FEDERAL COURT OF AUSTRALIA

Informax International Pty Ltd v Clarius Group Limited [2011] FCA 183

THE COURT ORDERS THAT:

1.    The parties bring in short minutes of order within fourteen days.

2.    In the event of short minutes of order not being received within fourteen days the matter be relisted for directions.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

I

Introduction

1    Mrs Isabel Menano-Pires is an experienced information technology (“IT”) project manager. She holds a Bachelor of Science degree from Manchester University with honours and majored, in that degree, in computer science. She began working in the IT industry in 1981 and for nearly 20 years worked for a US based IT consultancy company, Computer Science Corporation. Between 1999 and 2006 she worked as an IT project manager successively for NRMA Ltd, IBM Australia Ltd, Commonwealth Bank of Australia Ltd and SingTel Optus Ltd which are all large corporations. The evidence before me suggests, and I accept, that Mrs Menano-Pires’ skills as an IT project manager are of a high order.

2    This case is about Mrs Menano-Pires’ relationship with a recruitment firm who specialises in the placement of IT contractors with large corporations (such as the ones for whom Mrs Menano-Pires had previously worked). That firm is the respondent. Although it is presently called the Clarius Group Ltd, it was, at the times relevant to this litigation, called Candle Australia Ltd. Because the parties have referred to it as Candle I will adopt the same convention. Candle is a large business. It was listed on the Australian Stock Exchange in 1997 (ASX Ticker CND) and remains listed. It provides recruitment services across the Asia Pacific region. Apart from those contractors whom it places in positions with its clients, it has more than 350 of its own staff located in major cities across the region such as Sydney, Melbourne, Hong Kong, Beijing and Singapore as well as many others. It operates across a number of sectors including the IT sector.

3    In February 2007, Candle was successful in placing Mrs Menano-Pires in a position as an IT project manager with the well-known grocer, Woolworths Ltd, on a temporary contract of 3 months duration. The project she was to manage was known within Woolworths as the centralised fuel price management project. As a matter of personal choice, Mrs Menano-Pires provided her services through a corporate vehicle known as Informax International Pty Ltd which was a company owned by Mrs Menano-Pires and her husband, Mr Jose Menano-Pires, and which I will call “Informax”. The formal provider of Mrs Menano-Pires’ services was Informax and, when she was engaged by a firm to do work, it was Informax which generally entered into the relevant contractual documentation.

4    Although Candle placed Mrs Menano-Pires in the project management position with Woolworths neither she nor Informax had any contract with Woolworths. The contract which existed was, instead, between Candle and Informax. The initial contract – there were subsequent extensions – commenced on 5 March 2007. The contract was in writing and contained a number of terms. Among the principal terms was a promise by Informax to Candle that it would provide the project management services of Mrs Menano-Pires to Woolworths until 1 June 2007. Another was the corresponding promise by Candle that it would pay Informax $792 per day for those services (which included an amount for GST).

5    The placement of Mrs Menano-Pires with Woolworths was by no means mere happenchance. Candle assiduously pursued the acquisition of clients who were large corporations with significant IT needs under long term labour supply agreements. These were known as “Preferred Supplier Agreements” (or “PSAs”). Under these long term arrangements Candle was able to secure large volumes of work through the continuous and on-going engagement of contractors. There was, in fact, a PSA in place between Candle and Woolworths of 3 years duration which commenced on 23 August 2006. To give some flavour of the size of these arrangements, it is worth noting that the PSAs for Candle’s four largest client accounts generated $54,737,841 in gross revenue for the period from 1 July 2009 to 14 April 2010. For the October to December 2008 quarter, Candle generated gross revenues of $615,174 from Woolworths.

6    Of course, these figures are gross figures and Candle was obliged to pass much of that revenue on to its own contractors (such as Informax). Its profit consisted of the margin it could charge clients, like Woolworths, on the cost to it of the labour it provided. In the case of labour provided under a PSA, the margins were typically in the range of 8%-13%. Labour provided under PSAs accounted for up to 65% of Candle’s business.

7    Mrs Menano-Pires’ work at Woolworths was a success. Having completed one project she was asked by Woolworths consecutively to work on a number of others, some of which were of considerable strategic importance to Woolworths. Of course, she was not herself retained by Woolworths for it looked to Candle to supply it with labour under the PSA. As each new project was assigned to Mrs Menano-Pires, arrangements were made to extend her contract with Candle.

8    This state of affairs continued for well over one year to the mutual benefit of all. However, by April 2008 it looked likely that there might not be any further projects for Mrs Menano-Pires to work upon. At the beginning of May 2008, she had a meeting with representatives of Candle and informed them of this impending work shortage. Candle’s representatives said they would look on her behalf for positions both inside and outside Woolworths. Importantly, however, they recognised that it was Mrs Menano-Pires who was the person who had the most developed project management contacts within Woolworths and, in light of that, they suggested to her, and she accepted, that she herself should look within Woolworths for a position.

9    There was thus sown the seeds of discontent and, with them, not a small degree of confusion. As a result of the meeting at the start of May 2008 Mrs Menano-Pires says she was left with the impression that if she could find a project management position within Woolworths then she could take it as her own without any further involvement from Candle. This view is not shared by Candle.

10    There remained some tidying up work for Mrs Menano-Pires to do under the existing arrangements with Candle until 30 June 2008. One final extension of her contract through to 30 June 2008 was approved to facilitate that work and this occurred on 4 June 2008. This contract was on the same terms, save as to its duration, as the initial contract which had been executed back on 5 March 2007.

11    Whilst her work for Woolworths ebbed to its end, Mrs Menano-Pires took steps within Woolworths to find other project management positions and these efforts were rewarded with success. Within Woolworths she had become acquainted with a Ms Zozobrado, who was a business account manager in the customer engagement department, and Ms Zozobrado was able to offer Mrs Menano-Pires a position as a project manager on a new project known as “Instant Rewards” which was a loyalty programme for Woolworths’ customers. When the question of pay arose, Mrs Menano-Pires told Ms Zozobrado that Woolworths had previously been paying Candle $900 per day for her services with which she would be happy but, and this is crucial:

We’ve got our own company set up. I work with Candle at the moment, but they did not find me this position and, as such, I’d rather work through our company for Instant Rewards.

12    On 16 June 2008, Ms Zozobrado confirmed to Mrs Menano-Pires that she had the position which was to be of three months duration. Mrs Menano-Pires’ work for Candle finished on 30 June 2008 and the following day she commenced working for (or, to be more accurate, Informax began providing her services to) Woolworths in a direct fashion and without the involvement of Candle. There is no dispute that she did not inform Candle of this development. A written contract was executed in July 2008. The effect of its terms was that it would last as long as there was in force a “service schedule” (cl 3.1(b)). There was only one service schedule, however, and this specified the work to be done on the Instant Rewards project. It expressly expired after 30 September 2008. Accordingly, Informax’s contract with Woolworths would come to an end on 1 October 2008 unless a further service schedule was executed before that time.

13    As had previously been the case, those within Woolworths for whom Mrs Menano-Pires was working were satisfied with her work. On 12 August 2008, she was offered a further project management position within Woolworths on a related project known as “Customer Analytics”. Towards the beginning of September 2008, Ms Zozobrado offered her yet a further expanded project management role dealing with a particular loyalty card operating only in Tasmania which Mrs Menano-Pires was content to accept. These additional roles were to be perfected by means of further “service schedules” which would take effect from 1 October 2008 and result in an extension of the agreement to 31 March 2009. Mrs Menano-Pires signalled her willingness to work on such terms on 17 September 2008. The service schedule giving effect to that extension had not yet been executed, however, when events took an unexpected turn.

14    Unknown to Mrs Menano-Pires there had been a serious development only two days before. It will be recalled that Mrs Menano-Pires had met with representatives of Candle in early May 2008 to discuss the diminishing amount of work remaining for her to do. One of those representatives was Ms Rachel Diduszko. Ms Diduszko was one of Candle’s account managers responsible for handling the Woolworths account. On 15 September 2008 – two days before Mrs Menano-Pires had told Woolworths she was happy to extend her contract with it to 31 March 2009 – Ms Diduszko had been at Woolworths’ corporate headquarters at 1 Woolworths Way, Bella Vista, which is in the north west of Sydney (and which was where Mrs Menano-Pires worked). Woolworths provided a number of on-site coffee shops for its staff and, on this day, Mrs Menano-Pires and another person were sitting in one of those shops around a table. This is known because Ms Diduszko, by chance, happened to see her there. Her impression was that some kind of meeting was taking place. Of course, so far as Candle knew, Mrs Menano-Pires had finished working for Woolworths on 30 June 2008.

15    This otherwise anodyne chance encounter was rendered more piquant by cl 4.4 of the contract between Informax and Candle. Because of its central importance to this case it is useful to set it out in full:

The Contractor and the Principal Person agrees that during the term of this Agreement and for a period of six (6) months after the termination of this Agreement, it shall not, either directly or indirectly through another organisation, do any of the following:

a)    work for or be engaged by the Client, unless otherwise agreed to by Candle in writing;

b)    employ or otherwise engage, or solicit or offer employment or other engagement to any employee or contractor of the Client or Candle; or

c)    induce, solicit or entice or attempt to induce, solicit, or entice from Candle any of its clients.

d)    solicit, interfere with, entice or cause to be enticed away from the Client, any existing customer of the Client.

16    The effect of cl 4.4(a), if valid, was to prevent Informax or Mrs Menano-Pires working for Woolworths until 1 January 2009. Ms Diduszko was aware of this restraint clause. After she saw Mrs Menano-Pires in the coffee shop, she rang the reception area at Woolworths and was told that Mrs Menano-Pires had both a telephone number and an email address at Woolworths. Further, more formal, communications then took place between Woolworths and Candle. Woolworths’ role in this affair arises because of the terms of the PSA between it and Candle which, like the contract between Candle and Informax, also contained a restraint clause. It was in cll 7.2 and 7.3 and was in these terms:

7.2     No Solicitation

Neither party nor any of its Related Bodies Corporate will directly or indirectly employ, engage, solicit or otherwise retain any person who is, or has been a Representative of the other party, to:

a)    become an employee of the first party or any of its Related Bodies Corporate; or

b)    provide services to the first party or any of its Related Bodies Corporate (whether directly or indirectly, including through a related, associated, subsidiary or labour hire company),

without the written consent of the other party.

7.3    Terms of obligation

The obligation in clause 7.2 (No solicitation) commences in respect of each Representative on the date the Representative first becomes directly involved in the

provision of the Services and ends 12 months after the Representative ceases to be directly involved in the provision of the Services.

17    If effective, cl 7.2 bound Woolworths not to engage Informax or Mrs Menano-Pires for a period of 12 months which would have expired on 30 June 2009. Assuming, for the immediate sake of clarity only, that both cll 7.2 and 4.4 were valid, their effect was that it was a breach of the contract with Candle for Informax or Mrs Menano-Pires to work for Woolworths prior to 1 January 2009 and it was correspondingly a breach of the contract with Candle for Woolworths to engage Informax or Mrs Menano-Pires prior to 1 July 2009.

18    Following the initial communications between Candle and Woolworths, Mrs Menano-Pires had a meeting with the Woolworths IT Program Manager to whom she reported, a Mr Parbendra Singh, on 30 September 2008. In effect, he told her that if she wished to continue working for Woolworths she would need to do so through Candle. On the following day, he told her that she needed to resolve the situation and to speak with Candle. A telephone discussion between Ms Diduszko and Mrs Menano-Pires then ensued during which the former told the latter that she needed to work through Candle and that Woolworths was happy for this to occur. This was not satisfactory to Mrs Menano-Pires and this was conveyed to Candle. Sometime thereafter, but in any event on the same day, Mr Singh asked Mrs Menano-Pires to pack up her belongings and to leave Woolworths’ premises. Since the services schedule which would have extended Informax’s contract from 1 October 2008 to 31 March 2009 had not yet been executed, her initial contract had expired by effluxion of time at the end of the previous day, that is, at midnight on 30 September 2008. There was, therefore, no need for Woolworths to terminate her contract. Despite that, Woolworths purported to terminate the contract pursuant to an express power to do so on 14 October 2008. It is unlikely that this had any legal consequences since the contract had already ended pursuant to its own operation. In any event, the contract was at an end. Mrs Menano-Pires and Woolworths had parted company.

19    Mrs Menano-Pires is dissatisfied with this outcome and she and Informax now seek damages from Candle. The basis for this complex claim is as follows:

(a)    cl 7.2 of the contract between Woolworths and Candle was an invalid restraint of trade and unenforceable. By hinting to Woolworths that it might be in breach of its contract with Candle in hiring Mrs Menano-Pires, Candle engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) for it suggested both that cl 7.2 was valid and that Woolworths was in breach of that clause. But for that conduct Woolworths would have renewed Informax’s contract through to 31 March 2009 and there were prospects that it would have been further renewed into mid 2010.

(b)    Candle had promised in cl 2.1 of its contract with Informax that that contract “constitutes the entire agreement for the supply of services by [Informax] to Candle”. Since cl 7.2 of the contract between Woolworths and Candle also regulated the supply of Informax’s services to Candle this clause had been breached. Without that breach, Informax would have continued working for Woolworths.

(c)    The contract between Candle and Informax was “unfair” within the meaning of s 12(1) of the Independent Contractors Act 2006 (Cth) so that this Court’s jurisdiction to review it was enlivened. It is submitted to be unfair by Informax and Mrs Menano-Pires because they allege that Candle did not reveal the existence of the restraint clause in the contract between it and Woolworths to Mrs Menano-Pires. In essence, the argument is that because Mrs Menano-Pires was never told about that restraint clause it would be unfair for Candle to be able to achieve a superior result using it than that which it could achieve directly relying upon the restraint in cl 4.4 of the contract between Informax and Candle. This argument has the immediate weakness that cl 4.4 operated for a period of 6 months from 1 July 2008 to 31 December 2008 well-covering the period during which Candle approached Woolworths about Mrs Menano-Pires’ activities. For that reason, Informax and Mrs Menano-Pires must necessarily attack cl 4.4 which they do as follows:

(d)    Cl 4.4 of the contract between Candle and Informax was an “unfair” provision within the meaning of s 12(1) of the Independent Contractors Act 2006. This was for four reasons:

(i)    prior to her executing the contract with Candle Mrs Menano-Pires had been told by the person at Candle who recruited her, Ms Crystal Thomas, that the clause did not mean anything.

