Artcraft Pty Ltd v Chandler

Case [2003] QSC 102

SUPREME COURT OF QUEENSLAND

CITATION:

Artcraft P/L v Chandler [2003] QSC 102

PARTIES:

ARTCRAFT PTY LTD  ACN 004 399 642
(applicant)
v
GLENN CHANDLER
(respondent)

FILE NO:

S2511 of 2003

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

22 April 2003

DELIVERED AT:

Brisbane

HEARING DATE:

11 April 2003

JUDGE:

Muir J

ORDER:

The application is dismissed with costs to be assessed on the standard basis

CATCHWORDS:

TRADE AND COMMERCE – RESTRAINT OF TRADE – VALIDITY AND REASONABLENESS – whether a restraint clause in an employment agreement is reasonable in extent and duration – principles applicable to determination of reasonableness of restraints

Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288
Bridge v Deacons (1984) 2 WLR 837
Buckley v Tutty (1971) 125 CLR 353
Dewes v Fitch (1920) 2 Ch 159
Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269
Geraghty v Minter (1979) 142 CLR 177
Herbert Morris Ltd v Saxelby [1916] 1 AC 688
Gledhow Autoparts v Delaney [1965] 1 WLR 1366
Lindner v Murdock’s Garage [1950] 83 CLR 628

Littlewoods Organisations Ltd v Harris [1977] 1 WLR 1472

McEllistrim v Ballymacelligott Co-operative Agricultural and Dairy Society Ltd [1919] AC 548
Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535

Office Angels Ltd v Rainer-Thomas and O’Connor [1991] IRLR 214 (CA)
Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126
Scorer v Seymour-Johns [1966] 1 WLR 1419
Woodmason’s Melrose Dairy Pty Ltd v Kimpton [1924] VLR 475

COUNSEL:

A A J Horneman-Wren for the applicant
G C Martin SC for the respondent

SOLICITORS:

Macrossan Lawyers for the applicant
Phillips Fox for the respondent

The nature of the proceedings

  1. In these proceedings, commenced on 18 March 2003, the applicant seeks to restrain the respondent from acting as an employee of one of its competitors, Roadsigns and Marketing Supplies Pty Ltd (“RMS”) and from being employed by “any other entity directly in competition with the business of the applicant”. The claim is made in reliance on a restraint clause in an employment agreement entered into between the parties on about 1 November 2001.

  1. RMS is a major competitor of the applicant in New South Wales and Victoria and is in the process of expanding its operation into Queensland.

The restrictive covenant and other relevant contractual provisions

  1. The restraint clause provides –

“17.  EMPLOYMENT BY COMPETITORS

In consideration of specialised training and information being provided to you in the course of your employment with Artcraft Pty. Ltd., the Company requires you to undertake a ‘non-compete’ agreement.
Following the termination of your employment with Artcraft, except in the case of redundancy, the employee agrees to not engage whether alone or jointly, as an employee or as a principal partner, agent, director, servant or consultant, with any entity directly in competition with the business of the Company in the State of Queensland for a period of 6 months after termination.”

  1. Clause 3 of the agreement…

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AGLC
Artcraft Pty Ltd v Chandler [2003] QSC 102
Case
[2003] QSC 102
Decision Date

CaseChat Overview and Summary

In the matter of Artcraft Pty Ltd v Chandler, the Federal Court was called upon to adjudicate on the validity and reasonableness of a restraint clause contained in an employment agreement. The plaintiff, Artcraft Pty Ltd, sought to enforce a restraint against the defendant, Chandler, who was their former employee. The restraint was intended to prevent Chandler from engaging in competitive activities within a specified geographic area for a defined period following the termination of his employment. Chandler, in turn, challenged the enforceability of the restraint, arguing it was unreasonable in its scope and duration.

The primary legal issue before the court was whether the restraint clause was reasonable in its extent and duration. The court had to consider the principles established in previous case law concerning the reasonableness of restraints of trade. The court needed to assess if the restraint was necessary to protect a legitimate business interest of the plaintiff, whether it was reasonable in relation to the interests of the defendant, and whether it was reasonable in relation to the public interest. Furthermore, the court had to determine if the restraint was reasonable in terms of the time period and geographical scope specified.

In reaching its decision, the court examined the nature and scope of Chandler's duties and responsibilities during his employment, the proprietary information and trade secrets he had access to, and the potential for harm to Artcraft Pty Ltd if the restraint was not enforced. The court also considered the economic realities of the situation, including the availability of alternative employment for Chandler within the restricted area. Ultimately, the court found that the restraint clause was overly broad and not necessary to protect the plaintiff's legitimate business interests. It was determined that the clause was unreasonable in its extent and duration, and therefore, it was unenforceable. Consequently, the court dismissed the application, ordering that costs be assessed on the standard basis.

Orders

Orders of the court

The application is dismissed with costs to be assessed on the standard basis

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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