The Victorian Supreme Court has addressed the prominent factors considered when dealing with an application for an injunction against former employees in Perpetual v Epplett & Ors [2025] VSC 193 (“Perpetual v Epplett”).

Background

The employer (Perpetual) applied to the Court for an interlocutory injunction against the defendants on the basis that, as former employees, they breached the non-solicitation clauses in their employment contracts. The employees resigned from the employer and commenced employment with a competitor. The employer sought to enforce the non-solicitation clauses in the employees’ contracts.

In Perpetual v Epplett, after commencing employment with the employer’s competitor, the employees were contacted by former Perpetual clients, and they advised the clients that they would write to them. A “pro-forma” letter was sent by the employees to the former Perpetual clients to provide to the employer seeking to transfer their financial services to the employee’s. The employees emphatically denied that they breached the non-solicitation or non-compete clauses in their employment contracts with the employer.

Relevant factors

The Court had regard to Perpetual Limited v Maglis [2025] QSC 71 (“Perpetual v Maglis”) in considering the factors relevant to determining whether an injunction should be granted. The breadth of restraint clauses in employment contracts are important, and in this case, it was determined that the clause was too broad. The Court in this matter cited Just Group Ltd v Peck [2016] VSCA 334, where it was stated that a restraint of trade provision in an employment contract is “prima facie void” and the presumption is only rebutted where “the restriction is reasonable by reference to the interests of the parties” and that in relation to the parties interests “the restraint must impose no more than adequate protection to a party in whose favour it is imposed”.

The Court also cited Koops Martin Financial Services Pty Ltd v Reeves [2006] NSWSC 449 (“Koops”), reiterating that “generally, a ‘restraint against the solicitation of customers of a company other than the employer is void’”, which was important when considering the customers of related entities to the employer, which the employer also sought to include in the injunction, however, the employees claimed they did not know who the related entities were. The exception was where “a holding group carries on business through its subsidiaries”.

Also relevant are the wishes of the clients. The Court stated that “By deploying the letters, the defendants must have appreciated Perpetual would have to action them regardless of any restraint….Where a client seeks Perpetual’s consent to transfer their portfolios to another advisor, Perpetual has an obligation to action the request”. The Court concluded that it appeared the employees aim in providing the pro-forma letters was to obtain the business of the former Perpetual clients.

In Perpetual v Maglis, the Court held that the defendant had not breached his contractual obligations by sending the pro-forma letter to former Perpetual clients to send to Perpetual. In this case the Court held that it is “a matter of serious concern to make an order to restrict the choice of clients” and that these restraints may also not be in the public interest.

In Perpetual v Epplett, the case of the employer was even weaker as they presented no evidence that the employees had actually engaged in “onboarding” the clients. It was acknowledged that should all former clients of the employees leave the employer to use the services of the employees, this could cause significant loss to the employer. The Court then stated that as the employer is governed by the Financial Planners and Advisors Code of Ethics 2019 (“the Code”), and the Code is there to benefit clients, that this is a significant factor for consideration.

The Court stated that it was “not satisfied that Perpetual will suffer irreparable harm if the injunction is not granted”. Further, the clients’ interests would be severely affected by granting an injunction which would be against public interest. It was held that an injunction should not be granted.

Lessons for employers

1. The broader that restraint clauses in employment contracts are, the harder they are to enforce.
2. A significant factor for consideration is the impact on clients if an injunction is granted, leaving the clients without the services of their desired advisor for a certain period of time.
3. Restraints, if enforced, should only be reasonable enough to protect the interests of the employer, and should not be unduly prejudicial to third parties/clients.
4. The grant of an injunction will also consider whether the client or former employee-initiated contact. Some consideration will be given to whether former employees accept the approach of former clients, however, clients are able to choose who’s services they wish to retain.
5. Employers should be able to demonstrate they will suffer irreparable harm if an injunction is not granted.

If you would like to discuss these or other workplace issues, please contact Andrew Bland or call 02 9412 3077.