JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CAVILL BUSINESS SOLUTIONS PTY LTD -v- JACKSON [2005] WASC 138
CORAM: HASLUCK J
HEARD: 8 JUNE 2005
DELIVERED : 29 JUNE 2005
FILE NO/S: CIV 1857 of 2004
BETWEEN: CAVILL BUSINESS SOLUTIONS PTY LTD
Plaintiff
AND
KARL MICHAEL JACKSON
Defendant
Catchwords:
Practice and procedure - Application to strike out - Whether reasonable defence disclosed - Defendant's plea that repudiation by employer relieves the employee of restraint of trade obligations - Defendant's plea held to be arguable - Application to strike out dismissed
Legislation:
Nil
Result:
Plaintiff's application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr E Carlose
Defendant: Mr P R MacMillan
Solicitors:
Plaintiff: Eapon Carlose
Defendant: Stephen Kemp
Case(s) referred to in judgment(s):
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
General Billposting Company Ltd v Atkinson [1909] AC 118
Heyman v Darwins Ltd [1942] AC 356
Kaufman v McGillicuddy (1914) 19 CLR 1
McKenna Freight Lines Pty Ltd v Toll Holdings Ltd [2005] WASC 57
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Rock Refrigeration Ltd v Jones & Seawood Refrigeration [1996] IRLR 675
Shevill v Builders Licensing Board (1982) 149 CLR 620
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR(NSW) 632
Case(s) also cited:
Briggs v Oates [1991] 1 All ER 407
Foxwell (1896) 7 QLJ 4
General Billposting & Measures Brothers Ltd v Measures [1910] 2 Ch 248
Independent Corporate Services Ltd v Stevens [2002] WASC 280
Lindner v Murdock's Garage (1950) 83 CLR 628
Living Design (Home Improvements) Ltd v Davidson [1994] IRLR 69
Meyers v Casey (1913) 17 CLR 90
PR Consultants Scotland v Mann [1996] IRLR 188
Satellite Terrestrial Distributors Pty Ltd v Jonsa Ellies (Aust) Pty Ltd & Ors [2005] WASC 3
Shanahan v Fitzgerald [1982] 2 NSWLR 513
St Frances Xavier Cabrini Hospital Governing Board Inc v Micallef & Anor [1999] VSC 292
HASLUCK J:
Introduction
The plaintiff in these proceedings is an accountancy business that employed the defendant to assist in the provision of financial advice and other related services to clients of the firm. The plaintiff alleges in its statement of claim that pursuant to an employment agreement dated 22 January 2003 it was agreed that the defendant would not, during the period of employment or within 2 years after ceasing employment, contract or enter into arrangements with the plaintiff's current, former or prospective clients or provide accountancy or related services to such clients. The defendant has ceased employment with the plaintiff and certain questions have arisen concerning the plaintiff's capacity to enforce the former contract of employment.
I have before me a chamber summons dated 24 March 2005 whereby the plaintiff seeks to obtain an interim injunction restraining the defendant from contacting or soliciting persons or entities who were the plaintiff's clients as at 4 June 2004, being the date on which the defendant…
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- Case
- [2005] WASC 138
- Decision Date
CaseChat Overview and Summary
The legal issues involved interpreting the enforceability of a restraint of trade clause post-termination of employment, particularly in the context of alleged repudiation by the employer. The plaintiff contended that the breach was not of an essential term and therefore could not justify a release from the restraint of trade provisions. The defendant, on the other hand, relied on the reasoning from several cases that suggested a repudiation by the employer could release the employee from such obligations. The court had to assess whether the defendant's defence was sufficiently arguable to warrant proceeding to trial.
The court dismissed the plaintiff's application to strike out the defence. It found that the defendant's plea that the employer's repudiation relieved him of the restraint of trade obligations was arguable, even if it involved difficult questions of interpretation. The reasoning from General Billposting Company Ltd v Atkinson and McKenna Freight Lines Pty Ltd v Toll Holdings Ltd was considered relevant. The court noted that even if the breach by the employer was sufficient to excuse performance of primary obligations, the secondary obligations, such as the restraint of trade provisions, could still be enforced. The finer points of the controversy did not need to be resolved at the application stage, as they could be addressed at trial if necessary.
In summary, the court dismissed the application to strike out the defence, finding that the defendant's plea had sufficient arguability to warrant a trial. This decision allows the matter to proceed to trial where the facts and merits of the dispute can be fully examined.
Orders
Orders of the court
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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
Difficult questions may arise in applying this line of reasoning to the negative obligations that are placed on an employee by a restrictive covenant in relation to the period after his employment has ceased. See discussion in Rock Refrigeration Ltd v Jones & Seawood Refrigeration [1996] IRLR 675. Nonetheless, even if it be held that a contract has been brought to an end by repudiation and acceptance, the reasoning of Lord Diplock leaves open the possibility that a negative stipulation can still be enforced on the grounds that it should be characterised as a secondary obligation; that is, like an arbitration clause it was intended to survive the termination of the contract. It will be immediately obvious that in resisting the application to strike out on the ground that no reasonable defence was disclosed, the defendant gave weight to the reasoning in General Billposting Company Ltd v Atkinson (supra) and McKenna Freight Lines Pty Ltd v Toll Holdings Ltd (supra). Counsel for the defendant contended that upon the assumption that the facts and matters underlying the disputed passages of the statement of defence could be made out at the trial of the action, there was an arguable line of defence to the effect that prior to the cessation of the employment the plaintiff was in breach of an essential term. On the defendant's case (as pleaded) the plaintiff was not minded to rectify the matters of default complained of and thereby evinced an intention no longer to be bound by the contract, being a stance which amounted to a repudiation. The defendant accepted the repudiation with the result that he was no longer obliged to comply with the restraint of trade components of the contract. The plaintiff sought to answer this by placing reliance upon the reasoning reflected in Heyman v Darwins Ltd (supra) and Photo Production Ltd v Securicor Transport Ltd (supra) as summarised by me in earlier discussion. Counsel for the plaintiff questioned whether the breach complained of could be characterised as the breach of an essential term. Further, and in any event, he sought to distinguish General Billposting Company Ltd v Atkinson (supra), Kaufman v McGillicuddy (supra) and McKenna Freight Lines Pty Ltd v Toll Holdings Ltd (supra) upon the basis that in those cases the breach complained of was substantial with the result that after a putative repudiation and acceptance it was arguably unfair for the other party to be bound by a restraint of trade provision. However, in the present case, consistently with the reasoning of Lord Diplock in Photo Production Ltd v Securicor Transport Ltd (supra), even if the breach was sufficient to excuse the parties from performance of the primary obligations of employment and service pursuant to the employment agreement, the secondary obligations, including the restraint of trade provisions, should be regarded as running onwards. In the end, in respect of the application to strike out before me, I am of the view that it is not necessary to resolve the finer points of the controversy at this stage. I recognise that on the evidence presented at trial it might emerge, as suggested by Carol Cavill in her affidavit, that the defendant's allegations concerning the manner in which the subject accountancy practice was conducted lack substance. If such a finding is made then, of course, it would be difficult to hold that the plaintiff had repudiated the employment agreement as alleged by failing to respond to the defendant's complaints (if indeed any such complaints were made). In that event, the defendant would not be in a position to rely upon General Billposting Company Ltd v Atkinson (supra) and the line of reasoning reflected in the related cases.