CONSTRUCTION OF SERVICE AGREEMENT
Submissions
57 Mr. Sullivan QC for the plaintiff submitted that the same construction should be given to the expression "the Business" in the service agreement as in the sale agreement. Furthermore, it was permissible to take into account background facts known to the parties or notorious: Codelfa Construction v. State Rail Authority of NSW (1982) 149 CLR 337 at 352; Prenn v. Simmonds (1971) 1 WLR 1381; Reardon Smith Line v. Hansen-Tangen (1976) 1 WLR 989. In this case, such facts included that E.H. Harris' trade included the sale of ancillary products, which were sometimes sold separately; that D-E had purchased the whole of E.H. Harris' business, including stock-in-trade and equipment, such stock-in-trade including ancillary products and equipment including equipment used for packaging sugar; that allocation of goodwill to various parts of the business was based on total sales, including sales of ancillary products; that the sale of ancillary products provided a service to customers; and that D-E or the plaintiff would continue to conduct the same business. Accordingly, cl.6.1 of the service agreement operated to prevent Phillip McClelland from being involved in any business in the food services sector involving the sale of any of the products which, prior to the acquisition, were being sold as part of E.H. Harris' business.
58 Alternatively, there should be implied on the basis of business efficacy a term in the service agreement that, for a period of one year after termination of the agreement, Phillip McClelland would not seek or solicit or deal with customers of the plaintiff or employees of the plaintiff on behalf of any business which was competitive with that of the plaintiff.
59 Mr. Conti QC for the defendants submitted that the pre-contractual documents showed the minimal importance of products other than coffee and tea: they were not specified in such documents, and amounted to only 18% of gross sales. Coffee and tea was what the business was all about, and that is where the goodwill of the business lay. Mr. Conti pointed to variations between the definitions of "the Business" in the two agreements, and submitted that agreements restraining employees should not be given a wide interpretation. Accordingly, cl.6.1 should not be read as restraining the sale of ancillary products, and in particular the sale of ancillary products without any sale of coffee and tea. This was consistent with the attitude shown by the plaintiff, on becoming aware that ancillary products were being sold.
Decision
60 In my opinion, it is clear that "the Business" in the agreement whereby D-E purchased the business meant the whole business as conducted by E.H. Harris, including the dealing in ancillary products along with coffee and tea and, to a minor extent, independently. Plainly, the whole business was being purchased. The stock of ancillary products was being purchased. Eighteen percent of total sales was not insignificant, and on the evidence, I think it is clear that the dealing in ancillary products made some contribution to the goodwill of the business. The fact that the definition referred to "coffee and tea" and not other products does not in my opinion detract from that view, because that was a reasonable shorthand way of referring to the E.H. Harris business.
61 I accept that there is a change of wording when one comes to the definition of "the Business" in the service agreement. However, particularly where a draft of the service agreement was annexed to the sale agreement, it is plain that "the Business" in the service agreement, by which Phillip McClelland was to be employed pursuant to cl.2.1 of the sale agreement, was the business being purchased under the purchase agreement by D-E which was in turn to be licensed to the plaintiff (plus any other business designated by the plaintiff). In my opinion, the whole of the E.H. Harris business thus being purchased is fairly described by the words in the definition in the service agreement, that is, "the business of purchasing, processing, packaging and distributing coffee and tea". When one has regard to the relationship of the service agreement to the sale agreement, I do not think it would be appropriate to construe that definition narrowly, it might be as if it were purely a matter between employer and employee.
62 This approach does not mean that any sale of ancillary products in the food service market would necessarily be competitive with that business. However, it does mean that the business, in relation to which the question of competition arises, is not a business limited to dealing in coffee and tea and nothing else, but is rather the whole of the business as previously carried on by E.H. Harris, and subsequently carried on by the plaintiff.
63 In those circumstances, as I believe the plaintiff concedes, there is no basis for implying any term restricting competition.
