BlackBay Group Pty Ltd t/as BlackBay Lawyers v Carroll

File Number(s): 2025/73686

Publication restriction: Nil

JUDGMENT

Introduction

1. Before the Court are two notices of motion. The first filed on 10 October 2025 by the plaintiff, BlackBay Group Pty Ltd t/as BlackBay Lawyers (BlackBay), seeks to strike out paras 70 to 72 of the defence of the first defendant, Mr Justin Carroll, which was filed on 15 September 2025. Mr Carroll no longer presses those paragraphs. Instead, by a notice of motion filed on 3 November 2025 he seeks leave to file an amended defence (AD). In order to understand the amendments, it is necessary to say something about BlackBay’s claim.

BlackBay’s claim

2. Speaking broadly, by its amended statement of claim filed on 26 September 2025 (ASC), BlackBay relevantly claims that:

(a) On or about 5 October 2023, BlackBay and Mr Carroll entered into an employment agreement (the Employment Agreement) by which Mr Carroll was employed as a principal lawyer of BlackBay; (b) Mr Carroll owed contractual and fiduciary duties to BlackBay and obligations under s 183 of the Corporations Act 2001 (Cth), the effect of which was that Mr Carroll would keep confidential information of the firm confidential and would not use his position with BlackBay to gain a personal advantage for himself; (c) The Employment Agreement contained post contractual restraints the effect of which was to prevent Mr Carroll from soliciting work from clients of the firm, or competing with the firm in the Restraint Area, for the Restraint Period (as those terms were defined in the agreement); (d) In breach of the obligations referred to in (b), Mr Carroll, whilst still an employee of BlackBay, together with another employee, took steps to establish a rival legal practice, downloaded the firm’s client list and other confidential information of the firm and solicited clients of the firm to move to the new firm that was to be established by Mr Carroll and the other employee; (e) On 16 February 2025, it validly terminated the Employment Agreement with immediate effect for serious misconduct.

3. In these proceedings, BlackBay seeks an injunction to give effect to the restraints, a permanent injunction restraining Mr Carroll from using the firm’s confidential information and damages or equitable compensation.

The proposed amendments

Amendments relating to para 4 of the ASC

4. The first set of amendments are either expressed to be, or appear to be, a response to para 4 of the ASC, which pleads that “On or about 5 October 2023, the Plaintiff and Carroll entered into an employment agreement …”. By his defence, Mr Carroll, in effect, admits that allegation. By the AD, Mr Carroll seeks to plead three additional responses.

5. First, by paras 9(aa), and 9A to 9E of the AD, Mr Carroll seeks to plead the existence of a “Side Agreement” the effect of which was that Mr Carroll would agree not to enforce all his statutory entitlements under the Fair Work Act 2009 (Cth) (the FW Act) including his entitlement to annual leave, long leave, sick leave, and would be remunerated only by reference to a share of the professional fees that he billed on matters he worked on and that BlackBay collected. He pleads that the Side Agreement was illegal and void under the FW Act and that because it was entered into as a “pre-condition” to the Employment Agreement “the Employment Agreement is tainted with the illegality of the Side Agreement”.

6. Second, by paras 9F to 9K of the AD, Mr Carroll pleads that (1) BlackBay made several pre-contractual representations to him concerning the terms on which he would be remunerated and the legality of the Side Agreement, (2) BlackBay resiled from those representations after he commenced employment; and (3) by engaging in that conduct, BlackBay contravened s 18 of the Australian Consumer Law (ACL) and s 31 of the ACL (which prohibits misleading conduct relating to employment). Mr Carroll pleads in para 9K of the AD that “The first defendant says that, but for the Plaintiff’s Pre-contractual Representations, the first defendant would not have entered into the Employment Agreement”. However, no relief is sought in respect of that conduct.

7. Third, by para 9L of the AD, Mr Carroll pleads that BlackBay has repudiated the Employment Agreement by failing to pay amounts due under it consistently with BlackBay’s obligations under the FW Act.

Amendments relating to para 8 of the ASC

8. The second group of amendments are pleaded in response to para 8 of the ASC, which pleads certain express terms of the Employment Agreement. In para 13 of his defence, Mr Carroll admits the Employment Agreement and, in effect, otherwise relies on the terms of the agreement.

9. By paras 13A to 13D of the AD, Mr Carroll pleads that he and BlackBay agreed to amend the Employment Agreement in early December 2023 to vary the terms of his remuneration in cases where Mr Carroll agreed to take on matters for BlackBay on a “no win/no fee” basis. The amended terms are described in the AD as the “Speculative Arrangement”. Mr Carroll alleges that BlackBay has refused to pay him the amount to which he is entitled under the Speculative Arrangement in respect of one matter.

