Post-Employment Restraints and Urgent Interlocutory Hearings

15 Sep 2016

Since late July this year, I have acted in a series of urgent post-employment restraint matters. Here are a few helpful hints based on my experience over the last eight weeks:

  1. Delivery-up orders and an access regime allowing a forensic computer expert to examine personal computers or electronic devices are not “final orders” in the sense that they are unavailable at the interlocutory stage of the proceedings. In three of the matters I have been involved in, the defendants had either emailed to themselves or downloaded confidential information belonging to their previous employer (my client) prior to the termination of their employment. At the interlocutory state of each of the proceedings, the Court made orders in my clients’ favour (based on the decision in Orion Engineering Services (Aust) Pty Ltd v Waters [2010] FCA 226 per Foster J) that the defendants deliver up their personal computers (and other things) for examination by a computer expert.  By adopting this course my clients were able to either ascertain what had happened to their confidential information or verify that the same had been deleted from the defendants’ computers or other devices. 
  2. Joining the new employer to the proceedings, if you have a legitimate basis to do so, can be very helpful in resolving the dispute by way of a negotiated settlement. In one of the matters I was involved in, we joined the first defendant’s new employer as the second defendant on the basis that the first defendant had apparently disclosed confidential information belonging to the plaintiff to the new employer. Although we only sought delivery up orders against the new employer (as opposed the restraint orders we sought against the first defendant), the new employer initiated and was effectively responsible for (on the defendants’ part) settlement discussions taking place that resolved on a favourable basis including a modified restraint, confidential information undertakings, and costs.
  3. In circumstances involving a change in the employer it is important that the new employer confirm, in writing, that any restraints (not just “terms and conditions of employment”) contained in a previous contract of employment will apply in the new employment. Another one of the matters I was involved in resolved prior to proceedings being commenced. I acted for the defendant in this matter in circumstances where his original employer had been acquired by a new entity and his employment transferred to the new entity on the basis that his “terms and conditions of employment” would remain the same. After he commenced employment with a “competitor”, the new entity sought to enforce the non-compete restraint in the contract between the defendant and his original employer. By relying on his Honour White J’s decision in Aussie Home Loans v X Inc Services [2005] NSWSC 285 (followed in Keith Soames Real Estate (Thornleigh) Pty Ltd v Bambrick [2011] NSWSC 543 per Gzell J) we were able to persuade the new entity that it did not have a prima facie case on the basis that the phrase “terms and conditions of employment” does not include post-employment restraints.
  4. Lawyers should focus on the real legal and factual issues in dispute rather than getting bogged down in responding to every aspect of the other parties’ evidence. Because of their urgency, in post-employment restraint matters it is very easy to fall into a trap of responding to everything contained in the other parties’ evidence without giving proper consideration to the actual arguments that you want to run. This can cause your client to incur significant costs for no real gain. Lawyers are better served by first obtaining a factual background from their client, then preparing an outline of submissions and finally focussing and settling their clients’ evidence on the issues that really matter, rather than engaging in debate about irrelevant peripheral factual matters. 
  5. A good compromise is invariably better than a litigated outcome. In one of the matters where I acted for a defendant (led by Senior Counsel) the parties were able to negotiate an outcome whereby the defendant (and his new employer) agreed to some adjustments to his role in order to satisfy his previous employer that the information the defendant carried away in his head would not be deployed in his new employment. By doing this, the defendant was able to remain in employment and continue deriving an income without the risk of having to “sit on the side-lines” for any period of time (which is what occurred in a recent and not dissimilar case - DP World Sydney Ltd v Guy [2010] NSWSC 1072 per White J).  

Dilan Mahendra

Solicitor 2006
Barrister 2010

02 9151 2941

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