Bailey Aluminium Products Pty Ltd v Stephenson

The New South Wales Court of Appeal considered a dispute between Bailey Aluminium Products Pty Ltd and Stephenson. The core of the disagreement concerned the interpretation and enforceability of a restraint of trade clause contained within an employment contract.

The Court was required to determine whether the restraint of trade clause, which sought to prevent the former employee, Stephenson, from engaging in competitive activities for a specified period and within a defined geographical area after his employment ceased, was reasonable and therefore legally enforceable. This involved assessing whether the clause went beyond what was necessary to protect the legitimate business interests of Bailey Aluminium Products Pty Ltd.

The Court applied the established legal principles governing restraints of trade, which are presumed to be void as contrary to public policy unless the party seeking to enforce them can demonstrate their reasonableness. Reasonableness is assessed by considering the interests of the parties and the public. The Court examined the scope of the restraint in terms of its duration, geographical reach, and the nature of the activities prohibited, weighing these against the employer's need to protect its proprietary interests, such as trade secrets and customer connections. The Court found that the restraint was wider than necessary to protect the employer's legitimate business interests and was therefore unreasonable and void.

Consequently, the Court of Appeal dismissed the appeal, upholding the primary judge's decision that the restraint of trade clause was unenforceable.