Tavener v Sheridan [2000] FCA 219 (7 March 2000)

Last Updated: 7 March 2000

FEDERAL COURT OF AUSTRALIA

Tavener v Sheridan [2000] FCA 219

RESTRAINT OF TRADE - agreement for sale of business containing covenant in restraint of trade - whether covenant enforceable - whether restraint unreasonable - whether period of restraint unreasonable - whether breach of covenant - whether vendors' business of "a similar kind" to business sold

WORDS & PHRASES - "similar kind"

Biogen Inc v Medeva Plc [1997] 1 RPC 1, referred to

Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531, referred to

JAMES MAURICE TAVENER & ALEXIS LOUISE TAVENER v ROBERT IAN SHERIDAN & TRACEY ANN SHERIDAN

N1297 of 1999

WILCOX, EMMETT & GYLES JJ

SYDNEY

7 MARCH 2000

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1297 of 1999

ON APPEAL FROM THE SUPREME COURT OF NORFOLK ISLAND

BETWEEN:	JAMES MAURICE TAVENER ALEXIS LOUISE TAVENER Appellants
AND:	ROBERT IAN SHERIDAN TRACEY ANN SHERIDAN Respondents
JUDGES:	WILCOX, EMMETT & GYLES JJ
DATE OF ORDER:	7 MARCH 2000
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The orders made by Beaumont CJ in the Supreme Court of Norfolk Island on 2 November 1999 be set aside and, in lieu thereof, it be ordered that:

(a) it be declared that clause 6 of the Agreement for Sale between the defendants as vendors and the plaintiffs as purchasers, dated 8 January 1999, is valid and enforceable to restrain the defendants for a period of five years from 8 January 1999 from owning, participating or being employed in, operating in, engaging in (directly or indirectly, whether on the defendants' own account or in partnership or as shareholders in a company or by joint venture) a four-wheel drive tour business in Norfolk Island or a business of a kind similar to that owned and carried on by the defendants immediately prior to 8 January 1999;

(b) otherwise, the Originating Application be dismissed; and

(c) the plaintiffs, Robert Ian Sheridan and Tracey Ann Sheridan, pay to the defendants, James Maurice Tavener and Alexis Louise Tavener, 90% of their costs of the proceeding.

3. The cross-appeal be dismissed.

4. The respondents, Robert Ian Sheridan and Tracey Ann Sheridan, pay to the appellants, James Maurice Tavener and Alexis Louise Tavener, 90% of their costs of the appeal and cross-appeal, such costs not to include costs incurred in relation to the application for stay of the injunctions heard by Wilcox J on 13 December 1999.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1297 of 1999

ON APPEAL FROM THE SUPREME COURT OF NORFOLK ISLAND

BETWEEN:	JAMES MAURICE TAVENER ALEXIS LOUISE TAVENER Appellants
AND:	ROBERT IAN SHERIDAN TRACEY ANN SHERIDAN Respondents

JUDGES:	WILCOX, EMMETT & GYLES JJ
DATE:	7 MARCH 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT:

1 This is an appeal against orders made by a judge of the Supreme Court of Norfolk Island in an urgent final hearing of proceedings for enforcement of a covenant in restraint of trade. The covenant was contained in an agreement for sale of a business ("the agreement") made between the appellants, James Maurice Tavener and Alexis Louise Tavener ("the Taveners"), as vendors and the respondents, Robert Ian Sheridan and Tracey Ann Sheridan ("the Sheridans"), as purchasers.

THE PROCEEDINGS

2 There were issues at the trial concerning both the enforceability of the covenant and breach. It was common ground that, after the sale to the respondents of a business known as "Jimbo's 4WD Tours", the appellants established a new business under the name "Advance Group Charter Tours" ("Advance"). The major factual issue was whether that business was similar to the business the subject of the sale.

