Properties Northside Pty Ltd t/as Raine & Horne Manly/Freshwater v Pickering

Supreme Court of NSW|2015-02-24|Before: Ball J

Background

In 2008, the first defendant, Mr Pickering and Ms Marlena Jane Sait and Mr Tobias Hutton agreed to incorporate the plaintiff (PNPL) to carry on business as a real estate agent at 12 Belgrave Street, Manly trading under the name Raine & Horne Manly. Mr Pickering (together with his wife) held 50 per cent of the shares in PNPL, Ms Sait (together with Mr Taylor, who has since died and whose executor is Ms Sait) held 30 per cent of the shares and Mr Hutton (together with his wife) held 20 per cent of the shares. Previously, Mr Pickering, Ms Sait and Mr Hutton had worked together in real estate agencies in Harbord (as Freshwater was then known) and Balgowlah.
In June 2010, PNPL opened an office at 17 Albert Street, Freshwater.
In August 2011, Mr Pickering, who was facing financial difficulties at the time, approached Ms Sait and Mr Hutton and asked them if they were interested in buying his shares in PNPL. They agreed and, on 16 December 2011, the parties entered into a Share Buy Back Agreement (SBBA) under which PNPL agreed to buy Mr and Mrs Pickering's shares and PNPL agreed to pay a total price of $250,000.00 in three instalments. The first instalment was $185,000.00, which consisted of the sum of $202,820.00 less Mr and Mrs Pickering's loan balance of $17,820.00. The second instalment of $30,000.00 was payable 12 months from the date of the agreement, although that amount would reduce by the amount that commissions received by PNPL from sales made by Mr Pickering were less than $120,000.00. The third instalment of $35,000.00 was payable 18 months after the date of the agreement, but would be reduced if the commission earned by Mr Pickering on sales fell below $60,000.00. Clause 16.1 of the agreement provided: Pickerings agrees that they will not, directly or indirectly in any capacity whatsoever, seek the business of the existing clients of the partnership, nor offer any position of employment to any member of the staff of the partnership, nor be involved in the same type of business, or a similar type of business for a period of five (5) years within a radius of five (5) kilometres of the two business locations. Pickerings must not engage in any conduct derogating from the Company's right to obtain the full benefit of the goodwill of the business. Pickerings acknowledge that the restraint time and radial distance is no greater than is reasonably required to protect the goodwill of the Company.

The issues

PNPL submits that the defendants have breached their obligations under the Settlement Deed by listing and letting a property at Charles Street Freshwater (the Charles Street property), selling a property at Adams Street Curl Curl (the Adams Street property) and selling a property at Gardere Avenue Curl Curl (the Gardere Avenue property). The Charles Street property and Gardere Avenue property are both listed in annexure B (the Charles Street property was also included in annexure C). The Adams Street property is listed in annexure C. PNPL claims amounts earned or to be earned by Coastview from the letting and management of the Charles Street property ($25,882.41) and $22,880 as the commission payable on the sale of the Gardere Avenue property. PNPL also claims 50 per cent of the gross commission earned by Coastview on the sale of the Adams Street property ($9,900) under cl 6(a) of the Settlement Deed. PNPL also seeks various orders restraining the defendants from breaching cls 6 and 10 of the Settlement Deed. The form of the proposed orders largely repeats the terms of the deed.
The defendants resist PNPL's claims on a number of grounds. In relation to the Charles Street property and the Gardere Avenue property, the defendants submit that the properties were wrongly included in annexure B and they seek rectification of the annexure. Alternatively, they say that the inclusion of the properties in the annexure was an unreasonable restraint of trade. Lastly, they say that, even if there was a breach of cl 10(a), PNPL suffered no loss as a consequence of that breach because it would not have managed or sold the properties itself. In relation to the Adams Street property, the defendants say that the property was wrongly included in annexure C. Although it is not entirely clear, they appear to maintain that, on its correct construction, cl 6(a) should be interpreted as applying only where the person requesting the appraisal was the owner of the property or alternatively that cl 6(a) should be rectified to have that effect.
In addition, the defendants seek declarations that cls 10(a), 10(b) and 10(d) are unreasonable restraints of trade and consequently unenforceable. They also submit that cl 6(a) is in substance a restraint of trade and unenforceable. By an amendment allowed on 24 February 2015, they also seek declarations that, on its proper construction, cl 6(a) only applies where the defendants sell the property for a person listed as the owner of the property in annexure C and that it does not apply to a subsequent sale.

