Jaddcal Pty Ltd v Minson (No 3)
[2011] WASC 362
•23 DECEMBER 2011
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: JADDCAL PTY LTD -v- MINSON [No 3] [2011] WASC 362
CORAM: LE MIERE J
HEARD: 20-24, 27-29 JUNE 2011
DELIVERED : 23 DECEMBER 2011
FILE NO/S: CIV 2730 of 2010
BETWEEN: JADDCAL PTY LTD
First Plaintiff
ALEXANDER ANURIW
Second PlaintiffDONNA MAREE ANURIW
Third PlaintiffAND
DAVID SHANE MINSON
First DefendantLOUISE ANNE MINSON
Second DefendantJOHN ROBERT BRUSKE
Third DefendantCHERYL BRUSKE
Fourth DefendantROSELINK ENTERPRISES PTY LTD
Fifth DefendantDWIGHT ALEXANDER WILLIAMS
Sixth DefendantBRENDAN JOHN LOWICK
Seventh DefendantCASEY SHANE MINSON
Eighth DefendantDONALD ALEXANDER MacLELLAN
Ninth DefendantANDREW CHRISTOPHER BRUSKE
Tenth Defendant
Catchwords:
Contract - Restraint of trade - Clause in restraint of trade - Construction - Restraining party must have legitimate interest to protect - Reasonableness of restraint - Duration of restraint - Alleged breach of restraint - Turns on own facts
Tort - Interference in contractual relations - Inducement to commit breach of contract - Relevant principles - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 9(1)(b), s 233
Property Law Act 1969 (WA), s 11(2)
Result:
First to fourth defendants pay damages, other claims otherwise dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Ms C H Thompson
Second Plaintiff : Ms C H Thompson
Third Plaintiff : Ms C H Thompson
First Defendant : Mr D A Lenhoff
Second Defendant : Mr D A Lenhoff
Third Defendant : Mr D A Lenhoff
Fourth Defendant : Mr D A Lenhoff
Fifth Defendant : Mr M Curwood
Sixth Defendant : Mr M Curwood
Seventh Defendant : Mr M Curwood
Eighth Defendant : Mr M Curwood
Ninth Defendant : Mr M Curwood
Tenth Defendant : Mr M Curwood
Solicitors:
First Plaintiff : Gary Rodgers
Second Plaintiff : Gary Rodgers
Third Plaintiff : Gary Rodgers
First Defendant : Holborn Lenhoff Massey
Second Defendant : Holborn Lenhoff Massey
Third Defendant : Holborn Lenhoff Massey
Fourth Defendant : Holborn Lenhoff Massey
Fifth Defendant : Curwood & Co Pty Ltd
Sixth Defendant : Curwood & Co Pty Ltd
Seventh Defendant : Curwood & Co Pty Ltd
Eighth Defendant : Curwood & Co Pty Ltd
Ninth Defendant : Curwood & Co Pty Ltd
Tenth Defendant : Curwood & Co Pty Ltd
Case(s) referred to in judgment(s):
Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 58 FCR 26
Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288
Batts Combe Quarry Ltd v Ford [1943] Ch 51
BDO Group Investments (NSW‑VIC) Pty Ltd v NGO [2010] VSC 206
Bell Group Ltd (in liq) v Westpac (2008) 39 WAR 1
Berry v Wong [2000] NSWSC 1002
Bird v Lake (1863) 1 Hem & M 338
Butt v Long (1953) 88 CLR 476
C & S Constructions Pty Ltd v Dawson (1991) ATPR 41‑148
Cooper v Page (1876) 34 LT 90
Cream v Bushcolt Pty Ltd [2004] WASCA 82
D C Thomson & Co Ltd v Deakin [1952] Ch 646
Dawnay Day & Co Ltd v D'Alphen [1998] ICR 1068
Deputy Commissioner of Taxation v Austin (1998) 28 ACSR 565
Esso Petroleum Co Ltd v Harpers Garage (Stourport) Ltd [1968] AC 269
Extraman (NT) Pty Ltd v Blenkinship (2008) 220 FLR 375
Farrand v Armstrong (1911) 11 SR (NSW) 193
Federal Commissioner of Taxation v Murry (1998) 193 CLR 605
George Hill & Co v Hill (1886) 55 LT 769
Griffiths & Beerens Pty Ltd v Duggan [2008] VSC 201; (2008) 66 ACSR 472
Hanna v Oamps Insurance Brokers Ltd [2010] NSWCA 267
Herbert Morris Ltd v Saxelby [1916] 1 AC 688
Hope v Bathurst City Council (1980) 144 CLR 1
Hunt v Pascoe (1990) 21 NSWLR 10
Jones v Dunkel (1959) 101 CLR 298
Kores Manufacturing Co Ltd v Kolok Manufacturing Ltd [1959] Ch 108
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 85 ALJR 533
Lindner v Murdock's Garage (1950) 83 CLR 628
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286
McMahon v National Foods Milk Ltd (2009) 25 VR 251
Meretz Investments NV v ACP Ltd [2007] EWCA Civ 1303; [2008] 2 WLR 904
Moschi v Lep Air Services Ltd [1973] AC 331
OBG Ltd v Allan [2008] 1 AC 1
Office Angels Ltd v Rainer‑Thomas (1991) WL 837950
Pioneer Concrete Services Ltd v Galli [1985] VR 675
Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516
Seven Network (Operations) Ltd v Warburton (No 2) [2011] NSWSC 386
Shepherd v Australia & New Zealand Banking Group Ltd (1996) 20 ACSR 81
Smith v Hancock [1894] 2 Ch 377
Southland Frozen Meat and Produce Export Co Ltd v Nelson Brothers Ltd [1898] AC 442
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
William Cory & Son Ltd v Harrison [1906] AC 274
WPS Enterprises Pty Ltd v Radford (2009) 22 VR 1
LE MIERE J:
The ice rink businesses
The first plaintiff (Jaddcal) conducts the business of an ice rink under the name Perth Ice Arena in Malaga. The second and third plaintiffs (Mr and Mrs Anuriw) are the sole shareholders and directors of Jaddcal. The first defendant (Mr Minson), his wife, the second defendant (Mrs Minson), the third defendant (Mr Bruske) and his wife, the fourth defendant, (Mrs Bruske) were also directors and shareholders of Jaddcal from 8 February 2008 to 28 August 2009. The Perth Ice Arena opened to the public in April 2009.
Differences arose between the Anuriws on the one hand and the Minsons and Bruskes on the other. In June 2009 Mr and Mrs Anuriw commenced proceedings in this court against the Bruskes and Minsons under Corporations Act 2001 (Cth) s 233 for orders that the Anuriws purchase the shares of the Minsons and the Bruskes in Jaddcal or in the alternative that the company be wound up by reason that the conduct of the company's affairs was contrary to the interests of the members as a whole and was oppressive to, and unfairly prejudicial to, or unfairly discriminatory against, the Anuriws. Negotiations took place which resulted in an agreement that the Anuriws purchase the shares of the Minsons and the Bruskes in Jaddcal. The agreement was effected by a deed of settlement dated 28 August 2009 (the Deed). The Deed included a restraint clause (the Restraint Clause) by which the Minsons and the Bruskes agreed that they shall not be directly or indirectly engaged, concerned or interested in specified capacities in any corporation, firm or business that is engaged in or carries on, or has an interest in, an ice rink business within specified radiuses of the Perth GPO ranging from 10 km to 50 km for specified periods ranging from six months to three years after the settlement date.
The fifth defendant (Roselink) was acquired by some of the defendants in January 2010. The Ice Nemesis Unit Trust was created in February 2010 with Roselink as trustee. In May 2010 Roselink, as trustee of the Ice Nemesis Unit Trust, executed a lease of premises in Mirrabooka (the Mirrabooka premises or Mirrabooka site) for use as an ice rink. Since at least November 2010, when Xtreme Ice Arena opened to the public, Roselink has carried on an ice rink business as trustee of the Ice Nemesis Unit Trust under the name of Xtreme Ice Arena from the premises in Mirrabooka.
The sixth defendant (Mr Williams), the seventh defendant (Mr Lowick), the ninth defendant (Mr MacLellan) and the tenth defendant (Andrew) are and have since February 2010 been directors of Roselink. Andrew is the son of Mr and Mrs Bruske. The eighth defendant (Casey) is the son of Mr and Mrs Minson. Casey became a director of Roselink in February 2010 when he was an undischarged bankrupt. It appears he resigned in November 2010 when it was realised, that as an undischarged bankrupt, he was not entitled to be a director. Mr Williams and Mr Lowick were associates of Mr and Mrs Anuriw, Mr and Mrs Minson and Mr and Mrs Bruske and assisted in setting up the Perth Ice Arena. An equal number of units in the Ice Nemesis Unit Trust are held by each of Mr Williams as trustee of the Dwight Williams Family Trust, Mr Lowick and his mother, Karen Lowick, as trustees for the Lowick Unit Trust, Mr MacLellan and his wife as trustees of the MacLellan Family Trust, Andrew Bruske as trustee for the Bruske Family Trust and Casey Minson as trustee of the Minson Family Trust.
In this action Jaddcal and Mr and Mrs Anuriw allege that Mr and Mrs Minson and Mr and Mrs Bruske are or were engaged, concerned or interested in Roselink's ice rink business in breach of the Restraint Clause and the fifth to tenth defendants induced them to breach their contract by breaching the Restraint Clause.
The Evidence
The plaintiffs adduced evidence from Mr and Mrs Anuriw, Mr Grasso, who was employed as a DJ at Perth Ice Arena for a time, Mr Daws, an accountant and insolvency consultant, Mr Klopper, a real estate representative, Mr O'Hehir, a business broker, Ms Osborne, a book keeper employed by Jaddcal, Mr Salmond, President of the Western Australian Ice Hockey Association, Mr Sandon, a real estate agent and Ms Caffarelli, an accountant who assisted the defendants in establishing the business structure for the ice rink business to be operated by Roselink and in negotiating the lease for the Mirrabooka premises. A large volume of documents were received in evidence.
The defendants submitted there was no case to answer and elected to call no evidence. Mr Minson, Mr Bruske, Mr Lowick, Mr MacLellan, Mr Williams, Casey and Andrew each swore an affidavit in opposition to an application by the plaintiffs for an interlocutory injunction. Those affidavits were adduced in evidence at the trial by the plaintiffs.
Some of the evidence in those affidavits is self‑serving and some is inconsistent with oral evidence given by Mr Anuriw and Mr Grasso. Some of the evidence in the affidavits is qualified by, if not strictly inconsistent with, documentary evidence. In general I accept the evidence in the defendants' affidavits insofar as it is not contradicted by evidence of other witnesses or documentary material and is not argumentative or conclusionary in nature. For example, I do not accept the statement in [6] of Mr Minson's affidavit that 'John Bruske and I have never planned on establishing a new ice rink whether in Joondalup or anywhere else' or his statement in [9.13] that 'at no time have the Bruskes, my wife and I had an interest in the fifth defendant nor have we been involved in the establishment of the ice rink business nor is it our intention to be in any way involved in the day to day operations once the ice rink is opened'.
Counsel for the plaintiffs submitted, in accordance with the rule in Jones v Dunkel (1959) 101 CLR 298 that adverse inferences may be drawn against the defendants because they failed to give evidence. The scope and operation of the principle in Jones v Dunkel was recently explained by Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 85 ALJR 533 in the following terms:
The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.
The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party [63] ‑ [64].
Where a party fails to call a witness it may be appropriate to conclude that evidence already adduced by an opponent which might have been contradicted by the evidence not called may be more readily accepted: Jones v Dunkel (308) (Kitto J), (312) (Menzies J). Further, where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the party disputing it might have proved the contrary is properly to be taken into account as a circumstance in favour of drawing the inference: Jones v Dunkel (312) (Menzies J).
In this case the defendants made a no case submission and elected to call no evidence. The appropriate inferences can be drawn from the decision of the defendants to call no evidence in deciding whether the case has been proved.
I will first outline the events giving rise to this action before outlining the issues.
Idea of new ice rink is born
As I have said, the Deed, by which Mr and Mrs Minson and Mr and Mrs Bruske sold their shares in Jaddcal, ceased to be directors of Jaddcal and agreed to the restraints in the Restraint Clause, was executed on 28 August 2009.
Casey played ice hockey at semi‑professional level for the Newcastle Northstars. In August 2009 his father (Mr Minson), Mr Williams, Mr Lowick and Mr MacLellan visited him in Newcastle where he was playing in the grand final of the ice hockey season. In the course of that visit Mr Williams, Mr Lowick, Mr MacLellan and Casey discussed the idea of opening a new ice rink in Western Australia.
