GBAR (Australia) Pty Ltd v Brown - [2020] QSC 14

SUPREME COURT OF QUEENSLAND

CITATION:

GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14

PARTIES:

GBAR (AUSTRALIA) PTY LTD
ACN 166 408 635
(first applicant)
BAREND JACOBUS STOLTZ
(second applicant)
DANIEL PETRUS UYS
(third applicant)
VINCENT CHARLES MANNING
(fourth applicant)
STOLTZ SUPERANNUATION PTY LTD
ACN 141 083 052
(fifth applicant)
D. P. UYS SUPERANNUATION PTY LTD
ACN 162 567 848
(sixth applicant)
MACROCOMM (AUSTRALIA) PTY LTD
ACN 166 317 764
(seventh applicant)
v
GREGORY JOHN BROWN
(first respondent)
BROWN & CREMIN PTY LTD
ACN 128 512 961
(second respondent)

FILE NO/S:

BS No 9209 of 2016

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

21 February 2020

DELIVERED AT:

Brisbane

HEARING DATE:

9, 10 and 11 September 2019

JUDGE:

Bradley J

ORDER:

The applicants’ claim is dismissed and judgment is entered for the respondents.

CATCHWORDS:

TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – VALIDITY AND REASONABLENESS – PARTICULAR CASES – VENDOR OF BUSINESS – where the second respondent sold its asbestos removal business to the first applicant – where the contract for the sale of the business contained a clause purporting to restrain the second respondent from being involved in an asbestos removal business – whether the clause sought to protect the interest of the first applicant as the purchaser of the goodwill of the business – whether the clause went beyond what was reasonable to protect the interest of the first applicant as the purchaser of the goodwill of the business

TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – VALIDITY AND REASONABLENESS – PARTICULAR CASES – EMPLOYMENT – where the first respondent was involved in an asbestos removal business sold by the second respondent to the first applicant – where the first respondent was employed by the first applicant following the sale of the business – where the parties entered into a settlement agreement when the first respondent ceased to be employed by the first applicant – where the settlement agreement contained a clause purporting to restrain the first respondent from being involved in an asbestos removal business – whether the clause sought to protect the interest of the first applicant as the employer of the first respondent – whether the clause went beyond what was reasonable to protect the interest of the first applicant as the employer of the first respondent

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – OTHER CASES – where the second respondent sold its asbestos removal business to the first applicant – where the second respondent subsequently commenced carrying on a new asbestos removal business – whether the carrying on of the new business contravened the doctrine in Trego v Hunt – whether the doctrine in Trego v Hunt is better understood as an implied term that can be excluded by the parties by reaching an agreement in different terms

INTELLECTUAL PROPERTY – PASSING…

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: [2020] QSC 14
Decision Date: 21 February 2020

CaseChat Overview and Summary

GBAR (Australia) Pty Ltd and others brought an action against Gregory Brown and B&C, alleging that the respondents had breached contractual obligations and engaged in misleading and deceptive conduct by entering into the asbestos removal business in competition with the applicants. The applicants sought injunctive relief, damages, and an account of profits. The case involved the sale of an asbestos removal business by B&C to GBAR (Australia) Pty Ltd, with subsequent disputes over restrictive covenants and the continuation of the business by the respondents. The primary legal issues revolved around the validity and enforceability of non-compete clauses in the context of a business sale and employment, the applicability of the doctrine in Trego v Hunt, and whether the respondents had engaged in passing off.

The court examined the enforceability of non-compete clauses in the sale of a business and in the context of employment. It found that the non-compete clause in the business sale contract was not unreasonable and was intended to protect the goodwill of the business, but noted that the lack of extensive negotiations and legal advice diminished its weight. Regarding the employment-related non-compete clause, the court determined it went beyond what was reasonable to protect the employer's interests. The court also addressed the doctrine in Trego v Hunt, holding that it is based on an implied contractual term and does not extend beyond not soliciting former customers. It concluded that the respondents' conduct did not contravene this doctrine as they did not directly solicit former customers of the business they sold.

