Skellerup Rotocure Limited v Chadwick Industries Pty Ltd

Skellerup Rotocure Limited (the appellant) appealed to the New South Wales Court of Appeal against a decision of the Supreme Court of New South Wales. The dispute concerned the interpretation and enforceability of a restraint of trade clause contained within an employment agreement between the appellant and Mr. Chadwick (the respondent).

The primary legal issue before the Court of Appeal was whether the restraint of trade clause, which sought to prevent Mr. Chadwick from engaging in a competing business for a specified period and geographical area after his employment ceased, was reasonable and therefore legally enforceable. This involved considering whether the clause went beyond what was necessary to protect the legitimate business interests of Skellerup Rotocure Limited.

The Court of Appeal, applying established common law principles regarding restraints of trade, found that the clause was unreasonably wide in its scope. It reasoned that the duration and geographical extent of the restraint were not justified by the nature of the appellant's business or the position held by Mr. Chadwick. The court emphasised that restraints of trade are prima facie void and will only be upheld if the party seeking to enforce them can demonstrate their reasonableness in protecting legitimate business interests, such as trade secrets or customer connections, and that such protection is not unduly burdensome on the restricted party.

The appeal was dismissed, and the restraint of trade clause was declared unenforceable.