Butt v Long [1953] HCA 76

High Court of Australia Dixon C.J. Webb and Fullagar JJ. Butt v Long [1953] HCA 76

ORDER Appeal allowed with costs. Discharge so much of the decree of 2nd December 1952 as decrees that the defendants George Albert Butt and Harold George Butt and each of them be restrained for a period of five years from 1st September 1952 from carrying on a business of a trans-shipping agent at Wallangarra or Jennings and as decrees that the defendant J. E. Long & Co. Pty. Ltd. be restrained from aiding or abetting or facilitating the defendants George Albert Butt or Harold George Butt in carrying on for a period of five years from 1st September 1952 a transhipping agency business at Wallangarra or Jennings.

Cur. adv. vult.

The following written judgments were delivered:—

Nov. 20 Dixon C.J.

The question for decision upon this appeal is the validity of a covenant not to carry on the business of a transhipping agent for a period of five years. To decide whether the covenant is invalid as involving an unreasonable restraint of trade it is necessary to ascertain what is its meaning and intended scope.

The covenant forms part of an agreement for the dissolution of a firm called J. E. Long & Co. The firm carried on business at the border town called on its New South Wales side Jennings and on its Queensland side Wallangarra. The business was that of stock and station and commission agents produce merchants and forwarding and transhipment agents. There is a break of railway gauge at Wallangarra which involves the transhipment of goods and livestock from the trucks of one railway system to those of the other. A business exists of performing and superintending in the interests of consignors and consignees the work of and incidental to the transhipment. It includes the movement of the goods and livestock from truck to truck, the storage of goods where necessary, the resting watering and feeding of livestock, and for that purpose the providing of paddocks, and the reporting to owners if desired upon the condition of their goods or beasts. Such a business was associated with the produce business and stock station and commission agency of the firm. The partners at the material time were J. E. Long, who is one of the plaintiffs respondents in the appeal and G. A. Butt and H. G. Butt who are two of the defendants appellants. By an agreement in writing dated 23rd March 1950 these three parties dissolved the partnership between them. The relevant terms took an unusual form. Long sold all his share and interest in the whole business to the Butts in the first instance but it was stipulated that within two years from 1st July 1950, the Butts should sell to Long and he should purchase the transhipping branch (both goods and stock) of the business and all assets relating thereto. Long was required to give three months' notice of the date of taking over the transhipping branch. The consideration for each sale was based on book values and payment of the consideration for the transhipping branch was to be by set-off. By a subsequent agreement the date for taking over the transhipping branch was extended to 31st August 1952, and it was agreed that the plant of the branch should be vested in Long and his two sons who join with him in the suit as co-plaintiffs. The Butts formed a company which they called J. E. Long & Co. Pty. Ltd. They are the directors and chief shareholders. The company is the third defendant appellant. The business of the firm was taken over by the company, which in spite of the sale to Long and his sons of the transhipment branch proceeded to do transhipment business. It appears that the company had purchased a rival transhipment business and that having done so it carried it on under the name of J. E. Long & Co. Pty. Ltd.