HEADNOTE
[This headnote is not to be read as part of the judgment]
Mr Richmond Turner was an accountant employed by the appellant, Superannuation & Corporate Services Pty Ltd (SCS). He specialised in preparing financial statements and tax returns for self-managed superannuation funds that were clients of SCS. In late November 2016, Mr Turner resigned from SCS following a sustained period of bullying and harassment in the workplace by his manager, Mr Brian Taylor. Shortly before his resignation Mr Turner incorporated a company, Attain Super Services Pty Ltd, and downloaded files of 16 clients who were family and friends (which he could not open) and a client list containing 350 client names and postal addresses (as to which there was no evidence of actual misuse by Mr Turner). Following his resignation, Mr Turner contacted clients of SCS by email, using contact email addresses in his mobile phone. Mr Taylor sent a demand to Mr Turner on 4 December 2016 threatening legal action (including criminal prosecution).
On 21 December 2016 the parties entered into a deed of settlement and release resolving claims by SCS that upon his resignation, Mr Turner had engaged in, inter alia, unlawful conduct by using SCS' client information in relation to his own business - Attain - and was liable to criminal prosecution. Clause 2.1(f) of the deed relevantly provided that Mr Turner "pay SCS an agreed fee for each Client that voluntarily wished to become clients of [Mr Turner] arising from his…activities [and] conduct to date." The agreed fee was the amount charged or chargeable to the client for work on an annual basis. Mr Turner was to pay 50% of this agreed fee upfront and the balance of 50% twelve months thereafter.
Clause 5.1 provided for a qualified release of SCS's claims against Mr Turner, contingent upon his compliance with cl 2.1. Clause 6 provided that payment of Mr Turner's employee entitlements was contingent upon his compliance with cl 2.1.
In February 2018, SCS brought proceedings against Mr Turner in the District Court claiming a liquidated sum (ultimately calculated as $181,059) as the amount owing under cl 2.1(f). Mr Turner denied that the payment obligation in cl 2.1(f) was engaged and claimed that the deed was an unjust contract within the meaning of s 7 of the Contracts Review Act 1980 (NSW) (the Act) and should be set aside. The primary judge (Olsson SC DCJ) upheld Mr Turner's defence under the Act finding that the deed was an unjust contract under s 7 and dismissed the statement of claim which sought to enforce cl 2.1(f) of the deed.
SCS appealed. The two principal issues before the Court were:
whether her Honour erred in finding that the deed was unjust because of asserted errors in six factual findings, in taking into account the parties' historical dealings and in failing to consider sufficiently, or at all, a number of the considerations identified in s 9(2) of the Act;
whether her Honour erred by failing to separately consider the question of relief under s 7(1) of the Act from the anterior question of whether the deed was unjust.
Held, dismissing the appeal (per Gleeson JA; Basten and Leeming JJA agreeing):
As to issue (i):
The challenges to six factual findings of her Honour were not made good. First, there was no error in accepting Mr Turner's evidence in preference to Mr Taylor's evidence. Second, there was no error in characterising SCS's demand of 4 December 2016 as a continuation of Mr Taylor's bullying and harassment of Mr Turner. Third, SCS conceded that nothing turned on the date of Mr Turner's resignation. Fourth, her Honour did not make an express finding concerning ownership of certain software developed by Mr Turner. Fifth, there was no error in accepting Mr Turner's evidence of his unpaid entitlements. Sixth, there was no error in finding that there was "no plan" by Mr Turner to take work and clients from SCS when he incorporated Attain.
Fox v Percy (2003) 214 CLR 118;
Lee v Lee (2019) 372 ALR 383; and
Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679 considered.
The finding of injustice involved an evaluative judgment. Her Honour was entitled to have regard to historical dealings between the parties prior to entry into the deed, including the bullying and harassment of Mr Turner in the workplace, that SCS's demand of 4 December 2016 contained overbearing threats of legal action (including criminal prosecution) and that this played on Mr Turner's mind when entering into the deed: at [99]. Her Honour correctly took into account relevant circumstances under s 9(2) of the Act and evidence at the time of the deed, giving sufficient reasons for her decision: at [100], [106] and [110]. The finding that cl 2.1(f) was unjust was inevitable, given that it was not proportionate to Mr Turner's asserted wrongdoing, and it imposed an unreasonable burden on Mr Turner when it was not reasonably necessary to protect the legitimate interests of SCS: at [127]
Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 considered.
As to issue (ii):
By dismissing the statement of claim which sought to enforce payment of the "agreed fee" under cl 2.1(f) of the deed, the primary judge granted relief which was available under s 7(1)(a) of the Act: at [132] That her Honour did not consider alternative relief was not an error in the House v The King sense, given that no contrary submission was advanced by the appellant at trial, nor did the appellant advance alternative terms which should be enforceable if the deed was found to be unjust.