Injunction to restrain former IT sales manager from working for competitor denied
An application for injunctive relief to enforce a six month restraint clause against a former senior manager from information services company SAI Global Property has been rejected as his capacity to use confidential information is 'objectively limited', the NSW Supreme Court has found. By taking active measures to ensure their new employee would not approach customers of SAI or misuse confidential information, the Court held InfoTrack had done all that was needed to prevent any damage to his former employer.
Richard Jones was the former head of segment and strategic sales at SAI Global Property before his employment came to an end by mutual agreement in February 2018.
His employment contract contained a 12 month restraint clause preventing work for a competitor or soliciting customers, as well as disclosing confidential information from SAI. The contract specifically named InfoTrack Pty Ltd as an example of SAI's direct competion.
Two days after he left the company, Mr Jones contacted InfoTrack about a role and one month later, he signed a contract of employment with Perfect Portal, a related company of InfoTrack, to become its national sales manager.
SAI Global applied for injunctive relief to restrain Mr Jones from working for Perfect Portal or InfoTrack until the final hearing. SAI wanted to enforce the non-compete and non-solicitation clauses in his employment contract for a period of six months.
Mr Jones did not agree to SAI's terms, but offered an undertaking not to solicit SAI's customers for the next six months, and not use any confidential information from SAI.
His Honour Justice Slattery declined to grant the relief sought by SAI, emphasising the significance of financial hardship and stability for Mr Jones’ family in this case.
The court instead noted Mr Jones' undertaking not to solicit customers for the next six months or use confidential information in the context of there being "no suggestion Mr Jones has taken away any confidential information, any databases, any client lists or other electronic or paper-based information from SAI Global Property". Furthermore, InfoTrack inserted into the contract of Mr Jones a clause requiring strict compliance with his undertakings to SAI.
On this basis, Justice Slattery concluded there was no justification, at that time, to enforce the reemployment provision of the restraint clause, noting also there appeared to be “a real and well-defined functional separation between Perfect Portal and other InfoTrack products that has clear boundaries.”
Interestingly, in making the decision, His Honour considered Mr Jones’ capacity to use confidential information is “objectively limited”.
"SAI Global Property's, potential customers run into the many thousands, although there are fewer larger ones. [SAI's] case will run up against the ordinary fallibility and limits of human memory. Mr Jones left SAI Global Property's employ just over two months ago over which time his memory would be expected to deteriorate in any event."
Tips for Employers
This case is a timely reminder to employees of the respective obligations on all parties to a restraint provision.
For the employee leaving one employer for another, especially if it is a direct competitor of the former, they have an obligation to clearly inform their new (prospective) employer of the existence of a restraint;
For the new employer, they have an obligation to ask their new employees about the existence of any contractual restraint and demonstrate they will not be a participant in any contractual breach;
For the former employer, they have an obligation to objectively consider measures being put into place by the new employer (and their former employee) to ensure compliance with their restraint clause, before approaching the Supreme Court for injunctive assistance.
SAI Global Property Division Pt/L v Jones & Ors  NSWSC 438 (13 April 2018)
Aimee Saaib is the Practice Manager of O'Connell The Employment Law Specialists, a Sydney-based employment law firm. She is currently completing a Graduate Diploma in Legal Practice at the College of Law.