is binding and enforceable against the respondent, a former employee of the
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Catchwords
EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – INTERLOCUTORYINJUNCTIONS – where the applicants allege that anon-solicitation clauseis binding and enforceable against the respondent, a former employee of thefirst applicant who was employedas a financial adviser for clients of thesecond applicant – where the applicants seek interlocutory relief toprevent therespondent from contacting, or accepting approaches from, clients– where a number of clients have already requested to transfertheiraccounts from the applicants to the respondent’s new employer –whether the applicants have shown a prima faciecase that the restraint isreasonable and therefore valid and enforceable, and that the respondent has, orthreatens to, breach therestraint – whether the balance of conveniencefavours the grant of injunctive relief, including having regard to the interestsof third parties, namely, the clients2nd Chapter Pty Ltd v
Sealey [2023] VSC 599, cited
2nd Chapter Pty Ltd v Sealey
[2024] VSC 672, cited
AECI Australia Pty Ltd v Convey [2020] QSC
207, cited
Australian Broadcasting Corporation v O’Neill (2006)
227 CLR 57
[2006] HCA 46, cited
Avant Group Pty Ltd v Kiddle (2023)
325 IR 292, applied
Emeco International Pty Ltd v O’Shea (No 2)
(2012) 225 IR 423
[2012] WASC 348, cited
Findex Group Ltd v McKay
[2020] FCAFC 182, cited
Ice TV v Ross [2007] NSWSC 635,
cited
Just Group Ltd v Peck (2016) 344 ALR 162
[2016] VSCA 334,
considered
Koops Martin v Reeves [2006] NSWSC 449, cited
Patrick
Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - where the applicants allege that a non-solicitation clause is binding and enforceable against the respondent, a former employee of the first applicant who was employed as a financial adviser for clients of the second applicant - where the applicants seek interlocutory relief to prevent the respondent from contacting, or accepting approaches from, clients - where a number of clients have already requested to transfer their accounts from the applicants to the respondent's new employer - whether the applicants have shown a prima facie case that the restraint is reasonable and therefore valid and enforceable, and that the respondent has, or threatens to, breach the restraint - whether the balance of convenience favours the grant of injunctive relief, including having regard to the interests of third parties, namely, the clients
[1] The respondent, Mr Maglis, started to work for the first applicant, Perpetual, in November 2019. He began as a senior financial adviser, was promoted to associate partner in July 2022 and then to partner in July 2023. Mr Maglis says the term "partner" was a title only - he was not in partnership with anyone at Perpetual, and owned no equity in Perpetual. The terms and conditions of his employment in each of those positions included a requirement to keep confidential information (as defined in the employment agreement) confidential (clause 3.2), non-solicitation (clause 5) and non-compete (clause 6) provisions. Mr Maglis' employment came to an end on 28 February 2025. The applicants contend that he has acted, or there is a real threat that he will act, in breach of the non-solicitation provision, and seek an interlocutory injunction to restrain him from doing so.
[2] The non-solicitation provision provided in part as follows:
[18]
5.1 You must not (directly or indirectly in any capacity, including as a shareholder, unitholder, director, consultant, adviser contractor principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier) without prior written consent of Perpetual, for the period listed at Item 10 of Schedule 1 from the date of termination of your employment:
[19]
approach, canvass, solicit, accept any approach from or deal with any Client with a view to obtaining the business or custom of that Client in a business that is the same as or similar to any part or parts of the Business;
[20]
counsel, procure or otherwise assist any person, firm or entity to do any of the acts referred to above...
[21]
5.2 You acknowledge that the duration, extent and application of the restrictions set out in clause 5.1 are no greater than is reasonably necessary for the protection of the interests of Perpetual and its Related Entities.
[22]
5.3 If you breach any of your obligations under clause 5.1 then, in addition and without prejudice to any other remedy which Perpetual may have, Perpetual is entitled to seek and obtain injunctive relief in any court of competent jurisdiction.
[23]
5.4 Each restriction in clause 5 is intended to be separate and severable. If any of these are found to be invalid or ineffective, but would be valid or effective if some portion were deleted, then such portions will apply with such modifications as may be necessary to make them valid or effective."