(ii)    at the time Ms Thomas told Mrs Menano-Pires that the clause did not mean anything Ms Thomas had known that Woolworths was bound not to hire Mrs Menano-Pires under its contract with Candle. Holding back that information was an unfair tactic in negotiating the contract and the consequence was that cl 4.4 was unfair.

(iii)    between 5 March 2007 and 4 June 2008 when the final extension of the contract between Candle and Informax was implemented, it was Mrs Menano-Pires who located all of the various project management roles within Woolworths and negotiated Candle’s (and her own) pay increases. In her submission, Candle had done nothing to find her any work within Woolworths and she had had to do it all herself. Further, she had been given the impression in early May 2008 by Ms Diduszko that since she had all the contacts within Woolworths she should go ahead and try to find a position for herself within Woolworths. It was unfair in those circumstances for her to be bound not to work for Woolworths until six months after the end of her engagement with Candle (on 30 June 2008).

(iv)    The clause was, in any event, an invalid restraint of trade and that conclusion was an independent ground for finding it unfair.

(e)    The measure of damages for all claims was the same. It was Informax’s lost income through to the end of 31 March 2009 together with amounts reflecting the possibility of further extensions of her contract. In all, more than $400,000 is claimed.

20    In addition to Informax’s claim, also before the Court is Candle’s cross-claim against Informax. It argues that Informax breached cl 4.4 of the contract between them by working for Woolworths and it seeks the margin it says it would have received during the three months that Mrs Menano-Pires worked directly for Woolworths, a sum totalling $4,959.90. Informax and Mrs Menano-Pires say that cl 4.4 is an invalid restraint of trade and that Candle has not proven that it would have been able to fill Mrs Menano-Pires’ position.

21    I have concluded that Mrs Menano-Pires was not told by Ms Thomas that cl 4.4 meant nothing. I have also concluded that she was not given the impression by Ms Diduszko that she should go ahead and try to find a position for herself within Woolworths. Despite rejecting these significant aspects of her evidence I have nevertheless concluded that Informax is entitled to succeed and that Candle’s cross-claim should be dismissed. At the heart of this case lies a series of questions about how the restraint of trade doctrine operates in the case of labour hire firms such as Candle. These questions are of some novelty in Australian law and are not easy. Although the applicants put their case on the bases set out above it is convenient to deal with all of the restraint of trade issues at the outset and then to apply the conclusions drawn to the balance of the issues. These reasons are, therefore, divided as follows: Part II deals with the restraint of trade doctrine, Part III with the claim under the Trade Practices Act 1974, Part IV with the claim in contract, Part V with the claim under the Independent Contractors Act 2006, Part VI with the quantification of damages, Part VII with Candle’s cross-claim and Part VIII with relief.

II

The restraint of trade doctrine and labour hire firms

22    Unusually, there are two restraint clauses at play in this case both of which have an impact on Informax and Mrs Menano-Pires. But they are contained in different contracts between different parties and this is significant. Cl 4.4 operates, if valid, to prevent Informax or Mrs Menano-Pires working for Woolworths for the six months after the cessation of their work for Candle. That six months commenced on 1 July 2008 and expired at the end of 31 December 2008. By contrast, cl 7.2 bound Woolworths not to engage the applicants for 12 months commencing on 1 July 2008 and ending on 30 June 2009. One was a covenant by a contractor binding itself not to work for one of the employer’s clients; the other, a covenant by a client not to engage a former contractor.

23    Both of these are plainly covenants in restraints of trade and we are not here, therefore, concerned with some of the controversies that at one time attended non-solicitation clauses. At common law, a restraint of trade is contrary to public policy and void unless it can be shown that the restraint is, in the particular circumstances of the case, a reasonable one: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565 per Lord Macnaghten. Reasonableness, in that context, is to be judged having regard to the legitimate interests of the person in whose favour the restraint operates: Bridge v Deacons [1984] AC 705 at 714.

24    In this case, Candle submits that both clauses can be seen as reasonably protecting two quite distinct legitimate interests. The first is its interest in maintaining its customer connexion with Woolworths. Putting the matter broadly, it says that it goes to considerable ends to obtain clients such as Woolworths and it is legitimately entitled to protect itself against the risk of contractors placed with such clients exploiting the relationship thereby developed by poaching those clients from Candle.

25    The second interest is what Candle referred to as the interest in avoiding the risk of “opportunistic disintermediation,” that is, the middleman’s risk of being cut out.

26    There is no doubt that the first interest, that is, customer connexion, is a recognised category of legitimate interest for the purposes of the law concerning covenants which are in restraint of trade. However, the second interest in avoiding opportunistic disintermediation is not yet recognised in Australia. It being clear that the categories of legitimate interest are not closed (see J D Heydon, The Restraint of Trade Doctrine (3rd Ed, 2008) at 133) the question which arises is whether the interest should now be recognised. It is useful, however, to begin with the question of customer connexion and to return to opportunistic disintermediation afterwards.

Customer Connexion

27    One legitimate interest long accepted by the Courts is an employer’s interest in maintaining its connexion with its own customers against misappropriation by its employees or contractors: Lindner v Murdock’s Garage (1950) 83 CLR 628 at 633-634 per Latham CJ (Webb J agreeing at 647), 650 per Fullager J and 654 per Kitto J. In this context, I use the word employer to embrace also the situation involving the engagement of independent contractors.

28    An employer’s interest in protecting the connexion it has with its customers against diversion by its former employees does not extend to every employee. Few firms, for example, need to defend their client base from poaching at the instance of their former tea ladies or office boys. The guiding principle appears to be that a covenant to restrain a former employee from dealing with an employer’s clients will be supportable on the basis that it protects the employer’s customer connexions where there is “some element in the employee-customer relationship which causes customers to rely on the employee and to regard the employee as the business to the exclusion of the employer”: J D Heydon, The Restraint of Trade Doctrine (3rd ed, 2008) at 121. In that analysis, which involves real world questions, practical issues will naturally intrude such as the frequency of the contact between the employee and customer, the location at which the services are provided by the employee and, indeed, the nature of those services. Notions, too, of importance and seniority have their part to play.

29    The mechanical application of such tests should not, however, be permitted to obscure the mischief which the principle is designed to address which is the fact that there are employees whose position is such that they have the practical ability to control the business of their employer’s customers as if those customers were their own. It is against that particular risk that this doctrine is pitched and the various tests articulated in this area are all necessarily hewn to the end of identifying that risk in the case of particular employees. Where the risk is found to exist, however, an employer is entitled to be protected against it. The Restraint of Trade Doctrine quotes (at 122) Hoover J’s statement in Arthur Murray Dance Studios of Cleveland Inc v Witter 105 NE (2d) 685 at 706 (Ohio CP, 1951) that “the important thing is that the personal relation between the employee and the customer be such as to enable the employee to control the customer’s business as a personal asset” which I take to be to much the same effect. That statement has been referred to with approval in a number of decisions of Brereton J in the Supreme Court of New South Wales: Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 at [34]; Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 at [25]; John Fairfax Publications Pty Ltd v Birt [2006] NSWSC 995 at [30]; see also Twenty-First Australia Inc v Shade (unreported, New South Wales Supreme Court, Young J, 31 July 1998) at p 12. In RKR Dance Studios Inc v Makowski, Superior Court, judicial district of Hartford, Docket No CV 084035468 (46 Conn L Rptr 389) (September 12, 2008), Elgo J of the Superior Court of Connecticut described (at p. 9) the decision in Arthur Murray as “a tour de force exposition on the law of employment noncompete agreements” (citing M Garrison and J Wendt “The Evolving Law of Employee Noncompete Agreements: Recent Trends and an Alternative Policy Approach” (2008) 45 Am Bus LJ 107 at 124). The same question can be posed a different way by asking, as Brereton J did in Koops Martin at [34], whether the employee (in the extended sense) has become the “human face” of the employer with the client.

30    At least at a theoretical level there is no particular obstacle standing in the way of a conclusion that cl 4.4 may protect Candle’s interest in its customer connexion with Woolworths. This is because, if such an interest in fact exists, it is not difficult to see that it will justify some restraint on the ability of Informax and Mrs Menano-Pires to work with the former client.

31    However, whatever one might say about cl 4.4 of Informax’s contract I do not think that such an interest can conceivably sustain cl 7.2 of the Woolworths contract which, at least so far as this case is concerned, operates as a covenant by the client not to be poached. It is one thing to say that Candle’s interest in its customer connexion justifies a restraint on its staff or contractors eloping with Candle’s clients. It is another thing altogether to suggest that such an interest could justify a fetter on the client’s freedom to contract with whom it pleases. Of course, if Candle’s contract with Woolworths were an exclusive arrangement other notions might well intrude. But it is not such an arrangement and I do not see that any interest that Candle has in maintaining its client base against the blandishments of its former staff or contractors can justify a covenant binding the client itself not to leave Candle’s stable. It follows that I do not accept that any interest of Candle in its customer connexion with Woolworths can support cl 7.2 of the contract between them.

32    But what of cl 4.4 of the contract between Candle and Informax? Granted that such a clause can theoretically protect an interest in customer connexion, the question is whether such an interest exists on the facts of this case.

33    Candle’s simple submission at paragraphs 4.14 – 4.15 of its written submissions was that it had such an interest without any factual indication within the principles outlined above of why this might be so. In his oral submissions, however, Mr Moses SC, who appeared with Mr Shariff of counsel for the respondent, submitted that in the context of labour hire firms such an interest had been recognised by Young J in Dalysmith Corporation (Aust) Pty Ltd v Cray Personnel Pty Ltd (unreported, Supreme Court of New South Wales, 14 April 1997).

34    The submission made by Mr Kimber SC, who appeared with Mr Furlan of counsel for the applicants, was that the notion that customer connexion might justify a covenant in restraint of trade arose from cases concerned with protecting the goodwill of a purchaser under a contract for the purchase of a business. Caution should be exercised, so he submitted, in importing that concept into the field of employment covenants. In a supplementary written submission the applicants submitted that Dalysmith should be distinguished.

35    In my opinion, Dalysmith is of little assistance. I accept it stands for the proposition that a labour hire firm has a sufficient interest in its customer connexion to restrain a former employee from soliciting a former client. However, the conclusion in that case rested very much on the identity of the employees in question. Relevantly, for present purposes, neither of the employees restrained by Young J in Dalysmith were employees in the pool of blue collar workers maintained by the labour hire firm. They were, instead, full-time actual employees of the labour hire firm whose duties directly related to the business of placing staff. It is not difficult to see that a labour hire firm may well have a customer connexion interest viz à viz those of its staff who are directly involved in the business of placing persons in its employee placement pool with clients. But allowing that that might be so provides no warrant for drawing the broader, and somewhat distinct, conclusion that it has such an interest in relation to those of its employees or contractors who are in the pool from which placements to clients are made. The facts of Dalysmith bear this out. There the pool employees were blue collar workers and it would have been fanciful to suggest (and it was not suggested) that the labour hire firm could have restrained those employees from seeking positions with employers who happened to be on its books.

36    As I indicated above seniority has its role to play in this area but the real question in each case is the factual one of whether the particular employee or contractor has become the face of the employer to the client. In the case of labour hire firms that question can have no general answer and will depend in every case on the nature of the contractors in the pool, the manner of placement and the on-going tripartite relationship which then exists between contractor, client and labour hire firm. The factors must be assayed and exposed to the question which arises, namely, whether the contractor has been placed in a situation where it is likely that the client will identify the business of the labour hire firm with that of the contractor.

37    As the conclusion in Dalysmith very much rested on the identity of the employees, I do not accept that it provides any assistance to Candle in this case. In that regard it should be noted that Candle did not advance a separate argument that the facts showed that Mrs Menano-Pires had become Candle’s face to Woolworths so that, in accordance with principle, it had a legitimate interest in customer connexion. I would note for completeness, however, that there was some material before me which suggested that by reason of her position she might well have been afforded the opportunity to control Woolworths’ business as if it were her own.

38    For example by the time of the final renewal of the Informax contract on 4 June 2008, Mrs Menano-Pires had been on-site at Woolworths for 15 months (since 5 March 2007). She had worked, at a senior level, on a number of important projects within Woolworths. She had been paid initially $720 per day (excl. $GST) (and subsequently more) which was a considerable rate commensurate with the seniority of her position. By 4 June 2008, Mrs Menano-Pires knew how to enquire within Woolworths as to where there might be further work and, indeed, she did so. As a result of her various project management roles within Woolworths she was familiar with several managers inside the company and was well-regarded by them.

39    Further, after she started in March 2007, it became rapidly apparent that Candle had very little to do with the placement of Mrs Menano-Pires into further project management roles within Woolworths. After her initial placement by Candle on the centralised fuel price management project, it was Mrs Menano-Pires who thereafter procured her successive placements on other projects. As she came to the end of each project, it was Mrs Menano-Pires who was able to find, or was approached internally by Woolworths’ managers to work on, further projects. All of this she did by herself. Although Candle, from time to time, extended her contract with it to facilitate her continuing to work for Woolworths on these various fresh projects, it is apparent this was always as a response to steps which had already been taken by Mrs Menano-Pires to procure actual work inside Woolworths.

40    The nature of the relationship is well illustrated by a conversation which took place on 1 May 2008 between Mrs Menano-Pires and Ms Diduszko (a contractor care consultant, Ms Guyan, was also present). This conversation took place in the Woolworths cafeteria at Bella Vista. Both Mrs Menano-Pires and Ms Diduszko gave evidence about this conversation although their accounts are not precisely the same. It is clear, however, from both accounts that the discussion began by Ms Diduszko asking what it was that Mrs Menano-Pires was doing at Woolworths. Mrs Menano-Pires then explained the projects she was working upon and indicated that her time at Woolworths was nearly up and that she needed to find another position. Following further discussion – not presently material – Ms Diduszko said that it was Mrs Menano-Pires who had the inside knowledge at Woolworths and she should look around for a project management role. There is an additional question about this discussion which will need presently to be resolved (viz whether she was also told, or at least left with the impression, that if she found such a position she could take it without any further involvement on Candle’s part). For present purposes, however, the discussion amply shows that Mrs Menano-Pires and Candle both understood, prior to 4 June 2008 when the final extension to the contract was put in place, that it was Mrs Menano-Pires who was in the superior position to find work within Woolworths.

