Planet Fitness Pty Limited v Brooke Dunlop & Ors

Judgment 1HIS HONOUR: The plaintiff moves for the interlocutory relief sought in paras 8 to 10 of the summons. As I understand the position, the first defendant, without admissions, does not oppose an order being made in accordance with para 8 for a period of seven days, nor an order in the form of para 9 for a period of seven days. However, the second and third defendants resist an order in terms of para 9. All defendants oppose order 10. 2The plaintiff seeks to enforce clause 3.5 of an agreement dated 21 June 2010, which the plaintiff says was made between it and the first defendant. The first defendant, by that agreement, agreed to provide services of a personal trainer to the entity named in the agreement as "the Company". The agreement recites that "the Company" is engaged in operating a business running a gym located in Turton Road, Lambton. 3Clause 3.5 provides: "Restraint of Trade: During the term of this agreement and during the Restraint Period, the Contractor must not directly or indirectly or through any interposed entity (including a corporate vehicle, trust or partnership) without the prior written agreement of the Company, solicit, canvass or secure the custom of any person who is the Company's client. In this clause: (a) 'Client' means a person who has been a member of the Company (or any other 'Planet Fitness' branded gym) or otherwise attended any 'Planet Fitness' branded gym at any time whilst the Contractor is providing the Services under this agreement; and (b) 'Restraint Period' means a period of three months after this agreement is terminated. This clause survives termination of this agreement." 4The second and third defendants operate gyms (or so it can be inferred) at Warners Bay and Mayfield. All of these locations are in the Newcastle area. The second and third defendants trade under the name Genesis. 5There is an issue as to whether the plaintiff is a party to the agreement which it seeks to enforce. The company named in the agreement is Planet Fitness Lambton Pty Limited ABN 17 350 760 994. The plaintiff is Planet Fitness Pty Limited ACN 073 563 489. The director, or a director, of the plaintiff, Mr Rosekelly, deposes that the plaintiff operates a fitness gym at Lambton in Newcastle that trades as Planet Fitness. That is consistent with the business described in the agreement as the business carried on by "the Company". Mr Rosekelly deposes that: "In around June 2010 we took steps to have all our personal trainers sign Independent Contractor Agreements. At this time Planet Fitness held a meeting with all our personal trainers ... and talked through the agreement. ... Brooke [Dunlop, the first defendant] signed her agreement with Planet Fitness on 21 June 2010." 6Mr Rosekelly then annexes what he says is the copy of the Independent Contractors Agreement. 7A business name search of ABN 17 350 760 994 discloses that there is an entity with that ABN which is "the trustee for Planet Fitness Trust". The entity type is described as "Discretionary Trading Trust". 8There is no evidence that Planet Fitness Pty Limited is the trustee of a discretionary trading trust. I was told by counsel for the plaintiff that such evidence could be provided, but no adjournment was sought in that respect, except that counsel suggested that evidence on this question could be provided this afternoon. I expressed doubt as to whether that would give the defendants sufficient time to deal with the question. The defendants have urged me to deal with the matter on the basis of the evidence with which the plaintiff came to court, and I think I should do so. 9Having regard to the description in Mr Rosekelly's affidavit of the business of the plaintiff, and the correspondence of that description of the plaintiff's business with the business of "the Company" in the agreement, coupled with Mr Rosekelly's evidence that the agreement was in fact made between the plaintiff and the first defendant, I am satisfied that there is a serious question to be tried that the plaintiff is the contracting party with the first defendant and that the reference to Planet Fitness Lambton Pty Limited is a misnomer. Indeed, I was told by counsel for the second and third defendants that his searches had not revealed the existence of such an entity. 10If it is indeed the fact that the plaintiff is the contracting party then I can infer that it contracted in its capacity as trustee for a discretionary trading trust. Given that the trust is described as being a trading trust, I do not think there is any real question likely to be raised that its business, the goodwill of which is entitled to protection, would be any different from that described in the contract. 11The first defendant was engaged by the plaintiff as an independent contractor to provide the services of a personal trainer to clients of the plaintiff. The agreement does not provide for the first defendant to provide such services exclusively to the plaintiff. Nor is there any restraint on the plaintiff's providing services as a personal trainer to others after the agreement comes to an end. 12The relief sought in order 10 of the summons was for an order that the second and third defendants be restrained from employing, otherwise contracting with or permitting the first defendant to provide fitness training services or personal training services. Such an order would be too wide, as I think was ultimately accepted in the course of the plaintiff's submissions in reply. Whilst a contractual restraint of employment can be justified by the need to protect goodwill or confidential information and the difficulties of detecting breaches of obligations against solicitation or against disclosure of confidential information, I do not think that in the absence of such a contractual restraint against employment, an injunction against employment simpliciter could lie. 13In the alternative to that order the plaintiff sought an order restraining the first defendant from providing personal training services to persons who had been her clients when she worked for the plaintiff. Such persons were in fact clients of the plaintiff, but in a sense they would also have been clients of the first defendant. 