[24]
[3] "Business" and "Client" are defined in clause 15 as follows:
[25]
"'Business' means any business carried on by Perpetual or any of its Related Entities in which you worked at any time during the last 12 months of your employment.
[26]
'Client' means any person, firm or entity who was, at any time in the 12 months prior to the termination of your employment with Perpetual:
[27]
(a) a client or customer of Perpetual or any of its Related Entities; and
(b) with whom you worked or had contact or dealings at any time during the last 12 months of your employment."
[28]
[4] The period of restraint listed in item 10 of the schedule was 24 months, followed by cascading substituted terms of 12 months, 6 months or 3 months, "if the period of the restraint in clause 5.1 ... is adjudged by a court as being invalid".
[5] On 29 November 2024, Mr Maglis gave three months' notice of his resignation, as required by clause 4.1 and item 8 of the schedule to the employment agreement. From 16 December 2024, Mr Maglis says he served out his period of notice on "gardening leave", as required by Perpetual. This followed conversations between Mr Maglis and Mr Baker, the Managing Partner, Private Clients, with Perpetual on 10 and 16 December 2024. On 10 December 2024, Mr Baker says he asked Mr Maglis to continue servicing clients and not tell them about his resignation news "until we [have] done the work on where we would allocate clients..."; that Mr Maglis said he felt some of his clients may wish to follow him, given his longstanding relationship with them; and Mr Baker asked Mr Maglis to please call him if this happens and "we will work out what to do".[1] Mr Maglis says that the content of this conversation was somewhat different - that he asked Mr Baker if clients requested consent from Perpetual to leave and terminate the service, how will Perpetual react; and that Mr Baker said "let us know if there are clients wanting to leave, we would be more than happy to work that out together. We don't want to stop people from working with people who they want to and trust". Mr Maglis says he advised Mr Baker that clients had moved with him from the Commonwealth Bank (where he worked prior to Perpetual) and they would likely contact him in the future.[2]
[6] There was a further meeting between Mr Baker and Mr Maglis on 16 December 2024, during which Mr Maglis printed his full contacts list from his laptop to show Mr Baker that he had deleted contact information for clients from his phone. He also showed Mr Baker his phone to confirm he had deleted client information.[3] There is a difference on the evidence as to what was said during this meeting also. Mr Maglis says that he told Mr Baker that the majority of his clients had been with him for 10 to 15 years (prior to Perpetual) and may prefer continued engagement with him and Perpetual would need to manage this process. Mr Maglis said Mr Baker said he understood and asked Mr Maglis to let him know if any client approaches him and "we can work through the process". Although describing the conversation in different terms, Mr Baker does say that after this meeting, Mr Maglis sent him screen shots of phone numbers from his clients who had called him, and that "we then contacted the clients accordingly".
[29]
[16] There are two aspects to the question whether the applicants have made out a prima facie case - the validity and enforceability of the restraint clause and, assuming it is valid, whether there has been, or is a threat of, breach of it.
[17] In order to show a prima facie case (or serious question to be tried) the applicants do not have to show that they will probably succeed at trial. It is sufficient that the applicants show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. How strong the probability of success needs to be depends on the nature of the rights asserted and the practical consequences likely to follow from the orders sought.[14]
[30]
[18] The general principles governing restraint of trade clauses are not in dispute. A useful summary appears in the decision of the Victorian Court of Appeal in Just Group Ltd v Peck[2016] VSCA 334; (2016) 344 ALR 162 at [30]- [37] and, in the context of an employment agreement, in Wallis Nominees (Computing) Pty Ltd v Pickett (2013) 45 VR 657 at [14], where the principles are summarised as follows:
[31]
"(a) A contractual provision in restraint of trade is, prima facie void.
[32]
(b) The presumption can, however, be rebutted and the restraint justified by the special circumstances of a particular case, if the restriction is reasonable by reference to the interests of the parties.
(c) The validity of the covenant in a contract is to be judged as at the date of the Employment Agreement.