Some of the defendants and their family attended a barbecue in late August 2009 on the Swan River. Mr Lowick, Mr Williams, Mr MacLellan and Andrew were at the barbecue. Andrew said he was also interested in coming into the venture to set up an ice rink.
Mr Minson identifies a venue
Mr Williams says in his affidavit that after the barbecue each of Mr Lowick, Mr MacLellan, Andrew and he agreed that they should start looking around for a suitable venue to build an ice rink. There is no evidence that any of the defendants, other than Mr Minson, did anything to look for a suitable venue until Mr Minson identified the Mirrabooka premises in October.
The Mirrabooka site was owned by Gallway Investments Pty Ltd and Tilley Properties (Qld) Pty Ltd, companies based in Queensland. First State Group, on behalf of those companies, instructed Vend Property Pty Ltd to lease the Mirrabooka site. Jeff Klopper, the managing director of Vend Property, attended to those instructions. In October 2009 Mr Klopper received a phone call from Mr Minson expressing an interest in the Mirrabooka site. Mr Klopper met Mr Minson at the Mirrabooka site to inspect it. Mr Minson said he was making enquiries on behalf of directors who were looking to use the site for an ice rink business. Mr Minson told Mr Klopper that the company, or the directors as a whole, had experience in ice rinks in Western Australia and across the world. Mr Minson told Mr Klopper that he had experience with the Australian ice hockey team. On 27 November 2009 Mr Minson sent an email to Mr Klopper in which he asked Mr Klopper to accept the email as a genuine expression of interest in the Mirrabooka site and added:
We are having a director's meeting on Sunday to discuss the building and its potential for our project. We would be looking at least a 10 year + 5 + 5 lease with the first right to purchase within the first five years for this property. This will be discussed at our meeting but that is the general consensus at the moment. I will send thru our discussions to you on Monday for you to approach the owners.
A business structure is established
There was a meeting at the home of Mr and Mrs Minson on 13 December 2009. The people present included Mr Lowick, Mr MacLellan, Mr and Mrs Minson, Mr and Mrs Bruske, Mr Williams, Andrew and Ms Caffarelli. Ms Caffarelli was asked to attend the meeting to provide some advice on the options for structures for people setting up a business. Ms Caffarelli said that the best way to structure the business would be to incorporate a company which would act as the trustee of a unit trust and that each of the directors could have their own family trusts hold the units in the unit trust. Ms Caffarelli said that it would take her sometime to put all of that in place and it was better to put it in place sooner rather than trying to find suitable premises and then negotiate without an established business structure.
On 17 December Ms Caffarelli sent an email to Karen Lowick setting out the information that was required to set up the trustee company, the unit trust and the discretionary (family) trusts. On the same day, 17 December, Ms Lowick forwarded Ms Caffarelli's email to Mr and Mrs Minson, Mr and Mrs Bruske, Mr Lowick, Mr MacLellan, and others. Mr Bruske provided information to Ms Caffarelli in an email sent from Mrs Bruske's email address on 21 January 2010 in which he said:
As you may recall from Dave Minson, both Cheryl & I are under the same terms of restraint from being involved in another ice rink business in the Perth metro area for the next three years. Therefore, as we intended to build the business for our children anyway, we would like to formally loan our children the investment money for them to be part owners in the new ice rink. As per our discussions, we feel that the creation of a unit trust (family trust) would be the most suitable way of structuring our side of the business.
After stating that the unit holders were to be Andrew and his sister, Kristy, Mr Bruske continued:
Could you please take the necessary steps to create this family trust, and also advise if we need to draw up any paperwork to show I have loaned the money to my children for this venture to prove that both Cheryl & I are not linked to this venture.
On 29 January Ms Caffarelli sent an email to Mr and Mrs Minson, Mr and Mrs Bruske, Mr Lowick, Mr MacLellan, Karen Lowick and others in which she said that she had reserved a shelf company with the name of Roselink Enterprises Pty Ltd and that she was in the process of setting up a trading unit trust to be called the Ice Nemesis Unit Trust, the units in which would be held by each of 'your' trusts. Ms Caffarelli noted that 'you have all requested unit trusts' and she recalled from their meeting that the units should be held by discretionary trusts. Ms Caffarelli asked the recipients to confirm that their individual trusts should be discretionary trusts. Mr Bruske sent an email to, amongst others, Mr and Mrs Minson reminding the recipients to respond to Ms Caffarelli with respect to their trust accounts. Mr and Mrs Minson replied to Mr Bruske 'Yes please as discussed'. Mr Bruske then emailed to Ms Caffarelli stating:
As requested by Dave Minson, can you please set up his trust as a family trust.
In a separate email to Ms Caffarelli Mr Bruske requested that Ms Caffarelli make the Bruske Trust Account a discretionary trust (family trust).
Mr Williams, Mr Lowick, Casey, Mr MacLellan and Andrew became directors of Roselink on 15 February 2010. Also, on 15 February 2010 the Ice Nemesis Unit Trust was established by a deed executed on that day. The trustee is Roselink. Units were allotted to Mr Lowick and Karen Lowick as trustees for the Lowick Unit Trust, Andrew as trustee for the Bruske Family Trust, Mr MacLellan and his wife as trustees for the MacLellan Family Trust, Mr Williams as trustee for the Dwight Williams Family Trust and Casey as trustee for the Minson Family Trust.
The Bruske Family Trust was established by a deed executed on 15 February 2010. The trustees are Andrew and Kristy, who are also the specified beneficiaries. The general beneficiaries are persons related to Andrew and Kristy, including Mr and Mrs Bruske. Mr Minson witnessed the signature of each of Andrew and Kristy to the deed which established the Bruske Family Trust. There is no evidence of any email, or other communication between Andrew and Ms Caffarelli concerning the establishment of the Bruske Family Trust, the establishment of the Ice Nemesis Unit Trust, the allotment of units to the Bruske Family Trust or the acquisition of Roselink and appointment of Andrew as a director. The inference is open that all of the instructions to Ms Caffarelli concerning those matters, insofar as they affected Andrew or the Bruske Family Trust, were attended to by Mr Bruske. That inference is more readily drawn because Mr Bruske and Andrew did not give evidence. I draw the inference.
The Minson Family Trust was established by a deed executed on 15 February 2010. The trustee is Casey. The specified beneficiaries are Casey and his brothers, Liam and Blair. The general beneficiaries are persons related to the specified beneficiaries, including Mr and Mrs Minson. The guardian is Mr Minson. The trustee may not exercise the 'restricted powers' except with the consent of the guardian. The restricted powers include the power to distribute income or capital to a beneficiary or to lend any sum to any beneficiary. There is no evidence of any email or other communication between Casey and Ms Caffarelli concerning the Minson Family Trust, the Ice Nemesis Unit Trust or Roselink. The inference is open that, insofar as the Casey and the Minson Family Trust are concerned, all instructions were given to Ms Caffarelli by Mr and Mrs Minson, or Mr Bruske acting on the instruction of Mr and Mrs Minson. That inference is more readily drawn because Casey, Mr Minson, Mrs Minson, and Mr Bruske did not give evidence. I draw the inference.
Negotiations for a lease
Mr Klopper sent a blank offer to lease proposal to Mr Minson prior to Christmas 2009 but there was no subsequent communication between any of the defendants and Mr Klopper or anyone else concerning the Mirrabooka site until 18 January 2010 when Mr Klopper emailed Mr Minson asking whether he was still interested in the property. The following day, 19 January, Mr Bruske replied:
Sorry for the delay in getting back to you. Dave is overseas at the moment, and asked me to let you know we are still interested in the property, and will seriously sit down with you and go over the lease options very shortly. We are still getting our details finalised for the property. Will advise you very shortly.
Mr Minson was travelling overseas from 26 December 2009 to 13 January 2010 and again from 15 January to 1 March 2010.
Between late January and 8 April 2010 when Mr Williams signed an offer to lease on behalf of Roselink, Mr Minson and Ms Caffarelli negotiated with Mr Klopper for the lease of the Mirrabooka site. Notwithstanding Mr Klopper's evidence that he negotiated the terms of the deal with Ms Caffarelli, the emails passing between Mr Minson and Mr Klopper show that Mr Minson, as well as Ms Caffarelli, negotiated the terms of the lease with Mr Klopper. Furthermore, emails between Mr Minson and Ms Caffarelli show that Mr Minson gave instructions to Ms Caffarelli concerning the terms of the lease to be negotiated with Mr Klopper.
At some time Mr Minson attended an inspection of the property with Mr Klopper and others. At the meeting Mr Klopper was told that the prospective tenant had years of experience on local and overseas rinks. He was told that the operator had over 20 years of experience in the industry and had rolled out 15 ice rinks around the world. That description could only apply to Mr Minson.
On 30 March Mr Minson sent an email to Ms Caffarelli, Mr Lowick, Mr and Mrs Bruske, Mr MacLellan, Karen Lowick and others to which Mr Minson attached marked up amendments to the offer to lease. Mr Minson advised the others that they should feel free to add amendments and that it was going to be a compromise by both parties. Mr Minson said that it would go back and forth for at least another two weeks and asked the others to 'please be patient'.
The offer to lease was signed on behalf of Roselink by Mr Williams on 8 April 2010. Emails passing between Mr Minson and Ms Caffarelli on 8 April show that Mr Minson was the person giving instructions to Ms Caffarelli about the terms of the offer to lease that Roselink was willing to execute. It also appears that Mr Minson collected the 'paperwork' from Ms Caffarelli. Mr Minson asked Ms Caffarelli to ask Mr Klopper if 'we' could access the building over the weekend with 'our' engineer and architect.
The offer to lease provided that Roselink pay a deposit of $51,887. That amount was paid by Mr and Mrs Bruske. In drawing up the accounts for Roselink Ms Caffarelli subsequently treated the payment of the deposit as a director contribution by Andrew.
The owners of the Mirrabooka site required a bank guarantee as part of the lease. On 15 April 2010 Sandra Williams, Mr Williams' wife, referred to the bank guarantee in an email to Ms Caffarelli and said 'I believe Dave Minson is attending to that'. It is open to infer that Mr Minson attended to the arrangements necessary for the bank guarantee. That inference is more readily drawn because Mrs Williams, Mr Minson and the other defendants did not give evidence. I draw the inference.
On 27 April Mr Minson emailed Ms Caffarelli requesting that she set up a directors' contract/policy for Roselink. Ms Caffarelli replied asking whether Mr Minson was referring to an internal management agreement for the operation of the trust. Mr Minson replied:
Yes, the one with any possible internal disputes and get out clauses ‑ not that we are having any but need to cover all bases for everyone. No problems in a meeting maybe next week.
That evidence demonstrates that Mr Minson gave instructions to Ms Caffarelli to draw up an agreement regulating the arrangements between the people involved in the ice rink venture.
The offer to lease included conditions that Roselink would provide a detailed scope of lessee's works for the refit of the interior of the building, that Roselink have access to the premises prior to the commencement of the lease to survey and properly measure for intended fit‑out and Roselink obtain approval from statutory authorities for use of the premises as an ice rink. It may be inferred from subsequent emails that Mr Minson and the Roselink directors met with the council in relation to necessary approvals. Mr Minson communicated with Mr Klopper and with Mr Smeulders, of First State Group, in relation to the scope of works.
On 20 April 2010 Roselink had applied to the City of Stirling for approval to commence development for a change of use of the Mirrabooka site to an indoor sports centre and public amusement (ice rink). The application is not in evidence. However, the approval was given on 6 May 2010. The address of Roselink on the approval is Mr Minson's post office box. The inference is open that Mr Minson drafted and lodged, on behalf of Roselink, the application for development approval. That inference is strengthened because none of the defendants gave evidence. I draw the inference.
On 11 May 2010 Ms Caffarelli emailed to Mr Minson referring to the offer to lease documents and asking Mr Minson to confirm that conditions that were to be met before the lease could proceed had been met. The conditions were conditions with respect to council approval for an ice rink, correct power loadings, structural integrity and approval of 'your works' by the lessor. Mr Minson continued to communicate with Ms Caffarelli, Mr Klopper and Mr Smeulders about the terms of and completion of the lease. Mr Minson forwarded to Mr Smeulders and Mr Klopper drawings for the movement of poles for the building and a description of works to be done by Roselink. On 11 May Mr Klopper emailed to Mr Minson referring to 'your scope of works schedule' received this morning and pointing out that the 'power provided is what will be provided by the lessor and that any upgrade will be at the cost of the lessee'. Mr Minson emailed in reply stating 'understood and agreed'. The inference is open that Mr Minson oversaw the drafting and settling of the scope of works on behalf of Roselink. That inference is more readily drawn because none of the defendants gave evidence. I draw the inference.
