Dundoen Pty Limited v Richard Wills

The Parties' Respective Positions

1. The plaintiff asserts the written agreement entered into on 23 April 2019 is binding on the defendant and provides for restraints both temporal and geographic. The relevant restraints are said to be contained in clauses 10(a), 10(b) and 10(d) of the written agreement: 10. Without the Employer's prior consent, from the Termination Date,You are not to: a. solicit, attempt to solicit (via Social Media or otherwise), or accept any instructions to perform real estate agency services for any Client for the Restraint Period (the non-solicitation and no-dealing restraint); b. carry on or be engaged, concerned, interested directly or indirectly whether as a shareholder, director, employee, partner, joint venture participant, principal, agent, trustee, unitholder or otherwise, in carrying on any business for a Competitor for the Restraint Period (the non-competition restraint); … d. encourage, condone or entice any other person or entity, in which You are interested or by which You are engaged, to engage in conduct which, if You engaged in such conduct personally, would cause You to breach this paragraph 18 (sic) (the non-encouragement restraint).
2. The phrases "Restraint Period", "Client" and "Competitor" are defined as follows. Where lines in the definitions are crossed out this was done in handwriting and initialled by both the defendant and Ms Peterswald. a. Restraint Period means: 1. four (4) years; 2. three (3) years; 3. two (2) years; 4. twelve (12) months. b. Client means any person or entity: 1. to which the Employer provided services during Your employment; 2. with which the Employer had direct dealings during Your employment in relation to the provision (or proposed provision) of services by the Employer to the person or entity; 3. which referred business to the Employer during Your employment; 4. with which You had direct dealings in the course of, or in connection with, Your employment with the Employer c. Competitor means any business engaged in providing real estate agency services within a radius of: 1. 15 kilometres from the office of the Employer in which You were employed; 2. 10 kilometres from the office of the Employer in which You were employed; 3. 5 kilometres from the office of the Employer in which You were employed; 4. 1 kilometres from the office of the Employer in which You were employed;
3. The plaintiff submits the restraints should operate for a period of 18 months, notwithstanding that the employment agreement provides for a longer period. It initially sought to enforce the restraints as set out in the employment agreement for 18 months. However, at the commencement of the hearing in August the plaintiff was granted leave to amend the relief sought by confining the operation of the non-solicitation restraint to any person or entity "(a) to which the plaintiff provided property management services during the second defendant's employment…, or (d) with which the second defendant had direct dealings in the course of, or in connection with, the second defendant's employment with the plaintiff" (leaving out items b(2) and b(3) in the definition of client above), and abandoning its claims in respect of the non-compete restraint except insofar as it applies to the defendant's employment by Wills Property or any related entity or any relative of the defendant.
4. On the other hand, the defendant asserts the agreement is not binding as there was no consideration for the new promises as they put it and hence there are no operative restraints. However, the defendant submits that if the contract is binding the period of restraint should be no longer than 3 months.

The Plaintiff's Submissions

1. The plaintiff submits the written agreement involved discharging the parties' existing employment contract and replacing it, which constituted sufficient consideration (Charltons CJC Pty Ltd v Fitzgerald [2013] NSWSC 350; Figjam Pty Ltd v Pedrini [2005] NSWSC 221 at [15] citing Carter and Harland, Contract Law in Australia, 4th ed, 2002; J D Heydon, Heydon on Contract, Lawbook Co, 2019 at [5.490] and [5.510]; Compagnie Noga d'Importation et d'Exportation SA v Abacha [2003] 2 All ER (Comm) 915; [2003] EWCA Civ 1100 at [38], [52], [58], [59], [70]). The agreement expressly states its terms and conditions "replace any previous agreements" and the plaintiff submits it was intended to operate as a complete agreement rather than a variation (the plaintiff eschewed any reliance on variation in its oral submissions: T.234, line 30; cf Amended Statement of Claim at [20]). It says the recitals, the backdated commencement date (31 October 2016) and the fact the written agreement contained numerous express terms that were not included in the previous largely oral and implied contract support that view.
2. With respect to the defendant's submissions concerning the plaintiff's failure to pay accrued annual leave and backpay the defendant (see below), the plaintiff submits such matters are irrelevant post-contractual conduct that cannot bear on the question whether the written agreement disclosed an intention to discharge and replace the earlier agreement. It also suggests a distinction between the discharge of an employment contract and the question of whether the employment relationship continues (Visscher v Guidice (2009) 239 CLR 361 at [53]).
3. The plaintiff submits the defendant signed the agreement and is bound by the agreement she signed (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [39]-[50]). It submits the Court can safely infer the parties understood at the time of discussing and then executing the written agreement that they were entering into a binding agreement to set the terms that would apply to the defendant's employment. It further submits she turned her mind to the restraint clause, was given time to consider it, discussed it with her father and negotiated changes to it.
4. The plaintiff submits the non-solicitation restraint is justified because the defendant had strong and unusually long customer connections with many of the plaintiff's landlord clients and this was in the parties' contemplation at the time of entry into the written agreement. It submits the defendant was the "face of the business" for CP Bronte's landlord clients and had "personal knowledge and influence over" them (Jardin v Metcash Ltd (2011) 214 IR 448; [2011] NSWCA 409 at [97]). The plaintiff submits she either developed or at least enhanced that influence during her employment with the plaintiff. The plaintiff further submits it is not to the point that the defendant had established many of her customer connections prior to her employment with the plaintiff; an employee's "personal knowledge and influence over" customers is the employer's property (Jardin v Metcash Ltd at [95], [96]). Miles v Genesys Wealth Advisers Limited (2009) 201 IR 1; [2009] NSWCA 25 is said to demonstrate that a strong customer connection built up over a series of employers and maintained with the final employer falls within that category. The plaintiff submits the fact it paid a significant sum to purchase the Wills Bros' rent roll and goodwill and engaged and paid the defendant to develop and maintain its customer connections with those landlords gives a special emphasis to the need for the plaintiff to protect its customer connections with them.
5. The plaintiff also submits the defendant had access to confidential information regarding its clients and their properties, tenants, creditors and fees, and the plaintiff's systems and software, and it should be protected against the defendant's use of that information, particularly given her tendency to not record information within the plaintiff's management software. The plaintiff submits that, to the extent the confidential information derived from information originally held by Wills Bros, the transfer to the plaintiff of that information formed part of the purchase of Wills Bros' rent roll.
6. The non-solicitation restraint at issue in this case also included a restraint against accepting even unsolicited instructions to perform real estate services for "Clients" of CP Bronte (a "no-dealing restraint"). The plaintiff submits this is a case where the strength of customer connection is such that solicitation may not be necessary because clients may approach the defendant themselves (Wallis Nominees (Computing) Pty Limited v Picket (2013) 45 VR 657; [2013] VSCA 24 at [27]); a number of CP Bronte's clients contacted the defendant within days of her employment ending, one moved her property management to Wills Property, and another group indicated an intention to leave as a result of the defendant leaving. Many of the landlords were also friends with the defendant (although the plaintiff asserts the substantial majority were persons the defendant got to know as a result of managing their properties) however the plaintiff submits this is not a reason to not uphold the restraints (Koops Martin v Reeves [2006] NSWSC 449 at [43]).
7. The plaintiff submits the non-encouragement restraint is clearly included in the employment agreement to support the effectiveness of the non-solicitation restraint. It submits the non-encouragement and no-dealing restraints legitimately avoid the need for fine distinctions between whether the defendant or another person solicited or accepted instructions and removes the temptation for subterfuge and pretence (Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267 at [34]).
8. With respect to the non-competition restraint, the plaintiff submits such a restraint may be justified because of the near impossibility of proving what the former employee has done or is doing or intended to do for the competitor (Red Bull Australia Pty Ltd v Stacey [2011] NSWSC 1212 at [35]). The plaintiff submits the strong connections the defendant had with CP Bronte's landlord clients, the confidential information and knowledge she held in relation to those clients, and the fact that the defendant, working at Wills Property, would be able to exploit the landlords' familiarity with the "Wills" brand, supports the reasonableness of the non-competition restraint. The plaintiff emphasises that the orders sought do not preclude the defendant from continuing her current employment or obtaining employment with any real estate agency other than Wills Property, which it submits goes to reasonableness. However, her previous actual and ongoing threatened breach of her non-competition restraint is said to provide a basis for that restraint being enforced to the extent that it is considered reasonable.
9. As for the duration of the restraints, the plaintiff submits the parties negotiated a restraint period of three years however the plaintiff only seeks to enforce the restraint for 18 months. The plaintiff submits the interactions between a real estate agency and its property management clients are cyclical, in some instances occurring every six months or every year, however those interactions are often routine and so more meaningful interactions in relation to particular properties may not occur for 18 months or longer. The plaintiff had approximately 100 landlord clients at the time the defendant finished her employment. The plaintiff submits its confidential information relating to particular clients is capable of remaining valuable in winning the work of those clients for at least 18 months. An employer has an interest in protecting the whole, not just a majority, of its customer connections and confidential information (Cactus Imaging Pty Limited v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 at [42]). The plaintiff also submits the defendant's lengthy and strong connection with landlord clients may affect how long it will take the plaintiff to replace her connections with those clients. The plaintiff submits it is worth noting that the agreement for the purchase of the Wills Bros' rent roll included non-solicitation and non-compete restraints against Wills Bros that would operate for 5 years.
10. With respect to the geographical area of the non-competition restraint, the plaintiff submits the parties turned their minds to and excluded restraints wider than 5km. The plaintiff submits virtually all the properties managed by CP Bronte come within a 5km radius of CP Bronte's office and Wills Property operates from an office merely 1.8km from the CP Bronte office. However, the plaintiff submits the duration and geographic scope of the post-employment restraints can be read down to the extent they are considered unreasonable (s 4(1) of the Restraints of Trade Act 1976 (NSW)).

