Rentokil Pty Ltd v Lee
[1995] SASC 5318
•2 November 1995
COURT IN THE IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA DOYLE CJ(1), MATHESON(2) AND DEBELLE(3) JJ
CWDS
Contracts - general contractual principles - illegal and void contracts - contracts contrary to public policy - Deed restraining employee's involvement in certain businesses - restraint reasonable as to duration and area - restraint on involvement in 'any capacity' - particular capacities also stated - wide definition including particular capacities cannot be read down by reference to events not within contemplation of parties - definition unreasonably wide - severance - severance a question of parties' intention - particular capacities severed from definition of capacity. Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432; Attwood v Lamont (1920) 3 KB 571, applied. Home Counties Dairies Ltd v Skilton (1970) 1 All ER 1227, distinguished.
HRNG ADELAIDE, 18 August 1995 #DATE 2:11:1995 #ADD 12:12:1995
Counsel for appellant: Mr M Frayne
Solicitors for appellant: Fisher Jeffries
Counsel for respondent: Mr F Difazio
Solicitors for respondent: White Berman
ORDER
Appeal allowed.
JUDGE1 DOYLE CJ This is an appeal from a decision of a District Court Judge holding that a provision contained in a "Non-Competition Deed" made between the appellant as employer and the respondent as employee was not enforceable as against the employee. The relevant provision restrained the employee, after termination of the employment, from involvement in certain types of business. The Judge found that the restraint was not enforceable because although it was reasonable as to area and duration, it was unreasonable in relation to the range of activities restricted by the provision. Accordingly, the restraint afforded more than reasonable or adequate protection to the party in whose favour it was imposed, and so applying common law principles relating to restraint of trade clauses it was unenforceable.
2. I have read in draft the judgments of Matheson J and Debelle J. I agree with them that the employer's appeal should be allowed, the Notice of Contention filed by the employee that the restraint was unreasonable both as to area and duration notwithstanding. The matter should be remitted to the District Court for assessment of damages.
3. However, because I have reached that conclusion by an approach which differs in some respects from the approach taken in those judgments, it is necessary for me to set out my reasons for agreeing with them in the ultimate conclusion. I will do so briefly.
4. I do not propose to repeat the facts. They are to be found in the judgments of Matheson J and Debelle J.
5. I agree with most of what is to be found in those judgments. In particular, I agree with their conclusion that the District Court Judge erred in his approach to the interpretation of the restraint, and that the restraint in cl 2.2(a)(ii) is intended to limit the employee only from involvement in a business which is competitive with the business divisions of the employer in which the employee was employed. I agree that in principle such a restraint is reasonable and therefore enforceable. I also agree with the reasons of Matheson J and Debelle J for concluding that the restraint is reasonable as to area and duration.
6. That leaves the issue of whether the restraint is shown to be no more than is reasonable in the interests of the parties and in the interests of the public notwithstanding the operation given to it by the definition of "capacity" in cl 1.1 of the Deed.
7. As to that also I am in agreement with the broad approach taken by Debelle J. In particular I agree that the Courts should not take an approach to such provisions that would make it almost impossible to draft a clause which, from the employer's point of view, provided appropriate protection in a range of circumstances which could not be foreseen with any precision by the employer when the contract is entered into.
8. In particular, an employer who has a relevant protectable interest should be able to obtain effective protection against an employee engaging in a competitive business when the employee's engagement in that business would enable the employee to make use of the knowledge of and influence over customers of the employer which the employee might have acquired and to make use of protectable information in the possession of the employer: cf Lindner v Murdock's Garage (1950) 83 CLR 628 at 653-654 Kitto J and at 636 Latham CJ (diss).
9. It is well established by the cases that an employer who has a protectable interest is not limited to a restraint which prevents the specific conduct which would infringe that protectable interest. In other words, the employer is not restricted to a restraint which prohibits solicitation of former customers or making use of confidential information. It is well established that an employer may restrain a former employee from engaging in a business when to do so is likely to present an opportunity to behave in a manner which would infringe upon or damage the employer's protectable interest. That is what the employer has done here, and in principle that is permissible.
10. I also accept that in construing such restraints a Court will not treat them as providing a protection which is more than reasonable, and so hold them void, because there are circumstances, falling within the restraint but either unlikely to occur or not within the contemplation of the parties, in which the protection provided by the restraint would be more than reasonable. The judgment of Lindley MR in Haynes v Doman (1890) 2 Ch 13 at 24-26 which is set out in the judgments of Matheson J and Debelle J adequately expresses this principle. To my mind the principle is concisely summarised in Home Counties Dairies Ltd v Skilton (1970) 1 All ER 1227 by Salmon LJ at 1233:
"If a clause is valid in all ordinary circumstances which
can have been contemplated by the parties, it is equally
valid notwithstanding that it might cover circumstances
which are so 'extravagant', 'fantastic', 'unlikely or
improbable' that they must have been entirely outside the
contemplation of the parties."
11. But in my opinion there is not much scope for that approach in the present case. The Deed spells out in quite precise terms what the parties meant by the expression "in any capacity". The meaning given to the term "capacity" is an inclusive meaning, not a definition, but the Deed makes it clear that it is the intention of the parties that any of the identified forms of involvement in a business are to be caught. I do not consider that any of them can be disregarded.
12. I find some support for this approach in the case of Amoco Australia Pty Ltd v Rocca Bros. Motor Engineering Co Pty Ltd (1972) 133 CLR 288. The majority judgments in the High Court were those of Walsh J (with whom McTiernan ACJ agreed) and Gibbs J.
13. The submission was advanced that, despite the wide terms of the restraint in question, that restraint should not be considered unreasonable, because it was unlikely that the stipulation would be enforced. This submission relied upon a statement of Lord Reid in Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd (1968) AC 269, in which His Lordship had said that (at 303):
"(if) a garage owner chooses to rely on the commercial
probity and good sense of the producer, I do not think that
a court should hold his agreement unreasonable because it is
legally capable of some misuse."
14. This submission was rejected by Walsh J, who stated (at 300-1):
"There may be cases in which it is very clear that a
provision would never be enforced according to its strict
terms and I do not question the propriety of disregarding in
such cases some theoretical possibility. But I am of opinion
that, except within very narrow limits, the Court must have
regard to the rights and obligations created by the
agreement rather than to the manner in which it thinks it is
likely that the agreement will operate in fact."
15. In my opinion, the approach taken in this passage indicates that the Court is not free to disregard the wide definition of "capacity" in the Deed.
16. This is not a case in which an attack on the validity of a restraint is mounted on the basis that a general expression which in most applications would give no more than reasonable protection is capable, if taken to the limit, of applying and so giving protection which is more than reasonable. The difficulty, as I see it, is that the meaning given to "capacity" gives protection in circumstances which would mean that the protection is more than reasonable. In the present case we are not concerned with circumstances which are "extravagant" or which must have been outside the contemplation of the parties - we are concerned with circumstances specifically identified by the Deed.
17. It seems to me that the meaning given to "capacity" by the Deed would give protection which is more than reasonable, having regard to the protectable interest, insofar as it applies to a shareholder or unit holder, to a financier and to a guarantor. I also have some difficulty about its application to a member, in part because of my uncertainty as to the meaning of that expression.
18. It seems to me that the other capacities which are identified, such as employee and principal and director, identify an involvement in a competitive business which, as a matter of common sense, gives rise to a real risk of the employee's involvement infringing or damaging the employer's protectable interest. Applying the principles established by the cases it is, therefore, permissible for the employer to restrain the employee from involvement in a competitive business in those capacities. To the extent that it might be said that that restraint provides more than reasonable protection, the principle identified by Salmon LJ in the passage cited above is relevant.
19. But in respect of the other capacities identified, the position is, as a matter of common sense, that there is no basis for saying that involvement in a competitive business in those capacities would ordinarily give rise to any real risk of an infringement of or damage to the employer's protectable interest. That is not to say that an involvement, such as a shareholder or unit holder or financier or guarantor, could not lead to the employee becoming involved in a manner which infringes or damages the employer's protectable interest. But in my opinion the mere possibility of that occurring is not sufficient to justify the restraint. One must bear in mind that the general words of cl 2.2(a)(ii) provide protection against involvement in a business in a manner likely to damage the employer's protectable interest.
20. In my opinion the principle underlying the cases is that an employer with a relevant protectable interest can restrain an employee from accepting a position the nature of which is such that the employee would be likely to utilise confidential information or trade connections which have been acquired in the course of the employment. A restraint against accepting such a position will be read in a sensible fashion and, ordinarily, as not intended to apply to such a position in name but in which there is no risk of anything happening against which the employer could reasonably require protection. But if the employer identifies positions as subject to the restraint, being positions which do not give rise to the relevant risk, then it seems to me that on its face the restraint has gone too far.
21. To take this approach is not to put the employer in a difficult, let alone an impossible position. The employer can use fairly general expressions, such as were used here - "carry on, be associated with or engaged or interested in" - knowing that the Courts will not read such general expressions as extending to an involvement unlikely to give rise to any risk of injury to the employer's protectable interest. Or, if the employer so wishes, the employer can identify positions in a competitive business which would ordinarily give rise to the relevant risk - "principal, agent, director, employee" - once again knowing that the Courts will read such provisions in a practical way. But in my opinion the employer cannot then identify other means of involvement which, as a matter of common sense, do not give rise to the relevant risk and expect the restraint to survive.
22. For these reasons it is my opinion that the Deed goes too far, or provides protection which is more than reasonable, to the extent that it restrains the employee from being involved in a competitive business merely by virtue of being a shareholder or unit holder or by being a financier or guarantor. In other respects I consider that the restraint does not provide protection which is more than reasonable.