The formal lease was subsequently entered into by which Roselink as trustee for the Ice Nemesis Unit Trust leased the Mirrabooka premises. On 25 May 2010 Mr Lowick picked up the keys for the new building from the leasing agent.
Mr Minson provides equipment for the ice rink
Meanwhile, Mr Minson and Casey had been involved in obtaining equipment for the ice rink. In November 2009, Mr Minson had acquired from Becker Arena Products, a company in the United States, equipment needed to establish an ice rink. An invoice from Becker Arena Products to Mr Minson shows that on 30 November 2009 Mr Minson paid $152,028.31 for the equipment. The equipment eventually arrived in Australia in February 2010. It was stored at the property of Mr and Mrs Williams until it was installed at the Mirrabooka premises.
The defendants say that Mr Minson gave the ice rink machinery, plant and equipment to Casey and Casey supplied the equipment to Roselink. Mr Lowick prepared some documents recording expenditures by Roselink and contributions by directors. The information was provided to Ms Caffarelli in order for her to prepare BAS statements for Roselink. Those records state that on 30 December 2009 $150,036.07 was paid by a director for the purchase of various equipment. The records also state that amounts were paid for sea containers and customs and import duties. The records state that Casey's contribution was $194,000 made up, amongst other things, of $150,036.07 for various equipment and other amounts for containers, customs and other items. The same record states that Andrew's contribution was $194,000 including $51,922 paid for 'deposit for holding property' on 9 April 2010. The contributions by Mr Lowick, Mr MacLellan and Mr Williams are all stated to be simply 'deposit'.
Mr Bruske assists in fitting out ice arena
In the last week of April 2010 Mr Anuriw drove to the home of Mr and Mrs Williams at Ballajura. He saw four shipping containers. The doors of two containers were open and he saw that they contained goods he recognised as ice rink barriers, boards and a black coloured Zamboni ice resurfacing machine. Two people were moving the goods from one container to another. I find that the equipment that Mr Anuriw saw was equipment that Mr Minson had purchased from Becker Arena Products and imported from the United States.
On 25 August 2010 Mr Anuriw drove into the car park adjoining the Mirrabooka site. He saw Mr Bruske standing by the half open rear roller door of the building. On a truck parked nearby Mr Anuriw saw a 30 foot shipping container similar to the type he had seen at the Williams' property. Mr Bruske recognised Mr Anuriw and immediately turned and re‑entered the building. Mr Anuriw walked to the roller door carrying a camera. He saw Karen Lowick standing outside. He also saw Mr Lowick and Mr Williams. There was an altercation between Mr Anuriw, Mr Lowick and Mr Williams and Mr Anuriw was forced to leave the Mirrabooka premises. It is open to infer that Mr Bruske was participating in installing plant, machinery and equipment at the Mirrabooka premises. That inference is more readily drawn because Mr Bruske and the other defendants did not give evidence. I draw the inference.
Mr Bruske seeks quote for light and sound equipment
Mr Grasso was for some time employed by Jaddcal as a DJ at Perth Ice Arena. He gave evidence that he was approached by Mr Bruske to obtain some light and sound equipment for an ice rink. In the course of his cross‑examination Mr Grasso at times appeared to contradict himself and be confused about dates and even the sequence of events. However, in general I accept his evidence. I more readily accept his evidence because Mr Bruske did not give evidence to contradict it. I find that in May or June 2010 Mr Bruske approached Mr Grasso soliciting a quote for light and sound equipment for an ice rink. Mr Bruske said words to the effect, 'Dave wants a quote for a sound and lighting fit‑out for an ice rink that he's planning to set up in Melbourne'. Subsequently, Mr Grasso asked Mr Bruske, 'do you know anything about a new rink at 15 Chesterfield Road Mirrabooka?' and 'do you have anything to do with a company called Roselink?' In response Mr Bruske said, 'my suggestion to you is to keep your mouth shut. If you tell anyone anything about that there will be a number of people coming round to cut your balls off'. Mr Bruske did not accept the quote. There is no evidence that Mr Bruske was involved with Mr Minson in any ice rink enterprise other than the ice rink being established by Roselink at the Mirrabooka premises. The timing and circumstances of the request for the quote together with Mr Bruske's response to Mr Grasso when Mr Grasso asked him if he knew anything about a new rink at Mirrabooka and whether he had anything to do with a company called Roselink make it open to draw the inference that Mr Bruske was soliciting a quote for equipment for the Roselink ice rink at Mirrabooka. The inference is more readily drawn because Mr Bruske did not give evidence. I draw the inference.
Xtreme Ice Arena opens
Xtreme Ice Arena opened to the public for business in November 2010. Since then Roselink has carried on an ice rink business as trustee of the Ice Nemesis Unit Trust under the name of Xtreme Ice Arena from the premises in Mirrabooka.
The issues
The plaintiffs allege that Mr and Mrs Minson and Mr and Mrs Bruske are and have been involved in the Xtreme Ice Arena and the ice rink business of Roselink in breach of the Restraint Clause. The plaintiffs allege that Roselink, Mr Williams, Mr Lowick, Casey and Andrew induced them to breach their contract with Mr and Mrs Anuriw contained in the Deed.
The defendants say that the Restraint Clause is an unreasonable restraint of trade and is void. Alternatively, the first to fourth defendants (Mr and Mrs Minson and Mr and Mrs Bruske) say that a restraint period of no more than one year was reasonably required and any period longer than that was unreasonable. The defendants further say that upon a proper construction of the Restraint Clause, the first to fourth defendants did not breach the Restraint Clause. The fifth to tenth defendants (Roselink, Mr Williams, Mr Lowick, Mr MacLellan, Casey and Andrew) deny that they wrongfully interfered with the contractual relations between Mr and Mrs Anuriw and Mr and Mrs Minson and Mr and Mrs Bruske.
The defendants say that Jaddcal is not entitled to enforce the Restraint Clause because it is not a party to the Deed. Jaddcal says that the Deed expressly purported to confer the benefit of the Restraint Clause upon and for the benefit of Jaddcal and by reason of the Property Law Act 1969 (WA) s 11(2) the Restraint Clause is enforceable by Jaddcal.
Jaddcal claims against the first to fourth defendants damages for breach of contract for breach of the Restraint Clause. Jaddcal claims against the fifth to tenth defendants damages for tortious interference in the contractual relations between the plaintiffs and Mr and Mrs Minson and Mr and Mrs Bruske. Mr and Mrs Anuriw claim against the first to fourth defendants restitution of the amount they allege was paid in consideration of the restraints contained in the Restraint Clause. Alternatively, the plaintiffs each claim an injunction restraining the first to fourth defendants from further breaching the Restraint Clause.
The defendants deny that the plaintiffs have suffered any loss or damage as a result of any breach of the Restraint Clause by the first to fourth defendants or as a result of any wrongful interference by the fifth to tenth defendants in the contractual relations between the plaintiffs and Mr and Mrs Minson and Mr and Mrs Bruske. The first to fourth defendants deny that Mr and Mrs Anuriw paid any consideration for the Restraint Clause, or any separate and distinct consideration, and deny that they are liable to make restitution to Mr and Mrs Anuriw of any consideration paid for the Restraint Clause.
Jaddcal is entitled to enforce the Restraint Clause
The plaintiffs submit that although Jaddcal is not a named party to the Deed it is referred to within the Deed and upon a proper interpretation of the Deed it is the entity that is intended to take advantage of the Restraint Clause. The plaintiffs rely on s 11(2) of the Property Law Act 1969 (WA) which states:
11.Persons taking who are not parties
…
(2)Except in the case of a conveyance or other instrument to which subsection (1) applies, where a contract expressly in its terms purports to confer a benefit directly on a person who is not named as a party to the contract, the contract is, subject to subsection (3), enforceable by that person in his own name but -
(a)all defences that would have been available to the defendant in an action or proceeding in a court of competent jurisdiction to enforce the contract had the plaintiff in the action or proceeding been named as a party to the contract, shall be so available;
(b)each person named as a party to the contract shall be joined as a party to the action or proceeding; and
(c)such defendant in the action or proceeding shall be entitled to enforce as against such plaintiff, all the obligations that in the terms of the contract are imposed on the plaintiff for the benefit of the defendant.
The Explanatory Memorandum to the Property Law Bill 1969 which, upon enactment, became the Property Law Act said in relation to cl 11 which, upon enactment, became s 11:
Clause 11 provides that a person may take an interest in land or other property or the benefit of any covenant although he is not named as a party in the instrument concerned. Subclause (1) is in substance a re-enactment of section 5 of the Real Property Act 1845 (8 and 9 Vict C 106) which is to be repealed by this Bill. That section has been held to have a very limited effect and is in practice confined to what are known as 'covenants running with the land'. There has been a great deal of judicial argument on the question as to whether persons who are not parties to a contract should have the right to enforce the contract when it has been made for their benefit. See Coulls v Bagots Executor and Trustee Co Ltd 40 ALJR 471 and Beswick v Beswick (1967) 3 WLR 932. The result of the cases is that the Courts have refused to recognise third party rights except in limited categories of cases and not always on logical grounds. For example, in general, in the absence of any trust it can be said that a policy of insurance taken out by A and expressed to be payable to B is not enforceable by B. Similarly where two partners agree that on the death of one, the survivor will pay an annuity or other sum to the widow, such an agreement cannot be enforced by the widow. The manifest injustice caused by the rigid application of the third party rule has led to suggestions for reform. As long ago as 1937 the Law Revision Committee in England in its Sixth Interim Report stated:
'The common law of England stands alone among modern systems of law in its rigid adherence to the view that a contract should not confer any rights on a stranger to the contract, even though the sole object may be to benefit him.'
The Committee recommended (at para 48) legislation to provide that:
'Where a contract by its express terms purports to confer a benefit directly on a third party, it shall be enforceable by the third party in his own name subject to any defences that would have been valid between the contracting parties. Unless the contract otherwise provides it may be cancelled by the mutual consent of the contracting parties at any time before the third party has adopted it either expressly or by conduct.'
This proposal is advocated in 'Law Reform Now' published in 1964 and edited by the present Lord Chancellor and is among the subjects in Item 111 of the first programme of the English Law Commission of July 1965. It is also advocated in a leading text book, Cheshire and Fifoot's Law of Contract 6th Ed p 391-2. It is therefore felt that there is ample authority to justify the inclusion of a measure of law reform in the Bill by substantially adopting the wording of the Law Revision Committee's recommendation in subclauses (2) and (3) (Explanatory Memorandum, Property Law Bill 1969 (WA) 3 - 4).
The UK Law Revision Committee, Sixth Interim Report (1937) emphasised that proposed statutory recognition of third party rights should be carefully limited. It said:
The first and most important provision ought to be that no third party right can be acquired unless given by the express terms of the contract. A third party right ought not to be acquired by implication, e.g. merely because the performance of the contract will benefit the third party [47].
This recommended limitation on the statutory recognition of third party rights was embodied in Property Law Act s 11(2). The rights conferred on third parties by that provision apply only where a contract 'expressly in its terms purports to confer a benefit directly' on a person who is not named as a party to the contract.
In Bell Group Ltd (in liq) v Westpac (2008) 39 WAR 1 [3369] Owen J held that Property Law Act s 11(2) applies where the conferral of the benefit arises under an implied term. His Honour pointed out that s 11(2) substantially adopted the wording of the recommendation of the English Law Revision Committee in its Sixth Interim Report (cmd 5449, 1937, paras 41 - 49): see Westralian Farmers v Southern Meat Packers; the Explanatory Memorandum to the Property Law Act s 4. Owen J said that:
[T]he inclusion of the words 'expressly in its terms' in the English Law Revision Committee's recommendation was directed towards the problem of 'incidental beneficiaries', that is, towards ensuring that there was an intention to confer a benefit directly on third parties and that third parties did not gain enforceable rights merely because the contractual provisions would be of benefit to them [3369].
At [3371] Owen J said that a third party may enforce rights under a written contract, even though the particular rights might not appear expressly but arise by implication. His Honour said that:
The intention to confer a benefit directly on the third party would still have to appear expressly in the agreement [3371].
Property Law Act s 11(2) distinguishes between intended and incidental third party beneficiaries. Only intended beneficiaries acquire actionable legal rights in a contract. An intended beneficiary is a third party for whose benefit a contract is formed or a contractual provision included. An incidental beneficiary is a third party that benefits from the performance of a contract, but whose benefit was not the reason the contract was formed or the contractual provision included.
The court approaches the task of ascertaining the meaning of contractual provisions objectively. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 the High Court said:
The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of text, but also of the surrounding circumstances known to the parties, and the purposes and object of the transaction [40].
