Weir v Hoylevans Pty Ltd
[2001] WASCA 23
•12 FEBRUARY 2001
WEIR -v- HOYLEVANS PTY LTD [2001] WASCA 23
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASCA 23 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:109/2000 | 12 DECEMBER 2000 | |
| Coram: | PIDGEON J WALLWORK J STEYTLER J | 12/02/01 | |
| 22 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed save for Order 3 of the orders made by the learned trial Judge | ||
| PDF Version |
| Parties: | JOHN WEIR HOYLEVANS PTY LTD (ACN 078 884 821) |
Catchwords: | Appeal Contract Sale of business Tavern sold subject to restraint of trade clause Enforceability Whether director of vendor company personally bound by restraint of trade clause Estoppel Turns on own facts |
Legislation: | Trade Practices Act 1974, s 40, s 45(1), s 51(2)(e) |
Case References: | Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842 Commonwealth v Verwayen (1990) 170 CLR 394 Devries v Australian National Railways Commission (1993) 177 CLR 472 Foran v Wight (1989) 168 CLR 385 Garden City Wallpaper and Curtain Centre Pty Ltd v Barenfar Pty Ltd, unreported; FCt SCt of WA; Library No 980544; 18 September 1998 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 Hoyts Pty Ltd v Spencer (1919) 27 CLR 133 Jutland Nominees Pty Ltd v Nelson, unreported; SCt of WA; Library No 920402; 26 June 1992 Pioneer Concrete Services Ltd v Galli [1985] VR 675 Re Vandervell's Trusts (No 2); White v Vandervell Trustees Ltd [1974] 3 All ER 205 Smith v Hancock [1894] 2 Ch 377 Uranerz (Aust) Pty Ltd v Hale (1980) 30 ALR 193 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : WEIR -v- HOYLEVANS PTY LTD [2001] WASCA 23 CORAM : PIDGEON J
- WALLWORK J
STEYTLER J
- Appellant (Defendant)
AND
HOYLEVANS PTY LTD (ACN 078 884 821)
Respondent (Plaintiff)
Catchwords:
Appeal - Contract - Sale of business - Tavern sold subject to restraint of trade clause - Enforceability - Whether director of vendor company personally bound by restraint of trade clause - Estoppel - Turns on own facts
Legislation:
Trade Practices Act 1974, s 40, s 45(1), s 51(2)(e)
Result:
Appeal dismissed save for Order 3 of the orders made by the learned trial Judge
(Page 2)
Representation:
Counsel:
Appellant (Defendant) : Mr R W Bower
Respondent (Plaintiff) : Mr L E James
Solicitors:
Appellant (Defendant) : Corsers
Respondent (Plaintiff) : Kott Gunning
Case(s) referred to in judgment(s):
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Case(s) also cited:
Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842
Commonwealth v Verwayen (1990) 170 CLR 394
Devries v Australian National Railways Commission (1993) 177 CLR 472
Foran v Wight (1989) 168 CLR 385
Garden City Wallpaper and Curtain Centre Pty Ltd v Barenfar Pty Ltd, unreported; FCt SCt of WA; Library No 980544; 18 September 1998
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Hoyts Pty Ltd v Spencer (1919) 27 CLR 133
Jutland Nominees Pty Ltd v Nelson, unreported; SCt of WA; Library No 920402; 26 June 1992
Pioneer Concrete Services Ltd v Galli [1985] VR 675
Re Vandervell's Trusts (No 2); White v Vandervell Trustees Ltd [1974] 3 All ER 205
Smith v Hancock [1894] 2 Ch 377
Uranerz (Aust) Pty Ltd v Hale (1980) 30 ALR 193
(Page 3)
1 PIDGEON J : I agree with the reasons to be published by Steytler J and the orders proposed.
2 WALLWORK J: I agree with the reasons for judgment of Steytler J and to the orders proposed by his Honour. There is nothing I wish to add.
3 STEYTLER J : The appellant has been restrained, by orders made by the learned trial Judge, from carrying on or being engaged or interested in the business of a tavern and bottle shop (except for a liquor store in the Whitford City Shopping Centre) within a 10 kilometre radius of a tavern known as the Whitford Tavern and from continuing to operate as the approved manager of a tavern known as the Beldon Tavern until 5 March 2002. He has also been restrained from engaging in any conduct derogating from the respondent's right to obtain the full benefit of the goodwill of the Whitford Tavern and has been ordered to pay to the respondent damages of $100. He appeals against all of those orders.