41    Observations such as those above might well be thought to provide a basis for concluding that Mrs Menano-Pires had become the face of Candle so far as Woolworths was concerned. That argument, however, was not put by Candle and the applicants have had no chance to respond to it. There may be several objections to the foregoing argument: by cl 4.1 of the agreement between Informax and Candle the former was not the latter’s agent; the service provided by Informax was IT project management but the service provided by Candle was the procurement of such services. To this there may be further answers – perhaps Mrs  Menano-Pires took over Candle’s role of procuring IT services from Woolworths and thereby became its face independently of the terms of contract between Candle and Informax.

42    However, none of these questions can be answered because none of them was argued. I am bound to approach the matter on the basis that Candle’s case on this issue was that it had an interest in customer connexion only by reason of Dalysmith. For reasons already given, I reject that argument from which it follows that I must reject Candle’s argument that it had an interest in customer connexion sufficient to constitute a legitimate interest in supporting cl 4.4.

43    In those circumstances, it is not necessary to deal with the applicants’ suggestion that care should be exercised in applying notions of customer connexion in an employment contract. The contention appears, however, to be at odds with Lindner v Murdock’s Garage (1950) 83 CLR 628 and more recently with Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9 at [25] per Brereton J.

44    In those circumstances, I conclude that neither cl 7.2 of the contract between Woolworths and Candle nor cl 4.4 of the contract between Candle and Informax can be sustained by reference to any interest of Candle in its customer connexion with Woolworths. I turn then to the second interest relied upon by Candle – avoidance of opportunistic disintermediation.

Opportunistic Disintermediation

45    Candle submits that it goes to considerable lengths both to procure clients of the size of Woolworths and also to maintain a sufficiently large pool of appropriately qualified IT contractors to satisfy the needs of such clients. It contends that it is entitled to be rewarded for introducing its IT contractors to clients like Woolworths and so to recover the costs of providing a procurement service and with it a fair profit element. Accordingly, it had a legitimate interest, so it submits, in protecting itself against the loss of its duly earned reward which might well occur if its contractors were permitted immediately to deal with its clients. In effect, it characterises itself as an introduction agent (or perhaps as a labour broker) and points to the entitlement of such intermediaries to be rewarded for the introductory services they provide.

46    I was referred to no Australian authority which supports the notion that a covenant in restraint of trade may be sustained by reference to such an interest. Candle submits that I should follow a line of United States authorities which have as their ratio decidendi the acceptance of the existence of such an interest in the case of labour hire firms and of its ability to sustain covenants otherwise in restraint of trade. The applicants submitted that those authorities should not be followed in this country because they depended on the idea that an employer had a proprietary interest in its staff which was said to be inconsistent with English and Australian authorities denying that proposition.

47    The submissions of Candle should be preferred. The legitimate interest of a labour hire firm in avoiding the risk of opportunistic disintermediation was accepted by the Eleventh Circuit Court of Appeals in Consultants & Designers, Inc v Butler Service Group, Inc 720 F 2d 1553 (1983) where the Court (at 1558) said:

While in a technical sense the relationship between Butler and its job shoppers was employer-employee, this characterization of the relationship does more to obscure the relevant issues than to enlighten them. It is more revealing to recognize Butler’s role as that of the much maligned but time-honored middleman. Butler served as an intermediary in the market for highly-skilled, technically-trained workers. There were individuals seeking such employment and firms seeking to employ them.

…

In the market for the information in which Butler dealt, it had to compete with (1) all other technical services firms; (2) conventional employment agencies; and (3) disintermediation by firms and workers. Disintermediation is the actualization of the ever-present cry to eliminate the middleman, i.e., direct solicitation, negotiation and contracting between the firm and the worker. Eliminating the middleman is at first blush a facile and attractive alternative. However, middlemen exist because the provide a useful and highly valued service. If Butler’s covenant with its job shoppers is to have any justification, that justification must be to protect Butler’s role as a middleman in the market for information between job shoppers and client firms.

Once (1) a job shopper has been informed about a client and vice versa; (2) the shopper has expressed a desire to work for the client and vice versa; and (3) the employment has commenced and each is satisfied with the other, the primary mission of the technical service firm is complete. At that point barring some form of contractual constraint, the client firm and the job shopper could server their relationships with TSF and consummate a relationship with one another. The job shoppers and client firms could thereby opportunistically appropriate the work product of the TSF without paying it the full value of its services.

…

Therefore we conclude that Butler had a legitimate interest in protecting from opportunistic appropriation its investment in acquiring the information necessary to carry on its business, and that the covenant was reasonably well crafted to carry out that task.

48    The existence of the same interest, at least at the level of principle, was accepted by the Court of Civil Appeals of Alabama in Aerotek, Inc. v Burton 835 So 2d 197 at 203-204 (2001) and by the Tennessee Court of Appeals in Columbus Medical Services, LLC v Thomas 308 S.W.3d 368 at 389 (2009).

49    I reject the applicants’ submission that those decisions should not be followed in this country because they rest on the idea that a labour hire firm has a proprietary interest in a pool of employees per se and hence are inconsistent with Australian and English authority. The authorities were not identified but I take this submission to be at least a reference to the House of Lord’s decision in Herbert Morris Ltd v Saxelby [1916] 1 AC 688 and, in particular, Lord Shaw of Dunfermline’s statement (at 714) in these terms:

… a man’s aptitudes, his skill, his dexterity, his manual or mental ability – all those things which in sound philosophical language are not objective, but subjective – they may and they ought not to be relinquished by a servant; they are not his master’s property; they are his own property; they are himself.

50    Sentiments such as these have led some commentators to suggest that an employer has no sufficient proprietary interest in its employees to justify an agreement restricting competitive recruitment: see P J Sales “Covenants Restricting Recruitment of Employees and the Doctrine of Restraint of Trade” (1988) 104 LQR 600 at 611-612. As to whether that interest is adequate to justify a covenant restricting soliciting of present staff by a former employee there has been some debate. The conflicting views are set out in Office Angels Ltd v Rainer-Thomas [1991] IRLR 214 at 219 and Hanover Insurance Brokers Ltd v Schapiro [1994] IRLR 82 at 84; cf Kores Manufacturing Co Ltd v Kolok Manufacturing Co Ltd [1959] Ch 108. Ms J Riley in her article “No ‘poaching’ Why Not? A reflection on the legitimacy of post-employment restrictive covenants” (2005) 19(1) Comm Law Quarterly 3 is clear that an employee’s traits – such as know-how, experience and skill – “do not ‘belong’ in any sense to the employer” (at p 5) and she therefore regards those authorities suggesting that an employer has an interest in a stable workforce as being “a very dangerous line of authority”. Without wishing to become embroiled in that debate unnecessarily it may be useful to observe that just as there is difference between ownership of the copyright in a book and ownership of copyright in individual words, so too there may be a real conceptual distinction between the notion that an employer might have interests in the arrangement of its staff as a whole and the notion that it has an interest in any particular employee.

51    Something similar, with respect, was I think recognised in Cactus Imaging Pty Ltd v Peters (2006) 71 NSWLR 9. In that case, Brereton J conducted an extensive review of the authorities and concluded, at 27, as follows:

… The employees, along with the suppliers and the customers make up the three relations upon which the profitability of a business depends. The customers are not property, but their connection with the business adds value to the business and is recognised as deserving of protection in the proprietor’s legitimate interest. Similarly, employees are not property, but, all else being equal, a business with a stable trained workforce will be more attractive to a purchaser and command a higher price than one with a workforce which is unstable, disruptive or poorly trained, just as a loyal and satisfied clientele makes a business more attractive and valuable. In my opinion, staff connection constitutes part of the intangible benefits, which may give a business value over and above the value of the assets employed in it, and thus comprises part of its goodwill. It is amenable to protection by a covenant in a manner similar to customer connection, even in the absence of protectable confidences.

52    Whilst it is true that White J did not go this far in Aussie Home Loans v X Services (2005) ATPR 42-060, preferring instead to recognise an interest in maintaining a stable workforce as arising from an employer’s entitlement to protect his or her confidential information in the identity and roles of its employees, nevertheless, the flow of authority in this country now supports the conclusion reached by Brereton J. I will not set out the authorities which have applied Cactus in this regard. It suffices to say that Bryson AJ thought the proposition for which it stands “well-established in New South Wales”: Allied Express Transport Pty Ltd v Mears [2010] NSWSC 1112 at [14].

53    The conclusion in Cactus that an employer has an interest in staff connexion formed part of the ratio decidendi of the decision. Because the principles at hand are common law ones Cactus is a statement about the common law of Australia. It follows that as a Court of co-ordinate jurisdiction I am bound to follow Cactus unless persuaded that it is “plainly wrong”: see, writing extra-curially, J D Heydon “How Far Can Trial Courts and Intermediate Appellate Courts Develop the Law” (2009) 9(1) OUCLJ 1 at 22-23.

54    I do not regard Cactus as plainly wrong. Indeed, with respect the analysis appears compelling. In any event, the judges of this Court are constrained (correctly in my opinion) in how they approach the “plainly wrong” test by two Full Court decisions which emphasise that it is satisfied only where it appears that the dispositive adjudication of the controversy has, in some way, miscarried: BHP Billiton Iron Ore Pty Ltd v National Competition Council (2007) 162 FCR 234 at [83]-[84] per Greenwood J (with whom Sundberg J agreed). At [83] Greenwood J gives examples of instances in which a co-ordinate decision might be regarded as plainly wrong:

The circumstances in which a judge in the exercise of the Court’s original jurisdiction might find a decision of a single judge of the Court to be ‘plainly wrong’ should be approached with real and deliberative caution and would generally involve that class of case where for one reason or another there is transparent error such as the consideration of an incorrect statutory instrument in the resolution of the controversy; consideration of a provision of a statute in a form not enacted at the relevant date of the events or a failure to consider a provision of an Act relevant to the disposition of the cause, thus causing the analysis to fall into error; a failure to apply having regard to the issues raised by the controversy, a binding decision of a Full Court of this Court or the High Court; a failure to apply a decision of a Full Court of this Court, an intermediate Court of Appeal of another jurisdiction or an authority of the High Court expressing a clear persuasive emphasis of opinion in favour of a particular conclusion (particularly concerning legislation of the Commonwealth Parliament); or some other circumstance that has caused a dispositive adjudication of the controversy to miscarry.

55    The last sentence was picked up with apparent approval by Heydon J in the article referred to above at p 25. The approach necessarily dictates that mere disagreement with a decision of a court of co-ordinate authority will not suffice. The list of examples of reasoning which was “plainly wrong” given by Greenwood J, with its emphasis on the miscarriage of the adjudicative process, demonstrates that once a matter of law is determined at one level of the judiciary, it is to be applied at that level regardless of individual judge’s views about the matter for the “plainly wrong” test is not satisfied by the demonstration to a judge that the decision in question is “wrong”. As Greenwood J said in BHP Billiton at [84]:

That minds might differ on a question is not a foundation for a conclusion that a decision supported by exposed reasons for judgment after full argument, is plainly wrong.

56    This approach was applied by another Full Court in Saeed v Minister for Immigration & Citizenship (2009) 176 FCR 53 at [44] per Spender, Buchanan and Logan JJ. Although the decision was reversed on appeal by the High Court (Saeed v Minister for Immigration & Citizenship (2010) 241 CLR 252) this aspect of the Full Court’s reasoning was not. The consequence of BHP Billiton and Saeed is that I am bound to proceed upon the basis that “plainly wrong” means more than mere, or even strong disagreement with, the decision in question – it requires an actual conclusion that the reasoning process has miscarried.

57    I do not regard Cactus as plainly wrong in that sense (or even wrong at all). It follows that I am bound to follow it. Consequently, I am bound to reject the applicants’ argument that Australian law does not recognise any form of proprietary interest in the arrangement of employees or contractors. In that circumstance, I can see no other reason not to follow the United States authorities on the question of whether the disintermediation interest exists. I conclude, therefore, that a labour hire firm has a legitimate interest in protecting itself against the perils of opportunistic disintermediation.

58    That, however, is not the end of the matter. The interest involved is an interest in recouping expenditure together perhaps with a profit component or, to put it slightly differently, it is an interest in being permitted profitably to charge for the introduction of the contractor to the client. Whether such an interest actually exists in this particular case inevitably directs attention to the nature of Candle’s business.

59    Candle led evidence about its business from its chief operating officer, Ms Quick. Her evidence was concerned with Candle’s current practices but it was not suggested that her explanation of the business did not apply at the time the contract between Woolworths and Candle came into existence and I proceed on the assumption that it did. Such evidence is probative: Adamson v New South Wales Rugby League Ltd (1991) 31 FCR 242 at 286.

60    Mention has already been made of the fact that about 65% of Candle’s business comes through PSA arrangements. Ms Quick gave evidence of the considerable efforts which went into procuring clients under PSA arrangements. Usually these resulted from a tender process which involved a careful assessment of matters such as likely future volume, margin and profitability. Sometimes in excess of 100 hours of staff time might be required to prepare such a tender. If a PSA was secured there were then substantial costs in its administration. The largest of these were staff costs. Two types of employees were involved: these were, at one end, account managers who liaised with the relevant client and arranged the placement of appropriate contractors; and, at the other end, consultants who were assigned to look after the interests of the contractors. The rationale behind that approach was the need to maintain a pool of contractors who were readily available to meet the demands of the clients.

61    Ms Quick gave evidence that the costs of the tender process and those of administering the PSA after its formation were overheads in its business. She gave evidence that unless the PSAs were exclusive to Candle or at least placed Candle on a preferred basis there was no point incurring these expenses which would not be recouped.

62    At the same time, the maintenance of the pool of contractors was an important aspect of Candle’s business which necessarily depended on an ability rapidly to be able to service the needs of its clients. Thus significant expenditure was incurred in finding appropriate contractors to be placed in the pool, satisfying the needs of those contractors (to encourage them to stay in the pool) and keeping track, in an orderly way, of the skill set that the pool contained. Ms Quick gave evidence that Candle’s single largest cost was the on-going maintenance of its contractor database which required a substantial workforce of recruiters and contractor care consultants together with attendant infrastructure and advertising costs.

