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Aussie Home Loans v X Inc Services

Aussie Home Loans v X Inc Services

Case [2005] NSWSC 285 7 April 2005

Restraint of Trade

Breach of Contract

Novation

Post-employment restriction

Contract Law

Employment & Labour Law

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Reported Decision:
(2005) ATPR 42-060

New South Wales

Supreme Court

CITATION:
Aussie Home Loans v X Inc Services [2005] NSWSC 285

HEARING DATE(S): 15-17/03/05

JUDGMENT DATE :

7 April 2005

JUDGMENT OF:
White J

DECISION:
1. Dismiss the plaintiffs' claims for relief in the amended statement of claim; 2. order that the plaintiffs pay the defendants' costs; 3. exhibits may be returned after 28 days.

CATCHWORDS:
RESTRAINT OF TRADE - Whether a restraint of trade clause against soliciting, interfering with, or endeavouring to entice away employees of the employer for twelve months after termination of employment is too wide and therefore against public policy - Restraint on solicitation of employees of any description too wide to be enforceable - Period of restraint too long - Restraint applies to employees who joined the plaintiff after the defendants' termination of employment and to employees in other states - Unenforceable at common law - Application for a declaration that defendants are restrained from responding to an approach by an employee of the plaintiff - Declaration can only be made by having regard to individual circumstances of employment. - CONTRACT - Restrictive covenant - Breach - Whether enforceable - Whether the restraint was reasonable at the time the contract was entered into - Covenant cannot be read down - Unreasonable restraint of trade. - EMPLOYMENT LAW - Novation of contract of employment - Employee post-employment restriction - Employee bound by a twelve month restraint of trade term against poaching employees of his former employer - Post-contractual restraint not a "condition of employment". - TRADE AND COMMERCE - Where plaintiff seeks to enforce a restraint of trade provision in an employment contract - Whether employer has a legitimate interest in being protected against his employees or contractors being enticed to work for the former employee - Whether the restraint goes no further than is reasonably necessary to protect the employer's legitimate interest - Held to be an invalid restraint of trade.

LEGISLATION CITED:
Restraints of Trade Act, 1976 (NSW)

CASES CITED:
Heydon, The Restraint of Trade Doctrine, 2 ed p 66
Herbert Morris Ltd v Saxelby [1916] 1 AC 688
Attwood v Lamont [1920] 3 KB 571
Lindner v Murdock's Garage (1950) 83 CLR 628
Ecco Personnel Pty Ltd v Barrett (NSWSC, 2/9/96, unreported)
Dawnay, Day & Co Ltd v de Braconier d'Alphen [1997] IRLR 442
Ingham v ABC Contract Services (UKCA, unreported, 12/12/93)
Hanover Insurance Brokers Ltd v Schapiro [1994] IRLR 82
Littlewoods Organisations Ltd v Harris [1977] 1 WLR 1472
Barrett & Ors v Ecco Personnel Pty Ltd (NSWCA, 24/11/98, unreported)
Felthouse v Bindley (1862) 11 CB(NS) 869; 142 ER 1037
Carter & Harland, Contract Law in Australia, 4 ed

PARTIES:
Aussie Home Loans Ltd
v
X Inc Services Pty Ltd

FILE NUMBER(S):
SC 6521/04

COUNSEL:
Plaintiff: S Prince
Defendant: A Moses

SOLICITORS:
Plaintiff: Gadens Lawyers
Defendant: Bartier Perry Solicitors

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Thursday, 5 April 2005

6521/04…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Aussie Home Loans v X Inc Services

Details

AGLC: Aussie Home Loans v X Inc Services [2005] NSWSC 285
Case: [2005] NSWSC 285
Decision Date: 7 April 2005

CaseChat Overview and Summary

In the matter of Aussie Home Loans v X Inc Services, the primary focus was on the enforceability of a restraint of trade clause in an employment contract. The dispute centred around whether a provision that restricted the defendants from soliciting, interfering with, or attempting to entice away employees of the plaintiff for twelve months post-termination was overly broad and thus against public policy. The court was asked to determine the enforceability of this clause, considering its scope and duration, as well as its application to employees who joined after the defendants' employment termination and to those based in other states.

The legal issues before the court included the validity of a post-employment restraint of trade clause and whether such a clause was reasonable and necessary to protect the legitimate interests of the plaintiff. The court also needed to decide if the restraint clause could be read down to make it enforceable or if it was inherently unreasonable and therefore unenforceable. Additionally, the court considered whether the restraint applied to employees who were not directly involved in the novation of the employment contract.

The court found that the restraint of trade clause was too wide and thus against public policy. The clause not only applied to all employees of the plaintiff, including those who joined after the defendants' employment, but it also extended to employees in other states. The court held that the restraint was unreasonable because it did not limit itself to protecting the plaintiff's legitimate business interests. The court determined that the clause could not be read down to make it enforceable and that the restraint went beyond what was reasonably necessary to protect the plaintiff's legitimate interests. Consequently, the court ruled the restraint to be an invalid restraint of trade.

The court's final order was that the defendants were not to be restrained from responding to an approach by an employee of the plaintiff, as the restraint was found to be unreasonable and unenforceable. The court emphasised that any declaration regarding such restraints must be made with consideration of the individual circumstances of the employment.

Orders