Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Noack

[2004] NSWSC 347

CITATION:	Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Paul Michael Noack [2004] NSWSC 347
HEARING DATE(S):	06/04/04; 07/04/04; 23/04/04
JUDGMENT DATE:	3 May 2004
JUDGMENT OF:	Nicholas J
DECISION:	Para 69
CATCHWORDS:	CONTRACT - construction - meaning of "hereafter" - RESTRAINT OF TRADE - whether agreement is in restraint of trade - whether sufficient connection with trade or commerce - whether public policy requires restraint agreement to compromise disputes be upheld - whether restraint reasonable
LEGISLATION CITED:	Workplace Relations Act 1996 (Cth) ss 141; 166(1); 345
CASES CITED:	Adlam v Noack [1999] FCA 1230 Adlam v Noack [1999] FCA 1606 Amoco Australia Pty Ltd v Rocca Bros. Motor Engineering Co. Pty Ltd (1975) AC 561 Binder v Alachouzos [1972] 2 QB 151 Buckley v Tutty (1971) 125 CLR 353 Colchester Borough Council v Smith [1992] Ch. 421 Esso Petroleum Co. Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 Forbes v New South Wales Trotting Club Ltd (1979) 143 CLR 242 Kimberley John Hughes v Western Australian Cricket Association (inc) & Ors (1986) 19 FCR 10; ATPR 40-748 Noack v Adlam [1998] SASC 6788 Nordenfelt v Maxim Nordenfelt Guns & Ammunition Company Ltd [1894] AC 535 Panayiotou & Ors v Sony Music Entertainment (UK) Ltd (1994) EMLR 229 Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 Quadramain Pty Ltd v Sevastapol Investments Pty Ltd & Anor (1976) 133 CLR 390
PARTIES :	Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union - Plaintiff Paul Michael Noack - Defendant
FILE NUMBER(S):	SC 2090/04
COUNSEL:	M Condon - Plaintiff P M Noack - In person
SOLICITORS:	Taylor & Scott - Plaintiff P M Noack - In person

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Nicholas J

3 May 2004

2090/04 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Paul Michael Noack

JUDGMENT

1 His Honour: The Plaintiff, the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (the Union) in its Amended Statement of Claim seeks orders restraining the Defendant, Paul Michael Noack, from nominating and standing as a candidate for election to the office of State Secretary of its South Australian branch, which conduct it alleges to be in breach of clause 4 of the Deed of Separation made 28 October 1999 (the Deed). The Defendant, by his Notice of Motion, seeks orders that the Union’s claims be struck out and/or dismissed. Mr Miles Condon of counsel appeared for the Union. The Defendant represented himself.

Background

2 The evidence establishes the following underlying facts which provide the context for consideration of the issues in the proceedings.

3 In 1992 the Defendant became the secretary of the South Australian branch of the Vehicle Builders Employees Federation which he held at the time it amalgamated into the Australian Manufacturing Workers Union which subsequently amalgamated into the present Union. He held various full-time offices with these bodies until his election as State Secretary of the South Australian branch of the Union on 1 January 1998.

4 On 10 May 1996 the Defendant was involved in an incident with one Carolyn Jennifer Adlam. At the time he was the General Secretary of the Australian Manufacturers Workers’ Union and Ms Adlam was then an officer of that organisation, being head of the Technical and Supervisory Division and its Equal Opportunity Officer. The incident resulted in litigation in the District Court of South Australia. The Defendant sued Ms Adlam in defamation. The defamation was an allegation that she had been sexually assaulted by the Defendant on Friday 10 May 1996. Ms Adlam counter-claimed for damages arising from the alleged assault. She succeeded and was awarded damages in the sum of $5,000.00. The Defendant’s appeal to the Supreme Court of South Australia was dismissed on 20 August 1998 (Noack v Adlam [1998] SASC 6788).

