Compelling the employee to pursue proceedings in both jurisdictions would waste resources: court
The Federal Court has dismissed an employer’s application to stay proceedings and enforce an exclusive jurisdiction clause favouring English courts, citing strong countervailing reasons to continue the case in Australia.
The dispute centred on post-employment restraints and termination entitlements tied to two agreements: an employment contract and a shareholders’ agreement. The employment contract specified that disputes should be resolved in NSW courts, while the shareholders’ agreement assigned exclusive jurisdiction to England and Wales. The employer argued that the case should be split, requiring claims under each agreement to be pursued in their respective jurisdictions.
The Federal Court rejected this approach, finding that enforcing the exclusive jurisdiction clause would fracture the litigation, leading to inefficiencies, higher costs, and the risk of conflicting outcomes in different courts. Both agreements, signed simultaneously, were deemed interrelated, with overlapping obligations and shared factual bases, including restrictive covenants and entitlements tied to the employee’s termination and shareholding.
The court emphasised that the intertwined nature of the agreements necessitated resolving the issues in a cohesive manner. The restrictive covenants in both agreements, though differing in terms, were based on shared facts, such as the scope of business activities, client relationships, and territories involved. Determining the validity of these restraints and related termination entitlements would require overlapping evidence and witnesses.
The court also noted that compelling the employee to pursue proceedings in both jurisdictions would waste resources and potentially undermine justice. Meanwhile, the employer failed to show substantial prejudice if the case proceeded in Australia, given the relatively confined scope of the matter and the factual overlap between claims.
In its decision, the court ordered the parties to outline procedural steps to advance the litigation in Australia. The ruling highlighted the Federal Court’s discretion to decline enforcement of exclusive jurisdiction clauses when strong reasons exist, particularly in cases involving intertwined contracts and overlapping factual matters.