(d) A stricter view is taken of covenants in restraint of trade in employment contracts than those contained in contracts for the sale of a business.
(e) The onus of proving the special circumstances justifying the restraint is on the person seeking to enforce the covenant.
(f) So far as the parties' interests are concerned, the restraint must impose no more than adequate protection to a party in whose favour it is imposed. If the court is satisfied that the restraint confers greater protection than can be justified, there is no further issue of reasonableness.
(g) The meaning of the restraint clause may be construed by reference to the factual matrix, documentary context and surrounding circumstances."[15]
[33]
[19] It is established that employers do have a legitimate interest in protecting confidential information and trade secrets, and their "customer connections" (Just Group at [34]). If it is established that the employer has a protectable interest based on customer connection, the question is whether the restraint is no more than reasonable for the legitimate protection of that interest.
[20] The first point made on behalf of Mr Maglis is that the legal basis for the second applicant, Perpetual TC, to seek relief remains "elusive" - it is not a party to the employment agreement. On the evidence, Perpetual TC is a "related entity" of Perpetual, and is the holder of the relevant Australian financial service licence for the business. Perpetual TC is the entity which holds a contractual relationship with clients of "Perpetual's business".[16] The basis on which it would be entitled to the relief which is sought, in enforcement of the employment agreement, was not explained by the applicants, other than by reference to the fact that the clients are said to be clients of Perpetual TC.
[21] In submitting the clause is unenforceable, counsel for Mr Maglis focussed attention on the definition of "Client", which is incorporated into clause 5.1, submitting that it is too wide and too uncertain in its reach. This argument is put on two bases.
[22] The first is the reference to "a client of or customer of Perpetual or any of its Related Entities". The evidence suggests that Perpetual has about 44 related entities (within the meaning of the Corporations Act 2001). Only one of the related entities is nominated, as the second applicant to this proceeding. Mr Maglis says he did not know what the "related entities" of Perpetual were, nor did he believe he had any relationship with the second applicant. Mr Maglis says he only knows of the clients of Perpetual with whom he dealt. The respondent submits that "it is not for Perpetual to come to Court and simply nominate one related entity (now joined as a party) and then contend that the phrase [only] extends so far as to cover that party and its clients".
[23] There are a number of cases in which a restraint clause which purported to extend to related entities has been held to be too uncertain, or at an interlocutory stage it has been found there is a serious prospect of such a conclusion being reached at trial.
[34]
Has there been, or is there a threat of, breach of the non-solicit clause?
[35]
[33] As to whether there is a prima facie case that Mr Maglis has, by his conduct, contravened or threatened to contravene clause 5 of the employment contract, Mr Maglis' evidence, at [28] of his affidavit is that:
[36]
"I subsequently [to 16 December 2024] served the balance of my notice period on 'gardening leave' at the direction of the First Applicant. During that time, I did not contact or approach any clients of the First Applicant. Some of those clients contacted me on my mobile phone, the number of which I had when I was at the Commonwealth Bank [where he worked prior to Perpetual] and had retained throughout my employment at the First Applicant and still have. I answered the calls because no caller identification showed up - as I deleted all their contact information during my meeting with Mr Baker on 16 December 2024. When I was contacted by those clients I told them I was on gardening leave and that they would need to speak to a 'Perpetual' adviser. Some clients wanted a more detailed explanation, but I confirmed that I could not discuss the matter further. I was conscious that I remained an employee of the First Applicant at this time and subject to directions that had been given to me by Mr Baker to let them know if clients contacted me. On about a dozen occasions after receiving calls I would contact Elizabeth Hood at Perpetual to let her know that the client had called me and to expect a call from them."
[37]
[34] Mr Maglis goes on to say, at [31], that from 3 to 13 March 2025, 24 of his former clients contacted him by telephone at Ord Minnett. He says that:
[38]
"Each of them requested that I continue to provide financial services to them. In each case, I said to them words to the effect that I am taking a prudent and cautious approach in relation to the restrictive covenants set out in my Employment Agreement and that I would write to them explaining my position."