The court held that the applicants' claims were dismissed as the non-compete clauses were not enforceable to the extent they went beyond what was necessary to protect the goodwill and legitimate interests of the applicants. The court further found that the respondents' conduct did not amount to passing off as there was no likelihood of deception among consumers. The applicants' claims for injunctive relief, damages, and an account of profits were therefore rejected.

The final orders of the court were that the applicants' claim was dismissed, and judgment was entered for the respondents.

Orders

Orders of the court

The applicants’ claim is dismissed and judgment is entered for the respondents.

Background

Background to the litigation

Gregory Brown is the first respondent. Mr Brown is a director of, a shareholder in, and the controlling mind of B&C. He worked in the asbestos removal business before the sale and was employed by GBAR for 15 months after the sale. About 18 months after ending his employment, Mr Brown began working in an asbestos removal business commenced by B&C.Background In about 2007, Mr Brown established the business “Greg Brown Asbestos Removals”, which was also known by the initialism “GBAR” (the Business). From that time, B&C successfully operated the Business in South-East Queensland. According to Mr Brown, 80% of the services performed by the Business were within a 10 kilometre radius of the Brisbane CBD, 10% were in the outer suburbs and immediate surrounds of Brisbane, and the balance were on the Gold Coast and Sunshine Coast. Between 2007 and September 2013, the Business performed services further afield on only four occasions, in Charters Towers, Townsville, Bundaberg, and Moree, each time as a result of instructions or referrals from a client, insurer or lost adjuster located in Brisbane. By about October 2011, B&C had ceased trading as “Greg Brown Asbestos Removals” and from about April 2012 it traded as “GBAR Asbestos Removals”. Mr Brown described himself as very “hands on” in the Business, doing business development, scoping and pricing, as well as general management. This limited the operation of the Business to South-East Queensland. B&C did not advertise the services outside of South-East Queensland. By September 2013, the Business was running well and was profitable. Mr Brown had no plans or interest in expanding it beyond its then sphere of operations. An estimated 35% of work came from Cunningham & Lindsey, an insurance loss assessor firm operating Australia-wide, and its subsidiary Oriel Property Services (Oriel), and referrals from previous clients of the Business. The other 65% came from customers who responded to advertising on Google. At that time, a large number of firms competed to provide asbestos removal services in South-East Queensland. About a dozen companies of significance competed for trade at the “top end” of this market, with the competition based on skill, expertise and reputation. The Business was one of these. At the “bottom end” of the market, a larger number of firms competed for trade, with the competition based on price. This general market structure continued to the time of the trial.Business Sale Contract In September 2013, two of the applicants, Mr Stoltz and Mr Manning, approached Mr Brown about acquiring the Business from B&C. Mr Manning was known to Mr Brown. As the national manager of Oriel, Mr Manning had been the source of referral of much for the work performed by the Business following storm events, including the Brisbane floods and the Bundaberg floods. Mr Manning had left Oriel on 31 August 2013 and started work for Jani-King, a business owned by Mr Stoltz. He introduced Mr Brown to Mr Stoltz as a person interested in investing in the Business.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