14There is a strong prima facie case that the first defendant has solicited or canvassed persons for whom she provided personal training services when she was contracted to the plaintiff. She did so by posting messages on her Facebook page in which, amongst other things, she advised her Facebook friends that, first, she was in negotiation, and later that she had negotiated arrangements, with Genesis (that is, the second and third defendants), whereby those persons would be able to train at Genesis clubs at a reduced rate for the remaining periods of their contracts with the plaintiff. One of those messages stated: "I have negotiated an amazing deal exclusively for any of my PT [personal training] clients, PC members and Class participants. Please call Sean and the guys at GENESIS Warnersbay [sic] NOW ... All you need to do is mention my name and show your current membership tag ..." 15It is unnecessary to detail the various messages which at least prima facie strongly point to the first defendant having solicited and canvassed her former clients. It is clear from the extracts from her Facebook pages that many of her former clients, when she was contracted with the plaintiff, were amongst the first defendant's Facebook friends. The evidence also establishes that a number of those persons have cancelled their membership with the plaintiff and taken up the services of the first defendant through the gyms of the second and third defendants. 16The difficult question is what, if any, injunctive relief should follow as a consequence of those prima facie breaches. If the covenant in clause 3.5 is construed as being entirely a restraint against the first defendant's attempting to bring her former clients to her in a new position, then it can be said that the breach is complete, except in respect of any new acts of solicitation or canvassing. The question would then arise whether an injunction could be granted to restrain the consequences of the breach, that is, to restrain the first defendant from providing ongoing personal training services to those who have been so attracted. 17Counsel for the plaintiff said that it was not necessary to go so far. He submitted that the restraint against securing the custom of any person would be breached on an ongoing basis by the continuing provision of personal training services to such persons. He submitted that when personal training services were first provided to those persons in the second and third defendants' gyms, the first defendant would then have secured their custom, and that there would be continued acts of securing the custom by the continued provision of services. Hence the acts of providing services to such people would be continuing breaches of clause 3.5 which could be restrained. 18I do not think that that is the proper construction of clause 3.5. I agree with the submission of counsel for the second and third defendants that the words "solicit, canvas or secure the custom of" have to be read as a whole phrase and that each word in it gives sense to what is restrained. I agree that, considered as a whole, the clause is a restraint against endeavouring to attract, or achieving the attraction of, custom of the former clients of the first defendant, after her contract with the plaintiff had been terminated. 19 A clause which was intended simply to restrain the first defendant from providing services to former clients would need to be clearly so expressed. Different questions might then arise as to the enforceability of such a clause. I think the clause is one directed against soliciting and was not intended to deal, for example, with the case where a former client of his or her own volition wished to continue to use the first defendant as his or her personal trainer. 20It follows in my view that an injunction could only be granted, at the most, which restrained future solicitation, (which is not the matter in issue), and which sought to restrain the consequences of former solicitation. 21I was not referred to any authority to support the grant of an injunction to achieve the latter end. In the limited time available I have not myself found such an authority. An injunction which addressed the consequences of former solicitation would have to be framed so as to restrain the first defendant from providing her services as a personal trainer to her former clients that she had when she was contracted to the plaintiff, and who were or are her Facebook friends. In respect of those people one could infer that there is a real likelihood, although not a certainty, that they are still engaging the plaintiff because of her acts of solicitation or canvassing. But such an injunction would be very difficult to enforce and would create problems not only for the first defendant, but the second and third defendants. True it is that the second and third defendants have themselves been actively soliciting people's custom on the first defendant's Facebook page. But there is no evidence that at the time that was done they had knowledge of clause 3.5. That is to say, there is no evidence that they had knowledge that they may have been assisting the first defendant to breach her contract. 