23. But in my opinion the fact that in this respect the Deed provides more than reasonable protection to the employer does not lead to the invalidity of the Deed as a whole. Clause 4 of the Deed, which is set out in the judgment of Matheson J, manifests an intention on the part of the parties that a provision which becomes unenforceable is to be ineffective only to the extent of the unenforceability. In my opinion that provision can be read as applicable to a provision as a whole or to parts of a provision.
24. It is well established by the cases that if part of an agreement is invalid or unenforceable, that part may, under certain circumstances, be severed from the balance of the agreement or disregarded. In considering this issue the Court is not concerned with the construction of the particular provision. I have already expressed my views on the proper construction of the relevant provisions. The Court in considering severance is concerned with the question of whether, properly construed, the relevant agreement should be permitted to operate as between the parties with some part of its apparent or intended operation not being given effect. But while the Courts have said on many occasions that they will not rewrite the contract for the parties, in order to create a valid restraint from an invalid restraint, the question is again ultimately one of intention. The question is whether, construing the contract as a whole, it may be concluded on an objective basis that the parties intended the relevant provision to have the reduced operation if it could not have its full operation.
25. Accordingly, the exercise is not one in which the Court endeavours to create a valid restraint. It is one in which the Court should be mindful of the interests of employers and of employees, and it is clear that the Courts have shown some restraint in applying the principle of severance to save the validity of a restraint imposed on an employee which restraint would be unenforceable if it were given its apparent effect. But in dealing with these considerations the Court must give appropriate attention to the intentions of the parties.
26. In the present case I consider that cl 4 of the Deed makes it clear that the parties intended severance to take place. I do not understand cl 4 as authorising severance of a type which would, in the words of Lord Sterndale MR in Attwood v Lamont (1920) 3 KB 571 (at 580):
"... alter entirely the scope and intention of the
agreement."
27. Clause 4 indicates an intention on the part of the parties that subject to that overriding restraint it is their intention that provisions may be disregarded if they are particular provisions or words which to the extent of their operation render the Deed unenforceable. The decision of the Court of Appeal in Attwood v Lamont is often cited in this context. In that case the Court took the view that severance could not take place on the simple basis that severance was mechanically possible by applying the blue pencil test and striking out particular words which rendered a provision unreasonable and unenforceable. The reason for this was that, in the opinion of their Lordships, the relevant contract could not be construed as containing a number of separate covenants each expressed by the particular occupation identified. Reading the contract as a whole there was a single all embracing restraint and to break it up into a number of separate restraints was to change the nature of the intended contract. This was how Younger LJ expressed it (at 593):
"The doctrine of severance has not, I think, gone further
than to make it permissible in a case where the covenant is
not really a single covenant but is in effect a combination
of several distinct covenants. In that case and where the
severance can be carried out without the addition or
alteration of a word, it is permissible. But in that case
only.
Now, here, I think, there is in truth but one covenant for
the protection of the respondent's entire business, and not
several covenants for the protection of his several
businesses. The respondent is, on the evidence, not
carrying on several businesses but one business, and, in my
opinion, this covenant must stand or fall in its unaltered
form."
28. In the present case it is my opinion that cl 4 indicates that it is the parties' intention that the various restraints imposed upon the employee by the meaning given to "capacity" should be read as separate restraints, and that severance may take place, provided that to do so does not alter the scope and intention of the agreement. As Taylor J said (in a slightly different context) in Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 442:
"But the problem of severability is the same in either case;
fundamentally the question is one of intention to be
gathered from the instrument itself: Fitzgerald v Masters
(1956) 95 CLR 420 and Whitlock v Brew (1968) 118 CLR 445."
29. In my opinion the expressions which I have identified as providing protection to the employer which is more than reasonable can be severed from the meaning given to "capacity" without altering the underlying scope or intention of the Deed. In my opinion to do so does not involve the Court rewriting the promise which the parties have expressed. What remains is a workable agreement, an agreement consistent with the underlying intention to protect the employer against activities of the employee which would infringe or damage the employer's protectable interest, and an agreement which is consistent with the intention indicated by the parties: cf Cheshire and Fifoot's Law of Contract (6th Australian edition) para (1310).
30. I do not find it necessary to decide whether, as Matheson J has held, the whole of the meaning given to "capacity" can be severed from the Deed.
31. It is on that basis that I would allow the appeal, make the declaration that the appellant employer claims by way of amendment allowed at the hearing of the appeal, and remit the action to the District Court for assessment of damages.
JUDGE2 MATHESON J This appeal by a plaintiff employer concerns the construction of what is commonly called a covenant in restraint of trade. The learned trial Judge stated his findings of fact with some care. The employee, who is the defendant/respondent, does not challenge his findings, which I now set out:
"The plaintiff is a corporation with international business
interests in the area of environmental services. It is
engaged in the business of sanitary hygiene including the
provision to non-residential premises of wash room services,
soap dispensers, hand dryers and the sanitary disposal of
used tampons, nappies and similar products.
Although the parent company of the plaintiff is based in
England, the plaintiff is nevertheless established in
Australia and has a presence in each of the Australian
States carrying on business as aforesaid.
The plaintiff is separated into, and operates under, four
separate divisions. Two of them have no relevance to the
proceedings before me. They are "the Pest Control Division"
and "the Tropical Plants Division". One of the other two
divisions of the plaintiff's business which is of relevance
for present purposes is the Calmic Hygiene Services Division
("Calmic").
Calmic is engaged in the business of hiring and servicing a
variety of hygiene products including soap dispensers, wash
room services and hygiene treatment apparatuses for
non-residential premises.
The other division of relevance to the proceedings before me
is the Healthcare Services Division ("Healthcare"). This
division is engaged in business which involves the provision
of feminine hygiene services including the sanitary disposal
of used napkins and tampons. It is also involved in the
provision of, and with dispensing equipment for, those
items, as well as the hiring of hand dryers.
Although each division operates separately from the others
and from different premises, there is nevertheless some
intermingling of their respective activities. At one stage,
for example, all divisions combined to participate in "swap
sales meetings". At those meetings information gained by
the various consultants employed by the various divisions in
the field was passed on to all others. Another example of
that intermingling was that sales leads which had been
received in the course of any of the consultants' work of
any division in the field would be recorded and eventually
would be passed on to members of the appropriate division
for their attention.
The company's head office is located in New South Wales.
There are branches in each of the other States. Healthcare
has a general manager. There are also area managers for
each of the branches. There is only one branch in South
Australia. That branch is divided into five geographical
areas. Each area is serviced by a sales consultant. The
sales consultant is appointed by the company, inter alia, to
secure contracts with potential customers and to renew
contracts with existing customers, in each instance for
periods of about two years. The period of the contract is
negotiable and may be longer or shorter than that stated.
The plaintiff uses a standard form of contract. By one of
its terms it reserves the right to vary the contracted price
during the currency of the contractual period. All
consultants, including the defendant, are aware of that fact
but make it their business not to draw it to the attention
of potential customers and not to discuss it with them
unless specifically requested to do so. The geographical
areas as well as the number of sales consultants and the
territory which is allocated to each of them are all subject
to change by the company from time to time, depending on the
circumstances as seen by management in the best interests of
all concerned.
The defendant was initially employed by the plaintiff as a
sales consultant or representative in Calmic. She was
involved in the marketing of the product and services of
that division. Her employment began in March of 1992 and
continued until the end of November 1992.
In January 1993 the defendant was employed by the plaintiff
as a sales consultant or representative in Healthcare. The
terms of that employment are recorded in a written agreement
which is dated 7th January 1993. That document is in
evidence as P5. Whilst at Healthcare the defendant was
involved in the marketing of the plaintiff's health care
products and was responsible for the canvassing of new
customers and for attending on existing customers. Her task
was to secure new contracts, renew existing ones and
generally to attend to the ongoing requirements of existing
and/or of new clients. She was remunerated by means of a
basic salary and was paid commissions with respect to sales
which she might be able to secure above a prescribed
minimum.
The defendant could only operate within certain designated
areas. I do not find it necessary to make (a) precise
finding as to what were her designated areas of operation
whilst she was engaged either in the Calmic division and/or
in the Healthcare division. It is sufficient for me to say
that her territory was extensive and covered a large
proportion of the State including the North Eastern suburbs
(bounded by Main North Road to the East and by the beach to
the west) and country areas including the Eyre
Peninsular(sic), the Yorke Peninsula and the Iron Triangle."
(I interrupt the quotation to say that I think his Honour
would have been more accurate if he had not included his
words in brackets, and had added "the Eastern, North
Western, Northern and Western suburbs". )
"The defendant did not operate beyond her designated areas
of operation except for limited periods and as required by
the plaintiff's authorised officers from time to time in the
event of some other consultant being absent for extended
periods on sick leave or for some other reason. On one
occasion the defendant spent some three months in the South
Eastern region of the State for that purpose.
Some of the plaintiff's customers were multi-sited in the
sense that they operated in more than one place, and in some
cases in more than one geographical area as delineated by
the plaintiff for its purposes. Some of those customers
operated centrally from head office. Others had autonomous
branches. The defendant dealt only with the head office
purchasing officer and with those autonomous branches within
but not outside her designated geographical area.
For the purpose of its operation the plaintiff maintains a
file on each customer. The file contains various
information including the contract, the installation notice,
the quotation and the survey report relating to particular
customers.
There are literally thousands of files with respect to both
past and present clients of the plaintiff. All files on
former clients are archived. Those on existing clients are
kept in filing cabinets within the branch office itself.
