Lloyds Ships Holdings Pty Ltd v. Davros Pty Ltd & Ors [1987] FCA 102

Federal Court of Australia|1987-07-01|Before: Spender J

CONTRACT - restraint of trade clause - challenge to validity on grounds of uncertainty, public policy and unreasonableness - specialised business - limited market - protection of goodwill integral part of transaction - whether restraint reasonably necessary to protect the interests of the covenantee - whether applicants defeated by delay laches and acquiescence - equitable relief under principle in Trego v. Hunt £18961 A.C. 7.

CONTRACT - purported rescission of deed of settlement - breach of deed admitted - whether clause a condition - whether breach

remedied by subsequent payment - effect of rescission on restraint of trade clause.

DEFAMATION - representations made in United States as to the financial position of the applicants - whether representations amounted to defamation, injurious falsehood or misleading or deceptive conduct.

TRADE PRACTICES - consumer protection - misleading or deceptive conduct - passing off - sale of shipbuilding business known as "Lloyds Ships" - restraint of trade clause - subsequent carrying on by respondents of the business of shipbuilding in close proximity by reference to similar names - alleged representations of continuity of and a connexion with the business sold - specialised business of luxury motor vessels - limited market - whether conduct constitutes contraventions of s.52 of the Trade Practices Act 1974.

Amoco Australia Pty. Limited v. Rocca Bros. Motor Engineering Co. Pty. Ltd. (1972-3) 133 C.L.R. 288. Herbert Morris, Limited v. Saxelby £19161] 1 A.C. 688.

Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. £19681 A.C. 269.

Hawkesbury Bakery Pty.Ltd. v. Moses £19651 N.S.W.R. 1242.

The Queensland Co-operative Milling Association v. Pamag Pty. Limited (1973) 133 C.L.R. 260.

Austra Tanks Pty. Ltd. v. Running C1982] 2 N.S.W.L.R. 840. J.0.A.T. Pty. Limited v. Storm (unreported, Full Court of the Supreme Court of Queensland, 4 July, 1986).

Peters Ice Cream (Vic.) Ltd. v. Todd £1961] V.R. 485.

Mason v. Provident Clothing and Supply Company Limited £19131 A.C. 724.

Australia and New Zealand Banking Group Ltd. v. Beneficial Finance Corporation Ltd. (1983) 57 A.L.J.R. 352.

Associated Newspapers Limited v. Bancks (1951) 83 C.L.R. 322.

Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd. C1982] Q.B. 133.

Taco Company of Australia Inc. v. Taco Bell Pty. Ltd. 42 A.L-.R. 177.

Global Sportsman Pty. Ltd. v. Mirror Newspapers Ltd. 55 A.L.R. 25.

Bridge Stockbrokers Ltd. v. Bridges 57 A.L.R. 401. Fletcher Challenge Ltd. v. Fletcher Challenge Pty. Ltd. £1981]

Joseph Rodgers & Sons Ltd. v. W.N. Rodgers & Co. (1924) 41 R.P.C. 277.

Parker Knoll Limited v. Knoll International Limited (1962) R.P.C. 265.

LLOYD'S SHIPS HOLDINGS PTY.LTD. & ANOR. v. DAVROS PTY.LTD.& ORS. QLD. G17 of 1986

BETWEEN : LLOYD'S SHIPS HOLDINGS PTY. LTD. First Applicant AND: QUEENSLAND MERCHANT HOLDINGS LIMITED Second Applicant AND: DAVROS PTY. LID. First Respondent AND: LLOYD CORPORATION (a firm) Second Respondent AND: KEITH BERNIE LLOYD Third Respondent AND: LLOYD'S EXCLUSIVE CHARTERS PTY, LTD. Fourth Respondent DATE JUDGMENT DELIVERED: 6 MARCH 1987 COUNSEL: for the applicants Mr. Drummond Q.C. with Mr. A. J.H. Morris for the respondents Mr. Davies Q.C. with Mr. H.B.

) ) QUEENSLAND DISTRICT REGISTRY ) QLD. G17 of 1986 ) )

AND: QUEENSLAND MERCHANT HOLDINGS LIMITED Second Applicant AND: DAVROS PTY. LTD. First Pespondent AND: LLOYD CORPORATION (a firm) Second Respondent AND: KEITH BEPNIE LLOYD Third Respondent AND: LLOYD'S EXCLUSIVE CHARTERS PTY. LTD. Fourth Respondent SPENDER J.