The proper construction of the Settlement Deed

It is convenient to begin by considering the proper construction of the Settlement Deed.
In general, the effect of cls 6 and 10 is that the defendants are prevented from providing agency services to landlords in respect of Properties Under Management (as defined), to Prospective Clients (as defined) or in respect of Currently Listed Properties (as defined) for a period of 60 months from 12 April 2013. Subject to those restrictions, Mr Pickering and Coastview are entitled to conduct a real estate agency business from their current office. However, they are not entitled to solicit business from persons for whom Mr Pickering performed an appraisal before 12 April 2013 and if they sell a property that was first appraised by Mr Pickering prior to that date they must pay 50 per cent of their commission to PNPL. In addition, if they sell a property located in the area specified in cl 6(c) within 36 months of 12 April 2013, they must pay 30 per cent of their commission to PNPL.
PNPL accepts that cl 6(a) only applies to first sales and not to subsequent ones. In other words, PNPL accepts that the clause is to be read as applying to all properties for which Mr Pickering prepared an appraisal prior to 12 April 2013, including those listed on annexure C. If the defendants act on the sale of any of those properties following the appraisal, they must pay 50 per cent of the commission they earn to PNPL. However, if they act on a subsequent sale of the property, no proportion of the commission earned on that sale is payable to PNPL. Although neither party expressly addressed the issue, it is logical to interpret cl 6(b) in the same way. It only prevents Mr Pickering from approaching a potential client to act on the first sale of a property following the provision of an appraisal by him of the property prior to 12 April 2013.
The relationship between cls 6 and 10 is not entirely clear. It is apparent that cl 10(a) applies notwithstanding any other term of the Deed. Consequently, it prohibits the defendants from acting on a sale of a property or managing a property where that property falls within the definition of "Properties Under Management", even if the property falls within annexure C and the vendor of that property approaches the defendants to sell it. The position is less clear in the case of cl 10(b). There could well be an overlap in those persons who own a property that was appraised by Mr Pickering prior to 12 April 2013 and those persons with whom PNPL had engaged in negotiations to do business as an agent during the 36 months preceding the date of the Settlement Deed. Clause 6(b) states that the parties agree that the defendants may act for persons falling within the former class if approached by the vendor. Clause 10(b) prohibits Mr Pickering from acting for persons falling within the latter class. In my opinion, the Settlement Deed should be interpreted as permitting the defendants to act where a person falls within both classes. In contrast to cl 10(a), cl 10(b) is not expressed as applying notwithstanding any other terms of the deed. If it was intended to take priority, it is to be expected that it would have been expressed in the same terms as cl 10(a). Clause 6(b) states expressly that Mr Pickering can act in those circumstances; and cl 6(a) deals with what is to happen if he does. The parties must have intended that those specific provisions would take priority over the general provision in cl 10(b).
Four other points should be made about cl 6(a).
First, it is clear that the clause applies by reference to properties, not by reference to the person who requested the appraisal. The question is whether a property was first appraised by Mr Pickering prior to 12 April 2013. If it was, and if the defendants subsequently act on the sale of that property, then 50 per cent of the commission earned on that sale is payable to PNPL.
The defendants submit that the parties could not have intended that result, and that appraisals could only be done for clients, with the result that it is necessary to identify for whom the appraisal is done. Why that should be so is unclear. The person who requests the appraisal may not be the owner and may not ultimately be responsible for paying the commission. There is a question in this case whether Mr Pickering prepared an appraisal for the Adams Street property. However, if he did, it seems clear that he did so at the request of the daughter of the then registered owner (who, at the time, was 96). If, for example, the property was subsequently sold by the defendants for the owner or the executor of her estate, there is no obvious reason why the parties must be taken as intending that cl 6(a) not apply because the request for the appraisal was made by the daughter. Indeed, it might be thought that precisely who requested the appraisal was unimportant. The important point is that it was requested and the property was sold by the defendants.
Second, it is apparent that the parties agreed that all the properties that were listed on annexure C had been appraised by Mr Pickering prior to 12 April 2013. The parties also agreed that the list may not be exhaustive and that if properties were appraised by Mr Pickering prior to 12 April 2013 that were not on the list then the defendants should also pay commission in respect of those properties. The obvious purpose of the list was to minimise future disputes concerning which properties had been appraised by Mr Pickering.