[39]
[35] The evidence includes samples of these letters - for example, a letter from Mr Maglis to one client dated 3 March 2025 (exhibit CMM-3) is in the following terms:
[40]
"As you may be aware, the terms of my employment with Perpetual Limited (Perpetual) contains clauses that purport to restrain me from providing the same or similar financial services that I provided to you prior to my resignation.
[41]
I am adopting a prudent approach to these matters, regardless of whether those clauses are enforceable. I intend to comply with them rather than face the prospect of threatened or actual litigation by Perpetual.
[42]
I trust you appreciate that the prospect of the costs, stress and inconvenience of having to defend the threatened or actual litigation, irrespective of whether it has any merits, is not a problem that I want to invite upon myself.
[43]
Whilst I would be pleased to accept you as a client, I will only be able to do so if Perpetual confirms that it has no objection, or you are able to confirm that I have not:
[44]
approached you;
either before or after my resignation, canvassed or solicited your business; and
consulted with or advised you in any way since my resignation.
[45]
This is because even if I merely told you in passing that I was going to set up my own business or move to another employer, and you have acted upon that information to seek to transfer your business to me, then I will nevertheless be required to decline your request out of abundance of caution, unless I can be certain that there will be no retribution from Perpetual.
[46]
Accordingly, if you wish to request Perpetual's consent to you transferring your business to me, I enclose a draft form of letter for you to send to Perpetual.
[47]
If you are able to obtain that consent from Perpetual, then I would be delighted to work with you.
[48]
If Perpetual is not content to grant that consent, I would be happy to work with you once I am able to recommence as your adviser at the end of the next 24 months ..."
[49]
[36] That letter did enclose a pro forma draft letter for the client to send to Perpetual, saying that the client wished to continue their relationship with Mr Maglis, and requesting Perpetual to confirm it had no objection to that, and that it would not take any action against him as a consequence of the client's request to transfer their business to him.
[37] A number of clients sent letters to Perpetual in those terms. A sample of the response sent to such clients from Perpetual is exhibited to the affidavit of Mr Lunn (at pp 378-379). The response states that "[w]e understand that changes in advisers can be unsettling", and offers to arrange a phone call with the client's current Perpetual Wealth Management Adviser to "discuss how the team can assist you". The author of the letter states that he is "confident that [the current Adviser] will continue delivering best-in-class advice while managing your portfolios..." but goes on to say:
[50]
"If, however, you still wish to transfer your portfolio from Perpetual to Mr Maglis who we understand is now working at Ord Minnett, we will respect your decision and adhere to your request. We note, however, that your former adviser owes a number of post-employment contractual obligations to Perpetual, and as a consequence of this, he is restricted from managing your portfolio until after 28 February 2026.[20] For this reason, Perpetual regrets that it cannot consent to Mr Maglis providing financial services to you and, in the event that he should do so, we will have no choice in those circumstances other than to commence Court proceedings against him (and potentially his new employer) to protect Perpetual's legitimate business interests and ensure his strict compliance with his post-employment contractual obligations to our business."
[51]
[38] That reflects what Mr Baker says at [114]-[115] of his affidavit, as follows:
[52]
"114 Each adviser in the Private Clients Team is required to adhere to the Financial Planners and Advisers Code of Ethics 2019 (Code). This Code imposes a number of obligations on advisers, including to act for a client only with their free, prior and informed consent, and to act with integrity and in the best interests of each of their clients. On this basis, any formal request by a client to have their portfolios transferred to another adviser must be actioned, in accordance with that client's wishes and irrespective of whether doing so would violate any obligations owed by a former adviser of Perpetual. The onus is on that advisor to refrain from working in a competing business, or to decline to act, in accordance with their contractual obligations, and that is what Perpetual relies on to maintain its client base and goodwill.
[53]
115 In the current circumstances, this means that, in the event that any of the clients formally request that their portfolios are transferred to Mr Maglis (or another adviser at Ord Minnett), Perpetual is bound to action this request..."