Sales consultants have free access to those files. It is
company policy however, that the information contained in
those files is to be kept confidential and is not to be
diss(e)minated. The files may not be photocopied and
cannot be taken out of the office. All files, but in
particular those on existing clients, are regarded by the
plaintiff as being of a confidential nature. They are
commercially sensitive. That fact had been made known to
the various consultants including the defendant who
understood and was aware of the fact that all files and
their contents were, and were to remain, confidential to the
plaintiff and to the plaintiff's employees for the purposes
of their employment with it.
The plaintiff operates a computer. It keeps a list of all
its customers on it. The customer list contains sensitive
information relating to each customer including:-
(a) the name and address of the customer;
(b) the location where the services are provided,
especially in the case of multi-sited customers;
(c) the services provided by the plaintiff;
(d) the price charged for the services;
(e) the frequency of the services;
(f) the date of the first contract;
(g) the variations in price since the first contract;
and other information.
All information kept by the plaintiff in its files on
customers and on its computer is acquired through the
efforts of the sales consultants. That information is
updated on a regular basis as and when fresh material comes
into existence. Access to information kept on computer is
limited to the branch administrator and to the branch
manager only. Pass words are in existence in order to
access that information by those officers. Sales
consultants are not provided with any pass word. They do
not have direct access to the computer, but each of them can
be made aware of the computer data upon request to, and
through, one of the two authorised officers of the
plaintiff. The hard copy of the information so provided is
regarded as being commercially sensitive and of a highly
confidential nature. It can only be inspected within the
office itself. It may not be photocopied or removed and
must be returned to one of the two authorised officers for
destruction upon completion of the inspection by the sales
consultant concerned. The defendant was made aware of that
fact and understood that that was so.
In the course of her employment with the plaintiff the
defendant was provided, on a regular monthly basis, with a
list of the plaintiff's customers whose contracts with it
were about to expire. It was her task to re-negotiate those
contracts. Having attended upon each customer named on the
list which had been provided to her, it was her duty to
return the list to the branch manager for destruction. Once
again the information contained on the computer list was
considered to be highly confidential and commercially
sensitive. The defendant knew and understood that to be
the case.
Except for the names of customers appearing on those lists,
and the customers whom she had herself secured, the
defendant did not know the identity of the plaintiff's
customers in her designated area of operation or in any
other area. It was possible however, for her to gain that
information upon request and on making appropriate
arrangements in the event that she had wanted to acquire it
for the purposes of her employment duties. For the purpose
of its operation the plaintiff, of course, prepared,
distributed and updated price lists for its products and
services. Although the actual method of pricing was not
communicated to its employees the price lists in questions
were handed to sales consultants. The defendant received
those lists from time to time. It was company policy that
the contents of those lists was not to be diss(e)minated.
Consultants were not permitted to quote prices over the
phone. It was company policy that that had to be done face
to face only. The plaintiff regarded its price lists as
confidential material, particularly because in many cases
its prices were substantially higher, and in some cases
lower than those charged by its competitors.
During the time of the defendant's employment with the
plaintiff the defendant visited, contacted and/or had
dealings with thousands of the plaintiff's existing and
potential customers. She spent a substantial proportion of
her time "cold calling", a term used in the industry to
describe the activity of systematic door knocking in a
particular street or area in an endeavour to secure new
contracts.
Upon being employed and/or re-employed by the plaintiff the
defendant underwent an extensive training program in
relation to sales techniques (including selling and
planning) and product knowledge both in Adelaide on an
information basis, and later in Melbourne on a more formal
and concentrated basis when she attended a three day
conference held in Victoria for that purpose. At that time
she was provided with various information including
information in the nature of "Material Safety Data Sheets".
Shortly after the defendant's engagement in the plaintiff's
Healthcare division in January of 1993 the defendant entered
into a written agreement. That document is dated 7 January
1993 and is in evidence as Exhibit P5. In that document the
defendant agreed that upon the cessation of her employment
with the plaintiff she would not disclose or make use of any
confidential information of the plaintiff, and that during a
period of six months following the termination of that
employment she would neither solicit nor compete for the
custom or business of any person who was a customer of the
plaintiff and to whom she had provided services or with whom
she otherwise had had contact during the six months
preceding the termination of that employment.
In January 1994 the defendant agreed to accept changed terms
and conditions of her employment. Those changes are
contained in a letter dated 13 January 1994 addressed to the
defendant and subsequently signed by her. That document is
in evidence as P7. The changed terms and conditions of the
defendant's employment with the plaintiff included a non
disclosure clause which provided that after termination of
her employment with the plaintiff the defendant would
neither disclose to any unauthorised person any
"confidential" information which she may have received in
the course of her employment with the plaintiff, nor would
she use or attempt to use any such information in any manner
which may cause or which may be calculated to cause injury
or loss to the plaintiff. Confidential information was
defined in that document as including but not being limited
to inter alia manufacturing processes, business or trade
secrets, customer lists, customer pricing and servicing
information.
In accordance with the terms of the acknowledged letter of
13 January 1994 (Exhibit P7) the parties subsequently
entered into the Deed which is the subject of these
proceedings. That document is in evidence as P8. "
2. I set out the Deed in full, excluding the execution clause:
"NON-COMPETITION DEED
DEED made at ADELAIDE on the lst day of Feb (1994)
BETWEEN ANITA KATE LEE (the "Employee")
AND RENTOKIL PTY. LIMITED A.C.N. 000 034 597 of 150
Mowbray Road, Willoughby, New South Wales, 2068 (the
"Company")
RECITALS
A. The Employee wishes to enter, or continue in, Employment.
B. It is a condition of the Employee entering, or continuing
in Employment, that the Employee execute this Non-Competition
Deed.
THIS DEED WITNESSES
1. Definitions and Interpretation
1.1 Definitions
In this Deed (including the Recitals) unless the context
indicates a contrary intention:
'Capacity' means any capacity including, without limitation,
as principal, agent, director, employee, shareholder or
unitholder (other than as the holder of no more than 5% of
the issued capital of any company or trust whose shares or
units are listed on a recognised stock exchange), partner,
joint-venturer, member, trustee, beneficiary, financier,
guarantor, advisor or consultant.
'Company' includes a Related Body Corporate.
'Employment' means the employment (including any prior
period or periods of employment) of the Employee by the
Company.
'Related Body Corporate' has the meaning given in section 9
of the Corporation Law.
1.2 Interpretation
In this Deed (including the Recitals) unless the context
indicates a contrary intention:
(a) words denoting the singular number shall include the
plural and vice versa;
(b) words denoting gender shall include all genders;
(c) words denoting individuals shall include bodies
corporate, unincorporated associations and authorities;
(d) headings are for convenience only and shall not affect
interpretation;
(e) references to this Deed and any deed, agreement or
instrument shall include references to this Deed or such
other deed, agreement or instrument as amended, novated,
supplemented, varied or replaced from time to time;
(f) references to any party to this Deed shall include its
successors or permitted assigns; and
(g) references to any statute, ordinance or other law shall
include all regulations and other enactments thereunder and
all consolidations, amendments, re-enactments or
replacements thereof.
2. Non-Competition
2.1 During Employment
The Employee will not, during the Employment, either
directly or indirectly in any Capacity:
(a) carry on, be associated with, or be engaged or
interested in, any business or activity which is competitive
with any business carried on by the Company during the
Employment; or
(b) be associated with, or be engaged or interested in, any
public or private work or duties which, in the reasonable
opinion of the Company, may interfere with or detract from
the performance of the Employee in the Employment.
2.2 After Termination of Employment
The employee will not, after the termination of the
Employment, either directly or indirectly in any Capacity:
(a) carry on, be associated with or engaged or interested
in:
(i) if the Employee is a General Manager, an Area
Manager, a Branch Manager or is employed in another
position the title of which includes the word 'Manager'
(other than a Service Manager or a Sales Manager) at the
date of termination of the Employment - the business, for
the period and within the area specified in the First
Schedule; and
(ii) if the Employee is on the Sales, Service or
Administrative Staff at the date of termination of the
Employment and is not an Employee to whom clause 2.2(a)(i)
applies, - the stream of business, for the period and
within the area specified in the Second Schedule.
(b) canvass, solicit, procure or otherwise induce or
attempt to induce away from the Company all or part of the
custom of any person who or which during the Employment or
at the date of termination of the Employment was or is a
client or customer of or supplier to the Company or who was
or is in the habit of dealing with the Company;
(c) solicit, counsel, procure or otherwise induce or
attempt to induce any employee or agent of the Company to
terminate their employment or relationship with the Company;
or
(d) counsel, procure or otherwise assist any person to do
any of the acts referred to in clauses 2.2(b) and 2.2(c).
2.3 The provisions of clauses 2.1 and 2.2 shall apply to
each period of the Employment.
3. Breach May Result in Summary Dismissal
A breach of clause 2.1 of this Deed shall render the
Employee liable to summary dismissal.
4. Severability
Any provision of this Deed which is, or becomes, illegal,
void or unenforceable, shall be ineffective to the extent
only of such illegality, voidness or unenforceability and
shall not invalidate any other or the remaining provisions
of this Deed.
5. No Waiver
No relaxation, forbearance, indulgence, delay, failure or
omission by the Company at any time to enforce or require
strict compliance with any provision of this Deed shall
affect or impair that provision in any way or the right of
the Company to avail itself of the remedies it may have in
respect of any breach of any such provision.
6. Variation
This Deed may not be changed or modified in any way except
by a deed signed by or on behalf of each of the Employee and
the Company.
7. Acknowledgment
The Employee acknowledges that the provisions of this Deed
shall not be affected and shall continue to apply
notwithstanding a change in the Employee's job
classification or description during the course of the
employment.
