate interest:
Definitions of “Woodards” and “Business”
61The restraint intends not only to protect the business of W284, but all entities which form part of the Woodards network, regardless of whether such companies operate in Victoria, interstate or overseas. W284 and other entities in the Woodards network operate under licence arrangements:
(a) “Woodards” ought to be given its defined meaning where it appears in the restraint; and
(b) There is no contrary intention that reference to “Woodards” in the restraint should be anything other than a reference to “all entities, corporate or otherwise, that are related to or associated with Woodards”. To find that reference to “Woodards” in the restraint is actually a reference to “W284” would be re-writing the contract impermissibly. W284 failed to lead any evidence about the number and location of other entities (aside W284) related to or associated with Woodards.
62Giving “Woodards” its defined meaning in Schedule 3 is consistent with the introductory words to the restraint”: “To reasonably protect the goodwill of the Business…”. “Business” is defined “incredibly broadly” and “it is apparent that the objective [of the definition] is a broad, catch-all one”. The definition “extends well beyond the employment of Ms Wilson in terms of her duties, her functions and the nature of the customers with whom she dealt”.
“Dealings” with “Clients” and “Suppliers”
63The word “dealings” is not defined in Schedule 3, and thus broadly covers direct and indirect dealings. The generality of the word causes difficulty in determining whether Ms Wilson “had dealings with” Clients or Suppliers in the final 12 months of her Employment with W284.
64W284 did not lead any evidence connecting Ms Wilson to all persons caught by the definition of “Client” and “Supplier”. There are an indeterminate number of entities and persons whom Ms Wilson may have had dealings with in the final 12 months of her Employment with W284.
65The word “business” encompasses any product or service of any Client or Supplier with whom Ms Wilson had dealings during the last 12 months of her employment, even if such product or service was unrelated to her role in leasing and/or management of residential properties at W284.
66W284 has not justified the reasonableness of including “Suppliers” in the restraint. The restraint would, for example, prevent Ms Wilson from purchasing products and services (unrelated to leasing and/or management of residential properties) from a “Supplier” with whom she “had dealings” in the final 12 months of her Employment with W284. This inclusion is contrary to public policy because it restricts “Suppliers” rights to supply products and services to Ms Wilson in areas outside W284’s business operations.
“For Carole Wilson’s benefit, or the benefit of a third party in competition with Woodards”
67The restraint seeks to prevent Ms Wilson from “operating, both for her own benefit and for the benefit of another third party business in competition with [Woodards]”.
68The phrase “for Carole Wilson's benefit” would prevent Ms Wilson from:
(a) having “any dealings” with any Client or Supplier with whom she had dealings during the last 12 months of her Employment, even if the “benefit” Ms Wilson received was not at all competitive to W284’s business; and
(b) providing any product or service to any Client or Supplier with whom she had dealings during the last 12 months of her Employment, even if such product or service was unrelated to her role in leasing and/or management of residential properties at W284.
69This aspect of the restraint cannot be severed because it is a single restraint, it is not made up of separate servable restraints.
70The phrase “or the benefit of a third party in competition with Woodards” is also too broad because:
(a) the prohibited contact extends to contact with Clients and Suppliers of any other entity in the Woodards network; and
(b) in light of the definition of “Business”, the prohibition extends to a wide range of activities outside of property management and leasing.
No geographical limitation
71The geographic limitations imposed by a restraint is a critical consideration for the courts. A widely drafted clause which does not specify the area to which it applies will operate worldwide.
72Ms Wilson’s position at the time of entering into the employment agreement with W284 was based in Doncaster and the 31 properties the subject of this proceeding were located in and around the City of Manningham. The restraint seeks to prevent Ms Wilson from operating without geographic boundary, necessarily including in areas well beyond W284’s business operations and the location where Ms Wilson worked and operated in the course of her employment.
73For example, if Ms Wilson moved to Darwin, Ms Wilson would be prevented from managing a Darwin property owned by a Woodards’ client (it being assumed that Woodards does not operate in Darwin).
Conclusion and analysis — scope
74In my view, the restraint does more than is reasonably necessary to protect W284’s landlord customer connections in its scope. In summary:
(a) The broad definitions of “Woodards”, “Business, “Client” and “Supplier”, extend the prohibited contact to Clients and Suppliers of the entire Woodards network of entities with whom Ms Wilson had dealings in the course of the Employment in the last 12 months. It is not limited to Clients and Suppliers of the W284 property management business or of W284. Properly construed, the term “Woodards” as it appears in the Schedule 3 is a reference to the defined term in clause 1.1 of the Schedule 3 and not to W284. This is consistent with the objective intention of the parties reflected in:
(i)the introductory words to the restraint: “To reasonably protect the goodwill of the Business [as defined]…” (introductory words); and
(ii)the contract being a standard form employment agreement, that was drafted to cater for every employee regardless of seniority or role.
(b) The restraint prohibits contact in relation to activities which have nothing to do with property management or leasing. Properly construed, “the business of that Client or Supplier” is not a reference to prohibited contact in respect of property management related business only as contended for by Mr Korman. Those words of limitation do not appear in the restraint. To read in those words would be to remake the agreement contrary to the objective intention of the parties as referred to above. Mr Korman conceded that if the restraint operated to prohibit Ms Wilson from soliciting any business from Clients and Suppliers of Woodards (as defined), it is “excessive.”
“And this is important because if Ms Wilson was restricted only from soliciting property management business, I’ll be demonstrating how everything else falls into place and this is a reasonable restraint, but if Ms Wilson is not permitted to solicit from these other entities all sorts of things, it’s excessive, for example, sales or whatever or hairdressing, its [excessive].”[35]
(c) The purpose for which contact is prohibited extends beyond a purpose competitive to W284. The restraint prohibits contact “for Carole Wilson’s benefit.” The words “for Carole Wilson’s benefit” ought not be severed.
(d) The restraint has no geographic limitation; it operates at large. It does not limit the prohibition to the area in which Ms Wilson operated or some other reasonable area of operation. Due to the broad definitions referred to above, the limitation on the persons in respect of whom contact is prohibited being those with whom Ms Wilson had dealings during the 12 months prior to termination do not limit its operation such that it does no more than is reasonably necessary to protect W284’s customer connections.
The definition of “Woodards”
[35] T 670.20-28.
75In my view, where “Woodards” appears in clause 2.3, a reasonable person in the position of the parties would understand it to have the defined meaning.
76The introductory words evince an intention that the restraint have broad application, beyond the business and activities of W284.
77“Business” is defined broadly and covers activities beyond Ms Wilson’s property management role,[36] including aspects of the real estate industry in which W284 is not involved at all, for example, hotel and retirement property sales. In order to protect “Business” activities in which W284 is not involved, but in which other Woodards entities might be involved, references to “Woodards” in the restraint must be references to the defined term.
[36] And beyond all aspects of W284’s business.
78A reasonable person in the position of the parties would understand that the “commercial purpose or object” of the restraint is to protect not only W284’s legitimate interest, but other entities which form part of the Woodards network. The standard form contract was given to many employees in different roles and the restraint of trade provisions were not tailored to meet the specific seniority or wage level of any particular employee.[37]
[37] XXN Tormey T55.26-T56.4.
79The phrase “unless the contrary intention appears” permits reference to “Woodards” in one clause in Schedule 3 to mean what is defined, and reference to “Woodards” in another clause to mean W284. Defined terms must be read in the context in which they appear in the contract, and any contrary intention:[38]
(a) With respect to the definition of “Employment”, it is common sense that “employment of Carole Wilson by Woodards” means employment of Ms Wilson by W284, as Ms Wilson was only to be and only ever was employed by W284. A common-sense overlay is appropriate to understand the meaning of “Woodards” in that context. There is “good reason” to displace the defined meaning and doing so would avoid a “commercial nonsense”.
