Six month restraint on financial adviser

The District Court of Queensland has granted an injunction to an employer restraining a financial adviser from soliciting or providing professional services to any clients of his former employer for a period of up to 6 months.

The employee managed 60 portfolios for the employer before his departure. In the time between the employee’s departure and the hearing of the matter, the employer lost just over half of those portfolios, equating to some $50 million dollars.  It subsequently sought injunctive relief from the District Court.

The decision to grant an injunction was interesting given that the Court found that the employer had not actually established that the employee had solicited any of its clients. The Court however noted that the financial adviser’s failure to contest the allegation that he was providing those professional services meant that only one reasonable inference could be drawn – that he was providing such services in possible breach of the restraint and confidential information provisions of his employment contract.

With that inference drawn, the Court found that ‘the restraint of trade provisions were both necessary and reasonable and designed to protect a legitimate interest’ of the employer.

The Court noted that the employer sought to have the restraint apply to its current clients as well as ‘prospective clients’ of the employer. His Honour did not agree that the employee should be restrained from activities relating to the employer’s prospective clients, noting that such a restraint would be at odds with the employer’s intention to only seek ‘an order that only refers to the balance of the clients whose business still remains with [the Employer]’.

Lessons for Employers

With the injunction granted, the outcome of the breach of employment contract claim will be a decision to watch for employers. This case also highlights the often overlooked jurisdiction of the District Court to make injunctive orders.