Loading...
Queensland Judgments
Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  •   Notable Unreported Decision

GBAR (Australia) Pty Ltd v Brown

 

[2020] QSC 14

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

GBAR (Australia) Pty Ltd & Ors v Brown & Anor [2020] QSC 14

PARTIES:

GBAR (AUSTRALIA) PTY LTD
ACN 166 408 635
(first applicant)
BAREND JACOBUS STOLTZ
(second applicant)
DANIEL PETRUS UYS
(third applicant)
VINCENT CHARLES MANNING
(fourth applicant)
STOLTZ SUPERANNUATION PTY LTD
ACN 141 083 052
(fifth applicant)
D. P. UYS SUPERANNUATION PTY LTD
ACN 162 567 848
(sixth applicant)
MACROCOMM (AUSTRALIA) PTY LTD
ACN 166 317 764
(seventh applicant)
v
GREGORY JOHN BROWN
(first respondent)
BROWN & CREMIN PTY LTD
ACN 128 512 961
(second respondent)

FILE NO/S:

BS No 9209 of 2016

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

21 February 2020

DELIVERED AT:

Brisbane

HEARING DATE:

9, 10 and 11 September 2019

JUDGE:

Bradley J

ORDER:

The applicants’ claim is dismissed and judgment is entered for the respondents.

CATCHWORDS:

TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – VALIDITY AND REASONABLENESS – PARTICULAR CASES – VENDOR OF BUSINESS – where the second respondent sold its asbestos removal business to the first applicant – where the contract for the sale of the business contained a clause purporting to restrain the second respondent from being involved in an asbestos removal business – whether the clause sought to protect the interest of the first applicant as the purchaser of the goodwill of the business – whether the clause went beyond what was reasonable to protect the interest of the first applicant as the purchaser of the goodwill of the business

TRADE AND COMMERCE – OTHER REGULATION OF TRADE OR COMMERCE – RESTRAINTS OF TRADE – VALIDITY AND REASONABLENESS – PARTICULAR CASES – EMPLOYMENT – where the first respondent was involved in an asbestos removal business sold by the second respondent to the first applicant – where the first respondent was employed by the first applicant following the sale of the business – where the parties entered into a settlement agreement when the first respondent ceased to be employed by the first applicant – where the settlement agreement contained a clause purporting to restrain the first respondent from being involved in an asbestos removal business – whether the clause sought to protect the interest of the first applicant as the employer of the first respondent – whether the clause went beyond what was reasonable to protect the interest of the first applicant as the employer of the first respondent

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – OTHER CASES – where the second respondent sold its asbestos removal business to the first applicant – where the second respondent subsequently commenced carrying on a new asbestos removal business – whether the carrying on of the new business contravened the doctrine in Trego v Hunt – whether the doctrine in Trego v Hunt is better understood as an implied term that can be excluded by the parties by reaching an agreement in different terms

INTELLECTUAL PROPERTY – PASSING OFF – GOODWILL OR COMMERCIAL REPUTATION – PARTICULAR CASES – where the second respondent made certain representations about its asbestos removal business – where the applicants allege the second respondent passed off its business as the asbestos removal business it had sold to the first applicant – whether there was a likelihood of deception among consumers as a result of the representations

AGA Assistance Australia Pty Ltd v Tokody (2012) 224 IR 219, cited

Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269, cited

Faccenda Chicken Ltd v Fowler [1987] Ch 117, applied

GBAR (Australia) Pty Ltd v Brown [2017] 2 Qd R 256, approved

Greer v Sketchley Ltd [1979] IRLR 445, applied

Hansen Beverage Co v Bickfords (Australia) Pty Ltd (2008) 171 FCR 579, applied

Hepworth Manufacturing Co Ltd v Ryott [1920] 1 Ch 1, applied

Herbert Morris Ltd v Saxelby [1916] 1 AC 688, applied

Lindner v Murdock’s Garage (1950) 83 CLR 628, applied

Liverpool City Council v Irwin [1977] AC 239, cited

Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co [1894] AC 535, cited

Trego v Hunt [1896] AC 7, explained

COUNSEL:

A J H Morris QC, with L A Jurth, for the applicants

R A Perry QC, with M Long, for the respondents

SOLICITORS:

Londy Lawyers for the applicants

HWL Ebsworth for the respondents

  1. [1]
    The parties are in dispute about their rights and obligations arising from certain events after the first applicant GBAR (Australia) Pty Ltd (GBAR) purchased an asbestos removal business from the second respondent Brown & Cremin Pty Ltd (B&C).  The applicants (the GBAR parties) seek orders restraining the respondents from doing certain things and claim to be entitled to an account of profits or to recover damages of various kinds.
  2. [2]
    In addition to GBAR, there are six other GBAR parties.  The second, third and fourth applicants, Barend Stoltz, Daniel Uys and Vincent Manning, control the companies that hold shares in GBAR.  Mr Stoltz and Mr Manning are the directors of GBAR.  The fifth, sixth and seventh applicants are companies holding GBAR shares.  One company is controlled by each of Mr Stoltz, Mr Manning and Mr Uys.
  3. [3]
    Gregory Brown is the first respondent.  Mr Brown is a director of, a shareholder in, and the controlling mind of B&C.  He worked in the asbestos removal business before the sale and was employed by GBAR for 15 months after the sale.  About 18 months after ending his employment, Mr Brown began working in an asbestos removal business commenced by B&C.

Background

  1. [4]
    In about 2007, Mr Brown established the business “Greg Brown Asbestos Removals”, which was also known by the initialism “GBAR” (the Business).  From that time, B&C successfully operated the Business in South-East Queensland.  According to Mr Brown, 80% of the services performed by the Business were within a 10 kilometre radius of the Brisbane CBD, 10% were in the outer suburbs and immediate surrounds of Brisbane, and the balance were on the Gold Coast and Sunshine Coast.
  2. [5]
    Between 2007 and September 2013, the Business performed services further afield on only four occasions, in Charters Towers, Townsville, Bundaberg, and Moree, each time as a result of instructions or referrals from a client, insurer or lost adjuster located in Brisbane.
  3. [6]
    By about October 2011, B&C had ceased trading as “Greg Brown Asbestos Removals” and from about April 2012 it traded as “GBAR Asbestos Removals”.  Mr Brown described himself as very “hands on” in the Business, doing business development, scoping and pricing, as well as general management.  This limited the operation of the Business to South-East Queensland.  B&C did not advertise the services outside of South-East Queensland.
  4. [7]
    By September 2013, the Business was running well and was profitable.  Mr Brown had no plans or interest in expanding it beyond its then sphere of operations.  An estimated 35% of work came from Cunningham & Lindsey, an insurance loss assessor firm operating Australia-wide, and its subsidiary Oriel Property Services (Oriel), and referrals from previous clients of the Business.  The other 65% came from customers who responded to advertising on Google.
  5. [8]
    At that time, a large number of firms competed to provide asbestos removal services in South-East Queensland.  About a dozen companies of significance competed for trade at the “top end” of this market, with the competition based on skill, expertise and reputation.  The Business was one of these.  At the “bottom end” of the market, a larger number of firms competed for trade, with the competition based on price.  This general market structure continued to the time of the trial.