(b) The same may be said with respect to the execution clause in Schedule 3. The reference to “Woodards” could only be a reference to W284, as it was Ms Wilson’s employer. A reasonable person in the position of the parties would consider the words “EXECUTED by the Parties as an Agreement” to be a reference to the definition of the parties to the employment agreement on the first page. To this extent, a contrary intention appears in respect of that particular reference to “Woodards”.
[38] Wright v David John Neale Lemon as executor of the estate of Michael John Maynard Wright(No 2)
[2021] WASC 159, [365]–[367].
80Were it the objective intention of the parties that every reference to “Woodards” in Schedule 3 be a reference to W284, there would have been no cause for the plaintiff to have defined “Woodards” as “all entities, corporate or otherwise, that are related to or associated with Woodards” for the purpose of Schedule 3, or to have defined “Woodards” at all.
81This interpretation is consistent with the “broad, catch-all” nature of Schedule 2 and the broad definitions contained therein.
Dealings with Clients and Suppliers
82In my view, the prohibition on Ms Wilson contacting Clients and Suppliers with whom she had dealings in the course of her Employment in the last 12 months of her employment with W284 does not sufficiently limit the operation of the restraint and save it from invalidity.[39] Whilst it might go some way to narrowing the “universe” from which the group of Clients and Suppliers with whom Ms Wilson had dealings is selected, it does not restrict the type of activity in respect of which contact is prohibited to residential property leasing or management.
[39] In this respect, the present circumstances are distinguishable from those in Birdanco Nominees Pty Ltd
v Money (2012) 36 VR 341. There was no issue in that case that the restraint was in respect of clients of the firm and for whom he had provided account services within a specific time frame before his employment ceased.
83The words “the business” in context (i.e. the business of that Client or Supplier) ought not be construed as limited to “the business Carole Wilson was involved in”[40] or property management business as contended for by Mr Korman. Such an approach is not supported by principle:
(a) “business” is a word of generality not ambiguity.[41] A restrictive interpretation of general words is not to be adopted simply to save a covenant from invalidity; and
(b) to construe the words as the plaintiff contends amounts to determining, impermissibly, what degree of restriction would be justified and reading down the unduly wide clause in order to preserve its validity.[42]
[40] T 671.20-21.
[41] I.F. Asia Pacific Pty Ltd v Galbally & Ors [2003] VSC 192, [108]: While “evident ambiguity appearing
from the text” may justify a narrow construction of literal terms, mere generality does not constitute ambiguity.”
[42] Ibid [105].
84The presence of the expansive definitions of “Woodards”, “Business”, “Client” and “Supplier” in Schedule 3, together with the introductory words to the restraint, are inconsistent with a reading of the words “the business” in the restricted way contended for by the plaintiff. Rather, a reasonable person in the position of the parties would understand that the words “the business of that Client or Supplier” ought to be given their full effect. Such an interpretation is necessary to achieve the objective purpose of the broad, catch all restraint encapsulated in the words: “To reasonably protect the goodwill of the Business...”. “Business” including “sales, acquisitions, leasing and/or management of residential, commercial, retail, industrial, recreational, hotel, retirement and any other leasehold or real property and/or businesses” of Woodards (as defined) and any other business in which Carole Wilson provides, or provided, services in the course of the Employment. The introductory words and definition of “Business” would have no work to do were it intended to protect the residential property leasing and management aspect of W284’s business only.
85The present circumstances are distinguishable from those in Mills v Dunham in which the English Court of Appeal “read down” the general words of a restraint which placed no limit on the type of business in which soliciting by the former employee was prohibited to “a business similar to that of the plaintiff,” saving the clause from invalidity. In that case, the nature of the plaintiff’s business of manufacturing antiseptic substances was expressly set out in another clause of the agreement. Chitty J accepted that in context “dealing or transacting business with the old customers means business of the same or a similar kind to that which had been carried on by the plaintiffs.”
86In I.F. Asia Pacific Pty Ltd v Galbally & Ors,[43] Dodd-Streeton J noted that:
“While Mills v Dunham no longer represents an accurate statement of relevant principles, the application of the approach endorsed by Dixon CJ in Butt v Long does not exclude the possibility that in some contexts, general words might properly be held to have a narrower meaning.”[44]
[43] [2003] VSC 192.
[44] Ibid [123].
87Her Honour held however that in the absence of a definition of the plaintiff’s business, custom or the type of services it provided, the text of the clause displays generality rather than ambiguity. Her Honour was unable to conclude that it could be restricted by the applicable canons of construction to services, custom or business “the same as or similar to” those of the plaintiff.
88In the present case, the broad definitions together with the introductory words put beyond doubt the objective intention of the parties to protect the goodwill of the Business (defined term) of Woodards (as defined). To incorporate the restriction contended for by the plaintiff would be to remake the restraint rather than to give expression to its real meaning.[45] The need to limit the unduly wide words by introducing words of limitation is apparent from Mr Korman’s submission that “the Restraint in fact only proscribes interaction directed towards soliciting of business from Clients and Suppliers with whom Wilson had dealings in the course of her employment-related activities of leasing and managing residential property.”[46] The underlined words or other similar words of limitation are absent in the restraint.
[45] Ibid [127]
[46] Plaintiff’s Reply Closing Submissions, [15].
89On that basis alone, the clause exceeds what is reasonably necessary in order to protect W284’s legitimate interests in its customer connections and the restraint is unenforceable.
“For Carole Wilson’s benefit, or the benefit of a third party in competition with Woodards”
90In my view, in context, prohibiting contact “for Carole Wilson’s benefit” is unreasonably broad. The word “benefit” is not limited in any way. It would prevent Ms Wilson from having prohibited contact with any Client or Supplier with whom she had dealings during the last 12 months of her Employment, even if the “benefit” Ms Wilson received was:
(a) not at all competitive to W284’s business; and/or
(b) unrelated to her role in leasing and/or management of residential properties at W284.
91That Ms Wilson might engage in roles outside of property management is not some “improbable or extravagant contingency” that W284 could not have intended the restraint to cover in light of the wide scope of Schedule 3, in particular, the broad definitions and introductory words to the restraint. To construe the proscribed solicitation “for Carole Wilson’s benefit” to be restricted to solicitation “for Carol Wilson’s benefit in any future capacity as a property manager” as contended for by Mr Korman,[47] is again, an invitation to re-write words of generality.
[47] Ibid [28(a)].
92The phrase “for Carole Wilson’s benefit” is not amenable to severance.[48] To do so would be to engage in “curial disentanglement”.[49] As already addressed, the employment agreement including Schedule 3 containing the restraint was a standard form agreement used in respect of all employees no matter what position, role or experience. To refuse severance is consistent with the intention of the parties objectively assessed that the restraint have broad application in respect of the various businesses of the various Woodards entities, as set out above.
[48] Unlike cl 2.3(b)(i) which was a separate and distinct covenant.
[49] Just Group Ltd v Peck (2016) 344 ALR 162, [39].
93In my view, the phrase “for the benefit of a third party in competition with Woodards” is also unjustifiably broad in context. In light of the definition of “Woodards”, a third party may be in competition with any other entity in the Woodards network in any field of real estate, including sales of retail, industrial, hotel and retirement properties and/or businesses. To restrain Ms Wilson from contact with Clients and Suppliers in competition with entities operating in fields not covered by W284, does more than is reasonably necessary to protect W284’s legitimate interest in its customer connections with landlords on its rent roll.
