Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd
[2003] QSC 8
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- Notable Unreported Decision
- Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd[2003] QSC 8
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Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd[2003] QSC 8
Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd[2003] QSC 8
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial Division | |
PROCEEDING: | Trial |
ORIGINATING COURT: | |
DELIVERED ON: | 24 January 2003 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 20 and 21 November 2003 |
JUDGE: | Muir J |
CATCHWORDS: | CONTRACT – CONTRACTUAL CONSTRUCTION – FORMATION OF CONTRACTS – RESTRAINT OF TRADE – EXCLUSIONARY PROVISIONS – whether memorandum of understanding constitutes a concluded agreement – whether agreement in restraint of trade is unreasonable – alleged contraventions of s 45(2) of Trade Practices Act – Construction of Contract Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623 Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 Glass v Pioneer Rubber Works of Australia Ltd 9 [1906] VLR 754 Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 Haynes v McNeil (1906) 8 WALR 186 Masters v Cameron (1954) 91 CLR 353 Queensland Wire Industries Pty Ltd v BHP Ltd (1989) 167 CLR 177 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 11 FCR 456 G R Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631. Storer v Manchester City Council [1974] 1 WLR 1403 The Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd [1983] 2 Qd R 204 Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 |
COUNSEL: | H B Fraser QC with him M Martin for the plaintiffs |
SOLICITORS: | Bennett & Philp for the plaintiffs |
Introduction
[1] On 1 September 1997, the Rushton valuation business, established in Australia in about 1974, was being carried on by Edwin Rushton Pty Ltd, the shares in which were held by Bruce and Susan Rushton. The Rushtons, pursuant to an agreement of that date styled “Rushton Group Equity Holders Agreement” (“the Equity Agreement”) sold their shares in Edwin Rushton Pty Ltd to Rushton Group Pty Ltd. Parties to the agreement included Rushton (Qld) Pty Ltd and Senmead Pty Ltd, the first and second plaintiffs in action 10771/01 (companies controlled by Phillip Holzberger) and Rushton (Vic) Pty Ltd, Rushton (SA) Pty Ltd, the second and third defendants in action 10771/01 (companies controlled by Peter Rogan). Another party to the agreement was the first defendant, Rushton (NSW) Pty Ltd.
[2] In general terms, the effect of the Equity Agreement was to transfer ownership of the Rushton valuation business to entities controlled by Mr Holzberger and Mr Rogan. The Holzberger interests were given the right to use the Rushton name in connection with a valuation business in Queensland and Papua New Guinea and the Rogan interests were given similar rights in respect of Western Australia, Tasmania, Victoria and South Australia. Both the Rogan and Holzberger interests were to participate in the valuation business carried on in New South Wales under the Rushton name. The assets of the valuation business were distributed between the Holzberger and Rogan interests and the shared entity which was to carry on the New South Wales business. The Equity Agreement further provided that valuation work in a State, Territory or other location was to be carried out by the entity which had the right to use the Rushton name in that place but where another participating entity introduced the work it would be entitled to a fee equal to 10% of the gross charge for that work.
[3] Under an agreement dated 22 October 1999 (“the Sale Agreement”) the Holzberger interests sold to the Rogan interests for a consideration of $1,450,000, their interests in the New South Wales business, their interests in three partnerships and shares in three specified companies. The agreement still contemplated though that the Rushton business would be presented to the public as a National one with operations in New Zealand, Papua New Guinea and Fiji. As before, work within a particular State or designated location was to be performed only by the entity which had the right to use the Rushton name in that State or location and, where work was referred by another entity, the referrer would be entitled to a predetermined remuneration.
[4] On 8 June 2000 Rushton (Qld) commenced proceedings in the Supreme Court of Victoria against Rushton (Vic), Rushton (SA) and Rushton (NSW) for alleged breaches of the Sale Agreement. Prior to any trial of the proceedings the dispute was compromised. Counsel for the parties signed a document headed “Memorandum Of Understanding Of Terms To Be Incorporated into the Sale Of Business Interests Agreement dated 22 October 1999 and Other Matters” (“the Memorandum”). The Memorandum set out, in some detail, a new regime for the manner in which referral work was to be carried out and remunerated.
