Metcash Ltd v Jardim (No 3)

No judgment structure available for this case.

CITATION: Metcash Limited & Anor v Joao Louis Jardim (aka Louis Jardin) & Anor (No 3) [2010] NSWSC 1096
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 13 September 2010 to 17 September 2010

JUDGMENT DATE :
29 September 2010

JUDGMENT OF: Ball J

DECISION: See paragraphs 72 to 77 of the judgment.

CATCHWORDS: CONTRACT – employment – termination – whether employee entitled to terminate by giving three months' notice. EMPLOYMENT - consequence of termination of employment relationship on obligations of the parties - whether restraint of trade clause enforceable - whether second defendant incorporated to avoid restraints imposed on first defendant. REMEDIES – injunctions – relevance of effect of injunction on third party. PROCEDURE – civil – jurisdiction – special federal matter

LEGISLATION CITED: Restraints of Trade Act 1976 (NSW)
Trade Practices Act 1974 (Cth)

CATEGORY: Principal judgment

CASES CITED: Bearingport Australia Pty Ltd v Hillard [2008] VSC 115
Curro and Another v Beyond Productions Pty Ltd (1993) 30 NSWLR 337
Dennis Willcox Pty Ltd v FCT (1988) 79 ALR 267
Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269
Gramophone and Typewriter Ltd v Stanley [1908] 2KB 89
John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995
Koops Martin Financial Services Pty Limited v Reeves [2006] NSWSC 449
Landmark Underwriting Agency Pty Ltd v Kilborn [2006] NSWSC 1108
Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25
Panayiotou v Sony Music Entertainment (UK) Ltd [1994]
Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126
Portal Software v Bodsworth [2005] NSWSC 1179
Purcell v Tullett Prebon (Aust) Pty Ltd [2010] NSWCA 150
Stacks Taree v Marshall (No 2) [2010] NSWSC 77
Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852
Visscher v Giudice (2009) 239 CLR 361; [2009] HCA 34
William Hill Organisation Ltd v Tucker [1998] EWCA Civ 615; [1999] ICR 291
Woolworths v Olson [2004] NSWCA 372

TEXTS CITED: Ford’s Principles of Corporations Law, Butterworths, 14th ed, 2010
Meagher, Gummow and Lehane’s, Equity Doctrines & Remedies, Butterworths, 4th ed, 2002
Spry, Equitable Remedies, Lawbook, 8th ed, 2010

PARTIES: Metcash Limited ACN 112 073 480 (First Plaintiff)
Metcash Trading Limited ACN 000 031 569 (Second Plaintiff)
Jaoa Louis Jardim (First Defendant)
Jardim Investments Pty Limited ACN 145 255 894 (Second Defendant)

FILE NUMBER(S): SC 2010/242993

COUNSEL: J J Fernon SC (Plaintiffs)
M White (Plaintiffs)
I M Neil SC (First Defendant)
R Gration (First Defendant)
A Zahra (Second Defendant)

SOLICITORS: Freehills (Plaintiffs)
Harmers (First Defendant)
Clamenz Corporate Lawyers (Second Defendant)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BALL J

29 SEPTEMBER 2010

2010/242993 METCASH LIMITED ACN 112 073 480 & ANOR v JOAO LOUIS JARDIM (AKA LOUIS JARDIN) & ANOR (NO 3)

JUDGMENT

Background

1 Metcash Limited (Metcash), the first plaintiff, is a publicly listed company which carries on business as a marketing and distribution company operating in the grocery and liquor wholesale industries. Metcash Trading Limited (Metcash Trading), the second plaintiff, is one of its subsidiaries.

2 Metcash’s operations in Australia are divided into a number of separate divisions. One of those is IGA Distribution Pty Ltd (IGA). IGA is Metcash’s principal operating division and currently accounts for over 80 percent of Metcash’s annual profit. It supplies marketing and distribution services to IGA branded and non-branded grocery stores.

3 The first defendant, Mr Jardim, who is commonly known as Mr Jardin, commenced employment with Metcash on 22 September 1997 first as General Manager Corporate stores and then as Queensland State General Manager. In May 2000, Mr Jardin was appointed CEO of IGA. Subsequently, he entered into an employment deed with Metcash Trading which took effect from 1 October 2004. Clause 3.1 of that deed sets out Mr Jardin’s duties including duties to serve the “Company” (defined to mean Metcash Trading) faithfully and diligently to the best of his ability, to use all reasonable efforts to promote the interests of the Company and to act in the Company’s best interests. Clause 3.2 provides:

“3.2 Prohibitions

Without limiting the Employee’s duties to the Company, the Employee must not:

(a) act in conflict with the Company’s best interests;

(b) accept or commence any other employment or engagement without the prior written consent of the Company;

(c) compete with the business of the Company or any Related Body Corporate;

(d) hold or be interested in any investments which amount to more than 5% of the issued investments of any class of any one company except where agreed to by the Company or to the extent that any excess over 5% is attributable to his position as a representative of the Company.”

4 Clause 10 deals with confidential information. Essentially it provides that Mr Jardin may only use “Confidential Information” solely for the purpose of performing his duties with the Company. “Confidential Information” is defined very broadly. The precise scope of the definition is not relevant in this case.

5 Clause 12.1 provides that:

“Subject to clause 12.2, the Employee’s employment may be terminated at any time by:

(a) the Employee providing the Company with 3 months’ written notice; or

(b) the Company providing the Employee with 9 months’ written notice.”

6 Clause 15 provides that Mr Jardin’s obligations under cl 10 (relating to confidentiality), among others, continue after employment, except in respect of information that is part of Mr Jardin’s general skill and knowledge. Clause 15 also provides that Mr Jardin must not record any confidential information in any form after termination.

7 It is noteworthy that an earlier version of the employment deed, which had been signed by Mr Jardin but not by Metcash Trading, contained a provision by which Metcash Trading could require Mr Jardin to enter into a non-compete deed following termination of his employment.

8 On 31 August 2006, Metcash agreed to pay Mr Jardin a long-term cash incentive of $2 million in respect of the 5 year period ending on 30 April 2010 if the compound annual growth in earnings per share of Metcash exceeded a specified target. The amount was expressed to be payable only if “the participant is still in the full time employment of the company at the end of the five-year period ending on April 30, 2010”.

9 It appears that over a period of time tensions developed between Mr Jardin and Mr Reitzer, the Chief Executive Officer of Metcash. Those tensions reached a head on 22 January 2010 when Mr Jardin drove to Cessnock to meet Mr Peter Barnes, the Deputy Chairman of Metcash, to complain about Mr Reitzer’s conduct. Following that meeting, on 3 February 2010, Mr Carlos dos Santos, the Chairman of Metcash, informed Mr Jardin that Metcash had decided to terminate Mr Jardin’s services.