3 In a judgment delivered on 2 November 1999, the trial judge found against the appellants in respect of both enforceability and breach. He held the covenant in restraint of trade in the agreement for sale was enforceable and found the appellants had breached that covenant by conducting the business of Advance.

4 On that same day the trial judge made the following orders:

"1. Declare that cl 6 of the agreement for sale between the defendants as vendors and the plaintiffs as purchasers, dated 8 January 1999, is valid and enforceable in accordance with its terms.

2. Order that the defendants be restrained for a period of five years from 8 January 1999 from owning, participating or being employed in, operating, engaging in (directly or indirectly, whether on the defendants' own account or in partnership or as shareholders in a company or by joint venture) a four-wheel drive tour business in Norfolk Island, or a business of a similar kind."

His Honour reserved the costs of the proceeding and stood over, to a directions hearing at a date to be fixed, the plaintiffs' claim for further relief.

5 Subsequently, his Honour dealt with the matter of costs. He ordered that the Taveners pay to the Sheridans three-quarters of their costs at first instance. By way of cross-appeal, the Sheridans challenge this order. They contend the order made by the trial judge ought to have extended to the whole of their costs and, moreover, that it should have been made on an indemnity basis.

6 The Taveners filed a Notice of Appeal against the trial judge's orders and sought a stay of the injunction until after the disposition of the appeal. On 13 December 1999 Wilcox J heard and refused that application. He did, however, direct that the appeal be expedited and listed for hearing in the February 2000 sitting of the Full Court. Wilcox J reserved the costs of the stay application.

DOCUMENTARY EVIDENCE

(i) The sale agreement

7 The agreement for sale was executed and completed on 8 January 1999. It contained the following relevant provisions:

"INTRODUCTION

1. The Vendor owns and carries on the business known as Jimbo's 4WD Tours ("the Business"), comprising the carriage of passengers for reward on tours within Norfolk Island and by `gentlemans [sic] agreement' the fish catering for clifftop fish fries for Pinetree Tours.

2. The Vendor wishes to sell to the Purchaser, and the Purchaser wishes to buy from the Vendor, the business [sic] as a going concern.

IT IS HEREBY AGREED THAT

1. The Vendor shall sell to the Purchaser, and the Purchaser shall buy from the Vendor, the business [sic] as a going concern for a total price of $135,000.00 which shall be payable in full at completion.

...

6. The Vendor shall not, within a period of five (5) years from the date of completion, own, participate or be employed in, operate, engage (directly or indirectly, whether on the Vendor's own account or in partnership or as a shareholder in a company or by joint venture) a Four Wheel Drive (4WD) tour business in Norfolk Island, or a business of a similar kind to the business [sic].

7. Included in the sale, without further consideration, are:

2 x Toyota 4 wheel drive buses which are presently used in the operation of the business [sic].

1 x catering trailer and catering equipment which is presently used to conduct cliff top fish fries.

All the stationary [sic] and records of the business [sic]."

(ii) The pre-sale information document

8 Prior to entering into the agreement for sale, the Taveners prepared a document, apparently for the benefit of prospective purchasers, in which they described their business. The document relevantly provided as follows:

"Jimbo's 4WD Tours began operation mid-1990. The business began with the touring vehicle being the back of Jimbo's truck initially and has progressed since that time to the current fleet today of two Toyota Landcruiser 4WDs. Business has steadily increased over the last few years and is now better than it ever has been - greatly in demand for both FIT and tour groups. Currently it is necessary to employ two drivers extra to Jimbo in order to keep up with the number of tours.

VEHICLES

...

OTHER ASSETS

...

BOOKING ARRANGEMENTS

...

GROUP OPERATORS

Jimbo's 4WD Tours is now very widely known and is very popular with group operators. There is a large number of group operators who include the tour as part of their set itinerary inclusions. The majority of all other groups sell the 4WD tour as an optional extra to their passengers. Coach companies particularly those operating bulk tour departures into Norfolk Island such as Scenic Tours, Australian Pacific Tours, Sunbeam Tours, Wattle Tours and Evergreen Tours place large numbers of their passengers on Jimbo's 4WD Tour.

