Decision reserved in contract claim

Press, Volume CXV, Issue 33869, 14 June 1975, Page 20

Decision reserved in contract claim

Decision was reserved by ■: Mr Justice Somers in the Supreme Court yesterday in a claim for damages of j $BOOO by H. and R. Block, . Ltd. taxation consultants, against the company’s tor- ' mer Christchurch area manI ager for an alleged breach of I'a contract convenant. [ H. and R. Block. Ltd. (.claimed the damages from Peter Sanott, a company .‘manager, cited as the first I [defendant, and from Peter's Income Tax Service. Ltd. second defendant. Mr Sanott is governing director of ’’Peter's Income Tax Service, Ltd. 1 The hearing of the claim began on May 21. and was adjourned, while Mr Sanott : was giving evidence, until yesterday. Messrs K. N. Hampton [and W. G. G. A. Young appeared for H. and R. Block, Ltd, and Mr A. Hearn for Mr Sanott and the second; defendant, both of whom denied liability. Mr Hampton told his Honour that the plaintiff [ opened a branch in Christ-1 church in March, 1971. Mrl Sanott, who had been employed by the Inland Revenue Department, was appointed branch manager. He signed a contract of employ-! ment which said that for theterm of the agreement and‘ for five years after he would not engage in the business of preparing tax returns 1

within an area of 25 miles J of a branch office of the i[ plaintiff without written [consent. Mr Sanott set up Peter's Income Tax Service, Ltd, in breach of that agreement. Under cross-examination ' by .Mr Hampton, Mr Sanott agreed that he had started I the formation of his company before the termination ■of his employment with the plaintiff. His wife was the [only other shareholder in his company. The plaintiff was [aware of his intention to go into business. Mr Sanott agreed that the idea of setting up in opposition to the plaintiff came when he received notice from that company. If possible, he would have set up [in business next doot to the plaintiff's premises, because he honestly thought that he had been unjustly treated — he had worked hard lor the; ;firm but his wages had been! poor. He set up his company "in opposition to a monopoly,” and to “show up the[ injustice the firm had done; him,” not just for personal [ gain.

“NULL AND VOID" [ It meant that an individ- 1 Huai had a right to decide! [[where he would get his in- 1 [lcome-tax returns done. [[There was only one place to; go in Auckland, Timaru,[ ’Dunedin and Invercargill,; [where H. and R. Block, Ltd,!, ; operated. I Asked about the coven-;! | ant in the contract which |he had signed, restricting him from setting up in busi-l! ness within an area of 251 [miles of a branch of the[ i plaintiff firm, .Mr Sanott said | * that he regarded the provi- ’

sion as null and void. He! had been told by an official; of the plaintiff, when he was asked to sign the contract, that it was “not worth the paper it was written on.” The restriction was ridiculous as he was “chained body and soul.’’ Mr Sanott denied that he used the plaintiff’s forms in his business. Other former managers of the plaintiff firm, had left and gone into business on their own

- account, and they had no 1 been sued. He was bem e i sued on the instruction o > the two senior members o ■ •the firm in the United • States. Local members of the firm had not wanted the 0 case to proceed. He had nc ■animosity towards them. 1 “COVENANT VOID" Mr Sanott agreed that he [ had received training from [ the plaintiff both in Christchurch and in Auckland. Ht admitted that he had refused to go to Auckland to see M: Bloch from Kansas Citv. He said he would not go. be cause he was underpaid Ht knew that the question ot his remuneration would be discussed at that meeting. Mr Hampton: You could have gone to anv othet

[ centre in New Zealand am , set up in the tax-preparation _ business? , Defendant: No, I conic [[not, because 1 am a marriec man with nine children. Mr Hearn submitted that [the covenant was void beJ cause it was an unreasonable restraint of trade: and [ even if that was not so. [ there was no evidence of ; damage suffered by the [plaintiff. Mr Sanott saw himself as [a small man in the hands of . a big multi-national organi [sation. In his view, Mr Sai nott saw himself as unfairly [treated and he was of the | opinion that the covenant ■was not applicable to thi ; circumstances in which he found himself. A covenant restraining [competition per se ton the [ face of it) was void. The [covenant had to protect ; proprietary interest in rela tion to such things as trad secrets, Mr Hearn submitted. “UNFAIR COMPETITION’’ Mr Young said that H and R. Block, Ltd, did no: object to competition but die object to unfair competition The company had trained M; Sanott; had let him hav< access to the firm’s know ledge and experience method of operation, an forms; and then he had st up in business in oppositier a short distance away in t middle of town.