The claims in the action
[5] The third plaintiff in the Queensland action is Apada Investments Pty Ltd. It acquired an interest under the Sale Agreement when it replaced Senmead, the second plaintiff, as trustee of the Holzberger Trust. The other plaintiff is Rushton (Qld) Pty Ltd.
[6] In the action the plaintiffs’ claim –
(a) a declaration that on or about 20 June 2000 the first and second plaintiffs and the defendants became bound by an agreement comprising the terms in Schedules 3 and 4 to the Sale Agreement as amended by the Memorandum;
(b) a declaration that Apada has had the benefit of such agreement and the Memorandum since on or about 29 August 2001;
(c) damages for breach of the agreement;
(d) other related declaratory and injunctive relief.
[7] The plaintiffs’ claims are made in respect of the Sale Agreement and, alternatively, the Sale Agreement as varied by the Memorandum.
[8] The breaches of the Sale Agreement (or the Sale Agreement varied by the Memorandum) are allegedly constituted by the defendants providing, or causing to be provided, valuation services in Queensland and Papua New Guinea contrary to the provisions of the Sale Agreement in that regard. They are particularised in part B of a schedule which lists 84 alleged breaches. The schedule is divided into four columns and, for present purposes, it will suffice to set out the headings in that part of the schedule and the first allegation.
Part B – Known instances of alleged breaches and defendants’ responses
ITEM NO. | CLAIM | PLAINTIFFS’ COMMENTS | DEFENDANTS’ COMMENTS |
1. | Pursuant to the Sale of Business Interest Agreement (“SBIA”) (in particular its Schedule 3) dated 22 October 1999 and/or alternatively, the SBIA as modified by the Memorandum of Understanding (“MOU”) dated 20 June 2000, the defendants out to have referred to the plaintiffs (in particular the first plaintiff which would be responsible for actually carrying out the work), that component of valuation work which was required to be conducted within Queensland an/or Papua New Guinea by the defendants’ clients. The person and/or companies named in the adjacent column “Plaintiffs’ Comments” was a client of the Defendants that referred valuation work to the defendants and which had a component requiring valuation work to be conducted inside Queensland and/or Papua New Guinea. | Referral from Second Defendant. Client Pivot Ltd. Defendant’s job number 33079. Defendant’s job sheet dated 1 August 2000. | The job involved Queensland work. The defendant/s did not refer the Queensland work to the plaintiff/s. The Queensland work was done by the defendant/s. The job was sourced and invoiced by Rushton (Vic) Pt Ltd. |
2. | Ditto. |
|
|
[9] The matter under the heading “Claim” remains the same for each item.
[10] The defendants –
(a) admit that the Memorandum was executed by counsel acting on behalf of the first and second plaintiffs and the defendants with a view to resolving a dispute between them;
(b) deny that Apada is a party to the Memorandum;
(c) allege that the Memorandum is unenforceable as not being intended to bind the parties until Rushton (Qld) and Senmead reached agreement with the defendants with respect to the terms upon which the Sale Agreement was to be amended and until execution of a formal document reflecting the contents of the Memorandum which had the effect of amending the Sale Agreement and until the execution of a further such formal agreement by Rushton (NSW) of the one part and Rushton (Qld) and Senmead of the other part;
(d) allege that Rushton (NSW) is not a party to the Sale Agreement;
(e) allege that clauses 1.2 and 1.3 of Schedule 3 of the Sale Agreement are unenforceable as constituting unreasonable restraints of trade;
(f) allege that the restraints contained in clauses 1.2 and 1.3 of Schedule 3 to the Sale Agreement are in breach of s 45(1) of the Trade Practices Act 1974 and, for that reason, unenforceable.
