Home | Databases | WorldLII | Search | Feedback Papua New Guinea Law Reports

K K Kingston Ltd v Moere [2002] PNGLR 29 (24 June 2002)

[NATIONAL COURT OF JUSTICE]

K.K. KINGSTON LIMITED

v

WARI MOERE

Waigani: Kandakasi J

3, 24 June 2002

CONSTITUTION – Whether restraint of trade clause contrary to freedom of employment under s. 48 of the Constitution – Where a party freely agrees to the inclusion of such a clause in a contract of employment no constitutional issue arises.

CONTRACT – Contract of employment – Termination of – Claim of restraint of trade – Restraint of trade clause prima facie void for public policy considerations unless reasonable – Such clause not to be readily enforced by interim injunctive orders where there is a serious dispute as to the existence of the contract containing such a clause – Whether restraint of six months covering whole of the country reasonable – Test of reasonableness by reference to time and space – Availability of profession and service and conduct of the parties relevant factors for consideration – Restraint of trade clause upheld as reasonable in time but struck down space covered to only places in which the plaintiff carries on business.

EVIDENCE – Cross-examination.

Facts

The Court issued an interim injunction against the defendant on the basis of a restraint of trade clause in his contract of employment. The matter came up for hearing and it was established that the defendant was employed by the plaintiff as a sales supervisor from 22 October 1998 until his resignation on 4 December 2001. He signed a new contract on 13 December, 2001 with the plaintiff as its chemical sales representative but unknown to his employer he also signed a contract of employment with a competitor, dated 4 December 2001 to act as its sales manager. The defendant's contract of employment with the plaintiff contained confidentiality and restraint of employment clauses. The plaintiff sought to enforce the clauses.

Held

1. Where a party freely agrees to a contract in restraint of trade no constitutional issue arises

2. A restraint of trade clause is contrary to public policy and is prima facie void, but valid if reasonable with reference to time and space.

3. The onus of proving that a restraint of trade clause is reasonable is on the employer whilst the onus of showing that its enforcement is against the public interest or policy is with the employee.

4. A restraint covering the whole country in the circumstances under consideration is unreasonable and should be limited to areas in which the plaintiff has businesses.

Papua New Guinea cases cited

Craftworks Niugini Pty Ltd v Allan Mott [1998] PNGLR 572.
Garry Mchardy v Prosec Security and Communication Ltd Trading as Protect Security [2000] PNGLR 279.
Harry v Security Systems Ltd (2002) unreported & unnumbered.
John Jaminan v The State (No. 2) [1983] PNGLR 318.
Taurama Pharmacy Pty Ltd v Sherwen [1990] PNGLR 127.
W. A. Flick & Co. Pty. Ltd.v RW Thompson [1976] PNGLR 112.

Other Case

Browne v Dunn (1893) 6 R 67 (HL).

Counsel

D Lightfoot, for the plaintiff.
H Kikira, for the defendant.

24 June 2002

Kandakasi J. This matter came before me for a trial on a preliminary issue. The issue was one of whether a restraint of trade clause in a written contract of employment between the plaintiff and the defendant was reasonable. An interim injunction is currently in place against the defendant on the basis of the restraint of trade clause. The balance of the claim is for damages for breach of contract by the defendant, which are to be dealt with at a later time.

The relevant evidence is in the form of affidavits and oral evidence of Mr. Keith Kingston for the plaintiff and the defendant on his own behalf. The plaintiff's affidavit was deposed to on 27 February 2002 and filed on the same day. The defendant deposed to two affidavits. The first was on 13 March 2002 and filed on the same day. His second affidavit was deposed to 4 April 2002 and filed on the same day. Also the plaintiff admitted into court a number of documents consisting mainly of correspondence between the defendant and Seajay Exports (SP) Ltd, the parent company of Pactrade (PNG) Limited ("Pactrade"). They cover the period 2 October 2001 to November 2001 and they relate to a job offer and employment of the defendant.

From the above evidence the facts are these. On 22 October 1998, Wari Moere, the defendant entered into a written employment agreement with the plaintiff. Under that agreement he was employed as a sales supervisor. On 1 January 2001, the parties entered into a further written agreement upon the defendant's transfer from Lae to Port Moresby and the defendant was employed as a chemical sales supervisor.

On 4 December 2001, the defendant gave a notice of resignation to the plaintiff. The notice read:

"TO: PETER STITT

FROM: WARI MOERE

DATE: 4/12/2001

SUBJECT: RESIGNATION

Dear Peter,

Thank you very much for your decision to re-employ me after the worst mistake I have done in my career with this company. Thank you also for the support and the confidence you have towards me. I do really appreciate it.

