Stacks Taree v Marshall - [2010] NSWSC 34

CITATION: Stacks Taree v Marshall [2010] NSWSC 34

HEARING DATE(S): 27/01/2010 and 28/01/2010

JURISDICTION: Equity Division

JUDGMENT OF: McDougall J at 1

EX TEMPORE JUDGMENT DATE: 28 January 2010

DECISION: Application dismissed with costs.

CATCHWORDS: EMPLOYMENT LAW - contract on employment - restraint of solicitation and on competition - validity of clause - public policy - whether restraints necessary for reasonable protection of legitimate interests of plaintiff - whether restraint on solicitation should be limited to clients of the firm for whom defendant provided services or extended to clients generally - duration - whether blanket covenant against competitive activity goes further than reasonably necessary for protection of plaintiff - severability - Restraint of Trade Act 1976 (NSW) s 4.

LEGISLATION CITED: Restraints of Trade Act 1976 (NSW).

CATEGORY: Principal judgment

CASES CITED: Lindner v Murdock's Garage (1950) 83 CLR 628
N E Perry Pty Limited v Judge (2002) 84 SASR 86
Woolworths Limited v Olson [2004] NSWCA 372

PARTIES: Stacks/Taree Pty Limited (Plaintiff)
Anthony John Marshall (Defendant)

FILE NUMBER(S): SC 322946/09

COUNSEL: M Condon (Plaintiff)
A Moses SC / C N Bova (Defendant)

SOLICITORS: Stacks/Taree (Plaintiff)
Marque Lawyers (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

McDOUGALL J

28 January 2010 (ex tempore – revised 28 January 2010)

322946/09 STACKS / TAREE PTY LIMITED v ANTHONY JOHN MARSHALL

JUDGMENT

1 HIS HONOUR: The first plaintiff, a solicitor corporation carrying on practice in Taree, seeks to enforce a restraint of trade clause in a contract of employment made with its former employee, the defendant. That contract of employment came to end on 27 November 2009. The defendant wishes to take up employment with another firm in Taree. The plaintiff says that he is prevented from doing so by clause 13 of the contract.

2 Clause 13 imposes three restraints. Each of them, by reference to the schedule to the contract, provides for a period of twelve months. The first restraint is against soliciting anyone who, during the first defendant's employment with the firm or at the date of termination of that employment, was a “Client of the Firm” as defined. A Client of the Firm is defined to mean someone who is at termination, or was during the preceding one year, a client of the firm. The second prohibition is against soliciting employees to leave the firm and related companies. The third is a prohibition on engaging in “Competitive Activity” as defined. The definition of Competitive Activity is "any activity which involves carrying on either alone, as a director or in partnership with any person or persons or as an employee of any person or persons the business or profession of a lawyer within ten (10) kilometres of the post offices at Taree or Wingham".

3 The defendant, without admissions, has offered an undertaking to the Court in terms of the second prohibition (being that against solicitation of employees). He has offered also an undertaking going part, but not all, of the way of the first prohibition (the…

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 Stacks Taree v Marshall

Details

AGLC: Stacks Taree v Marshall [2010] NSWSC 34
Case: [2010] NSWSC 34
Decision Date: 28 January 2010

CaseChat Overview and Summary

In the case of Stacks Taree v Marshall, the dispute centred around the enforceability of a post-employment restraint of trade clause in a solicitor's employment contract. The matter was heard in the Supreme Court of New South Wales. The primary issue for the court was to determine the validity of a clause in the employment contract which restricted the defendant from soliciting clients for a period of two years after his employment ended and from competing with the plaintiff for the same period, both in the same geographic area. The court had to consider whether these restraints were necessary for the reasonable protection of the plaintiff's legitimate interests, and if so, to what extent.

The court examined the nature and scope of the restraint on solicitation, determining whether it should be limited to clients of the firm for whom the defendant provided services or if it should extend to clients generally. Additionally, the court assessed whether the blanket covenant against competitive activity went further than reasonably necessary for the protection of the plaintiff's interests. The court also had to consider the provisions of the Restraint of Trade Act 1976 (NSW) section 4, particularly the principle of severability.

In its judgment, the court found that the restraint on solicitation was necessary and reasonable, but the restraint on competition was not. The court held that the restraint on solicitation should be limited to clients of the firm for whom the defendant provided services, as extending it to all clients would be unreasonable. Furthermore, the court ruled that the blanket covenant against competitive activity was unenforceable as it went beyond what was reasonably necessary to protect the plaintiff's legitimate interests. The court applied the principle of severability under the Restraint of Trade Act 1976 (NSW) section 4, allowing the enforceable parts of the contract to stand while striking down the unenforceable provisions.

The final orders of the court declared the restraint on competition to be void and unenforceable, while the limited restraint on solicitation was upheld as valid and enforceable. The court's decision provided clarity on the enforceability of post-employment restraints in the context of legal practice, balancing the interests of both the employer and the employee.

Orders