Restraints of trade in practice

Yesterday, I published a blog about the principles which govern restraints of trade. I did so by quoting from a summary of the current law on that issue by Justice Lindsay of the New South Wales Supreme Court. Having sated those principles how did the leaned judge apply them to the fats of the case?

 

Here is the answer.

 

“Although the terms of the defendant’s contract with the plaintiff changed from time to time, each of the documents evidencing their contract included a 12 months post-employment restraint of trade. The fact that the defendant voluntarily agreed to such a restraint, more than once, and expressly agreed that it was no more than what was reasonable to protect the plaintiff’s legitimate interests, provides evidence in support of the reasonableness of the restraint: Russ Australia Pty Ltd v Benny [2006] NSWSC 1118 at [49].

Although by no means determinative, in the circumstances of this case, in an industry in which restraints of 6-12 months are not uncommon, the defendant’s express agreement that a 12 month restraint was reasonable should not lightly be discounted.

In its factual context, I find that the restraint is reasonable and, accordingly, valid.

In making that finding, I notice that the restraint does not constrain the defendant’s entitlement to provide his professional services to parties other than Queensland Health. I also take into account that the services which the defendant is qualified to provide require particular expertise, with commensurate remuneration; this is not a case of a unskilled worker, but a case of a highly-paid consultant whose services the Department chooses to acquire through corporations, known to it, responsible for procurement and employment of particular consultants.

In the circumstances in which the parties’ dispute about annual leave entitlements arose, the defendant’s allegation of non-payment of such entitlements cannot fairly bear upon the credit of Mr Hughes, or ground a discretionary bar asserted by the defendant (on the basis of “unclean hands”) to the grant of a final injunction to the plaintiff. The plaintiff was not given reasonable notice of the defendant’s allegation or a reasonable opportunity to counter it.

In formal terms, I reject the defendant’s tender of a selection of payslips from the plaintiff (MFI D8) which, the defendant contends, evidence a failure to acknowledge the defendant’s annual leave entitlements. If the payslips are otherwise admissible, I order (pursuant to section 135 of the Evidence Act 1995 NSW) that they not be admitted into evidence because their probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the plaintiff and misleading.

It was not contended for the defendant that any unperformed obligation of the plaintiff to provide annual leave entitlements to the defendant was, on the proper construction of the parties’ contract, interdependent with the defendant’s obligation to comply with his restraint undertaking.

Nor has it been contended that the plaintiff was otherwise in breach of any obligation owed to the defendant. He was peeved that the plaintiff did not secure for him the position with Queensland Health he was able to secure through Paxus Australia Pty Ltd; but he did not contend that a perceived failure of the plaintiff to advance his interests as well as he might have hoped constituted a breach of contract or the like. It provides no ground for a refusal to hold the defendant to his contract with the plaintiff.

CONCLUSION

Making allowance for the parties’ submissions as to the form of any final injunctive relief to be granted to the plaintiff, I make the following orders:

  • (1) ORDER that the interlocutory injunction granted to the plaintiff on 6 December 2016 be discharged.
  • (2) In lieu of that injunction, ORDER that the defendant be restrained, up to and including 4 November 2017, from performing any services involving the use of WorkBrain software for the Payroll Portfolio section of the Queensland Department of Health.
  • (3) ORDER that the Summons otherwise be dismissed.

I am not prepared to limit the injunction to which the plaintiff is entitled so as to permit the defendant to work within a particular “team” within the Payroll Portfolio section other than that within which he says he worked for the plaintiff. There is no sound reason for restriction of the restraint in that way. Throughout his employment by the plaintiff the defendant was engaged with Queensland Health as the plaintiff’s client, not limited to the particular team (within the department) of which he was a member.

Prima facie, with costs following the event, the defendant should pay the plaintiff’s costs of proceedings.

Counsel for the defendant seeks an opportunity (which I will allow) to submit that some allowance should be made in favour of the defendant for the plaintiff’s abandonment of claims for relief at the final hearing.

 

 

Thinkstorm Pty Ltd v Farah (2017) NSWSC 11 per Lindsay J