In determining whether a third party is an intended or incidental beneficiary, the court should use an objective, reasonable person test. Would a reasonable person have intended to confer on the third party:
(1)the right to bring an action to enforce the contract, and, thereby;
(2)the right to benefit from the contract.
A reasonable person in the position of the parties to the Deed would have intended to confer the benefit of the Restraint Clause on Jaddcal. The Restraint Clause is cl 8.2 of the Deed. Clause 8.10 provides that the purchasers and the vendors acknowledged that all the prohibitions and restrictions contained in cl 8 are necessary to protect the goodwill of the Company, that is Jaddcal. Recital V recites that the company (Jaddcal) conducts the ice rink business conducted by Jaddcal at the Perth Ice Arena. I find that Jaddcal is entitled to enforce the Restraint Clause in the Deed.
Construction of Restraint Clause
The Restraint Clause provides that the Vendors (the first to fourth defendants) shall not 'be directly or indirectly engaged, concerned or interested in the capacity specified in cl 8.3 in the trade or business specified in cl 8.4 within the area specified in cl 8.5 within the period specified in cl 8.6'.
The Restraint Clause is in a form which is variously known as a 'step', 'ladder' or 'cascade' clause. It provides that the Vendors separately enter with the Purchasers into each of the covenants resulting from the combination of each of the capacities in cl 8.3 with each trade or business specified in cl 8.4, each separate geographical area in cl 8.5 and each separate period in cl 8.6. Each of those covenants constitutes a separate restraint of trade imposed on the Vendors under the Deed. Clause 8.9 provides that if any of those covenants is or becomes unenforceable that does not affect the validity or enforceability of the other covenants that remain binding on the Vendors. The Restraint Clause contemplates all of the combinations applying with severance of those found to be an unreasonable restraint of trade. The defendants did not argue that the clause is uncertain. In any event, I find that it is not uncertain.
The reference to 'the capacity specified in cl 8.3' extends rather than limits the restraints imposed by the Restraint Clause. The clause lists 10 specific 'capacities' and a further capacity 'otherwise'. Including the capacity of 'otherwise' means that a vendor will breach the Restraint Clause if he or she is directly or indirectly engaged, concerned or interested in the specified business in any capacity. The intention of the clause appears to be to ensure that it covers conduct that might not otherwise be covered. For example, (c) of the clause is 'debenture holder or holder of any other security'. A person who was connected (to use a neutral word) with a business of the sort specified may fall within the Restraint Clause by reason of holding a debenture or other security over the business when he or she may not have come within the terms of the Restraint Clause if cl 8.3 had not been included.
Clauses 8.4, 8.5 and 8.6 are limiting provisions. Clause 8.4 limits the trade or business which the Vendors are restrained from being directly or indirectly engaged, concerned or interested in. Clause 8.4 extends at least to a corporation that is engaged in or carries on an ice rink business. The inclusion of '(b) firm' and '(c) business' extends the businesses which the Vendors are restrained from being involved in to unincorporated businesses.
Clauses 8.5 and 8.6 are limiting provisions. They limit the area within which and the period for which the Vendors are not to be engaged, concerned or interested in an ice rink business.
The gist of the Restraint Clause is that the first to fourth defendants shall not be directly or indirectly engaged, concerned or interested in an ice rink business within the specified area within the specified period.
An unreasonable restraint of trade is void
In general, at common law, a term of a contract that is an unreasonable restraint of trade is contrary to public policy and void. Whether a restraint is reasonable is a question of law. Reasonable means reasonable both in relation to the parties and in relation to the public interest. The onus is on the restraining party to prove that the restraint is reasonable as between the parties, but the other party has the onus of proving that the restraint injures the public interest. The defendants have not pleaded that the restraint injures the public interest. Accordingly, that is not an issue in this action.
A restraint of trade will be reasonable only if:
1.the party in whose favour the restraint is given has a genuine interest requiring protection;
2.the activities restrained are no wider than necessary for protection of that interest;
3.the restriction is for a period no longer than necessary for the protection of that interest; and
4.the restriction relates to a geographical area no larger than necessary for the protection of that interest.
Restraining party must have a legitimate interest to protect
For a restraint to be reasonable the restraining party must establish an identifiable interest calling for protection. A bare covenant restrictive of competition even if it is limited in point of time and place cannot be sustained: Butt v Long (1953) 88 CLR 476, 486; Lindner v Murdock's Garage (1950) 83 CLR 628, 633. The interest must be that of the party seeking to enforce the restraint: Berry v Wong [2000] NSWSC 1002.
In this case both Jaddcal and Mr and Mrs Anuriw seek to enforce the Restraint Clause. Jaddcal seeks to enforce it by an award of damages for breach of the clause and, alternatively, by an injunction to restrain Mr and Mrs Minson and Mr and Mrs Bruske from engaging in conduct in breach of the clause. The primary relief claimed by Mr and Mrs Anuriw is not to enforce the Restraint Clause but for restitution of an amount paid for the Restraint Clause, but alternatively they claim an injunction to restrain Mr and Mrs Minson and Mr and Mrs Bruske from engaging in conduct in breach of the clause.
The interest of the buyer of a business in protecting its goodwill from competition by the seller is a recognised legitimate interest meriting protection. However, the categories of contracts that may contain an enforceable covenant in restraint of trade are not closed. A commercial agreement that is not strictly one for the sale of a business may contain an enforceable covenant in restraint of trade. An investor in a business that has just started up, or that has not yet commenced, may have a legitimate interest to protect from fellow investors or from persons from whom they acquired the business directly or indirectly.
In Dawnay Day & Co Ltd v D'Alphen [1998] ICR 1068 the plaintiff company, Dawnay Day, was a merchant bank. The defendants (the managers) were experienced managers in the business of broking European bonds and were formerly employed by Euro Suisse Securities Ltd. They left Euro Suisse in order to establish a new joint venture business with Dawnay Day in the same field. The venture involved the creation of a jointly owned company, Dawnay Day Securities Ltd, by whom they were employed and of which they became directors. Dawnay Day invested large sums in the joint venture vehicle, Dawnay Securities. Subsequently the managers moved on from Dawnay Securities to another company dealing in European bonds. Dawnay Day issued proceedings claiming to enforce contractual undertakings by the managers not to compete with the business of Dawnay Securities. The undertakings were in a shareholders agreement between Dawnay Day and the managers. The managers argued that Dawnay Day's only interest was as an investor, that is the holder of shares in Dawnay Securities, and that an investment in a company does not give a shareholder a legitimate interest in need of protection by the imposition of covenants in restraint of trade. Robert Walker J observed that Dawnay Securities was not a party to the shareholders agreement but if it had been a covenantee under the shareholders agreement he would have had no difficulty in concluding that Dawnay Securities had a legitimate interest in protecting its goodwill. Counsel for the managers emphasised that the restrictive covenants were entered into, not in favour of Dawnay Securities, but Dawnay Day and that the covenants were not entered into on the occasion of a sale of shares in Dawnay Securities. Robert Walker J held that Dawnay Day had a sufficient legitimate interest of a proprietary nature to entitle it to seek protection in the form of restrictive covenants by the managers. The managers' appeal to the England and Wales Court of Appeal was dismissed. Evans LJ, with whom the other members of the court agreed, said at 1107:
In my judgment, far from confining the circumstances in which covenants in restraint of trade may be enforced to certain categories of case, and defining those categories strictly, the courts have moved in the opposite direction. The established categories are not rigid and they are not exclusive. Rather, the covenant may be enforced when the covenantee has a legitimate interest, of whatever kind, to protect, and when the covenant is no wider than is necessary to protect that interest. The fact therefore that Dawnay Day was neither the purchaser of a business from the managers, nor their employer, does not mean that the covenants cannot be enforced.
and at 1108:
Dawnay Day's undertaking to make the capital contribution, and certainly the contribution after it was made, gave Dawnay Day a clear commercial interest in safeguarding itself against competition from the managers, individually or collectively, for the agreed period set out in clause 9. The fact that the interest was 'commercial' does not mean that it was not lawful. In my judgment the judge was correct to describe it as an interest 'of a proprietary nature' which falls within the established principle that 'a proprietary or quasi‑proprietary interest' is entitled to protection, where and to the extent that protection is reasonably necessary: see Chitty on Contracts, 27th ed (1994), vol 1, para 16‑075, p 820. I would also be prepared to say more generally that Dawnay Day had a clear commercial interest in the success of the joint venture, by reason of its contribution to it, and that, whether or not the interest can be classified as proprietary or quasi‑proprietary, Dawnay Day is entitled to claim protection for that interest in the form of the covenants which it now seeks to enforce.
In Seven Network (Operations) Ltd v Warburton (No 2) [2011] NSWSC 386 at [66] Pembroke J held that there is no principle excluding a legitimate interest from existing outside of an employment contract or sale of business contract. The defendant, Mr Warburton, had entered into an employment contract with the plaintiff, Seven Network. Mr Warburton was a senior executive. The disputed restraint clause was not in the employment contract but in a management equity participation deed (MEP deed). The purpose of the MEP deed was to protect the interests of private equity investors (KKR) in the Seven Media Group (SMG). This was done by ensuring that senior executives had an economic stake in the business through options, as well as preventing them from competing with SMG after their employment had ended. Pembroke J said that from the perspective of KKR and Seven Network, the restraints on competition served to protect their investment. The object of the restraints on competition was, amongst other things, to reduce the risk of devaluation of the business by the departure of any executives to work for competitors and to reduce the risk of dissipation or reduction in the customer connection of the business. Pembroke J held that Seven Network and KKR had a legitimate interest to protect by the restrictive covenants.
Defendants say plaintiffs have no legitimate interest to protect
The plaintiffs say that the restraints imposed by the Restraint Clause are reasonably necessary to protect the goodwill of the business purchased by Mr and Mrs Anuriw from Mr and Mrs Minson and Mr and Mrs Bruske. The first to fourth defendants argue that the Restraint Clause does not protect any legitimate interest of the plaintiffs on two grounds. First, the first to fourth defendants submitted that in the case of covenants between vendors and purchasers of businesses the main justification for a restraint is the protection of the goodwill of the business acquired by the purchaser. Those defendants submitted that on a proper analysis of the Deed the consideration paid by Mr and Mrs Anuriw to the first to fourth defendants was for the shares held by the first to fourth defendants in Jaddcal and nothing was paid by Mr and Mrs Anuriw for goodwill. Secondly, the defendants argue that the business of Jaddcal did not have any goodwill at the time of the share purchase. Those defendants submitted that it is clear from the report of Graham O'Hehir that at the date of the Deed Jaddcal did not have any goodwill. The first to fourth defendants submitted that if the restraint is not ancillary to the sale of the goodwill of a business it should be struck down because if there is no protectable interest the covenant will be regarded as unreasonable.
Mr and Mrs Anuriw purchased interest in Perth Ice Arena business
It is not uncommon for a purchaser to acquire a business, or an interest in a business, by purchasing shares in the company which owns the business rather than purchasing the business directly. As a matter of substance, the purchaser of the shares has the same legitimate financial interest to support restraints on competition agreed as part of the transaction as it would if it had purchased the business directly.
In substance Mr and Mrs Anuriw purchased from Mr and Mrs Minson and Mr and Mrs Bruske their interests in the Perth Ice Arena business, including the goodwill of the business. Mr and Mrs Anuriw, Mr and Mrs Minson and Mr and Mrs Bruske acquired Jaddcal for the purpose of establishing and operating the Perth Ice Arena business. All of Jaddcal's assets were employed in that business. Jaddcal had no function other than owning and operating the Perth Ice Arena business. Mr and Mrs Anuriw purchased from Mr and Mrs Minson and Mr and Mrs Bruske two thirds of the shares in Jaddcal. The restraint on competition served to protect the investment of Mr and Mrs Anuriw in the business. The object of the restraints on competition was to reduce the risk of failure or devaluation of the business by the departing shareholders establishing, or assisting to establish, a rival business that undermined the Perth Ice Arena business by attracting customers who would otherwise have patronised Perth Ice Arena.
Jaddcal owned goodwill in Perth Ice Arena business
At the date of the Deed Jaddcal owned the goodwill of the Perth Ice Arena business. The evidence of Mr O'Hehir does not establish that at the date of the Deed Jaddcal did not have any goodwill in the relevant sense. Mr O'Hehir is a business valuer. He concluded that in August 2009 the Perth Ice Arena business had no goodwill because it had not been operating long enough to establish a sustainable turnover or earnings. Mr O'Hehir applied the accounting concept of goodwill meaning the value of an entity over and above the value of its assets. The accounting concept of goodwill differs from the legal concept.
