VISION MAKES US WHO WE ARE
law
Jul 17, 2025
by
The Legal Process and Practical Considerations
A recent Supreme Court of New South Wales decision, Premprop Sales Neutral Bay Pty Ltd v Davies [2025] NSWSC 725, sheds light on how courts approach applications for injunctions involving post-employment restraints and confidential information. The case involved a former real estate agent who left his employer and joined a competitor, prompting legal action to enforce post-employment obligations.
This article outlines the legal principles involved, the process for seeking interlocutory (interim) relief, and practical implications for both employers and employees.
Summary
The decision in Premprop v Davies illustrates how courts try to strike a balance between protecting business interests and allowing individuals to work in their chosen profession. While the employer’s concerns were valid, the Court refused to enforce an overly broad restraint that captured people who were not genuine clients and would have made it difficult for the employee to know whom he could deal with.
Restraint of trade clauses remain an important tool for businesses to protect their goodwill and confidential information. However, they must be drafted with care. Both employers and employees benefit from clarity, fairness, and reasonable limits. If a dispute arises, the court will examine the facts closely and as this case shows, injunctions are not automatic, even where there has been a breach.
Background
The plaintiff, a Belle Property franchisee operating across Sydney’s Lower North Shore, employed the defendant, Mr Davies, as a real estate agent. He had been with the agency since 2010, starting in leasing and eventually moving into a sales role in 2020. As part of that transition, he signed a new employment contract that included clauses preventing him from using confidential information and from competing with his employer for a set period after resignation.
In June 2025, Mr Davies resigned and took up a position with a rival agency, Ray White Lower North Shore, which operates in overlapping geographic areas. Just before resigning, he downloaded materials from the employer’s internal customer relationship management (CRM) system, which contained data on vendors, purchasers, appraisals, and marketing tools.
The employer claimed that this action breached both the confidentiality clause and the restraint of trade clause in the employment contract. It sought urgent interim relief from the Supreme Court to prevent Mr Davies from:
Using or deleting any confidential information,
Contacting or accepting instructions from clients within certain geographic locations,
Retaining or profiting from any business derived from the downloaded data.
The purpose of the application is to preserve the status quo and prevent further harm to the plaintiff pending the final hearing of the matter.
Restraint of Trade
In New South Wales, restraint of trade clauses are governed by the Restraints of Trade Act 1976 (NSW). These clauses are enforceable only to the extent that they protect a legitimate interest and are reasonable in duration, scope, and geography.
Legitimate business interests include:
Customer connections (commonly referred to as goodwill),
Protection of confidential information,
Maintenance of a stable workforce.
Importantly, a restraint cannot simply be used to prevent competition. A former employee is entitled to earn a living and compete fairly, provided they do not misuse confidential information or exploit relationships developed solely due to their previous role.
Interlocutory Injunctions
An interlocutory injunction is a temporary order made by a court to preserve the status quo until the matter can be finally determined. Courts grant this form of relief where:
There is a serious question to be tried,
The balance of convenience favours granting the order,
There are no discretionary reasons to refuse relief.
In this case, the court also considered other factors such as whether damages would be a sufficient remedy and whether the defendant’s right to earn a livelihood would be unfairly affected.
The Decision
Confidential Information
The Court was satisfied that the employer had a legitimate interest in protecting its confidential data. The CRM system contained a wealth of proprietary information gathered through years of client interaction and real estate operations.
The Court granted an order preserving the data to prevent it from being deleted or altered. The former employee had acknowledged he had taken the data and agreed to return or delete it. He also agreed to have his devices inspected by a forensic expert to ensure compliance.
Because of these undertakings and his cooperative attitude, the Court decided not to impose additional restrictions beyond what was necessary to ensure the data was not lost.
Restraint of Trade
The main issue was whether the former employee could be prevented from serving clients or working in a specific area, thus justifying an injunction for the plaintiff until a final hearing. The Court needed to determine if the plaintiff's request met the criteria for granting an interim injunction.
The Court considered that the restraint clause in his contract prohibited him from accepting instructions from any “Client” of the business for up to nine months after resignation. However, the term “Client” was broadly defined. It covered not only actual vendors and purchasers, but also anyone who attended an open home or made an enquiry, even if they had no direct dealings with Mr Davies.
The Court found this definition too wide. It observed that:
The clause would apply to hundreds or possibly thousands of people, many of whom were not real clients,
Some of these people may have had only passing contact with the business or none at all,
In some cases, Mr Davies would have no way of knowing whether someone he was dealing with fell within the definition, making compliance impractical.
Justice Richmond concluded that while the employer had a legitimate interest in protecting its business, the clause went beyond what was necessary to do so. The restraint would have the effect of preventing Mr Davies from working in a significant part of Sydney’s real estate market, which would unfairly limit his ability to earn a living.
Instead of granting the employer’s request, the Court accepted Mr Davies’ offer to:
Not accept instructions from any client who had signed an agency agreement with the employer between January and June 2025,
Return or delete the information he had taken,
Submit to an audit of his phone and computer by a forensic expert.
This balanced approach protected the employer’s interests without putting Mr Davies out of work for nearly a year.
Practical Considerations
For Employers
This case provides several lessons for employers seeking to enforce restraint clauses:
Be specific and targeted
Courts will not enforce blanket clauses that try to cover every person the business ever dealt with. A restraint must be drafted carefully to target genuine risks.
Define “Client” carefully
Include only those with whom the employee had material or ongoing contact. Consider excluding one-off enquirers or attendees at open homes.
Limit the geographic scope
Restrict the area to where the employee actually worked. A clause that covers too large a territory will likely be struck down.
Make sure the duration is reasonable
The shorter the restraint period, the more likely it is to be upheld. Clauses that last six to nine months are more common, but still need to be justified.
Keep records of confidential information
If you want to protect it, you must show it has real value and is not generally known or accessible.
For Employees
Understand your contract before resigning
Know what restrictions apply after you leave. If in doubt, get legal advice early.
Avoid downloading company data
Even if it seems harmless, taking files or screenshots can be seen as a breach of your contract and confidentiality obligations.
Consider offering undertakings
If a dispute arises, proposing a fair compromise (as Mr Davies did) can help avoid harsh orders and preserve your ability to work.
Know your rights
You are entitled to compete and earn a living, provided you do not misuse confidential information or breach reasonable restrictions.