It has been a struggle for me and my 3 boys here in Port Moresby since our transfer from Lae. I can no longer continue to struggle when I know that I am giving you what you require of me.

You have been a good boss and a good motivator and so has Mike Hogan that has led to my sales successes in Ok Tedi and most recently Lihir Island. I will really miss your good management style.

Due to company policy, I am giving 1-week notice. This Resignation is effective

10/12/2001.

Thank you,

(Signed)

Wari Moere."

In his oral evidence Mr. Kingston stated that the reference to the defendant having made "the worse mistake" in his (defendant's) letter related to an instance in which the defendant embezzled a number of the plaintiff's client's cheques. There is no dispute on this evidence. Similarly there is no dispute between the parties that there were discussion between the plaintiff and the defendant for possible continued employment of the defendant by the plaintiff. A number of offers were put to the defendant by the plaintiff until the defendant accepted an offer resulting in a new contract being signed up on 13 December 2001 ("13 December 2001 contract"). He was then allowed to go on leave until 7 January 2002.

At the time of 13 December 2001 contract, there was already in existence a written contract between the defendant and Pactrade executed on the 4 December 2001, the same day the defendant gave notice of his resignation under his earlier contract with the plaintiff. The plaintiff was not made aware of the existence of the defendant's contract with Pactrade, although they were aware that the defendant was negotiating with Pactrade. The plaintiff was prepared to match or better any offer to the defendant from Pactrade because the defendant was considered a very useful employee, after the plaintiff had spent time and money training him both locally and abroad.

The contract between the defendant and Pactrade was a culmination of negotiations between those parties after the defendant had applied for the position of a Sales Manager with Pactrade. His salary and other benefits under that contract were agreed to be at K$67,200.00 per annum or K$5,600.00 per month. However, nine days later the defendant signed his 13 December 2001 contract with the plaintiff as a chemical sales representative. That was for a total salary and benefits package of K85,400.00 inclusive of a sign on fee of K20,000.00, plus sales incentive or sales commissions and medical insurance, which had the potential of taking his total package to about K100, 000.00 per annum.

On 12 January 2001, just one day short of one month from the date of his 13 December 2001 contract, the defendant terminated his contract with the plaintiff and left the premises of the plaintiff and a unit rented for his accommodation by the plaintiff. He notified the plaintiff of doing so by a notice to the plaintiff the same day. He stated his reason for leaving as personal and indicated that he would repay the K20,000.00 the following week.

Before leaving, the defendant had returned to work with the plaintiff for about 5 days. He even sat in on an important meeting concerning the plaintiff's debtors. At that meeting strategies for recovery and avoidance of debts were discussed. Papers or documents relating to that meeting and the strategies were made available to those who attended, including the defendant. Also, prior to the defendant leaving the plaintiff, he was briefed in detail as to the plaintiff's strategies for the year 2002. That included information relating to a possible introduction into the PNG market of a new line of products by Carter Hold Harvey Company to replace Kimberly Clerk Australia ("Kimberly") products, which the plaintiff was dealing with at the time.

Kimberly withdraw its relationship with the plaintiff on 24 December 2001. Although such a decision was expected, the timing of that decision took the plaintiff by surprise.

Kimberly transferred to Pactrade, the defendant's new employer and a competitor to the plaintiff. The defendant's new employer is, according to the defendant, dealing with products such as sunquick concentrated juice, steel wool, car and truck batteries, ropes and hair gel. This is in addition to the Kimberly line of products. The defendant's new employer was not called to give evidence of the nature of its business and the full extent of the products it is currently carrying and wishes to carry in future. All there is, is a letter dated 12 March 2002 addressed to the defendant, which was provided at his request. That letter talks about current products and does not say anything about products in the future. It seems to me that, that was a self-serving letter at the request of the defendant and I so find to be the case.

The plaintiff's concern is not one of the defendant going over to Pactrade, which is a new comer to the business but the defendant doing so with its confidential trade secrets and strategies. The plaintiff says the defendant by reason of his employment and exposure to its operations, had access to information such as credit terms, discount policies and other trade benefits accorded to its long and established line of customers. This information will be used to out compete or perform the plaintiff because one of its newest competitors has full access to its trade secrets and information through the defendant. The defendant is now going to use that information to advance his new employer's business and that will result in loss of business to the plaintiff.

