AGAW Services Pty Ltd v MacCrory & Anor [2021] QCAT 341

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: AGAW Services Pty Ltd v MacCrory & Anor [2021] QCAT 341 PARTIES: AGAW SERVICES PTY LTD T/A COLBROW MEDICS (applicant) v SEAN MACCRORY (first respondent) and SPORT AND EVENT MEDICS PTY LTD APPLICATION NO: MCDO1195-20 MATTER TYPE: Other minor civil dispute matters DELIVERED ON: 28 September 2021 HEARING DATE: 16 September 2021 HEARD AT: Brisbane DECISION OF: Adjudicator Lember ORDERS: The application is dismissed. CATCHWORDS: ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – minor civil dispute – claim for debt or liquidated demand of money – whether a restraint clause in a contract was enforceable Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 9(1), s 11, s 13(1), s 93, Schedule 3 Amoco Australia Pty Lt v Rocco Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 Australian Woollen Mills Pty Ltd v Commonwealth (1955) 93 CLR 546 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161 Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 Yang & Anor v Wellcamp Properties Pty Ltd [2018] QCATA 161 APPEARANCES & REPRESENTATION: -- 1 of 7 -- 2 Applicant: Self-represented Respondent: No appearance REASONS FOR DECISION [1] The applicant supplies medics to clients in a delivery method not dissimilar to a “temp” agency. [2] The first respondent, as an independent contractor, was engaged by the applicant from 2014 to 2019 to provide medic services to the applicant’s clients under the terms of an independent contractor agreement dated 29 May 2014 (“the contract”). [3] Among other things, the independent contract agreement provided as follows: (a) the “Contractor” is Sean MacCrory (the first respondent); (b) in clause 9 (my emphasis added) that: The Contractor will not at any stage during the course of their services approach a client directly to offer them there [sic] services or where a client approaches the Contractor directly, they will refer the client to Colbrow Medics. This applies for a period of 24 months since the contractor’s last assignment to that client. Where this clause is breached, the Contractor agrees to pay Colbrow Medics the sum of $4,000.00 per breach and will be liable for any court costs; (c) in clause 15 that the Contractor indemnifies the applicant against claims, losses etc arising from the Contractor’s breach of the contract; and (d) in clause 16 that the Contract could be terminated by the applicant on seven days’ notice in writing. [4] The first respondent completed his last shift with a named client of the applicant (a school) on 29 August 2019. On 13 November 2019 the applicant tendered for the named client’s work for the following year but was informed the following day that it was not successful. [5] On or by 27 February 2020 the first respondent ceased providing services to the applicant under the contract. [6] The first respondent is the sole director and secretary of the second respondent, a company formed on 14 February 2020. That company, once formed, appears to have engaged directly with the named client of the applicant, which the applicant says breached the first respondent’s contractual obligations to the applicant causing a $4,000 loss for which the applicant is entitled to compensation from both respondents. [7] There is no direct evidence that either respondent has carried out work for the named client. The applicant relies on social media “check-ins” by the first respondent placing him onsite at the client’s premises during 2020. The only admission made by respondents are in the response wherein the first respondent states that “any works carried out by under Sports and Event Medics Pty Ltd (ABN 18 639 120 648) are separate from my sole trader arrangement with Colbrow”. It is open for the tribunal to infer that the second respondent is undertaking work for the former client -- 2 of 7 -- 3 of the applicant, and that those services are being delivered on behalf of the second respondent by the first respondent personally. [8] The applicant says the breach amount of $4,000.00 is an accurate calculation of its loss because: (a) when a client wishes to directly engage one of the applicant’s contractors, the applicant earns a $4,000 placement fee, paid by the client for that direct placement; and (b) the placement fee represents the net profit the applicant would have earned in a year from the named client from placing medics with the named client through the applicant’s business. [9] By an application for a minor civil dispute – minor debt filed 1 October 2020, the applicant seeks orders that the respondents pay: (a) $4,000 for the respondents’ breach of clause 9; (b) $125.40 as the filing fee;1 and (c) $91.00 in ASIC search fees. [10] On 29 October 2020 the respondents filed a response seeking that the application be dismissed on the bases that: (a) as against the first respondent, because: (i) he did not breach the terms of the contract because he did not approach a client of the applicant to offer his services; and (ii) the claim is “excessive”; and (iii) the contract is a “restraint of trade” (and, by implication, unenforceable); and (b) as against the second respondent because it was not a party to the contract, had no dealings with the applicant that could give rise to a claim and is unrelated to the applicant in all respects. [11] At the hearing on 16 September 2021, Mr Widuckel appeared2 for the applicant and the respondents made no appearance. [12] The respondents were given notice of the hearing by email and acknowledged the email in a reply email sent 18 August 2021. Satisfied that they were not only given, but received the notice of hearing, heard the matter in the absence of the respondent pursuant to s 93 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). [13] The questions for the tribunal are: 1 This was the corrected amount based on the filing fee actually paid, after the amount of $352.00 was initially claimed. 