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  4. Atlas People Pty Ltd v Carter Mills Hotels Pty Ltd - [2023] QDC 240

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Atlas People Pty Ltd v Carter Mills Hotels Pty Ltd[2023] QDC 240

Reported at (2023) 3 QDCR 477

Atlas People Pty Ltd v Carter Mills Hotels Pty Ltd[2023] QDC 240

Reported at (2023) 3 QDCR 477

DISTRICT COURT OF QUEENSLAND

CITATION:

Atlas People Pty Ltd v Carter Mills Hotels Pty Ltd [2023] QDC 240

PARTIES:

ATLAS PEOPLE PTY LTD

Plaintiff

v

CARTER MILLS HOTELS PTY LTD

First defendant

and

GARY CARTER

Second defendant

FILE NO/S:

BD 2181/2023

DIVISION:

Civil

DELIVERED ON:

14 December 2023

DELIVERED AT:

Brisbane

HEARING DATE:

2 November 2023

JUDGE:

Barlow KC, DCJ

ORDERS:

  1. The plaintiff’s claim be dismissed.
  2. The defendants’ counterclaim be dismissed.
  3. Unless either party, by 4.00pm on 21 December 2023, serves and emails to my associate a submission seeking a different order as to costs, the plaintiff pay the defendants’ costs of the proceeding.
  4. If either party makes such a submission, the other party serve and email to my associate any submission in response by 4.00pm on 18 January 2024.
  5. Any submission on costs be no more than 5 pages.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – PENALTIES AND LIQUIDATED DAMAGES – GENERAL PRINCIPLES – where a labour-hire agency contract provided for a set placement fee to be paid where a hirer employed or engaged a worker or made an offer to employ the worker – where the contract provided for an additional investigation fee if the hirer did not inform the agency of the employment or engagement or the offer of employment – whether the contractual fees were penalties

TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – VALIDITY AND REASONABLENESS – GENERALLY – where a labour-hire contract provided for fees if the hirer employed or engaged or offered to employ a worker – where the fee would be payable if the hirer engaged the worker within two years of the initial contract – whether the effect of the fees would be to deter the hirer from engaging the worker – whether the fees were an unreasonable restraint of trade

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – UNFAIR CONTRACT TERMS – where a labour-hire contract provided for fees to be payable by the hirer if it employed, engaged or offered employment to a worker –whether the clauses were unfair contract clauses

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where a contractual clause referred to engaging the services of a worker – where the worker’s employer made the worker available for the plaintiff – where there was no direct engagement of the worker by the plaintiff – whether the plaintiff engaged the services of the worker

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – FORM OF PLEADINGS – RAISING NEW MATTER – where the respondent alleged that the plaintiff brought a claim under the wrong contractual clause – where the plaintiff abandoned a proposal to amend its pleadings on the morning of the trial – where the evidence led at trial justified a claim on the other contractual provision and was not objected to – whether the plaintiff should be allowed to rely on the other contractual clause

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITOTRY COURTS – COSTS – AGREEMENTS AS TO COSTS – where the contract included an indemnity against losses caused by a breach of the contract – where the plaintiff sought to rely on the indemnity to claim legal costs on the indemnity basis – whether legal costs could be a ‘loss’ to which the indemnity applied

Australian Consumer Law (Cth) s 23, s 24

Uniform Civil Procedure Rules 1999 (Qld) r 159

AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170, applied

Andrews v Australia and New Zealand Banking Group Limited (2012) 247 CLR 205, applied

Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd (2015) 239 FLR 33, applied

Australian Competition and Consumer Commission v CLA Trading Pty Ltd (2016) 34 ACLC 16-009, applied

Banque Commerciale SA (En Liquidation) v Akhil Holdings Ltd (1990) 169 CLR 279, applied

Dunlop United Tyre Company Ltd v New Garage and Motor Company Ltd [1915] AC 79, applied

Geraghty v Minter (1979) 142 CLR 177, applied

Howard F Hudson Pty Ltd v Ronayne (1972) 126 CLR 449, applied

Moran v Argonaut Equity Partners Pty Ltd [2021] WASCA 45, distinguished

Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535, applied

O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359, applied

Paciocco v Australia and New Zealand Banking Group Ltd (2014) 309 ALR 249, applied

Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199, applied

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525, applied

Vale v Sutherland (2009) 237 CLR 638, applied

Vision Eye Institute Ltd v Kitchen [2014] QSC 260, applied

COUNSEL:

S Trewavas for the plaintiff

B Wacker for the defendants

SOLICITORS:

Celtic Legal for the plaintiff

Frigo James Legal for the defendants

Contents

The parties 1

The contract 1

The claim 2

Counterclaim 4

The structure of clause 10 4

Can the plaintiff rely on clause 10.1? 5

Who employed, or engaged the services of, Mr Wootton after January 2023? 8

Related business or company? 10

Was clause 10.2(a) engaged? 11

Is any of the fees a penalty? 12

Principles 12

Is the Standard Placement Fee (clause 10.1) a penalty? 17

Is the Introduction Fee (clause 10.2(a)) a penalty? 19

Is the Investigation Fee (clause 10.3) a penalty? 19

Restraint of trade?20

Principles 20

Clauses 10.1 and 10.2 22

Clause 10.3 22

Unfair contract terms? 23

Principles 23

Are these clauses unfair? 25

The parties’ submissions 25

Consideration 25

Interest and legal costs 26

The counterclaim 28

Conclusions 29

The parties

  1. [1]
    The plaintiff (Atlas) is a labour-hire company, which operates throughout Australia and New Zealand. Its business model primarily involves sourcing hospitality staff for businesses in that industry, employing those persons itself, then entering into labour-hire agreements with those businesses to supply its employees to work for them. These businesses are often in remote or rural areas where it is hard to source staff themselves. The director of Atlas is Dougall Fletcher.
  2. [2]
    The first defendant (Carter Mills) operates a restaurant in Gladstone called Dicey’s Irish Bar and Grill (Dicey’s). The second defendant, Gary Carter, is a director of Carter Mills.
  3. [3]
    Gary Carter’s brother is Scott Carter. He assists Gary Carter in the day to day management and operations of Carter Mills. Scott Carter is a director of Mills Carter Hotels Pty Ltd (Mills Carter), which operates a motel in Woodgate, known as the Woodgate Beach Motel (Woodgate Motel).[1]

The contract

  1. [4]
    The proceeding arises from a labour-hire contract between Atlas and Carter Mills.[2] Under this contract, Atlas was to provide Carter Mills with a worker (a chef) to work at Dicey’s for a period of time. In return, Carter Mills would pay Atlas for the chef’s services at agreed hourly rates. (Under its own contract of employment with the chef, Atlas would pay him lower hourly rates for the work performed.[3]) Gary Carter guaranteed Carter Mills’ obligations under the contract.
  2. [5]
    The discussions leading to the contract were between McAuley Hughes on behalf of Atlas and Scott Carter on behalf of Carter Mills. Mr Hughes sent to Scott Carter the proposed contract, with the resume of a chef, Paul Wootton, under cover of a letter of 15 November 2022.[4] In the letter, Mr Hughes expressly drew Scott Carter’s attention to clause 10 of the agreement, saying “This clause provides a recruitment fee should you employ our Chef within the prescribed period.”  At Scott Carter’s request, on 16 November 2022 Gary Carter executed the agreement on behalf of Carter Mills and as guarantor.
  3. [6]
    Clause 10 of the contract provided for “Introduction and Placement Fees”. Under clause 10.1, Carter Mills was to pay a “Standard Placement Fee” of $30,000 plus GST if, during the worker’s assignment to it or within 2 years of the end of that assignment, the worker accepted a permanent, full-time, part-time or casual position with Carter Mills or with a related business or company.
  4. [7]
    Clause 10.2 provided for an “Introduction Fee” (also of $30,000 plus GST) to be payable by Carter Mills to Atlas where, within 2 years after the end of the worker’s assignment to Carter Mills, either:
    1. Carter Mills made an offer to employ or engage the services of the worker; or
    2. Carter Mills passed on details of the worker to a third party, which resulted in the third party making an offer to employ or engage the services of the worker.

Notably, the Introduction Fee was payable whether or not the worker accepted such an offer.

  1. [8]
    Clause 10.3(a) provided for an additional fee of $7,500 plus GST (Investigation Fee) to be payable by Carter Mills to Atlas if Carter Mills did not inform Atlas that the worker had accepted a permanent, full-time, part-time or casual position, or that Carter Mills had made an offer to employ or engage the services of the worker, within 24 hours of either event occurring.  That fee was “to cover [Atlas’] additional administration and investigation costs.”
  2. [9]
    Clause 10.3(b) provided that any amount payable under clause 10:
    1. was not a penalty at common law;
    2. was a fair and reasonable sum; and
    3. was a genuine pre-estimate of any losses which may be incurred by Atlas if the worker was to commence working for Carter Mills directly.[5]
  3. [10]
    Clause 8 provided that Atlas would invoice Carter Mills weekly for the worker and it was entitled to charge “interest” of 10% on any such tax invoice that remained unpaid for 7 days. It also provided that Atlas could pass on any costs associated with engaging solicitors to pursue any unpaid tax invoices.
  4. [11]
    Clauses 12 and 13 are also relevant. Clause 12 relevantly provided that Carter Mills indemnified Atlas against any losses suffered or incurred by it arising directly or indirectly from any breach of its obligations under the contract. As will become clear, Atlas asserts that it is entitled to its legal costs on the indemnity basis under this clause. Clause 13, which is Gary Carter’s guarantee, provided similarly, but also provided that Mr Carter indemnified Atlas with respect to any costs it may incur in seeking to recover payment of any unpaid tax invoices, including all reasonably incurred legal costs and fees on a solicitor and own client basis.

