Jaycar Pty Limited v Lombardo

Jaycar Pty Limited (Jaycar) sought an interlocutory injunction against Mr. Lombardo to restrain him from continuing to operate a business selling electronic components and related goods in competition with Jaycar. Jaycar alleged that Mr. Lombardo had breached his obligations under a restraint of trade clause contained within a deed of settlement entered into between the parties. The matter came before Bell J of the Supreme Court of New South Wales.

The central legal issue before the Court was whether the restraint of trade clause, as drafted, was reasonable and therefore enforceable. Specifically, the Court had to consider whether the geographical scope and duration of the restraint were no wider than necessary to protect Jaycar's legitimate business interests, or if they imposed an unreasonable burden on Mr. Lombardo's ability to earn a living.

Bell J found that the restraint of trade clause was unreasonably broad in its geographical scope, extending to the entirety of Australia. His Honour reasoned that Jaycar's legitimate business interests, such as its customer connections and confidential information, were primarily confined to the areas where it actively traded and had a significant presence, not the entire nation. The Court applied the established legal principles governing restraints of trade, which require such clauses to be no wider than necessary to protect a party's proprietary interests and not to be contrary to public policy. As the restraint was found to be wider than necessary, it was deemed void and unenforceable.

Consequently, Bell J dismissed Jaycar's application for an interlocutory injunction.