Kau Media Group Limited v Thomas Hart

Post-termination restrictions in an employment contract are prima facie unlawful. The employer must establish a legitimate business interest, show that the restriction goes no further than reasonably necessary to protect it, and demonstrate that the restriction is commensurate with the contractual benefits secured to the employee.

A non-compete clause cannot be used merely to prevent competition. Customer restrictions require identifiable customer connections, and confidential-information restrictions protect objective information akin to trade secrets, not an employee’s skill, experience, know-how or general knowledge. The reasonableness of the covenant is assessed when the contract was made. An injunction remains discretionary and must be justified at trial.

Kau Media Group Limited sought to enforce six-month non-compete and 12-month non-solicitation and non-dealing restrictions against its former Account Director, Thomas Hart, who proposed joining MiSmile Media Ltd.

The claimant alleged that MiSmile Media was a competitor and that Mr Hart possessed confidential customer, pricing and business information capable of protecting its legitimate interests. Mr Hart denied that the businesses competed, disputed the existence of protectable information, and challenged the breadth and duration of the restrictions.

The court determined whether the restrictions were engaged, reasonable and enforceable, and whether injunctive relief should be granted.

1. Disposition. The claim to enforce both post-termination restrictions was dismissed. No injunction was granted, and any remaining undertakings given by the defendant were discharged.
2. Applicable approach. The restrictions were subject to the restraint of trade doctrine. The employer bore the burden at each stage: construing the covenant; identifying a legitimate business interest requiring protection; establishing that the covenant was no wider than reasonably necessary when assessed at the contract date; and, if enforceability were established, satisfying the court that an injunction should be granted as a matter of discretion. The court also considered whether the restriction was commensurate with the contractual benefits secured to the employee.
3. Non-compete restriction. The services supplied by the two businesses were ostensibly comparable, but MiSmile Media was principally providing in-house services to the MiSmile Network and targeting small practices within that network. The evidence did not establish competition in the same market area as Kau Media Group. The possibility of limited external work was insufficient to engage the restriction.
4. The claimant also failed to establish a legitimate proprietary interest in confidential information. The information relied upon was inadequately particularised, much of it was already known within the MiSmile group, and the material proved against the defendant largely comprised know-how, skill, experience and general knowledge. Clause 2.1 was in any event excessively wide, potentially preventing employment with digital marketing businesses operating in sectors in which the defendant had worked. It was therefore unreasonable and unenforceable, and could not be severed.
5. Customer restrictions. Clauses 2.2(a) and (d) were construed as applying to competitive digital marketing services supplied to customers of the claimant during the protected period with whom the defendant had material dealings. They were not engaged because the services and customer base were not competitive. They were also unsupported by any proved proprietary interest. Alternatively, the 12-month duration was disproportionate and inadequately justified in a fluid market, and severance could not make the restrictions effective.