Dependable Property Management Limited v Li
[2015] NZHC 916
•30 April 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-000897 [2015] NZHC 916
BETWEEN DEPENDABLE PROPERTY
MANAGEMENT LIMITED Plaintiff
AND
JUNNAN LI First Defendant
FAST RENTAL LIMITED Second Defendant
Hearing: 30 April 2015 Counsel:
MRT Colthart for Plaintiff
FC Deliu for DefendantsJudgment:
30 April 2015
JUDGMENT OF ASHER J
Solicitors/Counsel:
MRT Colthart, Auckland.
FC Deliu, Auckland.
DEPENDABLE PROPERTY MANAGEMENT LTD v LI [2015] NZHC 916 [30 April 2015]
[1] Dependable Property Management Ltd (“Dependable Property”) seeks an urgent interim injunction to restrain Junnan Li and Fast Rental Ltd from breaching the terms of restraint of trade and confidentiality provisions in the contract between Dependable Property and Mr Li.
[2] The application was filed on a without notice basis and it came before me as Duty Judge on 30 April. I directed that it be set down for 3.45pm that afternoon, but that in the meantime Dependable Property should serve the defendants.
[3] There has been an affidavit from Russell Nordstrand, a director of
Dependable Property, filed in support of the application.
[4] Dependable Property has been in business for approximately seven years. It presently manages approximately 85 rental properties and in the last financial year it let 294 properties. Mr Nordstrand deposes that two contracts were entered into between Dependable Property and Mr Li, the first on 28 June 2013 and the second on 22 January 2014. The agreement relied on is the agreement of 22 January 2014. It contains a restraint of trade clause at paragraph 10, which reads as follows:
Without in any way detracting from or affecting the validity of the foregoing (and so as to be severable there from), following the ceasing of his/her employment with the company upon any grounds referred to above, then: the General Manager shall not set himself up or engage in private business or undertaken other employment or employment which is directly or indirectly in competition with the Company or copy, prepare, acquire or memorise and list of customers or clients of the Company or undertaken any duty role or employment which involves the performance of the tasks or functions referred to above for a period of 4 months from the date of ceasing employment and within a radius of 15 kilometres of any of the Company’s Offices.
[5] Mr Nordstrand has given evidence of Mr Li having terminated his employment on 14 April 2015. He exhibits a letter which appears to be signed by Mr Li. He deposes that he has discovered since Mr Li’s termination of the contract, that Mr Li has been endeavouring to rent properties within the restraint of trade area. He refers to four listings in Trade Me by Fast Rental Ltd, a company which he has been informed is controlled by Mr Li, listing properties within the restraint of trade area. He also gives other evidence of what he has found on a mobile phone left by Mr Li, and on computers, indicating that he was preparing to trade in competition
within the restraint of trade area of Dependable Property. He also gives evidence that he confronted Mr Li with alleged breaches of the contract and that Mr Li’s reply was that he had created the listings and that he had come out of his employment with nothing and that he did not accept that what he was doing was wrong. However, he asserts that Mr Li did not dispute he was breaching the contract.
[6] I treat this application as still proceeding technically as a without notice application, adopting the procedure that is sometimes known in New Zealand as the Pickwick procedure. That reference is to the practice developed in the Chancery Courts in England, which is referred to in the decision of Pickwick International Inc
GB Ltd v Multiple Sound Distributors Ltd.1 New Zealand Judges will frequently
hear urgent cases where the application is not on notice, but either at the parties’ or the Court’s instigation the other party is informed of the filing and may appear, albeit without an ability to fully prepare or respond to the allegations.
[7] Mr Deliu has appeared today to oppose. He has filed an appearance under protest to jurisdiction, which reads as follows:
The defendants, Junnan Li and Fast Rental Limited, appear under protest to object to the jurisdiction of the High Court to hear and determine this proceeding.
The defendant’s objection is based on two discrete grounds: (I) there is no personal jurisdiction over them as they have not been served in accordance with law (and nor has substituted service been granted); and/or (II) there is no subject-matter jurisdiction over the dispute as the authority to adjudicate employment issues rests exclusively with another forum.
[8] Mr Deliu has not endeavoured to put forward any evidence (given the time frame that is perfectly understandable), but he has produced one document without protest which is an authority to act by Mr Li, dated 19 March 2015, addressed to Richard Zhao Lawyers Ltd where he seeks assistance on “employment matters”.