In November, 1984, a shipbuilding business was sold by the first respondent (then called "Seavad Industries Pty. Ltd."), the third respondent and other parties, to the first applicant, (then called "Q.M.H. Resources Pty. Ltd.").

The business has operated from premises in Byron Street, Bulimba, Brisbane, since the early 1970s, originally being known as "Striker Boats Australia". In 1980, the business was acquired by the first respondent, of whom the third respondent, Keith Lloyd is a principal. Thereafter, the business became widely known as "Lloyd's Ships" and established a reputation for the

The sale agreement, dated 16 November 1984, provided for the acquisition of the goodwill of the business and the exclusive right to use the names ""Seavad Industries", "Lloyds Ships", "Lloyds Marine", and "Striker Boats Australia". Provision was made also for the acquisition of land and certain other property associated with the business, work in progress, and bounty pursuant to the Bounty (Ships) Act, 1980. To protect the goodwill of the business, the six vendors, which included the first and third respondents, entered into a restraint of trade clause, the validity of which has been challenged in these

The purchase price of the business was $4,500,000. The sale agreement also provided for the purchaser (Q.M.H. Resources Pty. Ltd.) to expend $1.5m towards the construction of a vessel

known as the "Trade Ship", and to use its best endeavours to

complete certain specified work on it within eighteen months from the date of settlement, which was 21 December 1984. In essence,

The second applicant, Queensland Merchant Holdings Limited, entered a written guarantee on or about 16 November,

1984 of the first applicant's obligations under the agreement.

In eéarly 1985, disputes arose between the parties concerning the payment of bounty, profits received up to settlement, and work on the "Trade Ship". Proceedings were

commenced in the Supreme Court of Queensland. Negotiations occurred to resolve this litigation, culminating ina deed of

settlement dated 16 October 1985. That deed provided -

by cl.2, that upon execution thereof, the parties shall be bound by the provisions of the deed and shall perform their respective obligations thereunder, in a manner and at the times prescribed, which performance 15 therein referred to ag "the settlement". The date of execution by the last party to do so is referred to in the deed as "the settlement date";

by cl.6(a) that on settlement "the Trade Ship" (as defined in cl.6(b) of the deed) to the extent it is completed as at that date, shall be forthwith delivered to the vendors named in the deed (which included the first and third respondents) and/or Tradeship Pty.Ltd. and that delivery shall be effected by the first respondent and/or the second respondent floating the

"Trade Ship" and having the same available for collection on the settlement date;

by cl.6(c) that the first applicant and the second applicant "thereby warrant and it is a condition hereof that the Trade Ship and materials thereon or to he utilised therewith will have been completed to the stage (labour and materials), as at the settlement date, ina manner not less than the stage as represented in

Schedule 1 hereto PROVIDED THAT nothing in sub-clause

completed to the extent achieved since the 10th April 1985, up to settlement".

Clause 14 of the deed is also of central importance. It

"The parties hereto ... hereby acknowledge and agree that the terms of this Deed and the due and proper performance thereof by the parties shall be deemed to discharge and satisfy each and every obligation in the Agreement, with the exception of the terms and covenants set out in Clause 39 of the Agreement, Which shall, subject to the following provisions of this Clause 14, survive and remain operative notwithstanding execution, completion, performance or satisfaction, in whole or in part of any or all of the terms of this Deed. The rights, obligations and covenants contained in Clause 39 of the Agreement shall not merge upon completion of any of the rights, ebligations or covenants of this Deed. The parties ... agree that Clause 39 as aforesaid

shall have no operation or application in respect of completion of construction and fitting our {sic) of the Trade Ship."

The settlement deed was executed on 16 October 1985. The obligations of the applicants under the deed included the payment of $800,000.00, the acceptance of a transfer of the shares 1n a company, Blipteed Pty. Ltd., and the delivery of the "Trade Ship". The transfer of the shares in Blipteed Pty. Ltd. effectively involved the assumption of a debt in the order of

U.S.$1.7m which that company owed to Natwest Finance Ltd..

