27 March 2024
5 min read
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A recent high profile decision has highlighted that time is of the essence for employers seeking to enforce restraint of trade provisions against former employees, with a three-month delay in commencing proceedings deemed sufficient to thwart an employer’s application for interlocutory relief.
These proceedings involve Scyne Advisory Business Services Pty Ltd (Scyne), a new consulting firm arising from PwC’s sale of its public sector advisory business, and Ms Connie Heaney who had been a partner at PwC since July 2022 and became an employee of Scyne from 9 November 2023.
On 29 November 2023, Ms Heaney gave notice of her resignation, informing Scyne that she intended to join Downer Group, a competitor of Scyne.
On 7 December 2023, Scyne directed Ms Heaney to take gardening leave and confirmed that her final day of employment was 29 February 2024. This correspondence also referred the restraint of trade provisions within Ms Heaney’s employment contract and sought undertakings that she would not act in breach of those provisions.
On 13 December 2023, Ms Heaney confirmed she was aware of her restraint of trade provisions and that she would comply with those provisions to the extent they were reasonable and enforceable and otherwise had no intention of breaching the other ongoing obligations under her employment contract with Scyne. Ms Heaney refused to sign the undertakings and stated that she did not consider her employment at the competitor had, or would, breach the relevant restraint provisions.
From 13 December 2023 to 29 February 2024, further correspondence was exchanged between the parties, with both parties effectively reaching a stalemate by way of re-asserting the same positions set out above.
Ms Heaney’s employment with Scyne ended on 29 February 2024.
On 4 March 2024, the same day Ms Heaney commenced her new employment, Scyne commenced proceedings in the NSW Supreme Court against Ms Heaney, where they ultimately applied for interlocutory relief to restrain Ms Heaney from acting in breach of the non-compete restraint of trade provisions within her employment contract with Scyne.
In applications for interlocutory relief, the Court will generally make a determination based on the following:
Serious question to be tried
The judgment found that Scyne demonstrated there was a serious question to be tried in the proceedings.
On this issue, Ms Heaney gave evidence that it was expected that she would be working in an internal role at Downer, rather than in a role that directly deals with Downer’s clients. Scyne presented evidence of the confidential information that Ms Heaney was privy to in respect of her key client, as well as the commercial impact that breaching her ongoing obligations would have upon the company.
His Honour accepted Scyne’s evidence and found that on the construction of Ms Heaney’s ongoing obligations, it was possible that she could be in breach even if she was to work in a strictly internal role at Downer.
Balance of convenience
As to the balance of convenience, the Court also found in Scyne’s favour as Ms Heaney was unable to demonstrate that the application, if successful, would cause her undue hardship.
Time is of the essence
The final issue that the Court considered was that of Scyne’s delay from the date they became aware of the circumstances of a potential breach of Ms Heaney’s obligations (i.e. 29 November 2023, the date Ms Heaney gave notice of her resignation) to the date they commenced proceedings (i.e. 4 March 2024).
His Honour cited the following principles in respect of the timeliness of interlocutory relief:
His Honour also found that:
In light of the above principles and considerations, His Honour determined “that it would be most unreasonable now to restrain Ms Heaney from continuing with her well-signalled intention to join Downer simply because Scyne has now belatedly discovered the urgency of the case.”
Accordingly, his Honour refused Scyne’s application for interlocutory relief.
For employers seeking to enforce the ongoing obligations within their employee’s employment contracts, this decision is a reminder that proceedings should be commenced as soon as possible after the employer becomes aware of circumstances that support a threatened breach of those ongoing obligations.
Further, this decision highlights that employers do not need to wait until the employment ceases before commencing proceedings and they should be commenced as soon as possible so that the issues can be finally determined.
If you have any questions or need legal assistance with enforcing restraint of trade provisions, please get in touch with our team below.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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