No geographic limitation
94W284 conceded that a situation could arise where if Ms Wilson moved to Darwin, and a Client or Supplier of W284 with whom Ms Wilson had dealings in the last 12 months had a residential rental property in Darwin, she would be prevented from managing such property by the restraint even if it was uncompetitive with W284’s business. This situation is not an “improbable or extravagant contingency” that the Court should consider was not intended to be covered by the restraint. As Mr Piccolo said, “the Woodards network, its tentacles spread far and wide and we manage property in our core areas, our primary and secondary areas…”.[50]
[50] T 128.22-27 (Piccolo XXN).
95W284’s submission that should that situation arise, Ms Wilson could seek Woodards’ consent, brings into sharper focus the unreasonable breadth of the restraint. There is nothing preventing Woodards from unreasonably withholding consent.
A2. ENFORCEABILITY OF THE RESTAINT — DURATION
Issue
96Issue 2 in the Joint Statement is:
“If the answer to issue 1 is “yes”, was the enforceable restraint period:
(a)three (3) months from the date the Third Defendant’s employment ceased as alleged by the Defendants; or
(b)twelve (12) months from the date the Third Defendant’s employment ceased with the Plaintiff as alleged by the Plaintiff.”[51]
[51] In its Further Amended Statement of Claim dated 11 March 2020, the plaintiff defined “a period of 12
months from the date her employment by Woodards ceases” as the “Restraint Period” [6(b)]. The plaintiff did not plead an enforceable restraint period of 6 month in the alternative.
Conclusion
97Having determined that the restraint is unenforceable because it does more than is reasonably necessary to protect W284’s legitimate interest in its scope, it is unnecessary for me to determine Issue A2. However, had I determined Issue A1 in favour of W284, I would have found that:
(a) the restraint was not limited to 3 months by virtue of the notation as contended for by the defendants; and
(b) a 12 month restraint was longer than was reasonably necessary to protect the legitimate interests of W284. I would have found that 6 months was enforceable in duration.
The notation — 3 months
Plaintiff’s submissions
98Mr Korman submitted that, contrary to the defendants’ contention that 3 months was the restraint period agreed by the parties, the notation was not a counteroffer accepted by Mr Piccolo upon his signing of the employment agreement and Schedule 3.
99The meaning of the circle around the words “3 months” is objectively obscure. It is too uncertain to allow any application. Judged objectively, the circle may not have been intended to be a contractual term at all: it might have been the product of aimless doodling or directed study and consideration.
100If the intention was to exclude one or more periods of time, the objectively appropriate course would have been to strike out the rejected restraint period(s) and/or amend clauses 3.2 and 3.3. The effect of clause 3.2 together with clause 1.6 is that each period in the definition of “Restraint Period” constitutes a separate restraint.
101Ms Wilson did not alter clause 3.2 of the employment agreement, which provides:
“Each of the restraints in this Schedule are to have effect as a separate, severable and independent restraints, each form the other and as regards each Restraint Period so that the invalidity or unenforceability of any restraint in respect of any Restraint Period does not affect the validity or enforceability of any remaining restraint.”
102The effect of this is that the restraint contained in the words “12 months” at clause 1.6(a) and “6 months” at clause 1.6(b) (which were not altered) have effect as separate, severable and independent restraints.
103Ms Wilson did not alter clause 3.3 of the employment agreement either, which provides:
“If there is any inconsistency or contradiction between the restraints in this Schedule, the restraint with the longest Restraint Period constitutes the restraint agreed between Woodards and Caroline Wilson to the exclusion of any other restraint.”
104The effect is that the separate, severable and independent restraint contained in the words “12 months” constitutes the restraint agreed between Woodards and Ms Wilson, because it is inconsistent with the restraints contained in clause 1.6(b) (“6 months”) and clause 1.6(c) (“3 months”).
105Whatever the impact of the notation might be, those words “3 months” within the circle constitute a restraint that is shorter than and inconsistent with the restraint constituted by the words “12 months”. Therefore, by operation of clauses 3.2 and 3.3, that 3 month restraint cannot apply.
106It was not agreed between W284 and Ms Wilson that the restraint would be 3 months, because Mr Piccolo was not aware of Ms Wilson’s notation and did not agree to it. He did not sign next to Ms Wilson’s notation. Any “term” constituted by the circle and signature, if there was in fact one, should be severed from the agreement.
107Even if the notation was a counteroffer, Ms Wilson did not communicate her counteroffer. It follows that the notations cannot constitute a term of the employment agreement or affect its construction. Absent communication of the counteroffer, the employment agreement must take effect according to its terms.
108If Ms Wilson’s counteroffer was communicated, it does not necessarily follow that the original offer was “killed”. In this case Woodards’ conduct in offering Ms Wilson employment after the counteroffer was made, constituted a representation that the contract remained open for acceptance by Ms Wilson and had not been “killed” by her counteroffer.[52] Ms Wilson accepted Woodards’ offer of employment in accordance with the terms of the employment agreement by her subsequent conduct as a Woodard’s employee.
[52] N Seddon, R Bigwood, and M Ellinghouse, Cheshire and Fifoot Law of Contract (10th ed, LexisNexis,
2012) [3.25] (Cheshire and Fifoot) citing Brambles Holdings Ltd v Bathurst CC (2001) 53 NSWLR 143, [80].
109In any case, Ms Wilson’s conduct in making the notation without bringing it to Mr Piccolo’s attention was vitiating conduct. She tried to trick Mr Piccolo. She knew that he would likely not see the notation and then she could say “Look, I only have a three-month restraint.” This was a representation by silence that she had not changed anything in the agreement. She received the second copy of her employment agreement and would have known Mr Piccolo had not countersigned and had likely not seen the notation.[53] Having represented to Mr Piccolo that she made no changes to the standard terms, Ms Wilson is bound by the standard terms.
[53] Bourseguin v Stannard Bros. Holdings Pty Ltd (1994) 1Qd R 231, 240.
110Alternatively, Ms Wilson is estopped from asserting that she made (or communicated) her counteroffer and is estopped from asserting that she had not accepted the employment agreement in its original form. Alternatively, Mr Piccolo made a unilateral mistake as a consequence of Ms Wilson engaging in “sharp” conduct entitling the plaintiff to rectification in the form of the removal of the notation.[54]
[54] Cheshire and Fifoot [12.4].
Defendants’ submissions
111The defendants submitted that 3 months was the restraint period agreed under Schedule 3.
112The circling and initialling by Ms Wilson of the 3 month restraint period is certain and unequivocal. It clearly and objectively identifies the selection of the 3 month restraint period as the only agreeable restraint period, to the exclusion of the other listed restraint periods. There is no other reasonable explanation. There is no uncertainty occasioned by the notation.
113Neither clause 3.2 nor 3.3 of Schedule 3 required further alteration as the defined term “Restraint Period” had effectively been limited to only be 3 months.
114Neither clauses 15.6 of the employment agreement nor clause 5.2 of the Schedule 3 permit the severance sought. W284 appears to concede this, given the absence of reliance of those clauses.
115The evidence established that the parties agreed that the only potentially enforceable restraint period was 3 months. Ms Wilson’s notation was effectively a counteroffer of varied terms which was made to W284 for acceptance by it. W284 was free to reject that counteroffer. W284 accepted the varied term when Mr Piccolo signed the employment agreement, including Schedule 3, after Ms Wilson.