The Victorian proceedings
[11] In late July 2002 proceedings were commenced in Victoria by the Rogan interests against the Holzberger interests. Those proceedings were transferred to Queensland and are being tried with this action.
The Memorandum of Understanding
[12] The defendants contend that the parties did not intend to be bound by the Memorandum of Understanding until a formal contract was executed and that the circumstances of this case thus fall within the third class of cases referred to in Masters v Cameron.
[13] Whether the parties intended the Memorandum to be a binding agreement is to be determined objectively by reference to the words and actions of the parties.[1] In G R Securities v Baulkham Hills Private Hospital Pty Ltd[2], McHugh JA observed –
“However, the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances.”
[14] The existence of an agreement may be inferred from the subsequent conduct of the parties.[3] The fact that there has been performance of a transaction by both sides is also strong evidence of the existence of an intention to enter into legal relations.[4] Also, the existence of a contract may be proved by admissions.[5]
[15] The defendants’ argument draws attention to the description of the document; its reference to the preparation of another document and to language which is said to be executory in nature. It is said in that regard that it records the desire of the parties to enter into two further agreements and the terms of the “proposed” amendments, but does not purport to record any agreement by the parties to be immediately bound. It is argued that the words “such agreement or agreements as is or are necessary” in recital C implies that the parties intended to give further consideration to the way in which they would bind themselves to the terms contained in the Memorandum. Furthermore, it is asserted that recital C, by stating that the purpose of the agreement as being to reflect the matters referred to in the Memorandum by amendment of the Sale Agreement “or otherwise”, contemplates the possibility that some entirely new agreement might be entered into and that this is inconsistent with an intention by the parties to be bound. An additional such indication is said to be found in cl 12 of the Memorandum which requires a separate agreement to be entered into between Rushton (Qld) and Rushton (NSW) to reflect “the matters set out above”.
[16] I accept that most of these matters provide support for the defendants’ contentions. There are, however, even stronger indications that the parties intended the Memorandum to be a binding agreement.
[17] The preamble to the Memorandum recites the existence of the proceedings and the desire of the parties to resolve them. It provides, inter alia –
“C.And whereas the parties are desirous of resolving the proceeding and entering into such agreement or agreements as is or are necessary to reflect the matters referred to herein by amendment of the Sale of Business Interests Agreement dated 22 October 1999 or otherwise and by entering into a further agreement on similar terms between the Plaintiff and Rushton (NSW) Pty Ltd.
…
Now the parties set out the basis of the proposed amendments and resolution of the Proceedings below.”
[18] There then follows a number of clauses detailing the basis upon which work is to be referred by members of the Rushton group outside the State or Territory in which the work is to be done to the entity which has the right to use the Rushton name in that State or Territory. The following five clauses conclude the operative parts of the Memorandum –
“COURT ORDERS
- The parties shall consent to the following orders:
(a) The plaintiff’s application filed 8 June 2000 be struck out with no order as to costs.
(b) The proceeding be dismissed with no order as to costs.
OTHER MATTERS
- Peter George Rogan shall provide Phillip Michael Holzberger with a copy of the Partnership returns for the financial years ended June 1998 and June 1999 within seven days of the date hereof.
- Mutual releases to be entered into by the parties in relation to the subject matters of the Proceedings.
- A separate agreement between the Plaintiff and Rushton (NSW) Pty Ltd be entered into between these parties to reflect the matters as set out above.
- The parties agree to be bound by the terms of this Memorandum of Understanding from 14 June 2000.”
[19] It is implicit in cl 9 that the parties accept that the action has been compromised and is to be brought to an end. That is a strong indication of an intention to be bound immediately. Clause 10 imposes an unconditional obligation on Mr Rogan, performance of which is required within seven days of the date of the Memorandum. Again, that is suggestive of an intention by the parties to be bound by the terms of the Memorandum.
