McMahon & Anor v National Foods Milk Ltd

(2009) 25 VR 251; [2009] VSCA 153

Victorian Court of Appeal

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For Australian Law.

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Interrogate

Catchwords

1. Contract
2. › Interpretation
3. › Exclusivity clauses
4. › Whether Licensed Distributor Agreement conferred exclusive right to sell products in defined territory
5. › Construction of 'together with' as 'in connection with' rather than 'in addition to'
6. › Role of surrounding circumstances in resolving ambiguity
1. Contract
2. › Implied terms
3. › Business efficacy test
4. › Whether exclusive right to sell implied as necessary to give Licensed Distributor benefit of agreement
5. › BP Refinery (Westernport) v Hastings test
6. › Codelfa Construction v State Rail Authority
1. Contract
2. › Collateral contracts
3. › Pre-contractual statements
4. › Whether statements of intention to remove competitor constituted collateral promise
5. › Entire agreement clauses
6. › Whether merger clause prevents proof of collateral contract
1. Restraint of Trade
2. › Non-competition covenants
3. › Scope of prohibition
4. › Whether covenant applied to acts preparatory to commencement of competing business
5. › Whether covenant binding on director of corporate covenantor
6. › Distinction between acts of director in personal capacity and corporate capacity

Quick Take

A non-competition covenant prohibiting involvement in a competing business extends to acts preparatory to the commencement of that business where the business comes into existence by the time action is brought, the preparatory acts are committed shortly before the business begins, and the acts are calculated to harm the protected business. A restraint of trade clause binding only a corporate entity does not extend to the personal acts of its director committed in his own capacity, but the corporate entity itself breaches the covenant where it pledges its credit to fund the competing business. A guarantor's agreement to continue a guarantee following novation of the principal obligation may be inferred from the guarantor's conduct, particularly where the guarantor instigated the novation and was the sole director of both the old and new debtor companies.