Blue Metal Industries Ltd v Dilley

The High Court of Australia heard an appeal concerning a dispute between Blue Metal Industries Ltd and Mr Dilley. The core of the disagreement revolved around the interpretation and enforceability of a restrictive covenant contained within a deed of settlement. Mr Dilley, a former employee, had agreed not to compete with Blue Metal Industries Ltd for a period of five years following his resignation.

The central legal question before the court was whether the restrictive covenant was void as being contrary to public policy, specifically on the grounds that it unreasonably restrained trade. The court was required to consider the scope and duration of the covenant and determine if it went beyond what was necessary to protect the legitimate business interests of Blue Metal Industries Ltd.

The court ultimately found that the restrictive covenant was indeed void and unenforceable. Their reasoning focused on the breadth of the restriction, which encompassed not only direct competition but also activities that were only indirectly competitive. The court applied the established legal principle that covenants in restraint of trade are presumed to be void unless the party seeking to enforce them can demonstrate that they are reasonable and go no further than is necessary to protect their legitimate business interests. In this instance, Blue Metal Industries Ltd failed to discharge this onus, as the covenant was considered too wide in its geographical scope and the range of activities it prohibited.