The Defendant's Submissions

1. The defendant submits there was no consideration supporting a variation of the original employment agreement because the defendant did not receive any increased remuneration and there was no implicit promise from the plaintiff to the defendant that if she signed the written agreement she would not be terminated for a period of time (she was in fact terminated on 12 November 2019). The defendant submits the post-employment restraints came about because Ms Peterswald feared the defendant could leave and clients would follow her, but those circumstances do not constitute sufficient consideration. The defendant further submits that any changes that occurred in relation to the defendant's duties (including the restructuring of staff and roles within CP Bronte) were made before entry into the written agreement and were not referable to it.
2. In response to the plaintiff's discharge argument, the defendant submits the following matters demonstrate the parties did not intend to discharge all rights and duties that had accrued under the original employment agreement: 1. the Recital and the terms of the document; 2. there was no payment of annual leave, which is a statutory requirement upon termination of employment; 3. there was no backpay of the difference in salary between the amounts the defendant received up to February 2019 payable at the rate of $60,000.00 per annum and the amount recorded as the annual salary under the 23 April 2019 Agreement, namely, $65,000.00; 4. the Commencement Date of 31 October 2016, which, in conjunction with the above, indicates an intention to continue, not discharge, the original employment, albeit on varied terms. The defendant submits that since the 23 April 2019 Agreement records the Commencement Date as 31 October 2016 the words "replace any previous agreement" are only engaged if there was another agreement prior to 31 October 2016 (which there was not); 5. there was no communication that the 31 October 2016 employment contract had been terminated; 6. the only changes intended by the plaintiff by the 23 April 2019 Agreement was "the addition of the post-employment restraints"; 7. all employees of the plaintiff who did not have a written employment agreement were required to enter into a written agreement because the plaintiff's bank required written employment agreements. The defendant submits it would be most unlikely that the plaintiff and its employees sought to discharge all the original employment agreements and release each other from all accrued rights and obligations, including accrued statutory entitlements.
3. Alternatively, the defendant submits that the plaintiff's conduct falls within the exception identified in Charlton's case where the circumstances are properly characterised as an artifice because Ms Peterswald represented to the defendant that the proposed employment agreements were required by the plaintiff's bank but did not tell her that the bank did not require post-employment restraints. The defendant further submits the commencement date is an element of artifice.
4. The defendant submits the Court in assessing reasonableness assesses the interests of both parties as well as the public at the time of entry into the contract (Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 at [44(g)]). She submits the restraints in this case were not reasonable at the time they were entered because the defendant commenced employment with the plaintiff on 31 October 2016, when she had already been dealing with the majority of the landlords that became clients of the plaintiff. The defendant submits she did not secure any benefit upon entering into the 23 April 2019 agreement and her salary was relatively modest before and after she signed it. She further submits there is a paucity of evidence as to the confidential information she acquired. She says none of the IT systems were inherently confidential and she was not privy to the alleged assessment/analysis of the efficiency of the IT systems. She believed the restraints only applied if she resigned. She says she had no legal advice and was in a position of unequal bargaining power.
5. Specifically in relation to the non-compete restraint, the defendant submits the restraint does not protect the plaintiff's legitimate interests because she did not obtain "such an acquaintance with [the Plaintiff's] trade secrets as would enable [her] to take advantage of [her] employer's trade connection or utilise information confidentially obtained" (Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 at [44(j)]). She submits that, having regard to the existence of the non-solicitation restraint and the fact that the information cannot be utilised except in relation to the plaintiff's landlord clients, the non-compete restraint is not reasonably necessary, whether limited to the Wills Property or not; to the extent that it provides any "protection" beyond the non-solicitation/no-dealing restraint, the proscription is merely a restraint on competition. The defendant further submits that the mere fact an employee is related to the principal of a competitor of the employer, or shares their name, does not give rise to a legitimate protectable interest.
6. In relation to the non-solicitation and no-dealing restraint, the defendant submits that the customer connection or rapport arising between clients and herself prior to her employment with the plaintiff is not a legitimate proprietary interest of the plaintiff (Koops Martin v Reeves [2006] NSWSC 449 at [43], [50], [52], [78]; Jardin v Metcash Ltd (2011) 285 ALR 677; 214 IR 448; [2011] NSWCA 409 ('Jardin v Metcash') at [95], [97]; Cactus Imaging Pty Limited v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 at [25]; Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 at [44]; Portal Software Pty Ltd v Bodsworth [2005] NSWSC 1179 at [65]). The defendant submits that Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25 does not stand for the proposition the plaintiff contends it does. She submits the critical question is the extent to which the plaintiff should be entitled to its customer connection which developed between the defendant and the landlord clients as a consequence of her employment with the plaintiff. She submits such further connection as developed during her employment was minimal; she had built a rapport with 80 percent of the landlord clients prior to the commencement of her employment with the plaintiff (and was not the human face for the remaining 20 percent), many were her friends, and her knowledge of clients' preferences was usually acquired at the beginning of the relationship.
7. The defendant submits the appropriate duration for the non-solicitation clause should not exceed three months on the basis of the following factors: 1. her relatively modest annual remuneration of $65,000 (Tullett Prebon (Australia) Pty Ltd v Simon Purcell [2008] NSWSC 852 at [94], [95], [107]; Thinkstorm Pty Ltd v Farah [2017] NSWSC 11 at [31]-[36]); 2. the relatively sparse nature of information which could be said to be confidential to the plaintiff; 3. the fact that at the commencement of her employment with the plaintiff the defendant had a rapport and connections with the overwhelming majority of landlords (80 percent) prior to and separately from her employment with the plaintiff; 4. the absence of cogent evidence on client connection as a consequence of the defendant's employment with the plaintiff; 5. the substantial contacts and opportunity for contacts that Mr Falas and the plaintiff have had to engage with clients. The defendant submits most of the plaintiff's did not appear to be concerned by her departure; 6. the professional experience and competence of Mr Falas; 7. the failure to call Mr Falas whose evidence would have assisted the Court on material issues (Jones v Dunkel inference); 8. the upper limit of Mr Falas' restraint which is 12 months in circumstances where Mr Falas is remunerated 1.5 times as much as the defendant and where all of Mr Falas' client connection will be as a consequence of employment with the plaintiff; 9. the extent to which changes to the plaintiff's operations have decreased the client interface role of the defendant's replacement and reduced some of the opportunities for client interaction; 10. the policy that employees "be free to use [their] skills and experience to the best advantage": see Portal Software at [63]. 11. the plaintiff enjoys the benefits of incumbency in that landlord clients are subject to management agreements (terminable on 30 or 60 days' notice); 12. the Covid-19 pandemic has resulted in greater interaction between the plaintiff and Mr Falas and landlord clients; 13. the defendant was made redundant and Mr Falas assumed the senior property manager role at CP Bronte the day after her employment was terminated. The plaintiff had complete control over the timing and messaging of the defendant's departure and Mr Falas' commencement as the replacement property manager, such that no time was lost in having to recruit or secure an "alternative" employee.
8. The defendant submits that the "no-dealing" element of the non-solicitation restraint extends the restraint far beyond a standard "non-solicitation" clause and is akin to a non-competition clause. She submits the restraint significantly impacts her employability. For example, she submits the restraint would prevent her from working for any client of the plaintiff even if they went to a new employer without her solicitation, involvement or knowledge. This she submits is a matter that impacts the public interest. She also submits the restraint would place onerous obligations on her in terms of the need to identify and inform future employers of all the clients she could not complete work for, and would prevent clients seeking the defendant even though they may wish to appoint her for family or other reasons. Accordingly, the defendant submits the length of the non-solicitation clause should be reduced from what might otherwise have been appropriate.
9. The defendant further submits that she was not a party to the agreement for the sale of the rent roll from Wills Bros to the plaintiff. The defendant was not required to obtain restraints against her, and the plaintiff was not required to employ her. She submits that she would have been entitled to solicit clients if she had commenced employment with a real estate agency other than the plaintiff in October 2016.
10. Finally, the defendant submits the appropriate way in which the Court should deal with the Amended Statement of Claim is that the prayer(s) for relief in the Summons and initial Statement of Claim in respect of the non-compete restraint should be dismissed. That it is asserted would make clear that the non-compete restraint was unreasonable and therefore invalid from the outset, which is important because (i) the interlocutory orders made by Henry J were founded upon the broader version of the non-compete restraint; (ii) dismissal of the prayers for relief impacts issues related to the undertaking as to damages and costs; and (iii) it would be technically possible for the plaintiff to revive its original claims if there is no dismissal.
11. The defendant also made lengthy submissions concerning the credibility of the various witnesses.