[20] It is conceivable that an intention to be bound existed in relation to a part or parts of the Memorandum but not to the remainder. Clause 13, however, reinforces the impression created by the matters already discussed by plainly stating the agreement of the parties to be bound by the terms of the Memorandum. That agreement is expressed to be retrospective. In light of these matters it would be surprising, particularly having regard to the language used in clauses 9, 10 and 13 that, if there was in fact no intention that the parties be immediately bound, some conventional statement to this effect did not appear in the instrument.
[21] In addition, it is said on behalf of the plaintiffs, and I so find, that it appears from the Memorandum that agreement on no other matters of substance was contemplated. Agreement on all terms has been said to be a strong indication that the parties considered that a binding agreement had been reached.[6] Nor do I consider the fact that the Memorandum contemplated a separate agreement between Rushton (NSW) and the plaintiffs provides much assistance to the defendants’ case. Rushton (NSW) was a party to the Memorandum and was controlled by Mr Rushton. The Memorandum was not made conditional on the entering into of any such further agreement and, at the time the Memorandum was executed, the procuring of Rushton (NSW) to enter into the contemplated agreement was a formality.
[22] The existence of an agreement may be inferred from the subsequent conduct of the parties including admissions that an agreement exists[7] and performance of the agreement by the parties.[8] There is evidence of some performance of the agreement and there is an implicit admission of the existence of an agreement in a fax dated 23 June 200 from Mr Rogan to Mr Holzberger.
[23] Accordingly, I find that the Memorandum is binding on the parties to it.
Construction of the relevant contractual provisions
[24] The alleged restraints are said to be unreasonable, in the interests of the parties, as being unlimited in duration, unlimited as to the work to which they apply and as not protecting any legitimate interest on the part of the plaintiffs. The plaintiffs’ primary response is that clauses 1.2 and 1.3 of Schedule 3 do not restrict the defendants from providing valuation services to anyone. This, it is said, is made plain by clauses 11.1 and the preamble to Schedule 4. Clauses 11.1 and the relevant parts of schedules 3 and 4 provide as follows:
“11.1 Future use of Business Name
After Completion, the parties agree to be bound by and to operate their respective businesses of valuation under the Business Names in accordance with the rules and regulations set out in Schedules 3 and 4.
…
Schedule 3 – Interstate Trading Terms and Fee Sharing Arrangements
Each of the Rogan Group and the Holzberger Group agrees that:
Territory means New South Wales, Victoria, South Australia, Tasmania, Western Australia, Northern Territory, Queensland, Australia Capital Territory, New Zealand, Fiji or Papua New Guinea.
Group means the Holzberger Group and the Rogan Group.
…
1.2 Any work within a Territory shall be performed only by the Group which has the right to use the Business Name in that Territory.
1.3 If either the Rogan Group or the Holzberger Group is required to conduct work in a Territory where that Group does not have the right to use the Business Name, that Group (the “Selling Group”) shall offer the work to the other Group.
1.4 If the Selling Group sells the work to the other Group, which work is conducted wholly by the other Group within its Territory, the other Group shall pay to the Selling Group a fee equal to 10% of the amount billed for work performed by the Group.
…
Schedule 4 – Use of Business Name
Each of the Holzberger Group and Rogan Group acknowledge the need to maintain the integrity of the Business Name and the need to present the Business Name and the work conducted under it in a national and unified manner and agree that:
…
1.3 it must not and it must ensure that none of its Related corporations do not, either directly or indirectly, establish, set up or be engaged in any business in the Territories which is in competition or is likely to compete or be perceived to compete with the Business;
1.4 other than in its own Territories, it must not and it must ensure that none of its Related corporations do not, either directly or indirectly, establish, set up or be engaged in any business in the Territories under the name ‘Rushton’.”
[25] “Business Names” are defined as the “Rushton”, “Rushton Group” and “Edward Rushton” names. Schedules 3 and 4 make specific provision for the way in which and the extent to which the parties may do work and carry on business in prescribed circumstances.