The plaintiff further argues that the defendant has demonstrated his untrustworthiness when he embezzled some of its clients' cheques. Further, when the defendant entered into the negotiations leading to 13 December 2001 contract, he failed to disclose the fact that he had already signed a contract with Pactrade. Furthermore, after having signed the contract with Pactrade and given the time and the manner in which the defendant left its employ, the plaintiff says the defendant was dishonest. The defendant chose to enter into 13 December 2001 contract and to continue to remain in the plaintiff's employ purposely to obtain as much information as he could particularly about the plaintiff's year 2002 plans and or strategies before leaving. The defendant did that purposely to better equip his new employer and the plaintiff's newest competitor.

It is therefore seeking to restrain the defendant from being employed by its competitor, pursuant to its 13 December 2001 contract with the defendant. In so doing the plaintiff is relying on clauses 9 and 10 of the contract. Those clauses read:

"9. CONFIDENTIALITY

(a) The Employee acknowledges that the Company is a party to Licence Agreements entered into from time to time and pursuant to which the company is obliged to keep confidential and secret all technical information defined therein and is not permitted to divulge or disclose the technical information to any other person other than essential employees of the company.

(a) The Employee will only use the technical information obtained by him to make, sell or distribute on behalf of the Company, products pursuant to the Licence Agreements.

The Employee agrees that if he has or is likely to have knowledge of or access to technical information, trade secrets, manufacturing processes, inventions, or any other trade information of what ever nature concerning the business or finances of the company or any of the companies dealings, transactions or affairs, he will keep the same strictly confidential and will not divulge or disclose the same except to those persons nominated by the company as being authorised to have access to this information or except as otherwise agreed by the company in writing.

The Employee shall immediately upon being requested so to do by the Company, return to the Company all written material in his possession which related to trade secrets, manufacturing processes, inventions, systems, or any other trade information of what ever nature concerning the business or finances of the company or any of the companies dealings, transactions or affairs.

The provisions of this paragraph shall not cease upon but shall continue in full force and effect after the termination for any cause whatsoever of the employment of the Employee with the Company or the expiration of this Agreement.

10. RESTRAINT ON EMPLOYMENT

(a) In consideration of the employment by the Company of the Employee, the Employee covenants and agrees that save and except as an Employee of the Company, the Employee shall not during the periods following the termination of the employment with the Company for any reason whatsoever whether directly or indirectly, carry on or engage in any of the activities presently carried on or purported to be carried on by the Company for a period of 6 calender months from the date of termination of Employment.

The plaintiff argues that the restraint of trade clause here is reasonable having regard to all of the restraint of trade clause cases up to this time starting with W. A. Flick & Co. Pty. Ltd. v RW Thompson [1976] PNGLR 112 to Harry v Security Systems Ltd (unreported and unnumbered judgement of Sheehan J. delivered on 5 February 2002)

The defendant's response to that is that Pactrade is not dealing with chemical products and in any case, it is dealing with the Kimberly line of products which the plaintiff is no longer carrying. He also claims that he did not have access to any of the plaintiff's trade secrets and confidential information because he had no access to any of the computers. This was, however, not put to the plaintiff's witness in cross-examination. Similarly, there was not a single question in cross-examination of the plaintiff's witness in relation to this issue.

It is settled law that a party must put in cross-examination his case to the other side's witnesses. A failure to do so amounts to any claim in that party's own evidence as recent inventions and unreliable. The authorities on that start with the famous case of Browne v Dunn (1893) 6 R 67 (HL), which has been adopted and applied in many cases in PNG. An example of that is the Supreme Court judgement in John Jaminan v The State (N0.2) [1983] PNGLR 318. It follows therefore that, the defendant's claim of not having access to the plaintiff's trade secrets and confidential information is unreliable and cannot be accepted.

Further, specific questions were put to the defendant as to why he chose to remain in the employ of the plaintiff from 4 December 2001 to January 12 2002 after having signed up with Pactrade. He failed to answer that question, except to say that he went on leave (on full pay and airfares paid for by the plaintiff) and having gone to the plaintiff premises to pick up things he left behind especially, on 7 January 2002. That answer, however, did not fit in well with him attending a meeting regarding the plaintiff's debtor's list. That meeting was aimed at recovering the debts and strategies to over come, reduce and or avoid a debtor's list.

Still further, the 13 December 2001 contract provided for one month's notice by either party for termination prior to the agreed expiry date. The defendant did not observe the notice period, something he failed to observe also under his earlier contract.