5 On 15 July 1998 in proceedings in the Federal Court of Australia von Doussa J made a rule to show cause on the application of Ms Adlam directed to the Defendant and to Mr Cameron, National Secretary of the Union, why certain orders should not be made that each of them perform and observe the rules of the Union in specific respects. The gravamen of her complaints concerned the Defendant’s treatment of her and his behaviour towards her in her employment (Adlam v Noack [1999] FCA 1230 para 4).

6 On 22 July 1998 His Honour heard Ms Adlam’s application for interlocutory relief and then made orders which included the following:

“4. Pending the hearing and determination of the rule to show cause the respondent Paul Noack shall not engage in any conduct calculated to harass the applicant and shall not encourage, instruct, authorise or incite any person to engage in any act or behaviour calculated to harass the applicant”.

7 On 13 October 1998 Ms Adlam sought orders that the Defendant be dealt with by the Court for contempt in respect of the alleged breach of the abovementioned order. The proceedings were heard by Mansfield J whose judgment was delivered on 8 September 1999. He found the charge proved.

8 His Honour referred (para 6) to the description by von Doussa J of the nature of the application for the interlocutory relief as Ms Adlam seeking “…. to protect herself, through the Rules of the Union, against the continuation of alleged harassment by Mr Noack”.

9 His Honour found (para 21) that the Union “…. is clearly a house divided. Mr Noack is in one faction, and Ms Adlam is in the other. The factional division has flowed from the merger of several organisations into the organisation”.

10 He said (para 77) that he was satisfied beyond reasonable doubt that Mr Noack’s conduct was intended to harass Ms Adlam in the knowledge that it would distress her and cause her serious concern.

11 As a result of the finding of contempt Mr Andrew Plant, on about 20 September 1999, brought a charge against the Defendant under Rule 13 of the Union alleging that the Defendant’s conduct constituted gross misbehaviour. It was arranged that the charge would be heard by the National Council of the Union in Adelaide on 27 and 28 October 1999.

12 Mansfield J heard submissions as to the appropriate penalty for the Defendant’s contempt of Court on 22, 24 September and 6 October 1999. He was asked to await the outcome of the hearing of the charge as it may have been relevant to the question of penalty for the contempt.

13 Prior to the commencement of the hearing of the charge by the National Council on 28 October 1999 discussions took place as to settlement of the various disputes between the Union and the Defendant. The Union and the Defendant were each represented by a solicitor and a barrister in those discussions. With the agreement of both parties, the Hon. J Riordan acted as an intermediary to facilitate the negotiations.

14 The discussions resulted in the agreement which is recorded in the Deed made 28 October 1999. Pursuant to clause 2 thereof the Defendant resigned from his office as State Secretary of the South Australian branch of the Union, and the Union made the payments and provided the motor vehicle to him pursuant to clause 3.

15 After these matters took place the Defendant, in a further written submission on the question of penalty for the contempt, informed the Court of his resignation on 28 October 1999 and that he had also agreed with the Union that he would not henceforth nominate for, nor consent to be nominated for, any elected office in the Union and that the charge, in those circumstances, was not proceeded with (Adlam v Noack [1999] FCA 1606 para 23). Judgment was delivered on 23 November 1999.

16 As is apparent from his reasons on the question of penalty Mansfield J took these matters into account in deciding that the appropriate penalty was a substantial fine. Relevantly, he said (para 26) “…. I take into account that Mr Noack is no longer employed by the organisation. He submitted that the penalty for his contempt should be fixed having regard to that fact, and further that he now has no prospects of employment”.

17 By letter dated 10 December 2003 the returning officer of the Australian Electoral Commission advised the Union of dates for the conduct of ballots for the elections for offices within the Union including that of State Secretary of the South Australian branch. He advised that nominations were to open on 5 February and to close on 27 February 2004, and the ballot was to open on 28 April and close on 20 May 2004.

18 By letter dated 11 March 2004 to the Defendant the Union complained of breach of the Deed by him and requested written confirmation of the withdrawal of his nomination by 5pm 15 March 2004. The withdrawal has not been provided.

19 By letter dated 22 March 2004 the returning officer advised the Union of the acceptance of nominations which included that of the Defendant to the office of State Secretary of the South Australian branch.

