Balancing Restraint and Client Choice: Injunctive Relief Refused in Perpetual v Maglis

This case considers the enforceability of post-employment restraint clauses and the limits of interlocutory injunctive relief. Here, the Court declined to grant interlocutory relief restraining a former employee from accepting approaches by former clients. While a prima facie case existed that the respondent had accepted client approaches contrary to the restraint clause, the Court found no prima facie case of solicitation and noted that the case for enforceability of the restraint was weak. Weighing heavily against the grant of relief was the potential impact on 22 clients who had expressed a desire to continue working with the respondent. Accordingly, the balance of convenience favoured refusing the injunction.

In Perpetual Limited v Maglis [2025] QSC 71, the Court considered an application for interlocutory injunctive relief sought by Perpetual Limited and a related entity (the applicants) against a former employee, a financial adviser (the respondent). The applicants alleged that the respondent breached post-employment restraints by soliciting clients after commencing work with a competitor firm, Ord Minnett.

By way of background, the respondent’s employment came to an end on 28 February 2025. His contract included a restraint clause—Clause 5.1— prohibiting him, for 24 months post-employment, from “approach, canvass, solicit, accept any approach from or deal with any Client with a view to obtaining the business or custom of that Client in a business that is the same as or similar to any part or parts of the Business” or “counsel, procure or otherwise assist any person, firm or entity to do any of the acts referred to above…”.

After commencement at Ord Minnett in March 2025, the respondent was contacted by 24 former clients. In response, he sent each of them a letter explaining that he was bound by contractual restraints and could only act with Perpetual’s express consent. He enclosed a pro forma letter which clients could send to Perpetual to request such consent.

Several clients did so. Perpetual responded by offering to arrange a phone call to “discuss how the team can assist you.” The letter further stated: “I am confident that [the current Adviser] will continue delivering best-in-class advice while managing your portfolios…If, however, you still wish to transfer your portfolio from Perpetual to Mr Maglis who we understand is now working at Ord Minnett, we will respect your decision and adhere to your request. We note, however, that your former adviser owes a number of post-employment contractual obligations to Perpetual, and as a consequence of this, he is restricted from managing your portfolio until after 28 February 2026. For this reason, Perpetual regrets that it cannot consent to Mr Maglis providing financial services to you and, in the event that he should do so, we will have no choice in those circumstances other than to commence Court proceedings against him (and potentially his new employer) to protect Perpetual’s legitimate business interests and ensure his strict compliance with his post-employment contractual obligations to our business.”

Despite this, several clients contacted the respondent again, and he began what he described as an “onboarding process”, involving a “comprehensive discovery meeting” to discuss their financial objectives and risk profiles.

The applicants contended that this conduct, including the provision of draft letters and onboarding activities, amounted to solicitation and breach of the restraint.

Prima facie case

The issue for determination was whether the applicants had established a prima facie case. At [16]–[17], Bowskill CJ set out the applicable general principles:

[16] There are two aspects to the question whether the applicants have made out a prima facie case – the validity and enforceability of the restraint clause and, assuming it is valid, whether there has been, or is a threat of, breach of it.

[17] In order to show a prima facie case (or serious question to be tried) the applicants do not have to show that they will probably succeed at trial. It is sufficient that the applicants show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. How strong the probability of success needs to be depends on the nature of the rights asserted and the practical consequences likely to follow from the orders sought.

Validity and enforceability of the restraint clause

Her Honour expressed reservations regarding the argument for validity and enforceability of the restraint clause:

[31] On balance, and accepting that this is a determination at an interlocutory stage, I consider the argument for validity of the restraint clause has real challenges, having regard to the extremely broad definition of “Client”, which I do not accept is capable of being severed, read down, or read with additional words, as submitted by the applicants. The focus of the arguments was on the breadth of the clause itself, rather than the cascading periods of time during which it is said to apply. But I would regard that as a significant feature also, in the context of this case, in which it is difficult to see how a restraint – particularly on accepting approaches – for a substantial period of time would be enforceable.

[32] I do not go as far as concluding, on this interlocutory hearing, that there is no prima facie case for the validity of the restraint clause, but I do not consider the argument for validity to be a strong one.

Assuming the restraint clause is valid, whether there has been, or is a threat of, a breach

Her Honour considered that the respondent had accepted approaches from clients of a related entity of Perpetual, contrary to the restraint in clause 5.1:

[39] The evidence (exhibited to Mr Lunn’s affidavit) indicates some of the clients who received a letter in these terms forwarded it to Mr Maglis. There is also evidence of clients contacting Mr Maglis, after informing Perpetual of their desire to take their business elsewhere and receiving a response in the terms outlined above, and Mr Maglis then proceeding to begin what he called an “onboarding process”, which seems to have involved a “comprehensive discovery meeting” with them, discussing their financial objectives and reviewing their risk profile.

