Power of restraint of trade clauses reinforced in Queensland Supreme Court decision

A recent Queensland Supreme Court decision on the enforceability of restraint of trade clauses in a contract is a reminder of their value in protecting a business.

The decision in City Fertility Sydney CBD Pty Ltd v Reims Investments Pty Ltd & Anor underscores the importance of precise drafting in contracts involving professional services.

Restraint of trade provisions, when balanced and linked to legitimate business interests, can be enforceable and protect businesses from unfair competition following the departure of key personnel.

Background to the dispute

City Fertility Sydney CBD Pty Ltd (formerly CFC Global Pty Ltd) entered into a services agreement with Reims Investments Pty Ltd, the corporate entity of an experienced IVF clinician, Dr Simone Campbell. Under the contract, Reims Investments provided IVF services through Dr Campbell, while City Fertility operated clinics and provided laboratory support. The agreement included fee arrangements, termination provisions and post-termination restraints.

The contract required City Fertility to pay “Cycle Management Fees” for procedures such as Egg Pick Ups (EPU) and Frozen Embryo Transfers (FET). These payments reflected services Dr Campbell could not bill directly to patients under Medicare. A dispute arose when the respondents claimed that City Fertility had underpaid fees between 2023 and 2024 by failing to apply annual fee increases correctly.

Initial correspondence alleged an underpayment of $18,048.80, later revised to $6,924.50. City Fertility denied any breach, maintaining that its calculations complied with the contractual formula. The respondents issued notices to remedy and sought to terminate the agreement. City Fertility, in turn, alleged repudiation and sought to enforce the restraints.

Court’s findings on breach and termination

Justice Copley found that City Fertility’s interpretation of the contract was correct and that the applicant had not breached its payment obligations. Because there was no breach, the respondents’ notices to remedy were invalid and their purported termination ineffective.

In the circumstances, City Fertility validly accepted the respondents’ repudiation of the agreement and terminated the contract. This finding was critical, because the contract provided that its restraint clauses would not apply if termination arose from an unremedied breach by City Fertility.

The restraint of trade clauses

The restraint provisions prevented the respondents from:

• providing IVF clinician services to patients with whom Dr Campbell had prior dealings (restricted or prospective patients) for 12 months;
• performing IVF services within a 50-kilometre radius of City Fertility’s Newstead and Sunnybank clinics for 12 months; and
• soliciting City Fertility’s patients for 12 months.

The respondents argued that the restraints were excessive, contrary to public policy and unnecessary to protect City Fertility’s interests.

Justice Copley disagreed. The Court accepted evidence that IVF clinics require significant financial investment of approximately $6 million in fit-out costs and $1.5 million in specialised equipment, and that IVF treatments often involve patients over an extended period, sometimes several years. Protecting those patient relationships and the goodwill built around City Fertility’s services was held to be a legitimate business interest.

The restraints were found to be reasonable because they were:

• limited in time (12 months);
• confined to a defined geographic area (50 kilometres); and
• directed at preserving patient relationships developed through City Fertility's platform.

The Court granted an injunction restraining the doctor's service entity, and the doctor personally, from undertaking activities contrary to the restraints.

Practical lessons for businesses

This decision provides several important reminders for businesses entering into contracts with professional service providers:

1. Corporate-to-corporate contracts can effectively bind individuals
   Here, the agreement was between two corporate entities, but the obligations clearly extended to the individual practitioner. Businesses should ensure their contracts capture both the service entity and its key personnel.
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2. Restraints must be carefully drafted
   The enforceability of restraints depends on their reasonableness in scope, duration and geography. Clauses that are too broad are vulnerable to challenge. Tailoring them to legitimate business interests such as protecting investment in infrastructure, goodwill and patient or client relationships will increase their likelihood of being upheld.
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3. Termination provisions are critical
   In this case, the restraints would not have applied if the respondents had validly terminated the contract for breach. Careful drafting of termination triggers and notice requirements is essential to preserve rights under post-termination clauses. Similarly, a practitioner seeking to terminate agreement should consider the circumstances carefully before issuing a termination notice or claiming a fundamental breach.
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4. Injunctions remain a powerful tool
   The Court confirmed that damages may not always be an adequate remedy where goodwill and patient relationships are at stake. Businesses seeking to enforce restraints should consider injunctive relief to protect their position.

Conclusion

The case serves as a timely reminder to review service agreements, ensure payment and termination mechanisms are clear, and tailor restraints to the business’s genuine commercial needs.

For assistance on restraint of trade issues, please contact our Employment, Workplace Relations and Safety team.

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