A mass exodus of sales staff from Harcourts Wellington Paremata office to rival Bayleys resulted in a High Court order blocking them from local real estate work for a period of three months. Legal argument centred on whether real estate ‘leads’ as compared with ‘listings’ counted as Harcourts’ confidential information.
In early December 2023, Paremata senior sales manager Tony Fitzimons gave notice. Harcourts paid out his employment entitlements and he left immediately. He gave no indication of future plans.
A fortnight later, fellow staff members Martin Cardno, Tanya Davis, Ralph Kindl and Holly Williams followed him out the door. These sales staff were independent contractors, not employees.
The High Court was told a new Bayleys office opened the following month within several hundred metres of Harcourts Paremata branch. Advertised on its website were the former Harcourts staff together with listings of properties offered for sale.
Harcourts market share for local sales fell from some 67 per cent to 36 per cent in the period immediately after the mass exodus.
Harcourts sued. It alleged Bayleys’ new listings could only have been generated from contacts made whilst its staff previously worked for Harcourts, and as such was a misuse of Harcourts’ confidential information.
Evidence was given that Harcourts requires its sales staff to log information about potential leads: details of properties potentially coming on the market together with information about vendors; whether they are price sensitive plus personal and family information relevant to marketing.
Harcourts alleged both Ms Williams and Mr Kindl downloaded parts of its client contact database shortly before their departure.
Mr Fitzimons returned his company laptop on departure cleaned, following a factory reset. Harcourts expressed suspicions that confidential information had been accessed before being wiped.
In the High Court, Justice Isac ruled it was arguable that ‘leads’ do amount to confidential information Harcourts was entitled to protect.
Mr Fitzimons’ employment contract contains no restraint of trade clause. He was free to set up in opposition to Harcourts immediately on his departure. Employment law does prohibit former employees from misusing confidential information gained during employment. This is an issue for Harcourts to take up with the Employment Relations Authority should it choose to do so, Justice Isac said.
The other four sales staff had signed contracts prohibiting them from misusing confidential information and further prohibiting them from selling real estate within Harcourt’s Paremata area (from Tawa to Pukerua Bay) for six months after leaving Harcourts. They were not prohibited from immediately starting elsewhere in the wider Wellington area.
Justice Isac ruled these four sales staff had to surrender or destroy any confidential information taken from Harcourts and further ordered not to sell real estate in Harcourts’ Paremata area for a period of three months.
Evidence was that progression from a lead to a listing usually occurs within a three month period. A six month restraint period was excessive and likely to be ruled unreasonable, Justice Isac said.
Harcourts Paremata v. Cardno – High Court (14.03.24)
24.072