116In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,[55] the High Court held the general rule regarding signed documents is that:
“...where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document.”
[55] (2004) 219 CLR 165, [57].
117This ratio can be seen as, in substance, an affirmation of the principle in L'Estrange v Graucob[56] that:
"[w]hen a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not."
[56] [1934] 2 KB 394, 403.
118If the court finds, however, that there was no acceptance of the counteroffer as contended for by the plaintiff, Schedule 3 forms no part of the employment agreement because there has been no concluded agreement. Clauses 15.6 of the employment agreement and clause 5.2 of Schedule 3 permit severance of the entire restrictive covenants from the employment agreement.
119The general rule in Toll v Alphapharm is applicable. There was no vitiating element. The evidence cannot establish fraud, duress or misrepresentation. The plaintiff’s claim in respect of estoppel is misconceived. Unilateral mistake is not made out as it requires some improper conduct on the part of the unmistaken party whereby that party seeks to prevent the other becoming aware of the mistake. That is not the situation here. The plaintiff did not plead estoppel or an entitlement to rectification.
Legal principles
120It is well understood that contracts are to be interpreted objectively. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[57] the High Court said:
“The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.”
[57] (2015) 256 CLR 104, 116–7 [46]–[51] (citations omitted).
121With respect to counteroffers, Carter on Contract states:[58]
“Necessity for knowledge of offer. Acceptance cannot occur if the offeree is ignorant of the offer. Consequently, where an offer is made for a reward to be paid in return for the doing of some act (such as, the supplying of information relating to the commission of a crime), the mere fact that a person happens to perform that act while ignorant of the offer will not result in a binding contract. As Isaacs ACJ explained in R v Clarke,[59] unless the person who performed the required act was ‘acting on or in pursuance of or in reliance upon or in return for’ the consideration contained in the offer, there is no contract…” (emphasis in original)
[58] J W Carter, Contract Law in Australia (7th ed, LexisNexis Butterworths, 2018) [3-39].
[59] (1927) 40 CLR 227, 231. See also Gjergja v Cooper [1987] VR 167, 206, 208-11 per Ormiston J
acceptance must be ‘truly responsive’ to the offer).
122Cheshire and Fifoot Law of Contract states:[60]
“Counter-offer is a final rejection of original offer. To hold that there is an acceptance the offeree must unreservedly assent to the exact terms proposed by the offeror - sometimes referred to as the mirror principle. If, while purporting to accept the offer as a whole, the offeree introduces a new term which the offeror has not had the chance of examining, he or she is in fact merely making a counter-offer. The effect of this is said to destroy the original offer…
The proposition that a rejected offer is killed must depend on the circumstances. For example, if in a subsequent conversation it was obvious that the original offer was still open, then it would be possible to accept it, even though it was originally rejected. Heydon JA has commented:
A rejected offer may remain operative if in the circumstances it should be treated despite its rejection as remaining on foot, available for adoption as the basis of mutual assent manifested by conduct.[61]”
[60] Cheshire and Fifoot [3.25].
[61] Brambles Holdings Ltd v Bathurst CC (2001) 53 NSWLR 153, [80].
Conclusion and analysis
123In my view, a reasonable person in the position of the parties would have understood the notation to be a counteroffer limiting the restraint period to 3 months. Ms Wilson’s signature next to the circle is a clear indication that, of the 3 potential restraint periods, she was prepared to accept 3 months only. The presence of her signature is inconsistent with the circle being the product of aimless doodling.
124Understood as a selection of the only agreeable restraint period to the exclusion of the other possible restraint periods, the absence of striking out of the remaining periods and amendments to clauses 3.2 and 3.3 is of no consequence.
125However, for the reasons set out below, I find that Ms Wilson did not communicate the counteroffer. I accept Ms Tormey’s evidence that the notation was not raised with her, and Mr Piccolo’s evidence that he had no knowledge of the notation.
The evidence of Ms Wilson and Ms Tormey
126Ms Tormey gave evidence that:
(a) she does not recall Ms Wilson calling her about her employment agreement prior to attending the Landfield office;
(b) all of her calls go through reception — the receptionist would send her an email if she did not take a call, she would get back to them as soon as she could and she would always return calls;[62]
(c) she does not remember receiving any emails from Ms Wilson about her employment agreement prior to attending the Landfield office;[63]
(d) she attended the Landfield office on 8 May 2017;
(e) she spoke to at least six employees and “would have met with [Ms Wilson]” on that day;[64]
(f) she is “absolutely sure” Ms Wilson did not bring any issues relating to her employment at Woodards to her attention[65] and “there was no conversation about the employment agreement at all”;[66]
(g) Ms Wilson did not circle and sign the “3 months” in front of her;[67]
(h) Ms Wilson did not hand an executed employment agreement to her on that day;[68]
(i) the standard procedure for executing employment agreements is that Woodards gives two unsigned employment agreements to the employee, the employee signs both copies and returns them to Ms Tormey, Ms Tormey gives them to Mr Piccolo to sign, then one copy goes in the employee’s personal Woodards file and the other is returned to the employee.[69]
[62] T 51.29-52.6 (Tormey XN).
[63] T 52.7-9 (Tormey XN).
[64] T 64.4-6 (Tormey XXN).
[65] T 52.27-29 (Tormey XN).
[66] T 65.18-20 (Tormey XXN).
[67] T 65.12-17 (Tormey XXN).
[68] “And Carole didn't post her contract back to you, did she, she handed it to you on 8 May?—
Not on 8 May, no.”: T 64.7-8 (Tormey XXN).
[69] T 48.3-31 (Tormey XN).
127Ms Wilson gave evidence that:
(a) she tried to contact Ms Tormey but “she’s a very busy lady”;[70]
[70] T 168.28-30 (Wilson XN).
(b) she did not send back copies of her employment agreement to Ms Tormey before 8 May 2017;[71]
[71] T 169.19-20 (Wilson XN).
(c) when Ms Tormey attended the Landfield office on 8 May 2017, she had two copies of her employment agreement in an envelope in her bottom drawer;[72]
[72] T 169.21-23 (Wilson XN).
(d) she had marked up one copy by circling three points she wanted to discuss with Ms Tormey,[73] specifically:
[73] T 169.24-27 (Wilson XN).
(i)whether she was being “demoted”[74] as her title in the employment agreement was “Property Manager” rather than “Senior Property Manger”;[75]
[74] T 170.21-23 (Wilson XN).
[75] T 168.5-10 (Wilson XN).
(ii)whether she “could be shipped off because somebody was sick in another office” due to the “clause in relation to being moved to another office”; and
(iii)the restraint clause, because she “wanted three months as the others were unreasonable”;[76]
[76] T 168.24-26 (Wilson XN).
(e) Ms Tormey walked into the office — it was her first visit;[77]
[77] T 170.1-3 (Wilson XN).
(f) she had to go outside the office briefly;[78]
[78] T 170.3-4 (Wilson XN).
(g) she returned to sit at her desk and Ms Tormey came up to the left-hand side of her desk;[79]
[79] T 170.4-6 (Wilson XN).
(h) she pulled out the envelope and pulled out the two contracts;[80]
[80] T 170.6-10 (Wilson XN).
(i) she opened the marked up copy and went through the three points with Ms Tormey — “this was important to me, this was about my life and I wanted to make sure I covered every point”;[81]
[81] T 170.11-15 (Wilson XN).
(j) with respect to her title, Ms Tormey said “it was just a simple typo and it would be fixed”;[82]
[82] T 170.24-25 (Wilson XN).