[26] The plaintiffs concede that clauses 1.3 and 1.4 of Schedule 4 contain “rules and regulations” which operate irrespective of whether or not a party does work or trades under the “Business Names” but argue that this tends to lend support to their construction of Schedule 3. Otherwise, it is said, there would be no scope for the operation of clauses 1.2 and 1.3 of Schedule 3. A difficulty with this argument is that, however these clauses are construed, their scope of operation is within that of clauses. 1.3 and 1.4 of Schedule 4. On balance though it seems reasonable to conclude that the two sets of provisions were not intended to cover the same subject matter.
[27] It is further contended that clauses 1.2 and 1.3 of Schedule 3 apply only to work to be done by the defendants in Queensland which they have obtained in the Rushton name. This argument relies on the words “under the Business Names” in cl 11.1.
[28] Schedule 3, unlike Schedule 4, is concerned with establishing rules for the carrying out of “work in a Territory”. “Work” is undefined but clause 11 suggests that it does not mean valuation work of any description. Clause 11 provides that Schedules 3 and 4 contain “rules and regulations” for the operation of the parties’ “respective businesses of valuation under the Business Names”. It thus limits or defines the scope of the two schedules. Clause 11 and Schedules 3 and 4 are designed also to ensure that the parties continue to benefit from the presentation of the Rushton Group as a valuation business or group of businesses trading under the Rushton name throughout Australia and beyond.
[29] The introductory words of Schedule 4 further strengthen the conclusion that Clause 11.1 and Schedule 3 are concerned with work under “the Business Names”. The fact that clauses 1.3 and 1.4 of Schedule 4 seek to protect the goodwill in the “Business Names” by broader restraints does not, in my view, suggest that clauses 1.2 and 1.3 of Schedule 3 related to work outside of work performed under the Business Names.
[30] For those reasons I conclude that clauses 1.2 and 1.3 of Schedule 3 refer to valuation work done or to be done as work of a business trading under the “Business Names”.
Is clause 1.3 of schedule 3 unenforceable as a covenant in restraint of trade?
[31] Clauses 1.2 and 1.3 constitute covenants in restraint of trade but the restraint is of the limited nature described above.
[32] It is not contended that if the Sale Agreement or the amended Sale Agreement are in restraint of trade, the restraint is of a species which does not attract the operation of the common law doctrine.[9]
[33] I have already found that that a “restraint” within the meaning of the doctrine exists. The defendants did not seek to make out a case that the restraint was unreasonable with reference to the interests of the public. The next question for determination then is whether the restraints are reasonable in the interests of the parties.
[34] The following passage from the judgment of Gibbs J in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd,[10] usefully explains the test of reasonableness.
“The test to be applied in determining the validity of a restraint of trade was stated by Lord Macnaghten in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd, in a passage that has been cited with approval in many cases including, to name only recent decisions, Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. and Buckley v. Tutty .
Lord Macnaghten said:
‘All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.’
The requirement that the restriction be reasonable in the interests of the parties has been explained as meaning that the restraint "must afford no more than adequate protection to the party in whose favour it is imposed" (Herbert Morris Ltd. v. Saxelby, or in other words, ‘does the restriction exceed what is reasonably necessary for the protection of the covenantee?’ (McEllistrim v. Ballymacelligott Co-operative Agricultural and Dairy Society Ltd).” (footnotes omitted)
[35] In Bridge v Deacons,[11] the Judicial Committee expressed a test in these terms –
“The proper approach is that adopted by Lord Reid in the Esso Petroleum case (1968) A.C. 269, where he said at p.301:
‘I think it better to ascertain what were the legitimate interests of the appellants which they were entitled to protect and then to see whether these restraints were more than adequate for that purpose.’.’”
