Restrictive covenant was justified to protect franchisor’s know-how – Pirtek v Joinplace, High Court

P had granted a 10 year franchise agreement to X. Following the termination of the agreement, the franchisee and others were involved in competing with P’s business. P alleged that this was in breach of a restrictive covenant not to compete with P’s business for a limited period of time. P obtained an injunction to stop them doing so. The others claimed that the restrictive covenant should have been void and they had suffered loss arising out of the injunction.

The High Court sided with P. The level of know-how and assistance provided by P to its franchisees totally justified the restrictive covenants. The restrictive covenants were no more than necessary to protect P’s business. Those provisions were therefore not void at common law or contrary to competition law as they were essential to maintain P’s goodwill. The injunction was justified and the other side’s claim for damages was dismissed.