A preliminary settlement at the office of the respondents' solicitors occurred, and the "Trade Ship" was delivered. However, a dispute arose concerning the non-delivery

of a quantity of aluminium which had been delivered to the first

applicant for use in the construction of the Trade Ship. By letter dated 24 October 1985, the respondents' solicitors purported to rescind the deed on the basis that the non-delivery of the aluminium amounted to a breach of clause 6(c) of the

Correspondence ensued between solicitors about the non-delivery of the aluminium. The applicants tendered certain amounts in purported satisfaction of the respondents' claims. However, the respondents, through their solicitors asserted that they had rescinded the deed, were not bound by the restraint of trade clause, had accepted the tendered sums as part of their damages, and otherwise reserved their rights. By letter dated 23 December 1985, the respondents' solicitors advised the

applicants' solicitors "one or more of our clients are proceeding

It is admitted on the pleadings that since 16 October 1985, the first respondent has carried on the business of shipbuilding, and that between 16 October 1985 and on or about 14 March 1986, carried on the business of a ship and boat builder from premises at 41 Oxford St., Bulimba under the name "Keith Lloyd's Ships" and, during that period, Mr. Lloyd caused the premises to be advertised under the name "Lloyd Corporation". The premises at 41 Oxford Street, Bulimba are within 1,500 metres

of the premises of the first applicant at Byron St., Bulimba.

In December 1985, the first respondent applied for registration as a shipbuilder for bounty purposes. On 9 January 1986, the third respondent registered the business name "Keith Lloyd Ships". In January and February 1986 the third respondent travelled to Europe and America where, amongst other things, he sought contracts to build vessels. Certain conversations involving the third respondent in the United States of America are alleged to have defamed the first and second applicants and to have constituted conduct in breach of s.52 of the Trade

A dispute exists about the date upon which the applicants first became aware that the respondents were engaged

This application was commenced on 10 March 1986. A number of contested interlocutory hearings occurred, and then the action quickly came to trial. By consent, the trial of questions of damages and account of profits was adjourned sine die. The

affidavit material filed on the questions of liability was

voluminous. Some deponents were cross-examined during the six days of the hearing. Much of counsel's submissions was in writing.

Paragraphs 10, 10A and 11 of the amended Statement of

Claim allege that the respondents have carried on the business of

a ship or boat builder in 1986 under various names from premises at 41 Oxford Street, Bulimba, Queensland, within 1500 metres of the first applicant's premises at Byron Street, Bulimba. As indicated above, the amended defence admits that between 16 October 1985 and 14 March 1986, the first respondent carried on the business of a ship and boat builder at 41 Oxford Street, under the name "Keith Lloyd's Ships" and that the third respondent advertised those premises under the name "Lloyd Corporation", Until 24 March 1986, the first respondent is said to have carried on a ship and boat building business at 41 Oxford street, under the name "Keith Lloyd International", and since 14 March 1986 to have carried on a shipbuilding business under its own name from those premises. From 24 March 1986, the fourth

respondent 15 said to have carried on business under the name

Paragraphs 12 and 13 of the Amended Statement of Claim

"12. The conduct of the First and/or Second and/or Third and/or Fourth Respondents referred to in paragraphs 10, l10A and 11 hereof 1s intended by them and likely to cause members of the public to:-

(a) Confuse the First and/or Second and/or Third Respondents with the First Applicant;

(b) Confuse the business of the First and/or Second and/or Third Respondents with that of the First Applicant; and

(c) Assume that the business or businesses (or some one or more of them) referred to in paragraphs 10 and 10A hereof is or are the game business as and/or carried on in continuation of the business the subject of the Agreement referred to in paragraph 5 hereof.

The conduct of the First and/or Second and/or Third Respondents aforesaid constitutes:-

(a) Conduct that is misleading and deceptive or which is likely to mislead or to deceive;

(b) The passing-off by the First and/or Second and/or Third Respondents of themselves and their business as and for the business of the First Applicant; and

Respondents of the terms of the Agreement referred to in paragraph 5 hereof.

The terms of the Agreement referred to in paragraph 5 include the

The Amended Defence denies that the respondents' conduct was intended or likely to cause the alleged confusion, or that it amounted to misleading or deceptive conduct, passing off, ora breach of contract. Further, paragraph 6 of the Amended Defence

(a) as an unreasonable restraint of trade; or (b) for uncertainty; or

Paragraph 7 of the amended Defence recites certain provisions of the settlement deed of 16 October 1985, including the applicants' obligations under clause 6 to deliver the partly completed "Trade Ship" and the material to be utilised on it. Paragraphs 8 and 9 of the Amended Defence allege breaches of clause 6, and that by its solicitors' letter of 24 October 1985,

the respondents have rescinded the settlement deed.