4 The Whitford Tavern and an attached liquor store (together "the tavern") were bought by a company, K9 Pty Ltd ("K9"), in about 13 October 1995. The directors of that company were the appellant, Mr Lindsay Archer and Mr Michael Abbott. The appellant was, pursuant to provisions of the Liquor Licensing Act 1988, nominated as the approved manager of the tavern. K9 also acquired the liquor store in the Whitford City Shopping Centre, mentioned above, that store being known as Whitfords City Cellars.
5 Not long thereafter K9 decided to sell the tavern. It approached a business broker, Mr Ray Pitcher of Joseph Charles Learmonth Duffy, and engaged him to act as its agent for that purpose. Mr Pitcher approached the respondent in February 1997. On a Sunday morning towards the end of February 1997 the directors of the respondent, Mr Chris Hoyle and Mr Glyn Evans, and their wives were shown around the tavern by Mr Pitcher, the appellant and Mr Archer. They liked what they saw. On 5 March 1997 they executed an offer to purchase the tavern which had been drawn up by Mr Pitcher.
6 The offer was expressed to have been made by "Christopher Mark Hoyle & Glyn Evans or as proposers of a company yet to be incorporated ... ", the respondent then not yet having been incorporated. The purchase price of the tavern was expressed to be $1,150,000 of which $800,000 was allocated to goodwill. The offer was
(Page 4)
- accepted by K9 on the same day, with each of the appellant and Mr Archer having signed the document on its behalf.
7 Clause 4 of the printed conditions of the sale agreement reads as follows:
"4. Trade Restraints
(a) The Vendor will not directly or indirectly and whether solely or jointly with or as a director, manager, agent or servant of any person or corporation carry on, or be engaged or interested in, any business of the nature of the Business hereby sold, or any significant component thereof, or permit the Vendor's name or the names of any of them to be used in connection with such business:
(i) within the area set out in E of the Particulars, and
(ii) for the period set out in E of the Particulars.
(b) Except to the extent otherwise agreed, the Vendor shall not after completion of this Agreement during the period referred to in sub-clause (a)(ii) engage in conduct derogating from the Purchaser's right to obtain the full benefit of the goodwill of the Business.
(c) The area and period of restraint are acknowledged by the Vendor to be no greater than reasonably required to protect the goodwill sold to the Purchaser.
(d) The Vendor will upon completion deliver to the Purchaser a Deed whereby the person(s) named in E of the Particulars will covenant and if more than one, jointly and severally, with the Purchaser, to accept the same restrictions on competition as are accepted by the Vendor in clause 4(a) hereof. Such Deed will be prepared and tendered by the Purchaser to the Vendor within a reasonable time before the date of settlement."
(Page 5)
8 Paragraph E of the particulars referred to in cls 4(a) and 4(d) provides that the restraint was to be for a term of five years within a radius of 10 kilometres and that the restrained persons were to be "the directors and family of K9 Pty Ltd".
9 The appellant said in evidence that, before signing the sale agreement on behalf of K9, he read the printed conditions forming part of it and was concerned at the contents of condition 4. He consequently telephoned Mr Evans. His evidence in this respect, which was quoted in full by the learned trial Judge at [24], was as follows:
"I told him that I had an interest in the Whitfords City Cellars which was 500 yards from the tavern. From his words I understood that he already knew that. I also told him that I had an interest in the Ballajura Tavern which, at that time, I thought was within the 10 km radius. I subsequently learned that Ballajura Tavern is not inside the 10 km radius. At the time of my conversation I thought that it could have been affected by clause E. I told Evans that I was not going to sign this document if the restraint of trade clause was going to be an issue. I told him that he might as well forget about presenting the deed of restraint which was mentioned in the fine print to me because I definitely was not going to sign it. Evans told me that the restraint of trade clause was not an issue, he said he was not concerned about it.
... One thing that I am sure of is that at the time the offer was presented I knew Evans and I knew that he was the one to speak to about the offer. I said words to the effect to Evans that 'Don't even bother sending the deed of restraint of trade because I'm not going to sign it. If that's going to affect the deal then we won't proceed any further and I won't sign the agreement.' Evans said words to the effect 'The restraint of trade isn't an issue.' I think he may have said 'Don't worry about it'."
10 The appellant was asked, in cross-examination, why he did not insist that par E and condition 4 be crossed out if he was so concerned about them. He said that this was not really open to him because, as both Mr Archer and Mr Abbott had decided to sell the tavern, they could effect the sale in any event without reference to him. He did not speak to either of them about the restraint clause. The appellant agreed that, after his telephone conversation with Mr Evans and as a consequence of his
(Page 6)
- discussion with him, he signed the sale agreement, making only one minor alteration to an entirely different clause.