[9] Mr Colthart, who appeared for Dependable Property, argued that there was a serious question to be tried and that the balance of convenience favoured the
granting of an interim injunction and damages would not be an adequate remedy.
1 Pickwick International Inc GB Ltd v Multiple Sound Distributors Ltd [1972] 1 WLR 1213 (Ch).
[10] Mr Nordstrand in his affidavit referred to the need for urgency. He believed that Mr Li’s activities were devaluing the business of Dependable Property because of losses in letting and management fees. He said that the value of the business was devalued generally by the loss of contracts as it has developed a considerable database of information (which Mr Li had access to), and its experience and database differentiates it from competitors. He also stated that he is trying to sell the business and the continuation of turnover is important in that regard.
[11] Mr Deliu has not put forward his opposition on the basis of the merits of whether there has been a breach of the restraint of trade clause. He has not engaged on that issue. Rather, he has put forward two points. The first is that there has not been satisfactory service of Mr Li or Fast Rental Ltd. The second is that the protest to jurisdiction point. The issue is whether this is an employment issue to be enforced within the jurisdiction of the Employment Court, and should therefore not be heard by this Court. If there is an issue about the restraint of trade clause, Mr Deliu submits that the application should be determined by the Employment Court.
[12] I will deal with the two points made by Mr Deliu first before turning to general matters.
Service
[13] Mr Deliu points to various provisions in the rules which require personal service. There is no doubt that personal service is a general requirement in the High Court Rules. However, in the context of an interim injunction, personal service is not essential. The very existence of the without notice jurisdiction presupposes that there will be cases where injunctions are granted with no service at all.
[14] The procedure that has been adopted, which I have called the Pickwick procedure, provides something of a compromise whereby on short notice a defendant may appear and can properly bring any points of importance to the Court’s attention. That is what has happened here.
[15] Later in his submissions Mr Deliu asked for leave to be granted for a considered challenge to any interim injunction that might be ordered. He was of
course quite right to ask for that and is entitled to if interim relief is granted. However, the point is that there are occasions when personal service may not be practical because of the urgency of matters and where the Court is prepared to grant interim relief to hold a position.
[16] Mr Deliu quite rightly does not suggest that Mr Li and indeed Fast Rental Ltd are not now fully aware of the proceedings. His point is a procedural one.
[17] Given that there is awareness on the part of the defendants of what they face, and given the urgent interim nature of the relief sought, I do not consider it fatal to the application that there has not been personal service.
No jurisdiction
[18] Without going through the provisions of the Employment Relations Act 2000, I accept Mr Deliu’s basic proposition that if this were an employment dispute the application for interim injunction should be before the Employment Court. Indeed, Mr Colthart did not take issue with the point. His submission is that this is not an Employment Court issue.
[19] I am not able to finally determine the issue of whether this is an Employment Court matter, but I must engage with it to determine whether I should grant this interim injunction.
[20] The determination of whether someone is or is not an employee has generally been treated as a question of fact.2 The stated intention of persons is not conclusive.3
The Court will look at all relevant matters, and as stated by the Supreme Court in
Bryson v Three Foot Six Ltd, these will:4
… certainly include the written and oral terms of the contract between the parties, which will usually contain indications of their common intention concerning the status of their relationship. They will also include any divergences from or supplementation of those terms and conditions which are apparent in the way in which the relationship has operated in practice. It
2 Bryson v Three Foot Six Ltd [2005] NZSC 34, [2005] 3 NZLR 721 at [21].
3 At [31].
4 At [32].
is important that the Court or the Authority should consider the way in which
the parties have actually behaved in implementing their contract. …
[21] Mr Deliu has pointed to some indications that this is an employment relationship. There are some references to “employment” or “employ” in the contract. Mr Li seems to have thought that he had “employment” problems.
[22] However, there are a number of strong indications that this is not an employment relationship, but rather a contractual relationship.
[23] First, that is what is deposed by Mr Nordstrand in his affidavit. He expressly addresses the issue of the nature of the contract between Dependable Property and Mr Li, and says that Mr Li was an independent contractor, not an employee.
[24] Both of the agreements refer to a “contract for services” and not “contract of services”. Although paragraph 2 refers to the company employing Mr Li as the general manager, it goes on to say that he is contracted as an independent contractor and requires Mr Li to register as an independent contractor under s 51(2) of the Goods and Services Tax Act 1985. He records that Dependable Property is not to be liable to pay redundancy or any compensation for inability to work because of ill- health or holidays. The contract has specific provisions for termination and refers at paragraph 2.3 to “this independent contractor’s agreement”.
