Mikasa (NSW) Pty Ltd v Festival Stores

The High Court of Australia considered an appeal from a decision of the Supreme Court of New South Wales concerning a dispute between Mikasa (NSW) Pty Ltd and Festival Stores. The core of the disagreement revolved around the interpretation and enforceability of a restraint of trade clause contained within a lease agreement.

The central legal issue before the High Court was whether the restraint of trade clause, which purported to prevent the tenant, Festival Stores, from conducting a business similar to that of the landlord, Mikasa (NSW) Pty Ltd, within a specified radius and for a defined period after the lease expired, was void as being contrary to public policy. The court was required to determine if the restraint was reasonable in its scope, duration, and geographical extent, and if it went beyond what was necessary to protect the legitimate interests of the landlord.

The High Court, in its judgment, applied established principles of contract law relating to restraints of trade. The court acknowledged that while such restraints are prima facie void, they may be upheld if they can be shown to be reasonable in the interests of both the parties and the public. In this instance, the court found that the restraint imposed by the lease was wider than necessary to protect Mikasa (NSW) Pty Ltd's legitimate business interests. The geographical scope and the nature of the restricted activities were considered to be overly broad, thereby unduly restricting competition and the freedom of Festival Stores to conduct its business. The court reasoned that the onus was on the party seeking to enforce the restraint to demonstrate its reasonableness, and this onus had not been discharged.

Consequently, the High Court upheld the Supreme Court's decision, finding the restraint of trade clause to be void and unenforceable.