| Restrictions | Includes non-publication order |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | [2013] NZERA Christchurch 224 |
| Hearing date | 18 Jun 2013 - 19 Jun 2013 (2 days) |
| Determination date | 31 October 2013 |
| Member | H Doyle |
| Representation | R Towner ; P Churchman QC |
| Location | Dunedin |
| Parties | Warren Skerrett Investments Ltd v Camelot New Zealand Ltd Partnership and Anor |
| Other Parties | Broad |
| Summary | RESTRAINT OF TRADE – BREACH OF CONTRACT – Applicants sought damages for respondent’s breach of restraint of trade provision (“ROT”) in employment agreement (“EA”) and breach of duties of fidelity and confidentiality – Respondent’s employment transferred to first applicant when first applicant purchased business – First applicant and respondent negotiated new EA including ROT four months later – ROT applied for two years after termination of employment – Whether consideration provided for ROT – First applicant sold business to second applicant after respondent resigned – Whether benefit of ROT assigned to second applicant on sale of business – Whether respondent contacted first applicant’s clients and laid foundation for clients’ transfer to respondent’s new employer – Clients transferred to respondent’s new employer while respondent still employed by first applicant but after respondent had given notice of resignation – Whether respondent criticised first applicant’s decision to make office manager redundant and showed knowledge about new employer’s affairs while employed by first applicant – Whether respondent isolated first applicant’s clients – Garden leave – Financial adviser |
| Abstract | AUTHORITY FOUND –;RESTRAINT OF TRADE – BREACH OF CONTRACT: Authority ordered non-publication of financial details of applicants’ clients. ROT referred to clients respondent had dealings with within certain regions rather than respondent’s place of employment. ROT non-dealing clause as well as non-solicitation clause. Respondent’s access to confidential information about clients and influence over clients and customers justified form of restraint to protect client relationships. Two year period of ROT unreasonable. EA containing ROT more properly seen as variation of EA rather than initial EA or offer of employment. Respondent negotiated exception for six clients from ROT but exception not of value to respondent in circumstances where respondent did not have earlier ROT. Provisions in new EA for study / examination leave and reimbursement of professional membership fees appeared to be inferior to respondent’s previous terms of employment. Redundancy entitlement in EA arguably no better than respondent’s original entitlement. No consideration provided for ROT in new EA. EA between first applicant and respondent involved personal skill and confidence. Ability to assign employee’s obligations under EA to third party without employee’s knowledge or consent seemed inconsistent with good faith requirements under Employment Relations Act 2000. Nothing in EA demonstrated intention that agreement could be assigned, especially in circumstances where employment relationship between first applicant and respondent ended. No specific reference to EAs in sale of business agreement between first and second applicants. EA not normally regarded as business agreement, EA at end when business sold to second applicant, benefit of ROT could not be assigned without respondent’s consent and first applicant did not comply with sale of business agreement by using reasonable endeavours to obtain respondent’s consent to assignment of ROT. ROT not capable of assignment to second applicant. Not appropriate to direct first applicant and respondent to mediation four years after employment relationship ended and two years after restraint period ended. Not appropriate to modify ROT. ROT unenforceable. Authority could not be satisfied respondent solicited certain clients while employed by first applicant. Respondent’s interactions with other client amounted to attempt to solicit client’s custom indirectly or showed respondent did not act in best interests of first applicant but no damage caused to first applicant as result of respondent’s breach of EA. Departure of eleven clients to respondent’s new employer during respondent’s notice period gave first applicant very real reason for suspicion. Reasons existed why clients unhappy with first applicant and transferred to respondent’s new employer. Respondent not acting in concert with new employer. Would have been preferable for respondent to explain office manager’s redundancy in positive way but e-mail not breach of respondent’s obligations. Evidence did not support attempt to isolate clients. No evidence respondent breached confidentiality obligations. No damages. |
| Result | Application dismissed ; Costs reserved |
| Main Category | Restraint of Trade |
| Statutes | ERA;ERA s4(2);ERA s162;ERA s164;Illegal Contracts Act 1970;Illegal Contracts Act 1970 s8 |
| Cases Cited | Assoc of Staff in Tertiary Education Inc: ASTE Te Hau Takitini o Aotearoa v Hampton, Chief Executive of the Bay of Plenty Polytechnic [2002] 1 ERNZ 491;BFS Marketing Ltd v Field [1992] 2 ERNZ 1105;Castle Parcels Ltd v Dale (1988) 2 NZELC 96,774;C E Elley Ltd v Burgess (1997) 7 TCLR 582;Deacons (a firm) (formerly known as Deacons Graham & James) other than Fairbairn v White & Case Limited Liability Partnership [2003] 3 HKLRD 670;Fuel Espresso Ltd v Hsieh [2007] ERNZ 60 ; [2007] 2 NZLR 651;James & Wells Patent and Trade Mark Attorneys v Snoep [2009] ERNZ 284;M A Watson Electrical Ltd v Kelling [1993] 1 ERNZ 9;PGG Wrightson Ltd v Jary [2008] ERNZ 476;Post Haste Couriers Ltd v Casey unreported, Holland J, 24 October 2009, CP83-89;Precision Tracking (NZ) Ltd (Formerly CTL Finance Ltd) v Tait unreported, H Doyle, 16 December 2009, CA216/09;Provida Foods Ltd v Davidson unreported, R A Monaghan, 3 February 2010, AA45/10;Schilling v Kidd Garrett Ltd [1977] 1 NZLR 243;SSC & B: Lintas New Zealand Ltd v Murphy [1986] 2 NZLR 436;Walley v Gallagher Group Ltd [1998] 3 ERNZ 1153 |
| Number of Pages | 41 |
| PDF File Link: | 2013_NZERA_Christchurch_224.pdf [pdf 385 KB] |