Paragraph 5 of the Amended Reply admits the breach of clause 6, and states that the breach has been remedied by the

payment and acceptance of certain amounts of money totalling $45,149.69. Paragraph 6 of the Amended Reply denies that the

respondents' purported rescission was justified in law.

Paragraphs 15 to 22 of the Amended Statement of Claim allege that, on specified dates in February and March 1986, the third respondent, on behalf of the first respondent, and in the course of international trade, made certain untrue and defamatory

representations concerning the first and second applicants to certain persons in the United States of America. Those representations were sald to constitute injurious falsehoods, defamations and conduct that was misleading and deceptive, or likely to mislead or to deceive. Following certain rulings which I made on the admissibility of some evidence, the allegations contained 1n paragraphs 18 and 19 were not persisted in. The defences raised to the remaining claims and the manner in which these claims were litigated will be considered later in these

The applicants seek extensive relief, including injunctive relief. Apart from denying the applicants' claim to any relief, the Amended Defence contends that the injunction

should be refused because of delay, laches and acquiescence by

The issues raised by the pleadings may be summarised as

(b) as contravening public policy; (c) as an unreasonable restraint of trade.

If the restraint of trade clause is valid, did it come to an end upon rescission. This, in turn,

(a) Were the respondents entitled to rescind; (b) If so, what was the effect of rescission

on the sale agreement and, in particular, the effect of rescission on the restraint of trade clause.

If the restraint of trade clause is valid, and still operates, are the applicants prevented by any delay, laches and acquiescence from relying upon it.

If the restraint of trade clause is void, are the applicants entitled to limited relief upon the peinciple in Trego v. Hunt £18961 A.C. 7.

Did the conduct of the respondents in carrying on the business of ship and boat building constitute:

(a) conduct that 1s misleading or deceptive or which 1s likely to mislead or deceive;

If the conduct of the respondents constituted conduct under 5(a), (b) or (¢c), are the applicants prevented by any delay, laches and acquiescence from relying upon it.

Did the representations made by the third respondent to persons in the United States constitute:-

The approach to be adopted is clear. Gibbs J., as he

then was, in Amoco Australia Pty.Limited v. Rocca Bros. Motor

Engineering Co. Pty. Ltd. (1972-3) 133 C.L.R. 288, said at 315:-

"The test to be applied in determining the validity

of a restraint of trade was stated by Lord Macnaghten in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd. £1894] A.C.535, at p.565, in a passage that has been cited with approval in many cases including, to name only recent decisions, Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. £1968] A.C. at pp.299, 307, 318, and Buckley v. Tutty (1972) 125 C.L.R. 353, at p.396. Lord Macnaghten said:-

'ALL aunterference with individual liberty of action in trading, and all restraints of trade of themselves, if there 18 nothing more, are contrary to public policy, and therefore void. That 1s the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction 1s reasonable - reasonable, that 1s, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party 1n whose favour it 1s imposed, while at the same time it is in no way injurious to the public.' "

The onus of establishing that the Agreement is reasonable as between the parties is upon the applicants, while the onus of establishing that it is contrary to the public interest, being reasonable between the parties, is on the

respondents: Herbert Morris, Limited v. Saxelby £19161 1 A.C.

00, 707-8; Esso Petroleum Co.Ltd. v. Harper's Garage

is the time of entering into the contract: Geraghty v.

142 C.L.R. 177, per Barwick C.J. at 179 and 181;

entering into this Contract and to reasonably protect the goodwill of the business the Vendor, the Second Vendor, the Third Vendor, the Fourth Vendor, the Fifth Vendor and the Sixth Vendor and each of them do jointly and severally agree with the Purchaser that subject to Clause 39(b):-

(1) This Clause shall have etfect as 1f 1t were several separate covenants consisting of each separate covenant set out in sub-clause (il) of this Clause 39(a) combined with each separate period of time set out in sub-clause (111) of this Clause 39(a) and of each such separate combination combined with each separate area set out in sub-clause (iv) of this Clause 39(a) and if any of the said several separate covenants shall be or become invalid or unenforceable for any reason then such invalidity or unenforceability shall not affect the validity or enforceability of any of the other separate covenants:

(i1) The Vendor, the Second Vendor, the Third Vendor, the Fourth Vendor, the Fifth Vendor and the Sixth Vendor and each of them will for the period and within the area hereinafter specified without the prior written consent of the Purchaser whether directly or indirectly by themselves or jointly with or on behalf of any other persons or corporation or trust on any account or pretext by any means whatsoever or though (sic) an agent or independent contractor:-

carry on or be engaged in or concerned with directly or indirectly (whether as proprietor, employer, servant, agent, principal, partner or in any other capacity whatsoever ) or otherwise engage in the business of ship building of any description or any other business of a similar nature; or

procure or solicit or encourage any other pergon to procure or solicit the custom of any former customer of the business; or

hold or beneficially own whether directly or indirectly and whether absolutely or contingently or hold options over shares in or be an adviser to any corporation doing any of the things referred to in 39(a)(ii)(a) or 39(a)(i1)(b) above.

during the period of ten (10) years from and after completion;

during the period of nine (9) years from and after completion;

during the period of eight (8) years from the after completion;

during the period of seven (7) years from and after completion;

during the period of six (6) years from and after completion;

during the period of five (5) years from and after completion;

during the period of four (4) years from and after completion;

during the period of three (3) years from and after completion;

during the period of two (2) years from and after completion;

during the period of one (1) year from and after completion,

(a) within the United States, Canada, Australia and/or New Zealand;

(c) within the East Coast of Australia. 39. (b) Nothing in sub-clause 39(a) shall prevent the Sixth Vendor from representing to any interested person or persons

that he acts on behalf of the Purchaser in pursuance of the

commission agency agreement referred to in Clause 40 hereof."

The legal principles dealing with restraint of trade to which reference has been made, at first blush, seem to sita

little oddly with the commercial implications of the present

The difficulty may be illustrated by the following scenario: a vendor of business sells it, aincluding the goodwill. He knows that a substantial amount of the purchase price 1s for the goodwill of the business: he believes the restraint of trade clause, by which he purports to be bound, is teo wide and unenforceable. Having received the benefit of the price, he submits to the court that he can have the consideration for the promise to be bound and to be unbound. A successful challenge by the vendor might seem to be a regrettable result. Such a view is not unknown in the context of restraint of trade

cases: see the comments of Pearson L.J. in Commercial Plastics

Ltd. v. Vincent (19653 1Q.B. 623 at 647, and the note of that

case by Professor Goodhart at (1965) 81 L.Q.R. 5, at p.6.

In this case, the business sold was a very specialised one, in a very limited market. The consideration of the sale of the business clearly indicates that the protection of goodwill wags an integral part of the transaction. The taxation return prepared for Davros Pty.Ltd. for the year ending 30 June 1985 indicates a consideration for the goodwill of the shipbuilding business at s1,176,517. No reasonable purchaser would purchase such a business without a restraint clause to protect the goodwill so expensively purchased. On the question of whether the restraint is reasonable as between the parties, the quantum of consideration received by the covenantor is relevant: Amoco v. Rocca (supra) per Gibbs J. at 316, and the cases there referred to. The agreement for the purchase of the business was negotiated at arms length by experienced men of business on both sides, each

The facts of this case highlight the conflict between the policy of securing freedom of contract between parties of equal bargaining position and enforcing obligations assumed in its exercise, and the policy of preserving freedom of trade by imposing a test of reasonableness on contractual restraints of

trade. These opposing principles of policy were referred to by

Dixon J., as he then was, in Peters American Delicacy Company

Limited. v. Patricia's Chocolates and Candies Proprietary Limited

The cases show that a much wider range of restraints will be valid where aman sells his business and his goodwill

than is the case where a restriction is imposed on a former

employee; Bridge v. Deacons (supra) at 713; Geraghty v. Minter

In this case, Mr. Lloyd, prior to entering into the contract of November, 1984, adverted to the view of his legal advisors that it was unreasonably wide. Many aspects of his conduct after that time are consistent with the conclusion that he believed he could have his cake, in the form of the payment for goodwill, and eat it too, by setting up in competition with the purchasers in close proximity to them, and soliciting former

On 12 November 1984, the solicitors for the respondents,

wrote to the solicitors for the applicants, and said inter alia:-

"Restraint of Trade contained in Clause 39 15 far wider and for a longer period of time than our client had anticipated or 1s reasonable but has indicated that in the interests of goodwill they will accept the clause as drafted."