8. Governing Law
This Deed shall be construed according to the laws of that
State or Territory within the Commonwealth of Australia in
which the Employee is employed by the Company at the date on
which a provision of this Deed is required to be construed
or action is instituted to determine or enforce the rights
of a party to this Deed, and the parties submit
unconditionally to the non-exclusive jurisdiction of the
courts of that State or Territory and courts with
jurisdiction to hear appeals therefrom.
First Schedule
(Clause 2.2(a))
1. Business: Any business carried on by the Company at the
date of termination of the Employment.
2. Period: Two (2) years after the date of termination of
the Employment.
3. Area: The Commonwealth of Australia
Second Schedule
(Clause 2.2(b))
(It was agreed by both parties that the clause in brackets
was incorrectly typed or drafted and should have read
"Clause 2.2(a)(ii))
1. Business: Any business stream of any business carried
on by the Company at the date of termination of the
Employment in which the Employee is employed at that date or
in which the Employee has been employed within 2 years prior
to that date. For this purpose, the Calmic Hygiene Services
Division and the Healthcare Services Division shall be
deemed to be a business stream.
2. Period: One (l) year after the date of termination of
the Employment.
3. Area: The State or Territory of the Commonwealth of
Australia in which the Employee was employed at the date of
termination of the Employment."
3. The respondent resigned from her employment with the appellant with effect from 14 April, 1994, and commenced employment with one of the appellant's principal competitors in South Australia, Pink Environmental Services, on 18 April, 1994 as a sales consultant in the area of sanitary hygiene. To employ the language of Buckley LJ in Marion White Ltd v Frances (1972) 3 All ER 857 at p861, I think the respondent's conduct was "really quite inexcusable". She admitted in her defence that "in the course of (the) employment (she) has canvassed, solicited, procured or otherwise induced or attempted to induce the (appellant's) customers away from the (appellant)". The appellant alleged that the respondent's actions were in breach of clause 2.2(a)(ii) and 2.2(b) of the Deed, and claimed various remedies for that breach. At the hearing which took place between 24 January, 1995 and 1 February, 1995, the appellant's claim was limited to a claim for injunctions. The period of restraint specified in the Second Schedule is one year from the termination of the respondent's employment with the plaintiff, and that period has already expired. The learned trial Judge found that clause 2.2(b) was expressed too widely in that it was unlimited in time, and was therefore unreasonable. The appellant does not challenge that finding. Accordingly, in lieu of injunctions, the appellant now seeks declarations that clause 2.2(a)(ii) is valid and enforceable against the respondent and that the respondent is in breach thereof, and an order that its claim for damages be remitted to the District Court for assessment.
4. The learned trial Judge correctly identified the legal principles relating to agreements in restraint of trade, and the protection of confidential information in particular, and reached the following conclusion:
"I am satisfied to the appropriate degree as I now find that
the plaintiff's customer lists, price lists and sales leads
are so commercially sensitive as to make each of them highly
confidential so as to entitle the plaintiff to have each of
them protected, not necessarily as the plaintiff has
attempted to do, but by an appropriate restrictive covenant
at any rate ... The question now is: Is the restriction
contained in clause 2 of the Deed reasonable in all the
circumstances of the case, or has the plaintiff gone too far
so as to make the covenant void and unenforceable?
The question of reasonableness is a question of law to be
determined by the court on the special circumstances of each
case, Herbert Morris Ltd v Saxelby (1916) 1 AC 688 to 707.
The onus of proving the special circumstances justifying the
restriction as reasonable between the parties lies on the
person alleging it to be so. Similarly the onus of proving
injury to the public is on the person asserting it to be so
Salt Company's case 1914 AC at page 470; Saxelby's case
(1916) 1 AC at page 700.
For it to be upheld by the court then a covenant must be
adjudged to be reasonable (as it was said in Nordenfelt v
Maximum Nordenfelt Guns and Ammunition Co 1894 AC 535, at
page 565:- 'In reference to the interests of the public, so
framed and so guided as to afford adequate protection to the
party in whose favour it is imposed, while at the same time
it is no way injurious to the public.'
This statement of principle is generally understood as
meaning that for it to be upheld, the restrictive covenant
must be reasonable in all the circumstances of the case both
as to the period of time in respect of which the restraint
has been imposed, as well as to the area restrained, and as
to the employee's capacity or the employee's trade which has
been restricted or restrained."
5. The learned trial Judge found in the appellant's favour that the relevant "restrictive covenant" was reasonable as to the period of time in respect of which the restraint was imposed as well as to the area restrained. The respondent has filed a Notice of Contention, and contends that the judgment of the learned trial Judge should be upheld for the reasons given by him and, alternatively or additionally also, on the following ground:
"That clause 2.2(a)(ll) of the Non-Competition Deed is void
and unenforceable in that the restriction contained therein
as to geographic extent and duration are unreasonable in all
the circumstances."
6. I will revert to the Notice of Contention.
7. His Honour found in the respondent's favour that the "restrictive covenant" was not reasonable as to the employee's capacity which has been restricted or restrained. To understand the argument on this aspect of the case, it is convenient to repeat again the relevant parts of clause 2.2 of the Deed:
2.2 After Termination of Employment
The employee will not, after the termination of the
Employment, either directly or indirectly in any Capacity:
(a) carry on, be associated with or engaged or interested
in:
(i) if the Employee is a General Manager, an Area
Manager, a Branch Manager or is employed in another
position the title of which includes the word 'Manager'
(other than a Service Manager or a Sales Manager) at the
date of termination of the Employment - the business, for
the period and within the area specified in the First
Schedule; and
(ii) if the Employee is on the Sales, Service or
Administrative Staff at the date of termination of the
Employment and is not an Employee to whom clause 2.2(a)(i)
applies, - the stream of business, for the period and
within the area specified in the Second Schedule.
(b) - (d) inclusive ...
First Schedule
(Clause 2.2(a))
1. Business: Any business carried on by the Company at the
date of termination of the Employment.
2. Period: Two (2) years after the date of termination of
the Employment.
3. Area: The Commonwealth of Australia
Second Schedule
(Clause 2.2(a)(ii))
(I have corrected the Clause reference as agreed)
1. Business: Any business stream of any business carried
on by the Company at the date of termination of the
Employment in which the Employee is employed at that date or
in which the Employee has been employed within 2 years prior
to that date. For this purpose, the Calmic Hygiene Services
Division and the Healthcare Services Division shall be
deemed to be a business stream.
2. Period: One (l) year after the date of termination of
the Employment.
3. Area: The State or Territory of the Commonwealth of
Australia in which the Employee was employed at the date of
termination of the Employment."
8. The first thing to note is that sub-clause 2.2(a)(i) uses the words "the business" towards the end thereof, whereas sub-clause 2.2(a)(ii) uses the words "the stream of business" towards the end thereof. In two places in his judgment, the learned Judge misquoted the words in 2.2(a)(ii), proceeding erroneously on the basis that the words were "any stream of business".
9. Next, in interpreting the words "the stream of business" in 2.2(a)(ii), I consider one must have regard to the fact that the drafter of the Deed was dealing with one sort of Employee in (i) and another sort of Employee in (ii). Further, in considering the wording of the Schedules as one must, it is obvious that the Second Schedule is concerned with a "business stream" of a business, as one would expect, bearing in mind the Second Schedule has as a corrected sub-heading, Clause 2.2(a)(ii). It would seem to me to be absurd to say that one cannot read "business" in the marginal note thereof as meaning "stream of business". "Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency" (see Fitzgerald v Masters (1956) 95 CLR 420 at pp426-427 per Dixon CJ and Fullagar J). I have no hesitation in supplying the words "stream of" before the word "business". Further, I would correct the sub-heading to the First Schedule to read "Clause 2.2(a)(i)", another obvious typing or drafting error.
10. The learned Judge concluded:
"The effect of the clause, on a literal construction of it,
as it seems to me, is to prevent the defendant from being
employed not simply in the competitive business of sanitary
hygiene (that being the stream of business carried on by
Calmic and Healthcare at the relevant time) but also in any
of the other streams of business of each of the other two
divisions (i.e. Tropical Plants and Pest control) under
which the plaintiff operated at that time."
11. In my opinion, this conclusion was erroneous. His Honour continued:
"Furthermore, the covenant does not purport to restrict the
defendant from being employed by a competitor in her former
capacity of sales consultant or sales representative but, as
the covenant expressly states, it purports to restrain her
from working 'in any capacity'."
12. The Deed defines the term "capacity" as meaning ("unless the context indicates a contrary intention"):
"'Capacity' means any capacity including, without
limitation, as principal, agent, director, employee,
shareholder or unitholder (other than as the holder of no
more than 5% of the issued capital of any company or trust
whose shares or units are listed on a recognised stock
exchange), partner, joint-venturer, member, trustee,
beneficiary, financier, guarantor, advisor or consultant."
13. The learned Judge considered that this definition strongly reinforced his view, and added:
"... on a literal interpretation of the expressions in
question, the restraint sought to be imposed by the covenant
is in excess of what is reasonably required for the
protection of the plaintiff's interest, and for that reason
therefore it should be adjudged to be void at common law and
unenforceable against the defendant."