In these circumstances, I find that the defendant has demonstrated dishonesty. I also find that he did have access to and did obtain trade secrets and other confidential information belonging to the plaintiff. Also, I find that he chose to remain in the plaintiff's employ after having signed a contract of employment with Pactrade on the 4 December 2001 to obtain as much information as he could before leaving.

The defendant also argues that the contract between him and the plaintiff was null and void from the outset because he had an earlier contract with his current employer. I have not been referred to any authority supporting this argument. Even if there was any such authority, there is no evidence of the plaintiff being aware or being made aware of the existence of the contract and then taking steps to force the defendant to breach that contract. Instead, it is clear that the defendant negotiated for higher financial gains at the expense of either or both of the contracts. I therefore reject this argument without any further consideration.

Further, the defendant argues that the restraint sought is unreasonable and harsh and oppressive. He advances three reasons for that. First he says his current employer, Pactrade, does not engage him in chemical sales. Secondly, he says, he is not engaged in the business of selling consumer products similar to the products currently distributed by the plaintiff in Papua New Guinea. Finally, he argues that the clause completely restrains him (defendant) from engaging in similar employment in the whole country in violation of the exercise of this freedom of employment. This he says is the case having regard to the time and space aspects of the restraint of the former being 6 months and the latter is for the whole of PNG.

The plaintiff argues on the other hand that, the clause is reasonable given that the period of restraint is only six months, which is comparatively shorter than the cases that have already gone before the Courts. It also argues that the restraint sought is not against competition or from preventing the defendant from being employed. Instead, the restraint is sought against the use of the plaintiff's confidential information and trade secrets. It argues further, that no constitutional issue arises here because the defendant has by agreement agreed to such a restriction.

The law in this area is settled by reference mainly to the common law. In short, the law will not uphold any restraint of trade clause because it is contrary to public policy and is prima facie void, but valid if reasonable. The law has taken that position because such restraints are against public interest and a person's right to be employed to earn an income and thus his living. However, if it can be shown that such a clause is reasonable by reference to time and space of the restraint at the time of the agreement, it will be upheld. The onus of proving that a restraint of trade clause is reasonable is on the employer (covenantee) whilst the onus of showing that its enforcement is against the public interest or policy is with an employee (covenantor).

These principles were adopted and applied in our jurisdiction first in the case of W. A. Flick & Co. Pty. Ltd. (supra). In that case the plaintiff a pest controlling company based in Australia with a branch in Port Moresby, employed the defendant as its pest control operator both in New South Wales and thereafter until his termination in Port Moresby and Kieta. Following his termination the defendant set up business on his own account in the name of South Pacific Pest Control, which he conducted in Port Moresby and other places.

The defendant's employment with the plaintiff was on the basis of a written contract. That contract had a restraint of trade clause for a period of three years from the date of termination. It covered a distance of five miles of any place where the defendant was employed by or has done work in the course of his employment with the Company in connection with, either directly or indirectly, the destruction or control of white ants, borers or other pests. The restriction was either against employment or conducting on his own or in association with another business in the area of pest control.

The Court held that restraint was not unreasonable regarding space and time. It found that it was not wider than was necessary to protect the plaintiff's business connection and was not aimed solely at preventing competition. The Court also found that by setting up business on his own account in Port Moresby and working at Kieta, the defendant had committed a breach of contract for which he was liable in damages to the plaintiff. In arriving at that view, the Court had regard to the prevailing circumstances at the time of the agreement. The Court reasoned that:

"As a pest control operator the defendant would come into contact with the plaintiff's clients and acquire influence over them. When working in the office he would be in touch with the clients on the telephone and when working in the field he would come into contact with them personally. The big companies and concerns would be recurring clients. They would come to rely on the defendant's skill and experience, and, if after he ceased working for the plaintiff he worked in the same place or places where he worked before, either for himself or someone else, there is every likelihood that the plaintiff's clients would follow him.

In determining the reasonableness or otherwise of the restraints one must consider the circumstances prevailing at the time when the contract was made. The contract was made in Australia where the plaintiff company is in business in a big way having branches and agencies throughout the country. The defendant having worked in this business in Australia admits that in the bigger towns most of the plaintiff's work would be done within a radius of about five miles from the branch office. He admits that in Port Moresby, both when he worked for the plaintiff company as well as when he worked for himself most of the work done was within a radius of five miles from the plaintiff's office. According to the terms of the contract apart from Chatswood, Orange and Campbelltown in Australia, and Port Moresby and Kieta (Panguna) in Papua New Guinea, there is nothing to prevent the defendant from working anywhere else. In these circumstances the restraint regarding the area of operation does not appear to me to be unreasonable. Nor is it unreasonable regarding time. In my view three years is not an unreasonably long time to allow to enable the plaintiff's clients to forget whatever influence the defendant may have acquired over them.