(k) with respect to the “relocation clause”, Ms Tormey said:
(i)“there was no chance of being moved around for the purpose of… stepping in to help people”;[83]
(ii)she “wouldn’t get called for a day here or a day there”;[84]
(iii)“sometimes there is relocations but… [she] would be consulted”;[85]
(l) with respect to the restraint:
(i)she said she felt the 6 and 12 month restraints were “unreasonable” and Ms Tormey said “something about the six months [being] the only legally enforceable” restraint;[86]
(ii)she said “well, I’m only prepared to sign three months”, circled the 3 months and signed the back page of the clean copy, put it in the envelope and gave the envelope to Ms Tormey;[87]
[83] T 170.26-31 (Wilson XN).
[84] T 171.1-2 (Wilson XN).
[85] T 171.2-3 (Wilson XN).
[86] T 171.4-12 (Wilson XN).
[87] T 171.13-17 (Wilson XN).
(m) she put the marked-up copy back in her drawer and when the Landfield office was being cleaned out in December 2017, she emptied her desk and put the marked up copy in the recycling bin.[88]
[88] T 171.26-172.3 (Wilson XN).
128The plaintiff submitted that Ms Wilson’s evidence about the events of 8 May 2017 ought to be rejected because, amongst other things, it is implausible to suggest that:
(a) Ms Tormey approved a change to the standard terms of Ms Wilson’s employment agreement, or approved Ms Wilson’s notation, without authority to do so;
(b) Ms Tormey knew of Ms Wilson’s notation but failed to bring it to Mr Piccolo’s attention;
(c) Ms Wilson “rejected as unreasonable a three-month restraint period” even though she had longstanding relationships over many years with the Woodards landlords, yet accepted a 6 month restraint if she remained at Jellis Craig for 36 months or more;[89]
(d) Ms Wilson provided Ms Tormey only one signed copy of her employment agreement, and Ms Tormey provided Mr Piccolo only one signed copy, yet both failed to notice and/or do anything about Ms Wilson’s failure to provide two signed copies despite that being their usual practice;
(e) Ms Wilson did not receive a signed copy of the employment agreement and did not ask for it at any stage despite her concerns as to Mr Piccolo’s litigious approach;[90] and
(f) Ms Wilson was unaware that Mr Piccolo had not signed her notation.
[89] CB 269-275.
[90] “When I was at Woodards I had a conversation with Mr Piccolo, and in that conversation he talked about
a previous court case, or going to court, and he said, 'I will go to court, no problems', I will do this, I will do that, and he struck me as quite - what is the correct word, is it litigious or -”. T 356.8-15 (Wilson XXN).
129The defendants submitted that Ms Wilson’s evidence ought to be preferred because:
(a) Ms Wilson was very clear about the steps she took in relation to the employment agreement including giving it to Ms Tormey, raising the issues with Ms Tormey and then giving Ms Tormey one copy;
(b) Ms Tormey was clear in stating that she could not recall meeting with Ms Wilson;
(c) Ms Tormey was also clear in stating that she could not recall whether standard procedure was followed — she could not definitely say whether Ms Wilson returned two executed employment agreements in this case;
(d) Ms Tormey’s evidence was self-serving — despite not being able to recall whether she met with Ms Wilson, she positively stated that Ms Wilson did not raise the three issues with her that day;
(e) on 9 May 2017, Ms Tormey sent an email to Ms Wilson stating: “Nice to finally meet you yesterday”. This is consistent with a meeting occurring on 8 May 2017 that Ms Wilson recounts which Ms Tormey cannot recall;
(f) on 4 February 2019, Ms Wilson wrote to W284’s lawyers stating:
“Can you please forward me a copy of my amended Employment Contract that I signed. I did not receive a signed returned copy from Woodards.”
This is consistent with Ms Wilson’s account of only having returned one copy of the employment agreement to Ms Tormey, which contained the notation;
(g) when W284’s lawyers wrote to Ms Wilson asserting that she had breached the restraint, they did not challenge Ms Wilson’s notation.
130I reject Ms Wilson’s account. In my view, had the conversation occurred as described by Ms Wilson, one would have expected Ms Wilson to have:
(a) amended the employment agreement to reflect the outcome of the three points she said she discussed given her evidence of their importance to her. Had Ms Tormey said labelling Ms Wilson as a Property Manager rather than a Senior Property Manager was a “typo”, and “… it’s no problem, just change it…”,[91] Ms Wilson would likely have added the word “Senior” to her title. A typo would have taken a matter of seconds to correct. Similarly, Ms Wilson did not amend the work location clause to make it clear that she did not agree to be “shipped off” to other Woodards offices;
(b) followed up with Ms Tormey to confirm that Mr Piccolo had agreed to the three points. On Ms Wilson’s version of the events, the copy of the contract she handed to Ms Tormey contained only the notation and no reference to the other two matters of importance to her; and
(c) ensured she received a signed amended copy of her employment agreement reflecting the three matters that were of “importance to me, this was about my life and I wanted to make sure I covered every point.” However:
(i)despite having thrown her own copy of the employment agreement containing her record of the three points she said she discussed with Ms Tormey in the recycling bin, she took no steps to obtain a signed copy for her records;[92]
(ii)when Ms Wilson’s mind was focussed on the issue of the 12 month restraint in W284’s employment contracts in June 2018, she did not request a copy of her own employment contract. On 7 June 2018, Ms Wilson emailed Ms Tormey regarding Ms Chong’s[93] departure with a draft email to be sent to landlords in which she wrote:
“…all Real Estate firms in this case Woodards have employees sign contracts when they start, Woodards has an air tight contract that prevents property managers engaging with Landlords for twelve months…”[94]
(iii)Ms Wilson gave evidence that she wrote that email because she knew that “Wendy did not alter her [employment contract]”.[95] Ms Wilson said she knew Ms Chong was under a 12 month restraint “because we spoke about it”.[96] Knowing she had amended her own employment agreement to limit the restraint to 3 months (on Ms Wilson’s account), one would have expected her to have ensured the amendment to the restraint she considered she had made had been accepted and that she had a copy of her contract signed by Mr Piccolo;
(iv)Having received the letter from W284 dated 17 January 2019 threatening legal action “… should we become aware of any breaches of the terms of your Employment Agreement”[97], Ms Wilson did not request a copy of her employment agreement to check whether Mr Piccolo had countersigned the notation. It was not until after W284’s lawyers wrote to Ms Keleher on 1 February 2019 that Ms Wilson requested a copy of her “amended Employment Contract that I signed” on 4 February 2019.[98]
[283] CB 37; T 99.22-24 (Piccolo XN).
Defendants’ submissions
293W284’s submission that Ms Wilson is entitled to the loss of capital value of the rental management contracts, applying a multiplier of 3.5, is erroneous and misconceived.
294The defendants agreed with the plaintiff that when assessing damages, it is necessary for the Court to determine the degree of probability of the landlords leaving W284 in any event.[284]
[284] Malec v JC Hutton Pty Ltd (1990) 169 CLR 638, 643 (Deane, Gaudron and McHugh JJ) cited with
approval in Helensburgh Property Management Pty Ltd v Brady [2016] NSWSC 253, [103] (Bergin CJ).