The claim

  1. [12]
    Atlas provided Mr Wootton to work at Dicey’s from 29 November 2022 to 20 January 2023.[6] At the end of this period, he ceased working for Carter Mills. He subsequently started working for Mills Carter at the Woodgate Motel, but that company sent him back to Dicey’s when it was short of a chef. Scott Carter said that Mills Carter employed Mr Wootton and paid him even when he was working at Dicey’s. Scott Carter’s evidence about how often and for how long he sent Mr Wootton back to Dicey’s was vague, but at the least Mr Wootton worked there on St Patrick’s Day (17 March 2023) and for most of April 2023.
  2. [13]
    On 13 April 2023, Mr Fletcher travelled to Gladstone to confirm whether Mr Wootton was working at Dicey’s. He said that he was able to identify Mr Wootton based on a photograph of him that he had either memorised or carried with him to the venue. He saw Mr Wootton working there on that day.
  3. [14]
    As a consequence, Atlas claims that, in or around April 2023, Carter Mills engaged the services of Mr Wootton, but did not inform Atlas of that fact. Therefore, Atlas is entitled to payment of both the Introduction Fee under clause 10.2(a) and the Investigation Fee under clause 10.3(a). It issued a tax invoice to Carter Mills for $41,250.00 on 21 April 2023.[7] Carter Mills did not pay this invoice and so Atlas issued a further invoice, purportedly for “interest” under clause 8, for a further $4,537.50.[8]
  4. [15]
    Carter Mills did not, in the first invoice or in its statement of claim, make a claim under clause 10.1, notwithstanding that that clause concerns the engagement or employment of a worker by the hirer while clause 10.2 concerns making an offer of employment or engagement, or a referral to a third party.
  5. [16]
    When Carter Mills failed to pay the two invoices, Atlas engaged solicitors. The solicitors demanded payment of the sum of $45,787.50 within 7 days. No amount was paid by Carter Mills, so Atlas commenced a proceeding in the Magistrates Court. In that proceeding, which was subsequently transferred to this court, Atlas claims the principal debt of $41,250, plus interest of $4,537.50, which it asserts is calculated at an annual rate of 10% of the principal debt. It also claims its costs of the proceeding on the indemnity basis.[9]
  6. [17]
    The defendants contend that both the Introduction Fee and the Investigation Fee are penalties, or constitute an unreasonable restraint of trade, and therefore unenforceable.[10] They also deny that Carter Mills engaged the services of Mr Wootton and therefore contend that, even if the Introduction and Investigation Fees were not penalties, they had not been triggered and could not be charged to Carter Mills.[11] Consequently, the additional late payment fee was also improperly invoiced.[12]
  7. [18]
    Instead, the defendants allege that, in or about January 2023, Mr Wootton’s engagement with Carter Mills was terminated by mutual agreement.[13] By March and continuing into April 2023, Mr Wootton was employed by Mills Carter to work at the Woodgate Motel.[14]
  8. [19]
    The defendants claim that, both on and around St Patrick’s Day in 2023 and in April 2023, Carter Mills was short-staffed and so Scott Carter arranged for Mr Wootton to work at Dicey’s, although he remained employed and paid wages by Mills Carter.[15]

Counterclaim

  1. [20]
    The defendants claim that, in the event that the Introduction and Investigation Fees are otherwise enforceable against them, those clauses of the contract are unfair terms, as provided for by the Australian Consumer Law (ACL). They seek a declaration to that effect, an injunction restraining Carter Mills from enforcing those terms and an order that Carter Mills pay them compensation in the amount of its claims against them, together with interest and costs.

The structure of clause 10

  1. [21]
    Mr Wacker, counsel for the defendants, submitted that the structure of clause 10 was such that, under clause 10.1, a fee of $30,000[16] was payable if a worker was employed or his services engaged by the hirer; under clause 10.2, the same fee was payable if the hirer made an offer to employ or engage the worker, whether or not the offer was accepted; and the fee under clause 10.3 applied to each of clauses 10.1 and 10.2 if the hirer did not inform Atlas of the offer or the employment or engagement within the specified time. Thus, if those clauses were valid and if Carter Mills had in fact employed Mr Wootton after the contract ended, it would have been liable for $30,000 under clause 10.2 for making an offer of employment, $30,000 under clause 10.1 for actually employing him and $15,000 under clause 10.3 for not informing Atlas of the offer or the employment: a total of $75,000 plus GST.
  2. [22]
    Mr Trewavas, counsel for Atlas, submitted that that was not a business-like construction of clause 10. A sensible construction is that, if an offer of employment is made, or if it is made and accepted, then only one fee of $30,000 is payable and, if the offer or employment is not notified to Atlas within 7 days, only one investigation fee of $7,500 is payable.
  3. [23]
    I accept Mr Trewavas’ submission. The alternative is not a reasonable and business-like construction of the clause. There is a substantial difference between an offer of employment and the actual employment of a worker. Whether a fee for an offer or a fee for employment are penalties, unreasonable restraints of trade or unfair terms of a contract must also be determined on different criteria. An agreed placement fee is less likely to be a penalty or unfair (rather than consideration for referral of a person who was then employed) than a fee payable upon only an offer of employment being made. I consider that clause 10 addressed four separate possibilities and fees: under clause 10.1, a fee for the placement of a worker who accepted employment or engagement by the employer; under clause 10.2, a fee payable on an offer of employment or engagement being made, even though not accepted, or on referral of the employee to another person who makes an offer of employment or engagement to the worker (even if not accepted); and, under clause 10.3, an investigation fee if one or another of the three previous circumstances arises and Atlas is not informed within 24 hours of any those events occurring.

Can the plaintiff rely on clause 10.1?

  1. [24]
    Mr Wacker submitted that Atlas has sued under the wrong clause of the contract, as it elected to sue under clause 10.2, for an offer of employment, even though it asserts that, in fact, Carter Mills did employ or engage the services of Mr Wootton. If the latter assertion were correct, then the applicable clause would be clause 10.1. Mr Wacker submitted that there is a substantial difference, particularly as to whether the interest that Atlas seeks to protect by the clause sued on is a legitimate interest and whether a breach of that clause may give rise to any loss.
  2. [25]
    Mr Trewavas submitted that, notwithstanding the way in which Atlas’ case is pleaded, the evidence has shown that Mills Carter employed Mr Wootton shortly after his engagement with Carter Mills under the contract expired. That being so, Atlas should not be restricted to a claim under the contractual term that it has pleaded if the evidence shows facts that would entitle it to claim under the other clause. Atlas relied, in this respect, on the principle stated by Dawson J in Banque Commerciale SA (En Liquidation) v Akhil Holdings Ltd[17] and adopted in the joint judgment of all members of the High Court in Vale v Sutherland,[18] that -

modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties … cases are determined on the evidence, not the pleadings.

  1. [26]
    Mr Wacker submitted that that passage is incomplete. The true principle is that a party may sometimes seek leave to amend its pleading to reflect the evidence at trial. A party cannot simply, at the end of the evidence, run whatever case it can make good notwithstanding the case it has pleaded. He pointed out that, in the afternoon before the trial, Atlas had said that it wanted to amend its case, but had abandoned that proposal on the morning of the trial. The consequence is that it can rely only on its pleaded case, which relies on clauses 10.2 and 10.3, but not clause 10.1.
  2. [27]
    Mr Wacker is correct that the passage from Dawson J’s reasons in Banque Commerciale, as quoted in Vale, is incomplete. Furthermore, his Honour was in dissent, including on the point he was then considering. However, his Honour’s comparison of pleadings with the evidence was subsequently adopted by the full bench of the High Court in Vale.
  3. [28]
    Relevantly, Dawson J said the following:[19]

However, that rule is merely a rule of pleading which must give way to considerations of a more fundamental kind if the justice of the case requires it. Pleadings are but a means to an end and not an end in themselves … The basic function of pleadings was described by Isaacs and Rich JJ. in Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.):[20]

Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest.

…

It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings …

  1. [29]
    Having quoted the extract from his Honour’s reasons, in Vale the Court said:

Thus, whatever view is taken of the range of issues tendered by the pleadings, it was open to [the trial judge] to decide the case as he did.  No unfairness results to the Trustee from such a result.

  1. [30]
    I consider that the question is whether, in the light of the evidence as it fell out during the trial, it would do justice between the parties and would determine the true issues between them if I were now to allow Atlas to rely on clause 10.1 (or indeed clause 10.2(b)) as a basis for its claim, notwithstanding that it did not plead those bases and has not sought to amend its pleading, even after the evidence was completed.
  2. [31]
    There was no objection to the evidence that Mills Carter employed Mr Wootton and allowed Carter Mills to utilize his services from time to time. That evidence was only given by the affidavit of Scott Carter filed on 25 October 2013, 8 days before trial. However, on 12 September the defendants had disclosed a payroll advice, which became exhibit 6 and showed that Mr Wootton was employed by Mills Carter in April 2023.[21] That evidence was tested during the trial but, if the Court accepts it, then it does appear to justify a claim under clause 10.1 or clause 10.2(b) of the contract.
  3. [32]
    Some events occurred before and during the trial that have a bearing on this issue. I shall try to relate them briefly.[22]
    1. The proceeding was placed on the Commercial List on 23 August 2023. At the same time, the Court ordered the parties to give disclosure by 1 September and gave Atlas leave to amend its statement of claim by 18 September.
    2. On 28 August, the defendants caused a notice for non-party disclosure to be issued to Mills Carter, requiring it to disclose any documents directly relevant to Atlas’ allegation that Carter Mills engaged Mr Wootton’s services in April 2023.
    3. On 12 September 2023, the defendants served their list of documents, which included reference to a payroll advice dated 28 May 2023 showing that Mr Wootton was employed by Mills Carter in May.[23] Copies of that and other documents in the list were provided to the plaintiff’s solicitors on 19 September.
    4. On 5 October 2023, Atlas’ solicitor received from Mills Carter the payroll advice for April 2023 that later became exhibit 6.
    5. Scott Carter’s affidavit for the trial was sworn and filed (and presumably served) on 25 October. In it, he deposed that, in April 2023, Mr Wootton was employed by Mills Carter as a chef.[24] He exhibited the payroll advice for that month.
    6. At the commencement of the trial, Mr Trewavas objected to the admission into evidence of that payroll advice, on the basis that it had never been disclosed by the defendants. Mr Wacker submitted that it had been obtained on non-party disclosure and the copy so obtained was privileged in the defendants’ hands until they waived that privilege by filing Scott Carter’s affidavit. In Atlas’ notice of objections to the defendants’ evidence,[25] Mr Trewavas contended that, had it been produced earlier,

The Plaintiff would have amended its case to include passing on information to a third party …[26]

  1. In the course of his submissions on the plaintiff’s objections to evidence, Mr Trewavas said:[27]

it raises questions of fairness because if you want to use it you need to comply with the rules to make sure the game is fair. … It’s fine, you can claim privilege. But if you’re using the privilege to hide and make the trial unfair then it shouldn’t be allowed.

Later, he said:[28]

But the point is, the rules are there for a reason and they are to prevent trial by ambush. Now, if you want to take an approach where you seek to ambush, you bear the consequences. … If you want to do that, that’s fine, but you bear the consequences just like a pleading.

