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NSW Court of Appeal restraint of trade case judgment offers lessons for employees and employers

The NSW Court of Appeal handed down its long-awaited judgment in the Agha v Devine Real Estate on Tuesday, upholding its decision against former shareholder and Director of Roger Agha – save for a reduction of the area of restraint of trade.

The finding raised several interesting issues that should serve as a warning to both employers and employees in the industry when it comes to restraint of trade.

The Appeal successfully overturned orders against a second defendant and former employee, who was found previously to have breached his employment agreement with Devine Real Estate Concord, in circumstances that the signed employment agreement could not be produced by the employer.

The Court of Appeal upheld the interlocutory relief and substantially, the primary judgment against Roger Agha, overturned the judgment against a second employee and made some interesting comments that will have a flow-through effect for the real estate industry.

The first issue referred to in the case was the sabotage of confidential information in the Devine CRM.

The Court of Appeal said, “The inference was clearly available that Mr Agha was responsible for the sabotage of the client information.

“The sabotage was carried out by a person using his username access (which was password protected) on the same day that he gave notice of his intention to leave the Devine Group and when he was planning to set up business in competition to the Devine Group. 

“The primary judge was correct to find that the inference that Mr Agha was responsible for the sabotage could more readily be drawn from his failure to give evidence to contradict that inference”. 

Lisa Jemmeson, Senior Associate and Head of Litigation at Jemmeson & Fisher, who represented Devine in the case, said this issue served as a salient lesson to employers to ensure employees are provided with unique passwords to access their companies’ CRMs.

“When you go into the back end of (most CRMs) you can actually see who’s logged in the computer, the VPN address, what they looked at, what they printed, what they downloaded and what they changed,” Ms Jemmeson told Elite Agent.

She said that licences for most property CRMs were paid for on a per-user basis and pointed out if the defendant in this case had been using a shared login, the imputation that he had engaged in sabotage would have been difficult to infer.

The second issue, and a point in which the Court of Appeal found the employer failed, was in being able to produce a copy of the employment agreement signed by the employee. 

The employer gave evidence at the primary hearing that “previous and current management employees of Devine Group have used the REEF [Real Estate Employers’ Federation] Contracts when preparing employment agreements for Devine Group employees”. 

The Court of Appeal determined there was not evidence that an employment contract was prepared for and signed by the employee, and on that basis, the employee defendant could not be bound to the post-employment restraint, as the employer had not established that the employee had entered into an employment agreement containing the standard industry terms. 

This should sound alarm bells for employers, who should immediately verify that they hold a signed copy of an employment agreement with their employees, and if not, the employment relationship should be reduced to writing in the ordinary industry terms.

Ms Jemmeson said there was also a lesson here for employees, pointing out that it was worth seeking advice around template contracts for restraint of trade.

“It’s not relevant what happens at the end, but what you agreed to in the very beginning,” she said.

“When you have that meeting of the minds between the employee and employer at the start, that’s what you get bound by.”

The third issue was about the information sent from the Devine CRM to themselves, called “Contact Lists”

The appellant’s defence centred around the notion that emailing themselves the Confidential Information did not establish that they had actually received it.

They also contended what was transmitted from the employer to themselves via private email addresses was not a list of customers but instead a list of persons with whom the employer had not traded.

Both of these arguments failed in the Appeal.

The fourth issue was about the construction and interrelationship between the shareholder agreement and employee agreement.

In this case, each agreement contained different terms as to the restraint of trade. 

The primary judge held that the two agreements were intended to co-exist and made findings against the employee having regard to the maliciousness, blatancy and extensiveness of the breach. 

The Court of Appeal determined that the radius of the restraint (which was greater in the employment agreement) did not apply to the full term of the shareholder restraint being three years. Essentially, it was not open to take the respective restraints each at their highest and promulgate the terms of one restraint. 

This is instructive for real estate agencies, to ensure that there is consistency in their agreements, namely between the employment agreement and the shareholder agreement.

Devine Real Estate Group Director Steve Devine said he was happy with the Court of Appeal’s judgment. 

“It now allows me to seek my costs, having had the restraints upheld against Roger Agha.

“For the last three years I have done a lot of heavy lifting, so to speak, on post-employment restraints in the real estate industry,” Mr Devine said.

“On the back of the primary decision, other cases including Dundoen Pty Limited v Richard Wills Real Estate,  allowed other real estate employers to seek their relief against employees acting against express contractual terms of their employment contracts, and to have those post-employment restraints upheld.

“I will be diligently watching dealings with properties in the Concord area, to ensure that my rights in my Confidential Information and supported by findings of the Court are fully upheld.” 

“This case has been ongoing for three years, and only now do we get to return to the Supreme Court and plead out the part of the case that deals with my damages for the misuse of confidential information and in breach of the Restraint of Trade.

“It is my advice to fellow employers that you can still be in court enforcing restraints well after they have expired.

“I am very thankful to my legal team for their meticulous advocacy, albeit fiery at times, and their personable dealings throughout the litigation”.

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