2nd Chapter Pty Ltd v Sealey (No 2)

The case of 2nd Chapter Pty Ltd v Sealey (No 2) was heard in the Supreme Court of New South Wales. The case involved a dispute regarding the enforceability of restraint of trade clauses in a sale and purchase agreement (SPA) for a business. The primary issue was whether the restraints imposed by the agreement were reasonable and enforceable, considering the legitimate interests of the parties involved.

The court had to determine if the restraints went no further than reasonably necessary to protect the interests of the party in whose favour they were imposed, and if the duration of the restraint was reasonable. Additionally, the court examined whether the restraints were geographically reasonable and whether they were severable from other provisions in the agreement. The court applied the principles set out in Wallis Nominees (Computing) Pty Ltd v Pickett (2013) 45 VR 657, and Just Group Ltd (ACN 096 911 410) v Peck (2016) 344 ALR 162.

The court found that some of the restraints were unreasonably wide and not severable from the rest of the agreement. Therefore, these restraints were not enforceable. The court also held that the employees did not breach their employment contracts by negotiating to be employed by another employer in the future, signing an employment contract to that effect, and failing to inform their employer of those matters until after their resignation. The court concluded that no repudiatory breach had been established.

As a result of the court's findings, the unenforceable restraints were severed from the rest of the agreement, and the agreement was enforced with the invalid provisions removed. The court did not make any orders regarding the employees' conduct.