There was no evidence that the negotiations about the settlement agreements between the GBAR parties (on the one hand) and B&C and Mr Brown (on the other) were extensive. It was not a negotiation between sizeable, sophisticated, commercial concerns. There was no evidence that the parties were advised by lawyers with well-established reputations for advising on such transactions. In the circumstances, I give little weight to the acknowledgment by Mr Brown, in clause 4.2, “that each of the separate prohibitions and restrictions contained in this clause are [sic] reasonable and necessary to protect the goodwill and interests of GBAR.”The decision in Trego v Hunt The GBAR parties contend that the conduct of B&C and Mr Brown was unlawful according to the doctrine in Trego v Hunt. In Trego v Hunt, Lord Herschell thought it unnecessary to consider whether the basis for a vendor’s obligation was to be found in the principle that the vendor of a business “is not entitled to depreciate that which he has sold” or in an “implied contract to abstain from any act intended to deprive the purchaser of that which has been sold to him and to restore it to the vendor.” The better view is that what Mr Morris QC called “the doctrine in Trego v Hunt” rests on a contractual term implied by law.[25][25]Liverpool City Council v Irwin [1977] AC 239. The sale of goodwill implies some obligation on the part of the vendor to deliver the thing sold. Where such an obligation is implied, it is limited to not soliciting customers of the business sold by the vendor. The seller is permitted to let customers come to a new business if they wish to do so. As Lord Herschell explained in Trego v Hunt:“If a person who has previously been a partner in a firm sets up in business on his own account and appeals generally for custom, he only does that which any member of the public may do, and which those carrying on the same trade are already doing. It is true that those who were former customers of the firm to which he belonged may of their own accord transfer their custom to him; but this incidental advantage is unavoidable, and does not result from any act of his. He only conducts his business in precisely the same way as he would if he had never been a member of the firm to which he previously belonged. But when he specifically and directly appeals to those who were customers of the previous firm he seeks to take advantage of the connection previously formed by his old firm, and of the knowledge of that connection which he has previously acquired, to take that which constitutes the goodwill away from the persons to whom it has been sold and restore it to himself.”[26][26]Trego v Hunt [1896] AC 7 at 20-21. In the circumstances of that case, Lord Herschell was satisfied the obligation not to appeal directly to customers of the defendant’s former firm ought to be enforced by a court of equity.[27] Lord Davey agreed, noting the limit of the obligation should not prevent the House “from meting out such scanty measure of protection to the purchaser of the goodwill as the circumstances permit.”[28][27]Trego v Hunt [1896] AC 7 at 21.[28]Trego v Hunt [1896] AC 7 at 29.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14
PARTIES:	GBAR (AUSTRALIA) PTY LTD ACN 166 408 635 (first applicant) BAREND JACOBUS STOLTZ (second applicant) DANIEL PETRUS UYS (third applicant) VINCENT CHARLES MANNING (fourth applicant) STOLTZ SUPERANNUATION PTY LTD ACN 141 083 052 (fifth applicant) D. P. UYS SUPERANNUATION PTY LTD ACN 162 567 848 (sixth applicant) MACROCOMM (AUSTRALIA) PTY LTD ACN 166 317 764 (seventh applicant) v GREGORY JOHN BROWN (first respondent) BROWN & CREMIN PTY LTD ACN 128 512 961 (second respondent)
FILE NO/S:	BS No 9209 of 2016
DIVISION:	Trial Division
PROCEEDING:	Trial
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	21 February 2020
DELIVERED AT:	Brisbane
HEARING DATE:	9, 10 and 11 September 2019
JUDGE:	Bradley J
ORDER:	The applicants’ claim is dismissed and judgment is entered for the respondents.
CATCHWORDS:	TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – VALIDITY AND REASONABLENESS – PARTICULAR CASES – VENDOR OF BUSINESS – where the second respondent sold its asbestos removal business to the first applicant – where the contract for the sale of the business contained a clause purporting to restrain the second respondent from being involved in an asbestos removal business – whether the clause sought to protect the interest of the first applicant as the purchaser of the goodwill of the business – whether the clause went beyond what was reasonable to protect the interest of the first applicant as the purchaser of the goodwill of the business TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – VALIDITY AND REASONABLENESS – PARTICULAR CASES – EMPLOYMENT – where the first respondent was involved in an asbestos removal business sold by the second respondent to the first applicant – where the first respondent was employed by the first applicant following the sale of the business – where the parties entered into a settlement agreement when the first respondent ceased to be employed by the first applicant – where the settlement agreement contained a clause purporting to restrain the first respondent from being involved in an asbestos removal business – whether the clause sought to protect the interest of the first applicant as the employer of the first respondent – whether the clause went beyond what was reasonable to protect the interest of the first applicant as the employer of the first respondent CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – OTHER CASES – where the second respondent sold its asbestos removal business to the first applicant – where the second respondent subsequently commenced carrying on a new asbestos removal business – whether the carrying on of the new business contravened the doctrine in Trego v Hunt – whether the doctrine in Trego v Hunt is better understood as an implied term that can be excluded by the parties by reaching an agreement in different terms INTELLECTUAL PROPERTY – PASSING…