| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | CA 1/01 |
| Determination date | 12 January 2001 |
| Member | N Taylor |
| Representation | P Shaw ; SJ Adamson |
| Location | Christchurch |
| Parties | Wrightson Ltd v Swale |
| Summary | INTERIM INJUNCTION - Restraint of trade - Confidentiality clause in contract - Terminated employment to work for competitor - Competitive market - Question concerning integrity of respondent's conduct - Arguable case - Undertakings given - Balance of convenience favoured applicant - Livestock representative |
| Abstract | This was a successful application for an interim injunction enforcing a restraint of trade provision.;The applicant employed the respondent as a Livestock Representative. The contract of employment contained provisions relating to confidentiality and restraint of trade. The major competitor to the applicant, Reid Farmers Ltd (Reid"), approached the respondent and offered him employment with them. The respondent gave notice of his resignation to the applicant. Both the respondent and Reid were aware of the existence of the restraint of trade clause in the employment contract.;Before leaving his employment with the applicant, the respondent was asked to hand over his diary which contained work details. He did not hand it over immediately, alleging he had paid for it himself and that it was personal. He later offered to provide the diary subject to his deletion of personal information from it. There was also a complaint from the respondent's replacement that the respondent had failed or declined to introduce him to a number of clients. The respondent made two undertakings, supported by Reid, that he would not breach confidentiality in respect of information named to be confidential and that he would not solicit any of his former clients.;HELD: (1) Restraint covenants were prima facie unlawful unless the applicant could show that the restraint was reasonably necessary to protect its proprietary interests. The applicant had established that it had an arguable case. It had raised a serious question about the threat to its proprietary base and confidential information.;(2) But for the questions raised about the integrity of the respondent's conduct regarding the clients he addressed with his replacement and his response to the applicant's concerns when compared to the apparent conflict in his diary entries about certain clients, there would have been an alternative remedy open to the applicant. That being a reasonable reliance on the undertakings provided by the respondent and the confidentiality clause in the contract.;(3) Both the respondent and Reid were aware of the restraint covenant when they entered into an employment relationship. However, faced the with the difference between the parties as to who was a client of the applicant's, the comments about the extent of the respondent's role with the applicant, and the entries in the respondent's diary, the balance of convenience must favour the applicant.;(4) The proper exercise in equity must be in the applicant's favour. The issues were finely balanced and full determination of the matter could only be fairly judged with the benefit of a hearing. There was a relatively short period of time before the substantive matter could be determined, the respondent was therefore not to commence work for Reid until the substantive determination of the case." |
| Result | Application granted ; Costs reserved |
| Statutes | ERA s162;ERA s164;Illegal Contracts Act 1970 s8 |
| Cases Cited | Baker v Armourguard Security Ltd [1998] 1 ERNZ 424;Castle Parcels Ltd v Dale (1989) 2 NZELC 96,774;McGuinness v Lewis (1991) 5 PRNZ 172;Medic Corporation Ltd v Barrett [1992] 2 ERNZ 1048 |
| Number of Pages | 9 |
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