| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Christchurch |
| Reference No | CA 138A/10 |
| Hearing date | 20 Jul 2010 |
| Determination date | 27 August 2010 |
| Member | P Cheyne |
| Representation | B Nathan ; A Shakespeare |
| Location | Christchurch |
| Parties | Kiwi Stat Limied v Nichols |
| Summary | RESTRAINT OF TRADE – Applicant sought to enforce restraint of trade and non-solicitation clause against respondent – Respondent argued restraint of trade unenforceable as applicant had no protectable proprietary interest – Employment agreement (“EA”) provided not to induce, solicit or approach applicant’s customers – EA defined “customers” as hospitals and doctors - Applicant medical recruitment agency providing service to hospitals and doctors – Respondent’s employment duties to develop relationships with hospital and doctors to allow applicant to supply locum doctors to meet hospitals’ needs – Applicant had database recording doctors’ names which respondent had access to during course of employment – Respondent resigned from applicant and became employed at competitor company (“T”) – Under employ of T, respondent contacted doctors whom had no relationship with applicant however, contacted four hospitals formerly part of respondent’s client base when employed at applicant - Applicant successfully sought interim injunction against respondent pending substantive determination – Applicant claimed respondent’s relationship with hospitals gave rise to protectable proprietary interest – Authority found respondent’s relationship with hospital while under employ of applicant did not place respondent in such position to entice away business from applicant – Found hospitals advertise vacancies widely and up to individual recruitment agency to quickly respond – Found no protectable proprietary interest in hospitals for merely being applicant’s customer – Applicant claimed doctors on applicant’s database and had relationship with respondent gave rise to protectable proprietary interest - Found no protectable proprietary interest in doctor’s names as was public information – Found respondent’s ongoing professional relationship with certain doctors placed respondent in position to take doctors away from applicant – Found applicant’s trade connection with doctors whom had been applicant’s customers within 12 months of respondent’s resignation a protectable proprietary interests – Found 12 month duration of restraint unreasonable given respondent’s role relatively junior – Found locum doctors usually placed in hospitals for less than 13 weeks – Found given short duration of locum placement, reasonable duration of restraint three months – Found reasonably necessary to restrain respondent from working for T to enforce established proprietary interest in trade connection with doctors – Found likely respondent may seek to place doctors in hospitals using T’s database but who were also applicant’s client – Found such restraint reasonable in light of applicant and T’s business operation - Applicant claimed respondent’s unauthorised use of confidential information breached EA – Found no breach of confidentiality as applicant not in senior position to be privy to confidential business information – Found respondent’s knowledge of hospitals and doctors not confidential information to applicant – Found respondent encouraged applicant’s customers to continue their relationship with applicant upon resignation – Applicant sought damages pursuant to liquidated damages clause in EA – Found in absence of loss, clause unenforceable for being penal provision – Authority reserved point for further investigation – Parties directed to mediation – Ordered interim injunction to be discharged after three months from date of order pursuant to finding 3 months restraint period reasonable – Locum Coordinator |
| Result | Application granted ; Parties directed to mediation ; Orders made ; Costs reserved |
| Main Category | Restraint of Trade |
| Statutes | ERA s134;ERA s159(1)(b);Illegal Contracts Act 1970 |
| Cases Cited | Peninsular Real Estate v Harris [1992] 2 NZLR 216;The Broadcasting Corporation of New Zealand v Nielson (1988) 2 NZELC 96 |
| Number of Pages | 13 |
| PDF File Link: | ca 138a_10.pdf [pdf 45 KB] |