11 September 2013


In DC Payments Pty Ltd v Lester [2013] VSC 469 the Supreme Court of Victoria has rejected an application for an interlocutory injunction and ruled that on balance of convenience a previous employee of a major ATM operator (DC Payments) may not be restrained from working for competitor Next Payments Pty Ltd, taking into account the detriment that Lester would suffer.

DC alleged that Lester breached, and unless restrained would further breach:
 (a) the post-employment restraint set out at clause 11 of his  July 2009 written Contract of Employment 
(b) the confidentiality clause (clause 10) of the written contract[ 
(c) the “employee duties” which are alleged at paragraph 7 of the Statement of Claim; and 
(d) the “statutory duties” owed by him to the Plaintiff pursuant to sections 182 and 183 of the Corporations Act 2001 (Cth). 
DC referred to the risk that Lester
may act to the advantage of his now employer Next Payments and to the disadvantage and harm of his past employer the Plaintiff by conduct including the utilisation of highly confidential information in relation to DC Payment’s planned changes to its transaction surcharge, and associated planned client agreement renewal campaign. In addition, the Plaintiff may be harmed by the Defendant divulging the confidential information referred to by Mr Wingrove. The Defendant obtained this highly confidential information while in the employ of the Plaintiff. Mr Wingrove’s evidence also explains the unique advantages to Next Payments which would result from the Defendant and Next Payments deploying the confidential information gleaned by the Defendant whilst he was employed by the Plaintiff.[3] Mr Wingrove also deposes to the difficulty which would be experienced by the Plaintiff in winning back its corporate clients were they to terminate their agreements with the Plaintiff as a result of Next Payments’ actions, assisted by the Defendant.
The Court noted DC's reference to the articulation in Wallis Nominees (Computing) Pty Ltd v Matthew William Pickett [2013] VSC 24 of principles governing restraint of trade clauses
a) A contractual provision in restraint of trade is prima facie void. 
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.
Digby J stated that
This injunction would force the Defendant to leave his employment with Next Payments. In this regard the Plaintiff submits that the damage that the Plaintiff is trying to prevent through enforcement of the covenants is necessarily difficult to quantify, since the Plaintiff will know little if anything of what the Defendant does or will do in the course of his employment by Next Payments. In substance, the Plaintiff submits that unless the first injunction sought is granted, the risks of the Defendant utilising the Plaintiff’s confidential information to its detriment will remain. However, this likelihood is not, in my view, established by the Plaintiff’s evidence which is confined to acts of arguable breaches in the past by the Defendant. In my view, the nature of the Defendant’s past role with the Plaintiff and his present role with Next Payments and the Plaintiff’s past conduct in connection with the confidential information detailed above, do not combine to justify the granting of the employment related injunction sought by the Plaintiff. Such an injunction does not serve the balance of convenience when account is taken of the detriment that the Defendant will suffer. This is particularly so when the terms of the injunctions (defined below) which I intend to grant are also taken into account. 
Furthermore, there is no sufficient basis in the material filed in this application to justify the conclusion that the Defendant, in the face of restraining orders made by this Court, will not strictly comply with such orders. The Defendant should be taken to understand that severe penalties may well follow if he breaches such restraining orders as I propose to make. Therefore, it is appropriate for the Court to proceed on the basis that the proposed injunctions will be strictly complied with and in the result there will be a low likelihood that the Plaintiff will hereafter be exposed to the risks and detriment it feared at the time it launched the subject application. 
However, if this Court were to impose the first of the Plaintiff’s requested injunctions, effectively terminating the Defendant’s employment with Next Payments, I consider that the detriment to the Defendant would be out of proportion to the relevant additional protection which may be afforded to the Plaintiff. The balance of convenience does not lie in favour of granting the first requested injunction.
However, the Court found that it was appropriate to restrain Lester from directly or indirectly canvassing or soliciting business of any person who at any time during 12 months was a client, customer or identified prospective customer of DC.