A recent decision of the Supreme Court of New South Wales, Premprop Sales Neutral Bay Pty Limited atf Neutral Bay Sales Unit Trust T/A Belle Property Neutral Bay v Davies [2025] NSWSC 725, has highlighted the importance of carefully drafted restraint clauses in employment contracts.
The case serves as a reminder that post-employment restraints must be drafted so that the restraint is designed to protect the employer’s legitimate interests without prohibiting employees from earning a livelihood
Background
Belle Property Neutral Bay (Belle) (the Plaintiff) sought an injunction against a former sales agent, Christopher Davies (Davies), who resigned and joined a competitor real estate agency in the same geographical area.
Prior to resigning, Davies downloaded Belle’s Customer Relationship Management (CRM) data, which included property details, owner contacts, potential purchasers, sales contracts, appraisals, floorplans and marketing templates.
Belle sought to restrain Davies from using the downloaded material and prevent him from engaging with a broad category of clients (which was broadly defined in the employment contract).
Belle also sought interim orders with new restraints that would prevent Davies from:
- contacting any “Client” as defined in the employment contract; and
- providing real estate services to any property or property owner within specified suburbs in the Lower North Shore; and
- required Davies to return the Confidential Information.
In addition to the above, Belle sought a continuation of an order requiring Davies to keep records of all appraisals, sales and managements he participated in while proceedings were on foot.
Davies opposed the orders, and instead proposed undertakings that would:
- require him to return all materials to Belle;
- delete confidential information as required;
- provide an affidavit confirming that he had returned all materials to Belle and deleting all confidential information as required;
- submit his devices for forensic examination; and
- not act for any vendor or landlord who had signed an agency agreement with Belle between the period 1 January 2025 until April 2026.
The Court’s Findings
The Court found Belle’s case for interlocutory relief weak. The Court accepted that there was a serious question to be tried, but the scope of the restraints went beyond what was reasonably necessary to protect Belle’s goodwill or confidential information.
In making its decision, the Court made the following comments:
- The orders proposed by Belle included a broad definition of ‘Client’ and extended to people who merely attended open homes and could not reasonably be considered clients of Belle.
- Belle sought to restrain Davies from dealing with “hundreds, if not thousands of ‘Clients’’’ merely due to their geographical location and therefore, if the proposed orders were granted Davies would be prohibited from providing services to anyone who lived in the identified suburbs even if they were not a client of Belle.
- The Court stated that there was no legitimate interest in restraining Davies from dealing with such a large number of people. The orders would restrain Davies from dealing with people whose identities he could not know, because he was not permitted to keep a copy of the CRM list.
- The Court noted that given Davies was a sales agent and not in a senior managerial or strategic position, the confidential information contained in the CRM was general real estate knowledge and it was difficult for Belle to justify that the information was of a quality that could be protected.
Ultimately the Court, on the balance of convenience, refused the injunction and decided that damages were an adequate remedy if a breach of employment restraints were established at final hearing.
The Court found that the restraints sought would prohibit Davies from earning an income until the final hearing and the undertakings offered by Davies offered reasonable protection for Belle’s goodwill.
The case highlights the importance of ensuring restraints drafted in employment agreements are proportionate to protect legitimate business interests without prohibiting an employee’s ability to work.