14. The width of the definition of "capacity", combined with the use of the words "either directly or indirectly" and the words "carry on, be associated with or engaged or interested in", prompted me to consult drafting precedents. None that I could find actually had a definition of capacity, but the relevant precedents in both the Encyclopaedia of Forms and Precedents published in London by Butterworths, and the Australian Encyclopaedia of Forms and Precedents, also published by Butterworths, contain comparably wide wording, although that is not conclusive by any means. For example, that contained in Volume 6 of the Fourth edition of the former work contains the following clause in the precedent entitled "Agreement on Appointment of a Sales Director":
"9. The director shall not at any time within ...years
from the determination of this agreement either directly or
indirectly either on his own behalf or as agent for any
person firm or company carry on or be engaged or interested
in the trade or business of ... or any similar trade or
business carried on within ... miles of ... (except with the
consent in writing of the board of directors of the company
for the time being)."
15. I also refer to the following clause in the precedent entitled "Agreement between employer and assistant" in Volume 6 of the Australian Encyclopaedia. It reads:
"9. The Assistant expressly agrees as follows:
(1) not at any time during a period of (two) years after
the determination of his employment hereunder (whether the
same shall be determined by notice or otherwise) to
undertake or carry on or be employed or directly or
indirectly concerned or interested either as master
journeyman, manager, clerk, canvasser or otherwise howsoever
(except only as a servant of the employer or as a
shareholder or debenture-holder in a limited company) in any
business of (specify nature of business) at any place within
a radius of (number of kilometres) from the said business
premises at (address) aforesaid, or within the like radius
from the premises of the particular business of the employer
in which he shall be employed at the time of such
determination or within the like radius from any other
premises upon which the employer may be carrying on business
at the time of such determination."
16. One of the seminal judgments on the law relating to restraint of trade in master and servant contracts is that of Lindley MR in Haynes v Doman (1899) 2 Ch 13. At pp24-26, his Lordship said in a passage that has been frequently quoted:
"Another matter which requires attention is whether a
restriction on trade must be treated as wholly void because
it is so worded as to cover cases which may possibly arise,
and to which it cannot be reasonably applied. The
appellant's counsel strenuously contended that, even if the
restriction could be regarded as reasonable in the events
which have happened, and in the great majority of cases
likely to happen, yet, if others could be suggested to which
it would be unreasonable to apply the restriction, it must
be held void in toto. This contention has been considered
and repudiated when the restriction is so worded as to be
divisible into distinct portions, not depending on each
other. In all such cases the restriction is not held void
in toto, but is held to be good so far as it is free from
objection, and bad only as to those parts which are
objectionable. Mallen v. May ll M. and W. 653 is the
leading case on this point. This principle gets over any
difficulty arising from the introduction of the words 'or
any part thereof'; and the same principle is, in my opinion,
also applicable to cases not contemplated, and to which it
would be unreasonable to apply the restriction ...
Agreements in restraint of trade, like other agreements,
must be construed with reference to the object sought to be
attained by them. In cases such as the one before us, the
object is the protection of one of the parties against
rivalry in trade. Such agreements cannot be properly held
to apply to cases which, although covered by the words of
the agreement, cannot be reasonably supposed ever to have
been contemplated by the parties, and which on a rational
view of the agreement are excluded from its operation by
falling, in truth, outside, and not within, its real scope.
But, even if some extreme case of a technical breach
producing no injury to the party to be protected could be
proved, sound principle requires, not that the agreement
should be held void in toto, but only so far as it is really
unreasonable. Even if the restriction could not be so
construed as to exclude such a case, no jury would give the
plaintiff any damages, and no judge would grant him an
injunction. In such an extreme case the defendant is
sufficiently protected against oppression without holding
the agreement void in toto, and I am unable to see that
public policy requires more. The last words used by Lord
Macclesfield, in giving judgment in Mitchel v. Reynolds
(1711) l PWms 181, 197 were: 'In all restraints of trade,
where nothing more appears, the law presumes them bad; but
if the circumstances are set forth, that presumption is
excluded, and the Court is to judge of those circumstances,
and determine accordingly; and if upon them it appears to be
a just and honest contract, it ought to be maintained.'
This is good law and good sense, and, adopting it as a
guide, it leads to the conclusion that the Court ought not
to hold a just and honest agreement void, even when to
enforce it would be just, simply because the agreement is so
unskilfully worded as apparently, or even really, to cover
some conceivable case not within the mischief sought to be
guarded against. Public policy does not require so serious
a consequence to be attached to a mere want of accuracy in
expression. To hold such an agreement wholly illegal and
void is to lose all sense of proportion, and is not
necessary for the protection either of the defendant or of
the public. This conclusion is warranted by the judgments
of the Court in Rannie v. Irvine (1844) 7 Man. and G. 969.
Tindal CJ there said 7 Man. and G. 976: 'If, however, the
contract is a reasonable one at the time it is entered into,
we are not bound to look out for improbable and extravagant
contingencies in order to make it void.' The other judges
expressed their opinions to the same effect; and this view
was approved by Lord Macnaghten in Nordenfelt's Case (1894)
AC 574."
17. I also refer to a passage in the judgment of Warrington LJ in Dewes v Fitch (1920) 2 Ch 159, a case concerning a contract of service between a solicitor and a managing clerk. At p184, his Lordship said:
"It has been urged before us that the agreement may be so
construed as to make the doing of certain isolated and more
or less trivial acts which are done by a solicitor a breach
of it. I desire to express no opinion upon the construction
of the agreement in that respect. Whether or not what the
defendant does is a breach of the agreement is a matter that
will have to be decided when he does it, and on the finding
of a particular act on which the question arises. That he
has broken the agreement for the purpose of the present
action, and broken it purposely and deliberately, and with
the object of raising the question of its validity, there
can be no doubt. That is quite enough for the present
purpose. I shall be quite ready to construe the agreement
as to its extent if and when the question arises whether
what has been done is a breach of it."
18. A more recent case containing similar reasoning is Home Counties Dairies Ltd and Anor v Skilton and Anor (1971) All ER 1227. At p1233 Salmon LJ said:
"If a clause is valid in all ordinary circumstances which
can have been contemplated by the parties, it is equally
valid notwithstanding that it might cover circumstances
which are so 'extravagant', 'fantastical', 'unlikely or
improbable' that they must have been entirely outside the
contemplation of the parties.
There has been some argument at the Bar whether the
circumstances have to be 'extravagant' or 'fantastical' or
only 'unlikely or improbable' to fall within the principle
which I have enunciated. All these words have been used in
the different authorities to which we have been referred. I
do not think it matters which word is chosen. We are not
dealing with semantics or metaphysics, but with reality.
The words 'likely' or 'probable' have a wide range of
meanings which vary according to the context in which they
are used and which have been subject to considerable
differences of judicial opinion: see, for example, Lord
Reid's speech in The Heron II (1967) 3 All ER 686 at
693-696, (1969) l AC 350 at 387-393. In my judgment, the
far-fetched possibility about the customer and the employee
moving, say to Leeds is so completely outside the
contemplation of the parties and so remote that it cannot
affect the validity of cl 15."
19. At p1234, Cross LJ (as he then was) said:
"... even in a master and servant case the court will not
pay regard to improbable contingencies which were not within
the contemplation of the parties and in respect of which, if
they occurred, no court would grant an injunction or award
damages: see the judgment of Sir Nathaniel Lindley MR in
Haymes v Doman (1899) 2 Ch 13 at 25, and the judgment of
Warrington LJ in Dewes v Fitch (1920) 2 Ch 159 at 184."
20. I also refer again to Marion White Ltd v Frances (supra). The plaintiff company there carried on business as hairdressers at a number of salons in Hertfordshire and Buckinghamshire and employed the defendant as an assistant ladies hairdresser at one of their salons. The defendant was dismissed and eight days later entered the employment of a rival firm of hairdressers 150 yards away. A county court judge dismissed the plaintiff company's claim for an injunction holding that the relevant covenant was invalid on a ground that it was too wide as the words "in any way" and "in any other capacity" prevented the defendant from acting not only as a hairdresser but as, for example, a receptionist or bookkeeper. The Court of Appeal allowed an appeal.
21. Buckley LJ set out the relevant (and admittedly very wide) covenant at p859:
"'(The defendant) shall not during the continuance of (her)
employment hereunder or within Twelve months after she shall
have ceased to be in the service of (the plaintiff company)
(both of which periods are hereinafter included in the
expression "the prohibited period") either solely or jointly
with any other person or persons or Company and either on
her own behalf or on behalf of any other person or persons
or Company directly or indirectly carry on or assist in
carrying on either as principal or as manager agent or
servant or assistant or in any other capacity whatsoever or
be in any way engaged or concerned or interested in the
business of a Ladies' Hairdresser within one half mile of
any premises of the (plaintiff company) where the
(defendant) shall have served during the three months last
preceding the cessation or determination of (her) employment
hereunder (hereinafter referred to as "the prohibited
area")' ...
'AND the (defendant) shall not during the prohibited period
permit or suffer her name to be used or employed in carrying
on or in connection with such business as aforesaid within
the prohibited area.
'AND the (defendant) shall not during the prohibited period
promote or assist in promoting any Company formed or to be
formed for the purpose of carrying on such business as
aforesaid within the prohibited area or be or become a
member or director manager secretary or other officer of any
Company for the time being carrying on such business as
aforesaid within the prohibited area.
'AND the (defendant) shall not during the prohibited period
endeavour or attempt directly or indirectly to induce any
person or persons or Company who shall be known as the
(defendant) to have been at any time during her employment
hereunder a customer or customers of the (plaintiff company)
in their said business to cease from employing or dealing
with the (plaintiff company) in the way of their said
business or so as to employ or deal with any person persons
or Company other than the (plaintiff company)' ...
'AND during the aforesaid period after she shall have ceased
to be in the service of the (plaintiff company) the
(defendant) shall not on her own account or on account of
any other person or persons or Company attend in connection
with such business as aforesaid at the residence of any
person residing within the prohibited area.'"
