SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
POSITIVE ENDEAVOUR PTY LTD v MADIGAN & ORS
[2009] SASC 281
Judgment of The Full Court
(The Honourable Justice Bleby, The Honourable Justice Gray and The Honourable Justice Layton)
9 September 2009
TRADE AND COMMERCE - OTHER REGULATION OF TRADE OR COMMERCE - RESTRAINTS OF TRADE - VALIDITY AND REASONABLENESS - PARTICULAR CASES - VENDOR OF BUSINESS
TRADE AND COMMERCE - OTHER REGULATION OF TRADE OR COMMERCE - RESTRAINTS OF TRADE - SEVERANCE
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Appeal from order of District Court Judge dismissing appellant’s claim for damages for breach of contract – appellant and its controller were partners in finance broking business together with the respondents and companies controlled by them – partnership was dissolved and appellant bought part of business from other partners – contract for sale of business included clause by which vendors agreed not to “solicit, canvass or secure the custom of a person who is at completion, or was within twelve months before completion, a customer” of any of the partnership entities – appellant claims damages for breach of restraint of trade clause.
Whether restraint of trade clause imposes unreasonable restraint on trade – whether clause too broad in the activities it prohibits, the customers with whom it prohibits trading and the duration for which the restraint is to continue – consideration of intended purpose of restraint – whether severance is appropriate – whether relief avaliable against the third respondent, a company controlled by the first and second respondents.
Appeal allowed - (per Bleby and Layton JJ) clause unreasonably broad but severance of part of the clause is possible - (per Gray J) clause is reasonable restraint.
Supreme Court Act 1935 (SA) s 30; District Court Act 1991 (SA) s 36, referred to.
Brew v Whitlock (No 2) [1967] VR 803; Attwood v Lamont [1920] 3 KB 571, distinguished.
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Lake v Simmons [1927] AC 487; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; Pacific Couriers Ltd v BNP Paribas (2004) 218 CLR 451; Watson v Phipps (1985) 63 ALR 321; Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9; Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535; Hitchcock v Coker (1837) 6 AD & E 436; Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Company Pty Ltd (1973) 133 CLR 288; Ronbar Enterprises v Green [1954] 2 All ER 266; Eastwood Co-operative Society Ltd v Williams (1932) 34 SR(NSW) 403; Pemberton v Vaughan (1847) 10 QB 87; Avery v Langford (1854) 23 LJ Ch 837; Fitch v Dewes [1921]…
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- Case
- [2009] SASC 281
- Decision Date
CaseChat Overview and Summary
The appeal raised several legal issues. The primary issue was whether the restraint of trade clause imposed an unreasonable restraint on trade. The court also considered whether the clause was too broad in the activities it prohibited, the customers with whom it prohibited trading, and the duration for which the restraint was to continue. The intended purpose of the restraint was also considered. Additionally, the court examined whether severance of the clause was appropriate and whether relief was available against the third respondent, a company controlled by the first and second respondents.
The appeal was allowed by the majority of the judges, though there were differing views on the reasoning. Bleby and Layton JJ held that the clause was unreasonably broad but that severance of part of the clause was possible. Gray J held that the clause was a reasonable restraint. The majority concluded that by deleting the reference to new loans and limiting the class of loans to the refinancing of existing loans, the restraint was also limited in time to the duration of the loans existing at completion. This meant that the right to existing trail commission was preserved for the duration of the loan, as was the right to fresh commissions on any refinancing of an existing loan. The court also considered the position of First Pacific Mortgages Pty Ltd, a company controlled by the respondents. The court held that the company was not liable in damages for any breach of contract because it was not a party to the contract. However, there may be equitable remedies available against it. The court remitted the matter to the District Court for further hearing and determination, with the appellant to be awarded costs of the appeal.
Orders
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Background
Background to the litigation
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Evidence
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Decision
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Ratio Decidendi
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Established by: BLEBY J
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