Consideration

1. It is trite that for an agreement or variation of an agreement to be binding it must be supported by consideration. In Electroboard Administration v O'Brien [1999] NSWCA 452 ('the Electroboard case') at [10] Meagher JA (Mason P and Priestley JA agreeing) found that there was sufficient consideration to support a variation of a written employment agreement to include a restraint of trade where "the appellants said to Mrs O'Brien 'We shall dismiss you if you don't sign', or alternatively 'We shall not dismiss you if you do sign"' (at [10]). His Honour said (also at [10]): I cannot see how such an agreement lacks consideration: this is a benefit to the employers in obtaining the signature, and a benefit to the employee in diverting the prospect of imminent dismissal.
2. The Electroboard case was further explained but distinguished by Austin J in Galaxidis v Galaxidis [2001] NSWSC 1123 at [138].
3. Charltons CJC Pty Ltd v Fitzgerald [2013] NSWSC 350 ('Charltons') also concerned the imposition of restrictive covenants in circumstances where a contract of employment already existed. In determining that the restraints were supported by sufficient consideration, Pembroke J reasoned (at [24]-[28]): A third issue arises because Fitzgerald contends that the Terms of Employment, or at least the restraints imposed on him by Clause 7.1, are not binding by reason of the absence of valuable consideration. This is an exercise in false reasoning. As at September 2007, Fitzgerald was bound by an existing contract of employment with Charltons. Mr Charlton effectively proposed, and Fitzgerald agreed, that the existing contract be discharged and replaced by a further more extensive contract. The replacement contract addressed a number of topics that constituted a new and different subject matter. They were set out in Clauses 10, 11, 12 and 13 of the Terms of Employment. Although Fitzgerald's remuneration and responsibilities may have remained unchanged, the substitute contract dealt with new aspects of the employment relationship in ways that secured a 'practical benefit' or avoided some practical detriment or disadvantage to either or both parties, cf. the ungainly expression 'practical disbenefit' in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 at 746-747. In any event, as a matter of legal analysis, whenever parties agree to discharge an existing contract and replace it, their mutual promises to discharge the original agreement and abide by the new agreement will constitute sufficient consideration - unless their conduct is simply an artifice. The point was stated succinctly in Figjam Pty Ltd v Pedrini [2005] NSWSC 221 at [15]: [I]f the existing duty is discharged by a contract which includes a promise with the same content as the original promise, the promise will be regarded as binding because consideration is present in the parties' agreement that the original duty is to be discharged ... Unless the circumstances are such that it is impossible to interpret the second contract as a termination of the first, a court will discern an implied agreement to terminate the original contract and consideration will be present. That passage had its origin in Carter and Harland, Contract Law in Australia, 4 ed (2002) at 347: Termination of the Contract. The principle that a promise to perform a contractual obligation already owed to the other party is no consideration for a return promise by the latter has no application where the earlier obligation is, as part of the agreement, terminated or discharged. In other words, if the existing duty is discharged by a contract which includes a promise with the same content as the original promise, the promise will be regarded as binding because consideration is present in the parties' agreement that the original duty is to be discharged ... Unless the circumstances are such that it is impossible to interpret the second contract as a termination of the first, a court will discern an implied agreement to terminate the original contract and consideration will be present. (emphasis added) I adopt that analysis. The 2007 letter of offer and the Terms of Employment were explicitly intended to constitute a new contract. The general statement by Mason J in Wigan v Edwards (1973) 1 ALR 497 at 512 is not to the point. His Honour's observations relate to promises made under an existing contract. They are not concerned with the legal effect of the discharge of a contract and its replacement by a new contract. In my view, there is no sound basis for the contention that Fitzgerald's 2007 contract was not supported by consideration.
4. The plaintiff did not rely on the practical benefit/avoidance of practical detriment analysis evident in Electroboard Administration v O'Brien [1999] NSWCA 45 and Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723. It based its case solely on the alleged discharge and replacement of the parties' earlier oral agreement. As the defendant submitted, the settled approach (in contrast to that stated in Contract Law in Australia and underlined above) is to determine whether the parties intended to terminate and discharge or vary their original contract. In Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312; 176 ALR 693 ('Concut v Worrell' or 'Concut') Gleeson CJ, Gaudron and Gummow JJ said (at [18]-[21]): In the present case, the dispute centres not upon these other aspects of the employment relationship, but upon the identification of the contractual source of the relationship over a fairly lengthy period. In our view, the majority of the Court of Appeal erred in treating the service agreement as a new and discrete contract of employment which had the effect of terminating and replacing the anterior oral agreement between Concut and Mr Wells, and this error dictated an incorrect outcome to the appeal. The relevant principles are well settled. In FCT v Sara Lee Household & Body Care (Aust) Pty Ltd, Gleeson CJ, Gaudron, McHugh and Hayne JJ said: When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists. Their Honours went on to refer to the judgment of Taylor J in Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd. Taylor J had rejected submissions that (a) "it is impossible by a subsequent agreement, merely, to vary or modify an existing contract" and (b) "[an] agreement which purports to vary an existing contract operates … first of all to abrogate entirely the existing contractual relationship and, then, to reinstate the terms of the old contract as varied or modified by the new agreement". His Honour, to the contrary, accepted the propositions that (a) the earlier contract might be rescinded altogether, the determining factor being the intention of the parties disclosed by the later agreement; (b) partial rescission is a variation, not the destruction, of the contractual relationship between the parties; and (c) the earlier contract may be varied by way of (i) partial rescission with or without the substitution of new terms for those rescinded and (ii) the addition of new terms with or without any partial rescission at all. In Tallerman, Kitto J spoke in terms which involved acceptance of propositions (a) and (b) as identified above, adding that while "in strict logic" a variation may be a new contract, "the discharge of an old contract is a matter of intention". The decision of the majority in the Court of Appeal in the present case appears to involve the holding that there was a discharge of the prior contractual relationship between Concut and Mr Wells, that the service agreement became the exclusive charter of the contractual rights and duties of the parties, and that subsisting rights and liabilities under the prior contract, including those arising by reason of breach thereof, were compromised or released. However, the text of the service agreement itself, as well as the surrounding circumstances, indicate that such a conclusion would not be in accord with the manifest intention of the parties. The service agreement recited that Mr Wells was an employee of Concut and manifested no intention to displace rights and liabilities which had accrued between the parties since Mr Wells had become the Queensland Branch Manager in 1980 by releasing or compromising those rights and liabilities. Rather the employment relationship continued but was supplemented by the terms of the service agreement. Clause 1 thereof specified a term of employment to continue until 30 November 1991 and for periods thereafter as provided in the clause; cl 2 fixed Mr Wells' remuneration and provided for regular salary reviews; cl 8 contained various provisions protective of the interest of Concut in what was defined as "confidential information". Clause 11 stipulated an entitlement to four weeks annual leave on full salary, but this had to be read with cl 13. This was headed "prior service" and stated: Nothing contained in this agreement shall in anyway [sic] limit or restrict the accrued rights of [Mr Wells] in respect of prior service with [Concut] to long service leave, superannuation, holiday pay and other like emoluments. (my emphasis; citations omitted)
5. The approach in Concut v Worrell was applied by the Court of Appeal in Hillam v Iacullo [2015] NSWCA 196 ('Hillam') at [54]-[63]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd [2018] NSWCA 213 at [233], [243]; Waller v Hargraves Secured Investments Ltd [2010] NSWCA 300 at [74]-[78]; and Encyclopaedia Britannica Australia Ltd v David Campbell [2009] NSWCA 286 at [51]-[52], [57]. However, at [51] in Hillam Leeming JA (Basten and Ward JJA agreeing) also noted that: Once English law accepted that prior contractual obligations could be extinguished by implication, it sufficed to establish that that was the intention to be imputed to the parties. That may be established in a number of ways. However, where a later contract between the same parties deals with the whole of the subject matter of the former in a way that it is inconsistent with the continued existence of the former, then it must necessarily rescind the former by implication even in the absence of express language. That describes the effect of the Third Loan Agreement in respect of the Second.
6. Further, while the question is one of the parties' objective intention (Hillam at [57]) it would seem that no "narrow or pedantic approach is warranted", particularly in cases where unsophisticated parties or non-lawyers are concerned. In Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 for example the Court stated (at [83]-[86]) that "[i]t is unsurprising that Mr Mordey did not know of the legal term 'novation'. What non-lawyers would? ... in searching for the contractual intention, 'no narrow or pedantic approach is warranted…'".