The defendants are critical of annexure C. They point out that the list appears to contain errors. They also say that the list was prepared by Ms Sait and that Mr Pickering was given inadequate time to consider it before the Settlement Deed was exchanged. However, in the absence of rectification, these points are irrelevant. The defendants signed and exchanged the Settlement Deed. As a result, they are bound by its terms, including the term by which the parties agreed for whom Mr Pickering had conducted appraisals prior to 12 April 2013. As the High Court said in Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [57]: The general rule … is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document.
Third, cl 6(a) is not a restraint of trade. The clause does not restrain the defendants from doing anything. It merely requires the defendants to share certain income they earn with PNPL. It may be possible to conceive of cases where an obligation to share income effectively amounts to a prohibition on engaging in the activity that produces that income. For example, if the defendants were obliged to pay 100 per cent of any commission they earned to PNPL, that obligation may in effect be a restriction on engaging in the activity by which that commission could be earned. However, in the absence of any evidence to the contrary, there is no reason to suppose that an obligation to share 50 per cent of the commission on certain sales is so onerous financially that it is effectively a prohibition on acting on those sales. The evidence is that Mr Pickering has paid PNPL commission on a number of sales where he acted as agent. There is no question that the obligation to share commission with PNPL effectively prevented him from acting on those sales. Of course, a restriction is contained in cl 6(b) on Mr Pickering actively seeking appointment as a sales representative in respect of properties appraised by him prior to 12 April 2013. However, it is not alleged that Mr Pickering has breached that clause and no relief is sought by any of the parties in respect of it.
Fourth, the defendants claim that if cl 6(a) does not have the meaning for which they contend then a term to that effect should be implied into the agreement to give it business efficacy. There is no merit in that claim. Such a term would be inconsistent with the express terms of the contract. It is not so obvious that it goes without saying. Nor is it necessary to give business efficacy to the contract. For those reasons alone, the term cannot be implied: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3.
The operation of the restraints in cl 10(a) depends on the definition of "Properties Under Management", which in turn depends on annexure B. There is a question, not specifically raised by the defendants, whether the restriction is in respect of all and only those properties then currently managed by PNPL or whether it is in respect of all and only those properties listed in annexure B. On the first interpretation, the critical question is whether a particular property was actually managed by PNPL at the time of the Settlement Deed, and the annexure simply provides some evidence concerning that question. On the second interpretation, the list is determinative. The parties appear to have proceeded on the second basis. In my opinion, they were correct to do so. The words "as identified" in the definition of "Properties Under Management" suggest that the properties under management were those set out in the annexure. It is not clear what purpose the annexure satisfies if it was not intended to set out the properties to which the restriction in cl 10(a) applied. The obvious purpose of the list was to resolve in advance any dispute concerning which properties were and which were not properties then currently managed by PNPL. That was to the benefit of all parties to the Settlement Deed. Where the parties intended a list to be non-exhaustive (as in the case of annexure C), they specifically said so. There is nothing in the deed to suggest that the parties did not regard annexure B as determinative.
Again, the defendants are critical of annexure B. Again, they submit that it contains errors and that Mr Pickering did not have sufficient time to consider it. However, by signing the Settlement Deed, and subject to any question of rectification, the defendants became bound by it on its correct construction. Absent some statutory or equitable relief, it is not open to them now to maintain that annexure B incorrectly records the properties managed by PNPL at the time the Settlement Deed was signed.
Clause 10(d) of the Settlement Deed is similar to cl 16.1 of the SBBA, although the restraint imposed by cl 10(d) is for a longer period of time. However, the clause is expressed to be subject to other provisions of the deed. The other provisions of the deed make it clear that the defendants are entitled to carry on the business of a real estate agent from their offices in North Curl Curl subject to the express restrictions in cls 10(a), (b) and (c). The result is that cl 10(d) would prevent the defendants from moving offices. There is, however, no suggestion that they are contemplating doing so.