In Federal Commissioner of Taxation v Murry (1998) 193 CLR 605 the High Court considered the legal concept of goodwill. The respondent had sold a taxi licence which she had been leasing to a third party. The question before the High Court was whether the amount received on disposal of the licence, or some part of it, constituted a payment of goodwill for the purpose of pt IIIA of the Income Tax Assessment Act 1936 (Cth). The High Court held that goodwill is an asset of a business because it is the valuable right or privilege to use the other assets of the business to attract custom and produce income. The sale of an asset of a business does not involve any sale of goodwill unless the sale of the asset is accompanied by or carries with it the right to conduct the business. Since goodwill is an indivisible item of property which is distinct from and does not inhere in the assets of a business the taxpayer did not dispose of goodwill. She had sold no business, she merely sold an asset of the business.
In the course of their joint judgment the plurality made a number of points relevant to the issue presently under consideration. First, goodwill is an accounting and business term as well as a legal term. The understanding of accountants and business persons as to the meaning of the term differs from that of lawyers: [13]. Secondly, a business may have goodwill even though it is not profitable. The plurality said:
In a business trading at a loss or with less than industry average profitability, there may be a marked difference between the value of goodwill for legal purposes and its value for accounting or commercial purposes. That is because goodwill for legal purposes includes everything that adds value to the business ‑ 'every positive advantage' as Wood V‑C pointed out in Churton v Douglas. As a result, a business may have valuable goodwill in the eyes of the law although an accountant would conclude that the business either has no goodwill or that, if it has, it is of nominal value only. The value of such goodwill may be difficult to assess. Having regard to the likely future of the business, often it may have only nominal value. But in some cases, the value of the goodwill may be more than nominal. It may be the difference between the revenues generated by the relevant advantages and the operating expenses (other than a share of the fixed costs) incurred in earning those revenues [50].
If a business trading at a loss may have valuable goodwill, even more so a business which has not been trading long enough for a valuer to attribute any goodwill to it may have valuable goodwill in the eyes of the law. Thirdly, a person who has purchased the goodwill of a business may have a legitimate interest to be protected by the law even if it had no goodwill in an accounting sense, that is the value of the firm was no greater than the value of its identifiable assets. The plurality said:
A business may have goodwill for legal purposes even though its trading losses are such that its sale value would be no greater than its 'break‑up' value. Once the courts rejected patronage as the touchstone of goodwill in favour of the 'added value' concept, it might seem impossible for a business to have goodwill for legal purposes when its value as a going concern does not exceed the value of the identifiable assets of the business. But the attraction of custom still remains central to the legal concept of goodwill. Courts will protect this source or element of goodwill irrespective of the profitability or value of the business. Thus, a person who has sold the goodwill of a business will be restrained by injunction from soliciting business from a customer of the old firm even though the value of that firm is no greater than the value of its identifiable assets [20].
Fourthly, the attributes of a business which form part of its goodwill include its location and having no nearby competitor. The plurality said:
In some businesses, price and service may have little effect in attracting custom. The goodwill of such businesses may derive almost wholly from their location. This will often be the case where there is no nearby competitor and custom is drawn from nearby residents or those who must pass by the site of the business. The lack of competition resulting from an enforceable restrictive covenant may also enhance the goodwill of a business [26].
Furthermore, at the date of the Deed the parties agreed that the restrictions contained in the Restraint Clause are 'necessary to protect the goodwill of the Company'. That is, the first to fourth defendants recognised that the business carried on by Jaddcal had goodwill.
In any event I reject the first to fourth defendants' contention that the plaintiffs had no legitimate interest to protect because, as I have tried to explain, the question is not whether the Restraint Clause was in part consideration for the sale of the goodwill of the business acquired by the purchaser or part of a transaction for the sale and purchase of a business. The question is whether the party in whose favour the covenant is given has a genuine interest requiring protection. There is no principle excluding a legitimate interest from existing outside of the purchase of goodwill in a business acquisition. The investors in a start up business which has not yet earned income, or established a sustainable income, may have a legitimate interest requiring protection. Dawnay Day & Co Ltd v D'Alphen and Seven Network (Operations) Ltd v Warburton (No 2) provide examples of such legitimate interests.
Jaddcal has legitimate interest to protect
I find that Jaddcal had a genuine interest in the Perth Ice Arena business requiring protection from competition by the first to fourth defendants. It owned and operated the ice rink business. When the Deed was executed Jaddcal had been operating Perth Ice Arena and had attracted customers. There were connections between the customers and the ice rink that Jaddcal had a legitimate interest in protecting from competition from the first to fourth defendants. There may be different ways in which there is a connection between a business and its customers which is of value to the proprietor. The Perth Ice Arena business had been operating for four months. The West Coast Ice Hockey Club had been operating from there and its members resorted there to go skating or play ice hockey. Other people living north of the river resorted to the Perth Ice Arena to skate. Those connections were of some value and likely to continue if a rival did not open up at a location which is likely to attract customers who would otherwise skate or play ice hockey at the Perth Ice Arena.
Mr and Mrs Anuriw have legitimate interest
I find that Mr and Mrs Anuriw had a legitimate interest to protect. The Perth Ice Arena was in substance a joint venture between them, Mr and Mrs Minson and Mr and Mrs Bruske conducted through the joint venture vehicle, Jaddcal. When the Anuriws purchased the shares of the Bruskes and Minsons in Jaddcal they were in substance purchasing the interest of the Bruskes and the Minsons in the joint venture business conducted through Jaddcal. They had a legitimate interest to reduce the risk of failure or devaluation of the business by the departing shareholders establishing, or assisting to establish, a rival business that undermined the Perth Ice Arena business by attracting customers who would otherwise have resorted to the Perth Ice Arena.
Reasonableness of the Restraint Clause
In determining whether the Restraint Clause is reasonable there are three questions which must be addressed. First, is the operative scope, that is the activities restrained, unduly wide? Second, is the area of the restraint unduly wide? Third, is the duration of the restraint unduly long? As well as addressing these three questions separately, it is also necessary to consider the cumulative effect of the three categories of restraint: Cream v Bushcolt Pty Ltd [2004] WASCA 82 [87] (Malcolm CJ).
Before considering the reasonableness of each of these aspects of the Restraint Clause it is convenient to consider two matters that were raised during the course of the trial. The first is the expertise of Mr Minson and Mr Bruske and their connection with customers of Perth Ice Arena. The second is whether the payments made by Mr and Mrs Anuriw to Mr and Mrs Minson and Mr and Mrs Bruske under the Deed included payment for the share of Mr and Mrs Minson and Mr and Mrs Bruske in the goodwill of Jaddcal.
Expertise and customer connections of Mr Minson and Mr Bruske
Counsel for the plaintiffs stressed the expertise of Mr Minson in establishing or constructing an ice rink. I find that Mr Minson had both expertise and experience in constructing and fitting out an ice rink. Mr Minson's expertise and experience would be of great assistance in constructing and establishing an ice rink. That appears to have been of particular concern to the plaintiffs.
The plaintiffs also referred to the experience of Mr Minson, and to a lesser extent Mr Bruske, in State and national hockey associations. Mr Minson was for many years President of the WA Ice Hockey Association. In December 2009 and January 2010 Mr Minson was the team leader, and Mr Bruske the team manager, representing Ice Hockey Australia in the World Ice Hockey Championships in Canada and Turkey.
The skills and expertise of Mr Minson and Mr Bruske is relevant to anyone wishing to establish a new ice rink in Perth. However, the evidence does not establish that Mr Minson and Mr Bruske are the only persons in Perth with the necessary skills, expertise and experience to fit out an ice rink. Furthermore, it is not the purpose of the Restraint Clause to protect any business secrets or confidential information. The Restraint Clause does not seek to prevent Mr Minson and Mr Bruske using their expertise or experience to establish an ice rink except if the location of the ice rink is likely to cause injury to Jaddcal by drawing customers from Perth Ice Arena.
The evidence does not establish that any of the defendants had any personal association or connection with the customers of Perth Ice Arena. There is no evidence that Mr Minson or Mr Bruske solicited or served customers of Perth Ice Arena so as to develop some personal loyalty of the customers to Mr Minson or Mr Bruske. The evidence, so far as it goes, is that Mr Minson did much of the work in setting up Perth Ice Arena, including the fit out. Mr Minson is an electrical contractor and completed the electrical fit out of Perth Ice Arena. Mr Bruske had book‑keeping skills. There is no evidence that Mrs Minson or Mrs Bruske did anything that would have developed any customer loyalty.
Mr and Mrs Anuriw paid for goodwill
There is a controversy between the parties whether or not Mr and Mrs Anuriw paid anything for the Restraint Clause. In substance, Mr and Mrs Anuriw paid $640,000 for the interest of Mr and Mrs Minson and Mr and Mrs Bruske in the Perth Ice Arena business they held through Jaddcal. In addition to paying the first to fourth defendants for their shares, Mr and Mrs Anuriw agreed to procure the repayment of the first to fourth defendants' loan accounts with the company. Jaddcal's balance sheet as at 28 August 2009 shows net assets of $179,199. Jaddcal had no business or assets outside of the Perth Ice Arena business. In substance, Mr and Mrs Anuriw paid $640,000 to acquire part of a business with net assets of $179,199. Part of the transaction included Mr and Mrs Bruske and Mr and Mrs Minson entering into the Restraint Clause. I find that the Restraint Clause was part of a transaction in which Mr and Mrs Anuriw paid a substantial sum to acquire the interest of Mr and Mrs Bruske and Mr and Mrs Minson in the Perth Ice Arena business carried on through the vehicle of Jaddcal. That is, the Restraint Clause was part of the consideration provided by Mr and Mrs Minson and Mr and Mrs Bruske in return for the sum of $640,000 paid by Mr and Mrs Anuriw.
Activities restrained
The defendants did not challenge the reasonableness of the activities restrained by the Restraint Clause. In any event, I find that the operative scope of the Restraint Clause is not unduly wide. The Restraint Clause provides, in effect, that the restrained parties shall not be directly or indirectly engaged, concerned or interested in any corporation, firm or business that is engaged in or carries on, or has an interest in, an ice rink business within the specified areas within the specified periods.
The type of business which the restrained parties are restrained from engaging in is the type of business that Jaddcal was engaged in at the time the Deed was made, that is, an ice rink business. It is not too wide. It is no more than is adequate to protect the business of Jaddcal. So far as Mr and Mrs Anuriw are concerned the operative scope of the Restraint Clause was no wider than necessary for the protection of their interest, that is the business of the company in which they purchased the shares from the first to fourth defendants.
The geographical restraint
The primary challenge to the reasonableness of the restraint was directed at the geographical width of the restraint, that is the area within which the Restraint Clause restrains the first to fourth defendants from engaging in the business of an ice rink. The Restraint Clause is a cascade or step up clause which provides for progressively narrower restraint areas ranging from an area with a radius of 50 km from the Perth GPO to an area with a radius of 10 km from the Perth GPO. The plaintiffs contend that an area within a 10 km radius from the Perth GPO is reasonable. I will refer to that area as the 10 km circle.
The geographical extent of the restraint must bear some reasonable relationship to the geographical area in which the business was conducted. In considering the reasonableness of the restraint the court should have regard to the nature of the business in question, including the location of the ice rink and its customers.
It is a curious feature of the Restraint Clause that the geographical areas referred to are areas determined by their radius from the Perth GPO rather than from their distance from the Perth Ice Arena. The Perth Ice Arena falls outside the 10 km circle. If a covenant in relation to an area with a radius of no more than 10 km from the Perth GPO is enforceable, then the first to fourth defendants would be entitled to establish and operate an ice rink business next door to the Perth Ice Arena. That might have the consequence that the prescribed area is less than is adequate to reasonably protect the Perth Ice Arena business but it is not, for that reason alone, an area greater than is reasonably necessary to protect the business of the Perth Ice Arena.
A covenant against competition entered into by a vendor with the purchaser of a business will usually be upheld as necessary to protect the subject matter of the sale, provided that it is confined to the area within which competition on the part of the vendor would be likely to injure the purchaser in the enjoyment of the goodwill he has bought: Herbert Morris Ltd v Saxelby [1916] 1 AC 688, 708 ‑ 709 (Lord Parker); Kores Manufacturing Co Ltd v Kolok Manufacturing Ltd [1959] Ch 108, 118 (Jenkins LJ); Office Angels Ltd v Rainer‑Thomas (1991) WL 837950, 5 (Slade LJ, Butler‑Sloss & Mann LLJ agreeing).
