Bottoms v Featherstone
[2005] QSC 317
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- Unreported Judgment
- Bottoms v Featherstone[2005] QSC 317
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Bottoms v Featherstone[2005] QSC 317
Bottoms v Featherstone[2005] QSC 317
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial | |
PROCEEDING: | Application |
ORIGINATING COURT: | |
DELIVERED ON: | 4 November 2005 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 2 November 2005 |
JUDGE: | Douglas J |
ORDER: | On the defendant providing the undertaking offered to comply with the requirements of rule 91 of the Queensland Law Society Rules 1987 to keep proper books of account in respect of all moneys coming into his hands in the course of his practice and to make full and frank disclosure of all profits and losses made in his new practice, the application is dismissed. Further submissions sought as to costs |
CATCHWORDS: | EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INJUNCTIONS FOR PARTICULAR PURPOSES – TO RESTRAIN BREACH OF CONTRACT – IN GENERAL – where defendant was hired in 1993 to work as a solicitor with the firm of which the plaintiffs are partners, Bottoms English – where defendant became concerned over an arrangement between the firm and a website called AussieLegal – where defendant attempted to highlight his concerns to the plaintiffs – where defendant made a confidential inquiry to the Queensland Law Society Inc – where the plaintiffs and defendants differences over this issue were not resolved by meetings – where plaintiffs sent defendant letter on 29 September 2005 notifying him that they were giving him six months notice that his employment would terminate on 15 March 2006 – where defendant was directed to use up the balance of his annual and long service leave and was directed not to come to work for the balance of the six months – where defendant registered and advertised the name of a new law firm – where contract of employment contained a restraint of trade clause – where plaintiffs seeking an injunction to prevent defendant working as a solicitor except for their firm – whether injunction should be granted EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – SERIOUS QUESTION TO BE TRIED – OTHER CASES – where plaintiffs contend that defendant remains an employee of their firm – where defendant’s solicitors asserted in a letter in response to the plaintiff’s letter of 29 September 2005 that the plaintiffs had summarily dismissed the defendant – where the plaintiffs refused to accept the defendant’s purported termination of his contract of employment by letter of 4 October – whether the issue of the defendant’s status as an employee of the company is a serious issue to be tried EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – BALANCE OF CONVENIENCE – where defendant submits that damages are an adequate remedy especially in the circumstance that the defendant, as a solicitor, is required to maintain accurate books of account – where defendant alleges that inability to undertake actual work could result in losing his accreditation as a personal injury law specialist with the Queensland Law Society Inc – where defendant contends that quantification of his damages in the circumstance of having just invested in establishing a new firm is much more problematic than for the plaintiffs – where defendant alleges the plaintiff has failed to come with clean hands – where defendant argues that the efficacy of the Queensland Law Society’s confidential complaints mechanism would be undermined if the injunction were granted – where defendant highlighted innocent third parties who might be affected by the injunction – where plaintiff contended that their damages would be impossible to quantify – whether the balance of convenience was such that the injunction should be granted Industrial Relations Act 1999 (Qld), s 45(2), s 45(3) Personal Injuries Proceedings Act 2002 (Qld) Queensland Law Society Rules 1987 (Qld), r 91 Macauslane v Fisher & Paykel Finance Pty Ltd [2003] 1 Qd R 503, cited |
COUNSEL: | Mr G C Martin SC for the applicants Mr M P Amerena for the respondent |
SOLICITORS: | Milner Lawyers for the applicants MacDonnells for the respondent |
[1] DOUGLAS J: In this application for an interlocutory injunction the applicant plaintiffs are solicitors whose firm, Bottoms English, has been the employer of the defendant, Mr Featherstone, since 28 June 1993. They claim that he remains their employee until 15 March 2006 and wish to restrain him until trial or earlier order from practising as a solicitor other than as an employee of their firm and from holding himself out as practising law other than as an employee of that firm.
Background facts
[2] The plaintiffs required Mr Featherstone to attend a meeting with them on 9 September 2005. The principal subject of the meeting appears to have been a discussion about the firm’s relationship with the operator of a website known as “AussieLegal”. Mr Featherstone said that he was worried about the propriety of any relationship between Bottoms English and AussieLegal because of his concern that certain websites were contravening provisions of the Queensland Law Society Inc’s handbook and/or the Personal Injuries Proceedings Act 2002.
[3] He understood that the firm had some arrangements involving payment of a fee to AussieLegal and asked the office manager of Bottoms English to bring the issue to the partners’ attention urgently He did not receive a reply for some days, made a further enquiry of the office manager and eventually spoke to the plaintiff Anne English, in about mid-August receiving a memorandum from her saying that she would arrange to meet him to discuss the matter further. He says that did not happen but that he received further information about these issues from the Law Society’s magazine, Proctor. After that journal came out he made a confidential inquiry of the Law Society and then, on 7 September 2005, spoke with one of his fellow employed solicitors, Wendy Lehmann about the issue. She had about that time received an enquiry directed to her from the AussieLegal website. His conversation with her appears to have triggered the plaintiffs’ wish to see him on 9 September.
