NZ ‘too remote’ to cause harm to NSW business

Cases

NZ ‘too remote’ to cause harm to NSW business

The NSW Supreme Court has found that the likelihood of damage to an Australian food business from a former employee working in New Zealand was remote, particularly since the employee’s non-compete clause only included work within New South Wales.

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The NSW Supreme Court has found that the likelihood of damage to an Australian food business from a former employee working in New Zealand was remote, particularly since the employee’s non-compete clause only included work within New South Wales.
 
 
Background of the case
 
Mr M started work with Allied Mills in New South Wales in March 2010, and left on 27 June 2013. He began working at George Weston Foods in Auckland, New Zealand, and Allied Mills brought action in the NSW Supreme Court in an attempt to enforce a clause in his employment contract that restrained M from engaging in competitive activities for six months without Allied’s written consent.
 
However, the court determined that the restraint was limited to activities ‘within the Specified Area’, and that area was determined to mean the state or territory in which M’s employment was based.
 
Real foundation of case
 
In his determination, Justice Michael Pembroke wrote:
‘The real foundation for concerns was anxiety about the loss of a valuable employee and a misplaced suspicion about his motives.’ 
The court accepted the manager’s evidence that he had no intention to cause harm to his former employer.
 
The court concluded that the clause in question ‘is predominantly concerned with the protection of the plaintiff’s customers, clients and employees. In contrast, in his role pursuant to the GWF (NZ) contract, the defendant deals with suppliers. In that role, there is no reasonable prospect of him interfering inadvertently with the plaintiff’s customers, clients and employees. And there is no prospect whatsoever of him doing so intentionally during the Restricted Period — given my assessment of his honesty and character.’
 
Conclusion
 
In dismissing the summons and ordering Allied to pay M’s costs, Justice Pembroke concluded that:
‘The motives of the defendant are beyond criticism. The reality of threat is non-existent. In addition, the formulation in the summons of the declarations and injunctions which the plaintiff seeks, is so broad and general, that no useful purpose would be served, on the facts of this case, in making those declarations or granting those injunctions — even if I were satisfied that there is some substance to the plaintiff's case.’
 
Message for employers: Carefully define any restrictive clauses in an employment contract and understand what is included and what isn’t, as the strict definition will apply in a court decision. Generally, a court will not enforce a restraint of trade clause if its terms go beyond what is reasonably necessary to protect an employer’s business interests.
 
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