| Restrictions | OK |
|---|---|
| Jurisdiction | Employment Relations Authority - Auckland |
| Reference No | [2011] NZERA Auckland 181 |
| Hearing date | 2 May 2011 |
| Determination date | 05 May 2011 |
| Member | A Dumbleton |
| Representation | C Patterson ; A Gallie |
| Location | Auckland |
| Parties | Hally Labels Ltd v Powell |
| Summary | INJUNCTION - RESTRAINT OF TRADE – Application for injunctive relief restraining respondent from working for competitor - Respondent resigned, gave two months notice and informed applicant taking up employment with competitor – Competitor’s offer subject to respondent not having any restraint of trade obligations towards applicant - Applicant invoked employment agreement provision restraining respondent from becoming involved with any competitor for up to 12 months – Parties unsuccessfully attempted to negotiate variation to restraint provision – Employment agreement stated applicant to pay respondent six months’ salary as consideration for restraint of trade – No payment made - Respondent informed applicant had cancelled restraint provision pursuant to s7 Contractual Remedies Act 1979 (“CRA”) as applicant had breached agreement would provide consideration for restraint – Applicant made partial payment after termination – Applicant’s pay administrator advised respondent applicant would make 12 consecutive monthly payments - Respondent advised competitor had cancelled restraint provision with applicant and commenced new employment – Authority found restraint provision reasonably necessary as applicant had trade secrets and connections needing protection – Noted respondent expressly recognised applicant had legitimate proprietary interest in applicant’s customers, procedures and practices when signed agreement – Found breach of restraint provisions likely to cause applicant loss of competitive edge and business and some restraint reasonable – Found applicant did not intend to comply with agreement and partial payments were ongoing breach of restraint provision – Applicant claimed restraint provision did not specify payment time and respondent needed to first notify applicant of timeframe and provide opportunity to rectify – Respondent claimed restraint provision expressly or impliedly stated payment time – Authority found strong and clear implication payment would be made when employment terminated and restraint took effect – Found if timeframe not clearly inferred by provision, timeframe could be implied in accordance with business efficacy test – Applicant claimed implied term contradicted express terms of agreement – Authority found term did not contradict any express terms – Found circumstances within s7 CRA and respondent entitled to cancel restraint provision – Noted no evidence respondent agreed to variation of restraint provision – Cancellation effective from respondent’s notice in writing – Found serious issue to be tried – Found damages would not provide applicant adequate remedy – Found balance of convenience favoured respondent as applicant denied respondent income and wanted to enforce restraint provision – Noted respondent still bound by other terms of agreement – Noted balance of convenience would have favoured applicant if restraint had not been cancelled – Found overall injustice to enforce restraint against respondent – Noted material delays in applicant communicating with respondent and delays contributed to matter – Application for interim injunctive relief dismissed - Business Development Manager |
| Result | Application dismissed ; Costs reserved |
| Main Category | Injunction |
| Statutes | Contractual Remedies Act 1979 s7;Contractual Remedies Act 1979 s8;ERA s4;ERA s4(1A)(b);ERA s162;Illegal Contracts Act 1970 s8 |
| Cases Cited | Attorney-General v NZ Post Primary Teachers’ Assn [1992] ERNZ 1163;The Broadcasting Corporation of New Zealand v Nielsen (1988) 2 NZELC 96,040;Steele & Anor v Serepisos [2006] NZSC 67 |
| Number of Pages | 12 |
| PDF File Link: | 2011_NZERA_Auckland_181.pdf [pdf 38 KB] |