DENTISTS AT LAW

Manawatu Standard, Volume XLVIII, Issue 149, 24 May 1928, Page 8

DENTISTS AT LAW

ALLEGED BREACH OF COVENANT SUPREME COURT JUDGMENT. The reserved judgment of Mr Justice Ostler. was delivered at the Supremo Court yesterday afternoon in a caso heard at the last quarterly sittings wherein Richmond Vernon Hooper, of Palmerston North, dentist, proceeded against Cyril Marshall Day, of Pahiatua. another dentist, seeking the sum of £IOO as damages for an alleged breach of covenant, together with an injunction restraining him from practising in Pahiatua. At the hearing it was shown in evidence that defendant had been employed, by plaintiff to look after his Pahiatua branch. On tho first-named being released from his _ engagement and proceeding to America, plaintiff took into his employ another dentist, to whom he subsequently sold the branch business. Returning from America, defendant bought the goodwill of the Pahiatua practice from his successor and commenced in business there on his own 'account. Plaintiff claimed that this was a breach -of a covenant entered into between himself and defendant when the latter had been taken into his employ, whereby defendant undertook, on the completion of his employment, not to practise without the written consent of plaintiff within a radius of 50 miles of Palmerston North or Pahiatua, not including tho boroughs of Wanganui and Alasterton, for a period of five years. “Several defences have been raised,” said His Honour, “one of them being that the covenant was void as being an unreasonable . restraint of trade. Counsel for plaintiff admits that the onus lies on him to prove that tho restraint imposed is no more than reasonable for the protection of plaintiff’s business. He contends that all tho circumstances of the case must, be looked at to determine this question. In my opinion, however; none of the facts and circumstances which happened after tho agreement was entered into has any bearing on the question ol the reasonableness of the covenant. Contracts are made with respect to the state of circumstances existing as contemplated at the date when they are entered into, and this principle is applicable to contracts in restraint oi trade. What the Court has to determine is whether, in a contract of employment of a dentist in Pahiatua for a maximum period of two years, butwith the right of the employer to terminate the contract at any time on short notice if not satisfied, with the employee’s work, the restriction imposed was more than reasonably necessary for the protection of the employer’s business. This is a question of law, and, in considering it, regard must be had not only to the interests of the contracting parties, but also to tho public interest. . . .It is only if the employer can show that tho covenant is nocessary for the protection of a trade secret or a business connection that it is held to be legal, and then it must not be any wider than necessary to protect that interest, lr it is, it is against public policy and is void. , , “Plaintiff called two dentists as witnesses in an endeavour to prove that such a covenant is usual in such contracts in the dental profession. In my opinion, their evidence failed to prove this. No instance was cited where, in a contract of employment, the restriction was so large in space as it is m this contract. . - Plaintiff contends that, in these modern days of motor cars, considering tho central position of, Palmerston North, and the speed with which it can bo reached from, 50 miles round by motor or rail, 50 miles is not.a larger radius than necessary to protect plaintiff’s business. In my opinion, however, making all allowance for the speed and ease. of. modern travel, a radius of 50. miles is much wider than necessary for tlie protection of plaintiff’s business. I doubt very much if any of his regular patients live beyond a circle of 25 or 30 miles, or come to him for treatment from beyond such a circle. . . . The restriction prevents the employee from practising in Feilding, Marton, Foxton, Levin, Otaki, Carterton, Eketaliuna, Pahiatua, Woodville and Dannevirke. The effect of it is really to prevent competition, which renders the covenant void. “It might well be contended that, when plaintiff sold the goodwill of tho Pahiatua practice, he also sold tlie benefit of the covenant so far as regards the 50 mile's, radius of Pahiatua, and that all he has left of the covenant is the 50 miles radius of Palmerston North. I am, therefore, deciding this question of law on that assumption, and hold that such a restriction in a contract of employment is void as being greater than required for the protection of the employers’ business, and against the public interest. Some suggestion was made that the covenant could be severed. On consulting the late authorities, in my opinion the covenant cannot he severed so as to cut down the 50 miles radius of Palmerston North. That is a. single covenant for tlie protection of plaintiff’s Palmerston North business. If the Court endeavoured to sever the covenant by reducing tlie circle to what it thought reasonable limits, it would really bo reforming tho covenant. “For the reasons given, in my opinion, plaintiff’s claim fails, and it is unnecessary to consider the other defences raised. I judgment for defendant, with costs according to scale, witnesses’ expenses and disbursements as on a claim for £250.”

At the hearing Mr Cooper appeared for plaintiff and Mr O’Leary (Wellington) for defendant.