[4] It appears now, however, that the firm simply advertised on the website in circumstances not regarded as in breach of the rules of the Law Society. It was unfortunate that that issue was not clarified earlier.
Termination of the defendant’s employment
[5] The meeting of 9 September 2005 was not productive and, after some further negotiation, on 29 September 2005, Bottoms English sent Mr Featherstone a letter notifying him that the firm had decided to terminate his employment on six months notice expiring on 15 March 2006. That period of notice appears to have been adopted by the plaintiffs on the basis that six months notice was a reasonable period for an employee in his position.
[6] He was directed to take his annual leave and long service leave during the period of notice. His long service leave was to commence on 29 December 2005 and cease on 15 March 2006, and between 29 September 2005 and 29 December 2005 he was required to take all his remaining annual leave. He was also told that he would be paid for the intervening period between the end of his annual leave entitlement and the commencement of his long service leave but that he was not required to attend work during that time and was directed not to do so. The matters that the plaintiff said were taken into account in making this decision included an assertion that his behaviour as a senior associate and trusted employee of the firm in relation to the AussieLegal matter was inexcusable.
[7] Mr Featherstone has continued to receive payment from the plaintiffs, which he has accepted, although it was submitted to me that he was accepting the payments because of a counterclaim available to him against the firm. It is clear that the plaintiffs’ payments to him have been made by them on the basis of his contractual entitlements and there has been no assertion by Mr Featherstone in writing to the plaintiffs that he is receiving them only in respect of his potential counterclaim.
Repudiation by the plaintiffs?
[8] By his solicitor’s letter of 30 September 2005 Mr Featherstone asserted that he had been summarily dismissed by the plaintiffs, a course that the plaintiffs’ letter of 29 September 2005 asserted they were entitled to take but had decided not to, rather taking the course of giving him notice. Mr Featherstone’s solicitor’s letter of 30 September 2005 also asserted that the notice given was not reasonable because of the direction that he take his entitlement to annual leave and long service leave during the notice period. That argument has difficulties because of the decision of the Court of Appeal in Macauslane v Fisher & Paykel Finance Pty Ltd [2003] 1 Qd R 503, 518 where Holmes J said:
“The appellant would have been within its rights to require the respondent to exhaust his leave entitlements as part of the nine‑month period of notice, so that they should not be regarded as constituting an additional benefit lost.”
[9] Mr Featherstone’s solicitors’ letter of 30 September 2005 also asserted that the plaintiffs had repudiated their obligations as an employer by directing Mr Featherstone to commence long service leave on 29 December 2005. They relied upon s 45(2) of the Industrial Relations Act 1999 which provides that an employee and employer may agree when the employee is to take long service leave. Section 45(3) goes on to provide that if the employee and employer cannot agree, the employer may decide when the employee is to take leave by giving the employee at least three months written notice.
[10] The assertion in the letter of 30 September 2005 is that there was no attempt to reach agreement with Mr Featherstone concerning long service leave before the direction to take it from 29 December 2005 was imposed. I do not wish to decide the matter finally but it is difficult to see how that direction in itself amounted to repudiatory conduct by the plaintiffs: at worst it might be interpreted as thoughtless conduct rather than an attack on the basis of the contract. Mr Featherstone was also informed by the plaintiffs later, on 4 October 2005, that if he wished to take his long service leave at some other time the plaintiffs were happy to consider any proposal he wished to make.
[11] Other alleged repudiatory conduct by the plaintiffs asserted in Mr Featherstone’s solicitors’ letter of 30 September 2005 was their failure to afford him procedural fairness and to properly investigate the allegations of misconduct they made against him because of his contact with the Law Society. The letter also asserts that the plaintiffs engaged in conduct inconsistent with the employment relationship in that the firm had replaced Mr Featherstone with a new solicitor, a personal injury specialist like himself and had issued new keys to the premises to staff excluding Mr Featherstone.
[12] Mr Featherstone’s solicitors then purported to accept the plaintiffs’ claimed repudiation in their letter and demanded immediate payment of his outstanding annual leave entitlements, long service leave entitlements and of a bonus due to him from the previous financial year. Those sums form the basis of the counterclaim to which I have already referred. The letter also claimed the equivalent of 12 months wages on account of reasonable notice of termination.
[13] The plaintiffs refused to accept the Mr Featherstone’s purported termination of his contract of employment in their letter of 4 October 2005. On 7 October 2005 Mr Featherstone registered the name “Lehmann Featherstone Lawyers”. An advertisement for that firm appeared in the Cairns Post on 17 October 2005. On 18 October 2005 Lehmann Featherstone requested a transfer of certain files from the plaintiffs. The evidence is that those requests related to clients who had sought out Mr Featherstone since he has set up his own firm but had not been solicited by him from Bottoms English.
