The Case

APT Technology Pty Ltd v Aladesaye (2014)

While employed by APT in South Australia, Mr Aladesaye set up a business in competition with his employer. To assist him to set up his business and procure APT’s clients, Mr Aladesaye forwarded confidential information about APT to his new business email.

When APT discovered this, it terminated Mr Aladesaye’s employment. Despite the termination, APT had trouble restabilising client connections in South Australia, as Mr Aladesaye had been the main point of contact for the business in Adelaide.

APT then sought an injunction against Mr Aladesaye to stop him approaching its clients. It also sought damages for the loss suffered.

Mr Aladesaye’s contract of employment did not include an express restraint of trade clause, i.e. a clause that restricts an employee from engaging in economic activity beyond the scope of their contract.

The Verdict

The Federal Court granted an interim injunction restraining Mr Aladesaye from approaching APT’s clients. Despite the absence of an express restraint of trade clause, the Court held that Mr Aladesaye had breached the implied equitable duty not to misuse confidential information, as he had used this information as a springboard to the detriment of APT.

Further, Mr Aladesaye had breached his employment contract by acting against the interests of APT while still employed by them. The Court is yet to decide the damages component of APT’s claim against Mr Aladesaye.

The Lesson

This case demonstrates that, despite the absence of an express restraint of trade clause, the common law implied duty not to misuse confidential information still provides some protection to employers.

Remember that it can be difficult to prove that confidential information has been misused, particularly because:

• many employees are much more subtle than Mr Aladesaye was in securing confidential information; and
• past employees usually won’t commence operating a business in competition with their employer until after the employment relationship has ended.

To ensure that your confidential information, trade secrets, client and employee base are protected, it is vital that you implement reasonable restraint of trade clauses for pivotal employees. These restraint clauses can be inserted into the contracts of new and existing employees. For existing employees, you should provide some form of additional consideration, such as a pay rise or a one-off bonus.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.