22. At p863 in a judgment with which Stevenson LJ and Davies LJ agreed, his Lordship said:
"Counsel has contended on behalf of the defendant that the
learned judge was justified in taking the view that he did,
in the passage that I have read from his judgment, that this
covenant is too wide in its operation and that it would
extend to activities in which the defendant would not be
brought into connection with customers at all. He suggested
that she might be employed as a bookkeeper in a back room
and never see a customer; or she might be merely a
shareholder or a director in a company concerned with a
hairdressing establishment within the prohibited area. The
example taken by the learned judge was that she might become
or be employed as a receptionist. It is not absolutely
clear, on the language he used in the judgment, whether he
was there thinking of a receptionist in a hairdresser's
salon or a receptionist in some other kind of establishment,
perhaps a dentist's place of business or an hotel or
something of that sort. I think that on a fair reading of
what the learned judge said he was thinking of employment as
a receptionist in a hairdressing establishment. If that was
what the learned judge had in his mind, I would myself think
that that would be likely to be just as damaging or almost
as damaging to the goodwill of the plaintiff company as
employment in the actual processes of attending to people's
hair; for if a customer of the plaintiff company became
aware that the defendant, who had been used to serve her at
the plaintiff's shop and with whom she had become friendly,
had moved to a nearby competitor hairdresser as receptionist
or as manageress of the business in that shop, I think that
there would be almost as great a risk of custom being lost
by the plaintiff company as if the defendant had merely
entered the employment of the competitor as an assistant
carrying out the operation of dressing hair.
I have stressed already that I think this covenant is aimed
at active participation by the defendant in a hairdressing
business within the prohibited area, and I think it is aimed
at active participation in a way that is directly connected
with the hairdressing aspects of the business. I do not
think it was within the contemplation of the parties to this
agreement that the defendant would either be likely to be
employed as a bookkeeper in another hairdressing
establishment or as a cleaner or in any other capacity that
one can think of that has nothing to do with dressing hair
although it may have to do with the administrative or
domestic arrangements of the business. As was pointed out
by the court in Home Counties Dairies Ltd v Skilton (1971) 1
All ER 1227, (1970) 1 WLR 526, to which (I) have already
referred, an agreement of this kind and a clause of this
kind must be read in the context of the business in relation
to which the covenant is entered into and of the relation
between the parties, and I think for myself that it is
giving too wide an interpretation to this covenant to say
that it would extend to any such activities as being
employed as a bookkeeper or as a cleaner or anything of that
sort.
In my judgment this covenant, which cannot be criticised on
the basis of either area or period, is a good and valid and
effective covenant, and I think that the learned deputy
county court judge was in error in arriving at the contrary
conclusion. For these reasons, I would allow this appeal
and would make a declaratory order accordingly, since no
injunction will now be of any value to the plaintiff
company."
23. Strangely enough there have been very few relevant decisions of the High Court. The case of Geraghty and Anor v Minter and Anor (1979) 142 CLR l77 concerned a deed of partnership, clause 21 of which was in the following terms:
"Should the third party or the fourth party retire from this
partnership or should their his or her share of the
partnership be acquired by any other person or should their
interest in the partnership be determined or should the
partnership business be ceased or terminated for any reason
whatsoever then and in every such case the third party and
the fourth party and each of them shall not exercise carry
on or be in any manner whatsoever either directly or
indirectly concerned or interested by himself or herself or
in partnership with or as manager servant or agent for any
other person, persons, company, corporation engaging in the
trade or business of a similar nature within a radius of
twenty (20) miles by the nearest practicable route by road
from the corner of Sunbrite Avenue and Gold Coast Highway,
Mermaid Beach aforesaid for a period of three (3) years from
the date of retirement acquisition termination
ceasation(sic) or as the case may be."
24. At pp184-185, Gibbs J (as he then was), in a judgment with which Aickin J agreed, said:
"It is well settled that 'a restraint will not be
enforceable, unless it affords no more than adequate
protection to the interests of the covenantee in respect of
which he is entitled to be protected' (Amoco Australia Pty.
Ltd. v. Rocca Bros. Motor Engineering Co. Pty. Ltd. (1973)
133 CLR 288, at p 306; and see pp 315-316). The questions
that arise in the present case are whether the respondents
had an interest that they were entitled to protect and, if
so, whether the restriction imposed by cl.21 exceeded what
was reasonably necessary to protect that interest. At the
time when the deed was executed, the parties had been
carrying on in partnership the business of insurance loss
adjusters which the respondents had commenced and
established. The evidence discloses that an insurance loss
adjuster obtains most of his work from insurance companies;
he thus has a comparatively small number of clients, each
one of whom is therefore likely to be valuable. It is
apparent that such a business will depend to a considerable
extent - possibly to a large extent - on the personal
relationship that exists between those conducting the
business on the one hand and those managing the affairs of
the insurance companies on the other. When the appellants
were taken into the respondents' business, and given the
conduct of the office on the Gold Coast, they were placed in
a positon that enabled them to form their own associations
with the members of the staffs of the insurance companies
who were responsible for giving the instructions that led to
business for the loss adjusters. It was likely that any
associations formed in these circumstances would be of great
value to the appellants if they chose to set up a competing
business as insurance loss adjusters on the Gold Coast. If
the appellants derived an advantage in that way, it would be
to the disadvantage of the respondents' business. In these
circumstances, if the appellants had been employed by the
respondents as servants, and not taken as partners, there
can be no doubt that the respondents would have had an
interest which they were entitled to protect by an
appropriate covenant preventing the appellants from
competing with them. The respondents would have been
entitled to protect their business and the goodwill attached
to it, and for that purpose to prevent the appellants from
misusing their acquaintance with the respondents' clients
and taking advantage of the respondents' trade connexions.
A covenant such as cl.21 would in those circumstances have
been upheld on the authority of a line of cases which
includes Fitch v. Dewes (1921) 2 AC 158 and Scorer v.
Seymour Jones (1966) 1 WLR 1419; (1966) 3 All ER 347."
25. A very wide restraint clause was considered in the case of Davis and Anor v Wood and Anor (1979) ATPR 40-117 in the NSW Supreme Court. The background to the decision of Powell J is set out in the headnote:
"The parties were shareholders for a little over a year in a
company N which developed a successful business selling toys
to speciality shops throughout New South Wales. The first
defendant was responsible for sale to retailers before he
and his wife agreed to sell their shares to the plaintiffs.
The defendants covenanted not to be involved in trading in
toys in the State for one year thereafter. The first
defendant then acquired a toy-shop at Cronulla which he
operated for a short time before taking a position as sales
supervisor with a company selling, inter alia, toys
competing with those sold by Nick Nack.
The plaintiff sought a declaration that the covenant was
binding and an interlocutory injunction to enforce it. At
the time of the application the covenant had four months to
run, and there was no prospect of a final hearing in that
time.
The plaintiff argued that the covenant was no more than was
reasonable to protect his legitimate trading interests or,
if it was too wide, sec.4(1) of the Restraints of Trade Act
1976 (N.S.W.) ought to be applied.
Powell J. held that the restraint was not excessive in terms
of area or duration but that, unless it could be read down
or severed, the range of activities covered was excessive.
He considered the application of the section:
'4(1) A restraint of trade is valid to the extent to which
it is not against public policy, whether it is in severable
terms or not';
and held that what it contemplated was 'the notional
striking out of so much of the restraint as makes the
restraint excessive ... so as to produce a restraint which
is valid, rather than the remoulding of the restraint, if
need be by the introduction ... of appropriate words'.
This 'notional striking out' was appropriate in the instant
case but Powell J. held that in the circumstances, on the
balance of convenience, the granting of an injunction would
not assist the plaintiff and would be oppressive."
26. The relevant covenant is set out at p18,284, and reads as follows:
"4. The Vendors jointly and severally covenant with the
Purchaser for a period of one (l) year from the date hereof
that they will not nor either of them will without the
consent in writing of the Purchaser (which consent may be
withheld without assigning any reason therefor) be directly
or indirectly engaged concerned or interested whether as a
member shareholder debenture holder director employee
consultant agent or otherwise in any corporation firm or
business which is engaged in the trade of a toy wholesaler
importer or distributor of toy gifts novelty items to any
pharmacy, gift shop or novelty shop within the State of New
South Wales or to carry on such business as aforesaid
jointly severally or individually."
27. In the course of his judgment Powell J said at pp18,288-18,289:
"The question then is, is the restraint contained in cl. 4
more than is reasonably necessary to protect what was the
then existing and potential trade connection of Nick Nack?
It seems to me that, in terms of duration it was not; for it
is to be remembered that Mr. Wood had been the director
principally responsible for setting up and developing Nick
Nack's selling activities and was thus in a very special
position in relation to Nick Nack's customers (see e.g.
Stenhouse Australia Limited v. Phillips (1974) AC 391).
Nor do I think that it was excessive in terms of area; for
the business, although comparatively new, extended to many
places throughout the State and was growing (Connors Bros.
Limited v. Connors (1940) 4 All ER 179). However, it does
seem to me that, unless as was submitted by Mr. Douglas when
I raised the matter with him in argument, the restraint is
capable of being read-down or severed the nature of the
activity or activities restrained is excessive. Although
perhaps, the examples are extreme, it is, nonetheless, true
to say that, as a matter of language cl.4 is wide enough to
prevent Mr. Wood working as a cleaner, and to prevent
Mrs. Wood working as a 'tea lady', for a company such as
Racking Services.