  1. Mr Wacker submitted that Atlas had been aware, since it saw the defendant’s disclosed documents, that the defendants contended that Mills Carter, not Carter Mills, employed Mr Wootton. Atlas had had plenty of opportunity to amend its pleading since that became clear, but it had not done so.
  2. I upheld the objection to the exhibit to Scott Carter’s affidavit.[29] However, it was subsequently admitted into evidence in the re-examination of Scott Carter, as discussed below.[30]
  1. [33]
    Mr Trewavas did not, in fact, seek to amend the statement of claim to plead either clause 10.1 or clause 10.2(b). Nevertheless, he now seeks to rely on clause 10.1 (but not clause 10.2(b)) as an additional basis of liability, based on the facts that Mills Carter was the employer of Mr Wootton and is a related company or business to Carter Mills.
  2. [34]
    The defendants’ conduct of the proceeding obscured from Atlas, until very close to trial, the facts that Mills Carter employed Mr Wootton and had made him available to work for Carter Mills. They did not, for example, plead in answer to the allegation that , in or around April2023, Carter Mills engaged the services of Mr Wootton, that he was working at Dicey’s but not for Carter Mills, as he was employed by Mills Carter. They simply pleaded that Carter Mills did not engage the services of Mr Wootton.[31] Having tested the evidence of the arrangement between Carter Mills and Mills Carter (and who employed Mr Wootton in March and April 2023) during the trial, it seems to me reasonable for Atlas to take the position that, if I find that that arrangement did occur, it should be permitted to rely on it as evidence giving rise to an entitlement to claim the same amount from the defendants, but under a different clause of the same contract. I do not consider that the defendants will be prejudiced in any way if the court permits Atlas to rely on clause 10.1, as it now seeks to do. Mr Wacker did not suggest that the defendants would have conducted the trial any differently. To allow Atlas to rely on that clause, in the alternative to clause 10.2(a), enables the court to determine the true issues between the parties.
  3. [35]
    In the circumstances, I consider it appropriate to consider such a claim in determining the issues in the proceeding. But, in doing so, I shall also consider whether the defences that the defendants pleaded in answer to the pleaded claims apply to that clause. That is, does it give rise to a penalty, is it an unlawful restraint of trade and is it an unfair contractual term?

Who employed, or engaged the services of, Mr Wootton after January 2023?

  1. [36]
    In order to consider which, if any, clause of the contract was engaged, it is necessary first to determine whether Carter Mills employed or engaged the services of Mr Wootton (or made an offer to do so) after the contractual term of his hire by Atlas to Carter Mills ceased.
  2. [37]
    Scott Carter is not a director of Carter Mills. However, he said that he is an owner of that company and responsible for its overall management, including for the “back house stuff” such as the accounts. He is a director of Mills Carter. He dealt with Atlas about engaging a chef for Dicey’s, which led to the contract.
  3. [38]
    In his affidavit, comprising his evidence in chief, Scott Carter said that, in April 2023, Mr Wootton “remained employed and engaged by [Mills Carter] and not [Carter Mills]” and he was paid by Mills Carter for his work at Dicey’s. He did not say at what time, nor in what circumstances, Mills Carter first employed Mr Wootton.
  4. [39]
    In his oral evidence, Scott Carter said that Mr Wootton did not just work at Dicey’s for one day in April 2023, but he could have worked there for a month. He also said that he sent Mr Wootton to work at Dicey’s on St Patrick’s Day. In re-examination, he identified a payroll advice from Mills Carter for “Paul Henry Woofton”, whom Mr Carter identified as Mr Wootton. That advice (exhibit 6) shows that Mr Wootton was employed by Mills Carter between 27 March and 23 April 2023, although those are not the start and end dates of his employment by Mills Carter.
  5. [40]
    Gary Carter also gave evidence in chief by affidavit. He said that Mr Wootton worked at Dicey’s on a casual basis from November 2022 to January 2023, for which Carter Mills paid Atlas at the rates provided under the contract. He went on to say that, in April 2023, Carter Mills did not offer to engage, engage, nor pay any salary, fee or wages to MrWootton. He said that “Chef Wootton did not remain working at Dicey’s after the end of his placement in January 2023.” However, he did say that, on 13 April 2023, Mr Wootton worked at Dicey’s because the venue was short staffed on that day and Scott Carter arranged for him to work at Dicey’s. However, Mr Wootton was not paid by Carter Mills for his work at Dicey’s.
  6. [41]
    Gary Carter said, in his oral evidence, that he did not participate in the day to day management of Dicey’s. He did not know how often Mr Wootton was working at Dicey’s in April 2023, because Scott Carter “handles all of that.” Gary Carter was not involved in any way in the employment and engagement of staff at Dicey’s, which was all dealt with by Scott Carter. Notwithstanding his affidavit evidence referred to above, in his cross-examination Mr Carter said that he only knew those details because Scott Carter had told him. He had not seen any documents confirming those matters.
  7. [42]
    Having regard to the latter evidence, all of Gary Carter’s evidence referred to in paragraph [40] above is clearly hearsay and was not within his knowledge. While it was not objected to, it is of no weight and I shall not take it into account.
  8. [43]
    Scott Carter appeared to me to be very careful in giving his evidence, both by affidavit and orally. He did not explain how or when Mr Wootton came to be employed by Mills Carter. It is clear to me that, at least by some time before 17 March 2023 and throughout April 2023, Mills Carter employed Mr Wootton, who was then instructed to work at either the Woodgate Motel or Dicey’s, depending on the staffing needs of both businesses from time to time. Both venues were subject to Scott Carter’s overall management and he made decisions about where MrWootton would work from time to time. Clearly, while Mr Wootton was working for Carter Mills under its contract with Atlas, Scott Carter came to know him and, I infer, at some stage no later than March 2023, offered him full-time employment by Mills Carter, which he accepted. That gives rise to the circumstance described in clause 10.2(b): Carter Mills (by Scott Carter) referred Mr Wootton (that is, passed on his details) to Mills Carter, which offered to employ him.
  9. [44]
    In March and April 2023, therefore, Mr Wootton was not employed by Carter Mills, but was employed by Mills Carter. However, at least frequently (if not throughout that period) – and certainly for at least a substantial portion of April - he would work at Dicey’s instead of the Woodgate Motel, when instructed by Scott Carter to do so.
  10. [45]
    Of course, the contract not only provides for a fee if a worker is employed (or offered employment) by the hirer. It also applies where the hirer offers to engage or actually “engages the services of” the worker. There is a clear distinction between employment and engaging the services of a person. Under the former, there is a relationship of employer and employee under a contract of service. The latter term applies in different circumstances, one example of which would be where a worker contracts to provide his or her services to the hirer under a contract for services. This contract clearly applies in either circumstance.
  11. [46]
    Could the contract also apply where, as here, Mr Wootton was employed by Mills Carter, which made him available to provide his services to Carter Mills? In one sense, Carter Mills is engaging the services of Mr Wootton under its arrangement with Mills Carter. In my view, there is a reasonable argument that, in those circumstances, Carter Mills engaged the services of Mr Wootton, even though it was only able to do so under the arrangement with Mills Carter. The contract does not restrict itself to situations where the hirer directly engages (or offers to engage) the worker’s services.
  12. [47]
    Neither party drew this distinction in its principal submissions during the trial. However, I raised it with Mr Wacker during his address.[32] He accepted that engagement is different from employment, but submitted that the references in the contract to engaging (or offering to engage) his services should be understood as directly engaging his services under a contract between him and Carter Mills. In his written submission, he said:[33]

There is no evidence of any “engagement” by the Hotel of the Chef. That is, there is no evidence of any agreement (express or implied) between the Chef and the Hotel that the Hotel engaged the Chef. Rather, the only evidence is that Mills Carter employs the Chef and made the Chef available to the Hotel. But it does not follow that the Hotel “engaged” the Chef.

  1. [48]
    I disagree. This submission (and other parts of Mr Wacker’s submission) elides the different terminology in the contract, particularly the difference between “employing” a worker and “engaging the services of” a worker. The latter does not require a direct contractual arrangement between the worker and the hirer. Carter Mills initially engaged Mr Wootton’s services under its contract with Atlas. Although Atlas employed Mr Wootton, it made him available to work for (that is, to provide services to) Carter Mills. Under that arrangement, Mr Wootton provided his services to Carter Mills, which engaged his services through its contract with Atlas.
  2. [49]
    Similarly, when Mills Carter employed Mr Wootton, it made him available to provide his services to Carter Mills, which engaged those services through its arrangement with Mills Carter.
  3. [50]
    Thus, in my view, Carter Mills did engage the services of Mr Wootton by its arrangement with Mills Carter. This arrangement fell within clause 10.1 and gave rise to an obligation in Carter Mills, and Gary Carter as guarantor, to pay a Standard Placement Fee of $30,000 plus GST.[34]

Related business or company?

  1. [51]
    Mr Trewavas submitted that, in any event, Mills Carter is clearly a “related business or company” to Carter Mills, which gives rise to liability under clause 10.1 even if I were to conclude that Carter Mills did not engage Mr Wootton’s services.[35] He submitted that the relationship falls within clause 10.1 because the two companies have a commonality of shareholders, the director of Mills Carter runs and operates its business and the business of Carter Mills and the director of Carter Mills has no real involvement in its business. One might also add to those factors that Mills Carter seems to employ its staff to work at both businesses.
  2. [52]
    Mr Wacker submitted that Scott Carter is a director of “an unrelated entity” to Carter Mills.[36] He is correct in that submission if one were to consider the definition of a “related body corporate” in s 50 of the Corporations Act 2001. However, the contract does not define the term “related” by reference to that Act. The reference in the contract to “a related business or company” makes it clear that it does not incorporate the statutory definition, as there is no concept in that Act of a “related business.”[37] However, there is, in the Act, a concept of a “related entity” to a body corporate, which includes a director or a member of the body corporate.
  3. [53]
    Both Scott Carter and Gary Carter are minority shareholders in Carter Mills, along with 6 other persons, including Russell Kim Mills. (Gary Carter holds his shares jointly with someone else.) Gary Carter is one of two directors of Carter Mills, which Scott Carter is not. The other director and the secretary is Russell Kim Mills.[38]
  4. [54]
    Scott Carter and Russell Kim Mills are the two directors and Mr Mills is the secretary of Mills Carter. All but one of the shareholders in Carter Mills, including both Scott and Gary Carter, are also shareholders in Mills Carter. As the evidence showed, the two businesses conducted by the two companies were managed by Scott Carter and Mills Carter made at least one of its employees available to work in the business of Carter Mills for a not insubstantial period.
  5. [55]
    In my view, in common parlance and from a business perspective, for the purposes of the contract Carter Mills and Mills Carter are related companies and their businesses are related businesses.
  6. [56]
    Therefore, even if my conclusion that Carter Mills engaged the services of Mr Wootton were wrong, Mills Carter, a related company to Carter Mills conducting a related business, employed him within a short period after the conclusion of his assignment to Carter Mills under the contract. On that basis, Carter Mills and Gary Carter as guarantor are liable to pay Atlas a Standard Placement Fee of $30,000 plus GST.[39]

Was clause 10.2(a) engaged?