The Restraint of Trade Doctrine

1. The relevant principles were recently summarised by Gleeson JA (with whom Bathurst CJ and Beazley P agreed) in Isaac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343 at [59]-[74]: At common law a restraint of trade is contrary to public policy and void unless justified by the special circumstances of the particular case. A restraint may be enforced if the restraint is reasonably necessary for the protection of the parties concerned and reasonable in the interests of the public: Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535 at 565 (Lord Macnaghten); Lindner v Murdock's Garage (1950) 83 CLR 628 at 633 (Latham CJ); [1950] HCA 48; Buckley v Tutty (1971) 125 CLR 353 at 376, 379-380; [1971] HCA 71. In New South Wales, it is necessary to have regard to the Restraints of Trade Act 1976 (NSW) … The correct approach to the application of s 4(1) of the Restraints of Trade Act is well settled. In Orton v Melman [1981] 1 NSWLR 583 at 587 McLelland J (as his Honour then was) explained that first, the court determines whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed. Next, the court determines whether the restraint, so far as it applies to that breach, is contrary to public policy. If it is not, the restraint is valid, subject to any order which may be made under s 4(3)… The effect of s 4(1) of the Restraints of Trade Act is to require, for the purpose of determining the validity of a restraint, that attention be focused on the actual or apprehended breach, rather than on imaginary or potential breaches: Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9; [2006] NSWSC 717 at [10] (Brereton J). The validity of a covenant in restraint of trade is to be judged at the date of its creation: Lindner v Murdock's Garage at 653 (Kitto J); Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 318 (Gibbs J); [1973] HCA 40; Geraghty v Minter (1979) 142 CLR 177 at 181 (Barwick CJ); [1979] HCA 42. Nonetheless, the court may take into account future events that could have been foreseen: Lindner v Murdock's Garage at 653. Hence, when exercising its discretion whether or not to grant relief, the court considers matters as at the date of the hearing: Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418 at [70] (Young JA; Beazley and Basten JJA agreeing); Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414 at 440; [2008] NSWSC 852 at [88] (Brereton J). The nature of the interest meriting protection under a covenant in restraint of trade will differ according to the type of restraint under consideration. In Tullett Prebon (Australia) Pty Ltd v Purcell, a case involving restraints in an employment case, Brereton J said at [47]: "[47] … Whether a restraint is reasonable having regard to the interests of the parties depends on two, albeit related, considerations: first, whether the covenantee has a legitimate protectable interest, and secondly, whether the restraint is no more than reasonable for the legitimate protection of that interest. A covenantee is not entitled to be protected against mere competition; the legitimate interests which may be the subject of protection by covenant are in the nature of proprietary subject matter [Vandervell Products Ltd v McLeod [1957] RPC 185; Tank Lining Corp v Dunlop Industries Ltd (1982) 40 OR (2d) 219; 140 DLR (3d) 659 at 664], including trade secrets and confidential information, and goodwill including customer connection." However as Young JA explained in Sidameneo (No 456) Pty Ltd v Alexander at [31]-[32], the word "proprietary" is used in a special sense and will include legitimate commercial interests. In this regard, his Honour referred to the view he had expressed in Twenty-First Australia Inc v Shade (Supreme Court (NSW), Young J, 31 July 1998, unrep) and Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607 at 612-613. "Goodwill" has been described as a rather elusive concept: Sidameneo (No 456) Pty Ltd v Alexander at [54]. Goodwill has been referred to as the product of combining and using the tangible, intangible and human assets of a business for such purposes and in such ways that custom is drawn to it: Commissioner of Taxation of the Commonwealth of Australia v Murry (1998) 193 CLR 605; [1998] HCA 42 at [24]. It has been said that it is more accurate to refer to goodwill as having sources than being composed of elements, given that goodwill is to be seen as adding value to a business "by reason of" situation, name and reputation, and other matters, not because goodwill is composed of such elements: Commissioner of Taxation v Murry at [24], citing Commissioners of Inland Revenue v Muller & Co's Margarine Ltd [1901] AC 217 at 235 (Lord Lindley). It has also been recognised that many of the sources of goodwill are not themselves property, nor assets for accounting purposes: Commissioner of Taxation v Murry at [25]. Generally, a stricter and less favourable view is taken of covenants in restraint of trade between employer and employee than in commercial agreements. As Mason P explained in Woolworths Ltd v Olson at [38]: "[38] The courts in general take a stricter and less favourable view of covenants in restraint of trade entered into between employer and employee than of similar covenants in commercial agreements (Geraghty v Minter (1979) 142 CLR 177 at 185). The reasons are explained in J D Heydon, The Restraint of Trade Doctrine (2nd ed, 1999) at pp68-9. It is nevertheless well established that an employer may have interests capable of protection by a restraint covenant. These interests go beyond protection of goodwill and retention of customers and extend to trade secrets …" The same point is made by JD Heydon in the most recent edition of The Restraint of Trade Doctrine (4th ed, 2018, Chatswood, LexisNexis Butterworths) at 96-97, where four main reasons are given for the court's approach in employment cases. First, the inequality of bargaining power between the parties. Second, the employee may be giving up that employee's only asset, which depends on specialised training and which may not be at all negotiable. Third, when labour is hired it remains valuable whether or not the employee later competes. Fourth, once the employee accepts the post-employment restraints, the employer's power during the contract is much increased by reason of the inhibition on the employee's ability to threaten to leave and seek work elsewhere. … [72] In Bridge v Deacons [1984] 1 AC 705, doubt was expressed as to whether the legitimate interests can be necessarily ascertained by placing the relevant agreement in a particular category and then trying to align that category with existing cases, such as employment cases or sale of business agreements…
2. It is clear that the law will protect confidential information (see for example Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 329). An employer is also entitled to protection of its goodwill including customer connections which an employee has built with the employer's customers during the course of their employment. In Koops Martin v Reeves [2006] NSWSC 449 ('Koops Martin v Reeves') at [30] and [43] for example, Brereton J (as his Honour was then known) said: While the employer is not entitled to be protected against mere competition by a former employee, the employer is entitled to be protected against unfair competition based on the use by the employee after termination of employment of the customer connection which the employee has built up during the employment - which, because the employee has in effect represented the employer from the customer's perspective during the employment, might at least temporarily appear attached to the employee, but in truth belongs to the employer. The employer is entitled to be safeguarded against use after termination by the employer of special knowledge of or influence over customers gained as a result of customer contact during the employment. Thus in Herbert Morris v Saxelby, Lord Parker (at 709) said that a covenant was upheld to protect an employer from, amongst other things, a former employee's influence over customers. In Dewes v Fitch [1920] 2 Ch 159, Warrington LJ said (at 181) that an employer was entitled to protection against the influence acquired by the employee over the customers or clients. In Coote v Sproule [1929] NSWStRp 23; (1929) 29 SR (NSW) 578, Harvey CJ in Eq said that what was entitled to protection was customer connection through a special relationship between employee and customer as a consequence of the employment (at 580) … The position so far as concerns personal connections may I think be summarised as follows. First, the mere fact that the employee has friends or relations amongst, or makes friends with, customers of his employer, is not a sufficient connection to support a restraint. Secondly, however, if the employee in the course of employment gains special knowledge of or influence over the employer's customers, such as would give the employee an unfair advantage in competition, that will support a restraint, even if the customers include persons who are or have become the employee's friends or acquaintances. (my emphasis)