[54]
[39] The evidence (exhibited to Mr Lunn's affidavit) indicates some of the clients who received a letter in these terms forwarded it to Mr Maglis. There is also evidence of clients contacting Mr Maglis, after informing Perpetual of their desire to take their business elsewhere and receiving a response in the terms outlined above, and Mr Maglis then proceeding to begin what he called an "onboarding process", which seems to have involved a "comprehensive discovery meeting" with them, discussing their financial objectives and reviewing their risk profile.[21]
[40] I accept that, as a matter of principle, whether solicitation has occurred depends on the substance of what passes between the former employee and the client, and that the matter of who makes the initial contact is not decisive. However, simply responding positively to an approach from a former client will not amount to solicitation - "the line is crossed where the former employee, in response to an approach by a customer, does not merely indicate a willingness to be engaged, but positively encourages the customer to engage him or her".[22]
[41] Having regard to the evidence before the Court, I do not accept that there is a prima facie case in so far as solicitation is concerned. I accept on its face Mr Maglis' sworn evidence that he did not initiate contact with the clients; they called him; and I do not accept that he "crossed the line" in terms of his engagement with those clients, in terms of the letter he sent (an example of which is at paragraph [35] above). However, I do accept that there is a prima facie case that Mr Maglis has "accepted any approach from" clients of the second applicant. This is apparent from the evidence broadly described in paragraph [39] above. Counsel for the respondent accepted it was open to reach such a conclusion, at this interlocutory stage.
[42] I therefore conclude, in terms of the first enquiry, that there may be a prima facie case in so far as the first applicant is concerned, albeit a weak one in so far as the enforceability of the restraint clause is concerned, that the respondent has accepted approaches from clients of a related entity of Perpetual, contrary to the restraint in clause 5.1. As already noted, the basis on which the second applicant may be entitled to relief, by way of enforcement of a restraint clause in a contract to which it is not a party, was not explained.
[55]
[44] In considering where the balance of convenience lies, I take into account the view I have reached as to the strength of the applicants' case on the enforceability of the restraint clause, and the conclusion that there is no prima facie case in terms of solicitation, but only in terms of accepting approaches.
[45] The impact of the grant of an injunction in the terms sought by the applicants on third parties - in particular, the 22 clients who have said that they no longer want Perpetual to handle their financial affairs - is an important factor in this case, tending to weigh the balance against the grant of the relief sought. In addition, counsel for Mr Maglis submits that any protectable "customer connection" that Perpetual might have in those clients has already dissipated, and as a result there is no basis for any injunctive relief in so far as they are concerned. That argument has force, although counsel for the applicants submits they have not "given up" on the prospect of getting those clients to return.
[46] Lastly, in terms of whether damages are an adequate remedy, it is significant that, as Mr Baker acknowledges, clients are free to terminate their relationship with Perpetual and go elsewhere and, on the evidence, 22 of them have already done that. It does seem to me to be a matter of serious concern to be making an order, the effect of which would be to restrict the choice of clients to have their personal financial matters looked after by a person they trust and, in some cases, have worked with for a number of years. Indeed, it has been observed that a restraint which restricts choices available to customers of services may be unreasonable in the public interest.[23]
[47] As against that, Mr Baker also says, on the assumption that there has been a breach of the restraint by Mr Maglis, that it would be difficult to assess the loss and damage to Perpetual as a consequence of the alleged conduct of Mr Maglis, because there will always be a degree of uncertainty as to the length of time that clients would have stayed with Perpetual if there had been no breach; given that Perpetual has a history of servicing clients across generations, the loss of a client can result not only in loss of that client's business, but also future business of that client's children; and Perpetual will also lose the referral base its current clients provide. I accept that it would be difficult to assess damages in this case, even assuming the applicants are ultimately successful in the proceeding. Questions of causation (given the importance of the free will of clients in this context) and remoteness (in so far as the generational and referral points are concerned) would seem to loom large.
