Healthcare Australia Pty Ltd v Randstad Pty Limited

Supreme Court of NSW|2016-09-27|Before: Ball J

Introduction

By a business sale agreement dated 1 May 2015 (the BSA) made between the plaintiff, Healthcare Australia Pty Ltd (HCA), and the defendant, Randstad, HCA agreed to buy a healthcare and personnel placement business (more particularly identified in the BSA) carried on by Randstad for the sum of $7,700,000 subject to certain adjustments. Clause 22.2 of the BSA imposed on Randstad a restraint from conducting a rival business for a period of three and a half years from the date of completion of the agreement. The question in this case is whether Randstad has breached that restraint by recruiting for the Uniting Church of Australia Property Trust for Uniting (NSW.ACT) (Uniting) persons to fulfil the role of National Disability Insurance Scheme Local Area Coordinators (LACs) and, if so, whether HCA is entitled to an injunction to restrain Randstad from providing recruitment services in relation to LAC roles for the term of the restraint. The answer to that question turns on whether recruitment services in relation to LAC roles are part of the restrained business. It is not disputed that the restraint is reasonable. Nor is it disputed that, if the restraint has been breached, an injunction substantially in the form sought by HCA would be appropriate.

The business sold

The business that was sold was a division of the Human Resources Services business carried on by Randstad in Australia. The division was known as the "Care" division or "Randstad Care". It provided recruitment services to clients who provided healthcare, aged care and disability care services. It also directly employed healthcare staff itself in temporary roles and entered into commercial agreements with clients pursuant to which its employees would perform duties for those clients. The business was divided into three units consisting of a "nursing" business unit, a "disability support" business unit and a "permanent recruitment" business unit. The permanent recruitment unit recruited for permanent roles regardless of whether those roles were nursing or disability support.
Prior to its sale, the business recruited or itself employed various types of employee. It is not necessary to set out a comprehensive list. However, the types of employees recruited or employed by Randstad Care included the following:

Registered Nurses.
Disability Support Workers. A Disability Support Worker provides care or other support to people with an intellectual or physical disability. The role may include tasks such as assisting a disabled person with shopping, visiting a friend or engaging in other social activities, the performance of a broad range of domestic services and the performance of a range of healthcare procedures relating to the disabled person's personal hygiene and well-being. Depending on the tasks involved (and the grade of the employee), the employee may not need any particular qualifications or experience or may require some qualifications and experience relevant to the duties to be performed, such as a TAFE Certificate III in an appropriate field.
Case Manager in Disability Services. A Case Manager in Disability Services is responsible, among other things, for the facilitation, planning and delivery of care and support services and clinical care needs of a person suffering a disability, which includes regular liaison with healthcare professionals in relation to the person's clinical care and needs. The position requires degree qualifications in allied health or nursing together with certification with the Case Management Society of Australia and a current first aid certificate together with relevant experience in aged care, community services or the allied health industry.
Homecare Coordinators. The role of a Homecare Coordinator is similar to the role of a Case Manager in Disability Services except that the Homecare Coordinator is responsible for providing care to elderly people in their homes. The role includes ensuring that the services provided to the client are well planned and focussed on independence, wellness, that they provide meaningful activities for the client and that the care activities are undertaken or delegated to appropriately skilled staff within current legislative and regulatory requirements. The position requires a Certificate 4 Home and Community Care, Aged Care, Services Coordination or equivalent and a current first aid certificate together with relevant experience within the aged care industry.
ACFI [Aged Care Funding Instrument] Coordinators and Continuous Quality Improvement Consultants. The role of an ACFI Coordinator is to prepare, manage and lodge ACFI submissions and claims. The role includes conducting ACFI assessments and reviewing ACFI processes adopted by the employer to achieve the best financial outcomes for older people in need of care. The position requires a tertiary qualification in nursing and a high level of knowledge and understanding of the ACFI instrument in a residential aged care facility. The role of a Continuous Quality Improvement Consultant is to ensure aging community care services provided by the employer are consistently developed, delivered and evaluated to an industry best practice and standard. The position requires tertiary qualifications in relevant disciplines such as statistics, organisational psychology or business management and an up to date standards and accreditation certification or the willingness to undertake that certification and experience in a community aged care quality improvement role.

