Case Name And Reference: Net Affinity Limited V Michelle Conaghan and Revmac Limited trading as Avvio, [2011] IEHC 160

Court Or Tribunal: High Court

Jurisdictions/Subject Matter: Restraint of Trade clauses / Confidentiality Clauses


Facts

A Hotel Marketing Agency specialising in the provision of reservation and booking engine systems for independent and group hotels in Ireland sought a number of injunctions on foot of a contract of employment against a former key ex-worker to include the following:

A. An order restraining the ex-worker from breaching the duty of confidentiality as set out in her contract of employment
B. An order preventing the ex-worker from approaching clients of the Agency for the first 12 months of her employment with a rival firm
C. An order preventing the ex-worker from taking up employment with another competitor in the area

Essentially, the plaintiff had grave concerns that if the injunctions sought were not granted, he would suffer a serious detriment to his business and believed that the Agency may in fact be required to close down. It was submitted by the plaintiff that Ms. Conaghan, the ex-worker, had such personal knowledge of and influence over the customers of the Agency that she would be in a position to take advantage of her ex-employer’s trade connections and she could use information confidentially obtained.


Determination

It was established by the plaintiff that certain material was downloaded from the company lap-top the night before Ms. Conaghan handed in her notice. Ms. Justice Dunne accepted that Ms. Conaghan retained confidential information of the Agency on leaving her employment and granted injunctive relief to prevent Ms. Conaghan from breaching her duty of confidentiality to Net Affinity as set out in her contract of employment. However, the judge found that despite the fact that Ms. Conaghan retained information regarding specific clients and arrangements with Net Affinity which would be of benefit to a competitor, it was not necessary in order “to protect the legitimate interests of Net Affinity, to grant an injunction against Ms. Conaghan which would have the effect of preventing her from taking up employment with Avvio”.

The judge held that it was appropriate to ensure that for a period of 12 months, Ms. Conaghan should not approach, solicit or deal with any existing customers of Net Affinity. This order was extended to similarly prevent Avvio from soliciting, approaching or dealing with existing Net Affinity clients for a period of 12 months as Ms. Justice Dunne accepted that it would be virtually impossible to establish that contact between Avvio and the existing customer did not arise from some form of contact through Ms. Conaghan.

Finally, as the non-compete clause in Ms. Conaghan’s contract of employment was not limited in its scope geographically, Ms. Justice Dunne concluded the that non-compete clause was too wide. In those circumstances, the clause was void and unenforceable. She refused to grant an injunction in this respect. Therefore, Ms. Conaghan was free to take up employment with another competitor in the area. It is noteworthy that the court did not have any difficulty with the temporal limitation of 12 months after termination of contract.


Legal Review

Restraint Of Trade Clause / Non-Compete Clause

In general, the law acknowledges that competition should be encouraged and in the past courts have been very hesitant to enforce restraint of trade clauses. However, it is clear that the law does recognise that in some cases restraint of trade is necessary to protect goodwill. This case is a perfect example, highlighting the balancing act required to protect the legitimate interest of an employer versus the freedom of an individual to ply his or her trade.


Confidentiality Clauses

The courts have been less suspicious of Confidentiality clauses and enforcement is often easier to achieve. However, one of the practical difficulties is that, even if an ex-employee returns all confidential documents and materials to the former company, the ex-employee will still retain certain confidential information in their head such as know-how and customer connections.


Comment

It is important to remember that Restraint of Trade clauses AND Confidentiality clauses need to be drafted extremely carefully. Legal advice should be sought so that the interest to be protected is defined carefully and the clause is drafted appropriately. A widely drafted clause is dangerous because it can be struck down as an unreasonable restraint of trade.