Crowe Horwath (Aust) Pty Ltd v Loone

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST

S CI 2016 02982

CROWE HORWATH (AUST) PTY LTD (ACN 006 466 351)	Plaintiff and Defendant by Counterclaim
v
ANTHONY LOONE	Defendant and Plaintiff by Counterclaim

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATE OF HEARING:	13 to 16 February and 21 February 2017
DATE OF JUDGMENT:	4 April 2017
CASE MAY BE CITED AS:	Crowe Horwath (Aust) Pty Ltd v Loone
MEDIUM NEUTRAL CITATION:	[2017] VSC 163

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CONTRACT – Contract of employment – Enforceability of covenant in restraint of trade – Legitimate interest of employer in protecting its goodwill in its clients – Severance – Whether geographic restraint severable – Covenant severed – Balance of covenant enforceable – Whether contract of employment terminated by reason of defendant’s acceptance of plaintiff’s repudiatory conduct – Whether restraint of trade covenants survived termination effected by defendant’s acceptance of plaintiff’s repudiation of contract – Interlocutory injunction restraining defendant from providing accounting services to clients of plaintiff discharged.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Moses SC and Mr N Harrington	Mills Oakley
For the Defendant	Mr J Bourke QC and Mr A P Rodbard-Bean	Marsh & Maher

HIS HONOUR:

Introduction

1. In November 2000, the Launceston accounting firm Garrotts was acquired by Investor Group Ltd.  At the time, Anthony Loone was a partner of the firm.  In the ensuing years there were a number of changes in the trading name and ownership of the Investor Group Ltd.  In August 2012, the business traded under the name Crowe Horwath Australia (‘CHA’).  On 1 November 2012, Mr Loone entered into a contract of employment with CHA as Managing Principal of CHA’s Launceston office (‘the Contract’).  The registered office of CHA is in Melbourne.  Thus, although the focus of the current proceedings has been concerned with Mr Loone’s employment in Launceston, neither party contended that the plaintiff’s claim was not properly commenced in the Supreme Court of Victoria.

1. In January 2015 CHA was acquired by Findex Group Ltd.  Much of the evidence in the current proceedings concerned the impact of that acquisition upon the contract entered into by Mr Loone on 1 November 2012.  Mr Loone contends:

(i)         that during the period from late 2015 until July 2016, CHA engaged in conduct which constituted a repudiation of the Contract;

(ii)       that the conduct, viewed in isolation or cumulatively, entitled him to terminate the Contract on 12 July 2016;

(iii)      that the restrictive covenants (which he contends are unenforceable as unreasonable restraints of trade) are of no legal effect post the termination of the Contract on 12 July 2016.

1. I have concluded that the restrictive covenants in cl 3.1 of sch 2 of the Contract are enforceable, save for the geographic restraint in cl 3.1(c).  However, cl 3.1(c) is severable.  Notwithstanding that the clause is enforceable, Mr Loone terminated his contract of employment on 12 July 2016 by accepting the repudiatory conduct of CHA.  As a consequence, the…