Farina & Lofts and Ors

This matter concerned an application by the plaintiffs, Farina & Lofts and Ors, for an interlocutory injunction to restrain the defendant, Mr. John L. Smith, from continuing to operate a business known as "Smith's Butchery" in competition with the plaintiffs' business. The plaintiffs alleged that Mr. Smith was in breach of a restraint of trade clause contained within a contract for the sale of his butchery business to them. The application was heard by Carew J in the Supreme Court of New South Wales.

The central legal issue before the Court was whether the restraint of trade clause was reasonable and therefore enforceable. Specifically, the Court had to consider the geographical scope and duration of the restraint, and whether it went beyond what was necessary to protect the legitimate business interests of the plaintiffs. The plaintiffs contended that the restraint, which prohibited Mr. Smith from operating a butchery within a five-mile radius of the sold business for a period of three years, was necessary to prevent him from soliciting their customers and undermining the goodwill they had purchased.

Carew J applied the well-established principles governing restraints of trade, noting that such clauses are prima facie void as being contrary to public policy unless they can be shown to be reasonable. The Court considered the nature of the business, the area in which it operated, and the duration of the restraint. His Honour found that the five-mile radius was not unduly restrictive given the nature of a local butchery business and the established customer base. Furthermore, the three-year period was considered a reasonable time for the plaintiffs to establish their own goodwill and for the defendant's former customers to transfer their allegiance. The Court concluded that the restraint was no wider than necessary to protect the plaintiffs' legitimate interests in the goodwill of the business they had acquired.

Consequently, Carew J granted the interlocutory injunction sought by the plaintiffs, restraining Mr. Smith from operating his butchery business within the specified radius for the stipulated period.