Susan Buchanan v. Janesville Ltd

CACV000123/1981

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Coram: Yang, Barker, JJ.A. and Bewley, J.

Date of Judgment: 26th November, 1981.

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JUDGMENT

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Barker, J.A.:

1. This is an appeal from an Order of Mr. Justice Mayo made on the 14th October of this year whereby he restrained the 2nd Defendant until the trial of this action from working as a hairdresser at Le Salon or otherwise working in the Colony of Hong Kong as a hairdresser or in any other capacity connected with hairdressing in competition with La Coupe Salon.

2. The Plaintiffs in this action, the Respondent to this appeal, are the proprietors of La Coupe Salon which is a high class hairdressing salon for men and women on the 1st floor of Hutchison House, 10 Harcourt Road, Hong Kong.

3. The 2nd Defendant, the Appellant in this appeal, entered into a contract with the Respondent on the 8th of February 1979 and entered into a further contract with the Respondent on the 14th of February of 1980. It is this latter contract with which we are concerned today. That contract was to run for two years from the 1st April 1980. It was terminable on two months' notice for either party and it contained this vital clause about which all the disputes have arisen, i.e. Clause 7 which reads:-

"At the termination of employment the Employee agrees not to work in the colony of Hong Kong as a hairdresser or in any capacity connected with hairdressing in competition with La Coupe Salon for a period of one year."

4. What happened in fact was that for reasons which may be disputed but into which it is not necessary for us to go, the Appellant did leave the employment of La Coupe Salon and went to work at an establishment called 'Le Salon' which is in Hotung Building, Hankow Street in Tsimshatsui, in other words, on the other side of the harbour and there she is working or was working until this injunction was granted. She is a lady who was trained as a hairdresser in Australia and has worked abroad other than in Hong Kong as a hairdresser and as a stylist and is clearly a person of considerable ability and popularity as a stylist and a hairdresser and what the Respondents are concerned about is that by her working for the Salon known as Le Salon the goodwill of La Coupe Salon will be diminished and their profits will also suffer, hence the application for an interlocutory injunction.

5. This case has been argued with great skill and tenacity by Mr. Bunting. He accepts that all clauses in restraint of trade are prima facie unenforceable and they can only be enforced if it can be shown that they are reasonable as between the parties and reasonable as between the covenantor and the public interest. We have heard no argument on the latter of those two matters as it does not seem to enter into this particular dispute. What is it that makes a clause in restraint of trade contract reasonable as between the parties? It must first be reasonable in point of time. We take the view that other things being equal, one year would have been a reasonable time to stipulate. Secondly, it must be reasonable as to the geographical area of its operation. Thirdly, it must be reasonable as to the restraint that it imposes on the employee as to the type of work in which he is not permitted to engage. I read the relevant clause again. "At the termination of employment, the Employee agrees not to work in the colony of Hong Kong as a hairdresser or in any capacity connected with hairdressing in competition with La Coupe Salon for a period of one year." Mr. Bunting, in his submissions to us, reminded us of the decision of Littlewoods Organisation v. Paris⁽¹⁾ where Lord Denning in his judgment makes it clear that in construing a restraint clause a Court ought to have regard to its object and its intent. With that observation we respectfully agree and says Mr. Bunting 'If one looks at it in that light, then it is not' he submits 'too wide in point of geographical area'. He says it must have been the intent of the parties that the likelihood was that any Salon which was in competition with La Coupe Salon would have been or would be in fairly close proximity to La Coupe Salon even though it might be on the other side of the Island. But this in effect is asking us to re-write the terms of Clause 7. The fact of the matter is, I know not, that it may be that during what was the proposed continuance of this contract and the further year for the restraint clause, there might for example be opened up a highclass hairdressing establishment at, shall we say, Stanley where there are a large number of expatriates living. Would this clause then embody that establishment so as to prevent the Appellant working there? The answer, if Mr. Bunting's contruction be right, would be in the affirmative. But we cannot think it is reasonable to impose so wide a restraint. In our judgment this clause is bad as to area. That would be enough to dispose of the dispute but in deference to Mr. Bunting's able arguments we feel it right to deal some of his other points because they do concern the rest of the clause. He quotes the case of Marion & White v. Frances⁽²⁾ in support of his argument that the words 'in any capacity connected with hairdressing' are not so wide as to render the clause objectionable just by unnecessarily restricting the kinds of occupation from which the Appellant is prevented from engaging in. Each clause has to be construed in the light of its own words and it is to be noted that the words in this clause are different from and wider than the words in the clause in the Marion White⁽²⁾ case. In our judgment this clause is bad for the additional reason that it prevents the Appellant from engaging in any sort of work in connection with hairdressing, for example, selling hairdressing lotion to the hairdressing Salons and matters of that kind such as hairdressing equipment. That is a far wider protection than the Respondent's interests require. There is one further point with which I will deal and that is this. It is well settled that a clause in a contract as between employer and employee cannot stand if its object is merely to prevent the employee from competing per se with his previous employer. Mr. Bunting argues that that is not the purpose of this clause. What the Respondents are seeking to do, he says, is to prevent competition purely to protect their own business. They are not seeking to prevent the Appellant merely from engaging in a rival business. We disagree. We think this is a clause in a contract which is designed to prevent mere competition and we are strengthened in that view by the very broadness of the geographical area which is sought to be brought within the ambit of the clause and the rest of the occupations which the Appellant is prevented from engaging in. For these reasons we are of the view that the Respondents have not established an arguable case that the covenant was reasonable. We are of the view that the covenant is bad as being in unreasonable restraint of trade and it follows that we are of the view that the Judge was wrong in granting the injunction which he did. I add one further matter and that is this. We have not had it argued before us, because it has not been necessary for it to be argued, that the Judge's decision as to the balance of convenience ought to be interferred with. On the view that we have taken the matter, no decision is called for on that point. For those reasons the appeal will be allowed and the injunction will be discharged.

Representation:

R. Mills-Owens, Q.C. & R. Faulkner (Deacons) for Appellant.

M. Bunting (Johnson, Stokes & Master) for Respondent.

(1) 1977 W.L.R. 1472

(2) 1972 1 W.L.R. 1423