4 The Darby Street premises are held under lease. The subject matter of the sale and purchase was plant and the like, plus the goodwill of the business. The price of $101,000, paid as to $5,000 on exchange of contracts and as to the balance of $96,000 on completion, was apportioned so that $12,000 was for plant and $89,000 was for goodwill.
5 The agreement for the sale of the business contained a clause 19 as follows:
" NON COMPETITION
(a) In consideration for the mutual agreements given by the parties under this Agreement, the Vendor undertakes to the Purchaser that, it will not for a period of two (2) years from the date of this Agreement within five (5) kilometres of Premises:
(i) engage in any business or activity which is the same or similar to the Business or any material part of it. For the purposes of this clause 19, 'engage in' means to participate, assist or otherwise be directly or indirectly involved as a member, shareholder, unitholder, consultant, adviser, contractor, principal, agent, manager, director, joint venturer, beneficiary, partner, associate, trustee or financier;
(ii) solicit, canvass, approach or accept any approach from any person who was at any time during 12 month period ending on the Completion Date a customer of the Vendor with a view to obtaining the custom of any such person in a business which is the same or similar to the Business; or
(iii) interfere with the relationship between the Business and its clients or suppliers; or
(iv) entice, solicit or attempt to entice or solicit any employee, contractor or consultant of the Purchaser or any associated company away from employment or engagement with the Purchaser or associated company.
(b) If any of these several separate and independent agreements and restraints are or become invalid or unenforceable for any reason then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent agreements and restraints.
(c) The Vendor acknowledges that all the prohibitions and restrictions contained in this clause 19 are reasonable in the circumstances and necessary to protect the Goodwill."
6 The date of the agreement is, as I have said, 28 March 2007. The "Premises" are the premises at 88 Darby Street, Cooks Hill. The "Business" is the restaurant business conducted at the premises.
7 On 16 January 2008, the plaintiff read a restaurant review in the Newcastle Herald newspaper. It concerned a newly opened restaurant "Ristorante il Grifone" occupying premises of the former "Brewery" restaurant at the Honeysuckle Boardwalk. The new restaurant was described as "[o]wned by Roberto Carcagni, formerly of Benevenuti in Cooks Hill". The defendant, in his own affidavit, admits that he is the sole director and shareholder of Grifone Pty Ltd which carries on a restaurant business under the name "Ristorante il Grifone" at The Boardwalk, 1 Honeysuckle Drive, Newcastle. The defendant further says that the company purchased the restaurant business for $195,000 in late 2007, with the purchase completed on 24 December 2007. He also says that he later spent about $30,000 on changing the décor. The evidence shows that the defendant, as well as being the chef at Grifone, is in charge of operations as a whole. There is ample ground for a finding that, as well as being the sole shareholder and director of the company conducting the Grifone restaurant business, he is the manager of that business. He says in his own affidavit that he is the manager.
8 It appears from a map introduced into evidence (on which a scale is marked) and from descriptions of locations given by both plaintiff and defendant in the witness box, that the distance between the two restaurants in a straight line is about 1.1 kilometres. The distance by road would appear to be of the order of 1.5 kilometres. The defendant's Grifone restaurant is on the boardwalk at the harbour front (or riverfront) adjacent to the Crowne Plaza Hotel. The plaintiff's Benevenuti restaurant is to the south of that point, beyond the railway line near Civic station and also beyond the main street (Hunter Street), along Darby Street from its T-intersection with Hunter Street, past Civic Park and Laman Street to a point about 100 metres south of the intersection of Darby Street and Queen Street.
9 In approaching the plaintiff's application for an interlocutory injunction, I must be guided by what was said by Mason A-CJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153 in a passage adopted by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA; (2001) 208 CLR 199 at CLR 218:
"In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction."
10 On the matter of serious question to be tried, there is no apparent basis on which the defendant can resist the conclusion that he has, within the area and period referred to in clause 19, "engaged in" the business of the Grifone restaurant as a shareholder and as a director and probably also as manager. He does, however, appear to seek to put in issue two matters: first, whether the Grifone restaurant business is, in terms of clause 19, a "business activity which is the same or similar to the Business", that is, the Benevenuti restaurant business; and, second, whether the restraint involving a period of two years and a radius of five kilometres from the Darby Street premises is, as a matter of public policy, valid - that is, reasonably necessary, as to both period and area, for the protection of the plaintiff's goodwill.
11 As to the first of these matters, there is clearly a serious question to be tried. Evidence of the menus at the two restaurants shows that there is a substantial commonality of dishes offered. Both serve Italian food with a Tuscan emphasis. It appears that Grifone is in an area where many pedestrians pass along a waterfront boardwalk, while Benevenuti is in a conventional street setting; also that there are two sections of Grifone, one indoors and the other in the open on the other side of the boardwalk, while outdoor dining at Benevenuti is on a verandah. Each of the plaintiff and the defendant has a view about where his restaurant and its locality stand on the scale of "up-market" establishments, compared with the other's. Each considers his own superior in this respect. It is, I suppose, conceivable that some material difference between the two may be found at trial but, as the evidence stands now, the provisional conclusion must be that the Grifone business is at least "similar to" the Benevenuti business and may very well be the "same" as it.
12 As to the second matter (that is, validity of the restraint, as a matter of public policy), it might very well be found at trial that a restraint for two years within a five-kilometre radius entailed reasonable protection, in the Newcastle area, for a purchaser who had paid $89,000 for goodwill. And even if the radius of five kilometres were, in the Newcastle market for restaurant services, seen to be greater than required to protect the goodwill for which $89,000 had been paid, it is very likely that a radius of, say, two kilometres would be upheld by resort of s 4(3) of the Restraints of Trade Act 1976. As for the period, one would strongly doubt that, in the particular context, two years would be held excessive (see Orton v Melman [1981] 1 NSWLR 583) but, if it were, a slightly shorter period would virtually certainly would be upheld under s 4(3).
13 This is not a case of an employee whose right to earn a living is unreasonably curtailed. It is a case in which the owner of a business was paid $89,000 for the goodwill of the business by a purchaser who is entitled to expect that the benefit of the goodwill will be assured to him in accordance with the contract to which both parties consciously and deliberately committed themselves.
14 In summary, there is a serious question to be tried as to breach by the defendant of clause 19 of the agreement of 28 March 2007 by reason of his having been, and continuing as, the sole shareholder of the company which became on 24 December 2007, and has continued as, the owner and operator of the Grifone restaurant business (of which the defendant has been, and is, the manager). On the evidence as it stands, the prospects of the plaintiff's succeeding at trial in establishing breach of clause 19 (either in its original form or in some adjusted form produced by the Restraints of Trade Act) must be regarded as very strong.
15 That makes it necessary to consider the second matter to be taken into account, namely, whether, if interim relief is not awarded, the plaintiff will suffer injury for which damages will not be an adequate remedy. That matter requires no investigation or discussion in this case. The very nature of the circumstances is such that damages cannot be regarded as an adequate remedy and equity will intervene in the traditional way to protect goodwill by injunction: Trego v Hunt [1896] AC 7.