295Helensburgh Property, including the cases of AMP Services Ltd v Manning[285] and AMP Services Ltd v Manning (No 2) (AMP v Manning),[286] supports the defendants’ position:
“In AMP Services Ltd v Manning [2006] FCA 256 and AMP Services Ltd v Manning (No 2) [2007] FCA 82, a case in which many of the plaintiff’s clients moved their business to the competitor that the defendants had joined after leaving the plaintiff, Finkelstein J considered the bases on which damages could be awarded. The plaintiff claimed that the capital worth of the business had been diminished by about $4.3 million and sought to recover that amount from the defendants. Although dismissing a number of the plaintiff’s claims, his Honour was satisfied that the first defendant had breached her duty to the plaintiff in approaching its clients to entice them to deal with her once she went to work with the competitor ([2006] FCA 256 at [60]). His Honour referred to Southern Real Estate Pty Ltd v Dellow and Arnold and determined that the critical question was the plaintiff’s actual loss due to the defendant’s breach ([2006] FCA 256 at [64]).
Finkelstein J was satisfied that the plaintiff would not have been able to convince any of the subject clients to remain with it ([2006] FCA 256 at [70]). I am satisfied that this is also the position in the present case. In that case the relevant period before the clients could have moved to the competitor was one month. In the present case the relevant restraint period is six months. Finkelstein J addressed three possible heads of compensation: (1) capital loss arising from the loss of the clients; (2) the income lost in the one month period; and (3) the value of the lost opportunity to retain the clients ([2007] FCA 82 at [5]). His Honour was satisfied that it would not be possible for the plaintiff to recover the capital value of its lost clients because the clients would have been lost even if there were no breach ([2007] FCA 82 at [6]). His Honour assessed damages on the basis of the lost income for the relevant period. In a passage relevant to the circumstances of this case his Honour said ([2007] FCA 82 at [29]):
The value of the lost clients must be considered from the perspective of a potential purchaser who … is willing to pay for an income stream that he is confident will continue to be received in the foreseeable future. From the moment Ms Manning tendered her resignation no reasonable purchaser would so regard the income received from Ms Manning’s clients. Nor would a reasonable purchaser be encouraged into thinking the income was maintainable by the type of strategy Mr Regan had in mind [including writing to clients and holding meetings with them and the defendant]. A purchaser might be willing to pay a token amount for the client list, but he would do so more as a wager than as payment of a reasonable amount for an asset.
[285] [2006] FCA 256.
[286] [2007] FCA 82.
I am satisfied that it is not appropriate to assess damages on the basis contended for by the plaintiff as this would be awarding damages for the capital value of the lost clients. Having regard to my findings that the clients would have been lost after 6 months irrespective of the defendant’s breach of the Contract, the plaintiff is not entitled to recover the capital value of its lost clients: AMP Services Ltd v Manning (No 2) [2007] FCA 82 at [6].
It is appropriate to assess damages on the basis of the commissions lost…”[287] (emphasis added)
[287] [2016] NSWSC 253, [11]-[13].
296The Court can be satisfied that even if Ms Wilson left W284’s employment and complied with the alleged restraint, it is highly probable that the landlords would still have moved their business to her. W284 has not adduced any evidence that attrition rates after Ms Wilson’s departure could not have been accounted for by “mere dissatisfaction”.
297Like the defendant in Helensburgh Property, Ms Wilson was clearly an “effective and efficient property manager with a loyal following” constituted by the 19 landlords who moved the management of their properties to Jellis Craig.
298Even if Ms Wilson remained a property manager at W284, there was no guarantee that the landlords would continue to have W284 manage their properties. Mr Piccolo and Ms Mojaled gave evidence that the landlords were not obliged to remain with W284 after the exclusive leasing period expired, and that landlords might leave for any number of reasons without warning and at any time.
299With respect to the multiplier, there is no proper basis to apply a multiplier of 3.5 to the capital value. Mr Brindley was not provided with the rental management contracts for the purpose of rendering his advice, and therefore had no evidence that would enable him to value the rental management contracts for the 31 properties which moved to Jellis Craig.
300Mr Brindley also gave evidence that:
(a) the size of the rent roll could affect its price or value;
(b) the income generated from a rental management contract is usually a monthly fee calculated by reference to a percentage of the rent charged on the property;
(c) that income is gross revenue and not all profit as there will be running expenses incurred in servicing the management contracts as part of the business; and
(d) the immediate loss of income to the agency when a landlord departs (which it is free to do at any time) is the management fees.
301There have also been sales of rent rolls with even lower multipliers than the range given by Mr Brindley. In February 2019, Jellis Craig purchased a “small rent roll of 45 properties” that were located “all through Manningham, [Jellis Craig’s] local area”.[288] The multiplier in that sale was 2.7 times.[289]
[288] T 430.22-431.2 (Keleher XN).
[289] T 431.3-4 (Keleher XN).
Conclusion and analysis
302W284 would not have been entitled to the capital value of the rental management contracts which were lost to Jellis Craig.
303I would have considered the degree of probability whether the 19 landlords would have left W284 in any event to be high. I would have been satisfied that even if Ms Wilson had complied with the 12 month restraint, it is highly likely that the landlords would have eventually moved their business to Jellis Craig, or to another estate agency. This is so in absence of direct evidence from the landlords:
(a) The landlords were free to move their rental properties to another estate agency at any time of their choosing, and this was acknowledged by Mr Piccolo.
(b) Ms Wilson was an “effective and efficient property manager and it is obvious that she has a loyal following”.[290] Ms Mojaled agreed in cross-examination that Ms Wilson was a “pretty effective and efficient property manager”.[291] Ms Wilson gave unchallenged evidence she was “very well liked”.[292]
[290] Helensburgh Property Management Pty Ltd v Brady [2016] NSWSC 253, [104].
[291] T 33.24-25 (Mojaled XXN).
[292] T 224.7-9 (Wilson XXN).
(c) Landlords expressed concerns with Ms Wilson’s successor, as set out above.[293]
[293] CB 473; CB 452-453.
(d) A further factor is the movement of the management of the landlord properties from Doncaster to Camberwell by W284.
(i)The rent roll W284 purchased from Landfield largely consisted of properties situated in Doncaster. Mr Piccolo moved the portfolio of Doncaster properties Ms Wilson managed, from the Woodards Doncaster office to the Woodards Camberwell office. In cross-examination, Mr Piccolo gave the following evidence:
“… that would mean that Doncaster portfolio was then - instead of moving a kilometre down the road to the new office, it was moving from Doncaster all the way into Camberwell, correct?---You make it sound like a long way, it is not that far.
I have driven it, they are not neighbouring suburbs, are they, Mr Piccolo?---Well, the Woodards network, its tentacles spread far and wide and we manage property in our core areas, our primary and secondary areas. As long as you provide a level of service that is satisfactory to an owner, you won't lose the property.”[294]
(ii)Despite Mr Piccolo’s evidence, W284’s relocation from Doncaster to Camberwell was a factor that influenced Ms Lagos’ decision to move to Jellis Craig. In her email to Mr Piccolo on 6 February 2019, she stated “the protection of my assets are of key importance to me and I feel that I can be better served by an agency with a physical presence in the area”.[295]
(iii)In cross-examination, Ms Mojaled acknowledged that the location of an estate agency could affect whether a property remains on its rent roll:
“Where the property manager employee, so the employee managing the property moves away to another office of the agency away from the area where the property is located. That might be another reason why a person leaves the rent roll, correct?---Correct.
And also where the agency office closest to the property moves or shuts its doors and it is sent to another office further away, that might be another reason someone leaves?---Could be but - yes.”[296]
(iv)Ms Mojaled also agreed that in the text messages between her and Ms Wilson, “there are references to properties that are going to other agencies other than Jellis Craig”.[297]
[294] T 128.17-27 (Piccolo XXN).