The activities sought to be restrained

The National Disability Support Scheme (NDIS) was established by the National Disability Insurance Scheme Act 2013 (Cth) (NDIS Act) following a report dated 31 July 2011 prepared by the Productivity Commission entitled "Disability Care and Support". The object of the Act is to establish a national scheme for the provision of services to disabled people by providing coordination, strategic and referral services, by providing funding to persons or organisations to enable them to assist people with disability to participate in economic and social life and by providing for individual plans for disabled people under which reasonable and necessary supports will be funded by the scheme: see NDIS Act, s 8. The Act also establishes the National Disability Insurance Scheme Launch Transition Agency (the NDIA), which is the authority responsible for implementing the NDIS: s 117. One of the objects of the Act is to "enable people with disabilities to exercise choice and control in the pursuit of their goals and the planning and delivery of their supports": s 3(1)(e).
As part of the implementation of the NDIS, the NDIA has, in accordance with recommendations made by the Productivity Commission, established the LAC role. The role of LACs is described in these terms in a publication of NDIA entitled "Operational Guideline - Gateway - Local Area Coordinators": LACs will have an active role in the community to positively influence community attitudes to inclusion and work to address some of the systemic barriers to participation. They will also work to address barriers on behalf of individuals and support people with disability to build capacity to access other support systems and increase independence. LACs are expected to assist people with disability in the community by, for example: a. Providing general information about the NDIS, the types of supports available through the NDIS, and other supports available in the broader community at relevant community based activities, and to other stakeholders who are likely to play a key role in the lives of people with disability b. Linking people with disability to providers of supports so that less complex needs are met effectively c. Helping to build the independence of people with disability through building their capacity and their informal networks of support d. Identifying, and working with community organisations to build their capacity to understand and respond to needs and to become more inclusive and meet the needs of people with disability e. Provision of information about: making an access request, information on what information to provide and information on what to expect in working with the NDIA, and f. Assisting people to access the NDIA, for example, helping a prospective participant complete the My Access Checker and making appointments with the NDIA on their behalf where requested.
The NDIS is being rolled-out progressively throughout Australia. In January 2016, Uniting invited Randstad to tender for the volume recruitment of LAC roles as part of the progressive rollout of the NDIS. On 4 February 2016, NDIA announced the appointment of Uniting as one of two providers who would be responsible for the provision of LAC services in New South Wales from the time of the announcement to June 2018, which is the expected transition period to the NDIS. Following that announcement, Randstad was successful in winning the tender to recruit LACs for Uniting. Randstad carried out that work between February and June 2016, although it is still involved in the provision of some aspects of the recruitment process for individual LAC candidates from time to time. It is that work which has caused HCA to commence these proceedings.
A LAC does not require any particular qualifications or experience and it appears that the LACs who have so far been appointed by Uniting have a broad range of qualifications and experience.
The role of LACs is based on a similar role introduced in 1988 by the Western Australian Disability Services Commission. In addition, a similar role, known as "Linkers", was also recently adopted in New South Wales. A document published by Uniting in May 2014 described the role of "Linkers" in the following terms: Ability Links NSW (ALNSW) is the NSW approach to local area coordination. This model of support is a new way to assist people with disability, their families and carers, to have their needs met within their local communities. The position is responsible for working with people with disability, their families and carers, to build on their strengths and skills, develop networks in their own communities and help plan for the future. Linkers will provide a locally based first point of contact designed to improve access to, and engagement in, local community and mainstream services and disability services (where necessary) to facilitate social and economic inclusion of people with disability. The selection criteria set out in that document states that an essential requirement is "Relevant experience or qualifications in human services or community development". The document makes it clear that work experience in disability services is not required.
Prior to its sale to HCA, Randstad Care did not recruit or employ Local Area Coordinators in Western Australia or Linkers in New South Wales. However, there is evidence that another division of Randstad known as the "Assessment Centre" engaged a number of Linkers for Uniting prior to Randstad Care being sold to HCA. The Assessment Centre is the division of Randstad that is responsible for the recruitment and placement of large numbers of personnel at one time for the same or similar roles for a single client. At the time the BSA was entered into, what distinguished the Assessment Centre from other divisions of Randstad, and Randstad Care in particular, was the methodology involved in recruitment, not the industry for which it recruited or placed candidates or the roles for which it recruited. The methodology used by the Assessment Centre was to use group interviews and supervised role playing between candidates rather than the traditional individual interviews, which enabled a substantial number of applicants to be assessed over a short period of time.
From about 30 May 2015 to about 1 July 2015, Randstad also used the Assessment Centre to recruit approximately 45 disability support workers for the Endeavour Foundation in South Australia. That is the project referred to in cl 22.3(f) of the BSA as the "Endeavour Project".