Business Sale Contract

  1. [9]
    In September 2013, two of the applicants, Mr Stoltz and Mr Manning, approached Mr Brown about acquiring the Business from B&C.  Mr Manning was known to Mr Brown.  As the national manager of Oriel, Mr Manning had been the source of referral of much for the work performed by the Business following storm events, including the Brisbane floods and the Bundaberg floods.  Mr Manning had left Oriel on 31 August 2013 and started work for Jani-King, a business owned by Mr Stoltz.  He introduced Mr Brown to Mr Stoltz as a person interested in investing in the Business.
  2. [10]
    Mr Stoltz and Mr Manning had two meetings with Mr Brown to discuss a sale.  The first was at B&C’s business premises at Virginia.  The second was at Mr Stoltz’s office at Kenmore.
  3. [11]
    Mr Brown told Mr Stoltz and Mr Manning that clients came to the Business because of Mr Brown personally, due to his technical knowledge and expertise and his personal reputation in the industry.  He said he had developed a strong reputation for safety, service and technical competence in asbestos removal.
  4. [12]
    Mr Stoltz was interested in acquiring the Business with a view to expanding it to cities across Australia and New Zealand.  He had acquired and successfully expanded other local businesses in this manner.  He told Mr Brown that he and Mr Manning would contribute to the expansion of the Business and they would employ additional staff to help them do so.
  5. [13]
    Between the two meetings, Mr Stoltz, with the assistance of Mr Manning, formulated a plan to progressively grow the Business by adding offices in Sydney, Perth, Adelaide and Melbourne.  At the direction of Mr Stoltz, Mr Manning prepared a three year forecast of the profit and loss of GBAR.  It was an Excel spreadsheet.  It forecast that, between November 2013 and June 2014, business operations would be confined to Queensland.  Then, in July 2014, Mr Manning added a Sydney office earning $150,000 to $200,000 monthly revenue within three months.  Mr Manning’s forecast added a Melbourne office in October 2014 with a projected monthly income of $150,000 to $300,000 within three months, a Perth office in January 2015 with a monthly income of $150,000 to $325,000 within three months, and an Adelaide office in April 2015, with additional monthly earnings of $125,000 to $325,000, within three months.  In this way, Mr Manning forecast the total monthly turnover of the Business would increase from $350,000 in November 2013 to $1.6 million in June 2015.
  6. [14]
    According to Mr Stoltz, there was more than just a desire to expand the Business, but a definite plan.  The plan did not include any expansion in Queensland to a centre outside of Brisbane.  Mr Stoltz had no desire to call the Business “Greg Brown Asbestos Removals”, the name previously used by B&C.  He wanted to call the Business “GBAR” and expand under that name.
  7. [15]
    I do not accept the evidence of Mr Stoltz and Mr Manning to the effect that Mr Brown raised or promoted the idea of expanding the Business Australia-wide or that their financial plans and projections were based on Mr Brown’s remarks about “staged growth” of the Business.  I prefer the evidence of Mr Brown that business expansion was a matter raised and promoted by Mr Stoltz and supported by Mr Manning, because it is more consistent with their other evidence about their plans and the meetings.  Given Mr Manning’s then very recent exit from Oriel, it is likely they assumed they would use Mr Manning’s contacts with a major customer to draw work from elsewhere in the Cunningham & Lindsey group to build the Business in other States.  Mr Brown’s contacts and experience were local.
  8. [16]
    This is consistent with Mr Stoltz’s initial proposal, that he and his associates would acquire the whole of the Business and neither B&C nor Mr Brown would have any continuing financial interest in it.  It was only during the second meeting with Mr Brown, that Mr Stoltz offered him a shareholding in the company being formed for the specific purpose of acquiring the Business.  This company was GBAR, which had been incorporated on 23 October 2013.  It is also consistent with the near-contemporaneous decision of the GBAR parties to offer Mr Brown only the position of general manager of GBAR and for Mr Stoltz to be managing director and chief executive officer.
  9. [17]
    On 31 October 2013, B&C (as Seller) and GBAR (as Buyer) executed a written agreement (the Business Sale Contract).  The purchase price was $2.454 million.  GBAR and B&C attributed $2.122 million of the purchase price to the goodwill of the Business and $332,000 to other assets.  The sale was expressly on a “walk-in, walk-out” basis as a going concern.  It was agreed there would be no period of seller’s tuition or assistance to the buyer and no buyer’s trial period.  The only employee of B&C specified in the Business Sale Contract was the part-time office manager.
  10. [18]
    The Business Sale Contract was in the form of the REIQ Contract Business Sale (Second Edition) with special conditions annexed.  The standard conditions of sale included clause 12:

“12 RESTRICTION ON SELLER’S COMPETITION

12.1 The Seller must not in any manner whatsoever either directly or indirectly be concerned or interested either alone or in partnership with or as manager servant or agent for any other person, company or corporation in the Business described in Item J or any other business of a similar nature within the prescribed area as set out in Item W(a) for the prescribed period as set out in Item W(b).  If either the period set out in Item W(b) or the area set out in Item W(a) be found to be excessive and unenforceable by any court of competent jurisdiction then the Buyer may serve upon the Seller notice of variation of this clause and Items W(a) and (b), specifying a reduced period and area and upon the service of such notice the period and area shall be so reduced and the parties agree to be bound by the provisions of this clause as varied by the notice of variation.  Nothing in this clause 12.1 prevents any court of competent jurisdiction from reading down the area or period of restraint if such court is empowered to do so in order to validate these restraints.

12.2 The parties agree that:

  1. (a)
    this clause 12 is for the benefit of the Buyer to protect the goodwill of the Business; and
  1. (b)
    if the Seller is a company or a corporation then the Seller will on or before the date of Completion obtain a covenant in terms of clause 12.1 from the directors and shareholders of the Seller in favour of the Buyer.

12.3 If this clause 12 is annulled by any order of any court of competent jurisdiction, then this clause 12 shall be severable from this Contract.”

  1. [19]
    In Item J, B&C and GBAR described the Business as “GBAR Asbestos Removal”.  In Item W(a) they identified the prescribed area as “Queensland” and in Item W(b) the prescribed period as three years.
  2. [20]
    Mr Brown was not a party to the Business Sale Contract.  By special condition 3, GBAR and B&C agreed that the contract was conditional upon Mr Brown entering into an agreement with GBAR: binding GBAR to employ Mr Brown as its general manager from 1 November 2013; and containing a clause that Mr Brown:

“will be restricted to compete directly or indirectly either alone or in partnership with or as manager or servant or agent for any other person, company, or corporation in any business of a similar nature in Queensland for a period of 3 years from the date of termination of the employment contract”.

  1. [21]
    At the time of the Business Sale Contract, the shareholders in GBAR were Mr Stoltz’s company (with 39,920 shares), Mr Uys’ company (with 16,080 shares), Mr Manning’s company (with 8,000 shares) and B&C (with 16,000 shares).  It follows that B&C held a 20% interest in GBAR.  By a deed, also executed on 31 October 2013 (the Option Deed), GBAR was able to call on B&C to transfer its GBAR shares to GBAR or its nominee for a payment of $600,000.

Employment Agreement

  1. [22]
    Also on 31 October 2013, GBAR and Mr Brown entered into an agreement (the Employment Agreement).  It included four relevant restraint clauses:
    1. (a)
      by clause 13.1(a)(i), Mr Brown agreed that he would not directly or indirectly solicit, canvas, induce or encourage any person who is an employee or agent of GBAR with whom Mr Brown had dealings with in the last 12 months of his employment to leave the employment of GBAR;
    2. (b)
      by clause 13.1(a)(ii), Mr Brown agreed that he would not directly or indirectly solicit, canvas, approach or accept any approach from any person who within the last 12 months of his employment was a client or supplier of GBAR and with whom Mr Brown had dealings with in relation to the Business;
    3. (c)
      by clause 13.1(a)(iii), Mr Brown agreed that he would not directly or indirectly interfere or seek to interfere with the relationship between GBAR and its clients, employees, contractors or suppliers in the conduct of the Business; and
    4. (d)
      by clause 13.2, Mr Brown agreed that he would not either alone or in partnership be interested directly or indirectly as a director, shareholder, employee or consultant in a firm or corporation in Queensland, the business of which was similar to or in competition with the Business of GBAR, for a period of three years or one year.
  2. [23]
    There was no evidence to suggest that either GBAR or Mr Brown was an unwilling party to the Employment Agreement, that either was dissatisfied with any of its terms, or that either sought, unsuccessfully, to have different terms included in the agreement.[1]  There was no explanation for the difference between the restraints in clause 13 of the Employment Agreement and those referred to in special condition 3 of the Business Sale Contract.  There was no evidence about whether B&C otherwise obtained a covenant of the type referred to in standard condition 12.2(b) of the Business Sale Contract.  No party asserted any right arising from these matters.

The Business from the GBAR purchase until the departure of Mr Brown

  1. [24]
    On or about 31 October 2013, GBAR completed the purchase of the Business from GBAR under the Business Sale Contract and employed Mr Brown under the Employment Agreement.  Mr Stoltz became the chief executive officer.
  2. [25]
    From 1 November 2013 until 30 January 2015, Mr Brown was employed by GBAR.  For most of this period he was its general manager.  His annual salary was $150,000.  This was a senior position in the Business with management or executive level responsibilities.
  3. [26]
    After taking ownership of the Business, GBAR moved the office of the Business from Virginia to Geebung.
  4. [27]
    GBAR proceeded to establish a new office in Perth.  To this end, in November 2013, GBAR employed a new State Manager for Queensland, Mr Hempel.  He was based in Brisbane.  Mr Hempel left GBAR in September 2014 and no replacement was employed.
  5. [28]
    In April 2014, GBAR opened a Perth office.  No other office was opened during the time Mr Brown worked for GBAR.  Between April and November 2014, Mr Brown spent a lot of time in Perth establishing the office.  He supervised two other staff who were employed by GBAR in Perth, Mr Goldie and Mr Moyce.  He continued to assist with work in South-East Queensland.
  6. [29]
    In November 2014, a “supercell” storm caused significant damage to properties in the Brisbane area.  From that time until January 2015, Mr Brown worked in Brisbane, overseeing and managing work arising from the storm event.  The Perth office was “effectively shut down.”  At that time GBAR was not making a profit from the Perth office.
  7. [30]
    Mr Brown worked very long hours, supervising more than 20 staff, preparing quotes for work, organising site work, invoicing and credit management.  Mr Stoltz and Mr Manning refused to speak with Mr Brown and held meetings without him.  They declined to engage additional staff to assist with the large workload.  The strain of working from 4:00 am until 7:00 pm most days led Mr Brown to tell Mr Manning that he wanted to resign and exit GBAR.  Mr Manning proposed that Mr Brown leave early in 2015.