3. In a case where the relevant "customer connections" are shown to be partially attributable to customer contact had during the course of employment, as well as the personal skill and experience of the employee, or pre-existing or personal relationships between the employee and the employer's customers (as alleged in this case), the proper approach seems to be to weigh those competing considerations against one another in determining first whether the employer has a protectable interest and second whether the restraint is reasonable. In Miles v Genesys Wealth Advisers Limited (2009) 201 IR 1; [2009] NSWCA 25 for example Hodgson JA (Basten JA and Handley AJA agreeing with this part of his Honour's judgment) said (at [41]): In my opinion, the relationship shown to exist between Mr Miles and the Member Firms and their principals could properly be regarded as being, to a substantial extent, the property of Genesys, as well as being something supported by Mr Miles' own qualities of skill and experience. A fair and proper balance between these competing considerations is a matter of judgment, as to which reasonable minds could differ. Having regard to the length and quality of the connection maintained on behalf of Genesys, a judgment that a restraint of 30 months was appropriate to protect the employer's legitimate interests would not in my opinion be an unreasonable one. (my emphasis)
4. Further, in Koops Martin v Reeves, Brereton J referred (at [48]) to the fact that the defendant's "personal contacts formed a very small component of the clientele that he serviced, and to the extent he introduced them, he was paid to do so" as a factor seemingly weighing in favour of (or at least not against) the plaintiff having a protectable interest in customer connection in that case. Also relevantly to the present case, Brereton J had regard to the fact that the plaintiff had invested in gaining its clientele (at [45]-[46]): Against that background, it remains to consider whether Koops Martin had a protectable interest in customer connection in the present case. First, Koops Martin had invested in gaining its clientele. Many of Koops Martin's clients had come to Koops Martin as a result of the purchase of other businesses - in particular, the former Trevor Blay practice - for which Koops Martin had paid valuable consideration. Some had been introduced, while Mr Reeves was an employee, through referrals from Mr Eichmann, in respect of which referrals Koops Martin paid Mr Eichmann a referral fee. Part of Mr Reeves' function as an employee was to "grow" Koops Martin's business. As has been noted, he spent 40% of his time on it. In the year ending June 2005, he earned a bonus of $20,000 for his efforts in developing the business.
5. The plaintiff in this case seeks to enforce a non-solicitation and no-dealing restraint, a non-competition restraint and a non-encouragement restraint. An employer's interest in its customer connection can support a reasonable non-solicitation restraint, particularly where the employee has become the "human face of the business" (see for example Koops Martin v Reeves at [29], [34]; Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267 at [34]). Reasonable non-encouragement restraints have also been upheld to protect strong customer connections (see for example Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267).
6. With respect to "no-dealing" restraints, Brereton J said (at [83]-[84]) in Koops Martin v Reeves: One reason for accepting that a restraint on acting or accepting instructions is permissible is that it removes the difficulty of proof of actual solicitation, and the temptation to lay the groundwork for post-termination competition by surreptitious solicitation before termination… But the more powerful reason is that, the stronger the customer connection which the employee develops, the less will solicitation be required; the strongest connections are those in which the client will follow unsolicited because of his or her connection with the employee, notwithstanding that that connection belongs to the employer. An anti-solicitation covenant is insufficient to protect an employer's customer connection in that context.
7. In relation to non-competition restraints, Meagher JA (Campbell and Young JJA agreeing) held in Jardin v Metcash at [97]: Where an employee is in a position which brings him into close and personal contact with the customers of a business in such a way that he may establish personal relations with them of such a character that if he leaves his employment he may be able to take away from his former employer some of his customers and thereby substantially affect the proprietary interest of that employer in the goodwill of his business, a covenant preventing him from accepting employment in a position in which he would be able to use to his own advantage and to the disadvantage of his former employer the knowledge of and intimacy with the customers which he obtained in the course of his employment should, in the absence of some other element which makes it invalid, be held to be valid.
8. Further, the potential for an employer's confidential information to be used to the employer's detriment after an employee leaves can justify a reasonable restraint against competition (Woolworths Ltd v Olson [2004] NSWCA 372 at [67]; see also Stacks/Taree Pty Ltd v Marshall (No 2) [2010] NSWSC 77 at [44(j)]).
9. However, as McDougall J stated in Stacks/Taree Pty Ltd v Marshall (No 2) (at [63]): where an agreement contains both a non-solicitation clause and a covenant not to compete, the reasonableness of the latter must be assessed by reference to the adequacy of the protection, for the legitimate interests of the covenantee, offered by the former.
10. With respect to the duration and area of the restraint, the question is again one of reasonableness. In Hanna v OAMPS Insurance Brokers Ltd, the appellant argued that that the primary judge erred in not adopting the test in Stacks/Taree Pty Ltd v Marshall (No 2), where McDougall J adopted Rath J's approach in IRAF Pty Ltd v Graham [1982] 1 NSWLR 419 "of considering the time taken to sever the covenantor's connection with the customers or clients in question rather than the time for the covenantee to build up (or rebuild) a connection". Allsop P (Hodgson JA and Handley AJA agreeing) rejected the argument, stating (at [43]) "[t]here is no legally required test in these circumstances. The use of one test or another depends on the facts and the evaluation of the approach that is reasonable." In Koops Martin v Reeves, Brereton J held (at [86]): The territorial operation of the restraint is limited to the city of Coffs Harbour. Generally, the area within which a restraint operates is not relevant when it is one against solicitation of or dealing with customers (as distinct from one against engaging in business). Where a restraint prohibits solicitation of specific customers or classes of customers, no area limitation is generally required.
11. Finally, when it comes to the question of relief, the position at the date of trial is relevant and the usual factors apply in deciding whether an injunction should be granted (see, e.g., J D Heydon, The Restraint of Trade Doctrine at 335). In Tullet Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852, Brereton J said (at [88]): Even where a restraint is valid, equity retains a discretion as to whether and if so how far to enforce it. Mr Fernon SC does not dispute that the grant of an injunction, whether on an interlocutory or final basis, to enforce a negative contractual stipulation made for consideration is discretionary, although exceptional or compelling reasons will be required to persuade the court to decline injunctive relief in relation to the enforcement of such stipulations. The discretion to decline injunctive relief has been recognised in the context of applications to enforce restraints of trade. In exercising the discretion to grant or withhold injunctive relief, the court has regard to the circumstances as at the date of hearing. (citations omitted)
12. Brereton J had regard to whether the restraint no longer served to protect the legitimate interests of the plaintiff, whether the plaintiff should be left to a remedy in damages and whether "the jeopardy to the plaintiff from declining an injunction was slight, and the hardship occasioned by an injunction to the defendant was disproportionately great" ([104]), but did not in that case decline injunctive relief on any of those discretionary grounds ([107]).

