Goodwill and the Cascading Restraint
The preservation of “Location Goodwill” & “Personal Goodwill”
I will briefly deal with some issues concerning the component parts of the Business and their treatment.
While there have been many attempts at properly defining what Goodwill is, the Osborne Law Dictionary states that it is “the benefit or advantage which a Business has in a connection with its customers”. This is probably the most succinct. Those customers were given animal-like qualities by Rich J in FCT v Williamson  67 CLR 561 as cats, dogs, rats and rabbits.
“The cat prefers the old home to the person who keeps it, and stays in the old home although the person who has kept the home leases, and so it represents the customer who goes to the old shop whoever keeps it, and provides local goodwill. The faithful dog is attached to the person rather than the place; he will follow the outgoing owner if he does not go too far. The rat has no attachments, and is purely casual. The rabbit is attracted by mere propinquity. He comes because he happens to live close by and it would be more trouble to go elsewhere.”
Following from the above the common types of Goodwill sought by a Purchaser are “location Goodwill” and “personal Goodwill”. The preservation of this is dealt with by restraints which are given by the vendor and key persons. The limit of these restraints and the intention of the Vendor following completion should be ascertained at an early time to ensure that there are no issues with negotiation.
The continued use of cascading restraints in tailored contracts remains popular, however there is always an issue with such a clause as to whether it is too vague and uncertain to be enforceable.
Young J in Tyser Reinsurance Brokers Pty Limited v Cooper  NSWSC 689 said:
“… There are very real difficulties with a (cascading) clause in that form. The restraint period should not differ depending on what a Court should hold.”
The recent cases were considered by Hammerschlag J in OAMPS Insurance Brokers Pty Limited v Peter Hanna  NSWSC 781 and the Judge followed a Queensland Court of Appeal decision JQAT Pty Limited v Storm  2 Qd. R 162 upholding the particular cascading restraint. In both cases there was a further Clause confirming that each restraint constituted a separate and independent provision severable from the others and any invalidity found by a Court would not prejudice the validity or enforce the validity of the other resulting subclauses. The Court said such a Clause did not result in an inconsistency of a kind that will result in uncertainty.
The case considered by Young J (above) did not have such a provision so it would certainly seem that the cascading restraint must be coupled with such a Clause as it is in the tailored precedents available.
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