20 These proceedings were heard by me on 6 and 7 April 2004 and I reserved my decision.

21 On 16 April 2004 Lander J, in the Federal Court of Australia, heard the application by Ian Jones for an inquiry relating to an election of an office in the Union (SA Branch) (2004 FCA 462). On 20 April 2004 His Honour delivered judgment and made the following declarations and orders:

“1. Declare that the acceptance by the returning officer of the nomination for election for the office of South Australian Branch Secretary of the AFMEPKIU lodged by Paul Michael Noack on 24 February is void.
2. Declare that an irregularity has occurred in the election for the position of Branch Secretary in the South Australian Branch of the AFMEPKIU.
3. Direct the Industrial Registrar to make arrangements for the uncompleted steps in the election for the position of Branch Secretary of the South Australian Branch of the AFMEPKIU be completed on the basis of the valid nominations received.
4. Order that the inquiry be otherwise terminated”.

22 At the request of the parties the matter was re-listed before me on 23 April 2004. On that occasion the Defendant advised the Court and the Union that he accepted His Honour’s decision and would not be appealing from it. However, the parties indicated to the Court that the question of the validity of the restraint under clause 4 of the Deed remained in issue as the Defendant did not accept that he was precluded from nomination for election to any office in the Union if and when he became eligible under its rules. Although the effect of His Honour’s decision was to remove the urgency in these proceedings it remained appropriate to proceed to judgment.

The Deed

23 A summary of the disputes which involved the Defendant, the Union, and Ms Adlam is to be found in the recitals to the Deed. Relevantly, recital C stated:

“Noack is presently a respondent in proceedings before the Federal Court of Australia in matters SG 91 of 1998 and SG 141 of 1998 in which the applicant is CAROLYN JENNIFER ADLAM (hereinafter referred to as “Adlam”) who is the South Australian Regional Secretary of the Technical and Supervisory Division of the Union. Adlam has also brought proceedings against Noack in the Human Rights and Equal Opportunity Commission. The Union and/or the National Secretary and other members of the National Council and South Australian State Council are also respondents in these various proceedings”.

24 Recital H stated:

“Prior to the commencement of the said Special National Council hearing of the charge of Plant against Noack discussions have occurred involving the Hon. J M Riordan. As a consequence of those discussions, the parties to this Deed are desirous of confirming by the execution of this Deed various matters the subject of recommendations of the Hon. J M Riordan of 28 October 1999 prior to the Special Meeting of National Council of 28 October 1999, and for the National Secretary of the Union to submit the Deed and the said recommendation for consideration by the National Council”.

25 Clause 1 provided:

“The parties acknowledge by this Deed the terms of the recommendations of the Hon. J M Riordan AO made to Noack and to the National Secretary of the Union in Adelaide on 28 October 1999, and HEREBY AGREE AND CONFIRM that if endorsed by a Special Meeting of National Council of the Union on 28 October 1999 the said terms set out hereunder will constitute a full and final settlement between Noack and the Union”.

26 Under clause 2 the Defendant agreed to forthwith resign from his office of State Secretary of the South Australian branch of the Union.

27 Clause 3, summarised, provided that in consideration of the Defendant’s resignation the Union agreed to pay to him (a) the sum of $125,233.16 gross as an eligible termination payment; (b) an amount comprising all the Defendant’s accrued entitlements to 1 January 2002 (as if his period of service continued until then) as to annual leave, long service leave and superannuation; (c) to provide a new motor vehicle to the Defendant; and (d) to pay the sum of $125,000.00 on account of the Defendant’s legal costs and disbursements.

28 Clause 4 provided:

“Noack HEREBY COVENANTS with the Union that upon his resignation from his office as provided in Clause 2 hereof and upon payment of the moneys provided in Clause 3 hereof, he will not hereafter seek to nominate for or consent to be nominated for any elected office in the Union or any Branch, Division or Region thereof, nor hereafter involve himself or interfere in the operation of the Union in any way whatsoever”.

