N E PERRY PTY LTD v JUDGE & ANOR No. SCCIV-02-633 [2002] SASC 312

N E PERRY PTY LTD v JUDGE & ANOR No. SCCIV-02-633 [2002] SASC 312 - SASC 2002 case summary — Zoe

[53]

"The only point which has caused me any difficulty is the fact that the contract of employment is made terminable on twenty-one days' notice on either side. That the period of the employment may be a relevant matter in such cases as the present can hardly, I think, be doubted, but there is authority for saying that what must be taken to have been actually contemplated by the parties may be taken into consideration along with the actual terms of the contract itself. Moreover, it must always be borne in mind that an injunction is a discretionary remedy. In Haynes v Domain (1), where the agreement was terminable by a fortnight's notice on either side, Lindley M.R. said: "Possible cases in which the the (sic) restriction would not be reasonable are suggested. One would have arisen if the defendant had left the plaintiff's employ within a very short time after entering it, and before the defendant could have acquired or carried away with him any knowledge of the plaintiff's mode of conducting his business. Such an event has not happened, and clearly was not contemplated. This objection, if sound, would invalidate all agreements of the sort determinable on short notice, unless some words were introduced excluding their application to cases never contemplated. Another case to which the restriction could not be reasonably applied would have arisen if the defendant had left business altogether, or had had no dealings with the plaintiff's rivals for twenty or thirty years, and had then resumed business and assisted them". Romer L.J. (2) agreed with the above observations of the Master of the Rolls. The case of Haynes v. Doman (3) was decided before Mason v. Provident Clothing & Supply Co. Ltd. (4) and Herbert Morris Ltd. v Saxelby (5) but, when all the circumstances are regarded, I think that the decision is quite in line with Dewes v. Fitch (6), which was decided after the two leading cases in the House of Lords and in which a very similar covenant was held valid. In McPherson v. Moiler (7) where the agreement was terminable by a month's notice on either side, Harvey J. said: "I cannot altogether put out of consideration the fact that on the face of the agreement there was no security of employment for more than from month to month, though exactly what weight has to be given to that it is not easy in the present state of judicial authority to pronounce with any definiteness. The judgment of Lindley L.J. in Haynes v. Doman (8) and the judgment of Eve J. in Dewes v Fitch (6) both show that the Court may to a certain extent take into consideration what was probable as to the intention of the parties as to the length of the engagement ... Although the master has the power almost immediately to dismiss the employee, one has to look at the surrounding circumstances to see whether that was seriously in the contemplation of the parties as being likely to happen".

Parties

Applicant/Plaintiff:

# N E PERRY PTY LTD

Respondent/Defendant:

JUDGE & ANOR No. SCCIV-02-633 \[2002\] SASC 312

Legislation Cited (2)

Chiropractors Act 1991(SA)

Cases Cited (8)

Judgment No. [2002] SASC 312

When NEP contracted with AMJ, it introduced AMJ and Dr Judge to an existing group of patients at the Clinic. The connection between those patients and the Clinic is a form of goodwill of undoubted value to NEP. The contract enabled AMJ and Dr Judge to establish a connection with the patients of the Clinic such that AMJ and Dr Judge were in a position to take patients from the Clinic, were they to practise elsewhere. The nature of the interest that NEP was entitled to protect was conveniently identified by Latham CJ in Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628 at 636. Although Latham CJ was in dissent, what his Honour said correctly states the position. He said:

The basic principle is that being a restraint of trade, the restriction is unenforceable unless reasonable in reference to the interests of the parties concerned and reasonable in reference to the interests of the public: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565 Lord Macnaghten. As Gibbs J said in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40; (1973) 133 CLR 288 at 315-316:

In theory, the contract could have been terminated after a little over three months. The reasonableness of the restraint is to be assessed at the time when the contract is made: Amoco Australia Pty Ltd v Rocca Bros [1973] HCA 40; (1973) 133 CLR 288 per Gibbs J at 318. Does the ability to terminate on three month's notice render unreasonable a restraint of two years on practice in the area? In my opinion it does not, as the reasonableness of a restraint in a contract of this nature will depend upon the expectation of the parties at the time the contract was entered into, and not merely the ability to terminate the contract on short notice.

"In Haynes v Doman [1899] 2 Ch 13 at p 26, where the agreement was terminable for a fortnight's notice on either side, Lindley M.R. said: 'Possible cases in which the restriction would not be reasonable are suggested. One would have arisen if the defendant had left the plaintiff's employ within a very short time after entering it, and before the defendant could have acquired or carried away with him any knowledge of the plaintiff's mode of conducting his business. Such an event has not happened, and clearly was not contemplated. This objection, if sound, would invalidate all agreements of the sort determinable on short notice, unless some words were introduced excluding their application to cases never contemplated. Another case to which the restriction could not be reasonably applied would have arisen if the defendant had left business altogether, or had had no dealings with the plaintiff's rivals for twenty or thirty years, and had then resumed business and assisted them'. Romer L.J. [1899] 2 Ch at 30 agreed with the above observations of the Master of the Rolls. The case of Haynes v Doman was decided before Mason v Provident Clothing & Supply Co Ltd [1913] AC 724 and Herbert Morris Ltd v Saxelby [1916] 1 AC 688 but, when all the circumstances are regarded, I think that the decision is quite in line with Dewes v Fitch [1920] 2 Ch 159 which was decided after the two leading cases in the House of Lords and in which a very similar covenant was held valid. In McPherson v Moiler [1920] NSWStRp 55; (1920) 20 SR (NSW) 535 at p 541; 37 WN 162 at pp 163, 164 where the agreement was terminable by a month's notice on either side, Harvey J said: 'I cannot altogether put out of consideration the fact that on the face of the agreement there was no security of employment for more than from month to month, though exactly what weight has to be given to that it is not easy in the present state of judicial authority to pronounce with any definiteness. The judgment of Lindley LJ in Haynes v Doman and the judgment of Eve J in Dewes v Fitch both show that the Court may to a certain extent take into consideration what was probable as to the intention of the parties as to the length of the engagement.... Although the master has the power almost immediately to dismiss the employee, one has to look at the surrounding circumstances to see whether that was seriously in the contemplation of the parties as being likely to happen in this case'.... I do not think that the fact that the agreement was terminable by twenty-one days' notice on either side affords any sufficient ground for differing from the view taken by Napier CJ."

(1973) 133 CLR 288

(1950) 83 CLR 628

(1979) 142 CLR 177

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Judgment (77 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (8)