Relevant legal principles

The principles that apply to the interpretation of commercial contracts are well settled. They were recently summarised by the High Court in these terms in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] per French CJ, Hayne, Crennan and Kiefel JJ: The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". [Footnotes omitted]
If the meaning of words in a contract understood in their context is clear, then the court must give effect to them notwithstanding that that interpretation produces a capricious or uncommercial result. As Gibbs J (in dissent, but not on this issue) explained in Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109; [1973] HCA 36: If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate" … See also JP Morgan Australia Ltd v Consolidated Minerals Pty Ltd [2011] NSWCA 3 at [96] per Macfarlan JA with whom Campbell JA and Young JA agreed; Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114; Hohn v Mailler [2003] NSWCA 122.
Consistently with these principles, words used in a contract are to be given their ordinary grammatical meaning unless the context requires otherwise. As Lord Ellenborough explained in Robertson v French (1803) 4 East 130 at 135-6; (1803) 102 ER 779 at 781-2, cited with approval by Knox CJ in Minucoe v London and Liverpool and Globe Insurance Co Ltd (1925) 36 CLR 513 at 518; [1925] HCA 33: [A written instrument] is to be construed according to its sense and meaning, as collected in the first place from the terms used in it, which terms are themselves to be understood in their plain, ordinary, and popular sense, unless they have generally in respect to the subject matter, as by the known usage of trade, or the like, acquired a peculiar sense distinct from the popular sense of the same words; or unless the context evidently points out that they must in the particular instance, and in order to effectuate the immediate intention of the parties to that contract, be understood in some other special and peculiar sense.
Where the parties in a carefully drafted agreement have used the same word more than once in the document, there is a presumption that they intended that it have the same meaning each time: Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2013) 41 VR 636; [2013] VSCA 179 at [26]; Sageinvest AG v Western Metals Copper Ltd [2003] NSWSC 490 at [8], citing Prestcold (Central) Ltd v Minister of Labour [1969] 1 WLR 89 at [97].
Generally, evidence of pre-contractual negotiations is not admissible to interpret a written contract. However, pre-contractual negotiations may be admitted to establish the background facts known to the parties against which the contract was to be interpreted. As Mason J said in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24 at 352: ...prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
The relevant background facts may demonstrate that the parties intended a word or phrase used in the contract to have a particular meaning. If they do, that is the meaning that must be given to the word or phrase. As Kirby P said in B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 at 236: If the surrounding circumstances of the date of the written document show that the parties intended to use a word not in its primary or strict sense but in some secondary meaning, the court may construe it according to those circumstances and intention of the parties. The intention is of course, that which is objectively derived and not the unknowable subjective ruminations of those involved.

The parties' contentions

HCA's primary contention is that by recruiting LACs for Uniting, Randstad has engaged in a business which is a "Restrained Business" in contravention of cl 22.2(d). "Restrained Business" includes "any business which carries on healthcare recruitment". The expression "healthcare recruitment" as used in the definition of "Restrained Business" must have the same meaning as that expression has in the definition of "Business". It is apparent from the definition of "Business" that "healthcare recruitment" is a phrase used to describe the business actually carried on by Randstad Care at the time the BSA was entered into, including the activities described in paras (a) to (c). The business actually carried on by Randstad Care included the temporary and permanent placement of "disability care personnel", as para (a) recognises. LACs are properly described as "disability care personnel" since they are involved in the provision of care to those suffering from a disability. It follows that a business involved in the recruitment of LACs is a Restrained Business.
HCA also contends that by recruiting LACs Randstad has contravened cls 22.2(e) and (f). However, it is not suggested that those sub-clauses raise substantially different issues and they can be put to one side.
Randstad takes issue with the contentions made by HCA. It puts its case in various ways. However, in substance, it makes two points. The first is that the expression "healthcare recruitment" as used in the definition of "Restrained Business" does not have the meaning contended for by HCA. Rather, it means the recruitment of persons for roles involving the provision of direct physical or personal care to patients, aged persons and disabled persons or roles that require clinical qualifications. Second, Randstad submits that even if the expression "healthcare recruitment" has the meaning contended for by HCA, the recruitment of LACs was not "healthcare recruitment".