Settlement agreements

  1. [31]
    On 14 January 2015, the GBAR parties, Mr Brown and B&C executed a written agreement (the first settlement agreement).  The agreement was prepared by Mr Stoltz and signed by Mr Brown without any independent legal advice.  In the recitals, the parties referred to their desire:

“to resolve the manner and time of the exit of [Mr Brown] and any of his associated companies from GBAR, be it as an employee, director or shareholder”.

  1. [32]
    By clause 1 of the first settlement agreement, the parties agreed that Mr Brown’s employment would end on 27 February 2015 and he would resign as a director of GBAR with effect from that same date.
  2. [33]
    By clause 3, they agreed that the Option Deed was “extinguished” and that GBAR or its nominee would pay B&C $600,000 to purchase all of the GBAR shares held by B&C.
  3. [34]
    By clause 4, Mr Brown agreed that, for a period of three years, two years or one year after 27 February 2015, he would not:

“Either alone or in partnership be interested directly or indirectly as a director, shareholder or employee in a firm or corporation in Australia, the business of which is similar to or in competition with the business of GBAR, and that he will not provide consultancy services directly or indirectly to a firm or corporation that provides asbestos removal services in Australia”.

  1. [35]
    By clause 4.2, he also agreed that the restraints were reasonable and necessary to protect the goodwill of GBAR.
  2. [36]
    By clause 9, the parties waived:

“all and every claim they may have against each other in relation to the conduct or events relevant to the business of GBAR or the Business Sale Contract, the Option Deed, and the … Employment Agreement, to the extent that the conduct or events were the result of actions or behaviour that occurred before the date on which this agreement was executed.”

  1. [37]
    By clause 10, the parties agreed that:

“The terms and conditions of the Business Sale Contract and the … Employment Agreement remain in force except to the extent that they have been changed or over ruled by the terms and conditions of this agreement.”

  1. [38]
    On 24 January 2015, Mr Brown contacted Mr Stoltz and told him he had discussed the first settlement agreement with his solicitor and come to the decision that it was not in his best interest longer term.  Mr Stoltz ascertained from Mr Brown that he was not happy with the idea of resigning on 27 February 2015 and wanted to leave the business a month earlier.  Mr Stoltz also discussed with Mr Brown the idea of GBAR making a dividend payment to B&C rather than paying Mr Brown an employee bonus.
  2. [39]
    Mr Stoltz prepared another agreement (the second settlement agreement) and, the same day, the same parties entered into the second settlement agreement.  It was attended by recitals and contained operative restraint provisions relevantly the same as those in the first settlement agreement noted above, save that the parties set 30 January 2015 as the date on which Mr Brown’s employment would come to an end, each of the three alternative restraint periods would commence, he would resign as a director of GBAR and GBAR or its nominee would acquire B&C’s shares in GBAR.
  3. [40]
    On 30 January 2015, Mr Stoltz paid $600,000 to B&C pursuant to the second settlement agreement to purchase B&C’s shares in GBAR.  He did so as GBAR’s nominee.  Mr Brown ceased employment with GBAR on 30 January 2015.

Events after the second settlement agreement

  1. [41]
    After the departure of Mr Brown as an employee and B&C as a shareholder, on 30 January 2015, GBAR continued to trade in the Business.  Mr Manning became the general manager, in Mr Brown’s place.  Some evidence was given of how the Business fared.
  2. [42]
    In July 2015, GBAR purchased the asbestos removal and consultancy business of HMQ Pty Ltd (HMQ), which operated in Central and Far North Queensland under the name “Hazardous Materials Queensland”.  GBAR promoted the purchase to its existing clients.  However, GBAR closed that business in 2017 and disposed of the HMQ corporate entity.
  3. [43]
    The parties tendered reports by Mr Cook and Mr Lytras who had examined the financial performance of GBAR over the period from 2013 to 2018.  Both witnesses concluded that GBAR’s income from work in Brisbane declined about 46% from FY2015 ($3,979,865) to FY2016 ($2,139,066).[2]  According to Mr Stoltz and Mr Manning, the income for FY2015 may have been high due to a hailstorm in Brisbane in November 2014.  According to Mr Stoltz, the Business was doing very poorly in the first six months of 2016.  Mr Manning gave evidence that the Business was performing very, very badly and the firm was not winning work in the market at that time.  The figures reported by Mr Cook and Mr Lytras show the scale of the problem.  The relevant income of GBAR in the first six months of 2016 ($286,152) was nearly 90% lower than it had been in the first six months of 2015 ($2,858,817).
  4. [44]
    Mr Cook examined the GBAR MYOB customer comparison report.  His analysis showed that, during FY2016, GBAR lost all but 17 of the clients for which it performed work in FY2015.  These were the clients GBAR identified as the subject of the restraint in clause 13.1(a)(ii) of the Employment Agreement.
  5. [45]
    B&C was not in the asbestos removal business during FY2016.  The decline in the Business and the loss of clients cannot be attributed to any competition from B&C.  It could be due to the absence of Mr Brown from the Business.
  6. [46]
    In 2015 and 2016 Mr Brown was contacted by a number of former clients of the Business, who asked if he was getting back into the asbestos removal business.
  7. [47]
    In June 2016, solicitors acting for Mr Brown and B&C wrote to GBAR’s solicitors, communicating their contention that the restraint in the second settlement agreement went “well beyond what is necessary to protect the legitimate business interest” of GBAR and notifying GBAR that B&C proposed “to commence business providing asbestos removal services and related consultancy services in that industry.”
  8. [48]
    On 27 July 2016, B&C registered the business name “B and C Asbestos Removals”.  It commenced carrying on the business of removal of asbestos under the name “B & C Asbestos Removals” in South-East Queensland.  Its principal place of business was in Geebung, about 600 metres from the Brisbane base of GBAR.  It set up an internet website with the address http://asbestosremovalsaus.com.au.  Between March and May 2017, B&C used the name “Greg Brown Asbestos Removals”.
  9. [49]
    On 9 September 2016, the GBAR parties commenced this proceeding.  They sought interlocutory injunctions against B&C to enforce the restraint in clause 12 of the Business Sale Contract and against Mr Brown to enforce the restraint in the second settlement agreement.  The application for interlocutory orders was heard on 14 September 2016 before Peter Lyons J.  At the hearing, the GBAR parties did not pursue any relief against B&C.  His Honour dismissed the application and delivered reasons on 14 October 2016.[3]
  10. [50]
    The income of GBAR in Brisbane declined again, year on year, by about 44% from FY2016 ($2,139,066) to FY2017 ($1,184,938).[4]
  11. [51]
    In FY2018, the GBAR Business in Brisbane picked up, with income rising about 71% to $2,032,802.

Clients of GBAR

  1. [52]
    The GBAR parties alleged that 12 clients of GBAR, with whom Mr Brown dealt in relation to the Business during the last 12 months of his employment with GBAR,[5] were and have remained clients of the B&C asbestos removal business since about August 2016.
  2. [53]
    A number of witnesses gave evidence and were cross-examined about their dealings with GBAR and with Mr Brown and B&C.
  3. [54]
    Mr Barker of Prensa Pty Ltd had a “stable” of four to six contractors to whom he normally provided asbestos removal work.  GBAR was among them.  When he learned that Mr Brown was again working in the field, he added B&C to the list of companies Prensa was happy to use as suppliers of asbestos removal services.  He had little specific memory, but speculated that Mr Brown would have told him he had set up in business separately, away from GBAR.  He accepted it was possible Mr Brown had told him he was looking for work.  Mr Jones, also of Prensa, gave evidence that he “did not invite, or even consider inviting, [GBAR] to tender for” a job in early 2017 was “because I knew there was no working relationship with GBAR’s Brisbane operation at that time.”  He explained:

“This is because GBAR’s Brisbane operation were not referring Prensa any work also at that time, so in in turn work was not being referred to it by Prensa and no opportunities given for big jobs.”