RECTIFICATION
Submissions
64 The plaintiff's claim for rectification was pursued only if cl.6.1 was given a more limited operation than submitted by the plaintiff. Mr. Sullivan referred to Pukallus v. Cameron (1982) 180 CLR 447 at 452; Maralinga v. Major Enterprises (1973) 128 CLR 336 at 350; Slee v. Warke (1949) 86 CLR 271 at 280; and NSW Medical Defence Union v. Transport Industries Insurance Co. (1986) 6 NSWLR 740 at 753. He pointed to evidence of intention given by the plaintiff's representatives. He submitted that it should be inferred that Phillip McClelland had a similar intention.
Decision
65 Although my finding as to the construction of cl.6.1 may be slightly narrower than that sought by the plaintiff, in my opinion no case is made out for rectification. The evidence falls far short of showing a common continuing intention for any term wider than that which I have found.
REPUDIATION
Submissions
66 Mr. Sullivan submitted that repudiation occurs when a party evinces an intention no longer to be bound by the contract: Progressive Mailing House v. Tabali (1985) 157 CLR 17 at 33. The same principles apply to contracts of employment: Automatic Fire Sprinklers v. Watson (1946) 72 CLR 435, Turner v. Australian Coal & Shale Employees' Federation (1984) 55 ALR 635 at 647. The letter of 22nd June 1992 must be viewed in the light of two previous letters, those of 17th January 1992 and 26th May 1992. Those letters, which attempted to undermine the position of Mr. Rogers, a senior long-standing employee of D-E, without adopting the proper course for complaints, amounted to a deliberate attempt by Phillip McClelland to create a situation where his continued employment by the plaintiff was non-viable. The letter of 22nd June 1992 must also be viewed in the light of Phillip McClelland's conduct in seeking legal advice from Sly & Weigall on or about 19th June: his lack of recall about seeking such advice was, literally, incredible.
67 As for the letter itself, although it asked for termination, the remainder of the letter indicated that termination was a fate accompli. It expressed an unwillingness to stay beyond 26th September 1992. In several places, it assumed that there would be a termination of the employment. This is reinforced by the accompanying resignation from the Board of Directors. The letter was very reasonably taken as a resignation by D-E personnel. It was described as a resignation at the meeting on 23rd June, and Phillip McClelland did not demur to this description. This amounted to an admission by him that the letter truly was a resignation: Shaddock & Associates v. Parramatta City Council (1981) 150 CLR 225 at 230; Thomas v. Hollier (1984) 156 CLR 152; Davies v. Nyland (1975) 10 SASR 76 at 107; Dallhold Investments v. Gold Resources Australia (1991) 31 FCR 587 at 597. Mr Sullivan also referred to a letter from Phillip McClelland to a Mr. Douque dated 18th October 1993, which made it clear that he considered that he had made the decision to leave the plaintiff.
68 Accordingly, the Court ought to find that Phillip McClelland's conduct, and in particular his letter of 22nd June 1992, evinced the clearest intention not to be bound to perform the contract for the remainder of the three-year period, and hence was a repudiation.
69 Mr. Sullivan submitted that the plaintiff then accepted this repudiation: the plaintiff's conduct in allowing Mr. McClelland to continue physically working until 8th July 1992, and paying him three months' salary thereafter, did not detract from this: Western Excavating v. Sharp (1978) ICR 222 at 226. This was in conformity with the D-E policy to make such terminations of employment as "creditable" to both parties as possible.
70 Mr. Conti submitted that repudiation of a contract is a serious matter, not lightly found or inferred: Smyth & Co. v. Bailey (1940) 3 AllER 60 at 71; Grout v. Gunnedah Shire Council (1994) 126 ALR 355 at 370. Phillip McClelland appreciated he was subject to a service contract for an unexpired term of years, to which he was bound; and had sought legal advice from Sly & Weigall. The letter of 22nd June 1992 requested termination; and other parts of the letter, including a statement as to causing minimum disruption and an offer to stay until 26th September 1992, made it clear that the letter was seeking a negotiated end to the employment. This was confirmed by the expressed willingness to treat with the company, albeit preferably not with Mr. Rogers.
