Restraint of trade in settlement deeds

A "restraint of trade" clause in a contract seeks to restrain a person from conducting certain types of business or commercial activities. The law says that the restraint is unenforceable, unless it is reasonable for the protection of the legitimate commercial interests of the person trying to enforce it. Disputes often arise about whether a restraint is enforceable or not.

But what happens if there is a dispute about the restraint, and then the parties resolve that dispute by a settlement agreement which restates or varies the restraint of trade clause? Is that clause in the settlement agreement also subject to the law of restraints, or is it treated differently?

A recent NSW Court of Appeal decision considered that issue and found that the doctrine does apply to restraints imposed in settlement agreements, even where such agreements are "genuine and proper compromises" of disputes. In cases where the settlement concerns a controversy about a restraint of trade,