11 Mr Evans, in the course of his evidence, recalled the telephone conversation. The learned trial Judge referred to his evidence in that regard as follows:
"[27] ... when Mr Weir's evidence on this point was put to Mr Evans for comment in the course of Mr Evans' cross-examination, he confirmed that such a call did take place. He was uncertain as to whether this occurred before he had signed the offer, and nor could he recall exactly whether mention was made of a deed of the kind contemplated by condition 4. His recollection was that, at some stage, Mr Weir, as a personal matter, raised a concern about having an interest in the liquor store known as Whitfords City Cellars and about another interest in Ballajura Tavern. Mr Evans' recollection was that, at all stages of the negotiations, his stance on behalf of Mr Hoyle and himself was that they were not concerned about the Ballajura Tavern (because Mr Evans had little doubt that it lay outside the prescribed radius) and nor were they concerned about the Whitfords City Cellars, because this liquor shop was a going concern. They were, therefore, able to take account of its impact, if any, upon the Whitford Tavern before making their decision to buy. To the best of his recollection, he put this view to Mr Weir during the telephone call in question and this appeared to satisfy Mr Weir."
12 The learned trial Judge also mentioned that both directors of the respondent denied that they ever agreed to waive the trade restraint clause and said that it was "made ... perfectly clear that the people they had been dealing with, Mr Archer and Mr Weir, were not at liberty to compete with the ... [respondent] for a prescribed time, within a prescribed radius". However the deed contemplated by condition 4 was not prepared because, Mr Evans said, he left the necessary paperwork to Mr Pitcher and presumed that whatever was thought necessary to carry into effect the agreement made between the parties had been attended to.
13 One Tuesday evening, a few days after the sale agreement had been signed, Messrs Evans and Hoyle went to the tavern to inspect its books.
(Page 7)
- The learned trial Judge referred to Mr Evans' evidence of what then took place as follows:
"[31] Mr Evans said in his written statement that, towards the end of their visit to the premises on the evening in question, Mr Weir mentioned that he had an interest in the Ballajura Tavern and also in a pub or nightclub in Northbridge. He also referred to the fact that he owned a share in the liquor store in the Whitford City Shopping Centre, this being something that had been previously mentioned to the purchasers by Mr Pitcher. Although, as already indicated, Mr Evans was prepared to concede that this matter may have been first raised in the telephone call made by Mr Weir mentioned earlier, the tenor of his evidence was that it was on this Tuesday evening, to the best of his recollection, that the matter was specifically addressed. In dealing with it, he spoke on behalf of Mr Hoyle and himself in saying that the purchasers had no objection to Mr Weir holding interests of the kind he had referred to. Mr Evans' thought was that the Ballajura Tavern was outside the prescribed radius and the liquor store was an established business that they had already been informed about. The purchasers did not see these particular interests as being objectionable because they were not truly competitive outlets.
[32] According to Mr Evans, the purchasers made it plain on the Tuesday evening that, subject to exceptions concerning Ballajura and the liquor store, the trade restraint clause was to apply. Mr Weir did not say or do anything to suggest that the clause was not still operative as a consequence of their discussion on that evening. ... "
(Page 8)
15 After mentioning these matters the learned trial Judge returned to the issue of the restraint clause. He said, in that respect:
"[43] Mr Evans and Mr Hoyle contended that at no time prior to settlement were they told that Mr Weir, or indeed any of the directors of K9 Pty Ltd, did not regard themselves as bound by the trade restraint clause, or regarded themselves as free to set up in competition to the Whitford Tavern in a manner inconsistent with the restraint clause. Both men said further that if they had been informed that the restraints were not thought to be applicable, they would not have been prepared to go along with the deal and pay $650,000 for goodwill. Apart from his testimony concerning his telephone call to Mr Evans prior to signing the original offer, Mr Weir did not lead or rely on any evidence to the contrary in regard to this aspect of the matter. Put shortly, apart from the telephone call just mentioned, there was no evidence brought before me to suggest that the directors of K9 Pty Ltd did not regard themselves as bound by the restrictions set out in both the original offer and the amended offer, which restrictions purported to apply to 'the directors and family of K9 Pty Ltd'. There was certainly no evidence to that effect in respect of the period between renegotiation of the contract ... and settlement. It is significant that no attempt was made to delete the restraint clause during the renegotiation of the contract. The clause was simply amended, which strongly suggests that the clause was intended to remain in force. ... "
16 Some 12 months after settlement of the purchase of the tavern the respondent learned from the appellant that he had agreed to take up a position as the Approved Manager of the Beldon Tavern, which was only three kilometres distance from the Whitford Tavern. The appellant has since said, in this respect, that an opportunity came up, in May 1998, for him to purchase the Beldon Tavern but, because of his concern that his estranged wife might claim an interest in it in a property settlement under the Family Law Act 1975, he agreed with the present proprietor of the Beldon Tavern that if that person purchased that tavern the appellant would operate it for him. However the appellant did acquire an option to purchase that tavern from its proprietor.
