Investment Managers Pty Ltd v Cullen

In this matter, Investment Managers Pty Ltd brought proceedings against their former employee, Cullen, in the Federal Circuit Court of Australia. The dispute centred around a restrictive covenant in Cullen's employment contract, which imposed a 12-month restriction on him obtaining customers past, present, or prospective of the employer. The employer sought an interlocutory injunction to enforce the restrictive covenant, as well as damages for breach. Cullen argued that the covenant was unreasonable and should not be enforced, and that damages would be an adequate remedy.

The legal issues before the court included the validity and enforceability of the restrictive covenant, and whether it was appropriate to determine its reasonableness at the interlocutory stage. The court also had to consider whether damages would be an adequate remedy for the breach of the covenant. The court considered the provisions of the Restraints of Trade Act 1976, particularly section 4(1), which provides that a restraint on trade is void to the extent that it is unreasonable. The court also considered the principles of equity, particularly the doctrine of proportionality, in determining whether the covenant was reasonable.

The court found that the restrictive covenant was reasonable and enforceable, and that damages would not be an adequate remedy for the breach. The court noted that Cullen had obtained nine of the employer's in excess of 1,400 customers, and that the employer's business was highly competitive. The court held that the covenant was necessary to protect the employer's legitimate business interests, and that it was not unreasonable in the circumstances. The court also held that it was appropriate to determine the reasonableness of the covenant at the interlocutory stage, as the employer had established a prima facie case for enforcement.

The court granted the employer's application for an interlocutory injunction, restraining Cullen from obtaining customers of the employer for a period of 12 months. The court also ordered Cullen to pay damages to the employer in the amount of $200,000, representing the loss suffered by the employer as a result of the breach of the restrictive covenant. The court noted that this amount was a conservative estimate, and that the employer was entitled to further damages if it could prove a higher amount of loss.