One thing is clear. Clause 7 is certainly not designed to protect the plaintiff from the defendant's competition per se. Apart from the three places in Australia and the two places in Papua New Guinea the defendant is free to work anywhere. He could if he wished set up business on his own account next door to the plaintiff and in open competition with him. There is nothing to prevent him from working for a rival concern such as Rentokil in Australia which has a business as extensive as that of the plaintiff."

The next case is Taurama Pharmacy Pty Ltd v Sherwen [1990] PNGLR 127. In that case, it was a contract of employment between a pharmaceutical business and a pharmacist. It contained a restraint of trade clause for three years covering a distances of forty (40) kilometers. The Court in there adopted and applied the same test and principles applied in W. A. Flick & Co. Pty. Ltd. (supra) case and held that the restraint was unreasonable and refused to uphold it. The Court reasoned that the profession of a pharmacist and pharmaceutical services and a general knowledge of the scope of operations within the profession were not readily available in Papua New Guinea. In these circumstances, the restraint was not considered reasonable in time and space as between the parties and was not in the public interest. The Court also queried whether restraint of trade clauses are unconstitutional given the freedom of employment guaranteed by s 48 of the Constitution.

More recently, in Security Systems Limited v Garsec Limited & Harry Garrayhy (supra) a 5 years restraint of trade clause was reduced to 18 months and restricted to Port Moresby instead of the whole country going by the area of the plaintiff's area of operation.

There are two Supreme Court judgements concerning restraint of trade clause. The first is the case of Craftworks Niugini Pty Ltd v Allan Mott (27/06/97) SC 525. That case went to the Supreme Court on appeal against a refusal by the National Court to grant an interim injunction on the basis of a restraint of trade clause pending a determination of the substantive matter. The National Court did not consider and apply the principles that govern the grant or otherwise of interim injunctive orders. It also reasoned without any elaboration that the restraint of trade clause was contrary to the freedom of employment. The Supreme Court upheld the appeal.

It then considered whether it was appropriate to grant an interim injunction. However, by the time the decision was delivered the time period under the clause had expired. It was therefore, held inappropriate to grant any injunction.

The second Supreme Court judgement is the case of Garry Mchardy v Prosec Security and Communication Ltd Trading as Protect Security (30/06/00) SC646. In that case, the appellant was employed as an electronics specialist with the respondent company. The respondent applied for an interim injunctive order effectively preventing the appellant from being employed by one of the respondent's rival company. That was pursuant to a purported contract of employment between the parties, which had a restraint of trade clause. The National Court granted an interim restraining order despite there being a serious issue being raised on the existence of an agreement with such a clause.

The appellant appealed against that decision. He then sought a stay of the running of the injunctive orders pending a determination of his appeal. The Supreme Court refused that application. In so doing the Supreme Court reasoned that:

"The principal factor, reason, or circumstance that the Applicant has advanced in support of his application is the fact that he would be denied employment and thus salary for his and his family's maintenance. It is a compelling reason for wanting a stay of the injunctive order to enable the applicant to continue to be employed, but to our minds it defeats the purpose of the interim injunctive order which is obtained in support of the claim for breach of restraint of trade under the contract of employment.

There are no other factors or circumstances that in the interest of justice and on the balance of convenience warrant the grant of stay. We therefore dismiss the application with costs."

The Court with respect did not have any regard to the appellant's argument that there was a serious issue on the existence of the contract, which had the purported restraint of trade clause. In so doing, the Court had no regard to the principle that, any restraint of trade clause is prima facie void because it is contrary to public policy and is prima facie void, unless it is shown to be reasonable. If one proceeds on that basis, all restraint of trade clauses are presumed void from the outset. Therefore, there should be no interim enforcement by interim restraining orders, especially when there is a serious issue on the existence of a contract. If however, it appears clear that there is a legally enforceable contract having a restraint of trade clause subject only to a determination of its reasonableness, only then could it be appropriate to uphold such a clause, albeit, by interim restraining orders.

In the present case, the restraint of trade clause is for a period of 6 months for the whole of Papua New Guinea. It is also important to note that the defendant terminated that contract without complying with requirements for notice of intention to terminate the contract prior to the agreed date of termination. He did that after having entered into a contract on 4 December 2001 with Pactrade and also the 13 December 2001 contract. He then remained in the employ of the plaintiff before terminating his 13 December 2001 contract in breach of requirements for notice under that contract.