(Page 9)
17 The respondent contended that the appellant was estopped from denying that he was bound by the restraint clause, notwithstanding that no deed of the kind contemplated by cl 4 of the agreement was ever prepared. It pleaded that, to the knowledge of the appellant, it acted to its detriment upon his express and implied representations that he would be bound by and abide by the restraint clause and that, in reliance upon those representations, it bought the tavern, paying an amount of $650,000 for goodwill. The learned trial Judge made a number of findings in this respect, as follows:
"[72] ... I accept that Mr Evans and Mr Hoyle, as the prospective purchasers, took account of the trade restraint clause before signing the original offer and regarded it as a matter of importance. I find that they would not have proceeded further if it had been suggested to them that, notwithstanding the apparent effect of part E, the directors and family of the vendor company would be at liberty to carry on a tavern in competition to the Whitford Tavern within the stipulated term and radius. It is apparent, however, having left the paperwork to Mr Pitcher, that initially they did not apply their minds to the question of preparing and obtaining a deed signed by the directors of the vendor company. The question is whether Mr Weir by his words and actions created an assumption that all was in order and that no further paperwork was necessary. That he and Mr Archer had personally committed themselves to observing the terms of the restraint clause provided the Ballajura Tavern and the liquor store were excepted.
[73] Mr Weir says that the offer was delivered to him for signature on or shortly after 5 March 1997, whereupon he immediately telephoned Mr Evans to discuss the effect of the trade restraint clause. Mr Evans concedes that such a call was made. I am satisfied that this call was made prior to Mr Weir signing the document, from which it follows that the offerors, at that stage Mr Evans and Mr Hoyle, were not yet parties to a binding contract prior to acceptance. It remained open to them to withdraw their offer if a point of difficulty arose. Accordingly, if anything was said in the course of the conversation initiated by Mr Weir that had the effect of creating an assumption on the part of the prospective purchasers that
(Page 10)
- the safeguards they were looking for had been secured, then this could become a basis for application of the equitable principles concerning estoppel summarised by Mason CJ and Wilson J ... [in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 404] if the person creating the assumption later acted unconscionably."
18 The learned trial Judge also made the following findings:
"[76] I generally found Mr Evans to be a more believable and convincing witness than Mr Weir and I incline to the view that, at all material times, including the telephone call in question, Mr Evans consistently maintained that he was insistent upon the trade restraint clause continuing in force, although he made it clear that he had no objection to the Ballajura Tavern and the Whitford liquor store being treated as exempt. I also find that, at the conclusion of the crucial telephone call, Mr Evans on behalf of the offerors, in the manner pleaded in the statement of claim, was left with an assumption created by Mr Weir - the person actively involved in managing the Whitford Tavern - that there was no point in submitting to the vendors a deed corresponding to the trade restraint clause as it then stood in the original offer because such a deed would not be signed by Mr Weir. The purchasers could, however, rely upon Mr Weir's personal undertaking to abide by the clause so long as it did not apply to the Ballajura Tavern and the liquor store.
[77] I find that on a Tuesday evening, shortly after the original offer had been signed by all parties, while at the Whitford Tavern, Mr Weir confirmed to Mr Evans and Mr Hoyle that he was personally bound by the restraint clause so long as it did not apply to the Ballajura Tavern or the liquor store. It follows that Mr Weir, by his call and by his subsequent conduct, including especially his conduct on the Tuesday evening, was instrumental in creating an assumption on the part of the offerors that he personally, and as one of the directors of K9 Pty Ltd, would abide by the terms of the trade restraint clause, notwithstanding the absence of a formal deed, provided both parties were agreed that the clause had no application to the Ballajura Tavern or to the Whitford liquor store. The effect of
(Page 11)
- Mr Weir's conduct in negotiating an agreement of that kind and by then signing and purporting to abide by the original offer was to represent that he was bound personally to observe the requirements of the clause. In other words, the effect of the representation contained in his call was to substitute his personal undertaking by these verbal arrangements for the personal obligation that would otherwise have been imposed upon him by the formal deed. This created an assumption of the kind described by Mason CJ and Wilson J in Walton's case. Mr Archer accepted in evidence that he knew the restraint clause bound him personally and it is apparent that he acted accordingly throughout the negotiations, and afterwards."
19 His Honour went on to say:
"[79] In my view, Mr Weir's option to acquire an interest in the Beldon Tavern at market value can be characterised as being interested in a business of the kind prohibited. He was, in any event, as an approved manager, engaged in such a business.
