A software consultancy has failed to prove that it had sufficient grounds to restrain an IT specialist from moving to a management position with a former client.

Wallis Nominees (Computing) Pty Ltd (referred to as DWS) unsuccessfully sought a permanent injunction to prevent former employee Matthew Pickett moving to Grocon, a former client.

DWS relied on a clause of Pickett's employment agreement prohibiting him from providing services to clients within 12 months of leaving the company.

It argued that the clause was designed to protect the company’s legitimate interest in customer connection and that the clause did no more than was reasonably necessary to protect that interest.

However, Holding Redlich's Carmen Currie was able to successfully argue before the Victorian Supreme Court's Justice Michael Sifris that the clause was void and unenforceable because it ventured further than necessary to protect a legitimate interest and that the company had failed to identify a legitimate interest that required protection.

Pickett worked for DWS between July 2007 and January this year, when he submitted his resignation and informed the company he would be moving to become Grocon's IT operations manager.

For most of the previous year, Pickett had been providing IT consultancy services to Grocon after being moved there by DWS from his previous placement at ME Bank.

Late in 2011, Grocon decided to restructure its IT department and created a new IT Operations Manager position.

It offered the role to Pickett, who accepted it on the basis that it would involve less technical work and more management experience than his previous consultancy roles.

The counsel for DWS, Robert Strong, argued that Pickett would continue to provide a "substantial amount" of the services he had previously supplied to Grocon on behalf of DWS, which was a clear contravention of the employment agreement.

The company said that the restraint clause was designed to ensure that employees, such as Pickett, could not use their placement in client offices to provide clients with additional services to those offered by DWS or use these placements as opportunities to gain employment.

"Thus, it was submitted that the position of DWS required protection, particularly in circumstances where DWS invested time and money in the training and development of its staff".

Justice Sifris said, however, that several recent cases had shown that "more than exposure to or interaction with the customer or client by the employee is required" to justify an employer's protection and that the circumstances of this case did not "place Pickett in that special category that would create a risk of exploitation that required protection by covenant".

He said that Pickett was not the "human face" of the company, he did not have control over the business of the client, nor was his consultancy position designed to provide the basis for a special relationship to develop.

He was placed in client businesses at the behest of DWS and could be moved to another client prior to his work being completed if DWS felt he was needed elsewhere.

Justice Sifris said that he also did not accept that the skills and experience gained by Pickett while employed by DWS "constitute a legitimate business interest that DWS is entitled to protect".

Restraint not "frozen in time"

DWS also argued that the employment agreement prevented Pickett from providing services that were provided by DWS both at the beginning and end of his employment, while Currie put forward that DWS was only entitled to restrict the employee to services and clients in place at the time of his contract being signed.

Justice Sifris said that the agreement did not provide a definition of services or specific language that limited the definition of services to a point in time.

“While the validity of restraints of trade must be decided as at the time they are entered into, this is not to say that contractual terms are thereby frozen in time and are unable to reflect agreement between parties as to the future context of their on-going relationship”.

Justice Sifris said that the IT industry – and the skills and abilities of employees in the industry – are subject to rapid change and, as a result, it was not reasonable to argue that the contract was designed to be restricted to a particular time, services or clients.

Wallis Nominees (Computing) Pty Ltd v Pickett [2012] VSC 82 (14 March 2012)