  1. [55]
    In contrast, B&C were giving Prensa opportunities to work on some of B&C’s existing projects for perhaps six months.  Mr Jones sought tenders from three contractors, including B&C, for the second stage of a large project called Yarrabilba; and his client made the decision to use B&C, based on the tendered price.
  2. [56]
    Mr Connolly of ID Construction Professionals sought tenders from GBAR to do work for his clients, which included St Aidan’s School and St Margaret’s Anglican Girls School.  After Mr Brown left employment with GBAR, Mr Connolly “did not include GBAR” on his tender shortlist because he “did not know who was managing the company and what their experience was.”  After July 2016, he learned, probably at a social function, that Mr Brown was working again.  He contacted Mr Brown and asked him to quote for some work.  Mr Connolly was not solicited or approached by Mr Brown to use B&C’s services.
  3. [57]
    Ms Oddy of A P Eagers gave evidence that she approached Mr Brown to work as a consultant for the firm in March 2015, after his employment with GBAR ended.  While in that role, Mr Brown referred Eagers’ work to GBAR and to HMQ.  However, based on the poor performance, Eagers decided not to use GBAR again.  Mr Paterson of NPS Commercial was an adviser to Eagers and was asked to obtain a quote for some asbestos removal work in about mid-July 2016.  He confirmed Eagers asked him to seek a quote from Mr Brown.  This was when he learned that Mr Brown was back in business.  He said Eagers was dissatisfied with GBAR’s services.  Eagers accepted the B&C quote.
  4. [58]
    Mr Paterson also gave evidence that, in May 2016, his firm NPS Commercial also “made a decision not to use GBAR for any further work.”  This was a commercial decision, due to GBAR’s “excessive charging on [two] previous projects”, GBAR’s failure to honour a firm tender and its request for a change of scope after NPS had been awarded a project based on the GBAR tender, GBAR’s questioning of the scope of works in other projects and GBAR “too often” wanting to amend the scope after it had been approved.  As a consequence of his experience dealing with GBAR, Mr Paterson “formed the view that GBAR was too difficult to work with” and that Mr Manning “had poor project management skills” compared to Mr Brown.  GBAR’s sales to NPS were $884,245 in FY2015 and dropped by almost 95% to $48,652 in FY2016.  It does not appear NPS used GBAR’s services in the subsequent financial years.
  5. [59]
    In about early 2016, Mr Cranston of Advanced Building Queensland ceased inviting quotes from GBAR.  This was because he formed a view that GBAR’s quotes were “just too expensive” and their work was “not competitively priced at all”.  Through a loss adjuster, he learned that Mr Brown was working for B&C in asbestos removal.  When Mr Cranston awarded work to B&C, it was because of the price it quoted to do the work.  He was not approached by Mr Brown or solicited for work.
  6. [60]
    Mr McCarthy of Col McCarthy Builder decided not to use GBAR as a service provider because GBAR could not provide next day service.  This was after Mr Brown had left employment with GBAR.  In June 2015, Mr McCarthy learned Mr Brown was no longer working for GBAR when Mr Brown told him so.  In about June 2016, Mr McCarthy called Mr Brown and asked him whether he was “coming back into the industry”.  Mr Brown told him that he was.  It is clear from his evidence that this was expressed as a future intention.  Mr McCarthy was not sure Mr Brown would do so.  Later, Ms Mason told him that Mr Brown was back in business and Mr McCarthy asked her for a contact number for Mr Brown.  He then approached Mr Brown and started to use B&C’s services from October 2016.  He valued Mr Brown’s abilities in dealing with delicate and difficult cases.
  7. [61]
    Zara Mason works for ELS, a firm that provides hygienist services to asbestos removal contractors in Queensland and New South Wales.  In mid-September 2016, Ms Mason invited GBAR to tender for work.  GBAR did not respond to the invitation.  When Ms Mason contacted GBAR, she was told GBAR was “too busy in other States to be doing any work in Brisbane”.  Ms Mason thought she probably became aware that Mr Brown was working in asbestos removal again in 2016 because it became known “in the industry”.  She speculated that B&C may have engaged ELS for clearance work, after B&C had removed asbestos for a client or that the client may have engaged ELS for clearance work after using B&C.  At times Ms Mason is asked to recommend an asbestos removal contractor.  She would recommend Mr Brown.
  8. [62]
    Mr Pyle of Alpine Construction was dissatisfied with the work of GBAR or the price it charged for services.  He heard Mr Brown was working again and tracked him down in October 2016.
  9. [63]
    Mr Weaver gave evidence that his firm Allied Construction Services approached Mr Brown in about March 2017, on the recommendation of another manager who had joined the firm.  Until then, Mr Weaver was not aware of Mr Brown or that his firm had any earlier working relationship with Mr Brown.
  10. [64]
    In late 2017, Mr Whitehouse contacted Mr Brown and asked him if B&C would provide services to his clients.  He did so after a builder contact of his, Mr Roxby, told him Mr Brown was back in business.  Mr Whitehouse had recommended Mr Brown’s services when B&C had operated the Business, but did not recommend it after Mr Brown left the Business.  He said this was because he did not have any relationship with anyone else at GBAR and did not know the quality of their work.
  11. [65]
    Mr Fowler of QHR Asbestos Removal gave evidence that Mr Brown was the only person he would recommend and use.  He recommended and used his services when Mr Brown was at GBAR.  When Mr Brown was not working, in 2015 and 2016, Mr Fowler declined to make any recommendation about an asbestos removal contractor and asked his clients to source their own asbestos removalists directly.  Mr Fowler learned Mr Brown was back in the asbestos removal business when he ran into him, by chance.  He engaged Mr Brown in conversation and Mr Brown told him he was back in business and available to do work for Mr Fowler.
  12. [66]
    Mr Klinge of the residential builder Klinge Constructions gave evidence that GBAR remained on his company’s tender list after Mr Brown left its employ.  He did not recall when he became aware Mr Brown had recommenced working.  He did not recall Mr Brown telling him he had set up his own business.  He accepted it was possible Mr Brown had told him he was in business again.  The two are personal friends, having known each other for many years.  Klinge Constructions sourced quotes for asbestos removal work from GBAR, B&C and other providers and compared the pricing of each.  He denied the suggestion that B&C had received “the lion’s share” of work.  He regarded Mr Brown’s B&C business as his preferred supplier, but had just recently given a job to a competitor.

GBAR employees

  1. [67]
    Mr Manning gave evidence that, in August 2016, Mr Goldie, told him he had been offered employment by Mr Brown and did not accept the offer.  Mr Goldie seems to have been dropped by GBAR for some period in September 2016, but then returned to employment with GBAR.  GBAR did not call Mr Goldie to give evidence.
  2. [68]
    In about February 2017, Mr Tavake left employment with GBAR.  He had been a GBAR employee in the year before Mr Brown’s employment ended.  Mr Tavake subsequently became an employee of B&C in its business.
  3. [69]
    The office manager, Ms Harley, who had worked in the Business when it was owned by B&C, continued in that role under GBAR’s ownership until 25 October 2017.  Ms Harley gave notice of her resignation on 28 September 2017.  On her final day of work for GBAR, according to Mr Manning, an email from Mr Brown was intercepted “making arrangements in relation to her arrival” at the B&C business.  GBAR sent a solicitors’ letter to Mr Brown demanding that he not employ Ms Harley.  Whatever the basis of this particular demand, Ms Harley went to work as an employee of B&C in its asbestos removal business.

