Gerlach v Borglund

In *Gerlach v Borglund* [1997] NSWCA 122, the New South Wales Court of Appeal considered a dispute between the appellant, Gerlach, and the respondent, Borglund, concerning the interpretation and enforceability of a written agreement. The agreement in question related to the sale of a business and contained a restraint of trade clause.

The primary legal issue before the Court of Appeal was whether the restraint of trade clause within the agreement was reasonable and therefore enforceable. This involved determining whether the scope of the restraint, in terms of its geographical reach and duration, went no further than was necessary to protect the legitimate interests of the purchaser of the business.

The Court analysed the 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. Reasonableness is assessed by considering the interests of the parties and the interests of the public. The Court found that the restraint, as drafted, was wider than necessary to protect the purchaser's legitimate business interests and was therefore void. The Court applied the principles established in cases such as *Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd* and *Herbert Morris Ltd v Hancock*.

The Court of Appeal allowed the appeal, setting aside the orders of the court below and ordering that the plaintiff's claim be dismissed.