71 By its actions, the plaintiff indicated that it understood the letter in this way. Mr. Boonstra's facsimile referred to a company policy not to leave a manager in his responsibility after it has become clear that he is not performing or "is willing to leave". It was mutually agreed that he would remain at the plaintiff's offices until 8th July 1992, and then he was paid long service leave, holiday pay and salary up to that time, plus a further three months "termination pay". This conduct by the plaintiff was inconsistent with an acceptance of a repudiation. A significant incentive to the plaintiff entering into a consensual termination was that the plaintiff wished to have a continuing good relationship with other members of the McClelland family.
Decision
72 I have noted the submission on behalf of the plaintiff that Mr. McClelland's conduct, and in particular his letter of 22nd June 1992, evinced the clearest intention not to be bound to perform his contract. I should say at once that the plaintiff is limited by the pleadings to basing the allegation of repudiation on the letter of 22nd June 1992, and not on other conduct of Phillip McClelland. Early in the hearing, the defendants had sought to amend the Defence so as to allege that the plaintiff's conduct as employer amounted to a repudiation by the employer, which would have justified rescission by Phillip McClelland. Such application was opposed by the plaintiff, and rejected, on the basis that the plaintiff was not prepared for a hearing in which the merits of the conflict between Phillip McClelland and Mr. Rogers was investigated. In those circumstances, it is not open to the plaintiff to seek to bolster up a case of repudiation by the letter by calling in aid earlier conduct by Phillip McClelland. However, I do accept that the earlier conduct by Phillip McClelland is part of the background against which the letter of 22nd June 1992 must be considered and interpreted.
73 Apart from evidencing the serious dissatisfaction of Phillip McClelland with his dealings with Mr. Rogers, I do not think that the earlier letters bear very strongly on the construction of the letter of 22nd June 1992. It was put for the plaintiff that it was inappropriate conduct by Mr. McClelland to write these letters behind Mr. Rogers' back to his superiors in the organisation; but that is not relied on as repudiation, and it illustrates a consistency in Phillip McClelland's conduct between these two earlier letters, which on their face were seeking changes in the context of continued employment of Mr. McClelland, and the letter of 22nd June which is alleged to be repudiatory. It was said that the employer would more readily take the 22nd June letter as repudiatory, because Phillip McClelland had not made further enquiry as to the employer's response to the letter of 26th May, and had not allowed sufficient time for any further response. In circumstances where it is plain from evidence given by the plaintiff that no response favourable to Phillip McClelland was contemplated, it seems to me that Phillip McClelland cannot be criticised for correctly drawing this inference, and that the matter also has little bearing on the construction of the letter.
74 Similarly, it seems to me that the fact that Phillip McClelland took legal advice shortly before writing the letter cannot assist in the interpretation of the letter. It was not known to the plaintiff that this legal advice had been taken. One might draw the inference that, having taken legal advice, Phillip McClelland would have been careful to avoid repudiation; but the effect of the letter must be considered in the light of the circumstances known to both parties, rather than having regard to Phillip McClelland's subjective intentions.
75 For the plaintiff, considerable reliance was placed on the description of this letter as a "resignation". I accept that the ordinary meaning of the word "resign" in the context of an office, position, etc. is "to relinquish, surrender, give up, or hand over". However, its general use is to some extent equivocal, in that resignations notoriously are often tendered and not accepted, in which case the office or position is considered as continuing. That is, in many cases resignations are ineffective and known to be ineffective, unless they are accepted. Those resignations would be seen as the giving up of any claim to remain in the position or office, coupled with an offer to put an end to occupation of the position which might or might not be accepted. For that reason, although I am prepared to accept that the letter was described as a resignation at the meeting of 23rd June and that Phillip McClelland did not challenge that description, I do not think this carries very much weight concerning the question of whether the letter was or was not a repudiation.