2 By telephone, with the tribunal’s leave. -- 3 of 7 -- 4 (a) whether the claim is property a minor civil dispute – minor debt over which the tribunal has jurisdiction, or whether it is a claim in damages over which it does not; and (b) If the tribunal has jurisdiction to hear the claim: (i) whether the terms of the contract are enforceable and, if they are, (ii) whether the terms of the contract were breached and, if they were, which respondent, if not both, should be held liable to the applicant for the loss arising from the breach. Is the claim properly a minor debt claim within the tribunal’s jurisdiction? [14] The tribunal has jurisdiction to deal with matters if so empowered to do so by the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (“QCAT Act”) itself or by an enabling Act.3 [15] Schedule 3 of the QCAT Act describes a minor civil dispute, amongst other things, as “a claim to recover a debt or liquidated demand of money, of up to the prescribed amount”. The prescribed amount is currently $25,000.00. [16] Section 11 of the QCAT Act confers jurisdiction on the Tribunal to hear and decide a minor civil dispute and the Tribunal may exercise that jurisdiction if a “relevant person” has applied to the tribunal to deal with the dispute.4 [17] A “relevant person” is, relevant to these proceedings, defined in section 12(4) to include: (a) For a claim to recover a debt or liquidated demand of money – a person to whom the debt is owed or money is payable. [18] A debt is quite different from damages (liquidated or otherwise) in that it involves a claim for a sum of money owed under a contract - but is not in the form of a substitutory remedy (namely, a substitute for breach of contract). [19] For a claim to be a claim for a liquidated demand of money it does not also have to be a “debt”. Generally, a claim is liquidated when the monetary sum representing the claim is ascertained,5 which in this case it is. [20] I am satisfied that the applicant is a relevant person seeking to recover a liquidated demand of money under a contract and find that I have jurisdiction to hear it on that basis. Is clause 9 enforceable and, if so, against which respondent if not both? Is there a binding contract? [21] A legally enforceable agreement (contract) requires an offer, acceptance of that offer, consideration for the promises made and an intention to create legal relations.6 The terms must be certain, and the parties must have capacity to contract. 3 QCAT Act, s 9(1). 4 Ibid, s 13(1). 5 Yang & Anor v Wellcamp Properties Pty Ltd [2018] QCATA 161 at [36] and [38]. -- 4 of 7 -- 5 [22] It was not contested, and there is no evidence to suggest, that the contract that the applicant seeks to enforce was anything other than a binding contract as between the applicant and the first respondent and I have proceeded on that basis. Is the second respondent liable under the contract? [23] Even if the first respondent is the sole director and secretary of the second respondent, the second respondent is not a party to the contract. Indeed, the second respondent did not even exist when the contract was entered into – and, therefore, it cannot be liable to the applicant for any breach of its terms, even if clause 9 is enforceable. [24] To the extent the claim is against the second respondent for breach of contract, that claim must be, and is, dismissed. Is clause 9 unenforceable as a “restraint of trade”? [25] The response argues that clause 9 is a restraint of trade and, by implication, not enforceable. [26] Whilst generally speaking, restraint of trade clauses are at grave risk of being found void as contrary to public policy, they will be enforced by the courts where their terms are found to be reasonable and in the public interest.7 [27] However, clause 9 is not a restraint of trade. It does not stop or restrain the first respondent from working as a medic for a specified time or within a specified area. It does not prevent the first respondent from working for, or with, or from having any interest, directly or indirectly, in a competing business to the applicant’s business. Nor does it prevent the first respondent working for former clients of the applicant. [28] What it seeks to do is to prevent approaches (poaching) behaviours and to recoup the placement fee that the applicant would have earned had the first respondent successfully referred the client to the applicant for the 2020 year. Typically, that liability falls to the client8 but in this case, the applicant explained that its contract with the named client did not permit recovery of the placement fee from them. [29] To the extent the first respondent seeks to dismiss the application on the grounds that clause 9 is unenforceable as a restraint, that ground must fail. Is clause 9 unenforceable as a penalty? [30] A contractual clause that is found to be a penalty is unenforceable. When determining whether a clause is a penalty the principles to be considered include: (a) whether the clause protects the legitimate commercial interests of the non- defaulting party (or whether it goes beyond that);9 and 6 Australian Woollen Mills Pty Ltd v Commonwealth (1955) 93 CLR 546. 