[36] In determining whether the restraint is reasonable in the interests of the parties the quantum of consideration received by the covenantor and the effect of the agreement on the position of the covenantor are of relevance. So too is the fact that the parties have bargained at arms length on an equal footing.[12] It would appear, however, from the judgment of Gleeson CJ, Gummow, Kirby and Hayne JJ in Peters (WA) Ltd[13] that little weight is to be attached to the consensual nature of the restraint.
[37] The validity of the restraint must be determined as at the date of the agreement imposing it[14].
[38] The plaintiffs’ justification for the duration of the restraints is that: they are co-extensive with the duration of the plaintiff’s “right to use the Business Name in” Queensland; the limited nature of the restraints discussed above; and that they reasonably protect the plaintiffs’ interests in the Rushton name and assist in maintaining the goodwill of the plaintiffs’ valuation business.
[39] Under the Equity Agreement the various entities holding the rights in the Rushton name throughout Australia agreed that licences should be granted to nominated entities to carry on business under the Rushton name in designated locations. Pursuant to the agreement, Rushton Group Pty Ltd granted to Rushton (Qld) for a term of 99 years a licence to carry on the Rushton valuation business in Queensland and the Northern Territory. Under the Sale Agreement, Rushton Group Pty Ltd assigned to Senmead the goodwill in the Rushton names and the right to use the names in Queensland and Papua New Guinea. The assignment was given formal effect by a deed dated 6 December 1999. The Sale Agreement and the deed thus increased the interest of the plaintiffs in the Rushton names and the goodwill attaching to those names, but on 22 October 1999, the date of the Sale Agreement, only about two years of the 99 year licence agreement had expired.
[40] Oddly, perhaps, there is no evidence of registration of any of the Rushton names in Queensland under the Business Names Act 1962. It does appear to be the case, however, that the plaintiffs had the power at all material times to register the business names in Queensland and to prevent their registration by others. Registration of the Rushton names in Queensland by the plaintiffs would have prevented other persons from carrying on business under those names by operation of the Business Names Act 1962.[15]
[41] Against this background it is difficult to conclude that the interference with the defendants’ liberty to carry on business resulting from the operation of the subject provisions is unreasonable in the interests of the parties. The restraints need to be considered in the context of the pre-existing rights and continuing licensing arrangements of the parties. Moreover, it is not irrelevant that that the parties, by the agreement, elected to continue to maintain a national business under the Rushton names and legislated for the manner in which the national business was to be conducted. Clauses 1.2 and 1.3 of Schedule 3 are part of a group of provisions designed to ensure the effective operation of the national business and the appropriate utilisation of the assets and rights of those participating in it. It is relevant also, as the plaintiffs point out, that the defendants’ ability to use the Rushton name in Queensland may be circumscribed by the tort of passing off and by s 52 of the Trade Practices Act 1974. Consequently, the defendants have not established this ground of defence.
Do clauses 1.2 and 1.3 of Schedule 3 to the Sale Agreement contravene s 45(2) of The Trade Practices Act?
[42] The defendants contend that at the time of entering into the Sale Agreement (or the amended Sale Agreement if it is relevant) the businesses of the plaintiffs and the defendants were competitive within the meaning of s 4D of The Trade Practices Act 1974.
[43] It is submitted that clauses 1.2 and 1.3, by preventing competition within designated territories, supports the inference that the parties would be likely to be in competition were it not for those provisions. Reference is made also to Mr Holzberger’s evidence to the effect that discussion concerning clauses 1.2 and 1.3 was specifically to get protection for future referral work; that the monetary value of what was involved is significant and proved to be worth about $300,000 a year; that Mr Rogan tried to back out of committing to these terms; that there was pre-existing tensions between him and Rogan and that there were initial disagreements and that disputes as to the interstate work started as early as March 2000. It is pointed out that by June 2000 some of the plaintiffs were seeking an interlocutory injunction to enforce the provisions of the Sale Agreement.
[44] It is submitted that if Rushton (NSW) became party to the Sale Agreement, the above considerations apply equally to it.