The transaction of which the Restraint Clause formed a part is, or is analogous to, the sale of a business. The interest of Jaddcal and Mr and Mrs Anuriw which requires protection is or is analogous to, the interest of a purchaser of the goodwill of a business. The Restraint Clause should be upheld as necessary to protect the interests of Jaddcal and Mr and Mrs Anuriw provided that it is confined to the area within which competition by the first to fourth defendants would be likely to injure the Perth Ice Arena business.
Prior to the opening of Xtreme Ice there was no northern suburbs facility to compete with Perth Ice Arena for the patronage of people living north of the river. Mr Anuriw said that from his experience running the Perth Ice Arena, generally speaking people from the southern suburbs who go ice skating or play ice hockey go to the Cockburn Ice Arena and people from the northern suburbs came to Perth Ice Arena. Mr Anuriw gave evidence that the West Coast Ice Hockey Club train and play half of their fixtures at Perth Ice Arena. Their membership is about 350 people. From his knowledge of the club Mr Anuriw said that virtually all of those people live north of the river.
Randal Salmond is the president of the Western Australian Ice Hockey Association. He gave evidence that at the time of the trial there were three ice hockey clubs in Western Australia ‑ the Hawks, West Coast and the Vikings. The Hawks are based at Cockburn Ice Arena in Bibra Lake. West Coast are based at Perth Ice Arena. The Vikings, a recently founded club, are based at Xtreme Ice. All clubs including West Coast pay for their teams ice time for training. The Association pays for its members clubs ice time for games. Prior to Xtreme Ice Arena opening, the Association divided the State hockey teams' ice time for games and training between Perth Ice Arena and Cockburn Ice Arena.
Before Xtreme Ice Arena opened, ice rink customers living south of the river tended to frequent Cockburn Ice Arena and those living north of the river tended to frequent Perth Ice Arena. There were two ice hockey clubs - one based at Perth Ice Arena and one based at Cockburn Ice Arena. An ice rink opening in close proximity to Perth Ice Arena was likely to draw customers from Perth Ice Arena. As at August 2009, if a new ice rink was opened it was likely that some people who live closer to the new ice rink than Perth Ice Arena may patronise the new ice rink rather than Perth Ice Arena.
A reasonable area within which the restraints are to operate is an area within which a competing business would be reasonably accessible by the customers who went to the Perth Ice Arena: see C & S Constructions Pty Ltd v Dawson (1991) ATPR 41‑148, 53, 106‑7 (Waddell CJ). An area with a radius of 10 km from the Perth Ice Arena is an area within which a competing business would be reasonably accessible by the customers who went to the Perth Ice Arena as at August 2009 and customers who were foreseeably likely to go to Perth Ice Arena in the following months. The 10 km circle captures a substantial part of the catchment area from which in August 2009 the Perth Ice Arena drew its customers. That is principally the area north of the river and those locations to which the Perth Ice Arena is more accessible than the Cockburn Ice Arena.
Counsel for the plaintiffs said, and it appears from the maps in evidence, that the Perth Ice Arena is about 2 km outside the 10 km circle. Therefore, a location approximately 22 km from the Perth Ice Arena would be inside the 10 km circle. That is the extreme distance between the Perth Ice Arena and locations within the 10 km circle. Most points within the circle would be substantially closer to the Perth Ice Arena.
Some points within the 10 km circle are closer as the crow flies to the Cockburn Ice Arena than the Perth Ice Arena. In this case the Perth Ice Arena had only been operating for four months and it was reasonably foreseeable that it would draw customers from locations north of the river and to a lesser extent locations south of the river from which Perth Ice Arena was reasonably accessible and were not so close to Cockburn Ice Arena that they would be unlikely to go to any ice rink other than Cockburn Ice Arena. I find that the locations within the 10 km circle are generally locations from which the Perth Ice Arena is reasonably accessible in comparison with Cockburn Ice Arena notwithstanding that some of those locations would be closer in a straight line to Cockburn Ice Arena than Perth Ice Arena. There was a reasonable likelihood that people living in those locations who wished to go ice skating would patronise Perth Ice Arena.
The plaintiffs further sought to demonstrate the reasonableness of the 10 km circle restraint by evidence concerning the location and population basis of ice rinks in the metropolitan cities of Australia. Christopher Daws, who describes himself as an insolvency consultant, was briefed by the plaintiffs' solicitors to provide an analysis as to what population customer base would generally be required to sustain an ice rink business. Mr Daws considered the fixed overhead costs of an ice rink and considered the fixed costs and variable costs of Perth Ice Arena. He stated, unsurprisingly, that in order for an ice rink business to break even, that is cover its costs and expenses, it requires a substantial amount in sales revenue without allowing for any profit margin. Mr Daws said that any business will normally have a catchment area, that is, an area in which its customers are located. Some businesses require a larger catchment area in order to ensure a sufficient client base and therefore revenue. Mr Daws concluded that due to the nature of the costs that an ice rink business incurs a large catchment area is needed to ensure the viability of the business.
The plaintiffs submitted that ice rinks in other Australian cities require substantial population catchment areas and distances between each other so as to generate sufficient income to cover fixed costs and generate a profit to the owners. Mr Daws examined the location of ice rinks in each of the metropolitan areas of the States and Territories of Australia and their proximity to one another. Mr Daws obtained from the Australian Bureau of Statistics the population for each capital city. Mr Daws then determined the population base for each ice rink by assuming an evenly spread population and distribution of ice rinks across each metropolitan area. Mr Daws summarised his conclusions in the following table:
Metropolitan Area
Minimum Distance between Ice Rinks
General Population Base per Ice Rink
Melbourne
19 km
1,333,000 people
Sydney
15 km
900,000 people
Brisbane
26 km
1,000,000 people
Adelaide
26 km
595,000 people
Perth
30 km
830,000 people
Mr Daws' analysis was based upon the population of the metropolitan areas as at July 2010. Mr Daws stated that prior to November 2010 the only ice rinks in Western Australia were the Perth Ice Arena and Cockburn Ice Arena in Bibra Lake, south of the river and 29.9 km from Perth Ice Arena in a straight line.
Mr Daws' analysis must be approached with caution. Mr Daws does not consider the geographical distribution of the ice rinks within each metropolitan city nor attempt to identify a natural catchment area or population base for each ice rink. Nevertheless, Mr Daws' analysis provides an indication as to the distances between ice rinks and the relationship between ice rinks and population bases in the metropolitan cities of Australia. Mr Daws' analysis shows that the notional population base for each of the ice rinks in Perth was less than the notional population base for each ice rink in Melbourne, Sydney and Brisbane before Xtreme Ice commenced operations. Furthermore, ice rinks in other metropolitan cities are located a minimum of between 15 and 26 km from each other.
In Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 Lord Pearce said that in a doubtful case where the court does not see clearly whether or not the restraint is reasonable:
… there may be a danger in preferring the guidance of a general rule, founded on grounds of public policy many generations ago, to the guidance given by free and competent parties contracting at arm's length in the management of their own affairs. Therefore, when free and competent parties agree and the background provides some commercial justification on both sides for their bargain, and there is no injury to the community, I think that the onus should be easily discharged (323 - 324).
The evidence provides some commercial justification on both sides for the bargain which Mr and Mrs Anuriw and Mr and Mrs Minson and Mr and Mrs Bruske struck in including the Restraint Clause in the deed of settlement. They freely bargained and agreed upon that clause. Clause 8.10 of the Deed provides that the purchasers (Mr and Mrs Anuriw) and the vendors (Mr and Mrs Minson and Mr and Mrs Bruske) acknowledged that the prohibitions and restrictions contained in the Restraint Clause 'are reasonable in the circumstances and necessary to protect the goodwill of the Company' [Jaddcal]. The 10 km circle is the minimum area of restraint that the parties to the Deed agreed was reasonable and necessary to protect the goodwill of Jaddcal. I find that the restraint in the deed of settlement is reasonable insofar as it relates to an area with a radius of 10 km from the Perth GPO.
Ms Carty argues that this minimal degree of interference cannot be sufficient to render the defendant liable in tort. Arguably, the only legitimate reason for adding tort liability to the contract breaker's already existing liability in contract is precisely because the defendant has played an important part in persuading the co‑contractor to break his contract. It would appear justifiable to demand a causal link before facilitation could lead to liability. If the defendant has simply said 'yes' he is better regarded as the tool of the contract breaker, rather than vice versa. That view is supported by Batts Combe Quarry. There the father breached his contract not to assist in carrying on a rival quarry business. The breach involved the provision of a sum of money to his sons to enable them to purchase a rival quarry. The Court of Appeal agreed with the trial judge that the mere acceptance by the sons of the gift did not amount to a procuring by them of the breach of contract.
Furthermore, Ms Carty argues persuasively at page 47 of her book that none of the cases cited in support of the 'inconsistent transaction' doctrine are solid authority for its existence. In BMTA v Salvadori the defendant induced the claimant's co‑contractor to breach his contract by offering a high enough price for the contract breaker to agree.
In OBG Ltd v Allan the House of Lords did not address the question of whether facilitating a breach of covenant or being a party to inconsistent dealings is enough to establish the tort. However, their Lordships discuss the tort in terms of inducing, procuring or persuading a breach. And the other wide dicta of Jenkins LJ ‑ outlining varieties of the tort to include direct and indirect intervention in a contract ‑ were of course rejected. In the subsequent Court of Appeal decision in Meretz Investments NV v ACP Ltd [2007] EWCA Civ 1303; [2008] 2 WLR 904 there are dicta that seem to deny liability for inconsistent transactions: Arden LJ at [139]. So Toulson LJ in that case notes that inducing breach of contract 'requires the defendant's conduct to have operated on the will of the contracting party': [177].
Ms Carty argues that:
The acceptance of inconsistent transactions as tortious places liability in the area of facilitating a breach. This appears to downgrade the need for causal and intentional harm, emanating from the defendant. Yet, it was accepted in Allen v Flood that 'the procuring [of] … a breach of contract was … the gist of the action' [1898] AC 1, 123 Lord Herschell. In effect, the defendant must be the person in the background who 'pulls the strings' [as Lord Macnaghten put it in Allen v Flood [1898] AC 1, 152]. This requires accepting Batts as correct and rejecting the wider dicta in Salvadori.
Once it is accepted, as I do, that merely facilitating a breach of the Restraint Clause is not enough to establish the tort, the plaintiffs' case against Mr Lowick cannot succeed. There is no evidence that Mr Lowick did anything to persuade Mr Minson or Mr Bruske or Mrs Bruske to breach the Restraint Clause or that Mr Lowick's conduct influenced them to make up their mind to breach the Restraint Clause. There is no evidence that Mr Lowick's conduct operated on the will of Mr Minson or Mr or Mrs Bruske to cause them to do the things that amounted to breaching the Restraint Clause. The plaintiffs' case in tort against Mr Lowick is not made out.
Mr Williams did not induce a breach of Restraint Clause
Mr Williams knew that Mr and Mrs Minson and Mr and Mrs Bruske were under a contractual obligation not to have any involvement in an ice rink business. Mr Anuriw told Mr Williams that on or about 30 September 2009. That is sufficient knowledge of the restraint to ground an intention to induce a breach of the contract between Mr and Mrs Anuriw and Mr and Mrs Minson and Mr and Mrs Bruske.
However, there is no evidence that Mr Williams induced or procured any of the first to fourth defendants to breach their contract or that Mr Williams intended to induce a breach of the contract between Mr and Mrs Anuriw and Mr and Mrs Minson and Mr and Mrs Bruske. At most Mr Williams facilitated a breach. For the reasons explained in relation to Mr Lowick that is insufficient to amount to inducing or procuring a breach of contract.
Mr MacLellan did not induce a breach of Restraint Clause
There is no evidence that Mr MacLellan knew of the restraint. It is not necessary for him to have known of the precise terms of the contract; he need only have sufficient knowledge, including knowledge of the existence of the contract, to know or deemed to know that he is inducing a breach and a conscious decision not to enquire into the existence of a fact is in many cases treated as equivalent to knowledge of that fact. However, there is no evidence that Mr MacLellan knew of the existence of the contract between Mr and Mrs Anuriw, Mr and Mrs Minson and Mr and Mrs Bruske or that Mr and Mrs Minson and Mr and Mrs Bruske were under any obligation not to be involved in an ice rink business.
There is no evidence that Mr MacLellan induced or procured any of the first to fourth defendants to breach their contract or that Mr MacLellan intended to induce a breach of the contract between Mr and Mrs Anuriw and Mr and Mrs Minson and Mr and Mrs Bruske. At most Mr MacLellan facilitated a breach. For the reasons explained in relation to Mr Lowick that is insufficient to amount to inducing or procuring a breach of contract.