Mr. Lloyd says that he believed that the restraint of trade was

unreasonably wide but, "as I then had no intention of commencing a new shipbuilding business, I was happy to sign the agreement". The correctness of his statement needs to be examined against the

The shipyard established by the respondents at Oxford Street, Bulimba, is on land, various parcels of which were acquired in 1985. By a contract dated 18 April 1985, 4 acres of

waterfront land was agreed to be purchased for $1.i5m. Mr. Lloyd

says that the land originally acquired was for a marina development, and the surrounding houses were purchased to enlarge the holdings for the marina development. In fact, a company associated with Mr. Lloyd, Loufagg Pty.Ltd., contracted to purchase a 26 perch parcel of land on 24 May 1985 for $55,000, a 22 perch parcel of waterfront land on 16 July 1985 for $155,000, a 40 perch parcel of land with some water frontage for $150,000 on 17 July 1985, and on 19 August 1985, a 16 perch parcel of land

"You only intended to go into shipbuilding after the breach of the deed; is that true?

This 15 to be contrasted with a statement in his affidavit, "when I determined to go into the shipbuilding business, [I then acquired the surrounding houses to enlarge the area". Mr. Lloyd

In June 1985, Mr. Lloyd made application to the Bounty Office for registration of a shipyard at Oxford Street. He says that, by April 1985, he set about getting back into the business of shipbuilding. He says he was forced back into shipbuilding for the purpose of completing the Trade Ship. However, on 19 April 1985, he wrote a letter to an American yachtbroker, Mr.

Caribbean-Pacific Marine Inc, as sole international representative for Lloyd's International Yachts and Ships, excluding Australia.

It is further agreed that Lloyd's International will be the only Australian ship builder that your company will represent for a period of 3 years from this date, at which this agreement will be mutually reviewed.

Tt is further agreed that your company will advertise, promote and sell our company products with your high degree of integrity at all times in a competent, professional manner. Lloyd's International agrees to pay your company a commission of 10% of the base price of each vessel

on which we right(sic) a building contract, (excluding accessories, optional equipment and change orders etc), or as otherwise agreed."

In May 1985, Mr. Lloyd had negotiations for a U.5.$5m travelling lift crane; he says that a Mr. Barry Richardson handled the dealing on his behalf. A telex by Mr. Richardson to Mr. Stephens

of 28 May 1985, (which later refers to the purchase by Lloyd of

"ATTENTION JOSEPH STEPHENS: RE MR. ROBERTS - EUROPE. KEITH CAN BUILD HIS YACHT AS PER PLANS FOR MAXIMUM 3 MILLION U.S. DOLLARS. IF HE IS PREPARED TO PUT PURCHASE PRICE IN ESCROW IN AUSTRALIA AND PAY A SUBSTANTIAL DEPOSIT, THEN THE BALANCE COULD HE PAYABLE ON COMPLETION. PLEASE ADVISE - WE'RE READY."

"|. the position is that in May 1985 Mr. Richardson was actively soliciting shipbuilding work for you; that is so, is not it?"

"No. He was an independent broker and he was testing the market."

Finally, on this aspect, Mr. Frost, the chairman of directors of

each applicant, deposes that in late August or early September,

1985, at the boardroom of the applicants, he asked Mr. Lloyd:-

"We have been hearing rumours that you are going back into shipbuilding. What are you doing?"

Concerning that conversation, this question to and answer by Mr.

"At that meeting did you tell him something to the effect that, no, you had had enough of ship building; that what you intended doing was importing a small speed boat from Italy, that you were not going to do any building; you were simply

I do not accept the account by Mr. Lloyd that he was forced back unto shipbuilding only because of the failure of the applicants' in respect of the "Trade Ship". His second application for

registration as a shipbuilder for bounty purposes, on 20 December

"Davros Pty. Ltd. is a wholly owned subsidiary of Keith Lioyd Ships Pty. Ltd. which was formerly known as Lloyds Ships Pty. Ltd.

Lloyd's Ships Pty. Ltd. was the former holding company which operated the Lloyd's Shipbuilding Group's ship construction activities until the end of 1984 at Byron Street, Bulimba.