The meaning of "healthcare recruitment"

Randstad accepts that the expression "healthcare recruitment" is used in the definition of "Business" to describe the recruiting business carried on by Randstad Care and that that business included the business of recruiting disability care personnel. However, it contends that the expression "healthcare recruitment" as used in the definition of "Restrained Business" must be given a narrower meaning in order to give the BSA a sensible commercial operation. It is apparent from para (c) of the definition of "Business" that Randstad Care carried on the business of "the provision of value added healthcare services, including rostering, pay-rolling and related support to Clients". However, the parties could not have intended the restraints imposed by cl 22.2 to operate in relation to the business of recruiting staff involved in rostering and payroll and related activities. Those roles have nothing to do with healthcare. Yet that would be the effect of interpreting the expression "healthcare recruitment" in the definition of "Restrained Business" as having the same meaning as that expression has in the definition of "Business". Moreover, Randstad contends that if HCA is right, cl 22.3 has no work to do. The meaning of "healthcare recruitment" is so broad that a restriction on the operation of the restraint that operates by reference to it does nothing.
Randstad submits that these conclusions are supported by the pre-contractual negotiations, which it says are admissible as part of the relevant surrounding circumstances. The material on which Randstad relies consists of correspondence between the representatives of the parties who were responsible for negotiating the terms of the BSA in which the representatives proposed alternative wording for the restraint to be included in the contract and set out their views on what was intended to be achieved and the effectiveness of the words proposed in achieving that intention. In particular, Randstad relies on the following statement in an email dated 29 April 2015 from Mr Taylor, the Chief Financial Officer and a director of HCA, to a number of employees of Randstad: As a suggestion, I would delete a) through to f) [of an early draft of cl 22.3] and simplify the first part to read: "For the avoidance of doubt, nothing in this clause 22 prevents the Vendor or a Related Entity of the Vendor from providing services to a third party as long as such services are not healthcare roles." This still allows you to provide managed services to a hospital, still allows you to provide accountants, IT, etc etc, Again, Geert-Jan, I am very conscious of speaking for the both of us, and so please amend as you see fit, but the core of the restraint is that Randstad is out of healthcare in Australia for 3.5 years.
I do not accept Randstad's submissions. In my opinion, the expression "healthcare recruitment" should be interpreted in the same way each time it is used in the BSA. That is consistent with the presumption recognised in cases such as Dura. It was not suggested that the phrase "healthcare recruitment" is a term of art, and I do not think that it could be said to have some commonly understood meaning. "Healthcare" is a broad and flexible term that must take its meaning from the context in which it is used. In the present context, it is used as part of the description of the business being sold and as part of the identification of the restraint that the parties agreed should be imposed on the vendor following sale. It is plain that the purpose of the restraint was to protect the goodwill that was being sold as part of the business. The parties specifically stated that "goodwill" included the right of the purchaser to represent itself as the successor to the vendor in the business being sold. It is natural in those circumstances to interpret a phrase used to describe the business and to describe the restraint in the same way. That aligns the protection with what is being sold.
The difficulties identified by Randstad do not arise. The business that was sold is described as a "healthcare recruitment and personnel placement business". The word "healthcare" is obviously intended to be read distributively, so that what was being sold was a healthcare recruitment and healthcare personnel placement business. Consequently, "healthcare recruitment" only describes part of the business - that is, that part of the business involved in recruiting healthcare workers for clients. The phrase is not apt to describe the provision of "value added healthcare services". Those services are more aptly described as "healthcare personnel placement services", which are not caught by the definition of "Restrained Business". Moreover, para (c) of the definition of "Business" only refers to related support provided to "Clients" (defined to mean "a client or customer of the Business") at the date of the BSA. It is plain from that qualification that the expression "healthcare recruitment and personnel placement business" was not intended to capture generally the provision of value added healthcare services of the types referred to in para (c).
It is not correct to say that the interpretation contended for by HCA means that cl 22.3(a) has no work to do. The problem identified by Randstad appears to arise whatever meaning is given to the words "healthcare recruitment". A "Restrained Business" is essentially a business that carries on healthcare recruitment. Whatever that means, on its face it seems unnecessary then to say in cl 22.3(a) that the restraints only apply to the Restrained Business carrying out healthcare recruitment, since that limitation is already built into the definition of "Restrained Business". However, as HCA points out, not all the restraints operate by reference to the "Restrained Business", and cl 22.3(a) is necessary to deal with restraints that do not. For example, cl 22.2(g) restrains Randstad from knowingly soliciting etc the custom "of a person who is, or was at any time in the twelve (12) month period ending on Completion, a Client of the Business". On its face, that would prevent Randstad from offering any services to such a client. Although poorly worded, cl 22.3(a) appears to be included to make it clear that cl 22.2(g) only prevents Randstad from soliciting etc the custom of a client to the extent that the client requires healthcare recruitment services.
The correspondence on which Randstad relies is not inconsistent with interpreting "healthcare recruitment" as referring to recruitment services of the type carried on by Randstad Care. In a broad sense, those services were all concerned with the recruitment of staff who were involved in the provision of healthcare. In any event, in my opinion the correspondence relied on by Randstad is excluded by the parol evidence rule. Randstad seeks to rely on that correspondence to demonstrate what the subjective intentions of the parties were in propounding or rejecting various drafts. That is precisely the type of evidence that is excluded by the parol evidence rule.
The interpretation contended for by HCA is also supported by cl 22.3(f) of the BSA. That clause assumes that the Endeavour Project was caught by the restraint and creates an exception in respect of it. But the Endeavour Project involved the recruitment of disability support workers. Consequently, the parties must have intended that recruitment of disability support workers would fall within the description of "healthcare recruitment". Randstad accepts that conclusion. However, as I have said, it seeks to define "healthcare recruitment" as the recruitment of persons for roles involving the provision of direct physical or personal care to patients, aged persons and disabled persons or roles that require clinical qualifications. Why the expression should be limited in that way is not clear. Disability support workers provide a range of assistance to disabled persons beyond direct physical and personal care; and it is not clear why the nature of the qualifications required by an applicant rather than the role an applicant is to perform should be the touchstone of whether the recruitment of such a person is healthcare recruitment or not. It is apparent that there are a broad range of positions concerned with the provision of assistance to disabled persons to enable them to live fulfilling lives and be involved in their community notwithstanding their disability. The evidence is that Randstad Care recruited for those positions. Once it is accepted that "healthcare recruitment" was intended to cover the recruitment of persons involved in providing care to disabled persons and that Randstad Care recruited for those positions, it is difficult to see why "healthcare recruitment" as used in the definition of "Restrained Business' and cl 22.3(a) should be interpreted as applying to only a subset of those positions.