  1. [57]
    The next issue is whether, if clause 10.1 did not apply, the circumstances in which Mr Wootton worked at Dicey’s satisfied clause 10.2(a).
  2. [58]
    Atlas contends that I can infer, from the fact that Mr Wootton was working at Dicey’s in April 2023, that Carter Mills had made an offer to employ him or to engage his services, thus giving rise to liability for an Introduction Fee under clause 10.2(a).
  3. [59]
    Atlas does not contend that I can infer that Carter Mills referred Mr Wootton to a third party that made an offer to employ him or to engage his services, giving rise to liability under clause 10.2(b). Although I have inferred that Scott Carter, as manager of Dicey’s, effectively referred Mr Wootton to Mills Carter, which then employed him, I do not need to consider this proposition given that Atlas does not contend for it.[40]
  4. [60]
    Clause 10.2(a) is paraphrased at [7] above. Its actual wording is “You make an offer to employ or engage the services of the Worker.”
  5. [61]
    “You” is relevantly defined in clause 1 as meaning “the person, including a corporation, … if applicable, entering into this agreement with Us.”
  6. [62]
    In contrast with clause 10.1, clause 10.2(a) refers only to an offer made by “You” (that is, Carter Mills), not by “You or a related business or company.”
  7. [63]
    In my view, the proper construction of this clause is that any offer must be by Carter Mills to the worker concerned.
  8. [64]
    There is no evidence that Carter Mills made any offer to Mr Wootton to employ him or to engage his services other than under the contract. The highest the evidence goes is that Mills Carter employed him and made him available to work for Carter Mills. Although I have found that Carter Mills did engage the services of Mr Wootton, it did so under an arrangement with Mills Carter. Even then, there is no evidence that Carter Mills made an offer to Mills Carter to engage Mr Wootton’s service, but rather it appears that Mills Carter, in effect, offered Mr Wootton’s services to Carter Mills.
  9. [65]
    Therefore, I find that clause 10.2(a) has no application.

Is any of the fees a penalty?

  1. [66]
    The defendants contend that each of the Introduction Fee and the Investigation Fee is a penalty. As I have indicated above, having allowed Atlas to rely, in the alternative, on clause 10.1, it is also necessary to consider whether that clause imposes a penalty.

Principles

  1. [67]
    The seminal statement on when a clause of a contract might give rise to a penalty was that of Lord Dunedin in Dunlop United Tyre Company Ltd v New Garage and Motor Company Ltd.[41] In considering the validity of a contractual clause requiring a party to pay the other a fixed sum on breach of the contract by the first party, his Lordship said:

The essence of a penalty is a payment of money stipulated as in terrorem of the offending party:  the essence of liquidated damages is a genuine covenanted pre-estimate of damage.

It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

There is a presumption (but no more) that it is a penalty when “a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage.”

On the other hand, it is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties.

  1. [68]
    The penalty doctrine is not limited to where there has been a breach of contract. It can apply where the penal obligation is, as a matter of substance, collateral to and consequent on the defendant’s non-observance of another obligation. The collateral obligation imposes an additional detriment on the defendant, to the benefit of the plaintiff. It is in the nature of security for and in terrorem of the satisfaction of the primary obligation.[42] The collateral obligation is prima facie a penalty in that circumstance.
  2. [69]
    In O'Dea v Allstates Leasing System (WA) Pty Ltd,[43] Gibbs CJ considered a number of cases in which courts had held that a payment obligation is not a penalty. His Honour considered there to be two classes of case in which there can be no question of penalty. The second, relevantly, is one:[44]

where the parties have stipulated that a sum shall become payable on a certain event which, although brought about by the party required to make the payment, does not involve a breach of contract. It has been held that where there is a contract for the payment of a certain sum in a certain event, and that event has happened, the sum is payable and no question of penalty versus liquidated damages arises: In re Apex Supply Co;[45] Alder v. Moore.[46]

  1. [70]
    His Honour went on to discuss hire purchase agreements within the second class of case. Relevantly, he said:[47]

If, however, the agreement is terminated by the hirer himself, e.g. because he is unable to keep up his payments, it has been held that the question whether the sum payable is liquidated damages or a penalty does not arise, since what has occurred is that the hirer has exercised his option to put an end to the contract on paying a certain sum, and the sum for which he has made himself liable must be paid: Associated Distributors Ltd v Hall.[48] Conflicting opinions have been expressed as to the correctness of that decision (see Campbell Discount Co Ltd v Bridge;[49] and United Dominions Trust (Commercial) Ltd v Ennis[50]) but the question whether it was correct does not fall for consideration in the present case.

  1. [71]
    As Gibbs CJ recorded, there has been disagreement whether the decision in Associated Distributors was correct. I have reviewed that and later decisions, including those to which his Honour referred. The question does not appear to have been authoritatively decided, at least in Australia. Shortly after O'Dea, Mason and Wilson JJ (with whom Gibbs CJ agreed) considered Associated Distributors and subsequent cases at some length, but again did not decide whether it was correct.[51] Their Honours did note that “the doctrine of penalties has pursued such a tortuous path in the course of its long development that it is a risky enterprise to construct an argument on the basis of the old decisions.”[52] Unfortunately, the “tortuous path” in the development of the doctrine continues and this case sits somewhere along that path.
  2. [72]
    Having regard to the differences of opinion on the question expressed by eminent jurists, including in the House of Lords, and the High Court’s reluctance to determine whether Associated Distributors was correct,[53] there remains a live issue whether a clause not directly involving a breach of contract does provide for a penalty or simply “confers on [one party] a right for which he agrees to pay a price.”[54]
  3. [73]
    More recently, the High Court has made clear that a clause of a contract may be a penalty even if it does not provide for an additional obligation arising on breach of that (or another) contract.[55] Thus, even if the respective obligations in this case do not arise on a breach of contract, it is necessary to consider whether they may possibly amount to a penalty.
  4. [74]
    In explaining Andrews in a subsequent related decision, Gordon J (while on the Federal Court) described steps that she thought may (but not must) be considered in determining whether a particular obligation may be a penalty. Her Honour said:[56]

To assist in understanding the form and substance of the following analysis, a particular stipulation may (not must) be considered by reference to the following steps:

  1. Identify the terms and inherent circumstances of the contract, judged at the time of the making of the contract: Dunlop at 86-87 and AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170.
  1. Identify the event or transaction which gives rise to the imposition of the stipulation: Dunlop at 86-87 and Andrews High Court at [12].
  1. Identify if the stipulation is payable on breach of a term of the contract (a necessary element at law but not in equity). This necessarily involves consideration of the substance of the term, including whether the term is security for, and in terrorem of, the satisfaction of the term.
  1. Identify if the stipulation, as a matter of substance, is collateral (or accessory) to a primary stipulation in favour of one contracting party and the collateral stipulation, upon failure of the primary stipulation, imposes upon the other contracting party an additional detriment in the nature of a security for, and in terrorem of, the satisfaction of the primary stipulation.
  1. If the answer to either question 3 or 4 is yes, then further questions arise (at law and in equity: see Andrews High Court at [77]) including:

(5.1) Is the sum stipulated a genuine pre-estimate of damage?

(5.2) Is the sum stipulated extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved?

(5.3) Is the stipulation payable on the occurrence of one or more or all of several events of varying seriousness?

These questions are necessarily interrelated.

  1. If the answer to question 5 is that the sum stipulated is not a genuine pre-estimate of damage and is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have been sustained by the breach, or the failure of the primary stipulation upon which the stipulation was conditioned, then the stipulation is unenforceable to the extent that the stipulation exceeded that amount.  Put another way, the party harmed by the breach or the failure of the primary stipulation may only enforce the stipulation to the extent of that party’s proved loss:  Andrews High Court at [10].
  1. [75]
    Her Honour went on to analyse the reasoning of the High Court in Andrews. Helpfully for the parties and the Court in this case, her Honour made the following apposite remarks:[57]
    1. the law of penalties is not confined to payments (or other obligations) imposed upon breach of contract;
    2. as a matter of substance, the collateral or accessory stipulation constituting a penalty operates “in the nature of a security for, and in terrorem of, the satisfaction of the primary stipulation;”
    3. in other words:
      1. (i)
        the primary stipulation carries the substantive objective of the contract;
      1. (ii)
        the collateral stipulation is engaged on the failure of the primary stipulation and fulfils the function of acting as a security for, and in terrorem of, the satisfaction of that primary stipulation;
      1. (iii)
        the objective of the contract is achieved by payment of the money sum not being made rather than by being made - the second party wants the primary stipulation observed, not the payment of the penalty sum; the first party is so averse to paying the exorbitant sum that it will observe the primary stipulation;
    4. the primary stipulation may be the occurrence or non-occurrence of an event which need not be the payment of money;
    5. the question before her Honour was therefore – as a matter of construction of the relevant contract, was the requirement to pay the fee to be regarded as security for performance by the customer of other obligations to ANZ or was it a fee charged in accordance with pre-existing arrangements according to whether ANZ chose to provide something more and further to the customer?
  2. [76]
    On appeal from her Honour’s judgment, the Full Court upheld her decision insofar as it concerned what were termed “over-limit fees”.  Allsop CJ said about that type of fee that it “was payable for a contractually permitted transaction, effectively extending the drawing limits temporarily.”[58]  His Honour went on to say:[59]

as a matter of substance, her Honour construed the clause and came to the view, correctly, in my view, that the clause provided for a payment for honouring of a transaction that could be rejected as beyond arrangements.  To the extent that the submissions asserted that the clause cannot have any feature of encouragement to a desired end of compliance with contractual obligations such overlooked the fact that such is permissible.  As Jacobs JA said in Metro-Goldwyn-Mayer v Greenham at 723 (earlier set out):

It may well be intended by the agreement that such an additional showing should be strongly discouraged. For this reason a very large hiring fee compared with the original hiring fee is provided.

  1. [77]
    Of particular relevance to this proceeding are these remarks by the Chief Justice:[60]

It can be accepted that, in a given fact situation, the surrounding circumstances, including the level of the relevant fee, may lead to the conclusion that a provision, that on its face provides for a fee for an additional contractual benefit, is in substance a disguise for a fee for a breach that is extravagant and unconscionable.  Any such judgment recognises the possibility of the overlapping of the processes of construction of the instrument and its characterisation from all the circumstances.  The true legal substantive meaning of the clause is integral to any process of characterisation.  A high fee for the contractual benefit may, however, be just that – a high fee for the additional contractual benefit.

  1. [78]
    Justice Middleton made the following additional remarks about considerations relevant to determining whether a contractual term imposes a penalty:[61]

The object and purpose of the penalty doctrine (controlling the use of extravagant or unconscionable terms) must always be kept in mind when determining the ultimate issue of whether a term is a penalty.  Exceptions from freedom of contract, as the case law indicates, require good reason to attract judicial intervention in setting aside commercial bargains.  This explains the high hurdle required in the case of a propounded penalty, such that it must be found to be “extravagant and unconscionable”. 

One starting point in considering whether a penalty has been imposed is to identify the commercial interests that are sought to be protected by the bargain reached between the parties.  This can be achieved through a consideration of the language used by the parties, the circumstances addressed by the bargain, and the objects that the bargain intended to secure.

  1. [79]
    The Full Court’s decision about the over-limit fees was not appealed to the High Court, which was restricted to considering late payment fees and concluded that they did not constitute a penalty.[62]  In considering the law relating to penalties, Kiefel J (with whom French CJ agreed) said that:[63]

the point to be made is that threats and punishment were regarded as the essential characteristics of a penalty.  A sum stipulated to be paid on default, which amounted to a threat to the person obliged to pay it if the principal obligation was not performed, bore the character of a penalty, as did a sum stipulated to be paid which could not be accounted for other than as a punishment for default.

