Genuine Interest: the restraint protected a legitimate interest in retaining the value of the business. However the restraint was too broad as it would have prevented Mr Kowalski from being a shareholder in a publicly listed company engaged in a similar business to Austress. Therefore, the judge excluded this part of the restraint from the clause.
Area: an unlimited geographic area was unreasonable as Austress did not operate worldwide. The Judge said that Australia would be reasonable.
Time: a three-year period was reasonable. This was in light of the fact that Mr Kowalski had been with Austress and in that type of business for over 20 years and therefore departure to a competitor could be detrimental to Austress.
WA Employee Restraint
Nomad Modular Building sought to restrain a former employee, Mr Smith, from taking up employment with Australian Portable Buildings (APB) shortly after he resigned from Nomad. The restraint clause in Mr Smith’s employment contract prevented him from being engaged in a competing business and from soliciting or interfering with clients, employees and contractors of Nomad in WA and Queensland for a period of six months. In this case it was found that:
Genuine Interest: Nomad had a genuine interest to protect – it was reasonable to protect its relationship with customers who knew Mr Smith and to protect itself against the loss of employees and contractors who undertook its work. Also the extent of the restraint was reasonable as it did not prevent Mr Smith from working at all, it only prevented him from working for a firm making portable buildings.
Area: the restraint for WA and Queensland was reasonable. Nomad’s main business was in WA but it was planning to establish a business in Queensland and Mr Smith had knowledge of Nomad’s plans and strategy for Queensland.
Time: Six months was reasonable but the judge found it was probably the maximum that could be applied.
QLD Partner Restraint
Mr Rich was a partner of the accounting firm BDO Kendalls. He retired as a partner on 30 June 2005 but then became an employee of the firm for a year until 30 June 2006. Then, Mr Rich took a job as an in-house accountant for a client of BDO. BDO sought an injunction claiming Mr Rich was in breach of the restraint clause in his partnership agreement with BDO. The restraint clause prevented Mr Rich from working for clients of BDO, was unlimited as to area and had a number of alternatives as to time ranging from one year to three years from Mr Rich’s retirement as a partner. In this case it was found that:
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