The Evidence

1. Before I come to an evaluation of the relevant evidence I wish to say something about the form of much of it. Regrettably and not limited to this case, often evidence is presented as a stream of consciousness, or swathes of beliefs, opinions, submissions and detailed descriptions of attached documents and their effect, much of which is entirely unhelpful. It was as if each party was provided with an invitation to write their respective memoirs of the events. The invitation is often also extended to expressing with as much misplaced anger as is possible what each party really thinks of the other. What often emerges are lengthy paragraphs best described as composites in which lurks potentially relevant and important evidence obscured by form.
2. This case for that reason caused a good deal of frustration, indeed exasperation (T.38, line 45). Each counsel understandably took numerous objections to the other's affidavits largely on the basis of form. Each side's objections were to some extent a mirror image of the other.
3. Sixteen years ago in Toll v Alphapharm Pty Ltd (2004) 219 CLR 165, the High Court said at [35]: A striking feature of the evidence at trial, and of the reasoning of the learned primary judge, is the attention that was given to largely irrelevant information about the subjective understanding of the individual participants in the dealings between the parties. Written statements of witnesses, no doubt prepared by lawyers, were received as evidence in chief. Those statements contained a deal of inadmissible material that was received without objection. The uncritical reception of inadmissible evidence, often in written form and prepared in advance of the hearing is to be strongly discouraged. It tends to distract attention from the real issues, give rise to pointless cross-examination and cause problems on appeal where it may be difficult to know the extent to which the inadmissible material influenced the judgment at first instance.
4. A trial judge, fortunately perhaps these days is able to save or preserve some "evidence" so that a party is not left without a proverbial feather often by generously anointing arguably relevant evidence, bad in form with multiple descriptions under s 136 of the Evidence Act 1995 (NSW). This is on the basis that some unexpected or unintended use may be made of the so-called evidence in due course. That may have the advantage or benefit of pragmatism but it is hardly satisfactory. I will now return to the relevant admissible evidence.

Ms Peterswald

1. Ms Peterswald, the principal of the plaintiff prepared two affidavits, one of 22 December 2019 and the other 31 March 2020.
2. In her affidavit of December 2019 she said that on 12 April 2019 the defendant told her she was offered a job by her cousin at a real estate agent in Bondi Junction and that if she took the job "my owners would follow me" ([19]). Ms Peterswald said that as a result she reviewed the defendant's employment file and discovered that she had never entered a "formal" employment agreement with the plaintiff ([20]).
3. Ms Peterswald said that she "quickly" prepared a contract she sourced from the Real Estate Employers Federation website ([21]).
4. She had a conversation with the defendant and asked if she would sign the contract. The defendant refused because she would not be able to take her "owners" with her if she signed the agreement. Ms Peterswald said she could not do that as she had paid her father and Uncle for that business. The defendant said she would like to consult with her father and have him look over the agreement ([22]).
5. Although she reminded the defendant it was not until 26 April that the defendant signed the agreement ([23]-[24]).
6. After that Ms Peterswald had difficulties with the defendant in relation to her performance in a number of respects. On 9 September 2019 she had a discussion with the defendant and expressed her concerns about a number of aspects of the defendant's performance. On or about the same time one of the landlords terminated their agreement with the plaintiff ([26]-[27]).
7. As a result of other uncontroversial events Ms Peterswald decided to terminate the defendant and did so on 12 November 2019 on the basis of redundancy, along with another employee, Ms Lark ([35]-[36]).
8. In her affidavit of 31 March she provided more detail of her career and the background to the purchase of the business ([9]-[35]). Thereafter followed a description of the running of the business and her purchase of a business in Mosman and her relationship with the defendant ([36]-[93]).
9. Eventually Ms Peterswald returned to the signing of the April agreement ([121]-[134]). On 17 April 2019 she sent a copy of the draft agreement to the defendant with a request that it be signed for "the yearly bank audits so we conform for our rent roll loan" ([130]).
10. Ms Peterswald agreed with the defendant that there was in effect a negotiation about the terms of the restraint provisions on 23 April 2019 ([131]-[132]).
11. She then in the balance of the affidavit provided greater detail of the deterioration in the relationship between herself and the defendant leading to the latter's dismissal on 12 November 2019 ([135]-[152]).
12. In cross examination Ms Peterswald said that she did not want the defendant to leave. She also agreed that the major reason she wanted the defendant to sign the agreement was to get the post-employment restraints (T.56, line 32). But she agreed that the bank did not expressly require her to ask for restraints (T.57, line 5).
13. She said that although the defendant said she would be taking her owners with her, the defendant signed the agreement (T.58, line 5). She also agreed that the defendant accurately recorded the time, manner and place that the agreement was signed in [25] of the defendant's affidavit (T.58, line 41). She also agreed that certain of the clauses of the proposed agreement were crossed out (T.58, line 50).
14. She also agreed that there was no payment to the defendant in relation to annual leave or accrued statutory entitlements and she did not tell the defendant that her old employment had been terminated (T.59, line 47; T.60 line 1).
15. Ms Peterswald thought the defendant spent more time servicing existing clients as opposed to securing new landlord clients (T.60, line 49).
16. Ms Peterswald started to consider making the defendant redundant in about August 2019 (T.61, line 23) and she recruited Mr Falas who signed an employment agreement on 14 October 2019 (T.61, line 39). She agreed that she terminated the defendant's employment on 12 November 2019 (T.63, line 22). Ms Peterswald agreed that the intention was that Mr Falas would be the human face in relation to landlords (T.65, line 23).
17. Ms Peterswald agreed that Mr Falas had about 13 years' experience as a senior property manager and a strata managing agent (T.70, line 45). By March 2020 she expected that Mr Falas would have spoken to a majority of landlords (T.71, line 40).
18. Ms Peterswald agreed that after the defendant left she made contact with landlords but not so as to inform them that the defendant had left voluntarily (T.74, line 18). She was then taken to a series of diary entries identifying clients contacted in relation to the defendant leaving the plaintiff's employ and more generally (TT.75- 87).
19. Ms Peterswald agreed that she had not yet listed Mr Falas on the website, (T.90, line 13)
20. She agreed that she knew that a number of the defendant's clients were her friends or they were people the defendant knew well (T.98, line 31-32).
21. She believed she sent the letter of 9 August 2016 to the defendant but she had no independent recollection of it (T.99, line 32). She did however have a recollection of speaking to the defendant about it (T.99, line 36-37).
22. Ms Peterswald agreed that the defendant had a good knowledge of the landlords and their properties (T.99, line 49; T.100, lines 1-15). She also observed that the defendant had established a rapport with the property owners when she commenced her employment (T.103, line 11).
23. Ms Peterswald thought the defendant's bonus was more than $5000 and she had the non-exclusive use of a company car (T.109, lines 37 and 43).