[295] CB 448.
[296] T 37.6-14 (Mojaled XXN).
[297] T 29.6-8 (Mojaled XXN).
(e) The landlords left despite W284’s best efforts to convince them to stay, as described by Ms Mojaled.[298]
(f) In Ms Mojaled’s words: “No, [the landlords] didn’t stay because they wanted to move across to Jellis Craig to be with Carole”.[299]
[298] T 32.17-33.17 (Mojaled XXN).
[299] T 33.19-21 (Mojaled XXN).
304If I am wrong and W284 would have been entitled to the capital value of the lost rental management contracts, W284 has not established a proper basis for applying a multiplier of 3.5 to the annual rental management fee received for each property. W284 did not adduce evidence that the rent roll market in Victoria remained stable in the approximate 18 month period between W284 purchasing the rental management contracts and the properties moving to Jellis Craig. Further, Mr Brindley gave evidence of a number of factors that affect the value of rent rolls and the multiplier to be applied. Mr Brindley did not consider the W284 rent roll:
“The multipliers that are applied generally in the industry will vary somewhat due to variations in demographics and social economic factors characteristic of the location.
The size of the portfolio will also impact on price/value purely for quantum reasons.
The potential for rental growth will also impact on portfolio value.
The level of arrears will also impact on portfolio value…”
Loss of chance
Plaintiff’s submissions
305The plaintiff submitted that it is entitled to compensation for the loss of a chance to receive commission from the sale of the rental properties.
306Damages for loss of a business opportunity may be recovered as consequential loss.[300] Loss is ascertained by reference to the Court’s assessment of the prospects of success had the opportunity been pursued.[301]
[300] David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 93 ALR 271, 295; Chaplin v Hicks
[1911] 2 KB 786.
[301] Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 335; Hart Security Australia Pty Ltd v Boucousis
[2016] NSWCA 307, [131]-[134]; Howe v Teefy (1927) 27 SR (NSW) 301.
307Ten of the 31 properties that transferred from W284 to Jellis Craig have since been sold. Seven of those properties were listed with Jellis Craig. Three chose to list elsewhere.
308This is consistent with Mr Piccolo’s evidence that in his experience, “assuming that there is a good relationship with the owners, it would fall in that 70 to 80 per cent conversion rate” from rental management to sales.[302]
[302] T 102.2-20 (Piccolo XN).
309Had these properties not transferred to Jellis Craig, W284 would have had the opportunity to sell them and charge commission at a rate of 1.5% plus GST:
“… applying your internal policies for sales commissions, for a property of this kind what sort of sales commission would Woodards have obtained from the vendor, Woodards being the agent that sold the property?---We have a landlord rate but notwithstanding that, that's at our Camberwell office, but it would be at 1.5 per cent plus GST.”[303]
[303] T 101.22-28 (Piccolo XN).
310The loss may be calculated as 1.5% of the seven properties actually sold by Jellis Craig, as the seven properties would be approximately 70% of the ten rental properties which were transferred to Jellis Craig and subsequently sold. Such loss would be $104,899.50.
311A more accurate method of calculating the loss might have been to calculate the total sale value for the 10 properties, calculate the lost commission, then apply a discount of say 75% to account for the likelihood of earning commission income from those properties. However, there is no evidence as to the sale price for Bruce James’ property at 17/316-318 Manningham Road, Doncaster which was not sold by Jellis Craig.
312There is no issue with the plaintiff seeking damages for both loss of a rental management contract and loss of the opportunity to sell that property. A property being sold does not necessarily mean it will no longer need to be managed as a rental. The buyer may wish to continue leasing out the property and retain the same property manager. In any event, there is a limit to how far the Court can take account of hypothetical possibilities.
Defendants’ submissions
313Firstly, there is no evidence to show that Ms Wilson contacted the former W284 landlords about selling their properties. Even if Ms Wilson remained at W284 and the properties in question were not moved to Jellis Craig, Estate Agents at Jellis Craig could have contacted the landlords about selling.
314Demi Lagos’ properties at 3/243 Blackburn Road, Doncaster East and 5 George Street, Doncaster East were sold by Tony Tuccitto, Jellis Craig Estate Agent & Auctioneer in 2020. The email from Mr Tuccitto to Ms Wilson dated 27 July 2020 shows that “it's the landlord [Ms Lagos] reaching out to the [Jellis Craig] sales department, and the sales department going to Ms Wilson, not a contact the other way”:[304]
[304] T 517.1-7.
315Mr Humble’s other property at 19/1-25 Bellevue Avenue, Doncaster East was sold by Kristy Djordevic, Estate Agent at Jellis Craig in 2020. Ms Djordevic reached out to Mr Humble regarding selling, not Ms Wilson.[305]
[305] Exhibit D, PDF p 13.
316In the period between ceasing employment at W284 and commencing employment at Jellis Craig, Ms Wilson encouraged W284 to sell L T Liauw and S L Lai’s property at 22 Oakwood Court, Templestowe, which was later sold by Rod Yam, Estate Agent at Jellis Criag on 24 December 2020. Ms Wilson texted Ms Mojaled about the property “telling Woodards essentially to get on and sell the property”:[306]
“Ms Wilson: … Also don’t forget about Oakwood crt :D
Ms Mojaled:… YES! So should someone contact the landlord for Oakwood?
Ms Wilson:… For Oakwood, it should nearly be finished getting painted, I told Tania to get photos and sent to the owners, there are loads of emails going back and forth re sale. Just tell them now it’s time to sell”[307]
[306] T 519.2-5.
[307] Exhibit F, PDF p 14.
317Secondly, the evidence does not permit the Court to determine that the claimed loss of a chance to receive commission from the sale of the identified rental properties was anything more than speculative. Landlords may not choose the same estate agency to manage their rental property and subsequently sell such property. This is clear on the evidence.
318Peter Humble’s other property at 17/1-25 Bellevue Avenue, Doncaster East was sold by Ms Djordevic on 23 November 2019. This property “is said to have been managed by Landfield since 2001”.[308] The property report for this property, shows in the “For Sale History” that “despite [Landfield] having the management of it, it was listed for sale by Harcourts in Croydon at the same time that it was being managed by Landfield”:[309]
[310]
[308] T 519.8-9.
[309] T 519.10-13.
[310] Exhibit F, PDF p 18.
319A property report for 3/243 Blackburn Road, Doncaster East “shows that this property was listed for sale by Ray White Manningham during the period it was in management of the plaintiff and the plaintiff's Landfield”.[311]
[312]
[311] T 517.20-27.
[312] Exhibit F, PDF p 7.
320Thirdly, awarding commissions on those sales in the amounts claimed would provide a windfall gain in circumstances where W284 did not market or invest in achieving a commission. Mr Galbraith said in oral closing submissions:
“A commission is not all profit. You need to expend money to earn the commission… The same with the loss commissions on the sales, they didn't spend the money marketing it. Invest the human capital and result in internal expenditure. So to give 1them the full commission means that it's a windfall in the sense that they are being recompensed for expenses in earning the commission which they didn't spend…”[313]
[313] T 668.2-14.
321Fourthly, the defendants took issue with W284 claiming compensation for both lost capital value and lost commission on sales:
“If the property's sold to… a purchaser to live in, it no longer becomes a property for them to manage. It's no longer an asset of theirs that sits on the book to attain some capital value. So how, on the one hand, can you say, 'I'm entitled to the capital value of a management contract consistent with the value of that asset to me if I had of sold it' when there is an intervening event where the property is sold to someone else and you lose management of the contract and then you also want to claim the commission…”[314]
[314] T 668.20-30.