Construction of the Deed

29 The first issue was the proper construction of clause 4 of the Deed with regard to the meaning of the word “hereafter”.

30 The Defendant argued that “hereafter” in its context should be understood to mean “immediately after” so that the effect of clause 4 operated only to preclude him from seeking nomination, or consenting to nomination, for the office of State Secretary for which there was a casual vacancy following his resignation on 28 October 1999 pursuant to clause 2. He put that “hereafter” was not used in the sense of “forever” and contrasted the use of the word in clause 4 with its use in clause 5 in which, on one occasion, it appears in the phrase “…. at any time hereafter”. He put that this phrase made clear that “hereafter” in clause 5 was intended by the parties to mean “forever”, and that the absence of the words “…. at any time” in clause 4 demonstrated their intention that “hereafter” should not be understood in the same way.

31 For the Union Mr Condon’s submission was that “hereafter” should be given its natural and ordinary meaning, namely “after this time” or “at some future time”. He argued that, so understood, it reflects the clear intention of the parties evident from the Deed as a whole that upon his resignation the involvement of the Defendant in the operation of the Union was to be finally and forever ended. He also put that there is no rational support for the proposition that the parties intended to give the word in clause 4 a meaning different to that in clause 5.

32 In my opinion the Defendant’s submissions should be rejected. In its context the meaning of “hereafter” is clear, unambiguous and the same in clauses 4 and 5, namely “after this time” and/or “at some future time” (Macquarie Dictionary 3rd Edition; Butterworths: Australian Legal Dictionary, 1997). It is plain from the Deed when read as a whole that the parties intended that upon his resignation from the office of State Secretary and upon payment of moneys under clause 3 the Defendant would not in the future seek to nominate for, or consent to be nominated for, any elected office or involve himself or interfere in the operation of the Union. As the Defendant conceded in submissions, clause 4 contains no language which supports the construction for which he contended namely that the restraint was limited to seeking or accepting nomination for the casual vacancy left by his resignation.

33 In my opinion if the Defendant’s submission was accepted it would make a nonsense of the agreement, and would be in disregard of the words in clause 4 which are of wide application and in restraint “…. for any elected office in the Union, or any Branch, Division or Region thereof”. The Defendant’s acceptance that this was the intended effect of the Deed is demonstrated by the submissions made shortly after it was signed to the Federal Court of Australia on his behalf on the question of penalty in the contempt proceedings. (See paras 15 and 16 above).

Restraint of Trade

34 The Defendant submitted that clause 4 was invalid as an unlawful restraint of trade. He contended that he had been a member of the Union for 28 years, an official of it for 12 years, and that his chosen career was as an official of the Union. He argued that the effect of clause 4 was to permanently prevent him from election as an official of the Union anywhere in Australia and thereby his right to work as such was infringed.

35 For the Union it was submitted that the restraint imposed by clause 4 does not attract the operation of the common law doctrine. Several grounds were relied upon. Firstly, that the restraint was not upon or in respect of trade; alternatively, that the restraint was part of a compromise of disputes between the Union and the Defendant which as a matter of public policy should be upheld; alternatively, that in all the circumstances the restraint was reasonable.

36 In Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 it was said:

“14. A great number of the reported decisions respecting that doctrine turn upon the reasonableness of the restraint, particularly in relation to the legitimate interests of the parties. However, in particular cases, before the question of reasonableness is reached, there may be one or more threshold or preliminary questions requiring resolution. Three may be mentioned. First, it may be asked whether there is a “restraint” within the meaning of the doctrine. That is to be answered by having regard to the practical working of the alleged restraint rather than merely to its legal form. Secondly, it may be suggested that the restraint is not upon or in respect of “trade”. Buckley v Tutty established that, for the purposes of the common law doctrine, the notion of “trade” is not to be read narrowly, so that, for example, it is not limited to any category of skilled occupation and applies to employment generally. The third question is that with which this case is concerned, namely whether the restraint in question is one to which the doctrine applies so that, if the answer is in the negative, there is no occasion to go on to consider the question of reasonableness”.

