It is not uncommon in businesses that an employee can also simultaneously be a Shareholder and Director of a company. The matter of Agha v Devine Real Estate Concord & ORS [2021] NSW CA 29 dealt with this situation.
This case considered restraints in circumstances where there was a Shareholders Agreement and an Employee Agreement for Mr Agha. Both of the documents contained clauses in relation to Restraint of Trade as well as clauses protecting confidentiality. An issue that needed to be considered was which restraint applied out of the two documents as they provided different periods and overlapping areas of restraint.
The post-employment restraint period under the Employment Contract was for a maximum of twelve months whereby the restraint in the Shareholders Agreements was for a period of three years.
The brief facts of this case were as follows:
Mr Agha gave notice to Devine Real Estate that he was going to resign from his employment, sell his shares and resign as a Director.
Devine Real Estate discovered shortly thereafter that Mr Agha had sent confidential information to his personal email address and entered into an Employment Agreement with a competitor, Bell Property.
Devine Real Estate then brought proceedings in the Supreme Court which were later put on appeal by Mr Agha.
Both the primary judgment and the Court of Appeal agreed that the more extensive restraint in the Shareholders Agreement was valid and enforceable. Given Mr Agha’s seniority and position as a past shareholder it was reasonable.
Further, Mr Agha was in breach of soliciting existing clients within a restraint area whilst working for a direct competitor.
The case of Agha v Devine Real Estate Concord highlights the need for properly drafted Employment Agreements but also Shareholders Agreements. It is important that employees, Shareholders and Directors are aware of the post-employment obligations as an employee as well as any restraints contained in relevant Shareholders Agreements and the duties owed by a Director to a company.
Should you need assistance in relation to these issues, Everingham Solomons has the expertise to assist, because Helping You is Our Business.
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