The rectification case

The defendants put their case for rectification on the basis of a common mistake and on the basis of a unilateral mistake. In order to make out a case of rectification based on common mistake, the defendants must establish by clear evidence that the Settlement Deed fails to record what was the common intention of the parties: see Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349-50 per Mason J (with whom Menzies J agreed). In order to make out a case of rectification based on unilateral mistake, the defendants must at least establish that they were labouring under a mistake concerning the Settlement Deed which was contributed to by PNPL in a way that involved "a degree of sharp practice" on PNPL's part: Riverlate Properties Ltd v Paul [1975] Ch 133 at 140 per Russell LJ. That would include a case where PNPL knowingly took advantage of a mistake made by the defendants: see Medsara Pty Ltd v Sande [2005] NSWCA 40 at [4] per Ipp JA (with whom Handley JA and Young CJ in Eq agreed).
The defendants do not point to any evidence from which it could be concluded that the parties shared a common intention not to include some names or properties that appeared on the annexures or that the wording of the Settlement Deed did not reflect their common intention. The closest they come is in relation to the inclusion of the Gardere Avenue property in annexure B. In a letter dated 19 June 2013 from the defendants' solicitors to PNPL's solicitors, the defendants proposed terms for the settlement of the dispute that had arisen which included a term that: f) Geoff [Mr Pickering] and his entity would agree in respect of any property which is currently actively managed by [PNPL], other than the Dibbs property in Granger Avenue at North Curl Curl and the Bloomfield property in Gardere Avenue, Freshwater, not to list the properties for sale or management.
PNPL's solicitors responded to that term by saying "Agreed, subject to all other items herein being also agreed". It is apparent that not all the other terms then proposed by PNPL were agreed and there was then further negotiations in relation to the terms of the Settlement Deed. Consequently, it could hardly be said that there was a common intention of the parties that the Gardere Avenue property should not have been included in annexure B.
The defendants suggest that PNPL engaged in sharp practice because PNPL was unwilling to provide the defendants with copies of the proposed annexures until the time the Settlement Deed was exchanged. It appears that Ms Sait and Mr Hutton were concerned about the confidentiality of the information on those lists. What was proposed was that the defendants would sign the Settlement Deed and provide it to PNPL's solicitors. The defendants would then be given copies of the annexures. If they approved them, they would authorise PNPL to attach them to the executed copy of the agreement, PNPL would then sign the agreement and return the signed copy that included the annexures to the defendants' solicitors. That occurred on 15 August 2013. At 3.45 pm, the defendants were sent copies of the annexures and at 4.47 pm the defendants' solicitors sent an email to PNPL's solicitors authorising the annexures to be attached to the Settlement Deed. There was some urgency in resolving the matter because PNPL had commenced proceedings seeking to enforce the restraints contained in the SBBA and the first return date for the summons (which had been abridged) was 16 August 2013. The defendants also complain that they had earlier asked for access to PNPL's files in order to check the lists but that access had been refused.
None of this establishes that PNPL engaged in sharp practice. The annexures were compiled from PNPL's records. In some cases, PNPL has been unable to find the hard copy files relating to particular properties, and there may be a question whether the electronic records from which the annexures were principally prepared were completely accurate. However, I am satisfied that the annexures represented a genuine and reasonable attempt by PNPL to prepare annexures that met the descriptions set out in the Settlement Deed. The defendants were given an opportunity to consider those annexures. They were under some pressure to do so because the proceedings the Settlement Deed was designed to resolve were in court the following day. But it was not essential that the Settlement Deed be exchanged before that time, and PNPL did not make that a condition of the settlement. It was open to the defendants to ask for additional time to consider the annexures if they required additional time. However, they did not do so. In those circumstances, it could not be said that the defendants agreed to the annexures as a result of any sharp practice on the part of PNPL. It follows that there is no basis on which the annexures can be rectified.