[80] It follows from the preceding analysis that within the principles reflected in Walton's case (supra) that Mr Weir acted unconscionably in allowing Mr Evans and Mr Hoyle, and thus the plaintiff, to proceed with their purchase on the assumption that the trade restraint clause would be complied with, not only by K9 Pty Ltd, but also by its directors and then, at a later stage, acting inconsistently with the representation that had given rise to the assumption. It is not a sufficient answer to this plea that equity should not assist the purchasers in circumstances where they could have insisted on their common law contractual rights to have a deed of restraint signed by the K9 Pty Ltd directors, because the effect of Mr Weir's actions was to create an assumption that a deed of that kind was no longer appropriate or necessary. The plaintiff acted to its detriment in that it paid a substantial amount for goodwill pursuant to a belief created by Mr Weir that the trade restraint clause would be honoured. I find in favour of the plaintiff on this issue."
(Page 12)
20 His Honour next went on to consider an alternative argument advanced on behalf of the respondent, namely that "the renegotiation of the original offer, including a variation of the written agreement to exempt the [appellant's] interest in the Whitford liquor store, amounted to a collateral contract". It was argued by the respondent that the appellant's conduct "implied ... an offer to the ... [respondent] from the ... [appellant] that he would be bound by the provisions of the trade restraint clause as modified in consideration of the [respondent] entering into the contract to purchase the Whitford Tavern". His Honour found that such a contract did come into being.
21 Finally, his Honour turned to consider an argument, advanced on behalf of the appellant, that the trade restraint clause was an unreasonable restraint of trade and consequently unenforceable against the appellant or that it was an "exclusionary provision" within the meaning given to those words by s 4D of the Trade Practices Act 1974 and, accordingly, by virtue of s 45(1) of that Act, unenforceable as against the appellant. In the further alternative the appellant argued that the trade restraint clause had the purpose, or had or was likely to have the effect, of substantially lessening competition in the market and was consequently unenforceable against the appellant by virtue of s 45(1) of the Trade Practices Act. The learned trial Judge found, in respect of these arguments, that it was apparent from the evidence that the trade restraint clause was introduced solely for the protection of the purchaser in respect of the goodwill of the business. He said that Mr Evans gave clear evidence to that effect and that he found him to be a credible and convincing witness. He was satisfied that the clause fell within the exception allowed by s 51(2)(e) of the Trade Practices Act and that it did not contravene the provisions of that Act. He said that the restraint represented a reasonable protection of goodwill.
22 The appellant, in his grounds of appeal as amended at the hearing of the appeal, raises 10 grounds, as follows:
"1. The learned Judge erred in law and in fact in finding that the Appellant was instrumental in creating an assumption on the part of the Respondent's representatives that he, the Appellant, personally would abide by the terms of the trade restraint clause, such finding being against the evidence or the weight of the evidence. Specifically:
(a) the evidence that the Appellant had told Mr Evans in a telephone conversation that he would not sign
(Page 13)
- a deed containing a trade restraint clause, such evidence having been accepted by the learned Judge;
- (b) there was no evidence in the Statement of Mr Hoyle (received in evidence as an exhibit) of the Appellant having confirmed to Mr Evans and Mr Hoyle at the 'Tuesday evening' meeting that he, the Appellant would be personally bound by any such clause;
(c) there was no evidence in the Statement of Mr Evans (received in evidence as an exhibit) of the Appellant having confirmed to Mr Evans and Mr Hoyle at the 'Tuesday evening' meeting that he, the Appellant would be personally bound by any such clause;
(d) the Appellant specifically denied in evidence that he had told either Mr Evans or Mr Hoyle that he would be bound by any such clause.
- 2. Alternatively, if the Appellant did confirm to Mr Evans and Mr Hoyle that he was personally bound by a restraint clause, the learned Judge erred in law in finding that the creation of the assumption on the part of Mr Evans and Mr Hoyle that the Appellant was so personally bound estopped the Appellant from denying that he was so bound.
3. The learned Judge erred in law when finding that the Appellant was bound to abide by 'the trade restraint clause' by failing to specify the terms of the 'the trade restraint clause'.
4. Alternatively, if the Appellant was bound by a trade restraint clause as alleged in paragraph 9 of the Amended Statement of Claim, the learned Judge erred in law in finding that the Appellant had breached such a clause by being 'engaged in' a competing business by being an approved manager of such a business, such an allegation not having been raised on the pleadings.
(Page 14)
- 5. Further, if the Appellant was bound by a trade restraint clause as alleged in paragraph 9 of the Amended Statement of Claim, the learned Judge erred in law in finding that the Appellant had breached such a clause by being 'interested in' a competing business by having an option to acquire an interest in a competing business:
(a) such an allegation not having been raised on the pleadings; or
(b) alternatively, the arrangement that the Appellant had with the owner of the competing business did not amount to an option.