[25] Mr Nordstrand deposes that Mr Li was free to set his own hours and performed the role as he saw fit. He was not paid a salary or wages, but submitted an invoice to Dependable Property on a weekly basis and was paid accordingly. No PAYE or other tax was deducted by Dependable Property. Mr Nordstrand exhibited an invoice from Mr Li which is consistent with an independent contractor relationship.
[26] Mr Nordstrand also deposed that it is commonplace in the property management and real estate industry for property managers and lending agents to be engaged as independent contractors.
[27] I do not finally determine the issue of whether Mr Li was an independent contractor in this decision. However, all the indications that have been drawn to my attention, save for the odd references to employment or employed in the contract, point to that conclusion. For the purposes of this application I am willing to treat Mr Li to be an independent contractor of Dependable Property.
Overall assessment
[28] In my view there is at the very least a serious question to be tried that Mr Li is not an employee but is a contractor, and that Dependable Property is entitled to invoke the jurisdiction of this Court.
[29] There is no doubt that there is a restraint of trade clause in the agreement. It does not on its face seem unreasonable and it has not been suggested in submissions from Mr Deliu that it is. On the face of it there has been a breach of that restraint of trade clause and Mr Li has been carrying out work within the prohibited area. There is also evidence that Mr Li has been accessing Dependable Property’s database. Further, there is a confidentiality clause in the contract.
[30] I accept that in the circumstances of this case damages would not be an adequate remedy. The balance of convenience is in favour of granting an interim injunction, in that there is evidence of irreparable harm if the breach continues. Clearly there will be some detriment to Mr Li, but the restraint of trade clause is for a relatively short period and only extends for part of the Auckland area. Should Mr Li be ultimately successful he will have a claim for damages under the undertaking as to damages that has been filed.
[31] I recognise that the interim injunction order that I propose to make has been made on very short notice, and that Mr Li and Fast Rental Ltd should have leave to apply to set it aside, and I will make provision for that.
[32] I also recognise that it would not be appropriate at this point to make any costs order, and costs will be reserved.
[33] There are a few other matters I should formally deal with. Mr Deliu had asked for an adjournment of today’s hearing. Because of the urgency to which I have referred I declined to adjourn the case. I should also mention that there is an arbitration clause in the contract. However, this Court has jurisdiction to grant interim relief in such circumstances.5 I record that I consider the conditions for granting an interim measure set out in Art 17(b) of those Articles are met. However, I emphasise I have had no argument on the issue of whether this arbitration clause applies and whether it would pre-empt a Court from making orders.
[34] At this point I do not grant the mandatory orders sought in paragraph 1(b) of the application. If Dependable Property wishes to pursue those it may do so with full notice to the defendants.
[35] I therefore make the following orders:
(a) An interim injunction restraining Mr Li from setting himself up or engaging in private business or undertaking other employment which is directly or indirectly in competition with Dependable Property, or undertaking any duty, role or employment which involves the performance of the tasks or functions previously undertaken by him as General Manager and Residential Property Manager of Dependable Property for a period of four months from 14 April 2015 within a radius of 15 kilometres of Dependable Property’s office at 15 Cheryl Place, Hillcrest, Auckland.
(b)An interim injunction restraining Mr Li and Fast Rental Ltd from undertaking or offering to undertake any residential property management or letting service for any property identified in Dependable Property’s database of residential properties contained either in dropbox or in spreadsheet format at 14 April 2015.
(c) An interim injunction restraining the first and second defendants from disclosing or using any of Dependable Property’s confidential
5 Arbitration Act 1996, sch 1 art 9(2).
information (as that term is defined in the agreement between the Dependable Property and the first defendant dated 22 January 2014, including without being limited to Dependable Property’s database).
[36] I reserve leave to the defendants to apply on short notice to set aside this interim injunction, and indeed to the applicant to apply for further orders. However, I envisage that any such application will be first called in the Duty Judge list on very short notice and then a short order timetable will be allocated and a fixture for half a day granted. However, the parties may prefer to seek a full fixture if they cannot resolve matters between them.
[37] The costs of this application cannot be determined on such short notice and without a full consideration of the merits and accordingly costs are reserved.
……………………………..
Asher J
2