Roselink did not induce a breach of the Restraint Clause
Mr Lowick and Mr Williams had sufficient knowledge of the restraint. They were directors of Roselink and their knowledge is to be imputed to Roselink. However, Roselink did not induce or procure a breach of the Restraint Clause.
Roselink received the ice rink equipment gifted by Mr Minson to Casey as a capital contribution. Roselink accepted and ratified the payment by Mr and Mrs Bruske of the lease deposit on behalf of Roselink. Roselink received further sums of money from Mr and Mrs Bruske.
Roselink permitted Mr Minson to negotiate the terms of the lease on its behalf, to apply to the City of Stirling in its name for development approval and to participate in the preparation of the scope of works required for the lease. Roselink permitted Mr Bruske to assist the fit out of the ice rink. All of those activities may amount to facilitating a breach of the Restraint Clause but for the reasons given in relation to Mr Lowick they do not amount to inducing or procuring a breach. There is no evidence that Roselink, through any of its directors, operated on the will of Mr Minson or Mr and Mrs Bruske or influenced them to do any of those things.
Casey persuaded, induced or procured Mr Minson to breach the Restraint Clause by giving him the ice rink equipment for the new ice rink venture. Andrew persuaded, induced or procured Mr and Mrs Bruske to breach the Restraint Clause by getting them to loan him the money which he contributed to, and provided capital for, Roselink. However, Casey and Andrew did not do those things in their capacity of a director of Roselink.
The plaintiffs' case against Roselink for inducing a breach of the Restraint Clause is not made out.
Relief
In the statement of claim the plaintiffs claimed against the first to fourth defendants damages for breach of contract; further and in the alternative, restitution of the consideration paid for the Restraint Clause, an injunction restraining the first to fourth defendants from further breaching the deed and equitable damages. The plaintiffs claimed against the fifth to tenth defendants damages in tort, an injunction restraining those defendants from further tortiously interfering in the Deed and equitable damages. In their closing submissions the plaintiffs sought damages against both the first to fourth and fifth to tenth defendants and restitution from the first to fourth defendants. The plaintiffs further submitted: 'In the event that damages are awarded, the plaintiffs accept that no injunction should issue'.
I required counsel for the plaintiffs to specify what relief was sought by Jaddcal and what relief was sought by Mr and Mrs Anuriw rather than stating the relief that was claimed by 'the plaintiffs'. In the course of stating the relief claimed by each of the plaintiffs counsel for the plaintiffs made equivocal statements. Eventually, counsel stated that the relief claimed by the plaintiffs is as follows. Jaddcal claims against the first to fourth defendants damages for breach of the Restraint Clause and an injunction restraining them from breaching the Restraint Clause 'in the event that no other remedy were available'. Jaddcal claims against the fifth to tenth defendants damages for inducing a breach of the contract constituted by the Deed. Mr and Mrs Anuriw claim restitution from the first to fourth defendants of the amount paid for the Restraint Clause and an injunction 'the same as Jaddcal', which I take to mean that Mr and Mrs Anuriw claim against the first to fourth defendants an injunction to restrain them from breaching the Restraint Clause 'in the event that no other remedy were available'. Mr and Mrs Anuriw do not seek any relief against the fifth to tenth defendants. I will start by considering Jaddcal's claim for damages against the first to fourth defendants for breach of the Restraint Clause.
Jaddcal's claim against first to fourth defendants for damages for breach of Restraint Clause
Jaddcal's claim is for damages for breach of contract. The general rule is that where a party sustains a loss by reason of a breach of contract, it is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed. That directs attention to the losses caused by the breach. The measure of damages claimed by Jaddcal is lost profits. In essence, Jaddcal's case is that Xtreme Ice Arena would not have opened, or at least would not have opened before February 2011, if the first to fourth defendants had not breached the Restraint Clause and customers of Roselink would otherwise have attended Perth Ice Arena. Jaddcal says that it suffered a reduction in income as a result of the loss of customers to Xtreme Ice Arena and claims that loss of income as damages.
Plaintiffs' damages case
The plaintiffs called Christopher Daws, a chartered accountant and insolvency consultant to quantify its damages. Mr Daws prepared a report dated 11 May 2011 (report) and an addendum dated 22 June 2011 (addendum). In his report Mr Daws calculated Jaddcal's loss of income, as a result of competition from Xtreme Ice Arena, from 1 December 2010 to 30 April 2011. In his addendum Mr Daws calculated the loss for the month of May 2011 and updated the calculation for the loss for the period from 1 December 2010 to 27 May 2011.
Mr Daws calculated the loss on two bases. First, in his report Mr Daws calculated that Jaddcal has suffered a reduction of income for the period 30 November 2010 to 30 April 2011 of $165,848.13. That was the difference between the income, or revenue, received by Jaddcal in the periods between December 2009 and April 2010 and December 2010 and April 2011. Mr Daws then made some adjustments for various reasons as set out in his report.
Secondly, Mr Daws calculated the income generated by Xtreme Ice between 30 November 2010 and 30 April 2011. Mr Daws said:
In light of the relative proximity of the two ice arenas and the similar product that is offered, it is reasonable in my opinion to assume that but for the opening of Xtreme Ice, a significant portion of the income generated by that business would have been generated by Perth Ice Arena.
In considering whether there are losses occasioned by the opening of Xtreme Ice, I regard it as appropriate to deduct from the Xtreme Ice income any income attributable to known differences in the two business. In this case there are two known differences, being bumper car income and the location of the two venues.
After making adjustments for those reasons Mr Daws concluded that the income derived by Xtreme Ice which would have been available to Perth Ice Arena during that period is $223,341.
Counsel for the fifth to tenth defendants, Mr Curwood, criticised Mr Daws' assessment on a number of bases. First, Mr Curwood said that there was no basis in the evidence for making the assumption that all income earned by Xtreme Ice Arena, but for the two deduction factors identified by Mr Daws ‑ the bumper cars and the location premium ‑ would have been earned by Perth Ice Arena. That is correct. However, it is likely that, as Mr Daws said, a significant portion of the income earned by Xtreme Ice would have been earned by Perth Ice Arena if Xtreme Ice had not opened for the reasons given by Mr Daws.
Secondly, Mr Curwood submitted that if there are fewer members of West Coast Ice Hockey Club, it could not have had an effect on 'ice time' earnings as ice time for ice hockey at Perth Ice Arena costs $270 per hour. Mr Curwood refers to the evidence of Mr Salmond to that effect. However, I find that Perth Ice Arena did suffer loss of revenue as a result of less patronage from West Coast Ice Hockey Club. Mr Salmond stated that West Coast Peewee division team has stopped playing and training at Perth Ice Arena and currently play and train at Xtreme Ice Arena. Mr Salmond also stated that prior to Xtreme Ice Arena, the Western Australian Ice Hockey Association divided the State Ice Hockey teams ice time for games and training between Perth Ice Arena and Cockburn Ice Arena. Ice time for the State teams is now divided up between the three Perth rinks.
Thirdly, Mr Curwood said that there was no analysis undertaken by Mr Daws as to what expenditure would have been incurred earning the extra income. That is correct. Mr Anuriw conceded that his company's wages bill was higher when the business was making more money in its first year of operations. Mr Daws made no analysis of that issue.
Fourthly, Mr Curwood submitted that a similar difficulty arises as to a comparison of year to year income earnings. There is no analysis of the expenses required to make the earnings. The award of damages must be directed towards the lost profit rather than total loss revenue. Mr Curwood submitted that the plaintiffs' case has equated income to profit. In general, that is correct.
Fifthly, Mr Curwood submitted that with respect to the year by year comparisons, Mr Anuriw conceded that month by month sales at Perth Ice Arena for 2009 and 2010 were lower than in the 2010 year. That is correct. In cross‑examination Mr Anuriw agreed with the assertion that over the period from June 2009 until October 2010, that is the month before Xtreme Ice Arena opened, as a general proposition the month by month sales for Perth Ice Arena in 2010 were lower than in 2009. Mr Anuriw did not accept that the Perth Ice Arena business was in decline. Mr Anuriw said that his explanation for the lower sales in 2010 was that there was a honeymoon period in the first year.
Sixthly, Mr Curwood submitted that the two businesses do not operate for the same periods of time. Perth Ice Arena is a six and a half day a week business and Xtreme Ice Arena is a seven day a week business. Mr Anuriw did give evidence that before Mr and Mrs Minson and Mr and Mrs Bruske left the Perth Ice Arena business the rink operated seven days a week and after they left it operated six and a half days a week. Mr Anuriw also said that currently they do ice maintenance on Thursdays and the rink does not open.
There are substantial differences between the plaintiffs and the defendants relating to the calculation of damages. I will review a few points before determining the appropriate measure of damages.
The measure of damages
The damages must be assessed having regard to a number of points. First, Mr Daws assumed that Jaddcal lost profits as a result of Xtreme Ice Arena operating between 1 December 2010 and 27 May 2011. The defendants submitted that they are not liable for any loss of revenue to Jaddcal as a result of the operation of Xtreme Ice Arena beyond 28 February 2011, that is, 18 months after the date of the deed. I have found that the reasonable period for the restraint is a period of no more than 18 months. The first to fourth defendants are, and were, at liberty to directly or indirectly be engaged, interested or concerned in an ice rink business after 28 February 2011. They were entitled to do acts prior to 28 February 2011 that amounted to being directly or indirectly concerned in an ice rink business being carried on after 28 February 2011. If that was not so then the restraint would be for a period more than 18 months. The losses to which Jaddcal is entitled are losses resulting from the operation of Xtreme Ice Arena before 28 February 2011. It is possible that Jaddcal may have suffered losses after 28 February 2011 as a result of Xtreme Ice Arena operating before 28 February 2011. However, there is no evidence of that.
Damages should be calculated on the assumption that Xtreme Ice Arena would have opened on the expiration of the reasonable restraint period of 18 months, that is approximately 1 March 2011. On this basis the gross revenue lost to Jaddcal would be the revenue lost to Xtreme Ice Arena between 30 November 2010 and 28 February 2011.
Secondly, Jaddcal must prove that, but for the breaches of the Restraint Clause by the first to fourth defendants, Jaddcal would have obtained customers and revenue that was obtained by Roselink. This requires consideration of what would have happened had the first to fourth defendants not infringed the Restraint Clause. The process involves a degree of estimation, but that is no bar to recovery.
I find that the breach of the Restraint Clause by the first to fourth defendants caused, or contributed to, Roselink establishing and opening the ice rink business at the Xtreme Ice Arena. The ice rink equipment given by Mr and Mrs Minson to Casey, the lease deposit paid by Mr and Mrs Bruske and the further sums loaned by Mr and Mrs Bruske to Andrew all formed part of the capital of Roselink. There is no evidence that Casey or Andrew had the means to otherwise obtain and make those capital contributions. That capital was indispensable to the ice rink venture. Furthermore, Mr Minson played an important role in establishing the business. He found the Mirrabooka premises, played an important part in negotiating the lease, participated in the development application to the City of Stirling and in preparing the scope of works. Mr and Mrs Minson hosted the 13 December meeting and Mr and Mrs Bruske attended the meeting, at which the business structure was determined. Mr and Mrs Minson and Mr and Mrs Bruske played a role in effecting that business structure.
I find that Jaddcal lost customers to Roselink. The evidence is that prior to the opening of the Xtreme Ice Arena ice hockey players or skaters who lived north of the river would generally patronise Perth Ice Arena. It is to be expected that the Perth Ice Arena will have lost customers to the new ice rink which is 4.8 km away and would be more readily accessible to some of Perth Ice Arena's former or prospective customers. Furthermore, some West Coast Ice Hockey Club teams left Perth Ice Arena for Xtreme Ice Arena.
Thirdly, the claim is not properly for loss of revenue but for loss of profits. The profits to be calculated are the lost profits, that is lost revenue less costs that would have been incurred in earning the lost revenue. Costs savings are to be brought to account. If the ice rink has fewer customers it will likely incur less costs and that should be treated as a gain to be offset against the lost revenue which forms the basis of the calculation of lost profits.
If Jaddcal had earned greater revenue from skating fees, hire, café sales and other sources then its expenses incurred in earning that income would have increased. Mr Anuriw conceded that. Furthermore, Jaddcal's trading figures demonstrate that. Jaddcal's sales income for the period ended 30 June 2010 was $1,398,196 and direct costs were $716,483 and gross profit $681,713. In the previous year sales were $393,713 and direct costs were $159,329 and gross profit was $234,384. The gross profit margin for the year ended 30 June 2010 was 49% and for the previous year 59%. There was also a variation in expenditure or overheads. That is to be expected because the previous year's trading was only for a period of three months. A reasonable calculation of lost profit is to apply the gross profit margin to the lost revenue. In this case the gross profit margin is approximately 49%. Accordingly, the lost profit is approximately 49% of lost revenue.