Amendment relating to para 9 of the ASC

10. A further amendment is expressed to be a response to para 9 of the ASC, which pleads that “The restrictions referred to in paragraph 5(m) and (n) above [that is, the post contractual restraints] are valid and enforceable”. In para 14 of the defence, Mr Carroll pleads that by its conduct in these proceedings, BlackBay is estopped from seeking final relief that is wider than interlocutory relief granted by the Court on 25 February 2025, but otherwise denies that allegation.

11. By para 14A of the AD, Mr Carroll seeks to plead in response to para 9 of the ASC that by reason of BlackBay’s conduct in relation to the Side Agreement “the plaintiff has not provided the first defendant with any, or with any sufficient, consideration for the restraints in Clause 13 of the Employment Agreement” and that, therefore, BlackBay is not entitled to equitable relief “for the purposes of enforcing Clause 13 or any other obligation under the Employment Agreement for the plaintiff’s benefit”.

Amendment relating to para 10 of the ASC

12. The next amendment is expressed to be a response to para 10 of the ASC, which pleads that it was an implied term of the employment agreement that Mr Carroll would “act in good faith and fidelity towards the Plaintiff” and “would not, during the course of his employment, prefer his own interest, or the interests of a third party, at the expense of the Plaintiff”.

13. By para 15 of the defence, Mr Carroll does not admit para 10 of the ASC. By the AD, Mr Carroll seeks to amend para 15 to assert that “the plaintiff owed an implied contractual and equitable obligation to the first defendant to keep the first defendant’s confidential and ‘sensitive information’ confidential”.

The defence of unclean hands

14. By para 70 of the defence, Mr Carroll sought to raise a defence of unclean hands. He no longer presses that defence in those terms. Instead, he pleads an amended form of the defence in the AD.

15. The amendments seek to raise three additional issues which are said to go to a defence of the absence of “clean hands”. The first is BlackBay’s conduct in relation to what is said to be the Side Agreement. The second is BlackBay’s conduct which is said to contravene the ACL. The third is BlackBay’s conduct in obtaining information from Mr Carroll’s work computer and, in particular, his WhatsApp chat and Gmails, which was said to be “covert surveillance” within the meaning of s 3 of the Workplace Surveillance Act 2005 (NSW).

Further equitable defence

16. Finally, by para 70B of the AD Mr Carroll seeks to raise a further equitable defence to the effect that the Court should in the exercise of its discretion refuse equitable relief because BlackBay has refused to do equity itself by refusing to pay amounts owing to Mr Carroll and refusing to keep Mr Carroll’s “sensitive information” confidential. It appears that the reference to “sensitive information" is a reference to Mr Carroll’s WhatsApp chat and Gmail accounts accessible from his work computer.

Consideration

17. In my opinion, leave to file the AD should be refused.

18. One difficulty with the AD is that many of the proposed amendments are not responsive to the paragraphs of the ASC to which they are said to respond. Mr Carroll admits the existence of the Employment Agreement. Indeed, in separate proceedings in the Federal Court he sues to recover entitlements said to be due to him under it. Yet paras 9A to 9L of the AD appear to traverse that admission. Moreover, it is difficult to see how the allegation that BlackBay made pre-contractual misrepresentations is relevant to the existence of the Employment Agreement, when no relief is sought in relation to that conduct. Whether the Employment Agreement was repudiated or not is not relevant to the question whether the parties entered into it.

19. Similarly, whether BlackBay breached the terms of the Speculative Arrangement is not relevant to whether the terms pleaded in para 8 of the ASC were terms of the Employment Agreement. And whether BlackBay owed Mr Carroll duties of confidentiality is not relevant to whether Mr Carroll owed BlackBay the duties pleaded in para 10 of the ASC.

20. Mr Carroll submits that the paragraphs of the AD to which BlackBay takes objection simply plead facts which are relevant to his unclean hands defence. However, if that is said to be their only relevance, the pleading should make that clear. Moreover, if that is said to be their only relevance, it raises the question whether a number of the pleaded facts are relevant to that defence.

21. The pleading in paras 9A to 9E of the AD are confused. What is alleged is that there was a separate side agreement relating to Mr Carroll’s terms of employment that contravened the FWA and therefore were illegal and unenforceable. However, the gravamen of the paragraphs is that that illegality “tainted” the Employment Agreement. But it is unclear what that means and what consequences are said to follow from that.