Mr. Douglas has, as I have indicated, submitted that, having
regard to the nature of Mr. Wood's activities when with Nick
Nack I should 'read cl.4 down' so as to limit the restraint
to similar activities (see, e.g. Heydon: The Restraint of
Trade Doctrine 124-5). But even if, in the absence of
ambiguity, such an exercise be permitted, all that would be
achieved, so it seems to me is that one would read the words
'employee consultant agent or otherwise' as '(sales)
employee (sales) consultant (selling) agent or otherwise (in
a selling capacity)' or in a similar way. There would still
be left untouched a wide range of activities as, for
example, acquiring shares in any importer of toys (one would
think that a major retailer such as David Jones' Limited
would fall within that description), the prohibition of
which hardly seems necessary for the protection of the
goodwill of Nick Nack.
Mr. Douglas further submitted that, if that be the case, the
restraint should be severed so as to remove the excess.
That such an exercise is, in an appropriate case,
permissible is undoubted. The conditions for it being
undertaken are two; firstly, that the removal can be
achieved without altering the real nature of the restraint;
and, secondly, that the removal of the excess may be
achieved without having to add to or modify the wording in
any way other than by way of excision. It seems to me that,
even if it were permissible to combine the activities of
'reading down' and 'severing' the excessive part of the
restraint the result would be so different that the ultimate
nature of the restraint would be substantially different
from its original nature (see Attwood v. Lamont (1920) 3
KB 571, 593; British Reinforced Concrete Engineering Co.
Limited v. Schelff (1921) 2 Ch 563).
I turn, then, to the question of the applicability of
sec.4(1) of the Restraints of Trade Act 1976. That
subsection, which applies in the present case since the Deed
was executed after the date of assent to the Act (sec.
3(1)), is in the following terms:
'4(1) A restraint of trade is valid to the extent to which
it is not against public policy, whether it is in severable
terms of not.'
So far as I am aware, the sub section has not, hitherto,
been the subject of judicial interpretation, so that I must
approach it as a matter which is res integra.
It seems to me that, having regard to the use in the
subsection of the words 'whether it is in severable terms of
not', the subsection is directed towards overcoming some, at
least, of the problems which had, prior to its enactment,
arisen in cases where some form of restraint would have been
legitimate, but the form of restraint was excessive and,
having regard to the form in which it was taken, it was
incapable of being severed. But to which of those problems
is the subsection directed? Is it to those arising out of
the limitation to the excision of words; or is it to those
arising out of limitation that one cannot, by severing,
change the substance of the restraint? Although the matter
is not clear, I am disposed to think that, since the
subsection uses the words 'is valid to the extent to which
it is not against public policy' what is contemplated is the
notional striking out of so much of the restraint as makes
the restraint excessive (whether or not that changes the
substance of the restraint) so as to produce a restraint
which is valid, rather than the remoulding of the restraint,
if need be by the introduction (other than by way of
implication or construction) of appropriate words, so as to
"The courts are referees, not players; they are not supposed
to waste their time adapting illegal covenants at the
instance of those who seek to benefit from the illegality."
33. But the courts should not frame rules that have the consequence that it is almost impossible to draft a covenant which at the same time is wide enough to bind a former employee in a fair and reasonable manner and is not unenforceable because of the width with which it is expressed.
34. The draftsman of this deed has not been content to rely on the expression "in any capacity" but has expanded its meaning to include a wide range of possibilities. It was, I think, reasonable to do so. Had the expression "in any capacity" not been defined, the appellant would have had a legitimate concern whether a court would hold that the covenant was wide enough to restrain, say, a former employee who, as the holder of a small parcel of shares in a company which competed with it, from imparting knowledge of the appellant's customers to its competitor. A court could hold that the words "in any capacity" do not touch that situation. It is, I think, reasonable to restrain a former employee from engaging in such an activity since one obvious means of seeking to avoid the restraint is to make the employee a small shareholder. If, however, the employee is able to satisfy the Court that the shares were acquired in circumstances wholly unrelated to the provision of assistance to the competitor, the Court would refuse to enforce the covenant.
35. The problem is not new and the courts have recognised that regard should be had to the object of the parties when construing a restraint of trade clause. In Haynes v Doman (supra), Lindley MR rejected a contention that, even if a widely drawn restriction could be regarded as reasonable in the events which have happened and in the great majority of cases which are likely to happen, if others could be suggested which it would be unreasonable to apply the restriction, it must be held to be void in toto. In his view such an approach involved losing all sense of proportion and was not necessary for the protection of the employee or of the public. If the clause was so wide that in some extreme case a technical breach was involved which produced no injury to the party to be protected, principle required, not that the agreement should be held to be void in toto, but only in so far as it was really unreasonable. In an extreme case the clause would not be enforceable. It is appropriate to set out again the relevant parts of his frequently quoted judgment (at 24-26):
"Another matter which requires attention is whether a
restriction on trade must be treated as wholly void because
it is so worded as to cover cases which may possibly arise,
and to which it cannot be reasonably applied. The
appellant's counsel strenuously contended that, even if the
restriction could be regarded as reasonable in the events
which have happened, and in the great majority of cases
likely to happen, yet, if others could be suggested to which
it would be unreasonable to apply the restriction, it must
be held void in toto. This contention has been considered
and repudiated when the restriction is so worded as to be
divisible into distinct portions, not depending on each
other. In all such cases the restriction is not held void
in toto, but is held to be good so far as it is free from
objection, and bad only as to those parts which are
objectionable. Mallan v May 11 M and W 653 is the leading
case on this point. This principle gets over any difficulty
arising from the introduction of the words 'or any part
thereof'; and the same principle is, in my opinion, also
applicable to cases not contemplated, and to which it would
be unreasonable to apply the restriction. I am not
considering restrictions so worded as to be partly good and
partly bad, and in which the good parts are dependent on the
bad. Such restrictions are void in toto, the bad parts
infecting and destroying th whole. Perls v Saalfeld (1892)
2 Ch 149 is a modern instance of such a restriction, and my
observations do not apply to such cases.
Agreements in restraint of trade, like other agreements,
must be construed with reference to the object sought to be
attained by them. In cases such as the one before us, the
object is the protection of one of the parties against
rivalry in trade. Such agreements cannot be properly held
to apply to cases which, although covered by the words of
the agreement, cannot be reasonably supposed ever to have
been contemplated by the parties, and which on a rational
view of the agreement are excluded from its operation by
falling, in truth, outside, and not within, its real scope.
But, even if some extreme case of a technical breach
producing no injury to the party to be protected could be
proved, sound principle requires, not that the agreement
should be held void in toto, but only so far as it is really
unreasonable. Even if the restriction could not be so
construed as to exclude such a case, no jury would give the
plaintiff any damages, and no judge would grant him an
injunction. In such an extreme case the defendant is
sufficiently protected against oppression without holding
the agreement void in toto, and I an unable to see that
public policy requires more. The last words used by Lord
Macclesfield, in giving judgment in Mitchel v Reynolds
(1711) 1 P Wms 181, 197, were: 'In all restraints of trade,
where nothing more appears, the law presumes them bad; but
if the circumstances are set forth, that presumption is
excluded, and the Court is to judge of those circumstances,
and determine accordingly; and if upon them it appears to be
a just and honest contract, it ought to be maintained.'
This is good law and good sense, and, adopting it as a
guide, it leads to the conclusion that the Court ought not
to hold a just and honest agreement void, even when to
enforce it would be just, simply because the agreement is so
unskilfully worded as apparently, or even really, to cover
some conceivable case not within the mischief sought to be
guarded against. Public policy does not require so serious
a consequence to be attached to a mere want of accuracy in
expression. To hold such an agreement wholly illegal and
void is to lose all sense of proportion, and is not
necessary for the protection either of the defendant or of
the public. This conclusion is warranted by the judgments
of the Court in Rannie v Irvine (1844) 7 Man and G 969.
Tindal CJ there said 7 Man and G 976: 'If, however, the
contract is a reasonable one at the time it is entered into,
we are not bound to look out for improbable and extravagant
contingencies in order to make it void.' The other judges
expressed their opinions to the same effect; and this view
was approved by Lord Macnaghten in Nordenfelt's Case (1894)
AC 574."
36. This approach has been frequently applied: Home Counties Dairies Ltd v Skilton (1970) 1 All ER 1227; Marion White v Frances (1972) 3 All ER 857 at 863; Clarke v Newland (1991) 1 All ER 397; Littlewoods Organisation Ltd v Harris (1978) 1 All ER 1026. Although there are some instances of a literal approach being taken (as in Commercial Plastics Ltd v Vincent (1965) 1 QB
623), the preferred approach is to have regard to the object and intent of the parties and read down a covenant to give effect to that object and intent. Such a rule is fairer given the difficulties in drafting an appropriate clause. Salmon LJ expressed the principle in these terms in Home Counties Dairies Ltd v Skilton (supra) at 1233:
"If a clause is valid in all ordinary circumstances which
can have been contemplated by the parties, it is equally
valid notwithstanding that it might cover circumstances
which are so 'extravagant', 'fantastical', 'unlikely or
improbable' that they must have been entirely outside the
contemplation of the parties."
37. In the same decision Cross LJ recognised the difficulties in drafting the restraint and applied the approach of Lindley MR. He said (at 1235):
"It is in practice extremely difficult to frame restrictions
which will adequately protect a trade connection and may not
at the same time cover some cases where a breach will not
injure the trade connection. If the court can see that the
restriction has been carefully framed for a legitimate
purpose, I do not think that it should hold it void as
contrary to public policy in favour of an ex-employee who is
in flagrant breach of it on such narrow grounds as those
relied on in this case."