7 Amoco Australia Pty Lt v Rocco Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 315. 8 The applicant has since changed the terms of its contracts with clients. 9 Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28. -- 5 of 7 -- 6 (b) whether it is a genuine pre-estimate of the enforcing party’s interest in the due performance of the principal obligation, or a penalty inserted merely to secure the enjoyment of a collateral object.10 [31] The applicant explained that the imposition of the $4,000 payment obligation in clause 9 is a genuine pre-estimate of the loss incurred by the applicant for losing the client to which clause 9 refers in the event of breach as: (a) the direct loss of the placement fee that would otherwise have been payable to the applicant by the client if the client was referred to the applicant as the clause required; and (b) the lost net profit the applicant would have earned servicing the client if the applicant was able to continue servicing the client in the absence of the breaching party approaching the client to take on the work directly. [32] Although the wording of clause 9 is problematic for other reasons, I am satisfied that clause 9 is not a ‘penalty’ on its face, although, on a case-by-case basis, the applicant would need to satisfy a relevant decision maker that the loss claimed flowed from a breach in particular circumstances. Did the first respondent breach clause 9? [33] I have no doubt that the intention of clause 9 was something different to how it was drafted. The applicant sought, as it is entitled to do, to protect the goodwill of its client relationships, and the income that flowed from them. Specifically, it intended to protect itself from the direct financial loss it would suffer from poaching behaviours by clients and contractors. [34] Unfortunately for the applicant, all that Clause 9, as drafted, required was that the first respondent: (a) not approach a client directly to offer services; and (b) refer a client to the applicant where a client approached the first respondent directly. [35] Clause 9 goes on to say that “This applies for a period of 24 months since the contractor’s last assignment to that client”. [36] I must assume that the twenty-four-month post-service period applied to accepting approaches from a client and not to approaching clients (the latter of which was, expressly, only prohibited during the course of providing the services). Again, the drafting is not clear and may not have reflected the applicant’s intention for the clause. [37] Even if I am wrong, and the obligation was to refer, and not to approach, for twenty- four months after services ended, there is no evidence before the tribunal that the first respondent approached the client directly or that he failed to refer. [38] It is simply not known whether the respondents’ business relationship with the client was initiated by an approach from: 10 Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161. -- 6 of 7 -- 7 (a) the first respondent to the client; (b) the second respondent to the client; (c) the client to the first respondent; or (d) the client to the second respondent. [39] The tribunal cannot choose between several equally likely possibilities where compelling possibilities can only be resolved by conjecture.11 [40] Similarly, there is no evidence from which the tribunal can readily infer that the first respondent failed to refer the client to the respondent. To infer that would require a finding that the client approached the first respondent. [41] Further, it is not open on the evidence for the tribunal to infer a failure to refer simply from the fact that the client did not engage the applicant and seems ultimately to have engaged the second respondent to provide services. This is because: (a) once referral has taken place, if the client does not (a) accept the referral and contact the applicant, or (b) engage the applicant after making contact, that is the end of the first respondent’s obligation to the applicant; (b) clause 9 does not prohibit the first respondent (on his own behalf of in any other capacity or through a related entity) from working for a referred client; and (c) the consequence of a referral would have been simply that the applicant was given an opportunity to tender to the client for work. In this case, the applicant was given an opportunity to and did tender for the work of the client [42] If it was intended that the first respondent could not accept an approach from a client, or work for a client once the client had been referred, clause 9 needed to be drafted as such, but it was not. [43] In the absence of being satisfied that there is sufficient evidence before the tribunal to conclude that, on balance; (a) the first respondent approached the client directly, or (b) that the client approached the first respondent and the first respondent failed to refer the client to the applicant, I must order that the application be dismissed. 11 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1, 5. -- 7 of 7 --