Shareholder proxy group Morrow Sodali wins injunction against former employee

Morrow Sodali has secured a court win against a former senior employee who set up a rival firm, increasing debate about the enforceability of non-compete clauses.

The court case has implications for the use of confidential client information by former employees. Picture: Bianca De Marchi

Shareholder engagement and proxy group Morrow Sodali has secured a court win against former senior employee Marc Stanghieri, which restrains him from working for or contacting the firm’s existing clients, after he set up a rival company.

The NSW Supreme Court granted Morrow Sodali an injunction and ordered that Mr Stanghieri be restrained from a range of activities including using, communicating or disclosing confidential information or the firm’s intellectual property. The orders stipulated the injunction covered any customers that Mr Stanghieri “worked or had dealings with” in the 12 months before he departed Morrow Sodali in late February.

The case will be watched closely given it has implications for the use of confidential client information by former employees and a fierce broader debate occurring over the past year about non-compete clauses and their enforceability.

In 2023, the federal government formally requested advice from the Australian Competition and Consumer Commission on the potential competitive impacts of non-compete restraints and whether action was required. The government then in April released an issues paper on the topic which sought feedback from employees, businesses and the community on the use and impact of non-compete clauses across the economy.

The paper is seeking views on whether such clauses may stifle innovation, or weigh on productivity or job mobility.

The debate comes as the US has proposed a law banning non-compete clauses in most employment agreements, while Britain has flagged it will legislate limits of three months for the restraints.

Mr Stanghieri was Morrow Sodali’s Australian head of mergers and acquisitions and activism for about four years, according to his LinkedIn profile. Part of the court action centres on work he initiated with ASX-listed uranium company Boss Energy not long after leaving Morrow Sodali and setting up his own firm PGS Advisers.

The court orders – by Judge James Hmelnitsky – included that Mr Stanghieri was restrained from “directly or indirectly” carrying on or engaging in restricted business under the terms of his exit from Morrow Sodali. Mr Stanghieri was not restrained from completing the “current scope of works” for Boss Energy, but was unable to take on any further work.

Morrow Sodali declined to comment on Wednesday, as did Mr Stanghieri.

Boss Energy’s Honeymoon uranium project 80km northwest of Broken Hill.

The matter is next scheduled for a case management hearing on June 21.

The court documents outlined if Mr Stanghieri were to disobey the orders restraining him from using, disclosing or communicating confidential information or intellectual property, he would “be liable to sequestration of property and to imprisonment”.

Mr Stanghieri and Morrow Sodali were last year engaged in work for Origin Energy as it defended a bid from foreign investment giants Brookfield and EIG Partners. The $18.7bn takeover tilt of Origin failed, though, to win over enough shareholders and the process was canned in early December.

The New York and London-headquartered Morrow Sodali – which is backed by private equity fund TPG Growth – has enlarged its footprint in Australia over the past few years, in part via acquisitions. Last year, it bought communications consultancy Domestique.