Conclusion and analysis
322I would have agreed with the defendants that W284’s claim for compensation for the loss of a chance to receive commission from the sale of the rental properties is speculative and would provide W284 with a windfall gain.
323The property reported tendered by the defendants shows that it is not uncommon for one estate agency to manage a property and for another estate agency to sell it. Based on the evidence, it is speculative as to whether W284 would have had the opportunity to sell the properties, even if they had remained on their rent roll.
F2. ISSUE B — REGULATIONS 10(A) AND 13(2)
324Issue 11 in the Joint Statement is:
“If the answer to issue 3, 4(a), 4(b), 5, 6 and/or 7 is “yes” what, if any:
(a) loss and damage did the Plaintiff suffer as a result?; and
(b) claimed remedy is it entitled from the Third Defendant?” (emphasis added)
325Given my findings above at issue B of this judgment, issue 11 of the Joint Statement does not need to be determined with respect to:
(a) issue 4(a) — regulation 10(a); and
(b) issue 4(b) — regulation 13(2).
F3. ISSUE C — CLAUSE 14, EQUITABLE DUTY OF CONFIDENCE AND REGULATION 7
326Issue 11 in the Joint Statement is:
“If the answer to issue 3, 4(a), 4(b), 5, 6 and/or 7 is “yes” what, if any:
(a) loss and damage did the Plaintiff suffer as a result?; and
(b) claimed remedy is it entitled from the Third Defendant?” (emphasis added)
327Given my findings above at issue C of this judgment, issue 11 of the Joint Statement does not need to be determined with respect to:
(a) issue 5 — clause 14 of the employment agreement;
(b) issue 6 — equitable duty of confidence; and
(c) issue 7 — regulation 7.
F4. ISSUE D — BREACH OF ESTATE AGENTS ACT BY MR KELEHER
328Issues 12 and 13 in the Joint Statement are:
“12. If the answer to issue 8(a), 8(b), 8(c) and/or 8(d) is “yes”, what, if any:
(a) loss and damage did the Plaintiff suffer as a result?; and
(b) claimed remedy is it entitled from the Second Defendant?
13.If the answer to issue 9(a), 9(b) and/or 9(c) and both issue 10(a) and issue 10(b) is “yes”, what, if any:
(a) loss or damage did the Plaintiff suffer as a result?; and
(b) claimed remedy is it entitled from the First Defendant?” (emphasis added)
329Given my findings above at issue D of this judgment, issues 12 and 13 of the Joint Statement do not need to be determined.
F5. ISSUE E — BREACH OF ESTATE AGENTS ACT BY JELLIS CRAIG
330Issue 13 in the Joint Statement is:
“If the answer to issue 9(a), 9(b) and/or 9(c) and both issue 10(a) and issue 10(b) is “yes”, what, if any:
(a) loss or damage did the Plaintiff suffer as a result?; and
(b) claimed remedy is it entitled from the First Defendant?” (emphasis added)
331Given my findings above at issue E of this judgment, issue 13 of the Joint Statement does not need to be determined.
CONCLUSION
332The plaintiff’s claim is dismissed.
333Subject to any matters that the parties bring to my attention on the question of costs, I propose to order that the plaintiff pay the defendants’ costs of the proceeding (including reserved costs) on the standard basis, in default of agreement.
334I invite the parties to prepare draft orders to give effect to these reasons.
- - -
Certificate
I certify that these 334 paragraphs are a true copy of the judgment of Her Honour Judge Brimer delivered on 17 February 2023.
Dated: 17 February 2023
Taylah Stretton
Associate to Her Honour Judge Brimer
ANNEXURE
JOINT STATEMENT OF ISSUES IN DISPUTE
A. Claims for breach of restraint of trade by the Third Defendant
Did the contract of employment between the Plaintiff and the Third Defendant contain an enforceable restraint of trade in the form of clause 2 of the ‘Restricted Activity Agreement’ at Schedule 3 of the employment agreement signed by the Plaintiff and Third Defendant (Employment Agreement)?
If the answer to issue 1 is “yes”, was the enforceable restraint period:
(a) three (3) months from the date the Third Defendant’s employment ceased as alleged by the Defendants; or
(b) twelve (12) months from the date the Third Defendant’s employment ceased with the Plaintiff as alleged by the Plaintiff.
If there was an enforceable restraint of trade for a period of three (3) or twelve (12) months, did the Third Defendant breach any such enforceable restraint of trade as alleged?
B. Alleged breach of the Regulations 10(1) and/or 13(2) by the Third Defendant
If the answer to issue 3 is “yes”, did the Third Defendant breach:
(a)Regulation 10(1) of the Estate Agents (Professional Conduct) Regulations 2018 (Regulations); and/or
(b)Regulation 13(2) of the Regulations.
C. Alleged breach of confidentiality obligations by the Third Defendant
Did the Third Defendant breach clause 14 ”Confidential Information” of the Employment Agreement as alleged?
Further or alternatively, did the Third Defendant breach an equitable duty of confidence owed to the Plaintiff as alleged?
Further or alternatively, did the Third Defendant breach Regulation 7 of the Regulations as alleged?
D. Alleged breach of the Estate Agents Act 1980 by the Second Defendant
If the Third Defendant breached regulation 7, 10(1) and/or 13(2) of the Regulations as alleged, did the Second Defendant breach the following sections of Estate Agents Act 1980 (Act) as alleged:
(a)section 29B(2)(c) of the Act;
(b)section 29B(2)(d) of the Act;
(c)section 29B(2)(e) of the Act; and/or
(d)section 29B(2)(f) of the Act.
If the Third Defendant contravened regulation 7, 10(1) and/or 13(2) of the Regulations as alleged, was the Second Defendant “involved in” the Third Defendant’s contraventions of the Regulations because he was, for the purposes of section 217(7) of the Australian Consumer Law and Fair Trading Act 2012 (ACLFT Act), as modified by section 93A of the Act, in some way, directly or indirectly, knowingly concerned in the Third Defendant’s contravention of:
(a)regulation 7 of the Regulations as alleged;
(b)regulation 10(1) of the Regulations as alleged; and/or
(c)regulation 13(2) of the Regulations as alleged.
E. Alleged breach of the Estate Agents Act 1980 by the First Defendant
If the answer to issue 9(a), 9(b) and/or 9(c) is “yes”, was:
(a)the Second Defendant’s state of mind when engaging in the conduct alleged the state of mind of the First Defendant pursuant to section 196(1) of the ACLFT Act; and
(b)was the Second Defendant’s conduct (including his omissions to act) as alleged:
(i)within the scope of his actual or apparent authority; and
(ii)consequently, pursuant to section 196(2) of the ACLFT Act, conduct engaged in by the First Defendant?
F. Loss, damage and remedy
If the answer to issue 3, 4(a), 4(b), 5, 6 and/or 7 is “yes” what, if any:
(a)loss and damage did the Plaintiff suffer as a result?; and
(b)claimed remedy is it entitled from the Third Defendant?
If the answer to issue 8(a), 8(b), 8(c) and/or 8(d) is “yes”, what, if any:
(a)loss and damage did the Plaintiff suffer as a result?; and
(b)claimed remedy is it entitled from the Second Defendant?
If the answer to issue 9(a), 9(b) and/or 9(c) and both issue 10(a) and issue 10(b) is “yes”, what, if any:
(a)loss or damage did the Plaintiff suffer as a result?; and
(b)claimed remedy is it entitled from the First Defendant?
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