Austress-Freyssinet Pty Ltd v Kowalski - [2007] NSWSC 399

CITATION: Austress-Freyssinet Pty Limited & Ors v Kowalski [2007] NSWSC 399

HEARING DATE(S): 21 and 22 February 2007

JUDGMENT DATE :
27 April 2007

JURISDICTION: Equity Division

JUDGMENT OF: Windeyer J at 1

DECISION: Injunction to restrain conduct in breach of restraint of trade provision.

CATCHWORDS: CONTRACTS - restraint of trade - restraint period of three years after termination of agreement by exercise of option - restraint pursuant to shareholders agreement not solely employment agreement - whether restraint contrary to public policy - whether restraint period reasonable

LEGISLATION CITED: Restraints of Trade Act 1976

CASES CITED: Cactus Imaging Pty Limited v Peters [2006] NSW SC 717
Connors Bros Ltd v Conners [1940] 4 All ER 179
Stenhouse Australia Ltd v Phillips [1973] 2 NSWLR 691

PARTIES: Austress-Freyssinet Pty Limited (First Plaintiff)
Austress-PSC Design Pty Limited (Second Plaintiff)
Freyssinet SAS (Third Plaintiff)
Immer (No 141) Pty Limited (Fourth Plaintiff)
Andrew Anthony Kowalski (Defendant)

FILE NUMBER(S): SC 3164 of 2006

COUNSEL: Mr P M Wood with him Mr M Izzo (Plaintiffs)
Mr S T White SC (Defendant)

SOLICITORS: Mallesons Stephen Jaques (Plaintiffs)
Harris Freidman Hyde Page (Defendant)

- 14 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

FRIDAY 27 APRIL 2007

3164/06 AUSTRESS-FREYSSINET PTY LIMITED & 3 ORS V ANDREW ANTHONY KOWALSKI

JUDGMENT

Issue

1 Whether a restraint clause in a contract should be enforced.

Parties

2 The plaintiff, Austress-Freyssinet Pty Limited (Austress) is a company, the shares of which are owned as to 20% by Freyssinet SAS (Freyssinet), the third plaintiff, and as to 80% by Immer (No 141) Pty Limited (Immer), the fourth plaintiff. Austress in turn owns 100% of the shares in Austress-Freyssinet (Vic) Pty Limited, but that company is not a party.

3 Immer is a company, the shares of which are owned as to 75% of voting shares and 68.75% of ordinary shares by Freyssinet and as to 25% of voting shares and 31.25% of ordinary shares by Andrew Kowalski, the defendant, (Kowalski).

Separate trial

4 On 1 December 2006 I ordered that there be a separate hearing of the claims for relief of the third and fourth plaintiffs on the restraint claims. This judgment is on those separate claims.

Facts

5 Kowalski was employed as managing director of Austress from at least 1999 until 2005. He had been a director since 1984. Austress is a specialist construction contractor engaged in various areas of endeavour described as “structures (geo-technical) work, remedial work and products”. It has offices in Sydney, Melbourne and Brisbane and in New Zealand. Its principal activities are in Australia but it has had contracts in Indonesia, Hong Kong, Malaysia and perhaps other parts of Asia. Its expertise is in what is called “pre-stressing or pre-tensioning” of concrete.

6 In 1992 a shareholders agreement was entered into between Freyssinet, Austress, Immer, Kowalski and Mr Hay, Mr Young and A W Edwards Pty Limited, which related to the operation of Immer and Austress. Prior to that time the share capital of…

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.

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Details

Case: [2007] NSWSC 399
Decision Date: 27 April 2007

CaseChat Overview and Summary

In the matter of Austress-Freyssinet Pty Ltd versus Kowalski, the court was called upon to address the enforceability of a restraint of trade clause contained within a shareholders agreement. The primary dispute centred around the period of restraint, which was set at three years following the termination of the agreement by the exercise of an option by the company. The case was heard in the Federal Court of Australia.

The central legal issues before the court were whether the restraint was contrary to public policy and whether the restraint period was reasonable. Specifically, the court had to consider if the restraint was enforceable as it was not solely part of an employment agreement, but rather a shareholders agreement. This distinction was crucial in determining the nature and scope of the restraint clause.

The court ruled that the restraint was not contrary to public policy. It determined that the restraint was reasonable given the context of the agreement and the nature of the business involved. The court took into account the proprietary interests of the parties and the need to protect legitimate business interests. The court found the three-year period to be reasonable, balancing the need for protection of the company's interests against the employee's right to earn a livelihood.

As a result of the court's findings, the restraint of trade clause was deemed enforceable. The court provided a detailed analysis of the reasonableness of the restraint period and its alignment with public policy considerations. The decision reinforced the principles governing restraints of trade in shareholders agreements within the Australian legal framework.

Orders