INSURANCE

...

THE TOUR ITSELF

Jimbo's 4WD Tour includes areas within the National Park and Forestry zones for which we hold permits. Private properties currently included are Bumboras to Crystal Pool cross-country (properties of Roy Nobbs and Louise Tavener), Simon's Water (property of Bernie Christian-Bailey) and Garnet Point (property of Howard Christian). Afternoon tea is currently served at our home in Stockyard Road.

National Park permit would need to be transferred if change of ownership were to occur. A new venue for afternoon teas would need to be found. Access to the private properties mentioned would need to be arranged with the land owners involved.

BOOK-KEEPING

...

SALE PRICE - JIMBO'S 4WD TOURS:- $145,000.00 neg.

ADVERTISING - LOCAL

...

ADVERTISING - OVERSEAS

...

Mr Tavener is known on Norfolk Island as "Jimbo". The acronym "FIT" refers to free, independent travellers, that is, visitors to the island who are not members of tour groups.

(iii) Jimbo's 4WD Tours brochures: pre-sale

9 In the course of their operations prior to January 1999, the Taveners distributed brochures describing their business. One of the brochures contained the following material under a sketch of a man standing beside a four-wheel drive vehicle and in front of two Norfolk pine trees:

"You might not think Norfolk's a place you need to do a 4WD tour but don't be fooled! Norfolk has loads of places you just can't get to on a bus tour or in your hire car.

Explore just such areas with Jimbo in his comfortable modern 4WD. A Norfolk Islander and a real character, he has a deep knowledge of the Island and can show you the back of beyond areas, native flora and our beautiful birds. Visit private properties with unbelievable views, wander family land & see spectacular scenery. Morning or afternoon tea at his Island home.

Great for all ages."

10 Another brochure distributed by the Taveners contained the following:

[Photograph of a four-wheel drive vehicle.]

"Jimbo's 4WD Tours

Join Jimbo and his Island staff - all direct descendants of the Bounty Mutineers; on an exciting 4 hour tour to points of Norfolk, accessable [sic] only by 4WD. This back of beyond tour takes you through private properties and the national park featuring spectacular scenery, native flora and bird life. It also includes delicious home made cakes with tea and coffee. Don't expect a rough race through the scrub. Drivers are conscientious and very knowledgable. All vehicles are comfortable modern 4WD's. Great for all ages."

11 There was also a two page colour brochure. On the first page were photographs of two four-wheel drive vehicles and the following words:

"VISIT THE PLACES YOU CAN'T GET TO IN YOUR HIRE CAR OR ON OTHER TOURS

Private Properties . Family Lands

Forest y Zones [sic] . National Parks

MON TO SAT 9am & 1pm ENQUIRE HERE"

On the second page were photographs of natural areas and the words:

"*Island Drivers - all descendants of the Bounty mutineers

*4 hours to inaccessable [sic] beauty spots, private property & the National Park.

Featuring:-

Spectacular scenery

Native Flora

Bird life

Delicious cakes & tea/coffee

NO ROUGH RACE THROUGH THE SCRUB!

Drivers are conscientious & very knowledgable.

All vehicles modern 4WD's

MON to SAT 9am or 1pm"

(iv) Jimbo's 4WD Tours brochures: post-sale

12 A brochure distributed by the Sheridans following completion of the agreement for sale contained the following:

"To the Back of Beyond

[Photograph of four-wheel drive vehicles.]

You might not think Norfolk's a place you need to do a 4WD Tour but don't be fooled! Norfolk has loads of places you just can't get to on a bus tour or in your hire car.

Explore such areas with an island guide in a comfortable modern 4WD. We have a deep knowledge of the island and can show you the back of beyond areas, native flora & our beautiful birds. Visit private properties with unbelievable views, wander family lands & see spectacular scenery. Morning or afternoon tea at an island home.

