| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | [2012] NZERA Christchurch 168 |
| Hearing date | 7 Aug 2012 |
| Determination date | 15 August 2012 |
| Member | H Doyle |
| Representation | J Mills, E Cameron ; P James |
| Location | Christchurch |
| Parties | Taylors Floorcoverings & Furnishings Ltd v Brown |
| Summary | INJUNCTION – RESTRAINT OF TRADE – Applicant sought interim injunction to prevent respondent breaching restraint of trade covenant (“ROT”) in parties’ employment agreement – Authority found strongly arguable ROT designed to protect applicant’s proprietary interest in confidential information and customer relationships – Found arguable no valid variation of ROT – Found total restraint period of four years at high end of such periods but, if arguable duration of restraint not reasonable ROT potentially capable of modification – Found arguable ROT limited to businesses in Christchurch competing with applicant – Found serious issue to be tried – Found balance of convenience and overall justice of case in favour of applicant – Application for injunctive relief granted – Sales consultant |
| Abstract | Respondent employed by applicant as sales consultant. Applicant sought interim injunction to prevent respondent breaching restraint of trade covenant (“ROT”) in parties’ employment agreement. ROT provided respondent not to assist applicant’s competitors or solicit applicant’s customers for three years after sale of business to applicant and twelve months after termination of respondent’s employment. Respondent tendered resignation but agreed to remain at applicant for further nineteen months. Applicant claimed respondent breached ROT by commencing employment with competitor (“N”) within twelve months of leaving applicant. Respondent claimed agreed to extend notice period on basis of understanding twelve month time period under ROT began to run from respondent’s original intended exit date. Respondent claimed ROT unreasonable and respondent not breaching ROT as not engaged, interested or concerned with assisting N’s business financially. Respondent approached by applicant’s clients to undertake work but clients referred back to applicant.;AUTHORITY FOUND –;INJUNCTION – RESTRAINT OF TRADE: Applicant’s industry competitive and relied heavily on relationships with clients and customers. Arguable that customer and client base developed by respondent key part of goodwill purchased by applicant. Strongly arguable ROT designed to protect applicant’s proprietary interest in confidential information and customer relationships. Arguable applicant gave adequate consideration for ROT. Arguable no valid variation of ROT providing twelve month period began to run from respondent’s original intended exit date. Total restraint period of four years at high end of such periods but, if arguable duration of restraint not reasonably necessary to protect applicant’s proprietary interest, arguable ROT capable of modification. Although no geographical limit to ROT arguable ROT limited to businesses in Christchurch competing with applicant. Arguable no imbalance of power as ROT entered into around same time as sale of business to applicant in which respondent had obtained legal advice. Arguable respondent breached ROT by accepting employment with N, although not arguable respondent solicited applicant’s clients. Serious issue to be tried. Applicant able to pay any damages awarded to respondent if held subsequently interim injunction should not have been granted and such damage relatively simple to quantify. More difficult to quantify damage to applicant if interim injunction not granted but permanent injunction granted later. Balance of convenience in favour of applicant. Overall justice of case in favour of applicant. Application for injunctive relief granted. |
| Result | Application granted; Orders made; Costs reserved |
| Main Category | Restraint of Trade |
| Statutes | ERA s164;Illegal Contracts Act 1970 s8 |
| Cases Cited | Gallagher Group Ltd v Walley [1999] 1 ERNZ 490;Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129;United Pukekohe Ltd v Grantley [1996] 3 NZLR 762 |
| Number of Pages | 12 |
| PDF File Link: | 2012_NZERA_Christchurch_168.pdf [pdf 200 KB] |