In brief
Two decisions in the Supreme Court of Victoria and the Supreme Court of Queensland denied requests for interlocutory injunctions due to the broad scope and imprecise definition of “Client” in commonly used post termination non-solicitation provisions. While these decisions were not determined on a final basis, they highlight the importance of carefully drafting non-solicitation provisions.
Key takeaways
- These decisions highlight that without appropriate and clear limitations, terms like “had contact” and “dealings” in the definition of ‘Client’ can be interpreted too broadly, especially when not confined to commercial or work-related interactions, making the restraint vulnerable to challenge.
- Employers should ensure that non-solicitation restraints imposed on employees clearly link the employee’s interaction with the client to a commercial relationship i.e., the provision of services.
- It is difficult to read down and/or sever post-employment restraint provisions in jurisdictions that operate outside of the protections offered by the Restraints of Trade Act 1976 (NSW). In New South Wales, due to the operation of the Restraints of Trade Act 1976 , it is possible that a Court could exercise its discretion to intervene and amend the definition of a “Client” so that it is confined to those clients for whom the departing employee performed work whilst employed.
In depth
Perpetual Limited v Maglis [2025] QSC 71
In Perpetual Limited v Maglis, Perpetual sought an interlocutory injunction to restrain a former employee from breaching the non-solicitation provision in his employment contract, following his departure to join Ord Minnett, a direct competitor of Perpetual.
Relevantly, the clause in question was in the following terms:
5 Non-Solicitation
5.1 You must not (directly or indirectly in any capacity, including as a shareholder, unitholder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier) without prior written consent of Perpetual, for the period listed at Item 10 of Schedule 1 from the date of termination of your employment:
Approach, canvass, solicit, accept any approach from or deal with any Client with a view to obtaining the business or custom of that Client in a business that is the same as or similar to any part or parts of the Business;
5.2 “Business” means any business carried on by Perpetual or any of its Related Entities in which you worked at any time during the last 12 months of your employment.
“Client” means any person, firm or entity who was, at any time in the 12 months prior to the termination of your employment with Perpetual:
- A client or customer of Perpetual or any of its Related Entities; and
- With whom you worked or had contact or dealings at any time during the last 12 months of your employment.
The period of restraint listed in item 10 of the schedule was 24 months, followed by cascading substituted terms of 12 months, six months or three months.
The employee argued that the definition of “Client” incorporated into clause 5.1 was too broad and uncertain, rendering the non-solicitation clause unreasonable, on the following basis:
- In relation to the reference in the definition to “a client of or customer of Perpetual or any of its Related Entities”, the employee did not know what the “related entities” of Perpetual were, and only knew clients of Perpetual with whom he dealt with; and
- The phrase “with whom you worked or had contact or dealings” could include social contact, or “in passing” non-commercial interactions.
In response to this position, Perpetual argued:
- The scope of the definition of “Client” is limited by the filter in the definition to clients or customers with whom the employee worked or had contact or had dealings at any time during the last 12 months of his employment;
- The words “contact” and “dealings” should take their meaning from the word “worked”, although not necessarily including the connotation of being paid for by the client, and interpreted as though prefaced by words such as “substantial work related [contact or dealings]”; and
- If necessary, the phrase “had contact or dealings” could be severed from the definition of “Client” to preserve the restraint in a reasonable form.
Decision
Chief Justice Bowskill accepted the employee’s arguments and concluded that the validity of the non-solicitation provision had real challenges having regard to the extremely broad definition of “Client”. His Honour was not prepared to sever, read down or read in additional words to the definition of “Client” on the basis that principles of construction of commercial contracts, particularly in relation to restraint clauses, are construed strictly and any ambiguity should be resolved in favour of the employee with an emphasis on the words the parties have chosen to use, rather than the court re-writing (or reading words into) the clause to accord with a “more commercial construction”.
Perpetual Limited v Epplett & Ors [2025] VSC 193
Perpetual Limited v Epplett & Ors involved similar facts and circumstances to Perpetual Limited v Maglis, in that Perpetual sought an interlocutory injunction against six former employees who had commenced employment with Ord Minnett shortly after resignation from their employment with Perpetual.
Associate Justice Ierodiaconou in the Supreme Court of Victoria applied the same reasoning and reached the same conclusion as Chief Justice Bowskill in respect of the non-solicitation provision.
Conclusion
These recent decisions serve as a timely reminder for employers to review and, where necessary, refine their post-employment restraint clauses. The Courts have demonstrated a reluctance to ‘fix’ ambiguous or overly broad clauses, and have made it clear that such ambiguity, particularly in definitions such as “Client”, can render otherwise valuable protections unenforceable.
To ensure your restraint provisions are enforceable and tailored to your business needs, we recommend:
- Reviewing the scope and clarity of defined terms in restraint clauses, to ensure they are tailored to the employee’s role, the business relationships which they are likely to form during the course of their employment, and the threat which they are likely to pose to the business on departure;
- Ensuring that any client-related restrictions are clearly tied to commercial interactions; and
- Seeking legal advice when drafting or updating employment contracts, particularly for key personnel.
If you would like assistance reviewing your employment agreements or tailoring your restraint clauses to better protect your business, please get in touch with our employment law team.
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Sophia Herd, Associate, has contributed to this legal update.