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Roadblocks to restraint: Have you picked the right jurisdiction?

05 May 2021

#Workplace Relations & Safety

Published by:

Declan Johnston, Olivia Lawrence

Roadblocks to restraint: Have you picked the right jurisdiction?

Employers seeking to enforce post-employment restraints will need to carefully consider the jurisdiction in which proceedings are commenced, following a recent NSW Court of Appeal decision which found contracts with an exclusive overseas jurisdiction could not be enforced in Australia.

In Qantas Airways Ltd v Rohrlach [2021] NSWCA 48, the NSW Court of Appeal was required to make a preliminary determination as to which jurisdiction the restraints could be enforced due to the contract of employment containing an entire agreement clause and an exclusive jurisdiction clause limiting the jurisdiction to Singapore.

The Court of Appeal found that the post-employment restraints were exclusive to the Singapore jurisdiction, and therefore unable to be enforced by NSW courts. As such, Qantas’ only option was to seek an injunction in the Singaporean courts. The Singaporean courts granted this injunction and upheld to enforce the restraint pending the substantive proceedings.

Background – first proceedings in Qantas Airways Ltd v Rohrlach [2021] NSWCA 48

In March 2021, Qantas commenced proceedings in NSW to restrain a departing executive, Nick Rohrlach, from commencing with Virgin Australia as head of Virgin Australia’s Velocity loyalty program. At the time of his exit, Mr Rohrlach was based in Japan, after having spent a period of his employment in Singapore as well.

The following agreements governed Rohrlach’s employment:

  • employment agreement dated 17 December 2015 (Contract). In addition to setting out the terms of employment, the Contract contained an entire agreement clause and an exclusive jurisdiction clause limiting the jurisdiction to Singapore
  • assignment letter dated 8 November 2017 (Letter). Rohrlach signed the Letter following his reassignment from Singapore to Japan. The Letter confirmed that Rohrlach continued to be subject to the terms and conditions of the Contract, except as amended by the Letter. The Letter did not change the Contract’s exclusive jurisdiction clause. The terms of the Letter clearly stated the Letter was to be read in conjunction with the Contract
  • Deed of Release, which was an annexure to the Letter (Deed). The Deed contained the post-employment restraints, barring Rohrlach from commencing work with a competitor for six months. The Deed identified the laws of Japan as the choice of law, but did not contain an exclusive jurisdiction clause.

After Rohrlach gave notice of his resignation, both parties commenced legal action. Rohrlach commenced proceedings in Singapore seeking declarations that the restraints were void and unenforceable (Singapore Proceedings). Qantas then commenced proceedings in NSW seeking to enforce the Deed’s restraints and obtain an anti-suit injunction preventing Rohrlach from continuing the Singapore proceedings (NSW Proceedings). Rohrlach then sought to stay the NSW Proceedings.

At first instance, the NSW Supreme Court found in favour of Rohrlach and dismissed Qantas’ claim before Qantas appealed this decision to the NSW Court of Appeal.

Judgment of the Court of Appeal

The Court of Appeal upheld the decision at first instance and found in favour of Rohrlach.

The Court found that the Contract provided the “overarching architecture” governing Rohrlach’s employment and held that the Deed did not cease the operation of the Contract on its terms.

Although the Deed nominated the law of Japan as the relevant choice of law, the Court considered that it did not supersede the Contract’s operation because the Deed did not contain an exclusive jurisdiction clause nor an exclusive agreement clause.

The Court made their finding on the following grounds: 

  • by applying the principles of contractual interpretation and construction, the exclusive jurisdiction clause contained in the Contract applied to all agreements entered into by Qantas and Rohrlach
  • both parties could have utilised subsequent agreements to limit the jurisdiction of the Deed or Contract but, as neither party did so, the Contract’s exclusive jurisdiction clause prevailed. Nothing in the drafting of the Deed changed the operation of the Contract
  • neither the Letter nor the Deed indicated that the Contract’s exclusive jurisdiction clause should cease to operate
  • the Deed did not contain an exclusive jurisdiction clause nor an entire agreement clause. The Court indicated that their findings might have been different if this had been the case 
  • fundamentally, at all times, the terms of the Contract remained live and relevant. At all times, the dispute in NSW related to the Contract and therefore, the Contract’s exclusive jurisdiction clause applied.

Key takeaways

Although Qantas was ultimately successful in the Singaporean courts in obtaining an injunction to enforce the restraints pending the substantive proceedings, its approach in the NSW courts proved costly.

This case demonstrates a number of important matters for all employers, including:

  • employers should pay attention to the operation of exclusive jurisdiction and entire agreement clauses. A court will consider the whole arrangement between the parties in deciding what is the applicable exclusive jurisdiction or entire agreement clause. In a case of a series of agreements, it is important to review and modify by agreement any variation in those clauses each time a new agreement is entered into
  • employers seeking to enforce post-employment restraints in a standalone deed or secondary agreement will need to review the agreements in place to determine the existence of any continued terms applying to the restraint from pre-existing contractual arrangements, in particular with respect to jurisdiction.

Authors: Michael Selinger, Declan Johnston & Olivia Lawrence

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Declan Johnston, Olivia Lawrence

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