[45] In response, the plaintiff puts forward the following arguments –
(a) No evidence is lead by the defendants to establish that the relevant parties were competitive with each other. There is no such evidence and the defence therefore fails;
(b) The relevant market is customers in New South Wales, Victoria and South Australia (see s.45(3)) and there was and is no probability of competition between the parties in relation to the subject matter of clauses 1.2 and 1.3 of Schedule 3;
(c) As the plaintiffs could not carry on business under the Rushton name in New South Wales, Victoria or any place other than Queensland and New Guinea without contravening the local statutory equivalents of the Business Names Act 1967 (Qld) and/or s 52 of the Trade Practices Act it is not to be assumed that they could or ever would compete for that market segment;
(d) The defence does not plead any fact relevant to the application of s 4D(2) of the Trade Practices Act (which defines “competitor” for present purposes);
(e) The pleaded restriction is “the supply of valuation services by the defendants to persons resident within, or possessing property within Queensland” but –
(i) There is no such prevention or restriction;
(ii) The subjects identified in the defence are not the subject of schedule 3, clauses 1.2 and 1.3 – the latter concern the actual conduct of valuations in Queensland, not the residents of clients or their possession of properties in Queensland. Clauses 1.2 and 1.3 do not in any way restrict the defendants from marketing valuation services (even under the “Rushton” name) to persons resident in or possessing property in Queensland;
(iii) It is irrelevant that clauses 1.2 and 1.3 restrict the defendants from having “Rushton” work done in Queensland by other contractors (or their own employees) as the only pleaded complaint is that the restraints have the purpose of preventing or restricting “the supply” of “valuation services” by the defendants. That is not the effect of the provisions;
(iv) The purpose prescribed by s 4D is a subjective purpose held by all of the parties to the impugned provision.[16] “Particular” qualifies “classes” as well as “persons”.[17] Here, the clauses restrict the defendants from working in Queensland under the “Rushton” name for anyone not just for “persons resident within, or possessing property within Queensland” or any other “particular class”.
[46] By operation of the deeming provisions in s 4D of the Trade Practice Act persons are competitive with each other if –
“(a)they or related corporations or are likely to be competitive with each other; or
(b)they or related corporations would be or would be likely to be competitive with each other but for the contract arrangement or understanding
in relation to the supply or acquisition of services to which the subject provisions relate.”
[47] Were it not for clauses 1.2 and 1.3 the defendants’ ability to use the Rushton names in Queensland was restricted, if not prohibited entirely, for the reasons discussed earlier. Consequently, I find that the relevant entities were not and were not likely to be competitive with each other in any relevant sense. I further find that they were not likely to be competitive with each other but for the provisions of clauses 1.2 and 1.3.
[48] Having regard to the complex history and documentation of the parties’ relationship, the quite limited evidence about how work is generated and clients acquired and kept in the subject industry and to the failure of witnesses to specifically address the question of competition, I think it inappropriate to infer the likelihood of competitiveness from the matters relied on by the defendants.
[49] I accept also that there are difficulties arising out of the way in which the defendants have formulated their claim based on s 45(1) of the Act. The defence alleges that the subject restraints “have the purpose of preventing, or restricting the supply of valuation services by the defendants to persons resident within, or possessing property within Queensland”. It may well be the case that the supply of valuation services by the defendants to such persons is affected by the subject provisions but they are hardly directed to preventing or restricting the supply of services to such persons. The restraints are concerned with the performance of work within Queensland rather than with the residency of the client or the title of the client to Queensland property.
[50] The purpose of which s 4D speaks is the subjective purpose of the parties to the agreement.[18]
[51] In Dowling v Dalgety Australia Ltd,[19] Lockhart J observed –
“‘Purpose’ is concerned with motivation and the reasons of the parties for introducing the provisions. ‘Purpose’ … must be read in conjunction with s 4F (a provision is deemed to have had a particular purpose if it was included for purposes that include that purpose and it was a substantial purpose …)”.