6. The learned Judge erred in law and in fact in finding that a collateral contract was entered into between the Respondent and the Appellant there being no evidence that Lindsay Archer was acting on behalf of the Appellant when he sought a variation to the restraint of trade clause as alleged in paragraph 13 of the Amended Statement of Claim.
7. Alternatively, if the Appellant was bound by a trade restraint clause as alleged in paragraph 13 of the Amended Statement of Claim, the learned Judge erred in law in finding that the Appellant had breached such a clause by being 'engaged in' a competing business by being an approved manager of such a business, such an allegation not having been raised on the pleadings.
8. Further, if the Appellant was bound by a trade restraint clause as alleged in paragraph 13 of the Amended Statement of Claim, the learned Judge erred in law in finding that the Appellant had breached such a clause by being 'interested in' a competing business by having an option to acquire an interest in a competing business:
(a) such an allegation not having been raised on the pleadings; or
(b) alternatively, the arrangement that the Appellant had with the owner of the competing business did not amount to an option.
(Page 15)
- 9. Alternatively if the Appellant was bound by the trade restraint clause, the learned Judge erred in law in finding that section 51(2)(e) of the Trade Practices Act applied to the trade restraint clause, when on a proper construction of the trade restraint clause the clause is more than solely for the protection of the Respondent in respect of the goodwill of the business.
10. The learned Judge erred in law in awarding the Respondent its costs in relation to the application for Interlocutory Injunction (which were reserved costs) as, at the time that application was made, the Respondent's claim was based solely on the Appellant being a party to a written contract, the learned Judge having found that the Appellant was not a party to that written contract."
23 As to grounds 1 and 2, it is true that the evidence disclosed that, in the course of the telephone conversation to which I have referred and perhaps also at the meeting on the Tuesday evening, the appellant said, in effect, that he would not sign a deed containing the restraint clause. However the evidence also disclosed that he made it plain that this was because of his interest in the Whitford City Cellars liquor store and in the Ballajura Tavern which, at the time, he believed to be within the 10 kilometre radius. This was the effect both of the appellant's affidavit evidence and of his oral evidence. It will also be apparent from what I have said above that Mr Evans, in his evidence, confirmed that the appellant had raised his concern about the liquor store and the Ballajura Tavern and said that, in response, he said only that the respondent was not concerned about the prospect that the appellant would retain these two interests. He said, and his evidence was preferred by the learned trial Judge to that of the appellant, that he put this view to the appellant during the telephone call to which I have earlier referred and that this appeared to satisfy the appellant.
24 Moreover, there was no real dispute as to the fact that the learned trial Judge was entitled to accept, as he did, that at no time did the respondent, either through Mr Evans or Mr Hoyle, ever agree to waive the restraint clause in any other respect. I have earlier referred to the fact that his Honour specifically mentioned Mr Evans' evidence to the effect that he and Mr Hoyle made it plain on the Tuesday evening that, subject to exceptions concerning Ballajura and the liquor store, the trade restraint clause was to apply and that the appellant did not say or do anything to suggest that the clause was not still operative as a consequence of the
(Page 16)
- discussion on that evening. I have also earlier mentioned that his Honour also said that, apart from his testimony concerning his telephone call to Mr Evans prior to signing the original offer, the appellant did not lead or rely on any evidence which suggested that the restraints were not thought to be applicable. I have also mentioned that his Honour thought it significant that no attempt was made to delete the restraint clause, as opposed to amend it, during the renegotiation of the contract.
25 It will also be apparent from what I have said above that his Honour accepted the evidence of Messrs Evans and Hoyle that, if they had been informed that the restraints were not thought to be applicable, they (more accurately the respondent) would not have purchased the tavern and paid $650,000 for goodwill.
26 It was, against this background, entirely open to his Honour to find, as he did, that the appellant, by his words and actions, created an assumption that all was in order so far as the applicability of the restraint was concerned and that no further paperwork was necessary. I have mentioned that his Honour found, in this respect, that, after the telephone conversation with the appellant, Mr Evans was left with the opinion that there was no point in submitting to the vendors a deed corresponding to the trade restraint clause as it then stood because such a deed would not be signed by the appellant but that the purchaser could rely upon the appellant's personal undertaking to abide by the clause so long as it did not apply to the Ballajura tavern and the liquor store. I have also mentioned that his Honour also found (as he was entitled to do on the evidence to which I have referred) that the effect of the appellant's conduct on the Tuesday evening was that he confirmed to Mr Evans and Mr Hoyle that he was personally bound by the restraint clause so long as it did not apply to the Ballajura tavern or the Whitford liquor store and that the overall effect of the appellant's conduct in negotiating an agreement of the kind made, and then signing "and purporting to abide by" the original offer, was to represent that he was bound personally to observe the requirements of the restraint clause.