63    I accept all of this evidence which shows that Candle did put considerable economic effort into arranging the placement of contractors with its clients. But the evidence led did not descend to the level of explaining what the value of this effort was, what Candle’s profits were or how much of its investment had been recouped following Mrs Menano-Pires’ fifteen month placement with Woolworths. Unlike the interest in customer connexion which may be thought, in many cases, to be one which grows more substantial the longer the employee works with the client, the interest in avoiding the loss of the ability to recoup a business expense is likely to diminish as time passes and less and less remains to be recouped. There are some very subtle issues here but I do not need to explore them. Section 4(1) of the Restraints of Trade Act 1976 (NSW) means that cl 4.4 is valid to the extent that it is not against public policy in respect of restraint of trade. The established operation of s 4(1) requires me, inter alia, to ask whether at the critical time cl 4.4 was effective: Orton v Melman [1981] 1 NSWLR 583 at 587-588 per McLelland J. That time is the period between the time at which Ms Diduszko first contacted Woolworths about her discovery that Mrs Menano-Pires was still working at Woolworths, on 17 September 2008, through to the time Mrs Menano-Pires was asked to leave Woolworths’ premises on 1 October 2008.

64    The question then is whether cl 4.4 was effective during that two week period. Candle bears the onus of proving that its interest in not being disintermediated required, during that period, that Mrs Menano-Pires not be permitted to work for Woolworths. Contrary to the submissions of the applicants I do not think that it is correct that the interest in avoiding disintermediation should be protected only by requiring the payment of a fee (although I accept that it may be protected in that way). I see no particular difficulty, for example, with the recovery of the employer’s investment in the business arrangements which bring client and contractor together occurring over time by instalments. And, if that be so, there may be little objection to protecting the payment of those instalments (if taken out of the fees charged to the client for the contractor’s services) by preventing contractor and client dealing until the recoupment of the investment is complete. If such an arrangement can work there may well be some ability to protect its efficacy with a restraint clause.

65    I do not need however to express a concluded view on that potentially complex question because I do not think that Candle has demonstrated the extent of its disintermediation interest. As in the case of a covenant sustained by an employer’s interest in customer connexion it may be appropriate to approach the assessment of such interests in an impressionistic fashion: cf IRAF Pty Ltd v Graham [1982] 1 NSWLR 419 at 429 per Rath J. But even allowing that, Candle did not seek to rely, in this part of its case, on its daily margin on Informax’s work (ie how much it was making) or what its overhead costs were. On its cross-claim, Candle suggested it was making a margin of $75.15 per day. I do not think that I can fairly use that figure in this part of the case as it was not the subject of argument in the present context. It does, however, suggest that Candle may well have recouped, during the 15 month period Mrs Menano-Pires worked for Woolworths, in excess of $20,000 and this, in turn, may suggest that the questions surrounding the extent of its disintermediation interest are far from trivial. In any event, I am not satisfied that Candle has demonstrated that its legitimate interest in avoiding disintermediation justified restraining Informax or Mrs Menano-Pires from contracting with Woolworths during the period 17 September 2008 to 1 October 2008. It follows, during that period, cl 4.4 did not validly operate. No different reasoning can apply to cl 7.2.

66    It is implicit in the conclusion that the answers to the question at hand are likely to be related to the time at which the question arises. Adopting an impressionistic approach, I would have been prepared to conclude that a three month restraint (that is, the restraint presently asserted) would have been justifiable on a disintermediation basis at the end of the first three month contract (1 June 2007). However, impressionism simply cannot sustain such a finding when the term of prior employment is in the order of 15 months.

67    Neither cl 7.2 nor cl 4.4 validly operated between 17 September 2008 and 1 October 2008.

III

The claim under s 52 of the Trade Practices Act 1974 (Cth)

68    I reject this claim, in short, for the following reasons. I accept that Ms Diduszko did send an email on 17 September 2008 to Woolworths which implicitly suggested that Woolworths was in breach of the restraint provision in its contract with Candle by engaging Informax. I accept also that the same email implicitly contained the assertion that the restraint provision, cl 7.2, was valid. However, those implicit assertions were statements of opinion about matters of law. I do not think that a reasonable person receiving the email would have understood himself to be being told something upon which he could rely as to its correctness without further inquiry. Rather, at best, such a person would have understood only that this was the opinion held by Ms Diduszko. In this case, such a statement could only be misleading if the opinion was not actually held (that is, if Ms Diduszko had, in fact, thought that the restraint clause did not prevent Woolworths from engaging Informax) or if it could be shown that there was simply no basis for the opinion. But neither of these is the case. Ms Diduszko did hold the opinion and, for a lay person, she had an ample basis for it, namely, the very terms of cl 7.2. In that regard, it is not to the point to show – as Informax and Mrs Menano-Pires sought to do – that the correct legal analysis is that cl 7.2 was an invalid restraint of trade at the time the email was sent on 17 September 2008 and at the time Woolworths removed Mrs Menano-Pires from its premises on 1 October 2008.

69    Even if a breach of s 52 had been established, Woolworths did not rely on anything conveyed to it by Ms Diduszko. It formed, instead, its own opinion that it was exposed to a litigation risk from Candle if it continued to deal with Mrs Menano-Pires. That opinion was the result of its own consideration and did not arise from reliance upon any legal opinion expressed to it by Ms Diduszko. To put the matter perhaps another way, what provoked Woolworths into action was the fact that Ms Diduszko held the opinion that she did and not that Woolworths formed any view about that opinion’s correctness.

70    This Section is divided into three parts: The Representations, The Nature of the Statements of Opinion, and Whether Candle’s Opinion caused Woolworths to Terminate Informax.

Part One: The Representations

71    Mention has already been made of the sighting in the Woolworths café of Mrs Menano-Pires. This occurred on Monday 15 September 2008. There she was observed by Ms Diduszko with another person at a table with pens and note pads. Ms Diduszko thought that what she was seeing was evidently some kind of business meeting. Prior to this sighting, she had believed that Mrs Menano-Pires had finished up with Woolworths and that she was now working elsewhere. One of Ms Diduszko’s colleagues, Ms Guyan, had been told, in late August 2008, by Mrs Menano-Pires that she had obtained a 3 month position through another recruitment firm at a corporation which she refused to identify. Mrs Menano-Pires denied saying anything about another agency to Ms Guyan but Ms Guyan contemporaneously recorded such a remark in Candle’s computerised records (“Isabel has a contract until Sept – wouldn’t say where, but got the role through an agency”) and I accept that Mrs Menano-Pires did say those words. Ms Guyan had passed this on to Ms Diduszko who had understood, as a result, that Mrs Menano-Pires was not working at Woolworths after 30 June 2008. Confronted with Mrs Menano-Pires’ unexpected presence at Woolworths’ corporate headquarters, Ms Diduszko then rang the Woolworths switch and was told that Mrs Menano-Pires had both a phone number and an email address at Woolworths.

72    On the following Wednesday, 17 September 2008, Ms Diduszko sent an email to Woolworths about the position of Mrs Menano-Pires. That email had been approved and slightly amended by Mr Julian Eriksson who was a commercial and legal consultant at Candle. Ms Diduszko then sent the email in its approved form to Mr Eric Sottoriva who was the person at Woolworths ultimately responsible for the approval of expenditure on consultants such as Mrs Menano-Pires. Because Informax’s and Mrs Menano-Pires’ case turns, in large part, on what can be gleaned from this email and the discussions which followed it, it is necessary to set it out in full:

From:        Rachel Diduszko

Sent:        Wednesday, 17 September 2008 1:20 PM

To:        Eric Sottoriva

Cc:        Adam Forster; Julian Eriksson

Subject:    re: Contractor – Isabel Menano-Pires

Attachments:    image001.gif

Dear Eric

I apologise for coming to you with this unusual query, however knowing you are responsible for signing off all PO’s [sic], I wondered if you are aware of Candle’s ex-contractor Isabel Menano-Pires who finished her contract with Candle to Woolworths on 30th June 2008?

When I was onsite at Woolworths recently, I saw that Isabel was there having a business meeting in the coffee shop, which led me to wonder whether she is now contracting directly for Woolworths? This is a problem since it would amount to a breach of the surviving conditions of her contract.

Of course, my first instinct was to check with Gabi at Cyberlynx/Portland (see below). Gabi has confirmed that Isabel is not contracting via any of the other preferred suppliers to Woolworths … which means Woolworths may be paying more than the 11.5% mark-up and also probably more than the $28/day direct price for Isabel (if it is proven in fact she is contracting there).

Understandably, Candle do not wish to cause any unnecessary anxiety or trouble for Isabel or Woolworths, and would love to learn that a worst case scenario involving Isabel breaching her contract is not the case – however, commercially, we must be diligent in protecting our reputation, financial position and business longevity by not tolerating any such breaches of contract.

Therefore, could you possibly look into whether there is a PO approved for Isabel Menano-Pires to provide Project Management or Consulting services to Woolworths currently and if so, what course of action you feel is appropriate in this instance?

FYI – Isabel’s registered company name is “Informax International Pty Ltd” which may assist in locating any relevant contract / PO. Previously she was the Project Manager in charge of the Thomas Dux store implementation under the management of Andrew Choice.

I look forward to your response.

Kind regards

Rachel Diduszko

Account Manager | Candle ICT Talent Specialists

(emphasis added.)

73    This email was couched in polite terms of the kind which might naturally be anticipated between two parties with a substantial commercial relationship but the italicised words (“Candle do not wish to cause any unnecessary anxiety or trouble for… Woolworths”) carried, in my opinion, the faintest suggestion of a threat. Ms Diduszko’s email called for a response and 12 days later on Monday 29 September 2008 Mr Sottoriva telephoned her. Ms Diduszko says – and about this she was not really contradicted – that Mr Sottoriva told her that:

Isabel is in fact working directly at Woolworths on a 23 day assignment. It has happened under the guise of an old purchase order, which meant it did not come to my attention for approval. I am sorry about what has happened. I feel it is a breach of our agreement with Candle. I will be taking it up with the managers involved and will let you know how Candle might get its margin for the work.

74    Of those words one might readily conclude that Ms Diduzsko’s subtle message had been received. The following day Ms Diduszko received a telephone call from Mr Parbendra Singh who was the person at Woolworths responsible for overseeing Mrs Menano-Pires. Ms Diduszko gave evidence, which I accept, that a conversation along the following lines took place:

PS:    I understand you have spoken to Eric Sottoriva and know that we have engaged Isabel Menano-Pires. I am sorry this has occurred. I did not know there were restraint issues. What is your attitude to her now working through Candle as before?

RD:    That will be fine by us. We just want to ensure everyone is complying with their contractual obligations.

PS:    I will be talking to Isabel today and will let you know what is going to happen after that.

75    As this shows, it was not Ms Diduszko who first expressly suggested that Woolworths was in breach of its contract with Candle. Her email did not directly accuse Woolworths of being in breach. Indeed, it was couched as an inquiry and left open the face-saving possibility that the whole affair might have been an unfortunate misunderstanding. Instead, it was Mr Sottoriva, of Woolworths, who first expressly suggested that Woolworths was in breach of its contract with Candle. I accept that in the conversation which thereafter occurred between Ms Diduszko and Mr Singh both approached the matter on the assumption that there was a restraint clause between Woolworths and Candle and both assumed that the clause was valid. Despite the fact that it was Mr Sottoriva who first expressly raised the question of Woolworths’ breach, I do however, accept that Ms Diduszko’s initial email carried with it the veiled, almost ineffable, suggestion that Woolworths would be in breach of its contract with Candle if it were to transpire that Mrs Menano-Pires was working directly for it. Ms Diduszko was doing her utmost to be polite about it but the email conveyed – and I think was intended to convey – the suggestion of such a breach. One could not read, from Woolworths’ perspective, Ms Diduszko’s email, replete as it was with references to breaches of contract and restraint clauses, and remain indifferent to what was being hinted at. Nor could the reference to trouble and anxiety for Woolworths leave its recipient – Woolworths – unclear as to what was being said, no matter how polite the mode of expression adopted. For those reasons, I accept that the applicants have established through Ms Diduszko’s email of 17 September 2008 that Candle represented to Woolworths that it would be in breach of its contract with Candle if it transpired that Mrs Menano-Pires was working directly (or indirectly) for it. Further, I accept the suggestion that that also carried with it a further implicit assertion that the restraint clause underpinning that proposition was valid and enforceable.

76    I do not accept, however, that there was any further repetition of the representations in the telephone conversations which Ms Diduszko then had with Mr Sottoriva or Mr Singh. In both cases, the fact of the breach of contract and the implicit assumption that this meant that the restraint clause was valid simply formed part of what was, by then, a shared understanding between the parties. Nothing said by either side in these two telephone calls contributed to any further representation.

Part Two: The Nature of the Statements of Opinion

77    I do not accept that by sending the email, Ms Diduszko would have appeared to Mr Sottoriva to have conveyed a considered legal opinion about the operation of cl 7.2 of the contract between Woolworths and Candle. There are many reasons for this. The email was at pains to avoid explicitly mentioning the concept of a breach of contract by Woolworths altogether. Its style and form were casual but its apparent purpose was to head off, if at all possible, any unpleasantness between Candle and Woolworths. In the context of such an informal communication, the articulation of a formal expression of legal opinion would have been quite out of place and counterproductive. The very fact that the email was sent by Ms Diduszko rather than by Mr Eriksson (who, with minor amendments, approved its content) underscores its deliberately non-legal nature. That conclusion is buttressed by the fact that the representations in question – that the contract had been breached and that the restraint was valid and enforceable – do not even expressly appear in the text of the email but must be gleaned through a process of implication (the implication being that Woolworths would only be contacted about Mrs Menano-Pires’ breach of her contract if Woolworths was also in breach of its contract with Candle). In those circumstances, I do not accept that Ms Diduszko did anything more than convey to Mr Sottoriva her own and, therefore, Candle’s opinion that Woolworths was in breach of a restraint clause which they assumed was valid. I do not think that a person in Mr Sottoriva’s position would have understood himself to have been told a fact about the clause’s operation: cf Australian Securities and Investments Commission v Fortescue Metals Group [2011] FCAFC 19 at [106], [111] per Keane CJ, [214]-[215] per Emmett J and [218] per Finkelstein J.

