Facts

The Victorian Court of Appeal in Wallis Nominees (Computing) Pty Ltd v Pickett [2013] VSCA 24 involved Mr Pickett, who was employed by Wallis Nominees (Computing) Pty Ltd as an IT consultant. In his role, Mr Pickett was assigned to various companies who contracted with DWS to carry out IT related work. In February 2011, Mr Pickett was assigned to Grocon Pty Ltd. After working for a period of 11 months at Grocon, the company initiated a restructure of the IT department and Mr Pickett was offered a full-time position. He accepted this new role and resigned from Wallis.

Relying on the restraint clause

Relying on a restraint of trade clause in the contract, Wallis sought to prevent Mr Pickett from providing services to Grocon. The restraint of trade clause provided that Mr Pickett was restrained from providing services for a period of one year, to any company with which he directly or indirectly had relations with whilst at Wallis. Mr Pickett challenged the validity of this clause.

Relevant considerations

In deciding whether the restraint of trade clause was valid, the Court of Appeal relied upon the formulation applied by the trial judge. Namely, a contractual provision restraining trade is assumed void, unless the party attempting to invoke the clause can show that there are special circumstances which justify the restraint. Further, the restraint must not impose more protection than is reasonably necessary in the circumstances.

Court’s decision

The Court reserved judgement as to whether special circumstances did exist so as to justify the restraint clause. Instead, finding that even if such circumstances did exist, the restraint clause in Mr Pickett’s employment contract went beyond what was reasonably necessary to protect the legitimate interests of Wallis.

Specifically, the Court decided it was unreasonable for the clause to apply to companies Mr Pickett had only incidentally dealt with and for the clause to bind Mr Pickett for one year.

Conclusion

While the Court noted the importance of determining reasonableness with reference to the specific context, this case nevertheless illustrates the reluctance of courts to allow the enforcement of unreasonable or excessive restraint of trade clauses in employment contracts.