Barnes v Hance - [2001] VSC 238

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION No. 2028 of 2000

COMMERCIAL LIST F.5142

KEITH ROBERT BARNES	Plaintiff
v
ROBERT JAMES HANCE and DAVID WILLIAM MUIR	Defendants

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	21-22 February 2001, 30 May 2001
DATE OF JUDGMENT:	20 July 2001
CASE MAY BE CITED AS:	Barnes v Hance
MEDIUM NEUTRAL CITATION:	[2001] VSC 238

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CONTRACT - enforcement of option agreements by plaintiff - whether alleged act of default entitled defendants to terminate option agreements - act of default constituted by breach of provision in associated agreements between plaintiff and former employer - whether provision in associated agreements was an unreasonable restraint of trade - severance - estoppel

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Denton	Clayton Utz
For the Defendants	Mr M Sifris	Deacons

HIS HONOUR:

The plaintiff ("Barnes") claims specific performance of two share call option agreements ("the option agreements"), dated 31 October 1997, which he entered into, one with each of the defendants, Hance and Muir. Each of the option agreements granted to Barnes an option to purchase up to 30,000 ordinary shares of two cents in Timbercorp Eucalypts Ltd, now called Timbercorp Ltd ("Timbercorp"), at an exercise price of 75 cents per share. During the "Exercise Period" (31 October 1999 to 7 November 1999), Barnes exercised the options and claims to be entitled to a transfer of a total of 600,000 shares in Timbercorp for a total price of $45,000 - 300,000 shares from each of the defendants. The reason for the increase in the number of shares is that there was a ten for one share split in August 1999. The defendants say that Barnes was not entitled to enforce the option agreements or to exercise the options because they have terminated the option agreements due to an "act of default" by Barnes as defined by cl.6.1 (c) of the option agreements, which provided that it was an act of default by Barnes if he "has at any times been in breach of his obligations" under a Deed of Mutual Release between Barnes, Timbercorp and Timbercorp (W.A) Pty Ltd dated 31 October 1997 ("the DMR"). The issues between the parties raise questions of restraint of trade and related matters but before defining the issues it is necessary to outline the facts.

Facts

Barnes, a resident of Perth, Western Australia, is a qualified Chartered Accountant, Certified Practising Accountant, a Fellow of the Australian Institute of Company Directors and an Associate of the Australian Institute of Management. He was employed with Arthur Andersen as a Chartered Accountant from 1973 to 1980. From 1980 to 1988 he was employed by a large diversified industrial holding company, Winterbottom Holdings Limited, first as Finance Controller and later in a senior role as Finance Director. After two short-term jobs in 1988-9, he was employed from 1990-1 as Chief Financial Officer of the Bunnings Ltd group, one of Western Australia's larger public companies. He…

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: [2001] VSC 238
Decision Date: 20 July 2001

CaseChat Overview and Summary

The case of Barnes v Hance involved a dispute between the plaintiff, Barnes, and the defendants, Hance, regarding the enforcement of option agreements. Barnes sought to enforce two option agreements against the defendants. The defendants argued that an act of default by Barnes entitled them to terminate the option agreements. The act of default was alleged to be a breach of a provision in associated agreements between Barnes and his former employer. The defendants claimed that this provision was an unreasonable restraint of trade, which would entitle them to terminate the option agreements. Additionally, Barnes claimed that the defendants were estopped from terminating the agreements due to their representations and conduct.

The court was required to determine whether the provision in the associated agreements was an unreasonable restraint of trade and, if so, whether that would entitle the defendants to terminate the option agreements. The court also needed to assess whether the defendants were estopped from terminating the option agreements based on Barnes' claim.

The court found that the provision in the associated agreements was not an unreasonable restraint of trade. It held that the provision was a legitimate means of protecting the defendants' business interests and did not unduly restrict Barnes' ability to pursue his own interests. The court also found that the defendants were not estopped from terminating the option agreements, as Barnes had not relied on any representations or conduct of the defendants to his detriment. The court held that Barnes' claims were without merit and dismissed his application.

The court ordered Barnes to pay the defendants' costs of the proceeding.

Orders