Restraint clause on salesman upheld

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Restraint clause on salesman upheld

A restraint clause applicable to a real estate salesman was upheld by the NSW Supreme Court - allowing a specified geographical restraint and a time restraint of six months.

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A restraint clause applicable to a real estate salesman was upheld by the NSW Supreme Court — allowing a specified geographical restraint and a time restraint of six months.
 
Background
 
The salesman was employed by real estate agency on the South Coast of New South Wales.
 
By summons filed on 20 August, 2003, the former employer sought as final relief an order that, for a period of six months from 10 August 2003, the salesman be restrained from being employed or involved in providing the services of a real estate agency within a defined area from Bendalong in the north to Bawley Point in the South in New South Wales.
 
There was no claim for damages.
 
The critical question was whether cl 3 was a reasonable restraint to protect the interest of the former employer with respect to preservation of its client base.
 
Decision
 
Justice Austin concluded:
 
Geographical area
'As to the reasonableness of the geographical area stipulated in clause 3, the following evidence is relevant:
  • the proscribed area serves a small population of approximately 18,000 people;
  • the proscribed area is outside any metropolitan or large suburban area;
  • the real estate agencies in the proscribed area are, for the most part, on the eastern side of the Princes Highway, with the exception of one at Ulladulla and two at Milton (including the Countrywide agency), each of which has a frontage to the Princes Highway;
  • real estate salesman employed in the area between Nowra and Batemans Bay are often required to travel up to 200 kilometres each day incidentally to their employment;
  • the plaintiff has received applications for employment from real estate salesman who reside 50, 54, 55 and 60 kilometres respectively from its office;
  • there are 56 real estate agencies within 35 to 65 km of the defendant's home, but outside the prescribed area;
  • the distance from the defendant's home to the northern edge of the proscribed area is 20 km, and Nowra is 70 km away;
  • the distance from the defendant's home to the southern edge of the proscribed area is 25 km and Batemans Bay is 50 km away;
  • the nearest agencies outside the proscribed area are at Huskisson and Batemans Bay;
  • although the defendant submitted that, if he were required to take employment outside the proscribed area, he would have to drive for about an hour from home to place of work...evidence, which I prefer, that the drive from Ulladulla to Batemans Bay takes approximately 35 minutes, and the drive from Ulladulla to Nowra takes approximately 50 minutes.
In light of this evidence, I have reached the conclusion that the restraint imposed by clause 3 is not unreasonable by virtue of its geographical area.'
Period of restraint
 
'As to the period in which the restriction is to operate, Mr Leslight gave evidence that the time restriction was determined by taking into account a number of factors. One was that the plaintiff's salespersons are required to have a detailed knowledge of its clients' property and requirements, which they begin to acquire as soon as the prospective vendor makes contact, typically with one of the salespersons, and are likely to continue to acquire during a sales process that may take up to 12 months.'
 
'A normal exclusive agency agreement is for 90 to 120 days, during which time the salesperson maintains a close relationship with the vendor. After a period of exclusive agency, the vendor may continue on a non-exclusive basis.'
 
'My conclusion is that a restraint for a period of six months for a real estate salesperson placed in personal contact with clients the way the defendant was in this case, is not unreasonable by virtue of the duration of the restraint.'
 
'... My conclusion, therefore, is that the plaintiff has established its entitlement to a final injunction to restrain the defendant from acting in contravention of the relevant part of clause 3 of the second agreement. I shall make an order that, for a period of six months from 10 August 2003, the defendant be restrained, directly or indirectly, on his own behalf or on behalf of or within association with others, from carrying on, being employed in or being in any way involved in any activity or business of providing the services of a real estate agency within the area from Bendalong in the north to Bawley Point in the south in the State of New South Wales, marked in yellow on Exhibit 1 to the affidavit of Milton William Leslight made on 19 August 2003.’
 
The Court then heard submissions from the parties with respect to costs.
 
 
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