Connective Services Pty Ltd & Anor v Slea Pty Ltd & Ors

The High Court of Australia considered a dispute between Connective Services Pty Ltd and its related entities (the appellants) and Slea Pty Ltd and its related entities (the respondents). The core of the dispute concerned the enforceability of certain restrictive covenants contained within a franchise agreement. The respondents, who were former franchisees of the appellants, sought declarations that these covenants were void and unenforceable.

The primary legal issue before the High Court was whether the restrictive covenants, which purported to prevent the respondents from engaging in a competing business for a period after the termination of their franchise agreements, were void for being an unreasonable restraint of trade. This required the Court to assess the scope and duration of the covenants against the legitimate interests of the franchisor to protect its business.

The High Court determined that the restrictive covenants were indeed void as an unreasonable restraint of trade. The Court applied the established legal principles governing restraints of trade, which require such covenants to be no wider than is reasonably necessary to protect the legitimate business interests of the party seeking to enforce them. In this instance, the Court found that the covenants extended beyond what was reasonably necessary to protect Connective's interests, particularly in relation to the breadth of activities prohibited and the geographical scope of the restrictions. The Court reasoned that the restrictions imposed were overly broad and would unduly prevent the respondents from earning a livelihood in their chosen field, without a corresponding justification based on the protection of Connective's proprietary interests.

The High Court allowed the appeal, setting aside the orders of the Full Federal Court and declaring the restrictive covenants to be void and unenforceable.