During 1984 an offer was made by a public company, QO.T.L. Ltd., for the Lloyd's Shipbuilding Group's shipbuilding business. In response to that offer the bountiable vessels under construction at the Byron Street, Bulimba site were sold in December, 1984 together with the shipyard premises. Excluded from the sale was a 42 metre vessel under construction. This vessel remained the property of Davros Pty. Ltd. as it is intended for use as a

demonstration vessel. The partly constructed vessel is now located at Keith Lloyd Ships Pty. Ltd.'s new premises at 41 Oxford Street, Bulimba where construction is continuing.

At the time of the sale Lloyd's Ships Pty. Ltd. was considering acquiring a larger site for its shipyard. Acquisition of a site suitable for Lloyd's long term aspirations in the shipbuilding industry proved to be difficult and it was not until June 1985 that a 8x acre waterfront site in

Oxford Street, Bulimba was acquired from Rheem Australia.

It is this site for which registration is now sought.

Because of the sale of the Byron Street premises and the vessels under construction at those premises 1t was appropriate that the structure of the Lloyd's Shipbuilding group be reviewed. Asa

result of that review the following structure was developed -

Lloyd Ships Pty. Ltd. Seavad Industries was renamed Davros Pty. Ltd. and would

Loufagg Pty. Ltd. was formed for the purpose of acquiring ownership of the

new shipyard site which it leases to Davros Pty. Ltd."

His account in this document and his sworn testimony are quite

In my opinion, his self interest at any particular time determines what he says. No confidence can be reposed in the worth of his testimony. I much prefer to rely on the evidence of the contemporaneous documents. Consequently, while I am unable to conclude that, at the time of the sale of the business of "Llioyd's Ships", Mr. Lloyd intended to continue shipbuilding, I believe that he was of that mind, (and this was not restricted to

completion of the "Trade Ship"), at least by the middle of 1985.

I have dealt with the question of Mr. Lloyd's attitude ta the effect of the restraint of trade clause because of the submission that more weight than might otherwise be appropriate should be given to the policy that commercial men should be held

to their contracts when assessing the reasonableness of the

restraints. I do not think it right to accept this submission.

",.,in cases involving the sale of a business the courts have given significant weight to the opinions of avendor and purchaser as to the provision which is necessary 1n order to protect

the subject-matter of the sale." (Hawkesbury Bakery Pty. Ltd. v. Moses C1965] N.S.W.R. 1242, at p. 1246.)

To the same effect 18 the observation by Gibbs J., as he then

was, in Amoco v. Rocca (supra) at 316, where he refers to the principle that:-

".,.wWhere the parties to a contract have been ina position to bargain on an equal footing they should be treated as the best judges of what is reasonable in thelr own interests."

",.ethese statements, authoritative as they are, cannot mean that where the parties have been in an equal position of bargaining the question of reasonableness is entirely for the parties to decide. If that were so, the rule stated in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co.Ltd. (£18941 A.C.535 and constantly approved would be given quite a limited application,..."

Association v. Pamag Pty. Limited (1973) 133 C.L.R. 260 at 268

summarised what I perceive to be the true position:-

"Where, as in the present case, the parties have not been on unequal bargaining terms and there has not been any deception or overbearing of one of them by the other, the Court will give considerable weight, in deciding whether or not the restraint is reasonable between the parties, to the fact that they have been willing to agree upon the restrictions imposed by it. But the Court cannot regard that fact as conclusive. There are many cases in which covenants, upon which the parties bargaining upon equal terms have agreed, have been held to be unreasonable having regard to the interests of the parties in that they have imposed a greater degree of restraint than was reasonably necessary to protect the

It follows that, in my view, the validity of the restraint of trade clause is to be assessed by determining the true construction of the clause and applying the tests set out above. Subjective assessments of the motives or credit of Mr. Lloyd do not impinge on these questions. The fact that Mr. Lloyd agreed to it, believing that it did not bind him, does not influence the question of whether the clause is valid. If the clause 1s invalid, it is because it 1s uncertain or imposes a greater degree of restraint than is reasonably necessary to protect the covenantee or the covenantor, or is contrary to the

The sale of the goodwill of the business provides the justification for and the measure of enforceability of the

restraint: Esso Petroleum v. Harper's Garage (supra); Geraghty

At a glance

Court

Decision date

Before

Source

Judgment (586 paragraphs)

Cited By (14)