37 In Esso Petroleum Co. Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 at p 298 Lord Reid said that the whole doctrine of restraint of trade “…. ought to depend less on legal niceties or theoretical possibilities than on the practical effect of a restraint in hampering that freedom which it is the policy of the law to protect”. Therefore in order to determine the preliminary question as to whether the restraint operates in respect of the covenantor’s trade the requirement is to determine its practical effect in operation.

38 It is also relevant to have regard to the purpose of the restraint. In Quadramain Pty Ltd v Sevastapol Investments Pty Ltd & Anor (1976) 133 CLR 390 at p 415 Jacobs J said:

“It appears to me that the basis upon which certain covenants restricting the use of land for all trades or any particular trade have been treated as falling outside the application of the restraint of trade doctrine is that the latter doctrine only applies to covenants which are imposed in a trade or commercial context or for a trade or commercial purpose, present or future…. There is nothing narrow about the doctrine of restraint of trade and its categories are never closed. But it is not all embracing. So far as I am aware it has never been applied outside the context of commercial purposes, within which words I include personal employment of skills and labour, as an employee or otherwise, as well as commercial transactions of business”.

39 The authorities suggest “…. that there must be a sufficient actual or likely connexion with trade for the restriction in question to be capable of being characterised as a restraint of trade” (“The Restraint of Trade Doctrine” 2nd Ed. J D Heydon p 49).

40 With regard to the Defendant’s submission that clause 4 infringes his right to work as an elected official of the Union the following passage from the judgment of Barwick CJ in Forbes v New South Wales Trotting Club Ltd (1979) 143 CLR 242 at pp 260-261 is apt:

“The doctrines as to avoidance of restraints on trade have been developed so far as trade itself is concerned, upon the public interest, competition in trade being regarded as conducive to its augmentation and efficiency: and, in so far as the doctrine has come to include restraints on employment, it has been grounded on the public interest in the exercise of knowledge and skills, the use of which may conduce to the public benefit. It is most important to emphasize public interest as the mainspring of these doctrines. Even in relation to self-imposed or accepted restraints, where it is in the interest of both parties and not merely of one to impose or accept a restraint, public interest is a factor in determining whether or not the restraint is permissible. To convert the doctrine that, because of the public interest, there should be no unreasonable restraint on employment into a doctrine that every man has a “right to work”, is, in my opinion, to depart radically from the tenets of the common law. Yet it was the constant refrain in the appellant’s argument on this branch of the case that the resolution of the respondent impinged upon his “right to work”. If the expression “ability to work” is used, there is less likelihood of misconception. It is in the public interest that a man should be able to exercise his capacity to work. The law does not enforce a right to exercise that capacity: it does no more than remove the unreasonable impediment upon its exercise”.

41 Furthermore, there is no “…. over-arching principle whereby any interference with a person’s entitlement to work constitutes a tort or otherwise gives rise to a cause of action” (Kimberley John Hughes v Western Australian Cricket Association (inc) & Ors (1986) 19 FCR 10 at p 52 to Toohey J).

42 Ascertainment of the practical working of the restraint in clause 4 requires consideration of its operative words. There the Defendant covenanted with the Union that “…. he will not hereafter seek to nominate for or consent to be nominated for any elected office in the Union or any Branch, Division or Region thereof, nor hereafter involve himself or interfere in the operation of the Union in any way whatsoever”.

43 As I have already found (para 32) it was the clear intention of the parties to the Deed that upon his resignation the Defendant’s involvement in the operation of the Union was to be finally and forever ended. Further, the very words of clause 4 make clear that its purpose and practical effect is to forever restrict the Defendant from in any way whatsoever involving himself or interfering in the operation of the Union which includes not seeking, or consenting to, nomination for election for any office in the Union. The clause is to be properly understood as one of several provisions in the Deed the purpose and effect of which is to constitute a full and final settlement between the parties.

