Label Manufacturers Australia Pty Ltd v Chatzopoulos

The applicant, Label Manufacturers Australia Pty Ltd, sought to enforce a restraint of trade clause against the respondent, Mr Chatzopoulos, who had been employed as a sales executive. The clause prevented Mr Chatzopoulos from being involved with any business that competed with or was similar to the applicant, or from soliciting the applicant’s customers, potential customers, suppliers, and potential suppliers. The dispute arose after Mr Chatzopoulos left the applicant’s employment and started working for a competitor in Victoria. The applicant brought proceedings in the Supreme Court of New South Wales to enforce the restraint of trade clause.

The central legal issues were whether the restraint of trade clause was enforceable and whether it applied to Mr Chatzopoulos’s activities in Victoria. The court had to consider the reasonableness of the restraint of trade clause under the Restraints of Trade Act 1976 (NSW) and whether the restraint applied to Mr Chatzopoulos’s employment with the competitor in Victoria. The court also needed to determine whether the restraint of trade clause transferred to the new entity when the employment was transferred.

The court held that the restraint of trade clause was reasonable in its scope, geographical limitation, and duration. It was necessary to protect the applicant’s legitimate business interests, including its customer relationships and goodwill. The court found that the clause applied to Mr Chatzopoulos’s activities in Victoria, as the restraint was not limited to the place where the contract was made or performed. The court rejected the argument that the restraint of trade clause did not transfer to the new entity when the employment was transferred, as the clause was personal to Mr Chatzopoulos and not dependent on his employment with the applicant.

The court granted an interlocutory injunction restraining Mr Chatzopoulos from being involved with any business that competed with or was similar to the applicant, or from soliciting the applicant’s customers, potential customers, suppliers, and potential suppliers in Victoria. The court also ordered Mr Chatzopoulos to provide an undertaking as to his future conduct and to pay the applicant’s costs of the proceedings.