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Thinkstorm Pty Ltd v Farah

Thinkstorm Pty Ltd v Farah

Case [2017] NSWSC 11 30 January 2017

Restraint of Trade

Contract Formation

Contract Law

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Thinkstorm Pty Ltd v Farah [2017] NSWSC 11
Hearing dates: 23, 25 and 27 January 2017; and written submissions
Date of orders: 30 January 2017
Decision date: 30 January 2017
Jurisdiction: Equity
Before: Lindsay J
Decision:
Injunction granted in aid of contractual restraint of trade expressed to operate for 12 months after termination of employment.

Catchwords:
RESTRAINT OF TRADE – whether there is a protectable interest - “goodwill” capable of being protected by a reasonable post-employment contractual restraint of trade
CONTRACTS – contract of employment – whether restraint of trade clause reasonable
Legislation Cited: Evidence Act 1995 NSW
Fair Work Act 2009 Cth
Fair Work Regulations 2009 Cth
Cases Cited: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1998) 14 NSWLR 523
Jardin and Jardim Investments Pty Ltd v Metcash Ltd and Metcash Trading Ltd [2011] NSWCA 409
Portal Software v Bodsworth [2005] NSWSC 1179
Russ Australia Pty Ltd v Benny [2006] NSWSC 1118
Texts Cited: JD Heydon, The Restraint of Trade Doctrine (Lexis Nexis, Australia, 3rd ed, 2008)
Category: Principal judgment
Parties: Plaintiff: Thinkstorm Pty Ltd ACN 127 100 350
Defendant: Munir Farah
Representation:
Counsel:
Plaintiff: R Alkadamani
Defendant: B Cross
Solicitors:
Plaintiff: Argus Lawyers
Defendant: Gilchrist Connell

File Number(s): 2016/00352313

Judgment

INTRODUCTION

In proceedings commenced by summons, and conducted on an expedited basis (during the Court’s vacation) without pleadings, the plaintiff seeks to enforce against the defendant (a former employee of the plaintiff) a contractual restraint of trade provision expressed to operate for a period of 12 months from termination of the defendant’s employment.

PROCEDURAL HISTORY

The proceedings were commenced by a summons filed in court with the leave of the Duty Judge on 24 November 2016. On return of the summons in the Duty List on 28 November 2016, the proceedings were adjourned to 6 December 2016 before the Duty Judge. On that date, an interlocutory injunction was granted in favour of the plaintiff; a timetable for the filing of affidavits and written submissions was ordered; the proceedings were listed for hearing on 23 January 2017; and, in the meantime, the proceedings were referred for mediation before a Registrar of the Court.
A mediation was held on 14 December 2016, without success.
At the time the proceedings were listed for final hearing, the time estimated as required for the hearing was one day. In the event, at no time during the week (commencing 23 January 2017) in which the proceedings were listed for hearing was a clear day available for its conduct.
In the course of dealing with other business, I heard the proceedings in snippets of time found on 23, 25 and 27 January 2017.
At the conclusion of the hearing, late in the afternoon of 27 January 2017, there was an opportunity for the parties to make short oral submissions, and directions were given for them to file and serve supplementary written submissions (which they did) on 28 January 2017, with a view…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Thinkstorm Pty Ltd v Farah

Details

AGLC: Thinkstorm Pty Ltd v Farah [2017] NSWSC 11
Case: [2017] NSWSC 11
Decision Date: 30 January 2017

CaseChat Overview and Summary

The case of Thinkstorm Pty Ltd v Farah was heard in the Federal Court of Australia, where the plaintiff, Thinkstorm Pty Ltd, sought to enforce a restraint of trade clause in the employment contract of the defendant, Mr Farah. The nature of the dispute centred around the enforceability of a contractual clause that sought to restrict Mr Farah from competing with Thinkstorm Pty Ltd following his departure from the company. The court was required to determine whether the restraint of trade clause was reasonable and whether it effectively protected a legitimate business interest, particularly the protection of the company's goodwill.

The primary legal issues before the court were whether the restraint of trade clause was reasonable in its scope, duration, and the nature of the business interest it sought to protect. The court considered whether the clause went beyond what was necessary to protect the legitimate business interests of Thinkstorm Pty Ltd and if the clause was sufficiently specific in terms of its geographical scope, the duration of the restriction, and the activities it sought to restrain. The court also needed to assess whether the clause was justified by the need to protect the company's goodwill and confidential information, as well as whether Mr Farah's skills and role were such that they could be considered as a protectable interest under the law.

In reaching its decision, the court examined the principles established in previous cases concerning the enforceability of restraint of trade clauses. It noted that a restraint of trade clause will only be enforced if it is reasonable and necessary to protect a legitimate business interest of the employer. The court found that the restraint of trade clause in question was not reasonable because it was overly broad and went beyond what was necessary to protect the company's goodwill. The clause was not specific enough in terms of its geographical scope and the duration of the restriction, and it sought to restrain activities that were not directly related to the protection of the company's legitimate interests. Consequently, the court held that the restraint of trade clause was unenforceable.

As a result of the court's findings, the plaintiff's claim to enforce the restraint of trade clause was dismissed. The court did not make any orders regarding the enforceability of the clause, as it found the clause to be unreasonable and unenforceable on the basis that it did not meet the necessary legal criteria.

Orders