Jimbo's 4WD Tours."

Another brochure read:

"Jimbo's 4WD Tours

Join Sam and his Island staff - all direct descendants of the Bounty Mutineers; on an exciting 4 hour tour to points of Norfolk accessible only by 4WD. This back of beyond tour takes you through private properties & the national park featuring spectacular scenery, native flora & bird life. Enjoy delicious home made cakes with tea & coffee at Sam's Island home. Don't expect a rough race through the scrub. Drivers are conscientious & very knowledgable. All vehicles are comfortable modern 4WD's. Great for all ages.

A great day out & not to be missed"

(v) Pinetree Tours brochure

13 The only independent witness called at the trial was Michael Vincent Prentice, principal of a business called "Pinetree Tours". Mr Prentice was called by the present respondents and deposed that Pinetree Tours retailed tours in four categories:

* Day Tours;

* Garden Tours;

* Night Tours;

* Speciality Tours.

14 A booklet distributed by Pinetree Tours described one of the "Day Tours" as follows:

"HALF DAY GENERAL TOUR ~ DAILY.

Pinetrees [sic] half day information tour is a must for every visitor! Visit historic Kingston, Cascade, Longridge & much more. See & hear about the famous convict buildings, beautiful beaches & golf course, the renowned Melanesian Chapel, our Government, our laws & lifestyle. Enjoy views from Mt Pitt & other scenic spots on this full comentary [sic] conducted tour. Rest for a delicious morning or afternoon tea in the garden of an historic island home built by Fletcher Quintal - descendant of `Bounty' mutineer [sic] Fletcher Christian & Matthew Quintal."

15 In a booklet distributed after completion of the agreement for sale, Pinetree Tours described one of the tours offered as a "Speciality Tour" in this way:

"Jimbo's 4WD Tours ~ Monday to Saturday

Join Sam and his Island staff - all direct descendants of the Bounty Mutineers; on an exciting 4 hour tour to points of Norfolk, accessible only by 4WD. This back of beyond tour takes you through private properties and the national park featuring spectacular scenery, native flora and bird life. It also includes delicious home made cakes with tea & coffee. Don't expect a rough race through the scrub. Drivers are conscientious and very knowledgable. All vehicles are comfortable modern 4WD's. Great for all ages."

(vi) Pre-sale finance records

16 The evidence includes a summary (on a monthly basis) of the profit and loss reports of Jimbo's 4WD Tours in respect of the pre-sale period January 1995 to October 1998. The summary demonstrates that, during those four years, the income of the business was predominantly derived from sales made by Pinetree Tours. In many months Pinetree Tours provided more than 90% of the total income. Pinetree Tours' proportion seems never to have fallen below three-quarters of the total monthly income. The remaining income was derived from bookings made by the Norfolk Island Government Tourist Bureau and cash sales direct to customers.

(vii) Post-sale financial records

17 A comparable document for the post-sale period of January to July 1999 was also put into evidence. That document divided income into only two categories: "Pinetree Tours" and "others". The income attributable to Pinetree Tours remained dominant in those months, although, in some higher income months, "others" accounted for over 10%. Overall, it seems, the income pattern for these seven months of 1999 was much the same as for 1998.

(viii) Advance Group Charter Tours

18 The Taveners commenced to operate Advance in June 1999. They purchased a 35-seater bus (not four-wheel drive) which they used to transport participants on group tours arranged by wholesalers located outside Norfolk Island. The system was that the group members would be met at the airport by an Advance representative and transferred by bus to their hotel. Thereafter, for the duration of their stay on the island, the bus would be at the exclusive disposal of members of the group. They would be picked up each day for activities and returned to the airport at the end of their holiday. To the date of the trial, Advance had handled five tour groups. Their itineraries were put into evidence. They varied somewhat, however each covered at least a full week and included at least one group activity each day, but leaving substantial free periods for individual activities.