[56]
[50] I am not persuaded that the applicants have shown, on the evidence before the Court, a prima facie case that Mr Maglis has breached, or has threatened to breach, the provision regarding confidential information. There is no more than an assertion by Mr Baker of his "genuine concern" in this regard. This was dealt with by counsel for the applicant only in passing, in one paragraph of his written submissions (at [49]) and in one sentence at the end of his oral submissions in reply, at the time of handing up a draft order. Mr Maglis says in his affidavit that the clients he corresponded with all contacted him; he did not contact them. The evidence of starting an "onboarding" process, whilst consistent with "accepting approaches from" clients, is inconsistent with the suggestion that Mr Maglis is misusing confidential information about those clients (such as details about their financial position) obtained during his employment with Perpetual. For the reasons expressed by Wheelahan J in Avant Group Pty Ltd v Kiddle(2023) 325 IR 292 at [121], I am not prepared to make an order in terms of paragraph 3 of the draft provided by counsel for the applicant, because there is no principled basis, on the evidence before the Court, to do so.
[51] I do accept however that it is appropriate to order that the confidentiality of the exhibits to the second affidavit of Mr Baker be protected, and also that the confidentiality of the third party clients in respect of documents exhibited to Mr Lunn's affidavit be protected, by ordering that both affidavits be sealed on the court file.
[52] For those reasons, the application for interlocutory relief is dismissed.
[11]Australian Broadcasting Corporation v O'Neill[2006] HCA 46; (2006) 227 CLR 57 at [19] per Gleeson CJ and Crennan J and at [65] per Gummow and Hayne JJ.
[7] What transpired in both these conversations will be a matter to be determined at trial.
[8] Mr Maglis' employment with Perpetual ceased on 28 February 2025. Shortly after this, on 3 March 2025, Mr Maglis commenced employment with Ord Minnett, which is said to be a direct competitor of Perpetual.[6] Mr Maglis says that at no time during the 10 or 16 December meetings did Mr Baker raise any objection to him commencing employment with Ord Minnett (Mr Baker does not say that he did either); and Mr Baker is said to have been aware of this from about 1 December 2024 (following an article in the Financial Review).
[9] From 5 March to 20 March 2025, Mr Baker says that Perpetual received requests from 22 of the clients who were serviced by Mr Maglis, requesting that their account be transferred to Ord Minnett.[7] Mr Baker also says that, at the date of his affidavit (21 March 2025), Perpetual had been instructed by 22 clients to cease providing advice (out of a total of 57 clients that Mr Maglis had worked with[8]). He does not say, but I infer this is the same 22 clients who had sent the transfer requests. He describes this as an "unprecedented level of transfer requests from clients within a short space of time after resignation of a partner or any adviser".[9]
[10] It is not entirely clear on the evidence, but I infer that at least some of these 22 clients had worked with Mr Maglis prior to the commencement of his employment with Perpetual.[10]
[11] Perpetual, and the second applicant, Perpetual Trustee Company Ltd (Perpetual TC), contend that Mr Maglis has breached the "non-solicitation" provision, as well as the non-compete provision, of his employment agreement. Mr Baker also says he holds "genuine concerns" Mr Maglis has used "Confidential Information" to pursue Perpetual's clients.
[12] By originating application filed on 21 March 2025, the applicants seek both interlocutory and final injunctive relief, giving effect to the non-compete, non-solicitation and protection of confidential information obligations under the employment agreement.
[13] The proceedings came before the court on an urgent basis on 24 March 2025. On the undertaking of the respondent, by his counsel, that until 4 pm on 2 April 2025, "he will not correspond with or perform any work for any Client" (as defined in the order), orders were made for the exchange of further material, and submissions, and the application for interlocutory relief was listed for hearing on 2 April 2025.
[14] At the hearing on 2 April 2025, counsel for the applicant confirmed that the interlocutory relief sought was limited to enforcement of the non-solicitation provision (clause 5), and no interlocutory orders were sought in respect of the non-compete provision (clause 6). The obligation in relation to confidential information was only dealt with in passing, and I will return to that below.