44 The surrender by the Defendant of his quest for election cannot be equated with a restriction on his right to work. As the Union’s rules for election show (Rule 4 Part A: “Elections and Voting”) there is a scheme whereby a member who meets the required qualifications may be nominated. Sub-rule 3(e) prescribes the number of nominators; sub-rule 4(a) provides, relevantly, that the nomination form shall be signed by the nominee and by the required number of nominators, and be forwarded to the returning officer for further action.

45 Unsurprisingly, nomination is but a preliminary step in the election process. Ordinarily, a candidate’s fate remains speculative until the result of the ballot has been declared.

46 In its practical working out, one effect of clause 4 is to restrict the Defendant’s right to seek nomination for the chance of election to an office of the Union in which he would earn an income. However, such a restriction does not infringe in any way his ability to work or to undertake paid employment and lacks the characteristics of one in restraint of trade. In substance the conduct restrained is of an entirely political kind. Indeed, when it is understood as an incident of the Defendant’s agreed cessation of future involvement or interference in the operation of the Union it is clear that the restriction lacks any sufficient connection with trade or commerce so as to attract the common law doctrine of restraint of trade.

47 Accordingly, having regard to the clear and underlying purpose and practical effect of clause 4 in the context of the Deed as a whole, in my opinion the restraint which it imposes is not a restraint of or upon trade within the meaning of the common law doctrine.

48 In the alternative it was submitted for the Union that if the covenant in clause 4 operated as a restraint of trade it was a component of an agreement which was a proper compromise of disputes between the parties, and thus outside the scope of the restraint of trade doctrine. As a result the restraint would not require justification on the ground of reasonableness. Reliance was placed on the decision of Parker J in Panayiotou & Ors v Sony Music Entertainment (UK) Ltd (1994) EMLR 229. (In Peters (para 19) it was considered unnecessary to express any conclusion upon the effect of this decision).

49 In Panayiotou the Court was required to determine whether an agreement made in compromise of a dispute and pending litigation between the parties was unenforceable as being an unreasonable restraint of trade. For the Defendant it was successfully submitted that considerations of public policy should result in the Court upholding the agreement and refusing to allow it to be challenged by way of resurrection of issues intended to be settled by it.

50 In particular, for the Defendant the public policy argument was as follows (p 68):

“1. There is a public policy in favour of settlement of disputes in litigation.
2. There is a public policy in favour of the disposal of disputes whether by way of judicial or arbitral decision or by way of settlement inter partes being treated as final.
3. There is a public interest in resisting the re-opening or re-litigating of issues apparently resolved by judgment, award or inter partes settlement.
4. As a reformulation of points 1-3, where disputes have arisen and those disputes have been disposed of by means of an inter partes settlement, public policy favours giving effect to that settlement and to refusing to allow a party thereto to resurrect issues whether identical or similar to those which the settlement had been intended to lay to rest”.

51 Support for the submission was found principally in various passages from the judgments in Binder v Alachouzos [1972] 2 QB 151 and Colchester Borough Council v Smith [1992] Ch. 421 as to the significance of a genuine compromise and the public interest in requiring the parties to honour it.

52 In Binder Roskill LJ said (at p 160C-D):

“In my judgment it is the law of this country that where there is a bona fide compromise of an existing dispute and that compromise includes a compromise of what … is basically an issue of fact, namely whether or not there has in fact been unlawful moneylending, especially where the compromise has been reached under the advice of counsel and solicitors, that that compromise is enforceable against the party seeking subsequently to repudiate it. Any other course would cause very great difficulty in the administration of justice”.

53 In Colchester Butler-Sloss LJ said (at p 435E-F):

“Where parties to a dispute reach a compromise which brings that dispute to an end and avoids the need for litigation or further litigation, such a compromise is a valuable part of the resolution of disputes within the machinery of the administration of justice. The compromise has to be genuine, entered into freely by all parties to it without concealment of essential information or undue advantage taken by one party of another party, and preferably with the assistance of lawyers. Consequently, an agreement to compromise an action or dispute which may lead to litigation is binding and enforceable against the party seeking subsequently to repudiate it”.