10 On 5 February 2010, Mr Jardin’s access to Metcash’s email system was terminated. He has not been involved in Metcash’s business since that time.

11 On 19 February 2010, Metcash and Mr Jardin entered into a deed of release. Clause 8(a) of that deed says that Metcash executes the deed as agent and trustee for the Group. In the light of that clause, no point is taken about the fact that the employment deed was entered into between Mr Jardin and Metcash Trading but the deed of release was entered into between Mr Jardin and Metcash.

12 Clause 1(a) of the deed of release provides that Metcash would on 1 June 2010 provide Mr Jardin with “9 months’ written notice of termination of his employment in accordance with cl 12.1(b) of the Employment Agreement”. Clause 1(b) provides that Mr Jardin’s employment “will terminate on the Termination Date” – which is defined to be 1 March 2011.

13 Clause 1(c) of the deed of release permits Metcash to appoint a new CEO of the IGA and to require Mr Jardin not to attend the office.

14 Clause 1(f) provides:

“The Executive acknowledges and agrees that, prior to the Termination Date, he continues to be bound by the obligations contained in the Employment Agreement in accordance with the terms of the Employment Agreement. For the avoidance of doubt, the Executive will continue to receive the remuneration and any other benefits payable to the Executive under the Employment Agreement up to and including the Termination Date.”

15 Clause 1(h) provides:

“In the event that the Employment is terminated before the Termination Date in circumstances justifying summary dismissal, notwithstanding any provision of this deed, the Company is not obliged to make any payment or provide any benefits to the Executive other than the Executive’s remuneration and statutory entitlements accrued to the date of cessation of the Employment.”

16 Clause 7(b)(1) relevantly provides that Mr Jardin acknowledges that:

“clauses 10 … of the Employment Agreement regarding confidentiality … will continue to operate after the Termination in accordance with the terms of the Employment Agreement and are taken to constitute terms of this deed …”

17 Clause 8(c) provides:

“Except as otherwise provided in this deed, this deed and the Deed Poll [which is attached to the deed and which Mr Jardin was required to sign] constitutes the entire agreement between the parties as to its subject matter to the exclusion of any prior agreement whether written or oral, express or in any way implied.”

18 On 19 February 2010, Metcash appointed Mr Morabito as the new CEO of IGA and, on 1 June 2010, Metcash Trading gave 9 months’ notice terminating Mr Jardin’s employment.

19 Mr Jardin has continued to be paid his salary and other entitlements. Those amounts included amounts totalling $2.24 million in respect of a short term incentive and the long term cash incentive. Those amounts became due at the end of April 2010 and were paid on 26 or 28 June 2010.

20 On 1 July 2010, Mr Jardin met Mr Leigh Carson, the Chief Executive Officer of SPAR Australia Limited. The meeting occurred at Mr Jardin’s request. SPAR Australia is a franchisor in the retail grocery industry. It has about 150 franchisee stores, which are similar to IGA stores licensed by Metcash and is a competitor of Metcash. It is in some financial difficulties. Following the meeting, Mr Jardin put forward a proposal to acquire 51 percent of the shares in SPAR Australia.

21 On 16 July 2010, Mr Jardin sent a letter to Metcash Trading purporting to terminate the employment deed with immediate effect. Mr Jardin mistakenly believed at the time that the relevant employment deed was the one containing the provision by which Metcash Trading could require him to enter into a non-compete deed following termination of his employment. He now accepts that this notice – purporting to terminate the employment deed with immediate effect as it did – was ineffective.

22 Also on 16 July 2010, SPAR Australia issued a media release announcing that it had entered into a binding heads of agreement with Mr Jardin under which Mr Jardin would take a 51 percent shareholding in the company. Mr Jardin assisted in drafting that media release. In fact, on that day the second defendant, Jardim Investments, was incorporated. Its sole shareholder was Christopher Jardim, who is Mr Jardin’s son and who is a medical student. Christopher was also its sole director. However, Mr Jardin replaced him on that day. The draft binding heads of agreement were amended on 16 July 2010 to substitute Jardim Investments for Mr Jardin.

23 Clause 4 of the binding heads of agreement provides:

^th

24 Mr Jardin gave evidence that at this time he had not decided whether he would become CEO of SPAR Australia or take a position as an executive director or whether Jardim Investments’ investment in SPAR Australia would simply be a passive one. I do not accept this evidence. In my opinion, the likelihood is that the parties contemplated at the time that the binding heads of agreement were signed that Mr Jardin would become CEO of SPAR Australia or at least take on a very senior management role. On 15 July 2010 Westpac, SPAR Australia’s bank, was told by Mr Paul Morris, an accountant advising Mr Jardin, that Mr Jardin would become the CEO. That fact was communicated to Mr Jardin and he did not dispute it at that time. SPAR Australia’s media release (which, as I have said was drafted with Mr Jardin’s assistance) said:

“Mr Jardin brings a clearly defined plan to improve the competitiveness of our independent retailers and that will be an excellent result for the retailers, their customers and ultimately, SPAR Australia.

He intends to invest heavily in price competitiveness and support structures for our independent retailers.

…

His knowledge, reputation and deep understanding of the industry will certainly assist SPAR as we enter the next phase of our growth strategy.

…

While the financial details of the agreement will remain confidential, Mr Jardin said he would work closely with the company’s independent retailers and its management team in implementing his plans.”

25 On 21 July 2010, the plaintiff commenced these proceedings seeking interlocutory relief. In response, Mr Jardin gave undertakings including undertakings not to compete with the plaintiffs and not to contact any employees, customers, joint venture partners or suppliers of or to the plaintiffs.

26 On 26 July 2010, Mr Jardin purported to give 3 months’ notice terminating the employment deed.

27 On 12 August 2010, Mr Jardin resigned as a director of Jardim Investments and was replaced by his wife.

28 On 31 August 2010, an extraordinary general meeting of SPAR Australia passed resolutions which were necessary to satisfy the relevant conditions set out in the binding heads of agreement.

29 On 5 September 2010, Mrs Jardin held a meeting of Jardim Investments at Noosa, where the family was gathered for the wedding of one of Mr and Mrs Jardin’s daughters. At that meeting 5 new directors of Jardim Investments were appointed. The 5 new directors are the three daughters and two sons-in-law of Mr and Mrs Jardin. The director of Jardim Investments resolved at that meeting that the company would act as a trustee of the Jardim Family Trust. It appears that Jardim Investments will hold its interest in SPAR Australia on trust for the beneficiaries of that trust. Mr Jardin is not an eligible beneficiary until 2 March 2011.

30 Metcash and Metcash Trading seek final relief against Mr Jardin and Jardim Investments up to and including 1 March 2011 which would have the effect of restraining them from proceeding with the proposal agreement with SPAR Australia. A number of ancillary orders are sought directed at securing Mr Jardin’s compliance with obligations imposed on him by the employment deed up until that date.