38. The decision in Littlewoods Organisation Ltd v Harris (supra) is an extreme example and might extend the principle too far. But it is not necessary to determine that question.
39. Thus, the Court will construe the documents by reference to the object sought to be attained and, if on a strict construction, the words of the deed apply to cases which cannot be reasonably supposed as to have been contemplated by the parties and which on a rational view of the deed are excluded from its operation and are outside its intended scope, the Court will not invalidate the agreement but, instead, will refuse to enforce it only so far as it is really unreasonable. This process of reading down is limited to the exclusion of unlikely or improbably events. It has no application where a list of activities is proscribed in a restraint of trade covenant and it is not possible to sever the covenant: Attwood v Lamont (1920) 3 KB 571.
40. The intention of Clause 2.2(a)(ii) is to prevent the respondent from being engaged or interested in another business which competes with the appellant's Calmic and Healthcare Divisions and, whilst so engaged, from disclosing confidential information gleaned by her whilst in the employ of the appellant. In this context, it is relevant to have regard to the fact that the courts have long recognised that a surer means of protecting confidential information is to take a covenant in restraint of employment or other engagement by a competitor: Haynes v Doman (supra) at 19. As Lord Denning MR observed in Littlewoods Organisation Ltd v Harris (supra) at 1033:
"It is thus established that an employer can stipulate for
protection against having his confidential information
passed on to a rival in trade. But experience has shown
that it is not satisfactory to have simply a covenant
against disclosing confidential information. The reason is
because it is so difficult to draw the line between
information which is confidential and information which is
not; and it is very difficult to prove a breach when the
information is of such a character that a servant can carry
it away in his head. The difficulties are such that the
only practicable solution is to take a covenant from the
servant by which he is not to go to work for a rival in
trade."
41. Recognising that there are a number of means by which a former employee could act unfairly to the detriment of the appellant, the draftsman has defined "in any capacity" to include a wide list of potential interests in or involvement with a competitor. The list of proscribed activities is in large part clearly reasonable. Those activities which are not on their face reasonably proscribed are shareholder or unitholder, member, financier and guarantor. At first blush, the activities of trustee and beneficiary might appear unreasonable. But, given that it is not uncommon today for a business to be conducted by a trustee company, it is reasonable to include them. It is, I think, reasonable also to include financier and guarantor. The clear intention is that the appellant does not seek to prevent the respondent from acting as a financier or guarantor in any circumstances other than as financier or guarantor of a business which competes with its Calmic and Healthcare Divisions. If the respondent lent money to a competitor of the appellant or guaranteed its borrowings, there would be a substantial incentive to disclose confidential information obtained by her in order to protect the investment or avoid enforcement of the guarantee and it is reasonable for the appellant to be protected from that disclosure. For the reasons already mentioned, it is reasonable also to proscribe the respondent from being a member or shareholder or unitholder in a company or unit trust which competes with the appellant. Counsel for the respondent asserted that the attempt to limit the operation of the definition in the case of a company or unit trust listed on the Stock Exchange was inadequate. He asserted that it would be unreasonable to enforce the Deed if the respondent were to take a shareholding slightly in excess of 5 per cent in a publicly listed company. The reality is that that is a very remote event.
42. It must be recognised also that the expression "in any capacity" might inadvertently include activities which would be outside the contemplation of the parties. The respondent could be employed by a competitor of the appellant in a way which neither brought her into contact with former clients of the appellant nor which would give her the opportunity of disclosing confidential information. But it is clear that such occupations are outside the contemplation of the parties and the clause should in accordance with authority be read down so as to apply to those forms of employment in which the respondent might be capable of coming into contact with clients of the appellant or from making confidential information available to the competitor. It is relevant also that the proscription on all of these activities is for one year only.
43. For these reasons I have come to the conclusion that the restraint of trade is reasonable and is, therefore, valid.
44. It would have been possible to reach the same conclusion by severing the definition of "capacity" from the deed. For the reasons already expressed the use of the expression "in any capacity" is a reasonable restraint, particularly as the restraint is limited to businesses which compete with the Calmic and Healthcare Divisions of the appellant. It is possible to sever the definition of "capacity" without re-writing the covenants expressed in the deed. I would have also concluded that the restraint was reasonable by severing the definition.
45. The Area and Duration of the Restraint: The respondent filed a notice of contention against the decision of the trial judge that the restraint was reasonable both as to area and duration. The respondent did not assert the trial judge had misunderstood any of the general principles. Instead the contention was that the Judge had erred in the application of those principles to the facts.
46. As to the area of the restraint, the trial judge found that the appellant's business operated throughout the State, that the geographic areas allocated to the respondent covered a large part of the State, and that from time to time the respondent attended on customers of the appellant outside her allocated area. He concluded that, as the restraint was limited to the area of the appellant's business, it was reasonable. The trial judge correctly identified the principle that the restraint must relate to the area of the appellant's business: Brightman v Lamson Paragon Ltd (1914) 18 CLR 331.
47. A convenient summary of the principles relating to employment contracts is contained in Lindgren, Carter and Harland, Contract Law in Australia, para.1648:
"The proper approach in the case of employment contracts is
first to identify the properly protectable interests of the
employer; second to identify the status, functions and
duties of the particular employee; and, third, to determine
whether, in the light of these matters, the particular
restraint imposed goes no further than to safeguard the
employer's protectable interest. Of relevance to the first
of these matters will be the nature and geographical spread
of the employer's operations, the location of clients and
the goodwill of his business. Of relevance to the second is
the degree of contact between the particular employee and
the clients, his level of seniority and responsibility
within the structure of the employer's operations and his
possession of (or access to) trade secrets and confidential
information belonging to the employer."
48. Examples of the cases from which the learned authors extracted those principles are Brightman v Lamson Paragon Ltd (supra); Herbert Morris Ltd v Saxelby (1916) 1 AC 688; Fitch v Dewes (1921) 2 AC 158; Lindner v Murdock's Garage (1950) 83 CLR 628; Home Counties Dairies Ltd v Skilton (supra); Marion White Ltd v Francis (supra). In the course of her employment the respondent came into contact with customers of the appellant in most parts of the State. She had access to confidential information relating to many of those customers and her duties as a sales consultant gave her a degree of familiarity with those customers. In my view the trial judge was clearly correct in deciding that the area of the restraint was reasonable. That conclusion is reinforced by the fact that the restraint operated only for twelve months.
49. Although the respondent did not contend the trial judge had misunderstood the relevant principles concerning the duration of the restraint, she questioned the use made by the trial judge of the decision of the Privy Council in Stenhouse v Phillips (1974) AC 391 at 402 where it was held that it was not relevant to enquire how long the employee would be expected to enjoy by virtue of his employment, a competitive edge over others seeking the clients' business. The contention was that in the circumstances of this case the question was very relevant. The passage objected to must be read in context. It occurs in this part of the advice of their Lordships:
"The question is not how long the employee could be expected
to enjoy, by virtue of his employment, a competitive edge
over others seeking the clients' business. It is, rather,
what is a reasonable time during which the employer is
entitled to protection against solicitation of clients with
whom the employee had contact and influence during
employment and who were not bound to the employer by
contract or by stability of association. This question,
secondly, their Lordships do not consider can advantageously
form the subject of direct evidence. It is for the judge,
after informing himself as fully as he can of the facts and
circumstances relating to the employer's business, the
nature of the employer's interest to be protected, and the
likely effect on this of solicitation, to decide whether the
contractual period is reasonable or not. An opinion as to
the reasonableness of elements of it, particularly of the
time during which it is to run, can seldom be precise, and
can only be formed on a broad and common sense view."
50. The issues as identified by their Lordships are equally apposite to the circumstances of this case. The issue is not whether the respondent would have a competitive advantage over others but whether the knowledge she gained would assist her in soliciting customers from the appellant.
51. When dealing with the duration of the restraint, the trial judge relied on the fact that the appellant's standard form of contract was for a period of two years, that some 80 per cent of the appellant's customers bound themselves for that period, and that it took the respondent almost twelve months to revisit each of the customers in her allocated area. Although he noted that the respondent had gained knowledge of only a small proportion of the appellant's customers, that she would "have retained only a minute proportion of the information to which she had become privy", and that she would have retained that information for about three months, he nevertheless held that the duration of the restraint was reasonable. I agree with his conclusion and his reasons for it. I add that in the two years in which the respondent had been employed by the appellant she would have gained a good deal of knowledge of a number of customers which she could use to some advantage in seeking to solicitor custom for her new employer. In addition, she would have some knowledge of those customers whose contracts with the appellant were about to expire, know those customer whom she could more readily approach to seek to persuade them to contract with her new employer. The appellant is entitled to be protected from solicitation of its customers by the respondent and a period of twelve months is a reasonable degree of protection in the circumstances of this case.
52. The restraints both as to area and duration were not contrary to the public interest. The respondent was at liberty to seek employment as a sales person in any kind of business which did not compete with either the Calmic or Healthcare Divisions of the appellant's business. There would have been many other kinds of business in which the respondent would have been able to utilise the skills and attributes she possessed as a sales consultant or sales representative.
53. For these reasons I would dismiss the cross-appeal.
54. The Remedy: Initially, the appellant sought an injunction to restrain the respondent from being employed by Pink Environmental Services, the respondent's new employer. The Court refused an interim injunction. Given that the duration of the restraint has now expired, the appellant sought leave to amend its claim to include a claim for a declaration that the respondent had acted in brach of the restraint of trade and for damages. The respondent did not oppose the application. This Court granted leave to the appellant to include those claims. I would, therefore, allow the appeal, dismiss the cross-appeal and remit this action to the District Court for assessment of damages.
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