[52] Neither Mr Rogan nor Mr Holzberger gave evidence as to the purpose of the subject clauses and Mr Holzberger was not cross-examined on the point. I am not satisfied that either of them (the guiding minds of the relevant entities) held the pleaded purpose. There must be considerable doubt as to whether they even held a broader purpose of preventing, restricting or limiting the supply of services by the defendants within Queensland. Again, it must be borne in mind that there was a complex set of relationships between the parties governing trading and property rights which had evolved from trading activities prior to the Equity Agreement. The Equity Agreement, as already observed, provided for licence agreements in respect of the Rushton names. It is consistent with this background that the purpose of the parties was to give effect to a continuation of existing rights and arrangements in relation to the use of the Rushton names in Queensland.
[53] In the absence of direct evidence, the drawing of inferences as to purpose in the circumstances now under consideration needs to be approached with considerable caution and I am unable to find the existence of the purpose alleged by the defendants.
[54] For the above reasons I find that a contravention of s 45(2) of the Trade Practices Act has not been established.
Did the appointment of Apada in place of Senmead as trustee of the Holzberger Trusts result in the defendants being no longer obliged to refer work to the plaintiffs or any of them?
[55] The point was not relied on in the defendants’ submissions as a ground of defence but reference was made to it in support of a construction argument in the Victorian proceedings heard together with this action.
[56] I am not persuaded that there is any substance in the point. Senmead contracted in its own capacity as a trustee. Clause 1.2, the interpretation clause, provides that a reference to a party includes a party’s “successors and permitted assigns”. Those words are capable of accommodating a change in the trustee of the trust referred to in the definition of “Holzberger Group”. The plaintiffs are further assisted by the provision of section 15 of the Trusts Act 1973. If as the defendants contend, the section operates to vest the benefits of contracts in new trustees but not the burdens, that would not seem to affect Apada’s or Senmead’s rights for present purposes.
Conclusion
[57] My understanding of the way in which the case was conducted is that as a result of the above findings, liability is established in favour of the plaintiffs against the defendants in respect of the matters in the Scott schedule.
[58] I invite the parties to agree on minutes of order which reflect the reasons and I further invite submissions on costs.
Footnotes
[1] Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 at 502; Masters v Cameron (1954) 91 CLR 353 at 362; and Storer v Manchester City Council [1974] 1 WLR 1403 at 1408.
[2] (1986) 40 NSWLR 631.
[3] Haynes v McNeil (1906) 8 WALR 186; Glass v Pioneer Rubber Works of Australia Ltd 9 [1906] VLR 754; Brogden v Metropolitan Railway Co (1877) 2 App Cas 666; Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 and The Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd [1983] 2 Qd R 204.
[4] British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623 at 630 and Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 at 27.
[5] Australian Energy Ltd v Lennard Oil NL (supra).
[6] Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551 at 14,569 per Kirby P.
[7] Australian Energy Ltd v Lennard Oil NL [1986] Qd R 216.
[8] British Bank for Foreign Trade Ltd v Novinex [1949] 1 KB 623 at 630.
[9] As for the existence of such a species see Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at 135.
[10] (1972-1973) 133 CLR 288 at 315.
[11] (1984) 2 WLR 837. See also Geraghty v Minter (1979) 142 CLR 177 at 184.
[12] Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (supra) at 316-317.
[13] At 142-143.
[14] Amoco Australia Pty Ltd (supra) at 318 per Gibbs J.
[15] Section 5.
[16] South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 11 FCR 456 at paras 65-67, 144 and 243.
[17] South Sydney District Rugby League Football Club Ltd v News Ltd (supra) at paras 79 and 289 following Pont Data Australia Pty Ltd v ASX Operations Ltd (1990) 21 FCR 385 at 487-488.
[18] Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 at 134 and Queensland Wire Industries Pty Ltd v BHP Ltd (1989) 167 CLR 177.
[19] (Supra).