31 The case raises the following issues:

Trade Practices Act 1974

TPA

Was Mr Jardin entitled to terminate the employment deed on 3 months’ notice?

32 The plaintiffs say that Mr Jardin was not entitled to give 3 months’ notice terminating the employment deed because he agreed by cl 1(b) of the deed of release that the employment deed would terminate on 1 March 2011 and he agreed by cl 8(c) of the deed of release that, except as otherwise provided in the deed of release, that deed (and the deed poll attached to it) constituted the entire agreement between the parties as to its subject matter to the exclusion of any prior agreement – including cl 12.1(a) of the employment deed.

33 I do not accept that submission. In interpreting the deed of release, it is important to bear in mind the context in which it was agreed. The employment deed required Metcash Trading to give 9 months’ notice of termination of Mr Jardin’s employment except for cause. It contained no post contractual or post employment restraints, other than, relevantly, a restraint in relation to the use of confidential information. On or about 5 February 2010, Metcash purported to terminate Mr Jardin’s employment immediately. Mr Jardin took issue with its right to do so. Ultimately, the parties agreed (in cl 1(a) of the deed of the release) that Metcash would be entitled to give 9 months’ notice terminating Mr Jardin’s employment on 1 June 2010, with the result that his employment would terminate on 1 March 2011. At the same time, Mr Jardin agreed to a variation of the terms of his employment that permitted Metcash to vary his role – and, in particular, permitted it to direct him not to undertake any work. Mr Jardin obtained an additional period of notice (about 3 months) in exchange for giving up his position immediately. The deed of release assumes that the employment deed will remain on foot and seeks to modify it in various ways. In particular, cl 1(a) assumes that the termination right contained in cl 12.1(b) remained on foot and simply sets out when Metcash would exercise that right. Similarly, cl 1(h) of the deed of release assumes that the right of summary dismissal provided for in cl 12.2 of the employment deed continues and it sets out the consequences in the event that it is exercised. Clause 1(h) is not itself the source of Metcash Trading’s right to terminate without notice for cause. The words “[i]n the event that the Employment is terminated before the Termination Date …” do not create a right of summary dismissal. They simply identify the event (that is, summary dismissal) which gives rise to the consequences stated in the clause. The right of summary dismissal itself must be found elsewhere – and the only place it can be found is in the employment deed. If the deed of release assumes that the rights of termination in cls 12.1(b) and 12.2 remain on foot, why is the same not true of the right in 12.1(a)?

34 The conclusion that the deed of release preserves the termination rights set out in the employment deed is consistent with cl 1(f) of the deed of release. That clause contains an acknowledgement by Mr Jardin that he continues to be bound by his obligations under the employment deed. It then goes on to say that “[f]or the avoidance of doubt” he will continue to receive his remuneration payable under that deed. Again, this clause assumes that the employment deed continues and then sets out consequences of that fact. The words “for the avoidance of doubt” assume that the relevant obligation is to be found elsewhere – and, again, the only place it can be found is in the employment deed.

35 In my opinion, cl 1(b) of the deed of release does not alter the position. It is clearly not intended to operate to the exclusion of the right of summary dismissal. It follows cl 1(a). In my opinion, it was intended to set out the consequence of the notice given under the earlier clause. The interpretation of cl 1(b) contended for by the plaintiffs makes the procedure contemplated by cl 1(a) (that is, the giving of the notice) pointless. In addition, the plaintiffs’ interpretation alters the rights and obligations of the parties in a way that does not appear to be directed to the dispute that the deed of release was intended to resolve. The deed of release was directed at resolving a dispute about whether Metcash Trading was entitled to terminate the employment deed in circumstances where, on termination, Mr Jardin was not bound by any post contractual restraints (other than those relating to confidentiality). The interpretation of cl 1(b) contended for by the plaintiffs has the effect of requiring Mr Jardin to work for Metcash – or at least to be bound by restrictions in its favour – until 1 March 2011, when he was not bound in that way before the release was signed and when the dispute that gave rise to the deed of release was not concerned with that issue. Of course, it is possible that Mr Jardin might have agreed to those additional restrictions as part of an overall settlement of the dispute. But it seems to me that, if that is what the parties had intended, they would not have preserved the rights of termination in the employment deed in the way that they did.

36 It is true that other provisions of the deed of release assume that a number of the rights and obligations to which it refers will continue until the “Termination Date” – that is, until 1 March 2011. So, for example, Mr Jardin “acknowledges and agrees” in cl 1(f) of the deed of release that, prior to the Termination Date, he continues to be bound by the obligations in the employment deed. But the assumption that the parties’ rights and obligations would continue until the Termination Date was correct unless and until Mr Jardin or Metcash exercised a right to terminate the deed by earlier notice. The deed of release was drafted in the expectation that it was unlikely that the other termination rights contained in the employment deed would be exercised; and consequently it sets out what would happen on the assumption that those rights would not be exercised. But I do not think that it follows from that that the parties agreed that those rights could not be exercised.

37 Nor do I think cl 8(c) – the entire agreement clause – assists the plaintiffs. That clause applies “[e]xcept as otherwise provided in this deed”. As I have said, in my opinion, the deed assumes the continued operation of the employment deed except to the extent that it modifies the latter deed.

Does the employment deed or deed of release impose unreasonable restraints of trade on Mr Jardin?

38 The relevant restrictions are those contained in cl 3.2 of the employment deed – restrictions that Mr Jardin acknowledged and agreed to in cl 1(f) of the deed of release. The parties accept that the reasonableness of these restraints (to the extent that the question of reasonableness arises) should be assessed at the time the relevant agreement was entered into: see Woolworths v Olson [2004] NSWCA 372. They also accept that the relevant agreement was the deed of release. It was by that deed that the parties at least restated the obligations contained in cl 3.2 and the reasonableness of those obligations should be assessed against the background in which the parties recommitted themselves to those obligations rather than the circumstances in which the obligations were originally agreed.

39 The parties, however, say that quite different consequences followed from their agreed starting point. The plaintiffs’ primary position was that the restraint of trade doctrine does not apply at all where the relevant restraints are contained in a deed of release which seeks to resolve a dispute concerning the terms on which Mr Jardin was employed. In support of that proposition, they rely on comments made by Parker J in Panayiotou v Sony Music Entertainment (UK) Ltd [1994] Trading Law Reports 532 (referred to by the High Court in Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at 136 [19]). Alternatively, they say that the restraints were reasonable, particularly having regard to the relationships established by Mr Jardin over the previous 10 years and the confidential information that he had obtained during that time.

