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Restraint of trade clauses enforced against resigning partner

The decision of BDO Group Holdings (Qld) Ltd & Anor v Sully [2015] QSC 166 was delivered on 19 June 2015 by Justice Flanagan in the Supreme Court of Queensland.

The respondent, Mr Sully, was a chartered accountant who had practised in this capacity for over 30 years.

On or about 5 June 2012, he became party to a shareholders’ agreement with the first applicant, BDO Group Holdings (Qld) Pty Ltd.  The respondent was also a party to an employment agreement dated 1 July 2012 with the second applicant, BDO Administration (Qld) Pty Ltd.  Both the shareholders’ agreement and the employment agreement contained non-competition restraint clauses.

Mr Sully, by letter dated 19 January 2015, gave notice of his resignation which took effect on 19 April 2015 (he had a 3 month notice period).

Justice Flanagan confirmed that a restraint of trade clause is contrary to public policy and is prima facie void unless a party relying on such a clause is able to establish that the relevant restraints are necessary to protect its legitimate interest.

Justice Flanagan found that the legitimate interests sought to be protected by the restraint clauses included both the goodwill of the BDO Group and its established customer connections.  He also found that through the restraint clauses in the employment agreement, BDO Administration, the second applicant, sought to protect the same goodwill that was sought to be protected under the shareholders’ agreement.

Justice Flanagan found that a restraint period of 12 months post-employment was reasonable and that this timeframe was sufficient to enable the BDO Private Clients Division to establish rapport with the resigning partner’s clients.

Tait and Co Business Lawyers can provide you with independent legal advice if you need us to review a restraint of trade clause in an employment contract.  We also deal with disputes where a party wishes to enforce a restraint of trade clause.