COURT REFUSES INJUCTION

Southland Times, Issue 23682, 3 December 1938, Page 5

COURT REFUSES INJUCTION

CLAIM FOR DAMAGES DISMISSED ACTION BY SPORTS DEPOT AGAINST W. R. PATRICK

Ruling that the plaintiff had failed to establish his case, his Honour Mr Justice Kennedy, refused an injunction claimed by the Invercargill Sports Depot Limited, against William Robert Patrick, and dismissed a claim by the company of £lOO for damages. The case was heard in the Supreme Court on November 3 and 4, and the plaintiff company was represented by Mr Eustace Russell, Mr B W. Hewat appearing for the defendant.

In his reserved judgment his Honour stated that the plaintiff was an incorporated company carrying on business at Invercargill as tobacconist and dealer in sports requisites. The defendant was a member of the company, article 23 of which provided that no subscriber to these articles and no future member of the company shall hold shares in any other registered company carrying on a similar business to this company, and no such subscriber or member shall be a partner -in or be concerned directly or indirectly in any business of a similar nature to the business carried on by this company either at Invercargill or within a radius of 150 miles from Invercargill for a period of five years from the date hereof. It was claimed that in breach of this article, the defendant began business as a tobacconist and dealer in sports goods in Dee street, Invercargill, and was still carrying on that business. ASSISTANCE GIVEN The defendant was engaged as a manager by the plaintiff company from January 19, 1935, until November 18, 1937. on which date his services were terminated by the company. He then assisted a Mr Turner in the establishment of a tobacconist’s business carrying a very small amount of sports goods in Dee street, Invercargill. He lent his name to that business, a banking account was opened in his name, and he assisted in procuring fittings and fixtures for that business. He swore that he was not financially interested, although he hoped at a later date to acquire an interest. “There is no doubt in my mind as to the assistance which he rendered to the business—an assistance which could hardly have been greater had he been financially interested,” his Honour continued. “It is not necessary in the view I take of the law to determine whether or not he was financially interested. I am disposed to accept his statement that he was not for the moment financially interested but had the strongest expectations of later acquiring an interest. “Although the defendant had acted as manager, the clause now in question was not, made a term of his engagement and the restriction is not upon him as a former employee cf the company. It is a restriction applying to him as a subscriber to the articles. It applies to him as a member or former member of the company. The article is applicable to a member as such—indeed to any person who has become a member for however short a time, whether resident in New Zealand or cut of it, or in Invercargill or at a distance. It in terms binds the member not to be concerned in any other business similar to this business in Invercargill or within 150 miles of Invercargill. “It is a mere accident that the defendant was manager The restraint is not upon him in that capacity but upon him as a member or former member. The restriction contained in- the article is not a covenant in a contract of employment nor in the contract for the sale of a business and that distinguishes this case from many which have come I before the Courts.”

After quoting several legal authorities in which it was stated that the only reason for upholding such a restraint on the part of an employee was that the employer had some proprietary right, whether in the nature of trade connection or trade secrets for the protection of which some restraint was reasonably necessary, his Honour said that the company, in taking the covenant from members, as such, was not protecting a proprietary right, but was merely preventing competition by members, and that it might not do. Even had the restraint been not between the members of the company as such, but between an employee as such and the company, he would have been disposed to think that there were no trade secrets, and that any special influence with customers was by virtue of his position as cricket coach, which he independently held. As such he was not employed by the company, but this view need not be considered as the case was founded upon restraint upon a member as such and upon breach of the articles. “Consideration has to be shown to render a covenant in restraint of trade enforceable,” his Honour concluded, “and, although I do not express a final opinion, as at present advised, I am inclined to the view that there is in any event no consideration from the company to the member to support the covenant. The restriction is in terms only until December 22, 1939. No damages other than merely nominal damages have in any event been proved. In the result therefore, the plaintiff has failed to establish his case, an injunction is refused and the action for damages is dismissed. The plaintiff will pay the defendant costs on the lowest scale with witnesses’ expenses and disbursements to be fixed by the registrar.”