Background
Eight partners from a top-tier law firm in Sydney were (temporarily) prevented from moving to another rival law firm after ‘retiring’ from their old law firm by virtue of (some of) the restraints that they had entered into.
Decision
In a verdict granting an injunction in respect of the restraint provisions that was sought by the old law firm, the court:
- upheld the “detailed and extensive protections offered” by the partnership agreement – in particular restraint clauses concerning:
- transfer of work to the new law firm
- solicitation of other lawyers from the old firm
- rendering of services to the old firm’s current and related clients
- acknowledged the strength of the eight partners reasoning in relation a number of subsequent restraint clauses which they argued were void for being unreasonable restraints of trade
- found it difficult to see how a refusal to enforce the disputed restraint clauses could operate to the disadvantage of the old firm given the protections provided by the other restraint clauses
- observed the likely adverse, and in some cases significant, consequences for the outgoing partners, should the disputed restraint clauses be upheld
- stated that although the consequences “must have been apparent” to the “commercially and legally sophisticated” outgoing partners (particularly given their co-ordinated departure) the balance of convenience did not favour the enforcement of the disputed restraint clauses
- refrained from deciding disputed questions of law in circumstances where the injunction application was brought on urgently for hearing (these will be determined in substantive proceedings at a later date)
Tips for Employers
Although the restraints in question related to a partnership arrangement, fundamentally many of the concepts have direct application to employment law, thus employers should: [...]
