Case

Which case won?

casea
The case for wholesaler B
  • The restraint was reasonable. There was no evidence that the restraint was against the public interest or public policy.
  • V obtained a valuable commercial benefit as part of the deal, including our agreement not to import flowers from Kenya.
  • V agreed to the restraint and so did we. We both perceived the restraint to be to our mutual benefit.
  • The restraint was not anti-competitive. There was no evidence to indicate that the restraint had an effect on the market for the purchase of South American or Kenyan flowers.
  • There was no evidence to indicate that the restraint worked against either party's interests.
  • There was no evidence that the restraint unreasonably restricted competition between other parties or other vendors.
caseb
The case for wholesaler V
  • There was no agreement. We did not agree to those terms.
  • Even if there was an agreement, B repudiated it by selling flowers from Kenya.
  • Alternatively, B abandoned the agreement, as shown by the conduct of B in selling Kenyan flowers that it did not buy from us.
  • The restraint was unreasonable and very restrictive to our trading patterns.
  • While it may have been seen by the parties as beneficial to have mutual restraints against competition, that does not mean the restraints were valid.
  • Just because there were mutual restraints which were freely bargained for doesn’t mean the restraints were reasonable. In fact the restraints were unreasonable and breached public policy.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case B won. You were right!

How people voted
case a49%
case b51%

Expert commentary on the court's decision

Michael McHugh
Michael McHughLawyer
“This case shows that when parties come to an agreement, the bargain must be reasonable. If a dispute arises and the matter is heard before a court, a judge may find the arrangement to be unreasonable and in breach of legislation, even if the parties have agreed to it.”

In the case of Belflora Pty Ltd v Vinflora Pty Ltd [2021] NSWCA 178, the court found in favour of Vinflora Pty Ltd (wholesaler V) and dismissed the appeal brought by Belflora Pty Ltd (wholesaler B).  

The restraint was found to be unreasonable and in breach of legislation.

Grounds for Belflora’s appeal 

In the appeal, Belflora argued that the trial judge had erred by failing to apply section 41(1) of the Restraints of Trade Act. Section 4(1) outlines that restraints which are not wholly unreasonable are valid, as long as they do not contradict public policy.  

Belflora claimed that if section 4(1) of the Restraints of Trade Act had been applied, the court would have found the restraint from Belflora to be valid and not against public policy.   

However, the Court of Appeal found that the judge in the original proceedings had not erred in not considering section 4(1). Furthermore, it found that if he had considered it, the restraint still would have been found to be unreasonable, as it was against the public interest. 

Restraint found to be both vertical and horizontal

The court found that the agreement between Belflora and Vinflora was plainly a restraint of trade. It operated vertically, limiting the exporters and wholesalers from which Vinflora could purchase flowers.  

The restraint also operated horizontally, by restricting the trading activities between the two businesses which would otherwise be in competition with each other. This restricted the liberty of the parties to conduct their dealings with third parties as they saw fit. 

Did the restraint breach public policy?

At common law, a restraint of trade is contrary to public policy and void, unless it is reasonably necessary to protect the interests of the parties and is in the interests of the public. A mere restraint against competition per se, is unenforceable.  

An agreement that had the effect not only of prohibiting Vinflora from completing against Belfora, but also from competing in the market for the supply and sale of South American flowers generally, could not be said to be in the public interest. 

Ultimately the court found that the restraint was wholly unreasonable and therefore it was void.  

The appeal was dismissed and Belfora was ordered to pay Vinflora’s costs of the appeal. 

Tread carefully when creating a restraint of trade

It is so important to discuss with your lawyer any agreement which may be considered a restraint of trade, whether it be in an employment contract, or within a business dissolution or sale as in this case.  

The court is very strict on ensuring that people have the liberty to trade freely and that agreements between people or businesses do not hinder the availability of products or services on the market. 

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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