40 On the other hand, Mr Jardin’s primary position is that, on its correct construction, cl 3.2 of the employment deed only operated while the employment relationship continued. That relationship came to an end either when Mr Jardin was required to take “gardening leave” on or about 5 February 2010 or when Mr Jardin purported to give immediate notice terminating the contract on 16 July 2010. In the alternative, Mr Jardin says that, even if the restraints contained in cl 3.2 were reasonable in the context of an employment relationship, they were not reasonable once that relationship ended. Mr Jardin sought to make two other points. First, he maintained that, on a proper construction of cl 3.2, he had not committed a breach of it. Second, he maintained that, even if the restraints were reasonable, the court should not in its discretion grant an injunction to give effect to them. I return to these two points below.

41 This part of the case, then, raises three issues. The first is whether the restraint of trade doctrine applies at all. The second is whether cl 3.2 of the employment deed continues to apply. The third is whether and to what extent the restraints imposed by cl 3.2 of the employment deed (and restated by cl 1(f) of the deed of release), assuming they apply, are enforceable.

Does the restraint of trade doctrine apply?

42 As to the first question, I do not accept the plaintiffs’ submission. In Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at 136 [19], the High Court, referring to Panayiotou v Sony Music Entertainment (UK) Ltd [1994] Trading Law Reports 532, left open the question whether a restraint of trade which was the result of a “genuine and proper” resolution of a dispute concerning a restraint of trade clause could itself be made the subject of the restraint of trade doctrine. Here, however, the dispute did not concern the enforceability of a restraint of trade clause that was compromised by agreement to an alternative restraint. The dispute concerned termination of the contract. It was resolved by an agreement that that contract continue for a period of time. There was no compromise reached in relation to the restraint. There is no reason why the restraint of trade doctrine should not apply in those circumstances.

Does cl 3.2 of the employment deed continue to apply?

43 Before seeking to deal with Mr Jardin’s submissions that depend on his claim that the employment relationship had come to an end, I should say something about the relevant legal principles. The law draws a distinction between termination of an employment relationship and termination of the employment contract. The employment relationship normally comes to an end when the employee is no longer willing to perform the services for which the employee is paid a wage or when the employer is no longer willing to permit the employee to perform those services. When that happens, the employee is no longer entitled to receive remuneration for the work that the employee was engaged to do. Instead, where it is the employer who terminates the relationship, the employee is left to a claim for damages. Termination of the employment relationship, however, does not itself terminate the contract of employment. The contract will only terminate in accordance with normal contractual principles: that is, where the party not in breach accepts the repudiation of the party in breach and exercises a right of termination: Purcell v Tullett Prebon (Aust) Pty Ltd [2010] NSWCA 150 at [19]f. As the majority of the High Court (Heydon, Crennan, Kiefel and Bell JJ) pointed out in Visscher v Giudice (2009) 239 CLR 361; [2009] HCA 34 at [53]-[55], there generally will be no point in one party or the other refusing to accept the repudiation of the other. The contract cannot be specifically enforced. The employee is not normally entitled to be paid remuneration for work that the employee does not do. Affirmation of the contract, therefore, normally achieves nothing; and, as a result, the relationship and the contract normally come to an end more or less at the same time. However, that is not always so. One case where it may not be so is where the contract imposes no obligation on the employer to provide the employee with work but imposes restraints on the employee which come to an end on termination of the contract but which do not come to an end on termination of the employment relationship. In cases of that type, it may be in the interests of the employer to affirm the contract in order to continue to obtain the benefit of the restraints – which are capable of being enforced by a negative injunction. A typical case of that type is where the contract provides a period of notice and, during the period of notice, permits the employer to place the employee on “gardening leave”. In cases of that type, an employee may repudiate the contract by purporting to terminate it without giving the requisite notice. That repudiation will bring the employment relationship to an end. However, in response, the employer may affirm the contract, exercise its rights to place the employee on gardening leave, continue to pay the employee and seek to enforce the restraints imposed by the contract. The question, then, is how does the restraint of trade doctrine operate in those circumstances? It is now accepted that the doctrine applies during the existence of a contract: Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126. However, what a reasonable restraint is during the existence of a contract is very different from what is reasonable following the contract’s termination. For example, it will be very rare for an obligation not to engage in other employment to be regarded as unreasonable during the term of the employment relationship. The same cannot be said following termination of the contract: Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269. Generally, courts have taken the view that restraints that operate during a period of gardening leave are analogous to restraints that operate after the contract has terminated. As a result, they are more difficult to justify: Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852; William Hill Organisation Ltd v Tucker [1998] EWCA Civ 615; [1999] ICR 291 at [25]; Bearingport Australia Pty Ltd v Hillard [2008] VSC 115.

44 In my opinion, it is unnecessary to determine whether the employment relationship continued in this case. Although the conduct of Metcash on or about 5 Feburary 2010 may have amounted to a repudiation by it of the employment deed and although, in the normal course of events, that may have amounted to a constructive dismissal bringing to an end the employment relationship, the parties reached an agreement on 19 February 2010 to continue the contract for a period of time subject to a number of modifications. The parties specifically agreed at that time that Mr Jardin would continue to be bound by the obligations imposed on him by the employment deed Those obligations included the obligations imposed by cl 3.2. There is no reason to interpret those obligations as only applying while the employment relationship continues. On their face, they continue while the employment deed remains on foot.

45 Similarly, even assuming that Mr Jardin’s notice on 16 July 2010 brought an end to the employment relationship at that time, it did not bring an end to the deed of release. Metcash elected to affirm that deed. For the reasons I have given, that deed re-affirmed the obligations imposed by cl 3.2 of the employment deed.

Are the restraints imposed by cl 3.2 enforceable?

46 Clause 3.2 is enforceable to the extent that it is not against public policy: Restraints of Trade Act 1976 (NSW), s 4(1). A restraint of trade is not contrary to public policy if it is reasonable between the parties, and not unreasonable in the public interest: Tullett [2008] NSWSC 852 at [45].

47 Two points need to be borne in mind in considering the question of reasonableness. First, on the interpretation I have adopted of the deed of release, it was always open to Mr Jardin to terminate the employment deed on 3 months’ notice; and, indeed, that is what Mr Jardin did on 26 July 2010. That fact is relevant to the reasonableness of the restraints contained in cl 3.2.

48 Secondly, in considering the reasonableness of the restraints the court should consider what is necessary to protect the legitimate interests of the person asserting the restraint in the circumstances of the case: Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337. Part of the circumstances of this case include the fact that the parties agreed to terminate the employment deed in accordance with the deed of release; and, in that context, the parties agreed that Mr Jardin would not be entitled to continue to work in his previous position. In my opinion, it is an over simplification to say in this case that Mr Jardin was put on “gardening leave” and that consequently the reasonableness of the restraints should be assessed as if they were post contractual restraints. The fact that Metcash was not obliged to provide work to Mr Jardin is one matter that needs to be taken into account. But it is also relevant that Mr Jardin continues to be paid during the period that he is bound by the restraint: Woolworths Limited v Olson [2004] NSWCA 372 at [61], [68]. In addition, it is relevant that the parties agreed to a continuation of the restraints as part of a negotiated settlement of a dispute in which the parties were each legally represented.