Restraint of trade

The defendants submit that cls 6(a), 10(a), 10(b) and 10(d) contain unreasonable restraints of trade and are therefore unenforceable. I have already dealt with cl 6(a). It does not contain a restraint on trade at all.
A preliminary question arises in relation to the other clauses and that is whether the restraint of trade doctrine applies at all in circumstances where the restraints are contained in a settlement deed which itself represents a compromise of a dispute concerning the enforceability of the restraint contained in cl 16.1 of the SBBA.
There is authority to suggest that a genuine compromise of a dispute concerning the enforceability of a restraint of trade is itself not open to challenge on the ground that it imposes an unreasonable restraint of trade, on the basis that to permit such a challenge would be contrary to the public policy in favour of the finality of litigation and in upholding genuine and proper compromises: see Panayiotou v Sony Music Entertainment (UK) Ltd [1994] EMLR 229. That decision was followed by Nicholas J in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Noack [2004] NSWSC 347; (2004) 71 NSWLR 212 at [48]ff. After observing that the settlement in that case was a genuine and bona fide settlement that had been entered into freely by the parties who were legally represented, Nicholas J said (at [57]): Accordingly, in my opinion, there is no public interest or policy of the kind which underlies the common law doctrine of restraint of trade which would justify the Defendant's claim to have an essential component of this compromise declared unenforceable. Put another way, the settlement as incorporated in the Deed is one of the types of contract to which Lord Wilberforce referred in [Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269] (at 332) where he said: "There will be types of contract as to which the law should be prepared to say with some confidence that they do not enter into the field of restraint of trade at all." In this case, the public interest is served by upholding the Deed and, in particular, the restraint under cl 4.
The approach accepted in Panayiotou and Noack has been questioned on the ground that "It is not easy to see how private parties can by agreement exclude the application of a doctrine of public policy": J D Heydon, The Restraint of Trade Doctrine, (3rd ed) 2008, LexisNexis Butterworths at 84. However, the High Court left the issue open in Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 at [19].
In my opinion, it is appropriate in this case to follow the decision of Nicholas J in Noack. The restraint of trade doctrine renders covenants in restraint of trade unenforceable except to the extent that they are reasonable. They are reasonable if they afford no more protection than is reasonably necessary to protect the interests of the party in whose favour they are imposed and if they are reasonable having regard to the interests of the public: see McHugh v Australian Jockey Club Ltd [2014] FCAFA 45; (2014) 314 ALR 20 at [4] per Perram J (with whom Griffiths and White JJ relevantly agreed), citing Nordenfelt v Maxim Nordemfelt Guns and Ammunition Company Ltd [1894] AC 535 at 565 per Lord Macnaghten; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288 at 315-6 per Gibbs J.
Although the doctrine is a doctrine of public policy, that public policy has two aspects. One involves balancing the competing interests of the parties to the restraint. In that sense, it is a balance between an individual liberty and a right to protect by contract the legitimate interests of the person seeking to impose the restraint. In the present case, that involves balancing Mr Pickering's interest in being free to carry on the business of a real estate agent in the way he wishes against the interest of PNPL in protecting the goodwill it paid for under the SBBA and that was generated subsequently by Mr Pickering as an employee. The other involves balancing the public interest "in every person's carrying on his trade freely" (to use the words of Lord Macnaghten in Nordenfelt at 565) against the legitimate interests of the person seeking to impose the restraint. In the present case, it is not suggested that any specific public interest is affected by a restraint on Mr Pickering carrying on business as a real estate agent.
If the parties to a restraint reach a genuine compromise concerning what is reasonable as between them, it seems to me contrary to the public policy in favour of the finality of litigation to permit the party on whom the restraint is imposed to seek to argue that the compromise involves the imposition of an unreasonable restraint on that party's liberty. The public policy that underlies the restraint of trade doctrine is largely satisfied by the compromise. On the other hand, the public policy that encourages parties to settle their disputes would be completely undermined if the party the subject of the restraint were free to re-agitate its reasonableness.
The position may be different if it is alleged that the restraint is said to be unreasonable having regard to the interest of the public. However, no allegation of that type is made in this case; and it is difficult to see how such an allegation could be made. The dispute in this case is clearly about the effect of the restraints on Mr Pickering, not the effect of the restraints on the public interest.
There can be no question that the Settlement Deed represented a genuine compromise of the restraint imposed by cl 16.1 of the SBBA. The dispute that was settled by the Settlement Deed concerned the enforceability of that restraint. There were extensive negotiations between the parties in an attempt to resolve the dispute in which both parties were represented by lawyers. The resulting settlement represents a very substantial compromise. Under its terms, the defendants are permitted to continue to carry on their business as a real estate agent subject to a number of restrictions. There is no suggestion that those restrictions make the business unviable, with the result that the defendants are effectively prevented from carrying on business at all. It follows that the restraint of trade doctrine does not apply in the circumstances of this case.
Having regard to the conclusions I have reached, it is not necessary to express a view on whether the restraints contained in cls 10(a), 10(b) and 10(d) were reasonable. However, in the event that I am wrong, I should say something about that matter.
In my opinion, the restraints contained in cls 10(a) and 10(b) of the Settlement Deed were reasonable. Those restraints are largely directed at preserving the goodwill that PNPL acquired when it entered into the SBBA. That goodwill was largely represented by the clients for whom PNPL was currently managing properties and the persons with whom PNPL had had sufficient contact while Mr Pickering was an employee of PNPL that it might reasonably have been expected that those persons would engage PNPL to manage or to sell their properties. In cls 10(a) and 10(b) of the Settlement Deed, that class of persons is identified by reference to the properties managed by PNPL at the time the Settlement Deed was executed and by reference to the persons with whom PNPL had conducted negotiations to provide services within the past 36 months.