[40] I accept that, as a matter of principle, whether solicitation has occurred depends on the substance of what passes between the former employee and the client, and that the matter of who makes the initial contact is not decisive. However, simply responding positively to an approach from a former client will not amount to solicitation – “the line is crossed where the former employee, in response to an approach by a customer, does not merely indicate a willingness to be engaged, but positively encourages the customer to engage him or her”.

[41] Having regard to the evidence before the Court, I do not accept that there is a prima facie case in so far as solicitation is concerned. I accept on its face Mr Maglis’ sworn evidence that he did not initiate contact with the clients; they called him; and I do not accept that he “crossed the line” in terms of his engagement with those clients, in terms of the letter he sent (an example of which is at paragraph [35] above). However, I do accept that there is a prima facie case that Mr Maglis has “accepted any approach from” clients of the second applicant. This is apparent from the evidence broadly described in paragraph [39] above. Counsel for the respondent accepted it was open to reach such a conclusion, at this interlocutory stage.

[42] I therefore conclude, in terms of the first enquiry, that there may be a prima facie case in so far as the first applicant is concerned, albeit a weak one in so far as the enforceability of the restraint clause is concerned, that the respondent has accepted approaches from clients of a related entity of Perpetual, contrary to the restraint in clause 5.1. As already noted, the basis on which the second applicant may be entitled to relief, by way of enforcement of a restraint clause in a contract to which it is not a party, was not explained.

While the Court was not satisfied that solicitation had occurred, it found a prima facie case of the respondent accepting approaches from clients in a way that might contravene clause 5.1—particularly through the onboarding of clients via a “comprehensive discovery meeting”.

Balance of convenience

The balance of convenience weighed against granting the injunction. Bowskill CJ emphasised the weak enforceability case, the absence of solicitation and in particular, the clients’ freedom to choose their adviser:

[44] In considering where the balance of convenience lies, I take into account the view I have reached as to the strength of the applicants’ case on the enforceability of the restraint clause, and the conclusion that there is no prima facie case in terms of solicitation, but only in terms of accepting approaches.

[45] The impact of the grant of an injunction in the terms sought by the applicants on third parties – in particular, the 22 clients who have said that they no longer want Perpetual to handle their financial affairs – is an important factor in this case, tending to weigh the balance against the grant of the relief sought. In addition, counsel for Mr Maglis submits that any protectable “customer connection” that Perpetual might have in those clients has already dissipated, and as a result there is no basis for any injunctive relief in so far as they are concerned. That argument has force, although counsel for the applicants submits they have not “given up” on the prospect of getting those clients to return.

[46] Lastly, in terms of whether damages are an adequate remedy, it is significant that, as Mr Baker acknowledges, clients are free to terminate their relationship with Perpetual and go elsewhere and, on the evidence, 22 of them have already done that. It does seem to me to be a matter of serious concern to be making an order, the effect of which would be to restrict the choice of clients to have their personal financial matters looked after by a person they trust and, in some cases, have worked with for a number of years. Indeed, it has been observed that a restraint which restricts choices available to customers of services may be unreasonable in the public interest.

[47] As against that, Mr Baker also says, on the assumption that there has been a breach of the restraint by Mr Maglis, that it would be difficult to assess the loss and damage to Perpetual as a consequence of the alleged conduct of Mr Maglis, because there will always be a degree of uncertainty as to the length of time that clients would have stayed with Perpetual if there had been no breach; given that Perpetual has a history of servicing clients across generations, the loss of a client can result not only in loss of that client’s business, but also future business of that client’s children; and Perpetual will also lose the referral base its current clients provide. I accept that it would be difficult to assess damages in this case, even assuming the applicants are ultimately successful in the proceeding. Questions of causation (given the importance of the free will of clients in this context) and remoteness (in so far as the generational and referral points are concerned) would seem to loom large.

[48] Both parties are willing to work towards an early trial date for this dispute, and this can be accommodated by the Court.

[49] Taking all these factors into account, the balance of convenience favours refusing the grant of any injunctive relief, given the weak case for enforceability of the restraint (subject to severance of parts of clause 5.1, and limitation of the time period during which it applies) and the fact that the interests of third parties will be affected by the making of such an order in a manner which I consider to be inconsistent with the public interest, particularly as it concerns those third parties’ private financial affairs.

Conclusion

The Court ultimately refused to grant the interlocutory relief. Although a prima facie case existed that the respondent had accepted client approaches contrary to Clause 5.1, the absence of solicitation, the weak case for enforceability of the restraint, and the impact on client choice, weighed against granting the application. Bowskill CJ placed particular weight on the potential impact on the 22 clients who had expressed a desire to continue their relationship with the respondent. Her Honour observed that client autonomy—particularly in a trust-based industry such as financial advice—was an important public interest consideration.

The decision can be found here.