ON APPEAL FROM THE SUPREME COURT OF Restraint of trade-Agreement between employer and employee-Area covenant-
M., a firm carrying on the business of garage proprietors at Crystal Brook ADELAIDE,
and Wirrabara, two country townships in South Australia about thirty miles Oct. 2, 3.
apart, entered into a service agreement with L. After providing for a rate of SYDNEY,
pay and making provision for determination on either side by twenty-one days' notice, the agreement provided "The workman will not during his employment or within one year from the determination thereof in any way carry on or be engaged concerned or interested
in the business of garage proprietors
or in any other similar business now and hereafter carried on by the employers within the same area ". A schedule to the agreement provided 'This agreement shall apply to the sales territory for motor cars, trucks and tractors etc. of M.-Crystal Brook and Wirrabara ". The sales territory consisted of two areas, one surrounding Crystal Brook and the other about Wirrabara, the shortest distance between them being ten miles. The agreement did not fix any period of employment and did not state in what capacity or at what place L. was to be employed. After working for some years as leading hand in charge of the workshop at Crystal Brook where he had come into contact with a substantial number of M.'s customers, L. left M.'s employment and obtained employment at another garage at Crystal Brook some two or three hundred yards away from M.'s.
Held, by McTiernan, Webb and Kitto JJ. (Latham C.J. and Fullagar J. dissenting), that the restrictive provision was void on the ground that the area it encompassed was wider than was reasonably necessary for the pro- tection of M.'s business; also, since under the agreement L. could have been employed in either area and the validity of the provision must be determined
as at the date of the agreement, the restrictive provision could not be upheld as two distinct and severable restrictions, one in respect of the Crystal Brook area and one in respect of the Wirrabara area.
Per McTiernan J.: The restrictive covenant enforced by the judgment was void also because it was detrimental to the public interest, not reasonable in reference to the defendant's interest and in excess of what was reasonable to protect the plaintiff and was imposed only to protect the plaintiff from competition.
Nordenfelt v. Maxim Nordenfelt Guns &Ammunition Co. Ltd., (1894) A.C. 535; Haynes v. Doman, (1899) 2 Ch. 13; Mason v. Provident Clothing &Supply Co. Ltd., (1913) A.C. 724; Herbert Morris Ltd. v. Saxelby, (1916) 1 A.C. 688; Attwood v. Lamont, (1920) 3 K.B. 571; Dewes v. Fitch, (1920) 2 Ch. 159; Bowler v. Lovegrove, (1921) 1 Ch. 642 Putsman v. Taylor, (1927) 1 K.B. 637 McPherson v. Moiler, (1920) 20 S.R. (N.S.W.) 535; and Stephens V. Kuhnelle, (1926) 26 S.R. (N.S.W.) 327; 43 W.N. 67, referred to.
Decision of the Supreme Court…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Lindner v Murdock's Garage [1950] HCA 48
Case
[1950] HCA 48
Decision Date
CaseChat Overview and Summary
Murdock's Garage, a firm operating a garage business in Crystal Brook and Wirrabara, South Australia, entered into a service agreement with Lindner, a motor mechanic. The agreement contained a restrictive covenant preventing Lindner from engaging in a similar business for one year after the termination of his employment. Lindner subsequently left Murdock's employ and took up work at a competing garage in Crystal Brook, prompting Murdock's Garage to seek an injunction. The case was heard in the High Court of Australia on appeal from the Supreme Court of South Australia.
The central legal issue before the High Court was the validity of the restrictive covenant in the employment agreement. Specifically, the court had to determine whether the covenant was reasonably necessary for the protection of Murdock's Garage's business interests and whether it was unduly restrictive on Lindner's ability to earn a livelihood, considering public interest and the specific nature of Lindner's employment. The court also had to consider whether the geographical scope of the covenant, encompassing both Crystal Brook and Wirrabara, was justifiable, particularly given Lindner's employment solely at Crystal Brook.
A majority of the High Court (McTiernan, Webb, and Kitto JJ.) found the restrictive covenant to be void. Their reasoning was that the area encompassed by the covenant was wider than reasonably necessary to protect Murdock's business. Furthermore, as Lindner could have been employed in either Crystal Brook or Wirrabara under the agreement, and the validity of such covenants is assessed at the time of the agreement's formation, the court held that the covenant could not be upheld as two separate, severable restrictions. McTiernan J. also noted that the covenant was detrimental to the public interest, unreasonable in relation to Lindner's interests, and imposed solely to prevent competition rather than protect legitimate business interests.
The High Court reversed the decision of the Supreme Court of South Australia. The appeal was allowed, and the injunction granted by the trial judge was set aside.