The Supreme Court of New South Wales Court of Appeal

NATURE OF JURISDICTION: SUPREME COURT OF NEW SOUTH WALES - EQUITY DIVISION - YOUNG J

PARTIES: BARRETT and Ors v ECCO PERSONNEL PTY LIMITED

JUDGMENT OF: SHELLER JA, STEIN JA, FITZGERALD AJA

CONTRACT OF EMPLOYMENT - construction of `solicit' - whether former employee was in breach of a provision not to solicit when the initial approach to him was made by the client

The appellant submits that he was not in breach of his contract of employment with his former employer (the respondent) as the initial approach, inviting the appellant to submit a proposal, was made by the client and not by him. The contract provided that he would not `canvass, solicit, interfere with or entice away' any client of the employer for a period of 4 months after the termination of the contract.

The trial judge concluded that, although the client may have provided the window of opportunity, it was the appellant who had solicited and enticed the client away from the respondent.

It is not appropriate to construe `solicit' in a mechanistic fashion. In most instances the first approach will be made by an ex-employee to the former customer, however common sense demands that this is the not the exclusive means by which solicitation may occur. That the approach by the client was the catalyst or trigger for the solicitation by the appellant any less the mover for the action happening.

STEIN JA: The short point in this appeal is whether when a client (Nestlé) of the respondent (Ecco Personnel Pty Limited) makes the first approach to the appellant, a previous employee of the respondent, he can be in breach of his contract of employment.

The employment contract of the appellant relevantly provided that, for a period of four months after the date of termination of employment, the employee shall not `canvass, solicit, interfere with or entice away any person, firm or company ... being a client or employee of the Employer'.

It is common ground that within a few days of the first appellant (Barrett) leaving the employ of the respondent following an argument, an officer of Nestlé (having ascertained that Barrett had left the respondent) asked him to put in a proposal as an industrial consultant. Mr Barrett, having formed his own personnel agency (the fourth appellant Parramatta Personnel Pty Ltd) submitted a proposal a few days later and attended a meeting at Nestlé on 19 June 1996 where he made a presentation which resulted in Nestlé agreeing to proceed with the proposal.

At first instance, Young J made a finding which is key to the appeal. He found that the evidence of the Nestlé's officer, Mr Wales, was quite clear that it was the presentation by Barrett on 19 June 1996 that was the effective cause of his agency obtaining the contract with Nestlé. This finding is not challenged, nor could it be.

The appellants' argument before Young J (and before us) is that since Nestlé provided the invitation to Barrett to submit a proposal, he could not be guilty of canvassing, soliciting or enticing any client away from his previous employer in breach of the contract of employment. His Honour had concluded that, although Nestlé may have provided the appellant with the window of opportunity, it was the appellant who solicited and enticed Nestlé away from the respondent.

The appellant relies on obiter in Trego v Hunt [1896] AC 7 at 12. Lord Herschell referred to the decision of the Court of Appeal in Leggott v Barratt (1880) 15 Ch D 306 dissolving an injunction preventing the defendant from supplying a man with goods if he asked for them. It was said that he had no obligation to shut his door against a customer who came to him of his own free-will. At p 20 his Lordship said that if former customers transferred their custom to a previous partner, this incidental advantage was unavoidable and did not result from any act by him.

It is necessary to observe that Trego v Hunt is a case about the sale of the goodwill of a business and not a case on an employment contract containing a restraint of trade. A reading of Trego v Hunt demonstrates that it has nothing to say to the issue in this appeal. It is certainly no authority for the proposition advanced on behalf of the appellants.

The appellants' submission amounts to this. One should construe `solicit' in the agreement in a highly mechanical fashion. You simply ask, who made the first approach? If an old customer made the first approach to a former employee, then whatever the facts thereafter which might lead to business being done, there cannot be solicitation. This cannot be correct. One may acknowledge that in most instances the first approach will be made by the ex-employee to the former customer. Common sense however demands that this not be the exclusive means by which a solicitation may occur.

A simple illustration will suffice as to why this is so. Assume a customer finds out, quite accidentally, that a former employee with whom it dealt, had left his principal and established a business of his own and says `let us have a proposal'. The ex-employee then submits a proposal in very favourable terms and makes a presentation to the client which convinces it to award the contract to him. Should the fact of the first approach negative any solicitation or enticing away? I think not.

The task of the court is to interpret the words in the contract of employment in their context. In a liquor case in New Zealand (Sweeney v Astle [1923] NZLR 1198) Stout CJ noted that `solicit' was a common English word, and in its simplified form meant `to ask'. Its other meanings included `to call for' `to make request', `to petition', `to entreat', `to persuade'. Like Bryson J in Ridgeway International Ltd v McCullum (unreported, Equity Division, 9 April 1998) I cannot see that to propose to do business ceases to be soliciting business simply because the recipient invited the proposal.

It seems to me that Young J was saying that the approach by Nestlé merely provided the window of opportunity for the first appellant to submit a proposal more attractive to Nestlé than its current contract with the respondent. That the approach was the catalyst or trigger for the solicitation by the appellant does not make the appellant any less the mover for the action happening.

I can see no merit or substance in the appellants' submission on this aspect of the appeal. The submission that his Honour's conclusion had the effect of turning a no solicitation clause into a no competition clause is rejected.

The other issue arising on the appeal relates to the second appellant, Elizabeth Kulevska. His Honour found that there was `just sufficient evidence' that she was co-operating with Barrett in his solicitation of the respondent's clients. As she had not given evidence to the contrary, his Honour believed that he was justified in finding that she had also threatened to solicit the respondent's customers (Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298). When one reads his Honour's findings of fact together with the relevant evidence, it is plain that there was sufficient evidence available to base his Honour's inference of co-operation. Indeed, any other finding would have been inherently unlikely.