76 Turning to the letter itself, I think it is fair to say that the letter made it clear in no uncertain terms that Phillip McClelland wished to leave the employment of the plaintiff, and that he believed that the very likely result of this letter was that he would in fact leave that employment. At the very least, the letter very strongly sought agreement from the plaintiff to the termination of the employment. The question is, did the letter convey that the writer would leave that employment, whether or not agreement was reached with the plaintiff. On the whole, I am not satisfied that it did. The words "I ask for the termination of my contract" point very strongly towards interpretation of the letter as a request for an agreement, not a repudiation. To some extent, later parts of the letter, which appear to treat the termination as something of a fait accompli, and the implication that Phillip McClelland was not prepared to stay beyond 26th September 1992, point the other way. However, I do not think that these indications are strong enough to overcome the force of the earlier words. At the very best, they make the letter equivocal, and I do not think repudiation should be inferred from an equivocal letter.
77 Furthermore, I do not think the plaintiff treated the letter as a repudiation, and acted to accept it as a repudiation. For acceptance of a repudiation to occur, there must in my opinion be conduct by the innocent party conveying to the repudiating party that the innocent party is thereby treating the contract as at an end. Normally, to call on the repudiating party for any further performance of the contract would be an affirmation; although, if the intention to treat the contract as at an end is clear, and the further performance is in the circumstances insubstantial, affirmation may be avoided.
78 There has been some discussion of this issue in the context of repudiation by an employer, with the employee continuing in employment for a short time thereafter.
79 In Western Excavating (ECC) v. Sharp (1978) ICR 222 at 226, Lord Denning, MR said this:
If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave at the instant without giving any notice at all or, alternatively, he may give notice and say he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once. Moreover, he must make up his mind soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract.
It will be seen that Lord Denning did not regard continued working by an employee during the period of notice as being an affirmation.
80 In Bashir v. Brillo Manufacturing Co. (1979) IRLR 296, an employee alleged repudiation by an employer in that the employer refused to allow him to continue as a supervisor and instead offered him a job with less pay and lower status. The employee was away sick for about two and a half months after this act of the employer, and accepted sick pay during that period. However, throughout the period the employee or his advisers were saying very positively that the employee did not accept the new position which the employer had sought to offer him, and the sick pay collected was at the same rate as he was entitled to as a supervisor. In those circumstances, the Employment Appeal Tribunal found that the employee had not affirmed the variation in the contract of employment, and was still entitled to accept the employer's repudiation at the end of the two and a half months period.
81 Again, in W.E. Cox Toner (International) v. Crook (1981) ICR 823, a long delay in acceptance of a repudiation by an employee was held to have affirmed the contract. In that case, Brown-Wilkinson, J., giving the judgment of the Employment Appeal Tribunal, noted the difficult position of an employee faced with a repudiation by an employer: by continuing to work for any period of time, the employee risks affirming the contract. The judgment went on, at p.829, to note that "provided the employee makes clear his objection to what is being done, he is not to be taken to have affirmed the contract by continuing to work and draw pay for a limited period of time, even if his purpose is merely to enable him to find another job".
82 In the present case, in my opinion the plaintiff by its conduct manifested an intention to have a consensual ending of the agreement, in a manner "creditible" to both parties, and not to terminate the agreement for breach by Phillip McClelland. This intention was manifested by the arrangement that the employment continue until 8th July 1992, and by the payment of three months' "termination pay". This conduct, in my opinion, shows that the plaintiff did not take the letter as a repudiation; and in any event, shows that the termination which was effected was consensual and not termination for breach.
DURATION OF RESTRAINT
Submissions
83 Mr. Sullivan submitted that, if the contract was terminated for repudiation, the plaintiff was entitled to be put in the position it would have been in had that repudiation not occurred; that is, the plaintiff would have enjoyed a period of at least until November 1995 before Phillip McClelland could set up a competing business.