  1. [80]
    Her Honour went on to record that:[64]

[The] policy [of the law] has not changed over time.  It is that a sum may not be stipulated for payment on default if it is stipulated as a threat over the person obliged to perform; it may not be stipulated where the purpose and effect of requiring payment is to punish the defaulting party.

Is the Standard Placement Fee (clause 10.1) a penalty?

  1. [81]
    The principal object of the contract was that Atlas would identify a person suitable to meet Carter Mills’ need for an employee with certain skills who was prepared to work in the location of its motel for a period of time. Mr Fletcher gave evidence that almost all Atlas’ clients are in regional or remote areas, outside the principal metropolitan cities.[65]
  2. [82]
    It was not a principal object of the contract that Atlas find a permanent employee for its client, Carter Mills. The structure of the contract is the provision of the worker, who is employed by Atlas, for a short to medium term: referred to as the “duration of the assignment” in clause 5(b), although that duration was not specified anywhere in the contract.
  3. [83]
    This object can be seen to differ from that of recruitment agencies who assist employers to find permanent (or, indeed, temporary) employees. However, the contract did provide, under clause 10.1, for Carter Mills to pay an additional fee (the Standard Placement Fee) if it subsequently employed Mr Wootton on any basis.
  4. [84]
    For Carter Mills to employ Mr Wootton directly would not be a breach of the contract. While Atlas was obliged to provide the worker for the duration of the assignment, Carter Mills was entitled to “terminate a Worker” after the first week on five days’ notice. But Carter Mills did agree that, if it employed the worker directly, it would pay the placement fee.
  5. [85]
    Mr Wacker submitted that the clear purpose of clauses 10.1 and 10.2 was to prevent the hirer of a worker from “poaching” Atlas’ workers.[66] Those clauses did not give a right to Carter Mills to employ or engage the services of (or, in the case clause 10.2, to offer to employ or engage the services of) the worker upon payment of a fee. Rather, they were designed to discourage Carter Mills from taking any of those steps, even though to do so would not constitute a breach of the contract. They did so by operating in terrorem: if Carter Mills were to make an offer or actually to employ or engage a worker, it would have to pay $30,000 to Atlas. That figure is very large and there is no evidence that it is reasonable, nor a genuine pre-estimate of any loss to Atlas that might be caused if its employee (or former employee, where the employee no longer works for Atlas at the time he or she is made an offer or employed by Carter Mills) were to be engaged by the prior hirer of the employee from Atlas.[67]
  6. [86]
    A fee stipulated in a contract is not a penalty simply because it might be considered excessive. The doctrine of penalties does not apply simply to relieve a person from the harsh consequences of a bargain freely entered into. Though that price may seem to be high, one might consider that it was a matter for the defendant’s commercial judgment whether to agree to pay it.[68]
  7. [87]
    However, in this case, where Atlas was not in the business of recruiting people to work for other employers, I agree with the defendants’ submission that the fee is designed to operate in terrorem, to deter Carter Mills, as hirer of Mr Wootton while he was employed by Atlas, from subsequently employing or engaging or offering to employ or engage him, whether or not he continued to be employed by Atlas.
  8. [88]
    Indeed, in this case it is even more obvious that that is the principal object of the fee, where MrWootton was employed by Atlas itself as a casual worker under a contract that was only for the term of his assignment to Carter Mills.  That contract (exhibit 3) specifically provides that Mr Wootton’s employment by Atlas was for a temporary period: that is, for the period of his assignment to work for the hirer. On completion of the assignment, Atlas was under no obligation to offer him further work or assignments.  It also provided that he would not, during the assignment or within 2 years of its completion, accept any offer of employment by a client to whom he was introduced by Atlas without first informing Atlas. If he did not inform Atlas, he would pay Atlas a placement fee of $10,000 plus GST “to cover [Atlas’] administration and investigation costs.”
  9. [89]
    While Atlas’ contract with Mr Wootton cannot be used to construe the contract between Atlas and Carter Mills, it does confirm Atlas’ intention to deter its worker and its hirer from subsequently entering into direct arrangements for the employment or engagement of the worker without paying substantial additional fees to Atlas.
  10. [90]
    In my view, the Standard Placement Fee under clause 10 was not, in fact, a placement fee at all, but a fee intended solely to deter Carter Mills from employing or engaging Mr Wootton directly within two years of the end of Mr Wootton’s assignment by Atlas to Carter Mills.  There is no evidence (nor indeed, any pleading) that the amount was in any way calculated by reference to an estimate of the maximum loss that Atlas might incur if Carter Mills were to employ Mr Wootton after the assignment was completed.
  11. [91]
    I conclude that the Standard Placement Fee is therefore an unenforceable penalty.

Is the Introduction Fee (clause 10.2(a)) a penalty?

  1. [92]
    The Introduction Fee is even less a fee for a service than the Standard Placement Fee.  It is payable upon Carter Mills making an offer of employment to a person who had been assigned to it by Atlas, whether or not that offer is accepted and even if the worker is no longer employed by Atlas when the offer is made.  It is payable even if the assignment was for a very short time, whether the offer is for short-term or permanent employment and whether or not the worker would have been prepared to work further for Atlas. 
  2. [93]
    In my view, there is no reason for this fee other than to deter Carter Mills from making such an offer.  Again, there is no evidence that Atlas would suffer any loss from an offer being made.  If it is accepted, then clause 10.1 would apply (if enforceable).  If it is not accepted, then Atlas could not conceivably suffer any loss from it having been made.
  3. [94]
    I find that the Introduction Fee operates only as, and constitutes, a penalty and is therefore also unenforceable.

Is the Investigation Fee (clause 10.3) a penalty?

  1. [95]
    As with the other fees, the Investigation Fee arises if an offer of employment or engagement is made or Carter Mills actually employs or engages the worker.  In either case, if Carter Mills does not inform Atlas that the event has occurred, the fee becomes payable. 
  2. [96]
    In this case, there was evidence from Mr Fletcher that the fee is designed to offset, wholly or partly, the costs Atlas would incur in investigating whether an offer or actual employment or engagement of a worker has occurred.  Mr Fletcher gave examples of investigations he had conducted in other cases.  Because most of Atlas’ clients are in regional or remote areas, to investigate such a possibility, where it has reason to believe that an offer or direct employment or engagement has occurred, can be expensive and can take up a lot of Mr Fletcher’s time.  He assessed his time as worth a particular rate per hour, based on his own personal taxable income per year.  Therefore, Atlas submitted, the fee is a genuine pre-estimate of the loss that Atlas would suffer by investigating the facts if it were not informed by Carter Mills that it had offered to employ or had actually employed or engaged Mr Wootton.
  3. [97]
    Mr Wacker submitted that the examples about which Mr Fletcher gave evidence are not necessarily representative of the extent of loss or expense that Atlas might incur in investigating whether Carter Mills had employed or offered to employ Mr Wootton.  The examples are of investigations in far more remote places than where Mr Wootton was employed in this case.  Mr Fletcher’s methodology of valuing his own time was not reflective of any actual expense to Atlas.  The fee is also payable whether or not Atlas in fact undertakes any investigation and whether any investigation is simple or extensive.  It cannot be seen as a genuine pre-estimate of loss, particularly not of any loss that might be incurred in this particular case, under this particular contract.  Finally, it is clearly designed, in terrorem, to ensure that Carter Mills informs Atlas promptly if it makes an offer or employs or engages the worker originally supplied by Atlas, so that Atlas could immediately demand payment of the Standard Placement Fee or the Introduction Fee.
  4. [98]
    In my view, the Investigation Fee is a penalty.  It is not based on any reasonable pre-estimate of loss.  It is payable whether or not Atlas suffers any loss or conducts any investigation.  It is payable to encourage Carter Mills to inform Atlas of any offer or employment.  It is clearly intended to operate in terrorem, particularly where Carter Mills has only made an offer of employment.  In such a case, there is in fact no contractual obligation on Carter Mills to inform Atlas that it has made an offer of employment.  This is in contrast to where it employs or engages the services of the worker, in which case it is obliged, under clause 10.1(c), to give Atlas five days’ notice (presumably, of its intention to do that).
  5. [99]
    As an aside, arising from my findings that clauses 10.1 and 10.2(a) are unenforceable penalties, there is no commercial reason for clause 10.3, nor for any investigation, in any event, as any investigation would be of circumstances that arise where no fee is payable.  In that case, there would be no useful purpose to an investigation.

Restraint of trade?

  1. [100]
    The defendants contend that each of the Introduction Fee and the Investigation Fee is an unreasonable restraint of trade and therefore unenforceable. Again, I shall also consider that defence in relation to the Standard Placement Fee. I shall do so on the assumption that the fees are not otherwise penalties.

Principles

  1. [101]
    The classic statement concerning the validity and enforceability of contractual restraints of trade is that of Lord Macnaghten:[69]

The public have an interest in every person’s carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable – reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.

  1. [102]
    This principle has relevantly been described as,

The public policy that in the public interest the citizen should be free of any unreasonable restraint upon the exercise of his capacity to be gainfully employed or to engage in trade or commerce.[70]

  1. [103]
    Whether a restraint is reasonable must be judged as at the time when the contract was made.  Changes in circumstances since then are irrelevant.  The onus is on the person trying to enforce a restraint to demonstrate that it is reasonable.  As a general proposition, courts tend to take a stricter and less favourable view of restraints in an employment agreement than restraints in agreements such as the sale of a business.[71] But, in employment contracts, the essential purpose of a restraint is to enable the employer, for a reasonable period after the employee leaves, to attempt to take advantage of the relationship that the employee had promoted with the client by fostering that relationship through other employees or contractors, so as to preserve the employer’s goodwill.  That concept was much better expressed by Latham CJ in 1950, in a passage cited by Applegarth J in saying:

The principal interest which can be protected by a restraint against a former employee is the benefit [to] the former employer of the relationships with its customers.[72]

  1. [104]
    The same purpose applies, of course, to restraints on contractors who have personally promoted relationships with the principal’s clients.
  2. [105]
    Under ordinary principles, an excessive and therefore unreasonable restraint of trade cannot be read down by a court to make it reasonable.[73]  This contract is subject to the laws of Queensland (clause 27).  There is no law in Queensland that permits a court to read down an excessive restraint to the extent that it might otherwise have been lawful.[74]  Therefore, if any of the relevant clauses is an unreasonable restraint, it will be entirely void as contrary to public policy.
  3. [106]
    A provision need not directly prohibit trade.  It is sufficient that its practical effect is to restrict someone engaging freely in trade or employment.  As was also said in Hudson,

such an attempted restraint will be void though not effected by means of a promise by the person sought to be restrained[75]

and

a promise … may rightly be regarded as a restraint of trade because its practical operation is to tend to deter or restrain the promisee from engaging in trade even though it does not prohibit him from doing so.[76]