27 Finally, as regards these grounds, counsel for the appellant submitted that injunctive relief should have been refused in circumstances in which it was open to the respondent to have called for the execution of a deed in the terms contemplated by cl 4(d) of the printed conditions of the sale agreement but in which it did not do so. However, as I have already mentioned, his Honour specifically found that this was not done for the very reason that the appellant had led the respondent to assume that he
(Page 17)
- would abide by the restraint and that, as a result, no further paperwork was necessary.
28 There is consequently no substance to grounds 1 and 2.
29 As to ground 3, it seems to me to be quite plain that the "trade restraint clause" to which his Honour referred was that contained within cl 4(d) of the printed conditions to the sale agreement. As will be apparent, this provides for the delivery to the purchaser by the vendor, on completion, of a deed whereby, inter alia, the directors of the vendor jointly and severally covenant with the purchaser to accept the same restrictions on competition as are accepted by the vendor pursuant to cl 4(a). That clause, in turn, as will be apparent, restricts the vendor from carrying on, or being engaged or interested in, any business of the nature of that sold within the area and for the period set out in par E of the Particulars.
30 Consequently, to the extent that there is substance to this ground it exists only by reason of the fact that, in the orders which his Honour made, he included one to the effect that the appellant "be restrained from engaging in any conduct derogating from the plaintiff's right to obtain the full benefit of the goodwill of the Whitford Tavern", that order having apparently been grounded upon the restraint in condition 4(b) of the sale agreement, which binds only the vendor, K9.
31 Assuming that ground 3 is wide enough to cover this point (and there was no objection, by counsel for the respondent, to an argument put on this basis), I would to this extent allow ground 3, as argued on behalf of the appellant, and set aside Order 3 of the orders made by the learned trial Judge (although, I should add that the making of that order appears to have been a matter of little consequence to the respondent, its principal concern having been the restraining of the defendant from managing the Beldon Tavern).
32 It is convenient, next, to deal with grounds 4, 5, 7 and 8 together.
33 These grounds put forward the proposition that the learned trial Judge erred in law in finding that the appellant had breached the trade restraint clause by being "engaged in" a competing business and by being "interested in" a competing business by being, respectively, an approved manager of such a business and by having an option to acquire an interest in a competing business when no such allegations had been pleaded.
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34 Paragraph 9 of the amended statement of claim pleads that the appellant "is estopped by course ... [of] conduct on his part towards the ... [respondent] ... [from] denying he is bound by the express terms of the ... [restraint] ... ". That, in effect, was his Honour's principal finding. The principal relief afforded by his Honour was, as the respondent had claimed, an order restraining the defendant from doing anything which would constitute a breach of the terms of the restraint. There is, in my opinion, no deficiency in the pleadings which should have prevented his Honour from making this finding of estoppel or, subject to what I have said in respect of ground 3, from granting injunctive relief in the terms set out above.
35 The learned trial Judge also awarded the respondent $100 in damages. He found that this nominal sum was justified by virtue of his finding that the appellant's conduct had, in fact, been such as to amount to a breach of the terms of the trade restraint clause. This, too, was, in my opinion, sufficiently catered for by the pleadings. Paragraph 7 of the amended statement of claim provides that:
"7. In breach of the express terms pleaded in paragraphs 4 and 5 hereof [which set out, if inelegantly, the relevant terms of the restraint clause] ... the ... [appellant]:
7.1 has an interest in the Beldon Tavern which is less than ten kilometres from the Whitford Tavern; and
7.2 has been engaging in conduct derogating from the ... [respondent's] right to obtain the full benefit of the goodwill of the Whitford Tavern.
- 7.3 The ... [appellant] has taken a position as the approved Manager of the Beldon Tavern;
7.4 the ... [appellant] has been actively encouraging patrons of the Whitford Tavern to patronise the Beldon Tavern."
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- "A1. The Defendant is not entitled to be informed of the evidence whereby the Plaintiff will seek to prove that the Defendant has an interest in the Beldon Tavern, but without limiting that evidence the Plaintiff refers to the following:
1.1 The Defendant informed Glynn Wyndham Evans ('Evans') in June or July 1998 on a visit to the Whitford Tavern that the Defendant would be 'taking over the Beldon Tavern'.