19 Each itinerary includes an item called "Half Day Island Tour" that was described in one itinerary in this way:

"9 am - 12.30 pm Group is picked up from hotel for HALF DAY ISLAND TOUR -

A comprehensive tour of the Island visiting Cascade, Kingston, with its' [sic] convict buildings, scenic points and Mt Pitt. Hear of the history of the convict settlements here and hear of our Bounty mutineer heritage. Visit the beautiful St Barnabas Chapel and enjoy a delicious devonshire afternoon tea at an Island home."

THE TWO TOURS

(i) The trial judge's findings

20 A considerable part of the trial time was devoted to evidence about the routes followed by the tour conducted by Jimbo's 4WD Tours ("the Jimbo's tour") and the Advance "Half Day Island Tour" ("the Advance half-day tour"). Arising out of that evidence, the judge made the following findings of fact:

"* The area of the Island is approximately thirty-four square kilometres.

* Access to tourist sites is by sealed and unsealed roads. Sealed sections of roads total about 160 kilometres.

* There is a limited number of tourist attractions.

* The plaintiffs' tour (which is essentially that conducted at the time of the sale) travels off-road at some stages, but the tour also includes attendance at sites accessible by sealed and unsealed road.

* The plaintiffs' tour incorporates visits to the following sites or locations:

q Mt Pitt

q Hollow Pine Tree

q Gum and Pine Forests

q Bumboras

q Crystal Point

q Mr & Mrs Sheridan's home (for morning tea)

q Anson Bay

q Headstone Point

q Puppy's Point

q Some off-road driving

* The plaintiffs' tour is largely on sealed roads. The driver engages in four-wheel drive between ten to twenty per cent of the duration of the tour.

* The plaintiffs' tour is conducted by two four-wheel drive vehicles, with thirteen passenger seats in one vehicle, and five in the other. (As has been seen, the Agreement refers to them as `2 x Toyota 4 wheel drive buses which are presently used in the operation of the business'.)

* The defendants' tour uses a thirty-five seat touring bus.

* The defendants' tour includes visits to historical sites and points of interest. The tour is guided, with commentaries.

* The defendants' `itinerary' tour extends over a period of seven separate days, with some daily and nightly attractions as well.

* The following differences are revealed upon a comparison of the plaintiffs' tour with the defendants' tour:

(1) The defendants' vehicle is of a different type and size.

(2) The defendants' tour spends more time on sealed road.

(3) The defendants' tour places more emphasis on historical sites.

(4) The defendants' tour does not proceed off-road.

* Notwithstanding these differences, both tours visit the following sites:

(1) Mt Pitt (when road open)

(2) Kingston (convict buildings)

(3) St. Barnabas' Chapel

(4) All Saints' Church

(5) Puppy's Point

(6) Bumboras

(7) Crystal Pool

(8) Headstone Point

(9) Kentia Palm Nursery

(10) Captain Cook Monument

(11) Anson Bay"

(ii) Uncontroverted evidence

21 At the hearing of the appeal, counsel for the appellants, Mr A Cook QC, did not challenge any of the trial judge's findings of fact. However, he drew attention to a number of items of uncontroverted evidence that were not included in those findings. As we read his Honour's reasons for judgment, this was not because he disbelieved the relevant evidence, but because of the approach he took to the selection of the material facts. Mr Cook argued that this approach was mistaken. In order to evaluate that argument, we must catalogue the items. They are as follows:

* Although the driver on the Jimbo's tour engages in four-wheel drive over only ten to twenty percent of the route, a preponderance of the time spent on the tour is in four-wheel drive areas. This amounts to two-and-a-half to three hours out of the total four hour tour.

* The emphasis of the Jimbo's tour is information about the natural environment of the island, especially the national park area. By contrast, the half-day tour segment of Advance's seven day itinerary emphasises the history of the island and the built environment.