Success of the new B&C business

  1. [70]
    In August 2016, its first full month of trading, B&C had sales of $69,352.  By December 2016 its sales had risen to $176,329.  It reached its highest monthly sales in February 2017 ($364,557), but this was plainly an anomalous result.  The average monthly sales from July 2016 to April 2018 were $143,557.  These figures were calculated by Mr Cook.
  2. [71]
    Counsel for the GBAR parties submitted the court could infer the success of B&C in attracting work in the period August 2016 to April 2018 was only consistent with Mr Brown and B&C having committed the “business diverting conduct.”  This is a term defined in the GBAR parties’ pleading.  It does not appear in any of the relevant agreements.  It is a very broad allegation that B&C, through Mr Brown, did many things, relevantly including: soliciting, canvassing and accepting approaches from clients; offering its services to clients; and carrying on its business under the names “Greg Brown’s Asbestos Removals” and “Greg Browns Asbestos Removals”.  The use of this defined term in the GBAR parties’ pleading and submissions obscures the somewhat disparate bundle of facts they allege.  Some allegations go to terms of the restraints.  Others to different causes of action.
  3. [72]
    B&C began using the names “Greg Brown Asbestos Removals” and “Greg Brown’s Asbestos Removal” from no earlier than 9 September 2016.  The use of these names is not alleged to have continued after 24 March 2017.  It is not necessary to rely on an inference for those matters.  I am not persuaded that the other elements of the alleged “business diverting conduct” are established by inference.
  4. [73]
    In 2017, a major public health threat became apparent in Canberra, sometimes referred to as the “Mr Fluffy disaster”.  GBAR relocated Mr Goldie to Canberra, re-located Brisbane-based crews to Canberra and recruited local employees in order to perform services there for a period over one to two years.  When the contract for those services ended, in about the middle of 2018, GBAR closed its Canberra office and moved Mr Goldie to Sydney.  The Brisbane crews returned to work in Brisbane.  Staff recruited in Canberra were relocated to Wollongong, when another branch office was established.  From that time, any Canberra-based work was performed by the Wollongong office.
  5. [74]
    In April 2019, GBAR closed its office in Perth, according to Mr Stoltz, “because it was not financially viable”.

The restraints relating to Mr Brown and B&C

  1. [75]
    GBAR and the other GBAR parties seek to enforce contractual restraints against Mr Brown and B&C found in three different agreements:
  1. (a)
    the restraint in clause 12 of the Business Sale Contract;
  2. (b)
    the restraints in clause 13 of the Employment Agreement; and
  3. (c)
    the restraint in clause 4 of each of the Settlement Agreements.
  1. [76]
    From ancient times, the law has declined to allow a party with the benefit of a restraint of trade covenant – whether in a deed or a contract – to enforce it, unless the party proves special circumstances in the particular case that allow the court to conclude the restraint is reasonably necessary for the protection of a legitimate interest and is not contrary to public interests.[6]
  2. [77]
    The relevant law is quite settled.  A covenant against mere competition is not enforceable.  A covenant is not reasonable if it does not protect legitimate interests in the nature of proprietary rights, such as goodwill, trade secrets and confidential information.[7]  The enforceability (or validity) of a restraint of trade is assessed by reference to the circumstances at the date of its creation.[8]  These circumstances may include future events that could have been foreseen at that time.[9]  The party seeking to enforce the restraint bears the onus of proving there were special circumstances from which the court can infer that it was reasonable.[10]  A decision on whether or not a restraint was reasonable is formed on a broad and common sense view of the elements of the restraint and the time it was to be in force.[11]
  3. [78]
    A sound approach is to identify the legitimate interests the beneficiary of the restraint was entitled to protect and then assess whether the restraint was more than adequate for that purpose in the relevant circumstances.[12]

The Business Sale Contract restraint

  1. [79]
    The restraint in clause 12.1 of the Business Sale Contract was expressed to restrain B&C from being “concerned or interested … in the [GBAR asbestos removal business][13] or any other business of a similar nature within [Queensland] for [three years].”  The restraint was not to continue beyond 31 October 2016.  Understandably, the GBAR parties do not seek any relief that would enforce this restraint.  Its relevance now is limited to whether GBAR can claim damages for breach of contract, because B&C conducted an asbestos removal business between about 27 July 2016 and 31 October 2016.  As noted above, Mr Brown was not a party to the Business Sale Contract.  However, the alleged breaches by B&C are a vital element of the GBAR parties’ related damages claim against Mr Brown for inducing B&C to breach the Business Sale Contract.
  2. [80]
    In their approach to damages, the GBAR parties primarily seek an account of the profits made by B&C as a result of the alleged breaches of the contractual restraint.
  3. [81]
    The interest of GBAR to be protected by the restraint was its interest in the goodwill of the business it was acquiring from B&C.  The goodwill was the advantage GBAR would have by continuing to carry on and being entitled to represent that it was carrying on the same business formerly conducted by B&C as “GBAR Asbestos Removals”.[14]
  4. [82]
    The value of the goodwill of a business is a measure of the expected propensity of existing customers to continue to use the services of the business and of new customers to do likewise on the recommendation of existing customers, notwithstanding the change of ownership.[15]  One value of the goodwill is that attributed to it in the Business Sale Contract.  By this measure, it was worth a considerable sum.
  5. [83]
    The circumstances prevailing when the Business Sale Contract was executed include those set out in paragraphs [4] to [16] and [21] above.  B&C had traded the Business under a name including “GBAR” for about 18 months, between April 2012 and 31 October 2013.
  6. [84]
    None of the witnesses who worked for entities who used asbestos removal services in South-East Queensland or recommended providers of such services to others identified the name “GBAR” or the connection between B&C and any business as material to their decisions to use or recommend the use of its services.  All gave evidence to the effect that the experience and reputation of Mr Brown was important.  It was the connection with Mr Brown that explained the expected propensity of existing customers to continue to use the services of a particular asbestos removal business and to recommend those services to new customers.  So long as Mr Brown was working in the Business, GBAR had the benefit of custom driven by that connection.  This endured for 15 months until, by agreement, on 30 January 2015 Mr Brown’s employment with GBAR ended.  When, about 18 months later again, Mr Brown began working in the B&C business, B&C obtained the benefit of Mr Brown’s reputation.
  7. [85]
    The goodwill of the Business (as acquired by GBAR) could be protected by securing a leading role for Mr Brown in the Business and, by some lawful means, discouraging Mr Brown from providing his personal experience, skill, connections and reputation to a present or future competitor.  The Business Sale Contract provisions in clause 12.2(b) of the standard conditions and special condition 3 demonstrate GBAR and B&C shared this understanding.
  8. [86]
    The conduct expressed to be restrained by clause 12.1 was “in any manner whatsoever either directly or indirectly” being “concerned or interested in … the Business described in Item J or any other business of a similar nature”.  The circumstances established by evidence and admissions do not lead to a conclusion that the restriction on B&C having a direct concern or interest in a business similar to the Business acquired by GBAR was reasonable to protect GBAR’s interest in the goodwill.
  9. [87]
    The clause 12.1 restraint was unreasonable in other respects.
  10. [88]
    It is not possible to infer from the circumstances that the restraint on B&C having an indirect concern or interest in the Business, as a shareholder in GBAR, was reasonable to protect GBAR’s interest in the goodwill of the Business.  There was no evidence from which the court could conclude that requiring B&C to dispose of its shares in GBAR was reasonable in order to protect GBAR’s interest in the goodwill of the Business it was acquiring.  Similarly, the circumstances do not permit a conclusion that it was reasonable to restrain B&C from holding shares in another company with a similar business.
  11. [89]
    I am unable to conclude that the clause 12.1 restraint was no wider than reasonable or necessary to protect GBAR’s interest in the goodwill of the Business.  The restraint is not enforceable.  GBAR may not enforce it by claiming damages for its breach.  Nor may it indirectly enforce it by claiming damages from Mr Brown for inducing B&C to breach the restraint between 27 July and 31 October 2016.
  12. [90]
    Although, broadly considered, Mr Brown had interests in the Business Sale Contract – because he was the director of and a shareholder in B&C, which was in turn a shareholder in GBAR – he was not a party to the Business Sale Contract.  It follows that clause 12 could not operate directly to restrain Mr Brown.