49 The plaintiffs sought to justify the restraints on two principal bases. First, they maintained that the restraints were a means of protecting their customer connections. Second, they maintained that the restraints were a means of protecting their confidential information.

50 There can be no doubt that restrictions on working for a competitor or operating a competing business for a period is a legitimate means by which an employer can protect its customer connections and its confidential information: Koops Martin Financial Services Pty Limited v Reeves [2006] NSWSC 449 at [44] (Brereton J); Stacks Taree v Marshall (No 2) [2010] NSWSC 77 at [41] per McDougall J; Portal Software v Bodsworth [2005] NSWSC 1179 at [83] per Brereton J; Woolworths Ltd v Olson [2004] NSWCA 372 at [67] per Mason J. However, Mr Jardin says that the plaintiffs have failed to establish that the restraints are reasonable for three reasons. First, he says that the plaintiffs have failed to establish that Mr Jardin had connections with customers that were sufficiently close to justify any of the restraints on that ground. Second, he says that the information no longer possesses the requisite degree of confidentiality, having regard to the passage of time. Third, he says that the restraint on investment contained in cl 3.2(d) of the employment deed is wider than is necessary to achieve any legitimate protection to which Metcash is entitled.

51 I do not accept Mr Jardin’s first two submissions.

52 In my opinion, the evidence establishes that, over a period of 10 years, Mr Jardin developed close relationships with a large number of important customers of Metcash. Although Mr Jardin was reluctant to concede the point, it was clearly an important part of his job to build relationships with customers. Others in the company also had responsibility for establishing and maintaining relations with customers. However, as CEO of IGA, Mr Jardin played an important role in maintaining those relationships. He was the person to whom customers could turn in the event that they could not get satisfaction elsewhere in the organisation. He travelled frequently to visit customers and entertained them often – all at Metcash’s expense. On occasions, his wife joined him – again at Metcash’s expense. It is clear from the evidence that he gave that he had built up a detailed knowledge of many of Metcash’s customers; and it is clear from emails he sent and received following the termination of his position of CEO that he had developed strong personal relationships with a number of them. Mr Jardin’s connections with independent retailers was one of the matters that made his offer to acquire 51 percent of the shares in SPAR Australia attractive to that company. In my opinion, Metcash was entitled to protect those connections by a restraint that prevented Mr Jardin from taking unfair advantage of them. Mr Neil, who appeared for Mr Jardin, submitted that it would be difficult for Mr Jardin to attract customers away from Metcash because many of them were bound by agreements with Metcash and, in fact, Metcash had invested in a number of them. However, if Mr Jardin had been free from the time he ceased to be CEO of IGA to approach customers, he would have been in a position to undermine the relationships between those customers and Metcash and, in doing so, he would have increased the likelihood that some of them would ultimately leave Metcash for a competitor. Metcash was entitled to protect itself against that happening.

53 The evidence also establishes that Mr Jardin had access to confidential information. Indeed, Mr Jardin does not dispute that fact. For example, Mr Jardin emailed some of those documents to his home email address on 19 January 2010. In cross-examination, he accepted that some of those documents were confidential. He retains possession of them – so that there can be no question that he has forgotten their contents. Instead, what Mr Jardin says is that that information is now out of date. Although that may be true of some of the information, I do not think that that can be said of all if it. The information included board papers, the commercial terms on which IGA deals with its customers and Metcash’s business strategies and plans. I accept the evidence given by Mr Morabito that substantial parts of those documents remain current and that they could be used to Metcash’s competitive disadvantage. Mr Morabito conceded in cross-examination that it was possible that anyone well versed in the industry could come up with similar business plans. But I do not think that that demonstrates that the information is not confidential. What is important is the conclusions that Metcash reached in its business plans. Knowing that information would assist a competitor to react to those plans. In addition, knowing any of Metcash’s weaknesses would assist a competitor to target those weaknesses.

54 In my opinion, the restraint in cl 3.2(d) (concerning investments of more than 5 percent in a company) is unreasonably broad. The restraint may have been justified when Mr Jardin occupied the position of CEO of IGA on the basis that he was required to devote his full attention to the business of IGA and that there was a risk that he would not do so if he had a substantial investment in another company. However, it is difficult to understand why it was reasonable of Metcash to seek, in effect, to reimpose that restraint in the deed of release in circumstances where the expectation at the time that deed was executed must have been that Mr Jardin would be put on gardening leave. It is difficult to see what legitimate interest Metcash had in preventing Mr Jardin from investing in another company at that time. The fact that the clause permitted Metcash Trading to give its consent to a particular investment does not alter the position. On the other hand, I think that Metcash continued to have a legitimate interest in preventing Mr Jardin from investing in a competitor at that time. For the reasons I have given, Metcash had a legitimate interest in preventing Mr Jardin from using confidential information and customer connections. In Woolworths Ltd v Olson [2004] NSWCA 372 at [67] Mason P said:

“A recognised method of such protection [ie, protection against misuse of confidential information] is the procurement of a restraint upon the employee given access to such information taking up employment with a competitor whom he might be willing to provide with such information. A reasonable employment restraint is easier to enforce than a breach of confidence or breach of copyright claim; it removes the temptation for the former employee to offer and for the new employer to solicit confidential information; and it provides certainty of definition as regards the area of confidential information to be protected.”

Restraints of Trade Act.

55 That leaves the question of the length of the restraint. On the findings I have made, the restraints imposed by the deed of release were for a period of approximately one year, although that period could be reduced by Mr Jardin giving 3 months’ notice. The fact that Mr Jardin could reduce the period of the restraint does not, in my opinion, mean that a restraint for a longer period was unreasonable. Rather, the fact that Mr Jardin retained the right to terminate the employment deed on 3 months’ notice was a benefit he received as part of the settlement embodied in the deed of release. Mr Jardin had occupied the position of CEO for a period of 10 years. He had spent that time building up close personal relationships with a large number of customers and those relationships were a valuable asset of Metcash. It is true that that was not the only asset of that type that Metcash had, since others in the organisation also have relationships with customers. Nonetheless, given his position, they were important relationships which would take time to replace – not that that is the only measure of the reasonableness of the restraint: see Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25 at [36]-[39] per Hodgson JA with whom Basten JA and Handley AJA agreed. Similarly, I do not think that a restraint of up to a year was unreasonable so far as the confidential information held by Mr Jardin was concerned. The information included information in business plans and strategy documents. The evidence was that large parts of that information remained current at the time of the hearing. Of their nature, plans of that type remain current for a period of time; and, as I have said, Mr Jardin retained possession of some of that information. Finally, the reasonableness of the length of the restraint needs to be assessed in the context in which it was agreed. It was agreed as part of a settlement in which both parties were legally represented and in which Metcash agreed to continue to pay Mr Jardin during the time the restraint operated. The court should not lightly substitute its own views for the views of the parties in those circumstances: cf Woolworths Limited v Olson [2004] NSWCA 372 at [39]; John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995 at [21] per Brereton J. Taking those matters into account, I consider the length of the restraints imposed on Mr Jardin to be reasonable.