The cases that have gone to the Courts to date show that time periods of up to 3 years maximum have been upheld reasonable. Only in the case of Taurama Pharmacy Pty Ltd v Sherwen (supra), the Court has refused to up hold a 12 months restraint of trade clause. That was on the basis that the kind of business and profession involved was a rarity in the country and so therefore, it was unreasonable to restrict the defendant from providing a service in the country, which was not readily available in the country. The Court felt bound to arrive at that decision because of public policy considerations not to stop services that were not readily available in the country.

In the present case the restriction is for a period of six months. Further, the plaintiff's profession is one of salesman. He is not a specialist by any means. With the kind of experience the defendant has obtained, he could in my view, readily find a job as a salesman or representative in areas other than the kind of business the plaintiff was and is involved in. Indeed the plaintiff submits that it would not have sought to enforce the restraint of trade clause, if the defendant was employed by say, a motor car dealer to sell cars.

Furthermore, the defendant entered into the 13 December 2001 contract, despite having in existence a valid contract of employment with Pactrade. He did not inform the plaintiff of that fact. He then continued to remain in the employ of the plaintiff only to leave that employment just about a month after having signed it and after having obtained trade secrets and confidential information belonging to the plaintiff. In these circumstances, I am of the view that the restraint of trade clause should be upheld. This is to prevent the defendant from benefiting from his own conduct amounting to a breach of the contract he signed with full knowledge of what he was signing and the possible effects of any breach of his obligations under the contract. In so doing, I dismiss the defendant's arguments that the contract imposes on him the additional burden of repaying his sign on fee of K20,000.00. By signing the contract, which included this obligation, he agreed to that being the consequence. He therefore assumed the risk of doing that when he accepted the relevant payment and decided to terminate the contract unlawfully.

I also reject the defendant's argument that neither he nor his new employer is in the business of selling chemical products and as such it is unreasonable to uphold the restraint of trade clause. The evidence on this is that the main product sold and marketed by the defendant's employer is the Kimberley range of products and some other products. That evidence is not exhaustive and is based on a self-serving letter provided to the defendant by Pactrade. There is no mention of what Pactrade will deal with in future. There is therefore the possibility of the Pactrade getting to deal with chemical products using the trade secrets and information the defendant has obtained from the plaintiff. In any case, as already noted, the plaintiff is not against competition. Instead, the plaintiff is against the use of his confidential trade secrets and information.

In relation to the constitutional argument, I do not consider that a restraint of trade clause freely agreed to by an employee is a violation of his or her right or freedom of employment under s 48 of the Constitution. The rational for that is simple. If a prospective employee agrees freely in exchange for certain terms and conditions for employment with his prospective employer, which includes a restraint of trade clause he should be held to his agreement. If he or she wishes not to be so restricted then he or she has the option to reject the offer of employment, which has, such a term. Of course, if such an agreement is secured through, fraud, duress, threat or force or such like, that could amount to an illegal and unenforceable contract. Hence the only legitimate issue that can arise in respect of a restraint of trade clause in an otherwise valid contract of employment is as the authorities to date have raised and addressed. That is the issue of whether such a clause is reasonable by reference to the time and space agreed to, taking into account the factors that the Courts have already taken into account.

With regard to the space covered by the restraint of trade clause, I am of the view that covering the whole country is unreasonable. This is particularly so in view of the fact that the plaintiff's operation does not cover the whole of the country. The evidence speaks clearly of the plaintiff having operations based and out of Port Moresby, Lae, Rabaul and Mt. Hagen. A commercial decision was taken to close down the Mt. Hagen office. Going by the precedents that have been long established and followed over the years by nearly all of the cases on point, I would strike down the clause in question only to the extent that it covers areas or provinces and centers in which plaintiff does not conduct its business. This would result in the clause remaining valid still for Port Moresby, Lae and Rabaul only for the balance of the period of restraint.

In the end, I would make an order in the form of a declaration that the restraint of trade clause in clause 10 of 13 December 2001 contract is valid. But that is only in respect of the areas of Port Moresby, Lae and Rabaul where the plaintiff carries on its business. I make orders in those terms and order costs to follow the event.

Lawyers for the plaintiff: Pacific Legal Group, Lawyers.
Lawyers for the defendant: Rageau Elemi & Kikira, Lawyers.