b'CASE LAWRESTRAINTSAEI Insurance Group Pty Ltd v Martin (No 4) [2024] FCA 1110 (24 September 2024)What happened: AEI Insurance Group took legal action against itsformer Queensland Account Manager in late 2022after 21 clients decided to follow him to acompetitor, MA Brokers. Although AEI secured aninjunction preventing him from soliciting moreclients, another 25 clients still moved to MABrokers before the injunction was lifted lastAugust.Federal Court Justice Thawley reviewed AEIslargely circumstantial evidenceincluding diarynotes, client texts, and the managers ownadmission of using his work phone to contactclients. The manager delayed returning his workphone for six months after resigningand faced difficulties providing information.Justice Thawley found one of the manager\'s mobilephones was immersed in water and another "met Practical Implementation/Learnings: with the unhappy fate of being run over by a lawnmower". He noted these issues posed significant 1.Restraint clauses are enforceable whenchallenges to AEIs case in determining whether reasonableCourts will uphold restraintthe manager breached his contracts restraint of trade clauses where they protectclause. legitimate business interests, such ascustomer relationships, and where theOutcome:restraint period is proportionate to therisk.Federal Court Justice Thawley found it "more likely than 2.Evidencecan be inferred fromnot" that the former Account Manager solicited 16 circumstancesThe Courts will look atclients directly or through MA Brokers and played a role evidence with a very broad lense whenin soliciting another 29. He clarified: assessing whether or not a breach of anenforceable restraint occurred and this"AEI is not entitled to be protected against mere can include more circumstantial matterscompetition from [the manager]. However, AEI is like client migration patterns in theentitled to be protected against unfair competition absence of any marketing or otherbased on the use by [the manager] after his resignation campaigns on the part of the competitorof aspects of the customer connection which he that would explain a client\'s decision todeveloped for AEI during his employment." change firms. 3.Former employees must not exploitThe judge affirmed AEIs legitimate interest in protecting customer connectionsSoliciting clientsits customer connections and deemed a 12-month based on connections developed duringrestraint period reasonable. in the circumstances. employmenteven indirectlycanamount to a breach of restraint clausesIn assessing damages, Justice Thawley set AEIs upper and lead to significant damages.limit losses at $617,282 but awarded $500,000 afteraccounting for clients who left independently anduncertainties about renewals.Page | 24IR Update July 2025'