Alsons Pty Limited v Sunpost Pty Ltd

Alsons Pty Limited (the appellant) appealed to the New South Wales Court of Appeal against a decision of the Supreme Court of New South Wales. The dispute concerned the interpretation and enforceability of a restraint of trade clause contained within a contract for the sale of a business. The appellant sought to restrain the respondent from carrying on a competing business within a specified area and for a specified period following the sale.

The primary legal issue before the Court of Appeal was whether the restraint of trade clause was reasonable and therefore enforceable. This required the court to consider the scope of the restraint, including its geographical reach and duration, in relation to the legitimate interests of the purchaser of the business, namely the protection of the goodwill and customer connections acquired. The court also had to determine if the restraint went beyond what was necessary to protect those interests and thus constituted an unreasonable restriction on the respondent's ability to earn a living.

The Court of Appeal applied the established legal principles governing restraints of trade, which are presumed to be void as contrary to public policy unless they can be shown to be reasonable. The court examined the nature of the business sold, the extent of the goodwill, and the specific activities sought to be restrained. It considered whether the duration and geographical scope of the restraint were no wider than necessary to protect the goodwill of the business. The court found that the restraint, as drafted, was wider than reasonably necessary to protect the appellant's legitimate interests and was therefore void and unenforceable.

Consequently, the appeal was dismissed, and the orders of the Supreme Court were affirmed.