[15] The principles which apply on an application for an interlocutory injunction are well established. There are two enquiries. The first is whether the applicant has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the applicant will be entitled to relief. The second is whether the balance of convenience supports the relief claimed - in other words, whether the inconvenience or injury which the applicant(s) would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the respondent would suffer if an injunction were granted.[11] The two enquiries are related, not independent. The apparent strength of the parties' substantive cases is an important consideration to be weighed in the balance, as is the question whether other remedies, including an award of damages, are likely to be adequate.[12] Whether the injunctive relief sought will affect the rights and interests of third parties is a relevant consideration.[13]
[24] The applicants submit that the breadth of the clause in that respect is addressed by the "filter" of paragraph (b) of the definition - which limits the provision to a client or customer "with whom you worked or had contact or dealings at any time during the last 12 months of your employment".
[25] However, that leads into the second basis on which the respondent contends the restraint is too wide and uncertain - the composite nature of the phrase "with whom you worked or had contact or dealings". The respondent emphasises the broad meaning of "had contact" (which could include social contact) and "dealings" (which could extend to "in passing" non-commercial interactions), as rendering the clause impermissibly wide, opaque in its operation and likely fatal to its reasonableness.[18]
[26] The respondent also emphasises the cumulative effect of these two aspects of the definition of Client - the extension to Related Entities, as well as persons with whom the employee "had contact or dealings".
[27] The applicants submit the words should be read together, with the words "contact" and "dealings" taking their meaning from the word "worked", albeit "not necessarily including the connotation of being paid for by the client". They also submit the words ought be interpreted as though prefaced by words to the effect of "substantial work related [contact or dealings]." Whilst it is accepted restraint clauses are to be construed according to the principles of construction of commercial contracts, counsel for the respondent emphasises the principles of construction which apply in particular to restraint clauses, including that they are construed strictly, resolving any ambiguity in favour of the employee, with an emphasis on the words the parties have chosen to use, and with the courts not being prepared to re-write (or read words into) a restraint clause in order to accord with a "more commercial construction".[19] I accept the respondent's submission in this respect, which has the result that I would not be prepared to read the suggested words into the definition of "Client".
[28] Second, the applicants submit that, even if read in the broad way contended for the respondent, that is appropriate given the seniority of the respondent and his role in obtaining and developing customers for Perpetual's business.
[29] Lastly, the applicants submit the additional elements of the definition of Client - "had contact or dealings" - could be severed, to preserve the restraint in a reasonable form. As to this, counsel for the respondent submits that whilst you can sever a standalone covenant, you cannot sever within a single definition. I accept this submission, having regard to clause 5.4 of the employment agreement (which only contemplates severance of "each restriction" in clause 5.1); Just Group at [39], Findex at [112] and Emeco at [219]. Where severance may ultimately be relevant, consistent with the legal principles and clause 5.4, is in terms of the breadth of the restriction in the first dot point of clause 5.1, and the time period during which the clause is to operate.
[30] The applicants also submit that they can identify the clients which they consider are captured by the restraint. But that does not provide an answer to the interpretation question.
[31] On balance, and accepting that this is a determination at an interlocutory stage, I consider the argument for validity of the restraint clause has real challenges, having regard to the extremely broad definition of "Client", which I do not accept is capable of being severed, read down, or read with additional words, as submitted by the applicants. The focus of the arguments was on the breadth of the clause itself, rather than the cascading periods of time during which it is said to apply. But I would regard that as a significant feature also, in the context of this case, in which it is difficult to see how a restraint - particularly on accepting approaches - for a substantial period of time would be enforceable.
[32] I do not go as far as concluding, on this interlocutory hearing, that there is no prima facie case for the validity of the restraint clause, but I do not consider the argument for validity to be a strong one.
[43] Counsel for the applicant submitted that, although there is no evidence of soliciting or enticing any staff away from Perpetual, this should be included in the orders to be made in any event. There is no basis for this.
[48] Both parties are willing to work towards an early trial date for this dispute, and this can be accommodated by the Court.
[49] Taking all these factors into account, the balance of convenience favours refusing the grant of any injunctive relief, given the weak case for enforceability of the restraint (subject to severance of parts of clause 5.1, and limitation of the time period during which it applies) and the fact that the interests of third parties will be affected by the making of such an order in a manner which I consider to be inconsistent with the public interest, particularly as it concerns those third parties' private financial affairs.