84 Alternatively, it was submitted that the contract of employment came to an end on 8th October 1992, so that the restraint against competition continued until 8th October 1993. (Because the plaintiff's pleading had alleged a restraint only until 26th September 1993, it was accepted that the plaintiff could not succeed beyond that date.) It was submitted that Phillip McClelland had requested termination, but indicated he was prepared to stay until 26th September 1992; that the plaintiff in substance accepted the offer to remain employed until 26th September but relieved Phillip McClelland from his obligation to work in that period other than up to 8th July 1992; and that accordingly, the contract came to an end on 8th October 1992, being the date until which salary was paid, albeit performance had been excused after 8th July 1992: see Csomore v. Public Service Board of NSW (1987) 10 NSWLR 587 at 595; Mason Gray Strange NSW v. Eisdell, Powell, J., Supreme Court of NSW, 22/2/89.
85 Mr. Conti submitted that the conduct of both parties manifested an intention that the employment terminate on 8th July 1993. The employment came to an end on that day, and accordingly so did the contract of employment: see APESMA v. Skilled Engineering (1992) 12 ALR 471. Alternatively, where payment is made in lieu of notice, in the absence of evidence of a contrary intention, it should be inferred that the employer intended the termination to take effect immediately: Siagian v. Sanel (1994) 122 ALR 333.
Decision
86 In circumstances where I have found that the contract was not terminated for repudiation, I need not consider in any detail whether the plaintiff would in such case be entitled to damages on the basis that it would have had a restraint operative until November 1995. In general terms, I accept that a party in that situation is entitled to damages calculated with reference to the position it would have been in had the other party performed the contract. However, exactly how this would work out in this situation, I need not discuss.
87 Treating the termination as consensual, it seems to me that the intention manifested by the parties was that the employment should come to an end on 8th July 1992. The objective conduct of the employer was to pay ordinary salary, holiday pay and long service leave entitlements calculated until that day, and to pay in addition three months' "termination pay". The objective conduct of the employee was to accept those payments and to cease attending at the employer's premises after that date.
88 Certainly, circumstances may occur where the contract is treated as coming to an end after a period of notice, and the employer waives what would otherwise have been the continuing obligation of employee to perform services: that is what was considered to have happened in the Mason Gray Strange case. However, it seems to me that the question is what intention is manifested in the particular case. In this case, as I have said, I think the intention manifested by both parties was that the employment cease on 8th July. In Sirgian v. Sanel, Wilcox, CJ held that where payment in lieu of notice is made, in the absence of evidence of a contrary intention, it should be inferred that the employer intended the termination to take effect immediately. Whether or not there is any presumption to similar effect applicable in circumstances such as the present, in my opinion that was the intention manifested in this case.
89 For the plaintiff, some reliance was placed on the offer by Phillip McClelland to continue to work until 26th September 1992. That offer was not accepted, and I do not think the fact that offer was made effects the questions of what intention was manifested by the actions of the parties.
DID PHILLIP McCLELLAND COMMIT BREACHES OF CONTRACT?
Submissions
90 Mr. Sullivan submitted that the evidence showed that by July 1992 at the latest, Phillip McClelland had decided to establish a business to compete with the plaintiff's business in respect of the sale of coffee and tea and ancillary products in the food services market. In furtherance of this plan, he devised a strategy which included the following elements: to target existing customers of the plaintiff; initially to seek to sell only ancillary products to these customers; to do so as a short-term measure, in order to advance the ultimate business of selling coffee and tea, the selling of ancillary products on their own not being financially viable; and to engage key personnel of the plaintiff who had valuable contacts.