Employment Agreement restraints

  1. [91]
    The four relevant restraints in clause 13 of the Employment Agreement are described at [22] above.
  2. [92]
    Four former GBAR employees came to work for B&C in its asbestos removal business.  For the GBAR parties it was submitted that “Jones v Dunkel inferences arise” in relation to B&C’s failure to call them.  Only one of these four, Ms Harley, was the subject of any allegation made in the GBAR parties’ statement of claim.  The only other pleaded allegation concerned Mr Goldie, who did not go to work for B&C.  The GBAR parties bore the onus of proving the breaches they alleged.  Neither Mr Brown nor B&C had to prove a negative.
  3. [93]
    The evidence about Mr Goldie, Mr Tavake and Ms Harley is insufficient to establish that B&C or Mr Brown directly or indirectly solicited, canvassed, induced or encouraged any of them to leave employment with GBAR or otherwise acted in breach of clause 13.1(a)(i).
  4. [94]
    GBAR did not prove that Mr Brown acted contrary to the obligation in clause 13.1(a)(ii) in respect of any client or supplier of GBAR or clause 13.1(a)(iii) in respect of the relationship between GBAR and its clients, employees, contractors or suppliers in the conduct of the GBAR business.
  5. [95]
    It was common ground that Mr Brown was a director of and a shareholder in B&C (and, I infer, an employee of or consultant to B&C).  B&C was based in Brisbane.  It follows that, from 27 July 2016, when B&C began conducting an asbestos removal business similar to and in competition with the Business of GBAR, Mr Brown had an interest of a kind intended to be restrained by the covenant in clause 13.2 of the Employment Agreement, if the restraint period was three years from the termination of his employment.
  6. [96]
    Clause 13.2 of the Employment Agreement was undoubtedly a restraint of trade, because it deprived Mr Brown of the opportunity to earn a living in the field of asbestos removal as an employee or consultant and deprived the public of the work and service he might do in that field as a useful member of society.[16]
  7. [97]
    The restraint clause was entered into as an element of the broader commercial transaction effected by the Business Sale Contract.  Mr Brown was a director of and shareholder in B&C, the vendor of the business.  B&C was (or was to be) a 20% shareholder in GBAR, the purchaser of the business.  In these circumstances, it would be appropriate to consider the evidence of any special circumstances on a broader basis than might be the case if it were not part of such a broader transaction.
  8. [98]
    The evidence about the market for asbestos removal services was rather limited.  It is summarised at paragraph 8 above.  That evidence does not permit a finding that, in October 2013, in order to protect GBAR’s interest in the goodwill of the Business it was acquiring, it was necessary or reasonable to restrain Mr Brown from having an interest as a shareholder in a company that conducted a similar asbestos removal business anywhere in Queensland for three years after the termination of his employment.
  9. [99]
    In any event, it is not necessary to reach any conclusion on the reasonableness of the restraint in clause 13.2 of the Employment Agreement.  This is because, by clause 4 of the second settlement agreement, the parties agreed that Mr Brown would be subject to a different obligation.  By fixing the restraint area as Australia – in place of Queensland, the parties agreed to change the restraint obligation that was agreed in the Employment Agreement.
  10. [100]
    By clause 10 of the second settlement agreement, the parties agreed that an earlier agreed restraint would not “remain in force” where it was changed by the second settlement agreement.  From 24 January 2015, the restraint obligation in clause 4 of the second settlement agreement applied in place of the restraint in clause 13.2 of the Employment Agreement or, to use the parties’ expression, the new obligation “overruled” the former.
  11. [101]
    There was no allegation that Mr Brown engaged in any conduct restrained by clause 13.2 of the Employment Agreement before 24 January 2015.  It follows that the GBAR parties have no cause of action against Mr Brown for any breach of clause 13.2 of the Employment Agreement.

The settlement agreement restraints

  1. [102]
    By the second settlement agreement, the parties agreed that Mr Brown’s employment with GBAR would terminate on 30 January 2015.  This was inconsistent with the terms of the first settlement agreement.  The parties also agreed that the restraint in clause 4 would operate for a period after 30 January 2015, not for a period after 27 February 2015 as had been agreed in the first settlement agreement.
  2. [103]
    The settlement agreements are commercial agreements between the parties with respect to commercial subject matters.  Objectively considered, from the position of a reasonable business person in the position of the parties, the parties must have intended the agreement recorded in the second settlement agreement to supersede that in the first settlement agreement so that, relevantly, Mr Brown would cease employment and be bound by the restraint in clause 4 of the second settlement agreement from 30 January 2015 and would not continue in employment until 27 February 2015 and be bound by the restraint in clause 4 of the first settlement agreement from that later date.  It follows that the restraint in clause 4 of the first settlement agreement did not operate to bind Mr Brown in any respect.
  3. [104]
    When the settlement agreements were executed, the goodwill of the Business was the property of GBAR and was substantially under the control of those who controlled GBAR, principally Mr Stoltz.  It had been so for some time.  The goodwill was no longer the property of Mr Brown or B&C or under his or its substantial control.  In this respect I agree with the conclusion of Peter Lyons J, following the interlocutory hearing.  I also agree with his Honour that in each of the settlement agreements the sale of B&C’s shares in GBAR was ancillary to the termination of the Mr Brown’s employment.[17]
  4. [105]
    As his Honour observed, in the circumstances, the validity of the restraint imposed on Mr Brown in clause 4 of the second settlement agreement should be assessed by the principles relating to a restraint between an employer and an employee, rather than those relating to the sale and purchase of a business.
  5. [106]
    An employer cannot protect the use of information acquired by a former employee during employment by a restrictive covenant, if the information falls short of being a trade secret or is not so highly confidential as to require the same protection as a trade secret.[18]  GBAR did not establish the existence of any trade secret or confidential information, which the clause 4 restraint was necessary to protect.
  6. [107]
    In terms, clause 4 restrained Mr Brown from being “interested … as … an employee in a firm or corporation in Australia, the business of which is similar to or in competition with the business of GBAR” for a period of three years, two years or one year from 30 January 2015.
  7. [108]
    It is not alleged that Mr Brown engaged in any conduct in breach of the restraint before 27 July 2016.  It follows that the GBAR parties assert the restraint on the basis that it applied for a period of either two or three years from 30 January 2015.
  8. [109]
    The combination of the total prohibition on working for any similar business or any competitor, the restraint area being the whole of Australia, and its relevant duration being two or three years, meant that Mr Brown would have to find employment in a field outside of that in which he had worked for many years and in which he had acquired skills, experience and reputation or seek employment in another country, for a period of two or three years.
  9. [110]
    The reasonableness of the duration of a restraint on a former employee requires consideration of the amount of time reasonably necessary to protect the former employer from a risk of the combined effects of the former employee’s use of “relevant information about clients and developed personal relationships with individuals from those clients.”[19]
  10. [111]
    Mr Brown’s aptitudes, skill, dexterity and his manual and mental abilities were his own; and not the property of GBAR as his employer.[20]  The skill and experience he acquired working in the Business were also his own property.[21]  He was GBAR’s employee, not their slave.  The restraint on Mr Brown working anywhere in Australia for another employer in a similar business or competing business is inconsistent with “the elementary freedom of an employee to earn his living as best he can”.[22]
  11. [112]
    If the purpose of the restraint was to protect the goodwill of the Business by preventing Mr Brown from providing his skills as an employee of a competitor or by preventing Mr Brown from using his name and reputation for the benefit of any other employer, then it lacked mutuality.  Mr Brown did not proffer the restraint in order to obtain employment with GBAR.  On the contrary, the agreement was about the termination of his employment.  There was no evidence that GBAR could have forced Mr Brown to continue in its employment had he not agreed to the restraint.  The restraint impaired Mr Brown’s ability to earn a living, relevantly for two or three years, without compensating him for the loss of income.  The consideration paid for B&C’s shares in GBAR was the same amount the parties had fixed for the purchase of the shares under the Option Agreement.  There was no evidence that the consideration included any amount to compensate Mr Brown for the personal restraint.
  12. [113]
    The areas in which Mr Brown worked while employed in the Business (including when it was conducted by B&C) were relatively confined to South-East Queensland and a few other places, each for short periods.  The geographic reach of the restraint would prevent Mr Brown working anywhere in Australia, if his employer was anywhere in competition with GBAR.  This goes beyond restricting Mr Brown from working in those places where GBAR traded, being where the knowledge and customer connections he had acquired could have been used to the prejudice of GBAR’s goodwill.[23]
  13. [114]
    In the circumstances, the GBAR parties may not enforce the restraint in clause 4 of the second settlement agreement.
  14. [115]
    I have also considered whether the circumstances would allow the court to infer that the restraint in clause 4 was enforceable, if examined as a covenant relating to the sale and purchase of an interest in a business.  I have concluded they would not.
  15. [116]
    As noted above, the goodwill of the Business was already owned by GBAR, having acquired it 15 months before.  No goodwill attached to the 20% shareholding that B&C transferred by the second settlement agreement.  Considered as a vendor-purchaser covenant, it is a bare covenant to further protect GBAR’s existing goodwill from competition by Mr Brown (himself or as an officer, employee or consultant to a competitor).  Considered at its narrowest, it is a promise by Mr Brown to exclude himself from the industry in Australia.  I could not conclude that such a covenant was reasonable and enforceable in the circumstances.[24]
  16. [117]
    As well, the scope of conduct restrained goes beyond that reasonably necessary to protect GBAR’s interest in the Business goodwill.  Clause 4 would restrain Mr Brown from holding an indirect interest in a competitor of GBAR, including as a shareholder.
  17. [118]
    The restraint on Mr Brown working for another employer in a similar business anywhere in Australia would apply the restraint to prohibit employment with a new employer who was not in competition with the Business.  The circumstances were not such as to make such a restraint reasonably necessary for the protection of GBAR’s goodwill.
  18. [119]
    In the circumstances, I am unable to conclude that such a restraint was reasonably necessary to protect GBAR’s interest in the goodwill of Business.
  19. [120]
    There was no evidence that the negotiations about the settlement agreements between the GBAR parties (on the one hand) and B&C and Mr Brown (on the other) were extensive.  It was not a negotiation between sizeable, sophisticated, commercial concerns.  There was no evidence that the parties were advised by lawyers with well-established reputations for advising on such transactions.  In the circumstances, I give little weight to the acknowledgment by Mr Brown, in clause 4.2, “that each of the separate prohibitions and restrictions contained in this clause are [sic] reasonable and necessary to protect the goodwill and interests of GBAR.”