[14] The plaintiffs also seek to rely upon a restraint of trade clause in the letter offering employment to Mr Featherstone on 18 June 1993 to require him not to practise as a principal of a firm in Cairns for the three months after 15 March 2006 until 14 June 2006. It reads:-
“There will be a restraint of trade clause in relation to the Cairns area for a 3 month period, covering your establishment of your own practice from the date of your ceasation (sic) of your employment with us.”
[15] Interestingly that offer of employment included a term that Mr Featherstone was required to give the plaintiffs eight weeks notice should he wish to resign.
Serious question
[16] It is not appropriate for me to attempt to resolve these disputed issues at this stage but it is reasonably safe to conclude that there is a serious question to be tried about the issue whether Mr Featherstone continues to be an employee of the plaintiffs. Mr Amarena, for the defendant, was only willing to concede that the serious questions to be tried contended for the plaintiffs had “barely colourable” prospects. He submitted too that there was a good case that the plaintiffs had repudiated Mr Featherstone’s contract of employment rather than simply terminating it particularly because of their reaction to his attempts to satisfy himself of the propriety of the firm’s relationship with AussieLegal. Again that issue seems to raise a serious question in itself.
[17] It was also submitted on behalf of Mr Featherstone that his contract of employment contained an implied duty on the part of the employer to provide work to him because a bonus system existed in respect of the performance of work and because Mr Featherstone was employed as a skilled employee. It was submitted that the effect of the notice of 29 September 2005 was to breach this implied obligation because during the balance of the period of notice not covered by accrued annual leave and long service leave he was not allowed to work but was effectively locked out of his work place.
[18] The asserted restraint of trade clause was also attacked on the basis that it was not shown to have become a term of the contract, the clause itself suggested that it was a matter for further negotiation and potentially operative only in the circumstances where Mr Featherstone had resigned rather than where he was dismissed. There are other attacks made on the validity of this clause which again go to show, principally, that there are serious questions to be tried in the case.
Balance of Convenience
[19] The principal submission for the defendant was that damages were an adequate remedy in these circumstances. It was submitted that this was particularly the case because, as a solicitor, he was required to keep proper books of account by r 91 of the Queensland Law Society Rules 1987. There seems to me to be some merit in that submission. The defendant has also undertaken to comply with the requirements of that rule and to make “full and frank disclosure of all profits and losses made in his new practice”. It is also submitted that, should the injunction sought be imposed, the notice period envisaged would not only prevent the defendant from earning a bonus during that period but also there would be a risk to the defendant’s status as an accredited personal injuries solicitor if he cannot work.
[20] It was also argued that the value of the investment he has made in commencing his new practice would be put at risk in circumstances where the quantification of any damages he might incur, should it transpire that an injunction ought not have been granted, would be more problematical than the quantification of any damages that might be suffered by the plaintiff. The potential for harm to the interest of Mr Featherstone’s partner in his new firm, Ms Lehmann, was also submitted to be relevant on the basis that she was an innocent third party as were clients who wished to be legally represented by him and not by the plaintiffs.
[21] It was also submitted that the efficacy of the Law Society’s confidential ethical enquiry system would be undermined if an injunction were granted in these circumstances where the defendant claimed to have sought to rely upon that system and these consequences have followed.
[22] Finally the defendant argued that the plaintiff had not come to Court with clean hands in that they have created the false impression with persons making enquiries of the defendant at the firm that he was merely on leave, the implication being that he would have eventually returned to handle their matters.
[23] The most persuasive of these arguments on the balance of convenience seems to me to be that damages would be an adequate remedy for the plaintiffs. Mr Martin SC for the plaintiffs submitted that the damage which might be done to the plaintiffs’ practice could not be estimated as the number of clients who might leave and what loss that might occasion the plaintiffs can only be a matter for conjecture. That will certainly be true to some extent but those concerns do not seem to me to raise insuperable problems given the obligations of the defendant to keep proper accounts and the undertaking he has offered to do so. Certainly it seems to me that those damages would be more capable of assessment than would be the damages Mr Featherstone would suffer from the restraint sought against him. In the absence of the ability to operate a practice it is almost completely speculative what its earnings or profits would be. Although any injunction would only be granted on the giving of an undertaking as to damages by the plaintiffs it seems to me to be significant to assess also what the likely ability to prove such damages would be.
[24] It is also significant, in my view, in assessing the balance of convenience, that the plaintiffs asserted reliance on their contractual rights to maintain an employment relationship with Mr Featherstone is not so strong, when compared with the defendant’s claim that his contract of employment had been repudiated, as to warrant the conclusion that the plaintiffs’ prospects of obtaining final relief are so clear as to require me to prevent Mr Featherstone from operating his own practice even pending a trial of the action.
Resolution
[25] Accordingly, on the defendant providing the undertaking offered to comply with the requirements of r 91 of the Queensland Law Society Rules 1987 to keep proper books of account in respect of all moneys coming into his hands in the course of his practice and to make full and frank disclosure of all profits and losses made in his new practice, I dismiss the application. I shall hear further submissions as to costs.