Fadu Pty Ltd (ACN 007 815 090) v ACN 008 112 196 Pty Ltd as Trustee of the "International Linen Service Unit Trust"

The case of Fadu Pty Ltd (ACN 007 815 090) versus ACN 008 112 196 Pty Ltd as Trustee of the "International Linen Service Unit Trust" was presented before the court, which had to determine the reasonableness of non-compete clauses in a Heads of Agreement between the two parties. The central issue was whether the five-year non-compete clauses regarding both laundry hire and dry cleaning services were reasonable and, if not, how the court should address the matter.

The court was required to decide on the reasonableness of the non-compete clauses given the nature of the industry, its contracting practices, and the specific circumstances of the goodwill of Old Co. The court had to balance the need to protect the goodwill and established customer connections of Old Co against the broader public interest and the potential for undue restraint on trade. Specifically, the court examined the evidence provided to determine if a five-year period was necessary to protect the goodwill of Old Co or if it unduly restricted the freedom to trade of the parties involved.

In its reasoning, the court found that the five-year non-compete clause concerning laundry hire services was unreasonable, as it provided more than adequate protection to the respondents and was injurious to the public. Regarding the dry cleaning services, the court concluded that the clause was ambiguous and did not clearly define the scope of the restraint. The court was not prepared to infer the intended meaning of the clause based on the evidence provided, and thus, could not uphold the clause as reasonable. The court also noted the significance of the goodwill of Old Co, which was partly attributable to the Nemer family's involvement and reputation in the industry. However, the court found that the clauses as drafted went beyond what was necessary to protect this goodwill.

The court issued orders requiring the parties to provide minutes of the order reflecting the court’s findings and conclusions within seven days, and to file and serve submissions regarding costs within the same timeframe.