The decision in Trego v Hunt

  1. [121]
    The GBAR parties contend that the conduct of B&C and Mr Brown was unlawful according to the doctrine in Trego v Hunt.
  2. [122]
    In Trego v Hunt, Lord Herschell thought it unnecessary to consider whether the basis for a vendor’s obligation was to be found in the principle that the vendor of a business “is not entitled to depreciate that which he has sold” or in an “implied contract to abstain from any act intended to deprive the purchaser of that which has been sold to him and to restore it to the vendor.”  The better view is that what Mr Morris QC called “the doctrine in Trego v Hunt rests on a contractual term implied by law.[25]
  3. [123]
    The sale of goodwill implies some obligation on the part of the vendor to deliver the thing sold.  Where such an obligation is implied, it is limited to not soliciting customers of the business sold by the vendor.  The seller is permitted to let customers come to a new business if they wish to do so.  As Lord Herschell explained in Trego v Hunt:

“If a person who has previously been a partner in a firm sets up in business on his own account and appeals generally for custom, he only does that which any member of the public may do, and which those carrying on the same trade are already doing.  It is true that those who were former customers of the firm to which he belonged may of their own accord transfer their custom to him; but this incidental advantage is unavoidable, and does not result from any act of his.  He only conducts his business in precisely the same way as he would if he had never been a member of the firm to which he previously belonged.  But when he specifically and directly appeals to those who were customers of the previous firm he seeks to take advantage of the connection previously formed by his old firm, and of the knowledge of that connection which he has previously acquired, to take that which constitutes the goodwill away from the persons to whom it has been sold and restore it to himself.”[26]

  1. [124]
    In the circumstances of that case, Lord Herschell was satisfied the obligation not to appeal directly to customers of the defendant’s former firm ought to be enforced by a court of equity.[27]  Lord Davey agreed, noting the limit of the obligation should not prevent the House “from meting out such scanty measure of protection to the purchaser of the goodwill as the circumstances permit.”[28]
  2. [125]
    Lord Macnaghten agreed with the outcome, tracing the limit of the scope of any obligation through a line of cases to Harrison v Gardner,[29] and deciding that, in the absence of “a special stipulation” or “understanding of the parties”, the vendor of the goodwill of a business

“may do everything a stranger to the business, in ordinary course, would be in a position to do.  He may set up where he will.  He may push his wares as much as he pleases.  He may thus interfere with the custom of his neighbour as a stranger and an outsider might do”.

  1. [126]
    His Lordship continued:

“but he must not, I think, avail himself of his special knowledge of the old customers to regain, without consideration, that which he has parted with for value.  He must not make his approaches from the vantage-ground of his former position, moving under cover of a connection which is no longer his.  He may not sell the custom and steal away the customers in that fashion.”[30]

  1. [127]
    The evidence of former clients of GBAR about their dealings with B&C and Mr Brown after July 2016 is noted above.  They convey a consistent narrative of seeking out Mr Brown’s services, once they became aware he was back in business.  The GBAR parties failed to prove that Mr Brown (or through him B&C) made approaches to former clients of GBAR.  The 15 month period between Mr Brown ending his employment with GBAR and starting work with B&C had been sufficient for the former clients to understand Mr Brown was not operating “under cover” of being GBAR or operating its Business.
  2. [128]
    There is a further obstacle in the path of the GBAR parties’ Trego v Hunt claim.
  3. [129]
    The implied obligation the subject of Trego v Hunt is an implied term in the contract of sale.  It follows that the term may be excluded by the parties, by reaching an agreement in different terms.  This includes where the purchaser takes a “better” course, to use Lord Macnaghten’s words, to “protect himself by taking apt covenants from the person with whom he is dealing.”[31]
  4. [130]
    This is what GBAR did.
  5. [131]
    The contractual covenants GBAR extracted from B&C in the Business Sale Contract and from Mr Brown in the Employment Agreement (and then in the second settlement agreement) show that the parties turned their respective minds to and agreed on the specific contractual rights and obligations in respect of competition by B&C from the sale of the business and conduct by Mr Brown after the termination of his employment.
  6. [132]
    In text and in the context of the agreements, their genesis and what was commonly known of the circumstances in which B&C and GBAR were operating, the purpose of the restraint clauses was to protect or enhance the value of the goodwill of the Business acquired by GBAR by preventing competition from B&C for five years from 31 October 2013 and restricting Mr Brown’s conduct for one to three years after the termination of his employment.  In the circumstances, the implication of an obligation of the kind in Trego v Hunt is not appropriate.  It would not meet the requirements for implication of a term, being inconsistent with the express terms and not being necessary to give business efficacy to the contract.
  7. [133]
    If, by the agreed terms and conditions, the parties had not excluded the scope for the implication of a term of the kind found in Trego v Hunt, such a term could not have the effect of restraining Mr Brown or B&C in a manner that would offend the restraint of trade doctrine.

Internet representations

  1. [134]
    The GBAR parties also allege Mr Brown and B&C passed off the B&C asbestos removal business as the Business acquired by GBAR or “the trading successor” to the Business by making certain representations on the internet.  The GBAR parties allege the same conduct was the publication of an injurious falsehood about GBAR and its Business and was a breach of the Australian Consumer Law.
  2. [135]
    The representations relied upon are said to be found in the following words appearing on three website pages since about August 2016.
  3. [136]
    The first set of allegations concern the B&C website.  The GBAR parties rely on the following statements on the B&C website:

“B & C Asbestos removal a privately owned family company since 2007”

“Queensland’s Most Experienced Asbestos Removal Company”

“Australia’s Most Experienced Asbestos Removal Company”.

  1. [137]
    In their pleading, the GBAR parties explain their allegations in this way:

“by mentioning the date ‘2007’, especially in the context of references to ‘Queensland’s Most Experienced Asbestos Removal Company’ and ‘Australia’s Most Experienced Asbestos Removal Company’, [the B&C website] has conveyed or implied that”

  1. (a)
    the B&C business is “one and the same as” the Business or its “trading successor”; and
  2. (b)
    the Business is not “one and the same as” the Business or its “trading successor”.
  1. [138]
    This somewhat odd explanation arises from the GBAR parties’ use of a number of defined terms in their pleading.  As best it can be understood, the allegation is that by the reference to “2007” persons viewing the website are likely to be led to believe that the B&C asbestos removal business is the Business acquired by GBAR or is the business now trading in succession to the Business and that the Business, still conducted by GBAR, is not the Business or its trading successor.[32]
  2. [139]
    The GBAR parties allege it is the context of the three statements all appearing on the B&C website that makes them actionable.  They do not allege that any of the particular statements on the B&C website amounts to passing off, an injurious falsehood or misleading or deceptive conduct, save for the context of the other statements.
  3. [140]
    None of the website statements refers to the Business or to GBAR.  A reader would have to have knowledge about the Business and GBAR in order to contemplate any relationship between B&C and the Business or GBAR. There was no basis to assume that an ordinary reasonable reader of any of the websites would have any such knowledge.  None of the alleged representations was conveyed or implied by the B&C website.
  4. [141]
    The statement on the B&C website about B&C being privately owned since 2007 is perfectly accurate.  B&C has been owned by Mr Brown and Ms Cremin since that time.
  5. [142]
    A company, not being a natural person, has no experience.  A claim about the experience of a company could only reasonably be understood as a claim about the experience of the company’s officers and employees, whether present or past.  In so far as, on the B&C website, the context of the reference to B&C having been a privately owned family company since 2007 may convey that the experience claims for B&C extend over the same period, they are correct.  Mr Brown is an officer or an employee of B&C.  His experience in asbestos removal extends back to 2007, at least.  If the three statements on the B&C website were read together, they would convey to the ordinary reasonable reader that B&C has officers or employees with experience in asbestos removal dating back to 2007.  That would not be misleading or deceptive.
  6. [143]
    As there was no misrepresentation conveyed or implied by the B&C website statements, the passing off claim based on them fails.
  7. [144]
    The representations alleged to be conveyed or implied by statements on the other two website are the same as those alleged to have been conveyed or implied by the statements on the B&C website.
  8. [145]
    On the Greg Brown website, the GBAR parties rely on the following statements:

