Australia: Recent court case provides clues to successfully enforcing non-compete restraint obligations

Industrial and Employment Law Alert: 31 Aug 2012
Last Updated: 4 September 2012

By Andrew Tobin, Partner and Damon King, Associate

Many employers shy away from using non-compete restraint of trade clauses in their employment agreements, thinking that they are "not worth the paper they are written on" and won't be enforced by the courts. However, a recent Supreme Court of Queensland decision is proof that a well drafted restraint that prohibits post-employment competition can be enforceable.

In AGA Assistance Australia Pty Ltd v Tokody1, final injunctive relief was awarded in favour of the employer, preventing a former national sales executive from working for a competitor for a period of up to 12 months from the date of her resignation.

Here, partner Andrew Tobin and associate Damon King outline how the employer in this case was able to prove that a non-compete obligation was warranted.

Key facts in the Tokody case

  • The employer attempted to enforce a restraint provision that prohibited a departing senior sales executive from being employed by a direct business competitor in the travel insurance industry.
  • The judge found that the employer was entitled to reasonably protect itself from the misuse of the confidential information the employee was privy to, and the exploitation of customer connections she developed, during her long-term employment.
  • The employer was able to enforce the restraint nationally for a period of up to 12 months because the scope of the restraint was found to be no broader than reasonably necessary to protect the employer's legitimate business interests.
  • This case demonstrates the importance of seeking professional legal advice when preparing employment agreements for senior employees, particularly to tailor restraint clauses that ensure that any action ultimately taken to enforce the restraint is likely to be successful.

Background to the Tokody case

AGA Assistance Australia is an insurance company that specialises in providing insurance for customers who book travel online through providers such as Webjet and Virgin Australia.

From 2000 until July 2011, Ms Tokody was employed in a number of senior sales executive roles, most recently under a written contract signed on 12 April 2011.

This employment agreement contained a term which stopped Ms Tokody from being employed in a similar or competing business after ceasing employment with AGA.

The non-compete provision specified alternative periods for the restraint duration - three months, six months and one year - each starting when she ceased employment. Ms Tokody argued that all of these alternatives were unreasonable and therefore void.

Otherwise, she did not dispute that the restraint, if it was enforceable, should apply throughout the whole of Australia, considering the nationwide sales activities she undertook during the course of her employment.

The facts of the case

The trial judge decided the following:

  • No other employee was paid significantly more than MsTokody, except for the CEO. Her base salary was $235,000 plus superannuation, and she was also entitled to an annual bonus of 35 percent of her base salary if she achieved certain KPIs. She agreed that for six years, until her departure, she had been at a managerial level that reported directly to the CEO "in a sales and client relationship capacity".
  • Some 60 percent of the employer's business was in travel insurance, and the relationship between Ms Tokody and certain key clients was critical to its business. The contracts with these key clients were often for about three years.
  • Ms Tokody was involved in tendering for or negotiating contracts with these key clients, and was aware of the terms of those contracts, including details of the agreed commissions and fees to be paid by the employer. She also attained knowledge of the profitability of the business received through these clients, by becoming aware of the extent of claims from insurance issued through a certain client, and other relevant information such as the prices for particular policies. None of the information related to contracts or profitability was publicly known. It was likely to be very valuable to the employer's competitors in competing for the work available from these clients.
  • Ms Tokody also directly dealt with relevant representatives of the key clients, with evidence that she entertained one or more of these people at sporting events and other similar occasions. These types of dealings and relationships were of a kind which can be legitimately protected by a restraint against working for a competitor. In no case was the connection apparently so strong that the client saw the only attraction in dealing with the employer as being the personal involvement of Ms Tokody. But more likely than not, at least some of these relationships were such that there was the potential that a change in Ms Tokody's employment would contribute to a change in the insurer with whom the client did business.
  • The employer's legitimate business interests warranted a restraint preventing Ms Tokody from working in a competing business in Australia for a limited time.
  • Notwithstanding the presence of the employer's protectable interests, the court still had to consider whether the scope of the restraint, in any of its alternative forms, was broader than reasonably necessary to protect those interests.
  • In assessing what is required by way of reasonable protection, it is necessary to identify the relevant risk. There is a need to assess the time during which the advantages of the personal connection with clients and knowledge of confidential information would diminish to a point that they would no longer be worthy of protection by a restraint against employment in a substantially similar or competing business.
  • As to the advantage gained from personal connections, the employer would be expected to address that by appointing a replacement to build something of the same goodwill over time, reducing the risk of the defendant using the extensive knowledge and personal influence she acquired (as the person in charge of attracting and retaining key clients) in working for a competitor.
  • The confidential information itself was likely to have a 'shelf life' of more than twelve months, considering the contracting arrangements with key clients were usually for a term of three years.
  • In light of these facts, the court upheld the non-competition restraint as being reasonable for a period of one year.

The findings in this case

A restraint of at least 12 months was held to be reasonably necessary to protect the employer from the risks posed by Ms Tokody's use of relevant information about key clients and by her personal relationships with individuals from those key clients.

Notably, prohibiting the misuse of confidential information and including non-solicitation restraint obligations that prohibited Ms Tokody from poaching key clients in her employment contract did not stop the court from enforcing the additional non-competition restraint.

Finally, the court observed that any alleged failure on the employer's part to properly foster existing business relationships with key clients after Ms Tokody's departure was irrelevant to the enforceability of the restraint when considering an application for final injunctive relief. However, such facts may be relevant when considering a claim for compensatory damages for contractual breach.


1 [2012] QSC 176 (25 June 2012)

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.