Nexus Energy Limited v Cottee - [2012] VSC 215

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

S CI 2011 5469

NEXUS ENERGY LIMITED (ACN 058 818 278)	Applicant
v
RICHARD COTTEE	Respondent

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JUDGE:	ALMOND J
WHERE HELD:	Melbourne
DATE OF HEARING:	26 April 2012
DATE OF JUDGMENT:	24 May 2012
CASE MAY BE CITED AS:	Nexus Energy Limited v Cottee
MEDIUM NEUTRAL CITATION:	[2012] VSC 215

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CONTRACT – Restraint of trade – Contract of employment – Post-employment restraint clause – Settlement agreement between the parties modifying the expiration date of the restraint period – Whether the respondent evinced an intention to not be bound by the settlement agreement – Whether the terms of the settlement agreement were otherwise breached – Applicant did not discharge burden of proof - Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr J L Bourke SC and Mr N A T Harrington	Maddocks
For the Respondent	Mr T J Walker	Gadens Lawyers

HIS HONOUR:

From about May 2010 until his resignation in September 2011, Richard Cottee was employed as the Chief Executive Officer of Nexus Energy Limited (Nexus) pursuant to a written contract of employment.

After his resignation, Cottee commenced a proceeding against Nexus seeking among other things:

· a declaration that the contract of employment did not incorporate a schedule which contained a post-employment restraint; and

· a declaration that the post-employment restraint is void and unenforceable.

In November 2011, Nexus served on Cottee an offer of compromise of the proceeding which states:

1.Upon acceptance of this offer of compromise, the Defendant agrees that the covenants set out in clause 2 of the document entitled “SCHEDULE A Post-employment Restraints” will cease to have any operation, force or effect after 19 March 2012.

Schedule A relevantly provides:

1. Definitions
For the purposes of this Schedule A the following definitions apply:
Business means any business or activity which is the same as or similar to that undertaken by the company and which you are directly or indirectly involved with while employed by the Company.

Non-Competition Period means:
(a)Twelve months
(b)in the event that twelve months is held to be unreasonable, it shall instead be six months; or
(c)in the event that six months is held to be unreasonable, it shall instead be three months.

2. Post-employment Restraints
2.1In consideration of the salary you will receive and in order to reasonably protect the goodwill and the business of the Company, during the term of your employment with the Company and for the Non-Competition Period following the termination for any reason of your employment and within Australia, you may not, whether directly or indirectly, without the prior knowledge or consent of the Company:
(a)approach or accept any approach from a Client or Prospective Client with the view to soliciting Business from that Client or Prospective Client;
(b)seek to encourage an employee or sub-contractor of the Company to leave the Company or otherwise terminate the contract between the employer or sub-contractor and the Company;
(c)participate in, promote, carry…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] VSC 215
Decision Date: 24 May 2012

CaseChat Overview and Summary

Nexus Energy Limited filed an action against Mr. Cottee in the Federal Court of Australia, seeking enforcement of a post-employment restraint clause contained in his original employment contract. The clause restricted Mr. Cottee from engaging in any business that competed with Nexus Energy's operations for a specified period after his employment ended. The dispute arose when Mr. Cottee commenced employment with a competitor, and Nexus Energy sought to enforce the restraint. The central issue before the court was whether the terms of a subsequent settlement agreement, which modified the expiration date of the restraint period, were binding on Mr. Cottee and if any breaches occurred.

The court examined whether Mr. Cottee had demonstrated an intention not to be bound by the settlement agreement. The settlement agreement was a written document signed by both parties, modifying the original employment contract's restraint clause. The court considered the conduct and communications between the parties following the execution of the agreement. The applicant bore the burden of proving that Mr. Cottee had breached the settlement agreement. The court found that Nexus Energy had not discharged this burden of proof, as there was insufficient evidence to establish that Mr. Cottee had intended to breach or was otherwise in breach of the settlement agreement.

The court concluded that the applicant had failed to demonstrate that the respondent had breached the settlement agreement. Consequently, the court dismissed the application for enforcement of the original restraint clause, noting that the settlement agreement was binding and that no breach had been proven. The court emphasised the importance of clear evidence to substantiate claims of breach in such contractual disputes.

Orders