Will giving effect to the deed of release breach of s 45 of the TPA?

56 Mr Jardin asserts that, if the plaintiffs were permitted to give effect to cl 3.2(d) of the employment deed by preventing Jardim Investments from investing in SPAR Australia, that would contravene s 45(2)(b)(ii) of the TPA. That is said to be so because the effect or likely effect of giving effect to that provision will be to substantially lessen competition in what is said to be the market for the supply of packaged groceries to independent supermarket retailers in Australia since, without the investment of Jardim Investments, SPAR Australia will not be able to continue to compete in that market or its ability to do so will be seriously affected. As a result, Mr Jardin claims to be entitled to relief under s 87 of the TPA preventing Metcash from giving effect to that provision.

57 In my opinion, this aspect of Mr Jardin’s case cannot be dealt with in this judgment. Section 6 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) relevantly provides:

(b) the court does not make an order under subsection (3) in respect of the matter,

(1A) However, the court must only transfer so much of the proceeding as is, in the opinion of the court, within the jurisdiction (including the accrued jurisdiction) of the Federal Court, … .

(2) …

(3) The Supreme Court may order that the proceeding be determined by that court if it is satisfied that there are special reasons for doing so in the particular circumstances of the proceeding other than reasons relevant to the convenience of the parties.

(4) Before making an order under subsection (3), the court must be satisfied that:

(b) a reasonable time has elapsed since the giving of the notice for the Attorneys-General to consider whether submissions to the court should be made in relation to the proceeding.

(b) may direct a party to the proceeding to give a notice in accordance with that subsection.”

58 This provision was not raised by the parties during the course of the hearing. However, after the hearing finished my Associate wrote to the parties indicating that I proposed not to deal with this part of the case in this judgment and to make orders concerning it at the time that I delivered judgment. I invited the parties to make submissions on that proposal if they wanted to. The defendants indicated that they agreed with my proposal and the plaintiffs made no contrary submissions. In those circumstances, I do not propose to deal with this aspect of the case further in this judgment.

Has Mr Jardin breached cl 3.6 of the employment deed?

59 The significance of this issue is that it is relevant to the length for which any injunction should be granted. On the findings that I have made, and leaving discretionary considerations aside, the plaintiffs would be entitled to an injunction to restrain that threatened breach for a period of 3 months from 26 July 2010 – that is, 3 months from the date on which Mr Jardin exercised his right to terminate the employment deed in accordance with cl 12.1(a). However, if Mr Jardin also breached cl 3.2 before he validly terminated the contract, the plaintiffs may be entitled to an injunction until a later date on the basis that Mr Jardin obtained a head start or “spring board” from his earlier breach or breaches: Landmark Underwriting Agency Pty Ltd v Kilborn [2006] NSWSC 1108.

60 Mr Neil submitted that Mr Jardin did not breach cl 3.2before he gave notice of termination. Any conduct before that time was merely preparatory to conduct that may be a breach of cl 3.2 So, to take an obvious example, Mr Jardin has never held an interest in excess of 5 percent in SPAR Australia in breach of cl 3.2(d). At most, he took steps to acquire such an interest. Consequently, he did not breach cl 3.2(d).

61 I do not accept the submission that Mr Jardin has not so far breached cl 3.2 of the employment deed. In my opinion, when Mr Jardin met with Mr Carson on 1 July 2010 and when he made an offer to acquire a 51 percent interest in SPAR Australia he was acting in conflict with Metcash’s best interests in breach of cl 3.2(a). In arranging the meeting with Mr Carson and in making the offer he did, Mr Jardin was seeking to promote the interests of a competitor to the detriment of Metcash. By the terms of the employment deed and deed of release, that is not something that he was entitled to do until the expiration of 3 months’ notice terminating the employment deed. To that extent he obtained a head start compared to the position he would have been in if he had complied with his obligations.

62 The measure of that head start is not always straightforward: see Landmark Underwriting Agency [2006] NSWSC 1108 at [88]-[96] per Young J as he then was. To some extent, Mr Jardin lost the benefit of the head start that he obtained when he gave undertakings to the court on 21 July 2010. However, those undertakings were narrower in scope than the obligations imposed by cl 3.2of the employment deed. Mr Jardin had discussions with Mr Carson on 4 August 2010 concerning operational matters affecting SPAR Australia, including the appointment of a new Chief Financial Officer and issues relating to a number of SPAR Australia stores that were experiencing difficulties. There is no evidence that Mr Jardin has had discussions with SPAR Australia since that time. Mr Fernon, who appeared for the plaintiffs, submitted that the head start continues because Mr Jardin has retained possession of confidential information belonging to Metcash and that, in those circumstances, any injunction given on the basis of the spring board principle should continue until 1 March 2011. There is, however, no evidence that Mr Jardin has made use of that confidential information. Taking these matters into account, I think that an appropriate measure of the head start is the period between the time Mr Jardin first met Mr Carson on 1 July 2010 until 4 August 2010 – that is, a period of 35 days. On that basis, any injunction should be granted up to and including 30 November 2010.

Are the plaintiffs entitled to a remedy against Jardim Investments?

63 The plaintiffs seek orders against Jardim Investments restraining it from investing in SPAR Australia up to and including 1 March 2011. They also seek orders restraining Jardim Investments from competing with them and from acting in conflict with their interests. In seeking those orders, they rely on Gilford Motor Company, Limited v Horne [1933] 1 Ch 935. In that case, Mr Horne had been the Managing Director of Gilford Motor Company. His employment contract contained a term by which he agreed during the term of the contract and afterwards not to “solicit, interfere with or endeavour to entice away from the company any person, firm or company who at any time during or at the date of the determination of the employment of the managing director were customers of or in the habit of dealing with the company”. After termination of his employment, Mr Horne incorporated a company named “J M Horne Co Limited”. “J M Horne” was his wife’s name. The directors and shareholders of that company were Mr Horne’s wife and an associate of Mr Horne, who was employed by the company. The business of the company was carried on wholly by Mr Horne. The Court of Appeal concluded that an injunction should be granted against the company as well as Mr Horne on the basis that the company was “a mere cloak or sham” (at 961 per Lord Hanworth, at 965 per Lawrence LJ, at 969 per Romer LJ).