78    Unsurprisingly, there was no evidence before me that either Ms Diduszko or Mr Eriksson had undertaken a considered analysis of the legal qualities of the Woolworths restraint. Correspondingly, there is nothing in the email which conveyed that such an opinion had been formed. The email did not seek to convey to Mr Sottoriva, nor did it convey, a considered legal opinion. As French J said in Inn Leisure Industries Pty Ltd (Provisional liquidator appointed) v D F McCloy Pty Ltd (No 1) (1991) 28 FCR 151 at 167 a statement of legal opinion “may do no more than convey what is, on the face of it, the untutored opinion of the representor”. In this case, I do not think that Mr Sottoriva would have understood the email to be conveying any more than Ms Diduszko’s untutored opinion. This is not to say that statements of opinion cannot also be statements of fact: cf Australian Securities and Investments Commission v Fortescue Metals Group at [111] per Keane CJ (with whom Finkelstein J agreed on this point). But in cases where all that is conveyed is the holding of what is plainly a lay opinion then, unless the opinion be not held there will generally be no misleading and deceptive conduct. Here Ms Diduszko plainly held the opinion and Mr Eriksson plainly held it too. As a layperson, Ms Diduszko had good reason to hold that opinion for it was precisely what the contract between Woolworths and Candle said. I do not think Mr Eriksson stands in a different position. Nobody sought his opinion on the issue of restraints of trade – he was just settling an informal letter of demand which was to be sent under the name of a lay person.

79    Informax and Mrs Menano-Pires placed reliance on the Full Court’s decision in Transport Tyre Sales Pty Ltd v Montana Tyres Rims and Tubes Pty Ltd (1999) 93 FCR 421 at [112] where it was said:

Accordingly, an unqualified assertion that sale of any tyres bearing the Trade Marks was an infringement, was a false statement and was groundless. Therefore, there was a basis upon which a cause of action for contravention of s 52 of the Trade Practices Act could be maintained.

80    However, the representation in that case was made by a firm of solicitors under their own name and plainly involved the expression of a professional opinion on a question of law. The letter in question in part provided:

Our client is now recorded on the Australian Register of Trade Marks as the owner of the following trade marks in respect of tyres and associated products:

Ohtsu

Falken

Falken RX

Consequently, our client now has the exclusive right to use these trade marks (and/or authorise other persons to use these trade marks) throughout Australia in relation to tyres and other goods or services specified in the registration.

81    In fact, as a matter of trade mark law this was not correct. For present purposes, the important distinction is that the letter was written by a law firm under its own name and in terms which would suggest that what was being asserted was a considered legal opinion. In this case, however, Mr Eriksson’s minor alterations to Ms Diduszko’s email made it quite plain that Candle did not wish to assert such an opinion to Woolworths. Mr Eriksson’s email of 17 September 2008 to Ms Diduszko said, in fact, “All I did was remove anything that read like a claim or conclusion as to Isabel’s status with Woolies and also clarified the contractual details”. I do not read the email, therefore, as an expression of anything more than Ms Diduszko’s own opinion. The heart of the matter then is that Ms Diduszko believed that Woolworths was in breach of its restraint obligation with Candle. The text of the contract supported her view. She subtly conveyed to Woolworths what her view of the matter was. There was nothing, however, misleading or deceptive about such conduct.

Part Three: whether the assertion of Candle’s opinion caused Woolworths to terminate Informax.

82    An examination of the evidence reveals that the reason that Woolworths discontinued Mrs Menano-Pires’ services was because it was concerned about litigation with Candle. Mr Singh, who made the actual decision to end Woolworths’ relationship with Informax and Mrs Menano-Pires, gave evidence that he wished to avoid litigation with Candle and I accept this evidence. The same risk was adverted to in some internal Woolworths’ emails. Thus on 14 October 2008, a Mr Brown wrote a memorandum to the chief information officer enclosing a draft letter to terminate Informax’s services. The memo said (in part):

As a result of a pending case in the courts and the uncertainty around this, we do not want to expose Woolworths any further to potential risk, and wish to terminate the Consultancy Services Agreement with Informax International Pty Ltd by giving 10 business days notice, as provided for in the Agreement.

83    Nor was this new. Two weeks before the same Mr Brown had emailed Mr Singh saying that the situation had “potentially opened Woolworths to risk”. All of this demonstrates that Woolworths, understandably enough, wished to avoid getting into a dispute with Candle. Mr Moses SC submitted that the evidence showed that Woolworths made its own assessment of its obligations. I would not go so far as to say that Woolworths actively considered what its liability under the restraint clauses might have been. Its more basic concern was pitched at a somewhat higher level of generality and centred around the general risk of litigation with which it was confronted. That observation however, supports, rather than detracts from, Candle’s submissions, for it shows that Woolworths was not addressing itself to the question of whether or not it had breached its contract, but instead, only to the question of risk. Further, on the issue of risk it is plain that Woolworths was guided by its own assessment of Candle’s position.

84    For all these reasons, I reject the claim based on s 52 of the Trade Practices Act.

IV

The Claim in Contract

85    The initial contract between Candle and Informax was executed on 5 March 2007. It was a written document. Cl 2 of the agreement provided:

2.    SCOPE OF AGREEMENT

2.1    This Agreement, together with the conditions set out in the attached Schedules, constitutes the entire agreement for the supply of services by the Contractor to Candle and supersedes any representations, warranties, agreements or statements of any kind, whether written or oral, on the subject matter herein.

2.2    The conditions in the Schedules shall take precedence over any term or condition in the body of this Agreement.

2.3    At anytime during the term of this Agreement, Candle may offer to the Contractor an extension to the Conclusion Dates specified in Schedule A. If the Contractor accepts the extension then, unless otherwise agreed to in writing, the terms and conditions of this Agreement shall apply.

86    Informax and Mrs Menano-Pires submit that cl 2.1 was a warranty by which Candle should be taken to have promised that there was “no other restraint provision … that did or could operate as a restraint on the ability of the Applicants to work as IT contractors after the termination of any Services Contract”. But, so it was said, the agreement between Candle and Woolworths contained such a restraint in cll 7.2. and 7.3. Mr Kimber SC also advanced an argument in final submission that this provision was unfair. No such case was pleaded although there is a reference to such a claim at paragraph 3 of the applicants’ submissions in reply. I do not think, however, that such a case was run. Mr Moses SC objected to it being raised and I think he was right to do so. I will not deal the unfairness argument so far as it relates to cl 2.1.

87    The only question which, therefore, presently arises is whether the existence of the contract between Candle and Woolworths and, in particular its restraint provisions, constituted a breach of cl 2.1 of the agreement between Candle and Informax.

88     I do not think that it did. The critical question is the meaning to be attached to the statement in cl 2.1 that “this agreement … constitutes the entire agreement for the supply of services by the Contractor to [Candle]”. There are two possible meanings. First, the clause may be seeking to define the sources in which the parties’ agreement may be located. On this view, the clause operates as an authoritative statement of the terms of the bargain that had been concluded between them. Secondly, it may be read as a promise by both parties to each other that the regulation of the supply of Informax’s services to Candle was not the subject of any other agreement.

89    Granted that both readings are available the exercise at hand becomes the resolution of that ambiguity. That ambiguity may be resolved by an examination of the text of cl 2 itself. There are three matters which indicate that the clause was intended to operate to define the bargain between the parties rather than as a warranty. The first is the heading “Scope of Agreement” which is apt to suggest the subject matter of the clause is concerned with the ambit of the bargain between the parties to it. That is confirmed, I think, by the subject matter of each of the subclauses of cl 2 which are concerned with dealings between Informax (and Mrs Menano-Pires) and Candle, rather than third party dealings. Thus cl 2.2 and cl 2.3 regulate the nature of the bargain between the parties to it and thereby confirm the suitability of the heading “Scope of Agreement”. The third matter is the use of the words “supersedes” in cl 2.1. The second part of the clause, by the use of that word, suggests that the purpose of the clause is to regulate the content of the bargain between the parties rather than putting in place a set of warranties. Reading the first half of the clause as doing something similar leads, therefore, to a somewhat more uniform operation of cl 2.1. Taking these three matters together a construction of the clause which sees it operating as a definition provision results in a more harmonious reading. For those reasons, I do not accept that cl 2.1 operated as a warranty. It follows that the breach of contract case must fail.

V

The Claim under the Independent Contractors Act 2006

90    The Independent Contractors Act 2006 (Cth) concerns itself with “services contracts”. There is no issue in this case that all of the contracts in question are services contracts within the meaning of the Act. The Act confers upon this Court a power to “review” a services contract: s 12(1); but that review is available on only two grounds, namely, that the contract is either “harsh” or “unfair”. The Act includes a non-exhaustive list of matters which may be taken into account in determining whether harshness or unfairness has attended the making of the contract. These are contained in s 15(1) and include the relative bargaining position of the parties, the existence of undue influence or pressure, whether the contract provides for lower pay than would have been the case if an employee was performing similar work and, pointlessly since the list is not exhaustive, anything else the Court thinks might be relevant. Broad though that inquiry might sound, it is expressly limited to the state of affairs obtaining at a contract’s inception: s 12(3). Circumstances establishing unfairness and harshness after the date of the contract are not the concern of this statute.

91    It is by no means an easy thing to say shortly and clearly how this part of the applicants’ case works although its broad structural elements are set out above in Section I. There are, I think, in essence two steps to it.

Step One

92    Although the contract between Informax and Candle contained the restraint cl 4.4 that clause was “unfair” and the Court should write it out of the agreement. It was said to be unfair for five different reasons. First, Mrs Menano-Pires had expressly asked about the clause when she was first handed the contract and was told by one of Candle’s recruitment consultants, Ms Thomas, that cl 4.4 meant “nothing” with the inference being that it would be unfair for Candle to rely upon a term it said was meaningless. Secondly, Candle had deliberately withheld from Mrs Menano-Pires the existence of the restraint in the Woolworths contract. It would be unfair, having engaged in such a tactic, for Candle then to seek to rely on cl 4.4. Thirdly, throughout her time at Woolworths it had been Mrs Menano-Pires who had done all of the work securing further project management roles within that company and Candle had contributed nothing to this process at all. Allied to this proposition was a fourth argument that as a result of the meeting between Mrs Menano-Pires and Ms Diduszko on 1 May 2008 and its surrounding context, Mrs Menano-Pires was left with the impression, in light of her contacts within Woolworths, that she was free to contract directly with Woolworths and that there was no legal impediment to her doing so. Fifthly, cl 4.4 was said to be an invalid restraint of trade.

93    The arguments in Step One take the applicants only half the distance they must travel, however, for Informax was not dismissed by Candle and cl 4.4 was not used directly against it. Instead, what occurred was that Woolworths simply did not execute a further services schedule and its contract with Informax therefore expired on 1 October 2008. The subsequent purported termination of the contract by Woolworths on 14 October 2008 was legally ineffective and irrelevant. Informax and Mrs Menano-Pires say, however, that their relationship with Woolworths was severed as a result of Candle seeking to enforce cll 7.2 and 7.3 of the contract it had with Woolworths. It is to the legitimacy of that action, as I understand it, that the second step in the argument then speaks.

Step Two

94    Assuming as a result of Step One that cl 4.4 is not effective or has been otherwise deleted from the contract, Informax and Mrs Menano-Pires then argue that Candle did not tell them about the existence of cll 7.2 and 7.3 of the contract between Woolworths and Candle. In light of that failure and in light also of the fact that the applicants were not, as a result of Step One, restrained from working for Woolworths by Informax’s own contract, the argument is that it would be unfair for Candle to be able to exercise rights under its contract with Woolworths in a way which was inconsistent with its obligations under its contract with Informax. Put another way, if Candle could not restrain Informax from working for Woolworths under cl 4.4 (as a result of the arguments in Step One) it would be unfair for it to be permitted to achieve indirectly the same result using cll 7.2 and 7.3 of its contract with Woolworths.

95    Those who have persisted this far may well ask why the question of whether cl 4.4 of the contract is in restraint of trade now appears rebadged as an unfairness argument under the Independent Contractors Act. In fact, for reasons which remain, even now, obscure to me the applicants chose to put their restraint of trade arguments in that form and not directly. Candle took the point – soundly – that if the clauses were invalid they did not form part of the contract and could not therefore be reviewed under the Independent Contractors Act. Full argument, however, was had on the question of whether cll 4.4 and 7.2 were in restraint of trade and that was the real issue between the parties. I have resolved those issues above. I do not propose in that circumstance to deal with the restraint of trade issues under the guise of the Independent Contractors Act.

Conclusions in summary

96    In summary, whilst there is much to reject in this argument I accept crucial elements of it and therefore its ultimate soundness. As to Step One, I reject the argument that Mrs Menano-Pires was told that cl 4.4 meant nothing and I reject her evidence that she was. As to the argument that Mrs Menano-Pires was deliberately not told of the Woolworths restraint, I accept that Candle did not tell her about it but this was not a deliberate tactic on its part. As to the argument that she had done all of the work in getting the contracts I accept that she did indeed have many more contacts within Woolworths than Candle but I find that she had acquired them as a result of her position with Candle. She was located in Woolworths’ offices as its contractor and she was paid substantial remuneration by Candle to be there. Contrary to Mrs Menano-Pires’ understanding, the contacts she garnered during her time within Woolworths were not her own and I do not think it was unfair for Candle to seek to protect the integrity of Woolworths as a client against the risk of Mrs Menano-Pires advantageously availing herself of the position which Candle had placed her in. I reject also the suggestion that Mrs Menano-Pires was left with the impression by Ms Diduszko, or the surrounding context, in May of 2008 that she could go ahead and contract directly with Woolworths. However, by reason of the conclusions I have reached above about the restraint of trade argument I accept that cl 4.4 was between 17 September 2008 and 1 October 2008 an invalid restraint of trade and I conclude that, as at the time that Mrs Menano-Pires was asked to leave Woolworths, it did not, in fact, prevent her from working for Woolworths.

97    As to Step Two, I accept that Mrs Menano-Pires was not told about cl 7.2. I conclude that the contract was unfair to the extent that it permitted Candle to seek to prevent Informax and Mrs Menano-Pires from working with Woolworths when at the relevant time, no legal fetters on their or its ability to do so existed.

98    I deal with these points separately.

Part One: was cl 4.4 unfair because Mrs Menano-Pires was told it meant nothing

99    It is necessary at this point to return to the time at which Mrs Menano-Pires first approached Candle. Her specialty lies in the provision of IT project management services particularly to companies using Oracle software. Following a period during which she had worked for a family-related business she began, in October 2006, to look for more regular and lengthy engagements. In or around November 2006, Mrs Menano-Pires submitted her curriculum vitae to Candle. An initial attempt to place her in a role at Woolworths failed. However, in January 2007 she was telephoned by Ms Thomas (who it will be recalled was an account manager at Candle). She inquired of Mrs Menano-Pires if she would be interested in a project management role at Woolworths to which she replied that she would. Subsequently, on 2 February 2007, she attended a meeting at Woolworths’ premises at Bella Vista where she was told that, if she were successful in seeking the position, she would be managing the centralised fuel price management project.