The defendant

1. The defendant made four affidavits of 16 January, 6 February, 4 May and 16 July 2020 respectively.
2. In her 16 January affidavit she set out the history of Wills Bros and that it operated in Waverley from 1923 to 2016 ([2]). She also set out the duties of a property manager and said that managing agency agreements are standard documents usually providing for a 30 day termination period ([10]).
3. She commenced employment with the plaintiff and was paid $65,000 per annum plus superannuation. When she started she was not required to sign any employment contract and she started on a 6 month trial ([14]-[16]).
4. She was notified by email on 17 April 2019 that Ms Peterswald wanted to discuss a new employment contract with her ([18]-[19]). When she read the proposed contract she was concerned about the restrictions it placed on her ([21]).
5. She thought the restrictions would only apply if she resigned. She had never signed an employment agreement before. She met with Ms Peterswald on 19 April. She asked why she had to sign the contract and Ms Peterswald told her it was required by the bank. She did not sign immediately and showed it to her father over the next weekend ([23]-[24]). Her father expressed concerns about the restraints ([24]).
6. She met again with Ms Peterswald on 23 April and expressed her concerns about the length of the restraints and the geographical area covered. After discussion Ms Peterswald crossed out "four years" and also the 15km and 10km as well. They both then signed the contract ([25]-[26]).
7. The balance of the affidavit dealt with IT systems and other office matters, her relationship with some of the landlord clients, alleged performance issues, and confidential information ([42]-[54]). It also responded to the affidavit of Ms Peterswald of 22 December 2019 and the affidavit of Ms Dry of 15 January 2020.
8. In her affidavit of 6 February the defendant set out the history of her employment including the fact that she worked for the plaintiff from 31 October 2016 to 12 November 2019, when she was made redundant ([2]).
9. She stated that she had worked in real estate in the Eastern Suburbs of Sydney for over twenty five years whereby she had developed "skill, knowledge, experience and expertise" relating to properties located in the Eastern Suburbs. She had never worked in any other industry ([7]-[8]).
10. She stated (which is uncontroversial) that when she was terminated she was paid in total three weeks' pay in lieu of notice ([14]).
11. She claimed that she is facing financial hardship by reason of having to meet her living and legal expenses ([16]).
12. The defendant's May affidavit responded to Ms Peterswald's affidavits of December 2019 and March 2020. In general she accepted she had a good relationship with and rapport with the landlord clients and tenants ([4]). In addition she stated she had no recollection or record of receiving the 9 August 2016 letter of engagement ([7]).
13. She stated she had no part to play in the sale of the rent roll and she had no financial interest in Wills Bros ([8]). She also stated that she did her best to help the landlord clients and assist them to transfer their property managements to CP Bronte ([11]). She became aware that there was a high retention rate for CP Bronte of landlord clients ([19]).
14. She agreed that she had access to information about the landlord clients during her employment with the plaintiff ([23]). She was aware of this information prior to her commencing employment with the plaintiff but she also accepts she has a lot of information in her head about the clients ([23]). She also accepted that Ms Peterswald introduced some fairly significant changes to the property management systems ([27]).
15. The defendant acknowledged Ms Peterswald may have had experience in property management in Tasmania but asserted that the business in Sydney was in her view materially different to that in Tasmania ([27]).
16. She accepted that she did have difficulty in making the adjustment from her old employment to CP and also that it took her some time to "get the hang of how to do things" ([30]). She also accepted that Ms Peterswald complained about the defendant spending time speaking to landlords for too long as it was not profitable ([42]). She said she told Ms Peterswald she was struggling with the "new" systems at times ([51]). She was also aware that Ms Peterswald preferred that clients be emailed rather than them "dropping in" because it was more productive ([56]). She admitted that it took her some time to learn the new Property Tree system.
17. The defendant said although she had investment properties and lived at home with her parents she needed income and employment. If she was money driven, she would not have worked for the plaintiff as the wages and incentives were on the low side but she preferred to live and work in the Eastern Suburbs ([69]).
18. She agreed that about 80 percent of the properties transferred on the sale of the Wills Bros rent roll were still being managed by the plaintiff as at 12 April and 12 November 2019. She also had access to property and client information during her employment with the plaintiff but she already knew that information for the vast majority of the properties before she commenced at the plaintiff ([81]). She denies taking any confidential information. She also denies ever saying anything to Ms Peterswald that could be construed as a threat. She did believe that some landlords would want her to continue to manage their properties however she had no intention of leaving even though she been offered another job and could have left if she had wanted to ([88]).
19. Ms Peterswald did not ask her to sign an employment agreement until about 17 April. The entry into the agreement only advantaged the plaintiff and was a detriment to the defendant ([91]). After she told Ms Peterswald she had been offered a job at another real estate agency and that some of the landlords would likely follow her is when Ms Peterswald pressed her to sign a written employment agreement ([92]). After she signed the agreement her workload increased due to the introduction of new software systems ([98]).
20. Many of the relationships with the clients "stem" out of connections she has through family, friends, the local community and the local church ([120]). Some of the clients are friends that she has had for over 10 to 20 years ([120]).
21. The affidavit of 4 May is yet a further detailed response to Ms Peterswald affidavits of 22 December 2019 and 31 March 2020 totalling some 155 paragraphs. Much of the material is either repetitive or argumentative.
22. In cross examination the defendant stated she was not involved with sale of the rent roll but to a small degree she was involved in organising new management agreements for some of the landlords (T.157, line 46).
23. She had one day of training for the new property management system (T.159, line 30). She agreed that she received a pay increase when she moved from Wills Bros (T.160, line 32). She also identified some clients who wanted to be contacted in a particular way (T.163, line 42).
24. The rent roll was 95 percent residential and the balance commercial (T.169, line 9). Most of the leases were for 6 to 12 months. Most of the agency agreements could be terminated on 30 days' notice (T169, lines 47-48).
25. She denied she said that if she left "my owners" would follow me (T.176, line 24). She agreed that Ms Peterswald may have said that they were not her "owners" and that she had paid good money and that they belonged to the business (T.177, line 29). Some of the clients she had known since she was a child and there was a possibility that they would have chosen to follow her if she left (T.177, lines 37-39).
26. She agreed she showed her father the agreement and discussed some changes with Ms Peterswald (T.181, lines 10, 19). She enjoyed working there and she was not looking to going somewhere else (T.182, lines 1-3).
27. She accepted that after she left some of the landlords spoke to her (T.186, line 10).
28. She was asked questions about her dealings with various landlord clients (T.T199-208).
29. She denied not seeking other jobs because she was hoping to work for her cousin. Rather, she said she did not want start work and cause problems for someone else but it is a possibility she might get an offer from her cousin in the future (T.218, lines 43-46).

