S repos ara v fiterala Po

S repos ara v fiterala Po - [1933] HCA 8 - HCA 1933 case summary — Zoe

[17]

to his duty to the defendants used the defendants' plant and machinery and the service of the defendants' clerks and servants for his own purposes and benefit and not for the purposes or benefit of the defendants or either of them but to further and assist his own business ventures and transactions. (c) During the said period the plaintiff commenced and carried on another business at Cremorne Street, Richmond, and devoted time and attention thereto which should have been devoted to the business of the defendants or one of them and used the defendants' plant and machinery and the ser- vice of the defendants' clerks and servants in connection therewith and to further the same contrary to his and their duty to the defen- dants. (d) The plaintiff during the said period became the chair- man of directors for life and the principal or sole shareholder and acquired the controlling interest in a company known as Electrolytic Lead Products Proprietary Limited without the knowledge or con- sent of the defendants or either of them. The said proprietary company was a rival or potential rival in business of the defendants or one of them and the plaintiff thereby placed himself in a position in which his personal interest conflicted with his duty as a servant of the defendants or one of them. (e) After the defendants dis- covered that the plaintiff had become chairman of directors of the said Electrolytic Lead Products Proprietary Limited and had acquired a controlling interest therein they required the plaintiff _ to covenant and agree with the defendants that neither he nor the said proprietary company should during the period of his employ- ment by the defendants manufacture or sell or be concerned in - manufacturing dealing in or selling (except with the written consent of the defendants) any products containing or consisting of arsenate - of lead, litharge, red lead or lime sulphur (being products which the defendants or one of them was then engaged in manufacturing and - selling in Australia). The plaintiff refused to so do. (/) Further

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The appellant justified the dismissal of the respondent on the ground that during the period of his employment he, without the knowledge or consent of the appellant or its directors, became chairman of directors for life and the principal or sole shareholder with a controlling interest in a company known as the Electrolytic Lead Products Proprietary Limited, which was a rival or potential rival in business of the appellant. It is a fact that the respondent formed and was chairman of directors of this company, and completely controlled it. It was a company which had such wide powers under its memorandum of association that it could lawfully engage in the same class of business as the appellant. But, asa matter of fact, the business of the company was confined to the manufacture of white lead, much used in the preparation of paints. 'The appellant had no objection to the company preparing white lead, so long as it so confined itself. But it was apprehensive - the learned trial Judge says not unreasonably apprehensive - that the company would not confine itself to the manufacture of white lead, but would soon launch out into a business competing with the appellant's. Consequently, the directors of the appellant challenged the respondent on the subject, and pointed out to him the serious position that would arise if he identified himself with the company and it became a rival of the appellant in the manufacture of arsenate of lead, lime sulphur, litharge, and red lead. The respondent apparently recognized the ambiguity of his position, and said he was prepared to sign a document giving the appellant his assurance that while he was in any way associated with the company it would not become a competitor of the appellant in the manufacture of the products mentioned. This proposal satisfied the directors of the appellant, who referred the matter to solicitors to draw up an agreement embodying the respondent's undertaking. The solicitors drew up an agreement, in which they joined the company as a party.

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interfere with his management of Jaques Proprietary Limited. At length, on 24th November 1931, the appellant's board of directors gave him a personal interview. A long statement was read to him, which disclaimed any hostility to him, but stated the surprise of the directors on learning that he had become head of another lead product company capable of competing at any time it chose with their business, reminded him of his agreement of March 1927 not to compete or associate himself with any concern which competed with the products manufactured by Jaques Proprietary Limited, expressed a feeling that his written replies to the board displayed an evasiveness which was not reassuring, enquired how he could perform the duties of a full time branch manager, and, finally asked him for an assurance drawn up to the satisfaction of the solicitors of the appellant Company undertaking that "' there will be no action of a competitive nature taken by the Lead Products Co. beyond the manufacture of white lead, and that his connection with that Com- pany will not be allowed to interfere in any way with his duties to Blyth Chemicals Ltd." The respondent agreed to give such an undertaking. He said in his evidence : - ''I said I was prepared to do what Pearson " (a director) " wanted as read out and was prepared to give an agreement that I would not be connected with any com- pany manufacturing similar lines or in competition with Blyth's or : Jaques. I meant that this should be while I was in the employ of defendants." The appellant Company's solicitors prepared a covenant with Jaques Proprietary Limited by Electrolytic Lead Products Pro- prietary Limited and the respondent. The substance of the proposed covenant was that neither covenantor would while the respondent was employed by Jaques Proprietary Limited and for two years | afterwards, in Australia, manufacture or sell or be concerned in manufacturing or selling arsenate of lead, litharge, red lead or lim sulphur. The respondent altered the draft so as to exclude Electro-_ lytic Lead Products Proprietary Limited from the covenant, confine the restraint it imposed to Victoria and to terminate its operation when his employment with Jaques Proprietary Limite should cease. The appellant Company refused to agree to th alterations, but the respondent on his part would not agree

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procure his company to give the covenant sought. In his evidence he said that Electrolytic Lead Products Proprietary Limited was at the time under offer for sale and that he told one of the directors of the appellant Company that he was negotiating to sell the business. Finally, on 13th January 1932, the respondent returned the docu- ment saying that he had given the undertaking that he promised. He appears then to have gone on an annual visit to Tasmania. On 21st January 1932 the directors of the appellant Company dis- missed him. They did so because of his conduct in relation to and arising out of the establishment and carrying on of the new enter- prise to which they objected, and the first justification relied upon by the appellant Company for the dismissal has the same foundation. But, in the investigation which followed, matters were discovered which are relied on as additional grounds of justification and as strengthening that upon which they acted. It was ascertained that under the respondent's direction some white lead had been treated for the Electrolytic factory by the hydro-extractor of the Jaques Company and that some, or one of the employees of that company had done some work for that factory. The respondent says that a small quantity of white lead was thus treated in May 1931 because the new factory's extractor was not in working order, while that of Jaques Company was no longer in use owing to the fact that its arsenate of lead was all manufactured by the appellant Company. He says he wanted to experiment with Jaques Com- pany's extractor and that he directed that the cost should be charged up to the Electrolytic Lead venture. He says that he did direct one of the employees of Jaques Company to do a couple of hours' work in connection with this venture, but, again that he directed that his time should be charged. However, this may be, no entry appeared for either matter in the books of Jaques Proprietary Limited and the appellant relies upon both matters as amounting to misconduct. His work of selling chemical sprays necessarily brought the respondent into frequent contact with fruitgrowers, and it was further ascertained that he had offered to find buyers for the fruit of some of them and had sought a commission. More- over, upon his visit to Tasmania, during which he was dismissed, he spent much time in fruit-growing districts and it appeared that

At a glance

Court

Decision date

Before

Source

Judgment (78 paragraphs)

Parties