100    The accounts of Mrs Menano-Pires and Ms Thomas then diverge. Critically Mrs Menano-Pires gives evidence that on Monday 19 February 2007 she met face to face with Ms Thomas at Candle’s offices in the central business district in Sydney and that during the course of that meeting she went through the proposed contract, noticed the six month restraint clause, asked Ms Thomas why it needed to be there and was told by Ms Thomas it was a standard clause which had “no meaning”. Ms Thomas’ recollection is that no such meeting took place and that she neither said, nor had authority to say, that cl 4.4 meant nothing.

101    I reject Mrs Menano-Pires’ account of this meeting. It is inconsistent with the contemporaneous documents which are available and, more importantly, with her own subsequent conduct.

102    The first document it is inconsistent with is an email which was sent by Ms Thomas to Mrs Menano-Pires at 5.17pm on the afternoon of the disputed meeting. For Candle it is said that the terms of this email are inconsistent with a meeting having taken place earlier in the day. For Mrs Menano-Pires it is said that during the meeting the sending of such an email was explicitly countenanced and that not too much should be read into it as a result. Omitting irrelevant parts, the email was as follows:

Hi Isabel

Congratulations on your new contract opportunity with Woolworths in the capacity of Project Manager.

Your start date within this role is Monday, 5th March 2007 at 9.00am. Please ask for Andrew Burnet on arrival to reception.

In order to draw up your contracts I need the following information and will then Express Post them to you at your Frenchs Forest address.

Company Details

ABN:

…

[other details omitted]

…

Insurers name

Policy Numbers for each and expiry dates

If you don’t provide this for yourself Candle can provide this for you at a charge of $0.60 cents per hour for both PI and PL.

If you have any queries please feel free to contact me on the below details.

I look forward to speaking to you soon.

Kind regards

Crystal Thomas

103    This email is certainly consistent with the proposition that a contract would be drawn up upon the provision of the information sought. Candle says it is inconsistent with the idea that the contract was discussed at the meeting as alleged by Mrs Menano-Pires. In that sense, the words “In order to draw up your contracts I need the following information” sit a little uncomfortably with the idea that only a few hours before Ms Thomas and Mrs Menano-Pires had sat in a room going through those very same terms.

104    Mrs Menano-Pires, however, has an answer to this. She says during the course of the meeting (which she says took about 20 to 30 minutes) she was told by Ms Thomas that the draft contract was missing important information such as that relating to the bank account details of Informax, its ABN and workers compensation. All Mrs Menano-Pires needed to do was to “put your and Informax’s details in the blank spaces”. Mrs Menano-Pires does not say whether she had that information with her but I infer that she did not because she says that at the end of the meeting she said to Ms Thomas:

Look, there’s a lot of information that obviously you need to complete this contract. Why don’t you send me an email with the information you require and then I will reply to that email so you can complete the contract?

105    Ms Thomas’ email of 5.17pm is, on this view of things, to be seen as a follow-up requesting the self-same information which Mrs Menano-Pires had not had with her at the time of the earlier meeting. There is no doubt, I think, that the email which was sent does touch upon the same information. However, I am not at all comfortable with the idea that it is consistent with an earlier meeting at which it was agreed that Ms Thomas would send an email to Mrs Menano-Pires seeking the information which she needed. My discomfort springs from three matters:

a)    If Ms Thomas and Mrs Menano-Pires had met earlier in the day then, given that meeting, Ms Thomas would already have proffered her congratulations to Mrs Menano-Pires on her getting the job. The repetition of the same sentiment at the start of the email, whilst not impossible, is moderately surprising.

b)    It is strange that the email informs Mrs Menano-Pires of her start date and time when, presumably, that was information which might have been expected to have been exchanged at any face-to-face meeting earlier in the day. Again, this is not impossible but it is moderately surprising.

c)    The email does not refer to the earlier meeting or to any previous discussion. If a meeting had taken place earlier that day it might not have been surprising for it to say something like “As discussed earlier….” or “I refer to our meeting this morning” or even “Can you provide the following information from this morning’s meeting”.

106    I do not regard any of these observations as individually dispositive. But, if the only material available were the email, taken together they provide more support for the position of Candle than they do for Mrs Menano-Pires.

107    The second set of documents consists of electronic records generated by Ms Thomas. She gave evidence that when she arranged meetings she would keep a record of that fact in her electronic diary (which was a Microsoft Outlook calendar) and that, further, when she organised meetings at Candle’s city offices, she would book a meeting room which would result in an electronic record being kept of that meeting.

108    Ms Thomas’ electronic diary for Monday 19 February 2007 contains no reference to meeting with Mrs Menano-Pires. Instead, it records the following appointments:

8.00am    Contact Sat Tiwari – Oracle Financial AP – Finishing contract soon

8.30am    Touch base with Paul Penton

9.00am    Email Gabs re lunch today

2.00pm    Signing - Tapas Bhaumik

    Room 8 – Crystal Thomas

    Madeline Broadway

109    Whilst the electronic diary does show that a signing meeting took place in Room 8 it appears to have been with a Tapas Bhaumik. There is no record of a meeting with Mrs Menano-Pires. So far as the meeting rooms are concerned the following can be said. There appear to be 9 meeting rooms together with a boardroom and Candle appears to have kept an Outlook calendar for each of them. All ten for the week in question were in evidence. Rooms 1, 2, 4 and 7 show no appointments for the day. Business in room 3 was somewhat brisker and was recorded as having, interestingly, a “signing”, an interview, a client meeting and an induction. Room 5 was booked for a single “testing” session. Room 6 was booked for the day, room 8 had 3 bookings including the “signing” conducted by Ms Thomas herself (which appeared in her Outlook calendar) and room 9 was booked for computer use. The boardroom was booked for a demonstration.

110    I have set out the details of the bookings because of Mrs Menano-Pires’ submission that not too much should be read into the fact that there is no record of a meeting with her, either in Ms Thomas’ own calendar or for any of the meeting rooms. The point is made that Ms Thomas did not record all of her appointments and that it would have been easy for Ms Thomas and Mrs Menano-Pires to have slipped into one of the empty rooms since, on the Monday in question, there were many such rooms. This last submission is buttressed by the fact, so it is said, that Candle had neither called the receptionist who was responsible for the booking of rooms who could have contradicted Mrs Menano-Pires’ account that a meeting had occurred, nor proffered an explanation for that failure.

111    I accept that Ms Thomas did not keep an electronic record of everything which occurred. However, it is quite obvious that she did record signing events, such as the one Mrs Menano-Pires alleges, and did so on the day in question (at 2pm in Room 8). It is possible that a signing meeting was arranged with Mrs Menano-Pires on Monday 19 February 2007 but it is perhaps a little surprising that no reference is found in either set of records to it having occurred. I should say that I derive little assistance from the fact that Candle did not call the receptionist to contradict Mrs Menano-Pires’ account of the meeting having occurred. This is for two reasons. First, it is by no means obvious that the receptionist would have any recollection of the events in question, given her role, beyond that obtained from the records themselves. Secondly, assuming that problem could somehow be surmounted, the failure would only assist me in more comfortably drawing the inference that the meeting did occur if I were otherwise minded to draw that inference. For reasons to which I will shortly come, I am not prepared to draw that inference at all.

112    A third document is equivocal. Candle kept a file for each contractor, including Mrs Menano-Pires, upon which was recorded significant employment events or communications. There is an entry for Monday 19 February 2007: “Offered and accepted contract PM role with Woolworths”. This record is neutral on whether a meeting occurred or not.

113    Ms Thomas gave evidence that she was clear that the meeting did not occur because she recalled the first time she met Mrs Menano-Pires and this was on 13 March 2007 at Woolworths’ Bella Vista premises. I do not think that Ms Thomas intended to convey that she had an actual recollection that this first meeting happened on the particular date of 13 March 2007. Indeed, initially she thought it had happened on 8 March 2007. Rather, the contractor record for Mrs Menano-Pires includes a record created by Ms Thomas recording such a meeting (“Meeting for a coffee, has expressed that the location may just be too far for her”) and I take Ms Thomas to be saying that she is certain that that meeting was the first time she met Mrs Menano-Pires. The reason for her certainty about this is she did not know what Mrs Menano-Pires looked like so that their rendezvous was hampered by the practical problem of a mutual lack of recognition. This problem had been overcome, to her actual memory, by Mrs Menano-Pires working out that she, Ms Thomas, was a recruiter because she was on her own sitting with a folder and with her phone out. Ms Thomas knew that, so she said, because she had asked Mrs Menano-Pires how she recognised her and Mrs Menano-Pires had told her as much.

114    Mr Kimber SC, is critical of this evidence. He points out that Ms Thomas’ initial account was quite different for, when first asked about the matter, Ms Thomas had accepted that a meeting at Candle’s offices had taken place on Monday 19 February 2007. Indeed, this initial account had caused Candle to admit in its defence that that meeting had occurred. It was only after Ms Thomas was given access to her electronic records that she then revised her evidence to deny that a meeting had occurred on that day. I should say, in fairness to Ms Thomas, that she was no longer working for Candle by that stage. Mr Kimber SC asks, rhetorically, how Ms Thomas could be so sure that she met Mrs Menano-Pires at Woolworths when she was previously sure that she had met with her on Monday 19 February 2007 in the city. Ms Thomas explained the mistake by pointing out that she had just returned to Australia and was pregnant.

115    In assessing what occurred it is relevant to take account of the fact that Ms Thomas has no on-going connexion with Candle and has not for some time. She has no interest in the outcome of this litigation and no motive, apart from any personal embarrassment which might arise from the admission of error, to concoct any of her evidence. Mr Kimber SC submits that her evidence was “extremely unsatisfactory” but I do not accept this to be so. Whilst Ms Thomas had little in the way of actual recollection of the events in question I accept, however, that she did have the kind of recollection one gets from surveying contemporaneous documents and reconstructing past events. From Ms Thomas’ perspective there was nothing especially notable about Mrs Menano-Pires or her contract or the meeting with her at Bella Vista. I can see no reason why Ms Thomas would have any more reason to remember a specific meeting with Mrs Menano-Pires than any other client. More particularly, I do not think that a question “How did you recognise me?” would be a sufficiently striking occurrence to have lodged the encounter in Ms Thomas’ mind so that it remained until she gave her evidence. Further, the fact that she no longer worked for Candle can only have worsened her recollection. I am satisfied that Ms Thomas believes that the first time she met with Mrs Menano-Pires was on 13 March 2007 but I think this recollection is a reconstruction which has arisen from her survey of the records of Candle rather than from any substantive actual memory. For that reason I have placed little reliance upon her direct evidence on this issue. This is not really a criticism of her and I do not doubt that her evidence was honestly given. It is rather only an acceptance of the frailty of human recollection and the difficulties, at a distance, of distinguishing actual from reconstructive recollections.

116    That said, however, Ms Thomas’ reconstruction of the documents accords with my own. If the email of 19 February 2007 and the two Outlook calendar entries were looked at separately I would prefer Candle’s account of whether the meeting occurred to Mrs Menano-Pires’.

117    Mrs Menano-Pires’ version of events has the added difficulty of being inconsistent with three aspects of her own later conduct. The first relates to the period when she was negotiating with Woolworths for her own direct position in June 2008. On 24 June 2008, she was asked by Candle to consider a position with MLC. She declined this invitation on the basis that the pay was too low but did not mention in the course of doing so that she had, in fact, obtained a position with Woolworths. Candle submits, and I accept, that this shows that Mrs Menano-Pires thought that she was bound by cl 4.4 not to work directly with Woolworths. If she had really been told that the restraint clause meant nothing by Ms Thomas then she had no reason not to inform Candle that she had found work with Woolworths.

118    Mrs Menano-Pires’ answer to this during cross-examination was to say that at the time she rejected the MLC position on the basis of the pay she had not, in fact, yet signed the contract with Woolworths and was trying to keep her options open. This is technically correct. The contract with Woolworths was not signed until 8 July 2008 whereas her rejection of the MLC position occurred on 25 June 2008. However, I have found this evidence unconvincing. Woolworths had provided Mrs Menano-Pires with two proposed contracts for her review on 18 June 2008 by email. The two documents were a non-disclosure agreement and a consultancy services agreement. The email under which they were sent to her said (in part):

Lindsay will be picking up this matter so please revert to him if you are happy for execution copies of the NDA to be drawn up, and to discuss the CSA.

On 20 June 2008 Mrs Menano-Pires replied to “Lindsay” saying:

Both documents have been reviewed by Informax International Pty Ltd and they are happy for you to proceed with the execution of the NDA and CSA setup.

119    Woolworths executed the non-disclosure agreement on 22 June 2008 and Informax executed it on 23 June 2008. The final form of the consultancy services agreement was not formulated by Woolworths until 8 July 2008 but it was executed on that day by Informax, and backdated to 1 July 2008. All of this suggests, contrary to Mrs Menano-Pires’ evidence, that there was little doubt at the time she was confronted with the suggested position at MLC that she knew she had a position with Woolworths from 1 July 2008. Whilst it is true that no formal contract was signed until 8 July 2008 that has to be seen in a context which includes an email from Ms Zozobrado to Mrs Menano-Pires of 16 June 2008 which was in these terms:

This is to confirm that Customer Engagement IT will be requiring your services as Project Manager for 3 months effective from 1st July 2008 to 30 September 2008 to work of [sic] Instant Rewards Tactical Release which is already an approved CAPEX project.

120    The actual position was, and I find, that Mrs Menano-Pires had been given the position from 1 July 2008 subject only to the execution of formal documentation. I do not accept that there was any residual doubt in her mind at the time she rejected the MLC proposal that she would be working for Woolworths. In those circumstances, I reject her evidence that the reason she did not mention the Woolworths contract to Candle was because no formal contract had yet been executed by Woolworths.

121    The second piece of inconsistent evidence concerns Mrs Menano-Pires’ telephone conversation with Ms Diduszko after Woolworths had indicated that she would have to work through Candle. This conversation occurred on 1 October 2008 shortly before Mrs Menano-Pires was asked to leave. It was quite plain that during that conversation Mrs Menano-Pires did not mention that Ms Thomas had told her that cl 4.4 meant nothing. Yet Mrs Menano-Pires’ evidence of the telephone conversation was that Ms Diduszko had said to her that she was in breach of her contract with Candle. If ever there was a time to mention that she had previously been told the restraint clause was meaningless this was that time. Yet she remained silent on the topic. In the written submissions filed on her behalf it is submitted that such a statement would have been pointless because Woolworths was proceeding under cl 7.2 of its own contract. But this is not Mrs Menano-Pires’ evidence. She says that Ms Diduszko told her:

…you are in breach of contract because you are working for Woolworths and not via Candle and in the contract there is a six month restraint clause. Woolworths is also in breach of contract with Candle and even though you have a current purchase order, Woolworths is happy to rectify.

