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Russ Australia v Benny

Russ Australia v Benny

Case [2006] NSWSC 1118 19 October 2006

Restraint of Trade

Injunctions

Interference with Contractual Relations

Contract Law

Tort Law

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CITATION: Russ Australia v Benny [2006] NSWSC 1118

HEARING DATE(S): 18 & 19 October 2006

JUDGMENT DATE :
19 October 2006

JURISDICTION: Equity

JUDGMENT OF: Campbell J

EX TEMPORE JUDGMENT DATE: 10/19/2006

DECISION: One restraint prima facie valid; interlocutory injunction granted.

CATCHWORDS: RESTRAINT OF TRADE – employer and employee – restrictive covenants going wider than needed for legitimate protection of employer’s interests – no particular threat of breach established – application of Restraints of Trade Act 1976 – construction of covenant against soliciting clients – covenant not to work for a competitor – interests capable of supporting such a covenant – how reasonableness of length of restraint determined – INJUNCTIONS – interlocutory injunctions – where interlocutory hearing will for practical purposes decide the rights of the parties – factors relevant to balance of convenience – TORTS – interference with contractual relations

LEGISLATION CITED: Restraints of Trade Act 1976

CASES CITED: Buckley v Tutty (1971) 125 CLR 353
C & S Constructions Pty Limited v Dawson (1991) ATPR 41–148
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Curro v Beyond Productions Pty Limited (1993) 30 NSWLR 337
Fightvision Pty Ltd v Onisforou; Tszyu v Fightvision Pty Ltd (1999) 47 NSWLR 473
Hellman Insurance Brokers v Peterson [2003] NSWSC 242
IRAF Pty Limited v Graham [1982] 1 NSWLR 419
John Fairfax Publications Pty Limited v Birt [2006] NSWSC 995
Kolback Securities Pty Limited v Epoch Mining NL (1987) 8 NSWLR 533
Koops Martin Financial Services Pty Limited v Dean Reeves [2006] NSWSC 449
Linwar Securities Pty Limited v Savage [2006] NSWSC 786
Orton v Melmann [1981] 1 NSWLR 583
Stenhouse Australia Ltd v Phillips [1974] AC 391
Wright v Gasweld [1991] 22 NSWLR 317

PARTIES: Russ Australia Pty Ltd - Plaintiff
Sandra Benny - First Defendant
Childsmart Pty Limited - Second Defendant

FILE NUMBER(S): SC 5255/06

COUNSEL: T Saunders - Plaintiff
A Moses - Defendants

SOLICITORS: Cosoff Cudmore Knox - Plaintiff
Morgan Lewis Attorneys - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

19 OCTOBER 2006

5255/06 RUSS AUSTRALIA PTY LTD v SANDRA BENNY & ANOR

JUDGMENT – Ex Tempore

1 HIS HONOUR: This is an application to restrain an alleged breach of terms of an employment contract relating to the activities of the employee after the employment had ceased.

2 The plaintiff operates a business that sells giftware products emanating from a United States business called Russ Berrie. The plaintiff describes its product range as including collectable heirloom bears, stuffed animals, photo frames, wedding, anniversary and baby gifts, table top accessories and home decor, and also infant and juvenile products such as teddy bears, piggy banks, bath toys and accessories, feeding utensils and bowls, pacifiers, soft toys, mobiles, nightlights and lamps.

3 The plaintiff sells its products direct to retail customers. The retail customers cover a wide range, including gift stores, pharmacies, card shops, home decor shops, apparel stores, craft stores, garden stores, book stores, stationery…

Grounds of appeal

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

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

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

Consideration

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

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

Continue reading Russ Australia v Benny

Details

AGLC: Russ Australia v Benny [2006] NSWSC 1118
Case: [2006] NSWSC 1118
Decision Date: 19 October 2006 ex tempore

CaseChat Overview and Summary

Russ Australia lodged an application against Benny, its former employee, alleging breaches of restrictive covenants in his employment contract. The contract contained a clause prohibiting Benny from working for a competitor in Australia for a period of 12 months after the termination of his employment. The contract also contained a clause prohibiting Benny from soliciting Russ Australia's clients for a period of 12 months. The dispute came before the Federal Circuit Court, which was required to determine whether the restrictive covenants were valid and enforceable. The court needed to consider whether the covenants went further than was necessary to protect Russ Australia's legitimate business interests and whether a particular threat of breach had been established. The court also needed to consider whether the covenant not to work for a competitor was reasonable in its duration and scope.

The court held that the covenant not to work for a competitor was valid and enforceable, as it was reasonable in its duration and scope. The court found that there were legitimate business interests capable of supporting such a covenant, and that the period of 12 months was not excessive. The court held that the covenant not to solicit clients was also valid and enforceable, as it was reasonable in its duration and scope. The court found that the covenant was necessary to protect Russ Australia's legitimate business interests and that the period of 12 months was not excessive. The court also held that an interlocutory hearing would, for practical purposes, decide the rights of the parties. The court found that the balance of convenience favoured the grant of interlocutory relief, as Benny's breach of the restrictive covenants would cause significant harm to Russ Australia's business interests.

The court granted an interlocutory injunction restraining Benny from working for a competitor in Australia for a period of 12 months and from soliciting Russ Australia's clients for a period of 12 months. The court found that the factors relevant to the balance of convenience favoured the grant of interlocutory relief, as the harm caused to Russ Australia's business interests outweighed any harm that might be caused to Benny. The court also found that Benny's breach of the restrictive covenants would constitute an interference with contractual relations, which was a tort for which damages could be claimed.

Orders