91 In pursuit of these plans, he had commenced carrying on a business by November 1992. That business was properly characterised from November 1992 as one of purchasing, processing, packaging, and distributing coffee and tea. The breaches were not de minimis: see Acros v. E.A. Ronaason & Son (1933) AC 470 at 480; Shipton Anderson & Co. v. Wheil Bros. & Co. (1912) 1 KB 574. Furthermore, what was done went far beyond being merely preparatory to carrying on business in competition with the plaintiff: see Southern Estates v. FCT (1967) 117 CLR 481 at 494.
92 Mr. Conti submitted that Phillip McClelland's activities prior to 8th April 1993 did not extend to the proscribed coffee and tea activities. In any event, what was done was no more than to engage in preparatory acts, not to carry on a business in competition: see Pioneer Concrete Services v. Galli (1985) VR 675. Furthermore, it was wholly unrealistic to characterise the very minor sales made by Phillip McClelland as being in competition was a massive multi-national corporation. The plaintiff did not see his activities as being competitive. No claim for damages is made in respect of any pre-9th July 1993 activities. No damage to goodwill is alleged as flowing from those activities. Mr. Conti submitted that tax cases, such as Southern Estates, went to a different issue.
Decision
93 There are some disputed questions of fact which I need to look at in relation to this issue.
94 First, it was submitted for the plaintiff that I should infer that Phillip McClelland was soliciting customers of the plaintiff in respect of tea and coffee business prior to 8th July 1993. It was submitted that this inference arises from the Westpac credit proposal dated 15th September 1993, and Mr. McClelland's answers in cross-examination to questions about it. On the whole, I do not think I can draw the inference from that document or those answers that the sale of coffee and tea was actually discussed by Phillip McClelland with customers of the plaintiff prior to 8th July 1993. Quite plainly, coffee and tea had been discussed with customers between 9th July 1993 and 15th September 1993, and other matters had been discussed with customers prior to 9th July 1993. It may well be that prior to 9th July 1993 customers had approached Phillip McClelland expressing dissatisfaction with service provided by the plaintiff. I do not think the terms of the entry, the basis of which is not established with clarity, are sufficient to enable me to reject Mr. McClelland's claim that he was careful prior to 9th July 1993 not to discuss coffee and tea with customers of the plaintiff.
95 The other factual matter concerns the content of discussions entered into by Phillip McClelland, and more especially Mr. Holder, with employees of the plaintiff, prior to 9th July 1993. Those persons admitted that there had been discussions with employees of the plaintiff, but claimed that the discussions occurred on the initiative of the employees, and involved expressions of dissatisfaction by the employees with their employment with the plaintiff, and no more than indications from Mr. McClelland or Mr. Holder that there could possibly be a job for them after 8th July 1993. However, Mr. Clark, who managed the plaintiff's business in Cairns until July 1993, and who commenced employment with Ambassador Foods at about the end of August 1993, gave evidence to the effect that he was approached and solicited by Mr. Holder and Mr. McClelland prior to July 1993, and offered an employment package which he could take up after 8th July 1993. In addition, the plaintiff placed reliance on the placing of advertisements, in circumstances where all positions were in fact filled by employees or ex-employees of the plaintiff, with whom there had been previous contact: it was submitted that this, coupled with the obtaining of statutory declarations, supported an inference that Phillip McClelland was trying to hide the reality of his approaches to the plaintiff's employees.
96 In my opinion, I cannot rely on the details of Mr. Clark's evidence. His affidavit was made in circumstances where he had recently been dismissed by Ambassador Foods for alleged misconduct, whereupon he immediately contacted the plaintiff seeking employment, and indicating preparedness to make a statement about the activities of Phillip McClelland and Ambassador Foods. That statement and the affidavit were made shortly afterwards, and subsequently Mr. Clark was given employment by the plaintiff. In those circumstances, I must regard Mr. Clark as a partisan witness. Furthermore, on his own evidence, he was prepared to solemnly make a false statutory declaration as to the circumstances of his obtaining employment with Ambassador Foods. I also considered that Mr. Clark, in his evidence, sought to greatly underplay his own dissatisfaction with his employment by the plaintiff and the extent to which he was actively seeking employment by Ambassador Foods. As regards the advertisements and statutory declarations, these may fairly be regarded as window-dressing; but this window-dressing was undertaken on legal advice, and I do not infer that the object was to conceal something sinister.