22The evidence is not entirely clear as to how many people might fall into the category of those who should be restrained. Mr Rosekelly deposes that the first defendant would have had contact with between 50 to 70 members at each group class and on average took between six and eight classes each week. He said that she would train on average approximately 20 to 30 members each week at personal training sessions, either one-on-one or in group classes. There are thus possibly some hundreds of people, depending on how many times people attended a group or personal class, who might be the subject of the order. That could be limited by putting those people into the subgroup of Facebook friends of the first defendant, but it is not clear how that subclass could be identified. 23There would be a real difficulty on a day-to-day level in the employees of the second and third defendant who run their gyms knowing whether, if they allowed persons to be trained by the first defendant, they would then be assisting in a breach of an injunction, or inducing a breach of contract. 24A further difficulty is that an injunction so framed would obviously affect third parties, namely, those who would want to use the first defendant's services. Those persons have not been heard and it would not be practicable to hear them. There may well be many such persons who were unaffected by the solicitation of the first defendant and who would have followed her in any event. 25An injunction is a discretionary remedy. The difficulties of both framing an injunction and enforcing it, as well as the absence of any clear authority that an injunction against the consequences of the prima facie breach, as distinct from continuance of the breach, would be justifiable, lead to the conclusion that I ought not to grant such a remedy. 26The plaintiff, if it establishes its case at trial, will presumably be entitled to damages or an account of profits against the first defendant. If it establishes a case of knowing inducement of a breach of contract against the second and third defendants, it will be entitled to monetary remedies against them. 27In my view the orders that I ought to make are to continue the orders that I made ex parte on 7 November 2012 restraining the first defendant from posting any new messages on her Facebook page of the kind referred to in order 3 or from otherwise soliciting, canvassing or securing the custom of persons who were clients of the plaintiff during the relevant periods. 28The solicitors for the first defendant have advised that, without admission, the offending Facebook posts have now been removed and I do not understand any further order to require that to be done is now sought. 29Subject to hearing from counsel as to the appropriate form of order I think the orders should be that orders 3 and 4 made on 7 November 2012 be continued until further order, and then to direct pleadings, and to stand the matter over to the Registrar's list for directions so that the plaintiff's claim for final relief can come forward. [Counsel addressed.] 30I make the following orders: 1.Order that orders 3 and 4 made on 7 November 2012 continue until further order. 2.Order that the plaintiff's application for interlocutory relief in the summons be otherwise dismissed. 3.Order that the plaintiff file and service a statement of claim by 16 November 2012 and that the defendants file and serve their defences and any cross-claim by 28 November 2012. 4.Stand the matter over to the Registrar's list on 30 November 2012. [Counsel addressed on costs.] 31I think that separate costs orders should be made in respect to the first defendant on the one hand and the second and third defendants on the other. The first defendant has consented to the orders which I have continued in substance and was successful in her opposition to the further orders that the plaintiff sought today. On the other hand, at a final hearing it might be determined that the plaintiff should have been entitled to interlocutory relief against the first defendant. In those circumstances I think the appropriate order is that the costs of today be the first defendant's costs in the proceedings. 32So far as the costs of the second and third defendants are concerned, the real issue was the order sought in para 10 of the summons that would have restrained the second and third defendants from employing, or contracting with, or permitting the first defendant to provide fitness training or personal training services. In the end it was acknowledged that that order was too wide. The second and third defendants' opposition to that order was entirely justified. Further, although there is a strong prima facie case that this interlocutory application has been brought about by breaches by the first defendant of the contract, there is no such strong prima facie case against the second and third defendants. I think in those circumstances the appropriate order is that the plaintiffs pay the second and third defendants' costs of today. I make those 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: 23 November 2012