Clauses 10.1 and 10.2

  1. [107]
    I consider it unnecessary, for reasons which will become apparent, to consider each sub-clause of clause 10 separately in determining whether any of them imposes an unlawful restraint of trade.  Clauses 10.1 and 10.2 can be dealt with together, although clause 10.3 may be different. 
  2. [108]
    Each of clauses 10.1 and 10.2 operates for two years from the termination of Mr Wootton’s assignment to Carter Mills under the contract.  Their intended effect is that, during that period, Carter Mills must pay Atlas a substantial fee if it employs Mr Wootton or engages his services, or offers to do either.  Their clear intention is to discourage Carter Mills from taking any of those steps during that period.
  3. [109]
    The defendants submitted that the practical effect of clause 10.2 is that it operated by way of disincentive or pressure on Carter Mills to refrain from offering to employ the worker.  It tended to deter or restrain Carter Mills from offering to employ or engage Mr Wootton, even though it did not directly prohibit that conduct.  It did so for two years after Mr Wootton’s services ceased being supplied to Carter Mills by Atlas; it did so irrespective of whether Mr Wootton continued to be employed by Atlas; and it did so irrespective of whether Mr Wootton accepted the offer.  The fee was sufficiently high to deter Carter Mills from offering employment to Mr Wootton, particularly if that employment was short-term or casual.[77]  All these factors made it an unreasonable restraint of trade.
  4. [110]
    I agree.  Both clauses 10.1 and 10.2, if upheld, would have the practical effect of deterring Carter Mills from employing or engaging Mr Wootton’s services for two years, regardless of the term of his employment by either Atlas or Carter Mills, or whether he was employed or engaged full-time or on another basis.  While not directly banning Carter Mills from taking any such steps, the amount of the fees has the practical effect of tending to deter or restrain it from employing or engaging Mr Wootton, or even from referring him to somebody else, during the two year period.
  5. [111]
    Given the long period for which the restraint purported to apply, the absence of any correlation between the types of employment offered by both Atlas and Carter Mills respectively, as well as (although not dependent on) the absence of any geographical limit to the restraint, I do not consider it to be reasonable.  Each of these clauses is therefore void.

Clause 10.3

  1. [112]
    Clause 10.3 is different. It also imposes a fee related to the employment of Mr Wootton by Carter Mills, but only where Carter Mills does not inform Atlas, within 24 hours, that it has employed or offered to employ Mr Wootton. Of itself, I am not convinced that it is sufficiently high to constitute an unreasonable restraint of trade.
  2. [113]
    However, the clause is clearly intended to operate with clauses 10.1 and 10.2. It identifies the fee as an “additional” amount “to cover our additional administration and investigation costs” where Atlas has not been informed of Mr Wootton’s employment or an offer to him. In practical terms, it forms part of the scheme purportedly set up by those clauses, which have the practical effect of an unreasonable restraint of trade. In my view, this clause forms part of that scheme and it falls with clauses 10.1 and 10.2. As part of that scheme, it is part of an unlawful restraint of trade.

Unfair contract terms?

  1. [114]
    The defendants contend that each of the Introduction Fee and the Investigation Fee is an unfair contract term, as that phrase is defined in s 24 of the ACL. The Court should not enforce it. Again, I shall also consider that defence in relation to the Standard Placement Fee.

Principles

  1. [115]
    Section 23 of the ACL provides that a term of a small business contract is void where that term is unfair and the contract is a standard form contract.
  2. [116]
    A “small business contract” is relevantly a contract for the supply of services, where the upfront price payable under it does not exceed $300,000 and, when the contract is made, at least one party to it is a business that employs fewer than 20 persons.  In this case, there is no dispute that the contract is a small business contract and a standard form contract.[78]
  3. [117]
    Subsection 24(1) provides that a term of a small business contract is unfair if:
  1. it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
  1. it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
  1. it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
  1. [118]
    In determining whether a term is unfair, s 24(2) provides that a court may take into account such matters as it considers relevant but must take into account the extent to which the term is transparent and the contract as a whole. 
  2. [119]
    Subsection 24(4) also mandates a presumption that a term is not necessary to protect the legitimate interests of the advantaged party unless that party can prove otherwise.
  3. [120]
    Justice Leeming, of the New South Wales Court of Appeal, writing extra-judicially, has explained that open-ended statutes (which I take to include specific statutory provisions such as this and the general concept of what is unfair) which turn on broadly expressed concepts “naturally and indeed necessarily attract a more purposive and less minutely textual mode of construction.”[79] Edelman J has said that “the legislative concept of ‘unfairness’ in s 24, with elaboration through the three elements of unfairness, might be described as a guided form of open-ended legislation.”[80]
  4. [121]
    In a passage relied on by Mr Trewavas in his written outline, Gilmour J considered the equivalent provision to s 24 in the Australian Securities and Investments Commission Act 2001.[81] His Honour said:[82]
  1. the underlying policy of unfair contract terms legislation respects true freedom of contract and seeks to prevent the abuse of standard form consumer contracts which, by definition, will not have been individually negotiated: Jetstar Airways Pty Ltd v Free [2008] VSC 539 at [112];
  1. the requirement of a “significant imbalance” directs attention to the substantive unfairness of the contract: Director-General of Fair Trading v First National Bank plc [2002] 1 AC 481 at [37];
  1. it is useful to assess the impact of an impugned term on the parties' rights and obligations by comparing the effect of the contract with the term and the effect it would have without it: Director-General of Fair Trading v First National Bank plc at [54];
  1. the “significant imbalance” requirement is met if a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in its favour - this may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty: Director-General of Fair Trading v First National Bank at 494 [17] per Lord Bingham, applied in ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [950];
  1. significant in this context means “significant in magnitude”, or “sufficiently large to be important”, “being a meaning not too distant from substantial”: Jetstar Airways Pty Ltd v Free at [104]-[105] per Cavanough J: Cf. Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493 at [32]-[33];
  1. the legislation proceeds on the assumption that some terms in consumer contracts, especially in standard form consumer contracts, may be inherently unfair, regardless of how comprehensively they might be drawn to the consumer's attention: Jetstar Airways Pty Ltd v Free at [115]; and
  1. in considering “the contract as a whole”, not each and every term of the contract is equally relevant, or necessarily relevant at all. The main requirement is to consider terms that might reasonably be seen as tending to counterbalance the term in question: Jetstar Airways Pty Ltd v Free at [128].
  1. [122]
    In Chrisco, Edelman J said, regarding the required considerations set out in s 24(2), that the Court is only required to consider transparency and the contract as a whole in relation to the particular term that is said to be unfair and only in relation to matters concerning that term in s 24(1).  Also, a transparent clause may still be unfair.[83]

Are these clauses unfair?

The parties’ submissions

  1. [123]
    It is convenient to deal with all of clause 10 together in considering this issue. Mr Wacker made the following submissions.
    1. Each of the sub-clauses causes a significant imbalance in the parties’ rights, because each of the fees is payable in circumstances where the fees are out of all proportion to any loss that might conceivably be suffered by Atlas as a result of Carter Mills’ impugned conduct. This is particularly so with the Introduction Fee, as the liability to pay the fee arises on the making only of an offer of employment, even if it is not accepted.
    2. Atlas has not disproved the presumption under subsection (4), that the terms are not reasonably necessary to protect its legitimate interests. If its legitimate interest were to prevent its employees being “poached”, that might be protected by clause 10.1, but (I infer) it does not have such an interest in this case where the period for which Atlas employed Mr Wootton was only the period for which Atlas made him available to Carter Mills. Mr Wootton was not, and was not offered to be, an ongoing employee of Atlas thereafter, so Atlas had no legitimate interest in preventing his employment by Carter Mills.
    3. Both Carter Mills and Gary Carter would be caused detriment if Atlas were able to rely on any of the clauses. Although Mr Wacker did not expressly say what that detriment would be, one detriment is clearly financial – that each defendant would be exposed to pay Atlas a large fee. Another detriment that appears to me is that the clauses would have the practical effect of restricting Carter Mills from employing its employee of choice, for a significant period (2 years), unless it paid Atlas a substantial sum to do so.
    4. It is irrelevant that, in the covering letter by which Atlas sent the proposed agreement to Scott Carter, it expressly drew his attention to clause 10. The clauses themselves are not clear and, on one reading, provide for a fee of $30,000 plus GST to be payable both on the making of an offer and on acceptance of that offer, as well as an Investigation Fee on each occasion if the hirer does not inform Atlas of the offer and the acceptance. They are therefore ambiguous but, even if one considered them to be clear, the events that cause the fees to become payable and the consequences of those events are still unfair for the reasons discussed above.
  2. [124]
    Mr Trewavas submitted that the terms and the contract as a whole did not create a significant imbalance in the parties’ rights and obligations. On the contrary, the contract sought to balance “the risks to the plaintiff in providing his [sic] asset to the defendants. The impugned clauses are the plaintiff’s only safeguard.” They were reasonably necessary to protect Atlas’ interests, for the reasons submitted as to whether they were penalties. The clauses were transparent in each of the ways described in subsection (3) and they (and their effect) were specifically drawn to Carter Mills’ attention before it chose to execute the contract. Neither the terms nor the contract as a whole were unfair.

Consideration

  1. [125]
    I acknowledge that Atlas drew clause 10 to the attention of Carter Mills and stated Atlas’ construction of their meaning in an open and apparently transparent manner. I have little doubt that Scott Carter was aware of them and what was intended by them. The manner in which he appears to have arranged for Mr Wootton to be employed by Mills Carter but, in any event, then to work for Carter Mills seems to me to have been carried out by him as a deliberate attempt to get around the intended effect of the clauses.
  2. [126]
    But that does not mean the clauses are not unfair. I take into account the contract as a whole, including its short‑term nature and the correspondingly short term employment of Mr Wootton by Atlas (that is, solely for the term of Atlas’ contract with Carter Mills). The effect of these clauses, if valid, was to impose a substantial liability on the defendants if Carter Mills or a related company or business were to employ Mr Wootton on any basis, for any period, to perform any duties, at any time within two years of the end of his assignment to Carter Mills under the contract. In my view, that effect, in the context of the short term and limited nature of both this contract and Atlas’ contract of employment with Mr Wootton, was to create a significant imbalance of power between the parties and a significant detriment to each of the defendants. Not only has Atlas not disproved the presumption raised by s 24(4), but I have formed the positive view that, having regard to all these factors, no part of clause 10 was reasonably necessary to protect Atlas’ legitimate interests related to the contract.
  3. [127]
    Therefore, I find that each sub-clause of clause 10 is an unfair term. Pursuant to s 23(1), it is therefore void.