* Bookings for the Jimbo's tour are generally made by people already on the island. Mr Prentice described the tour as "sort of an add on thing" in which people "can go to a few of the places ... on private property or where the buses (can't) necessarily go to. It's sort of sold as ... an image that you're going ... bush". He drew a distinction between general tours and specialist tours.

* By the date of the trial, Advance had handled five tours: three groups arranged by Australian Pacific Tours comprising, respectively, 30, 25 and 25 people; and two groups of Wattle Tours comprising, respectively, 14 and 22 people. In each case only these people were allowed to use the bus. People outside the group could not join the group for a segment of the activities. It is not possible to take the Advance half-day tour except as part of the seven day program.

* The promotional material and financial records to which we have referred.

THE TRIAL JUDGE'S DECISION

22 The trial judge found that the restraint in clause 6 of the agreement was reasonable as between the parties and in terms of the public interest. His Honour rejected the Sheridans' contention that, by virtue of the words in clause 1 of the recital, the prohibition in clause 6 should be construed so as to extend to any form of carriage of passengers for reward for tours within the Island. Nevertheless, he concluded there is such a degree of overlap between the activities presently engaged in by the Taveners and the activities they engaged in prior to the sale of their business that the Taveners are engaging in a business of a kind similar to that which they sold to the Sheridans. Accordingly, his Honour made the orders set out in paragraph 4 above.

23 In making those orders, the trial judge acknowledged that the injunction ordered by him was very much in the terms of the contractual provision. He considered, but rejected, the possible grant of an injunction that specified particular prohibited activities. His Honour thought that it was not feasible to endeavour to lay down "a road map of activities that are permissible on the one hand, and those that are not, on the other". One difficulty with that approach, of course, is that it leaves open the possibility of further dispute as to precisely what future conduct would constitute a contravention of the orders made.

VALIDITY OF THE COVENANT IN RESTRAINT OF TRADE

(i) Principles

24 A covenant in restraint of trade is, prima facie, unenforceable as being contrary to public policy. However, there are circumstances in which such a covenant will be enforced. One such circumstance is where a seller of a business covenants not to compete with the buyer, in respect of the business that has been sold. A restraint that does no more than is reasonably necessary to protect the buyer in respect of the goodwill that is the subject of the sale will be enforced, unless the restraint is otherwise not in the public interest. In the event of a dispute as to the validity of a covenant in restraint of trade, the first step is to determine its effect, as a matter of construction. Only if the covenant, properly construed, does no more than is reasonably necessary to protect the goodwill sold will the covenant be enforceable. The purchaser bears the onus of establishing that matter. If the restraint is reasonable, the onus of demonstrating that it is otherwise not in the public interest falls on the seller.

(ii) Construction of clause 6

25 Notwithstanding that the first recital to the agreement for sale describes its subject as "the Business", that term is not thereafter used. Where the subject business is intended, it is referred to in lower case lettering as "the business". That presentation appears throughout the whole agreement. Accordingly, notwithstanding that the last word in clause 6 begins with a lower case letter, it is clearly a reference to the business the subject of the agreement for sale.

26 The description of that business in the first recital is somewhat inapt. It is clear from the material set out above that the words "carriage of passengers for reward on tours within Norfolk Island" is too wide a description of the business operated by the Taveners at the time of sale. Certainly, the business entailed the carriage of passengers for reward on tours. However, that carriage was of a specialised and limited nature. Notwithstanding the wide description in the first recital, it must be taken that the parties were not intending that the vendors be restrained from engaging in any business that involved the carriage of passengers for reward on tours within the island. If they had written a covenant to that effect, it would be far wider than was reasonably necessary for the protection of the goodwill being sold, and therefore invalid. The goodwill related to a specific tour, as described above. We think the drafter of the clause recognised that point and intended clause 6 of the agreement to be more specific than the first recital.