The defendants submit that the restraints are unreasonable for four reasons. First, they submit that the restraints operate by reference to the date of the Settlement Deed and consequently catch persons who became clients or potential clients of PNPL after Mr Pickering left PNPL. Second, they submit that the restraints operate for a period which is too long (that is, 60 months from 12 April 2013). Third, they submit that annexure B contained errors. Fourth, they submit that the restraint in cl 10(b), in so far as it applies to persons who were not current clients of PNPL, was too broad.
There is some force in the defendants' first point. As I have said, the principal purpose of the restraints was to protect the goodwill that PNPL acquired under the SBBA in December 2011. However, PNPL continued to employ Mr Pickering and he no doubt retained contact or established contact with potential clients during that time. The consideration payable under the agreement was payable over a period of time and was affected by the amount of business that Mr Pickering attracted. It was reasonable in those circumstances to seek to protect the client connections of PNPL up until the time Mr Pickering left PNPL's employment.
The defendants take issue with this proposition. They submit that Mr Pickering only worked at the Freshwater office and that consequently he could only have established client connections while he remained an employee of PNPL with persons who dealt with PNPL through that office, and that consequently the restraints should be limited to those persons. In my view, that is an unrealistically narrow approach. Up until the time Mr Pickering left, he had access to information concerning PNPL's properties under management and PNPL's database of potential clients. It does not appear that there was a strict division between the two offices. For example, the marketing efforts of the two offices were combined. It was reasonable of PNPL in those circumstances to seek to protect the relationships it had established while Mr Pickering was an employee irrespective of precisely how those relationships came about or which office was primarily responsible for them.
It is true that the Settlement Deed goes beyond the period when Mr Pickering was an employee. The restraint in cl 10(a) by its terms applies in respect of Properties Under Management as at the date of the deed and the restraint in cl 10(b) applies to persons who became Prospective Clients up until the date of the deed. In each case, it would have been more appropriate for the restraints to operate by reference to Properties Under Management as at the time Mr Pickering left and persons who became Prospective Clients up until that time. However, there is no evidence of the extent to which the position changed between 12 April 2013 and the date of the Settlement Deed (15 August 2013). In relation to the restraint in cl 10(a), Mr Pickering does give evidence that of the 214 properties listed on annexure B, 92 "appear to the best of my knowledge and recollection to be properties managed by [PNPL] before 16 December 2011" and that 122 "appear from my research to have either been sold recently or have only become managed by [PNPL] since 16 December 2011 or are currently managed by other agents". But for the reasons I have given, I do not think that 16 December 2011 is the correct date. It is not possible to say on the evidence how many properties were added to the list after 12 April 2013. Having regard to the relatively long term nature of property transactions and the relatively short period between when Mr Pickering left and the Settlement Deed was signed, there are not likely to be many. The same point may be made in relation to the number of additional Prospective Clients that were acquired during that period of time. Having regard to that fact and the limited nature of the restraints, I do not think that the restraints were unreasonable simply because they applied to what must be a limited number of properties with which Mr Pickering could have had no connection while a shareholder or employee of PNPL.
In my opinion, the 60 month restriction from 12 April 2013 was reasonable. For most people, the decision to sell a house or to move is a major one that occurs infrequently. Consequently, for most people dealing with real estate agents is not a common occurrence, and if a relationship is established between a client and a real estate agent, it may remain significant for a number of years. In that context, it was reasonable for PNPL to seek to protect relationships that had been established while Mr Pickering was a shareholder or employee of PNPL for a period of five years after he ceased to be an employee.
As to the defendants' third point, Mr Pickering's principal complaint about annexure B is that it includes properties that were first managed by PNPL after 16 December 2011. With one exception, he does not suggest that the list is an inaccurate list of Properties Under Management as at the date of the Settlement Deed. The exception is that he points to what he says is an inconsistency in the preparation of the list because the list does not include a property at Grainger Avenue North Curl Curl which was managed by PNPL where the owner had indicated an intention to move back in, but did include the Charles Street property where the property was not actually managed at the date the Settlement Deed was signed. Ms Sait explained that in the former case, there was no expectation that the owner of the property would re-lease it in the near future. On the other hand, in the latter case, the owner travelled frequently for work with the result that PNPL let the property out from time to time. In my opinion, that was a reasonable distinction to draw and it was reasonable to include the Charles Street property on annexure B for that reason. It follows that the defendants' third point adds nothing to their first.
As to the defendants' fourth point, it is important to bear in mind the nature of a real estate agency business. As I have explained, for most people dealing with real estate agents is not a common occurrence. The ability to attract and retain clients or potential clients may depend on building up relationships over a significant period of time. In those circumstances, it was reasonable of PNPL to seek to protect its relationship with persons with whom it had engaged in negotiations to do business during the 36 months preceding the date of the Settlement Deed.
On the other hand, in my opinion, the restraint contained in cl 10(d) is not reasonable. The plaintiff submits that the restraint imposed by cl 10(d) is so watered down by the other provisions of the deed that it has hardly any separate effect. However, that misstates the effect of the restraint. The effect of that restraint, when considered with other provisions of the Settlement Deed, is to prevent the defendants from moving offices. What interest that restraint protects is not clear.

