Restraint of Trade Clauses In Andrews Advertising Pty Ltd v David Andrews  NSWSC 318
Tuesday 17 June 2014 @ 9.35 a.m. | Trade & Commerce
The NSW Supreme Court has ordered a couple to pay $233,108.27 for breaching fiduciary duties and $300,000 in damages for breaching a restraint of trade clause in proceedings in relation to their former advertising agency. Stephen Trew from Holding Redlich told Smart Company that:
“the decision highlights the importance of having procedures in place to protect client revenue, including in respect of businesses that have been recently acquired.”
David and Gillian Andrews were the owners of Andrews Advertising, which employed David Andrews and his son Dean Andrews. The company was run as a “family enterprise” until it was taken over by Adcorp Australia Pty Ltd (“Adcorp”) in 2006. As part of the takeover, both David Andrews and Dean Andrews signed contracts of employment that included a restraint of trade clause and prevented them from soliciting the company’s clients. Andrews Advertising had two main clients – Lowes – Manhattan Pty Ltd and Sleep City Holdings Ltd ("Sleep City"). In July 2010, the Andrews ceased their employment and both clients concluded their relationship with the company.
Andrews Advertising began proceedings in 2011, alleging that the Andrews had breached the restraint of trade clauses in their employment contracts and the fiduciary duties owed to the company. The proceedings between the company and David Andrews were settled. These proceedings related to Dean Andrews and his wife, Danielle Andrews, who was the sole shareholder in Andrews Media and Creative Pty Limited (“AMC”).
Andrews Advertising alleged that Dean Andrews had been diverting business from the company to AMC from September 2009 until the end of his employment, and that after his employment ceased he breached his contract by continuing to work for Sleep City through AMC and a different company. The Andrews denied the allegations, saying that Mr Andrews was not involved in the provision of any advertising services through AMC.
Justice Darke found that Mr Andrews had diverted work from Andrews Advertising to AMC, which breached his fiduciary duties. He also found that Mrs Andrews was liable as an accessory, as she had
“knowledge of circumstances which would have indicated to an honest and reasonable person that Mr Andrews was engaged in a serious breach of his duties of loyalty to the Company which amounted to a dishonest and fraudulent design on his part” [at 130],
following the second limb of Barnes v Addy (1874) LR 9 Ch App 244.
The restraint of trade clause in the Andrews’ contracts was considered to be “reasonable in all the circumstances”, given the importance of Sleep City as a client. His Honour said the restraint
“would enable the company, through a new employee, a fair opportunity without interference from Mr Andrews to carry out whatever work was in progress” [at 168],
and was enforceable under s 4(1) of the Restraints of Trade Act 1974 (NSW).
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Andrews Advertising Pty Ltd v David Andrews  NSWSC 318