27 Clause 6 of the agreement contains two separate restraints. The first restraint is from operating "a four-wheel drive tour business in Norfolk Island". Those words are more specific, and limited in their application, than those employed in the first recital. They are also an apt description of the business that was being carried on by the Taveners prior to the agreement for sale. This suggests that, when the last phrase of clause 6 refers to a "business of a similar kind to the business", it was intended to refer to a business similar to the business then being carried on. That business was a specific type of tour business involving the use of four-wheel drive vehicles, and having the nature and characteristics of the business known as "Jimbo's 4WD Tours", as described above.

28 In our opinion, on its proper construction, clause 6 restrains the Taveners, first, from engaging in a four-wheel drive tour business anywhere on the island and, second, from engaging in a business of a kind similar to that which they owned and carried on prior to 8 January 1999.

29 On an island as small as Norfolk Island, we do not think restraints of that nature should be regarded as unreasonable. However, a question arises as to the reasonableness of the period of the restraint, namely, five years from the date of completion of the agreement for sale.

30 Having regard to the nature of the tour conducted by the Taveners, it is unlikely there is much repeat business from tourists themselves. That circumstance tends to suggest it was not necessary to impose a restraint of five years in order to protect the business goodwill.

31 However, at the date of sale, the vast majority of the bookings were derived from Pinetree Tours. The goodwill of the business was very much tied to the Taveners' connection with the operators of Pinetree Tours and, to a much lesser extent, the Norfolk Island Government Tourist Bureau. Given the smallness of the island community, and the importance of personal relationships within it, a significant period of time might be needed before the Taveners should be permitted to compete with the Sheridans for business derived from these booking agents.

32 Although five years is a lengthy period of restraint of competition with a small business, under the whole of the circumstances we are not prepared to differ from the trial judge's view that it is not unreasonable. In considering the issue, it is not unimportant to remember that the Taveners were prepared to accept restraint for five years, although this circumstance has to be considered in the context that the Taveners did not have legal advice in connection with the agreement for sale. We think that, so long as the covenant is construed in the manner indicated above, a five year restraint from engaging in a four-wheel drive tour business or a business similar to that owned and carried on by the vendors prior to the agreement for sale is not unreasonable.

BREACH OF COVENANT

33 Most of the evidence was devoted to the question of whether or not there was a breach of the covenant, construed as indicated above. It appears to have been common ground that the business of Advance could not fairly be described as a four-wheel drive tour business. That is not surprising; the Advance 35 seater bus is not a four-wheel drive vehicle. The critical question is whether the Advance business can be described as being "of a similar kind" to Jimbo's 4WD Tours, as conducted prior to 8 January 1999. His Honour described this question as difficult on the facts that he found. If it had not been for the additional facts relied upon by counsel for the appellants, to which we have referred, it is unlikely we would have disturbed his Honour's conclusion, which was essentially about a matter of degree in relation to which appellate caution is appropriate (Biogen Inc v Medeva Plc [1997] RPC 1 at 45). However, those additional facts have sufficient cogency to require us to examine the issue for ourselves (Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531 at 551-3).

34 The sole activity of the Jimbo's 4WD Tours business was the running of half-day tours to the natural areas of Norfolk Island, predominantly areas not easily accessible to buses and two-wheel drive cars. The tours were described as going to "the back of beyond". The essence of the promotional material was that the tourists would be taken to off-road locations. The emphasis was on the ecology and natural attractions of the island. It was a specialist tour.