54 In Panayiotou Parker J (p 70) found that the challenged agreement was genuine and bona fide, and was a compromise freely entered into in the sense that no party was under any pressure to accept its terms. He also found that there was no concealment of essential information in the course of the negotiations, nor was any undue advantage taken of any party by any other party. Following Binder and Colchester he held that in such circumstances there is a clear public interest in upholding genuine and proper compromises and that this policy applies to all such agreements whether or not they contain provisions which operate in restraint of trade. He went on to say (p 71):

“But the overriding consideration, as it seems to me, is that if it be open to a plaintiff to challenge a compromise of a restraint of trade issue by alleging that the compromise is itself in restraint of trade, then it seems to me to follow that a restraint of trade issue could never be compromised by the substitution of a new agreement. Unless the parties are able to compromise the issue in some way which does not involve the substitution of a new agreement, they will have no option but to litigate the issue to judgment, whether they like it or not”.

He regarded as apt the statement of Roskill LJ in Binder (p 160D-F) that the Court should encourage and when appropriate enforce any bona fide compromise arrived at, especially one arrived at under legal advice.

55 In this case the Deed records the bona fide compromise of several serious and complex disputes which adversely affected the conduct and operations of the Union and generated division and ill will among a number of its senior officials at least within the South Australian branch. This much is apparent from the recitals in the Deed and from the judgments in the cases referred to therein. The parties were legally represented during the course of negotiations and were assisted by the involvement of the Hon. J Riordon. The agreement was entered into freely. There was no inequality of bargaining power. The restraint under clause 4 was an important component of the settlement and was conditional upon the Defendant’s resignation and upon payment by the Union of the monies provided in clause 3, both of which happened shortly after the execution of the Deed on 28 October 1999.

56 It seems to me that these circumstances attract the application of the public policy as explained by Parker J in Panayiotou upon analysis of Binder and Colchester. I accept the submissions of Mr Condon for the Union.

57 Accordingly, in my opinion, there is no public interest or policy of the kind which underlies the common law doctrine of restraint of trade which would justify the Defendant’s claim to have an essential component of this compromise declared unenforceable. Put another way, the settlement as incorporated in the Deed is one of the types of contract to which Lord Wilberforce referred in Esso (p 322) where he said: “There will be types of contract as to which the law should be prepared to say with some confidence that they do not enter into the field of restraint of trade at all”. In this case, the public interest is served by upholding the Deed and, in particular, the restraint under clause 4.

58 Further, and in the alternative, Mr Condon submitted that if clause 4 is in restraint of trade it is reasonable. He puts that the restraint is reasonable according to the test in Nordenfelt v Maxim Nordenfelt Guns & Ammunition Company Ltd [1894] AC 535 at p 565 per Lord Macnaghten which is in these terms:

“It is a sufficient justification, indeed it is the only justification, if the restriction is reasonable – reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public. That, I think, is the fair result of all the authorities”.

59 Relevant considerations include the surrounding circumstances in which the agreement was negotiated and made (Esso p 319), and the size of the consideration and the fact that, as part of it, a covenantor has obtained and will continue to enjoy benefits under the relevant agreement which he claims to be unenforceable (Amoco Australia Pty Ltd v Rocca Bros. Motor Engineering Co. Pty Ltd (1975) AC 561 at p 579). It will also be relevant to consider whether the restraint exceeds what is reasonably necessary for the protection of the interests of the Union and whether it is reasonably related to its objects and those of its members (Buckley v Tutty (1971) 125 CLR 353 pp 376-377).

60 For the Union it was submitted that under clause 5 the Defendant received generous payments. These included payment of the full amount he would have received had he served out his term (without deduction on account of early payment) and notwithstanding that he was liable to the risk of forfeiting such entitlement if removed as State Secretary pursuant to the procedure then underway. Furthermore he received a motor vehicle to which he had no entitlement and $125,000.00 on account of legal costs to which there was no entitlement under any extant costs order.

