Transpacific Industries Pty Ltd v Whelan - [2008] VSC 403

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 8248 of 2008

TRANSPACIFIC INDUSTRIES PTY LTD & ORS	Plaintiffs
v
MATTHEW WHELAN	Defendant

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JUDGE:	WHELAN J
WHERE HELD:	Melbourne
DATE OF HEARING:	22-23, 25, 29-30 September 2008
DATE OF JUDGMENT:	7 October 2008
CASE MAY BE CITED AS:	Transpacific Industries Pty Ltd v Whelan
MEDIUM NEUTRAL CITATION:	[2008] VSC 403

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CONTRACTS – Employee – Restraint of trade provision – Whether restraint exceeds what is necessary to protect the legitimate interests of the employer – Restraint of trade too wide and therefore invalid

EMPLOYMENT LAW – Obligation of confidence of employee after termination – Danger of disclosure or misuse – Injunction granted

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr S Anderson SC Dr R Dean	Browne & Co
For the Defendant	Mr R Millar	Macpherson + Kelley Lawyers

HIS HONOUR:

Introduction

The defendant, Matthew Whelan, has been involved in the waste management industry since 1984. Until 2 July 2008 he was employed by the first named plaintiff, Transpacific Industries Pty Ltd (“TPI”). On 28 July 2008 he began working for another company in the waste management industry named Hi-Quality Sales Victoria Pty Ltd (“Hi-Quality Victoria”).

Before he left employment with TPI, Mr Whelan signed a deed of separation. The deed contains a restraint upon Mr Whelan’s future employment activities.

On 5 September 2008 TPI and three related companies issued this proceeding against Mr Whelan. It is alleged that he has breached the restraint in the deed of separation and it is also alleged that he has engaged in conduct by virtue of which he “risks improperly using or disclosing confidential information”. Counsel for the plaintiffs sought relief by way of injunctions only and disavowed any claim for damages.

The duration of the restraint provision in the deed of separation is six months from 30 June 2008. With the laudable cooperation of the parties and their legal advisors, the proceeding was brought on for trial urgently on Monday 22 September 2008. The pleadings were not such as would normally have been acceptable in a case of this kind, and there had been no formal process of discovery. Nevertheless, the parties and their legal advisors were able to put before the Court the relevant material and to articulate the issues in a manner which enabled me to conduct the trial and to conclude it late on Tuesday 30 September 2008.

Evidence in the trial was given by affidavit. Six officers of the plaintiffs swore affidavits and were cross-examined. The defendant swore two affidavits and he was cross-examined for more than a day. There was one further witness called on behalf of the defendant. As much of the hearing concerned information said by the plaintiffs to be confidential, substantial portions of the evidence were heard in camera. Some of the affidavits were the subject of directions as to confidentiality, as were some of the exhibits.

Given the period of the restraint and given that Mr…

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: [2008] VSC 403
Decision Date: 7 October 2008

CaseChat Overview and Summary

Transpacific Industries Pty Ltd brought a claim against its former employee, Mr Whelan, seeking to enforce a restraint of trade clause in his employment contract. The clause sought to restrict Mr Whelan from working for any competitor of Transpacific for a period of 12 months following the termination of his employment. Mr Whelan argued that the clause was unreasonable and thus invalid as it was overly broad and went beyond what was necessary to protect Transpacific’s legitimate business interests. The court was required to determine whether the restraint of trade provision was reasonable and enforceable, or if it was excessive and therefore void.

The court considered the nature of Transpacific’s business and the legitimate interests it sought to protect, including its confidential information, customer relationships, and goodwill. The court also assessed the extent of the restraint and whether it was reasonable in all the circumstances, including the length of the restraint period and the geographical scope. The court held that the restraint was too wide and went beyond what was necessary to protect Transpacific’s legitimate interests. The clause was considered to be unreasonable and therefore invalid. The court also found that Mr Whelan was under an obligation of confidence even after his employment had terminated, and granted an injunction to prevent him from disclosing or using any confidential information obtained during his employment with Transpacific.

The court ordered that the restraint of trade clause in Mr Whelan’s employment contract was invalid and unenforceable. The court also granted an injunction to prevent Mr Whelan from disclosing or using any confidential information obtained during his employment with Transpacific, and from working for any competitor of Transpacific for a period of six months. The injunction was to be effective from the date of the court’s decision and was to continue until six months after Mr Whelan’s employment with Transpacific had terminated.

Orders