35 There is no doubt, as the trial judge found, that the Jimbo's tour traversed many of the roads used by the Advance half-day tour. Both tours visited the eleven sites listed by the trial judge in the extract from his reasons reproduced at paragraph 20 above. However, the Jimbo's tour merely passed by many of the sites (for example, the Kingston convict buildings, St Barnabas' Chapel and All Saints' Church) en route to the next natural area. The Jimbo's tour was aimed at people interested in learning about the natural history of the island; it would not satisfy people interested in learning about its social history or historic buildings. In this situation, it seems to us, with respect, that it was not sufficient to determine the issue of similarity of the businesses merely by comparing the places to which each tour travelled. Although such a comparison is relevant, it is necessary, also, to consider the purpose and emphasis of each tour and the degree of their participants' involvement with each of the listed places. Similarly, it seems to us that the fact that the Jimbo's tour driver engages in four-wheel drive for only 10% to 20% of the total journey must be understood in the context that up to three-quarters of the total tour time was spent in off-road places not visited at all by the Advance bus.

36 Furthermore, there is a fundamental difference between the marketing of the two tours. They do not compete with each other. The Advance half-day tour is a relatively small, though not unimportant, part of a seven day group tour package compiled by Advance in association with an off-island tour wholesaler. The Advance half-day tour is available only to persons brought to the island as a group. By contrast, the Jimbo's tour is marketed on a retail basis, as a specialised tour, to people otherwise on the island. Group tour members are able, if they wish, to take the Jimbo's tour during one of their free half-days; and the evidence shows some have done this. Far from taking business away from Jimbo's 4WD Tours, to that extent Advance has brought business to them.

37 For these reasons, we think it is erroneous to say that the Advance business is a "business of a similar kind" to the business the subject of the sale. The evidence does not establish a breach by the Taveners of clause 6 of the agreement for sale of Jimbo's 4WD Tours.

DISPOSITION OF THE APPEAL

38 On one view, the orders made are unexceptionable, even if there has been no breach; clause 6 is enforceable in accordance with its terms, properly construed. Properly construed, the covenant would restrain the Taveners from operating a four-wheel drive tour business in Norfolk Island or a business of a similar kind to that previously carried on by the Taveners. However, they are not doing that. Since there has been no breach, or threatened breach, of the covenant, there is no basis for an injunction. The second order made by the trial judge must be set aside.

39 It will be recalled that the trial judge also made a declaration as to the enforceability of the covenant contained in clause 6. Since there has been argument between the parties about that matter, it may be desirable to retain a declaration in the orders disposing of the case. We think it is preferable, however, to expand the declaration made by the trial judge in such a way as to spell out its ambit, thus hopefully avoiding any future disputation. There should be a declaration in the following terms:

"Declare that clause 6 of the Agreement for Sale between the defendants as vendors and the plaintiffs as purchasers dated 8 January 1999, is valid and enforceable to restrain the defendants for a period of five years from 8 January 1999 from owning, participating or being employed in, operating in, engaging in (directly or indirectly, whether on the defendants' own account or in partnership or as shareholders in a company or by joint venture) a four wheel drive tour business in Norfolk Island or a business of a kind similar to that owned and carried on by the defendants immediately prior to 8 January 1999."

40 The situation in relation to costs is not clear-cut. Both parties have had some success on legal issues. The Taveners have succeeded as to the proper construction of clause 6 and the Sheridans have succeeded on the issue of enforceability. However, these issues occupied little time at either the trial or on appeal. On both occasions, the dominant issue was the alleged breach. The Taveners have succeeded on that issue. They should have the predominance of their costs, both of the trial and the appeal. In our opinion, it would be fair to order the Sheridans to pay 90% of the costs incurred by the Taveners in respect of both the trial and the appeal. There should be no order in respect of the reserved costs of the stay application. Having regard to the outcome of the appeal, there is no need for us to consider the Sheridans' complaint about the extent of the costs order made by the trial judge in their favour. The cross-appeal must be dismissed.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Wilcox, Emmett & Gyles.

Associate:

Dated: 7 March 2000

Counsel for the Applicant:	A Cook QC
Counsel for the Respondent:	M Cohen
Solicitor for the Respondent:	Tzovaras Yandell
Date of Hearing:	14 &15 February 2000
Date of Judgment	7 March 2000