Interest and legal costs

  1. [128]
    In case my findings that Atlas is not entitled to any of the fees sought by it are later held to be incorrect, it is necessary to address claims by Atlas for the payment of interest and costs.
  2. [129]
    In the statement of claim, Atlas pleads that the contract included terms that Carter Mills would pay Atlas’ tax invoice within seven days of the date of the invoice; in default of payment, it would pay interest on any outstanding balance at a rate of 10% of the invoiced amount; and it would pay Atlas’ legal costs on an indemnity basis. It went on to allege that it invoiced Carter Mills for the Introduction Fee and the Investigation Fee, the defendants failed to pay those fees and therefore it claimed the amount of the invoice, interest of 10% of the debt and costs on the indemnity basis.
  3. [130]
    The defendants deny that any such terms were in the contract and they deny any liability to pay interest on the alleged debt or indemnity costs.
  4. [131]
    Clause 8 of the contract relevantly provided:

You agree to pay us for the services of our Worker(s) based on the agreed hourly rates plus GST. …

We will invoice you weekly for a Worker and the payment is to be made to us within seven (7) days after the date of the Tax Invoice. If the Tax Invoice is not paid within seven (7) days of the date of the Tax Invoice, we reserve the right to charge interest of 10% of the Tax Invoice for late payment. If we are required to engage solicitors or a debt collection agency to pursue any unpaid Tax Invoices, you agree that we may also pass on all and any costs associated with engaging their services, including incidental costs.

  1. [132]
    One might think that the pleaded terms derive from clause 8. On that basis, MrWacker submitted that that clause does not apply to any invoice for the Introduction Fee and the Investigation Fee. The references to interest and costs concern weekly tax invoices for the hire of the worker, not invoices for other amounts alleged to be due. Therefore, there is no contractual entitlement to interest on the fees, nor to be paid the legal costs of recovering those fees on the indemnity basis.
  2. [133]
    Mr Trewavas did not deal with this part of the claim in his written submission. In his address, he submitted that the claim for interest is made under clause 8 but the claim for legal costs is not made under that clause but, against Carter Mills, under clause 12 and, against Gary Carter, under clause 13(c). Those clauses relevantly provided:

12.  Indemnity and Risk

You indemnify us … to the fullest extent permitted by law from and against all claims (including third party claims) or losses suffered or incurred by … us arising directly or indirectly from any damage, injury or loss caused by or resulting from any … breach of your obligations under this Agreement.

13.  Guarantors

In consideration for us agreeing to enter into this Agreement with the Hirer, the person … named as Guarantor … agree[s]:

(c)  Indemnify us with respect to any costs we may incur in seeking to recover payment of any unpaid tax invoices, including … all legal costs and legal fees on a solicitor and own client basis, that are reasonably incurred.

  1. [134]
    As to the interest claim, Mr Trewavas submitted that the invoice to Carter Mills for the fees was issued under clause 8, giving rise to the entitlement to interest when the invoice was not paid within seven days. The failure to pay the invoice was a breach of the contract. The claim for costs simply arises under clauses 12 and 13(c) respectively.
  2. [135]
    So far as “interest” is concerned, I agree with Mr Wacker that any entitlement to “interest” is only on unpaid invoices issued under clause 8. That clause only provides for the issue of tax invoices for the hourly hiring fee for the worker. The entitlement to an additional sum comprising 10% of the tax invoice is only on tax invoices for those fees.[84]
  3. [136]
    Furthermore, as I have noted above in footnote 8, the amount of “interest” that Atlas claims under that clause is more than 10% of the tax invoice for the fees.  That tax invoice was for $41,250 (including GST). Ten percent of that figure, of course, is $4,125, not the claimed sum of $4,537.50.  As I have noted, the latter sum includes GST on the “interest”, which is not permitted under the clause.  So, even if “interest” were payable at the rate provided, it would be limited to $4,125 unless it were a rate of interest rather than a flat late payment fee. If it were a rate of interest, then that amount was not yet payable at the time the invoice was raised.
  4. [137]
    Atlas does not claim, additionally or in the alternative, interest under s 58 of the Civil Proceedings Act 2011.  Such a claim must expressly be pleaded.[85]  In the absence of such a claim, there is no basis to award interest up to judgment on the principal debt.
  5. [138]
    As for the legal costs under clauses 12 and 13(c), one might consider reference to those clauses to have taken the defendants by surprise, as they were not pleaded.  However, Mr Wacker did not object to Atlas relying on them, nor did he make any submission about them in his submissions in reply.
  6. [139]
    As to clause 12, I do not consider that any liability Atlas has to its lawyers for legal costs is a “loss” to which the indemnity applies.  Arguably, I suppose, those costs could be “third party claims” arising from loss resulting from Carter Mills’ breach of its obligation to pay the fees.  However, that seems to me to be stretching the wording of the clause beyond its proper construction.  Ordinarily, a contractual entitlement to legal costs must be expressly and clearly stated in the contract, particularly if the costs are to be on the indemnity or some other special basis.[86]  Indeed, that is what Atlas has done in the guarantee in clause 13(c).  In my view, clause 12 does not entitle Atlas to be paid its legal costs by Carter Mills.  Its claim for legal costs may only arise on other bases, such as the rules of court.
  7. [140]
    As to clause 13(c), it raises a clear entitlement in Atlas to be indemnified by Gary Carter, as guarantor, against Atlas’ reasonable legal costs on “a solicitor and own client basis.”  That term is no longer used in courts of this State but, from a contractual point of view, but it is properly construes as referring to what are now known in courts as costs on the indemnity basis.[87]  The latter term is effectively defined in UCPR r 703 as “all costs reasonably incurred and of a reasonable amount,” having regard to the factors specified in the rule.
  8. [141]
    If Atlas were successful in its claims against Carter Mills and, under the guarantee, Gary Carter, it would therefore be entitled to claim its costs on the indemnity basis against Gary Carter, but not against Carter Mills.

The counterclaim

  1. [142]
    I do not consider it necessary to make any of the orders sought by the defendants in the counterclaim.  Having been successful in their defence of the claim, it is unnecessary for the court to make the declaration sought, or to enjoin the plaintiff from enforcing its claim, nor have the defendants suffered loss as a consequence of the unfair contract terms.  It seems to me that the counterclaim was unnecessary, as the issues raised in it were (or, in the case of the unfair contract terms issue, could have been) pleaded in the defence to the claim.  The defendants would have failed in their counterclaim if the plaintiff had succeeded on its claim and, in dealing with their defences (and in treating the unfair contracts claim as if it were pleaded as a defence), I have made findings and rulings that mean that nothing more is needed to uphold the defendants’ rights.
  2. [143]
    On the other hand, although the claim was within the jurisdiction of the Magistrates Court, given the number and complexity of the issues raised in the defence, one might consider it to have been appropriate to have the proceeding transferred to and dealt with by this Court.
  3. [144]
    In any event, the counterclaim should be dismissed.

Conclusions

  1. [145]
    I have concluded that Atlas’ claims against both defendants fail.  Its claim must therefore be dismissed.
  2. [146]
    The defendants’ counterclaim should also be dismissed.
  3. [147]
    Subject to either party filing submissions seeking an alternative order, in accordance with the usual rule Atlas should pay the defendants’ costs of the proceeding.

Footnotes

[1]  Woodgate is about 3 hours’ drive south of Gladstone.

[2]  Exhibit DF2 to the affidavit of Dougall Fletcher sworn 9 October 2023 (Fletcher affidavit).

[3]  Exhibit 3.

[4]  Exhibit 5.

[5]  Paragraph (c) of this clause does not appear to apply to the alternative situations where a fee became payable – where, instead of Carter Mills directly employing or engaging the worker, a third party or a related business or company to whom Carter Mills referred the worker made an offer or employed or engaged the worker’s services.  Nor does it appear to apply to the Introduction Fee or the Investigation Fee where there has been an offer, but no actual employment or engagement by Carter Mills.

[6]  Although that period was not stated in the contract, that was Mr Fletcher’s unchallenged evidence: Fletcher affidavit, [8].

[7]  Fletcher affidavit, exhibit DF 7.

[8]  Fletcher affidavit, exhibit DF 8.  That sum, of course, is more than 10% of the first invoice.  Atlas has added a further sum of GST to the 10% figure of $4,125. 

[9]  Although Atlas’ claim is well within the jurisdiction of the Magistrates Court and its claim was commenced in that court, in their counterclaim the defendants seek a declaration, an injunction and other relief under the ACL.  The proceeding was transferred to this court as there was at least a risk that the relief sought in the counterclaim is not able to be granted by the Magistrates Court:  BD1783/23.

[10]  Defence, [3](c)(i)(A) and (B).

[11]  Defence, [5]-[8].

[12]  Defence, [8].

[13]  Defence, [10](a)(i).

[14]  Affidavit of Scott Carter sworn 25 October 2023, [17] (S Carter Affidavit).

[15]  S Carter Affidavit, [18]; Affidavit of Gary Carter sworn 25 October 2023, [16] (G Carter Affidavit); T1-53:34 to T1-54:38.

[16]  The figures to which I refer are all excluding GST, which is also being claimed, unless the context shows otherwise.

[17]  (1990) 169 CLR 279, 296-297.

[18]  (2009) 237 CLR 638, [41].

[19]  Starting at 292, where his Honour was dealing with a rule of court requiring that a party plead any facts that may take the opposite party by surprise.

[20]  (1916) 22 CLR 490, 517.

[21]  See [39] below.

[22]  Relevant documents are an affidavit of Ronald Frigo, the defendants’ solicitor, and an affidavit of Keenan Leesworn, the plaintiff’s solicitor, both filed by leave at the commencement of the trial.  They were relevant to objections to evidence that had been exchanged, on which I ruled at that time.

[23]  That payment advice was not tendered in the trial.

[24]  It is clear from his oral evidence that he did not mean that Mr Wootton commenced his employment in April.  Other evidence, referred to at footnote 14 above, showed that he was employed some time before 17 March 2023 and was continuously employed by Mills Carter thereafter.

[25]  Marked B for identification at the trial and provided to the defendants on the day before the trial.

[26]  Clearly referring to clause 10.2(b).

[27]  T1-26.

[28]  T1-30.

[29]  T1-33.

[30]  At [39].

[31]  Statement of claim and defence, paragraphs 5.

[32]  T1-70-71.

[33]  Defendant’s closing submission, [30].  Emphasis in the original.

[34]  Subject, of course, to the defences raised.

[35]  T1-83.

[36]  T1-21:44-45.

[37]  The statutory definition is therefore irrelevant.  For a somewhat similar case, see Opal Holdings (Australia) Pty Ltd v Franklins Ltd (2002) 54 NSWLR 565, [43].

[38]  These facts appear from an ASIC extract that is exhibit DF3 to the Fletcher affidavit.

[39]  Again, subject to defences discussed later.

[40]  In submissions about objections, Mr Trewavas did contend that Atlas would have amended its statement of claim to make such a claim but, in his final address, he relied on clause 10.1 and did not pursue a claim under clause 10.2(b).

[41]  [1915] AC 79 (Dunlop), 86-88 (references and footnotes omitted).

