Usually, restraint of trade clauses are enforced by way of injunction. However, a trainee accountant has been ordered to pay his ex-employer the sum of AUD$188, 495.65, plus costs and interest, for breaching a restraint that contained a liquidated damages clause.
The employee signed a restraint that prohibited him from providing certain accounting services for three years after his employment ended to clients of the employer for whom he had worked. The liquidated damages clause provided where the employee breached the restraint, he had to pay 75% of the fees incurred by the particular client for services rendered.
The employee left the employer to take up part-time employment with both a major client of the employer and a competing accounting firm. Then, after requesting quotes from both firms, the major client terminated its retainer with the ex-employer and engaged the competing firm to perform its accounting services. The employee then commenced providing accounting services to both the major client and other clients of the ex-employer, whilst working for the new firm.
The court upheld the restraint, finding the legitimate interest the employer sought to protect was the 'trade' connection it had with those of its clients who had dealt directly with the employee – a connection long regarded as being capable of protection.
The liquidated damages clause (which is often found in construction contracts) was also not found to be "out of all proportion" so as to amount to a penalty and was a fair measure of the damages looking forward.
Sources:
Birdanco Nominees Pty Ltd v Money [2012] VSCA 64
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