Firstnamed Plaintiff Secondnamed Plaintiff Thirdnamed Plaintiff v Firstnamed Defendant Secondnamed Defendant Thirdnamed Defendant Fourthnamed Defendant

Firstnamed Plaintiff Secondnamed Plaintiff Thirdnamed Plaintiff v Firstnamed Defendant Secondnamed Defendant Thirdnamed Defendant Fourthnamed Defendant - [2010] VSC 206 - VSC 2010 case summary — Zoe

[55]

"16.1 Restriction

In consideration of the Buyer agreeing to purchase the Shares and the Units on the terms of this Agreement, at the request of the Seller, each of the Related Principals agrees and undertakes that they will not and each of their Associates will not:

(a) directly or indirectly;

(b) by themselves or jointly with or on behalf of any person, corporation or trust;

(c) through an agent, independent contractor or employee; or

(d) of any account or pretext or by any means whatsoever,

conduct any of the Restricted Activities within the Restriction Area for the Restriction Period.

16.2 Restricted Activities

The Restricted Activities are:

(a) subject to clause 16.5, carrying on, assisting, promoting or otherwise being engaged or concerned in any business or activity which is or may be competitive with the Business (whether as a member, shareholder, optionholder, unitholder, director, consultant, adviser, contractor, manager, employee, associate, proprietor, trustee, beneficiary, servant, agent, principal, partner or in any other capacity whatsoever);

(b) canvassing, soliciting, inducing or encouraging or enticing away from the Business or the Buyer Group or accepting the custom of any client, customer, identified prospective customer, representative or agent or correspondent of the Business or the Buyer Group;

...

16.3 Restriction Area

Subject to clause 16.6, the Restriction Area is any of the following areas:

(a) Australia;

(b) New South Wales, Australian Capital Territory, Victoria, Queensland and South Australia;

(c) New South Wales, Australian Capital Territory, and Victoria and

(d) Victoria.

16.4 Restriction Period

Subject to clause 16.6 the Restriction Period is the period from the Completion Date to the first to occur of the relevant Related Principal's Cessation Date and:

(a) 5 years after the Completion Date;

(b) 4 years after the Completion Date;

(c) 3 years after the Completion Date;

(d) 2 years after the Completion Date;

(e) 1 year after the Completion Date,

and after the Related Principal's Cessation Date, the following periods:

(f) 5 years after the relevant Related Principal's Cessation Date;

(g) 4 years after the relevant Related Principal's Cessation Date;

(h) 3 years after the relevant Related Principal's Cessation Date;

(i) 2 years after the relevant Related Principal's Cessation Date;

(j) 1 years after the relevant Related Principal's Cessation Date; and

(k) 6 months after the relevant Related Principal's Cessation Date.

...

16.6 Effective Restriction Area and Restriction Period

Unless the resulting covenants and restrictions are or become invalid or unenforceable for any reason, the Restriction Area and Restriction Period that will be effective between the parties in relation to any Restricted Activity will be those referred to in clauses 16.3(a) and 16.4(a) If a covenant and restriction is or becomes invalid or unenforceable because the Restriction Area or Restriction Period applying to a Restricted Activity is considered unreasonably large or long, the Restriction Area or Restriction Period will be reduced to the subsequent area or period listed in clause 16.3 or 16.4.

16.7 Severability

In this clause 16:

(a) each of the restrictions resulting from the various combinations of a Restricted Activity, Restriction Area and Restriction Period has effect as a separate and independent covenant and restriction;

(b) each of the Related Principals agree and acknowledge that each covenant and restriction is reasonable in the circumstances and necessary to protect the Buyer and the goodwill of the Business; and

(c) if any of those covenants and restrictions are or become invalid or unenforceable for any reason, they will be severed from this Agreement without effecting (sic) the validity or enforceability of any other covenant and restriction."

[71]

"22.1 Restriction after exit

No Unitholder, Former Unitholder or Related Principal may:

(a) directly or indirectly;

(b) by themselves or jointly with or on behalf of any person, corporation or trust;

(c) in any capacity (whether as employee shareholder, beneficiary, advisor, financier or otherwise); or

(d) on any account or pretext or by any means whatsoever;

conduct any of the Restricted Activities for the Restriction Period.

22.2 Restricted Activities

The Restricted Activities are:

(a) canvassing, soliciting, inducing, encouraging or enticing away from the Group or the business or accepting the custom of any person who during the 2 years before the commencement of the Restraint Period, or during the Restraint Period, was a client, identified prospective client, representative or agent of the Group or the Business;

...

(c) otherwise interfering with the relationship between the Group or the Business and its employees, contractors, suppliers or clients.

22.3 Restriction Period

Subject to clause 22.4, the Restriction Period is any of the following periods:

(a) in respect of Unitholders and their Related Principals, from the Commencement Date, to the relevant Cessation Date; and

(b) in respect of Former Unitholders and their Related Principals:

(i) two years after the Cessation Date;

(ii) one year after the Cessation Date;

(iii) six months after the Cessation Date; and

(iv) three months after the Cessation Date.

22.4 Effective Restriction Period

Unless the resulting covenants and restrictions are or become invalid or unenforceable for any reason, Restriction Period that will be effective between the parties in relation to any Restricted Activity will be the Periods referred to in clauses 22.3(a) and 22.3(b)(i). If a covenant and restriction is or becomes invalid or unenforceable because the Restriction Period specific in clause 22.3(b)(i) is considered unreasonably long, the Restriction Period will be reduced to the subsequent period listed in clause 22.3(b).

22.5 Acknowledgment

Each party agrees and acknowledges that the covenant and restriction in this clause 22 is reasonable in the circumstances and necessary to protect the goodwill of the Business."

[79]

"14. After termination

14.1 The Director may not:

(a) directly or indirectly;

(b) by themselves or jointly with or on behalf of any other person, corporation or trust; or

(c) in any capacity (whether as employee, director, shareholder, Unitholder, beneficiary, advisor or otherwise);

conduct any of the Restricted Activities within the Restriction Area for the Restriction Period.

14.2 For the purposes of this clause 14, the Restricted Activities are:

(a) canvassing, soliciting, inducing, encouraging or enticing away from the Employer of the Group or accepting the custom of any person who during the Restriction Period or during the 2 year period before the commencement of the Restriction Period, was a client, identified prospective client, representative or agent of the Employer or the Group of their predecessors;

...

14.3 Subject to clause 14.5, the Restriction Area is any of the following areas:

(a) Australia;

(b) Victoria, New South Wales and the Australian Capital Territory; and

(c) Melbourne, Sydney and Canberra.

14.4 Subject to clause 14.5, the Restriction Period is any of the following periods:

(a) from the commencement of this Agreement to the date of termination of the Director's Employment; and

(b) in respect of the period after termination of the Director's employment:

(i) two years after the termination of this Agreement;

(ii) one year after the termination of this Agreement;

(iii) six months after the termination of this Agreement; and

(iv) three months after the termination of this Agreement.

14.5 Unless the resulting covenants and restrictions are or become invalid or unenforceable for any reason, the Restriction Area and Restriction Period that will be effective between the parties in relation to any Restricted Activity will be those referred to in clauses 14.3(a) and 14.4(b)(i). If a covenant and restriction is or becomes invalid or unenforceable because the Restriction Area or Restriction Period applying to a Restricted Activity is considered unreasonably large or long, the Restriction Area or Restriction period will be reduced to the subsequent area or period listed in clauses 14.3 or 14.4(b)."

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Cases Cited (17)