122    Contrary to the submission, it is tolerably clear that Ms Diduszko was discussing the restraint in the contract between Informax and Candle. The point is underscored by the letter sent by Informax to Candle on the same day which I discuss below at [137]-[138].

123    The third piece of inconsistent evidence is Mrs Menano-Pires’ failure to take steps to work directly for Woolworths at some earlier stage. On her case, she was never bound not to work directly for Woolworths because she had been told at the outset that the restraint clause did not mean anything. This must have meant that she could work directly for Woolworths at any time she chose. Yet she did not do this. Mrs Menano-Pires was confronted in cross-examination with this matter. The cross-examination was directed to the extension of the Informax contract which occurred in November 2007. It is to be noted, for reasons that will become apparent, this is well before the meeting with Ms Diduszko on 1 May 2008 when Mrs Menano-Pires suggested that she was left with the impression that she could seek out a position for herself within Woolworths.

124    The cross-examination, excluding irrelevant portions, was as follows (the italicization is mine):

Okay. You didn’t seek to enter into a direct relationship with Woolworths; correct? --- That’s correct.

You agree that you had the opportunity to enter into such a relationship with Woolworths at that time? --- I had the opportunity but I had my reasons for not entering into direct contact.

Well, the reason was because you knew that the Candle restraint was operating to prevent you from doing so? --- That’s not true. That’s not the reason.

Well, would you like to share with us the reason? --- Yes, I will.

Okay, because you’re going to tell me ---? --- Yes.

So I should find out from you now? --- The reason is because I was working in the same department under the same contract with the same managers in the same portfolio. So it was all under the same specialty department.

…

Why was that a reason for not dealing directly with Woolworths? --- I felt I was still under the contract with Candle.

So you could work, as far as you were concerned, the Candle contract would allow you to do it in a separate department but not in the department you were placed in; is that right? Is that your thinking? I’m just trying to understand your reason? --- The reason also is the contact that I had with Candle was very limited and there’s also a reason that Candle basically made 2008 Rachel Diduszko basically said, “You look for work inside Woolworths; you’ve got that information.” So that was put to me by Candle, basically saying you look for work yourself in May 2008.

Ms Menano-Pires, I don’t mean to be rude but that doesn’t answer the question because you entered into this second extension agreement in November 2007; correct? --- That’s correct.

What may or may not have been your thoughts about what Candle was doing with you in 2008 has got nothing to do with what happened in November; do you agree with that? --- I agree with that.

…

You see, what you’ve told the court, I want to suggest to you is, as I understand it [is] this: the reason why you didn’t want to contract directly with Woolworths was that you were working in the same department that Candle replaced [placed] you in and working with the same management and the same persons; correct? --- And that the same portfolio and the same building; in the same building.

You felt that the Candle contract precluded you from doing that? --- I didn’t feel it precluded me but I felt that I wanted to stay and work – my primary objective was to stay with Woolworths as well, so yes. Sorry.

But you say that the reason why you didn’t negotiate directly with Woolworths was because you were at that stage working in the same department ---? --- Same ---

--- same building, same management, same project ---? --- Correct.

--- as Candle had placed you in? --- Correct.

And I think you’ve said that that’s not because there was anything in the Candle contract that precluded you from doing that; correct, that you just wanted to do that; correct? --- Correct.

Why? --- I have no reason why not.

125    This evidence is incoherent. I observed Mrs Menano-Pires give her evidence and whilst I understand Portuguese is her first language her English is good. I do not doubt her comprehension of what was taking place whilst giving that evidence. The initial delay in answering the question (“Well, would you like to share with us the reasons?”) followed by the incoherence in the response given was caused by the fact that Mrs Menano-Pires had no real answer to the question. To be clear, the principal reason she gave for why she had not dealt directly with Woolworths was this:

The reason is because I was working in the same department under the same contract with the same managers in the same portfolio. So it was all under the same specialty department.

126    But this makes no sense. The question was why, if she understood she could contract directly with Woolworths, she did not do so in November 2007 when her contract with Candle came up for extension. The delayed but eventually proffered answer – that she was working in the same department under the same contract with the same managers in the same portfolio – was non-responsive. Further, the latter parts of cross-examination set out above reveal an attempt by Mrs Menano-Pires then to explain the incoherence of her first answer away with a new explanation. This Mrs Menano-Pires did by reference to the impression allegedly left with Mrs Menano-Pires by Ms  Diduszko on 1 May 2008 that she could seek out work directly within Woolworths on her own account (I conclude below that Mrs Menano-Pires was not, in fact, left with that impression). However, as the cross-examiner correctly observed, this could be no response to the state of affairs existing in November 2007 which was what she was being asked about. Nor did it go anyway towards explaining the nonsensical answer she first gave.

127    I infer from the incoherence of Mrs Menano-Pires’ evidence about this that she has no good answer to Candle’s point that her subsequent conduct in not seeking to contract directly with Woolworths is inconsistent with her having been told cl 4.4 meant nothing. The written submissions prepared on her behalf deal with this topic in these terms:

As to [this argument], the Applicants have dealt with this contention in their written submissions and only need to add that there is no basis whatsoever for suggesting that the Applicants kept the Respondent as a contract party at least until 30 June 2008 because of the restraint provision. The evidence suggests that this occurred without any regard to the existence or relevance of such a provision. If the restraint caused the Applicants to keep the Respondent as a contract party with Woolworths prior to 30 June 2008 then logic would suggest that they would have maintained that stance after 30 June 2008 (or, at the very least, would have “honoured” that restraint by not engaging directly with Woolworths).

128    The only other reference to this matter in the applicants’ written submissions is in their closing submissions at paragraph [57]. The point made there, as I understand it, was that Mrs Menano-Pires did not deal directly with Woolworths at an earlier stage out of a sense of loyalty to Candle. However, the submission is not supported by Mrs Menano-Pires’ evidence and she did not put this forward as the reason why she had not directly contracted with Woolworths at an earlier stage. The balance of the paragraph set out above from the applicants’ submissions is unresponsive to the point being made. In those circumstances, I reject Mrs Menano-Pires’ evidence that she was told by Ms Thomas that the restraint clause meant nothing. The claim of unfairness erected on it fails. I should say for completeness that I have reached these conclusions based on my analysis of Mrs Menano-Pires’ evidence and the surrounding evidence. During the course of the trial I was not struck by any impression that Mrs Menano-Pires was seeking to mislead me; to put the matter frankly, I have not felt that her demeanour has been a particularly useful input in my assessment of her evidence beyond a conclusion that she understood what was being asked of her.

Part Two: whether it was unfair for Candle deliberately to withhold the existence of the restraint in the Woolworths contract from Mrs Menano-Pires

129    There is no doubt that Ms Thomas did not tell Mrs Menano-Pires about the restraint in the Woolworths contract but her evidence was that she did not know about it. It is likely that Ms Thomas had seen a copy for the version in evidence was marked for her attention. Ms Quick also gave evidence which suggested that account managers like Ms Thomas should have known about the restraint. I accept this and conclude that Ms Thomas should have known of it. However, I do not conclude that she was, in fact, aware of it, still less that she deliberately withheld its existence from Mrs Menano-Pires. In a sense her evidence that she was unaware of the restraint was against her interest, since it showed that she had not been as diligent as, perhaps, she should have been. On the other hand, she had no interest as a person no longer employed by Candle to make up her evidence that she was unaware of the restraint. I therefore accept her evidence that she was unaware of the restraint. This part of the case, therefore, fails on the facts.

Part Three: whether cl 4.4 was unfair when Mrs Menano-Pires had done all the work in finding the contacts and project management roles within Woolworths

130    I accept, and Candle did not really deny, that it was Mrs Menano-Pires who had all of the relevant contacts within Woolworths and who had secured each of the new project management roles in which Candle had placed her. This, it will be noted, is a different question to whether Mrs Menano-Pires was Candle’s “face” to Woolworths for the purposes of the restraint of trade doctrine. The former is a submission about what Mrs Menano-Pires did; the latter about how she appeared. Mrs Menano-Pires was, however, only in the situation where she could develop contacts within Woolworths by reason of Candle having first placed her there and thereafter having kept her there. Contrary, I think, to Mrs Menano-Pires’ perception of the situation, she was a Candle contractor whose presence at Woolworths’ premises, until 30 June 2008, was sustained by Candle. Without Candle, Mrs Menano-Pires would have had no relationship with Woolworths at all, a matter which it was my impression she tended somewhat to overlook or, at least, downplay.

131    By 4 June 2008 when the final extension to Informax’s contract with Candle was agreed to, there was nothing unfair about a clause which sought to limit the ability of Mrs Menano-Pires to exploit the advantages she had accrued with Woolworths whilst working as Candle’s contractor. Far from being unfair, cl 4.4 was precisely justified as a measure to counter that risk. This conclusion is to be contrasted with the conclusion above at [42] that Candle has not proved that it had a sufficient interest in its customer connexion with Woolworths to justify the validity of cl 4.4. Although these two questions bear a passing similarity they are not the same. So far as the validity of cl 4.4 is concerned the question is whether Mrs Menano-Pires appeared to be the face of Candle to Woolworths. That is a case about appearance and it is a case which I do not think Candle ran. On the present facts of the case, the question is about unfairness in operation which does not turn on how Mrs Menano-Pires appeared to Woolworths but instead on who did what. More importantly, it is a case which was run by the applicants and therefore open to me to consider and reject. It is easy to see how that case could have been built on by Candle to make a case that Mrs Menano-Pires was the face of Candle to Woolworths, but that was not undertaken. The apparent tension between my present conclusion and my conclusion at paragraph [42] is dispelled when the distinct nature of the two inquiries is recognised. The restraint of trade doctrine is concerned with legitimate interests, the Independent Contractors Act with unfairness. The conclusion that cl 4.4 was not unfair because Candle was entitled to protect itself against Mrs Menano-Pires’ poaching activities is a conclusion about fairness. A conclusion that the same clause is in restraint of trade because it has not been demonstrated that Mrs Menano-Pires had become the face of Candle to Woolworths is not. The restraint of trade doctrine reflects an economic theory; the Independent Contractors Act does not. The same remark may be made about the conclusions drawn above about opportunistic disintermediation.

Part Four: whether cl 4.4 was unfair because Mrs Menano-Pires was left with the impression by Ms Diduszko on 1 May 2008 that she could contract directly with Woolworths

132    Mrs Menano-Pires gave evidence that at a meeting with Ms Diduszko on 1 May 2008 she told Ms Diduszko that the work at Woolworths was drying up and that she needed Candle’s help to find her new work. She says that she asked Ms Diduszko to look for positions both within and without Woolworths to which she says Ms Diduszko replied:

Isabel, you’ve got the inside knowledge. It’s easier for you to look around for another PM [project management] role at Woolworths.

133    Together with the fact that Mrs Menano-Pires had for some time been doing the work of finding positions within Woolworths, the applicants submit that this statement carried with it the further implication that Candle told Mrs Menano-Pires she was free to contract on her own behalf within Woolworths.

134    Ms Diduszko gave a different account of the discussion. She says that she said:

As far as Woolworths is concerned, I can definitely enquire in the areas I know of to see if there is other work available. However, in the short while I have been looking after Woolworths, I have been finding that a lot of referrals occur internally very quickly. The inside knowledge is very powerful. Vacancies rarely get published formally, as it is predominantly referral and word of mouth from people who you know making recommendations. I have found that the people on one project do not know people in other projects or divisions even if they are located immediately beside each other. There is not a consistent way of learning about opportunities without inside assistance, so if you do hear of something being internal, I can then make enquiries on those leads for you.

135    I prefer Ms Diduszko’s account although I do not think that it much matters. Even if one were to accept Mrs Menano-Pires’ version of the conversation, it pulls up short of demonstrating that she was told that she could contract on her own behalf. Nor do I think that adding the fact that Mrs Menano-Pires had been locating project management positions for Candle to place her into is capable of changing the complexion of what was said to her. Accepting her evidence at its highest, I do not accept that Candle represented to her that she was free to contract with Woolworths on her own account. Mrs Menano-Pires does give evidence that following the discussion with Ms Diduszko “I understood what she had said to mean that Candle would not be representing me and helping me find work in Woolworths”. For reasons which follow I neither accept that Ms Diduszko said anything to such an effect nor that Mrs Menano-Pires thought that she had.

136    I prefer Ms Diduszko’s account (which puts the matter beyond doubt) and I reject Mrs Menano-Pires’ asserted understanding for three reasons. First, if, after this discussion with Ms Diduszko on 1 May 2008, she had genuinely believed that she was free to contract with Woolworths directly then there was no reason for her not to inform Candle of the fact that she had procured a position with Woolworths when Candle, on 24 June 2008, raised the position with MLC with her. For reasons I have already given, I do not accept her explanation that this discrepancy is to be discounted on the basis that the Woolworths’ agreement had not been formally documented at that date.

137    Secondly, if Mrs Menano-Pires genuinely held the view that she was entitled to contract directly with Woolworths by reason, in part, of what Ms Diduszko had told her on 1 May 2008 (or its surrounding context), then it is difficult to understand why, when she spoke with Ms Diduszko by telephone on 1 October 2008, she did not raise that precise matter with her then. According to Mrs Menano-Pires it was during that conversation that Ms Diduszko told her that she was in breach of the restraint clause in the contract with Candle (see above at paragraph [121]). If Ms Diduszko had really left Mrs Menano-Pires with the impression that she was free to contract with Woolworths on her own account, despite that provision, it is unlikely that she would not have raised this with Ms Diduszko during this telephone conversation. I reject the argument that it was not relevant because what was being enforced against Informax was the restraint in the Woolworths contract. Mrs Menano-Pires plainly regarded herself as having an argument with Candle about this matter. This is an unavoidable consequence of the fact that Informax wrote to Candle on the same day alleging Candle had no entitlement to intermeddle in Informax and Woolworths’ affairs and threatening a damages claim unless the intermeddling stopped. The terms of the letter are instructive. The precise complaint was as follows:

We would like to inform you that upon termination of the previous contract between Candle Australia Ltd and Informax, having due notice been given to you, Candle Australia Ltd did not have a further contract to offer us, either at Woolworths or anywhere else for that matter; as such we fail to understand why you should think yourselves entitled to be involved and obtain any kind of financial gain at this stage.

