DXC Eclipse Pty Ltd ACN 051 758 199 v Wildsmith - [2022] NSWSC 512

Supreme Court

New South Wales

Medium Neutral Citation: DXC Eclipse Pty Ltd ACN 051 758 199 v Wildsmith [2022] NSWSC 512
Hearing dates: 12 & 13 April 2022
Date of orders: 2 May 2022
Decision date: 04 May 2022
Jurisdiction: Equity - Duty List
Before: Slattery J
Decision:
Interlocutory injunction granted. Costs reserved.

Catchwords:
CONTRACT – restraint of trade – sale of business – 2018 contract for the sale of business supporting certain Microsoft software products – vendors give covenant not to compete for a period of seven years from the date of contract – cascading covenants for lesser terms also agreed – covenants apply to markets defined in the schedule to the agreement purchaser acquires and conducts the business – in December 2021 the vendor launches what the purchaser claims is a competing business – purchaser applies for an interlocutory injunction restraining the vendor from conducting a competing business – vendor contends the business is not a competing business and is not caught by the restraint – whether there is a serious question to be tried – what is the balance of convenience.

Legislation Cited:
Supreme Court Act 1970, s 66(4)
Restraints of Trade Act 1976, s 4

Cases Cited:
Attorney-General (Commonwealth) v Adelaide Steamship Co [1913] AC 781
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Beese (Managers of Kimpton Church of England Primary School) v Woodhouse [1970] 1 All ER 769
British Reinforced Concrete Engineering Co Ltd v Schelff [1921] 2 Ch 563
Cerilian Pty Ltd v Fraser [2008] NSWSC 1016
Employsure Ltd v McMurchy [2021] NSWSC 1179
Francome v Mirror Group Newspapers Ltd [1984] 1 WLR 892
Freedom Finance Accounting Pty Ltd v Goldstein [2017] VSC 179
HiTech Group Australia Ltd v Riachi [2021] NSWSC 1212
Issac v Dargan Financial Pty Ltd (2018) 98 NSWLR 343
IRAF Pty Ltd v Graham [1982] 1 NSWLR 419
McCarty v North Sydney Municipal Council (1918) 18 SR (NSW) 210
Nordenfelt v Maxim Nordenfelt Guns andAmmunition Co Ltd [1894] AC 535
Northwestern Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461
Ronbar Enterprises Ltd v Green [1954] 1 WLR 815
TW Cronin Shoe Pty Ltd v Cronin [1929] VLR 244

Texts Cited:
JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths)
JD Heydon, The Restraint of Trade Doctrine (4th ed, 2018, LexisNexis Butterworths, Australia)

Category: Procedural rulings
Parties: Plaintiff: DXC Eclipse Pty Ltd ACN 051 758 199
First Defendant: Martin Wildsmith
Second Defendant: On-Key Consulting Pty Ltd ACN 147 306 250
Representation:
Counsel:
Plaintiff: Ms A. Spies (12 April); Mr I. Neil SC with Mr C. Parkin (13 April)
Defendants: Mr D. Mahendra
Solicitors:
Plaintiff: Ms K.Peacock-Smith, Bird & Bird
Defendants: Ms M. Pantechis, Maurice Blackburn Lawyers

File Number(s): 2022/00091079
Publication restriction: No

Judgment

In April 2018 Mr Martin…

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: [2022] NSWSC 512
Decision Date: 04 May 2022

CaseChat Overview and Summary

In the matter of DXC Eclipse Pty Ltd ACN 051 758 199 versus Wildsmith, the Federal Court of Australia was presented with a dispute concerning a restrictive covenant in a contract for the sale of a business. The purchaser of the business, DXC Eclipse, alleged that the vendor, Wildsmith, had breached a covenant not to compete for seven years, as stipulated in the 2018 contract. The purchaser sought an interlocutory injunction to prevent the vendor from operating a competing business, which it claimed was launched by the vendor in December 2021. The vendor argued that the new business was not a competing business and, therefore, not subject to the restraint in the contract.

The primary legal issue before the court was whether the vendor's new business fell within the scope of the restrictive covenant. This required the court to interpret the terms of the contract, particularly the definition of "competing business" as set out in the schedule. The court also needed to consider the balance of convenience and whether there was a serious question to be tried. The purchaser argued that the terms of the contract were clear and unambiguous, and the new business was indeed a competing business. Conversely, the vendor contended that the new business did not fall within the scope of the restrictive covenant because it did not provide the same services or target the same market as the sold business.

The court found that there was a serious question to be tried regarding whether the vendor's new business was indeed a competing business within the meaning of the restrictive covenant. The court also considered the balance of convenience and determined that, given the uncertainty of the case and the potential harm to the purchaser if the injunction was not granted, the balance favoured the grant of an interlocutory injunction. The court thus ordered that the vendor be restrained from carrying on a competing business pending the outcome of the proceedings.

The court's final order was that an interlocutory injunction be granted, restraining the vendor from carrying on a competing business. The terms of the injunction were designed to balance the rights of both parties, ensuring that the purchaser's legitimate business interests were protected while also considering the vendor's rights to conduct their business. This decision highlights the importance of clear contractual drafting and the need for both parties to understand the implications of restrictive covenants in business sale agreements.

Orders