Lindner v Murdock’s Garage (1950) 83 CLR 628
Court:
High Court of Australia- Latham CJ, McTiernan, Webb, Fullagar and Kitto JJ
Procedural History:
Appeal from the Supreme Court of Australia
Facts:
Lindner was a mechanic employed by Murdock’s Garage. His contract of employment applied to the sales territory for motor vehicles, which encompassed two towns, Crystal Brook and Wirrabara, over 10 miles apart from one another. After several years of service in the repairs workshop in Crystal Brook, Lindner left his employment. Murdock’s Garage sought to restrain him by injunction from working for a competing business in Crystal Brook. Murdock’s Garage relied on the clause in Lindner’s employment contract which stated that Lindner would not work in the same sort of business within the same area within one year of termination of his employment.
Issues:
Was the restraint of trade clause in the contract enforceable?
What are the reasonable limits for the protection of Murdock’s Garage business?
Was the restraint of trade against public policy?
Reasoning:
The majority of the court held that the clause was unenforceable. It went beyond what was reasonable for the protection of Murdock’s Garage’s business. The garage sought protection for its business connections that might be affected by Lindner’s knowledge of the business and influence over customers he developed while working with the business. This was a recognized interest and was not held to make the clause invalid. However, the clause was unenforceable on grounds that its geographical limits were unreasonable. For a geographical limit to be enforceable it must be formulated with reference to the employer’s customers of whom the employee is likely to acquire special knowledge.[1] Since, in this case, the clause covered two towns, the contract did not specify where Lindner would be employed, and he was only employed in one area. It was unlikely that customers from one area would come in contact with his services. The restraint should be limited to the area in which Lindner worked for a reasonable time before termination. In this case, there was no way to sever the area portion from the rest of the clause, so the whole clause became unenforceable.
Ratio:
A restraint upon the employee’s becoming connected with a rival business after he leaves the employment will give the employer’s business reasonable protection against the effects of the intimacies and knowledge [acquired in the course of employment in order to create or assist a competing business in the same area,] if it is limited to the area or areas in which the employee in fact works within a reasonable time before the termination of his employment; and a restraint which applies indiscriminately to all the areas in which the employer carries on business will exceed what is reasonable necessary to prevent the injury to his business against which he is justified in guarding.[2]
Order:
Appeal Allowed
Relevance:
While the case summarised above resulted in a different outcome than the one sought by Bust-A-Move Dance Studios, it defines analogous rights, issues and rules that are very applicable to the client’s position, without explicitly limiting the possibility of such an outcome. Lindner v Murdock's Garage[3] more or less states the general framework of the law, and as it has been cited, approved, considered in almost every following case concerned with restraint of trade, it should still be used to frame Bust-A-Move’s position. Though there are many other cases which deal with closer issues to the client, there is ample room within the High Court’s decision to find a favourable outcome for Bust-A-Move. In the case, the High Court ruled that the injunction was invalid. However, this is based on reasoning, and the reasoning used in Lindner v Murdock’s Garage[4] has resulted in different outcomes for each different scenarios in which it has been applied.
Lindner v Murdock’s Garage[5] is so often cited because it carries some of the most persuasive force and authoritative weight found in Australia. This is because it was a decision from the High Court of Australia, complete with five justices. In Australia, the High Court sits above all other courts, which means decisions it makes are binding on each of the nine judicial hierarchies. For this reason, one would be hard-pressed to find a more persuasive decision on point.
Lindner v Murdock’s Garage[6] is one of the strongest statements of the present law. All covenants in restraint of trade are prima facie void and unenforceable by legal action. They may, however, be held to be valid by a decision of a court that in the particular circumstances the covenant is reasonable both in the interests of the parties and in the interests of the public. The judgment summarised above distinguished and defined the permissible limitations of restrictions that operate between the employer and the employee. It is within these limits that Bust-A-Move’s action rests, and it is within these limits that an injunction will be obtained.
[1]Lindner v Murdock’s Garage (1950) 83 CLR 628 [655].
[2] Lindner v Murdock’s Garage (1950) 83 CLR 628 [656].
[3] (1950) 83 CLR 628.
[4] Ibid.
[5] Ibid.
[6] Ibid.