“Greg Browns Asbestos Removals”

“Safe Asbestos Removal Across Brisbane & Surrounding Areas” [and references to doing work] “in Brisbane, Gold Coast and Sunshine and all other areas across Queensland”

  1. [146]
    In their pleading, the GBAR parties explain: 

“by use of the business name ‘Greg Browns Asbestos Removals’ in relation to the Brisbane, Gold Coast, Sunshine Coast areas ‘and all other areas across Queensland’, [the Greg Brown website] has conveyed or implied that”

  1. (a)
    the B&C business is “one and the same as” the Business or its “trading successor”; and
  2. (b)
    the Business is not “one and the same as” the Business or its “trading successor”.
  1. [147]
    On the yellowpages.com.au website, the GBAR parties rely on the following statements:

“Greg Brown’s Asbestos Removals”

“Australia’s Most Experienced Asbestos Removal Company”

  1. [148]
    In their pleading, the GBAR parties explain: 

“by use of the business name ‘Greg Browns Asbestos Removals’ in relation to the Brisbane, Gold Coast, Sunshine Coast areas ‘and all other areas across Queensland’, [the yellowpages.com.au website] has conveyed or implied that”

  1. (a)
    the B&C business is “one and the same as” the Business or its “trading successor”; and
  2. (b)
    the Business is not “one and the same as” the Business or its “trading successor”.
  1. [149]
    Unlike the allegation about the B&C website, the allegations about the other two websites are that, by the association of “Greg Brown[‘]s Asbestos Removals” with the experience claim, persons viewing each website are likely to be led to believe that the B&C asbestos removal business is the Business or is the business now trading in succession to the Business and that the Business, still conducted by GBAR, is not the Business or its trading successor.
  2. [150]
    The allegations about the Greg Brown website and the yellowpages.com.au website rely on the relationship between the Greg Brown Asbestos Removals business name and the experience claim.
  3. [151]
    It is true that between 2007 and about October 2011, B&C traded the Business under the name “Greg Brown Asbestos Removals”.  The change of business name to “GBAR” had been effective for two years before GBAR purchased the Business.  As noted above, GBAR acquired the Business with the intention of trading under the “GBAR” business name and has done so since that time.
  4. [152]
    None of the former GBAR client witnesses, who have used B&C’s services since July 2016, had the understandings alleged to have been conveyed or implied by the websites.  Each understood the difference between the Business that GBAR continued to operate and the new business started by B&C in July 2016.  There was no basis upon which the court could conclude that Mr Brown (or B&C through him) placed the website statements with the calculated and intended purpose of inducing the belief that the new B&C business was the Business or its successor or that the Business, as operated by GBAR, was no longer the Business.
  5. [153]
    To succeed in their claim for damages for passing off or attempted passing off, in respect of the other website statements, the GBAR parties had to establish that in August 2016, when the internet statements appeared, they had “the requisite reputation in the name” in Queensland and “that there is a likelihood of deception among consumers or potential consumers” resulting from publication of the internet representations.[33]
  6. [154]
    As noted above, the Business had not traded under the “Greg Brown Asbestos Removals” name since October 2011.  GBAR did not have and did nothing to establish a reputation as “Greg Brown Asbestos Removals” or to associate that business name with the Business.
  7. [155]
    The injurious falsehood claim must also fail because the alleged representations were not conveyed or implied by the website statements.

Conclusion

  1. [156]
    For the reasons noted above, the GBAR parties’ claim should be dismissed and judgment should be entered for the respondents.
  2. [157]
    I will hear the parties on any further orders that ought to be made.

Footnotes

[1]  It was at one time alleged that Mr Brown had been subject to duress.  No allegation was maintained at the trial.

[2]  Mr Lytras reported a slightly lower figure for FY2016, being $2,013,349.  Nothing turns on this difference.

[3] GBAR (Australia) Pty Ltd v Brown [2017] 2 Qd R 256.

[4]  Mr Lytras again reported a slightly lower figure for FY2017, being ($1,183,260.  Nothing turns on this difference.

[5]  The period from 31 January 2014 to 30 January 2015.

[6] Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 at 293 (Lord Reid); Lindner v Murdock’s Garage (1950) 83 CLR 628 at 633 (Latham CJ); Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co [1894] AC 535 at 565 (Lord Macnaghten).

[7] Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418 at [31]-[32] (Young JA).

[8] Keppell v Bailey (1834) 2 My & K 517 at 530; Aling v Olivier 1949 (1) SA 215 at 219 (Price J).

[9] Lindner v Murdock’s Garage (1950) 83 CLR 628 at 653 (Kitto J).

[10] Buckley v Tutty (1971) 125 CLR 353 at 377 (Barwick CJ, McTiernan, Windeyer, Owen and Gibbs JJ).

[11] Isaac v Dargan Financial Pty Ltd (2018) 279 IR 400 at 427 [129] (Gleeson JA).

[12] Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 at 301 (Lord Reid).

[13]  This part of the restraint makes no sense as B&C held and was to hold 20% of the shares in GBAR; so the parties knew and intended that B&C would be indirectly concerned or interested as a 20% shareholder in the company conducting the Business from completion of the Business Sale Contract.  This part of the restraint may be “blue pencilled” and the balance of the clause may be considered without it.

[14] Hill v Fearis [1905] 1 Ch 466 at 471 (Warrington J).

[15] Allied Dunbar (Frank Weisinger) Ltd v Weisinger [1988] IRLR 60 at 65 (Millett J).

[16] Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 714 (Lord Shaw).

[17] GBAR (Australia) Pty Ltd v Brown [2017] 2 Qd R 256 at 270 [48]-[49].

[18] Faccenda Chicken Ltd v Fowler [1987] Ch 117 at 137D-E (Neill LJ for the Court).

[19] AGA Assistance Australia Pty Ltd v Tokody (2012) 224 IR 219 at 231 [38] (P McMurdo J).

[20] Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 714 (Lord Shaw).

[21] Greer v Sketchley Ltd [1979] IRLR 445 at 446-447 (Lord Denning MR).

[22] Hepworth Manufacturing Co Ltd v Ryott [1920] 1 Ch 1 at 11 (Astbury J).

[23] Lindner v Murdock’s Garage (1950) 83 CLR 628 at 634 (Latham CJ).

[24] Bacchus Marsh Concentrated Milk Co Ltd (in liq) v Joseph Nathan & Co Ltd (1919) 26 CLR 410 at 441 (Isaacs J), citing Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 707-709 (Lord Parker), 713 (Lord Shaw).  See also Vancouver Malt & Sake Brewing Co Ltd v Vancouver Breweries Ltd [1934] AC 181 at 190 (Lord Macmillan for the Court).

[25] Liverpool City Council v Irwin [1977] AC 239.

[26] Trego v Hunt [1896] AC 7 at 20-21.

[27] Trego v Hunt [1896] AC 7 at 21.

[28] Trego v Hunt [1896] AC 7 at 29.

[29]  (1817) 2 Madd 198 at 219.

[30] Trego v Hunt [1896] AC 7 at 24-25.

[31] Trego v Hunt [1896] AC 7 at 25.

[32]  The contention that the Business was the trading successor of the Business is misconceived.  It may have arisen from the multiple definitions used in the pleading.

[33] Hansen Beverage Co v Bickfords (Australia) Pty Ltd (2008) 171 FCR 579 at 587 [34] (Tamberlin J).

Close

Editorial Notes

  • Published Case Name:

    GBAR (Australia) Pty Ltd & Ors v Brown & Anor

  • Shortened Case Name:

    GBAR (Australia) Pty Ltd v Brown

  • MNC:

    [2020] QSC 14

  • Court:

    QSC

  • Judge(s):

    Bradley J

  • Date:

    21 Feb 2020

  • White Star Case:

    Yes

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2020] QSC 1421 Feb 2020Applicants' claim to restrain the respondents from doing certain actions and for an account of profits or damages for breach of restraint of trade provisions; misrepresentation, passing off and injurious falsehood dismissed; judgment entered for the defendants: Bradley J.
Primary Judgment[2020] QSC 3406 Mar 2020Costs judgment: Bradley J.

Appeal Status

No Status
Help

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.