Woer & Woer v Mattsson & Mattsson - [2005] SADC 55

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
WOER & WOER v MATTSSON & MATTSSON
Judgment of His Honour Judge Bishop
31 May 2005
CONTRACTS
Contract - sale and purchase of a drilling business on Eyre Peninsula for $80,000 - special condition of the agreement provided that the vendors "will not carry on or be interested directly or indirectly in any business of a like nature within the boundaries of Eyre Peninsula for a period of five years" - whether the vendors were in breach of that condition - meaning of "carry on" and "be interested in" any business - whether the restraint was reasonable as to adequacy of protection, area, nature of the business, duration and capacity of restraint - action dismissed.
Smith v Hancock [1894] 2 Ch 377; Gophir Diamond Co v Wood [1902] 1 Ch 950; Ronbar Enterprises Ltd v Green [1954] 2 All ER 266; Kirkwood v Gadd [1910] AC 422; Smith v Anderson (1880) 15 Ch D 247; Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 50 ALJR 309; Smith v Capewell (1979) 142 CLR 509; Hope v Bathurst City Council (1980) 144 CLR 1; Pioneer Concrete Services Ltd v Galli [1985] VR 675; Newling v Dobell (1869) 38 LJ Ch 111; William Cory and Son Ltd v Harrison [1906] AC 274; Ford v Andrews (1916) 21 CLR 317; Sloane v Sambell [1931] VLR 393; AG for Victoria v Keating (1970) 26 LGRA 87; Downward v Babington (1975) 31 LGRA 314; Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd [1894] AC 535, considered.

WOER & WOER v MATTSSON & MATTSSON
[2005] SADC 55
Judge Bishop
Civil

In this action, a married couple, Kenneth Woer and Fiona Ruth Woer (“the plaintiffs”) have claimed liquidated damages of $50,000, interest and costs from another married couple, Neil Clifford Mattsson and Maureen Joan Mattsson (“the defendants”) in respect of their alleged breach of special condition 3 of the sale and purchase agreement entered into between the parties on 2 February 2001, by which agreement the defendants sold their business, Lincoln Drillers, to the plaintiffs for $80,000. Special condition 3 of the agreement provided that:
“3.The vendor will not carry on or be interested directly or indirectly in any business of a like nature within the boundaries of Eyre Peninsula for a period of five years from the date of possession and upon breach of this clause the vendor shall pay to the purchaser the sum of $50,000.00 as and for liquidated damages and not by way of penalty.” (My emphasis.)
To appreciate the issues which here arise, it is necessary to relate the factual circumstances from which those issues are derived.
Background
In 1995, the defendants began operating the business named Lincoln Drillers, for which purpose Mr Mattsson had obtained a well driller’s licence under the now repealed Water Resources Act 1990. (He still holds that licence.) The registered office of the business was the defendants’ residential address in Port Lincoln. Although…

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: [2005] SADC 55
Decision Date: 31 May 2005

CaseChat Overview and Summary

In this case, Woer & Woer sued Mattsson & Mattsson for breach of contract and liquidated damages. The defendants had sold their drilling business, Lincoln Drillers, to the plaintiffs on 9 February 2001. A special condition of the sale and purchase agreement provided that the vendors would not carry on or be interested directly or indirectly in any business of a like nature within the boundaries of Eyre Peninsula for a period of five years. The plaintiffs alleged that the defendants had breached this condition by operating a business named EP Water Bores, which was similar to Lincoln Drillers and within the boundaries of Eyre Peninsula. The defendants argued that they were not in breach of the condition, as they were not carrying on the business of EP Water Bores and were not interested directly or indirectly in that business. The court considered the legal definitions of "carry on" and "be interested in" any business and concluded that the defendants were not in breach of the special condition. The court also considered the restraint of trade principles and found that the restrictive covenant in the agreement was reasonable as between the parties and did not exceed what was reasonably necessary for the plaintiffs' protection in purchasing Lincoln Drillers from the defendants. The court dismissed the plaintiffs' claim against the defendants and ordered that costs be borne by the plaintiffs.

This case highlights the importance of properly drafting and interpreting contractual provisions, particularly those related to restraints of trade. The court's decision demonstrates that the burden of proof lies with the party alleging a breach of contract, and that the court will consider all relevant factors in determining whether a restraint of trade is reasonable and enforceable.

Orders