Does the recruitment of LACs fall within the expression "healthcare recruitment"?

Randstad offers two reasons why the recruitment of LACs does not fall within the meaning of "healthcare recruitment". First, it submits that the role of LACs did not exist at the time the BSA was entered into and Randstad Care had never recruited LACs. The expression "healthcare recruitment" should not be given an ambulatory meaning and instead should be confined to the types of role that existed at the time the BSA was entered into. Second, the role of LACs is essentially an administrative role. It is not relevantly distinguishable from other administrative roles that form part of the activities of an entity engaged in providing healthcare services - such as accounting, legal or general administrative roles. And it is not relevantly distinguishable from other administrative services that might be provided to a person suffering from a disability, such as accounting or legal advice, cleaning or gardening.
I do not accept these submissions. I accept that the expression "healthcare recruitment" is not ambulatory. It has the meaning it had at the time the BSA was entered into. But that does not mean that the phrase only covers positions that existed at the time the BSA was entered into or for which Randstad Care had actually recruited. The question is whether the role of LACs is sufficiently similar to roles for which Randstad Care did recruit that it can be said that recruitment for those roles also amounted to healthcare recruitment.
As I have said, Randstad Care recruited employees filling a broad range of roles involved in the provision of services to disabled persons. Those roles included roles that involved providing assistance to disabled persons beyond direct physical and personal care and included roles that involved the facilitation and planning of support and clinical care. It is apparent that the parties treated recruitment for all of those roles as healthcare recruitment. What distinguishes healthcare recruitment from recruitment for other types of position is that healthcare recruitment is relevantly concerned with the recruitment of persons who deliver services to disabled persons to assist them in living with their disabilities. The services are delivered because the persons are disabled. Often, the services are regulated or funded in particular ways and, no doubt, specialist knowledge of regulatory and funding regimes is relevant in providing recruitment services for those positions. Some of the services may correspond to services that are delivered to persons who do not suffer a disability - such as assistance with cleaning or gardening. But the services still involve the provision of disability support services if the services are being provided because the person is disabled.
In my opinion, the role of LACs is sufficiently similar to the other roles for which Randstad Care recruited that they too fall within the definition of "healthcare" recruitment. They involve the provision of assistance to persons who are disabled because of their disability. The fact that the assistance is in the nature of advice and guidance and assistance in identifying and contacting persons who can provide assistance does not alter the position. A number of types of position for which Randstad Care did recruit, such as a Case Manager in Disability Services, also involved undertaking administrative tasks to ensure that a disabled person obtained the appropriate type and level of care. The fact that LACs provide advice and administrative assistance at a more general level with the result that they do not require any particular type of qualification does not alter the position. They are still being engaged to provide assistance to disabled persons. That is sufficient to make their recruitment "healthcare recruitment" for the purposes of the definition of "Restrained Business".

Orders

The plaintiff should bring in short minutes of order to give effect to this judgment. If the orders, including orders concerning costs can be agreed, I will make them in chambers. If not, the matter should be relisted by contacting my Associate for any further argument in relation to the form of the orders to be made.

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: 19 April 2018

At a glance

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Cases Cited (16)

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