A national real estate office has successfully sued its former property manager for misuse of confidential information and poaching clients.

Emma Brady was found to have breached the terms of her contract including an implied “duty of loyalty and good faith” by setting up in competition whilst still employed and enticing her employer’s customers away before her resignation in September 2015 and during a six-month post termination restraint period.

The lawsuit by McGrath Property Management also named the company she established but at trial, Warren Campion and Colin Rodgers for McGrath conceded that All Over Rentals had no liability for damages for the 20 owners and 50 properties that had been lost to them.

They sought judgment only against Brady, who had controlled the management of 300 McGrath properties by the date she quit.

Earlier in the year McGrath had attempted to “incentivise” her performance by increasing her base salary to $60k plus car allowance with a quarterly bonus of 15% of the management fee income over $302k/yr. Her new business referral and re-letting bonuses were to remain the same.

“Some tension developed” between Brady and the agency “because of a lack of administrative support” as she grew the business. She became disenchanted and decided to go it alone.

Brady admitted her breaches and in a preliminary trial in December, orders were made restraining her “from soliciting or accepting instructions” from some specified McGrath clients, “cocooning” the fees earned; and for the keeping of records.

McGrath argued that the loss of each management should be valued in the same way as occurs during the sale of a rent roll prompting Justice Patricia Bergin to explore the intricate features of rent roll valuation.

“The demand for rent rolls is quite high because they provide a stable income for a real estate agent’s office,” noted Her Honour in the NSW Supreme Court.

“They are valued most commonly by applying a multiplier to the annual management fee commission that the managed property generates”.

Brady – “a highly competent property manager” – contended however that most of the defections were due to “dissatisfaction” and that “the vast majority of owners” would have taken their business to her after the expiration of the six months restraint period anyway.

Most of the property owners called to give evidence in the five days of court testimony supported that contention.

Instead of the $3.65 multiple McGrath contended should be applied to the annual management fee for formulation of damages, the court ordered it be compensated only on the basis of loss of commissions lost for six and in some cases, seven months.

Brady was ordered to pay damages totalling $34k.

Helensburgh Property Management Pty Ltd v Brady [2016] NSWSC 253, Bergin CJ in Eq 17/03/2016
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