Consideration

1. The question of whether the 23 April 2019 signed employment contract was supported by consideration is at the forefront of the defendant's defence. Without that document constituting a binding contract there are no restraints.
2. The case was conducted without many factual controversies of relevance. The circumstances surrounding the signing of the contract are not seriously in issue.
3. It is clear that the defendant was toying with leaving the plaintiff's employ in early 2019. That was probably because of the personality clashes born of very different approaches to and an understanding and commitment to technology. There was over time a good deal of resentment built up I consider between Ms Peterswald and the defendant. Many of the landlord clients were people well known to the defendant and she had her own unique way of dealing with them which rankled with Ms Peterswald who wanted to innovate with technology. The defendant was perhaps rather set in her ways and had developed what she must have believed was a proven if not folksy approach to client relations which she was convinced her clients preferred. No doubt the defendant but also other members of the defendant's family had known many of the clients for years. Ms Peterswald was on the other hand clearly intolerant of what she thought were inefficient and time consuming work practices; spending too much time in conversation or on the phone with clients, inadequate note taking and a real reluctance to embrace new technology plagued the relationship.
4. It is tolerably clear that there was no written contract of employment signed when the defendant started work in 2016. Ms Peterswald is certain that she sent a letter of engagement to the defendant on 9 August 2016 (CB.271). The defendant denies receiving it (the defendant's 4 May 2020 affidavit at [7]). The plaintiff believes she sent it or delivered it but there is no real proof of that occurring beyond Ms Peterswald's assertion. It does however exist in her emails. Either way it is clear in any event that it only set out the basics, namely remuneration and details about superannuation. It contained no detailed job description or restraints. However on balance I am satisfied the defendant did not receive it and the consequence is that the original contract of employment was oral.
5. The April document was prepared by Ms Peterswald from a website precedent. It was obviously done in a hurry by a non lawyer anxious to protect her commercial interests. The defendant had told Ms Peterswald on 12 April 2019 that she had been offered a job by her cousin at Wills Property. Ms Peterswald belatedly realised that she had no protection in place and wanted the restraints to be included. Although the defendant was initially reluctant to sign, after consulting with her father, she did. She was not happy about the restraints and had been boasting about other job offers and her ability to take landlords with her. But the restraints were subject to further negotiation. They crossed out four years and made it three years and cascading. The restraint area was also adjusted. I consider the clear implication is that as much as Ms Peterswald wanted the restraints, which the defendant regarded as detrimental to her interests, the defendant also wanted at that time to continue to work for the plaintiff, hence she was prepared to give certain restraints.
6. However, although the plaintiff had pleaded its case in the alternative, namely that there was either a variation of an existing contract or a discharge and replacement of an existing contract, it eschewed the former plea in final address. It submits that properly understood there was a discharge and replacement of an existing contract but the defendant says no such thing as a matter of law has occurred and therefore there was no consideration to support the 2019 contract and hence there are no restraints that bind the defendant.
7. Significant reliance is placed by the defendant on the decision of the High Court of Australia in Concut Pty Ltd v Worrell. For the reasons that follow I am unable to accept the defendant's submission on the point.
8. In Concut, Gleeson CJ, Gaudron and Gummow JJ said, in a situation analogous to this case, that in order to determine whether there was a discharge of one contract for another the court must look at the text and the surrounding circumstances.
9. It is true that in the present case as in Concut an oral contract was arguably replaced by a written one. But that is where the analogy ends.
10. The text under consideration in Concut differs markedly from the present. In Concut the written contract expressly preserved accrued rights under the rubric "Prior Service" and in particular the court found that the written contract continued the employment relationship and supplemented it (at [21]).
11. The contract here emphatically concludes as a prelude to signature the following: The terms and conditions set out in this Employment Agreement, including the following Reference Schedule and any associated annexure, are accepted and replace any previous agreements and understandings.
12. In my view that provision is enough to indicate that the written agreement was intended to replace the original oral contract. But there are other provisions which equally point to that outcome.
13. In the Recitals it is stated that: The Parties agree that the terms and conditions of Your employment with the Employer will be as they appear in this Agreement.
14. "Agreement" is defined to mean "this contract of employment" (cl 1(b)).
15. The term "Engagement" is defined to mean "The Employer appoints You to the Position on the terms set out in this Agreement" (cl 2(c)).
16. It is clear that Superannuation and Annual leave were to be whatever the relevant legislation provided (clauses titled "Leave Entitlements" and "Superannuation").
17. Further it is clear that by inference or implication (as it was not expressly stated) the offer from the plaintiff to the defendant was in my view that she was to be employed for the future on the basis set out in the written agreement or not at all. Neither side subjectively I am certain wanted the latter outcome, but it is inconceivable the plaintiff would have gone to the trouble of preparing such a comprehensive document with the requisite restraints and simply capitulate if the terms were refused. I consider the parties set out to replace their oral contract which was of a most informal kind with a written contract purporting to provide comprehensively for the very first time the terms of their employment relationship, including the restraints of trade. In my view it is clear Ms Peterswald set out to provide a fresh start for their employment relationship on a much more formal footing and the defendant agreed to that course.
18. It follows that the defendant was subject to an employment contract with restraints as to time and geography. The email exchange that occurred between the parties on 17 April is not illuminating. It gives very little if any insight into the situation. Further the parties purported to back date the date from which the contract had effect. It was said by the defendant that that was an "artifice". Nothing really turns upon the use of that epithet. Parties can for consideration agree that their contract has effect from a particular point in time. There is nothing novel or unorthodox about that. Here it is of no moment because the relevant terms are in any event to operate prospectively. I am also of the view that the failure of Ms Peterswald to pay out the defendant's accrued annual leave is of no moment. The parties clearly at that time intended their employment relationship to continue, albeit under a new contract of employment.
19. The terms of the restraint are in issue. The plaintiff says that each of the restraints are valid and notwithstanding the terms of the contract that a restraint period of 18 months is reasonable. The defendant on the other hand contends that none of the restraints are justified but in the alternative says three months is a more reasonable period.
20. The first question is whether the plaintiff has a legitimate protectable interest. An important factor here is the context in which the contract for the purchase of the rent roll took place. The plaintiff was obviously paying a significant sum of money for a business as a going concern. The price was subject to a final number of landlords signing up. Even the final figure was substantial, being some $1.1m. Equally the defendant had had a long term association with a number of the landlords and had agreed to work for the plaintiff in order no doubt to provide commercial continuity.
21. The defendant had a pre-existing relationship, and had built up a rapport, with approximately 80 percent of the landlords on the rent roll. She has personal connections with many of them, some are her friends, and she has known some of them since she was a child or at least for many years. However, her knowledge of those landlords' properties, tenants and preferences and her professional relationships with them were obtained during her employment at Wills Bros. She was then engaged to and must have developed or at least maintained that knowledge and those professional connections during her employment by the plaintiff and on behalf of the plaintiff. She was CP Bronte's property manager and later its "Senior Property Manager" and was the human face of the business for the landlords she managed. In these circumstances I am of the view that the plaintiff has a legitimate protectable interest in customer connection.
22. The next question is whether each of the restraints sought to be enforced by the plaintiff and their proposed duration are no more than reasonable for the legitimate protection of that interest.
23. This case is somewhat unusual. In most of these cases the employee who is leaving poses a real loss for the former employer. Often, they are a key employee who is or has been a valuable asset to the former business. Here quite the opposite is the case. Ms Peterswald obviously wanted to get rid of the defendant for any number of reasons, importantly because she disagreed with her work practices, style, efficiency and frankly her ability to learn new skills and yet she wants to enforce a substantial restraint. The employment of Mr Falas and the extensive measures Ms Peterswald has taken to shore up her landlords are both reasonable and so far effective.
24. As it turned out the differing styles and requirements of Ms Peterswald and the defendant were not amenable to a cordial compromise. The problem as I see it is that, although the defendant has not been handsomely remunerated (her salary was $60,000 and later $65,000 and she received only modest bonuses) and only worked for the defendant for about three years, she could if unrestrained I believe do significant damage to the plaintiff's business given her strong connections with a number of the landlords who may once they are aware she is employed elsewhere take their business to her or her new firm.
25. In my view the non-solicitation, no-dealing, non-competition and non-encouragement restraints are justified on the basis that the strength of the connections between the defendant and the landlord clients are such that some clients may follow her even without her solicitation or encouragement. This was obviously contemplated by the parties at the time the new agreement was brought into effect, the concern being that "owners may follow her". Further, the non-compete restraint has been limited to prevent the defendant being employed at Wills Property or its related entities or by the defendant's relatives only. The landlords' potential attraction to the "Wills" brand increases the risk for the plaintiff and is something Wills Property could be encouraged to exploit. In my view the four restraints support the effectiveness of one another and "remove the difficulty of proof of actual solicitation" (Koops Martin v Reeves at [83]; see also Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267 at [34]). I also take into account that a management agreement routinely can be terminated on 30 days' notice.
26. These factors must of course be balanced against the fact that the defendant's connections with some landlords are personal and that her knowledge and influence over them was built up at least partially outside of her employment with the plaintiff. In my view each restraint is supported by the nature of the defendant's customer connections in this case. However, in all the circumstances I would impose the restraints sought by the plaintiff in paragraphs 1-3 of its amended statement of claim on the defendant for a period of 12 months from 12 November 2019. I regard the restraint area of 5km as reasonable given the location of the properties managed by CP Bronte and the proximity of Wills Property's office.
27. The period of 18 months was a submission put by the plaintiff not based upon any contractual provision. The parties had contemplated a restraint period of 12 months, seemingly intended to apply in the event that a restraint period of three years and two years was determined unreasonable (see Restraint Period clause above). The Court gives considerable weight to what parties have negotiated and embodied in their contracts, although that is not conclusive (see, e.g., OAMPS Insurance Brokers Ltd v Peter Hanna [2010] NSWSC 781at [69(i)]). It also seems to me that Mr Falas has had sufficient opportunity to make contact with the landlord clients.
28. There is no discretionary reason in my view why those restraints should not be enforced (Tullet Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852). The defendant did not submit that I should limit the restraint period for hardship although the defendant stated in her evidence that she needs to work. The rent roll has been serviced by the plaintiff for only three years but the ties between the defendant and some of the clients are strong and the evidence is that a number of the plaintiff's landlords contacted the defendant after her termination without the defendant initiating contact. There is no evidence that she approached any clients herself. But Ms Peterswald's concerns which lead to the imposition of the restraint clauses have it seems been borne out to some extent. The current COVID crisis adds another dimension of complexity to the situation. Managing both landlords and tenants is obviously difficult.
29. I invite the parties to bring in short minutes reflecting my reasons. I would also make the confidentiality orders sought by the plaintiff on pages 3-4 of its opening submissions (discussed at TT.11-12). If required I will hear the parties further as to costs, including what if any special orders should be made concerning the original summons and statement of claim and what cost consequences may flow from such orders.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 November 2020