[42]  This formulation substantially derives from the reasons of the High Court in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 (Andrews), [10].

[43]  (1983) 152 CLR 359 (O'Dea).  The facts in that case are very different to this, but the principles discussed have some relevance to this contract, as the circumstances in which the relevant payments are provided for in the contract are not clearly upon breach of any direct obligation by Carter Mills.

[44]  (1983) 152 CLR 359, 367.

[45]  [1942] Ch 108, 119.

[46]  [1961] 2 QB 57, 65.

[47]  (1983) 152 CLR 359, 367-368.

[48]  [1938] 2 KB 83 (Associated Distributors).

[49]  [1962] AC 600, 614, 631, 633.

[50]  [1968] 1 QB 54, 64, 67.

[51] AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170, 183-186.

[52]  (1986) 162 CLR 170, 186.

[53]  Notwithstanding the view expressed by David J of the Supreme Court of South Australia that “the decision in Associated Distributors Ltd v Hall still stands:”  South Australian Famers Fuels Pty Ltd v Whittingham [2008] SASC 211, (2008) 257 LSJS 153, [33].

[54] Campbell Discount Co Ltd v Bridge [1962] AC 600, 613.

[55]Andrews, [78], [84].

[56] Paciocco v Australia and New Zealand Banking Group Ltd (2014) 309 ALR 249 (Paciocco trial), [15].

[57] Paciocco trial, [26]-[28], [31], [38].

[58] Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 (Paciocco appeal), [217].  Besanko J (at [371]) and Middleton J (at [398]) agreed with the Chief Justice.

[59] Paciocco appeal, [219], quoting Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717.

[60] Paciocco appeal, [222].

[61] Paciocco appeal, [400]-[401].

[62] Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525.

[63]  (2016) 258 CLR 525, [17].

[64]  (2016) 258 CLR 525, [32].

[65]  T1-44:18-20

[66]  Indeed, Atlas’ counsel also made that clear in his opening submissions, on which he relied in closing.

[67]  Mr Fletcher, in his affidavit, originally gave evidence about facts that could tend to prove that the fee was a fair estimate of the greatest loss that Atlas may suffer if its employee were directly engaged by the hirer, but that evidence was struck out for reasons not now relevant.  But, even if there were evidence to the effect of that in his affidavit, it would not, in my view, have demonstrated that the fee was a genuine pre-estimate of the maximum loss that Atlas might suffer if Carter Mills subsequently employed or engaged Mr Wootton, because Mr Wootton was not employed permanently by Atlas and therefore there would be no basis to conclude that, had Carter Mills or Mills carter not employed him, Atlas would (or likely would) have earned fees amounting to about that level (if at all) from hiring out his services to other businesses over the two years following the end of this contract.

[68]  cf Moran v Argonaut Equity Partners Pty Ltd [2021] WASCA 45, [89]; special leave to appeal refused: [2021] HCASL 138.

[69] Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535, 565.  This passage has been applied in Australia time and time again, in considering a wide variety of circumstances.

[70] Howard F Hudson Pty Ltd v Ronayne (1972) 126 CLR 449 (Hudson), 453-453 (Barwick CJ).

[71] Geraghty v Minter (1979) 142 CLR 177, 185.

[72] Vision Eye Institute Ltd v Kitchen [2014] QSC 260, [262], citing Lindner v Murdock’s Garage (1950) 83 CLR 628, 636.

[73]  Subject to construing a clause, if possible, as intended only to apply reasonably and therefore to be valid:  G Hughes (ed), Dean’s Law of Trade Secrets & Privacy (3rd ed, 2018), [100.1250].  That option is not open here as the restraint period is a fixed two years, which cannot be construed as meaning a lesser period.

[74]  Cf Restraints of Trade Act 1976 (NSW), s 4.

[75]Hudson, 453 (Barwick CJ).

[76] Hudson, 468 (Gibbs J).

[77]  Mr Wacker compared this clause with that in Earth Force Personnel Pty Ltd v EA Negri Pty Ltd [2010] VSC 426, in which Hargrave J held that the relevant clause was an unreasonable restraint.

[78]  Carter Mills pleaded the relevant facts and this conclusion in its counterclaim and Atlas admitted those facts in its answer.  Also, Gary Carter’s evidence was that, when the contract was made, Carter Mills employed fewer than 20 people:  affidavit of Gary Carter (exhibit 7), [6].

[79]  M Leeming, “Equity: Ageless in the ‘Age of Statutes’” (2015) 9 Journal of Equity 108, 116.  This passage was referred to with apparent approval by Edelman J in Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd (2015) 239 FCR 33, [40] (Chrisco).

[80] Chrisco, [40].

[81]  Regarding consumer contracts, to which the same principles apply as to small business contracts.

[82] Australian Competition and Consumer Commission v CLA Trading Pty Ltd (2016) 34 ACLC 16-009, [54].

[83] Chrisco, [43].

[84]  The contract is unclear whether “interest of 10% of the Tax Invoice for late payment” is simply a one-off late payment fee (as Atlas appears to have considered it, having issued a separate invoice for that sum) or is actually real interest, calculated at 10% pa for the period for which the fees remain unpaid (as pleaded in the statement of claim).  In the end, it is unnecessary for me to decide, although I incline to the view that it is the latter.

[85] Uniform Civil Procedure Rules 1999, r 159.

[86] Re Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498, 502; Chen v Kevin McNamara & Sons Pty Ltd [2012] VSCA 229, [8]-[16], [20]; Willmott v McLeay [2013] QCA 84, [26]-[29].

[87] Deen v Harburg Nominees Pty Ltd [2021] QCA 44, [65].

Close

Editorial Notes

  • Published Case Name:

    Atlas People Pty Ltd v Carter Mills Hotels Pty Ltd

  • Shortened Case Name:

    Atlas People Pty Ltd v Carter Mills Hotels Pty Ltd

  • Reported Citation:

    (2023) 3 QDCR 477

  • MNC:

    [2023] QDC 240

  • Court:

    QDC

  • Judge(s):

    Barlow KC, DCJ

  • Date:

    14 Dec 2023

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
ACCC v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368
1 citation
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Cite 1 - [2015] FCA 368
Alder v Moore [1961] 2 QB 57
1 citation
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Cite 1 - [1961] 2 QB 57
AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170
4 citations
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Cite 1 - (1986) 162 CLR 170
Cite 2 - (1986) 162 CLR 170
Cite 3 - (1986) 162 CLR 170
Cite 4 - (1986) 162 CLR 170
Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205
2 citations
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Cite 1 - (2012) 247 CLR 205
Cite 2 - (2012) 247 CLR 205
Apex Supply Co Ltd, In re [1942] Ch 108
1 citation
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Cite 1 - [1942] Ch 108
Associated Distributors Ltd v Hall [1938] 2 KB 83
1 citation
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Cite 1 - [1938] 2 KB 83
Australian Competition and Consumer Commission v Chrisco Hampers Australia Ltd (2015) 239 FCR 33
1 citation
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Cite 1 - (2015) 239 FCR 33
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
2 citations
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Cite 1 - (1990) 169 CLR 279
Cite 2 - (1990) 169 CLR 279
Campbell Discount Co. Ltd v Bridge (1962) AC 600
2 citations
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Cite 1 - (1962) AC 600
Cite 2 - (1962) AC 600
Chen & Anor v Kevin McNamara & Son Pty Ltd & Anor (No 2) [2012] VSCA 229
1 citation
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Cite 1 - [2012] VSCA 229
Deen v Harburg Nominees Pty Ltd [2021] QCA 44
1 citation
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Cite 1 - [2021] QCA 44
Director General of Fair Trading v First National Bank Plc [2002] 1 AC 481
1 citation
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Cite 1 - [2002] 1 AC 481
Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd (1915) AC 79
2 citations
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Cite 1 - (1915) AC 79
Cite 2 - (1915) AC 79
Geraghty v Minter (1979) 142 CLR 177
2 citations
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Cite 1 - (1979) 142 CLR 177
Cite 2 - (1979) 142 CLR 177
Gould & Birbeck & Bacon v Mt Oxide Mines (in liq) (1916) 22 CLR 490
1 citation
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Cite 1 - (1916) 22 CLR 490
Howard F. Hudson Pty Ltd v Ronayne (1972) 126 CLR 449
2 citations
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Cite 1 - (1972) 126 CLR 449
Cite 2 - (1972) 126 CLR 449
Jetstar Airways Pty Ltd v Free [2008] VSC 539
1 citation
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Cite 1 - [2008] VSC 539
Lindner v Murdock's Garage (1950) 83 CLR 628
1 citation
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Cite 1 - (1950) 83 CLR 628
Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717
1 citation
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Cite 1 - [1966] 2 NSWR 717
Moran v Argonaut Equity Partners Pty Ltd [2021] WASCA 45
2 citations
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Cite 1 - [2021] WASCA 45
Cite 2 - [2021] WASCA 45
Moran v Argonaut Equity Partners Pty Ltd [2021] HCASL 138
1 citation
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Cite 1 - [2021] HCASL 138
Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd (1894) AC 535
2 citations
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Cite 1 - (1894) AC 535
Cite 2 - (1894) AC 535
O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359
4 citations
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Cite 1 - (1983) 152 CLR 359
Cite 2 - (1983) 152 CLR 359
Cite 3 - (1983) 152 CLR 359
Cite 4 - (1983) 152 CLR 359
Paciocco v Australia and New Zealand Banking Group Limited (2014) 309 ALR 249
2 citations
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Cite 1 - (2014) 309 ALR 249
Cite 2 - (2014) 309 ALR 249
Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199
2 citations
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Cite 1 - (2015) 236 FCR 199
Cite 2 - (2015) 236 FCR 199
Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525
4 citations
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Cite 1 - (2016) 258 CLR 525
Cite 2 - (2016) 258 CLR 525
Cite 3 - (2016) 258 CLR 525
Cite 4 - (2016) 258 CLR 525
Re Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498
1 citation
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Cite 1 - [1953] 2 All ER 498
South Australian Famers Fuels Pty Ltd v Whittingham [2008] SASC 211
1 citation
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Cite 1 - [2008] SASC 211
South Australian Famers Fuels Pty Ltd v Whittingham (2008) 257 LSJS 153
1 citation
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Cite 1 - (2008) 257 LSJS 153
United Dominions Trust (Commercial) Ltd v Ennis [1968] 1 QB 54
1 citation
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Cite 1 - [1968] 1 QB 54
Vale v Sutherland (2009) 237 CLR 638
2 citations
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Cite 1 - (2009) 237 CLR 638
Cite 2 - (2009) 237 CLR 638
Vision Eye Institute Ltd v Kitchen [2014] QSC 260
2 citations
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Cite 1 - [2014] QSC 260
Cite 2 - [2014] QSC 260
Willmott v McLeay [2013] QCA 84
1 citation
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Cite 1 - [2013] QCA 84

Cases Citing

No judgments on Queensland Judgments cite this judgment.

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