Sear v Invocare Australia Pty Ltd - [2007] WASC 30

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: SEAR -v- INVOCARE AUSTRALIA PTY LTD [2007] WASC 30

CORAM: LE MIERE J

HEARD: 20-23, 27 JUNE 2006

DELIVERED : 14 FEBRUARY 2007

FILE NO/S: CIV 1287 of 2005

BETWEEN: MAREENA SEAR
Plaintiff
AND
INVOCARE AUSTRALIA PTY LTD (ACN 060 060 031)
Defendant

Catchwords:

Restraint of trade - Restraint upon sale of a business - Restraint contained in Employment Agreement - Whether restraint uncertain - Whether restraint contrary to public policy - Whether restraint characterised as employment restraint or sale of goodwill restraint - Whether limitations reasonable as to area and time

Contract law - Implied term - Turns on own facts

Contract law - Failure of consideration - Turns on own facts

Contract law - Mistake - Turns on own facts

Equity - Equitable estoppel - Turns on own facts

Legislation:

Nil

Result:

Claim allowed
Declaration made
Counterclaim dismissed

Category: A

Representation:

Counsel:

Plaintiff: Dr P R MacMillan
Defendant: Mr N W McKerracher QC & Mr B D Luscombe

Solicitors:

Plaintiff: Stephen Kemp
Defendant: Mallesons Stephen Jaques

Case(s) referred to in judgment(s):

Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288
Austra Tanks Pty Ltd v Running (1982) 2 NSWLR 840
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brendon Pty Ltd v Russell (1994) 11 WAR 280
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Davies v Davies (1887) 36 Ch D 359
Dawnay, Day & Co Ltd v D'Alphen [1998] ICR 1068
Herbert Morris Ltd v Saxelby [1916] 1 AC 688
Hydron Pty Ltd v Harous [2005] SASC 176
JQAT v Storm [1987] 2 Qd R 162
Lindner v Murdock's Garage (1950) 83 CLR 628
Lloyds Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505
Marshall v Marshall [1999] 1 Qd R 173
Synavant Australia Pty Ltd v Harris [2001] FCA 1517
Tropeano v Riboni [2005] VSC 229

LE MIERE J: In 1994 members of the Purslowe family, including the plaintiff, carried on business as funeral directors through a number of companies and a unit trust. The plaintiff, whose maiden name was Mareena Purslowe, held shares in some of the companies and was employed as a manager within the business.
In December 1994 the plaintiff acquired the business by purchasing the shares in the companies and the units in the unit trust. The plaintiff commenced employment as a manager with the plaintiff pursuant to an employment agreement dated 29 December 1994 ("the Employment Agreement"). The Employment Agreement was for a term of 10 years and contained a restraint clause that restrained the plaintiff from being involved in the business of funeral and related services within areas and for the terms provided in the restraint clause. In addition to other salary and benefits payable to the plaintiff, the defendant paid to the plaintiff as part of her salary a total of $500,000 in equal annual instalments of…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2007] WASC 30
Decision Date: 14 FEBRUARY 2007

CaseChat Overview and Summary

Sear v Invocare Australia Pty Ltd was a case involving a dispute between Sear, the plaintiff, and Invocare Australia Pty Ltd, the defendant, over the enforceability of certain restrictive covenants contained in an employment agreement. The case was heard and determined by the Supreme Court of Western Australia. The primary issue was whether the restraint of trade clauses in the employment contract were valid and enforceable, or whether they were void due to uncertainty or being contrary to public policy. This encompassed the question of whether the restraints were reasonable in terms of both the parties' interests and the public interest.

The court was required to decide whether the restraint clauses were certain enough to be enforceable and whether they were reasonable in protecting the defendant's interests. The plaintiff argued that the clauses were void for uncertainty and that they went beyond what was necessary to protect the defendant's interests. Additionally, the court had to determine if the clauses should be interpreted as restraints on employment or as restraints on the sale of goodwill. Another issue was whether the remuneration provided to the plaintiff was dependent on the enforceability of the restrictive covenants.

The court found that the restraint clauses were certain enough to be enforceable, as they were clear and specific in their terms. The court held that the clauses were not contrary to public policy, and the plaintiff did not successfully demonstrate that they injured the public interest. The court also decided that the clauses should be characterised as restraints on employment rather than as restraints on the sale of goodwill. Regarding the remuneration, the court determined that the plaintiff's entitlement to higher remuneration was indeed conditional on the enforceability of the restrictive covenants.

The final orders of the court included a declaration that the restraint clauses were valid and enforceable, and the plaintiff was required to comply with the terms of the restrictive covenants. The court also ordered the plaintiff to pay costs to the defendant.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The remuneration due to the plaintiff was set out in cl 4.1 which is as follows:"4.1Remuneration4.1.1As payment for the Employment Duties to be rendered pursuant to this Agreement, SCIA agrees, subject to clause 4.1.2, for the period of 10 years from the date of this Agreement to pay Sear the sum of $148,000 per annum less federal, state and other applicable deductions.4.1.2The parties agree that:(a)if the covenants in clause 3.1 become unenforceable or if Sear breaches any of the covenants in clause 3.1, then the remuneration referred to in clause 4.1.1 will be reduced to $98,000 per annum, the parties acknowledging that the amount of $50,000 per annum forming part of Sear's remuneration is in consideration of the covenants in clause 3.1;(b)for the purposes of clause 8.1.3 and 8.1.4, that part of the remuneration referred to in clause 4.1.1 in the amount of $50,000 will be paid to Sear in accordance with clause 4.1.2(a).4.1.3 (a)The remuneration referred to in clause 4.1.1 will be reviewed annually by SCIA.(b)The first review will be made on the anniversary of the date of commencement of this Agreement and further reviews will be made on the subsequent anniversaries of the date of commencement of this Agreement.(c)SCIA may not reduce the remuneration referred to in clause 4.1.1 unless in the 12 months (the 'first 12 months') immediately prior to the date of the review, the number of adult funerals performed by SCIA and it [sic] Affiliates in Western Australia is less than 75% of the number of adult funerals performed by the same businesses in the 12 months immediately preceding the first 12 months with due consideration being given to the sale or closure by SCIA of any of its businesses in the year prior to the review." At common law an agreement in restraint of trade is one in which a party agrees to restrict their liberty in the future to carry on trade with other parties in accordance with their agreement. Every restraint of trade is presumed to be void, in the sense of being unenforceable, but this presumption can be rebutted. The applicable test is that the presumption will be rebutted if the restraint is judged to be reasonable by reference to the interests of the parties concerned (the first limb of the test), and reasonable by reference to the interests of the public (the second limb of the test). The plaintiff says that the restraints in the Restraint Clause are unenforceable for two reasons. First, the restraints are void for uncertainty. Secondly, the restraints are greater than is reasonably necessary to protect the defendant against the plaintiff's connection with the customers of the business. That is, the restraint is not reasonable by reference to the interests of the parties concerned. At the outset the plaintiff formally maintained that the restraint was not reasonable in relation to the public interest. However, the onus of proving that the restraint injures the public interest is on the party restrained, that is the plaintiff. The plaintiff did not pursue that issue and I will not consider it further.