Redcoats Limited v Day - [2023] NZHC 1502

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2023-485-000188

[2023] NZHC 1502

BETWEEN
REDCOATS LIMITED

Plaintiff

AND

CHRISTOPHER DAY

First Defendant

AND

ANDCO REALTY LIMITED

Second Defendant

Hearing: 24 May 2023

Appearances:

D G Dewar and J Pietras for Plaintiff S Iorns and J Sylvester for Defendants

Judgment:

16 June 2023

JUDGMENT OF CULL J

[1] Redcoats Limited (Redcoats) obtained an injunction restraining Mr Day from undertaking any private business or employment that competes with Redcoats within a 15 kilometre radius of Redcoats’ business premises for a period of three months.1 Andco Realty Ltd (Andco), Mr Day’s intended employer, was also restrained from employing Mr Day in any capacity to undertake work that competes with Redcoats with the same restrictions as imposed on Mr Day.

[2] Mr Day and Andco (the defendants) apply to set aside the without notice restraining orders.

1 Redcoats Limited v Day [2023] NZHC 1037.

Redcoats Ltd v Day & Ando Realty Ltd [2023] NZHC 1502 [16 June 2023]

Background

[3] The background facts are summarised in the judgment of Gendall J delivered on 3 May 2023 and I adopt them for the purposes of this judgment.

[2] Redcoats operates a real estate agency in Wellington, Lower Hutt and elsewhere, trading as The Professionals Redcoats. Andco in turn operates a real estate agency in the same general areas under the name Lowe & Co.

[3] On 19 September 2014, Redcoats, as real estate agents and Mr Day as the salesperson, entered into a contract for services for Mr Day to act as a real estate salesperson for Redcoats (the Contract). The Contract contained a restraint of trade clause against Mr Day requiring him not to compete against Redcoats in the event of him leaving them as a salesperson, although that restraint was short, only some three months and it was limited to a 15 kilometre radius from Redcoats’ place of business.

[4] Evidence before the Court in support of this application from John Stewart Ross, a director of Redcoats, and Charles Lindsay, manager of the Redcoats Wellington office, indicates that Mr Day was Redcoats’ leading Central Wellington sales agent up to 11 April 2023 when he announced that he was resigning. They say that for the nine year period from the commencement of his Contract, Mr Day benefitted from considerable mentoring, training, and professional development as he came to the Redcoats team in 2014 with limited real estate experience.

[5] When Mr Day announced on 11 April 2023 that he was resigning from Redcoats, he gave 20 days’ notice with a stated termination date he calculated of 30 April 2023.

[6] Of particular interest here is clause 2.2 of the Contract. This requires that, for termination in circumstances such as the present, 20 working days’ notice in writing from the salesperson of his intention to terminate is required. This obligation, Redcoats say, was not in any way waived, and the contractual notice period in any…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2023] NZHC 1502
Decision Date: 16 June 2023

CaseChat Overview and Summary

The matter before the Court was an application by Christopher Day (Mr Day) and Andco Realty Limited (Andco) to set aside interim restraining orders that were made by Gendall J on 3 May 2023. The orders restrained Mr Day from undertaking any private business or employment that competed with Redcoats Limited (Redcoats) for a period of three months and restrained Andco from employing Mr Day to compete with Redcoats. Redcoats opposed the application. The Court was required to determine whether there was a serious question to be tried as to whether the restraint of trade clause was valid and enforceable, whether the Court's jurisdiction was ousted by the contractual dispute resolution and/or arbitration clause, whether the balance of convenience favoured Redcoats and whether damages would be an appropriate remedy, and whether the overall justice of the case favoured Redcoats. The Court held that there was a serious question to be tried as to whether the restraint of trade clause was valid and enforceable. It found that the Court was not precluded from making the interim orders by the contractual dispute resolution and/or arbitration clause. The balance of convenience favoured Redcoats and damages would be an inadequate remedy. The Court also found that the overall justice of the case favoured Redcoats. The application to set aside the interim orders was declined. The parties were directed to file memoranda of no more than three pages with a schedule in the event they could not agree on costs.

The Court's decision involved a consideration of the principles governing the enforcement of restraint of trade clauses, the balance of convenience test, and the overall justice of the case. The Court found that the restraint of trade clause was reasonable and necessary to protect Redcoats' legitimate proprietary interest in its goodwill and market presence. The Court also found that the balance of convenience favoured Redcoats, as Mr Day had breached the contractual notice period and intended to commence competing with Redcoats from the same premises. The Court held that damages would be an inadequate remedy in these circumstances, particularly where there would inevitably be an overlap of clients between the two agencies. The Court further found that the overall justice of the case favoured Redcoats, despite the unpleasant exchanges between Mr Day and Redcoats' agents.

Orders