The Western Australian Supreme Court has granted injunctive relief in a case concerning a 10-year restraint of trade clause. In his 8 February 2017 decision in Devil Dog Pty Ltd v Cook  WASC 27, Justice Paul Tottle temporarily barred a highly-specialised hydraulic engineer from working with any competitors in WA.
The defendant sold his stake in Matchtec Hydraulics in 2014, but remained an employee until his resignation in June 2016. The company was sold for $650,000, with $588,700 apportioned to goodwill. The defendant commenced work with a competing hydraulic engineering business in July 2016, and is alleged to have been soliciting former customers.
The common law position applicable in Western Australia considers all contracts in restraint of trade void unless the restraint is reasonable, with the onus on the party wishing to enforce the restraint to prove reasonableness. In his provisional assessment, Justice Tottle considered the ability of the defendant to find employment in other fields, the goodwill purchased in the sale of Matchtec, the strength of the defendant’s personal connection with the customers of Matchtec and the fact the 10-year restraint had been agreed between the parties when the business was sold. Citing these three distinct factors, Justice Tottle found the decade long restraint clause to be prima facie reasonable, “albeit one not without some difficulty.”
While commonly dismissed as unenforceable, this decision demonstrates that the courts will enforce properly crafted restraint of trade clauses, particularly those imposed upon the vendor of a business. Accordingly, it is of paramount importance that restraint clauses are drafted with regard to the particular facts and circumstances of the matter, and the relevant jurisdiction. As evidenced by this interlocutory decision, all too often it is the drafting of the clause that causes the restraint to come unstuck, rather than the period or geographic parameters of the restraint.
The reasonableness of the 10-year restraint clause, in addition to a number of factual matters, will be further tested when the case goes to trial in April.