22. As to paras 9F to 9K of the AD, BlackBay seeks injunctions giving effect to the restraints contained in the Employment Agreement and Mr Carroll’s obligations of confidentiality. Assuming BlackBay made the pleaded pre-contractual misrepresentations, it is difficult to see how the making of those representations, which is not said to give rise to any relief, could be relevant to the question whether BlackBay should be entitled to the injunctions it seeks. Either Mr Carroll is entitled to relief in respect of contraventions of the ACL or he is not. If he is, he should seek that relief. If he is not, then it is difficult to see what connection exists between the conduct and the relief BlackBay seeks.

23. Similarly, Mr Carroll pleads that BlackBay has repudiated the Employment Agreement. However, he does not plead that the consequence of the repudiation is that the agreement has come to an end (because he accepted the repudiation and terminated the agreement). But if the agreement remains on foot, it is difficult to see what connection there is between the relief sought by BlackBay and the breaches sought by Mr Carroll that would disentitle BlackBay from seeking that relief. A similar point may be made in relation to the pleading in paras 13A to 13D of the AD. The underlying assumption appears to be that any breach by BlackBay of the Employment Agreement as varied disentitles it from seeking equitable relief in respect of Mr Carroll’s breaches of confidence and breaches of the post-contractual restraints (assuming they can be established). However, that is not the law. Rather, the conduct said to amount to a lack of clean hands must have an immediate and necessary relation to the equity sued on: see Dewhirst v Edwards [1983] 1 NSWLR 34 at 51 and the cases cited there.

24. It is difficult to understand how the pleading in para 14A of the AD could be relevant to an unclean hands defence. That pleading is that BlackBay did not provide any or any sufficient consideration for the restraints in cl 13 of the Employment Agreement. But there is no doctrine of law that consideration must be sufficient for the enforceability of restraints in a contract. Moreover, the pleading again makes the incorrect assumption that any breach of the Employment Agreement by BlackBay disentitles it from seeking equitable relief.

25. The pleading in the amended para 15 of the AD is wholly inadequate. Insofar as the pleading is relevant to the defence of unclean hands, the allegation appears to be that because BlackBay obtained information relevant to the breaches by Mr Carroll of the Employment Agreement which give rise to the equitable relief it seeks by itself breaching a duty of confidence that it owed Mr Carroll, it is disentitled from obtaining that relief. However, if that is the allegation, it would be necessary for Mr Carroll to plead the facts giving rise to the duty of confidence and precisely how that duty was breached. The mere fact that BlackBay obtained the information from a computer belonging to it that was used by Mr Carroll in connection with his employment is not sufficient.

26. The defence raised by para 70B of the AD appears to be based on a misunderstanding of the law. The defence is said to be based on the equitable maxim that a person seeking equity must do equity. But the force of that maxim is that a person seeking an equitable remedy must fulfil their own equitable and legal obligations arising out of the subject-matter of the dispute. So, for example, a condition of an award of specific performance of a contract may be that the person seeking that relief must comply with their own obligations under the contract. The maxim does not provide a reason for refusing equitable relief in the form of injunctions because the plaintiff has breached some other term of the contract unrelated to the relief that it seeks.

27. In the present case, Mr Carroll has sued to recover his entitlements under the Employment Agreement. Either he will be successful or he will not. If he is successful, he will be entitled to those entitlements irrespective of whether BlackBay is entitled to the equitable relief it seeks. Conversely, if he is unsuccessful, that claim can have no relevance to the question whether BlackBay is entitled to the relief that it seeks. As has already been pointed out, if the true position is that BlackBay only obtained the information on which it relies to establish a breach by Mr Carroll as a consequence of a breach of confidence by it, that may provide a discretionary ground for refusing relief. However, a necessary condition for that to occur is that BlackBay’s own breach must be pleaded properly.

Conclusion and orders

28. Mr Carroll does not press paras 70 to 72 of his existing defence. Accordingly, those paragraphs should be struck out. Leave to file the AD should be refused for the reasons given. BlackBay has been successful in relation to both motions. There is no reason why Mr Carroll should not pay its costs.

29. Accordingly, the orders of the Court are:

30. Strike out paragraphs 70 to 72 of the first defendant’s defence filed on 15 September 2025;

31. Dismiss the first defendant’s notice of motion filed on 3 November 2025;

32. The first defendant is to pay the plaintiff’s costs of the notices of motion filed on 10 October 2025 and 3 November 2025; and

33. Stand the matter over to the Equity Registrar for directions on Wednesday, 10 December 2025.

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