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SWM Financial Services Pty Ltd v Lloyd

SWM Financial Services Pty Ltd v Lloyd

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Case Copied 31 October 2011 93 min read

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Supreme Court

New South Wales

Medium Neutral Citation: SWM Financial Services Pty Ltd v Lloyd [2011] NSWSC 1108
Hearing dates: 29 August 2011 to 2 September 2011 and 22 September 2011
Decision date: 31 October 2011
Jurisdiction: Equity Division
Before: Ball J
Decision:
See paragraph 118 of this judgment.

Catchwords: CONTRACT - construction - vendor warranty to 'do all things necessary' to retain staff post sale of business - whether should be interpreted as 'best endeavours' clause CONTRACT - acceptance - whether term of draft consultancy agreement incorporated by reference into another agreement. CONTRACT - construction - meaning of "entice". CONTRACT - termination -whether change in composition of partnership or dissolution of partnership terminate employment by operation of law -whether change in employee's role resulted in termination of contract. EQUITY - fiduciary duties - employer/employee relationship AND CONTRACT - implied terms - obligation to act with good faith - employee entitled to establish competing business post employment - preparatory acts to establish while still employed must not be inconsistent with duties as employee - no breach - confidential information - extent to which employee can use knowledge gained in course of employment. VICARIOUS LIABILITY - whether vicarious liability exists for breach of implied contractual or fiduciary duty to third party - whether conduct in course of employment. CONTRACT - implied terms - whether term should be implied in contract for sale of business providing for deferred consideration that purchasers would conduct business in a proper, business like and professional manner. TRADE PRACTICES - misleading and deceptive conduct - representations concerning how would conduct business - not misleading or deceptive - no loss or damage suffered
Legislation Cited: Fair Trading Act 1987 (NSW)
Partnership Act 1892 (NSW)
Restraints of Trade Act 1976 (NSW)
Cases Cited: Allen & Son v Coventry [1980] 1 ICR 9
Brace v Calder [1895] 2 QB 253
Brackenridge v Toyota Motor Corporation Australia Ltd (1996) 142 ALR 99
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Bromhead v Graham [2007] NSWCA 257
Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347
Commercial & Accounting Services (Camden) Pty Ltd v Cummins [2011] NSWSC 843
Coulthard v State of South Australia (1995) 63 SASR 531
Deeson Heavy Haulage Pty Ltd v Cox [2009] QSC 277; 82 IPR 521
Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172
Deutz Australia Pty Ltd v Skilled Engineering Ltd [2001] VSC 194
Ecco Personnel Pty Ltd v Barrett [1996] NSWSC 475
Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979
Kooee Communications v Primus Telecommunications Pty Ltd [2008] NSWCA 5
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; 210 CLR 181
Mainland Holdings Ltd v Szady [2002] NSWSC 699
Manildra Laboratories v Campbell [2009] NSWSC 987
Marks v GIO Australia Holdings [1998] HCA 69, 196 CLR 494
Menkens v Wintour [2011] QSC…

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: [2011] NSWSC 1108
Decision Date: 31 October 2011

CaseChat Overview and Summary

The case of SWM Financial Services Pty Ltd v Lloyd was heard in the Supreme Court of Victoria, where SWM Financial Services, a financial services company, sued Lloyd, a former employee, over various contractual and equitable issues. The central dispute involved whether Lloyd breached his employment contract and fiduciary duties by engaging in preparatory acts to establish a competing business while still employed by SWM, using knowledge gained during his employment, and whether SWM could be held vicariously liable for Lloyd's actions. Additionally, the case examined whether certain terms of a draft consultancy agreement were incorporated into a subsequent agreement and whether SWM was entitled to an implied term in the sale agreement that would ensure the purchasers would conduct their business in a proper, businesslike, and professional manner.

The court addressed several key legal issues, including the interpretation of the vendor's warranty to 'do all things necessary' to retain staff post-sale, whether this should be interpreted as a best endeavours clause, and the incorporation of terms from a draft consultancy agreement into another agreement. The court also considered the meaning of the term 'entice' within the employment contract, whether a change in the composition of a partnership or its dissolution resulted in the automatic termination of Lloyd's employment, and the extent to which Lloyd could use knowledge gained during his employment to establish a competing business. Furthermore, the court examined whether Lloyd breached any fiduciary duties or acted in bad faith, and whether SWM could be held vicariously liable for such breaches. Finally, the case explored whether SWM could claim an implied term in the sale agreement that the purchasers would conduct their business in a proper, businesslike, and professional manner and if there was any misleading or deceptive conduct in relation to representations about how the business would be conducted.

In its decision, the court held that Lloyd did not breach his employment contract or fiduciary duties by engaging in preparatory acts to establish a competing business while employed by SWM, as these acts were not inconsistent with his duties as an employee. The court also determined that SWM could not be held vicariously liable for Lloyd's actions. Regarding the draft consultancy agreement, the court found that certain terms were not incorporated into the subsequent agreement. The court interpreted the vendor's warranty to retain staff as a best endeavours clause rather than an absolute obligation. Finally, the court held that SWM was not entitled to an implied term in the sale agreement regarding the conduct of the purchasers' business, and that the representations made were not misleading or deceptive as no loss or damage was suffered.

The court ordered that Lloyd's actions did not constitute a breach of contract or fiduciary duties, and that SWM was not vicariously liable for Lloyd's conduct. The court also ruled that certain terms from the draft consultancy agreement were not incorporated into the subsequent agreement and that the vendor's warranty to retain staff should be interpreted as a best endeavours clause. Additionally, the court denied SWM's claim for an implied term regarding the conduct of the purchasers' business and found that no misleading or deceptive conduct occurred.

Orders