61 It was also put that it was relevant that the Defendant had the benefit of legal representation for the protection and advancement of his interests secured by the Deed. With respect to the relationship of clause 4 to the interest of the Union and its members, Mr Condon contended that the purpose of the restraint was to correct the fundamental problem which the Union was then experiencing by the disruption of its ordinary activities. He referred to the serious criticism of the Defendant by Judges in proceedings in the Federal Court of Australia which concerned the Defendant’s conduct in relation to the Union’s affairs. It was put that as a matter of policy the Union was entitled to redress that situation to bring to an end activities adverse to the interests of its members. It was pointed out that the Deed did not restrict the Defendant from remunerative employment in any activity other than by the Union itself.

62 The Defendant’s submission was to the effect that the restraint was, in a general sense, unreasonable, but he did not descend to particulars.

63 The background against which the negotiations took place are set out earlier in these reasons. Read with the recitals to the Deed they record the Defendant’s dispute with the Union arising from his activities as State Secretary and involvement in its operations, the result of which was found by Mansfield J to cause the Union to become “a house divided”. Clause 1 acknowledges the agreement was made as a full and final settlement. Clauses 2 to 5 are the covenants to bring about the settlement and mutual releases of any claims or legal proceedings arising out of or in any way connected with the Defendant’s employment by, or holding office in, the Union.

64 The objects of the Union are stated in Part 3 of its rules of which it is sufficient to note the following:

“Generally to promote the welfare of the members of the Union”.
“To promote ethical behaviour within the Union by members, officials, officers and employees including but not limited to non-democratic, non-discriminatory, and accountable practices …. In furtherance of this object to establish an Ethical Practices Code …. and to promote ethical conduct by AMWU Officials and Officers in accordance with such Code”.

65 In all the circumstances I am satisfied that the restraint under clause 4 is reasonably related to the objects of the Union and that it is reasonably necessary for the protection of both it and its members. It is plain that the monetary consideration paid to the Defendant for his resignation and agreement to give up future involvement in Union affairs was substantially in excess of what he would have received had his employment been terminated for proper cause, a situation which at the time was on the cards. When such consideration is coupled with the benefits to the Defendant arising from final settlement of present, and release from future, claims it is clear that the Deed is productive of significant future benefit for him.

66 In my opinion the Union’s submissions should be accepted. Accordingly, I hold that the restraint is justified in that it is reasonable in the circumstances and is enforceable.

Additional considerations

67 The Defendant further submitted that clause 4 was invalid in that it was in conflict with the rules of the Union. He argued that pursuant to s 166(1) Workplace Relations Act 1996 (Cth) (the Act), and subject to eligibility, he was entitled to (a) be admitted to membership of the Union and (b) to remain a member as long as he complied with its rules. He put that his statutory right to membership enabled him to participate in the democratic process of the Union and such right, which included the right to stand as a candidate for election to office, was unlawfully infringed by clause 4.

68 In my opinion the submission must be rejected. The sections of the Act to which I was referred, particularly ss 141, 166 and 345, do not afford a member the right to nominate or stand for election to office in the organisation to which he belongs. The rules of the Union for elections and voting, earlier referred to, provide a scheme for nomination but say nothing about a right to stand. On my understanding of the relevant provisions of the Act and the rules it cannot be said that clause 4 conflicts with any right of the Defendant or that the making of such an agreement is prohibited. By way of comment it may be observed that the Defendant by the exercise of his right to vote remains entitled to participate in the democratic process of the Union for as long as he remains a member of it.

Conclusion

69 For these reasons the Defendant’s challenge to the enforceability of clause 4 fails. In my opinion the Deed, in particular clause 4, does not operate in restraint of trade and is enforceable between the parties.

70 In the circumstances it is appropriate that I direct the Union to bring in short minutes of orders and of the terms of any declaration which give effect to the reasons for decision. The parties may also address me in relation to costs. Arrangements should be made with my Associate by 11 May 2004 for the re-listing of this matter.

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Last Modified: 05/07/2004