| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | CA 93/08 |
| Hearing date | 27 Jun 2008 |
| Determination date | 03 July 2008 |
| Member | P Cheyne |
| Representation | D Robinson ; J Costigan |
| Location | Christchurch |
| Parties | PGG Wrightson Ltd v Jary |
| Summary | INJUNCTION – Applicant sought to enforce against respondent restraint of trade provisions in employment agreement (“EA”) between respondent and W – W owned wool business that employed respondent – W sold wool business to applicant who offered to employ respondent – Respondent declined offer and joined competitor after being made redundant – Applicant sought injunction and damages against applicant and further interim injunction pending resolution of substantive problem – Respondent’s EA with W included non-solicitation and restraint of trade clauses – Applicant claimed was assigned provisions under sale and purchase agreement – Assuming restraint of trade in respondent’s EA capable of assignment then strongly arguable case assignment affected by sale agreement – Authority cited Gibbs v Crest Commercial Cleaning Ltd [2005] ERNZ 399 where Court found “long standing principle of employment law that no person (whether employee or employer) may be compelled to engage in an employment relationship with another” – Applicant, referring to Williams v Masters (1912) 31 NZLR 1148, argued restraint and non-solicitation clauses to protect goodwill of business and were assignable independently of employment relationship – Authority found Williams, did not support proposition that restraint in EA may be assigned as part of employers goodwill – Court in Williams referred to plaintiff’s submission as being supported only in “certain circumstances” – However in Gardner & Ors v Cooper HC Auckland CP 1360/90 the Court approved passage in Castle Parcels Ltd v Dale and Ors (1989) 2 NZELC 78-265 in making interim injunction against former employees of a company that had sold its business and at least implicitly assigned its employment agreements to the purchaser – Authority found on strength of Gardner arguable that restraint affecting employee may be part of goodwill of business and assignable independently of employment relationship – Authority noted significant arguments to the contrary – Authority found given principle in Nokes v Doncaster Amalgamated Collieries Limited [1940] AC 1014 (later followed in Gibbs) no circumstances short of explicit statutory language by which employment itself can be assigned – Authority stated if Gardner right then from employee’s perspective at common law burden of contract that survives termination can be validly assigned but not benefits – Authority found as case on significant point affecting many employees and employers consideration given to removing substantive to Employment Court – Issue for Authority whether restraints arguably reasonable so as to be enforceable – Restraint of trade clause (Clause 43) too uncertain to be enforceable – Clause 43 really had no meaning due to poor drafting – Authority found Clause 43 not reasonable or capable of modification even to arguable standard – No valid restraint – Authority found non-solicitation clause (Clause 42) too wide to be enforceable in current state as on face prevented ex-employee from soliciting anyone who might sell wool – Applicant submitted Authority permitted to modify unreasonable restraint under s8 Illegal Contracts Act 1970 – Authority found preconditions to exercise power to modify under s164 ERA not satisfied, however, correct that Clause 42 capable of modification in order to be made reasonable and therefore enforceable – Authority found applicant made case to arguable standard that Clause 42 could be enforceable – Evidence suggested breach of Clause 42 at least regarding W’s clients – Authority finding that breach of Clause 42 but no breach of Clause 43 made difference to assessment of balance of convenience – Authority determined respondent not prevented from working in field of expertise by order preventing solicitation of W’s clients – Applicant’s submission accepted that potential difficulties assessing damages if breach eventually established – Potential for significant financial harm – Interim injunction ordered prohibiting respondent from soliciting new business from any of W’s existing clients |
| Result | Application granted ; Orders accordingly ; Costs reserved |
| Main Category | Injunction |
| Statutes | Illegal Contracts Act 1970 s8;ERA s164 |
| Cases Cited | Castle Parcels Limited v Dale & Ors (1989) 2 NZELC 78-265;Davies v Davies 36 ChD 359;Gardner & Ors v Cooper & Ors HC Auckland CP 1360/90;Gibbs v Crest Commercial Cleaning Limited [2005] ERNZ 399;Nokes v Doncaster Amalgamated Collieries Limited [1940] AC 1014;Welstead v Hadley 21 TLR 165;Williams v Masters (1912) 31 NZLR 1148 |
| Number of Pages | 9 |
| PDF File Link: | ca 93_08.pdf [pdf 33 KB] |