Post Employment Restraint of Trade

In order to protect your legitimate interests and restrain others from engaging in contractually restricted activities you may need to litigate a restraint of trade type dispute. Alternatively, if you promised not to do something in a contract with another party, and you cannot resolve the issue you may need a court to determine whether the restraint was reasonable in the circumstances e.g. post employment restraints. 

Restraint of trade disputes typically take place in the Supreme Court of NSW when injunctive relief is sought to restrain a particular activity. Essentially then a restraint of trade dispute arises when those who have the benefit of a covenant, typically restricting an activity, and those who owe the obligation are in conflict. These disputes arise in a multitude of scenarios and contexts including:- employers and employees, business vendors and sellers, and partnerships and so on.

Potential Scenarios - in Restraint of Trade Matters

  • Sale of Business - there might be a restraint to protect your goodwill so as to prevent the vendor of a business sold to you from opening a similar business.
  • Employer and Employee - there might be a restraint preventing an employee from working within a particular industry within a specific location for a defined number of years.
  • Supply of Goods - a convenant that requires a business to only buy your products and only sell your products could lead to a dispute about the validity of the restraint.
  • Partnerships - when partners fall out and there are clauses in the partnership agreement about what may, or may not be engaged in post determination and the former partner then engages in that activity there could be conflicting views about the validity of the restraint.

Important Quotes in Disputes on Restraint of Trade

"The test to be applied in determining the validity of a restraint of trade was stated by Lord Macnaghten in Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd. [41] , in a passage that has been cited with approval in many cases including, to name only recent decisions, Esso Petroleum Co. Ltd. v. Harper's Garage (Stourport) Ltd. [42] , and Buckley v. Tutty [43] . Lord Macnaghten said:All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable — reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public." - Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd [1973] HCA 40

Let Us Help You

  • Understand the precise scope and effect of the restraint;
  • Consider whether the restraint is likely to be upheld or not by reference to the extent of it, the duration of it, its geographic area and so on;
  • Know the approach taken by the Courts to different contexts such as employment agreements, sale of business agreements and partnership agreements;
  • Approach the court for injunctive relief when a restraint is being breached (or likely to be breached);
  • Defend an application for the enforcement of a restraint when it goes beyond what is necessary to protect the legitimate interests of the person who has its benefit.

* Disclaimer:- This publication contains general information which may not suit your particular needs or circumstances. It may be summarised and include generalisations. Details that may be important in your specific circumstances might not be included. Litigant strives to ensure that the information in this publication is accurate and up-to-date, but does not represent or guarantee that it is accurate, reliable, current, complete or suitable. You should independently evaluate and verify the accuracy, reliability, currency, completeness and suitability of the information, before you rely on it. The information in this publication is not legal or other professional advice. You should obtain independent legal or professional advice that is tailored to your particular circumstances if you have concerns. To the maximum extent permitted by law, Litigant excludes liability for any loss, however caused (including by negligence), relating to or arising directly or indirectly from using or relying on any content in this publication. Litigant asserts copyright over the content of this publication.