1.2 The Plaintiff refers to the decision of the Director of Liquor Licensing dated 30 September 1998 in annexure 1 of the affidavit of the Defendant sworn 19 November 1998 in which the Director found that the Defendant 'has, or may intend to have, a financial interest in the Beldon Tavern'. This reflects the words used by the Defendant at the hearing ... [before] the Director of Liquor Licensing about his position, in which he did not make it clear whether he had a present interest in the Beldon Tavern or an interest in the nature of an option to acquire a future interest.
1.3 The Plaintiff also refers to paragraph 10 of the affidavit of the Defendant sworn 19 November 1998, in which the Defendant refers to an opportunity to purchase the Beldon Tavern and his concern that any interest which he might have in the tavern would be subject to a claim from his estranged wife. The Court will be asked to infer that the Defendant has or may have an interest in the Beldon Tavern which has been concealed in order to prevent any claim by his wife.
1.4 The Plaintiff will also interrogate the Defendant regarding the Defendant's involvement in the Beldon Tavern and the comments made by the Defendant to the Director of Liquor Licensing during a period of the hearing from which the Plaintiff's witnesses were excluded, which
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- interrogatories may furnish further evidence of the Defendant's interest."
37 The respondent was also asked on what basis and by reason of what matters it alleged that the appellant had been engaging in conduct derogating from the respondent's right to obtain the full benefit of the goodwill of the Whitford tavern and replied as follows:
"A2. The Plaintiff will rely upon the following:
2.1 The Defendant has taken a position as the approved Manager of the Beldon Tavern, being less than 10 kilometres from the Whitford Tavern, thus being in a position to attract the custom of drinkers who previously frequented the Whitford Tavern during the time that the Defendant was involved in the management of the Whitford Tavern.
2.2 The Defendant has contacted regular customers of the Whitford Tavern, with whom he had developed an acquaintanceship during his involvement with the Whitford Tavern, and solicited those customers to attend the Beldon Tavern by making offers of free drinks to them."
39 I should add, in any event, that there was no dispute as regards the fact that the defendant had taken up a position as the approved manager of the Beldon tavern, as found by his Honour, and it then became merely a matter of law whether or not that fact amounted, as the learned trial Judge found, also to a breach of condition 4(a) of the restraint read together with
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- Particular E thereof. It would consequently be a simple matter for an amendment of the pleadings to be made accordingly, even at this stage, if that should be moved.
40 Ground 9 is that which suggests that the learned trial Judge erred in law in finding that s 51(2)(e) of the Trade Practices Act applied to the trade restraint clause in circumstances in which that clause is said to have been "more than solely for the protection of the Respondent in respect of the goodwill of the business".
41 The appellant's contention, as expanded in argument, was that s 51(2)(e) of the Trade Practices Act does not apply because it has application only as between contracting parties in relation to a contract for the sale of a business and the appellant was not one of the contracting parties.
42 I am not persuaded that there is any substance to this ground. Section 51(2)(e) of the Trade Practices Act provides that in determining whether a relevant contravention of a provision of Part IV of that Act has been committed, regard shall not be had:
"(e) in the case of a contract for the sale of a business or of shares in the capital of a body corporate carrying on a business - to any provision of the contract that is solely for the protection of the purchaser in respect of the goodwill of the business ... ."
43 There is, in my opinion, no doubt that the provision in question was one solely for the protection of the purchaser of the tavern.
44 While it is true that the appellant was not a party to the contract for the sale of the tavern he was to be a party to the associated deed, the execution of which was required pursuant to a provision of the contract of sale, which provision (and the deed) were required solely for the protection of the purchaser of the business in respect of its goodwill.
45 There is consequently no substance to this ground.
46 It is unnecessary to consider ground 6, being that which relates to his Honour's finding of a collateral contract, having regard for the conclusion at which I have arrived on the estoppel point.
47 That leaves only ground 10 which relates to the costs of the interlocutory injunction. The appellant submits, in that respect, that
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- his Honour erred in awarding to the respondent the costs of its application for an interlocutory injunction (which had been reserved) because, at the time at which the application was made, the respondent's claim was based solely on the assumption that the appellant was a party to the contract for the sale of the tavern and his Honour, in the course of the trial, found that he had not been such. However, the difficulty with this ground is that the argument was never raised before his Honour at the time at which the reserved costs were discussed. When this difficulty was raised with counsel for the appellant he did not press his argument. It seems to me, with respect, that he was right in not doing so and that it is too late, now, to raise a contention of this kind. I should add, in any event, that it might be thought that there is no great distinction, for this purpose, between a situation in which the appellant was contractually bound and one in which he is estopped from denying that he is contractually bound.
48 It follows that, save that I would set aside Order 3 of the orders made by the learned trial Judge, I would otherwise dismiss the appeal.
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