<\/p>\n
Bulldogs Rugby League Club Ltd & anor v Williams & ors gave the Court another opportunity to consider the principles of Restraints of Trade and review the right of employers to enforce employee restraints. The following case analysis will discuss the Court\u2019s decision and its significance in the legal and commercial contexts.<\/p>\n
Sonny Bill Williams (the first defendant) entered into a five-year contract with the Bulldogs Rugby League Club Ltd (the first plaintiff) which was due to commence on 1 November 2007 and entitled Williams to an annual salary of $400,000 per season\u00a0[2<\/a>]<\/span>\u00a0and remuneration.\u00a0[3<\/a>]<\/span>\u00a0By signing the contract, according to clause 3.1(t) of the contract, Williams \u201cagreed to \u2018not, without the prior written consent of the Club\u2026 participate in any football match of any code\u2019, save for matches specified elsewhere in the contract\u201d.\u00a0[4<\/a>]<\/span><\/p>\n However, the Bulldogs realised that Rugby Club Toulonnais SA, who was a public company in professional sports based in France and also the second defendant, had commenced negotiations with the first defendant from about June 2008 regarding the first defendant playing for it \u201cin the 2008-2009 \u2018Top 14\u2019 competition in France\u201d.\u00a0[5<\/a>]<\/span>\u00a0In newspaper reports, the first defendant was said to have signed a contract with the second defendant and also be due to represent the second defendant in a game on 8 August 2008.\u00a0[6<\/a>]<\/span><\/p>\n As a result, the Bulldogs brought litigation to seek, among other things, an injunction to enforce clause 3.1(t) of the contract which would restrain the first defendant from playing for the second defendant.\u00a0[7<\/a>]<\/span><\/p>\n In order to decide whether to grant the injunction, the court had to consider the validity and enforceability of the restraint clause. Accordingly, Austin J identified several questions that would need to be answered:<\/p>\n In determining the validity of the restraint, Austin J initially examined the general principle at common law that \u201ca restraint of trade is contrary to public policy and void unless it is justified by the special circumstances of the particular case\u201d.\u00a0[10<\/a>]<\/span>\u00a0In addition, as the contract between the first plaintiff and the second plaintiff was governed by New South Wales Law, Austin J also referred to the Restraints of Trade Act 1976 (NSW) s4(1) in which \u201ca restraint is valid to the extent to which it is not against public policy, even if not in severable terms\u201d.\u00a0[11<\/a>]<\/span><\/p>\n In evaluating the reasonableness of the restrain, Austin J followed the approach of Palmer J in Idameneo (No 123) Pty Ltd v Angel-Honnibal\u00a0[12<\/a>]<\/span>\u00a0relating to the consideration that the parties had freely negotiated on equal terms before signing the contract where \u201cthe particular restraint has been sought by one and given by the other\u201d\u00a0[13<\/a>]<\/span>\u00a0. Moreover, the judge also applied the principle drawn from Doherty v Allman\u00a0[14<\/a>]<\/span>\u00a0that where there are no fraudulent, misleading or deceptive conduct or circumstances, \u201ca considered obligation undertaken by contract should be enforced against the person who undertakes it\u201d.\u00a0[15<\/a>]<\/span>\u00a0Besides, taking account of the distinction between covenants that operate only during the term of employment and covenants that extend beyond the termination of the employment period, Austin J adopted the observation of Crockett J of the Victorian Supreme Court in Buckenara v Hawthorn Football Club Ltd\u00a0[16<\/a>]<\/span>\u00a0that only in \u201cvery unusual\u201d circumstances would a restraint that operates exclusively during the course of employment be found to be unreasonable.\u00a0[17<\/a>]<\/span><\/p>\n Furthermore, in determining the enforceability of the restraint clause, Austin J upheld the longstanding principle in Lumley v Wagner\u00a0[18<\/a>]<\/span>\u00a0which was then followed by the Court of Appeal of New South Wales in Curro v Beyond Productions Pty Ltd\u00a0[19<\/a>]<\/span>\u00a0that \u201cif the contract is a contract for the provision of special services, the promise not to work for a competitor will be enforced\u201d.\u00a0[20<\/a>]<\/span><\/p>\n Austin J categorised the relationship between the first plaintiff and the first defendant as one of \u201cemployer and employee\u201d.<\/p>\n It was noted by the judge that the contract had been carried on by the first plaintiff as it had continued paying salary to the first defendant and the restraint clause was therefore still operative.\u00a0[21<\/a>]<\/span><\/p>\n Using the evidence and facts provided before Court,\u00a0[22<\/a>]<\/span>\u00a0Austin J subjectively argued that it was reasonable to apprehend that the first defendant intended to breach clause 3.1(t) of the contract by playing rugby for the second defendant.\u00a0[23<\/a>]<\/span>\u00a0Furthermore, it was also argued if the newspaper reports provided correct information on the signing of contract between the first defendant and the second defendant, it would be very likely that the first defendant intended to breach that provision of the contract.\u00a0[24<\/a>]<\/span>\u00a0As a result, this is consistent with the Restraints of Trade Act 1976 (NSW) s4(1) under which attention should be focused on the actual or apprehended breach, rather than on imaginary or potential breaches in determining the validity of a restraint.\u00a0[25<\/a>]<\/span><\/p>\n However, the central issue was whether the restraint went any further than was reasonably necessary to protect the legitimate interests of the employer.