Case: Peters (WA) Ltd v Petersville Ltd [2001] HCA 45 ; (2001) 205 CLR 126
Outcome: cited
(i) Public policy lies at the root of the rule that contracts in restraint of trade are, prima facie, unenforceable: see Amoco Australia Pty Ltd v Rocca Brothers Motor Engineering Co Pty Ltd [1973] HCA 40 ; (1973) 133 CLR 288 at 307; Peters (WA) Ltd v Petersville Ltd [2001] HCA 45 ; (2001) 205 CLR 126 at [27] . The only justification for a restraint is if it is reasonable in reference to the interests of the parties and reasonable in the interests of the public: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565; Buckley v Tutty [1971] HCA 71 ; (1971) 125 CLR 353 at 376. The two requirements merge to some extent. As Walsh J observed in Amoco (at 307): "... if a restraint is imposed which is more than that which is required (in the judgment of the court) to protect the interests of the parties, that is a matter which is relevant to the considerations of public policy which underlie the whole doctrine, since to that extent the deprivation of a person of his liberty of action is regarded as detrimental to the public interests ... I acknowledge that the consequence of what I have just stated is that there is to some extent a merging of the second branch of the Nordenfelt formulation of the applicable principle with its first branch. But this does not mean that the distinction between them is wholly obliterated. In order to justify a restraint of trade both tests must be satisfied. The restraint must be reasonable in the interests of the parties in that it affords no more than adequate protection to the covenantee 'while at the same time it is in no way injurious to the public' (see the Nordenfelt Case ). It may be that although a restraint satisfies the first requirement it is injurious to the public for some reason other than being in excess of what is reasonable in the interests of the parties." 128 It is not necessary for present purposes that I express a concluded view on the correctness of this observation. The burden of the subsection in the end is simply one of statutory interpretation. But what the s 51(2)(e) exception suggests for the purposes of the s 87(3) discretion is that there well could be circumstances in which it would be both appropriate and just and equitable to vary a restraint in a contract associated with the sale of an interest in a business so that it does no more than provide a level of protection that would be acceptable at common law for the policy reasons of the common law. Such an exercise of discretion would be permissible under s 87(3) in an appropriate case even if a provision valid at common law was not saved from contravening s 45 because of s 51(2)(e), i.e. because that provision did not operate in tandem with the common law: cf Peters (WA) Ltd v Petersville Ltd , at [46]-[50]. 129 I am satisfied that the present is a case in which a variation order should be made. I indicated in relation to the laundry hire restraint that I considered a three year period of restraint would appear to be reasonable as between the parties. I equally indicated that, save in relation to its extension into the Barossa Valley, the map tendered by the respondents (Appendix B to these reasons) delineates an area within which it would be reasonable to proscribe competition between the parties in relation to the applicants operating etc a laundry hire business. I also indicated what I consider to be the proper construction to be given the words "operate" and "operation" in the restraint but that, in any event, that meaning indicated what was a reasonable limit to the scope of the activities that could be the subject of an acceptable restraint. 130 Accordingly, I would vary the Restraint clause as it relates to the laundry hire business so as (i) to limit the restraint to conducting, or being involved directly or indirectly, in the conduct of, a laundry hire business; (ii) to limit the area of the restraint to that marked with a line in Appendix B to these reasons commencing at Aldinga and terminating at Barker Inlet but so as to exclude the area to the north between Williamstown, Tanunda and Gawler (i.e. the Barossa Valley); and (iii) to limit the duration of the restraint to three years from the "Completion Date" a date defined in the Heads of Agreement.