| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | [2012] NZERA Christchurch 260 |
| Hearing date | 9 Dec 2011 |
| Determination date | 28 November 2012 |
| Member | H Doyle |
| Representation | C O'Connor ; T Shaw |
| Parties | Design Engineering (SI) Ltd v Kearins |
| Summary | RESTRAINT OF TRADE – Applicant sought damages for respondent’s breach of restraint of trade (“ROT”) – Authority found previously duration of non-solicitation clause in parties’ employment agreement (“EA”) unreasonable – Found any remedy other than modification of non-solicitation clause inappropriate or inadequate – Ordered duration of non-solicitation clause in parties’ EA reduced to three months – Found respondent breached ROT by soliciting work from applicant’s client (“C”) during period of non-solicitation clause – Found applicant lost opportunity to retain C as result of respondent’s breach of ROT – Found while applicant would have lost work to respondent after three month period of non-solicitation clause, applicant would have secured work on specific project continuing beyond three month period – Found appropriate to allow recovery for three month non-solicitation period and two further months – Respondent to pay applicant $13,169 damages – Interest payable |
| Abstract | Applicant sought damages for respondent’s breach of restraint of trade (“ROT”). Parties’ employment agreement (“EA”) included non-solicitation clause. After resigning from applicant, respondent approached applicant’s client (“C”) and thereafter undertook steel detailing work for C. Applicant did not undertake any steel detailing work for C after respondent’s resignation not withstanding fact applicant had been performing work for C for six years. Authority found previously duration of non-solicitation clause unreasonable and referred parties to unsuccessful mediation. Respondent claimed told by C respondent only person C would use for steel detailing work and applicant would have lost work in any event. Respondent claimed applicant’s calculation of loss based on higher than appropriate average monthly rate as fees charged declined over previous years, made double provision for certain fees and relied on higher than appropriate average profitability margin based on industry standard rather than specific to applicant.AUTHORITY FOUND –RESTRAINT OF TRADE: Authority ordered non-publication of financial information provided by applicant and applicant’s accountant. Any remedy other than modification of non-solicitation clause inappropriate or inadequate. Ordered duration of non-solicitation clause in parties’ EA reduced to three months. Respondent breached ROT by soliciting work from C during period of non-solicitation clause. Not satisfied no one at applicant able to undertake steel detailing work for C after respondent’s resignation and not satisfied loss of C’s work certain to occur or probable during period of non-solicitation clause. Applicant lost opportunity to retain C as result of respondent’s breach of ROT. Some overlap between certain fees anticipated by applicant and fees declined over previous years. Appropriate to apply applicant’s actual profitability margin. While applicant would have lost work to respondent after three month non-solicitation period, applicant would have secured work on specific project continuing beyond three month period. Appropriate to allow recovery for three month non-solicitation period and two further months. Respondent to pay applicant $13,169 damages. Interest payable. |
| Result | Application granted ; Orders made ; Damages ($13,169.23) ; Interest (5%) ; Costs reserved |
| Main Category | Restraint of Trade |
| Statutes | ERA s162;ERA s164;ERA Second Schedule;Illegal Contracts Act 1970;Judicature Act 1908 s87(3) |
| Cases Cited | BFS Marketing v Field (No 1) [1993] 2 ERNZ 101;Design Engineering (SI) Ltd v Kearins unreported, H Doyle, 17 September 2010, CA 183/10;Schilling v Kidd Garrett Ltd [1977] 1 NZLR 243 |
| Number of Pages | 10 |
| PDF File Link: | 2012_NZERA_Christchurch_260.pdf [pdf 249 KB] |