Damages

PNPL claims an account of profits in respect of the letting and management of the Charles Street property. That claim has two components. The first is the fees earned by the Coastview during the period October 2013 to October 2015 said to total $10,539.91. The second, which appears to be claimed in PNPL's written submissions but is not in its summons, is the fees payable to Coastview during the period from October 2015 to August 2018 said to total $15,342.50.
Why PNPL is entitled to an account of profits arising from breaches of the Settlement Deed is not clear. It is not disputed that the Charles Street property was listed on annexure B. Consequently, it was a Property Under Management within the meaning of the Settlement Deed. The property was not actually leased at the time the Settlement Agreement was signed. However, the owner, Mr Walkley, worked overseas periodically and it was expected that it would be leased in the future. In fact, Mr Walkley went overseas unexpectedly because his father, who lived in England, fell seriously ill. The property was leased between 14 October 2013 and 14 October 2014 and is currently the subject of a lease commencing on 17 October 2014 and expiring on 16 October 2015. There is no question that Mr Pickering or Coastview is the agent in respect of both leases.
Mr Walkley sets out the history of his relationship with Mr Pickering in an email dated 7 February 2015 to Mr Pickering which was ultimately admitted into evidence by consent. In that email, Mr Walkley says that he first met Mr Pickering in 2001, that they had kept in touch, that he approached Mr Pickering about a sales appraisal, that he leased the property through Raine & Horne and that he moved back into the property when he returned to Australia. He then tried to contact Mr Pickering in about mid-2013. He was told that Mr Pickering had left Raine & Horne. He tracked Mr Pickering down through his mobile number and arranged to lease the property through him when he had to travel to England unexpectedly. He says "I would not have dealt with Raine and Horne or indeed Coastview Real Estate if you had not been working with them".
It is clear that Mr Pickering and Coastview are in breach of cl 10(a) of the Settlement Deed by acting for Mr Walkley. PNPL is entitled to recover damages in respect of that breach. Those damages are to be calculated as the value of the opportunity it lost to manage the property on behalf of Mr Walkley.
Little weight can be placed on Mr Walkley's evidence. There are difficulties with the form in which it was given. Moreover, in my opinion, it is likely that, despite what Mr Walkley says, he would have used PNPL if Mr Pickering told him that he could not act for him because of an agreement that he had reached with PNPL. Mr Walkley does not say who else he would have used or why. He had a relationship with Raine & Horne. He was no doubt under some pressure to act quickly in relation to his property. In those circumstances, the likelihood is that he would have gone back to Raine & Horne. If he had done so, Raine & Horne would have earned the management fees that Coastview has earned to date and the likelihood is that it would have continued to earn management fees in respect of the current lease. There is no evidence that PNPL would have earned management fees beyond the current lease.
In my opinion, there should be some discount in the damages recoverable by PNPL to take account of the risk - which I think is small - that Mr Walkley would have used a different agent. Some small discount should also be made for damages in respect of future revenue. Neither discount is amenable to precise calculation. Taking the various matters into account, I think it is appropriate to allow $9,000 in respect of this head of damage.
PNPL claims the commission earned by Coastview on the sale of the Gardere Avenue property in the amount of $22,880. Again, the claim is expressed as a claim for an account of profits, but it is in reality a claim for damages.
The Gardere Avenue property was owned by Mr Bloomfield. Mr Bloomfield swore an affidavit in the proceedings. He was not cross-examined on it. According to Mr Bloomfield, he has known Mr Pickering for about 20 to 25 years. Mr Pickering assisted him in buying the Gardere Avenue property, which Mr Bloomfield then leased for a period of time. It was for that reason that it was included on annexure B. In 2014, Mr Bloomfield says that he approached Mr Pickering and asked him to sell the property for him. It is not disputed that Mr Pickering did and that either he or Coastview earned a commission on the sale. Mr Bloomfield says that given his long friendship with Mr Pickering, he would not have used another agent. He also says that if Mr Pickering had not been available he would have used Mr James Smyth from SEA. He says that he would not have used Raine & Horne because he was not impressed with its service.
As I have said, Mr Bloomfield was not cross-examined. He explains why he would not have used Raine & Horne and who he would have used. I accept his evidence. It follows that I am not satisfied that PNPL has suffered any loss as a consequence of this breach of cl 10(b).
PNPL claims 50 per cent of the commission earned by Mr Pickering or Coastview on the sale of the Adams Street property ($9,900) on the basis that that property was included on annexure C. Having regard to the conclusions I have reached, there is no reason why PNPL is not entitled to recover that amount.