\u00a0[26<\/a>]<\/span><\/p>\n At common law, for a restraint to be reasonable, it must be reasonable in the interests of the privy parties and reasonable in relation to the interests of the public.\u00a0[27<\/a>]<\/span>\u00a0However, these two fronts are generally treated as one, which means that if the restraint is held to be reasonable in the interests of the parties, then it is also reasonable in the public interests.\u00a0[28<\/a>]<\/span><\/p>\n Moreover, to support the reasonableness of the restraint, from clause 18.2(c) of the contract, Austin J particularly pointed out that as the first plaintiff was given opportunity to obtain independent legal and financial advice before signing the contract, there was a bargain \u201cat arm\u2019s length and on an equal footing\u201d.\u00a0[30<\/a>]<\/span>\u00a0This observation of Austin J is justified and consistent with the case Curro v Beyond Productions where the relative bargaining position of the parties was regarded as a critical consideration when determining the reasonableness of a restraint.\u00a0[31<\/a>]<\/span><\/p>\n At the same time, the judge also took into account the simple idea of sanctity of contract which indicates that \u201ca considered obligation undertaken by contract should be enforced against the person who undertakes it\u201d.\u00a0[32<\/a>]<\/span><\/p>\n Besides, the facts of Bulldogs Rugby League Club Ltd were said to distinguish it from Aussie Home Loans Limited v X Inc Services\u00a0[33<\/a>]<\/span>\u00a0and Woolworths Limited v Olson\u00a0[34<\/a>]<\/span>\u00a0, where restrictive covenants in question operated only during the term of employment. Accordingly, Justice Austin held that the restraint, which in effect meant that while being employed by the Bulldogs but not after the contract had terminated, Williams could not work for another, was not unreasonable.<\/p>\n Based upon these considerations and despite the absence of restrictions on the geographical area and the range of football codes, Austin J held that the restraint clause did not extend further than reasonably necessary to protect the legitimate interests of the first plaintiff.\u00a0[35<\/a>]<\/span><\/p>\n Attention was then turned to the matter regarding the enforceability of the restraint clause. Austin J referred to the observation of Hodgson J in Australian Rugby Football League v Cross\u00a0[36<\/a>]<\/span>\u00a0that rugby league players could be regarded as tantamount to entertainers and therefore providing special services under their contracts.\u00a0[37<\/a>]<\/span>\u00a0Applying it to this case, Austin J was justified in finding that the contract was evidently for the provision of special services where \u201can elite rugby league player undertakes not to engage in another football code without the employer\u2019s consent\u201d.\u00a0[38<\/a>]<\/span>\u00a0Taking notice of this context, the judge followed the relevant principle\u00a0[39<\/a>]<\/span>\u00a0in Lumley v Wagner in drawing a conclusion that the restraint was enforceable.<\/p>\n Although employees have often been able to avoid restraints of trade in their employment contracts when the clauses are unreasonably broad, e.g. in respect of geographical limitation, in this case, the restraint was still held reasonable and not uncertain as it was justified by the purpose of protecting legitimate interests of the employer and more importantly, it was no more than needed to provide that protection. This case is consistent with many other cases in relation to restraints in employment contracts and therefore can reinforce the restraint of trade doctrine and be used as authority for future similar cases, especially those relating to contracts for special services.<\/p>\n The case has validated the right of employers to enforce employee restraints\u00a0[40<\/a>]<\/span>\u00a0provided the restraint clauses are made to the particular situations and reasonable in all the circumstances. At the same time, employees who disregard reasonable restraints will receive little clemency from the Court.\u00a0[41<\/a>]<\/span>\u00a0Consequently, this may have an effect of promoting commercial certainty in reference to the enforceability of restraints of trade in employers\u2019 favour.<\/p>\n The judgement of Austin J in this case was justified by the use of supportive evidence and a good application of relevant principles, approaches and the reasoning in a number of typical cases relating to the restraints of trade. The underlying principle is that a restraint clause must be reasonable to be enforceable. As a result, this may help heighten commercial parties\u2019 cognisance of their rights and obligations in contractual relations and therefore, a well-balanced result seems to have been obtained by the Court.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" A sample LawTeacher.net essay on contract law tackles Australian law and the Enforceability and Validity of the Restraint Clause, analysing several rugby contracts in the process.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[90],"class_list":["post-2095","post","type-post","status-publish","format-standard","hentry","category-free-law-essayscontract-law","tag-au-law"],"yoast_head":"\nIssues<\/h2>\n
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Ratio Decidendi<\/h2>\n
Critical Analysis and Evaluation<\/h2>\n
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Impact on subsequent cases<\/h2>\n
Implications<\/h2>\n
Conclusion<\/h2>\n
Bibliography<\/h2>\n
Case Law<\/h3>\n
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