138    This was a letter accusing Candle, not Woolworths, of wrongdoing. If Mrs Menano-Pires had been left with the impression she could contract directly with Woolworths I think it most unlikely that that allegation would not have appeared in this letter. Nor do I accept that it was a lawyer’s point which could not reasonably be expected to have been formulated at that early stage. To the contrary, if it had been truly suggested to Mrs Menano-Pires, it was her most basic complaint and went to the root of her complaint. It is the very thing that would have been said.

139    Thirdly, on 26 August 2008 Mrs Menano-Pires spoke with an employee of Candle, Ms Guyen (who had also been at the 1 May 2008 meeting). She told Ms Guyen that she had a three month contract which she had obtained through an agency but she would not tell Ms Guyen who the placement was with. As previously noted, Ms Guyan recorded this conversation in Candle’s electronic records. Although Mrs Menano-Pires denies saying this I have found above that she did. In that circumstance the statement that she had found a three month position through an agency was not true. It is difficult not to infer from it that Mrs Menano-Pires did not want Candle to know she had contracted directly with Woolworths. That inference is supported by her refusal to name the entity she was working for. If she had been left with the impression that Candle had approved her working directly for Woolworths this was a strange course to take. Under cross-examination she claimed that she did not want Candle to know where she was placed lest it seek to place someone else there (“It could be that my job could have been replaced by somebody else”). But as Mrs Menano-Pires pointed out, in this very case, Candle had few contacts within Woolworths which would allow this to occur. In any event, that risk did not effect her present contract even if it existed. The better view is that Mrs Menano-Pires was trying to conceal what she understood to be her own breach of cl 4.4. A person doing that could not have been left with the impression that she was free to contract with Woolworths.

140    It follows that I do not accept that Mrs Menano-Pires was told on 1 May 2008 that she was free to work directly for Woolworths. Since I accept Ms Diduszko’s account of this conversation I conclude that she was left in no doubt that the contrary was in fact the case. Even if I had accepted Mrs Menano-Pires’ evidence, the result would have been the same. The words she attributed to Ms Diduszko do not go far enough to make out this part of the applicants’ case and I do not accept that the fact that Mrs Menano-Pires had been finding work within Woolworths is capable of changing the complexion of what was said to her. It follows that I do not find that cl 4.4 was unfair on this basis.

Part Five: was the contract between Candle and Informax unfair because cll 7.2 and 7.3 and cl 4.4 were of no effect

141    Each of the distinct challenges under the Independent Contractors Act to cl 4.4 fails. However, I accept for reasons already given that both cll 7.2 and 7.3 of the contract between Candle and Woolworths and cl 4.4 of the contract between Candle and Informax operated as unenforceable restraints during the period when Candle first sought to dissuade Woolworths from engaging Informax through to the time when Mrs Menano-Pires was asked to leave Woolworths’ premises by Mr Singh.

142    In its own way the simultaneous invalidity of the two sets of clauses was the point the applicants’ case was groping towards, albeit concealed under the complexities of the Independent Contractors Act. It is not necessary, in light of the way I approach the case, to ascertain whether a contract in restraint of trade is also “harsh” or “unfair” within the meaning of s 12(1) of the Independent Contractors Act although the applicants spent some time seeking to show that it was. This is because, at least in New South Wales, where s 4(1) of the Restraints of Trade Act applies, the question cannot arise.

143    Mr Kimber SC sought to persuade me that the New South Wales Industrial Relations Court (previously the Commission) had held that a contract in restraint of trade was unfair within the meaning of s 106 of the Industrial Relations Act 1996 (NSW) and its predecessor s 275 of the Industrial Relations Act 1991 (NSW). Reference was made to Daley v New South Wales Rugby League Ltd (1995) 78 IR 247 at 280, 287 per Hungerford J and Carter v New South Wales Rugby League Ltd (1997) 78 IR 368 at 400 per Hill J. I do not think the submission can be correct. If a term of a contract in restraint of trade is void it does not form part of the contract and no question of its unfairness can arise. The scheme of s 106, previously in s 275, is different to s 12(1) particularly because the definition of an “unfair contract” includes the notion of contracts contrary to public interest which are absent from s 12(1), probably for constitutional reasons: cf Re Dingjan; ex parte Wagner (1995) 183 CLR 323 at 361 per Gaudron J (with whom Mason CJ, Brennan and Toohey JJ agreed). I do not feel constrained, in that circumstance, by the New South Wales authorities to construe s 12(1) as Mr Kimber SC submits because a sufficient reason exists to distinguish them. In any event, given the operation of s 4(1) of the Restraints of Trade Act 1976 I cannot see what the point of such a debate would be.

144    Was it unfair for Candle to seek to persuade Woolworths to break up the relationship between Woolworths and Informax when it had no entitlement to stop either from working with the other? I think the answer is that it was. Not having any legal entitlement to prevent Informax and Woolworths from working together, Candle’s persuasion of Woolworths to end its relationship with Informax achieved for Candle what it could not achieve under its own contract. For myself, I would have thought there was an implied term to similar effect: cf Mackay v Dick (1881) 6 App Cas 251 at 263 per Lord Blackburn; Butt v M’Donald (1896) 7 QLJ 68 at 71 per Griffith CJ (Cooper and Power JJ concurring); Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J (the Court concurring).

145    However, such an argument was not pursued. Despite that, a similar style of reasoning which suggests the implied term in Butt v M’Donald that each party agrees “to do all such things as are necessary on his part to enable the other party to have the benefit of the contract”, demonstrates here, I think, the unfairness in question. Candle and Informax had a bargain but it was not one (once the restraint of trade doctrine was taken into account) which contemplated any ability on Candle’s part to stop Informax working for Woolworths in the period 17 September 2008 to 1 October 2008. Yet Candle was in a position, by reason of its relationship with Woolworths, to bring about a result which not only lay outside the contract but which could not have been lawfully included in the contract as a covenant binding on Informax. Given Mrs Menano-Pires did not know of cl 7.2, this was a one-sided state of affairs and one which should be characterised as “unfair” within the meaning of s 12(1).

Part six: whether relief can be granted in respect of a terminated contract

146    Mr Moses SC submitted that s 12(1) did not permit relief to be granted where the contract in question had already been terminated. This argument rested principally on the word “is” where appearing in the definition of services contract in s 5(1) and in s 12(1) (my emphasis):

An application may be made to the Court to review a services contract on either or both of the following grounds:

(a)    the contract is unfair;

(b)    the contract is harsh.

147    Being expressed in the present tense this indicated, so the argument ran, that the provision was directed at presently subsisting contracts.

148    A similar jurisdiction was at one time conferred upon the former Australian Industrial Relations Commission by ss 127A and 127B of the Workplace Relations Act 1996 (Cth) to review contracts for services by independent contractors in terms which, at least for present purposes, are not materially different to s 12(1). In Re Dingjan; ex parte Wagner (1995) 183 CLR 323 it was held that ss 127A and 127B of the then Industrial Relations Act 1988 (Cth) could apply to a contract which had existed at the time the application was filed: see 183 CLR 361-363 per Gaudron J (with whom Mason CJ and Deane J agreed) and Toohey J at 356.

149    Although Gaudron J expressed a positive view on the point (at 362-363), left open was the question whether an application could be made in respect of a contract which had already been terminated prior to the commencement of the review proceeding. The Full Court of the Australian Industrial Relations Court, however, held in Gerrard v Mayne Nickless Ltd (1996) 135 ALR 494 at 505-507 (Wilcox CJ, Ryan and Marshall JJ) that ss 127A and 127B did operate to permit review of a contract which had come to an end prior to the making of an application. For present purposes s 12(1) is not relevantly distinguishable from ss 127A and 127B. It would not be appropriate, in that circumstance, for me to depart from Gerrard unless I was of the view that it was plainly wrong in the sense discussed earlier in these reasons. I do not think that it is.

150    It follows that I must reject Candle’s argument that the Court has no power to review the contract between Candle and Informax because it had come to an end before the applicants’ present application was filed.

Part seven: Discretionary matters

151    Candle pursued an argument that I should decline relief to Informax because of four discretionary matters.

(a)    the applicants had entered into the contracts voluntarily, had benefitted financially from them and had been given the opportunity to raise Mrs Menano-Pires’ profile as an IT contractor;

(b)    without the efforts of Candle, Informax would not have obtained any work with Woolworths at all;

(c)    Mrs Menano-Pires had engaged in disentitling conduct. She had deliberately set out to exclude Candle and she had sought to conceal what she was doing; and

(d)    Informax had been given the opportunity to rectify the whole situation by continuing to work with Woolworths through Candle but had declined to do so.

152    I do not think any of these provide good reasons for declining relief to Informax. As to (a) and (b), I do not perceive how they logically connect with the unfairness identified. As to (c), whilst I accept that Mrs Menano-Pires set out to conceal what she was doing and at one level this reflects adversely on her integrity, it has to be seen in a context which includes the fact that she was not bound by cl 4.4 (although she believed that she was). I do not think that moral obliquy, in itself, constitutes a reason for declining relief.

153    As to (d), I do not see that Informax was bound to accept such an arrangement. The argument proceeds upon the assumption that Informax was in breach of cl 4.4 but at the critical time whilst Candle was seeking to persuade Woolworths to dispense with Informax’s services it was not.

154    In those circumstances, I see no reason which would justify withholding relief under s 12(1) of the Independent Contractors Act.

Part eight: appropriate variations

155    The applicants sought a number of variations to the contracts between Informax and Candle. Relief was sought in respect of the original contact and the three separate extensions to that contract. Only the second variation (which occurred on 31 May 2008) and the third variation (which occurred on 4 June 2008) have any connexion with the events the subject of this litigation and only because the six month restraint provided for in each intersects with the period between 17 September 2008 to 1 October 2008.

156    Accordingly, relief should be confined to those two contracts. The applicants submitted that two kinds of variation should be ordered:

    the insertion of terms into the contract by which Candle promised not to seek to enforce directly or indirectly the restraints in the contract between Candle and Woolworths.

    an indemnity against any breach of those fresh terms.

157    I see no reason to impose an indemnity whose absence from the contract causes no harshness or unfairness. In principle, subject to one matter, a provision dealing with the restraint in the two contracts between Woolworths and Candle along the lines suggested by the applicants should be inserted. That one matter is this: all that has been established is the unfairness of the two contracts in permitting Candle to take the steps which it did between 17 September 2008 and 1 October 2008. I do not see that any protection after 1 October 2008 is relevant or, indeed, required.

158    In those circumstances the contracts between Candle and Informax of 31 May 2008 and 4 June 2008 should be varied by the addition of the following terms (which are largely based on those put forward by the applicants):

14.    Candle will not take any step to enforce any provision in any contract between Candle and the Client, the purpose or likely effect of which would be (in whole or in part) to fetter, restrain or otherwise impede the Contractor or the Principal Person from being directly or indirectly engaged by the Client during the period of 17 September 2008 to 1 October 2008 (being a period after the expiry of this agreement) including any restraint provision that exists before the formation of this agreement.

15.    Candle will not procure or encourage the taking of any step by the Client to enforce a provision of the kind referred to in clause 14.

Part nine: pleading amendments

159    At prayer 7 of their further amended application the applicants seek leave further to amend their proceedings in the event that relief is granted under s 12 of the Independent Contractors Act.

160    Candle submits that this course should not be taken because:

(a)    no order was made permitting the bifurcation of the trial; and

(b)    any amendment would be contrary to the principles in Aon Risk Services Australia Ltd v Australia National University (2009) 239 CLR 175.

161    It also submits that what the applicants effectively now wish to pursue is a claim for damages for retrospective breach of a retrospectively varied contract. It is said that this will give rise to complex issues.

162    At this stage, I think the appropriate course is to permit the parties to digest these reasons and for the applicants to make any application to amend their proceeding by notice of motion. The question of whether leave should be granted can then properly be ventilated.

VI

Assessment of damages

163    Whilst it would be possible to assess, in the alternative, damages for the claim under the Trade Practices Act and for the breach of contract I do not think it is appropriate to do so until the question of whether there is to be any amendment to the pleadings is finalised.

VII

Candle’s Cross-Claim

164    Candle claimed its margin for the three months that Informax worked directly for Woolworths on the basis that Informax had been in breach of cl 4.4. Since I have concluded that cl 4.4 was not enforceable during the period 17 September 2008 to 1 October 2008 the cross-claim should be dismissed insofar as it relates to that period. The same reasoning also supports the proposition that it has not been shown to be enforceable in the period 1 July 2008 to 16 September 2008 (that is, neither customer connexion nor disintermediation interests have been established). The cross-claim must, therefore, be dismissed with costs.

165    In the event that my conclusions about cl 4.4 are reversed I would assess Candle’s damages as follows. Informax submitted (if cl 4.4 were valid) that Candle had not proven that it would have been able to place a consultant in the position previously filled by Mrs Menano-Pires. I reject this argument. The award of damages in contract seeks to put the party claiming damages in the position it would have been in if the breach had not occurred and instead the promise had been performed. What would have happened (on this hypothesis) if Informax had not breached cl 4.4? If Informax had honoured its obligations under cl 4.4 Mrs Menano-Pires would have realised she could not work directly for Woolworths. Just as Ms Diduszko had suggested to her on 1 May 2008, she would have used her contacts within Woolworths to find the position through Ms Zozobrado that she did, in fact, find and she would have been placed in that position by Candle. The alternative is that she would have done nothing, preferring no employment at all. Mrs Menano-Pires is an active person and did not strike me as the kind of woman who would prefer to do nothing. Accordingly, I conclude that Candle would have succeeded in filling the position in question with Mrs Menano-Pires.

166    The amount paid to Informax under its final contract with Candle was $780 per day. The amount paid by Woolworths to Informax under its direct contract was $900 per day. The difference was $120 per day. Candle accepted that it incurred expenses of $44.85 per day. Accordingly, it would have been entitled to $75.15 per day which amounts to $4,959.90 for the period 1 July 2008 to 30 September 2008.

VIII

Relief

167    The parties are to bring in short minutes of order within fourteen days. In the event that this does not occur the matter will be relisted for further directions.

Associate:

Dated:    4 March 2011