Calculation of damages
A calculation of damages based on likely lost profit cannot be precise. I will begin by assessing the revenue lost by Jaddcal to Roselink. I will then deduct from that lost revenue an assessment of the costs that would have been earned by Jaddcal in earning that revenue.
It is not realistic to assume that if Xtreme Ice Arena had not opened then the whole of the revenue earned by Xtreme Ice Arena in the relevant period would have been earned by Perth Ice Arena. In considering the losses occasioned by the opening of Xtreme Ice Mr Daws regarded it as appropriate to deduct from the Xtreme Ice income any income attributable to known differences in the two businesses. Mr Daws identified two known differences, being bumper car income and the location of the two venues. Perth Ice Arena does not offer bumper cars and hence the income earned by Xtreme Ice from that source would not have been earned by Perth Ice Arena. So far as location is concerned, Mr Daws considered that Xtreme Ice is located in a shopping centre precinct with easy access to public transport whereas Perth Ice Arena is located in a largely industrial zone with limited transport and other local facilities. Therefore, it appeared to Mr Daws that there is a location premium in Xtreme Ice's favour which would mean that it might earn additional income that Perth Ice Arena would not be able to generate purely by reason of its preferred location. Mr Daws considered that the location premium may be reflected in the difference in monthly rent paid by Roselink for the Xtreme Ice premises in Mirrabooka as compared to the rent paid by Jaddcal for the Perth Ice Arena premises in Malaga. The percentage difference is 24.51%. Therefore in considering the income of Xtreme Ice and the impact of this on Perth Ice Arena Mr Daws deducted from the total income the bumper car income and the location premium so as to calculate only that income which would have been available to Perth Ice Arena if Xtreme Ice had not opened.
There is no empirical evidence that the percentage difference in rent between the two premises is likely to result in a similar difference in revenue. However, some allowance must be made for that difference. There are other factors that might contribute to different revenue, such as the state of the premises and fit out and the fact that Xtreme Ice is a seven days a week operation whereas Perth Ice Arena operated only for six and a half days or for a time six days a week. There may also be factors personal to the operators of the two ice rinks that might influence customers. All of those factors lead to the conclusion that some of the customers who attended Xtreme Ice Arena would not have attended Perth Ice Arena even if Xtreme Ice Arena had not been open. Taking all these matters into account, and recognising that it is a rough and ready exercise, I will assume that if Xtreme Ice Arena had not opened in the relevant period two thirds of its income, excluding income from bumper cars, would have been earned by Perth Ice Arena.
Xtreme Ice Arena's gross revenue from 30 November 2010 to 28 February 2011 was $168,490. Bumper car income in that period was $23,123. Total income, less bumper car income, for the period was $145,367. I assess that the gross revenue that would have been earned by Perth Ice Arena if Xtreme Ice Arena had not been open during that period is two thirds of $145,367, that is $96,911. That is gross revenue. Profit is approximately 49% of gross revenue. In this case lost profit for the period is approximately 49% of $96,911, that is $48,456. I assess Jaddcal's damages at $48,000.
Jaddcal's damages' claim against fifth to tenth defendants
I have found that Jaddcal has not proved that the fifth to tenth defendants, or any of them, induced the first to fourth defendants to breach the Restraint Clause. And in any event, Jaddcal has no cause of action against the fifth to tenth defendants because it is not a party to the Deed. If Jaddcal had made out a cause of action against any of the fifth to tenth defendants for having induced the first to fourth defendants to breach the Restraint Clause then I would have assessed Jaddcal's damages in the same amount as its damages for breach of the Restraint Clause by the first to fourth defendants, that is $48,000.
Jaddcal's claim for injunction
Jaddcal claims against the first to fourth defendants an injunction restraining them from breaching the Restraint Clause 'in the event that no other remedy were available'. I have found that Jaddcal is entitled to damages of $48,000 against the first to fourth defendants for breaching the Restraint Clause. In those circumstances, Jaddcal does not pursue its claim for an injunction against the first to fourth defendants. In any event, I would not have granted an injunction because it is now more than two years since the Deed was entered into and an injunction should only be granted if a restraint for three years is reasonable. I have found that a restraint for that period is not reasonable.
Mr and Mrs Anuriw's claim for restitution
Mr and Mrs Anuriw plead that pursuant to the terms of the Deed on or about 28 August 2009 they paid to the first to fourth defendants the amount of $160,000 each and by reason of the breach of the Restraint Clause by each of the first to fourth defendants the consideration for those payments has failed. Mr and Mrs Anuriw then plead that the consideration paid by Mr and Mrs Anuriw for the restraints contained in the Restraint Clause is severable from the consideration paid by them for the acquisition of the shares in Jaddcal and it would be unjust for the first to fourth defendants to retain the full consideration paid. Mr and Mrs Anuriw claim that they are entitled to repayment of so much of the sum of $160,000 paid to each of the first to fourth defendants which is not referable to the value of the shares in Jaddcal.
A plaintiff who has paid money under a contract may be entitled to restitution of that payment if the consideration for the payment has totally failed. In this context it is the performance of the defendant's promise not the promise itself which is the relevant consideration whether there has been a total failure of consideration.
In Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 the High Court held that there had been a failure of a distinct and severable part of the consideration for the purchase of the goods, so that there was a total failure of that consideration and the amount claimed was recoverable as money had and received to the recipients use. Rothmans was a tobacco wholesaler and Roxborough a retailer supplied by Rothmans. Under supply contracts between them, the price for a consignment of tobacco was broken down into two parts, the price for the tobacco itself and the 'tobacco licence fee', which was the licence fee payable by Rothmans, the wholesaler, in respect of the tobacco supplied. Thus, the arrangement was that Rothmans would pay the licence fee and pass the cost onto the retailers, who would of course pass it onto consumers. Because Rothmans was a licensed wholesaler, the retailers were not liable to pay any further licence fee in respect of their own sales of the tobacco supplied by Rothmans. It had previously been held that the licensing scheme was invalid as a disguised excise duty, which the New South Wales Parliament had no power to impose under the Australian Constitution. The retailers sued Rothmans, to recover the amount paid for the license fee and which Rothmans had not remitted to the taxing authority. A majority of the High Court held that there had been a failure of a distinct and severable part of the consideration for the purchase of the tobacco, so that there was a total failure of consideration and the amount was recoverable as money had and received to the retailer's use. In a joint judgment the plurality said that the amount of the net total wholesale cost referable to the tax was, from one point of view, part of the money sum each retailer was obliged to pay to obtain delivery of the tobacco products, that is it was merely part of the price for the transfer of title to the buyer of the tobacco. But the plurality said that there was more to it than that. The tax was a government imposition, in the form of a fee payable under a licensing scheme. The nature of the scheme was such that the licensed wholesaler, or, if not the wholesaler, then the licensed retailer, would pay the amount referable to particular tobacco products. The wholesaler, anticipating liability for the fee, required the retailers, when purchasing products by wholesale, to pay an amount equal to the fee. The retailers, in turn, had an interest in the wholesaler paying the fee to the revenue authorities, for they were thereby relieved of a corresponding liability. There was a purpose involved in the making of the requirement that the retailers pay the amounts described as 'tobacco licence fee', and in compliance with that requirement. At [16] the plurality said that to describe these amounts as nothing more than an agreed part of the price (or, to use the language of the parties, cost) of the goods, is to ignore an aspect of the facts. The plurality then said:
In a contract for the sale of goods, the total mount which the buyer is required to pay to the seller may be expressed as one indivisible sum, even though it is possible to identify components which were taken into account by the parties in arriving at a final agreed figure. The final figure itself may have been the result of negotiation, making it impossible to relate a cost component to any particular part of that figure. Or there may be other factors which prevent even a notional apportionment. But there are cases, of which the present is an example, where it is possible, both to identify that part of the final agreed sum which is attributable to a cost component, and to conclude that an alteration in circumstances, perhaps involving a failure to incur an expense, has resulted in a failure of a severable part of the consideration. Here, the buyers, the retailers, were required to bear, as a component of the total cost to them of the tobacco products, a part of the licence fees which the seller, the wholesaler, was expected to incur at a future time, and which was referable to the products being sold. It was in the common interests of the parties that the fees, when so incurred, would be paid to the revenue authorities by the seller, and it was the common intention of the parties (and the revenue authorities) that the cost of the goods would include the fees. In the events that happened, the anticipated licence fees were not incurred by the seller. The state of affairs, which was within the contemplation of the parties as the basis of their dealings, concerning tax liability, altered. And it did so in circumstances which permitted, and required, severance of part of the total amount paid for the goods [17].
The plaintiffs sought to establish that the amount paid by Mr and Mrs Anuriw for the Restraint Clause was severable from the rest of the payments made to the first to fourth defendants under the Deed by the evidence of Mr O'Hehir. Mr O'Hehir, a business broker, was called by the plaintiffs to give evidence of the value of the Perth Ice Arena business. Mr O'Hehir concluded that the most appropriate valuation method to employ for the business as at 28 August 2009 was an asset based methodology. That was because at that date Perth Ice Arena was an embryonic business which had only been trading 19 weeks. In Mr O'Hehir's opinion the business had not as of that date developed a sustainable level of revenue, nor had it developed a sustainable level of expenditure to match revenue. Applying an asset based methodology Mr O'Hehir valued the Perth Ice Arena business to be $577,022 and a four sixth interest in the business to be $384,681. Mr O'Hehir was instructed to comment on whether the consideration of $640,000 paid by Mr and Mrs Anuriw plus repayment of loan amounts of $185,598 and $205,000 (a total of $1,030,598) included any amount of premium. Mr O'Hehir concluded that a premium of $534,952 was paid based on the following:
The balance sheet shows a total of $191,365 in cash assets and a total of $24,918 in liabilities (excluding the three loans). The difference of the two is $166,447 ($191,365 ‑ $24,918 = $166,447).
2/3 of $166,447 = $110,965
Therefore;
$640,000 + $390,598 = $1,030,598 minus $384,681 + $110,965 = $534,952
Hence, a total premium of $534,952.
Mr O'Hehir said that the difference could be made up of numerous different components, including but not limited to:
•agreement to be restrained from entering into competition by one, several, or all of the four vendor individuals;
•goodwill;
•industry or intellectual knowledge (intangible assets) such as business plans, business software, and systems developed by the outgoing parties and transferred to the purchaser;
•a premium relating to the separation of business interests of the shareholders due to incompatibility.
Mr O'Hehir's evidence is that the Restraint Clause was but one of four factors that could have made up the difference between Mr and Mrs Minson and Mr and Mrs Bruske's proportionate share of the value of Jaddcal's assets and the amounts paid to them under the Deed. Furthermore, Mr O'Hehir merely identifies components that could make up the difference between the asset value of the shares and the price paid for them. There is no evidence that enables the court to identify that the four components referred to by Mr O'Hehir were taken into account by the parties in arriving at the final agreed figure or if they were whether all or only some of those components were taken into account and if so which. In any event, this case falls into the category referred to by the plurality in Roxborough v Rothmans of cases where the final figure paid for the shares was the result of negotiation and it is impossible to relate a cost component to any particular part of that figure.
In this case it is not possible to identify that part of the final agreed sum paid by Mr and Mrs Anuriw under the Deed which is attributable to the Restraint Clause and to conclude that a failure to observe the Restraint Clause has resulted in a failure of a severable part of the consideration.
Mr and Mrs Anuriw's case in restitution fails.
Mr and Mrs Anuriw's claim for injunction against first to fourth defendants
I decline to grant an injunction in favour of Mr and Mrs Anuriw restraining the first to fourth defendants from being directly or indirectly engaged, interested or concerned in the Roselink ice rink business or any other ice rink business. I would not have granted an injunction because it is now more than two years since the Deed was entered into and an injunction should only be granted if a restraint for three years is reasonable. I have found that the restraint for that period is not reasonable.
Mr and Mrs Anuriw's claim for damages from first to fourth defendants
In their statement of claim Mr and Mrs Anuriw claim that the first to fourth defendants breached the contract between Mr and Mrs Anuriw and the first to fourth defendants constituted by the Deed. In the prayer for relief the plaintiffs, which includes Mr and Mrs Anuriw, claim damages for breach of the contract. Mr and Mrs Anuriw did not attempt to establish what damages they suffered as a result of the breach of the Restraint Clause by the first to fourth defendants. In her closing address counsel for Mr and Mrs Anuriw only advanced their claim for restitution.
A party who has breached a contract is liable to pay at least nominal damages, even if no loss has been caused: Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286. I will order the first to fourth defendants to pay to Mr and Mrs Anuriw nominal damages of $10.
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