97 Accordingly, while I am not affirmatively satisfied that there was no more to the contacts between Phillip McClelland and Mr. Holder on the one hand, and employees of the plaintiff on the other, than those persons claim, I am not affirmatively satisfied that their dealings with Mr. Clark were as Mr. Clark claims. Probably, the truth lies somewhere in between these two accounts.
98 As submitted by Mr. Sullivan, Phillip McClelland had probably commenced business through Ambassador Foods by November 1992, and certainly he had done so by the beginning of February 1993. The question is, was this business "competitive" with the plaintiff's business as defined in the service agreement? In my opinion, this is not the same question as whether Ambassador Food's business prior to 8th July 1993 could be described as a "business of purchasing, processing, packaging and distributing coffee and tea".
99 If one confined attention to the sale of relatively small amounts of UHT milk, jam and cookies to customers of the plaintiff in the food service industry, the question may not have a clear-cut answer: the intersection with the plaintiff's business might be thought too insubstantial to amount to competition. However, so to confine attention would in my opinion be an incorrect approach. It is plain that these business activities were undertaken in preparation for a coffee and tea business to commence after 8th July 1993, and in order to give an advantage in the conduct of that business, particularly through the maintenance of business contacts with customers of the plaintiff. Furthermore, during the period February to July 1993, contact was also being maintained with certain key employees of the plaintiff, with a view to the possible employment of those persons in a coffee and tea business after 8th July 1993. When one puts all those elements together, it seems to me that, despite the relatively small quantities of products sold, and despite the entire absence from these products of coffee and tea, the business of Ambassador Foods during that period can correctly be regarded as being competitive with the plaintiff's business, that business being as I have determined earlier in this judgment. In my opinion, it went beyond being mere preparation for later competition.
DID MR. BANKS BREACH HIS CONTRACT OF EMPLOYMENT?
Submissions
100 It was submitted by Mr. Sullivan that I should accept the evidence of Mr. Hobbs that on 19th August 1993 he heard Mr. Banks introducing Mr. Bellchambers to the Food & Beverage Manager and the Catering Manager at the Hyatt Hotel, Coolum, Queensland, which was a customer of the plaintiff, and that he heard Mr. Bellchambers say words to the effect that Mr. Banks was joining McClellands and that they would come back and see them after he had done so. He submitted that this evidence should be preferred over Banks' denial of any such conversation and of knowledge that Mr. Bellchambers was about to be employed by Ambassador Foods; and that it should be inferred that Mr. Banks took Mr. Bellchambers along in order to promote the business of Ambassador Foods, which he was shortly to join. He submitted that I should reject Mr. Banks' evidence that he simply took Mr. Bellchambers, who was then unemployed, along because he thought he would like a drive and to see some of his old customers. Mr. Sullivan submitted that this conclusion was also supported by evidence from Mr. Hill, and a document of 30th August 1993 recording employment of Mr. Banks, this being inconsistent with Mr. Banks' evidence that he was not offered a job until after 1st September 1993.
101 Mr. Sullivan submitted that such conduct by Mr. Banks was a breach of fidelity and good faith to his employer: see Blyth Chemicals v. Bushnell (1933) 49 CLR 66 at 81; Wessex Dairies v. Smith (1935) 2 KB 80 at 84.
102 Mr. Conti submitted that I should accept the evidence of Mr. Banks and Mr. Bellchambers.
Decision
103 On the balance of probabilities, for the reasons advanced by Mr. Sullivan, I find that Mr. Banks did take Mr. Bellchambers to the Hyatt at Coolum for the purpose of advancing the interests of Ambassador Foods. That was a breach of his contract of employment, although as conceded for the plaintiff, not one which resulted in any damage being caused to the plaintiff.