The NSW Supreme Court has ruled a two-year restraint was unreasonable for a Willis Re senior executive who resigned to move to rival reinsurance broker Guy Carpenter in order to avoid the Aon merger, while it also found he was told to lie to clients about being “on leave” as part of damage control.

The court heard former Willis Re Asia-Pacific President Michael Harden gave one year’s notice on June 26 last year after deciding to leave the firm due to the proposed merger between Aon and Willis Towers Watson.

Mr Harden, who had worked with Willis Re or related entities for around 30 years, said that during his career he’d declined opportunities at Aon as he didn’t consider its culture or values aligned with his own.

After resigning, Willis solicitors wrote to confirm he would remain on full pay during his notice period and directed that if contacted by a client he should say “I’m sorry I cannot assist you because I am on leave”. He was told to direct clients to another person, and could add “there’s nothing further I can say at this time”.

Mr Harden was told to be available to answer business-related questions and was required to “attend for work at his current place of work”, which was at home due to the COVID pandemic. He had to hand back electronic devices and was required to remain away from Willis’ premises, while completing handover notes was the only work he was asked to do.

Mr Harden told the court Willis had instructed him to lie to clients, as he was not on “gardening leave” and the false direction repudiated the contract and prevented Willis from relying on post-employment constraints.

Mr Harden also argued he was effectively suspended for 12 months, and as a result the restraint period under the contract should be reduced by the period of suspension.

Willis maintained it sought a 12-month restraint, following the 12-month notice period in which Mr Harden was directed not to perform his usual duties but was still paid, and he was not suspended.

The firm noted the restraint period was justified as he had access to confidential information that would remain relevant for at least two, or even three years.

The court heard that five other employees had resigned at the same time as Mr Harden and Willis was concerned he had been trying to take other employees and clients with him to Guy Carpenter, which is part of Marsh & McLennan, and could misuse confidential information.

Justice John Sackar says Willis was clearly concerned about Mr Harden’s resignation and went into “entirely understandable damage control”, and directions to him resulted from a desire to minimise the impact of his resignation on clients.

“Given his status and longevity with Willis there was no doubt a genuinely held fear his merely telling clients he had resigned, and was moving to a new employer, might cause them to become unsettled and decide to follow him,” he said.

Justice Sackar notes gardening leave normally involves an employee staying away from work and performing no duties. Willis’ solicitors letters were hostile in tone and terms, and action taken toward Mr Harden was “in substance and in form disciplinary in nature”, he says.

“Mr Harden was not in my view in fact on leave, gardening or otherwise,” he says. “It follows that for him to be directed to inform clients he was on leave was an untruth. He was in fact suspended from his usual activities and placed as far as could be achieved in a cryogenically controlled setting.”

Justice Sackar says he accepts Mr Harden’s statements that he did not contact other employees or clients in attempts to persuade them to follow him and, while some other staff also resigned, it’s clear a recruiter had been retained by the other firm.

“What Willis did not wish to concede but what appears to have occurred is that they were outwitted by a clever recruiter and employees who were ripe for persuasion, and who did not want to work for an Aon-controlled organisation and found the Guy Carpenter offer more appealing,” he said.

Justice Sackar says Mr Harden presumably rose to the top of Willis because of his leadership qualities and because he was a person of integrity, and he had been a loyal and long-standing employee.

There was no evidence he had taken documents, nor had he had any access to Willis’ information since July last year, and it was unlikely he retained precise calculations or algorithms in his head.

Justice Sackar found the direction to lie did not amount to a repudiation of the contract, but the two-year restraint was unreasonable, taking into account Mr Harden’s age, the fact that the second year would be unpaid and the time required to find a replacement.

“Even if I had found Mr Harden was on gardening leave, I would have found a two-year restraint unreasonable,” he says. “As it stands, the finding that Mr Harden was suspended has a significant impact on the period for which he should be subject to restraint.”

The judgment is available here.