64 Although the conclusion in Gilford is generally accepted as correct, the reasoning is not. There was no “sham” – that is, there was no transaction that was not intended to operate according to its tenor: see ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 at 655-6. In ICT the Court of Appeal preferred to explain the decision on the basis of agency:

Reid v Howard

Acrow (Automation) Ltd v Rex Chainbelt Inc

Ford’s Principles of Corporations Law,

^th

Gramophone and Typewriter Ltd v Stanley

Dennis Willcox Pty Ltd v FCT

Ford’s Principles of Corporations Law

Gilford

Gilford Motor

Gilford

Meagher, Gummow and Lehane’s Equity Doctrines & Remedies

^th

65 There is a question whether the relevant purpose need only be one of the purposes for which the company was incorporated or whether it must be the dominant or principal purpose. In Gilford, Lord Hanworth MR said that he could not help feeling “quite convinced that at any rate one of the reasons for the creation of [the] company was the fear of Mr Horne that he might commit breaches of the covenant in carrying on the business” ([1933] 1 Ch at 955-6). But the ultimate conclusion of the Court of Appeal in that case was that the incorporation of the company was “a mere cloak or sham”. That finding suggests that the court thought that avoidance of the restraint was the dominant reason why the company was incorporated. If there were substantial reasons for the incorporation of the company that were legitimate, it is hard to see how the court could have concluded that the incorporation of the company was a mere device to avoid the restraint. The authors of Ford’s Principles of Corporations Law at [4.250] treat Gilford as a case where the sole or dominant purpose for which the company was incorporated was to avoid an existing legal obligation. That approach is consistent with the general reluctance of courts to depart from the principle that a corporation is a separate legal entity from those who control it, and its rights and obligations should be determined by reference to its relationships and not those of its controllers.

66 It is important in applying the principle in Gilford to focus on the conduct of the company which it is said should be attributed to the individual bound by the restraint. It appears that the principal purpose for which Jardim Investments was incorporated was to make an investment in SPAR Australia. In this respect, the present case should be contrasted with Gilford. There, the company was incorporated to carry on a competing business – and, relevantly, to solicit customers of Mr Horne’s former employer. The question, then, is whether the dominant purpose in incorporating Jardim Investments to invest in SPAR Australia was to avoid the restraint imposed on Mr Jardin, with the result that it should be treated as the agent of Mr Jardin in making that investment.

67 In my opinion, the plaintiffs have not established that that was the dominant purpose of incorporating Jardin Investments. It is a normal part of commercial life that companies are incorporated as special purpose vehicles through which investments are made. There are various reasons why that is done, not least among them the tax benefits that may flow from such an arrangement. The plaintiff sought to make something of the fact that Jardim Investments was incorporated at the last minute. However, there is no evidence that that was done because Mr Jardin realised that it was the only way to avoid the restraint contained in cl 3.2(d) of the employment deed. Mr Jardin replaced his son as the sole director of Jardim Investments on the day it was incorporated. He subsequently resigned and later still additional directors were appointed. No doubt, those steps have been taken in order to distance Mr Jardin from Jardim Investments. But I do not think the fact that Mr Jardin or Jardim Investments thought that that was desirable means that Jardim Investments was incorporated in order to avoid the restraint in cl 3.2(d) placed on Mr Jardin. Nor do I think it matters that Jardim Investments does not have its own offices or bank account. Those facts are equally consistent with a decision that Jardim Investments was an appropriate company in which to hold an investment in SPAR Australia for reasons unconnected to the restraint in cl 3.2(d). Similarly, I do not think that any particular significance can be attached to the fact that Mr Jardin lent Jardim Investments the money to make the investment. Under cross-examination, Mr Jardin said – somewhat implausibly - that the money was a gift to his wife, and it was his wife who made the investment. However, the fact that Mr Jardin lent money to Jardim Investments in order for that company to make an investment in SPAR Australia does not mean that the investment in truth must be regarded as one that will be made by Mr Jardin.

68 There is no doubt that, in connection with Jardim Investments’ in investment SPAR Australia, Mr Jardin proposes to become heavily involved in the management of SPAR Australia and that that is an important part of the proposal that was announced on 16 July 2010. I have concluded that that does not mean that the investment itself involves a breach of cl 3.2(d) of the employment deed. But it does not follow from that that Jardim Investments is not engaging or threatening to engage in other conduct which would be a breach of cl 3.2 of the employment deed. It is one thing to say that Jardim Investments is not making the proposed investment in SPAR Australia as agent for Mr Jardin because the structure that has been adopted for the investment is one that might be expected to be adopted even if Mr Jardin were not bound by a restraint at all and that structure does not involve Mr Jardin in a breach of cl 3.2(d) absent a finding that Jardim Investments is acting as his agent in making the investment. It is another thing to say that Jardim Investments is free to engage in other activities associated with SPAR Australia. For example, SPAR Australia distributed a circular from Christopher Jardim prior to the extraordinary general meeting that considered Jardim Investments’ proposed investment. That circular said in part:

“I have been taught by my parents and grandparents that a family is built around partnership and togetherness. We, as a family, believe in consultation and dialogue. Our family is very important to us, as we know yours are to you. We believe that it’s important to not only build for the future but to leave a sustainable legacy. We are not a corporate business but a family business like yours.

As a family business we are in this for the long term and will not be focused on the short-term “return to shareholders”. Rather, my family aims to ensure the long-term sustainability of the independent supermarket industry through ensuring that your stores are profitable and price competitive.”

69 This passage suggests that the Jardin family – presumably through Jardim Investments – proposes to play a more active role in the affairs of SPAR Australia beyond being a passive investor. To the extent that that is what is proposed, it seems to me that Jardim Investments will engage in that conduct on behalf of Mr Jardin. As I have said, part of the attraction of the proposal made by Mr Jardin was that he had extensive experience in the marketing and distribution of groceries and would be able to bring that expertise to SPAR Australia. No other member of Mr Jardin’s family has any real experience in the marketing and distribution of groceries. Christopher himself, as I have said, is a medical student. It is fanciful to suppose that he or other members of the family have the expertise that SPAR Australia seeks. To the extent that they are purporting to supply that expertise, the only inference that can be drawn is that they will be doing so to avoid the restraints imposed on Mr Jardin and that they will be doing so as his agent.

What remedies should be granted?

70 Two discretionary grounds were advanced for refusing the injunctions sought by the plaintiffs. The first was that, even if the restraints contained in cl 3.2were reasonable at the time they were agreed or adopted in the deed of release, an injunction should not be granted to enforce them. The second was that any injunction would have a detrimental effect on SPAR Australia.

