Sprout Trading NSW Pty Ltd trading as Sprout Ag v PBH Trading Pty Ltd

Sprout Trading NSW Pty Ltd, trading as Sprout Ag, brought an action against PBH Trading Pty Ltd, alleging breach of a restraint of trade clause contained in a Services Agreement. The plaintiff sought a declaration that the defendants had breached the restraint clause, which bound them to certain obligations after the termination of the Services Agreement. The court had to decide whether the defendants breached the restraint clause by soliciting, canvassing, securing, or diverting former clients of the plaintiff. The court also had to determine whether the restraint clause was valid and reasonable under the Restraints of Trade Act 1976 (NSW), whether the plaintiff had a legitimate protectable interest, and if the second defendant knew most former clients personally before the Services Agreement was entered into.

The court examined the restraint clause and found that it was valid and reasonable, given the nature of the business and the relationship between the parties. The court held that the restraint clause did not capture a passive receipt of instructions from a former client but rather an active solicitation or diversion of clients. The court found that the second defendant breached the restraint clause by soliciting and securing most of the former clients of the plaintiff after the Services Agreement terminated. The court also found that a fiduciary duty existed between the plaintiff and the defendants, and that the second defendant breached this duty by doing work for former clients of the plaintiff.

The court held that the restraint clause was enforceable and that the second defendant breached it by actively soliciting and securing former clients of the plaintiff. The court found that the restraint clause was valid and reasonable, and that the plaintiff had a legitimate protectable interest in its client base. The court also held that the second defendant breached a fiduciary duty owed to the plaintiff by doing work for former clients of the plaintiff. The court granted the plaintiff a declaration that the defendants breached the restraint clause and ordered the defendants to pay damages to the plaintiff.