Restraint of trade clauses and urgent injunctions

23 February 2023

Case note: Airmaster Corporation Pty Ltd v Mohtadi [2022] VSC 822

In Airmaster Corporation Pty Ltd v Mohtadi [2022] VSC 822, the Supreme Court of Victoria recently granted an application for an urgent injunction to restrain a former director from (as it is claimed) acting in breach of his contractual restraint of trade.

Significantly, Giannane J ordered the Defendant be restrained for the maximum stipulated period in a cascading restraint clause, or alternatively until the hearing and determination of the proceeding (whichever comes first).

The interlocutory injunction was granted despite the defendant’s objection that doing so would have the practical effect of reversing the presumption that restraints are not enforceable unless proved otherwise, although subject to the plaintiff’s undertaking as to damages.


The plaintiff, Airmaster Corporation Pty Ltd (Airmaster), is an Australian company which carries on an integrated services business involving the supply of heating, ventilation and air-conditioning, refrigeration, building controls and fire protection equipment and services including maintenance services.

The defendant, Mr Mohtadi, founded the Specialised Fire Protection business in 2013 and was its Managing Director. Mr Mohtadi and his wife, Ms Amar Mohtadi, were ultimate owners of the company that owned that business.

Airmaster’s purchase of the Specialised Fire Protection business on 19 April 2021. The purchase price paid was $10,253,745.24, including $5,116,741.69 attributed to good will, $3,369,000.00 to customer relationships and $290,000.00 to the brand name.

The sale of the Specialised Fire Protection business was evidenced and implemented by two agreements, the first being the Sale of Business Agreement and the second the Employment Agreement.

Under the Employment Agreement, Mr Mohtadi was:

  • to be employed as Specialised Fire Protection’s National Integrated Services Manager;
  • to be paid a commencing annual salary of $225,000 with the potential for bonuses, together with the use of a fully maintained motor vehicle;
  • to employed for a term of five years, although he had a right to terminate it on six months’ notice; and
  • not to compete with the Specialised Fire Protection business for six months after the termination of the agreement.

Mr Mohtadi’s employment was terminated on 30 November 2022, however the restraint of trade clause in the Sale of Business Agreement expired in April 2024.

Airmaster filed an urgent application to the Supreme Court of Victoria claiming that Mr Mohtadi breached the restraints contained in the Sale of Business Agreement and the Employment Agreement by his association with Pinnacle Fire Services Pty Ltd. The sole director of that company is Mohamed Rabia Chaaraoui, who Airmaster alleges is Mr Mohtadi’s accounting advisor, including in connection with the Sale of Business Agreement and is Mr Mohtadi’s cousin.

Airmaster contends that, since 9 May 2022, Mr Mohtadi essentially managed Pinnacle Fire. It claimed that he:

  • received reports on the progress of Pinnacle Fire;
  • had direct contact with Pinnacle Fire’s customers;
  • attempted to conceal his involvement with Pinnacle Fire;
  • had a Pinnacle Fire e-mail address; and
  • used Airmaster’s resources during working hours to conduct business for the benefit of Pinnacle Fire.

Airmaster filed expert IT evidence showing e-mails to the effect above (most of which needed to be retrieved as they were deleted).

Legal principles applied by the Court

The principles governing restraints can be summarised as follows:1

  • A restraint of trade clause is presumed to be void as contrary to public policy. This presumption may be rebutted if there are special circumstances that demonstrate the restraint to be:
    • reasonable as between the parties; and
    • not unreasonable in the public interest.
  • The concept of reasonableness varies depending on the situation and context of the contracting parties.
  • The person seeking to enforce the restraint clause has the onus of establishing the ‘reasonableness between the parties.’

Here, Ginnane J observed that the policy against restraints of trade is more strictly applied in employment agreements than in a sale of business agreement. This is because a person who is buying a business is paying for the goodwill and therefore entitled to ensure that the goodwill of the business is protected from the outgoing former-owner. The goodwill of the business is therefore seen as a legitimate interest worthy of protection against rival competition.

In the case here where the restraint was contained in both a sale of business agreement and an employment contract, the Court viewed the employment contract was a part of the overall business sale transaction, and was therefore more inclined to grant the injunction.

Therefore, by reason of the above Ginnane J concluded that:

  • the $10M purchase price was given significant weight in assessing reasonableness;
  • there was a serious question to be tried as to the enforceability of the restraint of trade clause; and
  • Mr Mohtadi’s claimed involvement in both the Specialised Fire Protection business and the Pinnacle Fire business meant that damages would be difficult to ascertain,

and therefore determined that the balance of convenience weighed in favour of granting the injunction and ordering that Mr Mohtadi be restrained from acting in competition with Airmaster until the matter had been finally determined at trial, or 19 April 2024 (whichever comes first).


As this decision shows, the enforceability of restraint of trade clauses is and remains a contentious area. It is therefore important to not only have a correctly drafted restraint clause in contracts, but even more importantly to seek the proper advice on what options are available to you. As in Airmaster’s case, circumstances may allow for the granting on an urgent injunction seeking to protect your good will.

Contact us

If you would like to know more about the recent decision, or would like to discuss any aspects of restraint of trade clauses and urgent injunctions, please contact a member of our Litigation & Dispute Resolution team.


1. Just Group Ltd v Peck [2016] VSCA 334.

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