Other relief and costs

In my opinion, PNPL is entitled to injunctions to restrain the defendants from engaging in conduct that is a breach of the restraints contained in the Settlement Deed where the defendants have or have threatened to engage in that conduct. There is no utility in granting injunctions to prevent conduct that has not occurred and is not threatened.
On that basis, PNPL is entitled to injunctions to restrain breaches of cls 10(a) and (b).
By their further amended cross-summons, the defendants seek a large number of declarations concerning the correct construction of the Settlement Deed and the enforceability of the deed. For the reasons I have given, the defendants are not entitled to those orders. They do seek declarations that they are entitled to carry on their business and also a declaration that, on its proper construction, cl 6(a) only applies to first sales following an appraisal by Mr Pickering. However, PNPL has never disputed that the defendants are entitled to carry on business from their current offices and PNPL accepts that cl 6(a) only applies to the first sale after Mr Pickering provided an appraisal. Consequently, there is no reason to grant any of the declarations sought by the defendants.
PNPL has been largely successful in the case. In particular, I have held that the Settlement Deed is enforceable according to its terms and relevantly has the meaning contended for by PNPL. In those circumstances, the defendants should pay PNPL's costs of the proceedings.

Orders

It follows, therefore, that the orders of the court are: 1. Judgment in favour of the plaintiff against the defendants in the sum of $18,900; 2. Order that the defendants for a period of 60 months from 12 April 2013 be restrained from directly or indirectly or in any capacity whatsoever being concerned with, employed or engaged in or conducting any business that provides sales or property management services to the person, entity or company who was as at 15 August 2013 the landlord of a property listed on annexure B to the Settlement Deed in respect of that property; 3. Order that the defendants for a period of 60 months from 12 April 2013 be restrained from directly or indirectly in any capacity whatsoever being concerned with, employed or engaged in or conducting any business that provides sales or property management services to any person, entity or company with whom the plaintiff had engaged in negotiations to do business in the capacity of an agent for the sale of real estate, letting agent or property manager during the 36 months preceding 15 August 2013 except to the extent that that conduct is permitted by clauses 6(a) and 6(b) of the Settlement Deed; 4. The Second Further Amended Cross-Summons be dismissed; 5. The defendants pay the plaintiffs' costs of the proceedings. In these orders "Settlement Deed" means the settlement deed dated 15 August 2013 between Properties Northside Pty Ltd ACN 134 362 306, Bree Joyce Hutton and Tobias James Hutton, Marlena Jane Sait, Geoffrey John Pickering and Leanne Karen Pickering and Coastview Real Estate Pty Ltd ACN 162 856 902.

Amendments 30 November 2015 - imported content to correct coversheet fields 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: 30 November 2015

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