In DP World Sydney Ltd v Guy [2016] NSWSC 1072 an employer sought to stop an employee, by interlocutory injunction, from working for a competitor on the basis of a restraint in an employment contract. There was no dispute that unless he was restrained from doing so then Mr Guy would take up employment with Asciano Executive Services Pty Ltd, as a Terminal Manager, and in competition with DP World Sydney. Whilst other restraints were sought regarding solicitation of customers, employees and disclosing confidential information the main issue was the restraint about working for Asciano.

Simply put the relevant employment contract prevented Mr Guy, for a period of 3 months from termination of his employment, from engaging in a business that was the same as or similar to what DP World did. As Mr Guy's employment required him to give three month's notice his employer took the view that as his resignation was effective on 28 April 2016 the notice period would end on 28 July 2016 so that the 3 month restraint would end on 27 October 2016. Mr Guy's lawyer's, however, took the view that as he was placed on "gardening leave" the restraint would commence on 28 April and end on 28 July 2016. The parties maintained their differing views in correspondence exchanged between them.

Given that Mr Guy was placed on gardening leave, and could sue for his wages (if required) the Court found that the employment was not terminated at that point. Moreover, this was not a case where there was some form of repudiation that had been accepted. The contract remained on foot until the expiry of the notice period.

In considering the validity of the restraint the Court noted that the validity is judged as at the time of entry into the contract. The general principles were also referred to by reference to Tullett Prebon Australia Pty Ltd v Purcell, in which Brereton J summarised the law as follows (at [47]):

“In New South Wales, a restraint of trade is valid to the extent that it is not against public policy [Restraints of Trade Act 1976 (NSW), s 4(1); Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 at [26]-[27]]. A restraint of trade is not contrary to public policy if it is reasonable as between the parties, and not unreasonable in the public interest, so that while affording adequate protection to the party in whose favour it is imposed, it is not injurious to the public [Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535 at 565; Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 706-707; Lindner v Murdock’s Garage (1950) 83 CLR 628 at 653]. Whether a restraint is reasonable having regard to the interests of the parties depends on two, albeit related, considerations: first, whether the covenantee has a legitimate protectable interest, and secondly, whether the restraint is no more than reasonable for the legitimate protection of that interest. A covenantee is not entitled to be protected against mere competition; the legitimate interests which may be the subject of protection by covenant are in the nature of proprietary subject matter [Vandervell Products v McLeod [1957] RPC 185; Tank Lining Corp v Dunlop Industries Ltd (1982) 40 OR (2d) 219; 140 DLR (3d) 659 at 664], including trade secrets and confidential information, and goodwill including customer connection."

Here, the Court found Mr Guy's knowledge went beyond the general knowledge of DP World's business and extended to confidential information and trade secrets such as expansion plans, where these plans would be targeted, projections of customer volumes, revenue, EBITDA and margins. Consequently, the DP World had a legitimate interest in need of protection and that:-

Having regard to the seniority of Mr Guy's position, the nature of the plaintiff's business, the small number of competitors operating in the same port as DPW and, in particular, the confidentiality of the information that Mr Guy would be expected to obtain and use and which he did so acquire, I think such a six-month restraint is not larger than is reasonably necessary to protect DPW's legitimate interests in preserving its confidential information

Consequently, the court considered that there was a serious question to be tried and that the balance of convenience favoured the granting of the injunction.

Whilst Mr Guy contended that there would be hardship in not being able to take up the new position DP World Sydney had offered to pay the equivalent of 3 months worth of salary so that the hardship argument fell away. On the question of delay the Court found there was an adequate explanation by the employer in not bringing the application sooner noting correspondence had been entered into and undertakings had been sought.

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