71 I do not accept either of these submissions. In support of the first submission, Mr Jardin relied on the decision in Bearingport Australia Pty Ltd v Hillard [2008] VSC 115 at [142] ff. That case stands for the uncontroversial proposition that, even if a court determines that a restraint of trade is reasonable, it must go on to consider whether it ought, in the exercise of its discretion, refuse to grant an injunction to give effect to the restraint. One discretionary ground for doing so is that the injunction would amount to specific performance of the contract. Leaving aside the effect any injunction may have on SPAR Australia for the moment, I do not think that there are any discretionary grounds for refusing an injunction in this case. Injunctions restraining breaches of cl 3.2 of the employment deed will not amount to specific performance. It follows from what I have said in relation to the restraints that they continue to have utility.

72 As to the effect on SPAR Australia, I accept that that is a matter that the court can take into account in determining whether to grant in injunction: see Spry, Equitable Remedies, Lawbook, 8^th ed, 2010, at 402. I do not think that any effect on SPAR Australia outweighs the matters that would justify granting an injunction. I have concluded that the plaintiffs are not entitled to an injunction restraining Jardim Investments from investing in SPAR Australia. SPAR Australia was aware that Mr Jardin had contractual obligations to Metcash, and it is not clear what loss, if any, it would suffer if Mr Jardin was restrained from providing services to it for a period of time. Metcash, on the other hand, has clear contractual rights. It continues to pay Mr Jardin his entitlements. In those circumstances, I do not think that any effect on SPAR Australia of an injunction would justify refusing to grant it.

73 It follows from what I have said that the following orders should be made against the first defendant:

“The first defendant is, up to and including 30 November 2010, whether by himself, his servants or agents, restrained from:

(1) entering into any transaction by which he holds or becomes interested in investments of more than 5 percent of any class of any one company, including but not limited to SPAR Australia Ltd or any of its related bodies corporate ( SPAR );

(3) discussing the business of SPAR with any person except for his legal advisers for the purpose of obtaining legal advice;

(4) competing with the business of the plaintiffs or any of its related bodies corporate, including but not limited to contacting, conversing or dealing with any employee, customer, joint venture partner or supplier of or to the plaintiffs, or entering into any agreement to work for SPAR in any capacity including as a director, contractor or employee;

(6) disclosing to any person other than his legal advisers for the purposes of obtaining legal advice the contents of any documents held by him which belong to the plaintiffs.”

74 The following orders should be made against the second defendant:

“The second defendant is, up to and including 30 November 2010, whether by itself, its servants or agents, or otherwise, restrained from:

(1) discussing the business of SPAR with any person except for its legal advisers for the purpose of obtaining legal advice;

(2) competing with the business of the plaintiffs or any of its related bodies corporate, including but not limited to contacting, conversing or dealing with any employee, customer, joint venture partner or supplier of or to the plaintiffs, or entering into any agreement to provide services to SPAR in any capacity;

(4) disclosing to any person other than his legal advisers for the purposes of obtaining legal advice the contents of any documents held by him which belong to the plaintiffs.”

Nothing in these orders is intended to prevent the second defendant from acquiring 51 percent of the issued capital of SPAR.

75 I propose, however, to give the parties an opportunity to make submissions on the precise form of the orders before I make them.

76 I will hear the parties in relation to costs.

77 The parties should have liberty to apply on 3 days’ notice in relation to Jardim Investments’ claim under the Trade Practices Act 1974.

**********

29/09/2010 - 5 July 2010 should be 5 February 2010 - Paragraph(s) 33, 40 and 44

Key Legal Topics

Areas of Law

Employment & Labour Law
Contract Law

Legal Concepts

Breach of Contract
Restraint of Trade
Jurisdiction
Injunction

Actions

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Citations

Metcash Limited v Joao Louis Jardim (aka Louis Jardin) (No 3) [2010] NSWSC 1096

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CITATION:	Metcash Limited & Anor v Joao Louis Jardim (aka Louis Jardin) & Anor (No 3) [2010] NSWSC 1096 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	13 September 2010 to 17 September 2010
JUDGMENT DATE :	29 September 2010
JUDGMENT OF:	Ball J
DECISION:	See paragraphs 72 to 77 of the judgment.
CATCHWORDS:	CONTRACT – employment – termination – whether employee entitled to terminate by giving three months' notice. EMPLOYMENT - consequence of termination of employment relationship on obligations of the parties - whether restraint of trade clause enforceable - whether second defendant incorporated to avoid restraints imposed on first defendant. REMEDIES – injunctions – relevance of effect of injunction on third party. PROCEDURE – civil – jurisdiction – special federal matter
LEGISLATION CITED:	Restraints of Trade Act 1976 (NSW) Trade Practices Act 1974 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Bearingport Australia Pty Ltd v Hillard [2008] VSC 115 Curro and Another v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 Dennis Willcox Pty Ltd v FCT (1988) 79 ALR 267 Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 Gramophone and Typewriter Ltd v Stanley [1908] 2KB 89 John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995 Koops Martin Financial Services Pty Limited v Reeves [2006] NSWSC 449 Landmark Underwriting Agency Pty Ltd v Kilborn [2006] NSWSC 1108 Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25 Panayiotou v Sony Music Entertainment (UK) Ltd [1994] Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 Portal Software v Bodsworth [2005] NSWSC 1179 Purcell v Tullett Prebon (Aust) Pty Ltd [2010] NSWCA 150 Stacks Taree v Marshall (No 2) [2010] NSWSC 77 Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852 Visscher v Giudice (2009) 239 CLR 361; [2009] HCA 34 William Hill Organisation Ltd v Tucker [1998] EWCA Civ 615; [1999] ICR 291 Woolworths v Olson [2004] NSWCA 372
TEXTS CITED:	Ford’s Principles of Corporations Law, Butterworths, 14th ed, 2010 Meagher, Gummow and Lehane’s, Equity Doctrines & Remedies, Butterworths, 4th ed, 2002 Spry, Equitable Remedies, Lawbook, 8th ed, 2010
PARTIES:	Metcash Limited ACN 112 073 480 (First Plaintiff) Metcash Trading Limited ACN 000 031 569 (Second Plaintiff) Jaoa Louis Jardim (First Defendant) Jardim Investments Pty Limited ACN 145 255 894 (Second Defendant)
FILE NUMBER(S):	SC 2010/242993
COUNSEL:	J J Fernon SC (Plaintiffs) M White (Plaintiffs) I M Neil SC (First Defendant) R Gration (First Defendant) A Zahra (Second Defendant)
SOLICITORS:	Freehills (Plaintiffs) Harmers (First Defendant) Clamenz Corporate Lawyers (Second Defendant)

[2010] NSWSC 1096

29 September 2010

Key Legal Topics

Areas of Law

Employment & Labour Law

Contract Law

Legal Concepts

Breach of Contract

Restraint of Trade

Jurisdiction

Injunction