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James D. Ford
James D. Ford, Solicitor
Category: Australia Law
Satisfied Customers: 1601
Experience:  Consulting Principal at Nexus Law Group
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I would like some advice with regards to Restraint of Trade

Customer Question

Hello,
I would like some advice with regards ***** ***** of Trade obligations. 21 months ago I purchased a small business which caters for the tourist trade and to locals, the business includes a café, antiques and gift shop. I lease the building from the previous owners and I consider that I pay a premium lease amount each month. The Sale of Business contract included a Restraint of Trade on the previous owners for a 20 kilometre radius for 3 years from settlement.
Since I have purchased the business there has been a downward trend in retail particularly in this area (which is a main popular tourist route in SE Qld). The business figures which I was provided with had showed a slowing in trade in the previous 6 months before I purchased the business.
I have given information from a customer who while not a direct local, has a number of friends that are local in the area. the previous owner and her mother while attending a local ladies group announced that the business was going downhill.
this information has caused me some concern, given that the local trade has seemed to diminish over the past 6 months and also that the previous owner is under a Restraint of Trade which prevents them from having dealings with previous staff, suppliers and customers, but that they also receive income from the Lease of the building and I feel they should be supporting the business at the local level.
Is this something I can or should be doing about this, they have effectively bad mouthed the business which could be causing local customer away.
Thanks
Debbie
Submitted: 1 year ago.
Category: Australia Law
Expert:  James D. Ford replied 1 year ago.

Hi Debbie

I understand that there is a Restraint of Trade clause.. however, the general nature of these clauses is that they restrain the vendor from opening up a competing business, or participating in a competitor business within the restraint area for the restraint period.

From what you have described, the Vendor is not competing against the business.

In my view, the cause of action you might have relates to a breach of confidentiality clause within the Contract, and/or the lease that would operate to prevent the vendor/landlord from sharing information regarding the business.

I would need to see the Sale of Business Contract, and the Lease to advise further.

Outside of this, it could be a case of defamation. However, it is a defence to defamation if it is the truth, or a "fair comment".. hence the above breaches, in my opinion would be your best way forward.

As such, your next step, once we are confident that there are breaches, is to send the LL a written warning letter.. regarding their actions, requesting they cease and desist immediately from repeating this conduct. It would state that you reserve your legal rights with respect to the breaches.

Please let me know if you want to investigate the potential claim for breach of confidentiality further, via my provision of legal services - starting with a review of the relevant docs, and feedback via a phone call. I will send you an offer of additional service...

Kind regards, James